Document:

Unassociated Document

    (Executive
      Officers)

    CAPITAL
      LEASE FUNDING, INC.

    

    Stock
      Award Agreement

     

    THIS
      AGREEMENT dated the ____ day of _______ 20__, between CAPITAL LEASE FUNDING,
      INC., a Maryland corporation (the “Company”), and _________ (the “Participant”),
      is made pursuant and subject to the provisions of the Company’s 2004 Stock
      Incentive Plan (the “Plan”), a copy of which has been made available to the
      Participant. All terms used herein that are defined in the Plan have the same
      meaning given them in the Plan. 

     

    1. Stock
      Award.
      Pursuant to the Plan, the Company, on ________ __, 20__ (the “Date of Grant”)
      granted to the Participant, subject to the terms and conditions of the Plan
      and
      subject further to the terms and conditions herein set forth, a Stock Award
      covering _________ shares of Common Stock, hereafter described as the
“Shares.”

     

    2. Restrictions.
      Except
      as provided in this Stock Award Agreement (“Agreement”), the Shares are
      nontransferable and are subject to a substantial risk of
      forfeiture.

     

    3. Vesting.
      Subject
      to Paragraph 6
      and
      except as provided in Paragraphs 4
      and
5
      below,
      the Participant’s interest in the Shares granted under this Agreement shall
      become nonforfeitable and transferable (“Vested”) [(i) as to ________ shares, in
      five equal annual installments commencing on the one-year anniversary of the
      Date of Grant (the “Time Vesting Shares”) and (ii) as to ________ shares, over a
      five year period ending on the fifth anniversary of the Date of Grant (the
      “Performance Termination Date”) if the restrictions lapse or expire based on the
      attainment of performance criteria determined by the Administrator in its sole
      discretion (the “Performance Vesting Shares”). One-fifth of the Performance
      Vesting Shares shall be available for Vesting annually (beginning on the first
      anniversary of the Date of Grant); provided, however, that any Performance
      Vesting Shares which fail to Vest will accumulate and not be forfeited but
      shall
      be available for Vesting in subsequent years until the Performance Termination
      Date at which time all Performance Vesting Shares which have not Vested shall
      be
      forfeited.]

     

    4. Death,
      Disability or Termination. Paragraph
      3
      to the
      contrary notwithstanding, if, prior to the forfeiture of the Shares under
      Paragraph 6,
      the
      Participant dies or becomes Disabled while in the employ of the Company or
      an
      Affiliate or terminates employment for Good Reason or is terminated other than
      for Cause, all Shares that are not then Vested shall become Vested as of the
      date of the Participant’s death, Disability, termination for Good Reason or
      termination other than for Cause. For purposes of Paragraphs 4
      and
6
      of this
      Agreement, Disability, Good Reason, and Cause shall have the same meaning as
      set
      forth in the Employment Agreement between the Company and the Participant as
      in
      effect on the date hereof. 

     

    5. Change
      in Control. Notwithstanding
      any other provision of this Agreement, all Shares not previously forfeited
      shall
      become Vested on a Control Change Date in accordance with the Plan.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6. Forfeiture.
      All
      Shares that are not then Vested shall be forfeited if the Participant’s
      employment with the Company terminates for any reason other than on account
      of
      the Participant’s death, Disability, termination for Good Reason or termination
      other than for Cause.

     

    7. Fractional
      Shares.
      Fractional shares shall not Vest hereunder, and when any provision hereof may
      cause a fractional share to Vest, any Vesting in such fractional share shall
      be
      postponed until such fractional share and other fractional shares equal a Vested
      whole share.

     

    8. Change
      in Capital Structure.
      The
      terms of this Agreement shall be adjusted as the Board determines is equitably
      required in the event the (a) Company (i) effects one or more stock dividends,
      stock split-ups, subdivisions or consolidations of shares or (ii) engages in
      a
      transaction to which Section 424 of the Code applies or (b) there occurs any
      other event which, in the judgment of the Board, necessitates such
      action.

     

    9. Governing
      Law.
      This
      Agreement shall be governed by the laws of the State of New York.

     

    10. Stock
      Power. With
      respect to any Shares that are forfeited in accordance with Paragraph
6,
      the
      Participant hereby irrevocably appoints the Company’s Secretary as his attorney
      to transfer any forfeited Shares on the books of the Company with full power
      of
      substitution in the premises. The Company’s Secretary shall use the authority
      granted in this Paragraph 10
      to
      cancel any Shares that are forfeited in accordance with Paragraph 6.
      The
      authority granted in this Paragraph 10
      shall
      terminate with respect to Shares on the date that such Shares become Vested
      in
      accordance with Paragraphs 3
      or
4.

     

    11. Shareholder
      Rights. The
      Participant shall have all of the rights of a Shareholder with respect to the
      Shares, including the right to vote the Shares and receive dividends thereon,
      from the Date of Grant and prior to a forfeiture of the Shares. On and after
      the
      date that any Shares are forfeited in accordance with Paragraph 6
      the
      Participant shall have no further rights as a Shareholder with respect to the
      forfeited Shares. The Company shall retain custody of the certificates
      evidencing the Shares until the Shares become Vested in accordance with
      Paragraphs 3
      or
4
      at which
      time the Company shall deliver to the Participant a certificate evidencing
      the
      Vested Shares.

