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 endedDecember 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 February 4, 2008 was 17,749,440.

RESOURCE AMERICA, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

			PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets – December 31, 2007 (unaudited) and September 30, 2007		3
	Consolidated Statements of Operations - Three Months Ended December 31, 2007 and 2006 (unaudited)		4
	Consolidated Statement of Changes in Stockholders’ Equity Three Months Ended December 31, 2007 (unaudited)		5
	Consolidated Statements of Cash Flows Three Months Ended December 31, 2007 and 2006 (unaudited)		6 − 7
	Notes to Consolidated Financial Statements – December 31, 2007 (unaudited)		8 − 34
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35 − 53
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		54 − 55
Item 4.	Controls and Procedures		56
PART II		OTHER INFORMATION
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 6.		Exhibits	57
SIGNATURES			58

PART I.  FINANCIAL INFORMATION

Item 1.                 Financial Statements

RESOURCE AMERICA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31, 2007			September 30, 2007
	(unaudited)
ASSETS
Cash	$	19,790		$	14,624
Restricted cash		76,613			19,340
Receivables		19,812			21,255
Receivables from managed entities		20,478			20,177
Loans sold, not settled		11,857			152,706
Loans held for investment, net		197,721			285,928
Loans held-for-sale, at fair value		112,634			−
Investments in commercial finance, net		646,394			243,391
Investments in real estate, net		49,265			49,041
Investment securities available-for-sale, at fair value		45,145			51,777
Investments in unconsolidated entities		34,924			36,777
Property and equipment, net		15,242			12,286
Deferred income taxes		36,482			30,995
Goodwill		7,969			7,941
Intangible assets, net		4,699			4,774
Other assets		24,438			18,664
Total assets	$	1,323,463		$	969,676
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accrued expenses and other liabilities	$	81,723		$	60,546
Payables to managed entities		2,561			1,163
Borrowings		1,050,476			706,372
Deferred income tax liabilities		11,124			11,124
Minority interests		6,146			6,571
Total liabilities		1,152,030			785,776
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; 27,117,108 and 26,986,975 shares issued, respectively (including nonvested restricted stock of 306,716 and 199,708, respectively)		268			268
Additional paid-in capital		265,730			264,747
Retained earnings		18,114			25,724
Treasury stock, at cost; 9,379,326 and 9,369,960 shares, respectively		(102,171	)		(102,014	)
ESOP loan receivable		(217	)		(223	)
Accumulated other comprehensive loss		(10,291	)		(4,602	)
Total stockholders’ equity		171,433			183,900
	$	1,323,463		$	969,676

The accompanying notes are an integral part of these statements

3

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended December 31,
	2007			2006
REVENUES
Commercial finance	$	27,965		$	7,089
Financial fund management		16,292			12,387
Real estate		6,472			4,564
		50,729			24,040
COSTS AND EXPENSES
Commercial finance		9,551			3,631
Financial fund management		6,614			4,552
Real estate		5,466			3,013
General and administrative		3,458			2,789
Provision for credit losses		2,773			45
Depreciation and amortization		966			709
		28,828			14,739
OPERATING INCOME		21,901			9,301
Interest expense		(14,677	)		(4,591	)
Minority interests		(1,091	)		(560	)
Other (expense) income, net		(18,368	)		2,528
		(34,136	)		(2,623	)
(Loss) income from continuing operations before taxes		(12,235	)		6,678
(Benefit) provision for income taxes		(5,873	)		2,210
(Loss) income from continuing operations		(6,362	)		4,468
Loss from discontinued operations, net of tax		(12	)		(19	)
NET (LOSS) INCOME	$	(6,374	)	$	4,449
Basic (loss) earnings per common share:
Continuing operations	$	(0.37	)	$	0.26
Discontinued operations		−			−
Net (loss) income	$	(0.37	)	$	0.26
Weighted average shares outstanding		17,428			17,292
Diluted (loss) earnings per common share:
Continuing operations	$	(0.37	)	$	0.23
Discontinued operations		−			−
Net (loss) income	$	(0.37	)	$	0.23
Weighted average shares outstanding		17,428			19,122
Dividends declared per common share	$	0.07		$	0.06

The accompanying notes are an integral part of these statements

4

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED DECEMBER 31, 2007

(in thousands)

(unaudited)

														Accumulated
			Additional								ESOP			Other			Totals
	Common		Paid-In		Retained			Treasury			Loan			Comprehensive			Stockholders’			Comprehensive
	Stock		Capital		Earnings			Stock			Receivable			Loss			Equity			Loss
Balance, October 1, 2007	$	268	$	264,747	$	25,724		$	(102,014	)	$	(223	)	$	(4,602	)	$	183,900
Net loss		-		-		(6,374	)		-			-			-			(6,374	)	$	(6,374	)
Treasury shares issued		-		54		-			80			-			-			134			−
Stock-based compensation		-		250		-			-			-			-			250			−
Restricted stock awards		-		521		-			-			-			-			521			−
Issuance of common shares		-		158		-			-			-			-			158			−
Purchase of treasury shares		−		−		−			(237	)		−			−			(237	)		−
Cash dividends		-		-		(1,236	)		-			-			-			(1,236	)		−
Other comprehensive loss		−		−		−			−			−			(5,689	)		(5,689	)		(5,689	)
Total comprehensive loss		−		−		−			−			−			−			−		$	(12,063	)
Repayment of ESOP loan		-		-		-			-			6			−			6
Balance, December 31, 2007	$	268	$	265,730	$	18,114		$	(102,171	)	$	(217	)	$	(10,291	)	$	171,433

