10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 0-4408

RESOURCE AMERICA, INC.

(Exact name of registrant as specified in its charter)

Delaware	72-0654145
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
One Crescent Drive, Suite 203
Navy Yard Corporate Center
Philadelphia, PA	19112
(Address of principal executive offices)	(Zip code)

Registrant's telephone number, including area code: (215) 546-5005

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

The number of outstanding shares of the registrant’s common stock on May 1, 2007 was 17,609,191.

RESOURCE AMERICA, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

		PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets - March 31, 2007 (unaudited) and September 30, 2006	3
	Consolidated Statements of Income Three Months and Six Months Ended March 31, 2007 and 2006 (unaudited)	4
	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income − Six Months Ended March 31, 2007 (unaudited)	5
	Consolidated Statements of Cash Flows Six Months Ended March 31, 2007 and 2006 (unaudited)	6
	Notes to Consolidated Financial Statements - March 31, 2007 (unaudited)	7 - 25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 - 44
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	46
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 6.	Exhibits	47
SIGNATURES		48

PART I.FINANCIAL INFORMATION

Item 1.Financial Statements

RESOURCE AMERICA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	March 31, 2007			September 30, 2006
	(unaudited)
ASSETS
Cash	$	18,199		$	37,622
Restricted cash		17,072			8,103
Receivables		33,839			2,312
Receivables from managed entities		14,132			8,795
Investments in commercial finance		200,908			108,850
Loans held for investment		495,275			69,314
Investments in real estate		49,505			50,104
Investment securities available-for-sale		66,721			64,857
Investments in unconsolidated entities		32,383			26,626
Property and equipment, net		9,918			9,525
Deferred income taxes		8,470			6,408
Other assets		32,130			24,237
Total assets	$	978,552		$	416,753
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, accrued expenses and other liabilities	$	65,955		$	29,526
Payables to managed entities		875			1,579
Borrowings		692,441			172,238
Deferred income tax liabilities		8,207			10,746
Minority interests		8,782			9,602
Total liabilities		776,260			223,691
Commitments and contingencies		−			−
Stockholders’ equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding		-			-
Common stock, $.01 par value, 49,000,000 shares authorized; 26,702,748 and 26,401,708 shares issued, respectively		267			264
Additional paid-in capital		263,848			259,882
Retained earnings		33,009			25,464
Treasury stock, at cost; 9,095,244 and 9,110,290 shares, respectively		(96,799	)		(96,960	)
ESOP loan receivable		(453	)		(465	)
Accumulated other comprehensive income		2,420			4,877
Total stockholders’ equity		202,292			193,062
	$	978,552		$	416,753

See accompanying notes to consolidated financial statements

3

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
REVENUES
Financial fund management	$	16,030		$	5,814		$	28,417		$	13,293
Real estate		7,008			9,206			11,572			13,860
Commercial finance		8,564			5,517			15,653			10,598
		31,602			20,537			55,642			37,751
COSTS AND EXPENSES
Financial fund management		5,401			2,765			9,953			5,064
Real estate		3,195			2,714			6,208			4,979
Commercial finance		4,560			3,553			8,191			6,471
General and administrative		2,754			2,236			5,588			5,461
Depreciation and amortization		719			836			1,428			1,674
		16,629			12,104			31,368			23,649
OPERATING INCOME		14,973			8,433			24,274			14,102
OTHER INCOME (EXPENSE)
Interest expense		(7,694	)		(1,369	)		(12,285	)		(3,665	)
Minority interests		(715	)		(369	)		(1,275	)		(771	)
Other income, net		1,811			1,962			4,339			2,835
		(6,598	)		224			(9,221	)		(1,601	)
Income from continuingoperations before income taxes and cumulative effect of a change in accounting principle		8,375			8,657			15,053			12,501
Provision for income taxes		2,955			3,723			5,165			2,186
Income from continuing operations before cumulative effect of a change in accounting principle		5,420			4,934			9,888			10,315
(Loss) income from discontinued operations, net of tax		(37	)		152			(56	)		1,090
Cumulative effect of a change in accounting principle, net of tax		−			−			−			1,357
NET INCOME	$	5,383		$	5,086		$	9,832		$	12,762
Basic earnings per common share:
Continuing operations	$	0.31		$	0.28		$	0.57		$	0.57
Discontinued operations		−			0.01			−			0.06
Cumulative effect of accounting change		−			−			−			0.08
Net income	$	0.31		$	0.29		$	0.57		$	0.71
Weighted average shares outstanding		17,242			17,606			17,267			17,822
Diluted earnings per common share:
Continuing operations	$	0.29		$	0.26		$	0.52		$	0.53
Discontinued operations		−			0.01			−			0.06
Cumulative effect of accounting change		−			−			−			0.07
Net income	$	0.29		$	0.27		$	0.52		$	0.66
Weighted average shares outstanding		19,027			19,069			19,074			19,232
Dividends declared per common share	$	0.07		$	0.06		$	0.13		$	0.12

See accompanying notes to consolidated financial statements

4

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

SIX MONTHS ENDED MARCH 31, 2007

(in thousands)

(unaudited)

	Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			ESOP Loan Receivable			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Comprehensive Income
Balance, October 1, 2006	$	264	$	259,882	$	25,464		$	(96,960	)	$	(465	)	$	4,877		$	193,062
Net income		-		-		9,832			-			-			-			9,832		$	9,832
Treasury shares issued		-		301		-			161			-			-			462
Stock-based compensation		-		450		-			-			-			-			450
Restricted stock awards		-		404		-			-			-			-			404
Issuance of common shares		3		924		-			-			-			-			927
Tax benefit from employee stock options		−		1,887		−			−			−			−			1,887
Other comprehensive loss		-		-		-			−			-			(2,457	)		(2,457	)		(2,457	)
Cash dividends		-		-		(2,287	)		-			-			-			(2,287	)
Repayment of ESOP loan		-		-		-			-			12			-			12
Balance, March 31, 2007	$	267	$	263,848	$	33,009		$	(96,799	)	$	(453	)	$	2,420		$	202,292		$	7,375

See accompanying notes to consolidated financial statements

5

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended March 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,832		$	12,762
Adjustments to reconcile net income to net cash used in operating activities:
Cumulative effect of a change in accounting principle, net of tax		−			(1,357	)
Depreciation and amortization		1,721			1,674
Equity in earnings of unconsolidated entities		(7,926	)		(4,287	)
Minority interests		1,275			771
Distributions from unconsolidated entities		7,852			6,038
Loss (income) from discontinued operations		56			(1,090	)
Gain on sale of assets		(5,307	)		(6,016	)
Deferred income tax (benefit) provision		(4,023	)		1,154
Non-cash compensation on long-term incentive plans		1,316			724
Non-cash compensation issued		1,174			531
Non-cash compensation received		(1,396	)		(1,222	)
Increase in commercial finance investments		(92,246	)		(12,415	)
Changes in operating assets and liabilities		(5,222	)		(5,354	)
Net cash used in operating activities of continuing operations		(92,894	)		(8,087	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(1,494	)		(1,550	)
Payments received on real estate loans and real estate		8,401			20,434
Investments in real estate		(10,163	)		(25,302	)
Purchase of investments		(9,881	)		(28,575	)
Proceeds from sale of investments		4,694			5,415
(Increase) decrease in restricted cash		(8,969	)		5,000
(Increase) decrease in other assets		(1,775	)		191
Net cash used in investing activities of continuing operations		(19,187	)		(24,387	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings		356,944			260,204
Principal payments on borrowings		(262,651	)		(237,928	)
Dividends paid		(2,287	)		(2,145	)
Distributions paid to minority interest holders		(968	)		(783	)
Proceeds from issuance of stock		927			79
Purchase of treasury stock		−			(8,350	)
Tax benefit from the exercise of stock options		1,887			−
Net cash provided by financing activities of continuing operations		93,852			11,077
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities		(49	)		8,828
Investing activities		−			27,124
Financing activities		(1,145	)		−
Net cash (used in) provided by discontinued operations		(1,194	)		35,952
Net cash retained by entities previously consolidated		−			(3,825	)
(Decrease) increase in cash		(19,423	)		10,730
Cash at beginning of period		37,622			30,353
Cash at end of period	$	18,199		$	41,083

See accompanying notes to consolidated financial statements

6

6

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2007

(unaudited)

NOTE 1 - MANAGEMENT’S OPINION REGARDING INTERIM FINANCIAL STATEMENTS

Resource America, Inc. (the "Company" or “RAI”) is a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for the Company and for outside investors in the financial fund management, real estate and commercial finance sectors. As a specialized asset manager, the Company seeks to develop investment vehicles in which outside investors invest along with the Company and for which the Company manages the assets acquired pursuant to long-term management and operating agreements. The Company limits its investment vehicles to investment areas where it owns existing operating companies or has specific expertise.

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for certain financial fund management entities and LEAF Financial Corp. (“LEAF”) in which the senior executives of LEAF hold a 13.7% interest. Senior executives of LEAF also hold an 8% interest in a subsidiary of LEAF.

In addition, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) 46-R, “Consolidation of Variable Interest Entities,” the Company consolidated certain variable interest entities (“VIEs”) as to which it has determined that it is the primary beneficiary. Due to the timing of the receipt of financial information from third parties, the Company accounts for these entities’ activities on a one quarter lag, except when adjusting for the impact of significant events such as a refinance or sale. The assets, liabilities, revenues and costs and expenses of the VIEs that are included in the consolidated financial statements are not those of the Company. The liabilities of the VIEs will be satisfied from the cash flows of the VIE, not from assets of the Company which has no legal obligation to satisfy those liabilities.

The consolidated financial statements and the information and tables contained in the accompanying notes as of March 31, 2007 and for the three and six months ended March 31, 2007 and 2006 are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006 (“fiscal 2006”). The results of operations for the three and six months ended March 31, 2007 may not necessarily be indicative of the results of operations for the full fiscal year ending September 30, 2007 (“fiscal 2007”).

Certain reclassifications have been made to the fiscal 2006 consolidated financial statements to conform to the fiscal 2007 presentation.

7

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2007

(unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Supplemental Cash Flow Information

Supplemental disclosure of cash flow information (in thousands):

	Six Months Ended March 31,
	2007		2006
Cash paid during the period for:
Interest	$	5,036	$	6,398
Income taxes paid	$	743	$	2,808
Non-cash activities include the following:
Conversion of notes (see Note 4):
Increase in minority interest	$	−	$	240
Net reduction of equity	$	−	$	205
Transfer of loans held for investment (see Note 10):
Reduction of loans held for investment	$	149,266	$	121,722
Termination of associated secured warehouse credit facilities	$	149,266	$	121,697
Activity on secured warehouse facilities:
Purchase of loans held for investment	$	575,218	$	23,970
Borrowings on associated secured warehouse credit facilities	$	575,177	$	23,945
Receipt of a note upon resolution of a real estate investment and a FIN 46-R asset	$	−	$	2,200

Recently Issued Financial Accounting Standards

In February 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of SFAS 115," which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. Entities choosing the fair value option would be required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. The Company is currently evaluating the expected effect of SFAS 159 on its consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” which provides guidance on measuring the fair value of assets and liabilities. SFAS 157 will apply to other accounting pronouncements that require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances. This standard will also require additional disclosures in both annual and quarterly reports. SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of its fiscal year 2009. The Company is currently determining the effect, if any, the adoption of SFAS 157 will have on its financial statements.

8

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Recently Issued Financial Accounting Standards − (Continued)

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  It establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company's financial statements and the related financial statement disclosures.  SAB 108 is effective for the Company’s current fiscal year ending September 30, 2007. Management does not believe adoption of SAB 108 will have a material impact on the Company's consolidated financial statements.

On July 13, 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of SFAS 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective as of the beginning of the first fiscal year beginning after December 15, 2006 with early adoption permitted if no interim financial statements have been issued. The Company will not elect early adoption of FIN 48; accordingly, the provisions of FIN 48 will be implemented in the Company’s fiscal quarter ending December 31, 2007. The Company is currently determining the effect, if any, the adoption of FIN 48 will have on its financial statements.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of periodic temporary investments of cash and cash equivalents. The Company places its temporary cash investments in high-quality, short-term money market instruments and deposits with high-quality financial institutions and brokerage firms. At March 31, 2007, the Company had $22.7 million in deposits at various banks, of which $20.1 million was over the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on such investments.

NOTE 3 − COMPREHENSIVE INCOME

Comprehensive income includes net income and all other changes in the equity of a business from transactions and other events and circumstances from non-owner sources. These changes, other than net income, are referred to as “other comprehensive income” and for the Company include changes in the fair value, net of taxes, of its investment securities available-for-sale and derivative instruments that qualify as cash flow hedges.

Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date. Revenues and expenses are translated at the average rate of exchange for the period. The resulting translation adjustment is also included in comprehensive income.

9

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 3 − COMPREHENSIVE INCOME − (Continued)

The following table reflects the changes in comprehensive income (in thousands):

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Net income	$	5,383		$	5,086		$	9,832		$	12,762
Other comprehensive income:
Unrealized (losses) gains on investment securities available-for-sale, net of tax (1) of $(2,712), $733, $(434) and $1,070		(3,486	)		(1,289	)		(1,173	)		1,180
Less: reclassification for gains realized in net income, net of tax of $341, $0, $907 and $0		(471	)		−			(1,252	)		−
		(3,957	)		(1,289	)		(2,425	)		1,180
Unrealized losses on hedging contracts, net of tax of $(194), $0, $(185) and $0		(268	)		−			(255	)		−
Foreign currency translation gain		36			−			223			−
Comprehensive income	$	1,194		$	3,797		$	7,375		$	13,942

(1) Reflects the cumulative adjustment for changes in the Company’s effective tax rate through the respective periods presented.

The Company had no cash flow hedge activity in fiscal 2006. During fiscal 2007, the changes in accumulated other comprehensive income associated with cash flow hedge activities were as follows (in thousands):

	Three Months Ended March 31, 2007			Six Months Ended March 31, 2007
Balance at beginning of period	$	13		$	−
Current period changes in fair value, net of tax of $(194) and $(185)		(268	)		(255	)
Balance at March 31, 2007	$	(255	)	$	(255	)

NOTE 4 − EARNINGS PER SHARE

Basic earnings per share (“Basic EPS”) is determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share (“Diluted EPS”) is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding after giving effect to the potential dilution from the exercise of securities, such as stock options, into shares of common stock as if those securities were exercised as well as the dilutive effect of other award plans, including restricted stock and director units.

Diluted income from continuing operations and diluted net income for the six months ended March 31, 2006 includes $35,000 of minority interest, net of tax, related to the assumed conversion of notes. These notes were converted on February 1, 2006 and, accordingly, minority interest for subsequent periods has been reflected in reported operating results.

10

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 4 − EARNINGS PER SHARE − (Continued)

The following table presents a reconciliation of the shares used in the computation of Basic EPS and Diluted EPS (in thousands):

	Three Months Ended March 31,				Six Months Ended March 31,
	2007		2006		2007		2006
Shares(1)
Basic shares outstanding		17,242		17,606		17,267		17,822
Dilutive effect of stock options and other equity awards		1,785		1,463		1,807		1,410
Dilutive shares outstanding		19,027		19,069		19,074		19,232

(1) As of March 31, 2007, options to purchase 27,500 shares were outstanding but were excluded from the computation of Diluted EPS as their effect would have been antidilutive. The exercise prices on those options were at $25.99, $26.06 and $27.84 per share. All outstanding options were dilutive as of March 31, 2006.

NOTE 5 − INVESTMENTS IN COMMERCIAL FINANCE

The Company’s investments in commercial finance include the following (in thousands):

	March 31,		September 30,
	2007		2006
Notes receivable, net	$	161,378	$	74,864
Direct financing leases, net		39,327		32,275
Assets subject to operating leases, net of accumulated depreciation of $7 and $46		203		1,711
Investments in commercial finance	$	200,908	$	108,850

The components of direct financing leases are as follows (in thousands):

	March 31,			September 30,
	2007			2006
Total future minimum lease payments receivable	$	45,189		$	37,398
Initial direct costs, net of amortization		1,130			598
Unguaranteed residual		310			362
Unearned income		(7,302	)		(6,083	)
Investments in direct financing leases	$	39,327		$	32,275

Although the terms of the leases and notes extend over many years, the Company routinely sells without recourse the leases and notes it acquires or originates to investment entities it manages shortly after their acquisition or origination in accordance with agreements with each party. As a result of these routine sales of leases and notes as well as the Company’s credit evaluations, management concluded that no allowance for loan and lease losses was deemed necessary at March 31, 2007.

11

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 6 − LOANS HELD FOR INVESTMENT

The Company typically funds the initial acquisition of portfolio assets for issuers of collateralized debt obligations (“CDOs”) it sponsors through a secured warehouse credit facility prior to closing the offering of the CDO. In those transactions in which the Company is deemed to be the primary beneficiary (as defined by FIN 46-R), the assets and liabilities of the CDO issuer are consolidated. Upon the execution of the CDO, the warehouse facility is refinanced through the issuance of CDOs and the CDO issuer is no longer consolidated with the Company.

The following is a summary of the Company’s bank loans held for investment (in thousands):

	March 31,			September 30,
	2007			2006
Principal	$	493,870		$	69,312
Unamortized premium		1,563			18
Unamortized discount		(158	)		(16	)
Loans held for investment	$	495,275		$	69,314

At March 31, 2007, the Company’s secured bank loan portfolio consisted of $495.3 million of floating rate loans at various London Inter-Bank Offered Rates (“LIBOR”), including European LIBOR rates, plus 1.50% to 8.50%, with maturity dates ranging from March 2010 to June 2017. There were no fixed rate loans as of March 31, 2007.

At March 31, 2007, all of the Company’s loans were current with respect to the scheduled payments of principal and interest. In reviewing the portfolio of loans and the observable secondary market prices, the Company did not identify any loans with characteristics indicating that impairment had occurred. Accordingly, as of March 31, 2007, management of the Company determined that no allowance for possible loan losses was needed.

At September 30, 2006, the Company’s secured bank loan portfolio consisted of $69.3 million of floating rate loans, with interest at various LIBOR rates, including European LIBOR rates, plus 1.75% to 4.25%, and maturity dates ranging from October 2012 to March 2016. There were no fixed rate loans as of September 30, 2006.

12

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 7 - INVESTMENTS IN REAL ESTATE

The following is a summary of the changes in the carrying value of the Company’s investments in real estate (in thousands):

	March 31,						September 30,
	2007			2006			2006
Real estate loans:
Balance, beginning of period	$	28,739		$	25,923		$	25,923
New loans		−			2,200			5,109
Additions to existing loans		−			65			2,310
Collection of principal		(341	)		(250	)		(5,068	)
Other		93			164			465
Balance, end of period		28,491			28,102			28,739
Real estate:
Ventures		9,365			9,751			9,519
Owned, net of accumulated depreciation of $1,930, $1,541 and $1,736		12,419			12,447			12,616
Total real estate		21,784			22,198			22,135
		50,275			50,300			50,874
Allowance for loan losses		(770	)		(770	)		(770	)
Investments in real estate	$	49,505		$	49,530		$	50,104

NOTE 8 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The Company’s investment securities available-for-sale are carried at fair value based on market quotes. Unrealized gains or losses, net of tax, are included in accumulated other comprehensive income in stockholders’ equity.

The Company has invested in two affiliated publicly-traded companies, Resource Capital Corp. (“RCC”) (NYSE: RSO), and The Bancorp, Inc. (“TBBK”) (Nasdaq: TBBK), in addition to its investments in CDO issuers it has sponsored and manages as follows (in thousands):

	March 31,		September 30,
	2007		2006
Investment in RCC, including unrealized gains of $2,344 and $879	$	31,071	$	29,588
Investment in TBBK, including unrealized gains of $3,661and $5,696		5,935		9,132
Investments in CDO securities, including net unrealized losses of $5,840 and $1,471		29,715		26,137
Investment securities available-for-sale	$	66,721	$	64,857

RCC is a specialty finance real estate investment trust (“REIT”) that the Company sponsored in fiscal 2005. The Company, through its indirect wholly-owned subsidiary, Resource Capital Manager, Inc. (“RCM”), provides investment management and administrative services to RCC under a management agreement with RCM.

The Company held approximately 1.9 million shares of RCC at March 31, 2007 and September 30, 2006. In addition, the Company held options to acquire 2,166 shares (at an average price per share of $15.00) and warrants to acquire an additional 100,088 shares (at $15.00 per share) of RCC common stock at March 31, 2007 and September 30, 2006.

13

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 8 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE − (Continued)

The Company held 228,290 and 358,290 shares of TBBK as of March 31, 2007 and September 30, 2006, respectively. During the three months ended March 31, 2007 and December 31, 2006, the Company sold 50,000 and 80,000 of its shares of TBBK stock for $1.3 million and $2.0 million, respectively, and realized gains of $805,000 and $1.3 million, respectively (see Note 15). Included in other assets are an additional 123,719 shares of TBBK which are being held in a supplemental employment retirement plan for the Company’s former Chief Executive Officer.

Investments in CDO securities represent the Company’s direct and indirectly owned investments in CDOs that the Company has sponsored and manages. These investments include investments in 14 and 10 CDOs at March 31, 2007 and September 30, 2006, respectively, which are held through the Company’s financial fund management entities.

NOTE 9 − INVESTMENTS IN UNCONSOLIDATED ENTITIES

As a specialized asset manager, the Company develops various types of investment vehicles, including partnerships and tenant-in-common (“TIC”) programs, which it manages under long-term management agreements or similar arrangements. The following table details the Company’s investments in these vehicles, including the range of partnership interests owned, which are accounted for using the equity method because the Company has the ability to exercise significant influence over their operating and financial decisions (in thousands, except percentages):

	March 31,		September 30,		Range of Combined
	2007		2006		Partnership Interests
Trapeza entities	$	15,906	$	15,007		13% to 50%
Financial fund management partnerships		6,385		5,772		10%
Real estate investment partnerships		4,741		3,927		5.0% to 10.0%
Commercial finance investment partnerships		1,231		1,353		1% to 5%
TIC property interests (1)		4,120		567		N/A
Investments in unconsolidated entities	$	32,383	$	26,626

(1) As of March 31, 2007, the Company held interests in two TIC properties.

 Historically, the Company had presented its equity in the earnings and losses of the Trapeza entities on a one-quarter delay as permitted under GAAP. Improvements in the timeliness and availability of financial data from the Trapeza entities allowed the Company to report its share in those earnings on a current basis as of October 1, 2005. As a result of this change, the Company’s equity in the earnings of the Trapeza entities of $1.4 million, net of tax of $983,000, for the three months ended September 30, 2005 was reported as a cumulative change in accounting principle as of October 1, 2005.

14

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 9 − INVESTMENTS IN UNCONSOLIDATED ENTITIES − (Continued)

The Company has equity interests of 50% and 33.33% in the managers of the Trapeza CDO entities, Trapeza Capital Management, LLC and Trapeza Management Group, LLC, respectively. The Company does not consolidate these entities since it does not have control over them. Summarized operating data for these entities is presented below (in thousands):

	Three Months Ended March 31,						Six Months Ended March 31,
	2007			2006			2007			2006
Trapeza Capital Management, LLC
Management fees	$	3,834		$	1,747		$	7,674		$	3,295
Operating expenses		(847	)		(295	)		(1,671	)		(669	)
Other income (expense)		41			(52	)		12			(100	)
Net income	$	3,028		$	1,400		$	6,015		$	2,526

	Three Months Ended March 31,						Six Months Ended March 31,
	2007			2006			2007			2006
Trapeza Management Group, LLC
Management fees	$	680		$	682		$	1,360		$	1,364
Operating expenses		(69	)		(53	)		(117	)		(150	)
Other expense		(12	)		(13	)		(17	)		(34	)
Net income	$	599		$	616		$	1,226		$	1,180

NOTE 10 - BORROWINGS

Borrowings outstanding consist of the following:

	As of March 31, 2007							Balance at
	Amount of Facility		Interest Rate			Balance		September 30, 2006
	(in millions)					(in thousands)		(in thousands)
Financial fund management - Secured warehouse credit facilities	$	533.4		4.78	%	$	90,204	$	−
		350.0		5.95	%		129,162		2,900
		400.1		4.58	%		275,842		66,397
		1,283.5					495,208		69,297
Commercial finance - Secured revolving credit facilities		150.0		6.89	%		71,500		86,400
		250.0		5.82	%		102,107		−
		33.0		13.82	%		−		−
		433.0					173,607		86,400
Corporate - Secured revolving credit facilities		14.0		7.96	%		6,000		−
		25.0		n/a			−		−
		39.0					6,000		−
Other debt				7.85	%		17,626		16,541
Total borrowings						$	692,441	$	172,238

15

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 10 - BORROWINGS − (Continued)

Financial fund management - Secured warehouse credit facilities.

The Company has entered into various warehouse credit facilities to fund its purchases of bank loans in the U.S and Europe. These facilities are consolidated in accordance with FIN 46-R. Facilities outstanding during the six months ended March 31, 2007 included the following:

In January 2007, the Company entered into a EUR 400.0 million (approximately $533.4 million at March 31, 2007) facility with affiliates of Morgan Stanley Bank (“Morgan Stanley”). The interest rate on this facility is at the European LIBOR plus 75 basis points. The facility will expire and interest will be payable upon the closing of the CDO, which is expected to be completed in the fourth quarter of fiscal 2007. The facility agreement provides for a guarantee by the Company as well as an escrow deposit (see Note 16).

In August 2006, another facility was opened with Credit Suisse for up to $350.0 million. The interest rate on this facility is at LIBOR plus 62.5 basis points. The facility will expire and interest will be payable upon the closing of the CDO, which is expected to be completed in the fourth quarter of fiscal 2007. The facility agreement provides for a guarantee by the Company as well as an escrow deposit (see Note 16).

In June 2006, the Company entered into a EUR 300.0 million (approximately $400.1 million at March 31, 2007) facility with affiliates of Credit Suisse International. The interest rate is at European LIBOR plus 65 basis points. The facility will expire and interest will be payable upon the closing of the CDO, which is expected to be completed by the third quarter of fiscal 2007. The facility agreement provides for a guarantee by the Company as well as an escrow deposit.

Commercial finance - Secured revolving credit facilities.

On July 31, 2006, LEAF entered into a $150.0 million revolving warehouse credit facility with a group of banks led by National City Bank that expires on July 31, 2009. Interest on borrowings are charged at one of two rates: (i) LIBOR plus 150 basis points or (ii) the prime rate. The underlying equipment being leased or financed collateralizes the borrowings under this facility.

In December 2006, LEAF assumed from RCC an unused $250.0 million line of credit with Morgan Stanley. As part of the agreement, LEAF reimbursed RCC $125,000 for the commitment fees it had paid and assumed the liability for an additional $725,000 of commitment fees and other costs. The facility is non-recourse to the Company and expires in October 2009. The underlying equipment being leased or financed collateralizes the borrowings under this facility. Interest is charged at one of two rates based on the utilization of the facility: (i) up to $100.0 million at one-month LIBOR plus 60 basis points and (ii) borrowings in excess of $100.0 million at one-month LIBOR plus 75 basis points. Interest and principal payments are due monthly.

The Company entered into interest rate swap agreements to mitigate fluctuations in the interest rate on the LEAF Morgan Stanley facility. The interest rate swaps terminate at various dates ranging from May 2012 to February 2017. As of March 31, 2007, these interest rate swap agreements fix the rate on the outstanding borrowings at 5.82% on a weighted average basis (see Note 11).

In March 2007, the Company entered into a $33.0 million credit facility with a financial institution to fund advances on business credit card receipts in connection with a new subsidiary formed by LEAF. Interest on borrowings are charged at a rate of LIBOR plus 8.5%. The facility terminates in September 2008 with the option to extend for additional one-year periods at the discretion of the lender. The assets of a newly-formed subsidiary of LEAF collateralize the borrowings under this facility (see “Other debt-subordinated note”).

16

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 10 - BORROWINGS − (Continued)

Terminated warehouse credit facility.

In December 2006, the Company entered into a $350.0 million facility with affiliates of Credit Suisse Securities (USA) LLC (“Credit Suisse”). Interest was charged during the warehouse period at LIBOR plus 62.5 basis points. In January 2007, the facility which had outstanding borrowings of $149.3 million, was transferred to and assumed by RCC. As a result, the Company’s escrow deposit was returned with interest.

Corporate - Secured revolving credit facility.

The Company has a $14.0 million revolving line of credit with Sovereign Bank expiring in July 2009, which is secured by certain real estate collateral and the market value of certain investment securities available-for-sale with a fair value of $11.3 million at March 31, 2007. Availability under this facility is limited based on the value of the collateral. Interest is changed at one of two rates elected at the Company’s option: (i) LIBOR plus 200 basis points, or (ii) the prime rate. As of March 31, 2007 and September 30, 2006, availability on this line was $6.1 million and $11.4 million, respectively.

Other debt.

Subordinated note. In March 2007, the Company borrowed $1.5 million from a financial institution in the form of a subordinated convertible note. Interest on the note, at a rate of 15%, will be added to the outstanding principal balance. The note matures in September 2008 and is convertible on or after September 15, 2007 into a 50% ownership interest in a newly-formed subsidiary of LEAF.

Annual principal payments on the Company’s aggregate borrowings over the next five years ending March 31 and thereafter are as follows (in thousands):

2008	$	104,171	(1)
2009		27,538
2010		52,091
2011		714
2012		12,138
Thereafter		581
	$	197,233

(1) Excludes $495.2 million related to secured warehouse credit facilities that will be transferred upon the execution of the associated CDO transactions and will not have to be repaid by the Company.

Covenants

At March 31, 2007, the Company was in compliance with all of the financial covenants under its various debt agreements. These financial covenants are customary for the type and size of the related debt facilities and include minimum equity requirements as well as specified debt service coverage and leverage ratios.

NOTE 11 - DERIVATIVE INSTRUMENTS

The Company implemented a hedging strategy using derivative financial instruments including interest rate swaps designated as cash flow hedges for one of its commercial finance secured revolving credit facilities (see Note 10). The Company does not use derivative financial instruments for trading or speculative purposes. The Company manages the credit risk of possible counterparty default in these derivative transactions by dealing exclusively with counterparties with investment grade ratings.

17

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 11 - DERIVATIVE INSTRUMENTS − (Continued)

Before entering into a derivative transaction for hedging purposes, the Company determines whether a high degree of initial effectiveness will exist between the change in the value of the hedged item and the change in the value of the derivative from a movement in interest rates. High effectiveness means that the change in the value of the derivative will be effectively offset by the change in the value of the hedged asset or liability. The Company measures the effectiveness of each hedge throughout the hedge period. Any hedge ineffectiveness, as defined by GAAP, will be recognized in the consolidated statements of operations.

There can be no assurance that the Company’s hedging strategies or techniques will be effective, that profitability will not be adversely affected during any period of change in interest rates, or that the costs of hedging will not exceed the benefits.

At March 31, 2007, the notional amount of the interest rate swaps was $110.7 million. For the three and six months ended March 31, 2007, included in comprehensive income were unrealized net losses of $268,000 (net of tax of $194,000) and $255,000 (net of tax of $185,000), respectively, on these interest rate swaps. The Company recognized no gain or loss during the three and six months ended March 31, 2007 for hedge ineffectiveness. Assuming market rates remain constant with the rates at March 31, 2007, none of the loss in accumulated other comprehensive income is projected to be recognized in earnings over the next 12 months.

NOTE 12 - STOCK-BASED COMPENSATION

Employee stock options

The Company adopted SFAS 123R, “Accounting for Stock-Based Compensation” as revised, as of October 1, 2005. Accordingly, employee stock options granted are being expensed by the Company over the option vesting period, based on the estimated fair value of the award on the date of grant. The Company granted 27,500 options during the three and six months ended March 31, 2007. There were no options granted during the three and six months ended March 31, 2006. For the three and six months ended March 31, 2007, the Company’s calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions:

	Periods Ended March 31, 2007
	Three Months		Six Months
Expected life (years)		6.25		6.25
Expected stock volatility		31.5%		27.8%
Risk-free interest rate		4.72%		4.72%
Dividends		1.2%		1.1%

18

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 12 - STOCK-BASED COMPENSATION − (Continued)

Employee stock options - (Continued)

Transactions for employee stock options for the six months ended March 31, 2007 are summarized as follows:

	Shares			Weighed Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding - October 1, 2006		3,641,096		$	7.77
Granted		27,500		$	26.47
Exercised		(279,316	)	$	3.31
Forfeited		(1,000	)	$	20.19
Outstanding - end of period		3,388,280		$	8.29		5.26	$	52,063,000
Exercisable - end of period		2,987,226		$	7.09		4.85	$	49,395,000
Available for grant		552,487	(1)

(1) Adjusted for shares of restricted stock granted under the 2005 employee stock plan.

The following table summarizes the activity for unvested employee stock options during the six months ended March 31, 2007:

	Units			Weighted Average Grant Date Fair Value
Unvested shares outstanding - October 1, 2006		374,554		$	7.37
Granted		27,500		$	10.59
Vested		−		$	−
Forfeited		(1,000	)	$	14.72
Unvested shares outstanding - end of period		401,054		$	7.57

As of March 31, 2007, there was a total of $2.1 million of unrecognized compensation cost related to unvested awards under stock option plans. This cost is expected to be recognized over a weighted-average period of 2.0 years. The total fair value of shares vested and recorded as compensation expense during the three and six months ended March 31, 2007 was $232,000 and $450,000, respectively. Compensation expense for the three and six months ended March 31, 2006 was $274,000 and $548,000, respectively.

Restricted common stock

In January 2007, the Company issued 129,446 shares of restricted common stock valued at $3.3 million based on the closing price of the Company’s common stock as of the date of grant. These restricted shares vest 25% on January 3, 2008 and 6.25% on a quarterly basis thereafter through January 3, 2011. For the three and six months ended March 31, 2007, the Company recorded stock-based compensation expense for these restricted shares of $206,000.

In January 2006, the Company issued 83,519 shares of restricted common stock valued at $1.4 million based on the closing price of the Company’s common stock as of the date of grant. These restricted shares vest 25% per year commencing on January 3, 2007. For the three and six months ended March 31, 2007, the Company recorded stock-based compensation expense for these restricted shares of $296,000 and $386,000, respectively.

19

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 12 - STOCK-BASED COMPENSATION − (Continued)

Restricted common stock − (Continued)

In February 2006, LEAF issued 300,000 shares of its restricted common stock valued at $69,000. These restricted shares were issued to three senior officers of LEAF and vest 50% per year commencing on February 1, 2007. In December 2006, 100,000 shares of restricted stock were forfeited. For the three and six months ended March 31, 2007, the Company recorded stock-based compensation for the LEAF restricted stock of $5,000 and $17,000, respectively.

In March 2007, a subsidiary of LEAF granted an 8% minority interest in a newly-formed subsidiary to certain members of senior management of LEAF for no consideration. The value of the subsidiary shares issued has been estimated to be nominal.

NOTE 13 - INCOME TAXES

The Company recorded the following provision for income taxes, as follows (in thousands):

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2007			2006		2007			2006
Provision for income taxes, at estimated effective rate	$	3,451		$	3,723	$	6,322		$	5,376
Change in valuation allowance		(496	)		−		(1,157	)		(3,190	)
Provision for income taxes	$	2,955		$	3,723	$	5,165		$	2,186

In the three months ended March 31, 2007, the Company has continued to evaluate its implemented tax planning strategies, projections for future profitability and legislative changes. Based upon this evaluation, management believes that it is more likely than not that the Company will be able to utilize $6.4 million of state and local net operating loss carryforwards (“NOLs”) before their expiration. Accordingly, $496,000 of the valuation allowance that was previously recorded was reversed. In the six months ended March 31, 2007, the Company has reversed $1.2 million of the valuation allowance against $13.0 million of NOLs that management believes can be utilized before their expiration. Management will continue to assess its estimate of the amount of NOLs that the Company will be able to utilize. The estimate of the required valuation allowance could be adjusted in the future if estimates of taxable income are revised.

For the six months ended March 31, 2006, the Company had determined that it would be able to utilize approximately $32.0 million of its NOLs before their expiration. Accordingly, $3.2 million of the valuation allowance was reversed in the quarter ended December 31, 2005.

20

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has ongoing relationships with several related entities. The following table details the receivables and payables with these related parties (in thousands):

	March 31,		September 30,
	2007		2006
Receivables from managed entities and related parties:
Commercial finance investment partnerships	$	4,907	$	3,938
Financial fund management entities		4,099		2,064
Real estate investment partnerships and TIC property interests		2,590		952
RCC		1,591		1,409
Atlas America		447		265
Anthem Securities		17		154
Other		481		13
Receivables from managed entities and related parties	$	14,132	$	8,795
Payables due to managed entities and related parties:
Real estate investment partnerships and TIC property interests	$	875	$	1,325
Anthem Securities		−		254
Payables to managed entities and related parties	$	875	$	1,579

The Company receives fees and expense reimbursements from several related/managed entities. In addition, the Company reimburses another related entity for certain of its operating expenses. The following table details those activities (in thousands):

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Financial Fund Management- fees from managed entities	$	4,208		$	2,154		$	6,819		$	4,244
Real Estate - fees from investment partnerships and TIC property interests		1,484			2,993			3,822			5,920
Commercial finance− fees from investment Partnerships		2,646			1,226			4,774			2,025
RCC:
Fees and net equity compensation		2,542			2,055			5,370			4,114
Reimbursement of expenses from RCC		1,010			239			1,274			528
Dividend income		751			629			1,574			1,326
Atlas America− reimbursement of net costs and expenses		447			415			643			677
Anthem Securities:
Payment of operating expenses		(584	)		(223	)		(782	)		(333	)
Reimbursement of costs and expenses		487			513			688			955
1845 Walnut Associates Ltd (1) - payment of rent and operating expenses		(112	)		(165	)		(271	)		(239	)
9 Henmar LLC - payment of broker/consulting fees		(58	)		(57	)		(216	)		(244	)
Ledgewood P.C. - payment of legal services		(89	)		(127	)		(146	)		(246	)

21

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

⁽¹⁾Relationship with 1845 Walnut Associates, Ltd. In the three months ended March 31, 2007, the Company sold 15% of its 30% interest in a real estate partnership that owns the building, in which it also leases office space. The Company received $2.9 million and recorded a gain of $2.7 million on the transaction. In the three months ended March 31, 2006, the Company received $4.0 million plus a $200,000 note receivable from the sale of 20% of its interest in the same property, resulting in a $4.2 million gain.

Relationship with RAIT Financial Trust. On March 30, 2007, the Company purchased a trust preferred security issued by an unrelated third party from RAIT Financial Trust (“RAIT”) (NYSE: RAS), a related party (see Note 15 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006), for $19.7 million (included in accounts payable and accrued expenses) and sold the security to a warehouse facility for $20.0 million (included in receivables), thereby recognizing a gain of $300,000 in the three months ended March 31, 2007. The Company has been engaged as the collateral manager for the warehouse facility.

NOTE 15 − OTHER INCOME, NET

The following table details the Company’s other income, net (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Gain on sale of investment securities available-for-sale	$	805	$	−	$	2,152	$	−
Litigation settlement		−		1,188		−		1,188
RCC dividend income		751		629		1,574		1,326
Interest, dividends and other income		255		145		613		321
Other income, net	$	1,811	$	1,962	$	4,339	$	2,835

In fiscal 2002, the Company charged operations $1.0 million, which was the amount of its maximum exposure relating to the settlement of a lawsuit. One of the insurance carriers refused to participate in the settlement. The Company thereafter filed an action seeking recovery on its policy with that carrier. In the second quarter of fiscal 2006, the Company prevailed in its action against the carrier, received a $200,000 reimbursement and reversed the $1.0 million accrual.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Senior lien financing obtained with respect to certain acquired properties, TIC investment programs and real estate loans are with recourse only to the properties securing them, subject to certain standard exceptions. The Company has provided guarantees on these senior liens, TIC programs, and loans totaling $443.0 million which expire as the related indebtedness is paid down over the next ten years.

The Company, through its financial fund management subsidiary, has commitments to purchase equity for all CDOs currently in their warehouse stage. These equity commitments, which total $26.7 million as of March 31, 2007, are contingent upon the successful completion of the respective CDOs over the next twelve months. Upon the close of each CDO, the actual amount of equity purchased may be less than the original committed amount.

A subsidiary of LEAF has a $33.0 million non-recourse line of credit with a financial institution that expires on September 15, 2008. LEAF has committed to a 9.1% participation in the borrowings on this line of credit, to a maximum of $3.0 million. As of March 31, 2007, there were no outstanding borrowings under this line.

22

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 16 - COMMITMENTS AND CONTINGENCIES − (Continued)

The January 2007 warehouse agreement with Morgan Stanley provides for guarantees by the Company on the first $14.2 million of losses on a portfolio of bank loans. This guarantee, secured by a $4.0 million cash deposit, expires upon the closing of the associated CDO which is anticipated in the first quarter of fiscal 2008 (see Note 10).

The August 2006 warehouse agreement with Credit Suisse provides for guarantees by the Company on the first $15.0 million of losses on a portfolio of bank loans. This guarantee, secured by a $5.0 million cash deposit, expires upon the closing of the associated CDO which is expected in the fourth quarter of fiscal 2007.

The Company is a party to various routine legal proceedings arising out of the ordinary course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition or operations.

NOTE 17 − DISCONTINUED OPERATIONS

Based on the Company’s intent to sell its interests in certain entities, the respective operations of these entities have been classified as discontinued and the related assets and liabilities have been classified as held for sale. These operations include those of two real estate entities as of March 31, 2006 that were consolidated under the provisions of FIN 46-R and the operations of one and two real estate properties owned by the Company at March 31, 2007 and 2006, respectively. Included in other assets in the consolidated balance sheets is a $1.3 million property which is being held for sale. The Company repaid the $1.1 million mortgage on this property during the three months ended March 31, 2007.

Summarized discontinued operating results are as follows (in thousands):

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
(Loss) income from discontinued operations before taxes	$	(57	)	$	1,206		$	(86	)	$	2,525
Loss on disposal		−			(974	)		−			(824	)
Benefit (provision) for income taxes		20			(80	)		30			(611	)
(Loss) income from discontinued operations, net of tax	$	(37	)	$	152		$	(56	)	$	1,090

23

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 18 − OPERATING SEGMENTS

The Company’s operations include three reportable operating segments that reflect the way the Company manages its operations and makes business decisions. In addition to its reporting operating segments, certain other activities are reported in the “All other” category. Segment profit (loss) represents income from continuing operations before income taxes and cumulative effect of accounting change. Summarized operating segment data are as follows (in thousands):

Three Months Ended March 31, 2007	Revenues from external customers		Equity in income (losses) of equity method investees			Interest expense			Depreciation and amortization		Segment profit (loss)(2)		Segment assets
Financial fund management	$	12,120	$	3,910		$	6,177		$	14	$	3,393	$	640,157
Real estate		6,956		52			261			194		3,408		144,413
Commercial finance		8,581		(17	)		3,211			307		417		228,243
All other(1)		−		−			112			204		1,157		80,036
Eliminations		−		−			(2,067	)		−		−		(114,297	)
Totals	$	27,657	$	3,945		$	7,694		$	719	$	8,375	$	978,552

Three Months Ended March 31, 2006
Financial fund management	$	2,983	$	2,831		$	−		$	−	$	2,098		$	80,970
Real estate		9,739		(533	)		267			151		5,967			137,941
Commercial finance		5,509		8			1,635			502		(239	)		68,921
All other(1)		−		−			46			183		831			80,104
Eliminations		−		−			(579	)		−		−			(69,524	)
Totals	$	18,231	$	2,306		$	1,369		$	836	$	8,657		$	298,412

Six Months Ended March 31, 2007
Financial fund management	$	20,352	$	8,065		$	9,874		$	28	$	6,774	$	640,157
Real estate		11,688		(116	)		522			363		4,572		144,413
Commercial finance		15,676		(23	)		5,730			634		884		228,243
All other(1)		−		−			154			403		2,823		80,036
Eliminations		−		−			(3,995	)		−		−		(114,297	)
Totals	$	47,716	$	7,926		$	12,285		$	1,428	$	15,053	$	978,552

Six Months Ended March 31, 2006
Financial fund management	$	7,729	$	5,564		$	1,481		$	15	$	4,935		$	80,970
Real estate		15,136		(1,276	)		528			302		7,814			137,941
Commercial finance		10,599		(1	)		2,713			1,042		222			68,921
All other(1)		−		−			52			315		(470	)		80,104
Eliminations		−		−			(1,109	)		−		−			(69,524	)
Totals	$	33,464	$	4,287		$	3,665		$	1,674	$	12,501		$	298,412

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

March 31, 2007

(unaudited)

NOTE 18 − OPERATING SEGMENTS − (Continued)

(1) Includes general corporate expenses and assets not allocable to any particular segment.

(2) Excluding intercompany interest charges, segment profit (loss) as adjusted for the three and six months ended March 31, 2007 would have been as follows (in thousands): Financial fund management - $4,917 and $9,720, respectively; Real estate - $3,408 and $4,572, respectively; Commercial finance - $960 and $1,933, respectively; and All other - $(910) and $(1,172), respectively. For the three and six months ended March 31, 2006, excluding intercompany interest charges, segment profit (loss) as adjusted would have been as follows (in thousands): Financial fund management - $2,098 and $4,935, respectively; Real estate - $6,168 and $8,208, respectively; Commercial finance - $139 and $937, respectively; and All other - $252 and $(1,579), respectively.

Significant Customer. Management and acquisition fees received from RCC were $2.5 million (8.0%) and $5.4 million (9.7%) of the Company’s consolidated revenues for the three and six months ended March 31, 2007, respectively. For the three and six months ended March 31, 2006, RCC fees were $2.1 million (10.0%) and $4.1 million (10.9%), respectively, of the Company’s consolidated revenues.

Geographic Information. Revenues generated from the Company’s European operations totaled $4.1 million and $5.6 million for the three and six months ended March 31, 2007. The Company began to acquire European bank loans in the fourth quarter of fiscal 2006. Included in segment assets as of March 31, 2007 and 2006, were $377.8 million and $232,000, respectively, of assets held in Europe, primarily loans held for investment.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited)

This report contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology. Such statements are subject to the risks and uncertainties more particularly described in Item 1A, under the caption “Risk Factors,” in our Annual Report on Form 10-K for period ended September 30, 2006. These risks and uncertainties could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to forward-looking statements which we may make to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable law.

Overview of the Three and Six Months Ended March 31, 2007 and 2006

We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for our own account and for outside investors in the financial fund management, real estate and commercial finance sectors. As a specialized asset manager, we develop investment funds in each sector in which outside investors invest along with us and for which we provide asset management services. As of March 31, 2007, we managed $14.7 billion of assets.

We limit our fund development and asset management services to asset classes in which we have specific expertise. We believe this strategy enhances the return on investment we can achieve for ourselves and for the investors in our funds. In our financial fund management operations, the asset classes on which we concentrate are asset-backed securities, known as ABS (principally residential and commercial mortgage-backed securities), structured finance securities, bank loans and the trust preferred securities of banks, bank holding companies, insurance companies and other financial companies. In our real estate operations, we concentrate on investments in multi-family and commercial real estate and real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, and mezzanine loans. In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial notes secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment.

We have continued to develop our existing operations with the sponsorship of new investment funds and tenant-in-common, or TIC, property programs. Additionally, we have undertaken several initiatives to further expand the scope of our asset management operations, in particular through the sponsorship of a follow-on offering for Resource Capital Corp, or RCC, and through Resource Europe Management, Ltd., or Resource Europe, in the origination and management of international debt assets.

Assets Under Management

We increased our assets under management by $5.2 billion to $14.7 billion at March 31, 2007 from $9.5 billion at March 31, 2006. The growth in our assets under management was the result of:

· an increase in the financial fund management assets we manage on behalf of individual and institutional investors and RCC, both in the United States and in Europe;

· an increase in real estate assets managed on behalf of RCC and limited partnerships and TIC property interests that we sponsor; and

· an increase in commercial finance assets managed on behalf of the limited partnerships we sponsor, and RCC.

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The following table sets forth information relating to our assets under management by operating segment and their growth from March 31, 2006 to March 31, 2007 (in millions):

	As of March 31,				Increase
	2007		2006		Amount		Percentage
Financial fund management	$	12,665	$	8,377	$	4,288		51%
Real estate		1,252		638		614		96%
Commercial finance		737		470		267		57%
	$	14,654	$	9,485	$	5,169		54%

Included in these assets at March 31, 2007 and 2006 were $10.9 billion and $6.2 billion of assets held through 25 and 15 issuers of collateralized debt obligations, or CDOs, we have sponsored, including $1.3 billion and $736.6 million in four and two CDOs sponsored for RCC, respectively, and $2.0 billion held on warehouse facilities for CDOs which had not closed as of March 31, 2007 for which we have been engaged as the collateral manager.

Our assets under management are primarily managed through various investment vehicles including CDOs, public and private limited partnerships, TIC property interests, a real estate investment trust, and other investment funds. The following table sets forth the number of entities we manage by operating segment:

	CDOs		Limited Partnerships (2)		TIC Property Interests		Other Investment Funds
As of March 31, 2007 (1)
Financial fund management		24		12		−		−
Real estate		1		6		6		−
Commercial finance		−		3		−		1
		25		21		6		1
As of March 31, 2006 (1)
Financial fund management		15		11		−		−
Real estate		−		5		4		−
Commercial finance		−		2		−		2
		15		18		4		2

(1)All of our operating segments manage assets on behalf of RCC.

(2)Includes one real estate investment program structured as a limited liability company.

The assets we manage are classified by asset class as follows (in millions):

	As of March 31, 2007
	Assets Held by Resource America		Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities			Total
Asset-backed securities	$	−	$	3,680	$	394	$	864		$	4,938
Trust preferred securities		−		4,445		−		302			4,747
Bank loans		−		1,476		615		805	(1)		2,896
Real properties		−		419		−		−			419
Mortgage and other real estate-related loans		101		−		732		−			833
Commercial finance assets		201		448		88		−			737
Private equity and hedge fund assets		−		84		−		−			84
	$	302	$	10,552	$	1,829	$	1,971		$	14,654

(1) Includes $495.2 million of bank loans which are reflected on our consolidated balance sheets, of which $366.0 million are European bank loans.

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	As of March 31, 2006
	Assets Held by Resource America		Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total
Asset-backed securities	$	−	$	2,065	$	1,230	$	741	$	4,036
Trust preferred securities		−		3,042		−		454		3,496
Bank loans		−		337		342		150		829
Real properties		−		314		−		−		314
Mortgage and other real estate-related loans		112		−		212		−		324
Commercial finance assets		53		355		62		−		470
Private equity and hedge fund assets		−		16		−		−		16
	$	165	$	6,129	$	1,846	$	1,345	$	9,485

Employees

As of March 31, 2007, we employed 313 full-time workers, an increase of 119, or 61%, from 194 employees at March 31, 2006. The following table summarizes our employees by operating segment:

	Total		Financial Fund Management		Real Estate		Commercial Finance		Corporate/ Other
March 31, 2007
Investment professionals		122		40		27		54		1
Other		191		24		11		121		35
Total		313		64		38		175		36
March 31, 2006
Investment professionals		64		20		19		24		1
Other		130		14		7		81		28
Total		194		34		26		105		29

Revenues

We generate revenues in each of our business segments from the fees we earn for structuring and managing the investment vehicles we sponsor on behalf of individual and institutional investors and RCC and from the income produced by the assets and investments we manage for our own account. The following table sets forth the revenues we have recognized in each of these revenue categories (in thousands):

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2007			2006		2007		2006
Fund management revenues (1)	$	15,599		$	10,879	$	30,125	$	20,793
Finance and rental revenues (2)		11,745			3,693		19,340		9,452
Gains on resolutions of loans and other property interests (3)		2,711			4,351		2,711		4,450
Net (losses) gains on sale of TIC property interests (4)		(5	)		258		86		596
Other (5)		1,552			1,356		3,380		2,460
	$	31,602		$	20,537	$	55,642	$	37,751

(1) Includes fees from each of our financial fund management, real estate and commercial finance operations and our share of the income or loss from limited and general partnership interests we own in our financial fund management, real estate and commercial finance operations.

