Document:

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                                                                    Exhibit 10.1

                              AMENDED AND RESTATED
                        MANAGEMENT AND ADVISORY AGREEMENT

      THIS AMENDED AND RESTATED MANAGEMENT AND ADVISORY AGREEMENT, is made as of
June 23, 2003 (the "Agreement") by and among NEWCASTLE INVESTMENT CORP., a
Maryland corporation (the "Company"), and FORTRESS INVESTMENT GROUP LLC, a
Delaware limited liability company (together with its permitted assignees, the
"Manager").

                              W I T N E S S E T H :

            WHEREAS, the Company and the Manager entered into that certain
Management and Advisory Agreement, dated as of June 6, 2002 (the "Original
Management Agreement"), as amended on March 4, 2003; and

            WHEREAS, the Company and the Manager desire to amend and restate the
Original Management Agreement in its entirety on the terms and conditions
hereinafter set forth.

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

            I. The Original Management Agreement is hereby modified so that all
of the terms and conditions of the aforesaid Original Management Agreement shall
be restated in their entirety as set forth herein.

            II. This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and assigns, and shall be
deemed to be effective as of the date hereof.

            III. Any reference in any other document executed in connection with
the Original Management Agreement or this Agreement to the Original Management
Agreement shall be deemed to refer to this Agreement.

            NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL AGREEMENTS HEREIN SET
FORTH, THE PARTIES HERETO AGREE AS FOLLOWS:
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      SECTION 1. DEFINITIONS. The following terms have the meanings assigned
them:

            (a) "Agreement" means this Management and Advisory Agreement, as
amended from time to time.

            (b) "Board of Directors" means the Board of Directors of the
Company.

            (c) "Code" means the Internal Revenue Code of 1986, as amended.

            (d) "Common Share" means a share of capital stock of the Company now
or hereafter authorized as common voting stock of the Company.

            (e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            (f) "Funds from Operations" is as defined by the National
Association of Real Estate Investment Trusts and means net income (computed in
accordance with GAAP) excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization on real estate assets, and
after adjustments for unconsolidated partnerships and joint ventures.

            (g) "Governing Instruments" means, with regard to any entity, the
articles of incorporation and bylaws in the case of a corporation, certificate
of limited partnership (if applicable) and the partnership agreement in the case
of a general or limited partnership or the articles of formation and the
operating agreement in the case of a limited liability company.

            (h) "Independent Directors" means the members of the Board of
Directors who are not officers or employees of the Manager.

            (i) "Investments" means the investments of the Company.

            (j) "Junior Share" means a share of capital stock of the Company
now or hereafter authorized or reclassified that has dividend rights, or rights
upon liquidation, winding up and dissolution, that are inferior or junior to the
REIT Shares.

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            (k) "Preferred Share" means a share of capital stock of the Company
now or hereafter authorized or reclassified that has dividend rights, or rights
upon liquidation, winding up and dissolution, that are superior or prior to the
REIT Shares.

            (l) "Prospectus" means the prospectus of the Company relating to
the Company's initial public offering of common stock.

            (m) "Real Estate Securities" and "credit sensitive real
estate-related securities" have the respective meanings ascribed to such terms
in the Prospectus.

            (n) "REIT Share" means a share of the Company's Common Shares, par
value $.01 per share. Where relevant in this Agreement, "REIT Shares" includes
shares of the Company's Common Shares, par value $.01 per share, issued upon
conversion of Preferred Shares or Junior Shares.

            (o) "Subsidiary" means any subsidiary of the Company and any
partnership, the general partner of which is the Company or any subsidiary of
the Company and any limited liability company, the managing member of which is
the Company or any subsidiary of the Company.

      SECTION 2. APPOINTMENT AND DUTIES OF THE MANAGER.

            (a) The Company hereby appoints the Manager to manage the assets of
the Company subject to the further terms and conditions set forth in this
Agreement and the Manager hereby agrees to use its commercially reasonable
efforts to perform each of the duties set forth herein. The appointment of the
Manager shall be exclusive to the Manager except to the extent that the Manager
otherwise agrees, in its sole and absolute discretion, and except to the extent
that the Manager elects, pursuant to the terms of this Agreement, to cause the
duties of the Manager hereunder to be provided by third parties.

            (b) The Manager, in its capacity as manager of the assets and the
day-to-day operations of the Company, at all times will be subject to the
supervision of the Company's Board of Directors and will have only such
functions and authority as the Company may delegate to it including, without
limitation, the functions and authority identified herein and delegated to the
Manager hereby. The Manager will be responsible for the day-to-day operations of
the Company and will

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perform (or cause to be performed) such services and activities relating to the
assets and operations of the Company as may be appropriate, including, without
limitation:

                (i) serving as the Company's consultant with respect to the
      periodic review of the investment criteria and parameters for Investments,
      borrowings and operations, any modifications to which shall be approved by
      a majority of the independent members of the Board of Directors (such
      policy guidelines as are in effect on the date hereof, as the same may be
      modified with such approval, the "Guidelines") and other policies for
      approval by the Board of Directors;

                (ii) investigation, analysis and selection of investment
      opportunities;

                (iii) with respect to prospective investments by the Company and
      dispositions of Investments, conducting negotiations with real estate
      brokers, sellers and purchasers and their respective agents and
      representatives, investment bankers and owners of privately and publicly
      held real estate companies;

                (iv) engaging and supervising, on behalf of the Company and at
      the Company's expense, independent contractors which provide real estate
      brokerage, investment banking and leasing services, mortgage brokerage,
      securities brokerage and other financial services and such other services
      as may be required relating to the Investments;

                (v) negotiating on behalf of the Company for the sale,
      exchange or other disposition of any Investments;

                (vi) coordinating and managing operations of any joint venture
      or co-investment interests held by the Company and conducting all matters
      with the joint venture or co-investment partners;

                (vii) coordinating and supervising, on behalf of the Company and
      at the Company's expense, all property

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      managers, leasing agents and developers for the administration, leasing,
      management and/or development of any of the Investments;

               (viii) providing executive and administrative personnel, office
      space and office services required in rendering services to the Company;

                 (ix) administering the day-to-day operations of the Company and
      performing and supervising the performance of such other administrative
      functions necessary in the management of the Company as may be agreed upon
      by the Manager and the Board of Directors, including, without limitation,
      the collection of revenues and the payment of the Company's debts and
      obligations and maintenance of appropriate computer services to perform
      such administrative functions;

                  (x) communicating on behalf of the Company with the holders
      of any equity or debt securities of the Company as required to satisfy the
      reporting and other requirements of any governmental bodies or agencies or
      trading markets and to maintain effective relations with such holders;

                 (xi) counseling the Company in connection with policy
      decisions to be made by the Board of Directors;

                (xii) evaluating and recommending to the Board of Directors
      modifications to the hedging strategies in effect on the date hereof and
      engaging in hedging activities on behalf of the Company, consistent with
      such strategies, as so modified from time to time, with the Company's
      status as a real estate investment trust, and with the Guidelines;

               (xiii) counseling the Company regarding the maintenance of its
      status as a real estate investment trust and monitoring compliance with
      the various real estate investment trust qualification tests and other
      rules set out in the Code and Treasury Regulations thereunder;

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                 (xiv) counseling the Company regarding the maintenance of its
      exemption from the Investment Company Act and monitoring compliance with
      the requirements for maintaining an exemption from that Act;

                  (xv) assisting the Company in developing criteria for asset
      purchase commitments that are specifically tailored to the Company's
      investment objectives and making available to the Company its knowledge
      and experience with respect to mortgage loans, real estate, real estate
      securities and other real estate-related assets;

                 (xvi) representing and making recommendations to the Company in
      connection with the purchase and finance, and commitment to purchase and
      finance, of mortgage loans (including on a portfolio basis), real estate,
      real estate securities and other real estate-related assets, and in
      connection with the sale and commitment to sell such assets;

                (xvii) monitoring the operating performance of the Investments
      and providing periodic reports with respect thereto to the Board of
      Directors, including comparative information with respect to such
      operating and performance and budgeted or projected operating results;

               (xviii) investing and re-investing any moneys and securities of
      the Company (including investing in short-term Investments pending
      investment in Investments, payment of fees, costs and expenses, or
      payments of dividends or distributions to stockholders and partners of the
      Company) and advising the Company as to its capital structure and capital
      raising;

                 (xix) causing the Company to retain qualified accountants and
      legal counsel, as applicable, to assist in developing appropriate
      accounting procedures, compliance procedures and testing systems with
      respect to financial reporting obligations and compliance with the
      provisions of the Code applicable to real estate investment trusts and to
      conduct quarterly compliance reviews with respect thereto;

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                 (xx) causing the Company to qualify to do business in all
      applicable jurisdictions and to obtain and maintain all appropriate
      licenses;

                (xxi) assisting the Company in complying with all regulatory
      requirements applicable to the Company in respect of its business
      activities, including preparing or causing to be prepared all financial
      statements required under applicable regulations and contractual
      undertakings and all reports and documents required under the Exchange
      Act;

               (xxii) taking all necessary actions to enable the Company to
      make required tax filings and reports, including soliciting stockholders
      for required information to the extent provided by the provisions of the
      Code applicable to real estate investment trusts;

              (xxiii) handling and resolving all claims, disputes or
      controversies (including all litigation, arbitration, settlement or other
      proceedings or negotiations) in which the Company may be involved or to
      which the Company may be subject arising out of the Company's day-to-day
      operations, subject to such limitations or parameters as may be imposed
      from time to time by the Board of Directors;

               (xxiv) using commercially reasonable efforts to cause expenses
      incurred by or on behalf of the Company to be reasonable or customary and
      within any budgeted parameters or expense guidelines set by the Board of
      Directors from time to time;

                (xxv) performing such other services as may be required from
      time to time for management and other activities relating to the assets of
      the Company as the Board of Directors shall reasonably request or the
      Manager shall deem appropriate under the particular circumstances; and

               (xxvi) using commercially reasonable efforts to cause the
      Company to comply with all applicable laws.