The accompanying notes are an integral part of this statement

5

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended December 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(6,374	)	$	4,449
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities, net of acquisitions:
Impairment charge on collateralized debt obligation investments		1,017			−
Depreciation and amortization		1,290			810
Provision for credit losses		2,773			45
Equity in earnings of unconsolidated entities		(3,609	)		(3,981	)
Minority interests		1,091			560
Distributions from unconsolidated entities		4,764			3,941
Losses on sales of loans held-for-sale		18,332			−
Gains on sales of investment securities available-for-sale		−			(1,347	)
Gains on sales of assets		(301	)		(74	)
Deferred income tax benefit		(5,487	)		(671	)
Non-cash compensation on long-term incentive plans		905			401
Non-cash compensation issued		110			797
Non-cash compensation received		(97	)		(673	)
Decrease (increase) in commercial finance investments		7,455			(63,594	)
Changes in operating assets and liabilities		(979	)		(7,706	)
Net cash provided by (used in) operating activities of continuing operations		20,890			(67,043	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(3,375	)		(219	)
Payments received on real estate loans and real estate		3,695			3,256
Investments in real estate		(738	)		(10,188	)
Purchase of investments		(200,311	)		(5,795	)
Proceeds from sale of investments		1,957			3,381
Net cash paid for acquisitions		(8,022	)		−
(Increase) decrease in other assets		(3,842	)		1,769
Net cash used in investing activities of continuing operations		(210,636	)		(7,796	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings		416,900			161,507
Principal payments on borrowings		(162,452	)		(97,751	)
Dividends paid		(1,236	)		(1,043	)
Distributions paid to minority interest holders		(937	)		−
Increase in restricted cash		(57,273	)		(5,639	)
Proceeds from issuance of stock		158			25
Purchase of treasury stock		(237	)		−
Net cash provided by financing activities of continuing operations		194,923			57,099
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities		(6	)		(14	)
Financing activities		(5	)		−
Net cash used in discontinued operations		(11	)		(14	)
Increase (decrease) in cash		5,166			(17,754	)
Cash at beginning of period		14,624			37,622
Cash at end of period	$	19,790		$	19,868

The accompanying notes are an integral part of these statements

6

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(unaudited)

NOTE 1 – NATURE OF OPERATIONS

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

The consolidated financial statements and the information and tables contained in the notes thereto as of December 31, 2007 and for the three months ended December 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 present fairly 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, 2007 (“fiscal 2007”).  The results of operations for the three months ended December 31, 2007 may not necessarily be indicative of the results of operations for the full fiscal year ending September 30, 2008 (“fiscal 2008”).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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 14.9% interest.

When the Company obtains an explicit or implicit interest in an entity, the Company evaluates the entity to determine if the entity is a variable interest entity (“VIE”), and, if so, whether or not the Company is deemed to be the primary beneficiary of the VIE, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation 46, “Consolidation of Variable Interest Entities,” as revised (“FIN 46-R”).  Generally, the Company consolidates VIEs for which the Company is deemed to be the primary beneficiary or for non-VIEs which the Company controls.  The primary beneficiary of a VIE is the variable interest holder that absorbs the majority of the variability in the expected losses or the residual returns of the VIE.  When determining the primary beneficiary of a VIE, the Company considers its aggregate explicit and implicit variable interests as a single variable interest.  If the Company’s single variable interest absorbs the majority of the variability in the expected losses or the residual returns of the VIE, the Company is considered the primary beneficiary of the VIE.  The Company reconsiders its determination of whether an entity is a VIE and whether the Company is the primary beneficiary of such VIE if certain events occur.

7

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007

(unaudited)

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

Principles of Consolidation − (Continued)

In certain collateralized debt obligation (“CDO”) transactions sponsored by the Company, the Company provides credit support in the form of a first loss guarantee to the warehouse lender, which is typically an investment banking firm that provides the warehouse facility to a CDO issuer while the CDO issuer accumulates assets.  If the warehouse lender has to dispose of the assets it holds at a loss, the Company will reimburse the lender for its losses up to a specified amount.  Generally, the first loss amount ranges from 3% to 6% of the total assets accumulated in the warehouse facility during the accumulation phase.  The Company is often required to deposit an amount into an account held by the warehouse lender as assets are being accumulated.  The Company reflects these amounts as restricted cash on its consolidated balance sheets.  In these cases, the Company has generally determined the CDO issuer is a VIE, the first loss guarantee is a variable interest and that the Company is the primary beneficiary and required to consolidate the CDO issuer’s assets and liabilities which generally consist of leveraged and commercial loans and a warehouse facility.