(2) Includes interest income on bank loans from our financial fund management, interest and accreted discount income from our real estate operations, interest and rental income from our commercial finance operations and revenues from certain real estate assets.

(3) Includes the resolution of loans we hold in our real estate segment.

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(4) Reflects net gains (losses) recognized by our real estate segment on the sale of TIC interests to outside investors.

(5) Includes the equity compensation we earned in connection with the formation of RCC and the disposition of leases and loans as well as other charges in our commercial finance operations.

A detailed description of the revenues generated by each of our business segments can be found under “Results of Operations: Financial Fund Management”, “Real Estate” and “Commercial Finance.”

Results of Operations: Financial Fund Management

We conduct our financial fund management operations through five principal subsidiaries:

· Apidos Capital Management, LLC, or Apidos, which invests in, finances, structures and manages investments in bank loans.

· Ischus Capital Management, LLC, or Ischus, which invests in, finances, structures and manages investments in asset-backed securities or ABS, including residential mortgage-backed securities, or RMBS, and commercial mortgage-backed securities, or CMBS.

· Trapeza Capital Management, LLC, or Trapeza, a joint venture between us and an unrelated third party, which originates, structures, finances and manages investments in trust preferred securities and senior debt securities of banks, bank holding companies, insurance companies and other financial companies.

· Resource Europe, which invests in, finances, structures and manages investments in international bank loans.

· Resource Financial Institutions Group, Inc., or RFIG, which serves as the general partner for four company sponsored affiliated partnerships which invest in financial institutions.

The following table sets forth information relating to assets managed by each of our principal financial fund management subsidiaries on behalf of institutional and individual investors and RCC (in millions):

	As of March 31, 2007
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total by Type
Apidos	$	1,476	$	615	$	402	$	2,493
Ischus		3,680		394		864		4,938
Trapeza		4,445		−		302		4,747
Resource Europe		−		−		403		403
Other Company sponsored partnerships		84		−		−		84
	$	9,685	$	1,009	$	1,971	$	12,665

	As of March 31, 2006
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total by Type
Apidos	$	337	$	342	$	150	$	829
Ischus		2,065		1,230		741		4,036
Trapeza		3,042		−		454		3,496
Other Company sponsored partnerships		16		−		−		16
	$	5,460	$	1,572	$	1,345	$	8,377

In our financial fund management segment, we earn fees on assets managed on behalf of institutional and individual investors as follows:

· Collateral management fees− We receive fees for managing the assets held by CDOs we sponsor. These fees vary by CDO, with our annual fee ranging between 0.08% and 0.75% of the aggregate principal balance of the collateral securities owned by the CDO issuers; and

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· Administration fees− We receive fees for managing the assets held by partnerships sponsored by us and for managing their general operations. These fees vary by limited partnership, with our annual fee ranging between 0.75% and 2.00% of the partnership capital balance.

We also receive distributions on our investments in the entities we manage which vary depending on our investment and, with respect to particular limited partnerships, with the terms of our general partner interest. We discuss the basis for our fees and revenues for each area in more detail in the following sections.

Apidos

We sponsored, structured and currently manage six CDO issuers for institutional and individual investors and RCC which hold approximately $2.1 billion in bank loans at March 31, 2007, of which $615.3 million are managed on behalf of RCC through Apidos CDO I and Apidos CDO III. In addition, at March 31, 2007, we managed $402.0 million of bank loans for two CDOs currently in their accumulation stage, one of which is managed on behalf of RCC. We expect to close one of these CDOs in the third quarter of fiscal 2007 and the other in a subsequent period.

We derive revenues from our Apidos operations through base and incentive management fees of up to 0.75% of the aggregate principal balance of the collateral held by the CDO issuers, of which a portion is subordinated to debt service payments on the CDOs, and interest income earned on the assets of certain issuers during the warehousing period prior to execution of a CDO.

Ischus

We sponsored, structured and currently manage six CDO issuers for institutional and individual investors and RCC, which hold approximately $4.1 billion in primarily real estate ABS including RMBS, CMBS and credit default swaps, of which $393.9 million is managed on behalf of RCC. In addition, at March 31, 2007, we managed $864.0 million of ABS for two CDOs currently in their accumulation stage, which we expect to close in subsequent periods.

We own a 50% interest in the general partner and manager of Structured Finance Fund, L.P. and Structured Finance Fund II, L.P., collectively referred to as the SFF partnerships. These partnerships own a portion of the equity interests of three Trapeza CDO issuers and Ischus CDO I. We also have invested as a limited partner in each of these limited partnerships.

We derive revenues from our Ischus operations through management and administration fees. We also receive distributions on amounts we invest in the limited partnerships. Management fees vary by CDO issuer, ranging from between 0.08% and 0.40% of the aggregate principal balance of the collateral held by the CDO issuer of which a portion is subordinated to debt service payments on the CDOs.

Trapeza

We have co-sponsored, structured and currently co-manage 12 CDO issuers holding approximately $4.4 billion in trust preferred securities of banks, bank holding companies, insurance companies and other financial companies. In addition, at March 31, 2007, we managed $302.3 million in trust preferred securities for three CDOs, all of which we expect to close in subsequent periods.

We own a 50% interest in an entity that manages 10 Trapeza CDO issuers and a 33.33% interest in another entity that manages two Trapeza CDO issuers. We also own a 50% interest in the general partners of the limited partnerships that own the equity interests of five Trapeza CDO issuers. We also have invested as a limited partner in each of these limited partnerships.

We derive revenues from our Trapeza operations through base and incentive management and administration fees. We also receive distributions on amounts we have invested in limited partnerships. Management fees, including incentive fees, vary by CDO issuer, but have ranged from between 0.25% and 0.60% of the aggregate principal balance of the collateral held by the CDO issuers of which a portion is subordinated. These fees are also shared with our co-sponsors. We are also entitled to incentive distributions in four of the partnerships we manage.

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Resource Europe

In April 2006, we commenced our European bank loan operations based in London, England. As of March 31, 2007, we managed $403.1 million in bank loan assets for two CDOs, one of which we expect to close in the third quarter of fiscal 2007 and one which we expect to close in a subsequent period.

Other Company-Sponsored Partnerships

We sponsored, structured and currently manage four affiliated partnerships for individual and institutional investors that invest in financial institutions. We derive revenues from these operations through an annual management fee, based on 2.0% of equity. We also have invested as the general partner of these partnerships and may receive a carried interest of up to 20% upon meeting specific investor return rates.

We have also sponsored, structured and currently manage another affiliated partnership organized as a hedge fund. We derive revenues from this partnership through base and incentive management fees. Base management fees are calculated monthly at 1/12^th of 2% of the partnership’s net assets. Incentive management fees are calculated annually at 20% of cumulative annual net profits. We also have invested as a limited partner in this partnership.

The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our financial fund management operations (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Revenues:
Fund management fees	$	5,698	$	1,997	$	10,606	$	3,213
Interest income on loans		6,734		−		9,946		2,341
Limited and general partner interests		1,087		1,393		2,566		2,939
RCC management fees and equity compensation		650		1,270		2,120		2,991
Earnings of Structured Finance Fund partnerships		531		555		1,060		1,091
Earnings on unconsolidated CDOs		579		113		1,024		133
Other		751		486		1,095		585
	$	16,030	$	5,814	$	28,417	$	13,293
Costs and expenses:
General and administrative expenses	$	4,883	$	2,388	$	8,761	$	4,346
Equity compensation expense		501		344		1,174		705
Expenses of Structured Finance Fund partnerships		17		33		18		13
	$	5,401	$	2,765	$	9,953	$	5,064

Fees and/or reimbursements that we receive vary by transaction and, accordingly, there may be significant variations in the revenues we recognize from our financial fund management operations from period to period.

Revenues - Three Months Ended March 31, 2007 as Compared to the Three Months Ended March 31, 2006

Revenues increased $10.2 million (176%) to $16.0 million for the three months ended March 31, 2007 from $5.8 million for the three months ended March 31, 2006. We attribute the increase to the following:

· a $3.7 million increase in fund management fees, primarily from the following:

- a $3.0 million increase in collateral management fees principally as a result of the completion of eight new CDOs coupled with a full quarter of collateral management fees for three previously completed CDOs; and

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- a $790,000 portfolio management fee received in connection with the formation of Trapeza CDO XII during the three months ended March 31, 2007. No such fee was received during the three months ended March 31, 2006.

· a $6.7 million increase in interest income on loans held for investment resulting from the consolidation of one Apidos and two Resource Europe CDO issuers in our financial statements while they accumulate assets through three separate warehouse facilities. The weighted average loan balances of CDO issuers we consolidate was $366.2 million (weighted average interest rate of 6.98%) for the three months ended March 31, 2007. In addition, $212,000 of miscellaneous fees are included in interest income on loans held for investment for the three months ended March 31, 2007. We did not consolidate any Apidos or Resource Europe CDO issuers during the three months ended March 31, 2006.

· a $306,000 decrease in revenues from our limited and general partner interests, primarily from the following:

- a $816,000 decrease in net unrealized appreciation in the book value of the partnership securities and swap agreements to reflect current market value, partially offset by

- a $510,000 increase in our limited and general partner share of the operating results of unconsolidated partnerships we have sponsored.

· a $620,000 decrease in RCC management fees and equity compensation, consisting of a $290,000 decrease in management fees as a result of the sale of RCC’s agency RMBS portfolio in the fourth quarter of fiscal 2006 and a $330,000 decrease in equity compensation.

· a $466,000 increase in our earnings in unconsolidated CDOs as a result of our investments in two new CDO issuers and an increase in earnings from investments in eight previously sponsored CDO issuers; and

· a $265,000 increase in other revenue primarily as a result of a $300,000 gain from the sale of a security during the three months ended March 31, 2007 (see Note 14 to the notes to consolidated financial statements). No such gain occurred during the three months ended March 31, 2006.

Costs and Expenses - Three Months Ended March 31, 2007 as Compared to the Three Months Ended March 31, 2006

Costs and expenses of our financial fund management operations increased $2.6 million (95%) for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006. We attribute the increase to the following:

· a $2.5 million increase in general and administrative expenses, primarily from the following:

- a $1.8 million increase in wages and benefits as a result of the addition of personnel in response to our growing assets under management;

- an $800,000 decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations; the amount of reimbursed expenses is primarily dependent upon the terms of the transaction; and

- a $394,000 increase in other operating expenses, primarily from insurance costs, rent allocations and other general and administrative expenses related to the addition of personnel.

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These increases were partially offset by:

- a $474,000 increase in reimbursed RCC operating expenses.

· a $157,000 increase in equity compensation expense related to the 344,079 of restricted shares of RCC that were held by RCM which have been transferred to members of management.

Revenues - Six Months Ended March 31, 2007 as Compared to the Six Months Ended March 31, 2006

Revenues increased $15.1 million (114%) to $28.4 million for the six months ended March 31, 2007 from $13.3 million for the six months ended March 31, 2006. We attribute the increase to the following:

· a $7.4 million increase in fund management fees, primarily from the following:

- a $5.8 million increase in collateral management fees principally as a result of the completion of eight new CDOs coupled with a full six months of collateral management fees for four previously completed CDOs;

- a $1.7 million increase in portfolio management fees received in connection with the formation of Trapeza CDO XI and Trapeza CDO XII during the six months ended March 31, 2007. No such fees were received during the six months ended March 31, 2006.

- a $315,000 increase in management fees from our five company-sponsored unconsolidated partnerships principally as a result of a full six months of management fees for two of the partnerships;

These increases were partially offset by:

- a $516,000 increase in the Company’s share of expenses for Trapeza Capital Management, LLC and Trapeza Management Group LLC.

· a $7.6 million increase in interest income on loans held for investment resulting from the consolidation of one Apidos and two Resource Europe CDO issuers in our financial statements while they accumulate assets through three separate warehouse facilities. The weighted average loan balances of CDO issuers we consolidate was $276.4 million (weighted average interest rate of 6.89%) for the six months ended March 31, 2007 and was $71.2 million (weighted average interest rate of 6.55%) for the six months ended March 31, 2006. In addition, $287,000 of miscellaneous fees are included in interest income on loans held for investment for the six months ended March 31, 2007. No miscellaneous fees were earned during the six months ended March 31, 2006. During the six months ended March 31, 2006, we consolidated one Apidos CDO issuers which was transferred upon the execution of the related CDO to the CDO issuer.

· a $373,000 decrease in limited and general partner interests, primarily from the following:

- a $1.4 million decrease in net unrealized appreciation in the book value of the partnership securities and swap agreements to reflect current market value; offset in part by

- a $988,000 increase from our limited and general partner share of the operating results of unconsolidated partnerships we have sponsored.

· an $871,000 decrease in RCC management fees and equity compensation, consisting of a $517,000 decrease in management fees as a result of the sale of RCC’s agency RMBS portfolio in the fourth quarter of fiscal 2006 and a $354,000 decrease in equity compensation received on the formation of RCC.

· an $891,000 increase in our earnings in unconsolidated CDOs as a result of our investments in four new CDO issuers and an increase in earnings from investments in six previously sponsored CDO issuers; and

· a $510,000 increase in other revenue primarily from the following:

- a $300,000 gain on the sale of a security during the six months ended March 31, 2007. No such gain occurred during the six months ended March 31, 2006; and

- a $404,000 increase in loan interest income resulting from the interest spread earned on assets accumulating with a third party through a warehouse facility based on the terms of a warehousing agreement.

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These increases were partially offset by:

- a $189,000 decrease in fees resulting from a transaction in which we facilitated the transfer of securities between two third party warehouse lenders.

Costs and Expenses − Six Months Ended March 31, 2007 as Compared to the Six Months Ended

March 31, 2006

Costs and expenses of our financial fund management operations increased $4.9 million (97%) for the six months ended March 31, 2007 as compared to the six months ended March 31, 2006. We attribute the increase to the following:

· a $4.4 million increase in general and administrative expenses, primarily from the following:

- a $3.2 million increase in wages and benefits as a result of the addition of personnel in response to growth in our assets under management;

- a $1.4 million decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations; the amount of reimbursed expenses is primarily dependent upon the terms of the transaction; and

- a $681,000 increase in other operating expenses, primarily from insurance costs, rent allocations and other general and administrative expenses related to the addition of personnel.

These increases were partially offset by:

- a $967,000 increase in reimbursed RCC operating expenses;

· a $469,000 increase in equity compensation expense related to the 344,079 restricted shares of RCC that were held by RCM which have been transferred to members of management.

Results of Operations: Real Estate

In our real estate segment, we manage three classes of assets:

· commercial real estate debt, principally first mortgage debt, whole loans, mortgage participations, subordinated notes, mezzanine debt and related commercial real estate securities;

· real estate investment limited partnerships, limited liability company and TIC property interests; and

· real estate loans, owned assets and ventures, known collectively as our legacy portfolio.

	As of March 31,
	2007		2006
	(in millions)
Assets under management:
Commercial real estate debt	$	732	$	212
Real estate investment entities		419		314
Legacy portfolio		101		112
	$	1,252	$	638

During the three and six months ended March 31, 2007, our real estate operations continued to be affected by two principal trends or events:

· the continued development of our commercial real estate debt platform; and

· growth in our real estate business through the sponsorship of real estate investment partnerships and the sponsorship of TIC property interests.

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We support our real estate investment partnerships by making long-term limited partnership investments. In addition, from time-to-time, we make bridge investments in the underlying partnerships and TIC property interests to facilitate acquisitions. We record losses on these equity method investments primarily as a result of depreciation and amortization expense recorded by the partnerships and TIC property interests. As additional investors are admitted to the partnerships and TIC programs, we transfer our bridge investment to new investors at our original cost and recognize a gain approximately equal to the previously recognized loss.

Gains on resolution of loans, FIN 46-R assets and other real estate assets (if any) and the amount of fees received (if any) vary from transaction to transaction. There have been in the past, and we expect that in the future, that there will be significant period-to-period variations in our gains on resolution and fee income. Moreover, it is anticipated that gains on resolution will likely decrease in the future as we complete the resolution of our legacy portfolio.

In the twelve months ended March 31, 2007, we resolved loans with a combined book value of $5.1 million, realizing $4.9 million in net proceeds. We reduced the number of loans in our portfolio from 10 at March 31, 2006 to nine at March 31, 2007 through the repayment of three loans, offset by the addition of two loans in conjunction with the resolution of one venture and one owned asset. In addition we sold 15% of a 30% interest in a real estate venture and received net proceeds of $2.9 million. As a result, the face value of the loans receivable that we manage in our legacy portfolio decreased from $84.0 million at March 31, 2006 to $78.3 million at March 31, 2007.

The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our real estate operations (in thousands):

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Revenues:
Fee income from sponsorship of partnerships, and TIC property interests	$	920		$	2,579		$	2,703		$	5,084
REIT management fees from RCC		1,575			255			2,585			495
FIN 46 revenues and rental property income		995			976			2,215			2,080
Property management fees		458			607			853			1,053
Interest, including accreted loan discount		232			259			457			514
Gains on resolutions of loans and other property interests		2,711			4,351			2,711			4,449
Income (losses) of unconsolidated entities		122			(79	)		(38	)		(411	)
Net (loss) gain on sales of TIC property interests		(5	)		258			86			596
	$	7,008		$	9,206		$	11,572		$	13,860
Costs and expenses:
General and administrative	$	2,461		$	1,991		$	4,714		$	3,627
FIN 46 operating and rental property expenses		734			723			1,494			1,352
	$	3,195		$	2,714		$	6,208		$	4,979

Revenues - Three Months Ended March 31, 2007 as Compared to the Three Months Ended March 31, 2006

Revenues decreased $2.2 million (24%) for the three months ended March 31, 2007 as compared to the prior year period. We attribute the decrease to the following:

·      a $1.7 million decrease in fee income related to the purchase and third-party financing of properties through the sponsorship of real estate investment partnerships and TIC property interests. We acquired two properties during the three months ended March 31, 2007, with an aggregate purchase price of $15.8 million; for the three months ended March 31, 2006, we acquired three properties, including one TIC property, with an aggregate purchase price of $54.6 million;

·      a $1.6 million decrease in gains on resolution. In the three months ended March 31, 2007, we received $2.9 million in net proceeds from the sale of a 15% interest in a real estate venture

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        resulting in a gain of $2.7 million; for the three months ended March 31, 2006 we received $4.0 million plus a $200,000 note receivable from the sale of a 20% interest in the same real estate venture, resulting in a gain of $4.2 million; and

·      a $263,000 decrease in net gains on sale of our real estate investment partnerships and TIC property interests. We sold 22% of our interest in one TIC property during the three months ended March 31, 2007; we sold 20% of our interest in one TIC property and 45% of our interest in a second during the three months ended March 31, 2006.

These decreases were partially offset by the following:

· a $1.3 million increase in REIT management fees due to an increase of $520.0 million to $732.0 million at March 31, 2007 from $212.0 million at March 31, 2006 in commercial real estate debt managed; and

· a $201,000 increase in our equity share of the operating results of unconsolidated real estate investments.

Costs and Expenses - Three Months Ended March 31, 2007 as Compared to the Three Months Ended March 31, 2006

Costs and expenses of our real estate operations were $3.2 million for the three months ended March 31, 2007, an increase of $481,000 (18%) as compared to the three months ended March 31, 2006. General and administrative expenses increased by $410,000 primarily due to increased wages and benefits as a result of theaddition of personnel to manage our expanded real estate operations through the sponsorship of real estate investment partnerships and TIC property interests.

Revenues - Six Months Ended March 31, 2007 as Compared to the Six Months Ended March 31, 2006

Revenues decreased $2.3 million (17%) to $11.6 million for the six months ended March 31, 2007 from $13.9 million in the six months ended March 31, 2006. We attribute the decrease to the following:

·     a $2.4 million decrease in fee income related to the purchase and third-party financing of property through the sponsorship of real estate investment partnerships and TIC property interests;

·     a $1.7 million decrease in gains on resolution of loans, FIN 46 assets and ventures. In the six months ended March 31, 2007 we received $2.9 million from the sale of a 15% interest in a real estate venture resulting in a gain of $2.7 million; for the six months ended March 31, 2006 we received $4.0 million plus a $200,000 note receivable from the sale of a 20% interest in the same real estate venture, resulting in a gain of $4.2 million; and

·      a $510,000 decrease in net gains on sale of our real estate investment partnerships and TIC property interests.

These decreases were partially offset by a $2.1 million increase in REIT management fees due to an increase of $520.0 million to $732.0 million at March 31, 2007 from $212.0 million at March 31, 2006 in commercial real estate debt managed.

Costs and Expenses − Six Months Ended March 31, 2007 as Compared to the Six Months Ended March 31, 2006

Costs and expenses of our real estate operations were $6.2 million for the six months ended March 31, 2007, an increase of $1.2 million (25%) as compared to the six months ended March 31, 2006. General and administrative expenses increased by $1.0 million primarily due to increased wages and benefits corresponding to our expanded real estate operations.

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Results of Operations: Commercial Finance

During the three and six months ended March 31, 2007, we continued to expand our commercial finance operations by increasing our assets under management to $736.6 million as of March 31, 2007 from $469.7 million as of March 31, 2006, an increase of $266.9 million (57%). During the three and six months ended March 31, 2007, we originated $129.9 million and $259.0 million in new equipment financing as compared to $93.6 million and $198.0 million for the three and six months ended March 31, 2006, an increase of $36.3 million (39%) and $61.0 million (31%), respectively. Our commercial finance origination growth was driven by our continued growth in new and existing vendor programs, the introduction of new equipment finance products and the expansion of our sales staff.

During the three and six months ended March 31, 2007, we sold $74.8 million and $139.6 million in equipment financing assets to our investment entities as compared to $105.1 million and $180.1 million for the three and six months ended March 31, 2006, a decrease of $30.3 million (29%) and $40.5 million (22%), respectively.

In December 2006, LEAF Equipment Leasing Income Fund III, or LEAF III, an equipment leasing partnership we sponsor, began a public offering of up to $120.0 million of limited partnership interests.

In March 2007, we entered a new line of business, Merit Capital Advance, LLC, or Merit, to provide capital to small businesses through a credit card receipt advance program. Merit’s capital needs are supported by a loan in the form of a $1.5 million subordinated convertible note and a $33.0 million line of credit with an international financial institution. The subordinated convertible debt is convertible into a 50% ownership interest in Merit on or after September 15, 2007. A subsidiary of LEAF has committed to a 9.1% (up to $3.0 million) participation in the $33.0 million credit facility. We anticipate that this business will begin to generate revenues in the fourth quarter of fiscal 2007.

The following table sets forth information related to the assets our commercial finance operations manage (in millions):

	As of March 31,
	2007		2006
LEAF Financial	$	201	$	53
LEAF I		88		80
LEAF II		326		75
LEAF III		24		0
RCC		88		62
Merrill Lynch		10		200
	$	737	$	470

As of March 31, 2007, we managed approximately 15,607 leases and notes that have an average original finance value $62,436 with an average lease term of 55 months. The following table sets forth certain information related to the types of businesses in which our commercial finance assets are used and the concentration by asset type of our portfolio under management as of March 31, 2007:

Lessee business			Equipment under management
Services	46	%		Medical	24	%
Finance/Insurance	16	%		Industrial	21	%
Retail trade services	8	%		Asset based lending	16	%
Manufacturing services	8	%		Computers	14	%
Transportation/Communication	7	%		Restaurant equipment	4	%
Construction	4	%		Office equipment	4	%
Agriculture	4	%		Garment care	4	%
Wholesaler trade	3	%		Communication	3	%
Other	4	%		Software	3	%
	100	%		Other	7	%
					100	%

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The revenues from our commercial finance operations consist primarily of finance revenues from leases and notes held by us prior to being sold, asset acquisition fees which are earned when commercial finance assets are sold to one of our investment partnerships and asset management fees earned over the life of the lease or loan after it is sold. The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our commercial finance operations (in thousands):

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Revenues:
Finance revenues	$	3,784	$	2,458	$	6,722	$	4,518
Acquisition fees		1,227		1,685		2,233		3,183
Fund management fees		2,989		1,071		5,447		2,410
Other		564		303		1,251		487
	$	8,564	$	5,517	$	15,653	$	10,598
Costs and expenses	$	4,560	$	3,553	$	8,191	$	6,471

(1) Total revenues include $317,000 and $665,000 from RCC for the three and six months ended March 31, 2007, respectively, and $529,000 and $626,000 for the three and six months ended March 31, 2006, respectively.

Revenues - Three and Six Months Ended March 31, 2007 as Compared to the Three and Six Months Ended March 31, 2006

Revenues increased $3.0 million (55%) and $5.1 million (48%) for the three and six months ended March 31, 2007, respectively, as compared to the prior year period.  We attribute these increases to the following:

· a $1.3 million (54%) and $2.2 million (49%) increase, respectively, in commercial finance revenues due to the growth in lease originations and our decision to hold more direct financing leases and notes on our balance sheet.  Commercial financing assets held by LEAF increased by $63.0 million and $92.0 million to $172.0 million at December 31, 2006 and $201.0 million at March 31, 2007. We increased our lease originations by $36.3 million (39%) and $61.0 million (31%) to $129.9 million and $259.0 million, respectively;

· a $458,000 (27%) and $950,000 (30%) decrease, respectively, in asset acquisition fees resulting from the decrease in leases sold as a result of our decision to hold a greater number of notes and direct financing leases on our balance sheet; and  

· a $1.9 million (179%) and $3.0 million (126%) increase, respectively, in fund management fees resulting from an increase in assets under management to $737.0 million at March 31, 2007 from $470.0 million at March 31, 2006; and

· a $261,000 (86%) and $764,000 (157%) increase, respectively, in other income primarily resulting from gains on dispositions and document fee income, which may vary significantly from period to period.

Costs and Expenses - Three and Six Months Ended March 31, 2007 as Compared to the Three and Six Months Ended March 31, 2006

Costs and expenses increased $1.0 million (28%) and $1.7 million (27%), respectively, primarily due to increased compensation and benefits costs of $900,000 and $1.6 million, respectively. We increased the number of employees by 70 (67%) to 175 at March 31, 2007 from 107 at March 31, 2006 to support the growth of our operations. 

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Results of Operations: Other Costs and Expenses and Other Income (Expense)

General and administrative costs were $2.8 million and $5.6 million for the three and six months ended March 31, 2007, respectively, an increase of $518,000 (23%) and $127,000 (2%) as compared to $2.2 million and $5.5 million for the three and six months ended March 31, 2006, respectively. Payroll and related benefit costs increased by $371,000 and $146,000 or the three and six months ended March 31, 2007, respectively, in conjunction with the growth in our asset management operations.

Depreciation and amortization expense was $719,000 and $1.4 million for the three and six months ended March 31, 2007, a decrease of $117,000 (14%) and $246,000 (15%) as compared to $836,000 and $1.7 million for the three and six months ended March 31, 2006, respectively. This decrease relates to the reduction in the average balance of operating leases held by our commercial finance operations by $2.3 and $3.3 million for the three and six months ended March 31, 2007, respectively.

Interest expense was $7.7 million and $12.3 million for the three and six months ended March 31, 2007, respectively, an increase of $6.3 million (462%) and $8.6 million (235%) as compared to $1.4 million and $3.7 million for the three and six months ended March 31, 2006, respectively. Expanded utilization of our secured warehouse credit facilities to purchase loans held for investment by our financial fund management business increased interest expense by $4.7 million and $5.4 million for the three and six months ended March 31, 2007, respectively. In addition, increased draws on our commercial finance credit facilities to fund the growth of our commercial finance note and loan originations and entry into asset-backed lending in connection with higher interest rates on borrowings caused an increase in interest expense of $1.4 million and $2.7 million for the three and six months ended March 31, 2007, respectively.

For the three and six months ended March 31, 2007, our operations reflected a charge of $715,000 and $1.3 million, respectively, to earnings for minority interests related to the SFF entities and participation interest by certain CDOs. At March 31, 2007, we owned a 15% and 36% limited partner interest in SFF I and SFF II, respectively, which invest in the equity of CDO issuers we have formed. In addition, certain warehouse providers are entitled to receive between 10% and 15% of the interest spread earned on consolidating Apidos and Resource Europe bank loan assets accumulating on associated warehouse facilities.

Other income, net, was $1.8 million and $4.3 million for the three and six months ended March 31, 2007, respectively, a decrease of $152,000 (8%) and an increase of $1.5 million (53%) as compared to $2.0 million and $2.8 million for the three and six months ended March 31, 2006, respectively. The principal components of other income, net, are as follows:

· during the three and six months ended March 31, 2007, we recorded gains of $805,000 and $2.2 million, respectively, from the sale of a total of 130,000 shares of The Bancorp, Inc. common stock which are classified as investment securities available-for-sale; and

· in fiscal 2002, we charged operations $1.0 million, which was the amount of our maximum exposure relating to the settlement of a lawsuit. One of the insurance carriers refused to participate in the settlement. In the second quarter of fiscal 2006, we prevailed in our action against the carrier, received a $200,000 reimbursement and reversed the $1.0 million accrual.

Our effective tax rate (income taxes as a percentage of income from continuing operations before taxes) decreased to 35% for the three months ended March 31, 2007 from a tax rate of 43% for the three months ended March 31, 2006. During the three months ended March 31, 2007, we have continued to evaluate our previously implemented tax planning strategies, projections for future profitability and legislative changes. Based on this evaluation, management believes that it is more likely than not that we will be able to utilize an additional $6.4 million of state and local net operating losses, or NOLs, prior to their expiration. Accordingly, $496,000 of the valuation allowance was reversed. Our effective tax rate, as adjusted to exclude this benefit, would have been 41% for the three months ended March 31, 2007.

Our effective tax rate for the six months ended March 31, 2007 increased to 34%, including the $1.2 million reversal of the valuation allowance, from a tax rate of 18%, inclusive of a $3.2 million reversal of the valuation allowance for the six months ended March 31, 2006. We project our effective tax rate for the next two fiscal quarters to be 42%, resulting in a 39% projected annual effective tax rate for fiscal 2007.

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Discontinued Operations

In accordance with SFAS 144, "Accounting for the Impairment or Disposal of Long Lived Assets," our decision to dispose of certain entities has resulted in the presentation of these operations as discontinued.

Discontinued operations, principally from our real estate segment, were as follows (in thousands):

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Operating (loss) income (period prior to dispositions)	$	(57	)	$	1,206		$	(86	)	$	2,525
Loss on disposal		−			(974	)		−			(824	)
Benefit (provision) for income taxes		20			(80	)		30			(611	)
Discontinued (loss) income loss, net of tax	$	(37	)	$	152		$	(56	)	$	1,090

The activity in the number of real estate investments held for sale, including FIN 46-R entities and owned properties, was as follows:

	Three Months Ended					Six Months Ended
	March 31,					March 31,
	2007		2006			2007		2006
Balance, beginning of period	$	1	$	4		$	1	$	6
Net additions		−		−			−		1
Resolved		−		(1	)		−		(4	)
Balance, end of period	$	1	$	3		$	1	$	3

Cumulative Effect of Change in Accounting Principle

Historically, we presented our equity in the earnings and losses of the Trapeza entities on a one-quarter lag as permitted under generally accepted accounting principles. Improvements in the timeliness and availability of financial data from the Trapeza entities allowed us to report our share in the earnings of these entities on a current basis as of October 1, 2005. As a result of this change, our equity in the earnings of the Trapeza entities of $1.4 million, net of tax of $983,000 for the three months ended September 30, 2005 has been reflected in the consolidated statements of income as a cumulative change in accounting principle as of October 1, 2005.

Liquidity and Capital Resources

General. Our major sources of liquidity have been from borrowings under our existing credit facilities, the resolution of our real estate legacy portfolio, and the proceeds from the sale of the TBBK shares we hold. We have employed these funds principally to expand our specialized asset management operations, including our sponsorship and investment in RCC and the repurchase of our common stock. We expect to fund our asset management businesses from a combination of cash to be generated by operations, continued resolution of our legacy portfolio and expanded borrowings under our existing credit facilities. The following table sets forth our sources and uses of cash for the periods presented (in thousands):

	Six Months Ended
	March 31,
	2007			2006
Used in operating activities of continuing operations	$	(92,894	)	$	(8,087	)
Used in investing activities of continuing operations		(19,187	)		(24,387	)
Provided by financing activities of continuing operations		93,852			11,077
(Used in) provided by discontinued operations		(1,194	)		35,952
Cash retained by entities previously consolidated		−			(3,825	)
(Decrease) increase in cash	$	(19,423	)	$	10,730

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We had $18.2 million in cash and cash equivalents at March 31, 2007, a decrease of $19.4 million (52%) from $37.6 million at September 30, 2006. Our ratio of earnings from continuing operations before income taxes, minority interest and interest expense to fixed charges was 2.3 to 1.0 for the six months ended March 31, 2007 as compared to 5.1 to 1.0 for the six months ended March 31, 2006. The decrease in this ratio reflects primarily the increase in interest expense associated with the increased utilization of our secured warehouse credit facilities to purchase loans held for sale as well as increased borrowings under our commercial finance secured credit facilities to support the expanded operations of that segment. This increase in debt is further reflected in the increase in our ratio of debt to equity to 342% at March 31, 2007 from 89% at September 30, 2006.

Cash Flows from Operating Activities.Net cash used in operating activities of continuing operations increased by $84.8 million to a $92.9 million use of cash for the six months ended March 31, 2007 from a $8.1 million use of cash for the six months ended March 31, 2006, substantially as a result of a $79.8 million increase in investments in commercial finance, reflecting our expanded operations in that business segment.

Cash Flows from Investing Activities.Net cash used by our investing activities of continuing operations decreased by $5.2 million for the six months ended March 31, 2007 as compared to the six months ended March 31, 2006, primarily reflecting the following:

· a $33.1 million decrease in purchases of investment securities available-for-sale, which includes a $15.1 million decrease in investments in real estate, primarily TIC properties, the prior year purchase of $13.5 million worth of RCC stock (900,000 shares at $15 per share), and a decrease of $5.2 million in investments in CDOs and private equity funds; offset by

· a $14.0 million increase in restricted cash balances related to escrow deposits maintained on CDO and commercial finance warehouse facilities;

· a $12.0 million decrease in proceeds received from the sale of real estate properties, principally from the sale of TIC property interests to investors; and

· a $1.9 million use of cash from an increase in other assets.

Cash Flows from Financing Activities. Net cash provided by the financing activities of our continuing operations increased by $82.8 million for the six months ended March 31, 2007 as compared to the six months ended March 31, 2006. This increase in our cash flows principally due to the following:

· a $72.0 million increase in our borrowings, net of repayments, reflecting the additional net borrowings to fund the expanded operations of our commercial finance business;

· a $8.4 million increase in cash as a result of the purchase of 482,000 shares of treasury stock in the six months ended March 31, 2006. No treasury shares were purchased in the six months ended March 31, 2007; and

·a $1.9 million tax benefit from the exercise of employee stock options.

Cash Retained by Entities Previously Consolidated. As of March 31, 2006, we ceased to consolidate with two affiliated partnerships that invest in regional banks due to a change in the rights of the limited partners to remove us as the general partner. Accordingly, the statement of cash flows for the six months ended March 31, 2006 reflects the $3.8 million decrease in cash from these entities that had been previously consolidated.

Cash Flows from Discontinued Operations. Net cash provided by discontinued operations decreased by $37.1 million, principally reflecting $36.8 million from the sale of four FIN 46-R assets during the six months ended March 31, 2006. There were no corresponding sales in the six months ended March 31, 2007.

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Capital Requirements

The amount of funds we must commit to investments in our financial fund management, real estate and commercial finance operations depends upon the level of funds raised through financial fund management, real estate and commercial finance programs. We believe cash flows from operations, cash and other working capital and amounts available under our credit facilities will be adequate to fund our contribution to these programs. However, the amount of funds we raise and the level of our investments will vary in the future depending on market conditions.

Contractual Obligations and Other Commercial Commitments

The following tables summarize our contractual obligations and other commercial commitments at March 31, 2007 (in thousands):

			Payments Due By Period
	Total		Less than 1 Year		1 - 3 Years		4 - 5 Years		After 5 Years
Contractual obligations:
Long-term debt (1)	$	17,486	$	819	$	3,234	$	12,852	$	581
Secured credit facilities (1)		179,607		103,313		76,294		−		−
Capital lease obligations (1)		140		39		101		−		−
Operating lease obligations		8,830		2,344		3,052		655		2,779
Purchase obligations		-		-		-		-		-
Other long-term liabilities		585		281		304		-		-
Total contractual obligations	$	206,648	$	106,796	$	82,985	$	13,507	$	3,360

(1) Not included in the table above are estimated interest payments calculated at rates in effect at March 31, 2007 as follows: less than 1 year: $9.0 million; 1-3 years: $8.1 million; 4-5 years: $4.9 million; and after 5 years: $52,000.

			Amount of Commitment Expiration Per Period
	Total		Less than 1 Year		1 - 3 Years		4 - 5 Years		After 5 Years
Other commercial commitments:
Guarantees	$	51,144	$	51,144	$	−	$	−	$	−
Standby letters of credit		246		246		−		−		−
Standby replacement commitments		−		−		−		−		−
Other commercial commitments		472,655		92,927		64,654		7,118		307,956
Total commercial commitments	$	524,045	$	144,317	$	64,654	$	7,118	$	307,956

Senior lien financing obtained with respect to certain acquired properties, TIC investment programs and real estate loans are with recourse only to the properties securing them, subject to certain standard exceptions. We provide guarantees on these senior liens, TIC programs, and loans totaling $443.0 million which expire as the related indebtedness is paid down over the next ten years.

Through our financial fund management subsidiary, we have commitments to purchase equity for all CDOs currently in their warehouse stage. These equity commitments, which total $26.7 million as of March 31, 2007, are contingent upon the successful completion of the respective CDOs over the next twelve months. Upon the close of each CDO, the actual amount of equity purchased may be less than the original committed amount.

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A subsidiary of LEAF has a $33.0 million non-recourse line of credit with an international financial institution that expires on September 15, 2008. LEAF has committed to a 9.1% participation, to a maximum of $3.0 million of this facility. As of March 31, 2007, there were no outstanding borrowings under this line.

Under the January 2007 warehouse agreement with Morgan Stanley, we guarantee the first $14.2 million of losses on a portfolio of bank loans. This guarantee, secured by a $4.0 million cash deposit, expires upon the closing of the associated CDO which we anticipate will occur in the first quarter of fiscal 2008.

Under the August 2006 warehouse agreement with Credit Suisse, we guarantee the first $15.0 million of losses on a portfolio of bank loans. This guarantee, secured by a $5.0 million cash deposit, expires upon the closing of the associated CDO which we anticipate will occur in the fourth quarter of fiscal 2007.

We are party to various routine legal proceedings arising out of the ordinary course of our business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations.

Critical Accounting Policies

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. In preparing these statements, we must make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the provision for possible losses, deferred tax assets and liabilities and certain accrued liabilities. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a detailed discussion on the application of policies critical to our business operations and other accounting policies, see our Annual Report on Form 10-K for fiscal 2006, at Note 2 of the “Notes to Consolidated Financial Statements.”

Recently Issued Financial Accounting Standards

In February 2007, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, 159 "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of SFAS 115", which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. Entities choosing the fair value option would be required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. We are currently evaluating the expected effect of SFAS 159 on our consolidated financial statements.

In September 2006, the FASB issued SFAS, 157, “Fair Value Measurements,” or SFAS 157, which provides guidance on measuring the fair value of assets and liabilities. SFAS 157 will apply to other accounting pronouncements that require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances. This standard will also require additional disclosures in both annual and quarterly reports. SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by us in the first quarter of our fiscal year 2009. We are currently determining the effect, if any, the adoption of SFAS 157 will have on our financial statements.

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    In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin, or SAB, 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” or SAB 108. SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  It establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company's financial statements and the related financial statement disclosures.  SAB 108 is effective for our current fiscal year ending September 30, 2007. Management does not believe adoption of SAB 108 will have a material impact on our consolidated financial statements.

On July 13, 2006, the FASB issued Interpretation, or FIN 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of SFAS 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective as of the beginning of the first fiscal year beginning after December 15, 2006 with early adoption permitted if no interim financial statements have been issued. We will not elect for early adoption of FIN 48; accordingly, the provisions of FIN 48 will be implemented in the quarter ending December 31, 2007. We are currently determining the effect, if any, the adoption of FIN 48 will have on our financial statements.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The following discussion is not meant to be a precise indicator of expected future losses, but rather an indicator of reasonable possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk-sensitive instruments were entered into for purposes other than trading.

General

We are exposed to various market risks, principally fluctuating interest rates. These risks can impact our results of operations, cash flows and financial position. We manage these risks through regular operating and financing activities.

The following analysis presents the effect on our earnings, cash flows and financial position as if hypothetical changes in market risk factors occurred at March 31, 2007. We analyze only the potential impacts of hypothetical assumptions. Our analysis does not consider other possible effects that could impact our business.

Financial Fund Management

At March 31, 2007, we had three outstanding secured warehouse facilities to purchase bank loans with balances of $90.2 million, $129.2 million and $275.8 million at interest rates of 4.78%, 5.95% and 4.58%, respectively. A hypothetical 10% change in the interest rates on these facilities would change our annual interest expense by a total of approximately $735,000 based on projected CDO execution dates.

Real Estate

Portfolio Loans and Related Senior Liens. As of March 31, 2007, we believe that none of the three loans held in our portfolio that have senior liens are sensitive to changes in interest rates since:

· the loans are subject to forbearance or other agreements that require all of the operating cash flow from the properties underlying the loans, after debt service on senior lien interests, to be paid to us and therefore are not currently being paid based on the stated interest rates of the loans;

· the senior lien interests ahead of our interests are at fixed rates and are not subject to interest rate fluctuation that would affect payments to us; and

· each loan has significant accrued and unpaid interest and other charges outstanding to which cash flow from the underlying property would be applied even if cash flows were to exceed the interest due, as originally underwritten.

FIN 46-R Loans. One mortgage that we consolidate at March 31, 2007 as a result of FIN 46-R is at a fixed interest rate and, therefore, not subject to interest rate fluctuations.

Commercial Finance

At March 31, 2007, we had $71.5 million of borrowings outstanding under a secured revolving credit facility at an interest rate of 6.89%. A hypothetical 10% change in the interest rate on this facility would change our annual interest expense by $311,000. In addition, we had $102.1 million of outstanding borrowings under a secured revolving credit facility with Morgan Stanley at March 31, 2007. This facility is not subject to fluctuation in the interest rates because we have entered into interest rate swap agreements which fix the interest rate.

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ITEM 4.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our disclosure committee, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

During the three months ended March 31, 2007, there were no significant changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

In fiscal 2002, we charged operations $1.0 million, the amount of our maximum exposure relating to the settlement of a lawsuit.  One of the insurance carriers refused to participate in the settlement. In April 2003, we filed an action in the Philadelphia County Court of Common Pleas seeking recovery on our policy with that carrier. In the second quarter of fiscal 2006, we prevailed in our action against the carrier, received a $200,000 reimbursement, and reversed the $1.0 million accrual.

We are a party to various routine legal proceedings arising out of the ordinary course of our business.  Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations. 

ITEM 6.EXHIBITS

Exhibit No.Description

3.1	Restated Certificate of Incorporation of Resource America. (1)
3.2	Amended and Restated Bylaws of Resource America. (1)
10.14	Form of Stock Award Agreement (2)
10.16	U.S. $250,000,000 Receivables Loan and Security Agreement, dated as of October 31, 2006, among Resource Capital Funding II, LLC, as the Borrower, and LEAF Financial Corporation, as the Servicer, and Morgan Stanley Bank, as a Lender and Collateral Agent, and U.S. Bank National Association, as the Custodian and the Lender’s Bank and Lyon Financial Services, Inc. (D/B/A U.S. Bank Portfolio Services), as the Backup Servicer. (3)
10.16(a)	First Amendment to Receivables Loan and Security Agreement, dated as of October 31, 2006. (3)
10.16(b)	Purchase and Sale Agreement, dated as of October 31, 2006. (3)
10.16(c)	First amendment to Purchase and Sale Agreement, dated as of December 21, 2006. (3)
10.16(d)	Morgan Stanley Bank, Fee Letter, dated October 31, 2006 (3)
10.17	Second Amendment to Credit Agreement, dated December 2006, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (3)
10.17(c)	Third Amendment to Credit Agreement, dated March 14, 2007, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank.
10.18	Limited Liability Company Agreement of LEAF Ventures, LLC, dated March 2007, between LEAF Financial Corporation and Crit DeMent, Miles Herman, Robert Moskovitz, David English, Matthew Goldenberg and Nicholas Capparelli.
10.19	Credit Agreement, dated March 15, 2007, between Merit Capital Advance, LLC and Deutsche Bank AG Cayman Islands
10.19(a)	Limited Liability Company Agreement of Merit Capital Advance, LLC, dated March 15, 2007.
10.19(b)	Merit Capital Advance, LLC 15% Subordinated Convertible PIK Note, dated March 15, 2007.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended December 31, 1999 and by this reference incorporated herein.

(2) Filed previously as an exhibit to our Report on Form 8-K filed on February 15, 2005 and by this reference incorporated herein.

(3) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 and by this reference incorporated herein.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RESOURCE AMERICA, INC.
	(Registrant)
Date: May 4, 2007	By:/s/ Steven J. Kessler
	STEVEN J. KESSLER
	Executive Vice President and Chief Financial Officer

Date: May 4, 2007	By:/s/ Arthur J. Miller
	ARTHUR J. MILLER
	Vice President and Chief Accounting Officer

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EX-10.17(C)

(Back to Main Document)

THIRD AMENDMENT TO CREDIT AGREEMENT

This THIRD AMENDMENT TO CREDIT AGREEMENT (the “Third Amendment”) dated March 14, 2007, is by and among LEAF FINANCIAL CORPORATION, a Delaware corporation (“LEAF Financial”), and LEAF FUNDING, INC., a Delaware corporation (“LEAF Funding” and together with LEAF Financial, each individually a “Borrower” and individually and collectively, jointly and severally, the “Borrowers”), the various financial institutions and other Persons parties hereto (the “Lenders”), and National City Bank, as administrative agent and collateral agent for the Lenders (in such capacity, the “Agent”).

BACKGROUND

A.Pursuant to that certain Credit Agreement dated July 31, 2006, by and among the Borrowers, the Lenders, and the Agent, as amended by a First Amendment dated August 14, 2006 and a Second Amendment dated December 22, 2006 (as the same may be modified and amended from time to time, including by this Third Amendment, the “Credit Agreement”), the Lenders agreed, inter alia, to extend to the Borrowers a revolving credit facility in the maximum aggregate principal amount of $150,000,000.

B.The Borrowers have requested an amendment to the Credit Agreement permitting certain Investments, to which the Lenders are willing to agree, on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1.Definitions.

(a)General Rule. Except as expressly set forth herein, all capitalized terms used and not defined herein shall have the respective meanings ascribed thereto in the Credit Agreement.

(b)Additional Definitions. The following additional definitions shall be added to Article 1 of the Credit Agreement to read in their entirety as follows:

“Credit Card Business” meansthe business of providing merchant advance financing to small businesses (and activities reasonably incidental, complementary or substantially similar thereto).

“Credit Card Subsidiary” means, so long as such entities are engaged solely in the Credit Card Business, Merit Capital Advance, LLC, a Delaware limited liability company, Merit Capital Manager, LLC, a Delaware limited liability company, and LEAF Ventures.

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“LEAF Ventures” means LEAF Ventures, LLC, a Delaware limited liability company.

“Third Amendment” means the Third Amendment to this Agreement dated March 14, 2007.

(c)Amended Definition. The following definition in Article 1 of the Credit Agreement shall be amended and restated to read in its entirety as follows:

“Subsidiary” means, with respect to any Person, any other Person of which more than 50% of the Voting Securities of such other Person (irrespective of whether at the time Capital Securities of any other class or classes of such other Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Notwithstanding the foregoing, the term “Subsidiary” shall not include any LEAF SPE or any Credit Card Subsidiary (provided that any Credit Card Subsidiary shall still be deemed an “Affiliate” of the Borrowers for purposes of Section 10.9 hereof). Unless the context otherwise specifically requires, the term “Subsidiary” shall be a reference to a Subsidiary of a Borrower.

2.Amendment to Section 10.4. Subsection (a) of Section 10.4 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(a)Investments (i) identified on Schedule 6.8 or Schedule 10.4, together with any future transfers of Investments described on Schedule 6.8, subject to the additional covenants set forth on Schedule 6.8, and (ii) made by LEAF Financial in LEAF Ventures out of funds contributed to LEAF Financial (to the extent such Investments in LEAF Ventures not to exceed $5,500,000);”

3.Representations and Warranties. Each Borrower hereby represents and warrants to the Agent and each Lender that, as to such Borrower:

(a)Representations. each of the representations and warranties of such Borrower contained in the Credit Agreement and/or the other Credit Documents are true, accurate and correct in all material respects on and as of the date hereof as if made on and as of the date hereof, except to the extent such representation or warranty was made as of a specific date;

(b)Power and Authority. (i) such Borrower has the power and authority under the laws of its jurisdiction of organization and under its organizational documents to enter into and perform this Third Amendment and any other documents which the Lenders require such Borrower to deliver hereunder (this Third Amendment and any such additional documents delivered in connection with the Third Amendment are herein referred to as the “Amendment Documents”); and (ii) all actions, corporate or otherwise, necessary or appropriate for the due

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execution and full performance by the Borrower of this Third Amendment have been adopted and taken and, upon their execution, the Credit Agreement, as amended by this Third Amendment will constitute the valid and binding obligations of the Borrower enforceable in accordance with their respective terms (except as may be limited by applicable insolvency, bankruptcy, moratorium, reorganization, or other similar laws affecting enforceability of creditors’ rights generally and the availability of equitable remedies);

(c)No Violations of Law or Agreements. the making and performance of this Third Amendment will not violate any provisions of any law or regulation, federal, state, local, or foreign, or the organizational documents of such Borrower, or result in any breach or violation of, or constitute a default or require the obtaining of any consent under, any agreement or instrument by which such Borrower or its property may be bound;

(d)No Default. no Default or Event of Default has occurred and is continuing; and

(e)No Material Adverse Effect. no Material Adverse Effect has occurred since July 31, 2006.

4.Conditions to Effectiveness of Amendment. This Third Amendment shall be effective upon the Agent’s receipt of the following, each in form and substance reasonably satisfactory to the Lenders:

(a)Third Amendment. this Third Amendment, duly executed by the Borrowers and the Lenders;

(b)Consent and Waivers. copies of any consents or waivers necessary in order for the Borrowers to comply with or perform any of its covenants, agreements or obligations contained in any agreement, which are required as a result of the Borrowers’ execution of this Third Amendment, if any; and

(c)Other Documents and Actions. such additional agreements, instruments, documents, writings and actions as the Lenders may reasonably request.

5.No Waiver; Ratification. The execution, delivery and performance of this Third Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders under the Credit Agreement or any Credit Document, or constitute a waiver of any provision thereof. Except as expressly modified hereby, all terms, conditions and provisions of the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed by any Borrower. Nothing contained herein constitutes an agreement or obligation by the Agent or any Lender to grant any further amendments to any of the Credit Documents.

6.Acknowledgments. To induce the Lenders to enter into this Third Amendment, each Borrower acknowledges, agrees, warrants, and represents that:

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               (a)Acknowledgment of Obligations; Collateral; Waiver of Claims. (i) the Credit Documents are valid and enforceable against, and all of the terms and conditions of the Credit Documents are binding on, the Borrowers; (ii) the liens and security interests granted to the Agent by the Borrowers pursuant to the Credit Documents are valid, legal and binding, properly recorded or filed and first priority perfected liens and security interests; and (iii) the Borrowers hereby waive any and all defenses, set-offs and counterclaims which they, whether jointly or severally, may have or claim to have against the Agent or any Lender as of the date hereof; and

(b)No Waiver of Existing Defaults. no Default or Event of Default exists immediately before or immediately after giving effect to this Third Amendment. Nothing in this Third Amendment nor any communication between the Agent, any Lender, any Borrower or any of their respective officers, agents, employees or representatives shall be deemed to constitute a waiver of (i) any Default or Event of Default arising as a result of the foregoing representation proving to be false or incorrect in any material respect; or (ii) any rights or remedies which the Agent or any Lender has against any Borrower under the Credit Agreement or any other Credit Document and/or applicable law, with respect to any such Default or Event of Default arising as a result of the foregoing representation proving to be false or incorrect in any material respect.