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Without limiting the foregoing, the Manager will perform portfolio management
services (the "Portfolio Management Services") on behalf of the Company with
respect to the Investments. Such services will include, but not be limited to,
consulting with the Company on the purchase and sale of, and other investment
opportunities in connection with, the Company's portfolio of assets; the
collection of information and the submission of reports pertaining to the
Company's assets, interest rates and general economic conditions; periodic
review and evaluation of the performance of the Company's portfolio of assets;
acting as liaison between the Company and banking, mortgage banking, investment
banking and other parties with respect to the purchase, financing and
disposition of assets; and other customary functions related to portfolio
management. Additionally, the Manager will perform monitoring services (the
"Monitoring Services") on behalf of the Company with respect to any loan
servicing activities provided by third parties. Such Monitoring Services will
include, but not be limited to, negotiating servicing agreements; acting as a
liaison between the servicers of the assets and the Company; review of
servicers' delinquency, foreclosure and other reports on assets; supervising
claims filed under any insurance policies; and enforcing the obligation of any
servicer to repurchase assets.

            (c) The Manager may enter into agreements with other parties,
including its affiliates, for the purpose of engaging one or more property
and/or asset managers for and on behalf, and at the sole cost and expense, of
the Company to provide property management, asset management, leasing,
development and/or similar services to the Company (including, without
limitation, Portfolio Management Services and Monitoring Services) with respect
to the Investments, pursuant to property management agreement(s) and/or asset
management agreement(s) with terms which are then customary for agreements
regarding the management of assets similar in type, quality and value to the
assets of the Company; provided, that (i) any such agreements entered into with
affiliates of the Manager shall be (A) on terms no more favorable to such
affiliate then would be obtained from a third party on an arms'-length basis and
(B) to the extent the same do not fall within the provisions of the Guidelines,
approved by a majority of the independent members of the Board of Directors,
(ii) with respect to Portfolio Management Services, (A) any such agreements
shall be subject to the Company's prior written approval and (B) the Manager
shall remain liable for the performance of such Portfolio Management Services,
and (iii) with respect to Monitoring Services, any such agreements shall be
subject to the Company's prior written approval.

            (d) The Manager may retain, for and on behalf, and at the sole cost
and expense, of the Company, such services of accountants, legal counsel,
appraisers, insurers, brokers, transfer agents, registrars, developers,
investment

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banks, financial advisors, banks and other lenders and others as the Manager
deems necessary or advisable in connection with the management and operations of
the Company. Notwithstanding anything contained herein to the contrary, the
Manager shall have the right to cause any such services to be rendered by its
employees or affiliates. The Company shall pay or reimburse the Manager or its
affiliates performing such services for the cost thereof; provided, that such
costs and reimbursements are no greater than those which would be payable to
outside professionals or consultants engaged to perform such services pursuant
to agreements negotiated on an arm's-length basis; and provided, further, that
such costs shall not be reimbursed in excess of $500,000 per annum.

            (e) As frequently as the Manager may deem necessary or advisable,
or at the direction of the Board of Directors, the Manager shall, at the sole
cost and expense of the Company, prepare, or cause to be prepared, with respect
to any Investment (i) an appraisal prepared by an independent real estate
appraiser, (ii) reports and information on the Company's operations and asset
performance and (iii) other information reasonably requested by the Company.

            (f) The Manager shall prepare, or cause to be prepared, at the sole
cost and expense of the Company, all reports, financial or otherwise, with
respect to the Company reasonably required by the Board of Directors in order
for the Company to comply with its Governing Instruments or any other materials
required to be filed with any governmental body or agency, and shall prepare, or
cause to be prepared, all materials and data necessary to complete such reports
and other materials including, without limitation, an annual audit of the
Company's books of account by a nationally recognized independent accounting
firm.

            (g) The Manager shall prepare regular reports for the Board of
Directors to enable the Board of Directors to review the Company's acquisitions,
portfolio composition and characteristics, credit quality, performance and
compliance with the Guidelines and policies approved by the Board of Directors.

            (h) Notwithstanding anything contained in this Agreement to the
contrary, except to the extent that the payment of additional moneys is proven
by the Company to have been required as a direct result of the Manager's acts or
omissions which result in the right of the Company to terminate this Agreement
pursuant to Section 15 of this Agreement, the Manager shall not be required to
expend money ("Excess Funds") in excess of that contained in any applicable
Company Account (as herein defined) or otherwise made available by the Company
to be expended by the Manager hereunder. Failure of the Manager to expend Excess

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Funds out-of-pocket shall not give rise or be a contributing factor to the right
of the Company under Section 13(a) of this Agreement to terminate this Agreement
due to the Manager's unsatisfactory performance.

            (i) In performing its duties under this Section 2, the Manager
shall be entitled to rely reasonably on qualified experts hired by the Manager.

      SECTION 3. DEVOTION OF TIME; ADDITIONAL ACTIVITIES.

            (a) The Manager will provide a dedicated management team, including
a President, a Chief Financial Officer and a Chief Operating Officer of the
Company, to provide the management services to be provided by the Manager to the
Company hereunder, the members of which team shall have as their primary
responsibility the management of the Company and shall devote such of their time
to the management of the Company as the Board of Directors reasonably deems
necessary and appropriate, commensurate with the level of activity of the
Company from time to time.

            (b) The Manager hereby agrees that neither the Manager nor any
entity controlled by or under common control with the Manager shall raise or
sponsor any new investment fund, company or vehicle whose investment policies,
guidelines or plan targets as its primary investment category investment in
United States dollar-denominated credit sensitive real estate-related securities
reflecting primarily United States loans or assets; it being understood that no
such fund, company or vehicle shall be prohibited from investing in credit
sensitive real estate-related securities. The Company shall have the benefit of
Manager's best judgement and effort in rendering services and, in furtherance of
the foregoing, the Manager shall not undertake activities which, in its
judgement, will substantially adversely affect the performance of its
obligations under this Agreement.

            (c) Except to the extent set forth in clauses (a) and (b) above,
nothing herein shall prevent the Manager or any of its affiliates or any of the
officers and employees of any of the foregoing from engaging in other businesses
or from rendering services of any kind to any other person or entity, including
investment in, or advisory service to others investing in, any type of real
estate or real estate-related investment, including investments which meet the
principal investment objectives of the Company.

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            (d) Managers, members, partners, officers, employees and agents of
the Manager or affiliates of the Manager may serve as directors, officers,
employees, agents, nominees or signatories for the Company or any Subsidiary, to
the extent permitted by their Governing Instruments, as from time to time
amended, or by any resolutions duly adopted by the Board of Directors pursuant
to the Company's Governing Instruments. When executing documents or otherwise
acting in such capacities for the Company, such persons shall use their
respective titles in the Company.

      SECTION 4. AGENCY. The Manager shall act as agent of the Company in
making, acquiring, financing and disposing of Investments, disbursing and
collecting the Company's funds, paying the debts and fulfilling the obligations
of the Company, supervising the performance of professionals engaged by or on
behalf of the Company and handling, prosecuting and settling any claims of or
against the Company, the Board of Directors, holders of the Company's securities
or the Company's representatives or properties.

      SECTION 5. BANK ACCOUNTS. At the direction of the Board of Directors, the
Manager may establish and maintain one or more bank accounts in the name of the
Company or any Subsidiary (any such account, a "Company Account"), and may
collect and deposit funds into any such Company Account or Company Accounts, and
disburse funds from any such Company Account or Company Accounts, under such
terms and conditions as the Board of Directors may approve; and the Manager
shall from time to time render appropriate accountings of such collections and
payments to the Board of Directors and, upon request, to the auditors of the
Company or any Subsidiary.

      SECTION 6. RECORDS; CONFIDENTIALITY. The Manager shall maintain
appropriate books of accounts and records relating to services performed under
this Agreement, and such books of account and records shall be accessible for
inspection by representatives of the Company or any Subsidiary at any time
during normal business hours upon one (1) business day's advance written notice.
The Manager shall keep confidential any and all information obtained in
connection with the services rendered under this Agreement and shall not
disclose any such information to nonaffiliated third parties except with the
prior written consent of the Board of Directors.

      SECTION 7. OBLIGATIONS OF MANAGER; RESTRICTIONS.

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            (a) The Manager shall require each seller or transferor of
investment assets to the Company to make such representations and warranties
regarding such assets as may, in the judgment of the Manager, be necessary and
appropriate. In addition, the Manager shall take such other action as it deems
necessary or appropriate with regard to the protection of the Investments.

            (b) The Manager shall refrain from any action that, in its sole
judgment made in good faith, (i) is not in compliance with the Guidelines or
(ii) would adversely affect the status of the Company as a real estate
investment trust under the Code or that, in its sole judgment made in good
faith, would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Company or any Subsidiary or that would
otherwise not be permitted by such entity's Governing Instruments. If the
Manager is ordered to take any such action by the Board of Directors, the
Manager shall promptly notify the Board of Directors of the Manager's judgment
that such action would adversely affect such status or violate any such law,
rule or regulation or the Governing Instruments. Notwithstanding the foregoing,
the Manager, its directors, officers, stockholders and employees shall not be
liable to the Company or any Subsidiary, the Board of Directors, or the
Company's or any Subsidiary's stockholders or partners for any act or omission
by the Manager, its directors, officers, stockholders or employees except as
provided in Section 11 of this Agreement.

