Document:

exv10w2

 

Exhibit 10.2

FORM OF ADVISORY AGREEMENT

     THIS ADVISORY AGREEMENT, dated as of      , 2006, is
between CPA:14 HOLDINGS INC., a Maryland corporation (the “Company”), and CAREY ASSET MANAGEMENT
CORP., a Delaware corporation and wholly-owned subsidiary of W. P. Carey & Co. LLC (the “Advisor”).

WITNESSETH:

     WHEREAS, the Company desires to avail itself of the experience, sources of information, advice
and assistance of, and certain facilities available to, the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the
supervision of the Board of Directors of the Company, all as provided herein; and

     WHEREAS, the Advisor is willing to render such services, subject to the supervision of the
Board of Directors, on the terms and conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:

     1. DEFINITIONS. As used in this Agreement, the following terms have the definitions
hereinafter indicated:

     Acquisition Expense. To the extent not paid or to be paid by the seller or lessee in the case
of a Property or the borrower in the case of a Loan, those expenses, including but not limited to
travel and communications expenses, the cost of appraisals, title insurance, nonrefundable option
payments on Property not acquired, legal fees and expenses, accounting fees and expenses and
miscellaneous expenses, related to selection, acquisition and origination of Properties and Loans,
whether or not acquired. Acquisition Expenses shall not include Acquisition Fees.

     Acquisition Fee. Any fee or commission (including any interest thereon) paid by the Company to
the Advisor or, with respect to Section 9(d), by the Company to any party, in connection with the
making or investing in Loans and the purchase, development or construction of Properties by the
Company. A Development Fee or a Construction Fee paid to a Person not affiliated with the Sponsor
in connection with the actual development or construction of a project after acquisition of the
Property by the Company shall not be deemed an Acquisition Fee. Acquisition Fees include, but are
not limited to, any real estate commission, selection fee, development fee (other than as described
above) or any fee of a similar nature, however designated. Acquisition Fees include Subordinated
Acquisition Fees unless the context otherwise requires. Acquisition Fees shall not include
Acquisition Expenses.

 

 

     Adjusted Invested Assets. The average during any period of the aggregate historical cost, or
to the extent available for a particular asset, the most recent Appraised Value, of the Investment
Assets of the Company, before accumulated reserves for depreciation or bad debt allowances or other
similar non-cash reserves, computed (unless otherwise specified) by taking the average of such
values at the end of each month during such period.

     Adjusted Investor Capital. As of any date, the Initial Investor Capital reduced by any
Redemptions, other than Redemptions intended to qualify as a liquidity event for purposes of this
Agreement, and by any other Distributions on or prior to such date determined by the Board to be
from Cash from Sales and Financings.

     Adjusted Net Income. For any period, the total revenues recognized in such period, less the
total expenses recognized in such period, excluding additions to reserves for depreciation and
amortization, bad debts or other similar non-cash reserves; provided, however, if the Advisor
receives a Subordinated Incentive Fee, Adjusted Net Income for purposes of calculating total
allowable Operating Expenses shall exclude any gain, losses or writedowns from the sale of the
Company’s assets that gave rise to such Subordinated Incentive Fee.

     Advisor. Carey Asset Management Corp, a corporation organized under the laws of the State of
Delaware and wholly-owned by W. P. Carey & Co. LLC.

     Affiliate. An Affiliate of another Person shall include any of the following: (i) any Person
directly or indirectly owning, controlling, or holding, with power to vote ten percent or more of
the outstanding voting securities of such other Person; (ii) any Person ten percent or more of
whose outstanding voting securities are directly or indirectly owned, controlled, or held, with
power to vote, by such other Person; (iii) any Person directly or indirectly controlling,
controlled by, or under common control with such other Person; (iv) any executive officer,
director, trustee or general partner of such other Person; or (v) any legal entity for which such
Person acts as an executive officer, director, trustee or general partner.

     Agreement. This Advisory Agreement.

     Appraised Value. Value according to an appraisal made by an Independent Appraiser, which may
take into consideration any factor deemed appropriate by such Independent Appraiser, including, but
not limited to, the terms and conditions of any lease of the relevant property, the quality of any
lessee’s credit and the conditions of the credit markets. The Appraised Value may be greater than
the construction cost or the replacement cost of the property. For purposes of the definition of
Adjusted Invested Assets, Appraised Value shall not include the initial appraisal of any property
in connection with the acquisition of that property.

2

 

     Articles of Incorporation. Articles of Incorporation of the Company under the General
Corporation Law of Maryland, as amended from time to time, pursuant to which the Company is
organized.

     Asset Management Fee. The Asset Management Fee as defined in Section 9(a) hereof.

     Average Invested Assets. The average during any period of the aggregate book value of the
assets of the Company invested, directly or indirectly, in Properties and in Loans, before reserves
for depreciation or bad debts or other similar non-cash reserves computed by taking the average of
such daily values at the end of each month during such period.

     Board or Board of Directors. The Board of Directors of the Company.

     Bylaws. The bylaws of the Company.

     Cash from Financings. Net cash proceeds realized by the Company from the financing of
Investment Assets or the refinancing of any Company indebtedness.

     Cash from Sales. Net cash proceeds realized by the Company from the sale, exchange or other
disposition of any of its assets after deduction of all expenses incurred in connection therewith.
Cash from Sales shall not include Cash from Financings.

     Cash from Sales and Financings. The total sum of Cash from Sales and Cash from Financings.

     Cause. With respect to the termination of this Agreement, fraud, criminal conduct, willful
misconduct or willful or negligent breach of fiduciary duty by the Advisor that, in each case, is
determined by a majority of the Independent Directors to be materially adverse to the Company.

     Change of Control. A change of control of the Company of a nature that would be required to be
reported in response to the disclosure requirements of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as enacted and in force
on the date hereof, whether or not the Company is then subject to such reporting requirements;
provided, however, that, without limitation, a Change of Control shall be deemed to have occurred
if: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in
force on the date hereof) is or becomes the “beneficial owner” (as that term is defined in Rule
13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the
Company representing 8.5% or more of the combined voting power of the Company’s securities then
outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which
is not approved by the Board; (iii)

3

 

there occurs a sale, exchange, transfer or other disposition of substantially all of the
assets of the Company to another entity, which disposition is not approved by the Board; or (iv)
there occurs a contested proxy solicitation of the Shareholders of the Company that results in the
contesting party electing candidates to a majority of the Board’s positions next up for election.

     Code. Internal Revenue Code of 1986, as amended.

     Company. Corporate Property Associates 14 Incorporated, a corporation organized under the laws
of the State of Maryland.

     Competitive Real Estate Commission. The real estate or brokerage commission paid for the
purchase or sale of a property that is reasonable, customary and competitive in light of the size,
type and location of the property.

     Construction Fee. A fee or other remuneration for acting as general contractor and/or
construction manager to construct improvements, supervise and coordinate projects or to provide
major repairs or rehabilitation on a Property.

     Contract Purchase Price. The amount actually paid for, or allocated to, the purchase,
development, construction or improvement of a Property or acquired Loan or, in the case of an
originated Loan, the principal amount of such Loan, exclusive, in each case, of Acquisition Fees
and Acquisition Expenses.

     Contract Sales Price. The total consideration received by the Company for the sale of
Properties and Loans.

     Cumulative Return. For the period for which the calculation is being made, the percentage
resulting from dividing (A) the total Distributions for such period (not including Distributions
out of Cash from Sales and Financings), by (B) the product of (i) the average Adjusted Investor
Capital for such period (calculated on a daily basis), and (ii) the number of years (including
fractions thereof) elapsed during such period. Notwithstanding the foregoing, neither the Shares
received by the Advisor or its Affiliates for any consideration other than cash, nor the
Distributions in respect of such Shares, shall be included in the foregoing calculation.

     Development Fee. A fee for the packaging of a Property including negotiating and approving
plans, and undertaking to assist in obtaining zoning and necessary variances and necessary
financing for the specific Property, either initially or at a later date.

     Directors. The persons holding such office, as of any particular time, under the Articles of
Incorporation, whether they be the directors named therein or additional or successor directors.

     Distributions. Distributions declared by the Board.

4

 

     Good Reason. With respect to the termination of this Agreement, (i) any failure to obtain a
satisfactory agreement from any successor to the Company to assume and agree to perform the
Company’s obligations under this Agreement; or (ii) any material breach of this Agreement of any
nature whatsoever by the Company; provided that such breach (a) is of a material term or condition
of this Agreement and (b) the Company has not cured such breach within 30 days of written notice
thereof or, in the case of any breach that cannot be cured within 30 days by reasonable effort, has
not taken all necessary action within a reasonable time period to cure such breach.

     Gross Offering Proceeds. The aggregate purchase price of Shares sold in any Offering.

     Independent Appraiser. A qualified appraiser of real estate as determined by the Board, who is
not affiliated, directly or indirectly, with the Company, the Advisor or their respective
Affiliates. Membership in a nationally recognized appraisal society such as the American Institute
of Real Estate Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of
such qualification.

     Independent Director. A Director of the Company who meets the criteria for an Independent
Director specified in the Bylaws.

     Individual. Any natural person and those organizations treated as natural persons in Section
542(a) of the Code.

     Initial Closing Date. The first date on which Shares were issued pursuant to an Offering.

     Initial Investor Capital. The total amount of capital invested from time to time by
Shareholders (computed at the Original Issue Price per Share), excluding any Shares received by the
Advisor or its Affiliates for any consideration other than cash.

     Investment Asset. Any Property, Loan or Other Permitted Investment Asset.

     Loan Refinancing Fee. The Loan Refinancing Fee as defined in Section 9(e) hereof.

     Loans. The notes and other evidences of indebtedness or obligations acquired or entered into
by the Company as lender which are secured or collateralized by personal property, or fee or
leasehold interests in real estate or other assets, including but not limited to first or
subordinate mortgage loans, construction loans, development loans, loans secured by capital stock
or any other assets or form of equity interest and any other type of loan or financial arrangement,
such as providing or arranging for letters of credit, providing

5

 

guarantees of obligations to third parties, or providing commitments for loans. The term
“Loans” shall not include leases which are not recognized as leases for Federal income tax
reporting purposes.

     Market Value. The value calculated by multiplying the total number of outstanding Shares by
the average closing price of the Shares over the 30 trading days beginning 180 calendar days after
the Shares are first listed on a national security exchange or included for quotation on Nasdaq, as
the case may be.

     Nasdaq. The national automated quotation system operated by the National Association of
Securities Dealers, Inc.

     Offering. The offering of Shares pursuant to a Prospectus.

     Operating Expenses. All operating, general and administrative expenses paid or incurred by the
Company, as determined under generally accepted accounting principles, except the following: (i)
interest and discounts and other cost of borrowed money; (ii) taxes (including state and Federal
income tax, property taxes and assessments, franchise taxes and taxes of any other nature); (iii)
expenses of raising capital, including Organization and Offering Expenses, printing, engraving, and
other expenses, and taxes incurred in connection with the issuance and distribution of the
Company’s Shares and Securities; (iv) Acquisition Expenses, real estate commissions on resale of
property and other expenses connected with the acquisition, disposition, origination, ownership and
operation of real estate interests, mortgage loans, or other property, including the costs of
foreclosure, insurance premiums, legal services, brokerage and sales commissions, maintenance,
repair and improvement of property; (v) Acquisition Fees or Subordinated Disposition Fees payable
to the Advisor or any other party; (vi) non-cash items, such as depreciation, amortization,
depletion, and additions to reserves for depreciation, amortization, depletion, losses and bad
debts; (vii) Termination Fees; and (viii) Subordinated Incentive Fees paid in compliance with
Section 9(i). Notwithstanding anything herein to the contrary, Operating Expenses shall include
the Asset Management Fee and the Loan Refinancing Fee.

