Edgar Filing: CAPITAL TRUST INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934, as amended

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240.14a-12

CAPITAL TRUST, INC.
.................................................................................
(Name of Registrant as Specified In Its Charter)

.................................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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Preliminary Proxy Materials April __, 2004

CAPITAL TRUST, INC.
410 Park Avenue, 14th Floor
New York, New York 10022

April , 2004

Dear Shareholder:

You are cordially invited to attend the 2004 annual meeting of
shareholders of Capital Trust, Inc., which will be held at 10:00 a.m., local
time, on Thursday, June 17, 2004, at the offices of Paul, Hastings, Janofsky &
Walker LLP, 75 East 55th Street, New York, New York 10022. At the meeting,
shareholders will be asked to elect directors, approve our 2004 long-term
incentive plan, approve a proposed direct public offering of shares of our class
A common stock, ratify the appointment of Ernst & Young LLP as our independent
auditors for 2004 and act upon such other business as may properly come before
the meeting, all as described in the attached notice of annual meeting of
shareholders and proxy statement.

It is important that your shares be represented at the meeting and voted
in accordance with your wishes. Whether or not you plan to attend the meeting,
we urge you to complete, date, sign and return your proxy card in the enclosed
prepaid envelope as promptly as possible so that your shares will be voted at
the annual meeting. This will not limit your right to vote in person or to
attend the meeting.

Sincerely,

/s/ SAMUEL ZELL

Samuel Zell
Chairman of the Board

Preliminary Proxy Materials April __, 2004

CAPITAL TRUST, INC.
410 Park Avenue, 14th Floor
New York, New York 10022
-------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To our Shareholders:

We hereby notify you that we are holding our 2004 annual meeting of
shareholders at the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East
55th Street, New York, New York 10022, on Thursday, June 17, 2004, at 10:00
a.m., New York City time, for the following purposes:

1. To elect eight directors to serve until our next annual meeting
of shareholders and until such directors' successors are duly
elected and qualify.

2. To approve our 2004 long-term incentive plan.

3. To approve, for purposes of the New York Stock Exchange listing
standards, the issuance of up to 2,000,000 of our class A common
stock in a proposed direct public offering that would exceed 20%
of the number of such shares outstanding.

4. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31, 2004.

5. To transact such other business as may properly come before the
annual meeting or any adjournment or postponement thereof.

You can vote your shares of class A common stock if our records show
that you owned the shares as of the close of business on April 27, 2004, the
record date for the annual meeting.

We have enclosed a proxy statement and a proxy card solicited by our
board of directors.

To assure your representation at the annual meeting, please vote.
Whether or not you plan to attend the annual meeting, please complete, date,
sign and return the enclosed proxy card promptly in the enclosed prepaid
envelope. This will help ensure that your vote is counted. If you fail to return
your card, your vote will not be counted, unless you attend the meeting and vote
in person. You may revoke your proxy in the manner described in the proxy
statement at any time before the proxy has been voted at the annual meeting.

By Order of the Board of Directors,

/s/ SAMUEL ZELL

Samuel Zell
Chairman of the Board

April , 2004

Preliminary Proxy Materials April __, 2004

CAPITAL TRUST, INC.
410 Park Avenue, 14th Floor
New York, New York 10022

--------------------

PROXY STATEMENT

FOR

2004 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 17, 2004

--------------------

This proxy statement is being furnished by and on behalf of our board of
directors in connection with the solicitation of proxies to be voted at the 2004
annual meeting of shareholders. The date, time and place of the annual meeting
is:

Date: June 17, 2004
Time: 10:00 a.m., New York City time
Place: The law offices of Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street, New York, New York 10022

At the annual meeting, shareholders will be asked to:

o Elect the following nominees as our directors to serve until our next
annual meeting of shareholders and until such directors' successors
are duly elected and qualify: Samuel Zell, Jeffrey A. Altman, Thomas
E. Dobrowski, Martin L. Edelman, Craig M. Hatkoff, John R. Klopp,
Henry N. Nassau and Lynne B. Sagalyn ("Proposal 1");

o Approve our 2004 long-term incentive plan ("Proposal 2");

o Approve, for purposes of the New York Stock Exchange listing
standards, the issuance of up to 2,000,000 shares of our class A
common stock in a proposed direct public offering that would exceed
20% of the number of such shares outstanding ("Proposal 3");

o Ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31, 2004 ("Proposal 4");
and

o Transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof.

Our principal offices are located at 410 Park Avenue, 14th Floor, New
York, New York 10022 and our telephone number is (212) 655-0220.

The share based information contained in this proxy statement has been
adjusted as appropriate to reflect our one-for-three reverse stock split that
was effected on April 2, 2003.

This proxy statement and the enclosed proxy card are being sent on or
about , 2004 to shareholders of record as of the close of business on
April 27, 2004.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

In this section of the proxy statement, we answer some common questions
regarding the annual shareholders meeting and the voting of shares at the
meeting.

Where and when will the annual meeting be held?

The date, time and place of the meeting is:

June 17, 2004
10:00 a.m. (New York City time)
The law offices of Paul, Hastings,
Janofsky & Walker LLP
75 East 55th Street,
New York, New York 10022

Why did you send me this proxy statement?

We sent you this proxy statement and the enclosed proxy card because our board
of directors is asking for your proxy to vote at the annual meeting. We have
summarized information in this proxy statement you should consider in deciding
how to vote at the meeting. But you don't have to attend in order to vote your
shares. Instead, you may simply complete, sign, and return the enclosed proxy
card.

Who can vote?

You can vote your shares of class A common stock if our records show that you
owned the shares as of the close of business on April 27, 2004, the record date
for the annual meeting. As of April 27, 2004, there were a total of 6,636,882
shares of our class A common stock outstanding and entitled to vote at the
annual meeting. You get one vote for each share of class A common stock that you
own. The enclosed proxy card shows the number of shares you can vote.

How are votes counted?

We will hold the annual meeting if shareholders representing the required quorum
of shares of class A common stock entitled to vote either sign and return their
proxy cards or attend the meeting. A majority of the shares of class A common
stock entitled to vote at the meeting present in person or by proxy will
constitute a quorum. If you sign and return your proxy card, your shares will be
counted to determine whether we have a quorum even if you abstain or fail to
vote as indicated on the proxy card.

The proposals to approve our 2004 long-term incentive plan and the issuance of
our class A common stock in the proposed direct public offering are non-routine
matters under the rules of the New York Stock Exchange. As a result, if your
shares are held in the name of a nominee such as your brokerage firm, and you as
beneficial owner do not tell your nominee by June 17, 2004 how to vote your
shares, the nominee cannot vote them on the proposals to approve our 2004
long-term incentive plan and the issuance of our class A common stock in the
proposed direct public offering (giving rise to what is known as a broker
non-vote). If the nominee signs and returns the proxy card, your shares will be
counted as present to determine whether a quorum exists.

If you abstain or withhold votes or your shares are treated as broker non-votes,
your abstention, withheld vote or the broker non-votes:

o will not be counted as votes cast and will have no effect on the result
of the vote on the election of directors and the ratification of the
appointment of Ernst & Young LLP as our independent auditors; and

o will have the effect of a vote against the proposals to approve the 2004
long-term incentive plan and the issuance of our class A common stock in
the proposed direct public offering, unless for purposes of the New York
Stock Exchange listing standards holders of over 50% of the shares of
class A common stock entitled to vote as of the record date cast votes,
in which event your broker non-votes will not have any effect on the
result of the votes on that proposal.

What is the required vote for approval?

The election of each of our nominees for director requires a plurality of the
votes cast at the annual meeting and the ratification of the appointment of
Ernst & Young LLP as our independent auditors requires a majority of the votes
cast at the annual meeting on such matter.

The 2004 long-term incentive plan and the issuance of our class A common stock
in the proposed direct public offering will be approved in accordance with the
applicable New York Stock Exchange rules if the

proposal receives in its favor a majority of the votes cast, provided that the
total votes cast represent over 50% of the shares of class A common stock
entitled to vote as of the record date.

How do I vote by proxy?

Follow the instructions on the enclosed proxy card to vote on the matters to be
considered at the annual meeting. Sign and date the proxy card and mail it back
to us in the enclosed envelope. The individuals named and designated as proxies
in the proxy card will vote your shares as you instruct. You have the following
choices in completing your voting.

o You may vote on each matter, in which case your shares will be voted in
accordance with your choices.

o In voting on directors, you can either vote FOR all directors or
withhold your vote on all or certain directors specified by you.

o You may abstain on any other proposal, in which case no vote will be
recorded.

o You may return a signed proxy card without indicating your vote on any
matter, in which case the designated proxies will vote to elect all
eight nominees as directors and approve the other proposals.

What if other matters come up at the annual meeting?

The only matters we now know of that will be voted on at the annual meeting
include the matters we have described in this proxy statement: the election of
eight directors and the proposals to approve our 2004 long-term incentive plan,
approve the issuance of our class A common stock in the proposed direct public
offering and ratify the appointment of Ernst & Young LLP as our independent
auditors for 2004. If other matters are properly presented at the meeting, the
designated proxies will vote your shares in their discretion.

Can I change my vote after I return my proxy card?

Yes. At any time before the vote on a proposal, you can change your vote either
by giving us a written notice revoking your proxy card or by signing, dating,
and returning to us a new proxy card or by attending the annual meeting and
voting your shares in person. We will honor the proxy card with the latest date.

Proxy revocation notices or new proxy cards should be sent to Capital Trust,
Inc. c/o American Stock Transfer & Trust Company, 6201 Fifteenth Avenue,
Brooklyn, New York 11219, Attention: Paula Caroppoli.

Can I vote in person at the annual meeting rather than by completing the proxy
card?

Although we encourage you to complete and return the proxy card to ensure that
your vote is counted, you can attend the annual meeting and vote your shares in
person even if you have submitted a proxy card.

What do I do if my shares are held in "street name"?

If your shares are held in the name of your broker, a bank, or other nominee,
that party will give you instructions for voting your shares.

Who pays for this proxy solicitation?

We do. In addition to sending you these materials, some of our employees may
contact you by telephone, by mail, or in person. None of these employees will
receive any extra compensation for doing this. We do not expect to engage an
outside firm to solicit votes, but if such a firm is engaged subsequent to the
date of this proxy statement, the cost is estimated to be less than $10,000,
plus reasonable out-of-pocket expenses.

PROPOSAL 1 -- ELECTION OF DIRECTORS

As of the date of annual meeting, the number of directors that comprise
our entire board of directors will be fixed at nine. Eight directors will be
proposed for election at the annual meeting to hold office as directors until
our next annual meeting of shareholders and until their successors are elected
and qualify. All eight nominees currently serve on our board of directors.

In light of the provisions requiring a majority of independent directors
and other corporate governance requirements recently adopted by New York Stock
Exchange and the guidelines published by Institutional Shareholder Services
imposing limits on the maximum number of boards on which an individual may
concurrently serve, Sheli Z. Rosenberg resigned from our board and Gary R.
Garrabrant and Steven Roth agreed not to stand for re-election.

As of the annual meeting, our board of directors will appoint another
director who will meet the independence criteria set forth in the New York Stock
Exchange listing standards to fill the vacancy created by the election of only
eight directors at the annual meeting. The vacancy will be filled by board
appointment and no nominations from the floor at the annual meeting will be
considered or acted upon.

All of the nominees are willing to serve as directors but, if any of
them should decline or be unable to act as a director, the individuals
designated in the proxy cards as proxies will exercise the discretionary
authority provided to vote for the election of such substitute nominee selected
by our board of directors, unless the board alternatively acts to reduce the
size of the board or maintain a vacancy on the board in accordance with our
bylaws. The board of directors has no reason to believe that any such nominees
will be unable or unwilling to serve.

Our board of directors has determined that Messrs. Altman, Dobrowski and
Nassau and Dr. Sagalyn are independent under the criteria for independence set
forth in the listing standards of the New York Stock Exchange. With the
appointment of an additional independent director to fill the vacancy, we will
meet the New York Stock Exchange requirement for a majority of independent
directors serving on the board of directors.

Nominees for Election as Directors

The names, ages as of April 27, 2004, and existing positions with us of
the nominees, if any, are as follows:

Name Age Office or Position Held
---- --- -----------------------
Samuel Zell......................... 62 Chairman of the Board of
Directors

Jeffrey A. Altman.................. 37 Director

Thomas E. Dobrowski............ 60 Director

Martin L. Edelman................. 62 Director

Craig M. Hatkoff................... 50 Director

John R. Klopp....................... 50 Director, Chief Executive
Officer and President

Henry N. Nassau.................. 49 Director

Lynne B. Sagalyn.................. 56 Director

The name, principal occupation for the last five years, selected
biographical information and the period of service as our director of each of
the nominees are set forth below.

Samuel Zell has been the chairman of our board of directors since 1997.
Mr. Zell is chairman of Equity Group Investments, L.L.C., a privately-held
investment company. He is chairman of the board of trustees of Equity
Residential, a REIT specializing in the ownership and management of multi-family
housing, and of Equity Office Properties Trust, a REIT specializing in the
ownership and management of office buildings. He also serves as chairman of the
board of Anixter International Inc., a provider of integrated network and
cabling systems; Manufactured Home Communities, Inc., a REIT specializing in the
ownership and management of manufactured home communities; and Rewards Network,
Inc., an administrator of consumer loyalty rewards programs. Additionally, he
serves as chairman of Danielson Holding Corporation, a holding company for
insurance, marine transportation and waste-to-energy businesses. Since July
2002, Mr. Zell has been chief executive officer of Danielson. Mr. Zell has
announced his intention to step down as chief executive officer and as a
director of Danielson prior to December 31, 2004.

Jeffrey A. Altman has been a director since 1997. Mr. Altman is the sole
managing partner of Owl Creek Asset Management, L.P., a manager of distressed
securities and value equities hedge funds, which he founded in February 2002.
Mr. Altman previously served from November 1996 to 2001 as a senior vice
president of Franklin Mutual Advisers, Inc., formerly Heine Securities
Corporation, a registered investment adviser, and a vice president of Franklin
Mutual Series Fund Inc., a mutual fund with assets in excess of $20 billion,
advised by Franklin Mutual Advisers. From August 1988 to October 1996, Mr.
Altman was an analyst with Franklin Mutual Advisers.

Thomas E. Dobrowski has been a director since 1998. Mr. Dobrowski is the
managing director of Real Estate and Alternative Investments for General Motors
Asset Management, an investment manager for several pension funds of General
Motors Corporation and its subsidiaries, as well as for several third party
clients. Mr. Dobrowski is a trustee of Equity Office Properties Trust and a
director of Manufactured Home Communities, Inc.

Martin L. Edelman has been a director since 1997. Mr. Edelman has been
of counsel to Paul, Hastings, Janofsky & Walker LLP, and prior thereto Battle
Fowler LLP, each a law firm that has provided services to us. Mr. Edelman was a
partner with Battle Fowler LLP from 1972 to 1993. He has been a director of
Cendant Corporation and a member of the executive committee of that
corporation's board of directors since November 1993. Mr. Edelman also serves as
a director of Ashford Hospitality Trust.

Craig M. Hatkoff has been a director since 1997. From 1997 to 2000, Mr.
Hatkoff served as our vice chairman. Mr. Hatkoff is chairman of Turtle Pond
Publications LLC, which is active in children's publishing and entertainment,
and is a private investor in other entrepreneurial ventures. Mr. Hatkoff was a
founder and a managing partner of Victor Capital Group, L.P., or Victor Capital,
from 1989 until our acquisition of Victor Capital in July 1997. Mr. Hatkoff was
a managing director and co-head of Chemical Realty Corporation, the real estate
investment banking arm of Chemical Banking Corporation, from 1982 until 1989.
From 1978 to 1982, Mr. Hatkoff was the head of new product development in
Chemical Bank's Real Estate Division, where he previously served as a loan
officer. Mr. Hatkoff is a trustee of the New York City Construction Authority,
an agency responsible for the construction of all public schools in New York
City.

John R. Klopp has been a director since 1997, and our chief executive
officer and president since 1997 and 1999, respectively. Mr. Klopp was a founder
and a managing partner of Victor Capital from 1989 until the acquisition of
Victor Capital by us in July 1997. Mr. Klopp was a managing director and co-head
of Chemical Realty Corporation from 1982 until 1989. From 1978 to 1982, Mr.
Klopp held various positions with Chemical Bank's Real Estate Division, where he
was responsible for originating, underwriting and monitoring portfolios of
construction and permanent loans.

Henry N. Nassau has been a director since 2003. Mr. Nassau was the chief
operating officer of Internet Capital Group, Inc., an internet holding company,
from December 2002 until June 2003 having previously served as managing
director, general counsel and secretary since May 1999. Since September 2003,
Mr. Nassau has been a partner at the law firm, Dechert LLP. Mr. Nassau was
previously a partner at Dechert LLP from

September 1987 to May 1999 and was chair of the firm's Business Department from
January 1988 to May 1999. At Dechert LLP, Mr. Nassau engages in the practice of
corporate law, concentrating on mergers and acquisitions, public offerings,
private equity, and venture capital financing.

Lynne B. Sagalyn has been a director since 1997. Dr. Sagalyn is
Professor of Real Estate Development and Planning at the University of
Pennsylvania, with appointments at both the Department of City Planning and the
Wharton School's Real Estate Department. From 1992 until her appointments at the
University of Pennsylvania in 2004, Dr. Sagalyn served as a professor and the
Earl W. Kazis and Benjamin Schore Director of the MBA Real Estate Program and
Paul Milstein Center for Real Estate at the Columbia University Graduate School
of Business. She also serves on the faculty of the Weimer School for Advanced
Studies in Real Estate and Land Economics. Dr. Sagalyn is a director of United
Dominion Realty Trust, a self-administered REIT in the apartment communities
sector and serves as its audit committee chairperson. Additionally, Dr. Sagalyn
is a board member of J.P. Morgan U.S. Real Estate Income and Growth Fund and has
served on the New York City Board of Education Chancellor's Commission on the
Capital Plan.

Vote Required; Recommendation

The election to the board of directors of each of our eight nominees
will require the affirmative vote of a plurality of the votes cast at the annual
meeting. Our board of directors unanimously recommends that you vote for the
election of all eight nominees.

Board of Directors; Committees

Our board of directors is currently comprised of Messrs. Zell, Altman,
Dobrowski, Edelman, Garrabrant, Hatkoff, Klopp, Nassau and Roth and Dr. Sagalyn.

Our board of directors currently has three standing committees: an audit
committee, a compensation committee and a performance compensation committee.
Effective as of the date of our annual meeting, our board will have the
following standing committees: an audit committee, a compensation committee and
a corporate governance committee.

Audit Committee: The audit committee is currently comprised of Messrs.
Dobrowski and Nassau and Dr. Sagalyn with Dr. Sagalyn serving as the committee's
chairperson. All audit committee members meet the independence criteria and have
the qualifications set forth in the listing standards of the New York Stock
Exchange and Rule 10A-3 under the Securities Exchange Act of 1934. Each of
Messrs. Dobrowski and Nassau is qualified as an audit committee financial expert
within the meaning of Item 401(h) of Regulation S-K under the Securities
Exchange Act of 1934 and our board of directors has determined that they have
the accounting and related financial management expertise within the meaning of
the listing standards of the New York Stock Exchange. The SEC has determined
that the audit committee financial expert designation does not impose on the
person with that designation any duties, obligations or liability that are
greater than the duties, obligations or liability imposed on such person as a
member of the audit committee of the board of directors in the absence of such
designation. The audit committee appoints our independent auditors, oversees the
quality and integrity of our financial reporting and the audits of our financial
statements by our independent auditors and in fulfilling its oversight function,
reviews with our management and independent auditors the scope and result of the
annual audit, our auditors' independence and our accounting policies. Our board
of directors has adopted a written charter under which the audit committee will
operate following the annual meeting. This charter will be posted on our
corporate website at www.capitaltrust.com as of the annual meeting and is also
included as Appendix A to this proxy statement.