When a sufficient amount of assets are accumulated, the CDO issuer repays the warehouse facility by issuing various layers of CDO securities to investors in a private offering, the Company’s first loss guarantee is terminated and the Company no longer consolidates the CDO issuer.  The Company generally serves as collateral asset manager of the CDO issuer and receives ongoing fees for this service until the expiration of the CDO issuer.

As of December 31, 2007, the Company consolidated three CDO issuers (Apidos CDO VI, Apidos CDO VII and Resource Europe II). Subsequent to December 31, 2007, the Company determined to end the warehouse agreements for Apidos CDO VII and Resource Europe II (see Note 12).  The underlying loans were sold in late January and early February 2008.  Accordingly, the Company reclassified these loans and recorded a loss on the reclassification in the quarter ended December 31, 2007.  The loss is included in other (expense) income in the consolidated statements of operations (see Note 18).  The assets and liabilities of those CDO issuers, which were included in the Company’s consolidated balance sheets at December 31, 2007 in accordance with FIN 46-R, will not be consolidated in subsequent periods as a result of the sale.  The restricted cash (see Note 5) securing the warehouse agreements was retained by the warehouse lender.  Additionally, the Company has no additional warehouse loss exposure under these facilities and is relieved of its commitments (see Note 19).

In December 2007, the Company purchased 100% of the outstanding preference shares of Apidos CDO VI for $21.3 million.  The equity interest is subordinated in right of payment to all other securities issued by Apidos CDO VI.  The Company was deemed to be the primary beneficiary and, therefore, has consolidated Apidos CDO VI in accordance with FIN 46-R.

Certain reclassifications have been made to the fiscal 2007 consolidated financial statements to conform to the fiscal 2008 presentation.

8

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

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

Allowance for Credit Losses

Loans held for investment are generally evaluated for impairment individually, but loans purchased on a pooled basis with relatively smaller balances and substantially similar characteristics may be evaluated collectively for impairment.  The Company considers a loan to be impaired when, based on current information and events, management believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  When a loan is impaired, the allowance for loan losses is increased by the amount of the excess of the amortized cost basis of the loan over its fair value.  Fair value may be determined based on market price, if available; the fair value of the collateral less estimated disposition costs; or the present value of estimated cash flows.  Increases in the allowance for credit losses are recognized in the statements of operations as a provision for credit losses.  When a loan, or a portion thereof, is considered uncollectible and pursuit of the collection is not warranted, then the Company will record a charge-off or write-down of the loan against the allowance for credit losses.  The Company periodically evaluates its loan portfolio, and in particular, any loans that are not current with respect to scheduled payments of principal and interest.  In reviewing its portfolio of loans held for investment and the observable secondary market prices, the Company determined that a reserve was needed at December 31, 2007 and recorded a provision for credit losses of $458,000.

For real estate loans included in investments in real estate in the consolidated balance sheets, the Company considers general and local economic conditions, neighborhood values, competitive overbuilding, casualty losses and other factors that may affect the value of loans and real estate.  The value of loans and real estate may also be affected by factors such as the cost of compliance with regulations and liability under applicable environmental laws, changes in interest rates and the availability of financing.  Income from a property will be reduced if a significant number of tenants are unable to pay rent or if available space cannot be rented on favorable terms.  In addition, the Company continually monitors collections and payments from its borrowers and maintains an allowance for estimated losses based upon its historical experience and its knowledge of specific borrower collection issues.  The Company reduces its investments in real estate loans and real estate by an allowance for amounts that may become unrealizable in the future.  Such allowance can be either specific to a particular loan or property or general to all loans and real estate.

An impaired loan may remain on accrual status during the period in which the Company is pursuing repayment of the loan; however, the loan would be placed on non-accrual status at such time as either (1) management believes that scheduled debt service payments will not be met within the coming 12 months; (2) the loan becomes 90 days delinquent; (3) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment; or (4) the net realizable value of the loan’s underlying collateral approximates the Company’s carrying value of such loan.  While on non-accrual status, the Company recognizes interest income only when an actual payment is received.  The Company recorded no provision on the real estate loans at December 31, 2007 or 2006.

The Company evaluates the adequacy of the allowance for credit losses in commercial finance, which includes investments in leases, notes and future payment card receivables, based upon, among other factors, management’s experience of portfolio default rates, subsequent collectability and economic conditions and trends.  The Company discontinues the recognition of revenue for leases and notes for which payments are more than 90 days past due.  Management has determined that an allowance for credit losses was needed at December 31, 2007 and 2006 and recorded a provision of $2.3 million and $45,000, respectively.

9

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

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

Allowance for Credit Losses − (Continued)

Generally, during the lease terms of existing operating leases, the Company will not recover all of the cost and related expenses of its rental equipment and, therefore, it is prepared to remarket the equipment in future years.  The Company’s policy is to review, on a continual basis, the expected economic life of its rental equipment in order to determine the recoverability of its undepreciated cost.  The Company writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds such value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment.  There were no writedowns of equipment during three months ended December 31, 2007 and 2006.