     Organization and Offering Expenses. Those expenses payable by the Company in connection with
the formation, qualification and registration of the Company and in marketing and distributing
Shares, including, but not limited to: (i) the preparation, printing, filing and delivery of any
registration statement or Prospectus and the preparing and printing of contractual agreements
between the Company and the Sales Agent and the Selected Dealers (including copies thereof); (ii)
the preparing and printing of the Articles of Incorporation and Bylaws, solicitation material and
related documents and the filing and/or recording of such documents necessary to comply with the
laws of the State of Maryland for the formation of a corporation and thereafter for the continued
good standing of a corporation; (iii) the qualification or registration of the Shares under state
securities or “Blue Sky” laws; (iv) any escrow arrangements, including any

6

 

compensation to an escrow agent; (v) the filing fees payable to the SEC and to the National
Association of Securities Dealers, Inc.; (vi) reimbursement for the reasonable and identifiable
out-of-pocket expenses of the Sales Agent and the Selected Dealers, including the cost of their
counsel; (vii) the fees of the Company’s counsel; (viii) all advertising expenses incurred in
connection with the Offering, including the cost of all sales literature and the costs related to
investor and broker-dealer sales and information meetings and marketing incentive programs; and
(ix) selling commissions, marketing fees, incentive fees, due diligence fees and wholesaling fees
and expenses incurred in connection with the sale of the Shares.

     Original Issue Price. For any share issued in an Offering, $10 per Share, regardless of
whether reduced selling commissions were paid in connection with the purchase of such Shares from
the Company.

     Other Permitted Investment Asset. An asset, other than cash, cash equivalents, short term
bonds, auction rate securities and similar short term investments, acquired by the Company for
investment purposes that is not a Loan or a Property and is consistent with the investment
objectives and policies of the Company.

     Other Permitted Investment Assets Fee. The Other Permitted Investment Assets Fee as defined in
Section 9(h).

     Person. An Individual, corporation, partnership, joint venture, association, company, trust,
bank, or other entity, or government or any agency or political subdivision of a government.

     Preferred Return. A Cumulative Return of six percent computed from the Initial Closing Date
through the date as of which such amount is being calculated.

     Property or Properties. The Company’s partial or entire interest in real property (including
leasehold interests) and personal or mixed property connected therewith.

     Property Management Fee. A fee for property management services rendered by the Advisor or its
Affiliates in connection with Properties acquired directly or through foreclosure.

     Prospectus. Any prospectus pursuant to which the Company offers Shares in a public offering,
as the same may at any time and from time to time be amended or supplemented after the effective
date of the registration statement in which it is included.

     Redemptions. An amount determined by multiplying the number of Shares redeemed by the Original
Issue Price.

7

 

     REIT. A real estate investment trust, as defined in Sections 856-860 of the Code.

     Sales Agent. Carey Financial, LLC.

     Securities. Any stock, shares (other than currently outstanding Shares and subsequently issued
Shares), voting trust certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise or in general any instruments commonly
known as “securities” or any certificate of interest, shares or participation in temporary or
interim certificates for receipts (or, guarantees of, or warrants, options or rights to subscribe
to, purchase or acquire any of the foregoing), which subsequently may be issued by the Company.

     Selected Dealers. Broker-dealers who are members of the National Association of Securities
Dealers, Inc. and who have executed an agreement with the Sales Agent in which the Selected Dealers
agree to participate with the Sales Agent in the Offering.

     Shareholders. Those Persons who, at the time any calculation hereunder is to be made, are
shown as holders of record of Shares on the books and records of the Company.

     Shares. All of the shares of common stock of the Company, $.001 par value, and any other
shares of common stock of the Company.

     Sponsor. W.P. Carey & Co. LLC and any other Person directly or indirectly instrumental in
organizing, wholly or in part, the Company or any person who will control, manage or participate in
the management of the Company, and any Affiliate of any such person. Sponsor does not include a
person whose only relationship to the Company is that of an independent property manager and whose
only compensation is as such. Sponsor also does not include wholly independent third parties such
as attorneys, accountants and underwriters whose only compensation is for professional services.

     Subordinated Acquisition Fee. The Subordinated Acquisition Fee as defined in Section 9(c).

     Subordinated Disposition Fee. The Subordinated Disposition Fee as defined in Section 9(g)
hereof.

     Subordinated Incentive Fee. The Subordinated Incentive Fee as defined in Section 9(i) hereof.

     Termination Date. The effective date of any termination of this Agreement.

8

 

     Termination Fee. An amount equal to 15% of the amount, if any, by which (1) the fair value of
the Investment Assets on the Termination Date, less the amount of all indebtedness secured by such
Investment Assets, exceeds (2) the total of the Adjusted Investor Capital plus an amount equal to
the Preferred Return through the Termination Date reduced by the total Distributions paid by the
Company from its inception through the Termination Date (other than Distributions made from Cash
from Sales and Financings that are counted in determining Adjusted Investor Capital). For purposes
of calculating this Fee (i) the fair value of any Property shall be its Appraised Value, and (ii)
any payments in respect of redeemed Shares (other than in respect of Redemptions intended to
qualify as a liquidity event for purposes of this Agreement). Shares received by the Advisor or
its Affiliates for any consideration other than cash and the Distributions in respect of such
Shares shall be excluded.

     Total Property Cost. With regard to any Property or Loan, an amount equal to the sum of the
Contract Purchase Price of such Property or Loan plus the Acquisition Fees paid in connection with
such Property or Loan.

     Two Percent/25% Guidelines. The requirement that, in the 12-month period immediately preceding
the end of any fiscal quarter, the Operating Expenses not exceed the greater of two percent of the
Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Adjusted Net
Income over the same 12-month period.

     2. APPOINTMENT. The Company hereby appoints the Advisor to serve as its advisor on the terms
and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

     3. DUTIES OF THE ADVISOR. The Advisor undertakes to use its best efforts to present to the
Company potential investment opportunities and to provide a continuing and suitable investment
program consistent with the investment objectives and policies of the Company as determined and
adopted from time to time by the Board. In performance of this undertaking, subject to the
supervision of the Board and consistent with the provisions of the Articles of Incorporation and
Bylaws of the Company and any Prospectus pursuant to which Shares are offered, the Advisor shall,
either directly or by engaging an Affiliate:

     (a) serve as the Company’s investment and financial advisor and provide research and
economic and statistical data in connection with the Company’s assets and investment
policies;

     (b) provide the daily management of the Company and perform and supervise the various
administrative functions reasonably necessary for the management of the Company;

9

 

     (c) investigate, select, and, on behalf of the Company, engage and conduct business
with such Persons as the Advisor deems necessary to the proper performance of its
obligations hereunder, including but not limited to consultants, accountants,
correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers,
insurance agents, banks, builders, developers, property owners, mortgagors, and any and
all agents for any of the foregoing, including Affiliates of the Advisor, and Persons
acting in any other capacity deemed by the Advisor necessary or desirable for the
performance of any of the foregoing services, including but not limited to entering into
contracts in the name of the Company with any of the foregoing;

     (d) consult with Directors of the Company and assist the Board in the formulation and
implementation of the Company’s financial policies and, as necessary, furnish the Board
with advice and recommendations with respect to the making of investments consistent with
the investment objectives and policies of the Company and in connection with any
borrowings proposed to be undertaken by the Company;

     (e) subject to the provisions of Sections 3(g) and 4 hereof: (i) locate, analyze and
select potential investments in Investment Assets; (ii) structure and negotiate the terms
and conditions of transactions pursuant to which investments in Investment Assets will be
made, purchased or acquired by the Company; (iii) make investments in Investment Assets on
behalf of the Company in compliance with the investment objectives and policies of the
Company; (iv) arrange for financing and refinancing of, make other changes in the asset or
capital structure of, dispose of, reinvest the proceeds from the sale of, or otherwise
deal with the investments in, Investment Assets; and (v) enter into leases and service
contracts for Properties and, to the extent necessary, perform all other operational
functions for the maintenance and administration of such Properties;

     (f) provide the Board with periodic reports regarding prospective investments in
Investment Assets;

     (g) obtain the prior approval of the Board (including a majority of the Independent
Directors) for any and all investments in Property which do not meet all of the
requirements set forth in Section 4(b) hereof and obtain the prior approval of the
Independent Directors for all investments in Loans;

     (h) negotiate on behalf of the Company with banks or lenders for loans to be made to
the Company, and negotiate on behalf of the Company with investment banking firms and
broker-dealers or negotiate private sales of Shares and Securities or obtain loans for the
Company, but

10

 

in no event in such a way so that the Advisor shall be acting as broker-dealer or
underwriter; and provided, further, that any fees and costs payable to third parties
incurred by the Advisor in connection with the foregoing shall be the responsibility of
the Company;

     (i) obtain reports (which may be prepared by the Advisor or its Affiliates), where
appropriate, concerning the value of investments or contemplated investments of the
Company in Investment Assets;

     (j) obtain for, or provide to, the Company such services as may be required in
acquiring, managing and disposing of Investment Assets, including, but not limited to: (i)
the negotiation, making and servicing of Loans; (ii) the disbursement and collection of
Company monies; (iii) the payment of debts of and fulfillment of the obligations of the
Company; and (iv) the handling, prosecuting and settling of any claims of or against the
Company, including, but not limited to, foreclosing and otherwise enforcing mortgages and
other liens securing the Loans;

     (k) from time to time, or at any time reasonably requested by the Board, make reports
to the Board of its performance of services to the Company under this Agreement;

     (l) communicate on behalf of the Company with Shareholders as required to satisfy the
reporting and other requirements of any governmental bodies or agencies to Shareholders
and third parties and otherwise as requested by the Company;

     (m) provide or arrange for administrative services and items, legal and other
services, office space, office furnishings, personnel and other overhead items necessary
and incidental to the Company’s business and operations;

     (n) provide the Company with such accounting data and any other information requested
by the Company concerning the investment activities of the Company as shall be required to
prepare and to file all periodic financial reports and returns required to be filed with
the Securities and Exchange Commission and any other regulatory agency, including annual
financial statements;

     (o) maintain the books and records of the Company;

     (p) supervise the performance of such ministerial and administrative functions as may
be necessary in connection with the daily operations of the Properties and Loans;

     (q) provide the Company with all necessary cash management services;

11

 

     (r) do all things necessary to assure its ability to render the services described in
this Agreement;

     (s) perform such other services as may be required from time to time for management
and other activities relating to the assets of the Company as the Advisor shall deem
advisable under the particular circumstances;

     (t) arrange to obtain on behalf of the Company as requested by the Board, and deliver
to or maintain on behalf of the Company copies of, all appraisals obtained in connection
with investments in Properties and Loans; and

     (u) if a transaction, proposed transaction or other matter requires approval by the
Board or by the Independent Directors, deliver to the Board or the Independent Directors,
as the case may be, all documentation reasonably requested by them to properly evaluate
such transaction, proposed transaction or other matter.

