EXHIBIT 10.2
 
 
CAPITAL LEASE FUNDING, INC.
 
2,400,000 SHARES
 
CONTROLLED EQUITY OFFERINGSM
 
SALES AGREEMENT
 

August 15, 2005
 

 
CANTOR FITZGERALD & CO.
110 East 59th Street
New York, NY 10022

Ladies and Gentlemen:

CAPITAL LEASE FUNDING, INC., a Maryland corporation (the “Company”), confirms
its agreement (this “Agreement”) with Cantor Fitzgerald & Co. (“CF&Co”), as
follows:
 
1.    Issuance and Sale of Shares. The Company agrees that, from time to time
during the term of this Agreement, on the terms and subject to the conditions
set forth herein, it may issue and sell through CF&Co, acting as agent and/or
principal, (a) up to TWO MILLION, FOUR HUNDRED THOUSAND (2,400,000) shares of
the Company’s common stock, par value $0.01 per share (the “Common Stock”);
provided, however, that, in no event shall the aggregate market value of the
Common Stock sold in an “at the market” offering (as defined in Section 3 below)
exceed $25,000,000; and (b) such preferred stock as the Company may subsequently
designate (the “Preferred Stock”; and together with the Common Stock,
the “Shares”). Notwithstanding anything to the contrary contained herein, the
parties hereto agree that compliance with the limitations set forth in this
Section 1 on the number and aggregate market value of Shares issued and sold
under this Agreement shall be the sole responsibility of the Company, and CF&Co
shall have no obligation in connection with such compliance. The issuance and
sale of Shares through CF&Co will be effected pursuant to the Registration
Statement (as defined below) filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”).
 
The Company has filed, in accordance with the provisions of the Securities Act
of 1933, as amended, and the rules and regulations thereunder (collectively, the
“Securities Act”), with the Commission a registration statement on Form S-3
(File No. 333-124003), including a base prospectus, with respect to the Shares,
and which incorporates by reference documents that the Company has filed or will
file in accordance with the provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder (collectively, the
“Exchange Act”). If required to do so under the Securities Act, the Company will
prepare a prospectus supplement (the “Prospectus Supplement”) to the base
prospectus included as part of such registration statement. Upon request, the
Company will furnish to CF&Co, for use by CF&Co, copies of one or more
prospectuses included as part of such registration statement, as supplemented by
the Prospectus Supplement, if any, relating to the Shares. Except where the
context otherwise requires, such registration statement, as amended when it
 
 
 
 

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became effective, including all documents filed as part thereof or incorporated
by reference therein, and including any information contained in a Prospectus
(as defined below) subsequently filed with the Commission pursuant to Rule
424(b) under the Securities Act and also including any other registration
statement filed pursuant to Rule 462(b) under the Securities Act, collectively,
are herein called the “Registration Statement,” and the base prospectus,
including all documents incorporated therein by reference, included in the
Registration Statement, as it may be supplemented by the Prospectus Supplement,
in the form filed by the Company with the Commission pursuant to Rule 424(b)
under the Securities Act is herein called the “Prospectus.” Any reference herein
to the Registration Statement, the Prospectus or any amendment or supplement
thereto shall be deemed to refer to and include the documents incorporated by
reference therein, and any reference herein to the terms “amend,”“amendment” or
“supplement” with respect to the Registration Statement or the Prospectus shall
be deemed to refer to and include the filing after the execution hereof of any
document with the Commission deemed to be incorporated by reference therein. For
purposes of this Agreement, all references to the Registration Statement, the
Prospectus or to any amendment or supplement thereto shall be deemed to include
any copy filed with the Commission pursuant to its Electronic Data Gathering
Analysis and Retrieval System (“EDGAR”).
 
2.    Placements. Each time that the Company wishes to issue and sell Shares
hereunder (each, a “Placement”), it will notify CF&Co of the proposed terms of
such Placement. If CF&Co wishes to accept such proposed terms (which it may
decline to do for any reason in its sole discretion) or, following discussions
with the Company, wishes to accept amended terms, CF&Co will issue to the
Company a written notice setting forth the terms that CF&Co is willing to
accept, including without limitation the number of Shares (“Placement Shares”)
to be issued, the type of Shares, the manner(s) in which sales are to be made,
the date or dates on which such sales are anticipated to be made, any minimum
price below which sales may not be made, and the capacity in which CF&Co may act
in selling Placement Shares hereunder (as principal, agent or both) (a
“Placement Notice”), the form of which is attached hereto as Schedule 1. The
amount of any discount, commission or other compensation to be paid by the
Company to CF&Co shall be equal to (a) two and three quarters percent (2.75%) of
the gross proceeds of the first one million two hundred thousand Placement
Shares sold pursuant to this Agreement and (b) two and one-half percent of the
gross proceeds of all Placement Shares sold in excess of one million two hundred
thousand. The terms set forth in a Placement Notice will not be binding on the
Company or CF&Co unless and until the Company delivers written notice of its
acceptance of all of the terms of such Placement Notice (an “Acceptance”) to
CF&Co; provided, however, that neither the Company nor CF&Co will be bound by
the terms of a Placement Notice unless the Company delivers to CF&Co an
Acceptance with respect thereto prior to 4:30 p.m. (New York time) on the
Business Day (as defined below) following the Business Day on which such
Placement Notice is received by Company in accordance with Section 12 (Notices).
It is expressly acknowledged and agreed that neither the Company nor CF&Co will
have any obligation whatsoever with respect to a Placement or any Placement
Shares unless and until CF&Co delivers a Placement Notice to the Company and the
Company accepts such Placement Notice by means of an Acceptance, and then only
upon the terms specified therein and herein. In the event of a conflict between
the terms of this Agreement and the terms of a Placement Notice, the terms of
the Placement Notice will control.
 
3.    Sale of Placement Shares by CF&Co. Subject to the terms and conditions
herein set forth, upon the Company’s Acceptance of a Placement Notice, and
unless the sale of the Placement Shares described therein has been suspended or
otherwise terminated in accordance with the terms of this Agreement, CF&Co will
use its commercially reasonable efforts consistent with its normal trading and
sales practices to sell such Placement Shares up to the amount specified, and
otherwise in accordance with the terms of such Placement Notice. CF&Co will
provide written confirmation to the Company no later than the opening of the
Trading Day (as defined below) next following the Trading Day on which it has
made sales of Placement Shares hereunder setting forth the number of Placement
Shares sold on such day, the compensation payable by the Company to CF&Co with
respect to such sales, and the Net Proceeds (as defined below) payable to the
Company, with an itemization of deductions made by CF&Co (as set forth in
Section 5(a)) from gross proceeds for the Placement Shares that it receives from
such sales. CF&Co may sell Placement Shares by any method permitted by law
deemed to be an “at the market” offering as defined in Rule 415 of the
Securities Act, including without limitation sales made directly on the New York
Stock Exchange (the “Exchange”), on any other existing trading market for the
Common Stock or to or through a market maker. CF&Co may also sell Placement
Shares in privately negotiated transactions. The Company acknowledges and agrees
that (i) there can be no assurance that CF&Co will be successful in selling
Placement Shares, and (ii) CF&Co will incur no liability or obligation to the
Company or any other person or entity if it does not sell Placement Shares for
any reason other than a failure by CF&Co to use its commercially reasonable
efforts consistent with its normal trading and sales practices to sell such
Placement Shares as required under this Section 3. For the purposes hereof,
“Trading Day” means any day on which Common Stock is purchased and sold on the
principal market on which the Common Stock is listed or quoted.
 
 
 
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4.    Suspension of Sales. The Company or CF&Co may, upon notice to the other
party in writing (including by email correspondence if receipt of such
correspondence is actually acknowledged by the party to whom the notice is sent,
other than via auto-reply) or by telephone (confirmed immediately by verifiable
facsimile transmission), suspend any sale of Placement Shares; provided,
however, that such suspension shall not affect or impair either party’s
obligations with respect to any Placement Shares sold hereunder prior to the
receipt of such notice. Each of the Parties agrees that no such notice shall be
effective against the other unless it is made to one of the individuals named on
Schedule 2 hereto, as such Schedule may be amended from time to time.
 
5.    Settlement.
 
(a)   Settlement of Placement Shares. Unless otherwise specified in the
applicable Placement Notice, settlement for sales of Placement Shares will occur
on the third (3rd) Business Day (or such earlier day as is industry practice for
regular-way trading) following the date on which such sales are made (each, a
“Settlement Date”). The amount of proceeds to be delivered to the Company on a
Settlement Date for the sale of the Placement Shares sold (the “Net Proceeds”)
will be equal to the aggregate sales price received by CF&Co at which such
Placement Shares were sold, after deduction for (i) CF&Co’s commission, discount
or other compensation for such sales payable by the Company pursuant to Section
2 hereof, (ii) any other amounts due and payable by the Company to CF&Co
hereunder pursuant to Section 7(g) (Expenses) hereof, and (iii) any transaction
fees imposed by any governmental or self-regulatory organization in respect of
such sales.
 
 
 
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(b)   Delivery of Placement Shares. On or before each Settlement Date, the
Company will, or will cause its transfer agent to, electronically transfer the
Placement Shares being sold by crediting CF&Co’s or its designee’s (provided
CF&Co shall have given the Company written notice of such designee prior to the
Settlement Date) account at The Depository Trust Company through its Deposit and
Withdrawal at Custodian System or by such other means of delivery as may be
mutually agreed upon by the parties hereto and, upon receipt of such Placement
Shares, which in all cases shall be freely tradable, transferable, registered
shares in good deliverable form, CF&Co will deliver the related Net Proceeds in
same day funds to an account designated by the Company prior to the Settlement
Date. If the Company defaults in its obligation to deliver Placement Shares on a
Settlement Date, the Company agrees that in addition to and in no way limiting
the rights and obligations set forth in Section 9(a) (Indemnification) hereto,
it will (i) hold CF&Co harmless against any loss, claim, damage, or expense
(including reasonable legal fees and expenses), as incurred, arising out of or
in connection with such default by the Company and (ii) pay to CF&Co any
commission, discount, or other compensation to which it would otherwise have
been entitled absent such default.
 
