Document:

Genesis Microchip Inc. Option Exchange Agreement

 Exhibit 10.25 
  
 GENESIS MICROCHIP INC. 
  
 OPTION EXCHANGE AGREEMENT 
  
 This Option Exchange Agreement (the “Agreement”) is being offered as of December 1, 2003 (the “Offering Date”) to Raphael Mehrbians
(the “Executive”) by Genesis Microchip Inc. (the “Company”). If accepted by the Executive, this Agreement will become effective at 5:00 p.m., Pacific Time, on the date that is twenty (20) Business Days (as defined below) after
the Offering Date (the “Effective Date”) unless the Executive withdraws his acceptance of this Agreement prior to the Effective Date. This Agreement must be accepted by the Executive prior to the Effective Date or shall be null and void
and shall have no further force and effect. 
  
 For purposes of
this Agreement, a “Business Day” shall mean any day other than any Saturday, Sunday or U.S. Holiday. 
  
 WHEREAS, the Company granted the Executive a stock option to purchase 50,000 shares of Company common stock on February 8, 2002 at an exercise
price of $44.07 (the “Old Option”) pursuant to the Company’s 1997 Employee Stock Option Plan (the “Plan”). 
  
 WHEREAS, the Old Option has an exercise price per share that is significantly higher than the current market price of the Company’s common
stock. The Company is offering the Executive the opportunity to exchange the Old Option for new options that will have an exercise price equal to the market value of the shares on the New Option Grant Date (as defined below) in order to provide the
Executive with the benefit of owning options that over time may have a greater potential to increase in value. The Company believes this will create better performance incentives for the Executive and, as a result, will maximize stockholder value.

  
 WHEREAS, the Executive and the Company both desire to
cancel the Old Option in its entirety in exchange for the Company’s commitment to grant the executive a new option at least six months plus one day after the Old Option is cancelled. 
  
 THEREFORE, The Executive and the Company agree as follows: 
  
 1. The Old Option shall be cancelled and disposed of to the Company
immediately following the Effective Date and following such cancellation, the Executive shall have no rights whatsoever with respect to the Old Option. 
  
 2. In exchange for the cancellation of the Old Option, the Company shall grant Executive a stock option to purchase sixteen thousand, six hundred and
sixty-seven (16,667) shares of common stock of the Company (the “New Option”) pursuant to the terms and conditions indicated herein. 
  
 3. The Executive shall receive the New Option on the first business day that is at least six (6) months and one (1) day from the date the Old Option is
cancelled (the “New Option Grant Date”); provided, however, that the Executive shall not be entitled to receive a New Option if the Executive is not an employee, director or consultant of the Company on the New Option Grant Date.

 4. The New Option shall be subject to the terms and conditions of the 1997 Employee Stock Option Plan and
a stock option agreement between the Company and the Executive in substantially the form attached hereto as Exhibit A. 
  
 5. The New Option shall be an incentive stock option to the maximum extent permitted by law. 
  
 6. The New Option shall have an exercise price per share equal to the fair market value of the Company’s common stock
on the New Option Grant Date, based on the closing price reported by the Nasdaq National Market for our common stock on the New Option Grant Date. The Executive understands and acknowledges that the exercise price of his New Option may be higher or
lower than the exercise price of the Old Option. 
  
 7. The New
Option shall vest in accordance with the following schedule, subject to the Executive’s continued employment or service with the Company on each relevant vesting date: On the date your new option is granted, you will be 56.25% vested in your
new option. The remainder of your option will vest in equal monthly installments over the 21 months following the date of option grant, provided you remain a service provider to the Company on each relevant vesting date. 
  
 8. The Company agrees that any successor to the Company shall be bound by
this Agreement. 
  
 9. The Executive acknowledges that by
accepting and not withdrawing his acceptance to this Agreement, he shall not be eligible to receive any stock option to purchase Company common stock prior to the New Option Grant Date. 
  
 10. The Executive acknowledges that he has had the opportunity to consult counsel and his tax advisors prior to entering
into this Agreement. The Executive further acknowledges that he has read and understands the summary of material U.S. federal income tax consequences related to the Agreement, which is attached hereto as Exhibit B. 
  
 11. The Executive acknowledges that he is aware of the Company’s
business affairs and financial condition, including the risks related to the Company’s business as set forth in the Company’s filings with the Securities and Exchange Commission on Form 10-Q and Form 10-K, and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to enter into this Agreement. 
  