     4. AUTHORITY OF ADVISOR.

     (a) Pursuant to the terms of this Agreement (including the restrictions included in
this Section 4 and in Section 7 hereof), and subject to the continuing and exclusive
authority of the Board over the management of the Company, the Board hereby delegates to
the Advisor the authority to: (1) locate, analyze and select investment opportunities; (2)
structure the terms and conditions of transactions pursuant to which investments will be
made or acquired for the Company; (3) acquire Property, make or acquire Loans and make or
acquire Other Permitted Investment Assets in compliance with the investment objectives and
policies of the Company; (4) arrange for financing or refinancing, or make changes in the
asset or capital structure of, and dispose of or otherwise deal with, Investment Assets;
(5) enter into leases and service contracts for Properties, and perform other property
level operations; (6) oversee non-affiliated property managers and other non-affiliated
Persons who perform services for the Company; and (7) undertake accounting and other
record-keeping functions at the Investment Asset level.

     (b) Notwithstanding the foregoing, any investment in Property, including any
acquisition of any Property by the Company (as well as any financing acquired by the
Company in connection with such acquisition), will require the prior approval of the Board
unless, prior to completion of any such transaction, the Advisor provides the Company
with:

12

 

     (i) an appraisal for the Property indicating that the Total Property Cost
of the Property does not exceed the Appraised Value of the Property; and

     (ii) a representation from the Advisor that the Property, in conjunction
with the Company’s other investments and proposed investments, at the time the
Company is committed to purchase the Property, is reasonably expected to fulfill
the Company’s investment objectives and policies as established by the Board and
then in effect.

     (c) Notwithstanding the foregoing, any investment in a Loan, including any
acquisition of any Loan by the Company, shall comply with Section 3(g) hereof.

     (d) Notwithstanding the foregoing, the prior approval of the Board, including a
majority of the Independent Directors and a majority of the Directors not interested in
the transaction, will be required for: (i) investments in Properties made through
co-investment or joint venture arrangements with the Sponsor, the Advisor or any of their
Affiliates; (ii) investments in Investment Assets which are not contemplated by the terms
of a Prospectus; (iii) transactions that present issues which involve conflicts of
interest for the Advisor or an Affiliate (other than conflicts involving the payment of
fees or the reimbursement of expenses); (iv) investments in equity securities; (v) the
lease of assets to the Sponsor, any Director, the Advisor or any Affiliate of the Advisor;
(vi) any purchase or sale of an Investment Asset from or to the Advisor or an Affiliate;
and (vii) the retention of any Affiliate of the Advisor to provide services to the Company
not expressly contemplated by this Agreement and the terms of such services by such
Affiliate. In addition, the Advisor shall comply with any further approval requirements
set forth in the Bylaws.

     (e) The Board may, at any time upon the giving of notice to the Advisor, modify or
revoke the authority set forth in this Section 4. If and to the extent the Board so
modifies or revokes the authority contained herein, the Advisor shall henceforth comply
with such modification or revocation, provided however, that such modification or
revocation shall be effective upon receipt by the Advisor and shall not be applicable to
investment transactions to which the Advisor has committed the Company prior to the date
of receipt by the Advisor of such notification.

     5. BANK ACCOUNTS. The Advisor may establish and maintain one or more bank accounts in its own
name for the account of the Company or in the name of the Company and may collect and deposit into
any such account or accounts, and disburse from any such account or accounts, any money on behalf
of the Company, provided that no funds shall be commingled with the funds of

13

 

the Advisor; and the Advisor shall from time to time render appropriate accountings of such
collections and payments to the Board and to the auditors of the Company.

     6. RECORDS; ACCESS. The Advisor shall maintain appropriate records of all its activities
hereunder and make such records available for inspection by the Board and by counsel, auditors and
authorized agents of the Company, at any time or from time to time during normal business hours.
The Advisor shall at all reasonable times have access to the books and records of the Company.

     7. LIMITATIONS ON ACTIVITIES. Anything else in this Agreement to the contrary notwithstanding,
the Advisor shall refrain from taking any action which, in its sole judgment made in good faith,
would adversely affect the status of the Company as a REIT, subject the Company to regulation under
the Investment Company Act of 1940, would violate any law, rule, regulation or statement of policy
of any governmental body or agency having jurisdiction over the Company, its Shares or its
Securities, or otherwise not be permitted by the Articles of Incorporation or Bylaws, except if
such action shall be ordered by the Board, in which case the Advisor shall notify promptly the
Board of the Advisor’s judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from the Board. In such
event the Advisor shall have no liability for acting in accordance with the specific instructions
of the Board so given. Notwithstanding the foregoing, the Advisor, its shareholders, directors,
officers and employees, and partners, shareholders, directors and officers of the Advisor’s
shareholders and Affiliates of any of them, shall not be liable to the Company, or to the Directors
or Shareholders for any act or omission by the Advisor, its shareholders, directors, officers and
employees, or partners, shareholders, directors or officers of the Advisor’s shareholders except as
provided in Sections 20 and 22 hereof.

     8. RELATIONSHIP WITH DIRECTORS. There shall be no limitation on any shareholder, director,
officer, employee or Affiliate of the Advisor serving as a Director or an officer of the Company,
except that no employee of the Advisor or its Affiliates who also is a Director or officer of the
Company shall receive any compensation from the Company for serving as a Director or officer other
than for reasonable reimbursement for travel and related expenses incurred in attending meetings of
the Board; for the avoidance of doubt, the limitations of this Section 8 shall not apply to any
compensation paid by the Advisor or any Affiliate for which the Company reimbursed the Advisor or
Affiliate in accordance with Section 10 hereof.

     9. FEES.

     (a) ASSET MANAGEMENT FEE. The Company shall pay to the Advisor as compensation for
the advisory services rendered to the

14

 

Company hereunder an amount equal to one percent per annum of the Adjusted Invested
Assets of the Company (the “Asset Management Fee”) calculated as set forth below. The
Asset Management Fee will be calculated monthly, beginning with the month in which the
Company first makes an investment in Investment Assets, on the basis of one-twelfth of one
percent of the Adjusted Invested Assets for that month, computed as a daily average.
One-half of the Asset Management Fee calculated with respect to each month shall be
payable on the first business day following such month. One-half of such Asset Management
Fee shall be subordinated to the extent described below and shall be payable quarterly.
The subordinated Asset Management Fee for any quarter shall be payable only if the Company
has generated cash flow from operations in the aggregate of no less than 7% of Gross
Offering Proceeds for the period beginning with the Initial Closing Date and ending on the
last day of the most recently completed fiscal quarter. Any portion of the subordinated
Asset Management Fee not paid due to the Company’s failure to meet the foregoing threshold
shall be paid by the Company, to the extent it is not restricted by the 2%/25% Guidelines
as described below, at the end of the next fiscal quarter through which the Company has
met the foregoing threshold. If at the end of any fiscal quarter, the Company’s Operating
Expenses exceed the 2%/25% Guidelines over the immediately preceding 12 months, payment of
the subordinated Asset Management Fee will be withheld consistent with Section 13. For
purposes of calculating the value per share of restricted stock given for payment of the
Asset Management Fee, the price per share shall be: (i) the net asset value per share as
determined by the most recent appraisal performed by an independent third party at the
time such Asset Management Fee was earned or, if an appraisal has not yet been made and
accepted by the Company, (ii) $10 per share. Any part of the Asset Management Fee that has
been subordinated pursuant to this subsection (a) shall not be deemed earned until such
time as payable hereunder.

     (b) ACQUISITION FEE. The Advisor may receive as compensation for services rendered in
connection with the investigation, selection, acquisition or origination (by purchase,
investment or exchange) of any Property or Loan, an Acquisition Fee payable by the
Company. The total such Acquisition Fees (not including Subordinated Acquisition Fees and
any interest thereon) payable to the Advisor may not exceed two-and-one-half percent of
the aggregate Total Property Cost of all Properties and Loans acquired or originated by
the Company, measured at such time as the Company shall have completed all Offerings
(other than pursuant to its dividend reinvestment plan) and invested substantially all of
the net proceeds of such Offerings, unless a majority of the Board (including a majority
of the Independent Directors) not otherwise interested in any transaction approves the
excess as being commercially competitive, fair and reasonable to the Company. No
Acquisition Fees will be payable on

15

 

the reinvestment of proceeds from the sale or refinancing of Properties or Loans.

     (c) SUBORDINATED ACQUISITION FEE. In addition to the Acquisition Fee described in
Section 9(b) above, the Advisor may receive as additional compensation for services
rendered in connection with the investigation, selection, acquisition or origination (by
purchase, investment or exchange) of Properties and Loans a Subordinated Acquisition Fee
payable by the Company to the Advisor or its Affiliates (the “Subordinated Acquisition
Fee”). The total Subordinated Acquisition Fees paid may not exceed two percent of the
aggregate Total Property Cost of all Properties and Loans purchased and originated by the
Company, measured at such time as the Company shall have completed all Offerings (other
than pursuant to its dividend reinvestment plan) and invested substantially all of the net
proceeds of such Offerings, unless a majority of the Directors (including a majority of
the Independent Directors) not otherwise interested in any transaction approves the excess
as being commercially competitive, fair and reasonable to the Company. The unpaid portion
of the Subordinated Acquisition Fee payable to the Advisor and its Affiliates with respect
to any Property or Loan shall bear interest at the rate of six percent per annum from the
date of acquisition of such Property or Loan until such portion is paid. Subject to the
following sentence, the Subordinated Acquisition Fee with respect to any Investment Asset
shall be payable in equal annual installments on January 1 of each of the eight calendar
years following the first anniversary of the date such Asset was purchased; accrued
interest on all unpaid Subordinated Acquisition Fees shall also be payable on such dates.
The portion of the Subordinated Acquisition Fees, and accrued interest thereon, otherwise
payable on any January 1 shall be payable only if the Preferred Return through the end of
the fiscal year preceding such January 1 has been met. Any portion of the Subordinated
Acquisition Fees, and accrued interest thereon, not paid due to the Company’s failure to
meet the Preferred Return through any fiscal year end shall be paid by the Company on the
January 1 following the first fiscal year thereafter through which the Preferred Return
has been met. No Subordinated Acquisition Fees will be payable on the reinvestment of
proceeds from the sale or refinancing of Properties or Loans.

     (d) SIX PERCENT LIMITATION. The total amount of Acquisition Fees (including
Subordinated Acquisition Fees and any interest thereon), whether payable to the Advisor or
a third party, and Acquisition Expenses may not exceed six percent of the sum of the
aggregate Contract Purchase Price of all Properties and Loans unless a majority of the
Directors (including a majority of the Independent Directors) not otherwise interested in
any transaction approves fees in

16

 

excess of this limit as being commercially competitive, fair and reasonable to the
Company.

     (e) LOAN REFINANCING FEE. The Company shall pay to the Advisor for all qualifying
loan refinancings of Properties a Loan Refinancing Fee in the amount up to one percent of
the principal amount of the refinanced loan. Any Loan Refinancing Fee shall be due and
payable upon the funding of the related loan or as soon thereafter as is reasonably
practicable. A refinancing will qualify for a Loan Refinancing Fee only if the refinanced
loan is secured by Property and (i) the maturity date of the refinanced loan (which must
have a term of five years or more) is less than one year from the date of the refinancing;
or (ii) the terms of the new loan represent, in the judgment of a majority of the
Independent Directors, an improvement over the terms of the refinanced loan; or (iii) the
new loan is approved by the Board, including a majority of the Independent Directors and,
in each case, the Loan Refinancing Fee is found, in the judgment of a majority of the
Independent Directors, to be in the best interest of the Company.

     (f) PROPERTY MANAGEMENT FEE. No Property Management Fee shall be paid unless
approved by a majority of the Independent Directors.