The audit committee has adopted complaint procedures for accounting,
internal control and auditing matters in accordance with Rule 10A-3 under the
Securities Exchange Act of 1934. The full text of these complaint procedures
will be available on our corporate website at www.capitaltrust.com as of the
annual meeting.

Compensation Committee: The compensation committee is currently
comprised of Mr. Altman and Dr. Sagalyn. Following the annual meeting, the
compensation committee will be comprised of Messrs. Altman and and
Dr. Sagalyn, with serving as the committee's chairperson. Mr. Altman
and Dr. Sagalyn also serve as members of the performance compensation committee,
which will be eliminated since its functions will be carried out by the
compensation committee following the annual meeting. Following the annual
meeting, all compensation committee members will meet the independence criteria
set forth in the listing standards of the New York Stock Exchange. The
compensation committee oversees the compensation of executive officers and
senior management, including plans and programs relating to cash compensation,
incentive compensation, equity-based awards and other benefits and perquisites
and administers any such plans or programs as required by the terms thereof. Our
board of directors has adopted a written charter under which the compensation
committee will operate following the annual meeting. As of the annual meeting,
this charter will be posted on our corporate website at www.capitaltrust.com.

Corporate Governance Committee: Following the annual meeting, the
corporate governance committee will be comprised of , and
, with serving as the committee's chairperson. All
corporate governance committee members following the annual meeting will meet
the independence criteria set forth in the listing standards of the New York
Stock Exchange. The corporate governance committee identifies qualified
individuals to become board members, recommends to the board individuals to be
designated as nominees for election as directors at the annual meetings of
shareholders, and develops and recommends to the board our corporate governance
guidelines. Our board of directors has adopted a

written charter under which the corporate governance committee will operate
following the annual meeting. As of the annual meeting, this charter will be
posted on our corporate website at www.capitaltrust.com.

During fiscal year 2003, our board of directors held three meetings. The
audit committee held four meetings in 2003. The compensation committee and the
performance compensation committee did not hold any formal committee meetings in
2003, but rather acted by unanimous written consent twice in performing their
functions. During 2003, each director, other than Mr. Altman, who missed one
meeting, attended all meetings of the board of directors (while he or she was a
member), and all meetings of committees on which he or she served. Our board of
directors eliminated the executive committee of the board which did not meet in
2003.

Corporate Governance

Code of Business Conduct and Ethics: We have adopted a code of business
conduct and ethics that applies to all of our employees, including our principal
executive officer, principal financial officer and principal accounting officer.
This code of business conduct and ethics is designed to comply with SEC
regulations and New York Stock Exchange listing standards related to codes of
conduct and ethics and will be posted on our corporate website at
www.capitaltrust.com as of the annual meeting. A copy of our code of business
conduct and ethics is available free of charge, upon request directed to
Investor Relations, Capital Trust, Inc., 410 Park Avenue, 14th Floor, New York,
N.Y. 10022.

Corporate Governance Guidelines: We have also adopted corporate
governance guidelines to advance the functioning of our board of directors and
its committees and to set forth our board of directors' expectations as to how
it should perform its functions. Our corporate governance guidelines will be
posted on our corporate website at www.capitaltrust.com as of the annual
meeting.

Shareholder Nominations and Communications Policy: Our board of
directors has adopted policies with respect to the consideration of candidates
recommended by shareholders for election as director and shareholder
communications with the board of directors.

Shareholders may recommend nominees for consideration by the corporate
governance committee by submitting the names and the following supporting
information to our secretary at: Secretary, Shareholder Nominations, Capital
Trust, Inc., 410 Park Avenue, 14th Floor, New York, N.Y. 10022. The submissions
should include a current resume and curriculum vitae of the candidate and a
statement describing the candidate's qualifications and contact information for
personal and professional references. The submission should also include the
name and address of the shareholder who is submitting the nominee, the number of
shares which are owned of record or beneficially by the submitting shareholder
and a description of all arrangements or understanding between the submitting
shareholder and the candidate.

Shareholders and other interested parties may communicate directly with
our board of directors or the non-management directors. All communications
should be in writing and should be directed to our secretary at: Secretary,
Shareholder Communications, Capital Trust, Inc., 410 Park Avenue, 14th Floor,
New York, N.Y. 10022. The sender should indicate in the address whether it is
intended for the entire board of directors, the non-management directors as a
group or an individual director. Each communication intended for the board of
directors or non-management directors received by the secretary will be
forwarded to the intended recipients in accordance with the existing
instructions.

The full text of the shareholder nominations and communications policy
will be available on our corporate website at www.capitaltrust.com as of the
annual meeting.

Director Attendance at Annual Meeting of Shareholders. We do not have a
formal policy regarding attendance by directors at our annual meeting of
shareholders but invite and encourage all directors to attend. We make every
effort to schedule our annual meeting of shareholders at a time and date to
permit attendance by directors, taking into account the directors' schedules and
the timing requirements of applicable law. At our last annual meeting, which was
held on June 5, 2003, one director attended.

Compensation of Directors

Generally, our non-employee directors are not paid any cash fees for
their services as such, but rather are compensated with an annual award of stock
units under our 1997 amended and restated non-employee director stock plan with
a value equal to $30,000. However, two of our non-employee directors have
elected and will continue to be paid an annual cash retainer of $30,000. The
number of stock units awarded to each director, which are convertible into an
equal number of shares of class A common stock according to individual schedules
set by each director, is determined quarterly in arrears by dividing one-quarter
of the annual retainer amount ($7,500) by the average closing price of the class
A common stock for the quarter. The stock units vest when issued. There is
currently no separate compensation for service on committees of the board of
directors. All directors are also reimbursed for travel expenses incurred in
attending board and committee meetings.

Compensation Committee Interlocks and Insider Participation

The compensation committee of the board of directors was comprised
during 2003 of Messrs. Altman, Edelman and Klopp, Ms. Rosenberg and Dr. Sagalyn.
Other than Mr. Klopp, none of the committee's members was employed by us as an
officer or employee during 2003. No committee member had any interlocking
relationships requiring disclosure under applicable rules and regulations.

For a description of certain relationships and transactions with members
of the board of directors or their affiliates, see "-Certain Relationships and
Related Transactions" beginning on page 20.

Executive and Senior Officers

The following sets forth the positions, ages as of April 27, 2004 and
selected biographical information for our executive and senior officers who are
not directors.

Jeremy FitzGerald, age 40, has served as a managing director since 1997.
Ms. FitzGerald is responsible for originating, structuring and negotiating high
yield investments. Prior to that time, she served as a principal of Victor
Capital Group and had been employed in various positions at such firm since May
1990. She was previously employed in various positions at PaineWebber
Incorporated.

Peter S. Ginsberg, age 41, has served as a managing director since 2003.
Mr. Ginsberg is responsible for originating, structuring and negotiating high
yield investments. He has been employed by us in various positions since 1997.
He was previously employed as a senior associate at a New York City law firm
focusing on real estate finance and investments.

Geoffrey G. Jervis, age 32, has served as our director of capital
markets since 2004 and previously served as our vice president since 2003. He
has been employed by us in various positions since 1999. Mr. Jervis is
responsible for our capital markets activities that include the structuring,
marketing and management of our equity and liability structures for our balance
sheet and on behalf of our funds under management. Prior to joining us, Mr.
Jervis was the Chief of Staff to the New York City Economic Development
Corporation under the Giuliani Administration.

Brian H. Oswald, age 43, has served as our chief financial officer since
2003. Mr. Oswald joined us in 1997 as our director of finance and accounting and
chief accounting officer. Prior to joining us, Mr. Oswald was employed for 10
years at KPMG Peat Marwick where he held various positions, including senior
manager in the financial institutions group. After leaving KPMG, he was employed
as the president of a savings and loan association, director of financial
reporting and subsidiary accounting for a $1.5 billion bank and corporate
controller for an international computer software company. Mr. Oswald is a
certified public accountant and certified management accountant.

Stephen D. Plavin, age 44, has served as our chief operating officer
since 1998. Prior to that time, Mr. Plavin was employed for fourteen years with
the Chase Manhattan Bank and its securities affiliate, Chase Securities Inc. Mr.
Plavin held various positions within the real estate finance unit of Chase,
including the

management of: loan origination and execution, loan syndications,
portfolio management, banking services and real estate owned sales. He served as
a managing director responsible for real estate client management for Chase's
major real estate relationships and in 1997 he became co-head of Global Real
Estate for Chase. Mr. Plavin serves as a director of Omega Healthcare Investors,
Inc., a skilled nursing real estate investment trust.

Thomas C. Ruffing, age 43, has served as our director of asset
management since 2001. Mr. Ruffing is responsible for the asset management of
our investment portfolios. Prior to joining us in 2001, Mr. Ruffing was employed
by JP Morgan Chase serving in its real estate and lodging investment banking
group since 1990. In various roles at the bank, his responsibilities included
structured corporate real estate finance transactions, major asset property
sales, and the restructuring and workout of problem real estate loans.

Report of the Audit Committee of the Board of Directors*

Our board of directors' audit committee carries out oversight functions
with respect to the preparation, review and audit of our financial statements
and operates under a written charter adopted by the board of directors. The
audit committee members are independent within the meaning of the applicable New
York Stock Exchange listing standards and Rule 10A-3 under the Exchange Act. Our
management is responsible for the development, maintenance and evaluation of
internal controls and procedures and the financial reporting system, the
maintenance of appropriate accounting and financial reporting principles or
policies and the preparation of financial statements in accordance with
generally accepted accounting principles. Our independent auditors perform an
independent audit of our consolidated financial statements in accordance with
generally accepted auditing standards and issue a report thereon. The audit
committee's responsibility is to monitor and oversee the foregoing functions.

The audit committee has met and held discussions with management and the
independent auditors with respect to our consolidated financial statements for
fiscal year 2003 and related matters. Management advised the committee that our
consolidated financial statements were prepared in accordance with generally
accepted accounting principles and the committee has reviewed and discussed the
consolidated financial statements with management and our independent auditors,
Ernst & Young LLP. Our independent auditors presented to and reviewed with the
audit committee the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). Our independent auditors
also provided to the committee the written disclosures and the letter from the
auditors required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and in connection therewith the committee
discussed with the independent auditors their views as to their independence. In
undertaking its oversight function, the audit committee relied, without
independent verification, on management's representation that the financial
statements have been prepared with integrity and objectivity and in conformity
with accounting principles generally accepted in the United States of America
and on the representations of the independent auditors included in their report
on our financial statements.

Based on the audit committee's considerations, discussions with
management and the independent auditors as described above, the audit committee
recommended to the board of directors that the audited consolidated financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2003 to be filed with the Securities and Exchange Commission.

Audit Committee

Lynne B. Sagalyn
Thomas E. Dobrowski
Henry N. Nassau

--------
* The material in this report is not "solicitation material," is not deemed
filed with the SEC, and is not incorporated by reference in any filing of the
company under the Securities Act of 1933 or the Securities Exchange Act of 1934,
whether made before or after the date hereof and irrespective of any general
incorporation language in any filing.

Executive Compensation

The following table sets forth for the years indicated the annual
compensation of the chief executive officer and our other executive officers who
earned annual salary and bonus in excess of $100,000, which we refer to as the
named executive officers.

Summary Compensation Table

--------------------------------------------------------------------------

Annual Compensation (1) Long Term Compensation
---------------------------------------------------------------------------------------------------------
Restricted Securities Other
Name and Principal Stock Underlying Compensation
Position Year Salary($) Bonus($) Award($) Options (#) ($)(7)
-------- ---- --------- -------- -------- ----------- ------

John R. Klopp
Chief Executive 2003 600,000 1,000,000 -- -- 6,000
Officer and 2002 600,000 1,100,000 -- 83,334 6,000
President 2001 600,000 1,400,000 400,000(2) 33,334 20,200

Stephen D. Plavin 2003 371,671 650,000 203,500(3) -- 6,000
Chief Operating 2002 371,671 600,000 312,500(4) -- 6,000
Officer 2001 380,728 1,000,000 625,000(4) 50,000 20,000

Brian H. Oswald
Chief Financial 2003 210,000 250,000 50,875(6) -- 6,000
Officer,
Secretary and
Treasurer (5)

------------------------

(1) The annual compensation presented for 2003 represents the annual base salary
paid during the fiscal year ended December 31, 2003 and the annual bonus
compensation that was paid in February 2004 and accrued as an expense by us for
the fiscal year ended December 31, 2003. As permitted by rules established by
the SEC, no amounts are shown with respect to certain "perquisites" where such
amounts do not exceed, in the aggregate, the lesser of 10% of bonus plus salary
or $50,000.

(2) Represents the value of 29,630 shares of class A common stock awarded to Mr.
Klopp in February 2001 (based on the $13.50 per share closing price on the date
of the grant). The value of such restricted stock award to Mr. Klopp at December
31, 2003 was $672,601 (based on the $22.70 per share New York Stock Exchange
closing price on such date).

(3) Represents the value of 10,000 shares of class A common stock awarded to Mr.
Plavin on October 22, 2003 (based on the $20.35 per share closing price on the
date of the grant). The value of this restricted stock award to Mr. Plavin at
December 31, 2003 was $227,000 (based on the $22.70 per share closing price on
such date).

(4) Represents the value of 16,667 and 33,334 shares of class A common stock
granted to Mr. Plavin on August 31, 1998 and issued during 2002 and 2001,
respectively (based on the $18.75 per share closing price on the date of the
grant). The value of these restricted stock awards to Mr. Plavin at December 31,
2003 was $1,135,023 (based on the $22.70 per share closing price on such date).

(5) Mr. Oswald was appointed chief financial officer on February 13, 2003.

(6) Represents the value of 2,500 shares of class A common stock awarded to Mr.
Oswald on October 22, 2003 (based on the $20.35 per share closing price on the
date of the grant). The value of this restricted award to Mr. Oswald at December
31, 2003 was $56,750 (based on the $22.70 per share closing price on such date).

(7) Represents contributions made by us to our 401(k) profit sharing plan.

Employment Agreement

John R. Klopp serves as our chief executive officer and president
pursuant to an employment agreement entered into on July 15, 1997, which will
terminate effective July 15, 2004, the effective date of his new employment
agreement that was entered into on April 19, 2004. The new employment agreement

provides for Mr. Klopp's employment through December 31, 2008 (subject to
earlier termination under certain circumstances as described below).

Under the new employment agreement, Mr. Klopp will receive a base salary
of $600,000 per year, subject to possible increase by our board of directors.
The agreement provide for annual performance compensation awards, pursuant to
our 2004 long-term incentive plan, referred to as the 2004 Plan, tied to the
achievement of threshold, target or maximum performance criteria set by the
compensation committee of the board each year after consultation with Mr. Klopp.
Under these awards, Mr. Klopp can earn an annual cash bonus ranging from 100% of
base salary at threshold performance, 150% of base salary at target performance
to 200% at maximum performance. The agreement also provide for an annual
performance compensation award of restricted shares ranging from $250,000 at
threshold performance, $500,000 at target performance to $750,000 at maximum
performance. The restricted share awards will be subject to further vesting: 50%
of the award will vest in equal installments over the three year period from the
date of grant and 50% of the award will vest on the fourth anniversary from the
date of grant provided the total shareholder return during the vesting period is
at least 13% per annum.

Pursuant to the agreement, Mr. Klopp will be granted as of the effective
date pursuant to the 2004 Plan an initial award of 218,818 restricted shares,
50% of which will be subject to time vesting in 24 equal monthly increments
commencing on the 36th month from the date of grant and 50% of which will be
issued as a performance compensation award and will vest on December 31, 2008 if
the total shareholder return, measured from January 1, 2004 through December 31,
2008, is at least 13% per annum. Mr. Klopp will also be awarded as of the
effective date pursuant to the 2004 Plan performance compensation awards tied to
the amount of cash we receive as incentive management fees, if any, from CT
Mezzanine Partners III, Inc. The agreement provides for an award entitling Mr.
Klopp to cash payments equal to 8% of incentive management fees, if any,
received by us. The agreement provides for an additional award on or before
April 19, 2005 as determined by the compensation committee in its discretion up
to an additional 10% of incentive management fees, if any, received by us. These
awards vest 65% on the expiration of the investment period for the fund and 35%
upon our receipt of the incentive management fees.

We may terminate Mr. Klopp's employment upon his death, upon disability
that has incapacitated him for 180 consecutive days, or for conduct defined as
"cause" in the agreement. Mr. Klopp has the right to terminate the agreement for
"good reason" as defined in the agreement, which includes the assignment of
materially inconsistent duties, responsibilities and title and change in
control. In the event of our termination of Mr. Klopp's employment without
"cause" or by Mr. Klopp for "good reason," Mr. Klopp is entitled to certain post
termination benefits, including: a lump sum cash payment equal to the greater of
(i) the sum of base salary and target performance bonuses for the balance of the
term of the agreement assuming satisfaction of the performance criteria or (ii)
twice current base salary and the highest annual cash bonus earned during the
term of the agreement; the accelerated granting and vesting in full of all
annual restricted share grants and the initial restricted share; the granting
and vesting in full of all incentive management fee performance compensation
awards; vested options may be exercised for the later of one year following
termination or the expiration of the options; and we shall pay medical insurance
coverage premiums for the earlier of 18 months following termination or the date
Mr. Klopp receives comparable coverage from another employer. If Mr. Klopp is
terminated upon expiration of the agreement, he receives the same post
termination benefits, except he will be paid a lump sum cash payment equal to
his base salary, earned unpaid bonus at target performance and all awards
previously granted will continue to vest for an additional year following
termination. The agreement also provides specified benefits upon death or
disability.

Mr. Klopp's employment agreement contains provisions relating to
non-competition during the term of employment, protection of our confidential
information and intellectual property, and non-solicitation of our employees.

Stock Options and Long Term Incentive Plan

No stock option grants were made to any named executive officer in 2003.

The following table shows the 2003 year-end value of the stock options
held by the named executive officers. None of the named executive officers
exercised stock options during 2003.

Year End 2003 Option/SAR Values

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs at
Options/SARs at Year End Year End (1)
----------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

John R. Klopp 141,668 66,668 $667,502 $480,011
Stephen D. Plavin 44,445 5,556 85,555 42,781
Brian H. Oswald 32,224 2,778 176,334 25,558

----------------------------------

(1) Amounts shown reflect the excess of the market value of the underlying class
A common stock at year end based upon the $22.70 per share closing price
reported on the New York Stock Exchange on December 31, 2003 over the exercise
prices for the stock options. The actual value, if any, an executive may realize
is dependent upon the amount by which the market price of class A common stock
exceeds the exercise price when the stock options are exercised.

The following table provides information with respect to a long term
incentive plan award made to three named executive officers in 2003.

Long Term Incentive Plans - Awards in Last Fiscal Year

Number of Performance or
Shares, Other Period
Units Until
or Other Maturation of Estimated Future Payouts under
Name Rights Payment Non-Stock Price-Based Plans
------------------------------------------------------------------------------------------------------
Threshold($) Target($) Maximum($)

John R. Klopp 6.250% (1) -- (2) -- (3) 623,844 -- (3)
Stephen D. Plavin 1.875% (1) -- (2) -- (3) 187,153 -- (3)
Brian H. Oswald 0.625% (1) -- (2) -- (3) 62,384 -- (3)

-----------------

(1) Represents rights to receive cash payments pursuant to incentive bonus
agreements based on the distributions, if any, received by us from our
incentive interest in CT Mezzanine Partners II LP, which we refer to as Fund
II. During 2003, Messrs. Klopp, Plavin and Oswald were each granted a right
to receive cash payments equal to the specified percentages of incentive
distributions to be received by us from Fund II. These rights vest in equal
increments of 50% upon the date of grant and 50% upon our receipt of
incentive distributions from Fund II. Including these grants, incentive
bonus agreements representing rights to receive cash payments equal to 25%
of our total incentive distributions, if any, from Fund II have been granted
to various employees.