7.Binding Effect. This Third Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

8.Governing Law. This Third Amendment and all rights and obligations of the parties hereunder shall be governed by and be construed and enforced in accordance with the laws of the internal laws of the Commonwealth of Pennsylvania.

9.Headings. The headings of the sections of this Third Amendment are inserted for convenience only and shall not be deemed to constitute a part of this Third Amendment.

10.Counterparts. This Third Amendment may be executed in any number of counterparts with the same affect as if all of the signatures on such counterparts appeared on one document and each counterpart shall be deemed an original.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Credit Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above.

LEAF FINANCIAL CORPORATION

By: ________________________________

Name:

Title:

LEAF FUNDING, INC.

By: ________________________________

Name:

Title:

Borrowers Signature Page

Third Amendment to Credit Agreement

ACKNOWLEDGEMENT OF GUARANTORS

The undersigned, each by its elected officer duly authorized as of the date set forth below, having previously executed and delivered to the Agent, pursuant to the Credit Agreement (the “Credit Agreement”) being amended by this Third Amendment (the “Third Amendment”), that certain Guaranty and Suretyship Agreement, dated July 31, 2006, (the “Guaranty”), securing the Obligations under the Credit Agreement, does hereby consent and agree to the above terms and conditions of this Third Amendment, together with the First Amendment, including, without limitation, specifically as to Section 5 of the Third Amendment amending the Guaranty, and confirms that the Guaranty is in full force and effect, without any setoff, counterclaim, deduction or other claim of avoidance of any nature (except as therein expressly provided).

RESOURCE AMERICA, INC.

By: _________________________

Name:

Title:

RESOURCE LEASING, INC.

By: _________________________

Name:

Title:

Dated this March 14, 2007

Guarantors Signature Page

Third Amendment to Credit Agreement

NATIONAL CITY BANK,

as Agent, Swingline Lender and as a Lender

By: ________________________________

Name:

Title:

Agent Signature Page

Third Amendment to Credit Agreement

HSH NORDBANK AG, NEW YORK BRANCH

By: ________________________________

Name:

Title:

By: ________________________________

Name:

Title:

Lender Signature Page

Third Amendment to Credit Agreement

SOVEREIGN BANK

By: ________________________________

Name:

Title:

Lender Signature Page

Third Amendment to Credit Agreement

LASALLE BANK NATIONAL ASSOCIATION

By: ________________________________

Name:

Title:

Lender Signature Page

Third Amendment to Credit Agreement

COMMERCE BANK, N.A.

By: ________________________________

Name:

Title:

Lender Signature Page

Third Amendment to Credit Agreement

WACHOVIA BANK, NATIONAL

    ASSOCIATION

By: ________________________________

Name:

Title:

EX-10.18

(Back to Main Document)

LIMITED LIABILITY COMPANY AGREEMENT

OF

LEAF VENTURES, LLC

(a Delaware Limited Liability Company)

THIS LIMITED LIABILITY COMPANY AGREEMENT is made as of March ____, 2007, by which LEAF Financial Corporation (the “Class A Member”), Crit DeMent, Miles Herman, Robert Moskovitz, David English, Matthew Goldenberg and Nicholas Capparelli (individually each a “Class B Member” and collectively the “Class B Members”), establish and organize a limited liability company (the “Company”) to be managed by the Class A Member. The Class A Member and the Class B Member are sometimes collectively referred to as the “Members”. The Members, intending to be legally bound, hereby set forth the terms of their agreement as to the affairs of the Company and the conduct of its business, as follows:

DEFINITIONS

As used in this Agreement, the capitalized terms shall have the following meanings:

“Act” shall mean the Delaware Limited Liability Company Act, as amended, and any successor act.

“Affiliate” means (i) a Person defined as an affiliate in Section 101 of the United States Bankruptcy Code, including all insiders (as defined in Section 101), or (ii) any Person controlled by, controlling or under common control with a Person.

“Agreement” shall mean this Limited Liability Company Agreement, as amended.

“Capital” shall mean the sum of all of the money and other property contributed to the Company by the Members as provided herein.

“Capital Account” shall mean the book capital account established and maintained for each Member.

“Capital Contributions” shall mean all contributions to the Capital of the Company made by the Members under the terms of this Agreement.

“Capital Contribution” shall mean each initial and any subsequent contribution to the Capital of the Company by a Member.

“Capital Transaction” shall mean any sale, transfer, financing, refinancing, exchange or other disposition of all or substantially all of the assets of the Company, not in the ordinary course of business.

“Capital Transaction Proceeds” shall mean all cash receipts of the Company arising from a Capital Transaction (including principal and interest received on a debt obligation received as consideration, in whole or in part, on a sale of assets and the net proceeds of

refinancing of any indebtedness of the Company), less all expenses incurred and reserves determined by the Class A Member to be necessary in connection with the Capital Transaction; provided, however, that neither distributions which are deemed returns of Capital for Federal income tax purposes nor the payment of Capital Contributions by the Members shall be included within the meaning of the term Capital Transaction Proceeds.

“Certificate” shall mean the Certificate of Formation of the Company as filed with the Delaware Secretary of State, including any and all amendments thereto.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Distributable Cash” shall mean, for any Fiscal Year (as defined in Section 4 hereof) or portion thereof, Gross Revenues minus the total annual cash expenditures of the Company (excluding cash expenditures attributable to a Capital Transaction) and any additions to cash reserves of the Company as determined by the Class A Member for such period.

“Gross Revenues” shall mean, for any Fiscal Year or portion thereof, the total cash gross receipts from operations of the Company from all sources (but excluding Capital Transaction Proceeds), Capital Contributions and the proceeds of any loans made to the Company) for such period.

“Interest” or “Interest in the Company” shall mean the ownership interest of each Member in the Company as set forth in Schedule A, as Schedule A may be amended from time to time.

“Merit Capital Advance LLC Agreement” shall mean the limited liability company agreement of Merit Capital Advance, LLC, a Delaware limited liability company.

“Person” shall mean any individual, corporation, partnership, limited liability company, trust or other entity.

“Regulations” shall mean the regulations promulgated from time to time by the U.S. Treasury Department under the Code.

“Transfer” shall mean any and all types of transfers including, but not limited to, any sale, conveyance, assignment, disposition, distribution, encumbrance, pledge, mortgage, hypothecation or gift.

“Units” shall mean a representation of a Member’s respective Interest in the Company.

Any capitalized terms not defined above shall have the meanings ascribed to them in the relevant sections of this Agreement.

1.FORMATION AND NAME

   The parties to this Agreement agree to establish and organize a limited liability company pursuant to the Act, upon the terms set forth in this Agreement. The Members

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are hereby admitted to the Company as members in the Company. The name of the Company shall be LEAF Ventures, LLC.

2.PRINCIPAL AND REGISTERED OFFICE

   The principal office of the Company shall be 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801, and the registered office of the Company shall be 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801. The Class A Member may from time to time change such principal and registered office upon written notice to the other Members. All Members agree to execute and deliver all necessary documents in connection with the registration of the Company in all jurisdictions requiring such registration.

3.PURPOSE

   The purpose of the Company shall be to acquire membership interests in Merit Capital Advance, LLC and to engage in any lawful act or activity for which limited liability companies may be organized under the Act and engage in any and all activities necessary, convenient, desirable or incidental to the foregoing. The Company shall have the authority to do all things necessary or advisable in order to accomplish such purpose.

4.TERM; FISCAL YEAR

The existence of the Company shall commence on the date the Certificate is filed and deemed effective in the office of the Secretary of State of the State of Delaware and shall continue until the Company is dissolved in accordance with the provisions of this Agreement (the “Term”). The fiscal year of the Company (the “Fiscal Year”) shall begin on October 1 and end on September 30 unless otherwise determined by the Class A Member.

5.MEMBERS AND THEIR INTERESTS

   5.1.Members. There shall be two classes of Members, the Class A Member and the Class B Members. Unless otherwise set forth in this Agreement, the Company shall be managed by the Class A Member in accordance with the provisions of Section 8. The Members each shall individually have the number of Units and a corresponding Interest in the Company as set forth on Schedule A hereto. The Class A Member shall modify Schedule A from time to time, upon the issuance of additional Units or a transfer of Units to reflect the then current Members and their respective Interests in the Company and such schedule shall be kept at the principal office of the Company. The Company may issue partial or fractional Units.

   5.2.Capital Contributions.

5.2.1.Members. Each Member agrees to make on the date of this Agreement the Capital Contribution in the amount set forth opposite such Member’s name on the attached Schedule A in exchange for the number of Units and Interest in the Company set forth opposite such Member’s name on the attached Schedule A. The initial Capital Contribution of the Class A Member is an amount that is equal to the required initial capital contribution of the Company under the terms of the Merit Capital Advance LLC Agreement.

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5.2.2.Additional Capital Contributions. No Class B Member shall be required to make any additional Capital Contributions to the Company. Any additional Capital Contributions shall be made by, and in the sole discretion of, the Class A Member. Notwithstanding the foregoing, the Class A Member shall make additional Capital Contributions to the Company in an amount equal to any additional capital contributions required to be made by the Company to Merit Capital Advance, LLC. Such additional Capital Contributions shall be made immediately prior to the time the Company is required to make such additional capital contribution to Merit Capital Advance, LLC.

5.3.Vote of Members. Any matter requiring the vote of the Members shall be determined by a vote in accordance with their Interests as set forth on the attached Schedule A.

5.4.Additional Members. Additional Members may be admitted to the Company or additional Units issued with the prior written consent of the Members holding in the aggregate equal to or greater than fifty-one percent (51%) of the Member Interests in the Company. In the event any additional Members are admitted to the Company, the Unit(s), Interest(s) and vote in the Company of the most recently admitted Member(s) shall be as specified at the time such new Member(s) shall be admitted, and the Interest in the Company of each of the Members of the Company shall be proportionately reduced, as appropriate. The foregoing shall not apply to any substituted Member who is the transferee of one or more Units and Interest in the Company from another Member. The existing Members shall not have any pre-emptive rights to any additional Units issued hereunder.

5.5.Other Activities of Members. The Members may engage in or possess an interest in other business ventures of any nature, whether or not similar to or competitive with the activities of the Company, for their respective accounts and not for the account of the Company or the other Members.

5.6.Limitation of Liability of Members. No Member shall have any liability or obligation for any debts, liabilities or obligations of the Company, or of any agent or employee of the Company, beyond the Member’s Capital Contribution.

5.7.Loans. Loans may be made to the Company by a Member only upon the consent of the Class A Member. If a Member makes any loan to the Company, or advances money on its behalf, the amount of any such loan or advance shall not be deemed an increase in, or contribution to, the Capital Contribution of the Member. Interest shall accrue on any such loan at an annual rate agreed to by the Company and the Member making such loan (but not in excess of the maximum rate allowable under applicable usury laws).

5.8.Certain Units Subject to Forfeiture. Notwithstanding any other provision of this Agreement, as provided below, Mr. Capparelli’s Units are subject to forfeiture if Mr. Capparelli ceases to be employed by Merit Capital Manager, LLC or any of its affiliates (“Employer”).

5.8.1.If Mr. Capparelli is not employed by Employer prior to the first anniversary of the date hereof, Mr. Capparelli shall forfeit 100% of his Units.

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5.8.2.If Mr. Capparelli is employed by Employer on the first anniversary of the date hereof but is not employed by Employer prior to the second anniversary of the date hereof, Mr. Capparelli shall forfeit 75% of his Units.

5.8.3.If Mr. Capparelli is employed by Employer on the second anniversary of the date hereof but is not employed by Employer prior to the third anniversary of the date hereof, Mr. Capparelli shall forfeit 50% of his Units.

5.8.4.If Mr. Capparelli is employed by Employer on the third anniversary of the date hereof but is not employed by Employer prior to the fourth anniversary of the date hereof, Mr. Capparelli shall forfeit 25% of his Units.

5.8.5.If Mr. Capparelli is employed by Employer on the fourth anniversary of the date hereof, his Units shall no longer be subject to forfeiture.

6.CAPITAL ACCOUNTS AND ALLOCATIONS

   6.1.Capital Accounts. A single Capital Account shall be established, determined and maintained for each Member in accordance with the “alternate test for economic effect” set forth in Regulation §1.704-l(b)(2), which provides, in part, that a Member’s Capital Account shall be:

6.1.1.increased by (i) the amount of money contributed by the Member to the Company, (ii) the fair market value of any property contributed by the Member to the Company (net of liabilities secured by such contributed property), and (iii) allocations to the Member of Company income and gain (or items thereof), including income and gain exempt from tax; and

6.1.2.decreased by (i) the amount of money distributed to the Member by the Company, (ii) the fair market value of any property distributed to the Member by the Company (net of liabilities secured by such distributed property), (iii) allocations to the Member of expenditures of the Company not deductible in computing its taxable income and not properly capitalized for federal income tax purposes, and (iv) allocations to the Member of Company loss and deduction (or items thereof).

   6.2.Transferred Capital Accounts; Adjustments. Upon the Transfer of all or any part of a Member’s Unit(s) and Interest in the Company, the Capital Account of the transferor Member that is attributable to the transferred interest shall carry over to the transferee Member, unless such Transfer causes a termination of the Company for federal income tax purposes, in which case the Capital Account that carries over to the transferee Member shall be adjusted in accordance with Regulation §1.704-l(b)(2)(iv)(e).

   6.3.Return of Capital. Each Member is entitled to the return of his Capital Contribution only by way of distributions made pursuant to Sections 7 and 12 hereof. No Member shall have the right to demand or receive any property other than cash in return for that Member’s Capital Contribution or to bring an action of partition against the Company or its property.

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   6.4.Profits and Losses; Allocations. The income (including tax exempt income), gains, deductions, losses and credits of the Company shall be determined in conformity with standard federal tax accounting principles consistently applied and shall be allocated among the Members in the following order:

6.4.1.First, to each Member in proportion to the aggregate net losses heretofore allocated to all the Members to the extent that such net losses have not heretofore been offset by allocations of net profits pursuant to this Section 6.4.1. to the extent thereof;

6.4.2.Second, to each Member in proportion to and up to the amount of Distributable Cash distributed under Section 7.1;

6.4.2.1.Profits in excess of Distributable Cash shall first be allocated among the Members to the extent that a Member was allocated less profit than Distributable Cash in prior years under Section 6.4.2.2. hereof; and

6.4.2.2.Profits in excess of Distributable Cash shall next be allocated among the Members in proportion to their respective Interests in the Company.

6.4.3.The Company’s net profits from a Capital Transaction shall be allocated among the Members, to the extent possible, to create positive balances in the Members’ respective Capital Accounts that will result in liquidating distributions pursuant to Section 12.2 hereof being made in the manner described in Section 7.3 hereof.

6.4.4.The Company’s net losses for any Fiscal Year shall be allocated among the Members in the following order:

6.4.4.1.First, to each Member in proportion to the aggregate net profits heretofore allocated to all Members to the extent that such net profits have not heretofore been offset by allocations of net losses pursuant to this Section 6.4.4.1. to the extent thereof; and

6.4.4.2.Second, to the Members in proportion to such Member’s respective Interest in the Company; provided, however, that in the event of a contribution to the Company of property to which Section 704 of the Code applies, or a revaluation of Company property pursuant to the Regulations, allocations of items of depreciation, amortization and gain or loss, as computed for federal income tax purposes, shall be made in a manner that takes into account the variations between the adjusted tax basis of such property and its adjusted value in accordance with the “Traditional Method” set forth in the Regulations.

   6.5.Qualified Income Offset; Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.4 hereof:

6.5.1.A Member shall not be allocated items of loss, deduction or nondeductible noncapitalizable expenditure (“Loss Items”) to the extent such an allocation would cause or increase a negative balance in such Member’s Capital Account as of the close of

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any taxable year in excess of the sum of (i) the amount of such balance the Member is obligated or deemed obligated to restore pursuant to the Regulations, and (ii) to the extent not taken into account under clause (i), the amount of any loan with respect to which the Member is treated as bearing the risk of loss pursuant to the Regulations. Any Loss Items prohibited to be allocated to a Member by reason of this Section 6.5.1. shall be allocated to or among the other Members as provided in this Section 6 and the applicable Regulations.

6.5.2.If there is a net decrease in Company minimum gain (as defined in the Regulations) or in minimum gain attributable to Member nonrecourse debt (as defined in the Regulations) during a Company Fiscal Year, the Members shall be allocated items of Company income and gain (“Income Items”) in accordance with the Regulations. This Section 6.5.2. is intended to comply with the minimum gain chargeback requirement of the Regulations, and shall be interpreted and applied consistently therewith.

6.5.3.If a Member unexpectedly receives an adjustment, allocation or distribution described in the Regulations which results in a negative balance in such Member’s Capital Account in excess of the sum described in Section 6.5.1. above, Income Items (consisting of a pro-rata portion of each item of Company income, including gross income, and gain) shall be allocated to such Member in an amount and a manner sufficient to eliminate such excess deficit balance as quickly as possible. This Section 6.5.3. is intended to comply with the qualified income offset requirement of the Regulations, and shall be interpreted and applied consistently therewith.

6.5.4.If (i) any Loss Items shall be specifically allocated pursuant to Section 6.5.1. hereof, and the Member to whom such Loss Items has been allocated does not have a related share of minimum gain (within the meaning of the Regulations) or minimum gain attributable to Member nonrecourse debt (within the meaning of the Regulations), or (ii) any Income Items shall be specially allocated pursuant to Section 6.5.2. or 6.5.3. hereof, then as quickly as possible thereafter (but not in such a manner as to violate the provisions of any part of this Section 6.5) Income Items and Loss Items shall be allocated to such Member to reverse such special allocations. The intention of this Section 6.5.4. is to cause the ultimate adjustment of all Capital Accounts to such balances as they would have had if no special allocations had been made pursuant to Sections 6.5.1., 6.5.2. or 6.5.3. hereof during the Term but the limitation set forth in Section 6.5.1. above had instead been applied immediately prior to the liquidation of the Company taking into account all Income Items and Loss Items incurred at any time during the Term.

7.CASH DISTRIBUTIONS

   7.1.Distributable Cash. Distributions of Distributable Cash to the Members shall be made within five business days of the Company’s receipt of a distribution pursuant to Section 5.1(a) of the Merit Capital Advance LLC Agreement. Distributable Cash shall be distributed to the Members in accordance with their Interests in the Company; provided, however, if the Class A Member reasonably determines that such distribution constitutes a capital transaction of Merit Capital Advance, LLC, then such distribution shall be deemed Capital Transaction Proceeds and distributed pursuant to Section 7.3. All other distributions shall be made at the sole discretion of the Class A Member.

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   7.2.Tax Distributions. The Company shall, at any time it receives a tax distribution pursuant to the Merit Capital Advance LLC Agreement, distribute the pro rata amount of such distribution to each Member. Any amount distributed pursuant to this Section 7.2 shall be deemed to be an advance distribution of amounts otherwise distributable to the Members pursuant to Section 7.1 and shall reduce the amounts that would subsequently otherwise be distributed to the Members pursuant to Section 7.1.

   7.3.Capital Transaction Proceeds. Distributions of Capital Transaction Proceeds to the Members shall be made in the manner, and at such time, as solely determined by the Class A Member but in no event later than sixty (60) days following the Capital Transaction giving rise to such proceeds. Capital Transaction Proceeds shall be distributed to the Members with positive Capital Account balances, pro rata, in proportion to the Members’ respective positive Capital Account balances until each Member’s Capital Account balance is zero and any excess Capital Transaction Proceeds shall be distributed, pro rata, in proportion to the Member’s respective Interest in the Company.

8.MANAGEMENT OF THE COMPANY

   8.1.Management. Except as otherwise expressly stated elsewhere in this Agreement, the business and affairs of the Company shall be managed solely by the Class A Member.

   8.2.Powers of the Class A Member. Subject to this Agreement, the Class A Member shall have the exclusive right to manage the business of the Company and is hereby authorized to take any action of any kind and to do anything and everything it deems necessary in accordance with the provisions of this Agreement. The Class A Member shall take all actions which may be necessary or appropriate for the continuation of the Company’s valid existence as a limited liability company under the laws of the State of Delaware, and to qualify the Company to do business in such other jurisdictions as required by law. All decisions concerning the management of the Company shall be made by the Class A Member. Except as otherwise provided in this Agreement or by nonwaivable provisions of the Act, the Class B Members shall not be entitled to vote on any matters concerning the management of the Company, or have the authority to bind the Company. The Class A Member shall have the power to do any and all acts necessary or convenient to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise, possessed by the Members under the laws of the State of Delaware.

Unless authorized in writing to do so by this Agreement or by the Class A Member, no attorney-in-fact, employee or other agent of the Company shall have any power or authority to bind the Company in any way, to pledge its credit or to render it liable pecuniarily for any purpose.

   8.3.Meeting of Members.

8.3.1.No annual meetings of the Members shall be held.

8.3.2.Special meetings of the Members for any proper purpose or purposes may be called at any time by the Class A Member. Only business within the purpose or

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purposes described in the notice (or waiver thereof) provided by the Class A Member to the Members may be conducted at a special meeting of the Members.

8.3.3.Any action to be taken at any meeting of Members may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of a majority of the Interests in the Company. Every written consent shall bear the date of signature of each Member who signs the consent.

   8.4.Exculpation and Indemnification.

8.4.1.The Class A Member shall not be held liable to the Company or to any Member for any loss suffered by the Company unless such loss is caused by the Class A Member’s gross negligence, willful misconduct or violation of law. The Class A Member shall not be liable for errors in judgment or for any acts or omissions that do not constitute gross negligence, willful and wanton misconduct or violation of law. The Class A Member may consult with counsel and accountants in respect of Company affairs and, provided the Class A Member acts in good faith reliance upon the advice or opinion of such counsel or accountants, the Class A Member shall not be liable for any loss suffered by the Company in reliance thereon.

8.4.2.Subject to the limitations and conditions as provided in this Section 8.4, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative (hereinafter a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that he or she, or a Person of whom he or she is the legal representative, is or was a Class A Member of the Company or a director, officer, employee or agent of the Class A Member, or while a Class A Member of the Company or a director, officer, employee or agent of the Class A Member, is or was serving at the request of the Company as a Class A Member, director, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise shall be indemnified by the Company to the fullest extent permitted by the Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment) against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including, without limitation, attorneys’ fees) actually incurred by such Person in connection with such Proceeding, and indemnification under this Section 8.4 shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Section 8.4 shall be deemed contract rights, and no amendment, modification or repeal of this Section 8.4 shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Section 8.4 could involve indemnification for negligence or under theories of strict liability.

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8.4.3.The right to indemnification conferred in this Section 8.4 shall include the right to be paid or reimbursed by the Company the expenses incurred by a Person of the type entitled to be indemnified under Section 8.4.2. who was, is or is threatened to be made a named defendant or respondent in a Proceeding in advance of the final disposition of the Proceeding and without any determination as to the Person’s ultimate entitlement to indemnification. Upon request, the Company shall pay such expenses incurred and to be incurred by any such Person in advance of the final disposition of a Proceeding, upon receipt of an undertaking by such Person to repay all amounts so advanced if it shall ultimately be determined that such Person is not entitled to be indemnified under this Section 8.4 or otherwise.

8.4.4.The right to indemnification and the advancement and payment of expenses conferred in this Section 8.4 shall not be exclusive of any other right which a Person may have or hereafter acquire under any law (common or statutory), provision of the Certificate or this Agreement, vote of Members or disinterested Class A Member or otherwise.

8.4.5.The Company may purchase and maintain insurance, at its expense, to protect itself and any Member (or director, officer, employee or agent of the Class A Member), or agent of the Company or is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any amounts entitled to be indemnified whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under this Section 8.4.

8.4.6.If this Section 8.4 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless the Class A Member or any other Person indemnified pursuant to this Section 8.4 as to any amounts entitled to be indemnified under Section 8.4.2. to the full extent permitted by any applicable portion of this Section 8.4 that shall not have been invalidated and to the fullest extent permitted by applicable law.

   8.5.Reliance by Third Parties. Third parties dealing with the Company shall be entitled to rely conclusively upon the power and authority of the Class A Member. Any corporation, trust, partnership, or other business entity called upon to Transfer any property to or from the name or account of the Company shall be entitled to rely on instructions or assignments signed by the Class A Member without inquiry as to the authority of the Person signing or purporting to sign such instructions or assignments and without inquiry as to the validity of the Transfer.

   8.6.Class A Member Has No Exclusive Duty to Company. The Class A Member shall devote to the Company such time and effort as may be necessary for the proper performance of its duties hereunder. The Class A Member shall not be required to manage the Company as its sole and exclusive function and it may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor any other Member shall have any right, by virtue of this Agreement, to share or participate in such other investments or activities of the Class A Member or to the income or proceeds derived

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from such investments or activities. The Class A Member shall incur no liability to the Company or any other Member as a result of engaging in any other business or venture.

   8.7.Tax Matters Member. The Class A Member is designated as the tax matters member under § 6231(a)(7) of the Code or under comparable provisions of state or local tax laws and shall have the duties and authority of a tax matters member as specified in the Code and the Regulations or under comparable provisions of state or local tax laws.

   8.8.Company Expenses. All reasonable third party expenses incurred by the Class A Member (or any third party hired by the Class A Member) for performing the services in performing its duties and obligations hereunder shall constitute operating expenses of the Company. The Class A Member shall not be required to use its own funds in carrying out any of its responsibilities under this Agreement. If the Class A Member uses its own funds to pay for any operating expenses of the Company, the Company shall reimburse the Class A Member within ten (10) days following receipt of evidence of such expenditure made by the Class A Member out of its own funds. The Members shall pay their own legal and other expenses in connection with the negotiation and execution of this Agreement.

   8.9.Tax Elections. The Company shall be treated, and shall file its tax returns, as a partnership for federal, state and local income and other tax purposes. All elections permitted to be made by the Company under the Code shall be made by the Class A Member. Notwithstanding the foregoing, no election shall be made by the Company or the Class A Member for the Company to be excluded from the application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions of any state tax laws.

9.LIABILITY AND RIGHTS OF MEMBERS

   9.1.No Participation in Management. Except as otherwise provided herein, the Members shall not participate in the management or control of Company business, nor shall the Members transact any business for the Company, nor shall the Members have the power to act for or bind the Company, said powers being vested exclusively in the Class A Member.

   9.2.No Personal Liability. No Member, employee or agent of the Company shall have any personal liability, whether to the Company, to any of the Members or to the creditors of the Company, for the debts, obligations or liabilities of the Company or any losses beyond the amount committed by the Member to the capital of the Company. No Member shall be personally liable for the return of any Capital Contribution made to the Company by another Member.

   9.3.Death of a Member. The death of a Member shall not cause a dissolution of the Company. Upon the death of a Member, the rights of such Member to share in the Company profits and losses, to receive distributions of Company funds and to transfer his or her Unit(s) and Interest in the Company shall descend to and vest in his or her personal representatives or successors-in-interest, subject to the terms and conditions of this Agreement, and the Company shall continue as a limited liability company.

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10.BANKING; BOOKS AND RECORDS

   10.1.Banking. All funds of the Company shall be deposited and kept in its name in such Company bank account or accounts as shall be designated by the Class A Member. All withdrawals therefrom shall be made upon checks signed by the Class A Member or its designee(s).

   10.2.Books and Records. Adequate accounting records of all Company business shall be kept and these shall be open to inspection by any of the Members at all reasonable times. The Company shall maintain its accounting records and shall report for income tax purposes on the cash or accrual method of accounting, as determined by the Class A Member.

   10.3.Tax Returns. The Class A Member shall cause all tax returns for the Company to be prepared and timely filed with the appropriate authorities, and shall provide copies of all such returns to the Members.

11.TRANSFERABILITY OF INTERESTS

   11.1.Member’s Unit(s) and Interest. A Member may not Transfer all or part of its Unit(s) or Interest in the Company to a Person (hereinafter sometimes referred to as an “Assignee”) unless such Transfer is made in accordance with the provisions of this Section 11. Any purported Transfer in violation of the provisions of this Section 11 shall be null and void and any non-transferring Member, in addition to any other remedies available under this Agreement and at law, in equity and otherwise, may seek to enjoin such Transfer and the transferring Member, or its legal representatives, agrees to submit to the jurisdiction of any court of the State of Delaware and to be bound by any order of such court enjoining such purported Transfer. An Assignee who receives all or a portion of a Member’s Unit(s) and Interest in the Company in a Transfer made in accordance with the provisions of this Section 11 shall be entitled to receive all distributions, allocations and economic benefits attributable to the interest transferred to such Assignee, but such Assignee shall in no event be admitted to the Company as a substitute Member unless the additional requirements set forth in Section 11.5.3. below are satisfied.

   11.2.Permitted Transfers. A Member shall be permitted to Transfer all or a portion of its economic interests in the Company in each of the following circumstances:

11.2.1.If such Transfer is made with the consent of the Class A Member, which consent may be granted or withheld in the Class A Member’s sole discretion;

11.2.2.Such Transfer is made to one or more members of the Member’s Immediate Family (as defined below) or to a trust, partnership, corporation or limited liability company established for the benefit of the Member or member of the Member’s Immediate Family, provided that such transferring Member retains all of the voting rights of the Unit(s) and Interest in the Company transferred;

11.2.3.In the case of one or more Units and Interest in the Company held by a trust, such Transfer is to the beneficiary or beneficiaries of such trust; or

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11.2.4.Such Transfer is made by the Class A Member to a Lender in connection with and as security for a loan; or

11.2.5.Such Transfer is made upon the death of the Member, by will or intestate succession.

As used herein, “Immediate Family” means with respect to a Person who is an individual, his or her spouse, his or her descendants, and his or her parents. In the case of a Transfer permitted under this Section 11.2, the Assignee of the transferred interest shall hold such transferred interest subject to the terms of this Agreement, including the restrictions on Transfers contained in this Section 11.

   11.3.Involuntary Transfers. If any Member becomes bankrupt or insolvent, or if all or any portion of a Member’s Unit(s) andInterest in the Company is Transferred or threatened to be Transferred involuntarily or by operation of law (other than a Transfer resulting from the death of such Member), the Company and the other Members shall have the right, but not the obligation, to purchase such Member’s Unit(s) andInterest in the Company for its fair market value, based upon such Member’s right to share in distributions from the Company. The fair market value shall be determined by an independent appraisal performed by a certified public accountant or other qualified appraiser selected by the Class A Member. Such independent appraisal shall take all relevant facts and circumstances into account, including, without limitation, minority discounts, lack of liquidity and restrictions on Transfer. At least twenty-five percent (25%) of such purchase price shall be paid in cash, with the remainder payable by means of a promissory note bearing interest at the rate of two (2) percentage points in excess of the rate of interest published from time to time in the Wall Street Journal as the prime rate of interest in effect on the date of such purchase, but in no event shall the interest rate be greater than the maximum rate permitted by law, and payable in equal quarterly payments over a period not to exceed five (5) years.

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   11.4.Additional Requirements for Assignment.

11.4.1.Notwithstanding any rule of law to the contrary, no Transfer, however accomplished, whether voluntary or involuntary, of a Member’s Unit(s) and Interest in the Company, although otherwise permitted under this Section 11, shall be recognized by the Company unless and until (i) the assigning Member has given written notice thereof to the Class A Member; (ii) the Assignee agrees in writing to be bound by all of the terms of this Agreement and to assume all obligations hereunder with respect to the assigning Member’s Unit(s) and Interest in the Company, and executes and delivers such other instrument in form and substance satisfactory to the Class A Member as it may reasonably deem necessary and desirable; and (iii) the Assignee pays or obligates himself to pay, as the Class A Member may determine, all reasonable expenses connected with such substitution, including but not limited to the cost of preparing and filing any amendment of the Certificate. If the Member is deceased or incompetent, certified copies of any court order or documents may be submitted in lieu of the document which the assigning Member is required to submit under clause (i), above.

11.4.2.Unless the Class A Member shall otherwise consent, no Transfer shall be permitted if such Transfer would result in termination or deemed termination of the Company pursuant to section 708(b)(1)(B) of the Code.

11.4.3.If a Transfer of a Member’s Unit(s) and Interest in the Company satisfies the other requirements of this Section 11, the Assignee shall be entitled to the distributions and allocations to which the assigning Member would have been entitled with respect to such interest, but such Assignee shall only become a substitute Member entitled to exercise the assigning Member’s other rights under this Agreement if: (i) the Class A Member consents to such substitution (or, in the case of an Assignee of the Manger’s Unit(s) and Interest in the Company, the Members holding in the aggregate equal to or greater than fifty-one percent (51%) of the Member Interests in the Company consent to such substitution), which consent may be withheld for any reason which the Class A Member or Members deems appropriate or for no reason; and (ii) the assigning Member grants the Assignee such right, provided, however, that such grant shall be deemed to have been given in the event of a Transfer which occurs by reason of the death, incompetency or bankruptcy of the assigning Member.

11.4.4.Upon the admission of a substitute Member in accordance with this Section 11.5, Schedule A to this Agreement shall be amended to reflect the current list of Members and their respective Unit(s) and Interests in the Company.

   11.5.Securities Law Representation. The Members and any assignee of an interest of any Member hereby represent, warrant and acknowledge to the Company that:

11.5.1.the Member or assignee is acquiring its Member Interest for its own account for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Acts, or other applicable securities law or regulations; and

11.5.2.the Member’s or assignee’s Member Interest may only be disposed of pursuant to an effective registration statement filed under the Securities Acts, or

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pursuant to an exemption from the registration requirements of the Securities Acts; the Company has not filed such a registration statement nor has any obligations to do so, nor has agreed to do so, nor contemplates doing so in the future; and in the absence of such a registration statement or such an exemption, the Member may have to hold its Member Interest indefinitely and may be unable to liquidate it in case of a financial emergency.

   11.6.Repurchase Option.

11.6.1.In the event a Class B Member other than Crit DeMent or Miles Herman is no longer employed by the Class A Member or any of its Affiliates (the “Separation”), such Member’s Units will be subject to repurchase at the option of the Company pursuant to the terms and conditions set forth in this Section 11.6 (the “Repurchase Option”).

11.6.2.The purchase price for each Unit will be the fair market value of such Unit. The fair market value shall be determined by the manner described in Section 11.3.

11.6.3.The Company shall have a one time right to exercise such option by giving notice to such Member to purchase all, but not less than all, of such Member’s Units by delivering written notice (the “Repurchase Notice”) to the Member within sixty (60) days after the Separation.

11.6.4.The closing of the purchase of the Units pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice, which date shall not be more than thirty (30) days nor less than five (5) days after the delivery of such notice or after the receipt by the Company of a binding determination of the Units’ fair market value, whichever is later. The Company will pay for the Units to be purchased by it pursuant to the Repurchase Option by a check or wire transfer of funds. At least twenty-five percent (25%) of such purchase price shall be paid in cash, with the remainder payable by means of a promissory note bearing interest at the rate of two (2) percentage points in excess of the rate of interest published from time to time in the Wall Street Journal as the prime rate of interest in effect on the date of such purchase, but in no event shall the interest rate be greater than the maximum rate permitted by law, and payable in equal quarterly payments over a period not to exceed five (5) years.

12.TERMINATION AND LIQUIDATION

   12.1.Termination. The existence of the Company shall terminate upon the occurrence of any of the following:

12.1.1.Upon the written consent of the Members holding in the aggregate equal to or greater than fifty-one percent (51%) of the Interests in the Company; or

12.1.2.Upon entry of a decree of judicial dissolution pursuant to the Act.

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On the occurrence of an event described in Section 12.1, the Company shall be liquidated, and the affairs of the Company shall be wound up in accordance with the provisions of Section 12.2.

   12.2.Liquidation. Upon the dissolution of the Company its assets shall be sold and reduced to cash and/or distributed in kind to the Members as provided in this Section 12.2. After the payment of all expenses and charges and the establishment of any reserve deemed by the Class A Member to be necessary or appropriate for the payment of any contingent or unsettled claims, all available cash and any remaining assets of the Company shall be distributed to the Members in proportion to their respective Capital Accounts, to the extent the sums are positive, and then in accordance with their respective Interests in the Company, subject to the prior discharge of any liabilities of the Company, first to outside creditors in order of legal priority and then to the Members (except liabilities arising from their respective rights to participate in distributions hereunder) and to the payment or setting aside of an amount sufficient to pay the costs of dissolution and winding up.

For purposes of making such liquidation distributions, the Capital Accounts of the Members shall be adjusted to reflect all Capital Account adjustments for the Company’s taxable year during which such liquidation occurs (other than those made pursuant to the preceding portions of this paragraph) and after adjustment for all items of unrealized income, gain, loss or deduction inherent in any property to be distributed to the Members that have not been previously reflected in their Capital Accounts, determined as if there had been a taxable disposition of the distributed property for its fair market value on the date of liquidation.

If any Member has a deficit balance in his Capital Account (after giving effect to all contributions, distributions, and allocations for all taxable years, including the year during which such liquidation occurs), such Members shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever.

In the event the Company is “liquidated” within the meaning of Regulations Section 1.704-1(6)(2)(ii)(g), distributions shall be made pursuant to this Section 12 to the Member’s who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)2)(ii)(b)(2). Notwithstanding anything to the contrary, in the event the Company is liquidating within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), and liquidated under this Section 12, liquidating distributions shall be made pursuant to this Section by the end of the taxable year in which the Company is liquidated, or if later, within 90 days after the date of such liquidation. Distributions pursuant to the preceding sentence may be made to a trust for the purpose of an orderly liquidation of the Company by the trust in accordance with the Act. Notwithstanding any other provision of this Section 12, in the event the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but the Company is not liquidated under this Section 12, the property of the Company shall not be liquidated, the Company’s liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up. Instead, the Company shall be deemed to have liquidated and reconstituted in the manner provided in the Regulations under Code Section 704.

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13.MISCELLANEOUS

13.1.Amendments. Subject to the provisions of Section 13.13, amendments to this Agreement shall become effective only upon the execution of a written instrument describing said amendment and signed by the Members holding in the aggregate equal to or greater than fifty-one percent (51%) of the Interests in the Company. Notwithstanding the foregoing, the Class A Member (pursuant to the Class A Member’s power of attorney from Member), without the consent of any Member, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file, and record whatever documents may be required in connection therewith, to reflect:

13.1.1.a change in the name of the Company, in the registered office or registered agent of the Company, or in the location of the principal place of business of the Company;

13.1.2.the admission, substitution, or removal of a Member in accordance with this Agreement;

13.1.3.a change that the Class A Member has determined is reasonable and necessary or appropriate to qualify or register, or continue the qualification or registration of, the Company as a limited liability company (or a partnership in which the Member has limited liability) under the laws of any state or which change is necessary or advisable in the opinion of the Class A Member to ensure that the Company will not be treated as an association taxable as a corporation for federal income tax purposes;

13.1.4.a change that (i) the Class A Member has determined does not adversely affect the Members in any material respect, or (ii) is necessary or desirable to satisfy any requirements, conditions, or guidelines contained in any opinion, directive, order, ruling, or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; or

13.1.5.an amendment that is necessary, in the opinion of counsel to the Company, to prevent the Company or the Class A Member or its directors, officers, employees, agents, or representatives from in any manner being subjected to the “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended.

Notice to Members of an amendment pursuant to this Section 13.1 shall not be necessary.

13.2.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such jurisdiction.

13.3.Headings. The headings herein have been included for convenience of reference only and shall not be considered in interpreting this Agreement.

13.4.Integration. This Agreement constitutes the sole agreement among the Members with respect to the subject matter hereof and shall supersede all oral agreements and prior writings with respect to the subject matter hereof.

17

13.5.Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective administrators, executors, legal representatives, heirs, successors and permitted assigns.

13.6.Severability. If any provision of this Agreement is held to be invalid, the same shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect.

13.7.Counterparts. This Agreement may be executed in counterparts, and by facsimile signature, each of which shall be deemed to be an original but all of which together shall constitute one and the same Agreement.

13.8.Dissociation. Each Member does hereby waive any right to dissociate or the right to take any other action which might otherwise be available to such Member for the purpose of severing his relationship with the Company, or such Member’s Unit(s) and Interest in the Company from the Unit(s) and Interests in the Company of the other Members until the end of the Term, except as otherwise provided in Section 11 hereof.

13.9.Notices. All notices required to be given pursuant to this Agreement shall be given personally or be sent by hand delivery, certified mail, return receipt requested, overnight express delivery service, telegram, telex, or telecopy to the addresses specified on Schedule A or, for a Member who shall become a Member after the execution hereof, on the joinder or other agreement executed by such Member (or any superseding addresses specified by proper notice) with all postage or other charges of conveyance prepaid and shall be effective upon the earlier of the actual receipt thereof or the second day (excluding weekends and Federal holidays) after the proper sending thereof.

13.10.Execution of Documents. The Members agree that they shall execute the Certificate or any amendment thereto or any other instrument necessary to carry our the terms of this Agreement and the actions contemplated hereby.

13.10.1.Authority. Nothing herein shall serve to limit or otherwise diminish the authority of the Class A Member to take any and all actions as are permitted in the Agreement.

13.10.2.Prevailing Party. The prevailing party in any arbitration and/or litigation shall be entitled to be reimbursed by the non-prevailing party for all attorney’s fees and costs.

13.11.Power of Attorney. The Members hereby make, constitute and appoint the Class A Member as their true and lawful attorney, to make, sign, execute, acknowledge and file with respect to the Company;

13.11.1.such formation documents and such amended formation documents as may be required by law or pursuant to the provisions of this Agreement;

13.11.2.all documents required to qualify the Company to do business in other states;

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13.11.3.documents of transfer of Member Interests and all other instruments to effect said transfers in the event the provisions of this Agreement have been complied with; and

13.11.4.all documents required to reflect the dissolution and termination of the Company after it has been dissolved or terminated in accordance herewith.

The foregoing power of attorney is hereby declared to be irrevocable and is a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, legal disability, withdrawal, dissolution, bankruptcy, insolvency or termination of any Member or the transfer of all or any portion of a Member Interest, and shall extend to each Member’s heirs, legal representatives, successors and assigns.

[SIGNATURES CONTAINED ON FOLLOWING PAGE]

19

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

Class A Member:

LEAF Financial Corporation

By: _______________________________

Name:

Title:

Class B Members:

___________________________________

Crit DeMent

___________________________________

Miles Herman

___________________________________

Robert Moskovitz

___________________________________

David English

___________________________________

Matthew Goldenberg

___________________________________

Nicholas Capparelli

= 1 LW: 264452.2LW: 264452.2

20

SCHEDULE A TO

LIMITED LIABILITY COMPANY AGREEMENT

OF

LEAF VENTURES, LLC

Name of Members	Capital Contribution		Units			Interests in the Company
LEAF Financial Corporation	$	2,500,000		920			92.0	%
Crit DeMent		0		20			2.0	%
Nicholas Capparelli		0		20	1		2.0	%
Miles Herman		0		15			1.5	%
Robert Moskovitz		0		10			1.0	%
David English		0		10			1.0	%
Matthew Goldenberg		0		5			0.5	%
Totals	$	2,500,000		1,000			100	%

¹Mr. Capparelli’s Units are subject to the conditions set forth in Section 5.8.

Unless otherwise noted in the books and records of the Company, Members’ addresses are as follows:

Class A Member:

LEAF Financial Corporation

1818 Market Street

9^th Floor

Philadelphia, PA 19103

Attn: Chief Executive Officer

Each Class B Member:

c/o LEAF Financial Corporation

1818 Market Street

9^th Floor

Philadelphia, PA 19103

EX-10.19

(Back to Main Document)

Execution Version

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

U.S. $33,000,000

CREDIT AGREEMENT

Dated as of March 15, 2007

between

MERIT CAPITAL ADVANCE, LLC

as Borrower

and

DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH

as Lender

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

TABLE OF CONTENTS

	Page
ARTICLE I DEFININTIONS AND ACCOUNTING TERMS	1
SECTION 1.01.Certain Defined Terms	1
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES	13
SECTION 2.01.The Commitment	13
SECTION 2.02.Advances	14
SECTION 2.03.Interest Elections	14
SECTION 2.04.Termination, Reduction and Extension of the Commitment	15
SECTION 2.05.Repayment of Advances	16
SECTION 2.06.Prepayment of Advances	16
SECTION 2.07.Commitment Fee	16
SECTION 2.08.Interest	17
SECTION 2.09.Alternate rate of Interest	17
SECTION 2.10.Increased Costs	18
SECTION 2.12.Taxes	19
SECTION 2.13.Payments Generally	20
ARTICLE III CONDITIONS OF LENDING	20
SECTION 3.01.Condition Precedent in Initial Advance	20
SECTION 3.02.Conditions Precedent to Each Advance	22
ARTICLE IV REPRESENTATIONS AND WARRANTIES	22
SECTION 4.01.Organization	22
SECTION 4.02.Authorization; Enforceability	22
SECTION 4.03.Government Approvals; No Conflicts	23
SECTION 4.04.No Material Adverse Effect	23
SECTION 4.05.Litigation	23
SECTION 4.06.Compliance with Laws and Agreements	23
SECTION 4.07.Investment and Holding Company Status	23
SECTION 4.08.Margin Regulations	23
SECTION 4.09.Solvency	24
ARTICLE V COVENANTS OF THE BORROWER	24
SECTION 5.01.Certain Covenants	24

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SECTION 5.02.Financial Covenants	27
SECTION 5.03.Operating Covenants	28
ARTICLE VI EVENTS OF DEFAULT	29
SECTION 6.01.Events of Default	29
ARTICLE VII MISCELLANEOUS	31
SECTION 7.01.Amendments, Etc	31
SECTION 7.02.Notices, Etc	31
SECTION 7.03.No Waiver; Remedies	31
SECTION 7.04.Costs, Expenses and Indemnification	32
SECTION 7.05.Assignments and Participations	32
SECTION 7.06.Governing Law; Submission to Jurisdiction	33
SECTION 7.07.Severability	33
SECTION 7.08.Execution in Counterparts	34
SECTION 7.09.Survival	34
SECTION 7.10.Waiver of Jury Trial	34
SECTION 7.11.No Fiduciary Relationship	34
SECTION 7.12.Confidentiality	35
SECTION 7.13.USA PATRIOT Act	35

EXHIBITS

Exhibit AForm of Security Agreement

Exhibit BForm of Notice of Borrowing

ii

CREDIT AGREEMENT dated as of March 15, 2007, between MERIT CAPITAL ADVANCE, LLC, a Delaware limited liability company (the "Borrower"), and DEUTSCHE BANK AG Cayman Islands Branch ("DB" or the "Lender").

The Borrower has requested that the Lender make Advances to it in an aggregate principal amount up to but not exceeding $33,000,000 at any one time outstanding for the purposes hereinafter set forth, and the Lender is prepared to make such Advances on and subject to the terms and conditions hereof. Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms.  As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined), with terms not otherwise defined herein having the respective meanings assigned thereto in the LLC Agreement referred to below:

"Account Control Agreement" means an account control agreement in form and substance reasonably satisfactory to the Lender, entered into by the Borrower, the Lender and a financial institution satisfactory to the Lender.

"Advance" has the meaning specified in Section 2.01.

"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person; provided, that, a Person shall be deemed to control another Person if such Person and its Subsidiaries own 10% or more of the Voting Shares of such other Person or otherwise controls, by contract or otherwise, the operations or business decisions of such other Person.

"Applicable Lending Office" means the office of the Lender specified on the signature pages hereof, or such other office of the Lender as the Lender may from time to time specify to the Borrower by written notice in accordance with the provisions of Section 7.02.

"Business Day" means (a) a day on which banks are not required or authorized to close in New York, New York, and (b) if the applicable Business Day relates to any Advance, a day on which dealings in deposits are carried on in the London interbank market.

"Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than LEAF Financial Corporation and its

Subsidiaries, of Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, LEAF Ventures or the Servicer (other than, in the case of the Servicer, in connection with the exercise by the Borrower of its right under the LEAF Services Agreement to purchase the Servicer, so long as Lender shall have provided its prior written consent thereto), (b) Crit DeMent ceasing to be the Chairman or Chief Executive Officer of LEAF Financial Corporation and not being replaced in such position by a similarly-qualified individual within 90 days thereof, or (c) the acquisition of direct or indirect Control of the Borrower, LEAF Ventures or the Servicer by any Person or group other than LEAF Financial Corporation and its Subsidiaries (other than, in the case of the Servicer, in connection with the exercise by the Borrower of its right under the LEAF Services Agreement to purchase the Servicer, so long as Lender shall have provided its prior written consent thereto); provided that Conversion of the Class A Note shall not be deemed to cause a "Change in Control".

"Closing Date" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied. The Lender shall notify the Borrower of the Closing Date, and such notice shall be conclusive and binding.

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

"Collateral" is defined in the Security Agreement.

"Commitment" has the meaning specified in Section 2.01.

"Commitment Fee Payment Date" means the first Business Day of each March, June, September and December.

"Commitment Termination Date" means the date 18 months following the Closing Date, subject to the provisions of Sections 2.04(b) and 2.04(d); provided, that if such day is not a Business Day, then the Commitment Termination Date shall be the immediately preceding Business Day.

"Contingent Liabilities" means, with respect to any Person, (a) any agreement, undertaking or arrangement by which such Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person (the amount of obligation under any Contingent Liabilities shall be deemed to be the maximum outstanding amount of the debt, obligation or other

2

liability guaranteed) and/or (b) liabilities that are contingent in nature which would be included as liabilities on the face of the balance sheet of such Person in accordance with GAAP.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

"Debt" of any Person means, without duplication:

(a)all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(b)all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person;

(c)all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as capital leases;

(d)all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined other than accounts payable, deferred revenue and accrued operating expenses incurred in the ordinary course of business in each case to the extent not otherwise constituting Indebtedness under the other terms of this definition;

(e)net liabilities of such Person under all Swap Agreements;

(f)whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and

(g)all Contingent Liabilities of such Person in respect of any of the foregoing.

“Debt to Tangible Net Worth Ratio” means, as of any date of determination, the ratio of (a) all Indebtedness of the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) as of such date of determination to (b) Tangible Net Worth as of such date of determination.

3

"Default" means an Event of Default or an event that, with notice or lapse of time or both, would become an Event of Default.

“Delinquency Ratio” means, as of any date of determination thereof, a fraction, expressed as a percentage, (a) the numerator of which is an amount equal to the sum of the Unpaid Specified Amounts of all Delinquent Assets as of such date, and (b) the denominator of which is equal to the sum of the Unpaid Specified Amounts of all Merchant Advance Contracts as of such date.

“Delinquent Asset” means, on any date of determination, (a) any Merchant Advance Contract with respect to which, during the period from the date such Merchant Advance Contract was originally entered into to such date of determination, the Borrower has received less than 75% of the aggregate payments expected to be received by the Borrower during such period, or (b) any Merchant Advance Contract with respect to which, during the 30 day period ending on such date of determination, the Borrower has received less than 50% of the aggregate payments expected to be received by the Borrower during such period. For purposes of this definition, "payments expected to be received by the Borrower" in relation to any Merchant Advance Contract shall mean payments assumed to be received by the Borrower in the credit analysis performed by the Borrower (or by the Servicer for the Borrower) on or before the date such Merchant Advance Contract was originally entered into.

"Dollars" and "$" means lawful money of the United States of America.

"EBITDA" means, for any period, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) earnings (calculated before taxes, Interest Expense, extraordinary and unusual items and income or loss attributable to equity in Affiliates) for such period, plus (b) non-cash interest accrued on the Class A Note during such period, plus (c) depreciation and amortization (to the extent deducted in determining earnings) for such period.