     (g) SUBORDINATED DISPOSITION FEE. If the Advisor or an Affiliate provides a
substantial amount of services (as determined by a majority of the Independent Directors)
in the sale of a Property, the Advisor or such Affiliate shall receive a fee equal to the
lesser of: (i) 50% of the Competitive Real Estate Commission and (ii) three percent of the
Contract Sales Price of such Property (the “Subordinated Disposition Fee”). The
Subordinated Disposition Fee will be paid only if Shareholders have received in the
aggregate a return of 100% of Initial Investor Capital (through liquidity or
Distributions) plus a Preferred Return through the date the Subordination Disposition Fee
has been paid. The return requirement will be deemed satisfied if the total Distributions
paid by the Company have satisfied the Preferred Return requirement and the Market Value
of the Company equals or exceeds Adjusted Investor Capital. To the extent that
Subordinated Disposition Fees are not paid by the Company on a current basis due to the
foregoing limitation, the unpaid fees will be due and paid at such time as the limitation
has been satisfied. The Subordinated Disposition Fee may be paid in addition to real
estate commissions paid to non-Affiliates, provided that the total of all real estate
commissions in respect of a Property paid to all Persons by the Company and the
Subordinated Disposition Fee shall not exceed an amount equal to the lesser of: (i) six
percent of the Contract Sales Price of such Property or (ii) the Competitive Real Estate
Commission. If this Agreement is terminated prior to such time as the Shareholders have
received (through

17

 

liquidity or Distributions) a return of 100% of Initial Investor Capital plus a
Preferred Return through the date of termination of this Agreement, an appraisal of the
Properties then owned by the Company shall be made and any unpaid Subordinated Disposition
Fee on Properties sold prior to the date of termination will be payable if the Appraised
Value of the Properties then owned by the Company plus Distributions to Shareholders prior
to the date of termination of this Agreement (through liquidity or Distributions) is equal
to or greater than 100% of Initial Investor Capital plus an amount sufficient to pay a
Preferred Return through the date of termination of this Agreement. If the Company’s
Shares are listed on a national securities exchange or included for quotation on Nasdaq
and, at the time of such listing, the Advisor or an Affiliate has provided a substantial
amount of services in the sale of Property, for purposes of determining whether the
subordination conditions for the payment of the Subordinated Disposition Fee have been
satisfied, Shareholders will be deemed to have received a Distribution in an amount equal
to the Market Value of the Company.

     (h) OTHER PERMITTED INVESTMENT ASSETS FEE. The Advisor may receive as compensation
for services rendered in connection with the investigation, selection, acquisition or
origination of Other Permitted Investments a fee (the “Other Permitted Investment Assets
Fee”) that shall be negotiated in good faith by the Advisor and the Company and approved
by the Board (including a majority of the Independent Directors) on a case by case basis;
provided that such compensation shall be on terms not more favorable, taken as a whole,
than what the Advisor receives in respect of investments in Properties and Loans.

     (i) SUBORDINATED INCENTIVE FEE. A fee shall be payable to the Advisor in an amount
equal to 15% of Cash from Sales distributable to Shareholders after Shareholders have
received a return of 100% of Initial Investor Capital (through liquidity or Distributions)
plus a Preferred Return through the date payment is made (the “Subordinated Incentive
Fee”). For these purposes the Shareholders will be deemed to have been provided liquidity
if the Shares are listed on a national security exchange or included for quotation on
Nasdaq. In the event the Shares are listed on a national securities exchange or included
for quotation on Nasdaq, the Advisor shall be paid the Subordinated Incentive Fee in an
amount equal to 12% of the excess (the “Excess Return”) of (A) the sum (the “Hypothetical
Return”) of (i) the Market Value of the Company plus (ii) the total of the Distributions
paid to Shareholders from the Initial Closing Date until the date the Shares are listed or
included for quotation over (B) the sum of (i) 100% of Initial Investor Capital and (ii)
the total amount of the Distributions required to be paid to Shareholders in order to pay
the Preferred Return through the date the Market Value is determined.

18

 

The Subordinated Incentive Fee shall be increased to 13% of the Excess Return if the
Hypothetical Return is an amount sufficient to return to investors 100% of Initial
Investor Capital plus a Cumulative Return of 8% or more but less than 9%; 14% if the
Hypothetical Return is an amount sufficient to return 100% of Initial Investor Capital
plus a Cumulative Return of 9% or more but less than 10%; and 15% if the Hypothetical
Return is an amount sufficient to return 100% of Initial Investor Capital plus a
Cumulative Return of 10% or more. The Cumulative Return shall be measured from the
Initial Closing Date through the last day on which the Market Value is determined. The
fee may only be paid if the average closing price of the Shares over any consecutive
three-month period ending within 24 months of the date of listing is sufficient, when
added to Distributions previously paid from the Initial Closing Date through the end of
such three-month period, to return 100% of Initial Investor Capital plus a 6% Cumulative
Return from the Initial Closing Date through the last day of such three-month period. The
return requirement will also be deemed satisfied if the total Distributions paid by the
Company has satisfied the Preferred Return requirement and the Market Value of the Company
equals or exceeds Adjusted Investor Capital. The Company shall have the option to pay such
fee in the form of a promissory note or as set forth in Section 9(l). The promissory note
shall be fully amortizing over five years, provide for quarterly payments and bear
interest at the prime rate announced from time to time in The Wall Street Journal.

     (j) LOANS FROM AFFILIATES. The Company shall not borrow funds from the Advisor or its
Affiliates unless (A) the transaction is approved by a majority of the Independent
Directors and a majority of the Directors who are not interested in the transaction as
being fair, competitive and commercially reasonable, (B) the interest and other financing
charges or fees received by the Advisor or its Affiliates do not exceed the amount which
would be charged by non-affiliated lending institutions and (C) the terms are not less
favorable than those prevailing for comparable arm’s-length loans for the same purpose.
The Company will not borrow on a long-term basis from the Advisor or its Affiliates unless
it is to provide the debt portion of a particular investment and the Company is unable to
obtain a permanent loan at that time or in the judgment of the Board, it is not in the
Company’s best interest to obtain a permanent loan at the interest rates then prevailing
and the Board has reason to believe that the Company will be able to obtain a permanent
loan on or prior to the end of the loan term provided by the Advisor or its Affiliates.

     (k) CHANGES TO FEE STRUCTURE. In the event the Shares are listed on a national
securities exchange or are included for quotation on Nasdaq, the Company and the Advisor
shall negotiate in good faith to establish a fee structure appropriate for an entity with
a

19

 

perpetual life. A majority of the Independent Directors must approve the new fee
structure negotiated with the Advisor. In negotiating a new fee structure, the Independent
Directors may consider any of the factors they deem relevant, including but not limited
to: (a) the size of the Advisory Fee in relation to the size, composition and
profitability of the Company’s portfolio; (b) the success of the Advisor in generating
opportunities that meet the investment objectives of the Company; (c) the rates charged to
other REITs and to investors other than REITs by Advisors performing similar services; (d)
additional revenues realized by the Advisor and its Affiliates through their relationship
with the Company, including loan administration, underwriting or broker commissions,
servicing, engineering, inspection and other fees, whether paid by the Company or by
others with whom the Company does business; (e) the quality and extent of service and
advice furnished by the Advisor; (f) the performance of the investment portfolio of the
Company, including income, conversion or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations; and (g) the quality of the
portfolio of the Company in relationship to the investments generated by the Advisor for
its own account. The new fee structure can be no more favorable to the Advisor than the
current fee structure.

     (l) PAYMENT. Compensation payable to the Advisor pursuant to this Section 9 shall be
paid in cash; provided, however, that any fee payable pursuant to Section 9 may be paid,
at the option of the Advisor, in the form of: (i) cash, (ii) common stock of the Company,
or (iii) a combination of cash and common stock. The Advisor shall notify the Company in
writing annually of the form in which the fee shall be paid. Such notice shall be provided
no later than January 15 of each year. If no such notice is provided, the fee shall be
paid in cash. For purposes of the payment of compensation to the Advisor in the form of
stock, the value of each share of common stock shall be: (i) the Net Asset Value per Share
as determined by the most recent appraisal of the Company’s assets performed by an
Independent Appraiser, or (ii) if an appraisal has not yet been performed, $10 per share.
If shares are being offered to the public at the time a fee is paid with stock, the value
shall be the price of the stock without commissions. The Net Asset Value determined on the
basis of such appraisal may be adjusted on a quarterly basis by the Board to account for
significant capital transactions. Stock issued by the Company to the Advisor in payment of
fees hereunder shall be governed by the terms set forth in Schedule A hereto, or such
other terms as the Advisor and the Company may from time to time agree.

     10. EXPENSES. (a) Subject to the limitations set forth in Section 9(d), to the extent
applicable, in addition to the compensation paid to the Advisor pursuant to Section 9 hereof, the
Company shall pay directly or reimburse the Advisor for the following expenses:

20

 

     (i) expenses other than Acquisition Expenses incurred in connection with
the investment of the funds of the Company;

     (ii) interest and other costs for borrowed money, including discounts,
points and other similar fees;

     (iii) taxes and assessments on income of the Company, to the extent paid or
advanced by the Advisor, or on Property and taxes as an expense of doing
business;

     (iv) costs associated with insurance required in connection with the
business of the Company or by the Directors;

     (v) expenses of managing and operating Properties owned by the Company,
whether payable to an Affiliate of the Advisor or a non-affiliated Person;

     (vi) fees and expenses of legal counsel for the Company;

     (vii) fees and expense of auditors and accountants for the Company;

     (viii) all expenses in connection with payments to the Directors and
meetings of the Directors and Shareholders;

     (ix) expenses associated with listing the Shares and Securities on a
securities exchange or Nasdaq if requested by the Board;

     (x) expenses connected with payments of Distributions in cash or otherwise
made or caused to be made by the Board to the Shareholders;

     (xi) expenses of organizing, revising, amending, converting, modifying, or
terminating the Company or the Articles of Incorporation;

     (xii) expenses of maintaining communications with Shareholders, including
the cost of preparation, printing and mailing annual reports and other
Shareholder reports, proxy statements and other reports required by governmental
entities;

     (xiii) expenses related to the Properties and Loans and other fees relating
to making investments including personnel and other costs incurred in Property
or Loan transactions where a fee

21

 

is not payable to the Advisor other than as provided in Section 10(b)
hereof; and

     (xiv) all other expenses the Advisor incurs in connection with providing
services to the Company, including reimbursement to the Advisor or its
Affiliates for the cost of rent, goods, materials and personnel incurred by them
based upon the compensation of the Persons involved and an appropriate share of
overhead allocable to those Persons as reasonably determined by the Advisor on a
basis approved annually by the Board (including a majority of the Independent
Directors). No reimbursement shall be made for the cost of personnel to the
extent that such personnel are used in transactions for which the Advisor
receives a separate fee.

     (b) Notwithstanding anything to the contrary in Section 10(a), the Company shall be
solely responsible for payment of (i) all Acquisition Expenses; (ii) all expenses of
whatever nature directly connected with the proposed acquisition of any property or loan
that does not result in the actual acquisition of Properties or Loans; (iii) finder’s fees
and similar payments to the extent not paid by the seller of Property or other third
party; and (iv) costs of retaining industry or economic consultants.

     (c) Expenses incurred by the Advisor on behalf of the Company and payable pursuant to
this Section 10 shall be reimbursed quarterly to the Advisor within 60 days after the end
of each quarter. The Advisor shall prepare a statement documenting the expenses of the
Company other than Acquisition Expenses during each quarter, and shall deliver such
statement to the Company within 45 days after the end of each quarter.