 12. The Executive acknowledges and agrees that this Agreement does not affect the “at-will” nature of his employment with the Company and that
his employment with the Company can be terminated by the Executive or the Company at any time, with or without cause or notice. 
  
 13. The Executive understands and acknowledges that if he does not, for any reason, remain an employee of or service provider to the Company on the New
Option Grant Date, Executive will not receive a New Option nor will Executive receive any consideration for the Old Option he elected to have canceled pursuant to this Agreement. 
  
 14. The Executive may withdrawal his consent to this Agreement at any time before the Effective Date by hand delivering a
copy of this Agreement with the “Withdrawal” section, below, properly filled out and executed to Ken Murray. Such a withdrawal will only be effective upon Ken Murray’s receipt of the withdrawal. 
  
 15. This Agreement and the Plan represent the entire agreement and
understanding between the parties as to the subject matter hereof and supersede all prior or contemporaneous agreements, whether 
  

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 written or oral. No waiver, alteration or modification of any of the provisions of this Agreement shall be binding,
unless in writing and signed by duly authorized representatives of the parties hereto. 
  
 IN WITNESS WHEREOF, this Agreement is entered into as of the date set forth below. 
  

			
	 GENESIS MICROCHIP INC.

		
	By:	 	/s/    Ken Murray        
	 	 	

		
	 Its:
	 	VP HR
	 	 	

  

	
	 ACCEPTED BY EXECUTIVE:

	
	/s/    Raphael Merhbians        
	

	 Raphael Merhbians

  

			
	 
		
	DATE:	 	12/17/03
	 	 	

  
  
 WITHDRAWAL OF ACCEPTANCE 
  
 Do Not Execute Unless You Wish to Withdraw Your Acceptance to the Agreement 
  
 I, Raphael Mehrbians, wish to withdraw my acceptance to the Option Exchange Agreement, which I originally accepted on
            . I understand that if Ken Murray at the Company receives this withdrawal after the Effective Date, this withdrawal will have no effect and I will be bound by my acceptance of
the Option Exchange Agreement. 
  
 WITHDRAWAL OF ACCEPTANCE BY: 
  

	
	EXECUTIVE
	
	 
	

	 Raphael Mehrbians

  

			
		
	DATE:	 	 
	 	 	

  
  
 RECEIVED BY GENESIS MICROCHIP:
                                        
            , Its:
                                        
                     
  

			
		
	DATE:	 	 
	 	 	

  

 3 

 EXHIBIT A 
  

(Attached 1997 Stock Option Plan) 
  
  

 4 

 EXHIBIT B 
  

SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES 
  

The following is a general summary of the material U.S. federal income tax consequences of the exchange of options pursuant to the Agreement. This
discussion is based on the U.S. Internal Revenue Code, its legislative history, treasury regulations thereunder and administrative and judicial interpretations as of the date of the offer, all of which are subject to change, possibly on a
retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. If you are a
resident of the United States, but are also subject to the tax laws of another country, you should be aware that there might be other tax and social insurance consequences that may apply to you. We strongly recommend that you consult with your own
advisors to discuss the consequences to you of this transaction with respect to the federal, state and local tax consequences of the Agreement, as the tax consequences to you are dependent on your individual tax situation. 
  
 You should not be required to recognize income for federal income tax
purposes at the time of the exchange of your Old Option. We believe that the exchange will be treated as a non-taxable exchange. 
  
 Your New Option will be granted as an incentive stock option to the maximum extent allowable under the tax laws as in effect on the New Option Grant Date.
For options to qualify as incentive stock options under the current U.S. tax laws, the value of shares subject to options that first become exercisable by the option holder in any calendar year cannot exceed $100,000, as determined using the new
option exercise price. The excess value is deemed to be a nonstatutory stock option, which is an option that is not qualified to be an incentive stock option under the current U.S. tax laws. 
  
 Incentive Stock Options. 
  
 Under current law, you will not realize taxable income upon the grant of an
incentive stock option. In addition, you generally will not realize taxable income upon the exercise of an incentive stock option. However, your alternative minimum taxable income will be increased by the amount that the aggregate fair market value
of the shares underlying the New Option, which is generally determined as of the date of exercise, exceeds the aggregate exercise price of the option. Except in the case of your death or disability, if an option is exercised more than 3 months after
your termination of employment, the option ceases to be treated as an incentive stock option and is subject to taxation under the rules that apply to nonstatutory stock options. 
  