(2) The incentive bonus agreements do not provide for any specified timeframe
during which cash payments are to be made. Cash payments pursuant to
incentive bonus agreements will be made when we receive incentive
distributions, if any, from Fund II. We currently expect to receive
incentives distributions from Fund II in 2006 and 2007.

(3) The incentive bonus agreements do not provide for minimum or maximum cash
payments to the recipients. Cash payments will depend on the amount of
incentive distributions, if any, we receive from Fund II. Our incentive
distributions will depend on whether the investors in Fund II receive a
return of 100% of their invested capital and a minimum return of 10% per
annum on invested capital. The "Target" amounts shown in the table are based
on numerous assumptions, including that all of Fund II's investments
continue to perform and pay off in full by December 31, 2007. There can be
no assurance that Fund II will perform in accordance with the foregoing
assumptions and produce returns that will be sufficient to generate
incentive distributions.

Equity Compensation Plan Information

The following table provides information about the securities authorized
for issuance under our equity compensation plans as of January 1, 2004:

Number of securities
remaining available
Number of securities for future issuance
to be issued upon Weighted-average under equity
exercise of outstanding exercise price of compensation plans
options, warrants outstanding options, (excluding securities
and rights warrants and rights reflected in column (a))
Plan category (a) (b) (c)
----------------------------- ----------------------- -------------------- ------------------------

Equity compensation plans
approved by security
holders 602,470 $20.30 147,001(1)
Equity compensation plans
not approved by security
holders(2) -- -- --

------------ ------------ ------------
Total 602,470 $20.30 147,001(1)

----------
(1) The number of securities remaining for future issuance in 2004 consists of
147,001 shares issuable under our amended and restated 1997 incentive stock
plan and our amended and restated 1997 non-employee director stock plan,
both of which were approved by our shareholders. Awards under the plan may
include restricted stock, unrestricted stock, stock options, stock units,
stock appreciation rights, performance shares or other equity-based awards,
as the board of directors may determine.
(2) We have no equity compensation plans not approved by security holders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act requires our officers and
directors, and persons who own, or are part of a group that owns, more than ten
percent of a registered class of our equity securities, to file reports of
ownership and changes in ownership with the SEC and the NYSE. Officers,
directors and greater than ten percent shareholders are required by regulation
of the SEC to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of Forms 3, 4 and 5 and amendments thereto
available to us and other information obtained from our directors and officers
and certain 10% shareholders or otherwise available to us, except as described
below, we believe that no director, officer or beneficial owner of more than 10%
of our class A common stock failed to file on a timely basis reports required
pursuant to Section 16(a) of the Securities Exchange Act with respect to 2003.
Form 4s required to be filed in October 2003 by Stephen D. Plavin and Brian H.
Oswald as a result of grants of restricted stock were filed late in March 2004.
In addition, to our knowledge, Rodney F. Dammeyer, a shareholder who was never
an employee, officer or director of Capital Trust, failed to file reports with
respect to three changes in his beneficial ownership of our class A common stock
occurring on or before his remaining shares were sold in March 2002.

Report on Executive Compensation*

Introduction

During 2003, our two existing compensation committees administered our
compensation programs. The compensation committee established and administered
the compensation and benefit arrangements for officers and key employees (except
to the extent vested in the performance compensation committee). The performance
compensation committee (which was comprised of the independent members of the
compensation committee) established and administered the compensation programs
as they relate to our executive officers. The performance compensation committee
could receive recommendations from the compensation committee, but could accept
or reject, or increase or decrease, any award or component of compensation
recommended by the compensation committee. As of the annual meeting, the
compensation committee will be reconstituted and operate under a new charter,
and the performance compensation committee will be eliminated since its
functions will be assumed by the reconstituted and newly chartered compensation
committee.

Compensation for 2003

Our 2003 executive compensation program consisted of three elements: an
annual base salary, annual bonus compensation and long-term incentive
compensation.

Mr. Klopp received a $600,000 annual salary which was previously
approved by the board of directors and the other executive officers also
received their previously established or negotiated salaries. The performance
compensation committee's goal was to provide competitive executive compensation
packages as a means of retaining its executive officers. To that end, the
committee strived to compensate executive officers with salaries commensurate
with prevailing compensation practices in the financial services industry.
Salaries vary according to the levels of responsibility undertaken by the
executive officers.

The performance compensation committee's goals with annual bonus and
long-term incentive compensation was to focus executive behavior on the
fulfillment of long-term and annual business objectives, and to create a sense
of ownership in the company that causes executive decisions to be aligned with
the best interests of our shareholders.

For 2003, the board of directors established the following goals for us:

o complete all aspects of the previously-adopted plan to qualify as a
REIT;

o commence and maintain payment of quarterly dividends to our
shareholders;

o capitalize and launch CT Mezzanine Partners III, Inc., our third
private equity fund; and

o re-establish our profile in the public equity capital markets.

----------
* The material in this report is not "solicitation material," is not deemed
filed with the SEC, and is not incorporated by reference in any filing of the
company under the Securities Act or the Securities Exchange Act, whether made
before or after the date hereof and irrespective of any general incorporation
language in any filing.

The performance compensation committee considered executive officer
performance in achieving these goals. We completed all steps necessary to
qualify as a REIT as of January 1, 2003 and paid four regular quarterly
dividends of $0.45 per share. We successfully raised $425 million of committed
equity capital for CT Mezzanine Partners III, Inc. and began deploying that
capital into new investments. For the year, new investments on behalf of our own
balance sheet and our funds under management totaled $371,607,399 million. We
effectuated a one-for-three reverse stock split, completed a private placement
of 1,075,000 shares of our class A common stock, and instituted an investor
outreach program to raise our profile in the public equity markets. For the
year, total shareholder returns, including reinvestment of dividends, equaled
57%.

In recognition of his leadership in achieving these goals, the
performance compensation committee awarded Mr. Klopp a $1,000,000 cash bonus.
The performance compensation committee awarded cash bonuses to other executive
officers based on each executive officer's contribution to achieving our goals
for 2003. In connection with its evaluation, the committee considered the
executive officer's level of job responsibility and relative influence on our
ability to manage successfully and accomplish the goals. As long term
incentives, the performance compensation committee awarded Mr. Klopp rights to
receive cash payments equal to 6.25% of our total incentive distributions, if
any, received from Fund II and awarded other executive officers shares of
restricted stock and similar rights to receive specified percentages of Fund II
incentive distributions.

Section 162(m) of the Internal Revenue Code of 1986 limits the
deductibility in our tax return of compensation over $1 million to any of our
executive officers unless, in general, the compensation is paid pursuant to a
plan which is performance-related, and non-discretionary and has been approved
by our shareholders. The performance compensation committee's policy with
respect to Section 162(m) was to make every reasonable effort to ensure that
compensation is deductible to the extent permitted while simultaneously
providing our executives with appropriate rewards for their performance. During
2003, we paid our executive officers approximately $777,869 aggregate cash
compensation that was non-deductible pursuant to Section 162(m). In awarding the
cash bonuses that produced the non-deductible compensation expense, the
performance compensation committee determined that the advantages to us of
awarding compensation at that level as a reward for the previously discussed
leadership of Mr. Klopp and the contributions of the other executive officers
outweighed the loss of the tax deduction. Following the annual meeting, our
compensation committee will continue to consider on a case-by-case basis whether
particular compensation awards and programs that do not satisfy the conditions
of Section 162(m) outweigh the costs to us of the loss of the related tax
deduction.

Performance Compensation Committee

Jeffrey A. Altman
Lynne B. Sagalyn

Performance Graph*

Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on shares of our class A common stock
against (i) the cumulative total return of companies listed on the New York
Stock Exchange, (ii) the cumulative total return of a peer group selected in the
previous year by us (iStar Financial Inc., Blackrock, Inc., Allied Capital
Corp., LNR Property Corp. and Federated Investors, Inc.), which we refer to as
the Old Peer Group and (iii) the cumulative total return of a peer group newly
selected by us (iStar Financial Inc., RAIT Investment Trust, Anthracite Capital
Inc., Allied Capital Corp. and LNR Property Corp.), which we refer to as the New
Peer Group. We have selected the New Peer Group as a basis for comparison
because we believe that, as a result of changes in our operations and the
competitive environment, a comparison of shareholder returns to the returns of
our newly selected peer group companies provides a more appropriate basis of
comparison. The five-year period compared commences December 31, 1998 and ends
December 31, 2003. This graph assumes that $100 was invested on January 1, 1999
in us and each of the market index and the peer group index, at the December 31,
1998 closing prices, and that all cash distributions were reinvested. Our class
A common stock price performance shown on the graph is not indicative of future
price performance.

[GRAPHIC OMITTED]

1998 1999 2000 2001 2002 2003

CAPITAL TRUST 100.00 83.33 82.30 96.00 88.33 132.65
NYSE MARKET INDEX 100.00 109.50 112.11 102.12 83.42 108.07
OLD PEER GROUP INDEX 100.00 70.93 123.93 145.94 138.66 185.63
NEW PEER GROUP INDEX 100.00 59.93 74.98 104.95 115.09 162.44

----------
* The price performance comparison information in the table is not
"solicitation material," is not deemed filed with the SEC, and is not
incorporated by reference in any filing of the company under the Securities Act
or the Securities Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any filing.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth as of April 27, 2004, certain information
with respect to the beneficial ownership of our class A common stock, by:

o each person known to us to be the beneficial owner of more than 5%
of our outstanding class A common stock,

o each director, director nominee and named executive officer
currently employed by us, and

o all of our directors and executive officers as a group.

Such information (other than with respect to our directors and executive
officers) is based on a review of statements filed with the SEC pursuant to
Sections 13(d), 13(f) and 13(g) of the Securities Exchange Act of 1934 with
respect to our class A common stock.

Number of Shares
Beneficially Percent of
Name of Beneficial Owner Owned (1) Class
------------------------ ------------------ ----------------

Veqtor Finance Company, L.L.C. (2) 897,429 13.5%
EOP Operating Limited Partnership (3) 1,424,474(4) 17.7
Vornado Realty, L.P. (5) 1,424,474(4) 17.7
JPMorgan Chase Bank, as trustee for General Motors
Employe Global Group Pension Trust (6) 99,713(7) 1.5
JPMorgan Chase Bank, as trustee for GMAM Group
Pension Trust II (6) 1,324,761(8) 16.6
Lend Lease Rosen Real Estate Securities LLC (9) 340,000 5.1
Jeffrey A. Altman -- --
Thomas E. Dobrowski --(10) --
Martin L. Edelman 38,230(11) *
Gary R. Garrabrant 24,896(11) *
Craig M. Hatkoff 669,701(12)(13) 10.0
John R. Klopp 835,446(12)(13) 12.3
Henry N. Nassau 11,377(14) *
Brian H. Oswald 55,507(15) *
Stephen D. Plavin 170,942(15) 2.6
Steven Roth --(16) --
Lynne B. Sagalyn 21,563(11) *
Samuel Zell 82,229(11)(17) 1.2
All executive officers and directors as a group (12 1,905,891 26.9
persons)

----------
* Represents less than 1%.
(1) The number of shares are those beneficially owned, as determined under
the rules of the SEC, and such information is not necessarily indicative
of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which a person has sole
or shared voting power or investment power and any shares which the
person has the right to acquire within 60 days through the exercise of
any option, warrant or right, through conversion of any security or
pursuant to the automatic termination of a power of attorney or
revocation of a trust, discretionary account or similar arrangement.
(2) Zell General Partnership, Inc. is the sole managing member of Veqtor
Finance Company, L.L.C. The sole shareholder of Zell General Partnership
is the Sam Investment Trust, a trust established for

the benefit of the family of Samuel Zell. Chai Trust Company, L.L.C.
serves as trustee of the Sam Investment Trust. Veqtor Finance Company,
L.L.C. is located at c/o Equity Group Investments, L.L.C., Two North
Riverside Plaza, Chicago, Illinois 60606.
(3) Beneficial ownership information is based on a statement filed pursuant
to Section 13(d) of the Securities Exchange Act of 1934 by EOP Operating
Limited Partnership. The address of EOP Operating Limited Partnership is
Two North Riverside Plaza, Chicago, Illinois 60606.
(4) Represents shares which may be obtained upon conversion of $29,914,000
in convertible amount of variable step up convertible trust preferred
securities issued by our consolidated Delaware statutory business trust
subsidiary, CT Convertible Trust I.
(5) Beneficial ownership information is based on a statement filed pursuant
to Section13(d) of the Securities Exchange Act of 1934 by Vornado
Realty, L.P. The address of Vornado Realty is c/o Vornado Realty Trust,
Park 80 West, Plaza II, Saddle Brook, New Jersey 07663.
(6) Each trust is a pension trust formed pursuant to the laws of the State
of New York for the benefit of certain employee benefit plans of General
Motors Corporation, its subsidiaries and unrelated employers. These
shares may be deemed to be owned beneficially by General Motors Asset
Management, a wholly-owned subsidiary of General Motors. General Motors
Asset Management is registered as an investment adviser under the
Investment Advisers Act of 1940. General Motors Asset Management's
principal business involves investment advice and investment management
services with respect to the assets of certain employee benefit plans of
General Motors, its subsidiaries and unrelated employers and with
respect to the assets of certain direct and indirect subsidiaries of
General Motors and associated entities. General Motors Asset Management
is serving as investment manager with respect to these shares and in
that capacity it has the sole power to direct the trustee as to the
voting and disposition of these shares. Because of the trustee's limited
role, beneficial ownership of the shares by the trustee is disclaimed.
(7) Represents shares which may be obtained upon conversion of $2,093,980 in
convertible amount of variable step up convertible trust preferred
securities issued by our consolidated Delaware statutory business trust
subsidiary, CT Convertible Trust I.
(8) Represents shares which may be obtained upon conversion of $27,820,020
in convertible amount of variable step up convertible trust preferred
securities issued by our consolidated Delaware statutory business trust
subsidiary, CT Convertible Trust I.
(9) Beneficial ownership information is based on a statement filed pursuant
to Section 13(g) of the Exchange Act by Lend Lease Rosen Real Estate
Securities LLC. The address of Lend Lease Rosen Real Estate Securities
LLC is 1995 University Avenue, Suite 550, Berkeley, CA 94704.
(10) Does not include the shares that may be deemed beneficially owned by
General Motors Asset Management, as to which Mr. Dobrowski disclaims
beneficial ownership.
(11) In the case of Mr. Zell, Mr. Edelman, Mr. Garrabrant and Dr. Sagalyn,
includes 13,229 shares obtainable by each upon conversion of vested
stock units. In the case of Mr. Zell, Mr. Edelman, Mr. Garrabrant and
Dr. Sagalyn, includes 40,000, 25,001, 11,667 and 8,334 shares issuable
upon the exercise of vested stock options.
(12) Includes, in the case of Mr. Hatkoff, the 610,044 shares owned by CMH
Investment Partnership LP, a family partnership for which Mr. Hatkoff
serves as a general partner. Includes, in the case of Mr. Klopp, 600,044
shares owned by JRK Investment Partnership LP, a family partnership for
which Mr. Klopp serves as general partner.
(13) Includes 180,558 and 47,223 shares issuable upon the exercise of vested
stock options held by each of Messrs. Klopp and Hatkoff. Includes 21,882
shares for Mr. Klopp that are the subject of restricted stock awards for
which he retains voting rights. Includes for Mr. Hatkoff 6,434 shares
that may be obtained upon conversion of vested stock units.

(14) Includes 1,377 shares obtainable upon conversion of vested stock units.
Includes 400 shares held by members of Mr. Nassau's family, as to which
Mr. Nassau disclaims beneficial ownership except to the extent of his
pecuniary interest therein.
(15) Includes 35,002 and 50,001 shares issuable upon the exercise of vested
stock options held by Mr. Oswald and Mr. Plavin, respectively. Includes
6,876 and 20,941 shares for Mr. Oswald and Mr. Plavin, respectively,
that are the subject of restricted stock awards for which they retain
voting rights.
(16) Does not include the shares that may be deemed beneficially owned by
Vornado Realty, L.P., as to which Mr. Roth disclaims beneficial
ownership.
(17) Does not include the shares that may be deemed beneficially owned by
Equity Office Properties Trust, as to which Mr. Zell disclaims
beneficial ownership. 25,000 of such shares are held by Samstock, L.L.C.
The sole member of Samstock is SZ Investments, L.L.C. The managing
member of SZ Investments is Zell General Partnership. Sam Investment
Trust is the sole stockholder of Zell General Partnership, and Chai
Trust Company is the trustee of the Sam Investment Trust. Mr. Zell is
not an officer or director of Chai Trust Company and does not have
voting or dispositive power over such shares. Mr. Zell disclaims
beneficial ownership of such shares except to the extent of his
pecuniary interest therein. 4,000 of such shares are owned by the Helen
Zell Revocable Trust, the trustee of which is Helen Zell, Mr. Zell's
spouse. Mr. Zell does not have a pecuniary interest in such shares.

Certain Relationships and Related Transactions

Arrangement with Equity Risk Services, Inc.

We pay Equity Risk Services, Inc., an affiliate of Samuel Zell, the
chairman of our board of directors, for certain services provided to us. These
services include consulting on insurance matters. During the year ended December
31, 2003, we incurred $48,000 of expenses in connection with these services.

Relationship with Martin L. Edelman

Martin L. Edelman, a director, is of counsel to Paul, Hastings, Janofsky
& Walker LLP, a law firm that provides us with ongoing legal representation with
respect to various matters.

Consulting Agreement with Craig M. Hatkoff

Craig M. Hatkoff, a director, is a party to a two year consulting
services agreement with our wholly owned subsidiary, CT Investment Management
Co., LLC, that extends through 2005, and pursuant to which he provides services
as requested by our chief executive officer and serves on the management
committee or board of the two private equity funds that we manage. Mr. Hatkoff
was paid $120,000 in 2003 pursuant to the agreement.

Relationship with Global Realty Outsourcing, Inc.

We pay Global Realty Outsourcing, Inc., a company in which we have an
equity investment and on whose board of directors John R. Klopp, our chief
executive officer, serves, for consulting services relating to monitoring assets
and evaluating potential investments. During the 2003 fiscal year, we incurred
$147,000 of expenses in connection with these services.

Investments by trusts established for the benefit of Samuel Zell in our funds

A trust established for the benefit of Mr. Zell and members of his
family indirectly invested on the same terms available to third party investors
in CT Mezzanine Partners II L.P. and CT Mezzanine Partners III, Inc., two
private equity funds which we currently manage, pursuant to which capital
commitments and capital contributions have been made, and from which income has
been received, since January 1, 2003.

We believe that the terms of the foregoing transactions are no less
favorable than could be obtained by us from unrelated parties on an arm's-length
basis.

PROPOSAL 2 -- APPROVAL OF THE CAPITAL TRUST, INC.
2004 LONG-TERM INCENTIVE PLAN

Background

On April 26, 2004, our board of directors adopted, subject to
shareholder approval, the Capital Trust, Inc. 2004 Long-Term Incentive Plan,
which we refer to as the 2004 Plan. We are seeking shareholder approval of the
2004 Plan to enable us to design appropriate awards and incentives with benefits
accorded by shareholder approval under the Internal Revenue Code and to satisfy
New York Stock Exchange listing standards shareholder approval requirements.
Except for the awards we have agreed to grant to John R. Klopp, our chief
executive officer, pursuant to his employment agreement, the amount and nature
of the proposed awards under the 2004 Plan have not yet been determined.