6.    Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, CF&Co that as of the date of this Agreement and as
of each Representation Date (as defined in Section 7(m) below) on which a
certificate is required to be delivered pursuant to Section 7(m) of this
Agreement, as the case may be:
 
(a)   Registration Statement and Prospectus. The Company meets the requirements
for use of Form S-3 under the Securities Act. The Registration Statement has
been filed with the Commission and has been declared effective under the
Securities Act. The Registration Statement has named CF&Co as an underwriter,
acting as principal and/or agent that the Company might engage in the section
entitled “Plan of Distribution.” The Company has not received, and has no notice
of, any order of the Commission preventing or suspending the use of the
Registration Statement, or threatening or instituting proceedings for that
purpose. Any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement have been so described or
filed. Copies of the Registration Statement, the Prospectus, and any such
amendments or supplements and all documents incorporated by reference therein
that were filed with the Commission on or prior to the date of this Agreement
have been delivered, or made available through EDGAR, to CF&Co and their
counsel. The Company has not distributed and will not distribute any offering
material in connection with the offering or sale of the Placement Shares other
than the Registration Statement and the Prospectus. The Common Stock is
currently listed on the Exchange under the trading symbol “LSE.”
 
(b)   No Misstatement or Omission. Each part of the Registration Statement, when
such part became or becomes effective or was or is filed with the Commission,
and the Prospectus, and any amendment or supplement thereto, on the date of
filing thereof with the Commission and at each Settlement Date, conformed or
will conform in all material respects with the requirements of the Securities
Act. Each part of the Registration Statement, when such part became or becomes
effective or was or is filed with the Commission, did not, or will not, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission and at each Settlement Date, did not or will not
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the foregoing shall not
apply to statements in, or omissions from, any such document made in reliance
upon, and in conformity with, written information concerning CF&Co that was
furnished in writing to the Company by CF&Co specifically for use in the
preparation thereof.
 
 
 
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(c)   Conformity with Securities Act and Exchange Act. The documents
incorporated by reference in the Registration Statement, the Prospectus or any
amendment or supplement thereto, when they were or are filed with the Commission
under the Securities Act, conformed or will conform in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable.
 
(d)   Financial Information. The financial statements of the Company, together
with the related schedules and notes thereto, set forth or included or
incorporated by reference in the Registration Statement and the Prospectus are
accurate in all material respects and fairly present the financial condition of
the Company as of the dates indicated and the results of operations, changes in
financial position, stockholders’ equity and cash flows for the periods therein
specified are in conformity with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise stated
therein). The selected financial data included or incorporated by reference in
the Registration Statement and the Prospectus present fairly the information
shown therein and, to the extent based upon or derived from the financial
statements, have been compiled on a basis consistent with the financial
statements presented therein. Any pro forma financial statements of the Company,
and the related notes thereto, included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission’s rules and
guidelines with respect to pro forma financial statements and have been properly
compiled on the basis described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein. The Company and, to the Company’s knowledge, the Subsidiaries (as
defined below) do not have any material liabilities or obligations, direct or
contingent (including any off-balance sheet obligations), not disclosed in the
Registration Statement and the Prospectus. No other financial statements are
required to be set forth or to be incorporated by reference in the Registration
Statement or the Prospectus under the Securities Act.
 
(e)   Conformity with EDGAR Filing. The Prospectus delivered to CF&Co for use in
connection with the sale of the Placement Shares pursuant to this Agreement will
be identical to the versions of the Prospectus created to be transmitted to the
Commission for filing via EDGAR, except to the extent permitted by Regulation
S-T.
 
(f)   Organization. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Maryland and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or assets or the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, assets, prospects, financial condition, or results of
operations of the Company and the Subsidiaries (as defined below) taken as a
whole (a “Material Adverse Effect”) and has full corporate power and authority
necessary to own, hold, lease and/or operate its assets and properties, to
conduct the business in which it is engaged and as described in the Registration
Statement and the Prospectus and to enter into and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby, and the
Company is in compliance in all material respects with the laws, orders, rules,
regulations and directives issued or administered by any jurisdictions in which
it owns or leases property or conducts business.
 
 
 
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(g)   Subsidiaries. The Subsidiaries listed on Schedule 3 attached hereto are
the only “significant subsidiaries” of the Company as such term is defined Rule
1-02 of Regulation S-X promulgated under the Securities Act (collectively, the
"Subsidiaries”). The Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, joint venture, association or
other entity, except as otherwise disclosed in the Registration Statement and/or
Prospectus (or where the failure to disclose is either (x) not required under
the Securities Act or the Exchange Act or (y) would not, or would not reasonably
be expected to, result in a material misstatement or omission). Complete and
correct copies of the articles of incorporation and of the bylaws or other
formation documents of the Company and each of the Subsidiaries, as applicable,
and all amendments thereto have been made available to CF&Co and/or its counsel.
To the Company’s knowledge, each Subsidiary has been duly incorporated or
organized and is validly existing as a corporation, partnership, limited
liability company or business trust in good standing under the laws of the
jurisdiction of its incorporation or formation or organization and is duly
qualified to do business and is in good standing as a foreign corporation,
partnership, limited liability company or business trust in each jurisdiction
where the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not have a Material Adverse Effect and, to the Company’s knowledge, each
Subsidiary has full corporate, partnership, limited liability company or other
power and authority, as applicable, necessary to own, hold, lease and/or operate
its assets and properties and to conduct its business in which it is engaged and
as described in the Registration Statement and the Prospectus, and, to the
Company’s knowledge, each Subsidiary is in compliance in all material respects
with the laws, orders, rules, regulations and directives issued or administered
by jurisdictions in which it owns or leases property or conducts business; to
the Company’s knowledge, all of the outstanding shares of capital stock or other
equity interests, as the case may be, of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable with respect to
the corporate Subsidiaries, and have been issued in compliance with all federal
and state securities laws and were not issued in violation of any preemptive
right, resale right, right of first refusal or similar right and are not subject
to any security interest, other encumbrance or adverse claims; and, to the
Company’s knowledge, no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligation into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
 
(h)   No Violation of Charter or Agreements. Neither the Company nor, to the
Company’s knowledge, any of the Subsidiaries is in breach or violation of or in
default under (nor has any event occurred that with notice, lapse of time or
both would result in any breach or violation of or constitute a default under or
give the holder of any indebtedness (or a person acting on such holder’s behalf)
the right to require the repurchase, redemption or repayment of all or a part of
such indebtedness under) (i) its respective charter, bylaws, certificate of
formation, partnership agreement or limited liability company agreement, as the
case may be, or (ii) any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness of the Company or any Subsidiary, or
any license, lease, contract or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound or affected the effect of which breach,
violation or default under clause (ii) could reasonably be expected to result in
a Material Adverse Effect. The execution, delivery and performance of this
Agreement by the Company, the issuance and sale of the Placement Shares by the
Company and the consummation of the transactions contemplated hereby by the
Company will not conflict with,
 
 
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result in any breach or violation of or constitute a default under (nor
constitute any event that with notice, lapse of time or both would result in any
breach or violation of or constitute a default under) (x) the charter, bylaws,
certificate of formation, partnership agreement or limited liability company
agreement, as the case may be, of the Company or, to the Company’s knowledge,
any of the Subsidiaries, or (y) any indenture, mortgage, deed of trust, bank
loan or credit agreement or other evidence of indebtedness, or any license,
lease, contract or other agreement or instrument to which the Company or, to the
Company’s knowledge, any of the Subsidiaries, is a party or by which any of them
or any of their respective properties may be bound or affected, the effect of
which breach, violation or default under clause (y) could reasonably be expected
to result in a Material Adverse Effect or (z) any federal, state, local or
foreign law, regulation or rule or any decree, judgment or order applicable to
the Company or, to the Company’s knowledge, any of the Subsidiaries.
 
(i)   Capitalization. As of December 31, 2004, the Company had an authorized,
issued and outstanding capitalization as set forth in its statements of
financial condition included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004. All of the issued and outstanding shares of
capital stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws and were not issued in violation of any
preemptive right, resale right, right of first refusal or similar right.
 
(j)   Authorization; Enforceability. This Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its terms, except to the
extent that (i) enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and by general equitable principles and (ii) the indemnification and
contribution provisions of Section 9 hereof may be limited by federal or state
securities laws and public policy considerations in respect thereof.
 
(k)   Capital Stock and Placement Shares in Proper Form. The capital stock of
the Company, including the Placement Shares, conforms in all material respects
to the description thereof contained in the Registration Statement and the
Prospectus and such description conforms to the rights set forth in the
instruments defining the same. The certificates for the Placement Shares are in
due and proper form and the holders of the Shares will not be subject to
personal liability by reason of being such holders.
 
 
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(l)   Authorization of Placement Shares. The Placement Shares, when issued and
delivered pursuant to the terms approved by the Board of Directors or a duly
designated committee thereof, against payment therefor as provided herein, will
be duly and validly authorized and issued and fully paid and nonassessable, free
and clear of any pledge, lien, encumbrance, security interest or other claim,
including any statutory or contractual preemptive rights, resale rights, rights
of first refusal or other similar rights, and will be registered pursuant to
Section 12 of the Exchange Act.
 
(m)   No Consents Required. No approval, authorization, consent or order of or
filing with any national, state or local governmental or regulatory commission,
board, body, authority or agency is required in connection with the issuance and
sale of the Placement Shares or the consummation by the Company of the
transactions contemplated hereby other than (i) registration of the Placement
Shares under the Securities Act, (ii) any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the Placement
Shares are being offered by CF&Co, (iii) filing of any reports under the
Exchange Act, or (iv) such approvals obtained or to be obtained in connection
with the approval of the listing of the Placement Shares on the Exchange.
 