 If you sell the option shares acquired upon exercise of an incentive stock option, the tax consequences of the disposition
depend upon whether the disposition is qualifying or disqualifying. The disposition of the option shares is qualifying if it is made: 
  

	 	•	at least 2 years after the date the incentive stock option was granted, and 

  

	 	•	at least 1 year after the date the incentive stock option was exercised. 

  

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 If the disposition of the option shares is qualifying, any excess of the sale price of the option shares
over the exercise price of the option will be treated as long-term capital gain taxable to the option holder at the time of the sale. Any such capital gain will be taxed at the long-term capital gain rate in effect at the time of sale. If the
disposition is not qualifying, which we refer to as a “disqualifying disposition,” the excess of the fair market value of the option shares on the date the New Option was exercised over the exercise price will be taxable income to you at
the time of the disposition. 
  
 Of that income, the amount up to
the excess of the fair market value of the shares at the time the New Option was exercised over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long-term or short-term capital gain, depending upon
whether or not the shares were sold more than 1 year after the New Option was exercised. 
  
 Unless you engage in a disqualifying disposition, the Company will not be entitled to a deduction with respect to an incentive stock option. If you engage in a disqualifying disposition, we will be entitled to a
deduction equal to the amount of compensation income taxable to you. 
  
 Nonstatutory Stock Options. 
  
 Under
current law, you will not realize taxable income upon the grant of a nonstatutory stock option. However, when you exercise the option, the difference between the exercise price of the New Option, and the fair market value of the shares subject to
the New Option on the date of exercise will be compensation income taxable to you. 
  
 The Company will be entitled to a deduction equal to the amount of compensation income taxable to the option holder if we comply with eligible reporting requirements. 
  
 We recommend that you consult your own tax advisor with respect to the
federal, state and local tax consequences of accepting the Agreement. 
  

 6Third Amendment to Purchase and Sale Agreement

 EXHIBIT 10.7 
  
 THIRD AMENDMENT 
  
 This Third Amendment, dated as of December 31, 2003 (this “Amendment”), is by and among Bank of America, N.A., a national banking
association (“Bank” or “Grantor”); Capital Lease Funding, LLC, a Delaware limited liability company that is the successor-in-interest to Capital Lease Funding, L.P. (“CLF” or
“Buyer”); and CLFC HPII Inc., a Delaware corporation (“CLFC”). 
  
 RECITALS 
  
 A. The parties to this Amendment are parties to that certain Purchase and Sale Agreement, dated as of January 31, 2000, as amended by that certain Amendment, dated as of April 30, 2002, by and among the parties hereto, and that certain
Second Amendment, dated as of February 28, 2003, by and among the parties hereto (as so amended, the “P&S Agreement”). Capitalized terms used but not defined herein have the meanings assigned in the P&S Agreement.

  
 B. Certain of the parties hereto are party to (i) that certain
Call Option Agreement, dated as of January 31, 2000, as amended by that certain Amendment, dated as of April 30, 2002, by and among the parties hereto, and that certain Second Amendment dated as of February 28, 2003, by and among the parties hereto
(as so amended, the “Option Agreement”), (ii) that certain Security Agreement dated as of January 31, 2000, as amended by that certain Amendment, dated as of April 30, 2002, by and among the parties hereto, and that certain Second
Amendment dated as of February 28, 2003, by and among the parties hereto (as so amended, the “Security Agreement”), and (iii) that certain Loan Contribution Agreement dated as of January 31, 2000, as amended by that certain
Amendment, dated as of April 30, 2002, by and among the parties hereto, and that certain Second Amendment dated as of February 28, 2003, by and among the parties hereto (as so amended, the “LC Agreement”). 
  
 C. The parties hereto and CLF Holdings, Inc. are parties to that certain
Assignment, Assumption and Consent Agreement dated as of November 15, 2001 (the “Consent Agreement”), pursuant to which (i) CLF succeeded to the rights and interests of Capital Lease Funding, L.P. under the P&S Agreement, the
Option Agreement and other related agreements, instruments and documents and (ii) the P&S Agreement was amended. 
  
 D. CLF has asked that the Bank amend certain provisions of the P&S Agreement and the Option Agreement and the Bank has agreed to do so, subject to the
terms and conditions set forth herein. 
  

