Related Party Transactions and Outside Related Director Information

Capital Lease Funding, Inc. (LSE)

4/17/2006 Proxy Information

Hercules Transaction

As of December 31, 2005, one of our Board members, Jeffrey F. Rogatz, owned approximately 1.5% of the preferred equity of the owner of an office building in Wilmington, Delaware, net leased to Hercules Incorporated, and had the right to share in an incentive fee under certain circumstances upon a refinancing of the debt on the property or a sale of the property. Also as of December 31, 2005, we had invested $36.4 million to finance the owner's purchase of the building, including a $27.7 million mezzanine loan to the owner and a pari passu $8.7 million preferred equity investment in the owner. As required by our conflict of interest policy, the disinterested directors on our Board approved our investment in the property. Our Board also concluded that Mr. Rogatz's interest in the transaction does not preclude him from being independent.

Qwest Communications Assignment of Rents

Paul H. McDowell, our chief executive officer and a member of our Board, William R. Pollert, our president and a member of our Board, Shawn P. Seale, our senior vice president, chief financial officer and treasurer, and Robert C. Blanz, our senior vice president and chief investment officer, collectively own a 50% interest in a computer data center in the Sacramento, California area that is net leased to Qwest Communications. The group owns the data center through a limited partnership. In February 2001, we originated a net lease loan to the limited partnership in the amount of approximately $42 million. At that time, management's ownership interest in the limited partnership was 25%. In February 2001, we sold the loan to Wachovia Bank, and the limited partnership agreed to pay us an advisory fee from the rent payable by Qwest in the amount of approximately $66,000 a month until November 2010. An affiliate of the limited partnership is also a party to a management agreement with Qwest for the operation of the data center, and another affiliate of the limited partnership subleases a portion of the leased building from Qwest at a nominal amount. No failure to perform under the management agreement or sublease entitles Qwest to any rent abatement or termination under the lease.