If the 2004 Plan is approved, 3,000,000 shares of our class A common
stock, which represents 45.2% of our outstanding shares of class A common stock,
subject to adjustment as provided for in the 2004 Plan, will initially be
available for issuance under the 2004 Plan pursuant to a variety of awards,
including options, share appreciation rights, which we refer to as SARs,
restricted shares, unrestricted shares, restricted share units, deferred share
units, and performance-based awards. If the 2004 Plan is approved by the
shareholders, our board of directors intends to cause the shares of our class A
common stock that will become available for issuance to be registered on a Form
S-8 registration statement to be filed with the SEC at our expense.

The following briefly summarizes our current share-based incentive plans
and the impact that this proposal will have on such plans if the 2004 Plan is
approved by our shareholders at the annual meeting.

The Company currently maintains two share-based incentive plans: the
amended and restated 1997 long-term incentive stock plan, which we refer to as
the 1997 Plan, and the amended and restated 1997 non-employee director stock
plan, which we refer to as the 1997 Director Plan. As of April 27, 2004, there
were 552,780 shares of our class A common stock subject to outstanding and
unexercised awards issued pursuant to these plans. Adoption of the 2004 Plan
will not affect these awards, and the two plans will remain in effect.

Summary of the 2004 Plan

The 2004 Plan is set forth in full as Appendix B to this proxy statement
and is summarized below. As a summary, the description is qualified in its
entirety by reference to Appendix B which contains a complete statement of the
terms and provisions of the 2004 Plan. Capitalized terms used in this summary
and not otherwise defined will have the meanings ascribed to such terms in the
2004 Plan.

Purpose

The purpose of the 2004 Plan is to attract, retain and motivate select
employees, officers and directors of ours and our affiliates, which we refer to
collectively as Eligible Persons, and to provide incentives and rewards for
superior performance.

Shares Subject to the 2004 Plan

The 2004 Plan provides that no more than 3,000,000 shares of our class A
common stock may be issued pursuant to awards under the 2004 Plan. These shares
of our class A common stock shall be authorized but unissued shares. The number
of shares of our class A common stock available for awards, as

well as the terms of outstanding awards, are subject to adjustment as provided
in the 2004 Plan for stock splits, stock dividends, recapitalizations and other
similar events.

The shares of our class A common stock subject to any award that
expires, or is forfeited, cancelled or becomes unexercisable, will again be
available for subsequent awards, except as prohibited by law. In addition,
future awards may occur with respect to shares of our class A common stock that
we refrain from otherwise delivering pursuant to an award as payment of either
the exercise price of an award or applicable withholding and employment taxes.

Administration

Either our board of directors or a committee appointed by our board
directors may administer the 2004 Plan. We refer to our board of directors and
any committee exercising discretion under the 2004 Plan from time to time as the
Committee. The board of directors may at any time appoint additional members to
the Committee, remove and replace members of the Committee with or without
cause, and fill vacancies on the Committee. To the extent permitted by law, the
Committee may authorize one or more persons who are reporting persons for
purposes of Rule 16b-3 under the Exchange Act, or other officers, to make awards
to eligible persons who are not reporting persons for purposes of Rule 16b-3
under the Exchange Act, or other officers whom we have specifically authorized
to make awards. With respect to decisions involving an award intended to satisfy
the requirements of section 162(m) of the Internal Revenue Code, the Committee
is to consist solely of two or more directors who are "outside directors" for
purposes of that code section. The Committee may delegate administrative
functions to individuals who are reporting persons for purposes of Rule 16b-3 of
the Exchange Act, officers or employees of ours or our affiliates.

Subject to the terms of the 2004 Plan, the Committee has express
authority to determine the Eligible Persons who will receive awards, the number
of shares of our class A common stock, units, or SARs to be covered by each
award, and the terms and conditions of awards. The Committee has broad
discretion to prescribe, amend, and rescind rules relating to the 2004 Plan and
its administration, to interpret and construe the 2004 Plan and the terms of all
award agreements, and to take all actions necessary or advisable to administer
the 2004 Plan. Within the limits of the 2004 Plan, the Committee may accelerate
the vesting of any awards, allow the exercise of unvested awards, and may
modify, replace, cancel, or renew them. In addition, the Committee may buy-out
options or SARs, subject to certain conditions may terminate and cancel options
or SARs in exchange for a commitment to issue new options or SARs after more
than six months or, subject to shareholder approval or under certain
circumstances, reduce the exercise price for outstanding options or SARs.

The 2004 Plan provides that we and our affiliates will indemnify members
of the Committee and their delegates against any claims, liabilities, or costs
arising from the good faith performance of their duties under the 2004 Plan. The
2004 Plan releases these individuals from liability for good faith actions
associated with the 2004 Plan's administration.

Eligibility

The Committee may grant options that are intended to qualify as
incentive stock options, which we refer to as ISOs, only to employees, and may
grant all other awards to Eligible Persons. The 2004 Plan and the discussion
below use the term "Participant" to refer to an Eligible Person who has received
an Award.

The 2004 Plan provides that no more than 3,000,000 shares of our class A
common stock may be issued pursuant to awards under the 2004 Plan. As of April
27, 2004, substantially all of our 24 employees, including officers, and our
affiliates and our eight non-employee directors would have been eligible to
participate in the 2004 Plan.

Options

Options granted under the 2004 Plan provide Participants with the right
to purchase shares of our class A common stock at a predetermined exercise
price. The Committee may grant options that are intended to qualify as ISOs, or
options that are not intended to so qualify, which we refer to as Non-ISOs. The
2004 Plan also provides that ISO treatment may not be available for options that
become first exercisable in any calendar year to the extent the value of the
underlying shares that are the subject of the option exceed $100,000, based upon
the fair market value of the shares of our class A common stock on the option
grant date.

Share Appreciation Rights (SARs)

A share appreciation right generally permits a Participant who receives
it to receive, upon exercise, cash and/or shares of our class A common stock
equal in value to the excess of (i) the fair market value, on the date of
exercise, of the shares of our class A common stock with respect to which the
SAR is being exercised, over (ii) the exercise price of the SAR for such shares.
The Committee may grant SARs in tandem with options, or independently of them.
SARs that are independent of options may limit the value payable on its exercise
to a percentage, not exceeding 100%, of the excess value.

Exercise Price for Options and SARs

The exercise price of Non-ISOs may not be less than 50% of the fair
market value on the grant date of the shares of our class A common stock subject
to the award, and the exercise price of SARs may not be less than 50% of the
fair market value on the grant date of the shares subject to the award. The
exercise price of ISOs may not be less than 110% of the fair market value on the
grant date of the underlying shares of our class A common stock subject to the
award for Participants who own more than ten percent of our shares of class A
common stock on the grant date. For ISOs granted to other Participants and for
options intended to be exempt from Internal Revenue Code Section 162(m)
limitations, the exercise price may not be less than 100% of the fair market
value of the underlying shares of class A common stock on the grant date.

As of April 27, 2004, the closing price of our class A common stock on
the New York Stock Exchange was $22.86 per share.

Exercise of Options and SARs

To the extent exercisable in accordance with the agreement granting
them, an option or SAR may be exercised in whole or in part, and from time to
time during its term; subject to earlier termination relating to a holder's
termination of employment or service. With respect to options, unless otherwise
provided in an award agreement, payment of the exercise price may be made in any
of the following forms, or combination of them: cash or check in U.S. dollars,
certain shares of our class A common stock, cashless exercise under a program
the Committee approves and surrender of restricted shares, restricted share
units, SARs or deferred share units.

The term over which Participants may exercise options and SARs may not
exceed ten years from the date of grant; five years in the case of ISOs granted
to employees who, at the time of grant, own more than 10% of our outstanding
shares of class A common stock.

Restricted Shares, Restricted Share Units, Unrestricted Shares and Deferred
Share Units

Under the 2004 Plan, the Committee may grant restricted shares that are
forfeitable until certain vesting requirements are met, may grant restricted
share units which represent the right to receive shares of our class A common
stock after certain vesting requirements are met, and may grant unrestricted
shares as to

which the Participant's interest is immediately vested. For restricted awards,
the 2004 Plan provides the Committee with discretion to determine the terms and
conditions under which a Participant's interests in such awards become vested.
Unless otherwise provided in an award agreement, recipients of restricted shares
will be entitled to the dividends declared and paid on the underlying shares and
recipients of restricted share units will be entitled to cash payments equal to
the amount of the dividends otherwise payable if the shares underlying the
restricted share units were outstanding. The 2004 Plan provides for unrestricted
shares that vest in full upon the date of a grant or other date determined by
the Committee. The 2004 Plan also provides for deferred share units in order to
permit certain directors, consultants, or select members of management to defer
their receipt of compensation payable in cash or shares of our class A common
stock, including shares that would otherwise be issued upon the vesting of
restricted shares and restricted share units. Deferred share units represent a
future right to receive shares of our class A common stock.

If an award agreement does not provide for earlier payment of dividends,
whenever shares of our class A common stock are released pursuant to these
awards, the Participant will be entitled to receive additional shares of our
class A common stock that reflect any stock dividends that our shareholders
received between the date of the award and issuance or release of the shares of
our class A common stock. Likewise, a Participant will be entitled to receive a
cash payment reflecting cash dividends paid to our shareholders during the same
period. Such cash dividends will accrue interest, at 5% per annum, from their
payment date to our shareholders until paid in cash when the shares of our class
A common stock to which they relate are either released from restrictions in the
case of restricted shares or issued in the case of restricted share units.

Performance Awards

The 2004 Plan authorizes the Committee to grant performance-based awards
in the form of Performance Units that the Committee may, or may not, designate
as "Performance Compensation Awards" that are intended to be exempt from
Internal Revenue Code Section 162(m) limitations. In either case, performance
units vest and become payable based upon the achievement, within the specified
period of time, of performance objectives applicable to the individual, us, or
any affiliate. Performance units are payable in shares of class A common stock,
cash, or some combination of the two; subject to an individual Participant limit
of $5,000,000and 250,000 shares of our class A common stock per performance
period. The Committee decides the length of performance periods, but the periods
may not be less than one fiscal year.

With respect to Performance Compensation Awards, the 2004 Plan requires
that the Committee specify in writing the performance period to which the award
relates, and an objective formula by which to measure whether and the extent to
which the award is earned on the basis of the level of performance achieved with
respect to one or more performance measures. Once established for a performance
period, the performance measures and performance formula applicable to the award
may not be amended or modified in a manner that would cause the compensation
payable under the award to fail to constitute performance-based compensation
under Internal Revenue Code Section 162(m).

Under the 2004 Plan, the possible performance measures for Performance
Compensation Awards include basic, diluted or adjusted earnings per share; sales
or revenue; earnings before interest, taxes and other adjustments, in total or
on a per share basis; basic or adjusted net income; basic or adjusted funds from
operations or cash flow; returns on equity, assets, capital, revenue or similar
measure; level and growth of dividends; the price or increase in price of
Shares; total shareholder return; distributions received on the account of so
called carried interests or incentive management fees from CT Mezzanine Partners
II LP, CT Mezzanine Partners III, Inc., and any other private equity fund
managed by us; total assets; growth in assets on new origination of assets;
equity market capitalization; assets under management; third-party equity
capital under management or raised; and mergers, acquisitions, and sales of
assets of affiliates or business units. Each measure will be, to the extent
applicable, determined in accordance with generally accepted accounting
principles as consistently applied by us, or such other standard applied by the
Committee and, if

so determined by the Committee, and in the case of a Performance Compensation
Award, to the extent permitted under Internal Revenue Code Section 162(m),
adjusted to omit the effects of extraordinary items, gain or loss on the
disposal of a business segment, unusual or infrequently occurring events and
transactions and cumulative effects of changes in accounting principles.
Performance measures may vary from performance period to performance period, and
from Participant to Participant, and may be established on a stand-alone basis,
in tandem or in the alternative.

Income Tax Withholding

As a condition for the issuance of shares of our class A common stock
pursuant to awards, the 2004 Plan requires satisfaction of any applicable
federal, state, local, or foreign withholding tax obligations that may arise in
connection with the award or the issuance of shares of our class A common stock.

Transferability

Awards may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of other than by will or the laws of descent and distribution, except
to the extent the Committee permits lifetime transfers to charitable
institutions, certain family members, or related trusts, or as otherwise
approved by the Committee for a select group of management or highly compensated
employees.

Certain Corporate Transactions

The Committee shall equitably adjust the number of shares covered by
each outstanding award, and the number of shares that have been authorized for
issuance under the 2004 Plan but as to which no awards have yet been granted or
that have been returned to the 2004 Plan upon cancellation, forfeiture, or
expiration of an award, as well as the price per share covered by each such
outstanding award, to reflect any increase or decrease in the number of issued
shares resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the shares of our class A
common stock, or any other increase or decrease in the number of issued shares
effected without receipt of consideration by us. In the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding options under the 2004 Plan such alternative consideration,
including securities of any surviving entity, as it may in good faith determine
to be equitable under the circumstances and may require in connection therewith
the surrender of all options so replaced. In any case, such substitution of
securities will not require the consent of any person who is granted options
pursuant to the 2004 Plan.

In addition, in the event or in anticipation of a Change in Control, as
defined in the 2004 Plan, the Committee may at any time in its sole and absolute
discretion and authority, without obtaining the approval or consent of our
shareholders or any Participant with respect to his or her outstanding awards,
except to the extent an award provides otherwise, take one or more of the
following actions: (i) arrange for or otherwise provide that each outstanding
award will be assumed or substituted with a substantially equivalent award by a
successor corporation or a parent or subsidiary of such successor corporation;
(ii) accelerate the vesting of awards for any period, and may provide for
termination of unexercised options and SARs at the end of that period, so that
awards shall vest (and, to the extent applicable, become exercisable) as to the
shares of our class A common stock that otherwise would have been unvested and
provide that our repurchase rights with respect to shares of our class A common
stock issued upon exercise of an award shall lapse as to the shares of our class
A common stock subject to such repurchase right; or (iii) arrange or otherwise
provide for payment of cash or other consideration to Participants in exchange
for the satisfaction and cancellation of outstanding awards.

Notwithstanding the above, in the event a Participant holding an award
assumed or substituted by the successor corporation in a Change in Control is
Involuntarily Terminated, as defined in the 2004 Plan, by the successor
corporation in connection with, or within 12 months following consummation of,
the Change in

Control, then any assumed or substituted award held by the terminated
Participant at the time of termination shall accelerate and become fully vested,
and exercisable in full in the case of options and SARs, and any repurchase
right applicable to any shares of our class A common stock shall lapse in full.
The acceleration of vesting and lapse of repurchase rights provided for in the
previous sentence shall occur immediately prior to the effective date of the
Participant's termination.

In the event of any distribution to our shareholders of securities of
any other entity or other assets, other than dividends payable in cash or our
stock, without receipt of consideration by us, the Committee may, in its
discretion, appropriately adjust the price per share covered by each outstanding
award to reflect the effect of such distribution. Finally, if we dissolve or
liquidate, all awards will immediately terminate, subject to the ability of our
board of directors to exercise any discretion that the board may exercise in the
case of a Change in Control.

Term of 2004 Plan; Amendments and Termination

The term of the 2004 Plan is ten years from April 26, 2004, the date it
was approved by our board of directors. Our board of directors may from time to
time, amend, alter, suspend, discontinue, or terminate the 2004 Plan; provided
that no amendment, suspension, or termination of the 2004 Plan shall materially
and adversely affect awards already granted unless it relates to an adjustment
pursuant to certain transactions that change our capitalization or it is
otherwise mutually agreed between the Participant and the Committee.
Notwithstanding the foregoing, the Committee may amend the 2004 Plan to
eliminate provisions which are no longer necessary as a result of changes in tax
or securities laws or regulations, or in the interpretation thereof.

Expected Tax Consequences

The following is a brief summary of certain tax consequences of certain
transactions under the 2004 Plan. This summary is not intended to be complete
and does not describe state or local tax consequences.

United States Tax Laws

Under the Internal Revenue Code, we will generally be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as the ordinary income that Participants recognize pursuant to awards,
subject to the Participant's overall compensation being reasonable, and to the
discussion below with respect to Internal Revenue Code Section 162(m)). For
Participants, the expected U.S. tax consequences of awards are as follows:

Non-ISOs. A Participant will not recognize income at the time a Non-ISO
is granted. At the time a Non-ISO is exercised, the Participant will recognize
ordinary income in an amount equal to the excess of (i) the fair market value of
the shares of our class A common stock issued to the Participant on the exercise
date over (ii) the exercise price paid for the shares. At the time of sale of
shares acquired pursuant to the exercise of a Non-ISO, the appreciation, or
depreciation, in value of the shares after the date of exercise will be treated
either as short-term or long-term capital gain, or loss, depending on how long
the shares have been held.

ISOs. A Participant will not recognize income upon the grant of an ISO.
There are generally no tax consequences to the Participant upon exercise of an
ISO, except the amount by which the fair market value of the shares at the time
of exercise exceeds the option exercise price is a tax preference item possibly
giving rise to an alternative minimum tax. If the shares of our class A common
stock are not disposed of within two years from the date the ISO was granted or
within one year after the ISO was exercised, any gain realized upon the
subsequent disposition of the shares will be characterized as long-term capital
gain and any loss will be characterized as long-term capital loss. If both of
these holding period requirements are not met, then a

"disqualifying disposition" occurs and (i) the Participant recognizes wages in
the amount by which the fair market value of the shares at the time of exercise
exceeded the exercise price for the ISO and (ii) any remaining amount realized
on disposition, except for certain "wash" sales, gifts or sales to related
persons, will be characterized as capital gain or loss.

Share Appreciation Rights. A Participant to whom a SAR is granted will
not recognize income at the time of grant of the SAR. Upon exercise of a SAR,
the Participant must recognize taxable compensation income in an amount equal to
the value of any cash or shares of our class A common stock that the Participant
receives.

Restricted Shares, Restricted Share Units, Deferred Share Units, and
Performance Units. In general, a Participant will not recognize income at the
time of grant of restricted shares, restricted share units, deferred share units
or performance units, unless the Participant elects with respect to restricted
shares or restricted share units to accelerate income taxation to the date of
the award. In this event, a Participant would recognize ordinary income equal to
the excess of the market value of the restricted shares over any amount the
Participant pays for them, in which case subsequent gain or loss would be
capital in nature. In the absence of an election to accelerate income taxation
to the date of an award, a Participant must recognize taxable compensation
income equal to the value of any cash or shares of our class A common stock that
the Participant receives when the award vests. The same tax consequences apply
to performance units.

Special Tax Provisions. Under certain circumstances, the accelerated
vesting, cash-out or accelerated lapse of restrictions on awards in connection
with a change in control of us might be deemed an "excess parachute payment" for
purposes of the golden parachute tax provisions of Internal Revenue Code Section
280G, and the Participant may be subject to a 20% excise tax and we may be
denied a tax deduction. Furthermore, we may not be able to deduct the aggregate
compensation in excess of $1,000,000 attributable to awards that are not
"performance-based" within the meaning of Internal Revenue Code Section 162(m)
in certain circumstances.

Tax Laws in Other Countries Differ from Those in the United States

In certain countries, awards under the 2004 Plan may be taxable at the
time the awards are granted or when they vest. In certain jurisdictions, options
and SARs may also be taxable when they are exercised and the sale of the
underlying shares may be subject to various taxes.

General Tax Law Considerations

The preceding paragraphs are intended to be merely a summary of certain
important tax law consequences concerning a grant of options under the 2004 Plan
and the disposition of shares issued thereunder in existence as of the date of
this proxy statement. Special rules may apply to our officers, directors or
greater than ten percent shareholders. Participants in the 2004 Plan should
review the current tax treatment with their individual tax advisors at the time
of grant, exercise or any other transaction relating to an award or the
underlying shares.

New Plan Benefits

The Committee will grant awards under the 2004 Plan at its discretion.
Consequently, it is not possible to determine at this time the amount or dollar
value of awards to be provided under the 2004 Plan, other than we have agreed,
in our employment agreement with our chief executive officer, John R. Klopp, to
grant, subject to shareholder approval, performance compensation awards and
restricted share awards described under the caption Proposal 1 -- Election of
Directors -- Employment Agreement.