     

    12. No
      Right to Continued Employment.
      This
      Agreement does not confer upon the Participant any right with respect to
      continuance of employment by the Company or an Affiliate nor shall it interfere
      in any way with the right of the Company or an Affiliate to terminate his
      employment at any time. 

     

    13. Conflicts.
      In the
      event of any conflict between the provisions of the Plan as in effect on the
      date hereof and the provisions of this Agreement, the provisions of the Plan
      shall govern. All references herein to the Plan shall mean the Plan as in effect
      on the date hereof.

     

    14. Participant
      Bound by Plan.
      The
      Participant hereby acknowledges that a copy of the Plan has been made available
      to him and agrees to be bound by all the terms and provisions
      thereof.

     

    15. Binding
      Effect.
      Subject
      to the limitations stated above and in the Plan, this Agreement shall be binding
      upon and inure to the benefit of the legatees, distributees, and personal
      representatives of the Participant and the successors of the
      Company.

     

    
      
         

      

      
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    IN
      WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly
      authorized officer, and the Participant has affixed his signature
      hereto.

     

    
      	
               

              CAPITAL
                LEASE FUNDING, INC.

               

              By:
                __________________________________

            	
               

               

              ______________________________________

              Participant

            

    

    
      

      
        
           

        

          3Unassociated Document

    EMPLOYMENT
      AGREEMENT

     

    This
      EMPLOYMENT AGREEMENT is made and entered into this 13th day of February, 2007,
      between Capital Lease Funding, Inc., a Maryland corporation (the “Company”), and
      Paul C. Hughes (the “Executive”).

     

     

    RECITALS

     

    WHEREAS,
      the
      Company desires to employ the Executive, and the Executive desires to be
      employed by the Company, all on the terms and subject to the conditions set
      forth herein; and 

     

    WHEREAS,
      the
      Executive is willing to enter into this Agreement in consideration of the
      benefits which the Executive will receive under the terms hereof.

     

    NOW,
      THEREFORE, in
      consideration of the mutual covenants contained herein, and for other good
      and
      valuable consideration, the receipt and adequacy of which are hereby
      acknowledged, the parties agree as follows:

     

     

    1. Term.
      The
      term of this Agreement will commence on the date hereof (the “Effective Date”)
      and end on December 31, 2009 (the “Initial Term”), and shall be automatically
      extended for one additional year each December 31 following the Effective Date,
      unless at least 90 days immediately preceding such December 31, the Company
      or
      the Executive provides written notice to the other that it does not wish to
      extend this Agreement. The Initial Term, together with any such extensions,
      shall be referred to herein as the “Employment Period.”

     

     

    2. Position
      and Duties.
      The
      Executive shall be employed by the Company as Vice President, Corporate
      Secretary and General Counsel. During the Employment Period, the Executive
      shall
      perform such duties on behalf of the Company as are normally associated with
      his
      position and such other duties as may be assigned by the Board of Directors
      from
      time to time. The Executive shall also serve without additional compensation
      in
      such other offices of the Company or its subsidiaries to which the Executive
      may
      be elected or appointed by the Board of Directors.

     

     

    3. Extent
      of Services.
      

     

    (a) During
      the Employment Period, the Executive shall devote substantially all of his
      business time, energy, skill and best efforts to the performance of his duties
      hereunder in a manner that will faithfully and diligently further the business
      and interests of the Company. Notwithstanding the foregoing, the Executive
      may
(i) make
      any investment where he is not obligated or required to, and shall not in fact,
      devote significant managerial efforts, (ii) participate in charitable,
      academic or community activities, and in trade or professional organizations,
      or
      (iii) hold directorships in other companies consistent with the Company’s
      conflict of interest policies and corporate governance guidelines as in effect
      from time to time.

     

    (b) Corporate
      Opportunities.
      The
      Executive agrees that he will not take personal advantage of any business
      opportunity which arises during his employment with the Company and which may
      be
      of benefit to the Company unless all material facts regarding such opportunity
      are promptly reported by the Executive to the Board of Directors for
      consideration by the Company and the disinterested members of the Board of
      Directors decide to reject the opportunity.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4. Compensation
      and Related Matters.

     

    (a) Annual
      Base Salary.
      During
      the Employment Period, the Company shall pay to the Executive an annual base
      salary of $215,000 (less all applicable deductions, the “Base Salary”) for all
      services rendered by the Executive to the Company. The Base Salary shall be
      payable in equal installments in accordance with the practice of the Company
      in
      effect from time to time for the payment of salaries to officers of the Company.
      The Executive’s Base Salary shall be reviewed annually by the Compensation
      Committee of the Board of Directors (the “Compensation Committee”). During the
      Employment Period and as of each anniversary of the Effective Date, the Base
      Salary shall be increased by (i) the product of (A) the Base Salary as then
      in
      effect and (B) the percentage increase in the Consumer Price Index for the
      prior
      calendar year (as defined in Section 14(c)) and (ii) the amount, if any,
      determined by the Compensation Committee.

     

    (b) Annual
      Bonuses.
      The
      Executive shall be eligible for an annual bonus (“Annual Bonus”) for each
      calendar year, payable no later than March 31 of the following year, based
      on
      his performance and the performance of the Company during such period as
      determined by the Compensation Committee. During the Employment Period, there
      shall be no maximum limit on the Annual Bonus awardable to the Executive.

     

    (c) Restricted
      Stock.
      In
      addition to awards of restricted common stock made on or prior to the date
      hereof, the Executive shall be eligible for future awards of restricted common
      stock pursuant to the Company’s 2004 stock incentive plan at the discretion of
      the Compensation Committee. Such future and currently outstanding awards shall
      be governed by the applicable grant agreement and related plan.