(n)   No Preferential Rights. Except as set forth in the Registration Statement
and the Prospectus, (i) no person, as such term is defined in Rule 1-02 of
Regulation S-X promulgated under the Securities Act (each, a “Person”), has the
right, contractual or otherwise, to cause the Company to issue or sell to such
Person any shares of Common Stock or shares of any other capital stock or other
securities of the Company, (ii) no Person has any preemptive rights, resale
rights, rights of first refusal, or any other rights (whether pursuant to a
“poison pill” provision or otherwise) to purchase any shares of Common Stock or
shares of any other capital stock or other securities of the Company, (iii) no
Person has the right to act as an underwriter or as a financial advisor to the
Company in connection with the offer and sale of the Shares, and (iv)  no Person
has the right, contractual or otherwise, to require the Company to register
under the Securities Act any shares of Common Stock or shares of any other
capital stock or other securities of the Company, or to include any such shares
or other securities in the Registration Statement or the offering contemplated
thereby, whether as a result of the filing or effectiveness of the Registration
Statement or the sale of the Placement Shares as contemplated thereby or
otherwise.
 
(o)   Independent Public Accountant. Ernst & Young LLP, who have audited certain
financial statements of the Company and its Subsidiaries, are independent public
accountants with respect to the Company, within the meaning of the Securities
Act and the Public Accounting Oversight Board (United States).
 
(p)   Enforceability of Agreements. All agreements between the Company and third
parties expressly referenced in the Prospectus are legal, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except to the extent that (i) enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles and (ii) the
indemnification provisions of certain agreements may be limited be federal or
state securities laws or public policy considerations in respect thereof.
 
(q)   No Litigation. There are no actions, suits, claims, investigations,
inquiries or proceedings pending or, to the best of the Company’s knowledge,
threatened to which either the Company or, to the Company’s knowledge, any
Subsidiaries or any of their respective officers or directors is a party or of
which any of their respective properties or other assets is subject at law or in
equity, or before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency that could result in a
judgment, decree or order having individually or in the aggregate a Material
Adverse Effect or prevent, or interfere in any material respect with the
consummation of the transactions contemplated hereby.
 
 
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(r)   Securities Act Filings. Since the effective date on May 20, 2005 of the
registration statement filed pursuant to the Securities Act, the Company has
timely filed with the Commission all documents and other material required to be
filed pursuant to Sections 13, 14 and 15(d) under the Exchange Act.
 
(s)   Market Capitalization. As of the date of this Agreement, the aggregate
market value of the Company’s voting stock held by nonaffiliates of the Company
was equal to or greater than $150 million.
 
(t)   No Material Changes. Subsequent to the respective dates as of which
information is given in, or incorporated by reference into, the Registration
Statement and the Prospectus, except as described in the Registration Statement
or Prospectus, there has not been (i) any change, development, or event that has
caused, or would reasonably be expected to result in, a Material Adverse Effect
or (ii) any change in the number of authorized shares of capital stock. The
Company has no material contingent obligation (including off-balance sheet
obligations) that is not disclosed in the Registration Statement or the
Prospectus.
 
(u)    No Material Defaults. No default or event of default hereunder has
occurred and is continuing. The Company has not defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more long-term
leases, which defaults could reasonably be expected to have a Material Adverse
Effect. The Company has not filed a report pursuant to Section 13(a) or 15(d) of
the Exchange Act since the filing of its last Annual Report on Form 10-K,
indicating that it (i) has failed to pay any dividend or sinking fund
installment on preferred stock or (ii) has defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more long-term
leases, which defaults could reasonably be expected to have a Material Adverse
Effect.
 
(v)   Certain Market Activities. Neither the Company nor, to the Company’s
knowledge, any of the Subsidiaries nor any of their respective directors,
officers or controlling persons has taken, directly or indirectly, any action
designed, or that has constituted or might reasonably be expected to cause or
result in, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Placement Shares.
 
(w)    Broker/Dealer Relationships. Except as set forth on Schedule 4 hereto,
neither the Company nor, to its knowledge, any of its affiliates (i) is required
to register as a “broker” or “dealer” in accordance with the provisions of the
Exchange Act or (ii) directly or indirectly through one or more intermediaries,
controls or is a “person associated with a [NASD] member” or “associated person
of a [NASD] member” (within the meaning of Article I of the Bylaws of the
National Association of Securities Dealers, Inc. (“NASD”)).
 
 
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(x)   No Reliance. The Company has not relied upon CF&Co or legal counsel for
CF&Co for any legal, tax or accounting advice in connection with the offering
and sale of the Placement Shares.
 
(y)   Property. As of the date of this Agreement and except as otherwise
disclosed in the Prospectus, the Company has no plan or intention to materially
alter its stated investment policies and operating policies and strategies, as
such are described in the Prospectus. The Company and, to the Company’s
knowledge, the Subsidiaries have good and marketable title to all properties and
assets owned directly by them, in each case free and clear of all liens,
security interests, pledges, charges, encumbrances, mortgages and defects
(except for any security interest, lien encumbrance or claim that may otherwise
exist under any applicable repurchase agreement or as otherwise disclosed in the
Prospectus), except such as do not interfere with the use made or proposed to be
made of such asset or property by the Company or any Subsidiary, as the case may
be. Any real property held under lease directly by the Company are held under
valid, existing and enforceable leases, with such exceptions, liens, security
interests, pledges, charges, encumbrances, mortgages and defects as are not
material and do not interfere with the use made or proposed to be made of such
property and buildings by the Company.
 
(z)   Taxes. The Company and, to the Company’s knowledge, each of the
Subsidiaries has filed on a timely basis (taking into account all applicable
extensions) all necessary federal, state, local and foreign income and franchise
tax returns, if any such returns were required to be filed, through the date
hereof and have paid all taxes shown as due thereon except for any failure to
file or pay which would not reasonably be expected to have a Material Adverse
Effect. No tax deficiency has been asserted against the Company or, to the
Company’s knowledge, any of the Subsidiaries, nor does the Company know of any
tax deficiency that is likely to be asserted against any such entity that, if
determined adversely to any such entity, could reasonably be expected to have a
Material Adverse Effect. All tax liabilities, if any, are adequately provided
for on the books of the Company and, to the Company’s knowledge, the
Subsidiaries.
 
(aa)   Intellectual Property. The Company and, to the Company’s knowledge, each
Subsidiary owns or possesses adequate license or other rights to use all
patents, trademarks, service marks, trade names, copyrights, software and design
licenses, trade secrets, manufacturing processes, other intangible property
rights and know-how, if any (collectively, “Intangibles”), necessary to entitle
the Company and, to the Company’s knowledge, each Subsidiary to conduct its
business as described in the Prospectus, and neither the Company nor, to the
Company’s knowledge, any Subsidiary has received notice of infringement of or
conflict with (and knows of no such infringement of or conflict with) asserted
rights of others with respect to any Intangibles which could have a Material
Adverse Effect.
 
(bb)   Environmental Laws. Except as otherwise disclosed in the Prospectus, the
Company has not authorized or conducted or has no knowledge of the generation,
transportation, storage, presence, use, treatment, disposal, release, or other
handling of any hazardous substance, hazardous waste, hazardous material,
hazardous constituent, toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls, petroleum product or waste (including crude oil or
any fraction thereof), natural gas, liquefied gas, synthetic gas or other
material defined, regulated, controlled or potentially subject to any
remediation requirement under any environmental law (collectively, “Hazardous
Materials”), on, in, under or affecting any real property currently leased or
owned or by any means controlled by
 
 
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the Company (collectively, the “Real Property”), except as would not reasonably
be expected to have a Material Adverse Effect. To the knowledge of the Company,
the Real Property, and the Company’s operations with respect to the Real
Property, are in material compliance with all federal, state and local laws,
ordinances, rules, regulations and other governmental requirements relating to
pollution, control of chemicals, management of waste, discharges of materials
into the environment, health, safety, natural resources, and the environment
(collectively, “Environmental Laws”). The Company is in material compliance with
all licenses, permits, registrations and government authorizations necessary to
operate under all applicable Environmental Laws. Except as otherwise disclosed
in the Prospectus, the Company has not received any written or oral notice from
any governmental entity or any other Person and there is no pending or
threatened claim, litigation or any administrative agency proceeding that
(i) alleges a violation of any Environmental Laws by the Company, (ii) that the
Company is a liable party or a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§§. 9601, et seq., or any state superfund law; (iii) has resulted in or could
result in the attachment of an environmental lien on any of the Real Property;
or (iv) alleges that the Company is liable for any contamination of the
environment, contamination of the Real Property, damage to natural resources,
property damage, or personal injury based on their activities or the activities
of their predecessors or third parties (whether at the Real Property or
elsewhere) involving Hazardous Materials, whether arising under the
Environmental Laws, common law principles, or other legal standards.
 
(cc)   Internal Controls. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles as
applied in the United States and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
 
(dd)   No Violation of Laws. Neither the Company nor, to the Company’s
knowledge, any Subsidiary is in violation, and none of them has received notice
of any violation with respect to, any applicable environmental, safety or
similar law applicable to its business and that could reasonably expect to
result in a Material Adverse Effect. The Company and, to the Company’s
knowledge, each Subsidiary have received all permits, licenses or other
approvals required of them under applicable federal and state occupational
safety and health and environmental laws and regulations to conduct their
businesses, and the Company and, to the Company’s knowledge, each Subsidiary is
in compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals that could not,
singly or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
 
(ee)   Finder’s Fees. The Company has not incurred any liability for any
finder’s fees or similar payments in connection with the transactions herein
contemplated, except as may otherwise exist with respect to CF&Co pursuant to
this Agreement.
 
 
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(ff)   Labor Disputes. There are no existing or threatened labor disputes with
the employees of the Company or, to the Company’s knowledge, any Subsidiary that
could reasonably be expected to have individually or in the aggregate a Material
Adverse Effect.
 
(gg)   REIT. The Company is organized in conformity with the requirements for
qualification and taxation as a “real estate investment trust” (a “REIT”) under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
“Code”). The proposed method of operation of the Company as described in the
Prospectus will enable the Company to continue to meet the requirements for
qualification and taxation as a REIT under the Code, and no actions have been
taken (or not taken that are required to be taken) that would cause such
qualification to be lost. The Company intends to continue to operate in a manner
that would permit it to qualify as a REIT under the Code. The Company has no
intention of changing its operations or engaging in activities that would cause
it to fail to qualify, or make economically undesirable its continued
qualification, as a REIT.
 