 AMENDMENT 
  

Now, Therefore, in consideration of the foregoing and for other consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
agree as follows: 
  
 1. Amendment of Purchase & Sale
Agreement. The P&S Agreement is hereby amended as follows: 
  
 (a) Amendment of Section 1. Section 1 of the P&S Agreement is hereby amended as follows: 
  
 (i) Section 1 of the P&S Agreement is hereby amended by adding or by amending and restating, as appropriate, the following
definitions: 
  
 “Ceiling” has the meaning
assigned in Section 3 hereof. 
  
 “Conversion”
means the conversion of CLF from a Delaware limited liability company to a Delaware limited partnership after the date hereof. 
  
 “Converted Entity” means the Delaware limited partnership that shall be the successor to CLF. 
  
 “Extension Fee” means a fee payable by CLF to Bank in an
amount equal to the product of (x) 15 basis points (0.0015) times (y) the Ceiling in effect as of the date on which the term of the Facility shall be extended. 
  

“Termination Date” means March 1, 2005. Notwithstanding the foregoing, the Termination Date may be extended, at the request of CLF
and at Bank’s reasonable discretion, to March 1, 2006, if, as of March 1, 2005, (i) the Ceiling Conditions are satisfied, (ii) Bank shall have received from CLF an Extension Fee and (iii) Bank has not terminated the Facility pursuant to Section
20 of this Agreement. 
  
 (ii) Section 1 of the
P&S Agreement is hereby further amended by deleting the definition of “CLF Change Event” and all references thereto. 
  

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 (b) Amendment of Section 4. Section 4 of the P&S Agreement is hereby amended
and restated as follows: 
  
 4. Termination of
Facility. The Facility shall terminate on March 1, 2005 or upon termination pursuant to Section 20 of this Agreement; provided, however, that the Facility may be extended at the timely request of CLF and at Bank’s reasonable
discretion to March 1, 2006, if, as of March 1, 2005: (i) the Ceiling Conditions are satisfied; (ii) Bank shall have received from CLF an Extension Fee; and (iii) Bank has not terminated the Facility pursuant to Section 20 of this Agreement.

  
 (c) Amendment of Section 5(c). Section
5(c) of the P&S Agreement is hereby amended and restated as follows: 
  
 (c) Representations and Warranties. Upon a sale of a Commercial Mortgage Loan, CLF shall make customary representations and warranties with respect to CLF’s good standing under the laws of the State of
Delaware as a limited liability company or, on and after the Conversion, as a limited partnership, and with respect to its legal ability to assign and convey to Bank all of CLF’s rights, title and interests in and to such Commercial Mortgage
Loan. If Bank discovers that any of these representations or warranties shall have been incorrect at the time of Bank’s purchase from CLF of a Commercial Mortgage Loan, and if Bank notifies CLF of such error or nonconformity within ten (10)
Business Days after receipt (actual or constructive) of the Mortgage File or discovery of the error or nonconformity, whichever occurs later, then CLF promptly shall repurchase from Bank such Commercial Mortgage Loan by remitting, in good funds, the
Purchase Price paid by Bank for such Commercial Mortgage Loan. 
  
 (d) Amendment of Section 11. Section 11 of the P&S Agreement is hereby amended by adding the following sentence at the end of the existing Section 11: 
  
 Upon Bank’s request following the Conversion, Bank, CLF and CLFC shall
execute and deliver an amendment to the Custody Agreement making the Converted Entity a party thereto. 
  

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 (e) Amendment to Section 12. Section 12 of the P&S Agreement is hereby amended
by adding the following sentence at the end of the existing Section 12: 
  
 Upon the Bank’s request following the Conversion, Bank, CLF and CLFC shall execute and deliver an amendment to the Servicing Agreement making the Converted Entity a party thereto. 
  