"EBITDA Funding Condition" means a condition that shall be deemed to be satisfied on any date (a "Test Date") if EBITDA for the period starting on the date hereof and ending on the last day of the period set forth below ending on or immediately prior to such Test Date is greater than or equal to the respective amount set forth below opposite such period:

4

Period: Date Hereof To	Amount
March 31, 2007	($287,565)
April 30, 2007	($306,534)
May 31, 2007	($325,666)
June 30, 2007	($344,925)
July 31, 2007	($264,192)
August 31, 2007	($23,862)
September 30, 2007	$216,304
October 31, 2007	$456,349
November 30, 2007	$696,308
December 31, 2007	$936,222
January 31, 2008	$1,385,438
February 29, 2008	$1,994,298
March 31, 2008	$2,616,970
April 30, 2008	$3,070,925
May 31, 2008	$3,524,956
June 30, 2008	$3,979,070
July 31, 2008	$4,411,752
August 31, 2008	$4,810,165

"Environmental Laws" means any and all present and future Federal, state, local and foreign laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of human health, safety or the environment or to emissions, discharges, releases or threatened releases of Hazardous Materials into the indoor or outdoor environment, including, without limitation, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

"Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

"ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of

5

the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414(m) of the Code.

"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

"Events of Default" has the meaning specified in Section 6.01.

"Excluded Taxes" means, with respect to the Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of the Lender, in which its applicable lending office is located and (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located.

"Federal Funds Rate" means a fluctuating interest rate per annum equal for each day to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Lender from three Federal funds brokers of recognized standing selected by it.

"GAAP" means, as to any Person, generally accepted accounting principles in effect in the jurisdiction of such Person.

"Governmental Authority" means any nation, government, branch of power (whether executive, legislative or judicial), state or municipality or other political subdivision thereof and any entity exercising executive, legislative, judicial, monetary, regulatory or administrative functions of or pertaining to government.

"Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise, other than agreements to purchase goods at an arm's length price in the ordinary course of

6

business) or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part); provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.

"Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

"Indemnified Taxes" means Taxes other than Excluded Taxes.

“Interest Coverage Ratio” means, as of any date of determination, the ratio of (a) EBITDA for the period of 12 calendar months ending on or most recently ended prior to such date of determination to (b) Interest Expense for such period; provided that the "Interest Coverage Ratio" as of any date of determination prior to March 31, 2008 shall be the ratio of (x) EBITDA for the period from the date hereof to the last day of the calendar month ending on or most recently ended prior to such date of determination to (y) Interest Expense for such period.

“Interest Expense” means, for any period, the total consolidated interest expense of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP(excluding, in any event, non-cash interest accrued on the Class A Note during such period, to the extent deducted from earnings in calculating EBITDA for such period).

"Interest Payment Date" means with respect to any Advance, the last day of each Interest Period therefor and, in the case of any Interest Period that has a duration of more than three months, the day three months after the first day of such Interest Period.

"Interest Period" means, with respect to any Advance, the period beginning on the date such Advance is made, or on the last day of the immediately preceding Interest Period, and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each Interest Period in respect of any Advance shall be 1, 2, 3 or 6 months as the Borrower may select as provided in Section 2.03; provided, however, that (i) each Interest Period that begins on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month, (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest

7

Period shall be extended to occur on the next succeeding Business Day, except that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day and (iii) any Interest Period that would otherwise extend beyond the Commitment Termination Date shall end on the Commitment Termination Date.

"LEAF Ventures" means LEAF Ventures, LLC.

"Lender" means Deutsche Bank AG Cayman Islands Branch, or any other Person that shall become a party pursuant to Section 7.05.

"Lien" shall mean any mortgage, lien, pledge, charge, encumbrance or other security interest or any preferential arrangement that has the practical effect of creating a security interest.

"LIBO Rate" means, with respect to any Advance, for any Interest Period:

(a) the offered rate for deposits in Dollars with a maturity comparable to such Interest Period appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Lender from time to time, for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) as of approximately 11:00 a.m. (London time) on the date two Business Days prior to the commencement of such Interest Period;

(b) if such date does not appear on said Page 3750 (or such successor), the offered rate for deposits in Dollars with a maturity comparable to such Interest Period appearing on the display designated on page "LIBO" on the Reuters Monitor Money Rate Service (or on any successor or substitute page of such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Lender from time to time, for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) as of approximately 11:00 a.m. (London time) on the date two Business Days prior to the commencement of such Interest Period; and

(c) in the event that neither rate referred to in clauses (a) or (b) is available at such time for any reason, an interest rate per annum equal to the rate per annum at which deposits in Dollars are offered by the principal office of Deutsche Bank AG in London, England to prime banks in the London interbank market at approximately 11:00 a.m. (London time) on the date two Business Days before the

8

first day of such Interest Period in the amount of the Advance if such Advance were to be outstanding for such Interest Period.

"LIBO Rate Reserve Percentage" for any Interest Period for any Advance means the effective rate (expressed as a percentage) at which reserve requirements (including, without limitation, emergency, supplemental and other marginal reserve requirements) are imposed on the Lender during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.

"LLC Agreement" means the Limited Liability Company Agreement of the Borrower dated as of March 15, 2007, as amended, supplemented, amended and restated or otherwise modified from time to time.

"Loan Documents" means this Agreement, the Security Agreement and each Account Control Agreement.

"Material Adverse Effect" means a material adverse effect on (i) the business or condition (financial or otherwise), operations or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the legality, validity or enforceability of any Loan Document or (iii) the ability of the Borrower to perform its obligations under any Loan Document.

"Monthly Date" means the 15^th day each calendar month (unless such day is not a Business Day, in which case "Monthly Date" shall mean the next succeeding Business Day).

"Multiemployer Plan" means a multiemployer plan defined as such in Section 4001(a)(3) of ERISA to which contributions have been made by the Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.

“Net Loss Asset”means, on any date of determination, a Merchant Advance Contract (a) which on such date shall have been deemed a loss by the Servicer in accordance with its usual and customary procedures or (b) with respect to which, during the 30 day period ending on such date of determination, the Borrower has received less than 25% of the aggregate payments expected to be received by the Borrower during such period. For purposes of this definition, "payments expected to be received by the Borrower" in relation to any Merchant Advance Contract shall mean payments assumed to be received by the Borrower in the credit analysis performed by the Borrower (or by

9

the Servicer for the Borrower) on or before the date such Merchant Advance Contract was originally entered into.

“Net Loss Ratio” means, as of any date of determination thereof, the percentage equivalent of a fraction, (a) the numerator of which is an amount (not less than zero) equal to the sum, without duplication, of the Unpaid Specified Amounts of all Merchant Advance Contracts which on any date from the date hereof to the date of determination were Net Loss Assets, and (b) the denominator of which is equal to the sum of the Specified Amounts of all Merchant Advance Contracts entered into on or prior to such date (whether or not such Merchant Advance Contracts, or any amounts owing to the Borrower thereunder, remain outstanding on such date).

"Notice of Borrowing" has the meaning set forth in Section 2.02.

"Operating Accounts" means account #XXXXXXXXX (collections account), account #XXXXXXXXX (general account) and account #XXXXXXXXX (funding account), in each case, of the Borrower and held at Commerce Bank, N.A., 1726 Walnut Street, Philadelphia, PA 19103.

"Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

"Par Value of Merchant Advances" means, with respect to any date of determination, an amount equal to sum for each outstanding Merchant Advance Contract (other than Merchant Advance Contracts that were Net Loss Assets on such date) of the difference between the Purchase Price for such Merchant Advance Contract, less (if such Merchant Advance Contract was a Delinquent Asset on such date) reserves in an amount for such Merchant Advance Contract determined by the Borrower (provided that the Lender shall have the right in its sole discretion to increase such reserved amount for such Merchant Advance Contract to an amount not in excess of the Unpaid Specified Amount thereof), less the aggregate amount of payments received by the Borrower in respect of such Merchant Advance Contract to the date of determination; provided that such difference for any Merchant Advance Contract shall not be less than zero.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

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           "Permitted Liens" shall mean, with respect to any Person:

(i)Liens imposed by law which were incurred in the ordinary course of business, including (but not limited to) carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business and which (x) do not in the aggregate materially impair the use thereof in the operations of the business of the Borrower or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject to such liens and for which adequate reserves have been made if required in accordance with GAAP;

(ii)pledges or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other similar social security legislation;

(iii)Liens securing taxes, assessments and other governmental charges, the payment of which is not yet due or is being contested in good faith by appropriate proceedings promptly initiated and diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made;

(iv)Liens in favor of the Lender arising pursuant to the Security Agreement; and

(v)Liens which arise pursuant to a final judgment or judgments that do not constitute an Event of Default under Section 6.01(f).

"Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

"Plan" means an employee benefit or other plan established or maintained by the Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan.

"Purchase Price" means, with respect to any Merchant Advance Contract to which the Borrower is a party, the purchase price (howsoever defined) initially specified under such Merchant Advance Contract to be payable by the Borrower to the counterparty thereto in exchange for the percentage specified therein of such counterparty’s future credit card receivables.

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 "Security Agreement" means a security agreement between the Borrower and the Lender in substantially the form of Exhibit A, as amended, supplemented, amended and restated or otherwise modified from time to time.

"Servicer" means Merit Capital Manager, LLC.

"Solvent" means, with respect to any Person on a particular date, that (i) the fair value of the property of such Person is greater than the total amount of the liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature, and (iv) such Person is not engaged in business, and is not about to engage in business, for which such Person's property would constitute unreasonably small capital.

"Specified Amount" means, with respect to any Merchant Advance Contract to which the Borrower is a party, the aggregate amount (howsoever defined) initially specified under such Merchant Advance Contract to be payable to the Borrower from the future credit card receivables which are the subject of such Merchant Advance Contract.

"Swap Agreement" means any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower shall be a Swap Agreement.

"Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company or other entity of which at least a majority of the Voting Shares is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

"Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any governmental authority.

“Tangible Net Worth” means, as of any date, the sum for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following:

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(a) the total assets of the Borrower and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Borrower and its Subsidiaries as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus

(b) the total liabilities of the Borrower and its Subsidiaries which would be shown as liabilities on a consolidated balance sheet of the Borrower and its Subsidiaries as of such date prepared in accordance with GAAP (excluding (i) the Class A Note and (ii) non-cash interest accrued on the Class A Note to such date), minus

(c) the net book amount of all assets of the Borrower and its Subsidiaries (after deducting any reserves applicable thereto) which would be shown as intangible assets on a consolidated balance sheet of the Borrower and its Subsidiaries as of such date prepared in accordance with GAAP.

“Unpaid Specified Amount” means, with respect to any Merchant Advance Contract and any date of determination, the Specified Amount for such Merchant Advance Contract, minus an amount equal to the sum, as of the close of business on the Business Day immediately preceding such date of determination, of all amounts received by the Borrower on or prior to such day with respect to such Merchant Advance Contract and allocable to the payment of such Specified Amount; provided that the Unpaid Specified Amount for any Merchant Advance Contract shall not be less than zero.

"Voting Shares" means, at any time, as to any Person, the outstanding securities of such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person.

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01. The Commitment.   The Lender agrees, on the terms and conditions hereinafter set forth, to make advances to the Borrower (each, an "Advance") in Dollars from time to time on any Business Day during the period from the date hereof until the Commitment Termination Date in an aggregate principal amount not to exceed at any one time outstanding $33,000,000 (the "Commitment"). Within the foregoing limits and subject to the terms and conditions of this Agreement, the Borrower may borrow, prepay and reborrow

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hereunder. Each Advance shall be in an amount not less than $500,000 or any whole multiple of $1,000 in excess thereof.

SECTION 2.02. Advances. To request an Advance, the Borrower shall give the Lender an irrevocable written notice substantially in the form of Exhibit B (a “Notice of Borrowing”) not later than 12:00 noon (New York, New York time) on the second Business Day prior to the date of such Advance. Each Notice of Borrowing shall be by facsimile and shall specify the requested (i) date of such Advance, which shall be a Business Day, (ii) amount of such Advance, (iii) initial Interest Period for such Advance and (iv) the account to which the Lender is to credit the proceeds of such Advance (such account to be located in the United States of America). The Lender will make the proceeds of each Advance available to the Borrower by transmitting the amount thereof not later than 3:00 p.m. (New York, New York time), in immediately available funds, to an account of the Borrower specified in the Notice of Borrowing provided by the Borrower pursuant to this Section 2.02.

SECTION 2.03. Interest Elections. Each Advance shall have an initial Interest Period as specified in the applicable Notice of Borrowing. Thereafter, the Borrower may elect Interest Periods therefor as provided in this Section 2.03. The Borrower may elect different options with respect to different portions of the affected Advance, in which case each such portion shall be considered a separate Advance (provided, that each such portion shall be in an amount not less than $500,000). To make an election pursuant to this Section 2.03, the Borrower shall notify the Lender of such election in writing by facsimile, telex or cable by the time that a notice of Advance would be required under Section 2.02 if the Borrower were requesting an Advance resulting from such election to be made on the effective date of such election. Each such written interest election request shall be irrevocable and in a form approved by the Lender and signed by the Borrower. Each such written interest election request shall specify the following information:

(i) the Advance to which such interest election request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Advance (in which case the information to be specified pursuant to clause (iii) of this paragraph shall be specified for each resulting Advance);

(ii) the effective date of the election made pursuant to such interest election request, which shall be a Business Day; and

(iii) the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".

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If any such interest election request does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. If the Borrower fails to deliver a timely and complete interest election request prior to the end of the Interest Period applicable thereto, then, unless such Advance is repaid as provided herein, at the end of such Interest Period, the Borrower shall be deemed to have selected an Interest Period of the same duration and such Advance shall be continued on such basis.

SECTION 2.04. Termination, Reduction and Extension of the Commitment

(a) Unless previously terminated, the Commitment shall automatically terminate on the Commitment Termination Date.

(b) The Borrower shall have the right to terminate or reduce the unused Commitment at any time or from time to time; provided, that (i) the Borrower shall give irrevocable, written notice of each such termination or reduction to the Lender at least three Business Days before such termination or reduction, (ii) each partial reduction shall be in an aggregate amount of not less than $1,000,000 and (iii) the Borrower shall not terminate or reduce the Commitment if, after giving effect to any concurrent prepayment of the Advances pursuant to Section 2.06, at any time, the aggregate outstanding principal amount of the Advances at such time would exceed the Commitment.

(c) The Commitment once terminated or reduced under this Section 2.04 may not be reinstated.

(d) The Borrower may, by written notice to the Lender not less 30 days and not more than 45 days prior to the Commitment Termination Date then in effect (the "Existing Commitment Termination Date"), request that the Lender extend the Commitment Termination Date to the date falling 364 days after the Existing Commitment Termination Date. The Existing Commitment Termination Date shall be extended (effective as of the Existing Commitment Termination Date) to the date falling 364 days after the Existing Commitment Termination Date, or, if such day is not a Business Day, the immediately preceding Business Day, if in each case the Lender so agrees in writing, in its sole and absolute discretion, not earlier than 20 nor later than 10 days before the Existing Commitment Termination Date; provided, that without prejudice to the discretionary nature of any such extension, no such extension shall be effective unless (i) no Event of Default or Default shall have occurred and be continuing on the date of such request or on the Existing Commitment Termination Date and (ii) each of the representations and warranties made by the Borrower in Article IV hereof shall be true on and as of the date of such request and the Existing Commitment Termination Date with the same force and effect as if made on and as of such dates. Each request for extension hereunder by the Borrower shall constitute a certification by the Borrower to the effect set forth in clauses (i) and (ii) above (both as of the date of such request and, unless the Borrower otherwise notifies the Lender prior to the

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Existing Commitment Termination Date, as of the Existing Commitment Termination Date). If any such extension of the Existing Commitment Termination Date shall not become effective, then the Commitment shall automatically terminate on the Existing Commitment Termination Date and the Commitment Termination Date shall remain the Existing Commitment Termination Date.

SECTION 2.05. Repayment of Advances

. The Borrower hereby unconditionally promises to pay to the Lender the outstanding principal amount of the Advances on the Commitment Termination Date.

SECTION 2.06. Prepayment of Advances

(a) The Borrower shall have the right at any time and from time to time to prepay any Advance in whole or in part without penalty or premium (but subject to the requirements of Section 2.11) on the terms of this Section 2.06.

(b) The Borrower shall notify the Lender by facsimile of any optional prepayment hereunder not later than 11:00 a.m. (New York, New York time) three Business Days before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Advance or portion thereof to be prepaid. Each partial prepayment of any Advance shall be in an amount not less than $500,000.

(c) On or before the date four Business Days following the last day (a "Calendar Month End Date") of each calendar month, the Borrower shall prepay Advances to the extent the aggregate outstanding amount of Advances as of such Calendar Month End Date exceeds the sum of (i) the Par Value of Merchant Advances as of such Calendar Month End Date plus (ii) a face amount not in excess of $1,000,000 of Financial Investments held by the Borrower as of such Calendar Month End Date.

(d) Amounts prepaid under this Section 2.06 may be reborrowed on and subject to the terms and conditions of this Agreement.

SECTION 2.07. Commitment Fee. The Borrower agrees to pay to the Lender a commitment fee at a rate equal to 0.50% per annum on the average daily unused amount of the Commitment during the period from and including the Closing Date to but excluding the earlier of the date the Commitment terminates and the Commitment Termination Date. The accrued commitment fee shall be payable on each Commitment Fee Payment Date and on the earlier of the date the Commitment terminates and the Commitment Termination Date, commencing on the first such date to occur after the Closing Date. The commitment fee shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

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SECTION 2.08. Interest.

(a) Each Advance shall bear interest during each Interest Period therefor at a rate per annum equal to the LIBO Rate for such Interest Period plus 8.50% per annum.

(b) Notwithstanding the foregoing, during any period while any Event of Default has occurred and is continuing, the interest rate provided for in paragraph (a) above shall automatically be increased by 2.00% per annum.

(c) Accrued interest on each Advance shall be payable in arrears on each Interest Payment Date for such Advance and upon termination of the Commitment; provided, that (i) interest at the rate provided in paragraph (b) of this Section 2.08 shall be payable on demand and (ii) in the event of any repayment or prepayment of any Advance, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment.

(d) The Borrower agrees to pay to the Lender, so long as the Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or the equivalent), additional interest on the unpaid principal amount of each Advance, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBO Rate for the then current Interest Period for such Advance from (ii) the rate obtained by dividing such LIBO Rate by a percentage equal to 100% minus the LIBO Rate Reserve Percentage for such Interest Period, payable on each date on which interest is payable on such Advance. A certificate of the Lender setting forth the amount to which the Lender is then entitled under this Section 2.08(d) shall be conclusive and binding on the Borrower in the absence of manifest error.

(e) All computations of interest based on the LIBO Rate and computations of interest pursuant to Section 2.08(d) shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable.

SECTION 2.09. Alternate Rate of Interest

. If on or prior to the commencement of any Interest Period for an Advance (an “Affected Interest Period”) the Lender determines (which determination shall be conclusive absent manifest error) that:

                                 (a) adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Affected Interest Period; or

(b) the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to the Lender of making or maintaining such Advance for such Affected Interest Period;

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then the Lender shall give notice thereof (a “Rate Determination Notice”) to the Borrower by facsimile as promptly as practicable thereafter. If such notice is given, during the thirty-day period following such Rate Determination Notice (the “Negotiation Period”), the Lender and the Borrower shall negotiate in good faith with a view to agreeing upon a substitute interest rate basis for the Advances which shall reflect the cost to the Lender of funding the Advances from alternative sources (a “Substitute Basis”), and if such Substitute Basis is so agreed upon during the Negotiation Period, such Substitute Basis shall apply in lieu of the LIBO Rate to all Interest Periods commencing on or after the first day of the Affected Interest Period, until the circumstances giving rise to such notice have ceased to apply. If a Substitute Basis is not agreed upon during the Negotiation Period, the Borrower may elect to prepay the Loans pursuant to Section 2.06(a); provided, however, that if the Borrower does not elect so to prepay, the Lender shall determine (and shall certify from time to time in a certificate delivered by the Lender to the Borrower setting forth in reasonable detail the basis of the computation of such amount) the rate basis reflecting the cost to the Lender of funding Advances for the Interest Period commencing on or after the first day of the Affected Interest Period, until the circumstances giving rise to such notice have ceased to apply, and such rate basis shall be binding upon the Borrower and the Lender and shall apply in lieu of the LIBO Rate for the relevant Interest Period.

SECTION 2.10. Increased Costs. If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the LIBO Rate Reserve Percentage) in or in the interpretation of (to the extent any such introduction or change occurs after the date hereof) any law or regulation or (ii) the compliance with any guideline or request of any central bank or other governmental authority adopted or made after the date hereof (whether or not having the force of law) (collectively, the "New Regulatory Developments"), there shall be any increase in the cost to the Lender of agreeing to make or making, funding or maintaining Advances, the Borrower shall from time to time, within 30 days after delivery by the Lender to the Borrower of a certifi-cate as to the amount of such increased cost, pay to the Lender the amount of the increased costs set forth in such certificate (which certificate shall be conclusive and binding on the Borrower in the absence of manifest error); provided, that (i) the Lender shall specify in such certificate the New Regulatory Development(s) causing the increased costs to be paid by the Borrower, and (ii) the Borrower shall not be required to pay to the Lender the amount of the increased costs not attributable to the making and performance of this Agreement and the transactions contemplated hereby by the Lender and/or the Borrower.

                              SECTION 2.11. Break Funding Payments. In the event of (a) the payment of any principal of any Advance on a day other than the last day of an Interest Period therefor (including as a result of an Event of Default), or (b) the failure to borrow, continue or prepay any Advance on the date specified in any notice delivered pursuant hereto (collectively, the "Breaking Funding Events"), then, in any such event, the Borrower shall compensate the Lender for the loss, cost and expense attributable to such event, which shall be deemed to include an amount determined by

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the Lender to be equal to the excess, if any, of (i) the LIBO Rate in effect for such Interest Period from the date of such payment or failure to the last day of such Interest Period (or, in the case of a failure to borrow or continue, the duration of the Interest Period that would have resulted from such Advance or continuation), over (ii) the amount of interest that the Lender would earn on such principal amount for such period if the Lender were to invest such principal amount for such period at the interest rate that would be bid by the Lender for Dollar deposits from other banks in the Eurodollar market at the commencement of such period. A certificate of the Lender setting forth any amount or amounts that the Lender is entitled to receive pursuant to this Section 2.11 shall be delivered to the Borrower not later than one month after the last day of such Interest Period (or, in the case of a failure to borrow or continue, the duration of the Interest Period that would have resulted from such Advance or continuation) with respect to each Break Funding Event and such certificate shall be conclusive absent manifest error. The Borrower shall pay the Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.12. Taxes.

(a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.12) the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant governmental authority in accordance with applicable law.

(b) Without limiting the generality of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant governmental authority in accordance with applicable law.

(c) The Borrower shall indemnify the Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.12) paid by the Lender on or with respect to any payment by or on account of any obligation of the Borrower hereunder and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant governmental authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender shall be conclusive absent manifest error of the Lender.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a governmental authority, the Borrower shall deliver to the Lender the

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original or a certified copy of a receipt issued by such governmental authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.

SECTION 2.13. Payments Generally.

(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or under Section 2.10, 2.11 or 2.12, or otherwise) prior to 3:00 p.m. (New York, New York time) on the date when due, in Dollars and immediately available funds, without deduction, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Lender at its office specified on its signature page hereto. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.

(b) If at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied first, to pay interest then due hereunder, then to pay fees and other amounts hereunder, then to pay principal due hereunder.

(c) The Borrower agrees that at any time after the occurrence and during the continuance of an Event of Default, in addition to (and without limitation of) any right of set-off, banker's lien, or counterclaim the Lender may otherwise have, the Lender shall be entitled, at its option, to offset balances held by it for the account of the Borrower at any of its offices, and other obligations of the Lender to the Borrower, in Dollars or in any other currency, against any principal of or interest on any of the Lender's Advances to the Borrower hereunder, or any other obligation of the Borrower hereunder, which is not paid when due (regardless of whether such balances or other obligations are then due to the Borrower), in which case it shall promptly notify the Borrower thereof; provided, that failure to give such notice shall not affect the validity thereof.

ARTICLE III

CONDITIONS OF LENDING

SECTION 3.01. Condition Precedent to Initial Advance. The obligation of the Lender to make its initial Advance is subject to the condition precedent that the Lender shall have received, on or before the date of the initial Advance, the following documents, each (unless otherwise specified below) dated the Closing Date and in form and substance satisfactory to the Lender:

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(a) A copy of each of the LLC Agreement and the Unitholders Agreement, each duly executed and delivered by the respective parties thereto, and certified copies of (i) the certificate of formation or certificate of incorporation, as the case may be, of each of the Borrower, LEAF Financial Corporation, LEAF Ventures, LLC and Merit Capital Manager, LLC and of the resolutions of the Board of Directors or equivalent of each such Person (or, as the case may be, its managing member) authorizing such Person's entry into of each of the Transaction Documents to which it is party and (in the case of the Borrower) the borrowings hereunder and (ii) of other documents evidencing other necessary corporate or limited liability action with respect to this Agreement and the other Transaction Documents.

(b) Certificates of each of the Borrower, LEAF Financial Corporation, LEAF Ventures, LLC and Merit Capital Manager, LLC certifying (i) the names and true signatures of the officers of such Person (or, as the case may be, its managing member) authorized to sign the Transaction Documents to which it is a party and any other documents to be delivered hereunder or thereunder, (ii) the accuracy of the representations and warranties of such Person under the Transaction Documents to which it is a party, (iii) the absence of Defaults and Events of Default under this Agreement and the Class A Note and (iv) such other matters as the Lender shall reasonably request.

(c) A favorable written opinion of Ledgewood, P.C., counsel to the Managing Member, in form and substance satisfactory to the Lender, covering such matters relating to this Agreement and the transactions contemplated hereby as the Lender may reasonably request.

(d) A favorable written opinion of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel for the Lender, covering such matters relating to the transactions contemplated hereby as the Lender may require.

(e) The Security Agreement, duly executed and delivered by the Borrower and the Lender with evidence of the perfection and first priority of the Liens created thereby.

(f) An Account Control Agreement with respect to the Operating Accounts, duly executed and delivered by the Borrower, the Lender and Commerce Bank, N.A.

(g) The Participation Agreement, duly executed and delivered by the Initial Class B Member and the Lender.

(h) The LEAF Services Agreement, duly executed and delivered by the parties thereto.

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(i) A copy of the Class A Note, duly executed and delivered by the Borrower.

(j) Evidence satisfactory to the Lender that the Borrower shall have received a Capital Contribution in the amount of $2,500,000 from the Initial Class B Member, as provided in Section 3.3(a) of the LLC Agreement.

(k) A copy of the Budget, which shall be in form and substance satisfactory to the Lender.

(l) Such other documents relating hereto as the Lender shall reasonably request.

SECTION 3.02. Conditions Precedent to Each Advance

. The obligation of the Lender to make each Advance (including, without limitation, the initial Advance) shall be subject to the further conditions precedent that (a) on the date of such Advance (i) the representations and warranties set forth in Article IV are true and correct on and as of the date of such Advance, before and after giving effect to such Advance and to the application of the proceeds thereof, as though made on and as of such date, (ii) no Default has occurred and is continuing, or would result from such Advance or from the application of the proceeds thereof and (iii) the EBITDA Funding Condition shall be satisfied on and as of the date of such Advance and (b) after giving effect to such Advance, the aggregate outstanding amount of Advances shall not exceed the sum of (i) the Par Value of Merchant Advances plus (ii) a face amount not in excess of $1,000,000 of Financial Investments held by the Borrower on such date. The giving of a Notice of Borrowing shall constitute a certification by the Borrower to the effect that the conditions set forth in this Section 3.02 have been fulfilled (both as of the date of the Notice of Borrowing and, unless the Borrower otherwise notifies the Lender prior to the date of the applicable Advance, as of the date of such Advance).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender that:

SECTION 4.01. Organization. The Borrower is duly organized, validly existing and in good standing under the laws of Delaware.

SECTION 4.02. Authorization; Enforceability. The execution, delivery and performance of this Agreement by the Borrower are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of

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the Borrower, enforceable in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

SECTION 4.03. Government Approvals; No Conflicts. The execution, delivery and performance of this Agreement by the Borrower (a) do not require any consent or approval of, registration or filing with, or any other action by, any governmental authority, (b) will not violate any applicable law or regulation or the certificate of formation or limited liability company agreement of the Borrower and (c) will not violate or result in a default under any loan agreement, indenture, or other agreement or instrument binding upon the Borrower or any of its Subsidiaries.

SECTION 4.04. No Material Adverse Effect. Since the date of this Agreement, no event or circumstance has occurred that could reasonably be expected to have a Material Adverse Effect.

SECTION 4.05. Litigation. There are no actions, suits or proceedings by or before any arbitrator or governmental authority now pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the transactions contemplated thereby.

SECTION 4.06. Compliance with Laws and Agreements. The Borrower and each of its Subsidiaries is in compliance with all applicable laws (including without limitation Environmental Laws, tax laws and ERISA), regulations and orders of any governmental authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 4.07. Investment and Holding Company Status. The Borrower is not an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

SECTION 4.08. Margin Regulations. The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Advance will be used to buy or carry any Margin Stock.

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SECTION 4.09. Solvency. The Borrower is and, after giving effect to each Advance and the use of the proceeds thereof, will be Solvent.

ARTICLE V

COVENANTS OF THE BORROWER

So long as any principal of or interest on any Advance or any other amount payable hereunder remains outstanding or the Commitment remains in effect, the Borrower covenants and agrees that:

SECTION 5.01. Certain Covenants.

(a) The Borrower will, and cause each of its Subsidiaries to, preserve and maintain its corporate existence and comply with all applicable laws, statutes, rules, regulations and orders, including without limitation, those relating to federal or State non-banking activities, licensing, usury, truth in lending, privacy, credit reporting, equal opportunity, predatory lending, money-laundering and terrorism financing, and all applicable Environmental Laws, tax laws and ERISA, except to the extent such non-compliance could not reasonably be expected to have a Material Adverse Effect or otherwise adversely affect the Lender. The Borrower will, and will cause each of its Subsidiaries to, comply with instructions provided from time to time by the Lender in connection with the Lender's efforts to ensure the business of the Borrower and its

Subsidiaries is at all times in compliance with all such applicable statutes, rules, regulations and orders, except to the extent non-compliance with such statutes, rules or regulations could not reasonably be expected to have a Material Adverse Effect or otherwise adversely affect the Lender.

(b) The Borrower will, and cause each of its Subsidiaries to, promptly from time to time obtain and maintain in full force and effect all licenses, consents, authorizations and approvals of, and make all filings and registrations with, any Governmental Authority necessary in connection with the business of the Borrower and its Subsidiaries, except to the extent the failure to obtain or maintain any of the foregoing could not reasonably be expected to have a Material Adverse Effect or otherwise adversely affect the Lender.

(c) The Borrower will, and cause each of its Subsidiaries to, timely file all required tax returns, and pay and discharge all taxes, assessments and other governmental charges imposed upon it and its property or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials or supplies which if unpaid might by law become a lien or charge upon any property of the Borrower or such Subsidiary, except (i) such items as are being contested in good faith by appropriate proceedings and as to which appropriate reserves are being maintained and (ii) items the non-payment of which could not (either individually or in the aggregate) reasonably be expected to have a Material Adverse Effect.

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(d) The Borrower will, and cause each of its Subsidiaries to, keep adequate records and books of account, in which complete entries will be made in accordance with GAAP, and permit representatives of the Lender, during normal business hours and upon reasonable notice, to examine, copy and make extracts from its books and records, to inspect any of its property, and to discuss its business and affairs with its officers, all to the extent reasonably requested by the Lender.

(e) The Borrower will furnish to the Lender:

(i) by the dates the Managing Member is required to make delivery thereof to the Members under the LLC Agreement (or, if delivered earlier, simultaneously with the Managing Member's delivery thereof to such Members), copies of all financial statements, monthly reports, notices and other informational materials required to be delivered to such Members under the LLC Agreement;

(ii) as soon as possible and in any event within five Business Days after the occurrence of any Default, a statement of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto;

(iii) on or before each Monthly Date:

(x) a copy of each Merchant Advance Contract entered into by the Borrower and not previously provided to the Lender; and

(y) a certificate of a senior financial officer of the Borrower (i) setting forth information in reasonable detail for each such Merchant Advance Contract as to the frequency and amount of payments to be received by the Borrower thereunder assumed when such Merchant Advance Contract was originally entered into, (ii) identifying each Merchant Advance Contract that was a Delinquent Asset or a Net Loss Asset as of the last day of the preceding calendar month and (iii) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.02 and 5.03 for, and satisfied the EBITDA Funding Condition during, such preceding calendar month;

(iv) on the date Advances are prepaid (or required to be prepaid) under Section 2.06(c) with respect to any Calendar Month End Date (or, if no such prepayment is required under Section 2.06(c) with respect to any Calendar Month End Date, on or

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before the date four Business Days following such Calendar Month End Date), a certificate of a senior financial officer of the Borrower (1) setting forth a calculation in reasonable detail (broken down by Merchant Advance Contract) of the Par Value of Merchant Advances as of such Calendar Month End Date and setting forth the face amount of all Financial Investments held by the Borrower as of such Calendar Month End Date and (2) identifying each Merchant Advance Contract that is a Delinquent Asset or a Net Loss Asset as of such Calendar Month End Date;

(v) promptly upon the Borrower becoming aware thereof, written notice of the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof or any Member; and

(vi) such other information respecting the condition or operations, financial or otherwise, of the Borrower and its Subsidiaries as the Lender may from time to time request.

(f) The Borrower will use the proceeds of the Advances solely to (1) finance the Borrower's obligations under Merchant Advance Contracts and (2) pay service fees owing by the Borrower under the LEAF Services Agreement, in each case in compliance with all applicable legal and regulatory requirements; provided, that the Lender shall have no responsibility as to the use of any of such proceeds.

(g) The Borrower will not, and will not permit any of its Subsidiaries to, merge with or consolidate into any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person.

(h) The Borrower will not create, and will not permit any of its Subsidiaries to, assume or suffer to exist any Lien on any of its property now owned or hereafter acquired by it, except Permitted Liens.

(i) The Borrower will not at any time incur or permit to remain outstanding any Indebtedness, other than (x) Indebtedness under this Agreement and (y) Indebtedness under the Class A Note.

(j) The Borrower will not exercise its right under the LEAF Services Agreement to acquire the Servicer, or acquire or permit any Subsidiary to acquire more than five percent of any class of voting securities of, or 25 percent of the equity of, any other Person. The Borrower will not permit its Subsidiaries to incur or have outstanding any Indebtedness.

(k) The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly enter into any transaction with an Affiliate (other than the LEAF Services

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Agreement) except in the ordinary course of and pursuant to the reasonable requirements of its business and upon commercially reasonable terms that are no less favorable to it than those which might be obtained in a comparable arm's-length transaction at the time from a Person which is not such an Affiliate.

(l) The Borrower will at all times comply with the restrictions on its activities set forth in the LLC Agreement.

(m) The Borrower will not, without the Lender’s prior written consent, have or maintain any Deposit Accounts or Securities Accounts (each as defined in the Security Agreement) other than the Operating Accounts, and will ensure that the Operating Accounts and each other Deposit Account and Securities Account (as so defined) is at all times subject to an Account Control Agreement unless maintained with the Lender. The Borrower will ensure that all amounts payable to the Borrower under any Merchant Advance Contract are paid directly into (i) an Operating Account, (ii) a Deposit Account or Securities Account that is subject to an Account Control Agreement or (iii) an account maintained with the Lender.

(n) The Borrower will from time to time give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be necessary or desirable to cause the Liens created by the Security Agreement to be valid first and prior perfected Liens on the Collateral purported to be covered thereby, subject to no equal or prior Lien.

SECTION 5.02. Financial Covenants.

(a)Debt to Tangible Net Worth Ratio. The Borrower will not permit the Debt to Tangible Net Worth Ratio to exceed the following respective ratios at any time during the following respective periods:

Period	Ratio
Date hereof to March 31, 2008	10.0 to 1.0
April 1, 2008 and at all times thereafter	8.0 to 1.0

(b)Interest Coverage Ratio. The Borrower will not permit the Interest Coverage Ratio at any time from and after December 1, 2007 to be less than 1.50 to 1.00.

(c)Tangible Net Worth. The Borrower will not permit Tangible Net Worth to be less than the following respective amounts at any time during the following respective periods:

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Period	Amount
Date hereof to December 31, 2007	$2,000,000
January 1, 2008 and at all times thereafter	$3,000,000

SECTION 5.03. Operating Covenants.

(a)Delinquency Ratio. The Borrower will not permit the Delinquency Ratio as of the last day of any calendar month to be greater than or equal to 9.8%.

(b)Net Loss Ratio. The Borrower will not permit the Net Loss Ratio as of the last day of any calendar month to be greater than or equal to 6.5%.

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ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default. If any of the following events ("Events of Default", provided that such term shall exclude any of such events caused primarily by action or omission of a Class A Member) shall occur and be continuing:

(a) The Borrower shall default in the payment when due of any principal of any Advance when the same becomes due and payable; or the Borrower shall fail to pay any interest on any Advance or any fee or other amount payable hereunder or under the Fee Letter when due and such failure remains unremedied for three Business Days; or

(b) Any representation or warranty made by the Borrower herein, in the Security Agreement or in any Account Control Agreement or in any certificate or other document delivered in connection herewith or therewith shall prove to have been incorrect when made or deemed made in any material respect; or

(c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(a), 5.01(b), 5.01(e), 5.01(f), 5.01(g), 5.01(h), 5.01(i), 5.01(j), 5.01(k), 5.01(l), 5.01(m), 5.02 or 5.03; or (ii) the Borrower shall fail to perform or observe any other term or covenant in this Agreement, the Security Agreement or any Account Control Agreement on its part to be performed or observed and such failure remains unremedied for thirty days after the earlier of (x) the date on which the Borrower has knowledge thereof or (y) the date on which written notice thereof shall have been given to the Borrower by the Lender; or

(d) The Borrower or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any other Debt of the Borrower or any of its Subsidiaries having an aggregate outstanding principal amount of $50,000 or more ("Material Debt") when the same becomes due and payable, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Material Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Material Debt; or any such Material Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Debt shall be required to be made, in each case prior to the stated maturity thereof; or

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(e) The Borrower or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Subsidiaries seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency, moratorium or reorganization or relief of debtors, or liquidation or winding up, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and such proceeding shall remain undismissed or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or

(f) Any judgment or order for the payment of money in excess of $50,000 shall be rendered against the Borrower or any of its Subsidiaries, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order and such proceedings shall not have been stayed or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(g) A Change in Control shall occur; or

(h) The Liens created by the Security Agreement shall, at any time with respect to any material portion of the Collateral intended to be covered thereby, not be valid and perfected (to the extent perfection by filing, registration, recordation, possession or control is required herein or therein) in favor of the Lender free and clear of all other Liens (other than Liens permitted under Section 5.01(h) of this Agreement or under the Security Agreement); or except for expiration in accordance with its terms, the Security Agreement shall for whatever reason be terminated or cease to be in full force or effect in any material respect, or the enforceability thereof shall be contested by the Borrower; or

(i) The Borrower or any of its Subsidiaries shall incur liability to a Plan, a Multiemployer Plan or the PBGC (or any combination of the foregoing) that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; or

(j) Any action, suit or proceeding by or before any arbitrator or governmental authority against or affecting the Borrower or any of its Subsidiaries that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, shall be commenced or threatened; or

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(k) Any Person shall initiate foreclosure proceedings with respect to any Lien on the Equity Interests in the Borrower, LEAF Ventures or the Servicer;

then, and in any such event, the Lender may, by notice to the Borrower, (i) declare the obligation of the Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and/or (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the obligation of the Lender to make Advances shall auto-matically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE VII

MISCELLANEOUS

SECTION 7.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. This Agreement and the documents referred to herein and therein constitute the entire agreement of the parties with respect to the subject matter hereof and thereof.

SECTION 7.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including facsimile, telegraphic, telex or cable communication) and mailed, submitted by facsimile, telegraphed, telexed, cabled or deliv-ered, to the respective addresses set forth on the signature pages hereof or at such other address as shall be desig-nated by any party in a written notice to the other party. All such notices and communications shall, (a) when submitted by facsimile, telegraphed, telexed or cabled, be effective when submitted by facsimile, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, or (b) when submitted by mail, upon receipt, except in any such case that notices and communications to the Lender pursuant to Article II shall not be effective until received by the Lender.

SECTION 7.03. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof;

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nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The reme-dies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 7.04. Costs, Expenses and Indemnification.

(a) The Borrower agrees to pay and reimburse on demand all reasonable costs and expenses incurred by the Lender in connection with the preparation, negotiation, execution and delivery, administration, modification, amendment or enforcement of this Agreement and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender with respect thereto and with respect to advising the Lender as to its rights and responsibilities under or in connection with this Agreement.

(b) The Borrower hereby agrees to indemnify the Lender and each of its Affiliates and their respective officers, directors, employees, agents, advisors and representatives (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (the "Indemnities"), in each case arising out of or in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto arising out of or in connection with or relating to this Agreement or the transactions contemplated hereby or thereby or any use made or proposed to be made with the proceeds of the Advances, whether or not such investigation, litigation or proceeding is brought by the Borrower, any of its shareholders or creditors, an Indemnified Party or any other Person, or an Indemnified Party is otherwise a party thereto, and whether or not any of the conditions precedent set forth in Article III are satisfied or the other transactions contemplated by this Agreement are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided, however, the Borrower's obligation to indemnify any Indemnified Party, other than the Lender, under this Section 7.04(b) shall be subject to its receipt of written demand for the Indemnities of such Indemnified Party, such demand to set forth evidence of such Indemnified Party's payment or liability for such Indemnities. The Lender shall have no liability for any special, indirect, consequential or punitive damages in connection with any matter relating hereto.

SECTION 7.05. Assignments and Participations.

   (a) The Lender may assign to another Person all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of the

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Commitment and the Advances); provided, that any such partial assignment shall be in an amount at least equal to $1,000,000.

(b) The Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Advances); provided, however, that the Lender's obligations under this Agreement (including, without limitation, its Commitment hereunder) shall remain unchanged.

(c) The Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 7.05, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower or any of its Affiliates furnished to the Lender by or on behalf of the Borrower.

(d) Notwithstanding any other provision set forth in this Agreement, the Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

(e) All amounts payable by the Borrower to the Lender under Sections 2.08(e), 2.10, 2.11 and 7.04 shall be determined as if the Lender had not sold or agreed to sell any participa-tions in the Advances or its Commitment and as if the Lender were funding each of such Advances and Commitment in the same way that it is funding the portion of such Advances and Commitment in which no participations have been sold.

SECTION 7.06. Governing Law; Submission to Jurisdiction.

(a) This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York County for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby.

(b) The Borrower irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

SECTION 7.07. Severability. In case any provision in this Agreement shall be held to be invalid, illegal or unenforceable, such provision shall be severable from the rest of this Agreement, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

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SECTION 7.08. Execution in Counterparts

. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

SECTION 7.09. Survival. This Agreement and the documents referred to herein and therein, which constitute the entire agreement of the parties with respect to the subject matter hereof and thereof, shall cease to be effective upon the termination of the Commitment and the final payment in full of all amounts due and payable hereunder; provided, that the obligations of the Borrower under Sections 2.08(e), 2.10, 2.11, 2.12 and 7.04 shall survive the termination of the Commitment and the repayment in full of all amounts due and payable hereunder. Each representation and warranty made or deemed to be made herein or pursuant hereto shall survive the making of such representation and warranty, and the Lender shall not be deemed to have waived, by reason of making any Advance, any Default or Event of Default that may arise by reason of such representation or warranty proving to have been false or misleading.

SECTION 7.10. Waiver of Jury Trial

. EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

SECTION 7.11. No Fiduciary Relationship

. The Borrower acknowledges that the Lender has no fiduciary relationship with, or fiduciary duty to, the Borrower arising out of or in connection with this Agreement, and the relationship between the Lender and the Borrower is solely that of creditor and debtor. This Agreement does not create a joint venture among the parties.

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    SECTION 7.12. Confidentiality. The Lender agrees to maintain the confidentiality of the Information (as defined below) of the Borrower, except that Information may be disclosed (a) to the Lender's and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to the Borrower, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 7.12, to any assignee of or participant in, or any prospective assignee of or participant in, any of the Lender's rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 7.12 or (ii) becomes available to the Lender from a source other than the Borrower. For the purposes of this Section, “Information” in relation to the Borrower means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 7.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

              SECTION 7.13. USA PATRIOT Act. The Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower in accordance with the Act.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

MERIT CAPITAL ADVANCE, LLC

By:LEAF Ventures, LLC

Its Managing Member

By:LEAF Financial Corporation

Its Managing Member

By:______________________________________

Name:

Title:

Address for Notices:

c/o LEAF Financial Corporation

1818 Market Street, 9^th Floor

Philadelphia, PA 19103

Attention: Crit DeMent

Telecopy: (215) 640-6330

DEUTSCHE BANK AG Cayman Islands Branch

By:____________________________

Name:

Title:

By:____________________________

Name:

Title:

Applicable Lending Office:

Cayman Islands

Address for Notices:

60 Wall Street

New York, NY 10005

Attention: Todd Hirsh

Telecopy: (732) 578-3944

NY3:#7401722v15

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EXHIBIT A

[FORM OF SECURITY AGREEMENT]

SECURITY AGREEMENT dated as of March 15, 2007, between Merit Capital Advance, LLC, a limited liability company duly organized and validly existing under the laws of Delaware (the "Grantor"), and Deutsche Bank AG Cayman Islands Branch (the "Secured Party") .

The Grantor may from time to time obtain credit and other financial accommodations from the Secured Party (by means of loans under the Credit Agreement referred to below, or otherwise).

To induce the Secured Party to extend such credit and other financial accommodations, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor has agreed to grant a security interest in the Collateral (as hereinafter defined) as security for the Secured Obligations (as so defined).

Accordingly, the parties hereto agree as follows:

Section 1.Definitions, Etc.

1.01Certain Uniform Commercial Code Terms. As used herein, the terms "Accession", "Account", "As-Extracted Collateral", "Chattel Paper", "Commodity Account", "Commodity Contract", "Deposit Account", "Document", "Electronic Chattel Paper", "Equipment", "Fixture", "General Intangible", "Goods", "Instrument", "Inventory", "Investment Property", "Letter-of-Credit Right", "Payment Intangible", "Proceeds", "Promissory Note", "Software" and "Tangible Chattel Paper" have the respective meanings set forth in Article 9 of the NYUCC, and the terms "Certificated Security", "Entitlement Holder", "Financial Asset", "Instruction", "Securities Account", "Security", "Security Certificate", "Security Entitlement" and "Uncertificated Security" have the respective meanings set forth in Article 8 of the NYUCC.

1.02Additional Definitions. In addition, as used herein:

"Casualty Event" means, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person receives insurance proceeds, or proceeds of a condemnation award or other compensation.

"Collateral" has the meaning assigned to such term in Section 3.

"Collateral Account" has the meaning assigned to such term in Section 4.01(a).

"Contingent Secured Obligations" means obligations of the Grantor in respect of (a) letters of credit issued by the Secured Party for the account of the Grantor under any Credit Document, (b) acceptances created for the benefit of the Grantor by the Secured Party under any Credit Document, and (c) any other claim that may be payable to the Secured Party by the Grantor under any Credit Document that is not yet due and payable.

Security Agreement

2

"Copyright Collateral" means all Copyrights of the Grantor, whether now owned or hereafter acquired by the Grantor, including each Copyright identified in Annex 4.

"Copyrights" means all copyrights, copyright registrations and applications for copyright registrations, including all renewals and extensions thereof, all rights to recover for past, present or future infringements thereof and all other rights whatsoever accruing thereunder or pertaining thereto.

"Credit Agreement" means that certain Credit Agreement dated as of the date hereof between the Grantor, as borrower, and the Secured Party, as lender, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time.

"Credit Documents" means collectively, this Agreement, the Credit Agreement and any other document or instrument now existing or hereafter entered into that relates to any Financial Accommodation at any time made available by the Secured Party to the Grantor (including any promissory note evidencing any thereof, and any document or instrument providing for the grant of a lien upon any property of the Grantor as collateral security for the obligations of the Grantor in respect of any Financial Accommodation).

"Default" means any of the following events: (a) any of the Secured Obligations shall have been declared, or shall become, due and payable prior to the stated maturity therefor, (b) the Grantor shall commence any bankruptcy or insolvency proceeding, or there shall be commenced against the Grantor any bankruptcy or insolvency proceeding and the same shall not be dismissed within 60 days, (c) the Grantor shall fail to pay when due any principal amount in respect of a Secured Obligation, (d) the Grantor shall fail to pay any interest, fees, commissions, indemnities, costs and other expenses in respect of any Secured Obligations for three or more business days after the date on which such amounts first become due or (e) any event of default or termination (however described) under any Credit Document shall occur and be continuing.

"Financial Accommodation" means any loan, advance, letter of credit or overdraft, securities lending, discount or purchase of notes, security or other instrument or property, acceptance, issuance or confirmation of any letter of credit, guarantee or indemnity, interest rate, currency, equity or other similar type of swap or protection agreement, foreign exchange agreement, cash management arrangement or any other kind of agreement under which the Grantor may be indebted or obligated to the Secured Party in any manner, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or not secured, and however acquired by the Secured Party.

"Foreign Subsidiary" means any subsidiary of the Grantor with respect to which the Secured Party determines that a pledge of more than 66-2/3% of the total number of shares of voting stock of such subsidiary would result in material adverse tax consequences under Section 956 of the Code.

Security Agreement

3

"Initial Pledged Shares" means the Shares of each Issuer beneficially owned by the Grantor on the date hereof and identified in Annex 3 (Part A).

"Intellectual Property" means, collectively, all Copyright Collateral, all Patent Collateral and all Trademark Collateral, together with (a) all inventions, processes, production methods, proprietary information, know how and trade secrets; (b) all licenses or user or other agreements granted to the Grantor with respect to any of the foregoing, in each case whether now or hereafter owned or used; (c) all information, customer lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs; (d) all field repair data, sales data and other information relating to sales or service of products now or hereafter manufactured; (e) all accounting information and all media in which or on which any information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data; (f) all licenses, consents, permits, variances, certifications and approvals of governmental agencies now or hereafter held by the Grantor; and (g) all causes of action, claims and warranties now or hereafter owned or acquired by the Grantor in respect of any of the items listed above.

"Issuers" means, collectively, (a) the respective Persons identified on Annex 3 (Part A) under the caption "Issuer", (b) any other Person that shall at any time be a subsidiary of the Grantor, and (c) the issuer of any equity securities hereafter owned by the Grantor.

"Motor Vehicles" means motor vehicles, tractors, trailers and other like property, if the title thereto is governed by a certificate of title or ownership.

"NYUCC" means the Uniform Commercial Code as in effect from time to time in the State of New York.

"Patent Collateral" means all Patents of the Grantor, whether now owned or hereafter acquired by the Grantor, including each Patent identified in Annex 5, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect thereto.

"Patents" means all patents and patent applications, including the inventions and improvements described and claimed therein together with the reissues, divisions, continuations, renewals, extensions and continuations in part thereof, all income, royalties, damages and payments now or hereafter due and/or payable with respect thereto, all damages and payments for past or future infringements thereof and rights to sue therefor, and all rights corresponding thereto throughout the world.

         "Person" means any individual, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof).

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"Pledged Shares" means, collectively, (i) the Initial Pledged Shares and (ii) all other Shares of any Issuer now or hereafter owned by the Grantor, together in each case with (a) all certificates representing the same, (b) all shares, securities, moneys or other property representing a dividend on or a distribution or return of capital on or in respect of the Pledged Shares, or resulting from a split-up, revision, reclassification or other like change of the Pledged Shares or otherwise received in exchange therefor, and any warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Shares, and (c) without prejudice to any provision of any of the Credit Documents prohibiting any merger or consolidation by an Issuer, all Shares of any successor entity of any such merger or consolidation.

"Secured Obligations" means, collectively, the obligations of the Grantor to the Secured Party in respect of the principal of and interest on any loan or other extension of credit made by the Secured Party to, and each promissory note (if any) constituting part of or delivered by the Grantor to the Secured Party under, the Credit Documents, and all other amounts from time to time owing to the Secured Party by the Borrower under the Credit Documents or in respect of any Financial Accommodation from time to time made available by the Secured Party to the Grantor, together with in each case interest thereon and expenses related thereto, including any interest or expenses accruing or arising after the commencement of any case with respect to the Grantor under the United States Bankruptcy Code or any other bankruptcy or insolvency law (whether or not such interest or expenses are allowed or allowable as a claim in whole or in part in such case).