     11. OTHER SERVICES. Should the Board request that the Advisor or any shareholder or employee
thereof render services for the Company other than as set forth in Section 3 hereof, such services
shall be separately compensated and shall not be deemed to be services pursuant to the terms of
this Agreement.

     12. FIDELITY BOND. The Advisor shall maintain a fidelity bond for the benefit of the Company
which bond shall insure the Company from losses of up to $5,000,000 and shall be of the type
customarily purchased by entities performing services similar to those provided to the Company by
the Advisor.

     13. LIMITATION ON EXPENSES. (a) Within 60 days after the end of any fiscal quarter, if
Operating Expenses of the Company during the 12-month period ending with the last month of such
quarter exceed the greater of (i) two percent of the Average Invested Assets during the same
12-month period or (ii) 25% of the Adjusted Net Income of the Company during the same 12-month

22

 

period, then subject to paragraph (b) of this Section 13, such excess amount shall be the sole
responsibility of the Advisor and the Company shall not be liable for payment therefor.

     (b) Notwithstanding the foregoing, to the extent that the Advisor becomes responsible
for any such excess amount, if a majority of the Independent Directors finds such excess
amount justified based on such unusual and non-recurring factors as they deem sufficient,
the Company shall reimburse the Advisor in future quarters for the full amount of such
excess, or any portion thereof, but only to the extent such reimbursement would not cause
the Company’s Operating Expenses to exceed the 2%/25% Guidelines in the 12-month period
ending on any such quarter. In no event shall the Operating Expenses paid by the Company
in any 12-month period ending at the end of a fiscal quarter exceed the 2%/25% Guidelines.

     (c) To the extent Organization and Offering Expenses payable by the Company exceed
15% of the Gross Offering Proceeds, the excess will be paid by the Advisor.

     (d) All computations made under paragraphs (a) and (b) of this Section 13 shall be
determined in accordance with generally accepted accounting principles applied on a
consistent basis.

     (e) If the Advisor receives a Subordinated Incentive Fee for the sale of Property,
Adjusted Net Income, for purposes of calculating the Operating Expenses, shall exclude the
gain from the sale of such Property.

     14. OTHER ACTIVITIES OF THE ADVISOR. Nothing herein contained shall prevent the Advisor from
engaging in other activities, including without limitation direct investment by the Advisor and its
Affiliates in assets that would be suitable for the Company, the rendering of advice to other
investors (including other REITs) and the management of other programs advised, sponsored or
organized by the Advisor or its Affiliates; nor shall this Agreement limit or restrict the right of
the Advisor or any of its Affiliates or of any director, officer, employee or shareholder of the
Advisor or its Affiliates to engage in any other business or to render services of any kind to any
other partnership, corporation, firm, individual, trust or association. The Advisor may, with
respect to any investment in which the Company is a participant, also render advice and service to
each other participant therein. The Advisor shall report to the Board the existence of any
condition or circumstance, existing or anticipated, of which it has knowledge, which creates or
could create a conflict of interest between the Advisor’s obligations to the Company and its
obligations to or its interest in any other partnership, corporation, firm, individual, trust or
association. The Advisor or its Affiliates shall promptly disclose to the Board knowledge of such
condition or circumstance. If the Sponsor, Advisor, Director or Affiliates thereof has or

23

 

have sponsored other investment programs with similar investment objectives which have
investment funds available at the same time as the Company, it shall be the duty of the Advisor to
adopt a reasonable method by which properties are to be allocated to the competing investment
entities and to use its best efforts to apply such method fairly to the Company.

     The Advisor shall be required to use its best efforts to present a continuing and suitable
investment program to the Company that is consistent with the investment policies and objectives of
the Company, but subject to the last sentence of the preceding paragraph, neither the Advisor nor
any Affiliate of the Advisor shall be obligated generally to present any particular investment
opportunity to the Company even if the opportunity is of character which, if presented to the
Company, could be taken by the Company.

     If the Advisor or its Affiliates is presented with a potential investment which might be made
by the Company and by another investment entity which the Advisor or its Affiliates advises or
manages, the Advisor shall consider the investment portfolio of each entity, cash flow of each
entity, the effect of the acquisition on the diversification of each entity’s portfolio, rental
payments during any renewal period, the estimated income tax effects of the purchase on each
entity, the policies of each entity relating to leverage, the funds of each entity available for
investment, the amount of equity required to make the investment and the length of time such funds
have been available for investment. To the extent that a Property might be suitable for the Company
and for another investment entity which is advised or managed by the Advisor, the Advisor shall
give priority to the investment entity, including the Company, which has uninvested funds for the
longest period of time. The Advisor may consider the Property for private placement only if such
Property is deemed inappropriate for any investment entity which is advised or managed by the
Advisor, including the Company.

     15. RELATIONSHIP OF ADVISOR AND COMPANY. The Company and the Advisor agree that they have not
created and do not intend to create by this Agreement a joint venture or partnership relationship
between them and nothing in this Agreement shall be construed to make them partners or joint
venturers or impose any liability as partners or joint venturers on either of them.

     16. TERM; TERMINATION OF AGREEMENT. This Agreement, as amended and restated, shall continue in
force until      , 2007 and thereafter shall be automatically renewed from year to
year, unless either party shall give notice in writing of non-renewal to the other party not less
than 60 days before the end of any such year.

     17. TERMINATION BY COMPANY. At the sole option the Board (including a majority of the
Independent Directors), this Agreement may be terminated immediately by written notice of
termination from the Company to the

24

 

Advisor upon the occurrence of events which would constitute Cause or if any of the following
events occur:

     (a) If the Advisor shall breach this Agreement; provided that such breach (i) is of a
material term or condition of this Agreement and (ii) the Advisor has not cured such
breach within 30 days of written notice thereof or, in the case of any breach that cannot
be cured within 30 days by reasonable effort, has not taken all necessary action within a
reasonable time period to cure such breach;

     (b) If the Advisor shall be adjudged bankrupt or insolvent by a court of competent
jurisdiction, or an order shall be made by a court of competent jurisdiction for the
appointment of a receiver, liquidator, or trustee of the Advisor, for all or substantially
all of its property by reason of the foregoing, or if a court of competent jurisdiction
approves any petition filed against the Advisor for reorganization, and such adjudication
or order shall remain in force or unstayed for a period of 30 days; or

     (c) If the Advisor shall institute proceedings for voluntary bankruptcy or shall file
a petition seeking reorganization under the federal bankruptcy laws, or for relief under
any law for relief of debtors, or shall consent to the appointment of a receiver for
itself or for all or substantially all of its property, or shall make a general assignment
for the benefit of its creditors, or shall admit in writing its inability to pay its
debts, generally, as they become due.

     Any notice of termination under Section 16 or 17 shall be effective on the date specified in
such notice, which may be the day on which such notice is given or any date thereafter. The Advisor
agrees that if any of the events specified in Section 17(b) or (c) shall occur, it shall give
written notice thereof to the Board within 15 days after the occurrence of such event.

     18. TERMINATION BY EITHER PARTY. This Agreement may be terminated immediately without penalty
(but subject to the requirements of Section 20 hereof) by the Advisor by written notice of
termination to the Company upon the occurrence of events which would constitute Good Reason or by
the Company without cause or penalty (but subject to the requirements of Section 20 hereof) by
action of a majority of the Independent Directors or by action of a majority of the Shareholders,
in either case upon 60 days’ written notice.

     19. ASSIGNMENT PROHIBITION. This Agreement may not be assigned by the Advisor without the
approval of the Board (including a majority of the Independent Directors); provided, however, that
such approval shall not be required in the case of an assignment to a corporation, partnership,
association, trust or organization which may take over the assets and carry on the affairs of the

25

 

Advisor, provided: (i) that at the time of such assignment, such successor organization shall
be owned substantially by an entity directly or indirectly controlled by the Sponsor and only if
such entity has a net worth of at least $5,000,000, and (ii) that the board of directors of the
Advisor shall deliver to the Board a statement in writing indicating the ownership structure and
net worth of the successor organization and a certification from the new Advisor as to its net
worth. Such an assignment shall bind the assignees hereunder in the same manner as the Advisor is
bound by this Agreement. The Advisor may assign any rights to receive fees or other payments under
this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by
the Company without the consent of the Advisor, except in the case of an assignment by the Company
to a corporation or other organization which is a successor to the Company, in which case such
successor organization shall be bound hereunder and by the terms of said assignment in the same
manner as the Company is bound by this Agreement.

     20. PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.

     (a) After the Termination Date, the Advisor shall not be entitled to compensation for
further services hereunder but shall be entitled to receive from the Company the
following:

     (i) all unpaid reimbursements of Organization and Offering Expenses and of
Operating Expenses payable to the Advisor;

     (ii) all earned but unpaid Asset Management Fees payable to the Advisor
prior to the Termination Date;

     (iii) all earned but unpaid Subordinated Acquisition Fees, in each case
payable to the Advisor relating to the acquisition of any Property prior to the
Termination Date;

     (iv) all earned but unpaid Subordinated Disposition Fees payable to the
Advisor relating to the sale of any Property prior to the Termination Date;

     (v) all earned but unpaid Loan Refinancing Fees payable to the Advisor
relating to the financing or refinancing of any Property prior to the
Termination Date; and

     (vi) all earned but unpaid Property Management Fees payable to the Advisor
or its Affiliates relating to the management of any property prior to the
termination of this Agreement.

26

 

     (b) Notwithstanding the foregoing, if this Agreement is terminated by the Company for
Cause, the Advisor will not be entitled to receive the sums in Section 20(a) above.

     (c) If this Agreement is terminated by the Company for any reason other than Cause,
by either party in connection with a Change of Control, or by the Advisor for Good Reason,
the Advisor shall be entitled to payment of the Termination Fee. Notwithstanding the
foregoing, the Advisor shall not be entitled to payment of the Termination Fee if:

     (i) this Agreement is terminated because of failure of the Company and the
Advisor to establish, following good-faith negotiations pursuant to Section 9(k)
hereof, a fee structure appropriate for an entity with a perpetual life in the
event the Shares are listed on a national securities exchange or are included
for quotation on Nasdaq, or

     (ii) the Subordinated Incentive Fee is paid to the Advisor as a result of
the listing of the Shares on a national securities exchange or their inclusion
for quotation on Nasdaq and this Agreement is terminated after such listing or
inclusion.

     (d) Any and all amounts payable to the Advisor pursuant to Section 20(a) and Section
20(c) shall be paid in a manner determined by the Board, but in no event on terms less
favorable to the Advisor than those represented by a note (i) maturing upon the
liquidation of the Company or three years from the Termination Date, whichever is earlier,
(ii) with no less than twelve equal quarterly installments and (iii) bearing a fair,
competitive and commercially reasonable interest rate (the “Note”) . The Note,
if any, may be prepaid by the Company at any time prior to maturity with accrued interest
to the date of payment but without premium or penalty. Notwithstanding the foregoing, any
amounts that relate to Investment Assets (i) shall be an amount which provides
compensation to the Advisor only for that portion of the holding period for the respective
Investment Assets during which the Advisor provided services to the Company, (ii) shall
not be due and payable until the Investment Asset to which such amount relates is sold or
refinanced, and (iii) shall not bear interest until the Investment Asset to which such
amount relates is sold or refinanced. A portion of the amount shall be paid as each
Investment Asset owned by the Company on the Termination Date is sold. The portion of such
amount payable upon each such sale shall be equal to (i) such amount multiplied by (ii)
the percentage calculated by dividing the fair value (at the Termination Date) of the
Investment Asset sold by the Company divided by the total fair value (at the Termination
Date) of all Investment Assets owned by the Company on the Termination Date. For

27

 

purposes of the Termination Fee, the fair value of any Property shall be its
Appraised Value.