 (f) Amendment of Section 21(b). Section 21(b) of the
P&S Agreement is hereby amended and restated in its entirety by the following: 
  
 (b) Additional Representations and Warranties of CLF. CLF represents and warrants to Bank that: (i) CLF is duly formed and in good
standing under the laws of the State of Delaware as a limited liability company and that, on and after the Conversion, CLF shall be duly formed and in good standing under the laws of the State of Delaware as a limited partnership; and (ii) CLF is
not insolvent. Without limiting the foregoing, CLF further represents and warrants that, as of the date of any sale of a Commercial Mortgage Loan to Bank, that: (i) CLF shall own such Commercial Mortgage Loan free and clear of any lien, security
interest, claim, encumbrance, or tax (other than those taxes that may have accrued but for which payment is not yet due under applicable law); (ii) CLF shall have taken all actions necessary under its limited liability company operating agreement
or, on and after the Conversion, limited partnership agreement to authorize the sale of such Commercial Mortgage Loan to Bank; (iii) CLF’s assignment of such Commercial Mortgage Loan to Bank will not violate any statute, regulation or other law
applicable to CLF; (iv) CLF’s sale of such Commercial Mortgage Loan to Bank will not violate any contract, agreement or order to which CLF is subject; (v) CLF’s assignment of such Commercial Mortgage Loan to Bank will constitute a legal,
valid and binding obligation of CLF; (vi) CLF shall not be insolvent or otherwise unable to pay its obligations as and when such obligations become due; (vii) upon the assignment of such Commercial Mortgage Loan to Bank, Bank shall accrue to and
have all rights, privileges and powers previously held by CLF under the documents and instruments evidencing such Commercial Mortgage Loan; (viii) such Commercial Mortgage Loan shall be a valid and binding commitment and obligation of the Mortgagor
thereunder, enforceable against the Mortgaged Property thereunder; and (ix) CLF shall have, immediately prior to such sale, a valid, perfected, first-priority security interest or lien in or on the Mortgaged 

  

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Property and other collateral with respect to such Commercial Mortgage Loan. 
  
 (g) Amendment of Section 24. Section 24 of the P&S Agreement is hereby amended by deleting the
existing notice address for Bank’s counsel and restating the notice address for Bank’s counsel as follows: 
  

	 	With a copy to:	Mr. Bradley E. Pearce 
Katten Muchin Zavis Rosenman 
401 S. Tryon Street, Suite 2600 
Charlotte, NC 28202-1935 
Telecopy: (704) 344-3071 

  
 (h) Amendment of Section 22. Section 22 of the P&S
Agreement is hereby amended and restated in its entirety as follows: 
  
 22. Covenants of CLF. CLF covenants that, at all times after the date hereof, it will: (i) forward to Bank, within two (2) Business Days of receipt, any and all notices, invoices, bills, statements, assessments
or other documents relating to or affecting any Purchased Mortgage Loan or any Mortgaged Property securing any Purchased Mortgage Loan; (ii) not take any action that could result in, or have a reasonably foreseeable result of causing or allowing the
occurrence of, a material adverse impact upon the enforceability of the instruments or documents evidencing a Purchased Mortgage Loan against the applicable Mortgagor or Mortgaged Property in respect of, or of Bank’s rights, interests in and
to, each Purchased Mortgage Loan; (iii) not make or issue any statement, or fail to correct any known misunderstanding, regarding the transfer and assignment to Bank of CLF’s rights, title and interest in and to any Purchased Mortgage Loan;
(iv) have at least One Million Dollars ($1,000,000.00) cash on hand; (v) maintain minimum equity of at least Twenty Million Dollars ($20,000,000.00), or eight percent (8%) of its assets (determined as if the sale to Bank of Purchased Mortgage Loans
were not a true sale under the provisions of SFAS 125), whichever is greater; (vi) not take any action, or fail to take any action, that could result in CLF or Bank losing a valid and enforceable, perfected first-priority security interest in, or
lien on, any Mortgaged Property or other collateral relating to any Purchased Mortgage Loan; (vii) take all reasonable actions after the execution and delivery of this Agreement to ensure that the lien on or security interest in the Mortgaged
Property and other collateral securing each Purchased Mortgage Loan at all times shall be a valid and enforceable, perfected first-priority security interest in or lien on such 
  
  

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Mortgaged Property and other collateral related to such Purchased Mortgage Loan; (viii) take, at Bank’s request, such actions as may be necessary or
reasonable to ensure that Bank shall have, and at all times shall continue to have, a valid and enforceable, perfected first-priority security interest in or lien on each Purchased Mortgage Loan; (ix) submit all Reports to Bank on at least a
bi-weekly basis; (x) provide Bank with financial reports, on at least a monthly basis, within thirty (30) days after the end of the immediately preceding reporting period; and (xi) provide Bank with copies of all filings made by CLF with the United
States Securities and Exchange Commission within ten (10) Business Days of such filing. 
  