Vote Required; Recommendation

The affirmative vote of a majority of the votes cast on the matter at
the annual meeting is required to approve the 2004 Plan in accordance with the
applicable New York Stock Exchange rules, provided that the total votes cast
represent over 50% of the 6,636,882 shares of class A common stock entitled to
vote as of the record date. Our board of directors unanimously recommends that
shareholders vote for the approval of the 2004 Plan.

PROPOSAL 3 -- EQUITY FINANCING

Background

We are seeking your approval to issue up to 2,000,000 shares of our
class A common stock in a proposed direct public offering which number of shares
would exceed 20% of our outstanding shares of class A common stock immediately
prior to such issuance. The proposed direct public offering is covered by and is
made pursuant to our effective shelf registration statement on Form S-3 (SEC
file number 333-111261).

We have offered to sell up to 2,000,000 shares of our class A common
stock to a prospective investor and are currently negotiating the terms of such
purchase. We may offer the shares to other prospective investors if we do not
reach agreement with the prospective investor. We expect to sell the shares of
our class A common stock offered to the prospective investor at a price per
share of $23.40. In addition, we intend to offer the prospective investor a
right to designate an individual for appointment to our board of directors.

Because our direct public offering described above involves the issuance
by us of a number of shares of our class A common stock that would exceed 20% of
our currently outstanding class A common stock, shareholder approval is required
by applicable New York Stock Exchange listing standards. We are seeking your
approval so that we can conclude the offering and raise the approximately $46.8
million of new equity capital.

Description of the Direct Public Offering

The direct public offering will consist of shares of our class A common
stock we have previously registered on our effective Form S-3 shelf registration
statement. The price per share of our class A common stock issued to the
investor may be at a discount or premium to the closing price of our class A
common stock on the New York Stock Exchange on the closing date of the offering.
We anticipate that the direct public offering will close as soon as practicable
following receipt of shareholder approval. However, we are not bound to sell and
no investor is bound to purchase any or all of the up to 2,000,000 shares of
class A common stock to be offered by us and we reserve the right to reject any
offers to purchase our class A common stock. We cannot assure you that we will
sell any of the up to 2,000,000 shares of class A common stock to be offered by
us.

The proceeds received by us from the direct public offering are
expected to be used by us for general corporate purposes, including funding our
balance sheet investments and capital commitments to private equity funds
managed by us, repayment of indebtedness, including our convertible trust
preferred securities and our credit facility, working capital and potential
business acquisitions.

Necessity of Shareholder Approval

Section 312.03 of the New York Stock Exchange Listed Company Manual
requires that companies listed on the New York Stock Exchange obtain shareholder
approval prior to the issuance of common stock (or securities convertible into
or exercisable for common stock), in any transaction or series of related
transactions if: (1) the common stock has, or will have upon issuance, voting
power equal to or in excess of 20 % of the voting power outstanding before the
issuance of such stock or of securities convertible into or exercisable for
common stock; or (2) the number of shares of common stock to be issued is, or
will be upon issuance, equal to or in excess of 20 % of the number of shares of
common stock outstanding before the issuance of the common stock or of
securities convertible into or exercisable for common stock.

If we sell 2,000,000 shares of our class A common stock in the direct
public offering, we will have issued a number of shares that exceeds 20% of our
currently outstanding common stock, based on 6,636,882

shares outstanding as of April 27, 2004. Therefore, we must obtain shareholder
approval to comply with this New York Stock Exchange listing requirement.

We are therefore now asking that the shareholders approve the issuance
by us of up to 2,000,000 shares of our class A common stock to be issued in the
direct public offering.

Vote Required, Recommendation

The affirmative vote of a majority of the votes cast on the matter at
the annual meeting is required to approve the proposed issuance of up to
2,000,000 shares of our class A common stock, provided that the total votes cast
represent over 50% of the 6,636,882 shares of class A common stock entitled to
vote as of the record date. Our board of directors unanimously recommends that
you vote for the approval of the issuance of our class A common stock in the
proposed direct public offering.

PROPOSAL 4 -- RATIFICATION OF INDEPENDENT AUDITORS

Description of Proposal

Our board of directors has appointed Ernst & Young LLP as our
independent auditors for the fiscal year ending December 31, 2004, and has
further directed that the appointment of such accountants be submitted for
ratification by the shareholders at the annual meeting. We have been advised by
Ernst & Young LLP that neither that firm nor any of its associates has any
relationship with us or our subsidiaries other than the usual relationship that
exists between independent certified public accountants and clients. Ernst &
Young LLP will have a representative at the annual meeting who will have an
opportunity to make a statement, if he or she so desires, and who will be
available to respond to appropriate questions.

Shareholder ratification of the appointment of Ernst & Young LLP as our
independent auditors is not required by our charter or otherwise. However, our
board of directors is submitting the appointment of Ernst & Young LLP to the
shareholders for ratification as a matter of what it considers to be good
corporate practice. Even if the appointment is ratified, our board of directors
in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the board determines that such a
change would be in our and our shareholders' best interests.

Principal Accounting Firm Fees

Aggregate fees we were billed for the fiscal years ended December 31,
2003 and 2002 by our principal accounting firm, Ernst & Young LLP are as
follows:

Fiscal Year Ended
December 31,
2003 2002

Audit fees................................ $206,917 $183,345

Audit-related fees (a).................... $ 20,300 --

Total audit and audit-related fees........ $227,217 $183,345

Tax fees (b).............................. $291,406 $300,707

All other fees (c)........................ $318,802 $260,933
------- -------

Total..................................... $837,425 $774,985

-------------------------
(a) The audit-related fees include amounts billed to us for review of our
registration statement and REIT accounting consulting advice in 2003.
(b) Tax fees include amounts billed to us primarily for tax planning and
consulting, tax compliance and preparation and review of federal, state and
local tax returns and tax fees related to REIT matters.
(c) All other fees include amounts billed to us related to audit of Fund II and
Fund III and tax return preparation for these funds for which we are reimbursed
by the funds.

The audit committee of the board of directors was advised of the
services provided by Ernst & Young LLP that are unrelated to the audit of the
annual fiscal year end financial statements and the review of

interim financial statements and has considered whether the provision of such
services is compatible with maintaining Ernst & Young LLP's independence as our
independent auditor.

Audit Committee Pre-Approval Policy

In accordance with our audit committee pre-approval policy, all audit
and non-audit services performed for us by our independent accountants were
pre-approved by the audit committee of our board of directors, which concluded
that the provision of such services by Ernst & Young LLP was compatible with the
maintenance of that firm's independence in the conduct of its auditing
functions.

The pre-approval policy provides for categorical pre-approval of
specified audit and permissible non-audit services and requires the specific
pre-approval by the audit committee, prior to engagement, of such services,
other than audit services covered by the annual engagement letter, that are
individually estimated to result in an amount of fees that exceed $50,000. In
addition, services to be provided by the independent accountants that are not
within the category of pre-approved services must be approved by the audit
committee prior to engagement, regardless of the service being requested or the
dollar amount involved.

Requests or applications for services that require specific separate
approval by the audit committee are required to be submitted to the audit
committee by both management and the independent accountants, and must include a
detailed description of the services to be provided and a joint statement
confirming that the provision of the proposed services does not impair the
independence of the independent accountants.

The audit committee may delegate pre-approval authority to one or more
of its members. The member or members to whom such authority is delegated shall
report any pre-approval decisions to the audit committee at its next scheduled
meeting. The audit committee does not delegate to management its
responsibilities to pre-approve services to be performed by the independent
accountants.

Vote Required; Recommendation

The affirmative vote of a majority of the votes cast at the annual
meeting is required to ratify the appointment of Ernst & Young LLP as our
independent auditors. Our board of directors unanimously recommends that you
vote for the ratification of Ernst & Young LLP as our independent auditors.

ANNUAL REPORT

Our annual report to shareholders is being concurrently distributed to
shareholders herewith.

OTHER MATTERS

Our management does not know of any other matters to come before the
annual meeting. If, however, any other matters do come before the annual
meeting, it is the intention of the persons designated as proxies to vote in
accordance with their discretion on such matters.

SHAREHOLDER PROPOSALS

If you wish to submit a shareholder proposal pursuant to Rule 14a-8
under the Securities Exchange Act for inclusion in our proxy statement and proxy
card for our 2005 annual meeting of shareholders, you must submit the proposal
to our secretary no later than January 1, 2005. In addition, if you desire to
bring business (including director nominations) before our 2005 annual meeting,
you must comply with our bylaws, which currently require that you provide
written notice of such business to our secretary no earlier than March 19, 2005
and no later than April 18, 2005. For additional requirements, shareholders
should refer to our bylaws, article II, section 12, "Nominations and Proposals
by Stockholders," a current copy of which may be obtained from our secretary. If
we do not receive timely notice pursuant to our bylaws, any proposal will be
excluded from consideration at the meeting, regardless of any earlier notice
provided in accord with SEC Rule 14a-8.

APPENDIX A

CAPITAL TRUST, INC.

Charter of the Audit Committee of the Board of Directors

PURPOSE

The Audit Committee (the "Committee") is appointed by the Board of
Directors (the "Board") to assist the Board in fulfilling its responsibility to
oversee the quality and integrity of the Company's financial reporting and the
audits of the financial statements of the Company. The Committee's purpose is
to:

o Assist the Board's oversight of:

o The integrity of the Company's financial statements and internal
controls;

o The Company's compliance with legal and regulatory requirements;

o The Company's overall risk management profile;

o The independent auditors' qualifications and independence; and

o The performance of the Company's internal audit function and
independent auditors.

o Prepare the report of the Committee required by the rules of the
Securities and Exchange Commission (the "SEC") to be included in the
Company's annual meeting proxy statement.

MEMBERSHIP

The Committee shall be comprised of not less than three members of the
Board. Members of the Committee shall be appointed by the Board and may be
removed by the Board in its discretion. The Board shall designate a chairperson
of the Committee. All members of the Committee shall meet the independence
criteria and have the qualifications set forth in the listing standards of the
New York Stock Exchange (the "NYSE") and Rule 10A-3 under the Securities
Exchange Act of 1934 (the "Exchange Act").

Accordingly, all of the members of the Committee shall be directors:

o Who do not accept any direct or indirect consulting, advisory or
compensatory fee from the Company other than for board service or in
respect of retirement or deferred compensation for prior service,
who are not "affiliated persons" within the meaning of Rule 10A-3
under the Exchange Act and who otherwise satisfy the independence
criteria set forth in the NYSE listing standards; and

o Who are financially literate (i.e. have the ability to read and
understand fundamental financial statements as determined by the
Board).

At least one member of the Committee shall qualify as an "audit
committee financial expert" as defined in Item 401(h) of Regulation S-K under
the Exchange Act (which the Board may presume satisfies the NYSE listing
standard that one member have accounting or related financial management
expertise).

Committee members shall not serve simultaneously on the audit committee
of more than two other companies, unless the Board determines that such service
will not impair the member's ability to serve on the Committee.

DUTIES AND RESPONSIBILITIES

The Committee's responsibility is one of oversight. The Company's
management is responsible for preparing the Company's financial statements and
the independent auditors are responsible for auditing those financial
statements.

To carry out its oversight responsibility, the Committee shall undertake
the activities set forth below. These activities are set forth as a guide with
the understanding that the Committee may diverge from this guide as appropriate
given the circumstances.

Independent Auditors and Audit Process
--------------------------------------

o The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to appoint,
retain (or nominate for shareholder ratification), oversee, evaluate
and, where appropriate, replace the independent auditors.

o The independent auditors shall report directly to the Committee.

o The Committee shall evaluate at least annually the experience,
qualifications and performance of the lead partner and the
senior members of the independent auditors' engagement team.

o The Committee shall review and approve the scope of the audit services
outlined in the independent auditors' annual engagement letter.

o The Committee shall review the scope of the annual audit outlined by the
independent auditors and their proposed audit plan and procedures.

o The Committee shall review with the independent auditors any problems,
difficulties or disputes the auditors may have encountered in the course
of the audit work or otherwise and any management letter provided by the
auditors and the Company's response to that letter.

o At least annually, receive and review a report by the independent
auditors describing:

o the independent auditors' internal quality-control procedures;

o any material issues raised by the most recent internal
quality-control review, or peer review, of the independent
auditing firm, or by an inquiry or investigation by governmental
or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
firm; and

o any steps taken to deal with any such issues.

o The Committee shall review any report of the independent auditors under
Section 10A(k) of the Exchange Act relating to:

o Critical accounting policies and practices to be used;

o Alternative treatments of financial information within GAAP that
have been discussed with management, ramifications of the use of
such alternative disclosure and treatments and the treatment
preferred by the independent auditors; and

o Other material written communications between the independent
auditors and management, such as a management letter or schedule
of unadjusted differences.

o The Committee shall:

o Request from the independent auditors annually a formal written
statement delineating all relationships between the auditors and
the Company consistent with Independence Standards Board
Standard Number 1;

o Discuss with the independent auditors any such disclosed
relationships and their impact on the independent auditors'
independence;

o Pre-approve all audit services and permissible non-audit
services to be provided by the independent auditors in
accordance with policies adopted by the Committee;

o Ensure that the independent auditors do not perform any
non-audit services that are prohibited by law or regulation;

o Establish clear hiring policies for employees or former
employees of the independent auditors; and

o Ensure the rotation of the independent auditors lead and
concurring audit partner every five years and other audit
partners every seven years.

Financial Statements
--------------------

o The Committee shall discuss with management and the independent auditors
the annual audited financial statements to be included in the Annual
Report on Form 10-K (or the Annual Report to Shareholders if distributed
prior to the filing of Form 10-K) and the quarterly financial statements
to be included in the Quarterly Reports on Form 10-Q, including the
matters required to be discussed by Statement of Auditing Standards
("SAS") No. 61, Communications with Audit Committees, as well as the
disclosures contained under

"Management's Discussion and Analysis of Financial Condition and Results
of Operations" prior to the Company's filing of the Form 10-K and Form
10-Q reports. The Committee shall determine whether to recommend
inclusion of these financial statements in these reports.

o The Committee shall review earnings press releases, as well as Company
policies with respect to earnings press releases, financial information
and earnings guidance provided to analysts and rating agencies. The
discussions need not occur in advance of each release or provision of
guidance.

o The Committee shall consider major changes and other major questions of
choice respecting the appropriate accounting principles, estimates and
practices to be applied in the preparation of the Company's financial
statements.

o The Committee shall review material pending legal proceedings involving
the Company and consider other contingent liabilities, as well as other
risks and exposures, that may have a material impact on the financial
statements.

o The Committee shall review the Company's policies with respect to risk
assessment and risk management.

o The Committee shall review with management and the independent auditors
the financial statement effects of pending regulatory and accounting
initiatives.

o The Committee shall review the impact of off-balance sheet structures on
the Company's financial statements.

o The Committee shall review any significant disputes between management
and the independent auditors that arose in connection with the
preparation of the Company's financial statements.

Internal Controls
-----------------

o The Committee shall consider the quality and adequacy of the Company's
internal controls.

o The Committee shall review the adequacy of the Company's internal audit
function and shall approve the engagement of any outsourced service
provider.

o The Committee shall review with the CEO and CFO the content of the
certifications to be included in Form 10-K and 10-Q reports and
certification process and related disclosures regarding disclosure
controls and procedures and internal controls for financial reporting.

o The Committee shall obtain reports from management, the internal audit
service provider and the independent auditors concerning the Company's
compliance with applicable laws and regulations and compliance by
directors, officers and employees with the Company's Code of Business
Conduct and Ethics and the Committee shall advise the Board with respect
to policies and procedures regarding such compliance matters.

o The Committee shall have the responsibility to establish procedures as
required by Section 10A(m)(4) of the Exchange Act for:

o the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls
or auditing matters; and

o the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.

o The Committee shall review all related party transactions.

The Committee shall report regularly to the Board and shall review with
the Board any issues that arise with respect to the quality or integrity of the
Company's financial statements, the Company's compliance with legal or
regulatory requirements, the performance and independence of the Company's
independent auditors or the performance of the internal audit function.

MEETINGS

The Committee shall meet as often as deemed necessary or appropriate in
its judgment, generally at least four times each year, either in person or by
phone. Any member of the Committee may call meetings of the Committee. The
Committee shall meet with the independent auditors at least quarterly. The
Committee shall meet on occasion with the independent auditors and internal
audit staff outside the presence of senior management. The Committee shall
report its recommendations to the Board after each Committee meeting.

PROCEDURES

In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company. The Committee shall have the
authority and sufficient funding to retain outside legal counsel, accountants or
other experts as it determines necessary and appropriate to assist the Committee
in carrying out its functions, without obtaining the approval of the Board or
management.

PERFORMANCE EVALUATION

The Committee shall prepare and provide to the Board an annual
performance evaluation of the Committee, including an assessment of the
performance of the Committee based on the duties and responsibilities set forth
in this charter and such other matters as the Committee may determine. The
evaluation to the Board may take the form of an oral report by the Committee
chairman or any other member of the Committee designated by the Committee to
make the report, and shall be undertaken under the supervision of the Corporate
Governance Committee in accordance with the Corporate Governance Guidelines
adopted by the Board. The Committee shall review and assess the adequacy of the
Committee charter annually, propose any necessary changes to the Corporate
Governance Committee for review and ultimate recommendation for approval to the
Board.

LIMITATION OF AUDIT COMMITTEE'S ROLE

While the Committee has the oversight responsibility set forth in this
Charter, it does not have the duty to plan or conduct audits or to determine
that the Company's financial statements and disclosures are complete and
accurate and are in accordance with generally accepted accounting principles and
applicable rules and regulations. These are the responsibilities of management
and the independent auditors. In addition, the Committee recognizes that the
Company's management, internal audit staff and the independent auditors, devote
more time to reviewing or analyzing the Company's business and its operations
and as a result, have more knowledge and detailed information concerning the
Company than members of the Committee. Consequently, in carrying out its
oversight responsibilities, the Committee is not providing any expert or special
assurance as to the Company's financial statements or any professional
certification as to the quality or adequacy of the independent auditors' work or
performance.

APPENDIX B

CAPITAL TRUST, INC.

2004 LONG-TERM INCENTIVE PLAN

1. Establishment, Purpose, and Types of Awards

Capital Trust, Inc., a Maryland corporation (the "Company") hereby
establishes an incentive compensation plan to be known as the "Capital Trust,
Inc. 2004 Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), for
the purpose of attracting, retaining and motivating select employees, officers,
directors, advisors, and consultants for the Company and its Affiliates and to
provide incentives and awards for superior performance.

The Plan permits the granting of the following types of awards
("Awards"), according to the Sections of the Plan listed here:

Section 6 Options
Section 7 Share Appreciation Rights
Section 8 Restricted and Unrestricted Share Awards
Section 9 Deferred Share Units
Section 10 Performance Awards

The Plan is not intended to affect and shall not affect any stock
options, equity-based compensation, or other benefits that the Company or its
Affiliates may have provided, or may separately provide in the future pursuant
to any agreement, plan, or program that is independent of this Plan.

2. Defined Terms

Terms in the Plan that begin with an initial capital letter have the
defined meaning set forth in Appendix A, unless defined elsewhere in this Plan
or the context of their use clearly indicates a different meaning.

3. Shares Subject to the Plan

Subject to the provisions of Section 13 of the Plan, the maximum number
of Shares that the Company may issue is 3,000,000 Shares for all Awards. For all
Awards, these Shares may be authorized but unissued Shares, or Shares that the
Company has reacquired or otherwise holds in treasury.