     

    (d) Expenses.
      The
      Company shall pay or reimburse the Executive for all reasonable expenses
      actually paid or incurred by the Executive during the Employment Period in
      the
      performance of the Executive’s duties under this Agreement in accordance with
      the Company’s employee business expense reimbursement policies in effect from
      time to time.

     

    (e) Other
      Benefits.
      During
      the Employment Period, the Executive shall be eligible to receive such employee
      benefits including, without limitation, participation in the Company’s
      retirement and welfare plans, as the Company may provide from time to time
      to
      similarly situated employees, and such other benefits as the Board of Directors
      may from time to time establish for the Company’s executive officers. In
      addition, the Company shall endeavor to provide at its sole expense a whole
      life
      insurance policy or policies to the Executive with a death benefit aggregating
      at least $500 thousand, as well as disability insurance providing for income
      replacement upon termination of at least 95% of the Base Salary, subject to
      such
      insurance being available at reasonable cost. The Company agrees to indemnify
      the Executive for any income tax he incurs as a result of the Company’s payment
      of these premiums. 

     

    
      
        
        

      

      
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    (f) Vacations.
      The
      Executive shall be entitled to at least five (5) weeks vacation in each calendar
      year, together with leave of absence and leave for illness or temporary
      disability in accordance with the policies of the Company in effect from time
      to
      time.

     

     

    5. Termination.
      Each
      party shall have the right to terminate the Executive’s employment hereunder
      before the Employment Period expires to the extent, and subject to the
      provisions, set forth in this Section 5:

     

    (a) Death.
      The
      Executive’s employment hereunder shall terminate upon his death.

     

    (b) Disability.
      The
      Company shall have the right to terminate the Executive’s employment if the
      Board of Directors determines that the Executive is unable to perform his duties
      by reason of Disability. As used herein, “Disability” shall mean the inability
      of the Executive due to physical or mental illness or injury to perform his
      duties hereunder for any period of 180 consecutive days and the return of the
      Executive to his duties for periods of 15 days or less shall not interrupt
      such
      180 day period. 

     

    (c) Cause.
      The
      Company shall have the right to terminate the Executive’s employment at any time
      upon delivery of a Notice of Termination (as defined in subsection (f) below)
      for Cause (as defined below) to Executive, such employment to terminate
      immediately upon delivery of such notice unless otherwise specified by the
      Board
      of Directors. For purposes of this Agreement, the term “Cause” means that the
      Executive: (i) has been convicted of, or entered a plea of guilty or
“nolo
      contendere”
to,
      a
      felony (excluding any felony relating to the negligent operation of an
      automobile), (ii) has intentionally failed to substantially perform (other
      than by reason of illness or temporary disability) his reasonably assigned
      material duties hereunder, (iii) has engaged in willful misconduct in the
      performance of his duties or (iv) has materially breached any non-competition
      or
      non-disclosure agreement in effect between the Executive and the Company,
      including such agreements in this Agreement.

     

    (d) Without
      Cause.
      The
      Company may at any time terminate the Executive’s employment
      hereunder.

     

    (e) Termination
      by the Executive.

     

    (i) The
      Executive may terminate his employment hereunder (A) for Good Reason, or (B)
      without Good Reason at any time after the date hereof by giving thirty (30)
      days’ prior notice of his intention to terminate.

     

    (ii) For
      purposes of this Agreement, “Good Reason” shall mean (A) any reduction by the
      Company in the Base Salary, (B) a material reduction in the Executive’s titles,
      duties and responsibilities, or the assignment to the Executive of any duties
      materially inconsistent with the Executive’s position with the Company without
      the consent of the Executive, (C) a requirement by the Company that the
      Executive relocate to a location other than the New York, New York metropolitan
      area, or (D) a material breach of this Agreement by the Company, which, with
      respect to (B) and (D), has not been cured within thirty (30) days after written
      notice of such action or breach has been given by the Executive to the
      Company.

     

    
      
        
        

      

      
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    (f) Notice
      of Termination.
      Any
      termination of the Executive’s employment by the Company or by the Executive
      (other than termination pursuant to subsection (a) hereof) shall be communicated
      by written Notice of Termination to the other party hereto in accordance with
      Section 14(a). For purposes of this Agreement, a “Notice of Termination” shall
      mean a notice which shall indicate the specific termination provision in this
      Agreement relied upon and shall set forth in reasonable detail the facts and
      circumstances claimed to provide a basis for termination of the Executive’s
      employment under the provision so indicated.

     

    (g) Date
      of Termination.
      The
“Date of Termination” shall mean (i) if the Executive’s employment is terminated
      by his death, the date of his death, (ii) if the Executive’s employment is
      terminated pursuant to subsection (b) or (c) above, upon delivery of the Notice
      of Termination unless otherwise specified in such notice, and (iii) if the
      Executive’s employment is terminated for any other reason, the date thirty (30)
      days following the date on which a Notice of Termination is given.