 (i) Amendment of Section 25(h). Section 25(h) of the P&S Agreement is hereby amended by substituting the phrase “Sections
16 and 22” for, and in replacement of, the phrase “Section 16.” 
  
 (j) Amendment of Section 25. Section 25 of the P&S Agreement is hereby amended by inserting the new subsection 25(k), as
follows: 
  

			
	 (k)    Effect of Conversion. The Conversion of CLF to a Delaware limited partnership shall result in
all references in this Agreement to “CLF” to be deemed to include reference to, and mean, the Converted Entity.

  
 2. Amendment of
Option Agreement. The Option Agreement is hereby amended as follows: 
  
 (a) Amendment of Section 2. Section 2 of the Option Agreement is hereby amended as follows: 
  
 (i) Amendment of Section 2(d). Section 2(d) of the Option Agreement is hereby amended by replacing the phrase “subject to the
provisions of this Section 2(d)” with the phase “subject to the provisions of this Section 2(d) and of Section 2(i), below” in the first sentence of Section 2(d). 
  
 (ii) Amendment of Section 2(f). Section 2(f) of the Option Agreement is hereby amended by inserting
the phrase “and any other amounts that may be due under Section 2(h) hereof” immediately after the phrase “and/or Option Premium Adjustment Amount(s)” in the first sentence of Section 2(f). 
  
  

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 (iii) Amendment of Section 2(h). Section 2(h) of the Option Agreement is hereby
amended and restated in its entirety by the following: 
  

	 	(h)	Termination of Call Option Rights. On the Expiration Date, (i) the Call Option shall expire without notice or demand from Grantor and (ii) Buyer’s purchase rights for
all Pool Assets shall terminate without notice. Upon any Securitization or any sale or transfer to a third party of Pool Assets by Grantor, Grantor shall remit the Disposition Surplus to Buyer. Before any such Securitization or sale, Grantor shall:
(a) notify Buyer of the terms of such Securitization or other disposition of Pool Assets; and (b) accept any Qualifying Offer tendered by Buyer for the purchase of the Pool Assets, provided that such offer must be tendered to Grantor prior to the
earlier of: (i) the date on which Grantor has entered into a binding agreement with a third party with respect to the Securitization or other disposition of Pool Assets; (ii) the date on which any securities that may be backed in whole or in part by
Pool Assets have been “circled”; or (iii) ten Business Days after the date on which Grantor gives Buyer notice that Buyer may exercise its right of first refusal set forth herein. As used herein, the term “Qualifying Offer” means
any offer by Buyer for the purchase of all Pool Assets for an amount, payable no later than the 30th day following
the date of such offer, equal to or greater than the sum of (x) the Exercise Price for all Pool Assets and (y) Grantor’s out-of-pocket costs and expenses (including its actual attorneys’ fees and expenses) incurred in connection with the
Securitization or other disposition of Pool Assets and in connection with the review, acceptance and consummation of a transaction with Buyer pursuant to such offer by Buyer. 

  
 (iv) Further Amendment of Section 2. Section 2 of the
Option Agreement is further amended by inserting the following new subsection (i), as follows: 
  

	 	(i)	Termination of Right of Substitution. Grantor’s right of substitution under Section 2(d) of this Agreement shall terminate upon the issuance by CLF (or any entity
acquiring all of CLF’s membership interests), to one or more unaffiliated persons or entities, of equity securities that are 

  

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 required to be registered under, and that require CLF (or such other entity) to comply
with the filing and periodic reporting requirements of, the Securities Act of 1933, as amended from time to time (15 U.S.C. § 77a et seq.) (the “Offering”). 
  
 (b) Amendment of Section 6. Section 6 of the Option Agreement is hereby amended and restated in its
entirety by the following: 
  
 6. Option
Rights of CLFC. If an Event of Default occurs, Grantor shall promptly notify CLFC of such Event of Default and CLFC, by timely tendering a Qualifying Offer to Grantor, may purchase all Pool Assets under the terms of Section 2(h) hereof to the
same extent as if all references to “Buyer” in Sections 2(h), 3(c) and 8 hereof were references to “CLFC.” 
  