            (c) The Manager shall not (i) consummate any transaction which
would involve the acquisition by the Company of property in which the Manager or
any affiliate thereof has an ownership interest or the sale by the Company of
property to the Manager or any affiliate thereof, or (ii) under circumstances
where the Manager is subject to an actual or potential conflict of interest
because it manages both the Company and another Person (not an Affiliate of the
Company) with which the Company has a contractual relationship, take any action
constituting the granting to such Person of a waiver, forebearance or other
relief, or the enforcement against such Person of remedies, under or with
respect to the applicable contract, unless such transaction or action, as the
case may be and in each case, is approved by a majority of the Independent
Directors.

            (d) The Company shall not invest in joint ventures with the Manager
or any affiliate thereof, unless (i) such Investment is made in accordance with
the Guidelines and (ii) such Investment is approved in advance by a majority of
the Independent Directors.

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            (e) The Board of Directors periodically reviews the Guidelines and
the Company's portfolio of Investments. If a majority of the Independent
Directors determine in their periodic review of transactions that a particular
transaction does not comply with the Guidelines, then a majority of the
Independent Directors will consider what corrective action, if any, can be
taken. If the transaction involved the acquisition of an asset from the Manager
or an affiliate of the Manager that was not approved in advance by a majority of
the Independent Directors, then the Manager may be required to repurchase the
asset at the purchase price (plus closing costs) to the Company.

            (f) The Manager shall at all times during the term of this
Agreement (including the Initial Term and any renewal term) maintain a tangible
net worth equal to or greater than $1,000,000. Additionally, during such period
the Manager shall maintain "errors and omissions" insurance coverage and other
insurance coverage which is customarily carried by property and asset and
investment managers performing functions similar to those of the Manager under
this Agreement with respect to assets similar to the assets of the Company, in
an amount which is comparable to that customarily maintained by other managers
or servicers of similar assets.

      SECTION 8. COMPENSATION.

            (a) During the term of this Agreement, as the same may be extended
from time to time, the Manager will receive an annual management fee (the
"Management Fee") equal to 1.50% of the Company's "Gross Equity." The Management
Fee shall be calculated and paid monthly in arrears based upon the weighted
daily average of the Gross Equity of the Company for such month. The term "Gross
Equity" for any period means (A) the sum of (i) the "Total Equity," plus (ii)
the value of contributions made by partners other than the Company, from time to
time, to the capital of any Subsidiary (reduced proportionately in the case of a
Subsidiary to the extent that the Company owns, directly or indirectly, less
than 100% of the equity interests in such Subsidiary), less (B) any capital
dividends or capital distributions made by the Company to its stockholders or,
without duplication, by any Subsidiary to its stockholders, partners or other
equity holders. As used herein, the term "Total Equity" shall mean (i) the
equity transferred from Newcastle Investment Holdings Corp. at the inception of
the Company, plus (ii) the amount of accumulated depreciation on the real estate
assets transferred (as directly or indirectly held assets) to the Company (items
(i) and (ii) thus representing the gross equity transferred to the Company at
inception), plus (iii) the total net proceeds to the Company from any common or
preferred equity capital heretofore or hereafter raised by the Company or

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any Subsidiary of the Company (exclusive, with respect to any Subsidiary, of
capital of such Subsidiary consisting of a capital contribution or other form of
capital investment made by the Company or another Subsidiary of the Company).

            (b) The Manager shall compute each installment of the Management
Fee within 15 days after the end of the calendar month with respect to which
such installment is payable. A copy of the computations made by the Manager to
calculate such installment shall thereafter, for informational purposes only and
subject in any event to Section 13(a) of this Agreement, promptly be delivered
to the Board of Directors and, upon such delivery, payment of such installment
of the Management Fee shown therein shall be due and payable no later than the
earlier to occur of (i) the date which is 20 days after the end of the calendar
month with respect to which such installment is payable and (ii) the date which
is two (2) business days after the date of delivery to the Board of Directors of
such computations.

            (c) The Management Fee is subject to adjustment pursuant to and in
accordance with the provisions of Section 13(a) of this Agreement.

            (d) The Board of Directors may, by written notice to the Manager
delivered ten (10) days prior to the date on which any payment of the Incentive
Compensation is payable, request that the Manager accept all or a portion of
such payment in the form of issued shares of common stock in Newcastle
Investment Corp., which notice shall specify the amount of the payment of the
Incentive Compensation, the amount thereof which the Company intends to pay in
cash, if any, and the amount thereof which the Company intends to pay in the
form of such shares of common stock of Newcastle Investment Corp. in the number
of such shares as determined by the Board of Directors. Within five (5) days
following receipt of said notice, the Manager shall notify the Company in
writing, such election to be made by the Manager in its sole discretion, whether
it will accept such portion of such payment in the form of such shares and in
such number of such shares.

            (e) In addition to the Management Fee otherwise payable hereunder,
the Company shall pay the Manager annual incentive compensation on a cumulative,
but not compounding, basis, in an amount equal to the product of (A) 25% of the
dollar amount by which (1)(a) the Funds from Operations (before such payment) of
the Company, per REIT Share (based on the weighted average number of REIT Shares
outstanding), plus (b) gains (or losses) from debt restructuring and gains (or
losses) from sales of property per REIT Share (based on the weighted average
number of REIT Shares outstanding), exceed (2) an amount equal to (a) the
weighted average of the book value per REIT Share of the net assets transferred
to

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the Company on or prior to July 12, 2002 by Newcastle Investment Holdings Corp.
and the prices per REIT Share at any subsequent offerings by the Company
(adjusted for any prior capital dividends or capital distributions) multiplied
by (b) a simple interest rate of ten percent (10%) per annum multiplied by (B)
the weighted average number of REIT Shares outstanding during such period. The
obligation of the Company to pay the Incentive Compensation shall survive the
expiration or earlier termination of this Agreement, subject to Section 16(b).

      SECTION 9. EXPENSES OF THE COMPANY. The Company shall pay all of its
expenses and shall reimburse the Manager for documented expenses of the Manager
incurred on its behalf (collectively, the "Expenses"). Expenses include all
costs and expenses which are expressly designated elsewhere in this Agreement as
the Company's, together with the following:

            (a) expenses in connection with the issuance and transaction costs
incident to the acquisitions, disposition and financing of Investments;

            (b) travel and other out-of-pocket expenses incurred by managers,
officers, employees and agents of the Manager in connection with the purchase,
financing, refinancing, sale or other disposition of an Investment;

            (c) costs of legal, accounting, tax, auditing, administrative and
other similar services rendered for the Company by providers retained by the
Manager or, if provided by the Manager's employees, in amounts which are no
greater than those which would be payable to outside professionals or
consultants engaged to perform such services pursuant to agreements negotiated
on an arm's-length basis;

            (d) the compensation and expenses of the Independent Directors and
the cost of liability insurance to indemnify the Company's directors and
officers;

            (e) compensation and expenses of the Company's custodian and
transfer agent, if any;

            (f) costs associated with the establishment and maintenance of any
credit facilities and other indebtedness of the Company (including commitment
fees, legal fees, closing and other costs) or any securities offerings of the
Company;

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            (g) costs associated with any computer software or hardware that is
used solely for the Company;

            (h) costs and expenses incurred in contracting with third parties,
including affiliates of the Manager, for the servicing and special servicing of
assets of the Company;

            (i) all other costs and expenses relating to the Company's business
and investment operations, including, without limitation, the costs and expenses
of acquiring, owning, protecting, maintaining, developing and disposing of
Investments, including appraisal, reporting, audit and legal fees;

            (j) all insurance costs incurred in connection with the operation
of the Company's business except for the costs attributable to the insurance
that the Manager elects to carry for itself and its employees;

            (k) expenses relating to any office or office facilities maintained
for the Company or Investments separate from the office or offices of the
Manager;

            (l) expenses connected with the payments of interest, dividends or
distributions in cash or any other form made or caused to be made by the Board
of Directors to or on account of the holders of securities of the Company or its
Subsidiaries, including, without limitation, in connection with any dividend
reinvestment plan;

            (m) expenses connected with communications to holders of securities
of the Company or its Subsidiaries and other bookkeeping and clerical work
necessary in maintaining relations with holders of such securities and in
complying with the continuous reporting and other requirements of governmental
bodies or agencies, including, without limitation, all costs of preparing and
filing required reports with the Securities and Exchange Commission, the costs
payable by the Company to any transfer agent and registrar in connection with
the listing and/or trading of the Company's stock on any exchange, the fees
payable by the Company to any such exchange in connection with its listing,
costs of preparing, printing and mailing the Company's annual report to its
shareholders and proxy materials with respect to any meeting of the shareholders
of the Company; and

                                       16
<PAGE>

            (n) all other expenses actually incurred by the Manager which are
reasonably necessary for the performance by the Manager of its duties and
functions under this Agreement.

      Without regard to the amount of compensation received under this Agreement
by the Manager, the Manager shall bear the following expenses: (i) wages and
salaries of the Manager's officers and employees; (ii) rent attributable to the
space occupied by the Manager; and (iii) all other "overhead" expenses of the
Manager.

      SECTION 10. CALCULATIONS OF EXPENSES. The Manager shall prepare a
statement documenting the Expenses of the Company and the Expenses incurred by
the Manager on behalf of the Company during each calendar month, and shall
deliver such statement to the Company within 20 days after the end of each
calendar month. Expenses incurred by the Manager on behalf of the Company shall
be reimbursed monthly to the Manager on the first business day of the month
immediately following the date of delivery of such statement.

      SECTION 11. LIMITS OF MANAGER RESPONSIBILITY; INDEMNIFICATION. (a) The
Manager assumes no responsibility under this Agreement other than to render the
services called for under this Agreement in good faith and shall not be
responsible for any action of the Board of Directors in following or declining
to follow any advice or recommendations of the Manager, including as set forth
in Section 7(b) of this Agreement. The Manager, its members, managers, officers
and employees will not be liable to the Company or any Subsidiary, to the Board
of Directors, or the Company's or any Subsidiary's stockholders or partners for
any acts or omissions by the Manager, its members, managers, officers or
employees, pursuant to or in accordance with this Agreement, except by reason of
acts constituting bad faith, willful misconduct, gross negligence or reckless
disregard of the Manager's duties under this Agreement. The Company shall, to
the full extent lawful, reimburse, indemnify and hold the Manager, its members,
managers, officers and employees and each other Person, if any, controlling the
Manager (each, an "Indemnified Party"), harmless of and from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including attorneys' fees) in respect of or arising from any
acts or omissions of such Indemnified Party made in good faith in the
performance of the Manager's duties under this Agreement and not constituting
such Indemnified Party's bad faith, willful misconduct, gross negligence or
reckless disregard of the Manager's duties under this Agreement.