     

     

    6. Compensation
      Upon Termination, Death or During Disability.

     

    (a) Death.
      If the
      Executive’s employment is terminated by his death, the Company shall, within ten
      (10) days following the Date of Termination, pay any earned and accrued but
      unpaid installment of Base Salary through the Date of Termination at the rate
      then in effect and any other accrued and unpaid amounts due to the Executive
      under Section 4, together with any other amounts to which the Executive is
      entitled pursuant to death benefit plans, programs and policies. In addition,
      subject to compliance with Section 6(f), upon the Executive’s termination, (i)
      the Executive’s estate shall be paid a Pro rata Portion of the Executive’s
      Maximum Bonus (each as defined below), and (ii) all of the Executive’s
      outstanding options, restricted share awards and any other equity rights granted
      by the Company to the Executive shall continue to be governed by the applicable
      grant agreement and related plan. For purposes of this Agreement, (i) “Maximum
      Bonus” means the highest aggregate Annual Bonus or incentive payment paid by the
      Company (or any predecessor of the Company) to the Executive for any of the
      three calendar years prior to the year the Date of Termination occurs and (ii)
      the “Pro rata Portion” of the Executive’s Maximum Bonus shall be calculated by
      multiplying the Maximum Bonus by a fraction, the numerator of which shall be
      the
      number of calendar days elapsed in the year in which the Date of Termination
      occurs, up to and including the Date of Termination, and the denominator of
      which shall be 365.

     

    (b) Disability.
      During
      any period that the Executive fails to perform his duties hereunder as a result
      of his incapacity due to a physical or mental illness, the Executive shall
      continue to receive his Base Salary at the rate then in effect for such period
      (and shall not receive his disability insurance benefits) until his employment
      is terminated pursuant to Section 5(b) hereof, and upon the Date of Termination,
      the Company shall, within ten (10) days of such termination, pay the Executive
      any earned and accrued but unpaid installment of Base Salary through the Date
      of
      Termination at the rate then in effect and any other accrued and unpaid amounts
      due to the Executive under Section 4. In addition, subject to compliance with
      Section 6(f), upon the Executive’s termination, (i) the Executive shall be paid
      a Pro rata Portion of his Maximum Bonus and (ii) all of the Executive’s
      outstanding options, restricted share awards and any other equity rights granted
      by the Company to the Executive shall continue to be governed by the applicable
      grant agreement and related plan. 

     

    
      
        
        

      

      
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    (c) Cause
      or other than Good Reason.
      If the
      Executive’s employment shall be terminated by the Company for Cause or by the
      Executive for other than Good Reason, the Company shall, within ten (10) days
      following the Date of Termination, pay the Executive any earned and accrued
      but
      unpaid installment of Base Salary through the Date of Termination at the rate
      then in effect at the time Notice of Termination is given and any other accrued
      and unpaid amounts due to the Executive under Section 4, and the Company shall
      have no further obligations to the Executive under this Agreement. All of the
      outstanding options, restricted share awards and any other equity rights granted
      by the Company to the Executive shall continue to be governed by the applicable
      grant agreement and related plan. 

     

    (d) Decision
      by the Company not to Extend the Agreement.
      In the
      event the Company determines not to extend this Agreement by giving written
      notice in accordance with Section 1, the Executive shall be entitled to receive,
      at the end of the Employment Period and subject to compliance with Section
      6(f),
      a lump sum payment equal to his annual Base Salary, at the rate in effect on
      the
      last day of the Employment Period.

     

    (e) Termination
      by the Company without Cause or by the Executive for Good Reason.
      If the
      Company shall terminate the Executive’s employment other than for death,
      Disability pursuant to Section 5(b) or Cause (and other than in connection
      with
      a decision not to extend the Agreement), or the Executive shall terminate his
      employment for Good Reason, then the Company shall, within ten (10) days of
      the
      Date of Termination, pay the Executive any earned and accrued but unpaid
      installment of Base Salary through the Date of Termination at the rate then
      in
      effect and any other accrued and unpaid amounts due to the Executive under
      Section 4. In addition, subject to compliance with Section 6(f), upon the
      Executive’s termination, the Executive shall be entitled to
      receive:

     

    (i) a
      lump
      sum payment equal to two (2) times his Base Salary, at the rate in effect on
      the
      Date of Termination;

     

    (ii) a
      lump
      sum payment equal to two (2) times his average Annual Bonus for the three (3)
      years preceding the year in which the Date of Termination occurs;

     

    (iii) a
      Pro
      rata Portion of his Maximum Bonus;

     

    (iv) continued
      payment by the Company of his life, health and disability insurance coverage
      during the twenty-four (24) month period following the Date of Termination
      to
      the same extent that the Company paid for such coverage immediately prior to
      the
      Date of Termination, subject to the eligibility requirements and other terms
      and
      conditions of such insurance coverage, provided that if any such insurance
      coverage shall become unavailable during such twenty-four (24) month period,
      the
      Company thereafter shall be obliged only to pay to the Executive an amount
      which, after reduction for income and employment taxes, is equal to the employer
      premiums for such insurance for the remainder of such severance period;
      and

     

    
      
        
        

      

      
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    (v) all
      of
      the outstanding options, restricted share awards and any other equity rights
      granted by the Company to the Executive shall continue to be governed by the
      applicable grant agreement and related plan.

     

    (f) Release.
      Payments by the Company required under this Section 6 following termination
      or
      expiration of the Executive’s employment for any reason (other than payments of
      accrued but unpaid amounts) shall be conditioned on and shall not be payable
      until receipt of a written release in form and substance reasonably acceptable
      to the Company of any and all past, present or future claims that the Executive
      (or, in the event of his death, his estate) may have against the Company or
      any
      of its affiliates and any of their respective officers, directors, members
      or
      managers. The Company agrees to provide the Executive with the release within
      15
      days of (i) the Date of Termination or (ii) the last day of the Employment
      Period.