Recently Issued Financial Accounting Standards

In December 2007, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 110 (“SAB 110”).  SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin series.  Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of the expected term of “plain vanilla” share options and allows usage of the “simplified” method for share option grants prior to December 31, 2007.  SAB 110 allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue to use the “simplified” method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007.  The Company will continue to use the “simplified” method until it has enough historical experience to provide a reasonable estimate of expected term in accordance with SAB 110.

In December 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 141-R, “Business Combinations.”  SFAS 141-R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination.  It also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141-R will apply prospectively to business combinations for which the acquisition date is on or after the Company’s fiscal year beginning October 1, 2009.  While the Company has not yet evaluated the impact, if any, that SFAS 141-R will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements.”  This Statement amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  The Company has not yet determined the impact, if any, that SFAS 160 will have on its consolidated financial statements.  SFAS 160 is effective for the Company’s fiscal year beginning October 1, 2009.

10

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

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

Recently Issued Financial Accounting Standards − (Continued)

In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position (“SOP”) 07-1, “Clarification of the Scope of the Audit and Accounting Guide ‘Investment Companies’ and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.”  SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the “Guide”).  Additionally, it provides guidance as to whether a parent company or an equity method investor can apply the specialized industry accounting principles of the Guide (referred to as investment company accounting).  This SOP is effective for fiscal years beginning on or after December 15, 2007, with early application encouraged (for the Company, its fiscal year beginning October 1, 2008).  In October 2007, the FASB issued an exposure draft indefinitely deferring the effective date of this SOP.

In May 2007, the FASB issued Staff Position (“FSP”) FIN 46-R(7), “Application of FASB Interpretation 46-R to Investment Companies” (“FSP FIN 46-R(7)”).  FSP FIN 46-R(7) amends the scope of the exception to FIN 46-R to state that investments accounted for at fair value in accordance with investment company accounting are not subject to consolidation under FIN 46-R.  This interpretation is effective for fiscal years beginning on or after December 15, 2007 (for the Company, its fiscal year beginning October 1, 2008).  Certain of the Company’s consolidated subsidiaries currently apply investment company accounting.  The Company is currently evaluating the impact, if any; the adoption of this interpretation will have on its consolidated financial statements.

In February 2007, the FASB issued 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 (“SFAS 159”).  The fair value option established by SFAS 159 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 (for the Company, its fiscal year beginning October 1, 2008).  The Company is currently evaluating the expected effect, if any; SFAS 159 will have 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”).  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 (for the Company, its fiscal year beginning October 1, 2008).  In November 2007, the FASB announced that it would defer the effective date of SFAS 157 for one year for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis.  The Company is currently determining the effect, if any; the adoption of SFAS 157 will have on its consolidated financial statements.

11

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

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

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of periodic temporary investments of cash and restricted cash. The Company places its temporary cash investments and restricted cash in high quality short-term money market instruments with high-quality financial institutions and brokerage firms.  At December 31, 2007, the Company had $39.5 million (excluding restricted cash) in deposits at various banks, of which $36.4 million was over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such investments.

NOTE 3 − SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosure of cash flow information (in thousands):

	Three Months Ended December 31,
	2007			2006
Cash paid during the period for:
Interest	$	18,279		$	1,650
Income taxes	$	1,224		$	61
Non-cash activities include the following:
Transfer of loans held for investment (see Note 12):
Reduction of loans held for investment	$	194,207		$	−
Termination of associated warehouse credit facility	$	(194,207	)	$	−
Activity on secured warehouse facilities related to secured bank loans:
Purchase of loans	$	(51,524	)	$	(210,129	)
Proceeds from sale of loans	$	152,843		$	2,630
Principal payments on loans	$	7,366		$	6,143
Use of funds held in escrow for purchases of loans	$	(3,000	)	$	−
(Losses) gains on sale of loans	$	(29	)	$	2
(Repayments of) borrowings on associated secured warehouse credit facilities	$	(107,841	)	$	201,355
Acquisition of leasing assets of NetBank Business Finance (see Note 7):
Commercial finance assets acquired	$	412,541		$	−
Purchase of building and other assets	$	7,835		$	−
Debt incurred for acquisition	$	(391,176	)	$	−
Liabilities assumed	$	(21,178	)	$	−

12

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

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.

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

	Three Months Ended December 31,
	2007		2006
Shares
Basic shares outstanding		17,428		17,292
Dilutive effect of stock option and award plans (1)		−		1,830
Dilutive shares outstanding		17,428		19,122

(1) As of December 31, 2007, all outstanding options and other equity awards were antidilutive due to the loss for the quarter and therefore, were excluded from the computation of diluted EPS.  In addition, of the options outstanding at December 31, 2007, 993,007 were at exercise prices exceeding the average market price of the Company’s stock for the three months ended December 31, 2007.  The exercise prices on these options range from $15.91 to $27.84.  As of December 31, 2006, all outstanding options were dilutive.