(hh)   Investment Company Act. The Company, after giving effect to the offering
and sale of the Placement Shares, will not be an “investment company” or an
entity “controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended (the “Investment Company Act”).
 
(ii)   Casualty. Neither the Company nor, to the Company’s knowledge, any of the
Subsidiaries has sustained since the date of the last audited financial
statements included in the Registration Statement, and the Prospectus any loss
or interference with its respective business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, in each case that is likely
either individually or in the aggregate to have a Material Adverse Effect.
 
(jj)   Sarbanes-Oxley Compliance. The Company is in compliance with all
presently applicable provisions of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) and is actively taking steps to ensure that it will be in
compliance with other applicable provisions of the Sarbanes-Oxley Act upon the
effectiveness of such provisions.
 
(kk)   Underwriter Agreements. The Company is not a party to any agreement with
an agent or underwriter for any other “at-the-market” or continuous equity
transaction other than an agreement with Brinson Patrick Securities Corporation.
 
(ll)   CF&Co Purchases. The Company acknowledges and agrees that CF&Co has
informed the Company that CF&Co may, to the extent permitted under the
Securities Act and the Exchange Act, purchase and sell shares of Common Stock
for its own account while this Agreement is in effect provided that (i) no such
purchase or sales shall take place while a Placement Notice is in effect (except
to the extent CF&Co may engage in sales of Placement Shares purchased or deemed
purchased from the Company as a “riskless principal” or in a similar capacity)
and (ii) the Company shall not be deemed to have authorized or consented to any
such purchases or sales by CF&Co.
 
(mm)   No Improper Practices. (i) Neither the Company nor it Subsidiaries, nor
to the Company’s knowledge, any of the executive officers of the Company or its
Subsidiaries has made any contribution or other payment to any official of, or
candidate for, any federal, state, municipal, or foreign office in violation of
any law or of the character required to be disclosed in the Prospectus; (ii) no
relationship, direct or indirect, exists between or among the Company or, to the
Company’s knowledge, any Subsidiary or any affiliate of any of them, on the one
 
 
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hand, and the directors, officers and stockholders of the Company or, to the
Company’s knowledge, any Subsidiary, on the other hand, that is required by the
Securities Act to be described in the Registration Statement and the Prospectus
that is not so described; (iii) no relationship, direct or indirect, exists
between or among the Company or any Subsidiary or any affiliate of them, on the
one hand, and the directors, officers, stockholders or directors of the Company
or any Subsidiary, on the other hand, that is required by the rules of the NASD
to be described in the Registration Statement and the Prospectus that is not so
described; and (iv) there are no material outstanding loans or advances or
material guarantees of indebtedness by the Company or, to the Company’s
knowledge, any Subsidiary to or for the benefit of any of the officers or
directors of the Company or any Subsidiary or any of the members of the families
of any of them.
 
7.    Covenants of the Company. The Company covenants and agrees with CF&Co
that:
 
(a)   Registration Statement Amendments. After the date of this Agreement and
during any period in which a Prospectus relating to any Placement Shares is
required to be delivered by CF&Co under the Securities Act, (i) the Company will
notify CF&Co promptly of the time when any subsequent amendment to the
Registration Statement, other than documents incorporated by reference, has been
filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission
for any amendment or supplement to the Registration Statement or Prospectus or
for additional information, (ii) the Company will prepare and file with the
Commission, promptly upon CF&Co’s request, any amendments or supplements to the
Registration Statement or Prospectus that, in CF&Co’s reasonable judgment, may
be necessary or advisable in connection with the distribution of the Placement
Shares by CF&Co (provided, however, that the failure of CF&Co to make such
request shall not relieve the Company of any obligation or liability hereunder,
or affect CF&Co’s right to rely on the representations and warranties made by
the Company in this Agreement); (iii) the Company will not file any amendment or
supplement to the Registration Statement or Prospectus relating to the Placement
Shares (except for documents incorporated by reference) unless a copy thereof
has been submitted to CF&Co a reasonable period of time before the filing and
CF&Co has not reasonably objected thereto (provided, however, (A) that the
failure of CF&Co to make such objection shall not relieve the Company of any
obligation or liability hereunder, or affect CF&Co’s right to rely on the
representations and warranties made by the Company in this Agreement and
(B) that the Company has no obligation to provide CF&Co any advance copy of such
filing or to provide CF&Co an opportunity to object to such filing if such
filing does not name CF&Co or does not relate to the transactions contemplated
hereunder) and the Company will furnish to CF&Co at the time of filing thereof a
copy of any document that upon filing is deemed to be incorporated by reference
into the Registration Statement or Prospectus, except for those documents
available via EDGAR; and (iv) the Company will cause each amendment or
supplement to the Prospectus to be filed with the Commission as required
pursuant to the applicable paragraph of Rule 424(b) of the Securities Act or, in
the case of any document to be incorporated therein by reference, to be filed
with the Commission as required pursuant to the Exchange Act, within the time
period prescribed (the determination to file or not file any amendment or
supplement with the Commission under this Section 7(a), based on the Company’s
reasonable opinion or reasonable objections, shall be made exclusively by the
Company).
 
 
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(b)   Notice of Commission Stop Orders. The Company will advise CF&Co, promptly
after it receives notice or obtains knowledge thereof, of the issuance or
threatened issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, of the suspension of the
qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose.
 
(c)   Delivery of Prospectus; Subsequent Changes. During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by CF&Co
under the Securities Act with respect to the offer and sale of the Placement
Shares, the Company will comply with all requirements imposed upon it by the
Securities Act, as from time to time in force, and will file on or before their
respective due dates all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange
Act. If during such period any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances then existing, not misleading, or if during
such period it is necessary to amend or supplement the Registration Statement or
Prospectus to comply with the Securities Act, the Company will promptly notify
CF&Co to suspend the offering of Placement Shares during such period and the
Company will promptly amend or supplement the Registration Statement or
Prospectus (at the expense of the Company) so as to correct such statement or
omission or effect such compliance.
 
(d)   Listing of Placement Shares. During any period in which the Prospectus
relating to the Placement Shares is required to be delivered by CF&Co under the
Securities Act with respect to the offer and sale of the Placement Shares, the
Company will use its commercially reasonable efforts to cause the Placement
Shares to be listed on the Exchange and to qualify the Placement Shares for sale
under the securities laws of such jurisdictions as CF&Co reasonably designates
and to continue such qualifications in effect so long as required for the
distribution of the Placement Shares; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation or
dealer in securities or file a general consent to service of process in any
jurisdiction.
 
(e)   Delivery of Registration Statement and Prospectus. The Company will
furnish to CF&Co and its counsel (at the expense of the Company) copies of the
Registration Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during any period in
which a Prospectus relating to the Placement Shares is required to be delivered
under the Securities Act (including all documents filed with the Commission
during such period that are deemed to be incorporated by reference therein), in
each case as soon as reasonably practicable and in such quantities as CF&Co may
from time to time reasonably request and, at CF&Co’s request, will also furnish
copies of the Prospectus to each exchange or market on which sales of the
Placement Shares may be made; provided, however, that the Company shall not be
required to furnish any document (other than the Prospectus) to CF&Co to the
extent such document is available on EDGAR.
 
 
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(f)   Earnings Statement. The Company will make generally available to its
security holders as soon as practicable, but in any event not later than 15
months after the end of the Company’s current fiscal quarter, an earnings
statement covering a 12-month period that satisfies the provisions of Section
11(a) and Rule 158 of the Securities Act.
 
(g)   Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, in accordance with
the provisions of Section 11 hereunder, will pay all expenses incident to the
performance of its obligations hereunder, including, but not limited to,
expenses relating to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each
Prospectus and of each amendment and supplement thereto, (ii) the preparation,
issuance and delivery of the Placement Shares, (iii) the qualification of the
Placement Shares under securities laws in accordance with the provisions of
Section 7(d) of this Agreement, including filing fees and any reasonable fees or
disbursements of counsel for CF&Co in connection therewith, (iv) the printing
and delivery to CF&Co of copies of the Prospectus and any amendments or
supplements thereto, and of this Agreement, (v) the fees and expenses incurred
in connection with the listing or qualification of the Placement Shares for
trading on the Exchange, (vi) filing fees and expenses, if any, of the
Commission and the NASD Corporate Finance Department.
 
(h)   Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus.
 
(i)   Notice of Other Sales. During either the pendency of any Placement Notice
given hereunder, or any period in which the Prospectus relating to the Placement
Shares is required to be delivered by CF&Co, the Company shall provide CF&Co
notice as promptly as reasonably possible before it offers to sell, contracts to
sell, sells, grants any option to sell or otherwise disposes of any shares of
Common Stock (other than Placement Shares offered pursuant to the provisions of
this Agreement) or securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire Common Stock; provided, that such
notice shall not be required in connection with the (i) issuance or sale of
Common Stock, options to purchase shares of Common Stock or Common Stock
issuable upon the exercise of options or other equity awards pursuant to the
Company’s 2004 Stock Incentive Plan or (ii) the issuance or sale of Common Stock
pursuant to any dividend reinvestment plan that the Company may adopt from time
to time provided the implementation of such is disclosed publicly in advance.
 
(j)   Change of Circumstances. The Company will, at any time during the term of
this Agreement, as supplemented from time to time, advise CF&Co immediately
after it shall have received notice or obtained knowledge thereof, of any
information or fact that would alter or affect in any material respect any
opinion, certificate, letter or other document required to be provided to CF&Co
pursuant to this Agreement.
 
(k)   Due Diligence Cooperation. The Company will cooperate with any due
diligence review conducted by CF&Co or its agents, including, without
limitation, providing information and making available documents and senior
corporate officers, during regular business hours, as CF&Co may reasonably
request.
 
(l)   Required Filings Relating to Placement of Placement Shares. The Company
agrees that on such dates as the Securities Act shall require, the Company will
(i) file a prospectus supplement with the Commission under the applicable
paragraph of Rule 424(b) under the Securities Act (each and every filing under
Rule 424(b), a “Filing Date”), which prospectus supplement will set forth,
within the relevant period, the amount of Placement Shares sold through CF&Co,
the Net Proceeds to the Company and the compensation payable by the Company to
CF&Co with respect to such Placement Shares, and (ii) deliver such number of
copies of each such prospectus supplement to each exchange or market on which
such sales were effected as may be required by the rules or regulations of such
exchange or market.
 