            (b) The Manager shall, to the full extent lawful, reimburse,
indemnify and hold the Company, its shareholders, directors, officers and
employees

                                       17
<PAGE>

and each other Person, if any, controlling the Company (each, a "Company
Indemnified Party"), harmless of and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
attorneys' fees) in respect of or arising from the Manager's bad faith, willful
misconduct, gross negligence or reckless disregard of its duties under this
Agreement.

      SECTION 12. NO JOINT VENTURE. Nothing in this Agreement shall be construed
to make the Company and the Manager partners or joint venturers or impose any
liability as such on either of them.

      SECTION 13. TERM; TERMINATION.

            (a) Until this Agreement is terminated in accordance with its
terms, this Agreement shall be in effect until the date that is one (1) years
after the date hereof, and thereafter on each anniversary of such date deemed
renewed automatically each year for an additional one-year period unless (i) a
majority consisting of at least two-thirds of the Independent Directors or a
simple majority of the holders of outstanding shares of Common Stock of the
Company, agree that there has been unsatisfactory performance that is materially
detrimental to the Company or (ii) a simple majority of the Independent
Directors agree that the Management Fee payable to the Manager is unfair;
provided, that the Company shall not have the right to terminate this Agreement
under clause (ii) foregoing if the Manager agrees to continue to provide the
services under this Agreement at a fee that the Independent Directors have
determined to be fair. If the Company elects not to renew this Agreement at the
expiration of the original term or any such one-year extension term as set forth
above, the Company shall deliver to the Manager prior written notice (the
"Termination Notice") of the Company's intention not to renew this Agreement
based upon the terms set forth in this Section 13(a) of this Agreement not less
than 60 days prior to the expiration of the then existing term. If the Company
so elects not to renew this Agreement, the Company shall designate the date (the
"Effective Termination Date"), not less than 60 days from the date of the
notice, on which the Manager shall cease to provide services under this
Agreement and this Agreement shall terminate on such date; provided, however,
that in the event that such Termination Notice is given in connection with a
determination that the compensation payable to the Manager is unfair, the
Manager shall have the right to renegotiate the Management Fee by delivering to
the Company, no fewer than forty-five (45) days prior to the prospective
Effective Termination Date, written notice (any such notice, a "Notice of
Proposal to Negotiate") of its intention to renegotiate its compensation under
this Agreement. Thereupon, the Company and the Manager shall endeavor to
negotiate in good faith the revised compensation payable to the Manager under
this

                                       18
<PAGE>

Agreement. Provided that the Manager and the Company agree to a revised
Management Fee (or other compensation structure) within 45 days following the
receipt of the Notice of Proposal to Negotiate, the Termination Notice shall be
deemed of no force and effect and this Agreement shall continue in full force
and effect on the terms stated in this Agreement, except that the Management Fee
shall be the revised Management Fee (or other compensation structure) then
agreed upon by the parties to this Agreement. The Company and the Manager agree
to execute and deliver an amendment to this Agreement setting forth such revised
Management Fee promptly upon reaching an agreement regarding same. In the event
that the Company and the Manager are unable to agree to a revised Management Fee
during such 30 day period, this Agreement shall terminate, such termination to
be effective on the date which is the later of (A) ten (10) days following the
end of such 30 day period and (B) the Effective Termination Date originally set
forth in the Termination Notice.

            (b) In the event that this Agreement is terminated in accordance
with the provisions of Section 13(a) of this Agreement, the Company shall pay to
the Manager, on the date on which such termination is effective, a termination
fee (the "Termination Fee") equal to the amount of the Management Fee earned by
the Manager during the period consisting of the twelve (12) full, consecutive
calendar months immediately preceding such termination. The obligation of the
Company to pay the Termination Fee shall survive the termination of this
Agreement.

            (c) No later than sixty (60) days prior to the anniversary date of
this Agreement of any year during the Term, the Manager may deliver written
notice to the Company informing it of the Manager's intention not to renew the
Term, whereupon the Term of this Agreement shall not be renewed and extended and
this Agreement shall terminate effective on the anniversary of the Closing Date
next following the delivery of such notice.

            (d) If this Agreement is terminated pursuant to this Section 13,
such termination shall be without any further liability or obligation of either
party to the other, except as provided in Section 13(b) and Section 16 of this
Agreement. In addition, Section 11 of this Agreement shall survive termination
of this Agreement.

      SECTION 14. ASSIGNMENT.

                                       19
<PAGE>
            (a) Except as set forth in Section 14(b) of this Agreement, this
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager, unless such assignment is consented to in writing by
the Company with the consent of a majority of the Independent Directors;
provided, however, that no such consent shall be required in the case of an
assignment by the Manager to an entity whose day-to-day business and operations
are managed and supervised by any two (2) or more of the Messrs. Wesley R.
Edens, Robert I. Kauffman, Randal A. Nardone and Erik P. Nygaard (collectively,
the "Principals"), one of whom must be Mr. Edens. Any such permitted assignment
shall bind the assignee under this Agreement in the same manner as the Manager
is bound, and the Manager shall be liable to the Company for all errors or
omissions of the assignee under any such assignment. In addition, the assignee
shall execute and deliver to the Company a counterpart of this Agreement naming
such assignee as Manager. This Agreement shall not be assigned by the Company
without the prior written consent of the Manager, except in the case of
assignment by the Company to another real estate investment trust or other
organization which is a successor (by merger, consolidation or purchase of
assets) to the Company, in which case such successor organization shall be bound
under this Agreement and by the terms of such assignment in the same manner as
the Company is bound under this Agreement.

            (b) Notwithstanding any provision of this Agreement, the Manager may
subcontract and assign any or all of its responsibilities under Sections 2(b),
2(c) and 2(d) of this Agreement to any of its affiliates in accordance with the
terms of this Agreement applicable to any such subcontract or assignment, and
the Company hereby consents to any such assignment and subcontracting. In
addition, provided that the Manager provides prior written notice to the Company
for informational purposes only, nothing contained in this Agreement shall
preclude any pledge, hypothecation or other transfer of any amounts payable to
the Manager under this Agreement.

      SECTION 15. TERMINATION FOR CAUSE.

            (a) The Company may terminate this Agreement effective upon sixty
(60) days prior written notice of termination from the Company to the Manager,
without payment of any Termination Fee, if any act of fraud, misappropriation of
funds, or embezzlement against the Company or other willful violation of this
Agreement by the Manager in its corporate capacity (as distinguished from the
acts of any employees of the Manager which are taken without the complicity of
any of the Principals) under this Agreement or in the event of any gross
negligence on the part of the Manager in the performance of its duties under
this Agreement.

                                       20
<PAGE>

            (b) The Manager may terminate this Agreement effective upon sixty
(60) days prior written notice of termination to the Company in the event that
the Company shall default in the performance or observance of any material term,
condition or covenant contained in this Agreement and such default shall
continue for a period of 30 days after written notice thereof specifying such
default and requesting that the same be remedied in such 30 day period.

      SECTION 16. ACTION UPON TERMINATION. (a) From and after the effective date
of termination of this Agreement, pursuant to Sections 13, 14, or 15 of this
Agreement, the Manager shall not be entitled to compensation for further
services under this Agreement, but shall be paid all compensation accruing to
the date of termination and, if terminated pursuant to Section 13 or Section
15(b), the applicable Termination Fee. Upon such termination, the Manager shall
forthwith:

            (i) after deducting any accrued compensation and reimbursement for
its expenses to which it is then entitled, pay over to the Company or a
Subsidiary all money collected and held for the account of the Company or a
Subsidiary pursuant to this Agreement;

            (ii) deliver to the Board of Directors a full accounting, including
a statement showing all payments collected by it and a statement of all money
held by it, covering the period following the date of the last accounting
furnished to the Board of Directors with respect to the Company or a Subsidiary;
and

            (iii) deliver to the Board of Directors all property and documents
of the Company or any Subsidiary then in the custody of the Manager.

            (b) In the event that this Agreement is terminated, the Company
shall have the option, to be exercised by written notice to the Manager within
ten (10) days following such termination, to purchase from the Manager the right
of the Manager to receive the Incentive Compensation. In exchange therefor the
Company will be obligated to pay the Manager a cash purchase price (the "Cash
Price") equal to the amount of the Incentive Compensation that would be paid to
the Manager if all of the Company's assets were sold for cash at their then
current fair market value (taking into account, among other things, expected
future performance of the underlying investments, the "Fair Market Value"). In
the event that the Company does not elect to exercise such option to purchase
the Incentive Compensation, the Manager shall have the right to require the
Company to do so at the Cash Price by delivering to the Company written notice
within twenty (20) days following such termination. The

                                       21
<PAGE>
Fair Market Value shall be determined by independent appraisal to be conducted
by a nationally recognized appraisal firm mutually agreed upon by the Company
and the Manager. If the Company and the Manager are unable to agree upon an
appraisal firm, then each of the Company and the Manager shall choose an
independent appraisal firm to conduct an appraisal. In such event, (i) if the
appraisals prepared by the two appraisers so selected are the same or differ by
an amount that does not exceed 20% of the higher of the two appraisals, the Fair
Market Value will be deemed to be the average of such appraisals, and (ii) if
the two appraisals differ by more than 20% of the higher of the two appraisals,
the two appraisers together shall select a third nationally recognized appraisal
firm to conduct an appraisal. If the two appraisers are unable to agree as to
the identity of such third appraiser, either of the Manager and the Company may
request that the American Arbitration Association ("AAA") select the third
appraiser, which shall then be selected by the AAA. The Fair Market Value will
then be deemed to be the amount determined by such third appraiser, but in no
event less than the lower or more than the higher of the first two appraisals
made under this Section 16(b).