"Shares" means shares of capital stock of a corporation, limited liability company interests, partnership interests and other ownership or equity interests of any class in any Person.

"Trademark Collateral" means all Trademarks of the Grantor, whether now owned or hereafter acquired by the Grantor, including each Trademark identified in Annex 6, together, in each case, with the product lines and goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark and service mark. Notwithstanding the foregoing, the Trademark Collateral does not and shall not include any Trademark that would be rendered invalid, abandoned, void or unenforceable by reason of its being included as part of the Trademark Collateral.

"Trademarks" means all trade names, trademarks and service marks, logos, trademark and service mark registrations, and applications for trademark and service mark registrations, including all renewals of trademark and service mark registrations, all rights to recover for all past, present and future infringements thereof and all rights to sue therefor, and all rights corresponding thereto throughout the world.

Section 2.Representations and Warranties. The Grantor represents and warrants to the Secured Party that:

2.01Organizational Matters; Enforceability, Etc. The Grantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The execution, delivery and performance of this Agreement, and the grant of the

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security interests pursuant hereto, (a) are within the Grantor's powers and have been duly authorized by all necessary corporate or other action, (b) do not require any consent or approval of, registration or filing with, or any other action by, any governmental authority or court, except for (i) such as have been obtained or made and are in full force and effect and (ii) filings and recordings in respect of the security interests created pursuant hereto, (c) will not violate any applicable law or regulation or the charter, by laws or other organizational documents of the Grantor or any order of any governmental authority or court binding upon the Grantor or its property, (d) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Grantor or any of its assets, or give rise to a right thereunder to require any payment to be made by any such person, and (e) except for the security interests created pursuant hereto, will not result in the creation or imposition of any lien, charge or encumbrance on any asset of the Grantor.

This Agreement has been duly executed and delivered by the Grantor and constitutes, a legal, valid and binding obligation of the Grantor, enforceable against the Grantor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

The Grantor is not (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

2.02Title. The Grantor is the sole beneficial owner of the Collateral and no lien exists upon the Collateral (and no right or option to acquire the same exists in favor of any other Person) other than (a) the security interest created or provided for herein, which security interest constitutes a valid first and prior perfected lien on the Collateral, and (b) the liens (if any) expressly permitted by the Credit Documents.

2.03Names, Etc.The full and correct legal name, type of organization, jurisdiction of organization, organizational ID number (if applicable) and mailing address of the Grantor as of the date hereof are correctly set forth in Annex 1.

2.04Changes in Circumstances. The Grantor has not (a) within the period of four months prior to the date hereof, changed its location (as defined in Section 9 307 of the NYUCC), (b) except as specified in Annex 1, heretofore changed its name, or (c) except as specified in Annex 2, heretofore become a "new debtor" (as defined in Section 9 102(a)(56) of the NYUCC) with respect to a currently effective security agreement previously entered into by any other Person.

2.05Pledged Shares. The Initial Pledged Shares constitute (a) 100% of the issued and outstanding Shares of each Issuer beneficially owned by the Grantor on the date hereof (other than any Shares held in a Securities Account referred to in Annex 7), whether or not registered in the name of the Grantor. Annex 3 (Part A) correctly identifies, as at the date hereof, the respective Issuers of the Initial Pledged Shares and (in the case of any corporate Issuer) the

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respective class and par value of such Shares and the respective number of such Shares (and registered owner thereof) represented by each such certificate. The Initial Pledged Shares are, and all other Pledged Shares in which the Grantor shall hereafter grant a security interest pursuant to Section 3 will be, (i) duly authorized, validly existing, fully paid and non assessable (in the case of any Shares issued by a corporation) and (ii) duly issued and outstanding (in the case of any equity interest in any other entity), and none of such Pledged Shares are or will be subject to any contractual restriction, or any restriction under the charter, by laws, partnership agreement or other organizational instrument of the respective Issuer thereof, upon the transfer of such Pledged Shares (except for any such restriction contained herein or in the Credit Documents, or under such organizational instruments).

2.06Promissory Notes. Annex 3 (Part B) sets forth a complete and correct list of all Promissory Notes (other than any held in a Securities Account referred to in Annex 7) held by the Grantor on the date hereof.

2.07Intellectual Property. Annexes 4, 5 and 6, respectively, set forth a complete and correct list of all copyright registrations, patents, patent applications, trademark registrations and trademark applications owned by the Grantor on the date hereof (or, in the case of any supplement to said Annexes 4, 5 and 6, effecting a pledge thereof, as of the date of such supplement).

Except pursuant to licenses and other user agreements entered into by the Grantor in the ordinary course of business that are listed in said Annexes 4, 5 and 6 (including as supplemented by any supplement effecting a pledge thereof), the Grantor has done nothing to authorize or enable any other Person to use any Copyright, Patent or Trademark listed in said Annexes 4, 5 and 6 (as so supplemented), and all registrations listed in said Annexes 4, 5 and 6 (as so supplemented) are, except as noted therein, in full force and effect.

To the Grantor's knowledge, (i) except as set forth in said Annexes 4, 5 and 6 (as supplemented by any supplement effecting a pledge thereof), there is no violation by others of any right of the Grantor with respect to any Copyright, Patent or Trademark listed in said Annexes 4, 5 and 6 (as so supplemented), respectively, and (ii) the Grantor is not infringing in any respect upon any Copyright, Patent or Trademark of any other Person; and no proceedings alleging such infringement have been instituted or are pending against the Grantor and no written claim against the Grantor has been received by the Grantor, alleging any such violation, except as may be set forth in said Annexes 4, 5 and 6 (as so supplemented).

The Grantor does not own any Trademarks registered in the United States of America to which the last sentence of the definition of Trademark Collateral applies.

2.08Deposit Accounts and Securities Accounts. Annex 7 sets forth a complete and correct list of all Deposit Accounts, Securities Accounts and Commodity Accounts of the Grantor on the date hereof.

2.09Commercial Tort Claims. Annex 8 sets forth a complete and correct list of all commercial tort claims of the Grantor in existence on the date hereof.

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2.10Fair Labor Standards Act. Any goods now or hereafter produced by the Grantor or any of its subsidiaries included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended.

Section 3.Collateral. As collateral security for the payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Grantor hereby pledges and grants to the Secured Party as hereinafter provided a security interest in all of the Grantor's right, title and interest in, to and under the following property, in each case whether tangible or intangible, wherever located, and whether now owned by the Grantor or hereafter acquired and whether now existing or hereafter coming into existence (all of the property described in this Section 3 being collectively referred to herein as "Collateral"):

(a)all Accounts:

(b)all As-Extracted Collateral;

(c)all Chattel Paper;

(d)all Deposit Accounts;

(e)all Documents;

(f)all Equipment;

(g)all Fixtures;

(h)all General Intangibles;

(i)all Goods not covered by the other clauses of this Section 3;

(j)the Pledged Shares;

(k)all Instruments, including all Promissory Notes;

(l)all Intellectual Property;

(m)all Inventory;

(n)all Investment Property not covered by other clauses of this Section 3, including all Securities, all Securities Accounts and all Security Entitlements with respect thereto and Financial Assets carried therein, and all Commodity Accounts and Commodity Contracts;

(o)all Letter-of-Credit Rights;

(p)all commercial tort claims, as defined in Section 9-102(a)(13) of the NYUCC, arising out of the events described in Annex 8;

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(q)all other tangible and intangible personal property whatsoever of the Grantor; and

(r)all Proceeds of any of the Collateral, all Accessions to and substitutions and replacements for, any of the Collateral, and all offspring, rents, profits and products of any of the Collateral, and, to the extent related to any Collateral, all books, correspondence, credit files, records, invoices and other papers (including all tapes, cards, computer runs and other papers and documents in the possession or under the control of the Grantor or any computer bureau or service company from time to time acting for the Grantor),

IT BEING UNDERSTOOD, HOWEVER, that (A) in the case of any of the foregoing that consists of general or limited partnership interests in a general or limited partnership, the security interest hereunder shall be deemed to be created only to the maximum extent permitted under the applicable organizational instrument pursuant to which such partnership is formed, (B) in no event shall the security interest granted under this Section 3 attach to any lease, license, contract, property rights or agreement to which the Grantor is a party (or to any of its rights or interests thereunder) if the grant of such security interest would constitute or result in either (i) the abandonment, invalidation or unenforceability of any right, title or interest of the Grantor therein or (ii) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, property rights or agreement (other than to the extent that any such term would be rendered ineffective by Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code as in effect in the relevant jurisdiction, and (C) the security interest created hereby in Shares constituting voting stock of any Issuer that is a Foreign Subsidiary shall be limited to that portion of such voting stock that does not exceed 65% of the aggregate issued and outstanding voting stock of such Issuer.

Section 4.Cash Proceeds of Collateral.

4.01Collateral Account. The Secured Party will cause to be established at a banking institution to be selected by the Secured Party a cash collateral account (the "Collateral Account"), that

(i)to the extent of all Investment Property or Financial Assets (other than cash) credited thereto shall be a Securities Account in respect of which the Secured Party shall be the Entitlement Holder, and

(ii)to the extent of any cash credited thereto shall be a Deposit Account in respect of which the Secured Party shall be the depositary bank's customer, and

into which the Grantor agrees to deposit from time to time the cash proceeds of any of the Collateral (including proceeds of insurance thereon) required to be delivered to the Secured Party pursuant to any of the Credit Documents, or pursuant hereto, and into which the Grantor may from time to time deposit any additional amounts that it wishes to provide as additional collateral security hereunder. The Collateral Account, and any money or other property from time to time

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therein, shall constitute part of the Collateral hereunder and shall not constitute payment of the Secured Obligations until applied as hereinafter provided.

4.02Proceeds of Casualty Events. Without limiting the generality of the provisions of the foregoing Section 4.01, promptly following the occurrence of any Casualty Event affecting the property of Grantor (whether or not such property is Collateral under this Agreement) resulting in a loss in excess of $10,000, the Grantor shall give prompt notice thereof to the Secured Party and shall cause the proceeds of insurance, condemnation award or other compensation received as a result of such Casualty Event to be paid to the Secured Party, for deposit into the Collateral Account, as additional collateral security for the payment of the Secured Obligations. To the extent the Secured Party shall receive proceeds of any such Casualty Event resulting in a loss of $10,000 or less, the Secured Party will, so long as no Default shall have occurred and be continuing, promptly remit such proceeds to the Grantor.

4.03Withdrawals. The balance from time to time in the Collateral Account shall be subject to withdrawal only as provided in this Section 4.03 and Section 4.04 below. The Secured Party shall (except as otherwise provided in the last sentence of this Section 4.03) remit the collected balance standing to the credit of the Collateral Account to or upon the order of the Grantor as the Grantor shall from time to time instruct, provided that (A) deposits in the Collateral Account that constitute any proceeds of insurance, condemnation award or other compensation in respect of any Casualty Event affecting any property of Grantor shall be subject to withdrawal only as provided in Section 4.04 below and (B) at any time following the occurrence and during the continuance of a Default, the Secured Party may in its discretion apply or cause to be applied (subject to collection) the balance from time to time standing to the credit of the Collateral Account (regardless of the origin thereof) to the prepayment of the principal of the Secured Obligations (and/or to provide cover for Contingent Secured Obligations).

4.04Restoration or Replacement of Property. With respect to any proceeds that are required to be paid into the Collateral Account pursuant to Section 4.02 above, the Grantor may, at its option, to be exercised by delivery of notice to the Secured Party within 60 days of the receipt of such proceeds, elect to apply any proceeds of insurance, condemnation award or other compensation received as a result of such Casualty Event either (A) to the rebuilding or replacement of the property affected by such Casualty Event (the "Damaged Property") or (B) to the prepayment of such of the Secured Obligations as shall be selected by it.

If the Grantor elects to rebuild or replace the Damaged Property, any such proceeds (and any earnings thereon) held in the Collateral Account shall be applied by the Grantor to the rebuilding and replacement of the Damaged Property and such proceeds shall be advanced to the Grantor by the Secured Party in periodic installments upon compliance by the Grantor with such reasonable conditions to disbursement as may be imposed by the Secured Party, including, but not limited to, reasonable retention amounts and receipt of lien releases.

Following the occurrence and the continuation of any Default, the Secured Party shall have no obligation to release any of such proceeds to the Grantor for rebuilding or replacement of Damaged Property. All insurance proceeds remaining after the payment for rebuilding and replacement of Damaged Property pursuant to this Section 4.04 may, at the option

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of the Secured Party, be applied to the prepayment of the principal of the Secured Obligations s (and/or to provide cover for Contingent Secured Obligations).

4.05Investment of Balance in Collateral Account. The cash balance standing to the credit of the Collateral Account shall be invested from time to time in such short-term U.S. government (or U.S. government-guaranteed) obligations as the Secured Party shall determine, which investments shall be held in the name and be under the control of the Secured Party (and credited to the Collateral Account), provided that at any time after the occurrence and during the continuance of a Default, the Secured Party may in its discretion at any time and from time to time elect to liquidate any such investments and to apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations then due and payable in the manner specified in Section 5.09.

Section 5.Further Assurances; Remedies. In furtherance of the grant of the security interest pursuant to Section 3, the Grantor hereby agrees with the Secured Party as follows:

5.01Delivery and Other Perfection. The Grantor shall promptly from time to time give, execute, deliver, file, record, authorize or obtain all such financing statements, continuation statements, notices, instruments, documents, agreements or consents or other papers as may be necessary or desirable in the judgment of the Secured Party to create, preserve, perfect, maintain the perfection of or validate the security interest granted pursuant hereto or to enable the Secured Party to exercise and enforce its rights hereunder with respect to such security interest, and without limiting the foregoing, shall:

(a)if any of the Pledged Shares, Investment Property or Financial Assets constituting part of the Collateral are received by the Grantor, forthwith (x) deliver to the Secured Party the certificates or instruments representing or evidencing the same, duly endorsed in blank or accompanied by such instruments of assignment and transfer in such form and substance as the Secured Party may reasonably request, all of which thereafter shall be held by the Secured Party, pursuant to the terms of this Agreement, as part of the Collateral and (y) take such other action as the Secured Party may reasonably deem necessary or appropriate to duly record or otherwise perfect the security interest created hereunder in such Collateral;

(b)promptly from time to time deliver to the Secured Party any and all Instruments constituting part of the Collateral, endorsed and/or accompanied by such instruments of assignment and transfer in such form and substance as the Secured Party may request; provided that (other than in the case of the promissory notes described in Annex 3 (Part B)) so long as no Default shall have occurred and be continuing, the Grantor may retain for collection in the ordinary course any Instruments received by the Grantor in the ordinary course of business and the Secured Party shall, promptly upon request of the Grantor, make appropriate arrangements for making any Instrument delivered by the Grantor available to the Grantor for purposes of presentation, collection

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or renewal (any such arrangement to be effected, to the extent requested by the Secured Party, against trust receipt or like document);

(c)promptly from time to time enter into such control agreements, each in form and substance reasonably acceptable to the Secured Party, as may be required to perfect the security interest created hereby in any and all Deposit Accounts, Investment Property, Electronic Chattel Paper and Letter-of-Credit Rights, and will promptly furnish to the Secured Party true copies thereof;

(d)promptly from time to time upon the request of the Secured Party, execute and deliver such short-form security agreements as the Secured Party may reasonably deem necessary or desirable to protect the interests of the Secured Party in respect of that portion of the Collateral consisting of Intellectual Property;

(e)promptly upon request of the Secured Party, cause the Secured Party to be listed as the lienholder on any certificate of title or ownership covering any Motor Vehicle (other than Motor Vehicles constituting Inventory) and within 120 days of such request deliver evidence of the same to the Secured Party;

(f)keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Secured Party may reasonably require in order to reflect the security interests granted by this Agreement; and

(g)permit representatives of the Secured Party, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Collateral, and permit representatives of the Secured Party to be present at the Grantor's place of business to receive copies of communications and remittances relating to the Collateral, and forward copies of any notices or communications received by the Grantor with respect to the Collateral, all in such manner as the Secured Party may require.

5.02Other Financing Statements or Control. Except as otherwise permitted under the Credit Documents, the Grantor shall not (a) file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to any of the Collateral in which the Secured Party is not named as the sole secured party, or (b) cause or permit any Person other than the Secured Party to have "control" (as defined in Section 9-104, 9-105, 9-106 or 9-107 of the NYUCC) of any Deposit Account, Electronic Chattel Paper, Investment Property or Letter-of-Credit Right constituting part of the Collateral.

5.03Preservation of Rights. The Secured Party shall not be required to take steps necessary to preserve any rights against prior parties to any of the Collateral.

5.04Special Provisions Relating to Certain Collateral.

(a)Pledged Shares.

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(i)The Grantor will cause the Pledged Shares to constitute at all times (1) 100% of the total number of Shares of each Issuer other than a Foreign Subsidiary then outstanding owned by the Grantor and (2) in the case of any Issuer that is a Foreign Subsidiary, 65% of the total number of shares of voting stock of such Issuer and 100% of the total number of shares of all other classes of capital stock of such Issuer then issued and outstanding owned by the Grantor.

(ii)So long as no Default shall have occurred and be continuing, the Grantor shall have the right to exercise all voting, consensual and other powers of ownership pertaining to the Pledged Shares for all purposes not inconsistent with the terms of this Agreement, the Credit Documents or any other instrument or agreement referred to herein or therein, provided that the Grantor agrees that it will not vote the Pledged Shares in any manner that is inconsistent with the terms of this Agreement, the Credit Documents or any such other instrument or agreement; and the Secured Party shall execute and deliver to the Grantor or cause to be executed and delivered to the Grantor all such proxies, powers of attorney, dividend and other orders, and all such instruments, without recourse, as the Grantor may reasonably request for the purpose of enabling the Grantor to exercise the rights and powers that it is entitled to exercise pursuant to this Section 5.04(a)(ii).

(iii)Unless and until a Default shall have occurred and be continuing, the Grantor shall be entitled to receive and retain any dividends, distributions or proceeds on the Pledged Shares paid in cash out of earned surplus.

(iv)If a Default shall have occurred and be continuing, whether or not the Secured Party exercises any available right to declare any Secured Obligations due and payable or seeks or pursues any other relief or remedy available to it under applicable law or under this Agreement, the Credit Documents or any other agreement relating to such Secured Obligation, all dividends and other distributions on the Pledged Shares shall be paid directly to the Secured Party and retained by it in the Collateral Account as part of the Collateral, subject to the terms of this Agreement, and, if the Secured Party shall so request in writing, the Grantor agrees to execute and deliver to the Secured Party appropriate additional dividend, distribution and other orders and documents to that end, provided that if such Default is cured, any such dividend or distribution theretofore paid to the Secured Party shall, upon request of the Grantor (except to the extent theretofore applied to the Secured Obligations), be returned by the Secured Party to the Grantor.

(b)Intellectual Property.

(i)For the purpose of enabling the Secured Party to exercise rights and remedies under Section 5.05 at such time as the Secured Party shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Grantor hereby grants to the Secured Party, to the extent assignable, an irrevocable, non exclusive license (exercisable without payment of royalty or other compensation to the Grantor) to use, assign, license or sublicense any of the Intellectual Property now owned or hereafter acquired by the Grantor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded

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               or stored and to all computer programs used for the compilation or printout thereof.

(ii)Notwithstanding anything contained herein to the contrary, but subject to any provision of the Credit Documents that limit the rights of the Grantor to dispose of its property, so long as no Default shall have occurred and be continuing, the Grantor will be permitted to exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of the business of the Grantor. In furtherance of the foregoing, so long as no Default shall have occurred and be continuing, the Secured Party shall from time to time, upon the request of the Grantor, execute and deliver any instruments, certificates or other documents, in the form so requested, that the Grantor shall have certified are appropriate in its judgment to allow it to take any action permitted above (including relinquishment of the license provided pursuant to clause (i) immediately above as to any specific Intellectual Property). Further, upon the payment in full of all of the Secured Obligations and the expiration and termination of all obligations of the Secured Party to make available any Financial Accommodation to the Grantor, or earlier expiration of this Agreement or release of the Collateral, the Secured Party shall grant back to the Grantor the license granted pursuant to clause (i) immediately above. The exercise of rights and remedies under Section 5.05 by the Secured Party shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by the Grantor in accordance with the first sentence of this clause (ii).

(c)Chattel Paper. The Grantor will (i) deliver to the Secured Party each original of each item of Chattel Paper at any time constituting part of the Collateral, and (ii) cause each such original and each copy thereof to bear a conspicuous legend, in form and substance reasonably satisfactory to the Secured Party, indicating that such Chattel Paper is subject to the security interest granted hereby and that purchase of such Chattel Paper by a Person other than the Secured Party without the consent of the Secured Party would violate the rights of the Secured Party.

5.05Remedies.

(a)Rights and Remedies Generally upon Default. If a Default shall have occurred and is continuing, the Secured Party shall have all of the rights and remedies with respect to the Collateral of a secured party under the NYUCC (whether or not the Uniform Commercial Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including the right, to the fullest extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Secured Party were the sole and absolute owner thereof (and the Grantor agrees to take all such action as may be appropriate to give effect to such right); and without limiting the foregoing:

(i)the Secured Party in its discretion may, in its name or in the name of the Grantor or otherwise, demand, sue for, collect or receive any money or other property at any time payable or receivable on account of or in exchange for any of the Collateral, but

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shall be under no obligation to do so;

(ii)the Secured Party may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral;

(iii)the Secured Party may require the Grantor to notify (and the Grantor hereby authorizes the Secured Party so to notify) each account debtor in respect of any Account, Chattel Paper or General Intangible, and each obligor on any Instrument, constituting part of the Collateral that such Collateral has been assigned to the Secured Party hereunder, and to instruct that any payments due or to become due in respect of such Collateral shall be made directly to the Secured Party or as it may direct (and if any such payments, or any other Proceeds of Collateral, are received by the Grantor they shall be held in trust by the Grantor for the benefit of the Secured Party and as promptly as possible remitted or delivered to the Secured Party for application as provided herein);

(iv)the Secured Party may require the Grantor to assemble the Collateral at such place or places, reasonably convenient to the Secured Party and the Grantor, as the Secured Party may direct;

(v)the Secured Party may apply the Collateral Account and any money or other property therein to payment of the Secured Obligations;

(vi)the Secured Party may require the Grantor to cause the Pledged Shares to be transferred of record into the name of the Secured Party or its nominee (and the Secured Party agrees that if any of such Pledged Shares is transferred into its name or the name of its nominee, the Secured Party will thereafter promptly give to the Grantor copies of any notices and communications received by it with respect to such Pledged Shares); and

(vii)the Secured Party may sell, lease, assign or otherwise dispose of all or any part of the Collateral, at such place or places as the Secured Party deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required by applicable statute and cannot be waived), and the Secured Party or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Grantor, any such demand, notice and right or equity being hereby expressly waived and released. In the event of any sale, assignment, or other disposition of any of the Trademark Collateral, the goodwill connected with and symbolized by the Trademark Collateral subject to such disposition shall be included. The Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by

Security Agreement

15

 announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned.

The Proceeds of each collection, sale or other disposition under this Section 5.05, including by virtue of the exercise of any license granted to the Secured Party in Section 5.04(b), shall be applied in accordance with Section 5.09.

(b)Certain Securities Act Limitations. The Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Secured Party may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Grantor acknowledges that any such private sales may be at prices and on terms less favorable to the Secured Party than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Secured Party shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for public sale.

(c)Notice. The Grantor agrees that to the extent the Secured Party is required by applicable law to give reasonable prior notice of any sale or other disposition of any Collateral, ten business days' notice shall be deemed to constitute reasonable prior notice.

5.06Deficiency. If the proceeds of sale, collection or other realization of or upon the Collateral pursuant to Section 5.05 are insufficient to cover the costs and expenses of such realization and the payment in full of the Secured Obligations, the Grantor shall remain liable for any deficiency.

5.07Locations; Names, Etc.Without at least 30 days' prior written notice to the Secured Party, the Grantor shall not (i) change its location (as defined in Section 9-307 of the NYUCC), (ii) change its name from the name shown as its current legal name on Annex 1, or (iii) agree to or authorize any modification of the terms of any item of Collateral that would result in a change thereof from one Uniform Commercial Code category to another such category (such as from a General Intangible to Investment Property), if the effect thereof would be to result in a loss of perfection of, or diminution of priority for, the security interests created hereunder in such item of Collateral, or the loss of control (within the meaning of Section 9-104, 9-105, 9-106 or 9-107 of the NYUCC) over such item of Collateral.

5.08Private Sale. The Secured Party shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 5.05 conducted in a commercially reasonable manner. The Grantor hereby waives any claims against the Secured Party arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Secured Party accepts the first offer received and does not offer the Collateral to more than one offeree.

Security Agreement

16

5.09Application of Proceeds. Except as otherwise herein expressly provided and except as provided below in this Section 5.09, the Proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant hereto, and any other cash at the time held by the Secured Party under Section 4 or this Section 5, shall be applied by the Secured Party:

First, to the payment of the costs and expenses of such collection, sale or other realization, including reasonable out of pocket costs and expenses of the Secured Party and the fees and expenses of its agents and counsel, and all expenses incurred and advances made by the Secured Party in connection therewith;

Next, to the payment in full of the Secured Obligations (or, in the case of any Contingent Secured Obligations, to the provision of cover as provided below), in such order as the Secured Party shall in its sole discretion determine; and

Finally, to the payment to the Grantor, or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining.

For purposes hereof, whenever this Agreement contemplates that cover shall be provided for Contingent Secured Obligations, such cover shall be effected by the payment to the Secured Party of any amount that will be deposited into a Collateral Account to be held by the Secured Party as collateral security for the payment of such Contingent Secured Obligations as and when they become due and payable.

5.10Attorney in Fact. Without limiting any rights or powers granted by this Agreement to the Secured Party while no Default has occurred and is continuing, upon the occurrence and during the continuance of any Default the Secured Party is hereby appointed the attorney in fact of the Grantor for the purpose of carrying out the provisions of this Section 5 and taking any action and executing any instruments that the Secured Party may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney in fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as the Secured Party shall be entitled under this Section 5 to make collections in respect of the Collateral, the Secured Party shall have the right and power to receive, endorse and collect all checks made payable to the order of Grantor representing any dividend, payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same.

5.11Perfection and Recordation. The Grantor authorizes the Secured Party to file Uniform Commercial Code financing statements describing the Collateral as "all assets" or "all personal property and fixtures" of the Grantor (provided that no such description shall be deemed to modify the description of Collateral set forth in Section 3).

  5.12Termination. When all Secured Obligations shall have been paid in full and all obligations of the Secured Party to make available any Financial Accommodation to the Grantor shall have expired or terminated, this Agreement shall terminate, and the Secured Party shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Grantor and to be released and canceled all licenses

Security Agreement

17

and rights referred to in Section 5.04(b). The Secured Party shall also, at the expense of the Grantor, execute and deliver to the Grantor upon such termination such Uniform Commercial Code termination statements, certificates for terminating the liens on the Motor Vehicles and such other documentation as shall be reasonably requested by the Grantor to effect the termination and release of the liens on the Collateral as required by this Section 5.12.

5.13Further Assurances. The Grantor agrees that, from time to time upon the written request of the Secured Party, the Grantor will execute and deliver such further documents and do such other acts and things as the Secured Party may reasonably request in order fully to effect the purposes of this Agreement. The Secured Party shall release any lien covering any asset that has been disposed of in accordance with the provisions of the Credit Documents.

Section 6.Miscellaneous.

6.01Notices. All notices, requests, consents and demands hereunder shall be in writing and telecopied or delivered to the intended recipient at the "Address for Notices" specified in the Credit Agreement or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

6.02No Waiver. No failure on the part of Secured Party to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Secured Party of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law.

6.03Amendments, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Grantor and the Secured Party.

6.04Expenses. The Grantor agrees to reimburse the Secured Party for all reasonable costs and expenses incurred by it (including the reasonable fees and expenses of legal counsel) in connection with (i) any Default and any enforcement or collection proceeding resulting therefrom, including all manner of participation in or other involvement with (w) performance by the Secured Party of any obligations of the Grantor in respect of the Collateral that the Grantor has failed or refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of the Secured Party in respect thereof, by litigation or otherwise, including expenses of insurance, (y) judicial or regulatory proceedings and (z) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 6.04, and all such costs and expenses shall

Security Agreement

18

be Secured Obligations entitled to the benefits of the collateral security provided pursuant to Section 3.

6.05Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Grantor and the Secured Party (provided that the Grantor shall not assign or transfer its rights or obligations hereunder without the prior written consent of the Secured Party).

6.06Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and either of the parties hereto may execute this Agreement by signing any such counterpart.

6.07Governing Law; Submission to Jurisdiction; Etc.

(a)Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b)Submission to Jurisdiction. The Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Secured Party may otherwise have to bring any action or proceeding relating to this Agreement against the Grantor or its properties in the courts of any jurisdiction.

(c)Waiver of Venue. The Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)Service of Process. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

6.08WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR

Security Agreement

19

INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

6.09Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

6.10Agents and Attorneys in Fact. The Secured Party may employ agents and attorneys in fact in connection herewith and shall not be responsible for the negligence or misconduct of any such agents or attorneys in fact selected by it in good faith.

6.11Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Secured Party in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

Security Agreement

20

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written.

Grantor:

MERIT CAPITAL ADVANCE, LLC

By:LEAF Ventures, LLC

Its Managing Member

By:LEAF Financial Corporation

Its Managing Member

By:______________________________________

Name:

Title:

Secured Party:

DEUTSCHE BANK AG Cayman Islands Branch

By ________________________

Title:

By ________________________

Title:

Security Agreement

ANNEX 1

FILING DETAILS

[See Sections 2.03 and 2.04 and 5.07]

Legal name:	Merit Capital Advance, LLC
Type of organization:	limited liability company
Jurisdiction of organization:	Delaware
Organizational ID number (if applicable):	4251811
Mailing address:	110 S. Poplar Street, Suite 101 Wilmington, Delaware 19801

Annex 1 to Security Agreement

ANNEX 2

NEW DEBTOR EVENTS

[See Section 2.04]

None.

Annex 2 to Security Agreement

ANNEX 3

PLEDGED SHARES AND PROMISSORY NOTES

[See definition of "Issuers" in Section 1.02 and Sections 2.05, 3(a), 3(b) and 5.01(b)]

None.

Annex 3 to Security Agreement

ANNEX 4

LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND

APPLICATIONS FOR COPYRIGHT REGISTRATIONS

[See definition of "Copyright Collateral" in Section 1.02 and Section 2.06]

None.

Annex 4 to Security Agreement

ANNEX 5

LIST OF PATENTS AND PATENT APPLICATIONS

[See definition of "Patent Collateral" in Section 1.02 and Section 2.06]

None.

Annex 5 to Security Agreement

ANNEX 6

LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,

TRADEMARK AND SERVICE MARK REGISTRATIONS AND

APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS

[See definition of "Trademark Collateral" in Section 1.02 and Section 2.06]

None.

Annex 6 to Security Agreement

ANNEX 7

LIST OF DEPOSIT ACCOUNTS, AND SECURITIES ACCOUNTS AND COMMODITY ACCOUNTS

[See Sections 2.05 and 2.08]

Name of Account	Financial Institution Where Account is held	Type of Account
collections account	Commerce Bank, N.A. 1726 Walnut Street, Philadelphia, PA 19103	deposit account
general account	Commerce Bank, N.A. 1726 Walnut Street, Philadelphia, PA 19103	deposit account
funding account	Commerce Bank, N.A. 1726 Walnut Street, Philadelphia, PA 19103	deposit account

Annex 7 to Security Agreement

ANNEX 8

LIST OF COMMERCIAL TORT CLAIMS

[See Sections 2.09 and 3(p)]

None.

Annex 8 to Security Agreement

EXHIBIT B

[FORM OF NOTICE OF BORROWING]

      ___________ __, ____

DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH

as Lender under the Credit Agreement referred to below

Ladies and Gentlemen:

The undersigned refers to the Credit Agreement dated as March 15, 2007 (as amended, supplemented or otherwise modified, the “Credit Agreement”; the terms defined therein being used herein as therein defined), between Merit Capital Advance, LLC (the “Borrower”) and Deutsche Bank AG Cayman Islands Branch (the “Lender”), and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement, that the Borrower hereby wishes to borrow an Advance under the Credit Agreement, and in that connection sets forth below the information relating to such Advance:

(i) The Business Day of the Advance is _________ __, ____.

(ii) The aggregate amount of the Advance is $_________.

(iii) The initial Interest Period of the Advance is [one/two/three/six] months.

(iv) The Lender shall credit the proceeds of the Advance to [specify account].

(v)The Par Value of Merchant Advances on the date hereof is $________.^{1 Attach a calculation in reasonable detail of the Par Value of Merchant Advances.}

(vi) The face amount of Financial Investments held by the Borrower on the date hereof is $________.^{2 Attach a list of Financial Investments held by the Borrower showing the face amount thereof.}

(vii) The sum of (i) the Par Value of Merchant Advances plus (ii) a face amount up to $1,000,000 of Financial Investments held by the Borrower on the date hereof is $________.

1.    Attach a calculation in reasonable detail of the Par Value of Merchange Advances.

2.    Attach is a list of Financial Investments held by the Borrower showing the face amount thereof.

The undersigned hereby certifies that the conditions precedent set forth in Section 3.02 of the Credit Agreement have been fulfilled as of the date hereof and will be fulfilled as of the

date of the Advance³, and that the representations and warranties of the Borrower set forth in Article 4 of the Credit Agreement are true on the date hereof and will be true as of the

date of the Advance.

Very truly yours,

MERIT CAPITAL ADVANCE, LLC

By:[______]

Its Managing Member

By___________________________

Name:

Title:

^{3.  Attach a calculation in reasonable detail demonstrating staisfaction of the EBITDA Funding Condition.}

Form of Notice of Borrowing

EX-10.19(A)

(Back to Main Document)

Execution Version

LIMITED LIABILITY COMPANY AGREEMENT

OF

MERIT CAPITAL ADVANCE, LLC

TABLE OF CONTENTS

	Page
ARTICLE I FORMATION OF THE COMPANY	1
Section 1.1Formation of the Company	1
Section 1.2Name	1
Section 1.3Business of the Company	1
Section 1.4Location of Principal Place of Business, Registered Office	2
Section 1.5Filings, Registered Agent	2
Section 1.6Term	3
Section 1.7Title to Company Property	3
Section 1.8Payments of Individual Obligations	3
Section 1.9Limited Initial Capacity of Class A Noteholder	3
ARTICLE II DEFINITIONS	3
Section 2.1Definitions	3
Section 2.2Rules of Construction	3
ARTICILE III INTERESTS, MEMBERS, CAPITAL CONTRIBUTIONS, ADDITIONAL AGREEMENTS	3
Section 3.1Interests	3
Section 3.2Class A Noteholder, Class A Members and Class B Members	4
Section 3.3Capital Contributions, Additional Units and Additional Members	4
Section 3.4Additional Agreements Among Members	7
Section 3.5Representations and Warranties	8
Section 3.6Permitted Reorganization	8
ARTICLE IV ALLOCATION OF NET INCOME AND NET LOSSES	8
Section 4.1Allocation of Net Income and Net Losses	8
Section 4.2Special Allocations	8
Section 4.3Curative Allocations	10
Section 4.4Other Allocation Rules	10
Section 4.5Tax Allocations, Code § 704(c)	11
Section 4.6Calculation of Depreciation, Etc.	12
ARTICLE V DISTRIBUTIONS, WITHDRAWALS	12
Section 5.1Distributions	12
Section 5.2Tax Distributions	12
Section 5.3Amounts Withheld	12
Section 5.4Making of Payments	13
Section 5.5Limitation on Distributions	13
ARTICLE VI MANAGEMENT	13
Section 6.1Management of the Company	13
Section 6.2Right to Rely on the Managing Member	15
Section 6.3Restrictions on Authority of the Managing Member	16

i

Section 6.4Board of Directors; Approvals	16
Section 6.5Conduct of Business by the Company; Other Management Matters	21
Section 6.6Compensation and Expenses	24
Section 6.7Execution of other Transaction Documents	24
Section 6.8Compliance with the LLC Agreement	24
Section 6.9Annual Budget	24
Section 6.10Initial Class A Member’s Right of First Refusal	25
ARTICLE VII ROLE OF NON-MANAGING MEMBERS	25
Section 7.1Rights of Powers	25
Section 7.2Voting Rights	25
Section 7.3Procedure for Consent	25
Section 7.4Special Rights of the Class A Noteholder and Class A Member	25
ARTICLE VIII ACCOUNTING BOOKS AND RECORDS	26
Section 8.1Accounting; Books and Records	26
Section 8.2Reports	27
Section 8.3Tax Matters	29
ARTICLE IX AMENDMENTS; MEETINGS	30
Section 9.1Amendments	30
Section 9.2Meetings of the Members	30
Section 9.3Manner of Consent	31
ARTICLE X TRANSFERS OF INTERSTS	31
Section 10.1Restriction on Dispositions of Interests	31
Section 10.2Prohibited Dispositions	32
Section 10.3Representation on Transfer	32
ARTICLE XI PURCHASE AND SALE RIGHTS	32
Section 11.1Purchase Option	32
ARTICLE XII DISSOLUTION AND WINDING UP	34
Section 12.1Liquidating Events	34
Section 12.2Winding Up	34
Section 12.3No Restoration of Deficit Capital Accounts; Compliance With Timing Requirements of Regulations	35
Section 12.4Deemed Distributions and Recontribution	35
Section 12.5Rights of Members	35
Section 12.6Notice of Dissolution	36
Section 12.7Character of Liquidating Distributions	36
Section 12.8The Liquidator	36
Section 12.9Form of Liquidating Distributions	36
Section 12.10Liquidation Notice	36
Section 12.11Allocations During Period of Liquidation	37

ii

ARTICLE XIII MISCELLANEOUS	37
Section 13.1Amendments	37
Section 13.2Notices	37
Section 13.3No Waiver, Cumulative Remedies	38
Section 13.4Waiver of Jury Trial	38
Section 13.5Counterparts	38
Section 13.6Survival of Representations, Warranties and Indemnities: Entire Agreement	38
Section 13.7Severability	38
Section 13.8Construction	39
Section 13.9Determination of Capital Accounts	39
Section 13.10Governing Law	39
Section 13.11Waiver of Action for Partition	39
Section 13.12Consent of Jurisdiction	39
Section 13.13Third Party Beneficiaries	39

ANNEX

Annex A: Definitions

SCHEDULES

Schedule 3.2	Members, Capital Commitments and Capital Accounts
Schedule 6.4(a)	Initial Board of Directors

EXHIBITS

Exhibit A:	Form of Membership Interest
Exhibit B:	Form of LEAF Services Agreement
Exhibit C:	Form of Member Interest Transfer
Exhibit D:	Form of Merchant Advance Contract
Exhibit E:	Form of Participation Agreement
Exhibit F:	Form of Class A Note
Exhibit G:	Underwriting Manual

iii

LIMITED LIABILITY COMPANY AGREEMENT

OF

MERIT CAPITAL ADVANCE, LLC

LIMITED LIABILITY COMPANY AGREEMENT (this "LLC Agreement") of MERIT CAPITAL ADVANCE, LLC (the "Company"), dated as of March 15, 2007 is entered into by the undersigned members (each, a "Member").

ARTICLE I

FORMATION OF THE COMPANY

Section 1.1Formation of the Company. The Company was formed as a limited liability company under the LLC Act by the filing of its Certificate of Formation on November 14, 2006 (the "Formation Date") with the Office of the Secretary of State of the State of Delaware.

Section 1.2Name. The name of the Company is "Merit Capital Advance, LLC", and all business of the Company shall be conducted in such name or, in the discretion of the Managing Member, under any other name; provided, however, that the Managing Member may change the name of the Company only upon executing and filing an amendment to the Certificate of Formation and delivering notice thereof to all the Members and the Class A Noteholder.

Section 1.3Business of the Company. The purposes of the Company are limited to (i) issuing (x) the Class A Note, (y) the Class A Interests issuable upon Conversion of the Class A Note (as provided therein), and (z) the Class B Interests, (ii) entering into Merchant Advance Contracts with counterparties, (iii) owning, managing, protecting, conserving and disposing of the Permitted Assets and (iv) engaging in such other activities related to the foregoing as are approved by the Required Directors. The Company, and the Managing Member on behalf of the Company, may, subject to Article VI, enter into and perform the Transaction Documents and all documents, agreements, certificates and financing statements contemplated thereby, all without further act, vote or approval of any Person. The authorization set forth in the preceding sentence shall not be deemed a restriction on the power and authority of the Managing Member to enter into other agreements or documents on behalf of the Company in accordance with the terms of this LLC Agreement and the other Transaction Documents, and the Managing Member is hereby directed by the Members to enter into the Transaction Documents to which the Company is to be a party on behalf of the Company and to cause the Company to perform its obligations thereunder. The Company shall have the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or in furtherance of the purposes of the Company set forth in this Section 1.3 and shall have, without limitation, any and all powers that may be exercised on behalf of the Company by the Managing Member pursuant to Article VI.

Section 1.4Location of Principal Place of Business; Registered Office. The principal place of business of the Company shall be at 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801. The registered office of the Company in the State of Delaware shall be located at 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801, or any successor office designated by the Managing Member by filing an amendment to the Company's Certificate of Formation.

Section 1.5Filings; Registered Agent.

(a)Filings. Lisa D. Schumm is hereby designated an "authorized person" within the meaning of the LLC Act and has executed and filed the Certificate of Formation of the Company with the Secretary of State of the State of Delaware. After such filing, Lisa D. Schumm ceased to be an authorized person, and the Managing Member is designated as the Company's "authorized person" within the meaning of the LLC Act.

The Managing Member shall take any and all other actions necessary to perfect and maintain the status of the Company as a limited liability company under the laws of the State of Delaware, including the preparation, execution and filing of amendments to the Certificate of Formation and such other certificates, documents and instruments as may be required by law. In addition, the Managing Member may, with prior written notice to the Class A Noteholder or the Class A Members, as the case may be, register or qualify the Company as a limited liability company in any jurisdiction in which registration or qualification is necessary or appropriate because of properties or activities of the Company in that jurisdiction.

(b)Delivery of Certificates, etc. in Connection With Qualification of the Company. At the request of the Managing Member, each Member shall execute, acknowledge, swear to and deliver all certificates and other instruments conforming with this LLC Agreement that are necessary or appropriate to form, qualify, continue and, in connection with a liquidation of the Company in accordance with Article XII, terminate the Company as a limited liability company under the laws of the State of Delaware and to qualify, continue and terminate the Company as a foreign limited liability company in all other jurisdictions in which the Company may so qualify, all to the extent contemplated and required by this LLC Agreement.

(c)Registered Agent. The registered agent for service of process on the Company in the State of Delaware shall be Andrew M. Lubin, 110 S. Poplar Street, Suite 101, Wilmington, Delaware 19801, or any successor as appointed by the Managing Member by filing an amendment to the Company's Certificate of Formation.

(d)Dissolution. Upon the dissolution and completion of the winding up and liquidation of the Company, the Liquidator, as an authorized person within the meaning of the LLC Act, shall promptly execute and cause to be filed statements of intent to dissolve and certificates of cancellation in accordance with the LLC Act and the laws of any other states or jurisdictions in which the Liquidator deems such filing necessary or advisable.

Section 1.6Term. The term of the Company commenced on the Formation Date and shall continue until the Company's Certificate of Formation is cancelled following the

2

winding up and liquidation of the Company and the completion of its business following a Liquidating Event as provided in Article XII.

Section 1.7Title to Company Property. All Company Property shall be owned by the Company as an entity, and no Member shall have any ownership interest in such property in its individual name or right. Each Member's interest in Company shall be personal property for all purposes. The Company shall hold all of its property in the name of the Company and not in the name of any Member.

Section 1.8Payments of Individual Obligations. The Company's credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be transferred or encumbered for or in payment of any individual obligation of any Member.

Section 1.9Limited Initial Capacity of Class A Noteholder. The Class A Noteholder is executing and delivering this Agreement solely as the holder of the Class A Note, in order to be provided with the rights accorded to it hereunder as such and to evidence its agreement to become bound by this Agreement as the Initial Class A Member upon Conversion of the Class A Note.

ARTICLE II

DEFINITIONS

Section 2.1Definitions. Unless otherwise defined herein or the context otherwise requires, capitalized terms used in this LLC Agreement (including the Schedules and Exhibits hereto) shall have the meanings set forth in Section 1.01 of Annex A hereto, and if not defined therein, in the Transaction Documents.

Section 2.2Rules of Construction. This LLC Agreement and the definitions referred to in Section 2.1 shall be governed by, and construed in accordance with, the rules of construction set forth in Section 1.02 of Annex A hereto.

ARTICLE III

INTERESTS; MEMBERS; CAPITAL CONTRIBUTIONS;

ADDITIONAL AGREEMENTS

Section 3.1Interests. There shall be two classes of Interests: a Class A Member Interest and a Class B Member Interest. Certificates in the form attached as Exhibit A hereto (each, a "Certificate of Interest") shall be issued to the Class A Members and the Class B Members to evidence their respective Interests (and Units) herein. Each of the parties hereto hereby acknowledges and agrees that the Interests (and Units) shall constitute "securities" governed by Article 8 of the Uniform Commercial Code as in effect in any applicable jurisdiction. A holder of a Class A Member Interest (and Class A Units) that has been admitted to the Company as a member shall have all of the rights and obligations provided to a Class A Member under this LLC Agreement, and a holder of a Class B Member Interest (and Class B

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Units) that has been admitted to the Company as a member shall have all of the rights and obligations provided to a Class B Member under this LLC Agreement. Each Certificate of Interest shall contain a legend containing conspicuous notice of the restrictions on transfers of Interests in this LLC Agreement and the Unitholders Agreement. The Company shall maintain books for the purpose of registering the transfer of limited liability company interests.

Section 3.2Class A Noteholder, Class A Members and Class B Members.

(a)Class A Noteholder. Upon the Class A Noteholder's execution of a counterpart to this LLC Agreement and payment to the Company by wire transfer of immediately available funds of an amount equal to 100% of the initial principal amount of the Class A Note, and without any further action being necessary, the Company shall duly execute and deliver the Class A Note to the Class A Noteholder. Upon Conversion of the Class A Note at the Class A Noteholder's election as provided therein, and without any further action being necessary, the Class A Noteholder shall be admitted to the Company as the Initial Class A Member. The name and address of the Class A Noteholder shall be as set forth in Schedule 3.2 hereto. The Managing Member is hereby authorized and directed to execute and deliver the Class A Note in the name of the Class A Noteholder, and upon such execution and delivery, the Class A Note shall be duly authorized and validly issued. The Managing Member is hereby authorized and directed to execute and deliver Certificate(s) of Interest in the name of the Initial Class A Member representing its Class A Member Interest (and Class A Units) issuable upon Conversion of the Class A Note, and upon such execution and delivery, such Class A Member Interest (and Class A Units) shall be duly authorized and validly issued. It is understood and agreed that this Agreement and the Unitholders Agreement shall bind the Class A Noteholder as the Initial Class A Member upon Conversion of the Class A Note.

(b)Initial Class B Member. Upon its execution of a counterpart to this LLC Agreement, and without any further action being necessary, the Initial Class B Member is hereby admitted to the Company as a Class B Member and shall be listed on Schedule 3.2 as such. The name and address of the Initial Class B Member and the Capital Account balance of the Initial Class B Member on and as of the Closing Date shall be as set forth in Schedule 3.2 hereto. The Managing Member is hereby authorized and directed to execute and deliver a Certificate of Interest in the name of the Initial Class B Member representing its Class B Member Interest (and Class B Units), and upon such execution and delivery, such Class B Member Interest (and Class B Units) shall be duly authorized and validly issued.

Section 3.3Capital Contributions, Additional Units and Additional Members.

(a)Initial Capital Contributions of Members. The Initial Class B Member hereby agrees to make a Capital Contribution to the Company on the Closing Date in an aggregate amount equal to, but not in excess of, the amount set forth opposite the Class B Member's name in Schedule 3.2 hereto (such Capital Contribution, and the deemed Capital Contributions of the Class B Member described in the following sentence, such Member's "Capital Commitment"). In consideration for the Initial Class B Member's Capital Commitment, the Initial Class B Member shall receive the number of Class B Units set forth on Schedule 3.2 for the Class B Member. Upon Conversion of the Class A Note, the Class A Noteholder shall be deemed to have made a Capital Contribution to the Company on the date of Conversion in an amount equal

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to the outstanding principal amount of the Class A Note being converted on such date, and shall receive the number of Class A Units specified in the Class A Note. No Member shall be obligated to make any other Capital Contributions to the Company.

(b)Additional Capital Contributions. As and when at any time the Required Directors determine that the Company requires additional capital to carry out the business of the Company, the Managing Member shall cause the Company to deliver to each Member a notice (a "Capital Call Notice") setting forth (i) the aggregate amount to be contributed by all of the Members (a "Requested Amount"), (ii) the general purposes to which such contributions are to be applied and (iii) the date by which Members wishing to participate in such capital call must elect to so participate, which may not be earlier than the fifth Business Day following delivery of such Capital Call Notice (the "Election Deadline"). Each Member may elect to contribute an amount equal to (x) its Percentage Interest multiplied by (y) such Requested Amount (its "Pro Rata Share") by providing the Company with written notice of such election by the Election Deadline, which notice shall set forth the maximum amount, up to the Requested Amount, that such Member is willing to contribute to the Company in accordance with this Section 3.1(b) (such Member's "Maximum Funding Amount"):

(i)If all of the Members elect to participate in such capital call, upon not less than seven Business Days' notice from the Company, each Member shall make a Capital Contribution to the Company in an amount equal to its Pro Rata Share by wire transfer of immediately available funds to a Company account designated by the Company in such notice.

(ii)If less than all of the Members elect to participate in such capital call:

(A)first, upon not less than seven Business Days' notice from the Company, each Member electing to participate in such capital call shall make a Capital Contribution to the Company in an amount equal to its Pro Rata Share by wire transfer of immediately available funds to a Company account designated by the Company in such notice;

(B)second, to the extent such Requested Amount exceeds the aggregate Capital Contributions to be made by the Members pursuant to the preceding clause (A), upon not less than three Business Days' notice from the Company, such Members electing to participate in such capital call shall make aggregate Capital Contributions (in addition to those set forth in clause (A) above) of such excess in proportion to their respective Maximum Funding Amounts by wire transfer of immediately available funds to a Company account designated by the Company in such notice; provided, however, that no Member shall be required to contribute pursuant to this clause (B), when taken together with amounts to be contributed pursuant to clause (A), an amount in excess of its Maximum Funding Amount;

(C)third, to the extent such Requested Amount exceeds the aggregate Capital Contributions to be made by the Members pursuant to the preceding clauses (A) and (B), the Board of Directors may cause the Company to admit one

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  or more Additional Members pursuant to Section 3.3(c) for aggregate Capital Contributions not to exceed such excess; and

(D)additional Units of the Class held by each Member making Capital Contributions in accordance with this Section 3.3(b) shall be issued to such Member, such that, after giving effect to such issuance, the Percentage Interest of such Member shall be an amount equal to (I) its Capital Contributions after giving effect to such capital call divided by (II) the aggregate Capital Contributions of all Members after giving effect to such capital call. Upon the issuance of additional Units, the Capital Accounts shall be adjusted consistent with Regulation §§1.704-1(b)(2)(iv)(f) and (g) so that the Capital Account balances of the Members are in proportion to their respective Units immediately following such issuance.

(c)Additional Units; Additional Members.

(i)Subject to the prior approval in writing of the Required Directors, the Company may issue additional Units of any Class at any time and from time to time to any Person (including one or more Members) for any amount of consideration, if any, as determined by the Required Directors and, in the case of a Person who is not a Member, subject to paragraphs (ii), (iii) and (iv) of this Section 3.3(c), admit such Person as an additional Member (an "Additional Member") with all of the rights and obligations of a Member under this Agreement; provided that no such approval of the Required Directors shall be required in connection with the Company's issuance of Class A Units to the Initial Class A Member upon Conversion of the Class A Note (and the Initial Class A Member shall not be an "Additional Member" for purposes of this Agreement). Any additional Units issued by the Company to any Person shall reflect the Contribution Value of the Capital Contributions made by such Person to the Company relative to the Value of the assets of Company at such time net of liabilities of the Company at such time, as determined by the Required Directors. Upon the issuance of additional Units, the Capital Accounts shall be adjusted consistent with Regulation §§1.704-1(b)(2)(iv)(f) and (g) so that the Capital Account balances of the Members are in proportion to their respective Units immediately following such issuance.