 
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(m)   Representation Dates; Certificate. During the term of this Agreement, each
time the Company (i) files the Prospectus relating to the Placement Shares or
amends or supplements the Registration Statement or the Prospectus relating to
the Placement Shares (other than a prospectus supplement filed in accordance
with Section 7(l) of this Agreement) by means of a post-effective amendment,
sticker, or supplement but not by means of incorporation of document(s) by
reference to the Registration Statement or the Prospectus relating to the
Placement Shares; (ii) files an annual report on Form 10-K under the Exchange
Act; (iii) files its quarterly reports on Form 10-Q under the Exchange Act; or
(iv) files a report on Form 8-K (other than an earning release pursuant to Items
2.02 or 7.01 of Form 8-K (each date of filing of one or more of the documents
referred to in clauses (i) through (iv) shall be a "Representation Date"); the
Company shall furnish CF&Co (but in the case of clause (iv) above only if CF&Co
reasonably determines that the information contained in such Form 8-K is
material) with a certificate, in the form attached hereto as Exhibit 7(m). The
requirement to provide a certificate under this Section 7(m) shall be waived for
any Representation Date if the Company does not intend to tender a Placement
Notice to CF&Co or sell Placement Shares prior to the next occurring
Representation Date; provided, however, that such waiver shall not apply for any
Representation Date on which the Company files its annual report on Form 10-K.
Notwithstanding the foregoing, if the Company subsequently decides to tender a
Placement Notice or sell Placement Shares following a Representation Date when
the Company relied on such waiver and did not provide CF&Co with a certificate
under this Section 7(m), then before CF&Co either accepts the Placement Notice
or sells any Placement Shares, the Company shall provide CF&Co with a
certificate, in the form attached hereto as Exhibit 7(m), dated the date of the
Placement Notice .
 
(n)   Legal Opinion. On the date of the first Placement Notice given hereunder
and thereafter within five (5) Trading Days of each Representation Date, the
Company shall cause to be furnished to CF&Co (but in the case of Section
7(m)(iv) only if requested by CF&Co in accordance with the provisions of Section
7(m)) with a written opinion of Hunton & Williams (the “Company Counsel”), dated
the Representation Date, substantially similar to the form attached hereto as
Exhibit 7(n)(1) (for the filing of the Prospectus relating to the Placement
Shares), and Exhibit 7(n)(2) (for subsequent dates), but modified, as necessary,
to relate to the Registration Statement and the Prospectus as then amended or
supplemented; provided, however, that in lieu of such opinion, counsel may
furnish CF&Co with a letter to the effect that CF&Co may rely on a prior opinion
delivered under this Section 7(n) to the same extent as if it were dated the
date of such letter (except that statements in such prior opinion shall be
deemed to relate to the Registration Statement and the Prospectus as amended or
supplemented at such Representation Date). The requirement to provide an opinion
of Company Counsel under this Section 7(n) shall be waived for any
Representation Date if the Company does not intend to tender a Placement Notice
to CF&Co or sell Placement Shares prior to the next occurring Representation
Date; provided, however, that such waiver shall not apply for any Representation
Date on which the Company files its annual report on Form 10-K. Notwithstanding
the foregoing, if the Company subsequently decides to tender a Placement Notice
or sell Placement Shares following a Representation Date when the Company relied
on such waiver and did not provide CF&Co with an opinion from Company Counsel
under this Section 7(n), then before CF&Co either accepts the Placement Notice
or sells any Placement Shares, the Company shall provide CF&Co with an opinion
from Company Counsel dated the date of the Placement Notice.
 
 
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(o)   Comfort Letter. On the date of the first Placement Notice given hereunder
and thereafter within five (5) Trading Days of any Representation Date, (but in
the case of Section 7(m)(iv) only if requested by CF&Co in accordance with the
provisions of Section 7(m)) the Company shall cause its independent accountants
to furnish CF&Co letters (the "Comfort Letters"), dated the date of such
Representation Date, in form and substance satisfactory to CF&Co, (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of such date, the conclusions and findings of such
firm with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in connection with
registered public offerings (the first such letter, the "Initial Comfort
Letter") and (iii) updating the Initial Comfort Letter with any information that
would have been included in the Initial Comfort Letter had it been given on such
date and modified as necessary to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter. The
requirement to provide a Comfort Letter under this Section 7(o) shall be waived
for any Representation Date if the Company does not intend to tender a Placement
Notice to CF&Co or sell Placement Shares prior to the next occurring
Representation Date; provided, however, that such waiver shall not apply for any
Representation Date on which the Company files its annual report on Form 10-K.
Notwithstanding the foregoing, if the Company subsequently decides to tender a
Placement Notice or sell Placement Shares following a Representation Date when
the Company relied on such waiver and did not provide CF&Co with a Comfort
Letter under this Section 7(o), then before CF&Co either accepts the Placement
Notice or sells any Placement Shares, the Company shall provide CF&Co with a
Comfort Letter dated the date of the Placement Notice .
 
(p)   Market Activities. The Company will not, directly or indirectly take any
action designed to cause or result in, or that constitutes or might reasonably
be expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Placement
Shares.
 
(q)   Insurance. The Company and its Subsidiaries shall maintain, or caused to
be maintained, insurance in such amounts and covering such risks as is
reasonable and customary for companies engaged in similar businesses in similar
industries.
 
(r)   Compliance with Laws. The Company and each of its Subsidiaries shall
maintain, or cause to be maintained, all material environmental permits,
licenses and other authorizations required by federal, state and local law in
order to conduct their businesses as described in the Prospectus, and the
Company and each of its Subsidiaries shall conduct their businesses, or cause
their businesses to be conducted, in substantial compliance with such permits,
licenses and authorizations and with applicable environmental laws, except where
the failure to maintain or be in compliance with such permits, licenses and
authorizations could not reasonably be expected to have a Material Adverse
Effect.
 
 
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(s)   Affirmation. Each authorization or Placement Notice issued by the Company
to CF&Co to solicit offers to purchase Placement Shares shall be deemed to be an
affirmation that the representations and warranties made by it in this Agreement
are true and correct in all material respects at the time such Placement Notice
is issued, except to the extent such representation and warranty is solely as of
a specific date, and that the Company has complied in all material respects with
all of the agreements to be performed by it hereunder at or prior to such time.
 
(t)   REIT Treatment. The Company will operate in conformity with the
requirements for qualification and taxation of the Company as a REIT under the
Code, and the Company will take all reasonable efforts to enable the Company to
continue to meet the requirements for qualification and taxation as a REIT under
the Code for subsequent tax years.
 
(u)   Investment Company Act. The Company will not be or become, at any time
prior to the termination of this Agreement, an “investment company,” as such
term is defined in the Investment Company Act, assuming no change in the
Commission’s current interpretation as to entities that are not considered an
investment company.
 
(v)   Securities Act and Exchange Act. The Company will comply with all
requirements imposed upon it by the Securities Act and the Exchange Act as from
time to time in force, so far as necessary to permit the continuance of sales
of, or dealings in, the Placement Shares as contemplated by the provisions
hereof and the Prospectus.
 
(w)   Sarbanes-Oxley Act. The Company will maintain such controls and other
procedures, including, without limitation, those required by Sections 302 and
906 of the Sarbanes-Oxley Act and the applicable regulations thereunder, that
are designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company’s management, including its chief
executive officer and chief financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure and to ensure that material information relating to the Company is
made known to them by others within those entities, particularly during any
period in which such periodic reports are being prepared. The Company will
comply with all effective applicable provisions of the Sarbanes-Oxley Act.
 
8.    Conditions to CF&Co’s Obligations. The obligations of CF&Co hereunder with
respect to a Placement will be subject to the continuing accuracy and
completeness of the representations and warranties made by the Company herein,
to the due performance by the Company of its obligations hereunder, to the
completion by CF&Co of a due diligence review satisfactory to CF&Co in its
reasonable judgment, and to the continuing satisfaction (or waiver by CF&Co in
its sole discretion) of the following additional conditions:
 
 
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(a)   Registration Statement Effective. The Registration Statement shall have
become effective and shall be available for the sale of (i) all Placement Shares
issued pursuant to all prior Placements and not yet sold by CF&Co and (ii) all
Placement Shares contemplated to be issued by the Placement Notice relating to
such Placement.
 
(b)   No Material Notices. None of the following events shall have occurred: (i)
receipt by the Company of any request for additional information from the
Commission or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement, the response to which
would require any amendments or supplements to the Registration Statement or the
Prospectus; (ii) the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Placement
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the occurrence of any event that makes any
statement made in the Registration Statement or the Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and, that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
 
(c)   No Misstatement or Material Omission. CF&Co shall not have advised the
Company that the Registration Statement or Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact that in CF&Co’s opinion
is material, or omits to state a fact that in CF&Co’s opinion is material and is
required to be stated therein or is necessary to make the statements therein not
misleading.
 
(d)   Material Changes. Except as contemplated in the Prospectus, or disclosed
in the Company’s reports filed with the Commission, there shall not have been
any material adverse change, on a consolidated basis, in the authorized capital
stock of the Company or any Material Adverse Effect, or any development that
would reasonably be expected to cause a Material Adverse Effect, or a
downgrading in or withdrawal of the rating assigned to any of the Company’s
securities by any rating organization or a public announcement by any rating
organization that it has under surveillance or review its rating of any of the
Company’s securities, the effect of which, in the case of any such action by a
rating organization described above, in the sole judgment of CF&Co (without
relieving the Company of any obligation or liability it may otherwise have), is
so material as to make it impracticable or inadvisable to proceed with the
offering of the Placement Shares on the terms and in the manner contemplated in
the Prospectus.
 
(e)   Legal Opinion. CF&Co shall have received the opinion of Company Counsel
required to be delivered pursuant Section 7(n) on or before the date on which
such delivery of such opinion is required pursuant to Section 7(n).
 