Shares that are subject to an Award that for any reason expires, is
forfeited, is cancelled, or becomes unexercisable, and Shares that are for any
other reason not paid or delivered under the Plan shall again, except to the
extent prohibited by Applicable Law, be available for subsequent Awards under
the Plan. In addition, the Committee may make future Awards with respect to
Shares that the Company retains from otherwise delivering pursuant to an Award
either (i) as payment of the exercise price of an Award, or (ii) in order to
satisfy the withholding or employment taxes due upon the grant, exercise,
vesting, or distribution of an Award. Notwithstanding the foregoing, but subject
to adjustments pursuant to Section 13 below, the number of Shares that are
available for

ISO Awards shall be determined, to the extent required under applicable tax
laws, by reducing the number of Shares designated in the preceding paragraph by
the number of Shares granted pursuant to ISO Awards (whether or not Shares are
issued pursuant to such Awards); provided that any Shares that are either
purchased under the Plan and forfeited back to the Plan, or surrendered in
payment of the Exercise Price for an Award shall be available for issuance
pursuant to ISO Awards.

4. Administration

(a) General. The Committee shall administer the Plan in accordance with
its terms, provided that the Board may act in lieu of the Committee on any
matter. The Committee shall hold meetings at such times and places as it may
determine and make such rules and regulations for the conduct of its business as
it deems advisable. In the absence of a duly appointed Committee or if the Board
otherwise chooses to act in lieu of a Committee, the Board shall function as the
Committee for all purposes of the Plan.

(b) Committee Composition. The Board shall appoint the members of the
Committee. If and to the extent permitted by Applicable Law, the Committee may
authorize one or more Reporting Persons (or other officers) to make Awards to
Eligible Persons who are not Reporting Persons (or other officers whom the
Committee has specifically authorized to make Awards). The Board may at any time
appoint additional members to the Committee, remove and replace members of the
Committee with or without Cause, and fill vacancies on the Committee however
caused.

(c) Powers of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its sole discretion:

(i) to determine Eligible Persons to whom Awards shall be granted
from time to time and the number of Shares, units, or SARs to be covered
by each Award;

(ii) to determine, from time to time, the Fair Market Value of
Shares;

(iii) to determine, and to set forth in Award Agreements, the
terms and conditions of all Awards, including any applicable exercise or
purchase price, the installments and conditions under which an Award
shall become vested (which may be based on performance), terminated,
expired, cancelled, renewed, or replaced, and the circumstances for
vesting acceleration or waiver of forfeiture restrictions, and other
restrictions and limitations;

(iv) to approve the forms of Award Agreements and all other
documents, notices and certificates in connection therewith which need
not be identical either as to type of Award or among Participants;

(v) to construe and interpret the terms of the Plan and any Award
Agreement, to determine the meaning of their terms, and to prescribe,
amend, and rescind rules and procedures relating to the Plan and its
administration; and

(vi) in order to fulfill the purposes of the Plan and without
amending the Plan, modify, cancel, or waive the Company's rights with
respect to any Awards, to adjust or to

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modify Award Agreements for changes in Applicable Law, and to recognize
differences in foreign law, tax policies, or customs; and

(vii) to make all other interpretations and to take all other
actions that the Committee may consider necessary or advisable to
administer the Plan or to effectuate its purposes.

Subject to Applicable Law and the restrictions set forth in the Plan,
the Committee may delegate administrative functions to individuals who are
Reporting Persons, officers, or Employees of the Company or its Affiliates.

(d) Deference to Committee Determinations. The Committee shall have the
discretion to interpret or construe ambiguous, unclear, or implied (but omitted)
terms in any fashion it deems to be appropriate in its sole discretion, and to
make any findings of fact needed in the administration of the Plan or Award
Agreements. The Committee's prior exercise of its discretionary authority shall
not obligate it to exercise its authority in a like fashion thereafter. The
Committee's interpretation and construction of any provision of the Plan, or of
any Award or Award Agreement, shall be final, binding, and conclusive. The
validity of any such interpretation, construction, decision or finding of fact
shall not be given de novo review if challenged in court, by arbitration, or in
any other forum, and shall be upheld unless clearly arbitrary or capricious.

(e) No Liability; Indemnification. Neither the Board nor any Committee
member, nor any Person acting at the direction of the Board or the Committee,
shall be liable for any act, omission, interpretation, construction or
determination made in good faith with respect to the Plan, any Award or any
Award Agreement. The Company and its Affiliates shall pay or reimburse any
member of the Committee, as well as any Director, Employee, or Consultant who
takes action in connection with the Plan, for all expenses incurred with respect
to the Plan, and to the full extent allowable under Applicable Law shall
indemnify each and every one of them for any claims, liabilities, and costs
(including reasonable attorney's fees) arising out of their good faith
performance of duties under the Plan. The Company and its Affiliates may obtain
liability insurance for this purpose.

5. Eligibility

(a) General Rule. The Committee may grant ISOs only to Employees
(including officers who are Employees) of the Company or an Affiliate that is a
"parent corporation" or "subsidiary corporation" within the meaning of Section
424 of the Code, and may grant all other Awards to any Eligible Person. A
Participant who has been granted an Award may be granted an additional Award or
Awards if the Committee shall so determine, if such Person is otherwise an
Eligible Person and if otherwise in accordance with the terms of the Plan.

(b) Grant of Awards. Subject to the express provisions of the Plan, the
Committee shall determine from the class of Eligible Persons those individuals
to whom Awards under the Plan may be granted, the number of Shares subject to
each Award, the price (if any) to be paid for the Shares or the Award and, in
the case of Performance Awards, in addition to the matters addressed in Section
10 below, the specific objectives, goals and performance criteria that further
define the Performance Award. Each Award shall be evidenced by an Award
Agreement signed by the

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Company and, if required by the Committee, by the Participant. The Award
Agreement shall set forth the material terms and conditions of the Award
established by the Committee.

(c) Limits on Awards. No Participant may receive Options and SARs that
relate to more than 500,000 Shares per calendar year. The Committee will adjust
these limitations pursuant to Section 13 below.

(d) Replacement Awards. The Committee may, in its sole discretion and
upon such terms as it deems appropriate, require as a condition of the grant of
an Award to a Participant that the Participant surrender for cancellation some
or all of the Awards or other awards that have previously been granted to the
Participant under this Plan or otherwise. An Award that is conditioned upon such
surrender may or may not be the same type of Award, may cover the same (or a
lesser or greater) number of Shares as such surrendered Award, may have other
terms that are determined without regard to the terms or conditions of such
surrendered Award, and may contain any other terms that the Committee deems
appropriate. In the case of Options, these other terms may not involve an
Exercise Price that is lower than the Exercise Price of the surrendered Option
unless either the new grant will not create any material financial expense for
the Company or the Company's shareholders approve the grant itself or the
program under which it is made pursuant to the Plan.

6. Option Awards

(a) Types; Documentation. The Committee may in its discretion grant ISOs
to any Employee and Non-ISOs to any Eligible Person, and shall evidence any such
grants in an Award Agreement that is delivered to the Participant. Each Option
shall be designated in the Award Agreement as an ISO or a Non-ISO. At the sole
discretion of the Committee, any Option may be exercisable, in whole or in part,
immediately upon the grant thereof, or only after the occurrence of a specified
event, or only in installments, which installments may vary. Options granted
under the Plan may contain such terms and provisions not inconsistent with the
Plan that the Committee shall deem advisable in its sole and absolute
discretion.

(b) ISO $100,000 Limitation. To the extent that the aggregate Fair
Market Value of Shares with respect to which Options designated as ISOs first
become exercisable by a Participant in any calendar year (under this Plan and
any other plan of the Company or any Affiliate) exceeds $100,000, such excess
Options shall be treated as Non-ISOs. For purposes of determining whether the
$100,000 limit is exceeded, the Fair Market Value of the Shares subject to an
ISO shall be determined as of the Grant Date. In reducing the number of Options
treated as ISOs to meet the $100,000 limit, the most recently granted Options
shall be reduced first. In the event that Section 422 of the Code is amended to
alter the limitation set forth therein, the limitation of this Section 6(b)
shall be automatically adjusted accordingly.

(c) Term of Options. Each Award Agreement shall specify a term at the
end of which the Option automatically expires, subject to earlier termination
provisions contained in Section 6(h) hereof; provided, that, the term of any
Option may not exceed ten years from the Grant Date. In the case of an ISO
granted to an Employee who is a Ten Percent Holder on the Grant Date, the term
of the ISO shall not exceed five years from the Grant Date.

-4-

(d) Exercise Price. The exercise price of an Option shall be determined
by the Committee in its discretion and shall be set forth in the Award
Agreement, subject to the following special rules:

(i) ISOs. If an ISO is granted to an Employee who on the Grant
Date is a Ten Percent Holder, the per Share exercise price shall not be
less than 110% of the Fair Market Value per Share on such Grant Date. If
an ISO is granted to any other Employee, the per Share exercise price
shall not be less than 100% of the Fair Market Value per Share on the
Grant Date.

(ii) Non-ISOs. The per Share exercise price for the Shares to be
issued pursuant to the exercise of a Non-ISO shall not be less than 50%
of the Fair Market Value per Share on the Grant Date.

(iii) Named Executive Officers. The per Share exercise price
shall not be less than 100% of the Fair Market Value per Share on the
Grant Date of an Option if (A) on such Grant Date, the Participant is
subject to the limitations set forth in Section 162(m) of the Code, and
(B) the grant is intended to qualify as performance-based compensation
under Section 162(m) of the Code.

(iv) Repricing. The Committee may at any time unilaterally reduce
the exercise price for any Option, but only if (I) the reduction will
not cause material financial expense for the Company or the Company's
shareholders approve the reduction or the program under which it is
made, and (II) the Committee promptly provides a written notice to any
Participant affected by the reduction.

(e) Exercise of Option. The times, circumstances and conditions under
which an Option shall be exercisable shall be determined by the Committee in its
sole discretion and set forth in the Award Agreement. The Committee shall have
the discretion to determine whether and to what extent the vesting of Options
shall be tolled during any unpaid leave of absence; provided, however, that in
the absence of such determination, vesting of Options shall be tolled during any
such leave approved by the Company.

(f) Minimum Exercise Requirements. An Option may not be exercised for a
fraction of a Share. The Committee may require in an Award Agreement that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent a Participant from purchasing the full number of
Shares as to which the Option is then exercisable.

(g) Methods of Exercise. Prior to its expiration pursuant to the terms
of the applicable Award Agreement, and subject to the times, circumstances, and
conditions for exercisability contained in the applicable Award Agreement, each
Option may be exercised, in whole or in part (provided that the Company shall
not be required to issue fractional shares), by delivery of written notice of
exercise to the secretary of the Company accompanied by the payment of the full
exercise price of the Shares being purchased. Unless otherwise provided in the
applicable Award Agreement, the acceptable methods of payment on the Grant Date
of any Option shall include the following:

(i) cash or check payable to the Company (in U.S. dollars);

-5-

(ii) other Shares that (A) are owned by the Participant who is
purchasing Shares pursuant to an Option, (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the
Shares as to which the Option is being exercised, (C) were not acquired
by such Participant pursuant to the exercise of an Option, unless such
Shares have been owned by such Participant for at least six months or
such other longer period as the Committee may determine, (D) are all, at
the time of such surrender, free and clear of any and all claims,
pledges, liens and encumbrances, or any restrictions which would in any
manner restrict the transfer of such shares to or by the Company (other
than such restrictions as may have existed prior to an issuance of such
Shares by the Company to such Participant), and (E) are duly endorsed
for transfer to the Company;

(iii) a cashless exercise program that the Committee may approve,
from time to time in its discretion, pursuant to which a Participant may
concurrently provide irrevocable instructions (A) to such Participant's
broker or dealer to effect the immediate sale of the purchased Shares
and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the exercise price of the
Option plus all applicable taxes required to be withheld by the Company
by reason of such exercise and (B) to the Company to deliver the
certificates for the purchased Shares directly to such broker or dealer
in order to complete the sale;

(iv) the Participant's surrender of Restricted Shares, Restricted
Share Units, Share Appreciation Rights, or Deferred Share Units;
provided that to the extent payment is made by means of the surrender of
any Award which is unvested or subject to restrictions, the Shares
issued pursuant to such surrender shall be subject to the same vesting
terms and other restrictions that applied to the surrendered Award; or

(v) any combination of the foregoing methods of payment.

The Committee shall have the discretion to exclude from an Award
Agreement any methods of payment set forth above. The Company shall not be
required to deliver Shares pursuant to the exercise of an Option until payment
of the full exercise price therefore is received by the Company.

(h) Termination of Continuous Service. The Committee may establish and
set forth in the applicable Award Agreement the terms and conditions on which an
Option shall remain exercisable, if at all, following termination of a
Participant's Continuous Service. The Committee may waive or modify these
provisions at any time. To the extent that a Participant is not entitled to
exercise an Option at the date of his or her termination of Continuous Service,
or if the Participant (or other Person entitled to exercise the Option) does not
exercise the Option to the extent so entitled within the time specified in the
Award Agreement or below (as applicable), the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the Plan
and become available for future Awards. In no event may any Option be exercised
after the expiration of the Option term as set forth in the Award Agreement.

The following provisions shall apply to the extent an Award Agreement
does not specify the terms and conditions upon which an Option shall terminate
when there is a termination of a Participant's Continuous Service:

-6-

(i) Termination other than Upon Disability or Death or for Cause.
In the event of termination of a Participant's Continuous Service (other
than as a result of Participant's death, disability, retirement or
termination for Cause), the Participant shall have the right to exercise
an Option at any time within 90 days following such termination to the
extent the Participant was entitled to exercise such Option at the date
of such termination.

(ii) Disability. In the event of termination of a Participant's
Continuous Service as a result of his or her "disability" within the
meaning of Section 22(e)(3) of the Code, the Participant shall have the
right to exercise an Option at any time within one year following such
termination to the extent the Participant was entitled to exercise such
Option at the date of such termination.

(iii) Retirement. In the event of termination of a Participant's
Continuous Service as a result of Participant's retirement, the
Participant shall have the right to exercise the Option at any time
within six months following such termination to the extent the
Participant was entitled to exercise such Option at the date of such
termination.

(iv) Death. In the event of the death of a Participant during the
period of Continuous Service since the Grant Date of an Option, or
within 90 days following termination of the Participant's Continuous
Service, the Option may be exercised, at any time within one year
following the date of the Participant's death, by the Participant's
estate or by a Person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent the right to exercise the
Option had vested at the date of death or, if earlier, the date the
Participant's Continuous Service terminated.

(v) Cause. If the Committee determines that a Participant's
Continuous Service terminated due to Cause, the Participant shall
immediately forfeit the right to exercise any Option, and it shall be
considered immediately null and void.

(i) Reverse Vesting. The Plan Administrator in its discretion may allow
a Participant to exercise unvested Options, in which case the Shares then issued
shall be Restricted Share Units having analogous vesting restrictions to the
unvested Options.

(j) Buyout Provisions. The Committee may at any time offer to buy out an
Option, in exchange for a payment in cash or Shares, based on such terms and
conditions as the Committee shall establish and communicate to the Participant
at the time that such offer is made. In addition, if the Fair Market Value for
Shares subject to an Option is more than 33% below their exercise price for more
than 30 consecutive business days, the Committee may unilaterally terminate and
cancel the Option either (i) by paying the Participant, in cash or Shares, an
amount not less than the Black-Scholes value of the vested portion of the
Option, or (ii) by irrevocably committing to grant a new Option, on a designated
date more than six months after such termination and cancellation of such Option
(but only if the Participant's Continuous Service has not terminated prior to
such designated date), on substantially the same terms as the cancelled Option,
provided that the per Share exercise price for the new Option shall equal the
per Share Fair Market Value of a Share on the date the new grant occurs.

-7-

7. Share Appreciate Rights (SARs)

(a) Grants. The Committee may in its discretion grant Share Appreciation
Rights to any Eligible Person, in any of the following forms:

(i) SARs related to Options. The Committee may grant SARs either
concurrently with the grant of an Option or with respect to an
outstanding Option, in which case the SAR shall extend to all or a
portion of the Shares covered by the related Option. An SAR shall
entitle the Participant who holds the related Option, upon exercise of
the SAR and surrender of the related Option, or portion thereof, to the
extent the SAR and related Option each were previously unexercised, to
receive payment of an amount determined pursuant to Section 7(e) below.
Any SAR granted in connection with an ISO will contain such terms as may
be required to comply with the provisions of Section 422 of the Code and
the regulations promulgated thereunder.

(ii) SARs Independent of Options. The Committee may grant SARs
which are independent of any Option subject to such conditions as the
Committee may in its discretion determine, which conditions will be set
forth in the applicable Award Agreement.

(iii) Limited SARs. The Committee may grant SARs exercisable only
upon or in respect of a Change in Control or any other specified event,
and such limited SARs may relate to or operate in tandem or combination
with or substitution for Options or other SARs, or on a stand-alone
basis, and may be payable in cash or Shares based on the spread between
the exercise price of the SAR, and (A) a price based upon or equal to
the Fair Market Value of the Shares during a specified period, at a
specified time within a specified period before, after or including the
date of such event, or (B) a price related to consideration payable to
Company's shareholders generally in connection with the event.

(b) Exercise Price. The per Share exercise price of an SAR shall be
determined in the sole discretion of the Committee, shall be set forth in the
applicable Award Agreement, and shall be no less than 50% of the Fair Market
Value of one Share. The exercise price of an SAR related to an Option shall be
the same as the exercise price of the related Option. The exercise price of an
SAR shall be subject to the special rules on pricing contained in paragraphs
(iii) and (iv) of Section 6(d) hereof.

(c) Exercise of SARs. Unless the Award Agreement otherwise provides, an
SAR related to an Option will be exercisable at such time or times, and to the
extent, that the related Option will be exercisable. An SAR may not have a term
exceeding ten years from its Grant Date. An SAR granted independently of any
other Award will be exercisable pursuant to the terms of the Award Agreement.
Whether an SAR is related to an Option or is granted independently, the SAR may
only be exercised when the Fair Market Value of the Shares underlying the SAR
exceeds the exercise price of the SAR.

(d) Effect on Available Shares. To the extent that an SAR is exercised,
only the actual number of delivered Shares (if any) will be charged against the
maximum number of Shares that may be delivered pursuant to Awards under this
Plan. The number of Shares subject to the SAR and the related Option of the
Participant will, however, be reduced by the number of underlying Shares as to
which the exercise relates, unless the Award Agreement otherwise provides.

-8-

(e) Payment. Upon exercise of an SAR related to an Option and the
attendant surrender of an exercisable portion of any related Award, the
Participant will be entitled to receive payment of an amount determined by
multiplying -

(i) the excess of the Fair Market Value of a Share on the date of
exercise of the SAR over the exercise price per Share of the SAR, by

(ii) the number of Shares with respect to which the SAR has been
exercised.

Notwithstanding the foregoing, an SAR granted independently of an Option
may limit the amount payable to the Participant to a percentage, specified in
the Award Agreement but not exceeding one-hundred percent (100%), of the amount
determined pursuant to the preceding sentence.

(f) Form and Terms of Payment. Subject to Applicable Law, the Committee
may, in its sole discretion, settle the amount determined under Section 7(e)
above solely in cash, solely in Shares (valued at their Fair Market Value on the
date of exercise of the SAR), or partly in cash and partly in Shares. In any
event, cash shall be paid in lieu of fractional Shares. Absent a contrary
determination by the Committee, all SARs shall be settled in cash as soon as
practicable after exercise. Notwithstanding the foregoing, the Committee may, in
an Award Agreement, determine the maximum amount of cash or Shares or
combination thereof that may be delivered upon exercise of an SAR.

(g) Termination of Employment or Consulting Relationship. The Committee
shall establish and set forth in the applicable Award Agreement the terms and
conditions on which an SAR shall remain exercisable, if at all, following
termination of a Participant's Continuous Service. The provisions of Section
6(h) above shall apply to the extent an Award Agreement does not specify the
terms and conditions upon which an SAR shall terminate when there is a
termination of a Participant's Continuous Service.