NOTE 5 − RESTRICTED CASH

At December 31, 2007, the Company held $76.6 million of restricted cash, which was comprised of the following (in thousands):

	December 31, 2007			September 30, 2007
	(unaudited)
Escrow funds − financial fund management	$	51,906	(1)	$	12,282
Collection accounts – commercial finance		23,719	(2)		5,884
Other		988			1,174
	$	76,613		$	19,340

(1) At December 31, 2007, Apidos CDO VI held $37.1 million in trust.  In addition, the Company held $14.8 million in escrow as required by the warehouse agreements for Apidos CDO VII and Resource Europe II.  These funds were retained by the lenders due to the termination of these facilities (see Notes 6, 12, 18 and 19).

(2) The Company is required under the existing credit facilities for its commercial finance operations to maintain collection accounts.  The significant increase in borrowings under those facilities, principally to fund the acquisition of NetBank (see Notes 7 and 12), resulted in an increase in cash held in the collection accounts at December 31, 2007.

13

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 6 − LOANS

Loans Held for Investment

The following is a summary of the Company’s secured bank loans held for investment by CDO issuers that the Company consolidated in accordance with FIN 46-R (in thousands):

	December 31, 2007			September 30, 2007
Principal	$	199,020		$	284,906
Unamortized premium		314			1,160
Unamortized discount		(1,155	)		(138	)
		198,179			285,928
Allowance for credit losses		(458	)		−
Loans held for investment, net	$	197,721		$	285,928

In December 2007, the Company closed Apidos CDO VI, a $240.0 million securitization of corporate loans, and provided the equity of $21.3 million for this investment.  At December 31, 2007, the portfolio of loans consisted of floating rate loans at various London Inter-Bank Offered Rates (“LIBOR”) plus 1.38% to 9.50% with maturity dates ranging from March 2010 to June 2022.

At September 30, 2007, the portfolio consisted of floating rate loans at various LIBOR rates, including European LIBOR rates, plus 1.38% to 8.50%, with maturity dates ranging from March 2010 to June 2022.

There were no fixed rate loans as of December 31, 2007 or September 30, 2007.

Loans Sold, Not Traded

In connection with the substantial volatility and reduction in liquidity in global credit markets that commenced in July 2007, the Company decided to decrease its exposure to corporate bank loans, principally in Europe and to a lesser extent the United States.  As a result, the Company entered into trades to sell certain bank loans prior to September 30, 2007, not all of which had settled at that date.  The gross proceeds of these trades totaled $152.7 million.  As of December 31, 2007, $11.9 million in proceeds remained outstanding from these trades.  All remaining proceeds from these trades were received in January 2008.

Loans Held-for-Sale

As of December 31, 2007, the Company consolidated three CDO issuers (Apidos, CDO VI, Apidos CDO VII and Resource Europe II).  Subsequent to December 31, 2007, the Company determined to end the warehouse agreements for Apidos CDO VII and Resource Europe II (see Note 12).  The underlying loans were sold in late January and early February 2008.  As a result, the Company reclassified $112.6 million of loans held for investment that had secured these warehouse facilities to loans held-for-sale.  In connection with the reclassification, the Company recorded an $18.3 million charge to reduce these loans to fair value (see Note 18).  The assets and liabilities of those CDO issuers, which were included in our consolidated balance sheets at December 31, 2007 in accordance with FIN 46-R, will not be consolidated in subsequent periods as a result of the sale.  The restricted cash (see Note 5) securing the warehouse agreements was retained by the warehouse lender.  Additionally, the Company has no additional loss exposure and is relieved of its commitments (see Note 19).

14

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 7 – INVESTMENTS IN COMMERCIAL FINANCE

Portfolio Acquisitions

Dolphin Capital Corp.  On November 30, 2007, the Company acquired the net business assets of Dolphin Capital Corp., an equipment finance subsidiary of Lehman Brothers Bank, FSB.  The total purchase price of $170.5 million included a $169.0 million portfolio of small ticket leases which was acquired directly by an investment partnership sponsored and managed by LEAF.  The investment partnership financed this transaction with bank borrowings under an existing facility.

NetBank Business Finance.  On November 7, 2007, the Company acquired at a discount a portfolio of over 10,000 equipment leases and loans to small businesses, of NetBank Business Finance, a division of NetBank, from the Federal Deposit Insurance Corporation which held it in receivership, for $412.5 million.  Financing for this transaction was provided by borrowings under the Company’s existing warehouse credit facility and a new facility with Morgan Stanley Bank and Morgan Stanley Asset Funding Inc. (see Note 12).

The following table summarizes the allocation of the estimated fair value of the assets acquired and liabilities assumed at the date of the respective portfolio acquisitions (in thousands):

	NetBank			Dolphin Capital Corp.
Leases and notes	$	412,539		$	−
Property and equipment and other assets		6,168			1,667
Liabilities assumed		(21,176	)		−
Borrowings under debt facilities		(389,683	)		(1,493	)
Net cash paid for acquisitions	$	7,848		$	174

Commercial Finance Assets

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

	December 31,			September 30,
	2007			2007
Notes receivable	$	471,516		$	192,262
Direct financing leases, net		152,387			44,100
Future payment card receivables, net		23,686			6,899
Assets subject to operating leases, net of accumulated depreciation of $27 and $7		200			250
Allowance for credit losses		(1,395	)		(120	)
Investments in commercial finance, net	$	646,394		$	243,391

The interest rates on notes receivable generally range from 7% to 15%.