     

    7. Change
      in Control.

     

    (a) Change
      in Control.
      For
      purposes of this Agreement, a “Change in Control” shall mean any of the
      following events:

     

    (i) the
      ownership or acquisition (whether by a merger or otherwise) by any Person (other
      than a Qualified Affiliate), in a single transaction or a series of related
      or
      unrelated transactions, of Beneficial Ownership of more than fifty percent
      (50%)
      of the Company’s then outstanding voting securities (the “Outstanding Voting
      Securities”);

     

    (ii) the
      merger or consolidation of the Company with or into any other Person (other
      than
      a Qualified Affiliate), if, immediately following the effectiveness of such
      merger or consolidation, Persons who did not Beneficially Own Outstanding Voting
      Securities immediately before the effectiveness of such merger or consolidation
      directly or indirectly Beneficially Own more than fifty percent (50%) of the
      outstanding shares of voting stock of the surviving entity of such merger or
      consolidation (including for such purpose in both the numerator and denominator,
      shares of voting stock issuable upon the exercise of then outstanding rights
      (including conversion rights), options or warrants) (“Resulting Voting
      Securities”), provided that, for purposes of this subsection, if a Person who
      Beneficially Owned Outstanding Voting Securities immediately before the merger
      or consolidation Beneficially Owns a greater number of the Resulting Voting
      Securities immediately after the merger or consolidation than the number the
      Person received solely as a result of the merger or consolidation, that greater
      number will be treated as held by a Person who did not Beneficially Own
      Outstanding Voting Securities before the merger or consolidation, and provided
      further that such merger or consolidation would also constitute a Change in
      Control if it would satisfy the foregoing test if rights, options and warrants
      were not included in the calculation;

     

    (iii) any
      one
      or a series of related sales or conveyances to any Person or Persons (including
      a liquidation) other than any one or more Qualified Affiliates of all or
      substantially all of the assets of the Company;

     

    (iv) the
      complete liquidation or dissolution of the Company; or

     

    (v) Incumbent
      Directors cease to be a majority of the members of the Board of Directors,
      where
      an “Incumbent Director” is (1) an individual who is a member of the Board of
      Directors on the Effective Date or (2) any new director whose appointment
      by the Board of Directors was approved by a majority of the persons who were
      already Incumbent Directors at the time of such appointment, election or
      approval, other than any individual who assumes office initially as a result
      of
      an actual or threatened election contest with respect to the election or removal
      of directors or other actual or threatened solicitation of proxies or consents
      by or on behalf of a Person other than the Board of Directors or as a result
      of
      an agreement to avoid or settle such a contest or solicitation.

     

    
      
        
        

      

      
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    (b) Certain
      Benefits upon a Change in Control.
      In the
      event of a Change in Control, all of the Executive’s outstanding options,
      restricted share awards and any other equity rights granted by the Company
      to
      the Executive shall continue to be governed by the applicable grant agreement
      and related plan. 

     

    (c) Termination
      of Executive.
      If (i)
      there is a Change in Control during the Employment Period, and within 12 months
      following the Change in Control, the Company (or its successor) terminates
      the
      Executive’s employment without Cause or the Executive terminates his employment
      for Good Reason, (ii) the Company terminates the Executive’s employment without
      Cause while the Company is negotiating a transaction that reasonably could
      result in a Change in Control, or (iii) the Company terminates the Executive’s
      employment without Cause and a Change in Control occurs within three (3) months
      following the Date of Termination, the Executive shall be entitled to receive
      the items referenced in Section 6(e)(i) through 6(e)(iv) (collectively, the
      “Control Change Severance Payment”).

     

    (d) Additional
      Payments by the Company.
      

     

    (i) In
      the
      event that any Control Change Severance Payment or other benefit payable to
      the
      Executive (under this Agreement or otherwise), shall (1) constitute
“parachute payments” within the meaning of Section 280G (as it may be
      amended or replaced) of the Internal Revenue Code (the “Code”) (“Parachute
      Payments”) and (2) be subject to the excise tax imposed by
      Section 4999 (as it may be amended or replaced) of the Code (“the Excise
      Tax”), then the Company shall pay to the Executive an additional amount (the
“Gross-Up Amount”) such that the net benefits retained by the Executive after
      the deduction of the Excise Tax (including interest and penalties) and any
      federal, state or local income and employment taxes (including interest and
      penalties) upon the Gross-Up Amount shall be substantially equal to the benefits
      that would have been delivered hereunder had the Excise Tax not been applicable
      and the Gross-Up Amount not been paid.

     

    (ii) For
      purposes of determining the Gross-Up Amount, the Executive shall be deemed
      to pay federal, state and local income taxes at the highest marginal rate of
      taxation for the Executive’s taxable year in which the Parachute Payments are
      includable in the Executive’s income for purposes of federal, state and local
      income taxation.