(ii)Notwithstanding the provisions of Section 3.3(c)(i), no Person may be admitted as an Additional Member if such admission would cause the Company to be treated as an association taxable as a corporation for Federal income tax purposes, cause the Company to be treated as a "publicly traded partnership" within the meaning of Code Section 7704, violate or cause the Company to violate any applicable Federal, state or foreign law, rule or regulation including, without limitation, the Securities Act of 1933, as amended, or any other applicable Federal, state or foreign securities laws, rules or regulations, cause the Company to be an investment company required to be registered under the Investment Company Act of 1940, as amended, or cause some or all of the Company's assets to be "plan assets" or the trading and investment activity of the Company to be subject to ERISA and/or Section 4975 of the Code.

(iii)Each Person desiring to become an Additional Member shall be admitted to the Company upon the approval of the Required Directors and the delivery of a

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                   counterpart signature page to this Agreement and the Unitholders Agreement that has been duly executed and delivered to the Company and any other documentation

                   required by the Required Directors.

(d)No Other Capital Contributions. Other than the Capital Contributions provided for in this Section 3.3 and the Capital Contributions of the Initial Class A Member deemed made as provided in Section 3.3(a) upon Conversion of the Class A Note, no Member shall be permitted to make Capital Contributions to the Company without the prior written consent of all Members.

Section 3.4Additional Agreements Among Members.

(a)Return of Capital Contributions. Except as otherwise provided in Article V, Article XII or in the LLC Act, no Member shall be entitled to demand or receive a return of its Capital Contributions or withdraw its capital from the Company without the consent of all Members. Under circumstances requiring a return of any Capital Contributions, no Member shall have the right to receive property other than Cash.

(b)Return on Capital. No Member shall receive any interest or draw with respect to its Capital Contributions or its Capital Account, except as otherwise provided in this LLC Agreement.

(c)Obligations of the Company. Except as required by the LLC Act, no Member (including the Managing Member) shall be personally liable for the debts, liabilities, contracts or any other Obligations of the Company, solely by reason of being a Member (or Managing Member). Except as otherwise provided by mandatory provisions of applicable state law or the provisions of this Article III, a Member shall not be required to lend any funds to the Company or to make any Capital Contributions to the Company. No Member shall be liable for the payment, repayment or return of any Capital Contributions of the other Members.

(d)Other Investments. Each Member acknowledges that the other Members and their Affiliates are free to engage or invest in an unlimited number of activities or businesses, any one or more of which may be related to the activities or businesses of the Company, without having or incurring any obligation to offer any interest in such activities or businesses to the Company or any Member, and neither this LLC Agreement nor any activity undertaken pursuant to this LLC Agreement shall prevent any Member or its Affiliates from engaging in such activities, or require any Member to permit the Company or any Member or its Affiliates to participate in any such activities, and as a material part of the consideration for the execution of this LLC Agreement by each Member, each Member hereby waives, relinquishes, and renounces any such right or claim of participation. Each Member acknowledges that certain conflicts of interest may thus arise and hereby agrees that the specific rights with respect to the Members' and their Affiliates' freedom of action provided in this Section 3.4(d), together with the other provisions of this LLC Agreement, are sufficient to protect their respective interests in relation to such possible conflicts and are to be in lieu of all other possible limitations which might otherwise be implied in fact, in law or in equity.

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Section 3.5Representations and Warranties By Each Member.

Each Member hereby represents and warrants to the Company and the other Members that (1) it is duly organized and validly existing under the laws of the jurisdiction of its organization and has all requisite power and authority to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated herein and therein, (2) the execution, delivery and performance of this Agreement and such other Transaction Documents, and the consummation of such transactions have been duly authorized by it and this Agreement constitutes its legal, valid and binding obligation, (3) its execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation by it of such transactions do not require any filing or registration with, notification to, or authorization, permit, consent or approval of, or other action by or in respect of, any Governmental Authority or any other Person, will not conflict with the provisions of its governing instruments or violate any provisions of applicable law or regulation or any order of any court or regulatory body and will not result in the breach of, or constitute a default, or require any consent, under any agreement, instrument or document to which it or any of its Affiliates is a party or by which it, any of its Affiliates or any of their respective property may be bound or affected (other than, in the case of the Initial Class B Member and the Managing Member, the written approval of the Agent and the Required Lenders under (and as defined in) the LEAF Warehousing Facility, which has been obtained and is in full force and effect) and (4) it is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and is not acquiring its Member Interests with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any state of the United States and understands the restrictions on transfer applicable to the Member Interests contained herein and in the Certificate of Interest.

Section 3.6Permitted Reorganization. The Required Directors shall have the power and authority to direct the Managing Member to cause the Company to reorganize into a corporation, whether by conversion into a corporation, merger into a corporation, having all of the Members contribute their Units to a corporation or otherwise (the "Permitted Reorganization") and the Members agree to do all things reasonably requested by the Required Directors to effect such Permitted Reorganization. Upon the consummation of the Permitted Reorganization, each Unit shall be converted into a number of shares of common stock of the Successor Corporation as is determined by the Board of Directors.

ARTICLE IV

ALLOCATION OF NET INCOME AND NET LOSSES

Section 4.1Allocation of Net Income and Net Losses.Except as otherwise provided in this Article IV, the Company's Net Income or Net Losses, as the case may be, and each item of income, gain, loss and deduction entering into the computation thereof, for each Allocation Period shall be allocated to the Members for Capital Account purposes in proportion to the Members' Percentage Interests.

Section 4.2Special Allocations. (a) Minimum Gain Chargeback/Member Minimum Gain Chargeback. If there is a net decrease in Company Minimum Gain for an

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Allocation Period, then there shall be allocated to each Member items of Company income and gain for that Allocation Period (and if necessary subsequent Allocation Periods) equal to that Member's share of the net decrease in Company Minimum Gain (within the meaning of Regulation § 1.704-2(g)(2)), subject to the exceptions set forth in Regulation § 1.704-2(f)(2) and (3), and to any exceptions provided by the Commissioner of the Internal Revenue Service pursuant to Regulation § 1.704-2(f)(5), provided, that if the Company has any discretion as to an exception provided pursuant to Regulation § 1.704-2(f)(5), the Tax Matters Member may exercise reasonable discretion on behalf of the Company, which discretion shall be exercised in good faith so as not to prejudice the interests of any Member. Allocations of excepted items and other items pursuant to the previous sentence shall be made in proportion to the respective amounts of the Members' shares of Company Minimum Gain under Regulation § 1.704-2(g). The items to be so allocated shall be determined in accordance with Regulation §§ 1.704-2(f)(6) and 1.704-2(j)(2). The foregoing is intended to be a "minimum gain chargeback" provision as described in Regulation § 1.704-2(f) and shall be interpreted and applied in all respects in accordance with that Regulation.

If during an Allocation Period there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt, then, in addition to the amounts, if any, allocated pursuant to the preceding paragraph, any Member with a share of that Member Nonrecourse Debt Minimum Gain (determined in accordance with Regulation § 1.704-2(i)(5)) shall, subject to the exceptions set forth in Regulation § 1.704-2(i)(4), be allocated items of Company income and gain for such Allocation Period (and, if necessary, subsequent Allocation Periods) equal to that Member's share of the net decrease in the Member Nonrecourse Debt Minimum Gain. Allocations of excepted items and other items pursuant to the previous sentence shall be made in proportion to the respective amounts of the Members' shares of Member Nonrecourse Debt Minimum Gain under Regulations § 1.704-2(i)(5). The items to be so allocated shall be determined in accordance with Regulation §§ 1.704-2(i)(4) and 1.704-2(j)(2). The foregoing is intended to be the "chargeback of partner nonrecourse debt minimum gain" required by Regulation § 1.704-2(i)(4) and shall be interpreted and applied in all respects in accordance with that Regulation.

(b)Qualified Income Offset. If during any Allocation Period a Member unexpectedly receives any adjustment, allocation or distribution described in Regulation § 1.704- 1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit balance in such Member's Adjusted Capital Account, there shall be allocated to such Member items of Company income and gain (consisting of a pro rata portion of each item of income, including gross income, and gain of the Company for such Allocation Period) in an amount and manner sufficient to eliminate such deficit as quickly as possible; provided, that an allocation pursuant to this Section 4.2(b) shall be made only if and to the extent that the Member would have a deficit balance in its Adjusted Capital Account after all other allocations provided for in this Article IV have been tentatively made as if this Section 4.2(b) were not in this LLC Agreement. The foregoing isintended to be a "qualified income offset" provision as described in Regulation § 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all respects in accordance with that Regulation.

(c)Gross Income Allocation. In the event that any Member has a deficit balance in its Adjusted Capital Account at the end of any Allocation Period, such Member shall be allocated

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items of Company income and gain in the amount of such deficit as quickly as possible; provided that an allocation pursuant to this Section 4.2(c) shall be made only if and to the extent that the Member would have a deficit balance in its Adjusted Capital Account after all other allocations provided for in this Article IV have been tentatively made as if Section 4.2(b) and this Section 4.2(c) were not in this LLC Agreement.

(d)Member Nonrecourse Deductions. Notwithstanding anything to the contrary in this Article IV, losses, deductions, or expenditures subject to Code § 705(a)(2)(B) that are attributable to a particular Member Nonrecourse Debt for any Allocation Period shall be allocated to the Member that bears the economic risk of loss with respect to the Member Nonrecourse Debt to which the losses, deductions, or expenditures are attributable in accordance with the rules of Regulation § 1.704-2(i).

(e)Section 754 Adjustments. To the extent Capital Accounts are required under Code §§ 734(b) and 743(b), including by reason of Regulation § 1.704-1(b)(2)(iv)(m)(2) or (4), to reflect the adjustment to the adjusted tax basis of any Company asset as a result of the distribution to a Class A Member in complete liquidation of its Class A Member Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment is an increase in such basis) or loss (if the adjustment is a decrease in such basis) that is allocated to the Members in accordance with their interests pursuant to Regulation § 1.704-1(b)(2)(iv)(m)(2) or to the Member to whom such distribution was made pursuant to Regulation § 1.704-1(b)(2)(iv)(m)(4) as applicable.

Section 4.3Curative Allocations. The allocations set forth in Sections 4.2(a),4.2(b), 4.2(c), 4.2(d) and 4.2(e) (the "Regulatory Allocations") are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with allocations of other items of income, gain, loss or deduction of the Company pursuant to this Section 4.3. Therefore, notwithstanding any other provision of this Article IV (other than the Regulatory Allocations), the Tax Matters Member, subject to (following the Conversion of the Class A Note) the Majority Class A Members' consent (such consent not to be unreasonably withheld) in the event that the Managing Member is the Class B Member, shall make such offsetting allocations of income, gain, loss or deduction of the Company in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this LLC Agreement and all items of the Company were allocated pursuant to this Article IV without regard to the Regulatory Allocations. In exercising its discretion under this Section 4.3, the Tax Matters Member shall take into account future Regulatory Allocations under Section 4.2(a) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 4.2(d) and 4.2(e).

Section 4.4Other Allocation Rules.

(a)Net Income, Net Losses and any other items of income, gain, loss or deduction shall be allocated to the Members pursuant to this Article IV as of the last day of each Allocation Period; provided that Net Income, Net Losses and such other items shall also be allocated at such

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other times as the Gross Asset Values of Company Property are adjusted pursuant to clause (ii) of the definition of Gross Asset Value.

(b)The Members hereby agree to be bound by the provisions of this Article IV in reporting their shares of the Company income and loss for income tax purposes, except to the extent otherwise required by law. Notwithstanding any requirements of law as to allocations for income tax purposes, the Members agree, for purposes of maintaining their Capital Accounts, to be bound by the allocations contained in this Article IV.

(c)To the extent permitted by Regulation § 1.704-2(h)(3), the Members shall endeavor to treat distributions of Cash as having been made from the proceeds of a nonrecourse liability (within the meaning of Regulation § 1.704-2(b)(3)) but only to the extent that such distributions otherwise would cause or increase a deficit balance of any Member's Adjusted Capital Account.

(d)Any fee paid to any Member on the Closing Date shall be treated as a guaranteed payment under Section 707(c) of the Code.

Section 4.5Tax Allocations; Code § 704(c). In accordance with Code § 704(c) and the applicable Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value.

In the event the Gross Asset Value of any asset of the Company is adjusted pursuant to clause (ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code § 704(c) and the applicable Regulations thereunder.

Any elections or other decisions relating to such allocations shall be made by the Tax Matters Member, subject to (following the Conversion of the Class A Note) the Majority Class A Members' consent (such consent not to be unreasonably withheld) in the event that the Managing Member is the Class B Member, in any manner that reasonably reflects the purpose and intent of this LLC Agreement and is otherwise in the best interest of the Members, provided that the Company shall elect to apply any allocation method permitted by the Regulations under Code § 704(c). Allocations pursuant to this Section 4.5 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Net Income, Net Losses, other items, or distributions pursuant to any provision of this LLC Agreement.

Except as otherwise provided in this LLC Agreement, for federal, state and local income tax purposes, all items of income, gain, loss, deduction of the Company, and any other allocations not otherwise provided for shall be allocated for federal income tax purposes to the Members in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Sections 4.1, 4.2 and 4.3.

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Section 4.6Calculation of Depreciation, Etc.Depreciation shall be calculated under the maximum rate and the shortest life permissible under the federal income tax law; provided that if federal income tax law changes in a way which increases the tax benefits available to the Members attributable to the Company's assets (whether by the introduction of an investment tax credit, energy tax credit or otherwise), the Tax Matters Member shall modify the allocations contained in this LLC Agreement or, as necessary, other provisions contained in this LLC Agreement, so as to cause, to the extent commercially reasonable, the Members to obtain the same benefits they had prior to such change; provided, further, that no such modification shall reduce the Cash otherwise Distributable to any Member or cause any Member any adverse federal income tax consequence as compared to the federal income tax law prior to such change.

ARTICLE V

DISTRIBUTIONS; WITHDRAWALS

Section 5.1Distributions.

(a)Priority of Payment. Except as otherwise provided in Sections 5.2 and 12.2, Distributions to the Members shall be subject to approval of the Required Directors. The Managing Member shall, on the date fixed for a Distribution (the "Distribution Date"), apply such Distribution to the Members in proportion to their Percentage Interests. For purposes of this Section 5.1(a), any transferee or successor to a Member shall be deemed to have made Capital Contributions and received Distributions in respect of its Interest in the amounts and times made by and received by the predecessors in interest to such Member in respect of that Interest. Calculations of amounts to be distributed on each Distribution Date in accordance with the priority set forth above shall be the responsibility of the Managing Member.

(b)No Other Distributions. Except as provided in this Section 5.1 and in Sections 5.2 and 12.2, no other Distributions shall be permitted.

Section 5.2Tax Distributions. Subject to Section 5.5, for each Fiscal Year, the Company shall, during such Fiscal Year or within the first 90 days following such Fiscal Year or when such taxes become payable, distribute to each Member a distribution in an amount equal to such Member's Presumed Tax Liability for such Fiscal Year (a "Tax Distribution"). Any amount distributed to a Member pursuant to Section 5.1 with respect to a Fiscal Year shall reduce the amount distributable to such Member as a Tax Distribution for such Fiscal Year. Any amount distributed pursuant to this Section 5.2 shall be deemed to be an advance distribution of amounts otherwise distributable to the Members pursuant to Section 5.1 and shall reduce the amounts that would subsequently otherwise be distributed to the Members pursuant to Section 5.1.

Section 5.3Amounts Withheld. All amounts withheld or required to be withheld pursuant to the Code or any provision of any state, local or foreign Tax law, with respect to any payment, distribution or allocation to the Company or the Members and treated by the Code (whether or not withheld pursuant to the Code) or any such Tax law as amounts payable by or in respect of the Members or any Person owning an interest, directly or indirectly,

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in such Member, shall be treated as a Distribution to the Members with respect to which such amount was withheld pursuant to this Article V for all purposes under this LLC Agreement (including an appropriate debit to such Member's Capital Account).

Section 5.4Making of Payments. Unless otherwise expressly provided herein, all distributions or payments to the Members pursuant to any provision of this LLC Agreement shall be made no later than 3:00 p.m., New York City time, on the day of distribution or payment, and, at the time of any such distribution or payment, the Managing Member shall provide to the Members a notice identifying the nature of the distribution or payment, the Section or Sections of this LLC Agreement pursuant to which it is being made and the amount being distributed or paid pursuant to each such Section.

Section 5.5Limitation on Distributions. Notwithstanding any other provision of this LLC Agreement, the Company shall not be required to make a distribution to a Member if such distribution would violate the LLC Act or any other Applicable Law.

ARTICLE VI

MANAGEMENT

Section 6.1Management of the Company.

(a)Except for actions requiring the approval of the Company's Board of Directors pursuant to Section 6.4 hereof and as otherwise provided herein (including Section 7.4), the overall management, control and administration of the business and affairs of the Company shall be vested with the Managing Member, which shall be a "manager" within the meaning of the LLC Act. The Managing Member shall have the authority to exercise all powers necessary and convenient for the purposes of the Company enumerated in Section 1.3, on behalf and in the name of the Company, subject to compliance with the restrictions and other provisions of this LLC Agreement. At any time following the Conversion of the Class A Note, the Majority Class A Members shall have the right to remove the Initial Class B Member as Managing Member upon the occurrence of any Board Reduction. Upon the delivery, at any time following the Conversion of the Class A Note, of written notice of such removal by the Majority Class A Members to the Initial Class B Member after the occurrence of any Board Reduction, the Member designated by the Majority Class A Members shall, upon its written acceptance of such position and without further act, become the Managing Member of the Company for all purposes of this LLC Agreement and the Initial Class B Member shall no longer be the Managing Member. The Initial Class B Member agrees to perform all actions reasonably requested by the new Managing Member to effectuate such transfer of management. If, following the Conversion of the Class A Note, the Majority Class A Members remove the Managing Member and appoint a new Managing Member, to the fullest extent permitted by law, the new Managing Member shall not be responsible for any of the past actions of the removed Managing Member and shall have no liability for the failure to take or perform any obligation of the Managing Member hereunder to the extent such obligation is not capable of being performed as a result of actions or omissions of the removed Managing Member.

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(b)The Managing Member shall have the authority on behalf and in the name of the Company to perform all acts necessary and desirable for the objects and purposes of the Company, subject only to the restrictions expressly set forth in this LLC Agreement (including Sections 6.3, 6.4, 6.5 and 7.4) and subject to the rights of the Liquidator to liquidate the Company and take all actions incidental thereto during the period of liquidation. Subject to such restrictions, the authority of the Managing Member shall include the authority to:

(i)engage in transactions and dealings on behalf of the Company, including transactions and dealings with any Member or any Affiliate of any Member;

(ii)call meetings of the Members or any class thereof;

(iii)vote any equity interests, Financial Investments or other Permitted Assets held by the Company;

(iv)purchase or otherwise acquire the Permitted Assets and cause the Subsidiaries to purchase or otherwise acquire the Permitted Assets;

(v)determine and make Distributions, in Cash or otherwise, on the Interests in accordance with the provisions of this LLC Agreement and the LLC Act;

(vi)appoint (and dismiss from appointment) officers, attorneys and agents on behalf of the Company, and engage (and dismiss from engagement) any and all Persons providing legal or financial services to the Company, or such other Persons as the Managing Member deems necessary or desirable for the management and operation of the Company (it being understood that the appointment (and dismissal from appointment) of the Company Accountant shall be subject to the prior approval of the Required Directors as provided in Section 6.4(e)(xiii));

(vii)incur and pay all expenses and obligations incidental to the operation and management of the Company;

(viii)open accounts;

(ix)subject to Article XII, effect a dissolution of the Company after the occurrence of a Liquidating Event;

(x)bring and defend (or settle) on behalf of the Company actions and proceedings at law or equity before any court or governmental, administrative or other regulatory agency, body or commission or any arbitrator or otherwise;

(xi)prepare or cause to be prepared reports, statements and other relevant information for distribution to the Members as may be required by this LLC Agreement or the LLC Act and any additional information determined to be appropriate by the Managing Member from time to time;

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(xii)execute, deliver and perform the Company's obligations under and exercise the Company's rights under, any of the Transaction Documents, including any certificates and other documents and instruments related thereto;

(xiii)prepare and file all necessary returns and statements and cause the Company to pay all taxes, assessments and other impositions applicable to Company Property pursuant to Section 8.3;

(xiv)borrow under the Credit Agreement to (1) finance the Company's obligations under Merchant Advance Contracts and (2) pay service fees owing by the Company under the LEAF Services Agreement;

(xv) enter into agreements for the provision of other financing to the Company (subject to the rights of first refusal of the Class A Noteholder and its designated Affiliates as set forth in the Class A Note and of Initial Class A Member and its designated Affiliates as set forth in Section 6.10); and

(xvi)execute all other documents or instruments, perform all duties, exercise all powers, and do all things for and on behalf of the Company necessary or desirable for or incidental to the foregoing.

If the Managing Member is the designee of the Majority Class A Members as provided in Section 6.1(a), the Managing Member will be permitted to outsource one or more of its responsibilities hereunder but shall select such outsource party with reasonable care and the Company shall pay the reasonable fees and expenses of any such outsource party.

(c)Except as otherwise provided herein (including Section 7.4 and 7.5), no Member (other than the Managing Member), as such, shall have any right to, and shall not, take part in the management or affairs of the Company, nor shall any Member (other than the Managing Member), as such, have the power to act for or bind the Company.

Section 6.2Right to Rely on the Managing Member.

(a)Any Person dealing with Company may rely (without duty of further inquiry) upon a certificate signed by the Managing Member as to:

(i)the identity of the Managing Member, the Class A Members or the Class B Members;

(ii)the existence or nonexistence of any fact or facts that constitute a condition precedent to acts by the Managing Member or that are in any other manner germane to the affairs of the Company;

(iii)the Persons who are authorized to execute and deliver any instrument or document of the Company; and

(iv)any act or failure to act by the Company or any other matter whatsoever involving the Company or any Member.

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(b)To the extent that the Company is permitted or required to dispose of any Company Property in accordance herewith, the signature of the Managing Member shall be sufficient to convey title to any such Company Property, and all of the Members agree that a copy of this LLC Agreement may be shown to the appropriate parties in order to confirm the same, and further agree that the signature of the Managing Member shall be sufficient to execute any documents necessary to effectuate this or any other provision of this LLC Agreement.

Section 6.3Restrictions on Authority of the Managing Member. The Managing Member shall not have the authority to:

(a)do any act in contravention of this LLC Agreement or any other Transaction Document;

(b)do any act which would make it impossible to carry on the ordinary business of the Company, except in connection with the dissolution, winding up and termination of the Company as permitted by Article XII;

(c)possess Company Property, or assign the Company's rights in specific Company Property, for other than a Company purpose;

(d)admit a Person as a Member except as provided in this LLC Agreement;

(e)take any action expressly reserved for the Class A Noteholder or the Majority Class A Members, as the case may be, under Section 7.4 hereof; or

(f)take any action that it has been advised by Deutsche Bank AG would cause Deutsche Bank AG to be in violation of the Bank Holding Company Act of 1956, as amended.

Section 6.4Board of Directors; Approvals. (a) The Company shall have a board of directors (the "Board of Directors") initially composed of three directors appointed by the Initial Class B Member. Prior to the Conversion of the Class A Note, the Class A Noteholder shall have the right from time to time to select, appoint and remove (with or without cause) two observers (each a "Board Observer") who shall be entitled to attend and observe (but not vote at) meetings of the Board of Directors as the representatives of the Class A Noteholder. On and after the Conversion of the Class A Note, the Board of Directors shall be composed of four directors, two of which shall be appointed by the Initial Class A Member and shall act as representatives of the Class A Members on the Board of Directors, and the other two of which shall be appointed by the Majority Class B Members and shall act as representatives of the Class B Members on the Board of Directors. Upon the occurrence of a Board Reduction Event (at any time following the Conversion of the Class A Note), the Majority Class A Members may, by delivering written notice of such election to the Class B Members, elect to reduce the number of directors acting as representatives of the Class B Members from two to one. Such reductions shall be effective upon receipt of such notice. In addition to the foregoing, the Board of Directors shall at all times have at least one director that is an Independent Director; provided that the Independent Director shall only be permitted to vote on the matters specified in Section 6.4(e)(xviii). All directors shall be natural persons. Each director is a "manager" within the meaning of the LLC Act. The initial directors, the Initial Board Observers and the initial Independent Director are listed on Schedule 6.4(a) hereto.

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(b) The Majority Class A Members shall have the exclusive right from time to time to select, appoint and remove (with or without cause) the director(s) acting as the representative(s) of the Class A Members on the Board of Directors. The Majority Class B Members shall, except with respect to removals following a Board Reduction Event, have the exclusive right from time to time to select, appoint and remove (with or without cause) the director(s) acting as the representative(s) of the Class B Members on the Board of Directors. Any vacancy occurring on the Board of Directors due to the death, disability, removal or resignation of a director shall be filled by the Member(s) who appointed the director and as whose representative the deceased, disabled, removed or departing director served, and in the case of the Independent Director, shall be filled by the Majority Class B Members with the consent (not to be unreasonably withheld) of the Class A Noteholder or the Majority Class A Members, as the case may be; provided that, following a Board Reduction (after the Conversion of the Class A Note), any such vacancy of the Independent Director shall be filled by the Majority Class A Members. In the event a Member fails or refuses to appoint representatives to the Board of Directors for any reason (and has actual notice of the death, resignation or other refusal to serve of any person previously acting as a member of the Board of Directors and representing such Member) so that for a period of fifteen days or more after such notice there is no representative of such Member acting as a member of the Board of Directors, then such Member shall be deemed to have consented to any actions taken by the Board of Directors (other than any action requiring the vote of the Required Directors) after the expiration of such fifteen day period and prior to the appointment by such Member of a director or directors to act as the representative of such Member on the Board of Directors as provided herein, and the quorum and voting requirements in Section 6.4(c) below shall be modified accordingly. The Board of Directors shall have the power to establish its own procedures for meeting and voting and to appoint one or more committees, in each case subject to the requirements of this Section 6.4.

(c)Subject to Section 6.4(e), a quorum for the conduct of business by the Board of Directors on behalf of the Company shall be (i) prior to the Conversion of the Class A Note, (x) two directors and (y) at least one Board Observer or (ii) on and after the Conversion of the Class A Note, (x) one director appointed by the Majority Class A Members and (y) one director appointed by the Majority Class B Members, in each case then acting and (in the case of each director) entitled to vote, provided that, following a Board Reduction (at any time following the Conversion of the Class A Note), quorum shall be no less than half of the total number of directors then appointed by the Members and acting and entitled to vote (it being understood that the term "majority" for this purpose shall mean more than 50% of the entire number of directors then acting and entitled to vote), and providedfurther that, (1) prior to the Conversion of the Class A Note and (2) for any matters specified in Section 6.4(e)(xviii) (whether prior to or after the Conversion of the Class A Note), the Independent Director shall also be required in order for quorum to be constituted. For quorum purposes, a director (or, prior to the Conversion of the Class A Note, a Board Observer) may be present in person or by conference telephone, teleconference or any other means wherein each director (and, prior to the Conversion of the Class A Note, each Board Observer) can hear each other director (and, prior to the Conversion of the Class A Note, each Board Observer). No action may be conducted at a meeting unless prior written or telephonic notice (including agenda) has been given to each director (and, prior to the Conversion of the Class A Note, each Board Observer), in the case of a telephonic meeting, personally at least 48 hours prior to the time fixed for such meeting, and in all other cases, at least 10 days prior to the time fixed for such meeting, unless such notice has been waived in

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writing by each director (and, prior to the Conversion of the Class A Note, each Board Observer) who did not receive notice as required hereby. Any meeting not conducted by conference telephone call shall be held in a location in Philadelphia designated in the notice of such meeting or at such other location as the directors (and, prior to the Conversion of the Class A Note, the Board Observers) shall agree. All directors (and, prior to the Conversion of the Class A Note, each Board Observer) shall use reasonable efforts to attend Board of Directors meetings. If a director (or, prior to the Conversion of the Class A Note, a Board Observer) is unable to attend a requested Board of Directors meeting, such director (or, prior to the Conversion of the Class A Note, such Board Observer) may provide the other directors (and, as applicable, prior to the Conversion of the Class A Note, the other Board Observer(s)) with two alternative dates and times for a meeting to be held within two days of the date originally requested for such meeting and the directors (and, prior to the Conversion of the Class A Note, the Board Observers) shall use good faith efforts to agree upon a mutually acceptable meeting time.

(d)Subject to the other applicable provisions of this Section 6.4, the Board of Directors may take action only by the vote of (i) prior to the Conversion of the Class A Note, at least two directors or (ii) on and after the Conversion of the Class A Note, at least one director appointed by the Majority Class A Members and at least one director appointed by the Majority Class B Members, provided that following a Board Reduction (at any time following the Conversion of the Class A Note), the Board of Directors may (subject to the other applicable provisions of this Section 6.4) take action only by the vote of a majority of the entire number of directors then appointed and acting at a meeting at which a quorum is present (it being understood that the term "majority" for this purpose shall mean more than 50% of the entire number of directors then acting and entitled to vote), and providedfurther that, for any matters specified in Section 6.4(e)(xviii), the vote of the Independent Director shall also be required. As provided in Section 18-404(d) of the LLC Act but subject to Section 6.4(e), action may be taken without a meeting if a consent in writing setting forth the action so taken is executed by at least such number of directors as would be sufficient to approve the action at a meeting.

(e)The prior written approval of the Required Directors (and, in the case of Sections 6.4(e)(ii), 6.4(e)(viii) (to the extent set forth therein) and 6.4(xvii), the Class A Noteholder) shall be required for the taking of any of the following actions, and notwithstanding any power or authority granted to the Managing Member under the LLC Act, the Certificate of Formation or this LLC Agreement (including Sections 6.1and6.5), the Managing Member and the Company shall not have the authority to, and the Managing Member agrees that it shall not take any of the following actions, without first obtaining such approval (in addition to any other approvals that may be required under this LLC Agreement):

(i)permit the Company or any Subsidiary to take any act in contravention of this LLC Agreement or any other Transaction Document;

(ii) (x) permit the Company to issue any limited liability company interests (including, without limitation, any preferred or non-voting limited liability company interests) in the Company, or permit the Company to issue any rights to acquire any such limited liability company interests (it being understood that the issuance of the Class A Units issuable upon Conversion of the Class A Note shall not require the consent of the

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Required Directors or the Class A Noteholder), or (y) permit the Company to reclassify or combine any limited liability company interests in the Company;

(iii)permit the Company or any Subsidiary to acquire any assets other than Permitted Assets;

(iv) permit the Company or any Subsidiary to incur or suffer to exist any Lien on any of its assets other than pursuant to the Security Agreement and other than Permitted Liens (as defined in the Credit Agreement);

(v)permit the Company or any Subsidiary to merge with any Person or Dispose of all or substantially all of its assets;

(vi) permit the Company or any Subsidiary to Dispose of any Permitted Asset other than (x) in the case of the Company, any pledge or other disposition under the Security Agreement or any Disposition in the ordinary course of the Company's business and (y) in the case of the Servicer Subsidiary, any Disposition in the ordinary course of such Subsidiary's business;

(vii) permit the Company or any Subsidiary to incur any Indebtedness, other than (x) Indebtedness of the Company incurred pursuant to the Credit Agreement and (y) Indebtedness of the Company under the Class A Note;

(viii) permit (A) any Distribution in respect of Interests or (B) any redemption of Interests, other than, in each of clause (A) or (B), as permitted or contemplated by Article V or Article XII of this LLC Agreement or by the Transaction Documents (provided that the prior written approval of the Class A Noteholder shall be required for any redemption of Interests);

(ix) permit the Company to approve any Budget (including the amount of any working capital and expense reserves), to be established each year; provided, if a new annual Budget is not approved, in order to allow the Company to continue to operate, the applicable Budget of the last approved year will be deemed to be approved until a new approved Budget can be put in place;

(x) permit the Company or any Subsidiary to (i) amend, modify or waive any provision of the LEAF Services Agreement, any Credit Card Processor Services Agreement or any Relevant Provision of a Merchant Advance Contract, or (ii) enter into any Merchant Advance Contract whose equivalent provisions differ from the Relevant Provisions set forth in the form of Merchant Advance Contract attached as Exhibit D;

(xi) permit any action by the Company or any Subsidiary in connection with the Company's exercise of its rights under the LEAF Services Agreement, excluding any action regarding a claim of fraud, theft or other misconduct or breach;

(xii) permit the Company or any Subsidiary to (i) terminate the LEAF Services Agreement, or (ii) enter into after the date hereof, terminate, or change (or consent or fail

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     to object to any change in) the settlement of funds procedures under, any Credit Card Processor Services Agreement;

(xiii)permit the Company or any Subsidiary to select and hire any material external service providers, including accountants and auditors (but excluding counsel) for the Company, other than service providers retained as of the Closing Date and identified to the Class A Noteholder;

(xiv) permit the Company or any Subsidiary to enter into any business combination, partnership or joint venture with any Person, or to terminate any such arrangement entered into;

(xv) (i) permit the Company to engage in any business activities other than those conducted and proposed to be conducted on the date hereof, (ii) permit the Servicer Subsidiary to engage in any business activities other than the provision to the Company of services of the type contemplated in the LEAF Services Agreement, (iii) permit the Company or any Subsidiary to enter into Merchant Advance Contracts with counterparties in California (other than Merchant Advance Contracts entered into by the Company with such counterparties while the Company maintains a valid and effective California finance lender license) or (iv) permit the Company or any Subsidiary to do business in any State of the United States of America other than New York, California, New Jersey, Pennsylvania, Florida, Texas and Nevada, or in any country other than the United States of America or any political subdivision of such other country;

(xvi) permit the Company or any Subsidiary to enter into any agreement or otherwise transact with the Class B Member or any of its Affiliates (other than the Company and its Subsidiaries, and other than as expressly contemplated by the Transaction Documents);

(xvii) permit the Company or any Subsidiary to voluntarily liquidate or dissolve itself or appoint a Liquidator;

(xviii)permit the Company or any Subsidiary to take any action under the definition of "Voluntary Bankruptcy"; provided that any action described in this clause (xviii) (whether prior to or after a Board Reduction) shall require the affirmative vote of each director (including the Independent Director);

(xix)permit the Company or any Subsidiary to change its Fiscal Year;

(xx)cause the Company or any Subsidiary to be treated as a corporation or other association taxable as a corporation or as a publicly traded partnership for federal income tax purposes or to take a position inconsistent with the Company or any Subsidiary not being treated as a corporation or other association taxable as a corporation except as required by Applicable Law;

(xxi) permit the Company or any Subsidiary to confess a judgment against the Company or any Subsidiary or settling actions in proceedings in law or in equity in relation to the Company or any Subsidiary before any court or other Governmental Authority;

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(xxii) permit the Company or any Subsidiary (other than the Servicer Subsidiary) to have any employees;

(xxiii)permit the Company to reduce the "Commitments" under the Credit Agreement;

(xxiv)permit the Company or any Subsidiary to incur any voluntary expense, or to enter into any agreement other than the Transaction Documents (and any agreement required to be entered into pursuant to any Transaction Document), that in any such case is not covered in the Budget, if the aggregate of all such expenses, or of all obligations of the Company and its Subsidiaries pursuant to the relevant agreement(s), as the case may be, (i) individually is in excess of $35,000 or (ii) in the aggregate during any annual fiscal period of the Company is in excess of $200,000, unless, in the case of any such voluntary expense, the incurrence thereof is necessary to comply with Applicable Law, and it being understood that the Managing Member shall provide the directors and (if applicable) the Board Observers with at least three Business Days prior written notice of the incurrence by the Company or any Subsidiary of any such expense, or any such entry into by the Company or any Subsidiary of any such agreement, in any such case not so covered (or not reasonably anticipated to be so covered) in the Budget;

(xxv)permit the Company or any Subsidiary to approve any new channel partner for marketing the merchant advance business of the Company and its Subsidiaries (it being understood that a Person which is a counterparty to a Merchant Advance Contract with the Company shall not, as the sole consequence thereof, be deemed to be channel partner of the Company for purposes of this Section 6.4(e)(xxv));

(xxvi)permit the Company to exercise its right under the LEAF Services Agreement to acquire the Servicer Subsidiary, or permit the Company or any Subsidiary to acquire more than five percent of any class of voting securities of, or 25 percent of the equity of, any other Person; or

(xxvii) permit the Company or any Subsidiary to hire any regulatory counsel, provided that DBAH Capital LLC and its Affiliates shall have the right to require that any advice provided by any regulatory counsel to the Company or any Subsidiary be in form and substance satisfactory to DBAH Capital LLC and its Affiliates and in a form expressly permitting DBAH Capital LLC and its Affiliates to rely thereon.

Section 6.5Conduct of Business by the Company; Other Management Matters.

(a)Covenants of the Company. Anything in this LLC Agreement to the contrary notwithstanding, the Managing Member shall conduct the affairs of the Company and its Subsidiaries such that:

(i)The Company and its Subsidiaries shall maintain books and records and bank accounts separate from those of any other Person.

(ii)All transactions between any Member (or any of their respective Affiliates, other than the Company and its Subsidiaries), on the one hand, and any of the

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 Company or any Subsidiary, on the other hand, shall be duly authorized and documented and recorded accurately in the appropriate books and records of such entities,

 except where normal industry practice does not normally require authorization or documentation.

(iii)The Company and its Subsidiaries shall: (x) maintain separate financial statements, showing their assets and liabilities separate and apart from those of any other Person and not have their assets listed on any financial statement of any other Person, except that the Company's and its Subsidiaries' assets may be included in a consolidated financial statement of an Affiliate if required by GAAP so long as appropriate notation is made on such consolidated financial statements to indicate the separateness of the Company and its Subsidiaries from such Affiliate and to indicate that the Company's and its Subsidiaries' assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (y) otherwise maintain their own records and books of account.

(iv)The Company and its Subsidiaries shall not commingle or pool any of the funds and other assets of the Company and its Subsidiaries with those of any Affiliate of the Company, any Member or any Affiliate of any Member or any other Person, and shall hold all of their assets in their own name.

(v)The Company has done, or caused to be done, and shall do, or cause to be done, all things necessary to observe limited liability company formalities and other organizational formalities and preserve its and its Subsidiaries' existence, and the Company shall abide by all statutory Delaware limited liability company formalities.

(vi)Neither the Company nor any of its Subsidiaries has, nor shall they, guarantee, become obligated for, or hold itself or its credit out to be responsible for, or available to satisfy, the debts or obligations of any other Person or control the decisions or actions respecting the daily business or affairs of any other Person (except as provided for in or permitted under the Transaction Documents).

(vii)Neither the Company nor any of its Subsidiaries shall acquire equity interests of any Affiliate of the Company or of any of the Members or any of their Affiliates (other than Permitted Assets and except as otherwise provided for in or permitted under this LLC Agreement or the other Transaction Documents). Neither the Company nor any of its Subsidiaries shall buy or hold any evidence of indebtedness for borrowed money issued by, or make any loan or advance to, any other Person (other than such evidence of indebtedness for borrowed money, loan or advance constituting Permitted Assets and except as otherwise provided for in or permitted under this LLC Agreement or the other Transaction Documents).

(viii)Neither the Company nor any of its Subsidiaries has made any loans or advances to, or pledged its assets (other than as otherwise provided for in or permitted under the Transaction Documents) for the benefit of, and shall not make any loans or advances (other than the Permitted Assets or as otherwise provided for in or permitted under the Transaction Documents) to, or pledge its assets (other than as otherwise

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provided for in or permitted under the Transaction Documents) for the benefit of, any Person, including, without limitation, any Affiliate of the Company, any Member, or any Affiliate of any Member.

(xi)The Company and its Subsidiaries shall maintain their assets in a manner such that it is not difficult to segregate, identify or ascertain such assets.

(x)Neither the Company nor any of its Subsidiaries shall assume, guarantee or pay the debts or obligations of any other Person or otherwise pledge its assets for the benefit of any other Person except as otherwise contemplated by the Transaction Documents.

(xi)Neither the Company nor any of its Subsidiaries shall enter into transactions with any of their Affiliates (other than the Company and its Subsidiaries) unless such transactions are on terms and conditions at least as favorable to the Company and its Subsidiaries as the terms and conditions that would be expected to have been obtained, under similar circumstances, from Persons who are not Affiliates of the Company; it being understood that the entering into of any Transaction Document and the performance thereof in accordance with its terms satisfies such standard.

(xii)The Company shall conduct its merchant advance business in accordance with the Underwriting Manual.

(b)Board Reduction Events and Liquidating Events. Promptly upon becoming aware of any Board Reduction Event or Liquidating Event, the Managing Member shall notify the Members of the occurrence of any such Board Reduction Event or Liquidating Event or any event that with notice or lapse of time or both would constitute such an event and the action that Company has taken or proposes to take with respect thereto.

(c)Maintenance of the Company's Existence, etc. At the Company's expense, the Managing Member shall take all actions that may be necessary or appropriate (i) for the continuation of the Company's and each of its Subsidiaries' valid existence as (in the case of the Company) a limited liability company or (in the case of any Subsidiary) a corporation or a limited liability company, in any such case, under the laws of its jurisdiction of formation or organization, and its qualification to do business under the laws of each other jurisdiction in which such existence or qualification is necessary to protect the limited liability of the Members or to enable the Company and its Subsidiaries to conduct the business in which they are engaged or to perform their respective obligations under any agreement to which they are a party, (ii) for the accomplishment of the Company's and each of its Subsidiaries' purposes, including the acquisition, management, maintenance, preservation, and operation of Permitted Assets in accordance with the provisions of this LLC Agreement, the organizational documents of the Subsidiaries and applicable laws and regulations and (iii) to enforce the rights of the Company and each of its Subsidiaries under each of the Transaction Documents. Without limitation of the foregoing, the Managing Member shall cause the Company and its Subsidiaries to maintain all licenses, permits, registrations, authorizations, use agreements, consents, orders or approvals of governmental or quasi-governmental agencies and authorities (whether Federal, state, local,

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municipal or foreign) necessary to own its properties and to conduct its activities in accordance with all applicable laws, rules, regulations and orders.

(d)Fiduciary Duty. Without limiting its rights under Section 3.4(d), the Managing Member shall be under a fiduciary duty to conduct the affairs of the Company in the best interests of the Company, including the safekeeping and use of all Company Property and the use thereof for the exclusive benefit of the Company and will not conduct the affairs of the Company so as to benefit any other business now owned or hereafter acquired by the Managing Member or any other Member if such conduct also produces a detriment to the Company.

(e)Notice Regarding Qualification to Do Business. The Managing Member shall provide notice to the Class A Noteholder and the Members of any state or jurisdiction in which Company is qualified to do business (other than its jurisdiction of organization and any jurisdiction in which Company is qualified to do business on the Closing Date).

Section 6.6Compensation and Expenses. No Member or Affiliate of any Member, nor any director (other than the Independent Director) or Board Observer, shall receive any salary, fee, or draw for services rendered to or on behalf of the Company or otherwise in its capacity as a Member or director, as the case may be, nor shall any Member or Affiliate of any Member or any director (other than the Independent Director) or Board Observer be reimbursed for any expenses (other than out-of-pocket travel and other expenses) incurred by such Member, Affiliate, director or Board Observer, as the case may be, on behalf of the Company or otherwise in its capacity as a Member, director or Board Observer, as the case may be; provided that if the Managing Member is the designee of the Majority Class A Members as provided in Section 6.1(a), the designee shall be reimbursed for its out-of-pocket costs and expenses incurred in connection with acting as Managing Member. For the avoidance of doubt, this Section 6.6 shall not apply to the receipt by the Servicer (as defined in the LEAF Services Agreement) of the service fees contemplated therein.

Section 6.7Execution of other Transaction Documents. Simultaneously with the execution of this LLC Agreement, the Managing Member, on behalf of the Company, shall cause the Company to enter into the Transaction Documents to which Company is a party.

Section 6.8Compliance with the LLC Agreement. The Managing Member shall exercise its rights hereunder as Managing Member to cause the Company to comply with all of the obligations of the Company set forth in this LLC Agreement.

Section 6.9Annual Budget. No later than the Closing Date and thereafter, no later than 60 days after the end of each calendar year during the term hereof, the Managing Member shall submit to the Board of Directors a preliminary budget for the Company for the next succeeding calendar year. Such budget shall become final when approved by the Required Directors. This Section 6.9 shall not apply to the Managing Member if the Managing Member is the designee of the Majority Class A Members as provided in Section 6.1(a); provided, that if the Managing Member is the designee of the Majority Class A Members and does not provide a budget in accordance with this Section 6.9, it shall provide the Members with information reasonably requested by a Member as to proposed amounts to be expended by the Company and

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as to such other matters concerning the business and affairs of the Company as any Member shall reasonably request.

Section 6.10Initial Class A Member's Right of First Refusal. The Initial Class A Member (and/or any of its Affiliates designated thereby) shall have a right of first refusal to provide (i) any debt or equity financing required by the Company, as approved by the Board, at then-market terms and (ii) any advisory, structuring, underwriting or other services required in connection with the Company's capital raising activities as approved by the Board (including any third party debt financing, equity investment or initial public offering) in exchange for market-rate compensation. For the avoidance of doubt, the rights described in this Section 6.10 shall not apply to additional capital contributions proposed to be made to the Company pursuant to Section 3.3(b) or to the issuance of Class A Units issuable upon Conversion of the Class A Note (or the Capital Contributions of the Initial Class A Member deemed made as provided in Section 3.3(a) upon such Conversion).

ARTICLE VII

ROLE OF NON-MANAGING MEMBERS

Section 7.1Rights or Powers. Except as otherwise provided herein (including Section 7.4), no Member (other than the Managing Member) shall have any right or power to take part in the management or control of the Company or its business and affairs or to act for or bind the Company in any way. Notwithstanding the foregoing, the Members shall have all the rights and powers specifically set forth in this LLC Agreement. Any Member, any Affiliate thereof or an employee, stockholder, agent, member, manager, director or officer of a Member or any Affiliate thereof, may also be an employee or agent of the Company or the Manager. The existence of these relationships and acting in such capacities will not result in such Member being deemed to be participating in the control of the business of the Company or otherwise by itself affect the limited liability of such Member.

Section 7.2Voting Rights. Each Member shall have the right to vote only on those matters expressly reserved for its vote (i) as provided in this LLC Agreement or (ii) as required by mandatory provisions of the LLC Act.

Section 7.3Procedure for Consent. In any circumstances requiring the approval or consent of any Member specified in this LLC Agreement, such approval or consent may, except as expressly provided to the contrary in this LLC Agreement, be given or withheld in the sole and absolute discretion of such Member. If the Managing Member receives the necessary approval or consent of the Members to such action, the Managing Member shall be authorized and empowered to implement such action without further authorization by the Members.

Section 7.4Special Rights of the Class A Noteholder and Class A Member. Notwithstanding any other provision hereof, the Class A Noteholder or the Majority Class A Member(s), as the case may be, shall have the exclusive right and power to (a) control the

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liquidation of the Company by appointing the Liquidator as and to the extent set forth in Article XII and (b) deliver a Liquidation Notice in accordance with Section 12.10.

ARTICLE VIII

ACCOUNTING; BOOKS AND RECORDS

Section 8.1Accounting; Books and Records.

(a)Maintenance of Books and Records. The Company shall maintain at its principal place of business or, upon notice to the Class A Noteholder and the Members, at such other place as the Managing Member shall determine, separate books of account for Company, which shall include a record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the conduct of the Company and the operation of its business in accordance with this LLC Agreement.

(b)Accounting Methods.

(i)The Company shall maintain appropriate books and records in a manner as necessary to comply with GAAP and with the Code and the Regulations, including maintaining a Capital Account and Adjusted Capital Account for each Member.

(ii)All amounts payable under any agreement, other than this LLC Agreement, between the Company on the one hand and the Members or their Affiliates (excluding Company) on the other hand, other than Distributions, shall be treated as occurring between Company and a Person who is not a Member within the meaning of Section 707(a)(1) of the Code and such amounts payable by the Company to any Member or such Member's Affiliates shall be considered an expense or capital cost, as the case may be, of the Company for income tax and financial reporting purposes, and shall not be considered a Distribution to such Member, including in maintaining such Member's Capital Account, and any such amounts payable by any Member or its Affiliates to the Company shall not, except as specifically contemplated by Article III, be considered a contribution to the Company, including in maintaining such Member's Capital Account.

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(c)Access to Books, Records, etc. Each Member or any agents or representatives of any Member (subject to reasonable safety requirements), upon reasonable notice and with reasonable frequency during normal business hours, may visit and inspect any of the properties of the Company and examine any information of the Company it may reasonably request and make copies of and abstracts from the financial and operating records and books of account of the Company, and discuss the affairs, finances and accounts of the Company with the Managing Member, all at such reasonable times and as often as such Member or any agents or representatives of such Member may reasonably request. The rights granted to each Member pursuant to this Section 8.1(c) are expressly subject to compliance by such Member with the reasonable confidentiality procedures and guidelines of the Company, as such procedures and guidelines may be established from time to time.

Section 8.2Reports.

(a)In General. The Managing Member shall be responsible for the preparation of (or for causing the preparation of) financial reports of the Company and the coordination of financial matters of the Company with the Company Accountants. Each report delivered by the Company to the Members pursuant to this Section 8.2 shall be accompanied by a representation of a Responsible Officer of the Managing Member that such report presents fairly in all material respects the information contained therein, subject, in the case of the reports to be delivered pursuant to Section 8.2(c), to year-end audit adjustments.

(b)Annual Financial Reports. Within 90 days after the end of each Fiscal Year commencing with the Fiscal Year ending September 30, 2007, the Managing Member shall cause to be prepared and to be delivered to each Member, a consolidated balance sheet as of the last day of such Fiscal Year and a consolidated income statement and consolidated statement of cash flows for Company for (x) in the case of the Fiscal Year ending September 30, 2007, the period from the Formation Date to September 30, 2007, and (y) in the case of any other Fiscal Year, such Fiscal Year, and notes associated with each, in each case prepared in accordance with GAAP and audited by the Company Accountants. The financial statements described in this Section 8.2(b) shall be accompanied by a representation of a Responsible Officer of the Managing Member stating that after reasonable inquiry, it has no actual knowledge of the occurrence of any Board Reduction Event or Liquidating Event (or any event which with the giving of notice or passage of time would reasonably be expected to become such an event) that is then continuing or, if it has any such actual knowledge, specifying each then continuing event.

(c)Quarterly Financial Reports. Within 45 days after the close of each Fiscal Quarter during any Fiscal Year beginning with the Fiscal Quarter ending March 31, 2007, the Managing Member shall cause to be prepared and to be delivered to each Member its unaudited financial statements consisting of a consolidated balance sheet as of the last day of such Fiscal Quarter and a consolidated income statement and a consolidated statement of cash flows for Company for such Fiscal Quarter, in each case prepared in accordance with GAAP except that such quarterly financial statements need not include footnote disclosure and may be subject to ordinary year-end adjustment. The financial statements described in this Section 8.2(c) shall be accompanied by a representation of a Responsible Officer of the Managing Member stating that (x) the financial statements described in this Section 8.2(c) present fairly, in all material respects, the financial position of the Company at the end of the most recently completed Fiscal Quarter and

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the results of its operations and its cash flows for such Fiscal Quarter, in conformity with GAAP, subject to year end audit adjustments or requirements, and (y) after reasonable inquiry, it has no actual knowledge of the occurrence of any Board Reduction Event or Liquidating Event (or any event which with the giving of notice or passage of time would reasonably be expected to become such an event) that is then continuing or, if it has any such actual knowledge, specifying each then continuing event.