 (c) Amendment of Section 10. Section 10 of the Option Agreement is hereby amended by deleting the existing notice address for
Bank’s counsel and restating the notice address for Bank’s counsel as follows: 
  

	 	With a copy to:	Mr. Bradley E. Pearce 
Katten Muchin Zavis Rosenman 
401 S. Tryon Street, Suite 2600 
Charlotte, NC 28202-1935 
Telecopy: (704) 344-3071 

  
 (d) Amendment of Section 17. Section 17 of the Option
Agreement is hereby amended by inserting the new following subsection 17(f), as follows: 
  

	 	(f)	Effect of Conversion. The Conversion of CLF to a Delaware limited partnership shall result in all references in this Agreement to “Buyer” to be deemed to include
reference to, and mean, the Converted Entity. 

  
 3. Amendment of Security Agreement. The Security Agreement is hereby amended by inserting the new Section 15, as follows: 
  
 15. Effect of Conversion. The Conversion of CLF to a Delaware limited partnership shall result in all references in this Agreement
to “CLF” to be deemed to include reference to, and mean, the Converted Entity. 
  

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 4. Amendment of LC Agreement. The LC Agreement is hereby amended by inserting the following new
Section 6.3 to the LC Agreement, as follows: 
  
 6.3 Effect of Conversion. The Conversion of CLF to a Delaware limited partnership shall result in all references in this Agreement to “CLF” to be deemed to be references to, and mean, the Converted Entity. 
  
 5. Acknowledgement and Agreement. Bank and CLFC each hereby
acknowledges and agrees that each reference to “CLF” in the P&S Agreement, the Security Agreement and the LC Agreement and each reference to “Buyer” in the Option Agreement shall be deemed to be references only to Capital
Lease Funding, LLC, a Delaware limited liability company (“CLF, LLC”), and not its predecessor-in-interest Capital Lease Funding, L.P., a Delaware limited partnership. Bank further acknowledges and agrees that (a) the Offering (as
defined in Section 2(a)(iv) hereof) and (b) the conversion of CLF, LLC from a Delaware limited liability company to a Delaware limited partnership shall not constitute Events of Default under the P&S Agreement, the Option Agreement or the
Security Agreement. 
  
 6. Effect of Amendment. Except as
expressly amended by the provisions of Sections 1 through 4 hereof, and subject to the foregoing Section 5, none of the Option Agreement, the P&S Agreement, the Security Agreement or the LC Agreement is, nor shall any of the foregoing be deemed
to be, modified or amended in any way by the execution and delivery of this Amendment or any other agreement, document or instrument executed in connection herewith. Each reference in the P&S Agreement, the Option Agreement, the Security
Agreement and the LC Agreement to the term “this Agreement” shall be deemed to mean “this Agreement, as amended from time-to-time.” 
  
 7. Representations and Warranties. The parties hereby represent and warrant as follows: 
  
 (a) Mutual Representations and Warranties. Each of the
parties hereto represents and warrants that: (i) it has full power and authority, and has taken all action necessary to execute and deliver this Amendment, and all documents required to be executed and delivered by it hereunder, and to fulfill its
obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby; (ii) the making and performance by it of this Amendment, and all documents required to be executed by it hereunder, and to fulfill its
obligations hereunder and thereunder, does not and will not violate any law or regulation of the jurisdiction under which it exists, any other law or regulation applicable to it or any other agreement to which it is a party or by which it is bound;
(iii) this Amendment has been duly executed and delivered by it and constitutes its legal, valid and binding obligations, enforceable in accordance with the respective terms hereunder (except as enforceability may be limited or otherwise affected by
applicable insolvency laws or equitable principles); (iv) it has no knowledge or notice of any fact or condition that limits or that may limit the validity or enforceability of this Amendment on equitable grounds; and (v) all approvals,
authorizations or other actions by, or filings with, any governmental authority necessary for the validity or enforceability of its obligations under this 
  

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 Amendment, and all documents required to be executed and delivered by it hereunder have been obtained.

  
 (b) CLF Representations and
Warranties. CLF represents and warrants to Bank that CLF has at least $1,000,000.00 cash on hand and maintains a minimum equity of at least $20,000,000.00 or eight percent (8%) of its assets, determined as if the sale of Purchased Mortgage Loans
under the P & S Agreement were not a true sale under generally accepted accounting principles, whichever is greater; and has not taken any action, or failed to take any action, that resulted, or could have resulted, in Bank or CLF losing a
valid, perfected first priority security interest in or lien on any mortgaged property or other collateral relating to any Purchased Mortgage Loan. 
  