     (e) The Advisor shall promptly upon termination:

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

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

     (iii) deliver to the Board all assets, including Properties and Loans, and
documents of the Company then in the custody of the Advisor; and

     (iv) cooperate with the Company to provide an orderly management
transition.

     21. INDEMNIFICATION BY THE COMPANY. (a) The Company shall not indemnify the Advisor or any of
its Affiliates for any loss or liability suffered by the Advisor or the Affiliate, or hold the
Advisor or the Affiliate harmless for any loss or liability suffered by the Company, unless all of
the following conditions are met:

     (i) The Advisor or Affiliate has determined, in good faith, that the course
of conduct which caused the loss or liability was in the best interests of the
Company;

     (ii) The Advisor or the Affiliate was acting on behalf of or performing
services for the Company; and

     (iii) Such liability or loss was not the result of negligence or misconduct
by the Advisor or the Affiliate.

     (b) Notwithstanding the foregoing, the Advisor and its Affiliates shall not be
indemnified by the Company for any losses, liabilities or expenses arising from or out of
the alleged violation of federal or state securities laws unless one or more of the
following conditions are met:

     (i) There has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee;

28

 

     (ii) Such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee; or

     (iii) A court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the request for
indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory
authority in which securities of the Company were offered or sold as to
indemnification for violation of securities laws.

     (c) The Company shall advance funds to the Advisor or its Affiliates for legal
expenses and other costs incurred as a result of any legal action for which
indemnification is being sought only if all of the following conditions are satisfied:

     (i) The legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of the Company;

     (ii) The legal action is initiated by a third party who is not a
Shareholder or the legal action is initiated by a Shareholder acting in his or
her capacity as such and a court of competent jurisdiction specifically approves
such advancement; and

     (iii) The Advisor or the Affiliate undertakes to repay the advanced funds
to the Company, together with the applicable legal rate of interest thereon, in
cases in which such Advisor or Affiliate is found not to be entitled to
indemnification.

     (d) Notwithstanding the foregoing, the Advisor shall not be entitled to
indemnification or be held harmless pursuant to this Section 21 for any activity which the
Advisor shall be required to indemnify or hold harmless the Company pursuant to Section
22.

     (e) Any amounts paid pursuant to this Section 21 shall be recoverable or paid only
out the net assets of the Company and not from Shareholders.

     22. INDEMNIFICATION BY ADVISOR. The Advisor shall indemnify and hold harmless the Company from
liability, claims, damages, taxes or losses and related expenses including attorneys’ fees, to the
extent that such liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by

29

 

insurance and are incurred by reason of the Advisor’s bad faith, fraud, willful misfeasance,
misconduct, negligence or reckless disregard of its duties.

     23. NOTICES. Any notice, report or other communication required or permitted to be given
hereunder shall be in writing unless some other method of giving such notice, report or other
communication is accepted by the party to whom it is given, and shall be given by being delivered
by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

	 	 	 
	To the Board

	 	Corporate Property Associates 14
	and to the Company:

	 	Incorporated
	 

	 	Rockefeller Plaza
	 

	 	New York, NY 10020
	 
	 	 
	To the Advisor:

	 	Carey Asset Management Corp.
	 

	 	50 Rockefeller Plaza
	 

	 	New York, NY 10020

     Either party may at any time give notice in writing to the other party of a change in its
address for the purposes of this Section 23.

     24. MODIFICATION. This Agreement shall not be changed, modified, terminated, or discharged, in
whole or in part, except by an instrument in writing signed by both parties hereto, or their
respective successors or assignees.

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

     26. CONSTRUCTION. This Agreement shall be governed by, construed and enforced in accordance
with the laws of the State of New York.

     27. ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other than by an agreement
in writing.

     28. INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on the part of a party to
exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude
any other or

30

 

further exercise of the same or of any other right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver
shall be effective unless it is in writing and is signed by the party asserted to have granted such
waiver.

     29. GENDER. Words used herein regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.

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

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

     32. NAME. W.P. Carey & Co. LLC has a proprietary interest in the name “Corporate Property
Associates” and “CPA(R)” Accordingly, and in recognition of this right, if at any time the Company
ceases to retain Carey Asset Management Corp., or an Affiliate thereof to perform the services of
Advisor, the Company will, promptly after receipt of written request from Carey Asset Management
Corp., cease to conduct business under or use the name “Corporate Property Associates” or “CPA(R)”
or any diminutive thereof and the Company shall use its best efforts to change the name of the
Company to a name that does not contain the name “Corporate Property Associates” or “CPA(R)” or any
other word or words that might, in the sole discretion of the Advisor, be susceptible of indication
of some form of relationship between the Company and the Advisor or any Affiliate thereof.
Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its
Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist
other investment vehicles (including vehicles for investment in real estate) and financial and
service organizations having “Corporate Property Associates” or “CPA(R)” as a part of their name,
all without the need for any consent (and without the right to object thereto) by the Company or
its Directors.

     33. INITIAL INVESTMENT. [The Advisor has contributed to the Company $200,000 in exchange for
20,000 Shares (the “Initial Investment”). The Advisor or its Affiliates may not sell any of the
Shares purchased with the

31

 

Initial Investment during the term of this Agreement. The restrictions included above shall
not continue to apply to any Shares other than the Share acquired through the Initial Investment
acquired by the Advisor or its Affiliates. The Advisor shall not vote any Shares it now owns or
hereafter acquires in any vote for the election of Directors or any vote regarding the approval or
termination of any contract with the Advisor or any of its Affiliates.]

32

 

     IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as of the day and
year first above written.

	 	 	 	 	 
	 	 	CPA:14 HOLDINGS INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name: Thomas Zacharias
	 

	 	 	 	Title: Managing Director and Chief Operating Officer
	 
	 	 	 	 
	 	 	CAREY ASSET MANAGEMENT CORP.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name: Gordon DuGan
	 

	 	 	 	Title: President and Chief Executive Officer

33

 

SCHEDULE A

     This Schedule sets forth the terms governing any Shares issued by the Company to the Advisor
in payment of advisory fees set forth in the Agreement.

     1. Restrictions. The Shares are subject to vesting over a five-year period. The Shares shall
vest ratably over a five-year period with 20% of the Shares paid in each payment vesting on each of
the first through fifth anniversary of the date hereof. Prior to the vesting of the ownership of
the Shares in the Advisor, the Shares may not be transferred by the Advisor.

     2. Immediate Vesting. Upon the expiration of the Agreement for any reason other than a
termination for Cause under paragraph 17 or upon a “Change of Control” of CPA(R):14 (as defined
below), all Shares granted to the Advisor hereunder shall vest immediately and all restrictions
shall lapse. For purposes of this Schedule A, a “Change of Control” of the Company shall be deemed
to have occurred if there has been a change in the ownership of the Company of a nature that would
be required to be reported in response to the disclosure requirements of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
enacted and in force on the date hereof, whether or not the Company is then subject to such
reporting requirements; provided, however, that, without limitation, a Change of Control shall be
deemed to have occurred if:

     (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other
than the Company, any of its subsidiaries, any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan of the Company or any of its subsidiaries), together
with all “affiliates” and “associates” (as such terms are defined in Rule 14b-2 under the Exchange
Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or
more of either (A) the combined voting power of the Company’s then outstanding securities having
the right to vote in an election of the Board (“Voting Securities”) or (B) the then outstanding
common stock of the Company (in either such case other than as a result of acquisition of
securities directly from the Company);

     (ii) persons who, as of the date hereof, constitute the Board (the “Incumbent Directors”)
cease for any reason, including without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to the date hereof whose election or
nomination for election was approved by a vote of at least a majority of the Incumbent Directors
shall be considered an Incumbent Director; or

A-1

 

     (iii) the stockholders of the Company shall approve (A) any consolidation or merger of the
Company or any subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or merger, beneficially own
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares
representing in the aggregate 50% or more of the voting equity of the entity issuing cash or
securities in the consolidation or merger (or of its ultimate parent entity, if any), (B) any sale,
lease, exchange or other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or dissolution of the Company.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the
Company which, by reducing the number of Shares of Common Stock outstanding, increases (A) the
proportionate number of Shares beneficially owned by any person to 25% or more of the Shares then
outstanding, or (B) the proportionate voting power represented by the Shares beneficially owned by
any person to 25% or more of the combined voting power of all then outstanding voting Securities;
provided, however, that if any person referred to in clause (A) or (B) of this sentence shall
thereafter become the beneficial owner of any additional Shares or other Voting Securities (other
than pursuant to a Share split, Share dividend, or similar transaction), then a “Change of Control”
shall be deemed to have occurred for purposes of the foregoing clause (i).

A-2<PAGE>

                                                                    EXHIBIT 10.3

July 20, 2006

CONFIDENTIAL

Corporate Property Associates 14, Inc.
50 Rockefeller Plaza, 2nd Floor
New York, NY 10020

Attention: Mark DeCesaris

Dear Mark:

FINANCING. Corporate Property Associates 14, Inc. ("you" or "Company") has
advised Wells Fargo Bank, National Association ("we" or "us") that the Company
would like to have up to $225,000,000 available to fund investment in existing
and to-be-acquired properties (including mortgages and interests in partnerships
and other entities), to retire or repay existing or future indebtedness, for
repayment of shareholder's equity investment and for general purposes. The
financing we propose ("Financing") is described in the Summary of Terms and
Conditions attached as Exhibit A ('Term Sheet"), and consists of an unsecured
revolving credit facility with a sublimit for letters of credit ("Revolver"), in
an amount of $150,000,000 or $225,000,000 at your discretion.

COMMITMENT. Subject to the terms and conditions of this letter, we are pleased
to commit to provide 100% of the Financing. We intend to form a syndicate of
institutional lenders and accredited investors reasonably acceptable to the
Company and us to provide a portion of the Financing. Our commitment will be
reduced as and when commitments to provide a portion of the Financing are
received from such lenders.

We will act as exclusive arranger and sole book runner for the Financing, and
also as administrative agent for the syndicate of lenders. You agree that no
additional agents, co-agents or arrangers will be appointed, no other titles
will be awarded and no compensation (other than as set forth in this letter and
the Fee Letter referred to below) will be paid in connection with the Financing,
unless you and we agree in writing.

CONDITIONS TO COMMITMENT. Our commitment is conditioned on (a) no material
adverse change occurring in the business, assets, financial condition,
performance or prospects of the Company or any of its material subsidiaries, or
in the ability of the Company to operate in accordance with the financial
projections and to comply with the financial covenants in the Term Sheet, in
each case since the date of the latest audited financial statements provided to
us, (b) our being satisfied with the results of our continuing due diligence
review of the Company and discovering no information in the course of our due
diligence or otherwise that we believe has a materially negative impact on any
of the items in (a) above, (c) the information provided by the Company as
described above being correct and complete in all material respects, (d) the
conditions to be set forth in the loan documents being satisfied, (e) no
material adverse change or disruption occurring in the bank loan syndication or
capital markets, (f) no litigation or other action being pending or threatened
seeking an injunction, damages or other relief relating to the

<PAGE>

Financing, and (g) no material adverse change occurring in governmental
regulation or policy that adversely affects you or us.