(d)Purchase Option and Liquidation Date Reports. The Managing Member shall cause to be prepared and to be delivered to each Member (x) on any Final Payment Date, a balance sheet as of the applicable Mark-to-Market Measurement Date setting forth the aggregate Mark-to-Market Value for each of the Permitted Assets (a "Mark-to-Market Balance Sheet") together with a certificate by the Managing Member that such statements have been prepared in accordance with this LLC Agreement, subject to adjustment as a result of the audit to be provided pursuant to the following clause (y) and (y) on the date on which final distributions are made to the Members pursuant to Section 12.2 hereof and not later than 75 days after the Purchase Date, certification by the Company Accountants that such statements have been prepared in accordance with this LLC Agreement.

(e)Valuation Reports. The Managing Member shall cause to be prepared contemporaneously with any adjustment to the Gross Asset Values of the Company assets in accordance with clause (ii) of the definition of Gross Asset Value, reports required to determine the Mark-to-Market Value of such assets and (x) in the event any Permitted Asset is acquired by contribution or distributed by the Company, with respect to such Permitted Asset only and (y) upon the occurrence of any adjustment to the Gross Asset Value of all Permitted Assets, with respect to all Permitted Assets, and the Managing Member shall furnish such reports to each Member together with a certification by the Company Accountants that such reports have been prepared in accordance with this LLC Agreement.

(f)Certain Other Information. The Managing Member shall provide to the Members a monthly report no later than the 15th day of each calendar month, which report shall provide in reasonable detail all material financial information with respect to the preceding month; provided that the Managing Member designated by the Majority Class A Members pursuant to Section 6.1 shall not be required to comply with this sentence for a period of six (6) months following such designation. In addition, the Managing Member shall provide to the Members: (i) concurrently with the sending thereof, copies of all written information and reports which the Company (or any Person on its behalf) provides under any of the Transaction Documents and promptly following receipt thereof, copies of all written information and notices which the Company (or any Person on its behalf) receives under any of the Transaction Documents (including, without limitation, weekly cash flow forecasts received by the Company under the LEAF Services Agreement); (ii) as promptly as practicable, any material correspondence or notices to or from any governmental authority, regulatory or self regulatory agencies, or other entities with jurisdiction over the Company or any Subsidiary; (iii) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Company or any Affiliate thereof or any Member; (iv) as promptly as practicable and in any event within five Business Days after having knowledge of the occurrence of each Default (as defined in the Credit Agreement), a statement of the Managing Member setting forth details of such Default and the action which the Managing Member has taken and proposes to take with

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respect thereto; and (v) as promptly as practicable, such other information as a Member may from time to time reasonably request.

Section 8.3Tax Matters.

(a)Actions by the Class B Member. The Managing Member is specifically authorized to act as the "Tax Matters Member" under the Code and in any similar capacity under state or local law. The Tax Matters Member is authorized to make any and all elections for federal, state, and local tax purposes including any election, if permitted by applicable law: (i) to adjust the basis of Company Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state or local law, in connection with Dispositions of Interests and Company Distributions; (ii) with the consent of the Members, to extend the statute of limitations for assessment of tax deficiencies against the Members with respect to adjustments to the Company's federal, state, or local tax returns; and (iii) to the extent provided in Code Sections 6221 through 6231, to represent the Company and the Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company or the Members in their capacities as Members, and to file or cause to be filed any tax returns and execute any tax returns, agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Members with respect to such tax matters or otherwise affect the rights of the Company and the Members, provided that the Tax Matters Member's authority to make an election under this Section 8.3(a) is subject to the consent of each Member for which such election could reasonably be expected to have an adverse impact.

(b)Tax Information and Filings. The Tax Matters Member shall deliver or cause to be delivered to each Member necessary tax information for each Member's estimated quarterly tax filings within 45 days of the end of the applicable quarter. The Tax Matters Member shall deliver or cause to be delivered to each Member: (i) on or prior to November 30 of each Fiscal Year, the Tax Matters Member's good faith estimate of the amount of such Member's allocable share of the Company's taxable income or loss for the preceding Fiscal Year and (ii) as soon as practicable after the end of each Fiscal Year of the Company but not later than April 30th of the next succeeding Fiscal Year, necessary tax information for each Member's annual tax filings. The Tax Matters Member shall file or cause to be filed tax or information returns and all other filings for the Company prepared in accordance with the Code, the Regulations and applicable state and local tax laws. The Tax Matters Member shall use reasonable efforts to provide the Members with details concerning the foregoing information upon the reasonable inquiry of a Member.

(c)Tax Classification.

(i)The Tax Matters Member shall take such action as may be required under the Code and Regulations to cause Company to be treated as a partnership for federal income tax purposes.

(ii)To the extent Section 8.3(c)(i) does not govern the state and local tax classification of the Company, the Tax Matters Member shall take such action as may be required under applicable state and/or local law to cause Company to be treated as, and in a manner consistent with a partnership (or the functional equivalent thereof) for state

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and local income and franchise tax purposes; provided, that the Tax Matters Member shall not take any action under this clause (c)(ii) which would be inconsistent with its obligations under Section 8.3(c)(i).

ARTICLE IX

AMENDMENTS; MEETINGS

Section 9.1Amendments. Amendments to this LLC Agreement may be proposed by any Member. Following such proposal, the Managing Member shall submit to the Members a verbatim statement of any proposed amendment once counsel for the Company shall have approved of the same in writing as to form, and the Managing Member shall include in any such submission a recommendation as to the proposed amendment. The Managing Member shall seek the written vote of the Members on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. Except as otherwise provided in Section 13.1, no amendment shall be adopted and be effective as an amendment to this LLC Agreement unless it receives the affirmative vote of all of the Members.

Section 9.2Meetings of the Members.

(a)Meetings of the Members may be called by the Managing Member and shall be called upon the written request of any Member. The request shall state the nature of the business to be transacted. Subject to other requirements specified herein regarding notice periods, notice of any such meeting shall be given to all Members not less than five Business Days nor more than 30 days prior to the date of such meeting, unless in any such case such notice has been waived in writing by each Member who did not receive notice as required hereby. Members may vote in person, by proxy or by telephone at such meeting. Whenever the vote or consent of Members is permitted or required under this LLC Agreement, such vote or consent may be given at a meeting of Members or may be given in accordance with the procedure prescribed in Section 9.3.

(b)For the purpose of determining the Members entitled to vote on, or to vote at, any meeting of the Members or any adjournment thereof, the Managing Member or the Member requesting such meeting may fix, in advance, a date as the record date for any such determination. Such date shall not be more than thirty days nor less than one Business Day before any such meeting.

(c)Each Member may authorize any Person or Persons to act for it by proxy on all matters in which the Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Member or its attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Member executing it or as provided under the terms of such proxy.

(d)Each meeting of Members shall be conducted by the Managing Member or such other Person as the Managing Member may appoint pursuant to such rules for the conduct of the meeting as the Managing Member or such other Person deems appropriate.

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Section 9.3Manner of Consent. In the event the consent of one or more Members is required for any action to be taken by the Company, such consent may be given at a meeting, which may be attended or conducted by conference telephone call, or provided in a writing executed by such Members.

ARTICLE X

TRANSFERS OF INTERESTS

Section 10.1Restriction on Dispositions of Interests.

(a)Dispositions of Class A Member Interests. Subject to Section 10.1(c) and to the Unitholders Agreement and except as provided in Article XI, no Class A Member shall Dispose of its Class A Interest or resign from the Company without the prior written consent of the Majority Class B Members and (so long as the Initial Class A Member and its Affiliates are the Majority Class A Members) the Majority Class A Members; provided that no consent of the Majority Class B Members shall be required if (x) a Board Reduction Event shall have occurred or (y) with respect to a Disposition of a Class A Member Interest by the Initial Class A Member or any of its Affiliates if, after giving effect to such Disposition, the Initial Class A Member and its Affiliates continue to own a majority of the Class A Member Interests; and provided further, that a Class A Member may Dispose of a Class A Member Interest to any Affiliate of such Class A Member in a transfer that complies with Section 10.1(c).

(b)Dispositions of Class B Member Interests. (i) Subject to Section 10.1(c) and to the Unitholders Agreement, no Class B Member shall Dispose of its Class B Interest or resign from the Company without the prior written consent of the Class A Noteholder or the Majority Class A Members, as the case may be; provided, that a Class B Member may Dispose of a Class B Member Interest to any Affiliate of such Class B Member in a transfer that complies with Section 10.1(c).

(c)Prohibited Transfers. No Disposition of an Interest that is a Disqualified Transfer shall be permitted by this Section 10.1.

(d)Class B Member Proxy. If as a result of any transfer permitted by this Section 10.1, there is more than one Class B Member, all Class B Members shall designate a single Class B Member as their attorney-in-fact, in its name and stead, to give or withhold all consents and approvals that each Class B Member shall be entitled to give or withhold, and to exercise all voting rights and other rights, and take all other actions, that such Class B Member is entitled to take pursuant to the provisions of this LLC Agreement until such time as such designation and appointment is revoked in writing, and this Section 10.1(d) shall be, to the extent required by Applicable Law to give it effect, construed as a proxy in favor of such designated Class B Member. The Class B Members or any of them shall provide a copy of any such designation or revocation to the Class A Members or the Class A Noteholder, as the case may be, promptly upon such designation or revocation being effected.

(e)Miscellaneous. Following any transfer by a Member of all of its Interest, such Member shall cease to be a Member. Upon any transfer of any Interest in accordance with this

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Section 10.1, the transferee of such Interest will, without further action or consent by any other Member, be admitted as a Class A Member or Class B Member, as the case may be, of the Company upon such transferee's execution and delivery to the Company and each Member of (to the extent such transferee is not already a party thereto) a counterpart to this Agreement and the Unitholders Agreement.

Section 10.2Prohibited Dispositions. To the fullest extent permitted by law, any purported Disposition of an Interest that is not made in accordance with Section 10.1 or the Unitholders Agreement shall be null and void and of no effect whatever; provided, however, that, if the Company is required to recognize a Disposition of an Interest that is not made in accordance with Section 10.1 or the Unitholders Agreement, the transferred Interest shall be strictly limited to the transferor's rights to allocations and distributions as provided by this LLC Agreement with respect to the transferred Interest, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts or obligations, or liabilities for damages that the transferor or transferee of such Interest may have to the Company.

To the fullest extent permitted by law, in the case of a Disposition or attempted Disposition of an Interest that is not made in accordance with Section 10.1 or the Unitholders Agreement, the parties engaging or attempting to engage in such Disposition shall be liable to indemnify and hold harmless the Company and the other Members from all losses, costs, liability, and damages that any of such indemnified Persons may incur (including incremental tax liability and reasonable lawyers' fees and expenses) as a result of such Disposition or attempted Disposition and efforts to enforce the indemnity granted hereby.

Section 10.3Representation on Transfer. Any Person to whom an Interest is transferred in accordance with the terms of this LLC Agreement shall be deemed to make the representations and warranties provided for in Section 3.5 to the Company and each other Member.

ARTICLE XI

PURCHASE AND SALE RIGHTS

Section 11.1Purchase Option.

(a)Following (i) a material breach by a Member of a term of this LLC Agreement which is not promptly cured, (ii) deadlock between directors of the Company entitled to vote as to a matter requiring the approval of the Required Directors, (iii) a change in Applicable Laws that makes participation by the Class A Noteholder or a Member in this LLC Agreement illegal or subject to a material increase in regulatory or tax costs for the Class A Noteholder or such Member, (iv) Bankruptcy of the Class A Noteholder or a Member, (v) termination of the LEAF Services Agreement, (vi) failure by the Lender to satisfy a funding obligation under the Credit Agreement within five Business Days of any such obligation becoming due thereunder, (vii) failure by LEAF Ventures, LLC to comply with its obligations under the Participation Agreement to purchase a 10% participation interest in any Advance made by the Lender under the Credit Agreement within five Business Days of the making of such Advance (except to the

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extent that, after giving effect to such purchase, the aggregate outstanding principal amount of participation interests held by LEAF Ventures, LLC in Advances made under the Credit Agreement would exceed $3,000,000), (viii) failure by the Company to comply with any of the operating or financial covenants set forth in Sections 5.02 or 5.03 of the Credit Agreement or to satisfy the EBITDA Funding Condition (as defined in the Credit Agreement) on any date, (ix) the tenth anniversary of this LLC Agreement or (x) delivery of a Liquidation Notice (any of the foregoing events described in clauses (i) through (x), a "Triggering Event"), any Relevant Member (the Relevant Member initiating such election, the "Electing Member") may elect to purchase or cause the purchase of the entire Investment Interest of the other Members and the Class A Noteholder (such other Members and the Class A Noteholder, the "Other Members", and their Investment Interest, the "OtherMembers' Interest"); provided, that the Electing Member makes an Irrevocable Election and gives written notice (a "Purchase Option Notice") to the Other Members.

(b)Any Purchase Option Notice shall include the following:

(i)a statement that all of the Other Members' Interest is to be purchased;

(ii)a statement specifying the date on which the closing of the purchase and sale of the Other Members' Interest shall occur (the "Purchase Date"), which Purchase Date shall not be less than 60 days nor more than 120 days from the date of the occurrence of the first such Triggering Event; and

(iii)the price at which the Electing Member is offering to purchase the Other Members' Interest, and the price at which the Electing Member would be willing to sell its own Investment Interest to the Other Members (each thereof, a "Purchase Price").

(c) Upon the receipt of a Purchase Option Notice, the Other Members may either (i) elect to sell, on the Purchase Date, the Other Members' Interest to the Electing Member at the relevant Purchase Price or (ii) deliver an Irrevocable Election to the Electing Member evidencing the Other Members' election to purchase, at the relevant Purchase Price and on the Purchase Date, all but not less than all (in proportion to the Percentage Interests (in the case of the Class A Note, as though Converted)) of the Investment Interest owned by the Electing Member.

(d)Purchase. The closing of the purchase and sale of the Investment Interest to be sold as aforesaid (the "Purchased Interest") shall occur on the Purchase Date and at such place as is mutually agreeable to the Class A Noteholder (if applicable) and the Members, or upon the failure to agree, at the principal place of business of the Company. On the Purchase Date, the Class A Noteholder and/or Member(s) selling the Purchased Interest (the "Selling Members") shall, upon payment of the relevant Purchase Price, deliver to the Member(s) or Class A Noteholder, as the case may be (the "Purchasing Member(s)") or their designee(s) purchasing the Purchased Interest all of their right, title and interest in and to the Purchased Interest purchased, free and clear of any liens, claims, encumbrances, security interests or options by delivery of endorsed Certificates of Interest and/or the Class A Note, as the case may be, and by (in the case of Interests) executing instruments of conveyance attached hereto as Exhibit C. To the fullest extent permitted by law, the transfer of the Purchased Interest shall be made "as-is, where is" without any representation or warranty other than the absence of liens as aforesaid.

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The Purchasing Member(s) shall pay or cause to be paid the reasonable costs of such Disposition and closing, including attorneys' fees and filing fees of the Selling Members. For the avoidance of doubt, pending the transfer of the Purchased Interest, the Managing Member shall continue to comply with its obligations under this Agreement and otherwise act in furtherance of the purposes of the Company as set forth in Section 1.3.

(e)Treatment as Purchase Under Section 741. The Members agree to treat the Disposition of Interests pursuant to this Section 11.1 as a purchase and sale under Section 741 of the Code and not as a retirement under Section 736 of the Code.

ARTICLE XII

DISSOLUTION AND WINDING UP

Section 12.1Liquidating Events. The Company shall dissolve and commence winding up and liquidating upon the first to occur of any of the following (collectively, "Liquidating Events"):

(a)Liquidation Notice. The date on which, pursuant to Section 12.10, a Liquidation Notice becomes effective to cause a Liquidating Event.

(b)Unanimous Vote. The unanimous vote of the Members to dissolve, wind up, and liquidate Company.

(c)Illegality, etc. The happening of any event that makes it unlawful, impossible, or impractical to carry on the business of the Company or the Delaware Court of Chancery has entered a decree pursuant to Section 18-802 of the LLC Act.

(d)Last Member. At any time there are no members of the Company unless the Company is continued without dissolution in a manner permitted by the LLC Act.

(e)Triggering Event. If, within ten days of the occurrence of a Triggering Event, (i) no Electing Member shall have delivered a Purchase Option Notice to the Other Members pursuant to Section 11.1(a), and (ii) at such time the Bankruptcy of the Managing Member shall be continuing.

The Members hereby agree that, notwithstanding any waivable provision of the LLC Act, the Company shall not dissolve prior to the occurrence of a Liquidating Event.

Section 12.2Winding Up. Upon the occurrence of a Liquidating Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and thereafter Members, and no Member shall take any action with respect to the Company that is inconsistent with the winding up of the Company's business and affairs; provided that all covenants contained in this LLC Agreement and obligations provided for in this LLC Agreement shall continue to be fully binding upon the Members until such time as Company Property has been distributed pursuant to

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this Section 12.2 and the Certificate of Formation has been canceled pursuant to the LLC Act. The Liquidator shall be responsible for overseeing the winding up and dissolution of the Company. On the occurrence of a Liquidating Event, the Gross Asset Values of all of the Company's assets shall be adjusted to equal their respective Mark-to-Market Values as of the Mark-to-Market Measurement Date and any Net Income, Gross Income, Net Losses and other items of income, loss, deduction, gain and credit of the Company shall be allocated among the Members as of such Mark-to-Market Measurement Date in accordance with Article IV. The Liquidator shall take full account of the Company's liabilities and Company Property and, except as otherwise provided in Section 12.3, shall, within 75 days of the occurrence of a Liquidating Event or, in the event that the certification by the Company Accountants required by Section 8.2(d) has not been delivered by such 75th day, as soon as practicable after delivery of such accountant's certification but in any event within 90 days of such Liquidating Event, cause Company Property or the proceeds from the sale or disposition thereof (as determined pursuant to Section 12.9), to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by Applicable Law and notwithstanding anything in this LLC Agreement to the contrary, in the following order (without duplication):

(a)First, to creditors of the Company (including any Class A Member to the extent such Class A Member is a creditor), in satisfaction of all of the Company's debts and liabilities (whether by payment or making provision for payment thereof); and

(b)Second, the balance to the Members in accordance with Article V.

Section 12.3No Restoration of Deficit Capital Accounts; Compliance With Timing Requirements of Regulations. In the event the Company is "liquidated" within the meaning of Regulation § 1.704-1(b)(2)(ii)(g), (x) distributions shall be made pursuant to this Article XII to the Members who have positive balances in their Capital Accounts in proportion to and to the extent of such positive balances in compliance with Regulation § 1.704-1(b)(2)(ii)(b)(2), and (y) if a Member's Capital Account has a deficit balance (after giving effect to all contributions, distributions, and allocations for all taxable years, including the taxable year during which such liquidation occurs), the Member whose Capital Account has a negative balance shall have no obligation to contribute to the capital of the Company the amount necessary to restore such deficit balance to zero, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever.

Section 12.4Deemed Distribution and Recontribution. Notwithstanding any other provision of this Section 12, in the event the Company is liquidated within the meaning of Regulation §1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, Company Property shall not be liquidated, the Company's debts and other liabilities shall not be paid or discharged, and the Company's affairs shall not be wound up. Instead, solely for federal income tax purposes, the Company shall be deemed to have contributed all of Company Property and liabilities to a new limited liability company in exchange for an interest in such new company and, and immediately thereafter, the Company will be deemed to have been liquidated by distributing interests in the new company to the Members.

Section 12.5Rights of Members. Each Member shall look solely to Company Property for the return of its Capital Contribution and, except as otherwise provided in

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Section 12.9, shall have no right or power to demand or receive property other than Cash from Company.

Section 12.6Notice of Dissolution. The Managing Member shall promptly provide written notice to each of the Members of the occurrence of a Liquidating Event known to it in accordance with Section 6.5(b).

Section 12.7Character of Liquidating Distributions. All payments made in liquidation of the Interest of a retiring Member, other than payments made under Section 12.2, shall be made in exchange for the interest of such Member in Company Property pursuant to Code § 736(b)(1), including the interest of such Member in goodwill of the Company.

Section 12.8The Liquidator.

(a)Definition. The "Liquidator" shall mean the Person appointed as Liquidator by the Company, subject to the approval of the Required Directors.

The Liquidator shall have the rights set forth in Section 18-803(b) of the LLC Act and exclusively shall have the rights, power and authority of the Managing Member necessary or appropriate in its discretion to effect the dissolution, winding up and liquidation of the Company. The actions of the Liquidator shall for all purposes be the actions of the Company.

(b)Fees. The Company is authorized to pay a reasonable fee to the Liquidator for its services performed pursuant to this Article XII and to reimburse the Liquidator for its reasonable costs and expenses incurred in performing those services.

(c)Resignation of Liquidator. At any time any Liquidator may, in its discretion, resign as Liquidator and the Managing Member shall appoint a replacement Liquidator, subject to the approval of the Required Directors.

Section 12.9Form of Liquidating Distributions. Except as provided in this Section 12.9, for purposes of making distributions required by Section 12.2, the Liquidator may determine whether to distribute all or any portion of Company Property in-kind or to sell all or any portion of Company Property and distribute the proceeds therefrom, provided that the Liquidator shall not distribute Company Property other than Cash to any Member without its consent, and the Liquidator shall be required to reduce Company Property to Cash to the extent necessary to make distributions to the Members pursuant to Section 12.2 in Cash. In the case of a liquidation in kind, the amount distributed shall be deemed to equal to the Mark-to-Market Value of the property distributed on the date of such distribution.

Section 12.10Liquidation Notice. The Class A Noteholder or any Class A Member (at the direction of the Majority Class A Members) may, at any time on or after the occurrence of a Board Reduction Event, deliver to the Managing Member and the Class B Members a written notice (a "Liquidation Notice") stating that such Board Reduction Event constitutes a Liquidation Event; provided, however, that: (i) the delivery of such Liquidation Notice shall not become effective to cause a Liquidating Event until the expiration of a period of 90 days from the date of delivery of such Liquidation Notice; (ii) the Class A Noteholder or Majority Class A Members, as the case may be, may rescind such Liquidation Notice by

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delivering to the Managing Member and the Class B Members a rescission notice prior to the end of such 90 day period; and (iii) if a Purchase Option Notice has been delivered in accordance with Section 11.1(a) prior to the expiration of such 90 day period, such Liquidation Notice shall not become effective to cause a Liquidating Event until the day after the Purchase Date specified in such notice (and then if, but only if, the Class A Noteholder or Initial Class A Member or any of their Affiliates shall continue to be the Class A Noteholder or Class A Members, as the case may be, after giving effect to the purchase of Investment Interests effected in connection with such Purchase Option Notice).

Section 12.11Allocations During Period of Liquidation. For the avoidance of doubt, during the period commencing on the first day of the Fiscal Year during which a Liquidation Event has occurred and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 12.2 hereof, the Members shall continue to share in Net Income, Net Losses, and other items of Company income, gain, loss or deduction in the manner provided in Article IV hereof.

  Section 12.12Bankruptcy. Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution.

ARTICLE XIII

MISCELLANEOUS

Section 13.1Amendments. No amendment or waiver of any provision of this LLC Agreement, and no consent to any departure by any party herefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Class A Members (at any time following Conversion of the Class A Note) and the Majority Class B Members; provided that (a) no such amendment, waiver or consent having an effect on any Member materially worse than the effect of such amendment, waiver or consent on the Majority Members of any Class shall be effective without the consent of such Member and (b) no such amendment, waiver or consent shall (i) change the definition of "Majority Class A Members", "Majority Class B Members" or "Majority Members" without the consent of all of the Members of the applicable Class, (ii) change this Section 13.1 without the consent of each Member, or (iii) increase or accelerate the payment of any capital contribution obligation of, or decrease the amount or delay the payment of any Distribution payable to, any Member, or limit any Member's right to participate in the election of directors representing the Class of such Member, without, in any such case under this clause (iii), the consent of such Member; and providedfurther that no such amendment, waiver or consent prior to the Conversion of the Class A Note shall be effective unless consented to in writing by the Class A Noteholder. No such waiver of a provision or consent to a departure in any one instance shall be construed as a further or continuing waiver of or consent to subsequent occurrences, or a waiver of any other provision or consent to any other departure.

Section 13.2Notices. Any notice, payment, demand, or communication required or permitted to be given by any provision of this LLC Agreement shall be in writing or

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by facsimile and shall be deemed to have been delivered, given, and received for all purposes (a) if delivered personally to the Person or to an officer of the Person to whom the same is directed or (b) when the same is actually received (if during the recipient's normal business hours if during a Business Day, or, if not, on the next succeeding Business Day), if sent by facsimile (followed by a hard copy of the facsimiled communication sent by certified mail, postage and charges prepaid), or by courier or delivery service or by mail, addressed, if to any Member or the Managing Member, to such person at its address or facsimile number set forth on Schedule 3.2 hereto or to such other address as such Person may from time to time specify by notice, and if to any other Person, at its address specified in the Transaction Document pursuant to which such Person is to receive notice or by notice given in the manner provided herein to each other Person entitled to receive notice hereunder, or, in each case, to such other address (and with copies to such other Persons) as the Person entitled to receive notice hereunder shall specify by notice given in the manner provided herein to the other Persons entitled to receive notice under the relevant Transaction Document.

  Section 13.3No Waiver; Cumulative Remedies. No failure on the part of any Person to exercise, and no delay in exercising, any right under this LLC Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this LLC Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in this LLC Agreement are cumulative and not exclusive of any remedies provided by Applicable Law.

Section 13.4Waiver of Jury Trial. EACH PARTY TO THIS LLC AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS LLC AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 13.5Counterparts. This LLC Agreement may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. To the fullest extent permitted by law, this LLC Agreement may be delivered by facsimile transmission of the relevant signature pages thereof.

Section 13.6Survival of Representations, Warranties and Indemnities: Entire Agreement. All representations, warranties and indemnities and undertakings to pay costs and expenses contained in this LLC Agreement shall survive (a) the execution and delivery of this LLC Agreement and the other Transaction Documents and (b) performance by each party of its Obligations under this LLC Agreement and each other Transaction Document to which it is a party.

Section 13.7Severability. Any provision of this LLC Agreement that is prohibited by or unenforceable in any relevant jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall, to the fullest extent permitted by law, not invalidate or render unenforceable such provision in any other jurisdiction.

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Section 13.8Construction. The parties intend that every covenant, term, and provision of each Transaction Document shall be construed simply according to its fair meaning and not strictly for or against any party thereto.

Section 13.9Determination of Capital Accounts. In the event any Class A Member or any Class B Member disputes in an appropriate proceeding the determination of its Capital Account, an independent determination of the Members' Capital Accounts shall be made without any special weight being given to any prior determination made within the discretion of the Managing Member.

Section 13.10Governing Law. THE LAW OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES) SHALL GOVERN THE VALIDITY OF THIS LLC AGREEMENT, THE CONSTRUCTION OF ITS TERMS, AND THE INTERPRETATION OF THE RIGHTS AND DUTIES OF THE MEMBERS.

Section 13.11Waiver of Action for Partition. Each of the Members irrevocably waives any right that it may have to maintain any action for partition with respect to any of Company Property.

Section 13.12Consent to Jurisdiction. Each Member (i) irrevocably submits to the jurisdiction of any Delaware State court or federal court sitting in Wilmington, Delaware in any action arising out of this LLC Agreement, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum and (iv) to the fullest extent permitted by law, consents to the service of process by mail. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.

Section 13.13Third Party Beneficiaries. The covenants contained herein are made for the benefit of the parties hereto and permitted successors and assigns of such parties as specified herein, and (except as expressly specified herein) shall not be construed as having been intended to benefit any third party not a party to this Agreement.

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IN WITNESS WHEREOF, the undersigned have executed this LLC Agreement as of the date above first written.

CLASS A NOTEHOLDER

(executing and delivering this LLC Agreement not as a Member, but solely for the limited initial purposes set forth in Section 1.9):

DBAH CAPITAL LLC

By:______________________________

Name:

Title:

By:______________________________

Name:

Title:

INITIAL CLASS B MEMBER:

LEAF VENTURES, LLC

By:LEAF Financial Corporation

Its Managing Member

By:____________________________________

     Name:

Title:

Schedule 3.2

Class A Noteholder	Address
DBAH Capital LLC	60 Wall Street New York, NY 10005

Initial Class B Member	Address	Capital Commitment	Number and Class of Units
LEAF Ventures, LLC	c/o LEAF Financial Corporation 1818 Market Street 9th Floor Philadelphia, PA 19103	$2,500,000	50 Class B Units

Schedule 6.4(a)

Initial Board Observers and Board of Directors

Board Observers Appointed by Class A Noteholder

Spring Hollis

Todd Hirsch

Directors Appointed by Class B Member

Crit DeMent

Robert K. Moskovitz

Miles Herman

Independent Director

Elvran Glazer

ANNEX A TO

LIMITED LIABILITY COMPANY AGREEMENT OF

MERIT CAPITAL ADVANCE,LLC

DEFINITIONS AND RULES OF CONSTRUCTION

SECTION 1.01 Definitions. Capitalized terms used in this Annex A and, except as otherwise expressly provided in any Transaction Document with respect to specific capitalized or other terms used in such Transaction Document, capitalized terms used in the Transaction Documents and all appendices, schedules and exhibits thereto, shall in each case have the respective meanings given to them in this Section 1.01. Not all of the terms defined in this Annex A are used in any particular Transaction Document.

"Additional Member" is defined in Section 3.3(c)(i).

"Adjusted Capital Account" means, with respect to any Member, the balance, if any, in such Member's Capital Account as of the end of the relevant Allocation Period, after giving effect to the following adjustments:

(i)credit to such Capital Account any amounts that such Member is obligated to contribute or deemed to be obligated to contribute pursuant to the penultimate sentences of Regulation §§ 1.704-2(g)(1) and 1.704-2(i)(5); and

(ii)debit to such Capital Account the items described in Regulation §§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).

The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulation § 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

"Advance" is defined in the Credit Agreement.

"Affiliate" means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of any provision in the LLC Agreement limiting the ability of the Company or any Member to enter into transactions with Affiliates, a Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners, or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

"Allocation Period" means the annual period beginning on January 1 of each year; provided, that (i) the Allocation Period for the first year of the Company shall commence on the Closing Date and end on December 31, 2007 and (ii) in the year in which the Company is liquidated, the final Allocation Period shall end on the date the Company is liquidated.

"Applicable Law" means all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, and orders, all binding interpretations thereof, and the related

requirements and mandatory conditions of licenses and permits, of any governmental authority, and judgments, decrees, injunctions, writs, orders, or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction.

"Applicable Rate" means, for any Allocation Period, the highest effective marginal combined U.S. federal, state and local income tax rate (taking into account any deductions and/or credits relating to the payment of state and local taxes and the limitations on deductibility imposed by sections 55, 67 and 68 of the Code for purposes of computing federal taxable income) applicable to individuals or corporations under the Code and the laws of New York state and city on ordinary income or capital gain, as the case may be. In the case of the Initial Class A Member and any Affiliate thereof which is a Class A Member, Applicable Rate shall also take into account any income tax imposed under section 11-503 of the New York City Administrative Code.

"Bankruptcy" means, with respect to any Person, a Voluntary Bankruptcy or an Involuntary Bankruptcy. A "Voluntary Bankruptcy" means, with respect to any Person: (a) (i)  the failure of such Person generally to pay its debts as such debts become due or (ii) an admission in writing by such Person of its inability to pay its debts generally or a general assignment by such Person for the benefit of creditors; (b) the filing of any petition by such Person seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any Applicable Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for such Person or for any substantial part of its property or the filing of an answer or other pleading admitting or failing to contest the allegations of a petition filed against it in any proceeding of the foregoing nature; or (c) action taken by such Person to authorize any of the actions set forth above. An "Involuntary Bankruptcy" means, with respect to any Person, without the consent or acquiescence of such Person, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar Applicable Law, or the filing of any such petition against such Person, that shall not be dismissed or stayed within 60 days, or, without the consent or acquiescence of such Person, the entering of an order appointing a trustee, custodian, receiver or liquidator of such Person or of all or any substantial part of the property of such Person that shall not be dismissed or stayed within 60 days. With respect to the Members, this definition is intended to supersede the definition of Bankruptcy and similar events set forth in Sections 18-101(1) and 18-304 of the LLC Act.

"Board Observer" is defined in Section 6.4(a).

"Board of Directors" is defined in Section 6.4(a) of the LLC Agreement.

"Board Reduction" means the removal of one of the two directors appointed by the Majority Class B Members following a Board Reduction Event (at any time following the Conversion of the Class A Note) as provided in Section 6.4 of the LLC Agreement.

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"Board Reduction Event" means the occurrence and continuance of any of the following events and the failure of any such event to be cured prior to a Board Reduction:

(i) the failure of a Class B Member (including in its capacity as Managing Member) to: (1) make a material Capital Contribution when required under the LLC Agreement, (2) pay any other material amount due from it hereunder or (3) make any material Distribution required pursuant to Article V and, in each case, such failure shall continue for more than five Business Days after written notice of such failure from the Class A Noteholder or the Majority Class A Members;

(ii) a material breach by a Class B Member (including in its capacity as Managing Member) or any Affiliate thereof of any covenant, obligation or agreement to be performed or observed by it under any of the Transaction Documents (other than as specified in clause (i) of this definition) and such breach remains uncured for more than 30 days after a Responsible Officer of the Class B Member has received written notice or has actual knowledge of such breach; provided, that if such breach does not, in the reasonable judgment of the Class A Noteholder or Majority Class A Members, as the case may be, have a material adverse effect on the Company, such 30 day period shall be extended for an additional 60 days so long as the Class B Member is diligently working to fully cure such breach;

(iii) a Bankruptcy of a Class B Member or any of its Affiliates that are party to any Transaction Document;

(iv) an "Event of Default" arising other than primarily as a result of circumstances beyond the Managing Member's reasonable control occurs under the Credit Agreement; or

(v) any representation or warranty made by a Class B Member or any Affiliate thereof in a Transaction Document shall prove to have been incorrect in any material respect when made (or deemed made) and such incorrectness remains uncured for more than 30 days after a Responsible Officer of the Class B Member has received written notice or has actual knowledge of such incorrectness; provided, that if such incorrectness does not, in the reasonable judgment of the Class A Noteholder or the Majority Class A Members, as the case may be, have a material adverse effect on the Company, such 30 day period shall be extended for an additional 60 days so long as the Class B Member is diligently working to cure such incorrectness.

"Budget" means the budget of the Company approved in accordance with Section 6.9 of the LLC Agreement.

"Business Day" means any day of the year except Saturday, Sunday and any day on which commercial banking institutions are authorized or obligated by law, regulation or executive order to close in New York, New York.

"Business Entity" means a corporation (or, when used as an adjective, corporate), limited liability company, partnership (whether general or limited), business trust, joint stock company, unincorporated association, joint venture or other applicable business entity.

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"Capital Account" means, with respect to any Member, the capital account in the Company maintained for such Member in accordance with the following provisions:

(i)to each Member's Capital Account there shall be credited such Member's Capital Contributions, such Member's distributive share of Net Income and any items in the nature of income or gain allocated to such Member pursuant to Article IV of the LLC Agreement (other than Section 4.5), and the amount of any Company liabilities of such Member assumed by such Member or which are secured by any Company Property Distributed to such Member;

(ii)to each Member's Capital Account there shall be debited: (a) the amount of Cash and the Gross Asset Value of any Company Property Distributed to such Member pursuant to any provision of the LLC Agreement; (b) such Member's distributive share of Net Losses and any items in the nature of expenses or losses, allocated to such Member pursuant to Article IV of the LLC Agreement (other than Section 4.5); and (c) the amount of any liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company; and

(iii)in the event all or a portion of an Interest in the Company is Disposed of in accordance with the terms of the LLC Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent of the transferred Interest.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations § 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations.

"Capital Contributions" means, with respect to any Member, the amount of Cash and the initial Gross Asset Value of any property (other than Cash) contributed (or deemed to be contributed) to the Company by such Member (or its predecessors in interest) with respect to the Interest held by such Member.

"Cash" means cash, amounts credited to deposit accounts and other immediately available funds that are denominated in Dollars.

"Certificate of Interest" is defined in Section 3.1 of the LLC Agreement.

"Class" in relation to an Interest means that such Interest is a Class A Interest or Class B Interest, as the case may be. An Interest of any Class shall be represented by a Unit of such Class.

"Class A Member" means any Person that has been admitted to the Company as a member and that holds any Class A Units, in each such Person's capacity as a member of the Company, or the collective reference to all such Persons, as the context may require. For the avoidance of doubt, the Class A Noteholder shall not be a Class A Member except upon Conversion of the Class A Note, at which time the Class A Noteholder shall become the Initial Class A Member.

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"Class A Member Interest" or "Class A Interest" means an Interest in the Company designated as a Class A Interest under the LLC Agreement.

"Class A Note" means a convertible note in the form attached as Exhibit F to the LLC Agreement issued on the Closing Date by the Company to the Class A Noteholder. On and after Conversion or repayment in full of the Class A Note in accordance therewith, the Class A Note shall be deemed to no longer be outstanding for purposes of this Agreement.

"Class A Noteholder" means DBAH Capital LLC or its successors and assigns as holder(s) of the Class A Note, as the case may be. On and after Conversion or repayment in full of the Class A Note in accordance therewith, there shall no longer be a Class A Noteholder for purposes of this Agreement.

"Class B Member" means any Person that has been admitted to the Company as a member and that holds any Class B Units, in each such Person's capacity as a member of the Company, or the collective reference to all such Persons, as the context may require.

"Class B Member Interest" or "Class B Interest" means an Interest in the Company designated as a Class B Interest under the LLC Agreement.

"Closing Date" means March 15, 2007.

"Code" means the United States Internal Revenue Code of 1986, as amended from time to time.

"Company" means Merit Capital Advance, LLC, the limited liability company formed pursuant to the LLC Agreement and the Certificate of Formation.

"Company Accountants" means KPMG or any other replacement independent accounting firm of national reputation selected by the Managing Member and approved by the Required Directors.

"Company Minimum Gain" has the same meaning as the term "partnership minimum gain" in Regulations §§ 1.704-2(b)(2) and 1.704-2(d).

"Company Property" means all property owned by the Company, including both tangible and intangible property, which shall include, as the context requires, property of any Subsidiary.

"Consolidated" refers, with respect to any Person, to the consolidation of accounts of such Person and its Subsidiaries in accordance with GAAP.

"Contingent Liabilities" means, with respect to any Person, (a) any agreement, undertaking or arrangement by which such Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person (the amount of obligation

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under any Contingent Liabilities shall be deemed to be the maximum outstanding amount of the debt, obligation or other liability guaranteed) and/or (b) liabilities that are contingent in nature which would be included as liabilities on the face of the balance sheet of such Person in accordance with GAAP.

"Contribution Value" means the Value of a Company asset contributed by a Member to the Company (net of liabilities secured by such contributed asset that the Company is treated as assuming or taking subject to).

"Conversion" means the conversion of the Class A Note into Class A Units as provided therein, and "Converted" and "Convertible" shall have like meanings.

"Credit Agreement" means the $33,000,000 revolving credit agreement dated as of March 15, 2007 between the Company, as borrower, and the Lender, as the same may be amended, amended and restated, waived, supplemented or modified from time to time.

"Credit Card Processor Services Agreement" means an agreement (howsoever titled), in form and substance satisfactory to the Required Directors, entered into by the Company with a credit card processor acceptable to the Required Directors, providing, among other things, for the payment of the Percentage of Future Credit Card Receivables by such processor to the Company until the Company has received the Specified Amount (as each such term is defined in each applicable Merchant Advance Contract).

"Depreciation" means, for each Allocation Period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Allocation Period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Allocation Period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Allocation Period bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Allocation Period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Tax Matters Member, subject to (following the Conversion of the Class A Note) the Majority Class A Members' consent (such consent not to be unreasonably withheld) in the event that the Managing Member is the Class B Member.

"Disposition" means, with respect to any property, any sale, assignment, gift, exchange, lease, conversion, transfer, pledge or other disposition or divestiture of such property, or of any property interest therein, including, without limitation, any transfer by way of a capital contribution. "Dispose" and "Disposed" shall have correlative meanings.

"Disqualified Transfer" means any Disposition of a Member Interest (i) to any Person that is not a United States person within the meaning of Section 7701(a)(30) of the Code, (ii) to any Person that is a tax-exempt entity within the meaning of Section 168(h) of the Code, (iii) in any manner that would cause a termination of the Company under Section 708(b)(1)(B) of the Code, (iv) to any natural person or (v) to any Person that is not an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

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"Distribution" means, as applicable, any distribution or dividend or return of capital or any other distribution, payment, remittance or delivery of property or Cash in respect of, or the redemption, retirement, purchase or other acquisition, directly or indirectly, of, any Interest now or hereafter outstanding or the setting aside of any funds for any of the foregoing purposes, including any distribution under Sections 5.1, 5.2 or 5.3 or Article XII of the LLC Agreement. "Distribute", "Distributed" and "Distributive" shall have correlative meanings.

"Dollars" and the sign "$" each mean the lawful currency of the United States.

"Fee Letter" means the Fee Letter dated as of the Closing Date between the Company, LEAF Financial Corporation and DBAH Capital LLC.

"Final Payment Date" means with respect to (i) the liquidation of the Company pursuant to Article XII of the LLC Agreement, the date on which all Company Property is distributed pursuant to Section 12.2 of the LLC Agreement and, (ii) a Member's or Members' election to purchase Interests pursuant to Section 11.1 of the LLC Agreement, the Purchase Date.

"Financial Investments" means:

(a)Cash;

(b)direct general obligations of, or obligations fully and unconditionally guaranteed as to the timely payment of principal and interest by, the United States or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, but excluding any of such securities whose terms do not provide for payment of a fixed dollar amount upon maturity or call for redemption;

(c)certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition, and overnight bank deposits and other short-term deposit instruments, in each case with any domestic commercial bank having capital and surplus in excess of $500,000,000 and having a rating of at least "A2" (or the equivalent thereof) by Moody's and at least "A" (or the equivalent thereof) by S&P;

(d)repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (b) or (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above;

(e)commercial paper (having original maturities of not more than 180 days) of any Person rated "P-2" (or the equivalent thereof) or better by Moody's or "A-2" (or the equivalent thereof) or better by S&P; and

(f)money market mutual or similar funds having assets in excess of $100,000,000, at least 95% of the assets of which are comprised of assets specified in clauses (a) through (e) above.

"Fiscal Quarter" means (i) the period commencing on the Closing Date and ending on March 31, 2007 and (ii) any subsequent three-month period commencing on each of January 1,

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April 1, July 1 or October 1 and ending on the next of March 31, June 30, September 30 and December 31, respectively; provided that the last Fiscal Quarter shall end on the first date on which all Company Property is distributed pursuant to Section 12.2 of the LLC Agreement and the Certificate of Formation has been canceled pursuant to the LLC Act.

"Fiscal Year" means (i) the period commencing on the Closing Date and ending on September 30, 2007 and (ii) any subsequent period commencing on October 1 and ending on the earlier to occur of (a) the following September 30, or (b) the first date on which all Company Property is distributed pursuant to Section 12.2 of the LLC Agreement and the Certificate of Formation has been canceled pursuant to the LLC Act.

"Formation Date" is defined in Section 1.1 of the LLC Agreement.

"GAAP" means United States generally accepted accounting principles as in effect from time to time. Any financial statements or other information required by the Transaction Documents to be prepared in accordance with GAAP shall mean in accordance with GAAP as consistently applied for the period or periods covered by such financial statements or other information.

"Governmental Approval" means, with respect to any Person, any consent, license, approval, registration, permit, sanction or other authorization of any nature which is required to be granted by any Governmental Authority under Applicable Law (a) for the formation of such Person, (b) for the enforceability of any Transaction Document against such Person and such Person's making of any payments contemplated thereunder, and (c) for all such other matters as may be necessary in connection with the performance of such Person's material obligations under any Transaction Document.

"Governmental Authority" means any federal, national, state, provincial, municipal, local, territorial or other governmental department, commission, board, bureau, agency, regulatory authority, instrumentality or judicial or administrative body, whether domestic or foreign, having jurisdiction over the matter or matters in question.

"Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows:

(i)the initial Gross Asset Value of any asset other than a Financial Investment contributed by a Member to the Company shall be the fair market value of the asset on the date of contribution and the initial Gross Asset Value of any Financial Investment shall be equal to its face value, less unamortized discount and plus unamortized premium, if any;

(ii)the Gross Asset Values of all the Company assets shall be adjusted to equal their respective Mark-to-Market Values as determined by the Managing Member and, in the event that the Managing Member is the Class B Member, subject to (following the Conversion of the Class A Note) the Majority Class A Members' consent (such consent not to be unreasonably withheld) (a) upon the issuance of any additional Interest to any person, (b) as specified in Section 12.2 of the LLC Agreement, (c) upon the liquidation of the Company within the meaning of Regulation § 1.704-1(b)(2)(ii)(g), and

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(d) in connection with the grant of an Interest that is not de minimis as consideration for the provision of services to or for the benefit of the Company by an existing Member acting in a member capacity, provided that an adjustment under clause (a), (b), or (d) of this paragraph shall be made only if the Managing Member, subject to, in the event that (following the Conversion of the Class A Note) the Managing Member is the Class B Member, the Majority Class A Members' consent (such consent not to be unreasonably withheld), reasonably has determined that such adjustment is necessary to reflect the relative economic interests of the Members;

(iii)the Gross Asset Value of any Company Property distributed to any Member shall be adjusted to equal the Mark-to-Market Value of such asset on the date of such distribution;

(iv)the Gross Asset Values of the assets of the Company shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code § 734(b) or Code § 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulation § 1.704-1(b)(2)(iv)(m) and clause (v) of the definition of "Net Income" and "Net Losses" or Section 4.2(e) of the LLC Agreement; provided, however, that Gross Asset Values shall not be adjusted pursuant to this clause (iv) to the extent that an adjustment pursuant to clause (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this clause (iv); and

(v)if the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (i), (ii), or (iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Losses.

"Gross Income" means all items of gross income and gain (before reduction for cost of goods sold or similar items of cost) that are realized by the Company.

"Indebtedness" of any Person means, without duplication:

(a)all obligations of such person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(b)all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person;

(c)all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as capital leases;

(d)all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined other than accounts payable, deferred revenue and accrued operating expenses incurred in the ordinary course of business in each case to the extent not otherwise constituting Indebtedness under the other terms of this definition;

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(e)net liabilities of such Person under all Swap Agreements;

(f)whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and

(g)all Contingent Liabilities of such Person in respect of any of the foregoing.

"Independent Director" means a director that is a natural person and is not and has not been for at least five years from the date of his or her or appointment (i) a direct or indirect legal or beneficial owner of the Company or any Member or any of their respective Affiliates (other than indirectly as a holder of shares in a publicly traded mutual fund), (ii) a relative, supplier, employee, officer, director (other than as an independent director), manager (other than as an independent manager), contractor or material creditor of the Company or any Member or any of their respective Affiliates or (iii) a Person who controls (whether directly, indirectly or otherwise) any Member or its Affiliates or any creditor, employee, officer, director, manager or material supplier or contractor of any Member or its Affiliates.

"Initial Class A Member" means the Class A Noteholder, following Conversion of the Class A Note into Class A Units.

"Initial Class B Member" means LEAF Ventures, LLC.

"Interest" means any limited liability company interest in the Company, including any and all benefits to which the holder of such an interest may be entitled as provided in the LLC Agreement, together with all obligations of such Person to comply with the terms and provisions of the LLC Agreement. The Company has two classes or groups of Interests and Members: Class A and Class B (and two corresponding classes or groups of Units: Class A and Class B). Notwithstanding anything to the contrary herein, a Member's Interest shall not exist separate from such Member's Units, and the Class A Note shall not constitute an "Interest".

"Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise.

"Investment Interest" means an Interest or the Class A Note, as the context shall require.

"Involuntary Bankruptcy" is defined in the definition of "Bankruptcy".

"Irrevocable Election" means, with respect to a Member's or the Class A Noteholder's proposed purchase of Investment Interests in accordance with Section 11.1, the delivery by such Member or the Class A Noteholder, as the case may be, to the Company of a written notice pursuant to which such Member or the Class A Noteholder, as the case may be, unconditionally covenants and agrees that such purchase shall be consummated on or prior to the Purchase Date, and at the applicable Purchase Price, specified in the relevant Purchase Option Notice.

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"LEAF" means LEAF Financial Corporation, a Delaware corporation.

"LEAF Services Agreement" means the services agreement dated as of March 15, 2007 between the Company, LEAF Ventures, LLC and LEAF, substantially in the form of Exhibit B to the LLC Agreement.

"LEAF Warehousing Facility" means the Credit Agreement dated July 31, 2006 by and among LEAF and LEAF Funding, Inc., as Borrowers, the financial institutions party thereto, as Lenders, and National City Bank, as Agent.

"Lender" is defined in the Credit Agreement.

"Lien" means any mortgage, pledge, hypothecation, assignment for security, encumbrance, lien (statutory or other), security interest or other security device or arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing).

"Liquidating Events" is defined in Section 12.1 of the LLC Agreement.

"Liquidation Notice" is defined in Section 12.10 of the LLC Agreement.

"Liquidator" is defined in Section 12.8 of the LLC Agreement.

"LLC Act" means the Delaware Limited Liability Company Act, as set forth in Del. Code Ann. Tit. 6, §§ 18-101, etseq. and any successor statute, as the same may be amended from time to time.

"LLC Agreement" means the Limited Liability Company Agreement of Merit Capital Advance, LLC, dated as of March 15, 2007, and includes this Annex A and all other annexes and schedules attached thereto, as amended, supplemented, amended and restated or otherwise modified from time to time.

"Majority Class A Members" means the Class A Member or Class A Members holding more than 50% of all outstanding Class A Units; provided that any Class A Member that is an Affiliate of the Class B Member shall be disregarded for purposes of the foregoing calculation (unless the Class B Member and its Affiliates own all of the Class A Member Interests).

"Majority Class B Members" means the Class B Member or Class B Members holding more than 50% of all outstanding Class B Units; provided that any Class B Member that is an Affiliate of the Class A Member shall be disregarded for purposes of the foregoing calculation (unless the Class B Member and its Affiliates own all of the Class A Member Interests).

"Managing Member" means initially the Class B Member of the Company and any replacement Member appointed in accordance with the terms of the LLC Agreement, in such Person's capacity as managing member of the Company.

"Mark-to-Market Balance Sheet" is defined in Section 8.2(d) of the LLC Agreement.

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"Mark-to-Market Measurement Date" means (a) with respect to the retirement of any Interest in the Company or the issuance of any additional Interests in the Company to any Person (except for any permitted transferees in accordance with Sections 10.1(a) or (b) of the LLC Agreement), the last day of the Fiscal Quarter preceding the Fiscal Quarter during which the retirement or issuance, as the case may be, occurs; (b) with respect to the liquidation of the Company pursuant to Section 12.2 of the LLC Agreement, the last day of the Fiscal Quarter immediately preceding the Fiscal Quarter during which the earlier of (i) the Liquidating Event giving rise to such liquidation occurred or (ii) if applicable, the Board Reduction Event giving rise to such Liquidating Event occurred; or (c) with respect to the exercise of the Purchase Option, the last day of the Fiscal Quarter immediately preceding the Fiscal Quarter during which the earlier of (i) the date on which the Purchase Option Notice was delivered or (ii) if the Purchase Option Notice was delivered after a Board Reduction Event, the Board Reduction Event occurred.

"Mark-to-Market Value" means (a) prior to a Mark-to-Market Measurement Date, the sum of the initial Gross Asset Values of the assets held by the Company, and (b) on or after a Mark-to-Market Measurement Date, the sum of the Mark-to-Market Values of each asset owned by the Company net of all applicable liabilities not taken into account in the calculation of Asset Values.

"Member Nonrecourse Debt" has the same meaning as the term "partner nonrecourse debt" in Regulations § 1.704-2(b)(4).

"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt equal to Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a nonrecourse liability with the meaning of Regulation § 1.704-2(b)(3), determined in accordance with Regulation § 1.704-2(i)(3).

"Members" means each Class A Member and each Class B Member, collectively. "Member" means any one of the Members.