15

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 7 – INVESTMENTS IN COMMERCIAL FINANCE − (Continued)

Commercial Finance Assets − (Continued)

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

	December 31, 2007			September 30, 2007
Total future minimum lease payments receivables	$	178,501		$	50,196
Initial direct costs, net of amortization		781			658
Unguaranteed residuals		2,276			442
Unearned income		(29,171	)		(7,196	)
Investments in direct financing leases, net	$	152,387		$	44,100

The Company typically sells without recourse all of the leases and notes it acquires or originates to the investment entities it manages within two to three months after their acquisition or origination.  However, due to the significant volume of leases and loans acquired from NetBank ($383.0 million at December 31, 2007), these assets are not expected to be completely sold until April 2008.  In addition, the Company has accumulated a $130.0 million portfolio of leases and notes that are anticipated to be sold to a new investment entity it formed and will manage.  This new investment entity is currently in the offering stage.

Merit Capital Advance (“Merit”), an indirect subsidiary of the Company, provides capital advances to small businesses based on factoring their future credit card receipts.  The components of future payment card receivables are as follows (in thousands):

	December 31, 2007			September 30, 2007
Total future payment card receivables	$	28,111		$	8,135
Unearned income		(4,425	)		(1,236	)
Investments in future payment card receivables	$	23,686		$	6,899

The following table summarizes the activity in the allowance for credit losses (in thousands):

	LEAF			Merit			Total
Balance, October 1, 2007	$	−		$	120		$	120
Provision for credit losses		1,586			729			2,315
Charge-offs, net of recoveries		(616	)		(424	)		(1,040	)
Balance, December 31, 2007	$	970		$	425		$	1,395

16

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 8 – 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):

	December 31,						September 30,
	2007			2006			2007
Real estate loans:
Balance, beginning of period	$	27,765		$	28,739		$	28,739
New loans		−			−			1,597
Additions to existing loans		−			−			42
Collection of principal		(1,602	)		(281	)		(3,373	)
Other		165			47			760
Balance, end of period		26,328			28,505			27,765
Less: allowance for credit losses		(629	)		(770	)		(629	)
Net real estate loans		25,699			27,735			27,136
Real estate:
Ventures		9,863			9,421			9,769
Owned, net of accumulated depreciation of $2,223, $1,833, and $2,125		13,703			12,336			12,136
Total real estate		23,566			21,757			21,905
Investments in real estate	$	49,265		$	49,492		$	49,041

NOTE 9 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The Company’s investment securities available-for-sale are carried at fair market value based on market quotes.  Unrealized gains or losses, net of tax, are included in accumulated comprehensive loss 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) (see Note 17), in addition to investments in the CDO issuers it has sponsored and manages, as follows (in thousands):

	December 31,		September 30,
	2007		2007
RCC stock, including unrealized losses of $11,309 and $7,344	$	18,272	$	22,099
TBBK stock, including unrealized gains of $418 and $1,010		1,592		2,184
CDO securities, including net unrealized losses of $8,547 and $7,543		25,281		27,494
Investment securities available-for-sale	$	45,145	$	51,777

The Company held approximately 2.0 million shares of RCC at December 31, and September 30, 2007.  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 December 31, and September 30, 2007.

The Company held 118,290 shares of TBBK at December 31, and September 30, 2007.  Included in other assets at December 31 and September 30, 2007 are an additional 123,719 shares of TBBK as well as $1.1 million and $1.2 million, respectively, of other equity securities that are held in a supplemental employment retirement plan for the Company’s former Chief Executive Officer.

17

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 9 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE − (Continued)

Investments in CDO securities represent investments in the CDO issuers that the Company sponsored and manages.  Investments in 18 CDOs at December 31 and September 30, 2007 were held directly through the Company’s financial fund management entities and indirectly through the consolidation of two investment partnerships, the Structured Finance Funds (“SFF”) entities, that the Company manages as the general partner.  Interests owned by third parties of the SFF entities, reflected as minority interest holdings on the consolidated balance sheets, totaled $4.2 million and $3.6 million as of December 31 and September 30, 2007, respectively.  The investments held by the respective CDOs are sensitive to interest rate fluctuations, which accordingly impact their fair value.  Unrealized losses are generally caused by the effect of rising interest rates on those securities with stated interest rates that are below market.