 
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(f)   Comfort Letter. CF&Co shall have received the Comfort Letter required to
be delivered pursuant Section 7(o) on or before the date on which such delivery
of such letter is required pursuant to Section 7(o).
 
(g)   Representation Certificate. CF&Co shall have received the certificate
required to be delivered pursuant to Section 7(m) on or before the date on which
delivery of such certificate is required pursuant to Section 7(m).
 
(h)   No Suspension. Trading in the Shares shall not have been suspended on the
Exchange.
 
(i)   Other Materials. On each date on which the Company is required to deliver
a certificate pursuant to Section 7(m), the Company shall have furnished to
CF&Co such appropriate further information, certificates and documents as CF&Co
may reasonably request. All such opinions, certificates, letters and other
documents will be in compliance with the provisions hereof. The Company will
furnish CF&Co with such conformed copies of such opinions, certificates, letters
and other documents as CF&Co shall reasonably request.
 
(j)   Securities Act Filings Made. All filings with the Commission required by
Rule 424 under the Securities Act to have been filed prior to the giving of any
Placement Notice hereunder shall have been made within the applicable time
period prescribed for such filing by Rule 424.
 
(k)   Approval for Listing. The Placement Shares shall either have been (i)
approved for listing on the Exchange, subject only to notice of issuance, or
(ii) the Company shall have filed an application for listing of the Placement
Shares on the Exchange at, or prior to, the giving of any Placement Notice.
 
(l)   No Termination Event. There shall not have occurred any event that would
permit CF&Co to terminate this Agreement pursuant to Section 11(a).
 
9.    Indemnification and Contribution.
 
(a)   Company Indemntification. The Company agrees to indemnify and hold
harmless CF&Co, the directors, officers, partners, employees and agents of CF&Co
and each person, if any, who (i) controls CF&Co within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, or (ii) is controlled
by or is under common control with CF&Co (a “CF&Co Affiliate”) from and against
any and all losses, claims, liabilities, expenses and damages (including, but
not limited to, any and all legal and other expenses reasonably incurred in
connection with, and any and all amounts paid in settlement (in accordance with
Section 9(a)) of, any action, suit or proceeding between any of the indemnified
parties and any indemnifying parties or between any indemnified party and any
third party, or otherwise, or any claim asserted), as and when incurred, to
which CF&Co, or any such person, may become subject under the Securities Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based, directly or indirectly, on (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or (ii) the omission or alleged
omission to state in such document a material fact required to be stated in it
or necessary to make the statements in it not misleading; provided, however,
that this indemnity agreement shall not apply to the extent that such loss,
claim, liability, expense or damage arises from the sale of the Placement Shares
pursuant to this Agreement and is caused directly or indirectly by an untrue
statement or omission made in reliance on and in conformity with information
relating to CF&Co and furnished in writing to the Company by CF&Co expressly
stating that such information is intended for inclusion in any document
described in clause (a)(i) above. This indemnity agreement will be in addition
to any liability that the Company might otherwise have.
 
 
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(b)   CF&Co Indemnification. CF&Co agrees to indemnify and hold harmless the
Company and its directors and each officer of the Company who signed the
Registration Statement, and each person, if any, who (i) controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act or (ii) is controlled by or is under common control with the
Company (a “Company Affiliate”) against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 9(a), as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendments thereto) or the Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information relating to CF&Co
and furnished to the Company by CF&Co expressly stating that such information is
intended for inclusion in any document as described in Section 9(a)(i).
 
(c)   Procedure. Any party that proposes to assert the right to be indemnified
under this Section 9 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 9, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve the indemnifying party from (i) any liability that it might have to any
indemnified party otherwise than under this Section 9 and (ii) any liability
that it may have to any indemnified party under the foregoing provision of this
Section 9 unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement of
the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below. The indemnified party will have the
right to employ its own counsel in any such action, but the fees, expenses and
other charges of such counsel will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are materially
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party), (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or
(5) the claim is one which could result in criminal sanctions against or
criminal liability of the indemnified party, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not, in any event, be liable for any settlement of any action or claim effected
without its written consent. No indemnifying party shall, without the prior
written consent of each indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 9 (whether or
not any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising or that may arise out of such claim, action or
proceeding, provided that the indemnified party’s consent shall be required if
any such judgment or settlement imposes an injunction or other equitable relief
on the indemnified party, results in criminal sanctions against or criminal
liability of the indemnified party, or includes a statement or admission of
fault, culpability or a failure to act by the indemnified party.
 
 
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(d)   Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or CF&Co, the Company and
CF&Co will contribute to the total losses, claims, liabilities, expenses and
damages (including any legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company from persons other than CF&Co, such as persons who control the
Company within the meaning of the Securities Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and CF&Co may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and CF&Co on the other. The relative benefits
received by the Company on the one hand and CF&Co on the other hand shall be
deemed to be in the same proportion as the total net proceeds from the sale of
the Placement Shares (before deducting expenses) received by the Company bear to
the total compensation (before deducting expenses) received by CF&Co from the
sale of Placement Shares on behalf of the Company. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and CF&Co, on the other, with respect to the statements or omission that
resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or CF&Co, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and CF&Co agree that it would not be just and
equitable if contributions pursuant to this Section 9(d) were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability,
expense, or damage, or action in respect thereof, referred to above in this
Section 9(d) shall be deemed to include, for the purpose of this Section 9(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim to the
extent consistent with Section 9(c) hereof. Notwithstanding the foregoing
provisions of this Section 9(d), CF&Co shall not be required to contribute any
amount in excess of the commissions received by it under this Agreement and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 9(d), any person who controls a party to this Agreement within the
meaning of the Securities Act, and any officers, directors, partners, employees
or agents of CF&Co, will have the same rights to contribution as that party, and
each officer of the Company who signed the Registration Statement will have the
same rights to contribution as the Company, subject in each case to the
provisions hereof. Any party entitled to contribution, promptly after receipt of
notice of commencement of any action against such party in respect of which a
claim for contribution may be made under this Section 9(d), will notify any such
party or parties from whom contribution may be sought, but the omission to so
notify will not relieve that party or parties from whom contribution may be
sought from any other obligation it or they may have under this Section 9(d)
except to the extent that the failure to so notify such other party materially
prejudiced the substantive rights or defenses of the party from whom
contribution is sought. Except for a settlement entered into pursuant to the
last sentence of Section 9(c) hereof, no party will be liable for contribution
with respect to any action or claim settled without its written consent if such
consent is required pursuant to Section 9(c) hereof.
 
10.    Representations and Agreements to Survive Delivery. All representations
and warranties of the Company herein or in certificates delivered pursuant
hereto shall survive, as of their respective dates, regardless of (i) any
investigation made by or on behalf of CF&Co, any controlling persons, or the
Company (or any of their respective officers, directors or controlling persons),
(ii) delivery and acceptance of the Placement Shares and payment therefor or
(iii) any termination of this Agreement.
 
11.    Termination.
 
(a)   CF&Co shall have the right by giving notice as hereinafter specified at
any time to terminate this Agreement if (i) any Material Adverse Effect, or any
development that has actually occurred and that is reasonably expected to cause
a Material Adverse Effect has occurred that, in the reasonable judgment of
CF&Co, may materially impair the ability of CF&Co to sell the Placement Shares
hereunder, (ii) the Company shall have failed, refused or been unable to perform
any agreement on its part to be performed hereunder; provided, however, in the
case of any failure of the Company to deliver (or cause another person to
deliver) any certification, opinion, or letter required under Sections 7(m),
7(n), or 7(o), CF&Co’s right to terminate shall not arise unless such failure to
deliver (or cause to be delivered) continues for more than thirty (30) days from
the date such delivery was required; (iii) any other condition of CF&Co’s
obligations hereunder is not fulfilled, or (iv) any suspension or limitation of
trading in the Placement Shares or in securities generally on the Exchange shall
have occurred. Any such termination shall be without liability of any party to
any other party except that the provisions of Section 7(g) (Expenses), Section
7(u) (Investment Company), Section 9 (Indemnification), Section 10 (Survival of
Representations), Section 16 (Applicable Law; Consent to Jurisdiction) and
Section 17 (Waiver of Jury Trial) hereof shall remain in full force and effect
notwithstanding such termination. If CF&Co elects to terminate this Agreement as
provided in this Section 11(a), CF&Co shall provide the required notice as
specified in Section 12 (Notices).
 
 
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(b)   The Company shall have the right, by giving thirty (30) days notice as
hereinafter specified to terminate this Agreement in its sole discretion at any
time following the period of three (3) months after the date of this Agreement.
Any such termination shall be without liability of any party to any other party
except that the provisions of Section 7(g), Section 7(u), Section 9, Section 10,
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.
 
(c)   CF&Co shall have the right, by giving thirty (30) days notice as
hereinafter specified to terminate this Agreement in its sole discretion at any
time following the period of three (3) months after the date of this Agreement.
Any such termination shall be without liability of any party to any other party
except that the provisions of Section 7(g), Section 7(u), Section 9, Section 10,
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.
 
(d)   This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 11(a), (b), or (c) above or otherwise by mutual agreement
of the parties; provided, however, that any such termination by mutual agreement
shall in all cases be deemed to provide that Section 7(g), Section 7(u), Section
9, Section 10, Section 16 and Section 17 shall remain in full force and effect.
 
(e)   Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided, however, that such termination shall
not be effective until the close of business on the date of receipt of such
notice by CF&Co or the Company, as the case may be. If such termination shall
occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this
Agreement.
 