"Merchant Advance Contract" means a contract substantially in the form of Exhibit D to the LLC Agreement.

"Moody's" means Moody's Investors Service, Inc. or any successor by merger, consolidation or otherwise to its business.

"Net Income" and "Net Losses" means, for each Allocation Period, an amount equal to the Company's taxable income or loss for such Allocation Period, determined in accordance with Code § 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code § 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(i)any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Losses pursuant to this definition of "Net Income" and "Net Losses" shall be added to such taxable income or loss;

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(ii)any expenditures of the Company described in Code § 705(a)(2)(B) or treated as Code § 705(a)(2)(B) expenditures pursuant to Regulation § 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Losses pursuant to this definition of "Net Income" and "Net Losses" shall be subtracted from such taxable income or loss;

(iii)in the event the Gross Asset Value of any asset of the Company is adjusted pursuant to clause (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Losses;

(iv)gain or loss resulting from any disposition of Company Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of Company Property disposed of, notwithstanding that the adjusted tax basis of such Company Property differs from its Gross Asset Value;

(v) in lieu of depreciation, amortization and other cost recovery deductions taken into account in computing Net Income and Net Losses, there shall be taken into account Depreciation for such Allocation Period, computed in accordance with the definition of Depreciation; and

(vi)any items that are allocated pursuant to Section 4.2 or 4.3 of the LLC Agreement shall not be taken into account in computing Net Income or Net Losses.

The amounts of the items of income, gain, loss or deduction of the Company available to be allocated pursuant to Sections 4.2 and 4.3 of the LLC Agreement shall be determined by applying rules analogous to those set forth in clauses (i) through (v) above.

"Net Income Tax Distribution Amount" means, for any Allocation Period, the product of (i) the Applicable Rate and (ii) a Member's allocable share of Net Income for such Allocation Period.

"Nonrecourse Deductions" has the meaning set forth in Regulations §§ 1.704-2(b)(1) and 1.704-2(c).

"Nonrecourse Liability" has the meaning set forth in Regulations § 1.704-2(b)(3).

"Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding.

"Participation Agreement" means a Participation Agreement substantially in the form of Exhibit E to the LLC Agreement entered into on the date hereof between the Lender and the Initial Class B Member, pursuant to which the Initial Class B Member shall have agreed to

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purchase from the Lender certain participations in Advances made to the Company from time to time by the Lender under the Credit Agreement.

"Percentage Interest" with respect to each Member, means a fraction, expressed as a percentage, the numerator of which is the number of Units held by such Member, and the denominator of which is the aggregate number of Units held by all Members (and "Percentage Interest" with respect to each Member's Interest or Units of a particular Class shall have a correlative meaning).

"Permitted Assets" means

(a)in relation to the Company: (i) Financial Investments; (ii) Merchant Advance Contracts, including future receivables thereunder; (iii) intellectual property rights; (iv) furniture, fixtures and equipment; (v) equity interests in Subsidiaries and other Persons (to the extent permitted in the LLC Agreement); and (vi) other assets approved in writing by the Required Directors; and

(b)in relation to the Servicer Subsidiary: (i) furniture, fixtures and equipment; and (ii) other assets approved in writing by the Required Directors.

"Permitted Reorganization" has the meaning set forth in Section 3.6.

"Person" means any individual, trust, estate, association, Business Entity or other entity, or a government or any political subdivision or agency thereof.

"Presumed Tax Liability" means, with respect to each Member for any Fiscal Year, an amount equal to the product of (a) the amount of taxable income allocated by the Company to such Member for such Fiscal Year (taking any carryforwards of net operating losses and capital losses not previously taken into account, computed as if each Member's sole income in all Fiscal Years was income allocated to such Member by the Company) and (b) the Presumed Tax Rate.

"Presumed Tax Rate" for any Fiscal Year means the higher of the highest effective combined Federal, state and local income tax rate applicable during such Fiscal Year to a corporation or a natural person doing business solely in or residing in, New York City, New York, taxable at the highest marginal Federal income tax rate and the highest marginal New York State and New York City income tax rates (after giving effect to the Federal income tax deduction for such state and local income taxes, the state tax deduction for local income taxes, taking into account the effects of Code Sections 67 and 68 and the character of any income or gain, e.g. as long-term capital gains).

"Purchase Date" is defined in Section 11.1(b)(ii) of the LLC Agreement.

"Purchase Option" is defined in Section 11.1(a) of the LLC Agreement.

"Purchase Option Notice" is defined in Section 11.1(a) of the LLC Agreement.

"PurchasePrice" is defined in Section 11.1(b)(iii) of the LLC Agreement.

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"Regulations" means regulations promulgated under the Code (including temporary regulations), as such regulations are amended, modified or supplemented from time to time.

"Regulatory Allocations" is defined in Section 4.3 of the LLC Agreement.

"Relevant Member" means (a) in the case of Section 11.1(a)(i) of the LLC Agreement, any Member other than the Member which shall have breached the relevant term of this LLC Agreement, (b) in the case of Section 11.1(a)(ii) of the LLC Agreement, any Member represented by director(s) entitled to vote on the relevant matter, (c) in the case of Section 11.1(a)(iii) of the LLC Agreement, any Member or the Class A Noteholder, as the case may be (an "Investor") which is subject to such illegality or material increase in costs, (d) in the case of Section 11.1(a)(iv) of the LLC Agreement, any Investor other than the Investor which is the subject of such Bankruptcy, (e) in the case of Section 11.1(a)(v) of the LLC Agreement, (i) in the event the LEAF Services Agreement shall have been terminated as a result of the occurrence of a Bankruptcy Event (as defined therein) with respect to any Party (as so defined) pursuant to Section 2.2(a) thereof, the Class A Noteholder or any Class A Member, (ii) in the event the LEAF Services Agreement shall have been terminated at the election of the Company pursuant to Section 2.2(b)(ii) thereof, any Investor, (iii) in the event the LEAF Services Agreement shall have been terminated at the election of the Servicer (as defined therein) or LEAF, in either case, pursuant to Section 2.2(b)(ii) thereof, the Class A Noteholder or any Class A Member, (iv) in the event the LEAF Services Agreement shall have been terminated for Cause (as defined therein) pursuant to Section 2.2(b)(iii) thereof, the Class A Noteholder or any Class A Member, (f) in the case of Section 11.1(a)(vi) of the LLC Agreement, any Class B Member, (g) in the case of Section 11.1(a)(vii) of the LLC Agreement, the Class A Noteholder or any Class A Member, (h) in the case of Section 11.1(a)(viii) of the LLC Agreement, any Investor, (i) in the case of Section 11.1(a)(ix) of the LLC Agreement, any Investor and (j) in the case of Section 11.1(a)(x) of the LLC Agreement, any Class B Member.

"Relevant Provision" means, in relation to a Merchant Advance Contract, the following provisions (with terms not otherwise defined having the respective meanings set forth therein): (a) provisions specifying that the transactions contemplated in the Merchant Advance Contract constitute a purchase and sale of Future Credit Card Receivables, rather than a loan, (b) provisions relating to governing law, (c) the covenants of the counterparty to such Contract (the "Counterparty") set forth on the face page thereof under the heading "Certain Covenants", (d) the Owners' guarantee of the obligations of the Counterparty, (e) the Counterparty's acknowledgement that it shall have no right to repurchase Future Credit Card Receivables and (f) the Company's obligation, in the event the transactions contemplated in such Contract are held to be a loan rather than a purchase, to repay to the Counterparty the excess of amounts received by the Company over any applicable usurious rate of interest.

"Required Directors" means (i) prior to a Board Reduction, all directors of the Company and (ii) on and after a Board Reduction (at any time following the Conversion of the Class A Note), a majority of the Board of Directors, in any such case, excluding the Independent Director, except with respect to Section 6.4(e)(xviii).

"Responsible Officer" means, (i) with respect to the Class B Member, any senior officer of the Class B Member and (ii) with respect to the Company, the Managing Member.

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"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor by merger, consolidation or otherwise to its business.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to the Securities Act or any successor law.

"Security Agreement" is defined in the Credit Agreement.

"Servicer Subsidiary" means the Servicer under (and as defined in) the LEAF Services Agreement, if acquired by the Company in accordance with Section 2.4 of such Agreement.

"Subsidiary" means, as to any Person, any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the right or power to direct, in the case of any entity of which such Person or any of its Subsidiaries is a general partner, or both the beneficial ownership of and the right or power to direct, in any other case, such limited liability company, partnership or joint venture, or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries; provided, however, that no such corporation, partnership, joint venture or other entity shall constitute a Subsidiary of any other Person unless such entity would appear as a consolidated Subsidiary of such Person on a Consolidated balance sheet of such Person prepared in accordance with GAAP. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company.

"Successor Corporation" means the corporation resulting from the Permitted Reorganization of the Company.

"Swap Agreement" means any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Company shall be a Swap Agreement.

"Tax" or "Taxes" means any and all taxes (including net income, gross income, franchise, value added, ad valorem, gross receipts, leasing, excise, fuel, excess profits, sales, use, property (personal or real, tangible or intangible) and stamp taxes), levies, imposts, duties, charges, assessments, or withholdings of any nature whatsoever, general or special, ordinary or extraordinary, now existing or hereafter created or adopted, together with any and all interest, penalties, fines, additions to tax and interest thereon; provided, that the terms "Tax" and "Taxes" shall not include any governmental charge for which a direct product or service is received.

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"Tax Distribution" has the meaning set forth in Section 5.2.

"Tax Matters Member" is defined in Section 8.3(a) of the LLC Agreement.

"Transaction Documents" means the LLC Agreement, the Class A Note, the Credit Agreement, the Security Agreement, each Account Control Agreement referred to in the Credit Agreement, the Fee Letter, each Merchant Advance Contract, each Credit Card Processor Services Agreement, the LEAF Services Agreement and any certificates and other documents and instruments related thereto.

"Triggering Event" is defined in Section 11.1(a) of the LLC Agreement.

"Underwriting Manual" means the Underwriting Manual attached as Exhibit G to the LLC Agreement, as such Underwriting Manual may be modified from time to time by written agreement of the Class A Noteholder or the Majority Class A Members, as the case may be, and the Majority Class B Members.

"United States" or "U.S." means the United States of America and the territories, possessions and territorial waters of the United States of America.

"Units" means the Units representing Interests in the Company.

"Unitholders Agreement" means the Unitholders Agreement, dated as of the date hereof, by and among the Company and the Members, as amended, modified or supplemented from time to time.

"Value" of the assets of the Company as of any date, means the fair market value of such assets as of such date, as determined by the Required Directors in good faith. Any determination of the Value or of the fair market value of an asset of the Company made in good faith by the Required Directors shall be binding on the Members for all purposes of this Agreement.

"Voluntary Bankruptcy" is defined in the definition of "Bankruptcy".

SECTION 1.02 Rules of Construction. This Annex A and, except as otherwise expressly provided in any Transaction Document with respect to specific rules of construction for such Transaction Document, all Transaction Documents and all appendices, schedules and exhibits to the Transaction Documents shall be governed by, and construed in accordance with, the following rules of construction:

(a)Computation of Time Periods. In the computation of periods of time from a specified date to a later specified date, the word or phrase "from" and "commencing on" mean "from and including" and the words or phrase "to" and "until" and "ending on" mean "to but excluding".

(b)Accounting Terms. All accounting terms shall be construed in accordance with GAAP applied consistently, except with respect to Capital Accounts and items

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entering into the computation of Capital Accounts, and except to the extent otherwise specified in the provisions of Section 1.01 or 1.02 hereof.

(c)No Presumption Against Any Party. Neither any Transaction Document nor any uncertainty or ambiguity therein shall be construed against any particular party, whether under any rule of construction or otherwise. On the contrary, each Transaction Document has been reviewed by each of the parties thereto and their respective counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties thereto.

(d)Use of Certain Terms. Unless the context of any Transaction Document requires otherwise, the plural includes the singular, the singular includes the plural, and "including" has the inclusive meaning of "including without limitation." The words "hereof," "herein," "hereby," "hereunder," and other similar terms of any Transaction Document refer to such Transaction Document (including this Annex A to the extent incorporated or referred to therein (whether or not actually attached thereto) and all other annexes, schedules and exhibits attached thereto) as a whole and not exclusively to any particular provision of such Transaction Document. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the identity of the Person or Persons may require.

(e)Headings and References. Article, Section and other headings are for reference only, and are not intended to describe, interpret, define or limit the scope, extent or intent of any Transaction Document or any provision thereof. References in any Transaction Document to Articles, Sections, Annexes, Schedules and Exhibits refer to Articles, Sections, Annexes, Schedules, and Exhibits of or to such Transaction Document, and references in Sections of such Transaction Document to any clause refer to such clause of such Section. Whether or not specified in any Transaction Document or in this Annex A, references in such Transaction Document or in this Annex A to such Transaction Document, any other Transaction Document or any other agreement include, unless otherwise provided in such Transaction Document or in this Annex A, this Annex A, such Transaction Document, the other Transaction Documents and such other agreements, as the case may be, as the same may be amended, restated, supplemented or otherwise modified from time to time pursuant to the provisions thereof and of any other Transaction Documents applicable thereto. Whether or not specified in any Transaction Document or in this Annex A, a reference to any Applicable Law or law (as the case may be) as at any time shall mean that Applicable Law or law (as the case may be) as it may have been amended, restated, supplemented or otherwise modified from time to time, and any successor Applicable Law or law (as the case may be). A reference to a Person includes the successors and assigns of such Person, but such reference shall not increase, decrease or otherwise modify in any way the provisions in this Annex A or any Transaction Document governing the assignment of rights and obligations under, or the binding effect, of any provision of this Annex A or any Transaction Document.

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Exhibit A

FORM OF MEMBERSHIP INTEREST

NUMBER [__]	ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE	CLASS [__]
MERIT CAPITAL ADVANCE, LLC

This Certifies that [_____________] is the owner of ___ Class [A/B] limited liability company interest units of Merit Capital Advance, LLC, a Delaware limited liability company (the "Company"), with such rights and privileges as are set forth in the Limited Liability Company Agreement of the Company dated as of March 15, 2007, as amended from time to time (the "LLC Agreement").

THE LIMITED LIABILITY COMPANY INTEREST UNIT REPRESENTED BY THIS CERTIFICATE (THE "MEMBERSHIP INTEREST") HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF ANY STATE (THE "STATE ACTS") OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND IS BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE MEMBERSHIP INTEREST HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, BY ANY STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

NEITHER THE MEMBERSHIP INTEREST NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) TO THE EXTENT PERMITTED UNDER THE LLC AGREEMENT OR THE UNITHOLDERS AGREEMENT REFERRED TO THEREIN, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR FOR WHICH

SUCH REGISTRATION IS OTHERWISE NOT REQUIRED AND (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR FOR WHICH SUCH REGISTRATION OTHERWISE IS NOT REQUIRED.

THE MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER RESTRICTIONS CONTAINED IN THE LLC AGREEMENT AND THE UNITHOLDERS AGREEMENT REFERRED TO THEREIN. A COPY OF THE LLC AGREEMENT AND UNITHOLDERS AGREEMENT WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE.

THERE IS NO PUBLIC MARKET FOR THE MEMBERSHIP INTEREST AND NONE IS EXPECTED TO DEVELOP. THEREFORE, RECIPIENTS OF THIS MEMBERSHIP INTEREST OR ANY OTHER LIMITED LIABILITY COMPANY INTEREST WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

THE MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE CONSTITUTES "SECURITIES" GOVERNED BY ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION.

In Witness Whereof,the said Company has caused this Certificate to be signed by its Managing Member this_________ day of _________, 20__.

MERIT CAPITAL ADVANCE, LLC

By: [__________],

as Managing Member

By:_____________________________,

Name:________________________

Title: _________________________

Exhibit B

Form of LEAF Services Agreement

Exhibit C

Form of Member Interest Transfer

This MEMBERSHIP INTEREST ASSIGNMENT AGREEMENT (this "Agreement") is made and entered into as of ___________, 20__, by and among [________], a Class [A/B] Member and a [__________] ("Assignor") and [designated assignee], a [___________] ("Assignee").

WITNESSET
60;H:

WHEREAS, Assignor is the owner of [ ] Class [A/B] Units representing Class [A/B] Member Interests (the "Assignor Class [A/B] Member Interest") in Merit Capital Advance, LLC, a Delaware limited liability company (the "Company");

WHEREAS, pursuant to Section 11.1 of the Limited Liability Company Agreement of the Company, dated as of March 15, 2007 (the "LLC Agreement"; terms used in this Agreement but not defined herein shall have the meanings given to such terms in the LLC Agreement), the Assignee has the right, following the occurrence of any Triggering Event and subject to certain other conditions set forth in Section 11.1 of the LLC Agreement, to elect to purchase the Assignor Class [A/B] Member Interest;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for the good and valuable consideration specified in the LLC Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.Assignment and Delegation. Assignor does hereby irrevocably from and after the Effective Time (as defined below) (a) sell, transfer, assign and deliver to Assignee all of Assignor's right, title and interest in and to the Assignor Class [A/B] Member Interests (Assignor's assigned interest, an "Assigned Interest") and (b) transfer, delegate and deliver to Assignee all of Assignor's obligations and liabilities in respect of the Assignor Class [A/B] Member Interests (Assignor's delegated obligations, the "Delegated Obligations").

THE ASSIGNED INTEREST IS SOLD AND TRANSFERRED IN "AS IS, WHERE IS" CONDITION AT THE EFFECTIVE TIME AND ASSIGNOR MAKES NO WARRANTIES, GUARANTEES, OR REPRESENTATIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE. Nothing in the foregoing is intended to limit or otherwise affect in any manner Assignor's representations and warranties set forth in Section 5 of this Agreement.

Notwithstanding the foregoing, Assignor shall retain any and all rights of Assignor in and to each and every indemnity or other similar payment under the LLC Agreement, in each case, with respect to claims arising, or events, acts or omissions occurring, or circumstances existing, prior to the Effective Time.

2.Acceptance and Assumption. Assignee hereby from and after the Effective Time (i) accepts the assignment of Assignor's Assigned Interest and (ii) assumes Assignor's respective Delegated Obligations.

3.Effectiveness. This Agreement shall be effective upon the execution and delivery hereof and the payment of the purchase price payable to Assignor pursuant to Section 11.1 of the LLC Agreement (the "Effective Time").

4.Release. As of the Effective Time, Assignee, on its own behalf and on behalf of its members, affiliates, subsidiaries, managers, officers and external advisers (collectively, the "Releasing Parties") grants to Assignor and its equity holders, affiliates, subsidiaries, managers, officers and external advisers (collectively, the "Released Parties") a release as broad as permitted by law with respect to any liability, claim, or contingency or any other responsibility that may arise in relation with or derived from the operations of the Company carried out on or after the date hereof; provided, that the foregoing release shall not operate to release obligations of any Released Parties under this Agreement. Subject to the foregoing, each Releasing Party waives any right, action or claim of any kind against any Released Parties in relation with or derived from the operations of the Company carried out on or after the date hereof.

5.Representations of Assignor. Assignor hereby represents and warrants to Assignee that, as of the date hereof:

(a) Assignor is the owner of its Assigned Interest; and

(b) Assignor has not previously encumbered, sold or assigned the Assigned Interest (except with respect to encumbrances and other transfer restrictions imposed by the LLC Agreement, the Unitholders Agreement and/or applicable laws (including, without limitation, applicable securities laws)).

6.Representations of Assignee. By executing this Agreement, the Assignee hereby makes to the Company and each other Member, as of the date hereof, each of the Assignee's representations and warranties as a Member in Section 3.5 of the LLC Agreement.

7.Further Assurance. Each of the parties to this Agreement agrees that at any time and from time to time, it shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as may reasonably be necessary in order to give full effect to this Agreement and of the rights and powers herein granted. Without limitation, upon execution and delivery of this Agreement, the Assignee shall execute and deliver to the Company and each other Member a counterpart to the Unitholders Agreement.

8.Amendment. This Agreement may be changed, modified or terminated only by an instrument in writing signed by each of the parties hereto.

9.Governing Law. This Agreement shall be governed by and construed under the law of the State of Delaware, without regard to the conflict of law principles thereof.

10.Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.Entire Agreement. This Agreement constitutes the sole understanding of the parties with respect to the subject matter hereto.

[Signature pages following.]

NY3:#7400967v15

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date indicated above.

ASSIGNOR:

[ASSIGNING MEMBER]

By:_________________________________

Name:

Title:

ASSIGNEE:

[NAME OF ASSIGNEE]

By:_________________________________

Name:

Title:

By its execution of this Agreement, Merit Capital Advance, LLC hereby acknowledges that the Assignor shall be released from all of its obligations under the LLC Agreement accruing from and after the Effective Time

MERIT CAPITAL ADVANCE, LLC

By: [__________],

as Managing Member

By:_________________________________

Name:

Title:

Exhibit D

Form of Merchant Advance Contract

Exhibit E

Form of Participation Agreement

Exhibit F

Form of Class A Note

Exhibit G

Underwriting Manual

EX-10.19(B)

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CONVERTIBLE NOTE

THIS NOTE AND THE SECURITIES INTO WHICH THIS NOTE MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

MERIT CAPITAL ADVANCE, LLC

15% SUBORDINATED CONVERTIBLE PIK NOTE

$1,500,000.00          March 15, 2007

FOR VALUE RECEIVED, Merit Capital Advance, LLC, a Delaware limited liability company (the "Company"), hereby unconditionally promises to pay to DBAH Capital LLC (including its successors and assigns, "Holder") on the date 18 months from the date hereof (the "Maturity Date") the principal sum of one million five hundred thousand United States dollars ($1,500,000.00) (the "Original Principal Amount"), with interest as provided in Section 1.02 hereof. Capitalized terms used but not otherwise defined herein have the respective meanings given to such terms in the Limited Liability Company Agreement of the Company dated as of the date hereof (the "LLC Agreement") or in Article VII hereof.

ARTICLE I

PRINCIPAL AND INTEREST

SECTION 1.01. Principal. The entire unpaid principal amount of this Note shall be paid on the Maturity Date.

SECTION 1.02. Interest. For each day during the period from and including the date hereof to but excluding the date this Note shall be paid in full, interest shall accrue at a rate of fifteen percent (15%) per annum (the "Interest Rate") on the outstanding principal amount of this Note from time to time, and shall be payable on the last day of each calendar quarter and (if not the last day of a calendar quarter) on the date this Note shall be paid in full (each such date, an "Interest Payment Date"). Such interest shall be payable by capitalizing the amount of such interest that would have been due on each such Interest Payment Date (the "Capitalized Amount") so that the principal amount

of this Note is increased on each Interest Payment Date by the Capitalized Amount. The Capitalized Amount shall be deemed as part of the principal amount of this Note and shall be subject to the same terms and entitled to the same benefits as the previously outstanding principal amount of this Note. Interest on this Note shall be computed on the basis of a year of 360 days consisting of twelve 30-day months.

SECTION 1.03. Default Interest. Without duplication of any interest payable under Section 1.02 hereof, the Company hereby unconditionally promises to pay to the Holder interest on any principal or interest payable by the Company under this Note that shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period from and including the due date of such payment to but excluding the date the same is paid in full, at a rate per annum equal to the Interest Rate plus 2%, which interest shall be payable from time to time on demand of the Holder.

SECTION 1.04. Optional Prepayment. The Company shall not be entitled to prepay this Note at any time in whole or in part.

ARTICLE II

PAYMENTS

All payments of principal and interest to be made by the Company in respect of this Note are to be made in lawful money of the United States of America at the principal office of Deutsche Bank AG in New York, New York (or at such other place as the Holder shall have des-ig-nated by written notice to Company), not later than 12:00 p.m. New York City time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). If the due date of any payment in respect of this Note would otherwise fall on a day that is not a Business Day, such due date shall be extended to the next succeeding Business Day, and interest shall be payable on any principal so extended for the period of such extension. All amounts payable under this Note shall be paid free and clear of, and without reduction by reason of, any deduction, set-off or counterclaim.

ARTICLE III

CONVERSION

SECTION 3.01. Conversion. The outstanding principal amount of this Note may, at any time (at the option of the Holder) on or after the date six months from the date hereof (or on or after such date later than the date six months from the date hereof as the Holder shall elect by providing written notice of such election to the Company) (the date six months from the date hereof, or such later elected date, the "Convertibility Date"), be converted (a "Conversion"), in whole (but not in part), into a number of Class A Units of the Company equal to the number of Class B Units of the

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Company outstanding on the date of Conversion. If, on the date of Conversion, there shall be outstanding any options or warrants to purchase Class B Units or other securities convertible into or exchangeable for Class B Units, all Class B Units issuable upon exercise, conversion or exchange of such options, warrants or securities shall be deemed to be outstanding on the date of Conversion, for purposes of determining the number of Class A Units into which this Note shall be convertible.

SECTION 3.02. Manner of Conversion. The Holder may exercise the right to convert this Note into Class A Units by delivering for such purpose to the Company, at its principal office, a written notice stating that Holder elects to convert this Note in accordance with the provisions of this Section 3. The Holder will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of the issue and delivery of Class A Units on Conversion of this Note. Upon the delivery of such notice, the Company shall deliver or cause to be delivered to the Holder a Certificate of Interest representing the number of validly issued, fully paid and nonassessable Class A Units to which the Holder shall be entitled. Such Conversion shall be deemed to have been made at the close of business on the date of giving of such notice, and Holder shall be deemed to have become the holder of the Class A Units represented by such Certificate of Interest on such date.

SECTION 3.03. Reservation of Class A Units, Etc. The Company shall at all times reserve and keep available out of its authorized and unissued Class A Units, solely for the purpose of effecting the Conversion of this Note, such number of Class A Units as shall from time to time be sufficient to effect the Conversion of this Note. The Company shall from time to time, subject to and in accordance with the LLC Act, increase the authorized amount of Class A Units if at any time the number of authorized Class A Units remaining unissued shall not be sufficient to permit the Conversion of this Note.

SECTION 3.04. Cancellation of Note Upon Conversion. Upon Conversion of this Note, (i) this Note shall no longer be deemed to be outstanding, (ii) the Company shall not be required to make any payments in respect of principal or interest on this Note, (iii) interest shall cease to accrue on this Note and (iv) the Holder shall upon written request of the Company return this Note to the Company for cancellation.

ARTICLE IV

TERMS OF SUBORDINATION

SECTION 4.01. General. Anything in this Note to the contrary notwithstanding, the indebtedness evidenced by this Note shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all indebtedness or other liabilities of the Company outstanding from time to time under the Credit Agreement dated as of the date hereof between the Company and Deutsche Bank AG Cayman Islands Branch, as lender (as the same may from time to time be amended, extended, renewed, increased, modified, restated or refinanced, the "Credit Agreement"),

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including, without limitation, any interest accruing after the commencement of any proceedings referred to in clause (ii) below, whether or not such interest is an allowed claim in such proceeding (all such indebtedness or other liabilities and interest being herein called "Senior Obligations"):

(i) The holders of Senior Obligations shall be entitled to receive payment in full in cash of all amounts constituting Senior Obligations before the Holder is entitled to receive any payment on account of this Note.

(ii) In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, then (a) the holders of Senior Obligations shall be entitled to receive payment in full of all amounts constituting Senior Obligations before the Holder is entitled to receive, or make any demand for, any payment on account of this Note, and to that end the holders of Senior Obligations shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities and (b) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holder would be entitled but for the provisions of this Section 4.01, including any such payment or distribution that may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of this Note, shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Obligations (or their representatives), ratably according to the respective aggregate amounts remaining unpaid thereon, to the extent necessary to pay all Senior Obligations in full.

No present or future holder of Senior Obligations shall be prejudiced in its right to enforce subordination of this Note by any act or failure to act on the part of the Company or by any act or failure to act or delay in acting, in good faith on the part of such holder or any trustee or agent for such holder, nor shall any single or partial exercise of any right, remedy or power hereunder preclude any other or future exercise by a holder of Senior Obligations of any other right, remedy or power. Each and every right, remedy and power granted to the holders of Senior Obligations, or allowed the holders of Senior Obligations by law or other agreement shall be cumulative and not exclusive, and may be exercised by the holders of Senior Obligations, from time to time. The foregoing provisions are solely for the purpose of defining the relative rights of the holders of Senior Obligations on the one hand, and the Company and the Holder on the other hand, and nothing herein shall impair, as between the Company and the Holder, the obligation of the Company, which is unconditional and absolute, to pay to the Holder the principal hereof and interest hereon in accordance with the terms hereof, nor shall anything herein

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prevent the Holder from exercising all remedies otherwise permitted by applicable law in respect hereof, subject to the rights, if any, under this Note of holders of Senior Obligations to receive cash, property or securities otherwise payable or deliverable to the Holder.

SECTION 4.02. Modification of Senior Obligations. Without in any way limiting the generality of the foregoing provisions of this Section 4, at any time, without the consent of or notice to the Holder, without incurring responsibility or liability to the Holder and without impairing or releasing the subordination provided herein or the obligations hereunder of the Holder, the holders of Senior Obligations may do any one or more of the following: (i) change the manner, place or terms of payment of or extended the time of payment of, or renew or alter, the Senior Obligations or any collateral security or guaranty therefor, or otherwise amend or supplement in any manner the Senior Obligations or any instruments evidencing the same or any agreement under which Senior Obligations is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Obligations; (iii) release any Person liable in any manner for the Senior Obligations; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. The Holder unconditionally waives notice of the incurring of Senior Obligations or any part thereof.

SECTION 4.03. Defaults. After payment in full in cash of the Senior Obligations (but not otherwise), if any payment is not made when due hereunder, the Holder may declare all amounts owing under this Note due and payable, provided that if after repayment in full of the Senior Obligations, any payments of Senior Obligations shall at any time be rescinded or otherwise must be returned by the holder of any Senior Obligations, such demand, if made, shall be automatically rescinded.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to the Holder that:

SECTION 5.01. Organization. The Company is duly organized, validly existing and in good standing under the laws of Delaware.

SECTION 5.02. Authorization; Enforceability. The execution, delivery and performance of this Note by the Company are within the Company's corporate powers and have been duly authorized by all necessary corporate action. This Note has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity

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(regardless of whether such enforceability is considered in a proceeding in equity or at law).

SECTION 5.03. Government Approvals; No Conflicts. The execution, delivery and performance of this Note by the Company (a) do not require any consent or approval of, registration or filing with, or any other action by, any governmental authority, (b) will not violate any applicable law or regulation or the certificate of formation or limited liability company agreement of the Company and (c) will not violate or result in a default under any loan agreement, indenture, or other agreement or instrument binding upon the Company or any of its Subsidiaries.

SECTION 5.04. Litigation. There are no actions, suits or proceedings by or before any arbitrator or governmental authority now pending against or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries (i) that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Note or the transactions contemplated thereby.

SECTION 5.05. Compliance with Laws and Agreements. The Company and each of its Subsidiaries is in compliance with all applicable laws (including without limitation Environmental Laws, tax laws and ERISA), regulations and orders of any governmental authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.06. Investment and Holding Company Status. The Company is not an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

SECTION 5.07. Margin Regulations. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of this Note will be used to buy or carry any Margin Stock.

SECTION 5.08. Solvency. The Company is, after giving effect to the use of the proceeds of this Note will be, Solvent.

ARTICLE VI

COVENANTS

So long as any principal of or interest or any other amount payable under this Note remains outstanding, the Company agrees that:

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SECTION 6.01. Certain Covenants. (a) The Company will, and cause each of its Subsidiaries to, preserve and maintain its corporate existence and comply with all applicable laws, statutes, rules, regulations and orders, including without limitation, those relating to federal or State non-banking activities, licensing, usury, truth in lending, privacy, credit reporting, equal opportunity, predatory lending, money-laundering and terrorism financing, and all applicable Environmental Laws, tax laws and ERISA, except to the extent such non-compliance could not reasonably be expected to have a Material Adverse Effect or otherwise adversely affect the Holder. The Company will, and will cause each of its Subsidiaries to, comply with instructions provided from time to time by the Holder in connection with the Holder's efforts to ensure the business of the Company and its Subsidiaries is at all times in compliance with all such applicable statutes, rules, regulations and orders, except to the extent non-compliance with such statutes, rules or regulations could not reasonably be expected to have a Material Adverse Effect or otherwise adversely affect the Holder.

(b) The Company will, and cause each of its Subsidiaries to, promptly from time to time obtain and maintain in full force and effect all licenses, consents, authorizations and approvals of, and make all filings and registrations with, any Governmental Authority necessary in connection with the business of the Company and its Subsidiaries, except to the extent the failure to obtain or maintain any of the foregoing could not reasonably be expected to have a Material Adverse Effect or otherwise adversely affect the Holder.

(c) The Company will, and cause each of its Subsidiaries to, timely file all required tax returns, and pay and discharge all taxes, assessments and other governmental charges imposed upon it and its property or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials or supplies which if unpaid might by law become a lien or charge upon any property of the Company or such Subsidiary, except (i) such items as are being contested in good faith by appropriate proceedings and as to which appropriate reserves are being maintained and (ii) items the non-payment of which could not (either individually or in the aggregate) reasonably be expected to have a Material Adverse Effect.

(d) The Company will, and cause each of its Subsidiaries to, keep adequate records and books of account, in which complete entries will be made in accordance with GAAP, and permit representatives of the Holder, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its property, and to discuss its business and affairs with its officers.

(e) The Company will furnish to the Holder:

(i) by the dates the Managing Member is required to make delivery thereof to the Members under the LLC Agreement (or, if delivered earlier, simultaneously with the Managing Member's delivery thereof to such Members), copies of all financial statements, monthly reports, notices and other informational materials required to be delivered to such Members under the LLC Agreement;

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(ii) as soon as possible and in any event within five Business Days after the occurrence of any Default, a statement of the Company setting forth details of such Default and the action which the Company has taken and proposes to take with respect thereto;

(iii) within three Business Days of its receipt thereof, a copy of each invoice for Service Fees received by the Company under (and as defined in) the LEAF Services Agreement, together with all information Holder may reasonably request to substantiate the amount of such Service Fees;

(iv) promptly upon the Company becoming aware thereof, written notice of the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Company or any Affiliate thereof or any Member; and

(v) such other information respecting the condition or operations, financial or otherwise, of the Company and its Subsidiaries as the Holder may from time to time request.

(f) The Company will not, and will not permit any of its Subsidiaries to, merge with or consolidate into any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person.

(g) The Company will not create, and will not permit any of its Subsidiaries to, assume or suffer to exist any Lien on any of its property now owned or hereafter acquired by it, except Permitted Liens.

(h) The Company will not at any time incur or permit to remain outstanding any Indebtedness, other than (x) Indebtedness under this Note and (y) Indebtedness under the Credit Agreement.

(i) The Company will not permit its Subsidiaries to incur or have outstanding any Indebtedness.

(j) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly enter into any transaction with an Affiliate (other than the LEAF Services Agreement) except in the ordinary course of and pursuant to the reasonable requirements of its business and upon commercially reasonable terms that are no lessfavorable to it than those which might be obtained in a comparable arm's-length transaction at the time from a Person which is not such an Affiliate.

(k) The Company will at all times comply with the restrictions on its activities set forth in the LLC Agreement.

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(l) The Company will cooperate actively and in good faith with the Holder, prior to the Convertibility Date, to implement such anti-money laundering policies and procedures and such other compliance procedures in each case as the Holder shall require in connection with this Note being convertible into Class A Units of the Company as provided in Section 3.

(m) The Company will, in the event that "Cause" under (and as defined in) the LEAF Services Agreement shall exist, take such steps as the Holder shall reasonably direct, including the exercise of the Company's right to terminate the LEAF Services Agreement.

SECTION 6.02. Certain Protections of This Note's Contingent Equity Interest.

In addition to any applicable requirements of the LLC Agreement, the Managing Member agrees that it will not, without the prior written consent of the Holder:

(a)reorganize the Company into a corporation;

(b)permit the Company or any Subsidiary to take any action in contravention of the LLC Agreement or any other Transaction Document;

(c)(i) permit the Company to issue any limited liability company interests (including, without limitation, any preferred or non-voting limited liability company interests) in the Company, or permit the Company to issue any rights to acquire any such limited liability company interests (other than the Class A Units issuable upon Conversion of this Note), or (ii) permit the Company to reclassify or combine any limited liability company interests in the Company;

(d)make or permit to be made any Distribution in respect of or redemption of Interests (other than reasonable Tax Distributions made in accordance with Section 5.2 of the LLC Agreement);

(e)permit the Company or any Subsidiary to acquire any assets other than Permitted Assets;

(f)permit the Company or any Subsidiary to (i) amend, modify or waive any provision of the LEAF Services Agreement, any Credit Card Processor Services Agreement or any Relevant Provision of a Merchant Advance Contract, or (ii) enter into any Merchant Advance Contract whose equivalent provisionsdiffer from the Relevant Provisions set forth in the form of Merchant Advance Contract attached as Exhibit D to the LLC Agreement;

(g)permit the Company or any Subsidiary to (i) terminate the LEAF Services Agreement, or (ii) enter into after the date hereof, terminate, or change

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   (or consent or fail to object to any change in) the settlement of funds procedures under, any Credit Card Processor Services

  agreement;

(h)permit the Company or any Subsidiary to enter into any material business combination, partnership or joint venture with any Person, or to terminate any such arrangement entered into;

(i) (i) permit the Company to engage in any business activities other than those conducted and proposed to be conducted on the date hereof, (ii) permit the Servicer Subsidiary to engage in any business activities other than the provision to the Company of services of the type contemplated in the LEAF Services Agreement, (iii) permit the Company or any Subsidiary to enter into Merchant Advance Contracts with counterparties in California (other than Merchant Advance Contracts entered into by the Company with such counterparties while the Company maintains a valid and effective California finance lender license) or (iv) permit the Company or any Subsidiary to do business in any State of the United States of America other than New York, California, New Jersey, Pennsylvania, Florida, Texas and Nevada, or in any country other than the United States of America or any political subdivision of such other country;

(j) permit the Company or any Subsidiary to voluntarily liquidate or dissolve itself or appoint a Liquidator;

(k)permit the Company or any Subsidiary to change its Fiscal Year;

(l)cause the Company or any Subsidiary to be treated as a corporation or other association taxable as a corporation or as a publicly traded partnership for federal income tax purposes or to take a position inconsistent with the Company or any Subsidiary not being treated as a corporation or other association taxable as a corporation except as required by Applicable Law;

(m) permit the Company or any Subsidiary to confess a judgment against the Company or any Subsidiary or settling actions in proceedings in law or in equity in relation to the Company or any Subsidiary before any court or other Governmental Authority;

(n) permit the Company or any Subsidiary (other than the Servicer Subsidiary) to have any employees;

(o)permit the Company to reduce the "Commitments" under the Credit Agreement;

(p)(x) permit the Company or any Subsidiary to incur any voluntary expense (other than for Service Fees as defined in the LEAF Services Agreement), or to enter into any agreement other than the Transaction Documents

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(and any agreement required to be entered into pursuant to any Transaction Document), if the aggregate of all such expenses, or of all obligations of the Company and its Subsidiaries pursuant to the relevant agreement(s), as the case may be, (i) individually is in excess of $35,000 or (ii) in the aggregate during any annual fiscal period of the Company is in excess of $200,000, unless, in the case of any such voluntary expense, the incurrence thereof is necessary to comply with Applicable Law, and it being understood that the Managing Member shall provide the Holder with at least three Business Days prior written notice of the incurrence by the Company or any Subsidiary of any such expense, or any such entry into by the Company or any Subsidiary of any such agreement, that exceeds or is reasonably likely to exceed the foregoing limits; or (y) permit the Company or any Subsidiary to pay Service Fees (as defined in the LEAF Services Agreement) in an aggregate amount in excess of $350,000 per calendar month, $875,000 per fiscal quarter of the Company or $3,500,000 per fiscal year of the Company;

(q)permit the Company or any Subsidiary to approve any new channel partner for marketing the merchant advance business of the Company and its Subsidiaries (it being understood that a Person which is a counterparty to a Merchant Advance Contract with the Company shall not, as the sole consequence thereof, be deemed to be channel partner of the Company for purposes of this Section 6.02(q));

(r)permit the Company to exercise its right under the LEAF Services Agreement to acquire the Servicer Subsidiary, or permit the Company or any Subsidiary to acquire more than five percent of any class of voting securities of, or 25 percent of the equity of, any other Person;

(s)permit or consent to any amendment to or modification or waiver of any provision of the LLC Agreement or the Unitholders Agreement;

(t)permit or consent to the transfer of any Class B Unit to any Person (other than an Affiliate of the Initial Class B Member in a transfer that complies with Section 10.1(c) of the LLC Agreement); or

(u)permit the Company or any Subsidiary to hire any regulatory counsel, provided that DBAH Capital LLC and its Affiliates shall have the right to require that any advice provided by any regulatory counsel to the Company or any Subsidiary be in form and substance satisfactory to DBAH Capital LLC and its Affiliates and in a form expressly permitting DBAH Capital LLC and its Affiliates to rely thereon.

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ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:

(a) The Company shall default in the payment when due of any principal of or interest on this Note when the same becomes due and payable; or

(b) Any representation or warranty made by the Company herein or in any certificate or other document delivered in connection with this Note shall prove to have been incorrect when made or deemed made in any material respect; or

(c) (i) The Company shall fail to perform or observe any term, covenant or agreement contained in Section 6.01(a), 6.01(b), 6.01(e), 6.01(f), 6.01(g), 6.01(h), 6.01(i), 6.01(j), 6.01(k), 6.01(l), 6.01(m) or 6.02; or (ii) the Company shall fail to perform or observe any other term or covenant in this Agreement on its part to be performed or observed and such failure remains unremedied for thirty days after the earlier of (x) the date on which the Company has knowledge thereof or (y) the date on which written notice thereof shall have been given to the Company by the Holder; or

(d) The Company or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any other Indebtedness of the Company or any of its Subsidiaries having an aggregate outstanding principal amount of $50,000 or more ("Material Debt") when the same becomes due and payable, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Material Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Material Debt; or any such Material Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Debt shall be required to be made, in each case prior to the stated maturity thereof; or

(e) The Company or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Company or any of its Subsidiaries seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection,

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relief, or composition of it or its debts under any law relating to bankruptcy, insolvency, moratorium or reorganization or relief of debtors, or liquidation or winding up, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and such proceeding shall remain undismissed or unstayed for a period of 60 days; or the Company or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or

(f) Any judgment or order for the payment of money in excess of $50,000 shall be rendered against the Company or any of its Subsidiaries, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order and such proceedings shall not have been stayed or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(g) A Change in Control shall occur; or

(h) The Company or any of its Subsidiaries shall incur liability to a Plan, a Multiemployer Plan or the PBGC (or any combination of the foregoing) that either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; or

(i) Any action, suit or proceeding by or before any arbitrator or governmental authority against or affecting the Company or any of its Subsidiaries that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, shall be commenced or threatened; or

(j) Any Person shall initiate foreclosure proceedings with respect to any Lien on the Equity Interests in the Company, LEAF Ventures or the Servicer;

then, and in any such event, the Holder may, by notice to the Company, declare the outstanding principal amount of this Note (including capitalized interest as provided in Section 1.02 hereof) and all other amounts payable under this Agreement to be forthwith due and payable, whereupon such principal amount, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company; provided, however, that in the event of an entry of an order for relief with respect to the Company under the Federal Bankruptcy Code, the outstanding principal amount of this Note, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Company.

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ARTICLE VIII

DEFINITIONS

The following terms shall have the meanings set forth below:

"Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than LEAF Financial Corporation and its Subsidiaries, of Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Company, LEAF Ventures or the Servicer (other than, in the case of the Servicer, in connection with the exercise by the Company of its right under the LEAF Services Agreement to purchase the Servicer, so long as the Holder shall have provided its prior written consent thereto), (b) Crit DeMent ceasing to be the Chairman or Chief Executive Officer of LEAF Financial Corporation and not being replaced in such position by a similarly-qualified individual within 90 days thereof, or (c) the acquisition of direct or indirect Control of the Company, LEAF Ventures or the Servicer by any Person or group other than LEAF Financial Corporation and its Subsidiaries (other than, in the case of the Servicer, in connection with the exercise by the Company of its right under the LEAF Services Agreement to purchase the Servicer, so long as Holder shall have provided its prior written consent thereto); provided that Conversion of this Note shall not be deemed to cause a "Change in Control".

"Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

"Default" means an Event of Default or an event that, with notice or lapse of time or both, would become an Event of Default.

"Environmental Laws" means any and all present and future Federal, state, local and foreign laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of human health, safety or the environment or to emissions, discharges, releases or threatened releases of Hazardous Materials into the indoor or outdoor environment, including, without limitation, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

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     "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

"ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414(m) of the Code.

"Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

"LEAF Ventures" means LEAF Ventures, LLC.

"Material Adverse Effect" means a material adverse effect on (i) the business or condition (financial or otherwise), operations or prospects of the Company and its Subsidiaries taken as a whole, (ii) the legality, validity or enforceability of this Note or (iii) the ability of the Company to perform its obligations under this Note.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

"Permitted Assets" means:

(a)in relation to the Company: (i) Financial Investments; (ii) Merchant Advance Contracts, including future receivables thereunder; (iii) intellectual property rights; (iv) furniture, fixtures and equipment; (v) equity interests in Subsidiaries and other Persons (to the extent permitted in the LLC Agreement); and (vi) other assets approved in writing by the Holder; and

(b)in relation to the Servicer Subsidiary: (i) furniture, fixtures and equipment; and (ii) other assets approved in writing by the Holder.

"Permitted Liens" shall mean, with respect to any Person:

(i)Liens imposed by law which were incurred in the ordinary course of business, including (but not limited to) carriers', warehousemen's and

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mechanics' liens and other similar liens arising in the ordinary course of business and which (x) do not in the aggregate materially impair the use thereof in the operations of the business of the Company or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject to such liens and for which adequate reserves have been made if required in accordance with GAAP;

(ii)pledges or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other similar social security legislation;

(iii)Liens securing taxes, assessments and other governmental charges, the payment of which is not yet due or is being contested in good faith by appropriate proceedings promptly initiated and diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made;

(iv)Liens securing the Senior Obligations; and

(v)Liens which arise pursuant to a final judgment or judgments that do not constitute an Event of Default under Section 7.01(f).

"Servicer" means Merit Capital Manager, LLC.

"Solvent" means, with respect to any Person on a particular date, that (i) the fair value of the property of such Person is greater than the total amount of the liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature, and (iv) such Person is not engaged in business, and is not about to engage in business, for which such Person's property would constitute unreasonably small capital.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Delay or Omission Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

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SECTION 9.02. Governing Law; Submission to Jurisdiction.

(a) This Note shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the conflicts of laws provisions thereof. The Company hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York County for the purposes of all legal proceedings arising out of or relating to this Note or the transactions contemplated hereby.

(b) The Company irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

SECTION 9.03. Successors. All agreements of the Company in this Note shall bind its successors and permitted assigns. This Note shall inure to the benefit of the Holder and its successors and assigns.

SECTION 9.04. Amendment, Modification or Waiver. No provision of this Note may be amended, modified or waived except by an instrument in writing signed by the Company and the Holder.

SECTION 9.05. Assignment. The Company shall not assign or delegate any of its obligations hereunder without the prior written consent of Holder.

SECTION 9.06. Waivers. The Company waives demand, presentment for payment, notice of dishonor, protest, notice of protest and notice of non-payment of this Note.

SECTION 9.07. Notices. All notices and other communications in respect of this Note (including, without limitation, any modifications of, or requests, waivers or consents under, this Note) shall be given or made in writing (including, without limitation, by telecopy) (a) in the case of the Company, at the address for notices specified in the LLC Agreement and (b) in the case of the Holder, at the address for such purpose as shall have been most recently specified to the Company by the Holder; or, as to either the Company or the Holder, at such other address as shall be designated by such party in a notice to the other party. Except as otherwise provided in this Note, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

SECTION 9.08. Right of Set-off. The Company agrees that, in addition to (and without limitation of) any right of set-off the Holder may otherwise have, the Holder shall be entitled, at its option, to offset amounts owing by the Holder to the Company, in Dollars or in any other currency (regardless of whether such amounts are

17

then due to the Company), against any amount payable by the Company to the Holder under this Note that is not paid when due; provided that nothing contained herein shall require the Holder to exercise any such right.

SECTION 9.09. Costs, Expenses and Indemnification.

(a) The Company agrees to pay and reimburse on demand all reasonable costs and expenses incurred by the Holder in connection with the administration, modification, amendment or enforcement of this Note and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Holder with respect thereto and with respect to advising the Holder as to its rights and responsibilities under or in connection with this Note.

(b) The Company hereby agrees to indemnify the Holder and each of its Affiliates and their respective officers, directors, employees, agents, advisors and representatives (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (the "Indemnities"), in each case arising out of or in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto arising out of or in connection with or relating to this Note or the transactions contemplated hereby or thereby or any use made or proposed to be made with the proceeds of this Note, whether or not such investigation, litigation or proceeding is brought by the Company, any of its shareholders or creditors, an Indemnified Party or any other Person, or an Indemnified Party is otherwise a party thereto, and whether or not the other transactions contemplated by this Note are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided, however, the Company's obligation to indemnify any Indemnified Party, other than the Holder, under this Section 9.09(b) shall be subject to its receipt of written demand for the Indemnities of such Indemnified Party, such demand to set forth evidence of such Indemnified Party's payment or liability for such Indemnities. The Holder shall have no liability for any special, indirect, consequential or punitive damages in connection with any matter relating hereto.

SECTION 9.10. Right of First Refusal. Prior to the Conversion of this Note, the Holder (and/or any of its Affiliates designated thereby) shall have a right of first refusal to provide (i) any debt or equity financing required by the Company, as approved by the Board, at then-market terms and (ii) any advisory, structuring, underwriting or other services required in connection with the Company's capital raising activities as approved by the Board (including any third party debt financing, equity investment or initial public offering) in exchange for market-rate compensation.

SECTION 9.11. Waiver of Jury Trial. THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY

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APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

SECTION 9.12. Confidentiality.The Holder agrees to maintain the confidentiality of the Information (as defined below) of the Company, except that Information may be disclosed (a) to the Holder's and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to the Company, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.12, to any assignee of or participant in, or any prospective assignee of or participant in, any of the Holder's rights or obligations under this Agreement, (g) with the consent of the Company or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.12 or (ii) becomes available to the Holder from a source other than the Company. For the purposes of this Section, “Information” in relation to the Company means all information received from the Company relating to the Company or its business, other than any such information that is available to the Holder on a nonconfidential basis prior to disclosure by the Company; provided that, in the case of information received from the Company after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 9.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION 9.13. Holder Representation.By its acceptance of this Note, the Holder represents and warrants to the Company that the Holder is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), and is not acquiring this Note with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States.

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an authorized officer thereof as of the date and year first above written.

MERIT CAPITAL ADVANCE, LLC

By:LEAF Ventures, LLC

Its Managing Member

By:LEAF Financial Corporation

Its Managing Member

By:_____________________________________

Name:

Title:

Accepted as of the date first written above:

DBAH CAPITAL LLC

as Holder

By: __________________________

Name:

Title:

By: __________________________

Name:

Title:

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EX-31.1

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EXHIBIT 31.1

CERTIFICATION

I, Jonathan Z. Cohen, certify that:

1)   I have reviewed this report on Form 10-Q for the quarterly period ended March 31, 2007 of Resource America, Inc.;

2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5)   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Jonathan Z. Cohen
Date: May 4, 2007	Jonathan Z. Cohen
	Chief Executive Officer

EX-31.2

(Back to Main Document)

EXHIBIT 31.2

CERTIFICATION

I, Steven J. Kessler, certify that:

1)   I have reviewed this report on Form 10-Q for the quarterly period ended March 31, 2007 of Resource America, Inc.;

2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5)   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Steven J. Kessler
Date: May 4, 2007	Steven J. Kessler
	Executive Vice President and Chief Financial Officer

EX-32.1

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resource America, Inc. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jonathan Z. Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Jonathan Z. Cohen
Date: May 4, 2007	Jonathan Z. Cohen
	Chief Executive Officer

EX-32.2

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resource America, Inc. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven J. Kessler, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Steven J. Kessler
Date: May 4, 2007	Steven J. Kessler
	Executive Vice President and Chief Financial Officer