Unrealized Losses

The following table discloses the pre-tax unrealized gains (losses) relating to the Company’s investments in CDO securities (in thousands):

	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
December 31, 2007	$	33,828	$	242	$	(8,789	)	$	25,281
December 31, 2006	$	31,282	$	157	$	(1,861	)	$	29,578

Unrealized losses as of December 31, 2007 and 2006, along with the related fair value and aggregated by the length of time the investments were in a continuous unrealized loss position, are as follows (in thousands):

	Estimated Fair Value		Less than 12 Months			Estimated Fair Value		More than 12 Months
December 31, 2007	$	16,194	$	(2,714	)	$	5,282	$	(6,075	)
December 31, 2006	$	15,896	$	(899	)	$	5,353	$	(962	)

Realized Losses

The global credit markets have been subject to substantial volatility and reduction in liquidity, principally as a result of conditions in the residential mortgage sector, particularly in the subprime sector.  In the first quarter of fiscal 2008, the Company recorded a $1.0 million charge for the other–than-temporary impairment of certain of its investments in CDOs, primarily those with investments in real estate asset-backed securities (“ABS”), including residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”), and trust preferred securities of a subprime lender and a subprime investor.  There were no impairment charges in the first fiscal quarter of 2007.

18

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 10 − INVESTMENTS IN UNCONSOLIDATED ENTITIES

As a specialized asset manager, the Company develops various types of investment vehicles 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 (in thousands, except percentages):

	December 31, 2007		September 30, 2007		Range of Combined Partnership Interests
Trapeza entities (1)	$	15,726	$	16,190		13%−50%
Financial fund management partnerships		7,582		7,185		5%−10%
Real estate investment partnerships		8,111		7,926		5%–11%
Commercial finance investment partnerships		2,002		2,109		1%−5%
Tenant-in-Common (“TIC”)  property interest (2)		1,503		3,367	N/A
Investments in unconsolidated entities	$	34,924	$	36,777

(1) Includes the Company’s 50% equity interest in one of the managers of the Trapeza CDO entities, Trapeza Capital Management, LLC (“TCM”).  The Company does not consolidate TCM since it does not have control over it.

(2) The Company held an interest in one TIC property.  Of the Company’s 49% ownership interest in the property, 13.8% and 32.9% remained available for sale to investors at December 31 and September 30, 2007, respectively.

Summarized operating data for TCM is presented below (in thousands):

	Three Months Ended
	December 31,
	2007			2006
Management fees	$	2,910		$	3,839
Operating expenses		(890	)		(824	)
Other expense		(67	)		(29	)
Net income	$	1,953		$	2,986

NOTE 11 − PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following (in thousands):

	Estimated Useful Lives		December 31, 2007			September 30, 2007
Land (1)		−	$	200		$	−
Building (1)	39 years			1,667			−
Leasehold improvements	1-15 years			5,539			4,420
Real estate assets − FIN 46-R	40 years			3,900			3,900
Furniture and equipment	3-10 years			10,178			9,438
				21,484			17,758
Accumulated depreciation and amortization				(6,242	)		(5,472	)
Property and equipment, net			$	15,242		$	12,286

(1) Reflects the value of the land and building located in Moberly, Missouri which the Company acquired from Dolphin Capital Corp. (see Notes 7 and 12 ).

19

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 12 – BORROWINGS

The credit facilities of the Company, as well as those of the financial fund management CDO issuers that the Company consolidates under FIN 46-R, and related borrowings outstanding are as follows:

	As of December 31, 2007					As of September 30, 2007
	Amount of Facility		Balance			Balance
	(in millions)		(in thousands)			(in thousands)
Financial fund management:
Secured warehouse credit facilities consolidated under FIN 46-R	$	300.0	$	54,018		$	50,626
		589.2		89,050			223,549
		−		−			165,364
CDO senior notes consolidated under FIN 46-R, net		218.0		212,950	(1)		−
Subtotal – Financial fund management	$	1,107.2		356,018			439,539
Commercial finance:
Secured revolving credit facilities	$	150.0		129,600			83,900
		250.0		128,098			137,637
Bridge loans
A Loan		333.4		321,658			−
B Loan		34.7		33,527			−
Subtotal – Commercial finance	$	768.1		612,883			221,537
Corporate:
Secured revolving credit facilities	$	75.0		56,600			29,600
		14.0		8,000			−
Subtotal – Corporate	$	89.0		64,600			29,600
Other debt				16,975			15,696
Total borrowings outstanding			$	1,050,476		$	706,372

(1) The senior notes are shown net of deferred issuance costs of $5.1 million.

20

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 12 – BORROWINGS − (Continued)

Financial fund management - Secured warehouse credit facilities

The Company is a party to various warehouse credit agreements for facilities which provide funding for the purchase of bank loans in the U.S. and Europe.  Borrowings under these facilities are consolidated by the Company in accordance with FIN 46-R while the assets accumulate prior to the completion of the CDO.  Upon the closing of the CDO, the facility is terminated and the interest is paid.  The following financial fund management facilities were in place at December 31, 2007:

· In July 2007, a $300.0 million facility was opened with affiliates of Morgan Stanley Bank (“Morgan Stanley”) with interest at LIBOR plus 75 basis points.  The Company determined to end this facility at its maturity date on January 16,2008.  The Company has recorded a loss as of December 31, 2007 from the subsequent sale and reclassification of the underlying loans in the portfolio (see Note 18).  The facility provides for a guarantee by the Company as well as an escrow deposit (see Notes 5 and 19).  The Company has no further exposure under this facility.  Average borrowings were $50.5 million at an average interest rate of 5.8% for the three months ended December 31, 2007.