(h) Repricing and Buy-out. The Committee has the same discretion to
reprice and to buy-out SARs as it has to take such actions with respect to
Options.

8. Restricted and Unrestricted Share Awards

(a) Grants. The Committee may in its discretion grant restricted shares
("Restricted Shares") to any Eligible Person and shall evidence such grant in an
Award Agreement that is delivered to the Participant which sets forth the number
of Restricted Shares, the purchase price for such Restricted Shares (if any) and
the terms upon which the Restricted Shares may become vested. In addition, the
Company may in its discretion grant the right to receive Shares after certain
vesting requirements are met ("Restricted Share Units") to any Eligible Person
and shall evidence such grant in an Award Agreement that is delivered to the
Participant which sets forth the number of Shares (or formula, that may be based
on future performance or conditions, for determining the number of Shares) that
the Participant shall be entitled to receive upon vesting and the terms upon
which the Shares subject to Restricted Share Units may become vested. Unless
otherwise provided in the Award Agreement, the holder of Restricted Shares shall
receive any cash and stock dividends declared and paid on the Restricted Shares.
Unless otherwise provided in the Award Agreement, the holder of Restricted Share
Units shall receive (i) in the case of any cash dividends declared and paid

-9-

on the Shares, a cash amount equal to that amount that would otherwise be
payable as cash dividends so declared and paid if the Shares subject to the then
outstanding Restricted Share Units were outstanding and (ii) in the case of any
stock dividends declared and paid on the Shares, a grant of additional
Restricted Share Units (which shall be subject to the same outstanding vesting
terms) for the number of Shares equal to any stock dividends so declared and
paid that would otherwise be payable if the Shares subject to the then
outstanding Restricted Share Units were outstanding. The Committee may condition
any Award of Restricted Shares or Restricted Share Units to a Participant on
receiving from the Participant such further assurances and documents as the
Committee may require to enforce the restrictions. In addition, the Committee
may grant Awards hereunder in the form of unrestricted Shares ("Unrestricted
Shares"), which shall vest in full upon the date of grant or such other date as
the Committee may determine or which the Committee may issue pursuant to any
program under which one or more Eligible Persons (selected by the Committee in
its discretion) elect to receive Unrestricted Shares in lieu of cash bonuses
that would otherwise be paid.

(b) Vesting. The Committee shall set forth in an Award Agreement
granting Restricted Shares or Restricted Share Units, the terms and conditions
under which the Participant's interest in the Restricted Shares or the Shares
subject to Restricted Share Units will become vested. Except as set forth in the
applicable Award Agreement or as the Committee otherwise determines, upon
termination of a Participant's Continuous Service for any other reason, the
Participant shall forfeit his or her unvested Restricted Shares and Restricted
Share Units; provided that if a Participant purchases the Restricted Shares and
forfeits them for any reason, the Company shall return the purchase price to the
Participant only if and to the extent set forth in an Award Agreement.

(c) Issuance of Restricted Shares Prior to Vesting. The Company shall
issue stock certificates that evidence Restricted Shares pending the lapse of
applicable restrictions, and that bear a legend making appropriate reference to
such restrictions. Except as set forth in the applicable Award Agreement or the
Committee otherwise determines, the Company or a third party that the Company
designates shall hold such Restricted Shares and any dividends not currently
paid to the Participant pursuant to the applicable Award Agreement.

(d) Issuance of Shares upon Vesting. As soon as practicable after
vesting of a Participant's Restricted Shares (or Shares underlying Restricted
Share Units) and the Participant's satisfaction of applicable tax withholding
requirements, the Company shall release to the Participant, free from the
vesting restrictions, one Share for each vested Restricted Share (or issue one
Share free of the vesting restriction for each vested Restricted Share Unit),
unless an Award Agreement provides otherwise. No fractional shares shall be
distributed, and cash shall be paid in lieu thereof.

(e) Dividends payable on Vesting. If an Award Agreement does not provide
for an earlier payment of dividends, whenever Shares are issued to a Participant
or duly-authorized transferee under Section 8(d) above pursuant to the vesting
of Restricted Shares or the Shares underlying Restricted Share Units, such
Participant or duly-authorized transferee shall also be entitled to receive,
with respect to each Share issued, an amount equal to any cash dividends (plus
simple interest at a rate of five percent per annum, or such other reasonable
rate as the Committee may determine) and a number of Shares equal to any stock
dividends, which were declared and paid to the holders of Shares between the
Grant Date and the date such Share is issued to the extent not currently paid to
the Participant pursuant to the applicable Award Agreement.

-10-

(f) Section 83(b) Elections. If a Participant who has received
Restricted Share Units provides the Committee with written notice of his or her
intention to make an election under Section 83(b) of the Code with respect to
the Shares subject to such Restricted Share Units (the "Section 83(b)
Election"), the Committee may in its discretion convert the Participant's
Restricted Share Units into Restricted Shares, on a one-for-one basis, in full
satisfaction of the Participant's Restricted Share Unit Award.

(g) Deferral Elections. At any time within the calendar year in which a
Participant who is a member of a "select group of management or highly
compensated employees" (within the meaning of ERISA) receives an Award of either
Restricted Shares or Restricted Share Units, the Committee may permit the
Participant to irrevocably elect, on a form provided by and acceptable to the
Committee, to defer the receipt of all or a percentage of the Shares that would
otherwise be transferred to the Participant upon the vesting of such Award. If
the Participant makes this election, the Shares subject to the election, and any
associated unpaid dividends and interest thereon, shall be credited as Deferred
Share Units (as defined below) to an Account (as defined below) established
pursuant to Section 9 hereof on the date such Shares would otherwise have been
released or issued to the Participant pursuant to Section 8(d) above.
Notwithstanding the foregoing, Shares with respect to which a Participant makes
a Section 83(b) Election shall not be eligible for deferral pursuant to Section
9 below.

9. Deferred Share Units

(a) Elections to Defer. The Committee may permit any Eligible Person who
is a Director, Consultant or member of a "select group of management or highly
compensated employees" (within the meaning of the ERISA) to irrevocably elect,
on a form provided by and acceptable to the Committee (the "Election Form"), to
forego the receipt of cash or other compensation (including Restricted Shares
for which a Section 83(b) Election has not been made, Shares subject to
Restricted Share Units and the dividends or the cash amount equal to the amount
of dividends that would otherwise be paid in respect of Restricted Shares or
Shares subject to Restricted Share Units), and in lieu thereof to have the
Company credit to an internal Plan account (the "Account") a number of deferred
share units ("Deferred Share Units") having a Fair Market Value equal to the
Shares and other compensation deferred. These credits will be made at the end of
each calendar month during which compensation is deferred. Each Election Form
shall take effect five business days after its delivery to the Company, unless
during such five business day period the Company sends the Participant a written
notice explaining why the Election Form is invalid. Notwithstanding the
foregoing sentence, Election Forms shall be ineffective with respect to any
compensation that a Participant earns before the date on which the Company
receives the Election Form.

(b) Vesting. Each Participant shall be 100% vested at all times in any
Shares subject to Deferred Share Units.

(c) Crediting of Dividends. Unless otherwise provided in the Award
Agreement, whenever cash dividends are declared and paid on the Shares, the
Account shall be credited with additional Deferred Share Units calculated by
dividing (i) the amount obtained by multiplying the number of Shares subject to
the then outstanding Deferred Share Units by the per share dividend amount by
(ii) the Fair Market Value of the Shares on the date of payment of the
dividends. Whenever stock dividends are declared and paid on the Shares, the
Account shall be credited with additional Deferred Shares Units for the number
of Shares equal to any stock dividends declared and paid on

-11-

the Shares that would otherwise be payable if the Shares subject to the then
outstanding Deferred Share Units were outstanding.

(d) Issuances of Shares. The Company shall provide a Participant with
one Share for each Deferred Share Unit in five substantially equal annual
installments that are issued before the last day of each of the five calendar
years that end after the date on which the Participant's Continuous Service
terminates, unless -

(i) the Participant has properly elected a different form of
distribution, on a form approved by the Committee that permits the
Participant to select any combination of a lump sum and annual
installments that are completed within ten years following termination
of the Participant's Continuous Service, and

(ii) the Company has received the Participant's distribution
election form either more than 90 days before a Change in Control, or
more than one year before the date on which the Participant's Continuous
Service terminates for any reason other than death, or before the
Participant's death.

Fractional shares shall not be issued, and instead shall be paid out in
cash.

(e) Hardship Withdrawals. In the event a Participant suffers an
unforeseeable hardship within the contemplation of this Section 9(e) , the
Participant may apply to the Company for an immediate distribution of all or a
portion of the Participant's Deferred Share Units. The hardship must result from
a sudden and unexpected illness or accident of the Participant or a dependent of
the Participant, casualty loss of property, or other similar conditions beyond
the control of the Participant. Examples of purposes which are not considered
hardships include post-secondary school expenses or the desire to purchase a
residence. In no event will a distribution be made to the extent the hardship
could be relieved through reimbursement or compensation by insurance or
otherwise, or by liquidation of the Participant's nonessential assets to the
extent such liquidation would not itself cause a severe financial hardship. The
amount of any distribution hereunder shall be limited to the amount necessary to
relieve the Participant's financial hardship. The Committee shall determine
whether a Participant has a qualifying hardship and the amount which qualifies
for distribution, if any. The Committee may require evidence of the purpose and
amount of the need, and may establish such application or other procedures as it
deems appropriate.

(f) Unsecured Rights to Deferred Compensation. A Participant's right to
Deferred Share Units shall at all times constitute an unsecured promise of the
Company to pay benefits as they come due. The right of the Participant or the
Participant's duly-authorized transferee to receive benefits hereunder shall be
solely an unsecured claim against the general assets of the Company. Neither the
Participant nor the Participant's duly-authorized transferee shall have any
claim against or rights in any specific assets, shares, or other funds of the
Company.

10. Performance Awards

(a) Performance Units. The Committee may in its discretion grant
Performance Units to any Eligible Person and shall evidence such grant in an
Award Agreement that is delivered to the Participant which sets forth the terms
and conditions of the Award. A Performance Unit is an Award which is based on
the achievement of specific goals with respect to the Company or any

-12-

Affiliate or individual performance of the Participant, or a combination
thereof, over a specified period of time. Subject to subsection (d) hereof , the
maximum Performance Unit compensation that may be paid to any one Participant
with respect to any one Performance Period (hereinafter defined) shall be
250,000 Shares, $5,000,000 in cash, or both.

(b) Performance Compensation Awards. The Committee may, at the time of
grant of a Performance Unit, designate such Award as a "Performance Compensation
Award" in order that such Award constitutes "qualified performance-based
compensation" under Code Section 162(m), in which event the Committee shall have
the power to grant such Performance Compensation Award upon terms and conditions
that qualify it as "qualified performance-based compensation" within the meaning
of Code Section 162(m). With respect to each such Performance Compensation
Award, the Committee shall establish, in writing within the time required under
Code Section 162(m), a "Performance Period," "Performance Measure(s)", and
"Performance Formula(e)" (each such term being hereinafter defined). Once
established for a Performance Period, the Performance Measure(s) and Performance
Formula(e) shall not be amended or otherwise modified to the extent such
amendment or modification would cause the compensation payable pursuant to the
Award to fail to constitute qualified performance-based compensation under Code
Section 162(m).

A Participant shall be eligible to receive payment in respect of a
Performance Compensation Award only to the extent that the Performance
Measure(s) for such Award are achieved and the Performance Formula(e) as applied
against such Performance Measure(s) determines that all or some portion of such
Participant's Award has been earned for the Performance Period. As soon as
practicable after the close of each Performance Period, the Committee shall
review and certify in writing whether, and to what extent, the Performance
Measure(s) for the Performance Period have been achieved and, if so, determine
and certify in writing the amount of the Performance Compensation Award to be
paid to the Participant and, in so doing, may use negative discretion to
decrease, but not increase, the amount of the Award otherwise payable to the
Participant based upon such performance. Subject to subsection (d) hereof, the
maximum Performance Compensation Award for any one Participant for any one
Performance Period shall be 250,000 Shares, $5,000,000 in cash, or both.

(i) "Performance Formula" means, for a Performance Period, one or
more objective formulas or standards established by the Committee for
purposes of determining whether or the extent to which an Award has been
earned based on the level of performance attained or to be attained with
respect to one or more Performance Measure(s). Performance Formulae may
vary from Performance Period to Performance Period and from Participant
to Participant and may be established on a stand-alone basis, in tandem
or in the alternative.

(ii) "Performance Measure" means one or more of the following
selected by the Committee to measure Company, Affiliate, and/or business
unit performance for a Performance Period, whether in absolute or
relative terms, including, without limitation: terms relative to a peer
group or index; basic, diluted, or adjusted earnings per share; sales or
revenue; earnings before interest, taxes, and other adjustments (in
total or on a per share basis); basic or adjusted net income; basic or
adjusted funds from operations or cash flow; returns on equity, assets,
capital, revenue or similar measure; level and growth of dividends;

-13-

the price or increase in price of Shares; total shareholder return;
distributions received on the account of so called carried interests or
incentive management fees from CT Mezzanine Partners II LP, CT Mezzanine
Partners III, Inc., and any other private equity fund managed by the
Company; total assets; growth in assets or new originations of assets;
equity market capitalization; assets under management; third-party
equity capital under management or raised; and mergers, acquisitions,
sales of assets of Affiliates or business units. Each such measure shall
be to the extent applicable, determined in accordance with generally
accepted accounting principles as consistently applied by the Company
(or such other standard applied by the Committee) and, if so determined
by the Committee, and in the case of a Performance Compensation Award,
to the extent permitted under Code Section 162(m), adjusted to omit the
effects of extraordinary items, gain or loss on the disposal of a
business segment, unusual or infrequently occurring events and
transactions and cumulative effects of changes in accounting principles.
Performance Measures may vary from Performance Period to Performance
Period and from Participant to Participant, and may be established on a
stand-alone basis, in tandem or in the alternative.

(iii) "Performance Period" means one or more periods of time (of
not less than one fiscal year of the Company), as the Committee may
designate, over which the attainment of one or more Performance
Measure(s) will be measured for the purpose of determining a
Participant's rights in respect of an Award.

(d) With respect to the maximum limits set forth in Section 10(a) and
10(b) above, the Committee shall have the discretion to provide in any Award
Agreement that any amounts earned in excess of these amounts during a
Performance Period will either be credited as Deferred Share Units, or as
deferred cash compensation under a separate plan of the Company or an Affiliate
(provided in the latter case that such deferred compensation either bears a
reasonable rate of interest or has a value based on one or more predetermined
actual investments). Any amounts for which payment to the Participant is
deferred pursuant to the preceding sentence shall be paid to the Participant in
a future year or years but not earlier than, and only to the extent that, the
Participant is either not receiving compensation in excess of these limits for a
Performance Period, or is not subject to the restrictions set forth under
Section 162(b) of the Code

11. Taxes

(a) General. As a condition to the issuance or distribution of Shares
pursuant to the Plan, the Participant (or in the case of the Participant's
death, the Person who succeeds to the Participant's rights) shall make such
arrangements as the Company may require for the satisfaction of any applicable
federal, state, local or foreign withholding tax obligations that may arise in
connection with the Award and the issuance of Shares. The Company shall not be
required to issue any Shares until such obligations are satisfied. If the
Committee allows the withholding or surrender of Shares to satisfy a
Participant's tax withholding obligations, the Committee shall not allow Shares
to be withheld in an amount that exceeds the minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes.

(b) Default Rule for Employees. In the absence of any other arrangement,
an Employee shall be deemed to have directed the Company to withhold or collect
from his or her cash compensation an amount sufficient to satisfy such tax
obligations from the next payroll payment otherwise payable after the date of
the exercise of an Award.

-14-

(c) Special Rules. In the case of a Participant other than an Employee
(or in the case of an Employee where the next payroll payment is not sufficient
to satisfy such tax obligations, with respect to any remaining tax obligations),
in the absence of any other arrangement and to the extent permitted under the
Applicable Law, the Participant shall be deemed to have elected to have the
Company withhold from the Shares or cash to be issued pursuant to an Award that
number of Shares (or equivalent cash amount) having a Fair Market Value
determined as of the applicable Tax Date (as defined below) equal to the amount
required to be withheld. For purposes of this Section 11, the Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined under the Applicable Law (the "Tax
Date").

(d) Surrender of Shares. If permitted by the Committee, in its
discretion, a Participant may satisfy the minimum applicable tax withholding and
employment tax obligations associated with an Award by surrendering Shares to
the Company (including Shares that would otherwise be issued pursuant to the
Award) that have a Fair Market Value determined as of the applicable Tax Date
equal to the amount required to be withheld. In the case of Shares previously
acquired from the Company that are surrendered under this Section 11, such
Shares must have been owned by the Participant for more than six months on the
date of surrender (or such longer period of time the Company may in its
discretion require).

12. Non-Transferability of Awards

(a) General. Except as set forth in this Section 12, or as otherwise
approved by the Committee for a select group of management or highly compensated
Employees, Awards may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or by the laws of descent or
distribution. The designation of a beneficiary by a Participant will not
constitute a transfer. An Award may be exercised, during the lifetime of the
Participant issued an Award, only by such Participant, the duly-authorized legal
representative of a disabled Participant, or a transferee permitted by this
Section 12.

(b) Limited Transferability Rights. Notwithstanding anything else in
this Section 12, the Committee may in its discretion provide in an Award
Agreement that the Award may be transferred by instrument to an inter vivos or
testamentary trust (or other entity) in which the Award is to be passed to
beneficiaries upon the death of the trustor (settlor), or by gift to charitable
institutions, the Participant's "Immediate Family" (as defined below), on such
terms and conditions as the Committee deems appropriate. "Immediate Family"
means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, domestic partner, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
and shall include adoptive relationships.

13. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions

(a) Changes in Capitalization. The Committee shall equitably adjust the
number of Shares covered by each outstanding Award, and the number of Shares
that have been authorized for issuance under the Plan but as to which no Awards
have yet been granted or that have been returned to the Plan upon cancellation,
forfeiture, or expiration of an Award, as well as the price per Share covered by
each such outstanding Award, to reflect any increase or decrease in the number
of issued Shares resulting from a stock-split, reverse stock-split, stock
dividend, combination, recapitalization or reclassification of the Shares, or
any other increase or decrease in the number of

-15-

issued Shares effected without receipt of consideration by the Company. In the
event of any such transaction or event, the Committee may provide in
substitution for any or all outstanding Options under the Plan such alternative
consideration (including securities of any surviving entity) as it may in good
faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all Options so replaced. In any case, such
substitution of securities shall not require the consent of any Person who is
granted options pursuant to the Plan. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be required to be made with respect to, the number or
price of Shares subject to any Award.

(b) Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company other than as part of a Change of Control, each Award
will terminate immediately prior to the consummation of such action, subject to
the discretion of the Committee to exercise any discretion authorized in the
case of a Change in Control.

(c) Change in Control. In the event of a Change in Control (or
beforehand through an Award Agreement or modification of an Award Agreement),
the Committee may in its sole and absolute discretion and authority, without
obtaining the approval or consent of the Company's shareholders or any
Participant (subject to the specific commitments made in any Award Agreement)
with respect to his or her outstanding Awards, take one or more of the following
actions:

(i) arrange for or otherwise provide that each outstanding Award
shall be assumed or a substantially similar award shall be substituted
by a successor corporation or a parent or subsidiary of such successor
corporation (the "Successor Corporation");

(ii) accelerate the vesting of Awards for any period that the
Committee may authorize at the end of which the Committee may provide
for termination of any unexercised Options or SARs, so that Awards shall
vest (and, to the extent applicable, become exercisable) as to the
Shares that otherwise would have been unvested and provide that
repurchase rights of the Company, if any, with respect to Shares issued
upon exercise of an Award shall lapse as to the Shares subject to such
repurchase right; or

(iii) arrange or otherwise provide for the payment of cash or
other consideration to Participants in exchange for the satisfaction and
cancellation of outstanding Awards.