      SECTION 17. RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST. The
Manager agrees that any money or other property of the Company or Subsidiary
held by the Manager under this Agreement shall be held by the Manager as
custodian for the Company or Subsidiary, and the Manager's records shall be
appropriately marked clearly to reflect the ownership of such money or other
property by the Company or such Subsidiary. Upon the receipt by the Manager of a
written request signed by a duly authorized officer of the Company requesting
the Manager to release to the Company or any Subsidiary any money or other
property then held by the Manager for the account of the Company or any
Subsidiary under this Agreement, the Manager shall release such money or other
property to the Company or any Subsidiary within a reasonable period of time,
but in no event later than sixty (60) days following such request. The Manager
shall not be liable to the Company, any Subsidiary, the Independent Directors,
or the Company's or a Subsidiary's stockholders or partners for any acts
performed or omissions to act by the Company or any Subsidiary in connection
with the money or other property released to the Company or any Subsidiary in
accordance with the first sentence of this Section 17. The Company and any
Subsidiary shall indemnify the Manager and its members, managers, officers and
employees against any and all expenses, losses, damages, liabilities, demands,
charges and claims of any nature whatsoever, which arise in connection with the
Manager's release of such money or other property to the Company or any
Subsidiary in accordance with the terms of this Section 17. Indemnification
pursuant to this provision shall be in addition to any right of the Manager to
indemnification under Section 11 of this Agreement.

                                       22
<PAGE>
      SECTION 18. NOTICES. Unless expressly provided otherwise in this
Agreement, all notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given, made and received when delivered against receipt or upon actual
receipt of (i) personal delivery, (ii) delivery by reputable overnight courier,
(iii) delivery by facsimile transmission against answerback, (iv) delivery by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:

(a) If to the Company:

                                    Newcastle Investment Corp.
                                    c/o Fortress Investment Group LLC
                                    1251 Avenue of the Americas
                                    16th Floor
                                    New York, New York  10020
                                    Attention: Mr. Randal A. Nardone

(b) If to the Manager:

                                    Fortress Investment Group, LLC
                                    1251 Avenue of the Americas
                                    16th Floor
                                    New York, New York 10020
                                    Attention: Mr. Randal A. Nardone

      Either party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section 18 for the giving of notice.

      SECTION 19. BINDING NATURE OF AGREEMENT; SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and permitted
assigns as provided in this Agreement.

      SECTION 20. ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding among the parties hereto with respect to the subject matter of
this Agreement, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter of this Agreement.
The

                                       23
<PAGE>
express terms of this Agreement control and supersede any course of performance
and/or usage of the trade inconsistent with any of the terms of this Agreement.
This Agreement may not be modified or amended other than by an agreement in
writing.

      SECTION 21. CONTROLLING LAW. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of New York, notwithstanding any New York or other conflict-of-law provisions to
the contrary.

      SECTION 22. INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

      SECTION 23. TITLES NOT TO AFFECT INTERPRETATION. The titles of paragraphs
and subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation of this Agreement.

      SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts of this Agreement, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

      SECTION 25. PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

      SECTION 26. GENDER. Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,

                                       24
<PAGE>
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.

                                       25
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                                       COMPANY:

                                       NEWCASTLE INVESTMENT CORP.,
                                       a Maryland corporation

                                       By: /s/ Randal A. Nardone
                                          --------------------------------------
                                          Name: Randal A. Nardone
                                          Its: Secretary

                                       MANAGER:

                                       FORTRESS INVESTMENT GROUP
                                       LLC, a Delaware limited liability company

                                       By: /s/ Randal A. Nardone
                                          --------------------------------------
                                          Name: Randal A. Nardone
                                          Its: Chief Operating Officer
                                               and Secretary<PAGE>
                                                                    Exhibit 10.4

                           NEWCASTLE INVESTMENT CORP.
                          NONQUALIFIED STOCK OPTION AND
                              INCENTIVE AWARD PLAN

                             ADOPTED ON JUNE 6, 2002
               AMENDED AND RESTATED EFFECTIVE AS OF JUNE 23, 2003
<PAGE>
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                  PAGE
<S>                 <C>                                                                           <C>
SECTION 1           PURPOSE OF PLAN; DEFINITIONS....................................................1
                    1.1    PURPOSE..................................................................1
                    1.2    DEFINITIONS..............................................................1

SECTION 2           ADMINISTRATION..................................................................5
                    2.1    ADMINISTRATION...........................................................5
                    2.2    DUTIES AND POWERS OF COMMITTEE...........................................6
                    2.3    MAJORITY RULE............................................................6
                    2.4    COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD
                           FAITH ACTIONS............................................................6

SECTION 3           STOCK SUBJECT TO PLAN...........................................................6
                    3.1    NUMBER OF AND SOURCE OF SHARES...........................................6
                    3.2    UNREALIZED AND TANDEM AWARDS.............................................7
                    3.3    ADJUSTMENT OF AWARDS.....................................................7

SECTION 4           ELIGIBILITY.....................................................................8

SECTION 5           AWARDS..........................................................................8
                    5.1    STOCK OPTIONS............................................................8
                    5.2    STOCK APPRECIATION RIGHTS................................................9
                    5.3    RESTRICTED STOCK.........................................................9
                    5.4    PERFORMANCE AWARDS......................................................10
                    5.5    MANAGER AWARDS AND TANDEM AWARDS........................................10
                    5.6    AUTOMATIC NON-OFFICER DIRECTOR AWARDS...................................12
                    5.7    OTHER AWARDS............................................................14

SECTION 6           AWARD AGREEMENTS...............................................................14
                    6.1    TERMS OF AWARD AGREEMENTS...............................................14
                    6.2    REPLACEMENT, SUBSTITUTION, AND RELOADING................................15
                    6.3    SURRENDER OF OPTIONS....................................................16

SECTION 7           LOANS..........................................................................16

SECTION 8           AMENDMENT AND TERMINATION......................................................17
</TABLE>

                                       i
<PAGE>
<TABLE>
<S>                 <C>                                                                            <C>
SECTION 9           UNFUNDED STATUS OF PLAN........................................................17

SECTION 10          GENERAL PROVISIONS.............................................................17
                    10.1   SECURITIES LAWS COMPLIANCE..............................................17
                    10.2   CERTIFICATE LEGENDS.....................................................18
                    10.3   TRANSFER RESTRICTIONS...................................................18
                    10.4   COMPANY ACTIONS; NO RIGHT TO EMPLOYMENT.................................18
                    10.5   PAYMENT OF TAXES........................................................18

SECTION 11          EFFECTIVE DATE OF PLAN.........................................................18

SECTION 12          TERM OF PLAN...................................................................19
</TABLE>

                                       ii
<PAGE>
                                      iii
<PAGE>
                           NEWCASTLE INVESTMENT CORP.
               NONQUALIFIED STOCK OPTION AND INCENTIVE AWARD PLAN

                                    SECTION 1

                          PURPOSE OF PLAN; DEFINITIONS

      1.1 Purpose. The purpose of the Plan is (a) to reinforce the long-term
commitment to the Company's success of those Non-Officer Directors, officers,
directors, employees, advisors, consultants and other personnel who are or will
be responsible for such success; to facilitate the ownership of the Company's
stock by such individuals, thereby reinforcing the identity of their interests
with those of the Company's stockholders; to assist the Company in attracting
and retaining individuals with experience and ability, (b) to compensate the
Manager for its successful efforts in raising capital for the Company and to
provide performance-based compensation in order to provide incentive to the
Manager to enhance the value of the Company's Stock and (c) to benefit the
Company's stockholders by encouraging high levels of performance by individuals
whose performance is a key element in achieving the Company's continued success.

      1.2 Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:

         (1) "Award" or "Awards" means an award described in Section 5 hereof.

         (2) "Award Agreement" means an agreement described in Section 6 hereof
entered into between the Company and a Participant, setting forth the terms,
conditions and any limitations applicable to the Award granted to the
Participant.

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

         (4) "Board" means the Board of Directors of the Company.

         (5) "Change in Control" of the Company shall be deemed to have occurred
if an event set forth in any one of the following paragraphs (i)-(iii) shall
have occurred unless prior to the occurrence of such event, the Board determines
that such event shall not constitute a Change in Control:

                                       1
<PAGE>
      (i)   any Person is or becomes Beneficial Owner, directly or indirectly,
            of securities of the Company representing thirty percent (30%) or
            more of the combined voting power of the then outstanding securities
            of the Company, excluding (A) any Person who becomes such a
            Beneficial Owner in connection with a transaction described in
            clause (x) of paragraph (ii) below, and (B) any Person who becomes
            such a Beneficial Owner through the issuance of such securities with
            respect to purchases made directly from the Company; or

      (ii)  the stockholders of the Company approve a merger or consolidation of
            the Company with any other corporation or the issuance of voting
            securities of the Company in connection with a merger or
            consolidation of the Company (or any direct or indirect subsidiary
            of the Company) pursuant to applicable stock exchange requirements,
            other than (x) a merger or consolidation which would result in the
            voting securities of the Company outstanding immediately prior to
            such merger or consolidation continuing to represent (either by
            remaining outstanding or by being converted into voting securities
            of the surviving entity or any parent thereof) fifty percent (50%)
            or more of the combined voting power of the securities of the
            Company or such surviving entity or any parent thereof outstanding
            immediately after such merger or consolidation, or (y) a merger or
            consolidation effected to implement a recapitalization of the
            Company (or similar transaction) in which no Person is or becomes
            the Beneficial Owner, directly or indirectly, of securities of the
            Company representing thirty percent (30%) or more of the combined
            voting power of the then outstanding securities of the Company; or

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

            (6) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto.