 8. Covenants of CLF. CLF covenants to Bank that: (i) CLF shall not take any action or make any statement in connection with the Offering (as such
term is defined in Section 2(a)(iv) hereof) in derogation of Bank’s rights, title or interests in and to Purchased Mortgage Loans; (ii) no later than ten (10) Business Days before the conversion of CLF from a Delaware limited liability company
to a Delaware limited partnership (the “Converted Entity”), CLF shall give Bank and its counsel written notice of the legal name and address of the Converted Entity and of the legal name, state of incorporation, formation or
organization and address of the Converted Entity’s general partner; (iii) the Converted Entity shall be a “registered organization” (as such term is defined in Section 9-102(70) of the Uniform Commercial Code) formed under the laws of
the State of Delaware; and (iv) the issuance or sale of any security that may be issued in connection with the Offering shall not modify or impair any of Bank’s rights, title or interests in, to or under any Purchased Mortgage Loan or any
Mortgaged Property or other collateral securing any Purchased Mortgage Loan. 
  
 9. Conditions. This Amendment shall not be valid and binding against Bank unless each of the following conditions are satisfied: 
  
 (a) Condition Precedent. This Amendment shall not be effective until CLF shall have delivered to the
Bank any due and owing Option Premium Adjustment Amount. 
  
 (b) Condition Subsequent. Prior to the effectiveness of this Amendment against Bank, notwithstanding Bank’s prior execution and delivery hereof, within ten (10) days after written demand, CLF shall
reimburse Bank for its reasonable out-of-pocket fees and expenses, including the fees and expenses of counsel, incurred in connection with the review, negotiation, execution and delivery of this Amendment and any other documents, agreements or
instruments that may be reviewed, executed, delivered or filed in connection this Amendment. 
  

 -10- 

 10. Miscellaneous. The following provisions shall apply to this Amendment: 
  
 (a) Binding Effect and Benefit. This Amendment shall
be binding upon, enforceable by, and inure to the benefit of, the parties hereto and their respective successors and assigns. 
  
 (b) Survival. The representations, warranties, covenants, agreements and indemnities contained herein shall survive the execution,
delivery and performance of this Amendment and all documents to be executed in connection herewith. 
  
 (c) Complete Agreement; Amendments. This Amendment constitutes the full and final agreement among the parties hereto with respect
to the matters set forth herein; there are no prior or contemporaneous agreements with respect to the subject matter hereof that shall survive execution and delivery of this Amendment. Any amendments to, or waivers of, this Amendment shall be in
writing and signed by each of the parties hereto. 
  
 (d) Choice of Law; Jurisdiction and Venue. This Amendment shall be interpreted under the laws of the State of North Carolina, without giving effect to the choice-of-law provisions thereof. Any action or proceeding relating in any
manner to this Amendment or the Call Option shall be heard by a court sitting in Mecklenburg County, North Carolina. The parties acknowledge that this Amendment, and the rights and obligations hereunder, bear a substantial relationship to the State
of North Carolina. 
  
 (e) Counterparts;
Delivery by Telecopy. This Amendment may be executed in one or more counterparts, each of which shall constitute an executed original hereof and which together shall constitute but one and the same instrument. Any party hereto may deliver an
executed counterpart of this Amendment by telecopy, which telecopy, when so received, shall be fully enforceable against the party delivering the executed original by telecopy and fully admissible in any action or proceeding to the same extent as if
it were the original executed instrument. Without limiting the foregoing, any party delivering an executed original of this Amendment by telecopy shall promptly deliver an executed original hereof to the other parties, without further notice or
demand. 
  
 (f) Hereof, Herein. Words used
in this Amendment such as “hereof,” “herein,” “herewith” and “hereto” indicate reference to this Amendment as a whole, and not to any particular section or clause of this Amendment. 
  
 [Remainder of Page Intentionally Left Blank] 
  

 -11- 

 IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date first above
written. 
  

					
	BANK OF AMERICA, N.A.
		
	By:	 	/s/    ROBERT HOWLETT

	 	 	Name: Robert Howlett
	 	 	Title: Principal

  

					
	CAPITAL LEASE FUNDING, LLC
		
	By:	 	/s/    PAUL MCDOWELL

	 	 	Name: Paul McDowell
	 	 	Title: Chief Executive Officer

  

					
	CLFC HPII INC.
		
	By:	 	/s/    ROBERT A. PERRO

	 	 	Name: Robert A. Perro
	 	 	Title: Vice President

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