Notwithstanding the above, in the event a Participant holding an Award
assumed or substituted by the Successor Corporation in a Change in Control is
Involuntarily Terminated by the Successor Corporation in connection with, or
within 12 months following consummation of, the Change in Control, then any
assumed or substituted Award held by the terminated Participant at the time of
termination shall accelerate and become fully vested (and exercisable in full in
the case of Options and SARs), and any repurchase right applicable to any Shares
shall lapse in full. The acceleration of vesting and lapse of repurchase rights
provided for in the previous sentence shall occur immediately prior to the
effective date of the Participant's termination.

(d) Certain Distributions. In the event of any distribution to the
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Committee may, in its discretion,

-16-

appropriately adjust the price per Share covered by each outstanding Award to
reflect the effect of such distribution.

14. Time of Granting Awards.

The date of grant ("Grant Date") of an Award shall be the date on which
the Committee makes the determination granting such Award or such other date as
is determined by the Committee, provided that in the case of an ISO, the Grant
Date shall be the later of the date on which the Committee makes the
determination granting such ISO or the date of commencement of the Participant's
employment relationship with the Company.

15. Modification of Awards and Substitution of Options.

(a) Modification, Extension, and Renewal of Awards. Within the
limitations of the Plan and any Award Agreement, the Committee may modify an
Award (i) to accelerate the rate at which an Option or SAR may be exercised
(including without limitation permitting an Option or SAR to be exercised in
full without regard to the installment or vesting provisions of the applicable
Award Agreement or whether the Option or SAR is at the time exercisable, to the
extent it has not previously been exercised), (ii) to accelerate the vesting of
any Award, (iii) to extend or renew outstanding Awards, or (iv) to accept the
cancellation of outstanding Awards to the extent not previously exercised either
for the granting of new Awards or for other consideration in substitution or
replacement thereof.

(b) Substitution of Options. Notwithstanding any inconsistent provisions
or limits under the Plan, in the event the Company or an Affiliate acquires
(whether by purchase, merger or otherwise) all or substantially all of
outstanding capital stock or assets of another corporation or in the event of
any reorganization or other transaction qualifying under Section 424 of the
Code, the Committee may, in accordance with the provisions of that Section,
substitute Options for options under the plan of the acquired company provided
(i) the excess of the aggregate fair market value of the shares subject to an
option immediately after the substitution over the aggregate option price of
such shares is not more than the similar excess immediately before such
substitution and (ii) the new Option does not give Persons additional benefits,
including any extension of the exercise period.

16. Term of Plan.

The Plan shall continue in effect for a term of ten (10) years from its
effective date as determined under Section 20 below, unless the Plan is sooner
terminated under Section 17 below.

17. Amendment and Termination of the Plan.

(a) Authority to Amend or Terminate. Subject to Applicable Laws, the
Board may from time to time amend, alter, suspend, discontinue, or terminate the
Plan.

(b) Effect of Amendment or Termination. No amendment, suspension, or
termination of the Plan shall materially and adversely affect Awards already
granted unless either it relates to an adjustment pursuant to Section 13 above,
or it is otherwise mutually agreed between the Participant and the Committee,
which agreement must be in writing and signed by the Participant and the
Company. Notwithstanding the foregoing, the Committee may amend the Plan to
eliminate

-17-

provisions which are no longer necessary as a result of changes in tax or
securities laws or regulations, or in the interpretation thereof.

18. Conditions Upon Issuance of Shares.

Notwithstanding any other provision of the Plan or any agreement entered
into by the Company pursuant to the Plan, the Company shall not be obligated,
and shall have no liability for failure, to issue or deliver any Shares under
the Plan unless such issuance or delivery would comply with Applicable Law, with
such compliance determined by the Company in consultation with its legal
counsel.

19. Reservation of Shares.

The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

20. Effective Date.

This Plan shall become effective on the date of its approval by the
Board; provided that this Plan shall be submitted to the Company's shareholders
for approval, and if not approved by the shareholders within one year from the
date of approval by the Board, this Plan and any Awards shall be null, void, and
of no force and effect. Awards granted under this Plan before approval of this
Plan by the shareholders shall be granted subject to such approval and no Shares
shall be distributed before such approval.

21. Controlling Law.

All disputes relating to or arising from the Plan shall be governed by
the internal substantive laws (and not the laws of conflicts of laws) of the
State of New York, to the extent not preempted by United States federal law. If
any provision of this Plan is held by a court of competent jurisdiction to be
invalid and unenforceable, the remaining provisions shall continue to be fully
effective.

22. Laws And Regulations.

(a) U.S. Securities Laws. This Plan, the grant of Awards, and the
exercise of Options and SARs under this Plan, and the obligation of the Company
to sell or deliver any of its securities (including, without limitation,
Options, Restricted Shares, Restricted Share Units, Unrestricted Shares,
Deferred Share Units, and Shares) under this Plan shall be subject to all
Applicable Law. In the event that the Shares are not registered under the
Securities Act of 1933, as amended (the "Act"), or any applicable state
securities laws prior to the delivery of such Shares, the Company may require,
as a condition to the issuance thereof, that the Persons to whom Shares are to
be issued represent and warrant in writing to the Company that such Shares are
being acquired by him or her for investment for his or her own account and not
with a view to, for resale in connection with, or with an intent of
participating directly or indirectly in, any distribution of such Shares within
the meaning of the Act, and a legend to that effect may be placed on the
certificates representing the Shares.

-18-

(b) Other Jurisdictions. To facilitate the making of any grant of an
Award under this Plan, the Committee may provide for such special terms for
Awards to Participants who are foreign nationals or who are employed by the
Company or any Affiliate outside of the United States of America as the
Committee may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom. The Company may adopt rules and procedures
relating to the operation and administration of this Plan to accommodate the
specific requirements of local laws and procedures of particular countries.
Without limiting the foregoing, the Company is specifically authorized to adopt
rules and procedures regarding the conversion of local currency, taxes,
withholding procedures and handling of stock certificates which vary with the
customs and requirements of particular countries. The Company may adopt
sub-plans applicable to particular locations and countries.

23. No Shareholder Rights. Neither a Participant nor any transferee of a
Participant shall have any rights as a shareholder of the Company with respect
to any Shares underlying any Award until the date of issuance of a share
certificate to a Participant or a transferee of a Participant for such Shares in
accordance with the Company's governing instruments and Applicable Law. Prior to
the issuance of Shares pursuant to an Award, a Participant shall not have the
right to vote or to receive dividends or any other rights as a shareholder with
respect to the Shares underlying the Award, notwithstanding its exercise in the
case of Options and SARs. No adjustment will be made for a dividend or other
right that is determined based on a record date prior to the date the stock
certificate is issued, except as otherwise specifically provided for in this
Plan.

24. No Employment Rights. The Plan shall not confer upon any Participant any
right to continue an employment, service or consulting relationship with the
Company, nor shall it affect in any way a Participant's right or the Company's
right to terminate the Participant's employment, service, or consulting
relationship at any time, with or without Cause.

-19-

CAPITAL TRUST, INC.
2004 LONG-TERM INCENTIVE PLAN

----------

Appendix A: Definitions

----------

As used in the Plan, the following definitions shall apply:

"Affiliate" means, with respect to any Person (as defined below), any
other Person that directly or indirectly controls or is controlled by or under
common control with such Person. For the purposes of this definition, "control,"
when used with respect to any Person, means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
such Person or the power to elect directors, whether through the ownership of
voting securities, by contract or otherwise; and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.

"Applicable Law" means the legal requirements relating to the
administration of options and share-based plans under applicable U.S. federal
and state laws, the Code, any applicable stock exchange or automated quotation
system rules or regulations, and the applicable laws of any other country or
jurisdiction where Awards are granted, as such laws, rules, regulations and
requirements shall be in place from time to time.

"Award" means any award made pursuant to the Plan, including awards made
in the form of an Option, an SAR, a Restricted Share, an Unrestricted Share, a
Restricted Share Unit, a Deferred Share Unit and a Performance Award, or any
combination thereof, whether alternative or cumulative, authorized by and
granted under this Plan.

"Award Agreement" means any written document setting forth the terms of
an Award that has been authorized by the Committee. The Committee shall
determine the form or forms of documents to be used, and may change them from
time to time for any reason.

"Board" means the Board of Directors of the Company.

"Cause" for termination of a Participant's Continuous Service will exist
if the Participant is terminated from employment or other service with the
Company or an Affiliate for any of the following reasons: (i) the Participant's
conviction of a felony committed in connection with his or her employment or
service with the Company, (ii) the Participant's willful and failure to
substantially perform his or her duties and responsibilities to the Company or
deliberate violation of a material Company policy; (iii) the Participant's
commission of any material act or acts of fraud, embezzlement, dishonesty, or
other willful misconduct; (v) the Participant's material unauthorized use or
disclosure of any proprietary information or trade secrets of the Company or any
other party to whom the Participant owes an obligation of nondisclosure as a
result of his or her relationship with the Company; or (v) Participant's willful
and material breach of any of his or her obligations under any written agreement
or covenant with the Company.

-20-

The Committee shall in its discretion determine whether or not a
Participant is being terminated for Cause. The Committee's determination shall,
unless arbitrary and capricious, be final and binding on the Participant, the
Company, and all other affected Persons. The foregoing definition does not in
any way limit the Company's ability to terminate a Participant's employment or
consulting relationship at any time, and the term "Company" will be interpreted
herein to include any Affiliate or successor thereto, if appropriate.

"Change in Control" means any of the following:

(a) Approval by the shareholders of the Company of the dissolution or
liquidation of the Company;

(b) Approval by the shareholders of the Company of an agreement to merge
or consolidate, or otherwise reorganize, with or into one or more entities that
are not Affiliates, as a result of which less than 50% of the outstanding voting
securities of the surviving or resulting entity immediately after such
transaction are, or will be, owned, directly or indirectly, by shareholders of
the Company immediately before such transaction (assuming for purposes of such
determination that there is no change in the record ownership of the Company's
securities from the record date for such approval until such transaction and
that such record owners hold no securities of the other parties to such
reorganization), but including in such determination any securities of the other
parties to such transaction held by Affiliates of the Company);

(c) Approval by the shareholders of the Company of the sale of
substantially all of the Company's business and/or assets to a Person or entity
that is not an Affiliate of the Company;

(d) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act but excluding any Person described in and satisfying the
conditions of Rule 13d-1(b)(1) thereunder), other than a Person that is a
shareholder of the Company on the Effective Date or a trustee or a fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries or an entity owned directly or indirectly by the shareholders of
the Company in substantially the same proportion as their ownership of the stock
of the Company, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 33% of the combined voting power of the Company's then outstanding
securities entitled to then vote generally in the election of directors of the
Company other than as a result of the acquisition of securities directly from
the Company; or

(e) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board cease to constitute at
least a majority thereof, unless the election, or the nomination for election by
the Company's shareholders, of each new Board member was approved by a vote of
at least three-fourths of the Board members then still in office who were Board
members at the beginning of such period (including for these purposes, new
members whose election or nomination was so approved).

"Code" means the U.S. Internal Revenue Code of 1986, as amended.

"Committee" means one or more committees or subcommittees of the Board
appointed by the Board to administer the Plan in accordance with Section 4
above. With respect to any decision involving an Award intended to satisfy the
requirements of Section 162(m) of the Code, the

-21-

Committee shall consist solely of two or more Directors of the Company who are
"outside directors" within the meaning of Section 162(m) of the Code.

"Company" means Capital Trust, Inc., a Maryland corporation.

"Consultant" means any natural person, including an advisor, who is
engaged by the Company or any Affiliate to render services and is compensated
for such services.

"Continuous Service" means the absence of any interruption or
termination of service as an Employee, Director, or Consultant. Continuous
Service shall not be considered interrupted in the case of: (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Committee,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; (iv) changes in status from Director to advisory director or
emeritus status; or (iv) in the case of transfers between locations of the
Company or between the Company, its Affiliates or their respective successors.
Changes in status between service as an Employee, Director, and a Consultant
will not constitute an interruption of Continuous Service.

"Deferred Share Units" mean Awards pursuant to Section 9 of the Plan.

"Director" means a member of the Board, or a member of the board of
directors of an Affiliate.

"Eligible Person" means any Consultant, Director or Employee and
includes non-Employees to whom an offer of employment has been extended.

"Employee" means any natural person whom the Company or any Affiliate
classifies as an employee (including an officer) for employment tax purposes.
The payment by the Company of a director's fee to a Director shall not be
sufficient to constitute "employment" of such Director by the Company.

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

"Fair Market Value" means, as of any date (the "Determination Date")
means: (i) the closing price of a Share on the New York Stock Exchange or the
American Stock Exchange (collectively, the "Exchange"), on the Determination
Date, or, if shares were not traded on the Determination Date, then on the
nearest preceding trading day during which a sale occurred; or (ii) if such
stock is not traded on the Exchange but is quoted on NASDAQ or a successor
quotation system, (A) the last sales price (if the stock is then listed as a
National Market Issue under The Nasdaq National Market System) or (B) the mean
between the closing representative bid and asked prices (in all other cases) for
the stock on the Determination Date as reported by NASDAQ or such successor
quotation system; or (iii) if such stock is not traded on the Exchange or quoted
on NASDAQ but is otherwise traded in the over-the-counter, the mean between the
representative bid and asked prices on the Determination Date; or (iv) if
subsections (i)-(iii) do not apply, the fair market value established in good
faith by the Board.

"Grant Date" has the meaning set forth in Section 14 of the Plan.

-22-

"Incentive Share Option or ISO" hereinafter means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable Award Agreement.

"Involuntary Termination" means termination of a Participant's
Continuous Service under the following circumstances occurring on or after a
Change in Control: (i) termination without Cause by the Company or an Affiliate
or successor thereto, as appropriate; or (ii) voluntary termination by the
Participant within 60 days following (A) a material reduction in the
Participant's job responsibilities, provided that neither a mere change in title
alone nor reassignment to a substantially similar position shall constitute a
material reduction in job responsibilities; (B) an involuntary relocation of the
Participant's work site to a facility or location more than 50 miles from the
Participant's principal work site at the time of the Change in Control; or (C) a
material reduction in Participant's total compensation other than as part of an
reduction by the same percentage amount in the compensation of all other
similarly-situated Employees, Directors or Consultants.

"Non-ISO" means an Option not intended to qualify as an ISO, as
designated in the applicable Award Agreement.

"Option" means any stock option granted pursuant to Section 6 of the
Plan.

"Participant" means any holder of one or more Awards, or the Shares
issuable or issued upon exercise of such Awards, under the Plan.

"Performance Awards" mean Performance Units and Performance Compensation
Awards granted pursuant to Section 10.

"Performance Compensation Awards" mean Awards granted pursuant to
Section 10(b) of the Plan.

"Performance Unit" means Awards granted pursuant to Section 10(a) of the
Plan which may be paid in cash, in Shares, or such combination of cash and
Shares as the Committee in its sole discretion shall determine.

"Person" means any natural person, association, trust, business trust,
cooperative, corporation, general partnership, joint venture, joint-stock
company, limited partnership, limited liability company, real estate investment
trust, regulatory body, governmental agency or instrumentality, unincorporated
organization or organizational entity.

"Plan" means this Capital Trust, Inc. 2004 Long-term Incentive Plan.

"Reporting Person" means an officer, Director, or greater than ten
percent shareholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.

"Restricted Shares" mean Shares subject to restrictions imposed pursuant
to Section 8 of the Plan.

"Restricted Share Units" mean Awards designated as such pursuant to
Section 8 of the Plan.

-23-

"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as
amended from time to time, or any successor provision.

"SAR" or "Share Appreciation Right" means Awards granted pursuant to
Section 7 of the Plan.

"Share" means a share of class A common stock, par value $0.01 per
share, of the Company, as adjusted or substituted in accordance with Section 13
of the Plan.

"Ten Percent Holder" means a Person who owns stock representing more
than ten percent (10%) of the combined voting power of all classes of stock of
the Company or any Affiliate.

"Unrestricted Shares" mean Awards designated as such pursuant to Section
8 of the Plan.

-24-

CAPITAL TRUST, INC.

2004 LONG-TERM INCENTIVE PLAN

As approved by the Board of
Directors on April 26, 2004
and by the shareholders on
_________ __, 2004

CAPITAL TRUST, INC.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CAPITAL TRUST, INC. FOR THE
2004 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 17, 2004.

The undersigned, as a holder of class A common stock, par value $.01 per
share ("Class A Common Stock"), of Capital Trust, Inc., a Maryland corporation
(the "Company"), hereby appoints John R. Klopp and Brian H. Oswald, and each of
them, with full power of substitution, as proxies to vote all shares of Class A
Common Stock which the undersigned is entitled to vote through the execution of
a proxy with respect to the 2004 Annual Meeting of Shareholders of the Company
(the "Annual Meeting") to be held at the offices of Paul, Hastings, Janofsky &
Walker LLP, 75 East 55th Street, New York, New York 10022, on Thursday, June 17,
2004 at 10:00 a.m., local time, or any adjournment or postponement thereof, and
authorizes and instructs said proxies to vote in the manner directed below.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" EACH OF THE
FOLLOWING

1. Election of directors.

FOR WITHHELD Nominees: Samuel Zell
Jeffrey A. Altman
|_| |_| Thomas E. Dobrowski
Martin L. Edelman
Craig M. Hatkoff
John R. Klopp
Henry N. Nassau
Lynne B. Sagalyn

For, except vote withheld for the following nominee(s):

___________________________________________

2. On the proposal to approve the Company's 2004 long-term incentive plan.

(check one box) |_| For |_| Against |_| Abstain

___________________________________________

3. On the proposal to approve the issuance of up to 2,000,000 shares of our
class A common stock in a proposed direct public offering.

(check one box) |_| For |_| Against |_| Abstain

___________________________________________

4. On the proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31, 2004.

(check one box) |_| For |_| Against |_| Abstain

___________________________________________

In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the Annual Meeting, or any adjournment or
postponement thereof, or upon matters incident to the conduct of the Annual
Meeting.

You may revoke or change your proxy at any time prior to its use at the Annual
Meeting by giving the Company written direction to revoke it, by giving the
Company a new proxy or by attending the Annual Meeting and voting in person.
Your attendance at the Annual Meeting will not by itself revoke a proxy given by
you. Written notice of revocation or subsequent proxy should be sent to Capital
Trust, Inc. c/o American Stock Transfer & Trust Company, 6201 Fifteenth Avenue,
Brooklyn, New York 11219, Attention: Paula Caroppoli, or hand-delivered to
Capital Trust, Inc. c/o American Stock Transfer & Trust Company, so as to be
delivered at or before the taking of the vote at the Annual Meeting.

(Continued and to be signed on the reverse side)

Returned proxy cards will be voted (1) as specified on the matters listed above;
(2) in accordance with the Board of Directors' recommendations where no
specification is made; and (3) in accordance with the judgment of the proxies on
any other matters that may properly come before the meeting. Please mark your
choice like this: x

The shares represented by this Proxy will be voted in the manner directed and,
if no instructions to the contrary are indicated, will be voted FOR the election
of the named nominees and approval of the other proposals set forth above.

The undersigned hereby acknowledges receipt of the notice of the Annual Meeting
and the proxy statement furnished therewith.

Print and sign your name below exactly as it appears hereon and date this card.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. Joint owners should each sign. If a corporation, please
sign in full corporate name by president or authorized officer. If a
partnership, please sign in partnership name by authorized person.

Date: ____________________________, 2004

_____________________________________
Signature (title, if any)

______________________________________
Signature, if held jointly

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TODAY. YOU MAY REVOKE THIS PROXY IN THE MANNER DESCRIBED ABOVE AT ANY
TIME PRIOR TO THE TAKING OF A VOTE ON THE MATTERS DESCRIBED HEREIN.