            (7) "Commission" means Securities and Exchange Commission.

                                       2
<PAGE>
         (8) "Committee" means any committee the Board may appoint to administer
the Plan. To the extent necessary and desirable, the Committee shall be composed
entirely of individuals who meet the qualifications referred to in Section
162(m) of the Code and Rule 16b-3 under the Exchange Act. If at any time or to
any extent the Board shall not administer the Plan, then the functions of the
Board specified in the Plan shall be exercised by the Committee.

         (9) "Company" means Newcastle Investment Corp., a Maryland corporation.

         (10) "Effective Date" means the date provided pursuant to Section 11.

         (11) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         (12) "Fair Market Value" means, as of any given date, (i) the closing
price of a share of the Company's Stock on the principal exchange on which
shares of the Company's Stock are then trading, if any, on the trading day
previous to such date, or, if stock was not traded on the trading day previous
to such date, then on the next preceding trading day during which a sale
occurred; or (ii) if such Stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, (x) the last sales price (if the Stock
is then listed as a National Market Issue under the NASDAQ National Market
System) or (y) the mean between the closing representative bid and asked prices
(in all other cases) for the Stock on the trading day previous to such date as
reported by NASDAQ or such successor quotation system; or (iii) if such Stock is
not publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the mean between the closing bid and asked prices for the
Stock, on the day previous to such date, as determined in good faith by the
Committee; or (D) if the Stock is not publicly traded, the fair market value
established by the Committee using any reasonable method and acting in good
faith.]

         (13) "Initial Offering Price" means the initial price to the public as
set forth in the final prospectus included within the Registration Statement.

         (14) "Manager" means Fortress Investment Group LLC, a Delaware limited
liability company, or any affiliate of Fortress Investment Group LLC who shall
succeed as manager under that certain Management and Advisory Agreement, dated
as of June 6, 2002, by and among the Company, Fortress Partners, L.P. and
Fortress Investment Group LLC as amended from time to time.

                                       3
<PAGE>
         (15) "Manager Awards" means the Awards granted to the Manager as
described in Section 5.5 hereof.

         (16) "Non-Officer Director" means a director of the Company who is not
an officer or employee of the Company.

         (17) "Non-Officer Director Stock Option" shall have the meaning set
forth in Section 5.6.

         (18) "Non-Officer Director Stock" shall have the meaning set forth in
Section 5.6.

         (19) "NYSE" means the New York Stock Exchange.

         (20) "Participant" means any Non-Officer Director, the Manager and any
director, officer, employee, consultant or advisor to the Company or to any
parent, affiliate or subsidiary of the Company, selected by the Committee,
pursuant to the Committee's authority in Section 2 below, to receive Awards.

         (21) "Plan" means this Newcastle Investment Corp. Nonqualified Stock
Option and Incentive Award Plan.

         (22) "Registration Statement" means the registration statement filed
with the Securities and Exchange Commission for the initial underwritten public
offering of the Company's Stock.

         (23) "Restricted Stock" means Stock as described in Section 5.3 hereof.

         (24) "Stock" means the common stock, par value $0.01 per share, of the
Company.

         (25) "Stock Appreciation Right" shall have the meaning set forth in
Section 5.2 hereof.

         (26) "Stock Option" means any option to purchase shares of Stock
granted pursuant to the Plan. The Stock Options granted hereunder are not
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code.

                                    SECTION 2

                                       4
<PAGE>
                                 ADMINISTRATION

      2.1 Administration. The Plan shall be administered in accordance with the
requirements of Section 162(m) of the Code (but only to the extent necessary and
desirable to maintain qualification of awards under the Plan under Section
162(m) of the Code) and, to the extent applicable, Rule 16b-3 under the Exchange
Act ("Rule 16b-3"), by the Board or, at the Board's sole discretion, by the
Committee, which shall be appointed by the Board, and which shall serve at the
pleasure of the Board.

      2.2 Duties and Powers of Committee. The Committee shall have the power and
authority to grant Awards to Participants pursuant to the terms of the Plan,
and, in its discretion, to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall from time to time deem
advisable; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan.

      In particular, the Committee shall have the authority to determine, in a
manner consistent with the terms of the Plan:

         (1) in addition to the Manager and the Non-Officer Directors, those
officers, employees, directors, managers, consultants or advisors, if any, who
shall be Participants;

         (2) subject to Section 3, the number of shares of Stock to be covered
by each Stock Option granted hereunder;

         (3) the terms and conditions of any Award granted hereunder, including
the waiver or modification of any such terms or conditions, consistent with the
provisions of the Plan (including, but not limited to, Section 8 of the Plan);
and

         (4) the terms and conditions which shall govern all the Award
Agreements, including the waiver or modification of any such terms or
conditions.

                                       5
<PAGE>

      2.3 Majority Rule. The Committee shall act by a majority of its members in
attendance at a meeting at which a quorum is present or by a memorandum or other
written instrument signed by all members of the Committee.

      2.4 Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee may receive such compensation for their services as members as may
be determined by the Board. All expenses and liabilities that members of the
Committee or Board may incur in connection with the administration of this Plan
shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Committee, the Board, the Company and any officers and directors of
the Company shall be entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations and determinations
made by the Committee or Board in good faith shall be final and binding upon all
Participants, the Company and all other interested persons. No member of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or any Award, and
all members of the Committee and Board shall be fully protected and indemnified
to the fullest extent permitted by law, by the Company, in respect of any such
action, determination or interpretation.

                                    SECTION 3

                              STOCK SUBJECT TO PLAN

      3.1 Number of and Source of Shares. The maximum number of shares of Stock
reserved and available for issuance under the Plan each fiscal year shall be as
follows: for the Company's fiscal year during which the Effective Date occurs,
5,000,000 (subject to adjustment as provided herein); for each of the Company's
fiscal years thereafter, fifteen percent (15%) of the number of shares of Stock
outstanding as determined as of the first day of the fiscal year during which an
Award may be granted (subject to adjustment as provided herein). Notwithstanding
the foregoing, in no event shall such number of shares exceed 10,000,000. The
Stock which may be issued pursuant to an Award under the Plan may be treasury
Stock, authorized but unissued Stock, or Stock acquired, subsequently or in
anticipation of the transaction, in the open market to satisfy the requirements
of the Plan. Awards may consist of any combination of such Stock, or, at the
election of the Company, cash. The aggregate number of shares of Stock as to
which Awards may be granted to any Participant during any calendar year may not,
subject to adjustment as provided in this Section 3, exceed 50% of the shares of
Stock reserved for the purposes of the Plan. If any shares of Stock subject to
an Award are forfeited, cancelled, exchanged

                                       6
<PAGE>

or surrendered or if an Award otherwise terminates or expires with or without a
distribution of shares to the Participant, the shares of Stock with respect to
such Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, count against the maximum number of shares
for which Awards may be granted to the Participant under the preceding sentence.

      3.2 Unrealized and Tandem Awards. Subject to the limitations set forth in
the last sentence of Section 3.1, if any shares of Stock subject to an Award are
forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires with or without a distribution of shares to the
Participant, the shares of Stock with respect to such Award shall, to the extent
of any such forfeiture, cancellation, exchange, surrender, termination or
expiration, again be available for grants under the Plan. The grant of a Tandem
Award (as defined herein) shall not reduce the number of shares of Stock
reserved and available for issuance under the Plan.

      3.3 Adjustment of Awards. Upon the occurrence of any event which affects
the shares of Stock in such a way that an adjustment of outstanding Awards is
appropriate in order to prevent the dilution or enlargement of rights under the
Awards (including, without limitation, any extraordinary dividend or other
distribution (whether in cash or in kind), recapitalization, stock split,
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event),
the Committee shall make appropriate equitable adjustments, which may include,
without limitation, adjustments to any or all of the number and kind of shares
of Stock (or other securities) which may thereafter be issued in connection with
such outstanding Awards and adjustments to any exercise price specified in the
outstanding Awards and shall also make appropriate equitable adjustments to the
number and kind of shares of Stock (or other securities) authorized by or to be
granted under the Plan. Such other substitutions or adjustments shall be made
respecting Awards hereunder as may be determined by the Committee, in its sole
discretion. In connection with any event described in this paragraph, the
Committee may provide, in its discretion, for the cancellation of any
outstanding Award and payment in cash or other property in exchange therefor,
equal to the difference, if any, between the fair market value of the Stock or
other property subject to the Award, and the exercise price, if any.

                                       7
<PAGE>
                                    SECTION 4

                                   ELIGIBILITY

      The Manager, each employee of the Manager who is performing services for
the Company and each Non-Officer Director, officer, director, employee,
consultant or advisor of the Company or any parent, affiliate or subsidiary of
the Company shall be eligible for Awards under the Plan. Additional Participants
under the Plan may be selected from time to time by the Committee, in its sole
discretion, and the Committee shall determine, in its sole discretion, the
number of shares covered by each Award.

                                    SECTION 5

                                     AWARDS

      Awards may include, but are not limited to, those described in this
Section 5. The Committee may grant Awards singly, in tandem or in combination
with other Awards, as the Committee may in its sole discretion determine.
Subject to the other provisions of this Plan, Awards may also be granted in
combination or in tandem with, in replacement of, or as alternatives to, grants
or rights under this Plan and any other employee (or director) benefit or
compensation plan of the Company.

      5.1 Stock Options. A Stock Option is a right to purchase a specified
number of shares of Stock, at a specified price during such specified time as
the Committee shall determine.

          (a) A Stock Option may be exercised, in whole or in part, by giving
written notice of exercise to the Company, specifying the number of shares of
Stock to be purchased.