12.    Notices.
 
All notices or other communications required or permitted to be given by any
party to any other party pursuant to the terms of this Agreement shall be in
writing and if sent to CF&Co, shall be delivered to CF&Co at Cantor Fitzgerald &
Co., 110 East 59th Street, New York, New York 10022, fax no. (212) 829-4972,
Attention: ITD-Investment Banking, with copies to Stephen Merkel, General
Counsel, at the same address, and DLA Piper Rudnick Gray Cary US LLP, 1251
Avenue of the Americas, New York, NY 10020, fax no. (212) 884-8494, Attention:
Dean M. Colucci; or if sent to the Company, shall be delivered to Capital Lease
Funding, Inc., 110 Maiden Lane, New York, NY 10005, Attention: General Counsel,
fax no. (212) 217-6301, with a copy to Hunton & Williams LLP, Riverfront Plaza,
East Tower, 951 E. Byrd Street, Richmond, VA, 23219-4074 fax no. (804) 788-8218,
Attention: David C. Wright. Each party to this Agreement may change such address
for notices by sending to the parties to this Agreement written notice of a new
address for such purpose. Each such notice or other communication shall be
deemed given (i) when delivered personally or by verifiable facsimile
transmission (with an original to follow) on or before 4:30 p.m., New York City
time, on a Business Day or, if such day is not a Business Day, on the next
succeeding Business Day, (ii) on the next Business Day after timely delivery to
a nationally-recognized overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business
Day” shall mean any day on which the Exchange and commercial banks in the City
of New York are open for business.

 
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13.    Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the Company and CF&Co and their respective successors and the
affiliates, controlling persons, officers and directors referred to in Section 9
hereof. References to any of the parties contained in this Agreement shall be
deemed to include the successors and permitted assigns of such party. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Neither party may
assign its rights or obligations under this Agreement without the prior written
consent of the other party.
 
14.     Adjustments for Stock Splits. The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into
account any stock split, stock dividend or similar event effected with respect
to the Placement Shares.
 
15.    Entire Agreement; Amendment; Severability. This Agreement (including all
schedules and exhibits attached hereto and placement notices issued pursuant
hereto) constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and CF&Co. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
 
16.    Applicable Law; Consent to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New York
without regard to the principles of conflicts of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
 
17.    Waiver of Jury Trial. The Company and CF&Co each hereby irrevocably
waives any right it may have to a trial by jury in respect of any claim based
upon or arising out of this agreement or any transaction contemplated hereby.
 
18.    Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Delivery of an executed Agreement by one
party to the other may be made by facsimile transmission.
 
[Remainder of Page Intentionally Blank]

 
 
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If the foregoing correctly sets forth the understanding between the Company and
CF&Co, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and CF&Co.
 
Very truly yours,

CAPITAL LEASE FUNDING, INC.

By: /s/ Paul H. McDowell

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

   
Name: Paul H. McDowell

   
Title: Chief Executive Officer

 
ACCEPTED as of the date
first-above written:

CANTOR FITZGERALD & CO.

By: /s/ Jeffrey Lumby

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

Jeffrey Lumby
Managing Director

 
 
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SCHEDULE 1
 

 
CANTOR FITZGERALD & CO.
110 East 59th Street
New York, New York 10022
 
Date _______________, 200[5]
 

Capital Lease Funding, Inc.
110 Maiden Lane
New York, NY 10005
Attn: [Name],
[Title]

VIA FACSIMILE
 
FORM OF PLACEMENT NOTICE
 
Dear _________:
 
This confirms our agreement to sell up to ______________ shares of [Common
Stock]/[Preferred Stock], par value $0.01 per share of CAPITAL LEASE FUNDING,
INC., a Maryland corporation (the “Company”), pursuant to the CONTROLLED EQUITY
OFFERINGSM Sales Agreement executed between the Company and Cantor Fitzgerald &
Co. (“CF&Co”) on August 15, 2005 (the “Agreement”). Terms used herein but not
defined herein shall have the meanings set forth in the Agreement.
 
 
Number of Shares to be Sold:
   
 
Minimum Price per share at which Shares may be Sold:
    
 
Date(s) on which Shares may be Sold:
    
 
Underwriting Discount/Commission per share:
   
 
Manner and capacity in which Shares are to be Sold :
    

 
By executing this draw down notice, the parties agree to comply with the
aforementioned agreements, and to execute the transaction as described herein:
 
 
 

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Placements. The terms set forth in this Placement Notice will not be binding on
the Company or CF&Co unless and until the Company delivers written notice of its
acceptance of all of the terms of such Placement Notice (an “Acceptance”);
provided, however, that neither the Company nor CF&Co will be bound by the terms
of a Placement Notice unless the Company delivers to CF&Co an Acceptance with
respect thereto prior to 4:30 p.m. (New York City time) on the Business Day
following the Business Day on which such Placement Notice is received to the
Company in accordance with Section 12 (Notices) of the Agreement. In the event
of a conflict between the terms of the Agreement and the terms of a Placement
Notice, the terms of this Placement Notice will control.
 
Sale of Placement Shares by CF&Co. Subject to the terms and conditions of the
Agreement, upon the Acceptance of a Placement Notice, and unless the sale of the
Placement Shares described therein has been suspended or otherwise terminated in
accordance with the terms of the Agreement, CF&Co will use its commercially
reasonable efforts consistent with its normal trading and sales practices to
sell such Placement Shares up to the amount specified, and otherwise in
accordance with the terms of this Placement Notice.
 
CF&Co will provide written confirmation to the Company no later than the opening
of the Trading Day next following the Trading Day on which it has made sales of
Placement Shares hereunder setting forth the number of Placement Shares sold on
such day, the compensation payable by the Company to CF&Co with respect to such
sales, and the Net Proceeds (as defined below) payable to the Company.
 
The Company acknowledges and agrees that (i) there can be no assurance that
CF&Co will be successful in selling Placement Shares, and (ii) CF&Co will incur
no liability or obligation to the Company or any other person or entity if it
does not sell Placement Shares for any reason other than a failure by CF&Co to
use its commercially reasonable efforts consistent with its normal trading and
sales practices to sell such Placement Shares. For the purposes hereof,
“Trading Day” means any day on which the Common Stock is purchased and sold on
the principal market on which the Common Stock is listed or quoted.
 
Suspension of Sales. The Company or CF&Co may, upon notice to the other party in
writing or by telephone (confirmed immediately by verifiable facsimile
transmission), suspend any sale of Placement Shares; provided, however, that
such suspension shall not affect or impair either party’s obligations with
respect to any Placement Shares sold hereunder prior to the receipt of such
notice. The Company agrees that no such notice shall be effective against CF&Co
unless it is made to one of the individuals named on Schedule 2 to the
Agreement, as such Schedule may be amended from time to time.
 
Settlement of Placement Shares. Unless otherwise specified herein, settlement
for sales of Placement Shares will occur on the third (3rd) Business Day (or
such earlier day as is industry practice for regular-way trading) following the
date on which such sales are made (each a “Settlement Date”). The amount of
proceeds to be delivered to the Company on a Settlement Date for the sale of the
Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate sales
price received by CF&Co at which such Placement Shares were sold, after
deduction for (i) CF&Co’s commission, discount, or other compensation for such
sales payable by the Company pursuant to Section 2 of the Agreement, (ii) any
other amounts due and payable by the Company to CF&Co pursuant to Section 7(g)
(Expenses) of the Agreement, and (iii) any transaction fees imposed by any
governmental or self-regulatory organization in respect of such sales.
 
 
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Delivery of Placement Shares. On or before each Settlement Date, the Company
will, or will cause its transfer agent to, electronically transfer the Placement
Shares being sold by crediting CF&Co’s or its designee’s account at The
Depository Trust Company through its Deposit Withdrawal Agent Commission System
or by such other means of delivery as may be mutually agreed upon by the parties
hereto and, upon receipt of such Placement Shares, which in all cases shall be
freely tradable, transferable, registered shares in good deliverable form, CF&Co
will deliver the related Net Proceeds in same day funds to an account designated
by the Company prior to the Settlement Date. If the Company defaults in its
obligation to deliver Placement Shares on a Settlement Date, the Company agrees
that in addition to and in no way limiting the rights and obligations set forth
in Section 9(a) (Indemnification) of the Agreement, it will (i) hold CF&Co
harmless against any loss, claim, damage, or expense (including reasonable legal
fees and expenses), as incurred, arising out of or in connection with such
default by the Company and (ii) pay to CF&Co any commission, discount, or other
compensation to which it would otherwise have been entitled absent such default.
 
Very truly yours,
 
CANTOR FITZGERALD & CO
 

By: __________________________

 
 
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[FORM OF ACCEPTANCE]

CAPITAL LEASE FUNDING, INC.
110 MAIDEN LANE
NEW YORK, NEW YORK 10005

[Date]

[SENIOR EXECUTIVE]
Cantor Fitzgerald & Co.
135 E. 57th Street
New York, New York 10022

VIA FACSIMILE

This confirms our acceptance of the Placement Notice received by us on [_____],
200_ (the “Placement Notice”) to sell up to [_____] shares of our [Common
Stock][Preferred Stock], par value $0.01 per share, of CAPITAL LEASE FUNDING,
INC., a Maryland corporation (the “Company”), pursuant to the CONTROLLED EQUITY
OFFERINGSM Sales Agreement executed between the Company and Cantor Fitzgerald &
Co. (“CF&Co”) on August 15, 2005 (the “Agreement”). Terms used herein but not
defined shall the meanings set forth in the Agreement.

By executing this Acceptance the undersigned certifies that (i) all of the
representations and warranties contained in the Agreement are true and correct
on the date hereof as if made on the date hereof, (ii) the Board of Directors or
a duly appointed committee thereof has approved the general terms and conditions
of the Placement Notice, (iii) the Company is in full compliance with its
obligations under the Agreement and (iv) all of the conditions precedent to the
consummations of the sales contemplated by the Placement Notice have been
satisfied. The undersigned undertakes to promptly notify CF&Co in the event that
the above certification shall cease to be true and correct during any period in
which sales may be made under the Placement Notice.

ACCEPTED as of the date
first-above written:

CAPITAL LEASE FUNDING, INC.

By: __________________________
Name:
Title: 

 

 
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SCHEDULE 2
 

 
CANTOR FITZGERALD & CO.
 
Phil Marber
 
Marc J. Blazer
 
Jeff Lumby
 
Patrice McNicoll

CAPITAL LEASE FUNDING, INC.
 
Paul H. McDowell
 
William R. Pollert.
 