     

    (iii) The
      determination of whether the Excise Tax is payable, the amount thereof, and
      the
      amount of any Gross-Up Amount shall be made in writing in good faith by a
      nationally recognized independent certified public accounting firm selected by
      the Company and approved by the Executive, such approval not to be unreasonably
      withheld (the “Accounting Firm”). If such determination is not finally accepted
      by the Internal Revenue Service (or state or local revenue authorities) on
      audit, then appropriate adjustments shall be computed based upon the amount
      of
      Excise Tax and any interest or penalties so determined; provided, however,
      that
      the Executive in no event shall owe the Company any interest on any portion
      of
      the Gross-Up Amount that is returned to the Company. For purposes of making
      the
      calculations required by this Section 7(d)(iii), to the extent not otherwise
      specified herein, reasonable assumptions and approximations may be made with
      respect to applicable taxes and reasonable, good faith interpretations of the
      Code may be relied upon. The Company and the Executive shall furnish such
      information and documents as may be reasonably requested in connection with
      the
      performance of the calculations under this Section 7(d)(iii). The Company shall
      bear all costs incurred in connection with the performance of the calculations
      contemplated by this Section 7(d)(iii). The Company shall pay the Gross-Up
      Amount to the Executive no later than sixty (60) days following receipt of
      the
      Accounting Firm’s determination of the Gross-Up Amount.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (e) Definitions.
      For
      purposes of this Agreement, the following definitions shall apply:

     

    (i) “Beneficial
      Ownership,” “Beneficially Owned” and “Beneficially Owns” shall have the meanings
      provided in Exchange Act Rule 13d-3;

     

    (ii) “Exchange
      Act” shall mean the Securities Exchange Act of 1934, as amended;

     

    (iii) “Person”
      shall mean any individual, entity or group (within the meaning of Section
      13(d)(3) or 14(d)(2) of the Exchange Act), including any natural person,
      corporation, trust, association, company, partnership, joint venture, limited
      liability company, legal entity of any kind, government, or political
      subdivision, agency or instrumentality of a government, as well as two or more
      Persons acting as a partnership, limited partnership, syndicate or other group
      for the purpose of acquiring, holding or disposing of the Company’s securities;
      and

     

    (iv) “Qualified
      Affiliate” shall mean (i) any directly or indirectly wholly owned subsidiary of
      the Company, (ii) any employee benefit plan (or related trust) sponsored or
      maintained by the Company or by any entity controlled by the Company, or (iii)
      any Person controlled by the Executive or one or more individuals who are then
      the Company’s Chief Executive Officer or any other named executive officer (as
      defined in Item 402 of Regulation S-K under the Securities Act of 1933) of
      the
      Company as indicated in its most recent securities filing made before the date
      of the transaction. For purposes of this definition, “controlled by”
shall
      mean having possession, directly or indirectly, of the power to direct or cause
      the direction of the management and policies of a Person, whether through the
      ownership of voting securities, by contract or otherwise.

     

    8. Confidentiality.

     

    (a) Definition
      of Proprietary Information.
      The
      Executive acknowledges that he may be furnished or may otherwise receive or
      have
      access to confidential information which relates to the Company’s past, present
      or future business activities, strategies, services or products, research and
      development; financial analysis and data; improvements, inventions, processes,
      techniques, designs or other technical data; profit margins and other financial
      information; fee arrangements; terms and contents of loans, leases, asset
      management agreements and other contracts; borrower, tenant and vendor lists
      or
      other compilations for marketing or development; confidential personnel and
      payroll information; or other information regarding administrative, management,
      financial, marketing, lending, leasing or sales activities of the Company,
      or of
      a third party which provided proprietary information to the Company on a
      confidential basis. All such information, including any materials or documents
      containing such information, shall be considered by the Company and the
      Executive as proprietary and confidential (the “Proprietary
      Information”).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (b) Exclusions.
      Notwithstanding the foregoing, Proprietary Information shall not include
      information in the public domain not as a result of a breach of any duty by
      the
      Executive or any other person.

     

    (c) Obligations.
      Both
      during and after the Employment Period, the Executive agrees to preserve and
      protect the confidentiality of the Proprietary Information and all physical
      forms thereof, whether disclosed to him before this Agreement is signed or
      afterward. In addition, both during and after the Employment Period, the
      Executive shall not (i) disclose or disseminate the Proprietary Information
      to
      any third party, including employees of the Company (or their affiliates)
      without a legitimate business need to know, (ii) remove the Proprietary
      Information from the Company’s premises without a valid business purpose, or
      (iii) use the Proprietary Information for his own benefit or for the benefit
      of
      any third party.

     

    (d) Return
      of Proprietary Information.
      The
      Executive acknowledges and agrees that all the Proprietary Information used
      or
      generated during the course of working for the Company is the property of the
      Company. The Executive agrees to deliver to the Company all documents and other
      tangibles (including diskettes and other storage media) containing the
      Proprietary Information at any time upon request by the Board of Directors
      during his employment and immediately upon termination of his
      employment.

     

    9. Non-Competition.

     

    (a) Restriction
      on Competition.
      During
      the Employment Period and for twelve (12) months thereafter or following the
      Date of Termination (the “Restricted Period”), the Executive agrees not to
      engage, directly or indirectly, as an owner, director, trustee, manager, member,
      employee, consultant, partner, principal, agent, representative, stockholder,
      or
      in any other individual, corporate or representative capacity, in any of the
      following: (i) any public or private specialty finance company focused on
      financing and investing in net leased commercial real estate or (ii) any
      other business that is substantially similar to the business of the Company
      during the Employment Period. Notwithstanding the foregoing, the Executive
      shall
      not be deemed to have violated this Section 9(a) solely by reason of his passive
      ownership of 1% or less of the outstanding stock of any publicly traded
      corporation or other entity.