Our commitment is also conditioned on the negotiation, execution and delivery of
loan documents acceptable to you, us, the other lenders and respective counsel,
not later than December 31, 2006. In connection with such negotiation, execution
and delivery, you authorize us to communicate all information and documentation
related to this Financing (whether to you or to any participant, syndicate
member, legal counsel, appraiser or other necessary party) directly by e-mail,
fax or other electronic means (including Intralinks) used to transmit
information. The Term Sheet does not include all of the conditions, business and
financial covenants, representations, warranties, defaults, definitions and
other terms to be contained in the loan documents, some of which must still be
developed and agreed upon. We reserve the right to propose additional terms.

SYNDICATION. We intend to commence syndication efforts promptly after you sign
this letter. You agree to cooperate with us in good faith toward the execution
and delivery of the loan documents ("Closing") and to take all actions we
reasonably request of you to assist us in forming a syndicate of lenders and
completing a syndication satisfactory to us. These actions will include (a)
providing us with all information we consider necessary, and in the form we
request, including information and projections relating to the Financing and its
uses, (b) assisting us in preparing an information memorandum for use in
connection with the syndication, and verifying the information contained
therein, and (c) making senior officers and representatives of the Company
available during the syndication to make presentations concerning the business
and prospects of the Company at one or more meetings and conference calls we may
arrange with prospective lenders. You also agree to refrain from any activity in
the bank loan syndication market and the private placement market from the date
you sign this letter until the syndication is successfully completed.

You represent and warrant (in the case of industry information, to the best of
your knowledge) that (a) all information (other than financial projections) that
you or your representatives have provided or will provide to us or any
prospective lender is, or when provided will be, complete and correct in all
material respects and does not, or when provided will not, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which they are made, and (b) all financial projections
that have been or will be so provided have been or will be prepared in good
faith based on reasonable assumptions (it being understood that assumptions as
to future results are inherently subject to uncertainty and contingencies, many
of which are beyond your control, and that no assurance can be given that any
particular projections will be realized). You agree to supplement such
information and projections from time to time before the Closing and during the
syndication so that these representations and warranties remain complete and
correct. We will use the information and projections without independent
verification in syndicating the Financing.

INDEMNIFICATION AND EXPENSES. You agree to indemnify and hold harmless us, the
prospective lenders and our and their respective directors, officers, employees,
agents, attorneys and affiliates (each, an "indemnified person") from and
against all losses, claims, damages, liabilities and expenses which may be
incurred by or asserted against an indemnified person in connection with or
arising out of this letter, the Financing, the use of the proceeds

<PAGE>

thereof, or any related transaction, regardless of whether the indemnified
person is a party thereto, and to reimburse each indemnified person on demand
for all reasonable legal and other expenses incurred in connection with
investigating or defending any of the foregoing, provided that this indemnity
will not, as to any indemnified person, apply to losses, claims, damages,
liabilities or expenses arising from the willful misconduct or gross negligence
of such indemnified person or any breach by such indemnified person of its
obligations under this letter. No party hereto will be liable to any other party
hereto for indirect or consequential damages relating to any such matters. You
also agree to pay all of our reasonable expenses (including fees and expenses of
our outside counsel, consultants and other experts and allocated costs of our
internal counsel) incurred in connection with preparing, negotiating and
enforcing this letter and the loan documents, conducting the due diligence
reviews, syndicating the Financing (including any LIBOR breakage fees, if
applicable) and related matters.

GENERAL. Your obligations under Indemnification and Expenses above will survive
the Closing or the expiration or termination of our commitments in this letter.
Your representations and warranties under Syndication above will be superseded
by your representations and warranties in the loan documents.

This letter is supplemented by a separate fee letter dated the date hereof from
us to you (the "Fee Letter"). This letter and the Fee Letter constitute the
entire understanding of the parties hereto with respect to the subject matter
hereof and supersede all prior and current understandings and agreements,
whether written or oral. Any changes to this letter or the Fee Letter must be
agreed in writing by the parties hereto. This letter and the Fee Letter may be
executed in any number of counterparts (and delivery of an executed counterpart
by telecopier will be effective as delivery of a manually executed counterpart),
which together will constitute one agreement, and will be governed by and
construed in accordance with the internal laws of the State of New York. The
parties hereto hereby waive any right to trial by jury with respect to any
claim, action, suit or proceeding arising out of or contemplated by this letter
and/or the Fee Letter.

You agree not to disclose this letter, the Fee Letter or any of their terms,
directly or indirectly, to any person other than your employees, agents and
advisors who are directly involved in the Financing or related transactions and
agree not to disclose the same, or as may be required by law (in which case you
agree to inform us promptly thereof); provided that after you sign and return
this letter and the Fee Letter, the foregoing restrictions will cease to apply
to this letter but continue to apply to the Fee Letter. This letter is for your
benefit only and may not be relied upon by, and does not create any rights in
favor of, any other person or entity, including those who are authorized to
receive copies hereof.

If you are in agreement with the foregoing, please sign and return to us a copy
of this letter and the Fee Letter, no later than 5:00 p.m., Eastern time, on
Wednesday, July 26, 2006. Our commitment and other agreements herein will expire
at that time if by then we have not received such signed letters.

We look forward to working with you on this transaction.

<PAGE>

                                        Very truly yours,

                                        WELLS FARGO BANK, NATIONAL ASSOCIATION

                                        By: /s/ Jan LaChapelle
                                            ------------------------------------
                                        Name: Jan LaChapelle
                                        Title: Relationship Manager

Accepted and agreed to:
Corporate Property Associates 14, Inc.
[COMPANY NAME]

By: /s/ Mark J. DeCesaris
    --------------------------------
Name: Mark DeCesaris
Title: Acting CFO
Dated: August 11, 2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

                         SUMMARY OF TERMS AND CONDITIONS

Nothing contained herein is intended, in any way, to constitute a commitment to
lend or to obligate Wells Fargo to enter into any loan transactions. Wells
Fargo's willingness to make loans will be determined in our sole and absolute
discretion and will be subject to review, loan application, full loan approval
and customary due diligence procedures and practices. This Summary of Terms is
confidential and does not purport to list all the terms, conditions,
representations, warranties and other provisions that shall be mutually agreed
upon and detailed in definitive documentation.

<TABLE>
<S>                              <C>
PROPOSAL DATE:                   July 18, 2006

BORROWER:                        a TBD entity resulting from the merger between
                                 W.P. Carey's CPA 12 and CPA 14 and its
                                 subsidiaries, whether wholly owned or partially
                                 owned (the "Borrower").

FACILITY AMOUNT:                 An aggregate principal amount of $225,000,000
                                 senior unsecured revolving line of credit (the
                                 "Facility"), of which only $150,000,000
                                 ("Initial Facility Amount") will be available
                                 to the Borrower if Borrower does not accept in
                                 writing the entire Facility Amount 45 days
                                 prior to the closing of the Facility.

ACCORDION FEATURE:               The Borrower shall have the right to increase
                                 the Facility by $75,000,000, not to exceed
                                 $225,000,000, at any time following the date of
                                 closing of the Facility, provided that one or
                                 more Lenders increase their respective funding
                                 commitments, in their sole discretion, or the
                                 Borrower delivers a new qualified lender to
                                 provide funding commitments to achieve such
                                 amount.

INITIAL LOAN TERM:               Three years from the closing of the Facility
                                 ("Initial Term").

PURPOSE:                         To fund investment in existing and
                                 to-be-acquired properties (including mortgages
                                 and interests in partnerships and other
                                 entities), to retire or repay existing or
                                 future indebtedness, for repayment of
                                 shareholder's equity investment and for general
                                 purposes.

SOLE LEAD ARRANGER &             Wells Fargo Bank, National Association
ADMINISTRATIVE AGENT:            ("Wells Fargo" or "Agent")

LENDERS:                         A group of financial institutions mutually
                                 acceptable to the Borrower and Wells Fargo. The
                                 financial institutions, including Wells Fargo,
                                 are collectively referred to as the "Lenders"
                                 or singularly as "Lender".

RECOURSE:                        The Facility shall be a fully recourse
                                 obligation of the Borrower.

GUARANTOR:                       All future Subsidiaries, whether wholly owned
                                 or partially owned, will guaranty the Facility.
                                 In addition, any Subsidiary or unconsolidated
                                 affiliate of the REIT or Borrower that shall
                                 guarantee or otherwise
</TABLE>

WELLS                                   1                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

<TABLE>
<S>                              <C>
                                 become obligated for Indebtedness of the
                                 Borrower or REIT shall guaranty the Facility.
                                 To the extent a Subsidiary is not a Guarantor,
                                 that Subsidiary will be prohibited from
                                 incurring recourse debt.

INTEREST RATE:                   At the Borrower's option, the interest rate
                                 shall accrue at either the Base Rate of LIBOR
                                 plus the applicable margin based on the
                                 Borrower's ratio of Total Liabilities to Total
                                 Asset Value (the "Leverage Ratio") (as defined
                                 in the Financial Covenants section below)
                                 within the following range:

                                     Leverage       Base Rate   LIBOR Margin
                                       Ratio          (bps)        (bps)
                                 ----------------   ---------   ------------
                                 <      55%             0.0         135.0
                                 > or = 55%, < 60%      0.0         145.0
                                 > or = 60%, < 65%     12.5         160.0

                                 LIBOR for an interest period means the rate of
                                 interest at which deposits are offered for 1,
                                 2, 3, or 6-month periods to the Agent in the
                                 interbank Eurodollar market for delivery of the
                                 first day of the interest period, and rounded
                                 upwards if necessary to the next higher 1/16%.
                                 (The cost of reserves, if any actual costs
                                 apply to a Lender and are certified, will be
                                 billed by that Lender to the Borrower.)

                                 Base Rate on any day means the higher of (a)
                                 the Prime Rate in effect on that day, and (b)
                                 the Federal Funds Rate in effect on that day as
                                 announced by the Federal Reserve Bank of New
                                 York, plus 0.5%.

                                 Prime Rate means, at any time, the rate of
                                 interest most recently announced within Wells
                                 Fargo at its principal office in San Francisco
                                 as its Prime Rate.

                                 Interest will be payable monthly, computed on
                                 the actual days elapsed in a 360-day year.

UNUSED FEE:                      The unused portion of the Facility will be
                                 subject to an unused fee, as shown below. The
                                 Unused Fee will be based upon the average daily
                                 outstanding balances of the Facility during the
                                 quarter, payable quarterly in arrears on a
                                 pro-rata basis to Lenders.

                                 Aggregate Unused Amount   Unused Fee Per Annum
                                 -----------------------   --------------------
                                        < or = 50%                .125%
                                        >      50%                .175%
</TABLE>

WELLS                                   2                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

<TABLE>
<S>                              <C>
LETTERS OF CREDIT:               Maximum letter of credit amount shall be
                                 $25,000,000 with letter of credit maturity not
                                 to extend beyond 30 days prior to the maturity
                                 of the Facility. No more than five (5) letters
                                 of credit may be outstanding at any one time.

LETTER OF CREDIT FRONTING        Wells Fargo.
BANK:

LETTER OF CREDIT FEES:           The fees payable to the Lenders shall
                                 correspond to the LIBOR ranges set forth in the
                                 Interest Rate section based on the face amount
                                 of the Letter of Credit(s) issued and
                                 outstanding and are payable quarterly in
                                 arrears.

LETTER OF CREDIT FRONTING        A fronting fee shall accrue to the issuing bank
FEE:                             at the rate of 0.125% per annum on the average
                                 daily amount of letter of credit exposure
                                 payable on the third business day following the
                                 end of each calendar quarter.

