NEWCASTLE INVESTMENT CORP.

                                  Common Stock

                                 TERMS AGREEMENT

                                                         Dated:  January 6, 2004


To:   Newcastle Investment Corp.
      1251 Avenue of the Americas
      New York,  New York 10020

Attention:  Wesley R. Edens

Ladies and Gentlemen:

We understand that Newcastle Investment Corp., a corporation organized and
existing under the laws of Maryland (the "Company"), proposes to issue and sell
3,300,000 shares of common stock, set forth below (the "Underwritten
Securities"). Subject to the terms and conditions set forth or incorporated by
reference herein, the underwriter named below (the "Underwriter") offers to
purchase the number of Underwritten Securities (as such term is defined in the
Underwriting Agreement referred to below) set forth below opposite its name, at
the purchase price set forth below.



                                                          NUMBER
                                                       OF SHARES OF
                                                       UNDERWRITTEN
           UNDERWRITER                                  SECURITIES

                                                    
Merrill Lynch, Pierce, Fenner & Smith
                     Incorporated                       3,300,000
                                                        ---------
           Total..................................      3,300,000
                                                        =========



The Underwritten Securities shall have the following terms:

Title of Securities: Common Stock, $.01 par value per share
Number of Shares: 3,300,000
Public offering price per share: $26.30
Purchase price per share: $26.015
Number of Option Securities, if any, that may be purchased by the Underwriter:
None
Delayed Delivery Contracts:  Not Authorized
Additional co-managers, if any: None

Terms of Lock-up:      As stated in section 3(a)(x) of the Underwriting
                       Agreement, during the period of 30 days from the date of
                       the Prospectus Supplement, the Company will not, directly
                       or indirectly, without the prior written consent of
                       Merrill Lynch, Pierce, Fenner and Smith Incorporated (a)
                       issue, sell, offer or agree to sell, grant any option for
                       the sale of, pledge, make any short sale or maintain any
                       short position, establish or maintain a "put equivalent
                       position" (within the meaning of Rule 16-a-1(h) under the
                       1934 Act), enter into any swap, derivative transaction or
                       other arrangement that transfers to another, in whole or
                       in part, any of the economic consequences of ownership of
                       the Common Stock (whether any such transaction is to be
                       settled by delivery of Common Stock, other securities,
                       cash or other consideration) or otherwise dispose of, any
                       Common Stock (or any securities convertible into,
                       exercisable for or exchangeable for Common Stock) or
                       interest therein of the Company or of any of its
                       subsidiaries, other than the Company's sale of Shares
                       pursuant to this Agreement and the Company's issuance of
                       Common Stock (i) upon the exercise of presently
                       outstanding options; (ii) in connection with acquisitions
                       by the Company or a subsidiary, and (iii) the grant and
                       exercise of options under, or the issuance and sale of
                       shares pursuant to, employee stock option plans in effect
                       on the date hereof or (b) file a registration statement
                       under the 1933 Act registering shares of Common Stock (or
                       any securities convertible into, exercisable for or
                       exchangeable for Common Stock) or any interest in shares
                       of Common Stock, except for a registration statement on
                       Form S-8 with respect to shares of Common Stock issuable
                       under the Newcastle Investment Corp. Nonqualified Stock
                       Option and Incentive Award Plan, as amended from time to
                       time.

                       At the time the Underwriting Agreement and this Agreement
                       are executed, Merrill Lynch, Pierce, Fenner & Smith
                       Incorporated shall have received a letter agreement from
                       the Manager and Fortress Principal Investment Holdings
                       LLC ("FPIH"), and each director, officer or related party
                       of the Company and the Manager designated by you and
                       listed on Schedule II to the Underwriting Agreement,
                       substantially in the forms attached thereto as Annex III
                       and Annex IV, respectively.

Other terms: None

Closing date and location: January 9, 2004, 10:00 a.m.; Sidley Austin Brown &
                 Wood LLP, 787 Seventh Avenue, New York, New York 10019



All of the provisions contained in the Underwriting Agreement attached as Annex
A hereto are hereby incorporated by reference in their entirety herein and shall
be deemed to be a part of this Terms Agreement to the same extent as if such
provisions had been set forth in full herein. Terms defined in such document are
used herein as therein defined.



                                       2

Please accept this offer no later than 7:00 P.M. (New York City time) on January
6, 2004 by signing a copy of this Terms Agreement in the space set forth below
and returning the signed copy to us.

                                  Very truly yours,

                                  MERRILL LYNCH, PIERCE, FENNER & SMITH
                                               INCORPORATED

                                  By:     /s/ Alexander S. Rubin
                                       ---------------------------
                                      Name:    Alexander S. Rubin
                                      Title:      Managing Director

Accepted:

NEWCASTLE INVESTMENT CORP.



By:           /s/ Wesley R. Edens
     -------------------------------------------
      Name:  Wesley R. Edens
      Title:    Chief Executive Officer

FORTRESS INVESTMENT GROUP LLC


By:         /s/  Randal A. Nardone
     -------------------------------------------
      Name:   Randal A. Nardone
      Title:     Chief Operating Officer


                                       3