     

    (b) Non-Solicitation
      of Clients.
      During
      the Restricted Period, the Executive agrees not to solicit, directly or
      indirectly, on his own behalf or on behalf of any other Person, any client
      of
      the Company to whom the Company had provided services at any time during the
      Executive’s employment with the Company in any line of business that the Company
      conducts as of the termination of such Executive’s employment or that the
      Company is actively soliciting, for the purpose of marketing or providing any
      service competitive with any service then offered by the Company. In addition,
      during the Restricted Period, the Executive agrees not to encourage any client
      of the Company as of the termination of such Executive’s employment to reduce
      its patronage to the Company.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (c) Non-Solicitation
      of Employees.
      During
      the Restricted Period, the Executive agrees that he will not, directly or
      indirectly, hire or attempt to hire or cause any Person, other than an affiliate
      of the Company, to hire any person who is then or was at any time during the
      preceding six (6) months an employee of the Company.

     

    (d) Acknowledgement.
      The
      Executive acknowledges that he will acquire much Proprietary Information
      concerning the past, present and future business of the Company as the result
      of
      his employment, as well as access to the relationships between the Company
      and
      its clients and employees. The Executive further acknowledges that the business
      of the Company is very competitive and that competition by him in that business
      during his employment, or after his employment terminates, would severely injure
      the Company. The Executive understands and agrees that the restrictions
      contained in this Section 9 are reasonable and are required for the Company’s
      legitimate protection, and do not unduly limit his ability to earn a
      livelihood.

     

    (e) 
      Rights and Remedies upon Breach.
      The
      Executive acknowledges and agrees that any breach by him of any of the
      provisions of Sections 8 and 9 (the “Restrictive Covenants”) would result in
      irreparable injury and damage for which money damages would not provide an
      adequate remedy. Therefore, if the Executive breaches, or threatens to commit
      a
      breach of, any of the provisions of the Restrictive Covenants, the Company
      and
      its affiliates shall have the following rights and remedies, each of which
      rights and remedies shall be independent of the other and severally enforceable,
      and all of which rights and remedies shall be in addition to, and not in lieu
      of, any other rights and remedies available to the Company and its affiliates,
      under law or in equity (including, without limitation, the recovery of
      damages):

     

    (i) the
      right
      and remedy to have the Restrictive Covenants specifically enforced (without
      posting bond and without the need to prove damages) by any court of competent
      jurisdiction, including, without limitation, the right to an entry against
      the
      Executive of restraining orders and injunctions (preliminary, mandatory,
      temporary and permanent) against violations, threatened or actual, and whether
      or not then continuing, of such covenants; and

     

    (ii) the
      right
      and remedy to require the Executive to account for and pay over to the Company
      and its affiliates all compensation, profits, monies, accruals, increments
      or
      other benefits (collectively, “Benefits”) derived or received by him as the
      result of any transactions constituting a breach of the Restrictive Covenants,
      and the Executive shall account for and pay over such Benefits to the Company
      and, if applicable, its affected affiliates.

     

    (f) If
      any
      court or other decision-maker of competent jurisdiction determines that any
      of
      the Restrictive Covenants, or any part thereof, is unenforceable because of
      the
      duration, scope of activities or geographical scope of such provision, then,
      after such determination has become final and unappealable, the duration or
      scope of such provision, as the case may be, shall be reduced so that such
      provision becomes enforceable and, in its reduced form, such provision shall
      then be enforceable and shall be enforced.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    10. Executive
      Representation.
      The
      Executive represents and warrants to the Company that he is not now under any
      obligation of a contractual or other nature to any person, business or other
      entity which is inconsistent or in conflict with this Agreement or which would
      prevent him from performing his obligations under this Agreement.

     

     

    11. Continued
      Performance.
      Provisions of this Agreement shall survive any termination or expiration of
      this
      Agreement if so provided herein or if necessary or desirable fully to accomplish
      the purposes of such provisions, including, without limitation, the obligations
      of the Executive under the terms and conditions of Sections 8 and 9. Any
      obligation of the Company to make payments to or on behalf of the Executive
      under Section 6 is expressly conditioned upon the Executive’s continued
      performance of the Executive’s obligations under Sections 8 and 9 for the time
      periods stated in Sections 8 and 9. The Executive recognizes that, except to
      the
      extent, if any, provided in Section 6, the Executive will earn no compensation
      from the Company after the Date of Termination or expiration of this
      Agreement.

     

     

    12. Arbitration.

     

    (a) Except
      as
      provided in Section 12(b), any disputes between the Company and the Executive
      in
      any way concerning the Executive’s employment, the termination of his
      employment, this Agreement or its enforcement shall be submitted at the
      initiative of either party to mandatory arbitration in New York, New York before
      a single arbitrator pursuant to the Commercial Arbitration Rules of the American
      Arbitration Association, or its successor, then in effect. All proceedings
      under
      this Section 12(a) shall be maintained in confidence by the Company and the
      Executive. The decision of the arbitrator shall be rendered in writing, shall
      be
      final, and may be entered as a judgment in any court in the State of New York.
      The parties irrevocably consent to the jurisdiction of the federal and state
      courts located in New York for this purpose. Each party shall be responsible
      for
      its or his own costs incurred in such arbitration and in enforcing any
      arbitration award, including attorneys’ fees and expenses.