RATES AND FEES:                  See Appendix B.

EXTENSION OPTION:                The Borrower shall have two, twelve-month
                                 extension options following the Initial Loan
                                 Term provided that all the following conditions
                                 are satisfied:

                                 (i)  At least 90 days prior to initial maturity
                                      date, the Borrower provides written notice
                                      of its intent to exercise the Extension
                                      Option;

                                 (ii) No event of default exists or an event
                                      that with the passage of time would become
                                      an event of default;

                                 (iii) Receipt by Agent, for the benefit of
                                      Lenders, of the Extension Fee.

EXTENSION FEE:                   0.15% of the Facility amount for each Extension
                                 Option. Lenders will share the fee pro-rata in
                                 accordance with their commitments.
</TABLE>

WELLS                                   3                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

<TABLE>
<S>                              <C>
FINANCIAL COVENANTS:             Financial covenants and other covenants shall
(See Appendix A for              be re-certified by an officer of the Borrower
definitions)                     at each borrowing and calculated no less
                                 frequently than quarterly.

                                 1)   Limitation on Total Liabilities

                                      65% (Total Liabilities to Total Asset
                                      Value)

                                 2)   No Additional Unsecured Indebtedness
                                      outside of the Facility

                                 3)   Limitation on Recourse Indebtedness
                                      outside of the Facility

                                      5% (Total Recourse Indebtedness to Total
                                      Asset Value).

                                 4)   Minimum Interest Expense Coverage Ratio

                                      The Borrower shall maintain a quarterly
                                      minimum ratio of Adjusted EBITDA to
                                      Interest Expense of 1.65 to 1.

                                 5)   Minimum Fixed Charge Coverage Ratio

                                      The Borrower shall maintain a quarterly
                                      minimum ratio of Adjusted EBITDA to Fixed
                                      Charges of 1.50 to 1.

                                 6)   Minimum Equity Value

                                      $625 million at closing, plus 85% of new
                                      equity offering proceeds.

                                 7)   Minimum Yield on Debt

                                      12.5% (Adjusted EBITDA to Total
                                      Liabilities)

                                 8)   Maximum Dividend Payout Ratio

                                      The Borrower shall not make common and
                                      preferred dividend distributions, on a
                                      trailing four quarters basis, in excess of
                                      90% of EBITDA. Upon a material
                                      non-monetary event of default under the
                                      Facility, the Borrower may not make
                                      distributions in excess of the minimum
                                      amount necessary to remain qualified as a
                                      REIT for federal income tax purposes until
                                      the Event of Default is cured or the
                                      Facility is repaid and cancelled. Upon the
                                      occurrence of a monetary or bankruptcy
                                      Event of Default under the Facility, the
                                      REIT will not be permitted to make any
                                      Distributions.
</TABLE>

WELLS                                   4                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

<TABLE>
<S>                              <C>
CERTAIN OTHER COVENANTS:         Cross Default

                                 The Facility will be cross-defaulted to any
                                 recourse indebtedness of the Borrower in excess
                                 of $10,000,000 and non-recourse in excess of
                                 $50,000,000.

                                 Sale, Encumbrances or Transfer

                                 In the event that subsequent to the Borrower's
                                 certification of covenant compliance, it
                                 engages in transactions involving the sale,
                                 encumbrance or transfer of properties
                                 (including any partnership or other ownership
                                 interest) which transactions aggregate more
                                 than $50MM, then the Borrower will notify Agent
                                 that such threshold has been met and provide a
                                 recertification of compliance with all loan
                                 covenants on both a historical and prospective
                                 basis. If a proposed transaction would result
                                 in a failure to comply with any loan
                                 covenant(s), proceeds of such transaction must
                                 first be applied to reduce outstandings under
                                 the Facility to a level that results in
                                 compliance with all loan covenants.

                                 Permitted Investments

                                 Borrower shall be limited to investments in:

                                 (a)  certain governmental obligations,
                                      commercial paper, certificates of deposit
                                      and similar instruments;

                                 (b)  real property (except as otherwise limited
                                      herein);

                                 (c)  WP Carey JVs, limited to 35% of Total
                                      Asset Value;

                                 (d)  real property outside the United States
                                      limited to 15% of Total Asset Value;

                                 (e)  joint ventures which are not WP Carey JVs
                                      limited to 5% of Total Asset Value;

                                 (f)  notes secured by mortgages;

                                 (g)  real property under construction limited
                                      to 5% of Total Asset Value;

                                 (h)  real property consisting of undeveloped
                                      land, not to exceed 5% of Total Asset
                                      Value;

                                 (i)  publicly-traded equity interests in REITs,
                                      not to exceed $25,000,000 in the aggregate
                                      (valued at historical cost);

                                 (j)  marketable securities, not to exceed
                                      $25,000,000 in the aggregate with Moody's
                                      and/or Standard & Poor's rating services
                                      long-term unsecured indebtedness ratings
                                      of > or = Baa2/BBB;
</TABLE>

WELLS                                   5                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

<TABLE>
<S>                              <C>
                                 (k)  securities of tenants under leases;

                                 provided, however, that investments in clauses
                                 (d) through (k) shall not exceed 18% of Total
                                 Asset Value in the aggregate, and no
                                 speculative development will be permitted.

                                 Additional Covenants

                                 Such additional negative and affirmative
                                 covenants as Wells Fargo shall require
                                 including, without limitation, additional
                                 covenants regarding: limitations on secured
                                 recourse indebtedness and guarantees;
                                 maintenance of REIT status; maintenance of
                                 corporate and partnership existence; limitation
                                 or changes in operations or control; approval
                                 of Management Agreements and any modifications
                                 thereto; limitations or investment in
                                 non-income generating assets; compliance with
                                 laws; payment of taxes, insurance and other
                                 obligations; furnishing of financial statements
                                 and reports; notices of material changes,
                                 defaults and litigation, all to be consistent
                                 with the existing revolving credit facility as
                                 modified by this sheet.

MANDATORY PREPAYMENT EVENTS:     In the case of a merger, if the Borrower is not
                                 the surviving entity and does not control
                                 the Board of Directors.

FINANCIAL REPORTING,             To be acceptable to the Arranger and Wells
REPRESENTATIONS, WARRANTIES,     Fargo and its counsel.
CONDITIONS PRECEDENT,
EVENTS OF DEFAULT:
</TABLE>

WELLS                                   6                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

<TABLE>
<S>                              <C>
ASSIGNMENTS & PARTICIPATIONS:    Lenders may grant assignments to any commercial
                                 bank or other acceptable financial institution
                                 in all or any portion of its loans or
                                 commitments under the Facility in minimum
                                 amounts of $10,000,000, subject to approval by
                                 the Borrower and Agent, whose approvals will
                                 not be unreasonably withheld. However if there
                                 is an Event of Default under the Loan, the
                                 Lenders can sell or assign any portion of their
                                 Loan without the Borrower's approval. Lenders
                                 may grant Participations to any commercial bank
                                 or other acceptable financial institution in
                                 all or any portion of its loans or commitments
                                 under the Facility. Voting rights of
                                 participants will be limited.

REQUISITE LENDERS:               Requisite Lenders to be defined as Lenders,
                                 including Agent, holding interests equal to or
                                 greater than 66 2/3%.

LOAN DOCUMENTATION:              The Facility will be subject to the
                                 preparation, execution and delivery of Loan
                                 Documents satisfactory to all parties. Such
                                 documents will contain conditions to borrowing,
                                 representations and warranties, covenants,
                                 events of default, indemnification, payment of
                                 expenses, and other provisions normal and
                                 customary for loans of this type.

CONDITIONS TO CLOSING:           Usual and customary for transactions of this
                                 nature.

CONFIDENTIALITY:                 The terms contained herein are confidential,
                                 and except for disclosure to your board of
                                 directors, officers and employees, to
                                 professional advisors retained by you in
                                 connection with this transaction, or as may be
                                 required by law, may not be disclosed in whole
                                 or in part to any other person or entity
                                 without the prior written consent of Wells
                                 Fargo.
</TABLE>

This Summary of Terms and Conditions is conditioned on (a) no material adverse
change occurring in the business, assets, financial condition, performance or
prospects of the Borrower or any of its material subsidiaries, or in the ability
of the Borrower to operate in accordance with the financial projections and to
comply with the financial covenants outlined herein, in each case since the date
of the latest audited financial statements provided to us, (b) our being
satisfied with the results of our continuing due diligence review of the
Borrower and discovering no information in the course of our due diligence or
otherwise that we believe has a materially negative impact on any of the items
in (a) above, (c) the information provided by the Borrower as described above
being correct and complete in all material respects,(d) no litigation or other
action being pending or threatened seeking an injunction, damages or other
relief relating to the Facility, and (e) no material adverse change occurring in
governmental regulation or policy that adversely affects you or us.

WELLS                                   7                           CONFIDENTIAL
FARGO                               8/30/2006

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

                        APPENDIX A - CERTAIN DEFINITIONS

"ADJUSTED EBITDA" is defined as Borrower's pro-rata share of EBITDA, adjusted to
add back Performance Fees and to include a management fee equal to the greater
of actual management fees or 3% of rental income.

"EBITDA" is defined as net operating income before minority interests and
preferred distributions (excluding extraordinary gains or losses) plus GAAP
interest expense, income taxes, depreciation and amortization, and other
non-cash charges. EBITDA shall include equity in the net earnings or losses of
unconsolidated affiliates.

"EQUITY VALUE" is defined as Total Asset Value less Total Liabilities.

"FIXED CHARGES" is be defined as the sum of Interest Expense plus scheduled
principal amortization (excluding balloon payments due at maturity) on Total
Liabilities plus preferred stock dividends.

"INTEREST EXPENSE" is defined as interest expense on Total Liabilities (accrued,
paid and capitalized).

"PERFORMANCE FEES" is defined as performance fees paid out in stock or other
non-cash equivalents under management contracts.

"TOTAL ASSET VALUE" is defined as the total of the following items, but adjusted
for minority interests as applicable:

     (i)  for properties owned four fiscal quarters or longer: trailing four
          quarters Adjusted EBITDA capitalized at 8.5%;

     (ii) for properties owned fewer than four fiscal quarters, Borrower's pro
          rata share of undepreciated investment at cost;

     (iii) build-to-suit properties under construction valued at cost;

     (iv) unrestricted cash, cash equivalents and marketable securities as
          defined in Permitted Investments.

"TOTAL LIABILITIES" is defined as Borrower's total liabilities, contingent or
otherwise, including Borrower's and its subsidiaries pro rata share of JV debt
and other off balance sheet items including, but not limited to letters of
credit, purchase obligations and forward equity sales.

                                       A-1

<PAGE>

W.P. CAREY - UNSECURED LINE OF CREDIT

"TOTAL RECOURSE INDEBTEDNESS" is defined as any liability, to the extent that
recourse of the applicable lender for non-payment is not limited to such
lender's liens on a particular asset or group of assets.

"UNSECURED INDEBTEDNESS" is defined as all unsecured indebtedness of the
Borrower (whether contingent or otherwise, but excluding standard recourse
"carve-outs" for fraud, willful misconduct and the like in non-recourse
financings) including borrowings under the Facility.

"WP Carey JVS" is defined as joint ventures between the Borrower and WP Carey,
LLC, or one of its wholly owned subsidiaries, or a CPA REIT managed by WP Carey,
LLC or subsidiary.

                                       A-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]