                                       8
<PAGE>
         (b) The exercise price of the Stock Option may be paid in cash or its
equivalent, as determined by the Committee. As determined by the Committee, in
its sole discretion, payment in whole or in part may also be made (i) by means
of any cashless exercise procedure approved by the Committee, or (ii) in the
form of unrestricted Stock already owned by the Participant which, (x) in the
case of unrestricted Stock acquired upon exercise of an option, have been owned
by the Participant for more than six months on the date of surrender, and (y)
has a Fair Market Value on the date of surrender equal to the aggregate option
price of the Stock as to which such Stock Option shall be exercised. No
fractional shares of Stock will be issued or accepted.

      5.2 Stock Appreciation Rights. A Stock Appreciation Right is a right to
receive, upon surrender of the right, an amount payable in cash and/or shares of
Stock under such terms and conditions as the Committee shall determine.

         (a) A Stock Appreciation Right may be granted in tandem with part or
all of (or in addition to, or completely independent of) a Stock Option or any
other Award under this Plan. A Stock Appreciation Right issued in tandem with a
Stock Option may be granted at the time of grant of the related Stock Option or
at any time thereafter during the term of the Stock Option.

         (b) The amount payable in cash and/or shares of Stock with respect to
each right shall be equal in value to a percentage (including up to 100%) of the
amount by which the Fair Market Value per share of Stock on the exercise date
exceeds the Fair Market Value per share of Stock on the date of grant of the
Stock Appreciation Right. The applicable percentage shall be established by the
Committee. The Award Agreement may state whether the amount payable is to be
paid wholly in cash, wholly in shares of Stock, or in any combination of the
foregoing; if the Award Agreement does not so state the manner of payment, the
Committee shall determine such manner of payment at the time of payment. The
amount payable in shares of Stock, if any, is determined with reference to the
Fair Market Value per share of Stock on the date of exercise.

         (c) Stock Appreciation Rights issued in tandem with Stock Options shall
be exercisable only to the extent that the Stock Options to which they relate
are exercisable. Upon exercise of the tandem Stock Appreciation Right, and to
the extent of such exercise, the Participant's underlying Stock Option shall
automatically terminate. Similarly, upon the exercise of the tandem Stock
Option, and to the extent of such exercise, the Participant's related Stock
Appreciation Right shall automatically terminate.

                                       9
<PAGE>
      5.3 Restricted Stock. Restricted Stock is Stock that is issued to a
Participant and is subject to such terms, conditions and restrictions as the
Committee deems appropriate, which may include, but are not limited to,
restrictions upon the sale, assignment, transfer or other disposition of the
Restricted Stock and the requirement of forfeiture of the Restricted Stock upon
termination of employment or service under certain specified conditions. The
Committee may provide for the lapse of any such term or condition or waive any
term or condition based on such factors or criteria as the Committee may
determine. Subject to the restrictions stated in this Section 5.3 and in the
applicable Award Agreement, the Participant shall have, with respect to Awards
of Restricted Stock, all of the rights of a stockholder of the Company,
including the right to vote the Restricted Stock and the right to receive any
cash or stock dividends on such Stock. The Company may require that the stock
certificates evidencing Restricted Stock granted hereunder be held in the
custody of the Company until the restrictions thereon shall have lapsed, and
that, as a condition of any award of Restricted Stock, the Participant shall
have delivered a stock power, endorsed in blank, relating to the Stock covered
by such award.

      5.4 Performance Awards. Performance Awards may be granted under this Plan
from time to time based on such terms and conditions as the Committee deems
appropriate provided that such Awards shall not be inconsistent with the terms
and purposes of this Plan. Performance Awards are Awards which are contingent
upon the performance of all or a portion of the Company and/or its subsidiaries
and/or which are contingent upon the individual performance of a Participant.
Performance Awards may be in the form of performance units, performance shares
and such other forms of Performance Awards as the Committee shall determine. The
Committee shall determine the performance measurements and criteria for such
Performance Awards. The Company may require that the stock certificates
evidencing Performance Awards granted hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a
condition of any award of Performance Awards, the Participant shall have
delivered a stock power, endorsed in blank, relating to the Stock covered by
such award.

      5.5 Manager Awards and Tandem Awards.

         (a) Grant of Compensatory Stock Options. As consideration for the
Manager's role in raising capital for the Company, the Manager shall be granted
Stock Options to acquire that number of shares of Stock equal in number to ten
percent (10%) of the equity securities issued by the Company on the Registration
Statement.

                                       10
<PAGE>
         (b) Terms of Manager Awards. The Stock Options referred to in clause
(a) above shall be 100% vested as of the date of grant and become exercisable as
to 1/30th of the Stock subject to the Stock Options on the first day of each of
the following 30 calendar months following the date of grant. Such Stock Options
shall expire on the tenth anniversary of the date of grant. Such Stock Options
shall have a per share exercise price equal to the Initial Offering Price,
subject to adjustment as set forth in Section 3.3 hereof. The exercise price of
such Stock Options may be paid in cash or its equivalent, as determined by the
Committee. As determined by the Committee, in its sole discretion, payment in
whole or in part may also be made (i) by means of any cashless exercise
procedure approved by the Committee, or (ii) in the form of unrestricted Stock
already owned by the Manager which, (x) in the case of unrestricted Stock
acquired upon exercise of an option, have been owned by the Manager for more
than six months on the date of surrender, and (y) has a Fair Market Value on the
date of surrender equal to the aggregate option price of the Stock as to which
such Stock Option shall be exercised. No fractional shares of Stock will be
issued or accepted. The Award Agreement with respect to such Stock Options shall
also set forth such other terms and conditions with respect to Awards to the
Manager as the Committee may determine, including, without limitation,
provisions for replacement, substitution and reloading of such Stock Options
and/or the grant of Restricted Stock, Performance Awards or other Awards.

         (c) The Committee shall (unless the members thereof determine that such
Awards are inappropriate), award Stock Options to such employees of the Manager
as the Manager shall recommend, who act as officers of or perform other services
for the Company, which options may be tandem to the Stock Options that are the
subject of outstanding Manager Awards designated by the Manager--i.e., shares of
Stock issuable pursuant to the exercise of the Stock Options that are subject to
certain designated Manager Awards would alternatively be issuable pursuant to
the exercise of Stock Options that are the subject of the tandem awards granted
to persons who perform services for or on behalf of the Company, provided that
such shares of Stock may be issued pursuant to the exercise of either the
designated Manager Awards or the tandem awards but not both (the "Tandem
Awards").

         (d) As a condition to the grant of Tandem Awards, the Manager shall be
required to agree that so long as such Tandem Awards remain outstanding, it will
not exercise any Stock Options under any designated Manager Award that are
related to the options under such outstanding Tandem Awards. If Stock Options
under a Tandem Award are forfeited, expire or are cancelled without

                                       11
<PAGE>
being exercised, the related Stock Options under the designated Manager Award
shall again become exercisable in accordance with its terms. Upon the exercise
of Stock Options under a Tandem Award, the related Stock Options under the
designated Manager Award shall terminate.

         (e) The terms and conditions of each such Tandem Awards (e.g., the per
share exercise price, the schedule of vesting and exercisability, etc.) shall be
determined by the Committee in its sole discretion, provided, that the term of
such award may not be greater than the term of its related Manager Award.

         (f) Other Awards. The Committee may, from time to time, grant such
Awards to the Manager as the Committee deems advisable in order to provide
additional incentive to the Manager to enhance the value of the Company's Stock.

         (g) Change in Control Provisions. Notwithstanding anything herein or in
any Award Agreement to the contrary, all Awards granted to the Manager pursuant
to this Plan shall become immediately and fully exercisable upon a Change in
Control and all Tandem Awards granted pursuant to this Plan shall become
immediately and fully vested and exercisable upon a Change in Control.

      5.6 Automatic Non-Officer Director Awards.

         (a) Initial Grant of Non-Officer Director Stock Option. Each
Non-Officer Director shall be granted a Stock Option, which shall be fully
vested as of the date of the grant, to purchase 2,000 shares of Stock (each, a
"Non-Officer Director Stock Option") upon the later to occur of (i) the
Effective Date of the Plan, or (ii) the date of the first Board of Director's
meeting attended by such Non-Officer Director. For those Non-Officer Directors
serving as of the Effective Date of the Plan, the option price per share of
Stock shall be equal to the Initial Offering Price. For any Non-Officer Director
appointed to the Board of Directors after the Effective Date of the Plan, the
option price per share of Stock shall be 100% of the Fair Market Value of the
Stock on the date of grant.

         (b) Annual Grant of Stock. On the first business day after the first
annual stockholders' meeting of the Company following June 23, 2003, and on the
first business day after each such annual meeting of the Company thereafter
during the term of the Plan, each Non-Officer Director shall be granted that
number of shares of Stock, the Fair Market Value of which shall equal $15,000 on
the date of

                                       12
<PAGE>
grant and which shall be fully vested as of such date (the "Non-Officer Director
Stock").

                                       13
<PAGE>

         (c) Stock Availability. In the event that the number of shares of Stock
available for grant under the Plan is not sufficient to accommodate the awards
of Non-Officer Director Stock Options and Non-Officer Director Stock, then the
remaining shares of Stock available for such automatic awards shall be granted
to each Non-Officer Director who is to receive such an award on a pro-rata
basis. No further grants shall be made until such time, if any, as additional
shares of Stock become available for grant under the Plan through action of the
Board or the stockholders of the Company to increase the number of shares of
Stock that may be issued under the Plan or through cancellation or expiration of
Awards previously granted hereunder.