     

    (b) Notwithstanding
      the foregoing, the Company, in its sole discretion, may bring an action in
      any
      court of competent jurisdiction to seek injunctive relief and such other relief
      as the Company shall elect to enforce the Restrictive Covenants. If the courts
      of any one or more of such jurisdictions hold the Restrictive Covenants wholly
      unenforceable by reason of breadth of scope or otherwise it is the intention
      of
      the Company and the Executive that such determination not bar or in any way
      affect the Company’s right, or the right of any of its affiliates, to the relief
      provided in Section 9(e) above in the courts of any other jurisdiction within
      the geographical scope of such Restrictive Covenants, as to breaches of such
      Restrictive Covenants in such other respective jurisdictions, such Restrictive
      Covenants as they relate to each jurisdiction being, for this purpose,
      severable, diverse and independent covenants, subject, where appropriate, to the
      doctrine of res
      judicata.
      The
      parties hereby agree to waive any right to a trial by jury for any and all
      disputes hereunder (whether or not relating to the Restrictive
      Covenants).

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    13. Consultation
      With Counsel.
      The
      Executive acknowledges that he has had a full and complete opportunity to
      consult with counsel or other advisers of his own choosing concerning the terms,
      enforceability and implications of this Agreement, and that the Company has
      not
      made any representations or warranties to the Executive concerning the terms,
      enforceability and implications of this Agreement other than as are reflected
      in
      this Agreement.

     

     

    14. Miscellaneous.

     

    (a) Notices.
      Any
      notice or other communication required, permitted, or desirable hereunder shall
      be hand delivered (including delivery by a commercial courier service) or sent
      by United States registered or certified mail, postage prepaid, addressed as
      follows:

     

    If
      to the
      Executive:

     

    Paul
      C.
      Hughes

    30
      West
      Street

    Apt.
      6G

    New
      York,
      NY 10004

    

    

    If
      to the
      Company:

     

    Capital
      Lease Funding, Inc.

    1065
      Avenue of the Americas

    New
      York,
      New York 10018

    Attention:
      Chair of the Compensation Committee

    

     

    or
      such
      other addresses as shall be furnished in writing by the parties. Any such notice
      or communication shall be deemed to have been given as of the date so delivered
      in person or three business days after so mailed.

     

    (b) Applicable
      Law.
      This
      Agreement shall be construed and interpreted according to the laws of the State
      of New York, without regard to the conflicts of law rules thereof.

     

    (c) Consumer
      Price Index.
      For
      purposes of this Agreement, the term “CPI” refers to the Consumer Price Index as
      published by the Bureau of Labor Statistics of the United States Department
      of
      Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical
      Workers (1982-1984=100). If the CPI is hereafter converted to a different
      standard reference base or otherwise revised, the determination of the CPI
      adjustment shall be made with the use of such conversion factor, formula or
      table for converting the CPI, as may be published by the Bureau of Labor
      Statistics, or, if the bureau shall no longer publish the same, then with the
      use of such conversion factor, formula or table as may be published by an agency
      of the United States, or failing such publication, by a nationally recognized
      publisher of similar statistical information.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (d) Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the Company’s
      successors and the Executive’s personal or legal representatives, executors,
      administrators, heirs, distributees, devisees and legatees. This Agreement
      shall
      not be assignable by the Executive, it being understood and agreed that this
      is
      a contract for the Executive’s personal services. This Agreement shall not be
      assignable by the Company except that the Company may assign it to a Qualified
      Affiliate. When assigned to a Qualified Affiliate, the assignee shall assume
      this Agreement and expressly agree to perform this Agreement in the same manner
      and to the same extent as the Company would be required to perform it in the
      absence of such an assignment. 

     

    (e) Construction;
      Headings.
      The
      language used in this Agreement shall be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rule of strict construction
      shall
      be applied against any party. The headings of sections of this Agreement are
      for
      convenience of reference only and shall not affect its meaning or construction.
      

     

    (f) Entire
      Agreement; Amendments.
      This
      Agreement sets forth the entire agreement and understanding of the parties
      with
      respect to the subject matter hereof, and there are no other contemporaneous
      written or oral agreements, undertakings, promises, warranties, or covenants
      not
      specifically referred to or contained herein. This Agreement specifically
      supersedes any and all prior agreements and understandings of the parties with
      respect to the subject matter hereof (including the letter agreement dated
      as of
      January 31, 2005 between the Company and the Executive), all of which prior
      agreements and understandings are hereby terminated and of no further force
      and
      effect. This Agreement may be amended, modified, or terminated only by a written
      instrument signed by the parties hereto.

     

    (g) Severability.
      If any
      provision, clause or part of this Agreement, or the applications thereof under
      certain circumstances, is held invalid or unenforceable for any reason, the
      remainder of this Agreement, or the application of such provision, clause or
      part under other circumstances, shall not be affected thereby.

     

    (h) Waivers.
      No
      delay or omission by either party hereto in exercising any right, power or
      privilege hereunder shall impair such right, power or privilege, nor shall
      any
      single or partial exercise of any such right, power or privilege preclude any
      further exercise thereof or the exercise of any other right, power or
      privilege.

     

    (i) Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      deemed an original but all of which together will constitute one and the same
      instrument.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties have executed this Agreement on the date and year first above
      written.

     

     

    
      	 	 	 
	 	Capital
              Lease
              Funding, Inc.
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              E. Gagliardi
	 	
              
Name:
              Michael E. Gagliardi
	 	Title:
              Chairman, Compensation Committee
	 	 
	 	 
	 	/s/ Paul C. Hughes 
	 	
              
                
Paul
                C. Hughes 

            

    

     

     

    
      
        
        

      

      14

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