Shawn P. Seale
 
Robert C. Blanz
 
Paul C. Hughes

 
 

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SCHEDULE 3

Entity
State of Incorporation or Formation
Caplease, LP
Delaware
CLF 1000 Milwaukee Avenue LLC
EVA LLC
Caplease CDO 2005-1, Ltd
Caplease Credit LLC
Delaware
Delaware
Cayman Islands
Delaware

 
 

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SCHEDULE 4

The Company’s chairman, Lewis S. Ranieri, is an advisor to Signature Securities
Group, A NASD member and wholly-owned subsidiary of Signature Bank.

Mr. Ranieri is a Chairman and a control person of Five Mile Capital Partners
LLC, which owns and controls Five Mile Securities, LLC (formerly known as East
Hills Trading, LLC), a NASD member. Mr. Raineri has no involvement in the
day-to-day operations of Five Mile Securities, LLC.

 
 

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Exhibit 7(n)
 
MATTERS TO BE COVERED BY INITIAL OPINION OF
 
HUNTON & WILLIAMS LLP
 

(i)  
As of December 31, 2004, the Company had an authorized capitalization as set
forth in its statements of financial condition included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2004. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable and conform, in all material respects, to the
description thereof contained in the Prospectus.

 

(ii)  
The Company has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the State of Maryland. The Company has full
corporate power and authority to own its assets and to conduct its business as
described in the Prospectus.

 

(iii)  
To the knowledge of such counsel, the Company is duly qualified or registered as
a foreign corporation to transact business in each jurisdiction set forth on
Schedule 1 hereto in which the failure, individually or in the aggregate, to be
so qualified could reasonably be expected to have a Material Adverse Effect. To
the knowledge of such counsel, other than the Company’s interests in the
Subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any other corporation or any ownership
interest in any limited liability company, partnership, joint venture or other
association, except for any securities held in the Investment Portfolio.

 

(iv)  
The execution, delivery and performance of the Sales Agreement by the Company
and the consummation by the Company of the transactions contemplated thereby do
not conflict with, or result in any breach of, or constitute a default under
(nor constitute an event that with notice, lapse of time or both would
constitute a breach of or default under), (i) the charter or by-laws of the
Company, (ii) any agreement listed on Schedule 2 hereto or (iii) to our
knowledge, any Applicable Law or any decree, judgment or order applicable to the
Company (other than state and foreign securities or blue sky laws, as to which
we express no opinion), except in the case of clauses (ii) and (iii) for such
conflicts, breaches or defaults, which individually or in the aggregate could
not be reasonably expected to have a Material Adverse Effect.

 

(v)  
The Company has full corporate power and authority to enter into, and to perform
its obligations under, the Sales Agreement and to consummate the transactions
contemplated therein. The execution and delivery of the Sales Agreement has been
duly authorized by all necessary corporate action on the part of the Company and
the Sales Agreement has been duly executed and delivered by the Company.

 
 
 

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(vi)  
No approval, authorization, consent or order of, or filing with, any federal or
state governmental or regulatory commission, board, body, authority or agency is
required under Applicable Law in connection with the execution, delivery and
performance of the Sales Agreement, or the consummation of the transactions
contemplated thereby, by the Company, other than such as have been obtained or
made under the Securities Act or the Securities Exchange Act of 1934, as
amended, and such approvals as have been obtained in connection with the listing
of the Placement Shares on the New York Stock Exchange; provided, however, that
we do not express any opinion as to any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the Placement
Shares are being offered by CF&Co or any approval of the underwriting terms and
arrangements relating to the offering of the Placement Shares by the NASD.

 

(vii)  
The Placement Shares have been duly authorized by the Company for issuance and
sale pursuant to the Sales Agreement. The Placement Shares, when issued and
delivered by the Company in accordance with such authorization and pursuant to
the Sales Agreement against payment of the consideration specified in the Sales
Agreement, will be validly issued, fully paid and nonassessable under the MGCL.

 

(viii)  
The issuance and sale of the Placement Shares by the Company is not subject to
preemptive or other similar rights arising by operation of the MGCL, under the
charter or by-laws of the Company or under any agreement known to us to which
the Company is a party.

 

(ix)  
To our knowledge, except as otherwise described in the Registration Statement,
the Prospectus, the documents incorporated therein by reference or the exhibits
filed in connection therewith, there are no persons with registration or other
similar rights to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the Securities Act.

 

(x)  
The form of certificate used to evidence the Placement Shares complies in all
material respects with all applicable statutory requirements of the MGCL, the
charter and by-laws of the Company.

 

(xi)  
At the time the Registration Statement became effective, the Registration
Statement and, as of the date of the Sales Agreement and the date hereof, the
Prospectus (in each case, other than the financial statements, financial
schedules and other financial and statistical data included or incorporated by
reference in, or excluded from, the Registration Statement and the Prospectus,
as to which we express no opinion) complied as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
promulgated thereunder.

 
 
 
 

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(xii)  
The statements under the caption “Description of Stock” in the Prospectus,
insofar as such statements constitute a summary of the legal matters referred to
therein, constitute accurate summaries thereof in all material respects.

 

(xiii)  
To our knowledge, there are no actions, suits or proceedings or inquiries or
investigations, pending or threatened, against the Company or any of its
officers and directors or to which the Company’s assets (excluding the Company’s
direct or indirect interests in the Subsidiaries) are subject, at law or in
equity, before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority, arbitration panel or agency that
are required to be described in the Prospectus or the documents incorporated
therein by reference but are not so described.

 

(xiv)  
The Company is not an “investment company” or a company “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, as those terms are currently interpreted by the Commission.

 

(xv)  
Commencing with its taxable year ended December 31, 2004, the Company was
organized in conformity with the requirements for qualification and taxation as
a REIT under the Code and its method of operation as described in the Prospectus
and as set forth in a certificate of representations from the Company has
enabled it to meet the requirements for qualification as a REIT under the Code,
and the Company’s proposed method of operation as described in the Prospectus
and the certificate of representations will enable the Company to continue to so
qualify.

 

(xvi)  
The statements under the caption “Federal Income Tax Considerations” in the
Prospectus Supplement and Prospectus, insofar as such statements constitute a
summary of the legal matters referred to therein, constitute accurate summaries
thereof in all material respects.

 
The Registration Statement became effective under the Securities Act on May [ ],
2005 and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission.
 
In addition, we have reviewed the Registration Statement and the Prospectus and
participated in the preparation of the Prospectus Supplement and in conferences
with officers and other representatives of the Company, representatives of
independent public accountants for the Company at which the contents of the
Registration Statement and the Prospectus and related matters were discussed,
and we have reviewed certain corporate records, documents and proceedings and,
on the basis of the foregoing, nothing has come to our attention that leads us
to believe that the Registration Statement, at the time such Registration
Statement became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, as of the
date of the Sales Agreement or the date hereof, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that we express no belief with respect to the financial statements, financial
schedules and other financial data included or incorporated by reference in, or
excluded from, the Registration Statement or the Prospectus).
 
The limitations inherent in the independent verification of factual matters and
the character of determinations involved in the preparation of a disclosure
document are such, however, that we do not assume any responsibility, except as
otherwise stated in opinion (xiii) above, for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or Prospectus
or any amendments or supplements thereto (including any of the documents
incorporated by reference therein).
 
 
 
 

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Exhibit 7(n)(2)

 
Matters to be covered by subsequent Company Counsel Opinions
 
The Registration Statement, when it became effective, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof with the
Commission, complied as to form in all material respects with the requirements
for registration statements on Form S-3 under the Securities Act and the rules
and regulations of the Commission thereunder, and each of the documents
incorporated by reference in the Registration Statement or the Prospectus, or
any amendment or supplement thereto, on the date of filing thereof with the
Commission, complied as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission thereunder;
it being understood, however, that we express no opinion with respect to the
financial statements, schedules or other financial data included or incorporated
by reference in, or omitted from, the Registration Statement or the Prospectus
or any other document. In passing upon the compliance as to form of the
Registration Statement and the Prospectus and any other document, we have
assumed that the statements made and incorporated by reference therein are
correct and complete.
 
(a) The Registration Statement has become effective under the Securities Act
and, to the best of our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceeding for that purpose
has been instituted by the Commission.
 
(b) To our knowledge and other than as set forth in the Prospectus, there are no
legal or governmental proceedings, pending or threatened, to which the Company
is a party required to be described in the Prospectus that are not described as
required.
 
(c) The Company has qualified as a real estate investment trust (“REIT”) under
the Internal Revenue Code (the “Code”) for the taxable years ended December 31,
[ ], [ ] and the Company is organized and operates in a manner that will enable
it to qualify to be taxed as a REIT under the Code, for the taxable year ended
[December 31, 200_] provided that it continues to meet the asset composition,
source of income, shareholder diversification, distribution, record keeping and
other requirements of the Code that are necessary for the Company to qualify as
a REIT.
 
In addition, we have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives, at which the contents of
the Registration Statement and the Prospectus and related matters were discussed
and, although we are not passing upon, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained or
incorporated by reference in the Registration Statement and the Prospectus,
during the course of such participation, no facts came to our attention that
caused us to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (including the
Incorporated Documents), as of its date, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; it being understood that we express no belief with respect
to the financial statements, schedules and other financial and statistical data
included or incorporated by reference in the Registration Statement or the
Prospectus.
 
* Note: “Registration Statement” and “Prospectus” will be defined to include
documents incorporated by reference therein (“Incorporated Documents”).
 

 
 
 

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Exhibit 7(m)

 
OFFICER CERTIFICATE

The undersigned, the duly qualified and elected _______________________, of
CAPITAL LEASE FUNDING, INC. (“Company”), a Maryland corporation, does hereby
certify in such capacity and on behalf of the Company, pursuant to Section 7(m)
of the Sales Agreement dated August 15, 2005 (the “Sales Agreement”) between the
Company and Cantor Fitzgerald & Co., that to the best of the knowledge of the
undersigned.
 
(i) Except for non-material exceptions as may be set forth on Annex A hereto,
the representations and warranties of the Company in Section 6 of the Sales
Agreement are true and correct on and as of the date hereof, except for those
representations and warranties that speak solely as of a specific date and which
were true and correct as of such date, with the same force and effect as if
expressly made on and as of the date hereof; and
 
(ii) The Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied pursuant to the Sales Agreement at or
prior to the date hereof.
 

 

By:

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Name:
Title:

Date:

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