         (d) Term; Method of Exercise of Non-Officer Director Stock Option. Each
Non-Officer Director Stock Option shall cease to be exercisable no later than
the date that is ten (10) years following the date of grant. The exercise price
of such Stock Options may be paid in cash or its equivalent, as determined by
the Committee. As determined by the Committee, in its sole discretion, payment
in whole or in part may also be made (i) by means of any cashless exercise
procedure approved by the Committee, or (ii) in the form of unrestricted Stock
already owned by the Non-Officer Director which, (x) in the case of unrestricted
Stock acquired upon exercise of an option, have been owned by the Non-Officer
Director for more than six months on the date of surrender, and (y) has a Fair
Market Value on the date of surrender equal to the aggregate option price of the
Stock as to which such Stock Option shall be exercised. No fractional shares of
Stock will be issued or accepted.

         (e) Award Agreements. Each recipient of a Non-Officer Director Stock
Option and Non-Officer Director Stock shall enter into an Award Agreement with
the Company, which agreement shall set forth, among other things, the exercise
price, the term and provisions regarding exercisability of the Non-Officer
Director Stock Option, or, as applicable, the number of shares of Non-Officer
Director Stock awarded hereunder, which provisions shall not be inconsistent
with the terms of this Section 5.6 and Section 6.1. The Award Agreement with
respect to such Non-Officer Director Stock Option and Non-Officer Director Stock
shall also set forth such other terms and conditions with respect to Awards to
the Non-Officer Director as the Committee may determine.

                                       14
<PAGE>
      5.7 Other Awards. The Committee may from time to time grant to its
Non-Officer Directors Stock, other Stock-based and non-Stock-based Awards under
the Plan, including without limitation those Awards pursuant to which shares of
Stock are or may in the future be acquired, Awards denominated in Stock,
securities convertible into Stock, phantom securities, dividend equivalents and
cash. The Committee shall determine the terms and conditions of such other
Stock, Stock-based and non-Stock-based Awards provided that such Awards shall
not be inconsistent with the terms and purposes of this Plan.

                                    SECTION 6

                                AWARD AGREEMENTS

      Each Award under this Plan shall be evidenced by an Award Agreement
setting forth the number of shares of Stock or other securities, and such other
terms and conditions applicable to the Award (and not inconsistent with this
Plan) as are determined by the Committee.

      6.1 Terms of Award Agreements. Award Agreements shall include the
following terms:

         (a) Term. The term of each Award (as determined by the Committee);
provided that, no Award shall be exercisable more than ten years after the date
such Award is granted.

         (b) Exercise Price. The exercise price per share of Stock purchasable
under an Award (as determined by the Committee in its sole discretion at the
time of grant); provided that, the exercise price shall not be less than the par
value of the Stock provided, further, that Awards intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, shall not be less than 100% of the Fair Market Value of the Stock on such
date.

         (c) Exercisability. Provisions regarding the exercisability of Awards
(which shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at or after grant).

         (d) Method of Exercise. Provisions describing the method of exercising
Awards.

                                       15
<PAGE>

         (e) Termination of Employment or Service: Provisions describing the
treatment of an Award in the event of the retirement, disability, death or other
termination of a Participant's employment or service with the Company, including
but not limited to, terms relating to the vesting, time for exercise, forfeiture
and cancellation of an Award in such circumstances.

         (f) Rights as Stockholder: A provision that a Participant shall have no
rights as a stockholder with respect to any securities covered by an Award until
the date the Participant becomes the holder of record. Except as provided in
Section 3.3 hereof, no adjustment shall be made for dividends or other rights,
unless the Award Agreement specifically requires such adjustment, in which case,
grants of dividend equivalents or similar rights shall not be considered to be a
grant of any other stockholder right.

         (g) Nontransferability. A provision that except under the laws of
descent and distribution, the Participant shall not be permitted to sell,
transfer, pledge or assign any Award, and all Awards shall be exercisable,
during the Participant's lifetime, only by the Participant; provided, however,
that the Participant shall be permitted to transfer one or more Stock Options to
a trust controlled by the Participant during the Participant's lifetime for
estate planning purposes.

         (h) Other Terms. Such other terms as are necessary and appropriate to
effectuate an Award to the Participant, including but not limited to, (1)
vesting provisions, (2) deferral elections, (3) any requirements for continued
employment or service with the Company, (4) any other restrictions or conditions
(including performance requirements) on the Award and the method by which
restrictions or conditions lapse, (5) effect on the Award of a Change in
Control, (6) the right of the Company and such other persons as the Committee
shall designate ("Designees") to repurchase from a Participant, and such
Participant's permitted transferees, all shares of Stock issued or issuable to
such Participant in connection with an Award in the event of such Participant's
termination of employment or service, (7) rights of first refusal granted to the
Company and Designees, if any, (8) holdback and other registration right
restrictions in the event of a public registration of any equity securities of
the Company and (9) any other terms and conditions which the Committee shall
deem necessary and desirable.

      6.2 Replacement, Substitution, and Reloading. Award Agreements may also
include provisions permitting the replacement or substitution of outstanding
Awards or securities held by the Participant in order to exercise or realize
rights under

                                       16
<PAGE>
other Awards, or in exchange for the grant of new Awards under similar or
different terms, and for the grant of reload Stock Options upon exercise of
outstanding Stock Options.

                                       17
<PAGE>

      6.3 Surrender of Options. The Committee may require the voluntary
surrender of all or a portion of any Stock Option or other Award granted under
the Plan as a condition precedent to a grant of a new Stock Option or Award.
Subject to the provisions of the Plan, such new Stock Option or Award shall be
exercisable at the price, during such period and on such other terms and
conditions as are specified by the Committee at the time the new Stock Option or
Award is granted; provided that, should the Committee so require, the number of
shares subject to such new Stock Option or Award shall not be greater than the
number of shares subject to the surrendered Stock Option or Award.

                                    SECTION 7

                                      LOANS

      The Company or any parent or subsidiary of the Company may make loans
available to Stock Option holders in connection with the exercise of outstanding
Stock Options granted under the Plan, as the Committee, in its discretion, may
determine. Such loans shall (i) be evidenced by promissory notes entered into by
the Stock Option holders in favor of the Company or any parent or subsidiary of
the Company, (ii) be subject to the terms and conditions set forth in this
Section 7 and such other terms and conditions, not inconsistent with the Plan,
as the Committee shall determine, (iii) bear interest, if any, at such rate as
the Committee shall determine, and (iv) be subject to Board approval (or to
approval by the Committee to the extent the Board may delegate such authority).
In no event may the principal amount of any such loan exceed the sum of (x) the
exercise price less the par value of the shares of Stock covered by the Stock
Option, or portion thereof, exercised by the holder, and (y) any federal, state,
and local income tax attributable to such exercise. The initial term of the
loan, the schedule of payments of principal and interest under the loan, the
extent to which the loan is to be with or without recourse against the holder
with respect to principal or interest and the conditions upon which the loan
will become payable in the event of the holder's termination of employment shall
be determined by the Committee. Unless the Committee determines otherwise, when
a loan is made, shares of Stock having a Fair Market Value at least equal to the
principal amount of the loan shall be pledged by the holder to the Company as
security for payment of the unpaid balance of the loan, and such pledge shall be
evidenced by a pledge agreement, the terms of which shall be determined by the
Committee, in its discretion; provided that, each loan shall comply with all
applicable laws, regulations and rules of the Board of Governors of the Federal
Reserve System and of the U.S. Securities and Exchange Commission and any other
governmental agency having jurisdiction.

                                       18
<PAGE>
                                    SECTION 8

                            AMENDMENT AND TERMINATION

      The Board may at any time and from time-to-time alter, amend, suspend, or
terminate the Plan in whole or in part; provided that, no amendment which
requires stockholder approval in order for the Plan to comply with a rule or
regulation deemed applicable by the Committee, shall be effective unless the
same shall be approved by the requisite vote of the stockholders of the Company
entitled to vote thereon. Notwithstanding the foregoing, no amendment shall
affect adversely any of the rights of any Participant, without such
Participant's consent, under any Award or Loan theretofore granted under the
Plan.

                                    SECTION 9

                             UNFUNDED STATUS OF PLAN

      The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.

                                   SECTION 10

                               GENERAL PROVISIONS

      10.1 Securities Laws Compliance. Shares of Stock shall not be issued
pursuant to the exercise of any Award granted hereunder unless the exercise of
such Award and the issuance and delivery of such shares of Stock pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act and the
requirements of any stock exchange upon which the Stock may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

      10.2 Certificate Legends. The Committee may require each person purchasing
shares pursuant to a Stock Option to represent to and agree with the Company in
writing that such person is acquiring the Stock subject thereto without a view
to distribution thereof. The certificates for such Stock may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.

                                       19
<PAGE>

      10.3 Transfer Restrictions. All certificates for shares of Stock delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Commission, any stock exchange upon which the
Stock is then listed, and any applicable federal or state securities law, and
the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.

      10.4 Company Actions; No Right to Employment. Nothing contained in the
Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is necessary and
desirable; and such arrangements may be either generally applicable or
applicable only in specific cases. The adoption of the Plan shall not confer
upon any employee, consultant or advisor of the Company any right to continued
employment with the Company, as the case may be, nor shall it interfere in any
way with the right of the Company to terminate the employment or service of any
of its employees, consultants or advisors at any time.

      10.5 Payment of Taxes. Each Participant shall, no later than the date as
of which the value of an Award first becomes includible in the gross income of
the Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of, any federal,
state, or local taxes of any kind required by law to be withheld with respect to
the Award. The obligations of the Company under the Plan shall be conditional on
the making of such payments or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.

                                   SECTION 11

                             EFFECTIVE DATE OF PLAN

      The Plan became effective (the "Effective Date") on June 6, 2002, the date
the Board formally approved the Plan.

                                   SECTION 12

                                  TERM OF PLAN

      No Award shall be granted pursuant to the Plan on or after the tenth

                                       20
<PAGE>
anniversary of the Effective Date, but Awards theretofore granted may extend
beyond that date.

                                       21

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