· In January 2007, a EUR 400.0 million facility (approximately $589.2 million at December 31, 2007) was opened with Morgan Stanley with interest at European LIBOR plus 75 basis points.  The Company determined to end this facility at its maturity date on January 11, 2008.  The Company has recorded a loss as of December 31, 2007 from the subsequent sale and reclassification of these underlying loans (see Note 18).  The facility provides for a guarantee by the Company as well as an escrow deposit (see Notes 5 and 19).  The Company has no further exposure under this facility.  Average borrowings were $141.9 million at an average interest rate of 5.3% for the three months ended December 31, 2007.

· In connection with the closing of Apidos CDO VI, a $400.0 million facility opened in August 2006 with affiliates of Credit Suisse Securities (USA) LLC (“Credit Suisse”) was terminated in December 2007.  The interest rate was LIBOR plus 62.5 basis points.  Average borrowings for the three months ended December 31, 2007 were $144.1 million at an average interest rate of 5.7%.  Average borrowings for the three months ended December 31, 2006 were $81.4 million at an average interest rate of 6.0%.

Financial Fund Management – CDO senior notes

In December 2007, the Company closed Apidos CDO VI, which issued $218.0 million of its senior notes at par.  The investments held by Apidos CDO VI collateralize the debt it issued and, as a result, the investments are not available to the Company, its creditors or stockholders.  The senior notes issued consist of the following classes: (i) $181.5 million of class A-1 notes bearing interest at LIBOR plus 0.64%; (ii) $6.0 million of class A-2 notes bearing interest at LIBOR plus 1.25%; (iii) $13.0 million of class B notes bearing interest at LIBOR plus 2.25%; (iv) $8.0 million of class C notes bearing interest at LIBOR plus 4.00%; and (v) $9.5 million of class D notes bearing interest at LIBOR plus 6.75%.  All of the notes issued mature on December 13, 2019, although the note holders have the right to call the notes anytime after January 4, 2012 until maturity, or in the case of a refinancing, anytime after January 4, 2011.  The weighted average interest rate on all the notes was 5.94% at December 31, 2007.

21

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 12 – BORROWINGS − (Continued)

Commercial finance - Secured revolving credit facilities

In July 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 is charged at one of two rates: (i) LIBOR plus 1.5%, or (ii) the prime rate.  In September 2007, LEAF entered into an interest rate swap agreement in the amount of $75.0 million for this facility in order to mitigate fluctuations in LIBOR (see Note 14).  The swap agreement terminates in September 2009.  The underlying equipment being leased or financed collateralizes the borrowings.  Weighted average borrowings for the three months ended December 31, 2007 were $121.0 million at an effective interest rate of 6.4%.  Weighted average borrowings for the three months ended December 31, 2006 were $105.5 million at an effective interest rate of 7.3%.

In December 2006, LEAF assumed an unused $250.0 million line of credit with Morgan Stanley from RCC.  The facility is non-recourse to the Company.  The facility matures in October 2009.  However, any outstanding borrowings as of that date will continue to amortize until fully repaid at a higher rate of interest.  The underlying equipment being leased or financed collateralizes the borrowings.  Interest is charged at one of two rates based on the utilization of the facility:  (i) one-month LIBOR plus 60 basis points on borrowings up to $100.0 million and (ii) one-month LIBOR plus 75 basis points on borrowings in excess of $100.0 million.  Interest and principal payments are due monthly.  The Company utilizes interest rate swap agreements to mitigate fluctuations in LIBOR (see Note 14).  The swap agreements terminate at various dates ranging from November 2011 to November 2020.  Weighted average borrowings for the three months ended December 31, 2007 were $135.2 million at an effective interest rate of 5.8%.  Weighted average borrowings for the three months ended December 31, 2006 were $2.2 million at an effective interest rate of 7.3%.

In June 2007, LEAF entered into a $100.0 million short-term revolving credit facility opened with a commercial bank, which was terminated in October 2007.  Interest was charged at one of three rates:  (i) LIBOR plus 1.75%, (ii) one-month LIBOR divided by the sum of 1 minus the LIBOR reserve percent, plus 1.75%; and (iii) the higher of the lender’s base rate or the federal funds rate plus 50 basis points.  There were no borrowings on this facility in fiscal 2008.

Commercial finance – Bridge loans

In November 2007, an indirect subsidiary of LEAF obtained $368.1 million of bridge financing from Morgan Stanley to fund the NetBank acquisition. The financing agreement provides for two loans − a class A loan and a class B loan.  These loans are secured by the assets of the LEAF subsidiary.  The agreement terminates on November 1, 2008 unless extended at the discretion of the lender.  However, any outstanding borrowings as of that date will continue to amortize until fully repaid, at a higher rate of interest.  The Company has entered into an interest rate swap agreement to mitigate fluctuations in the interest rate on this facility (see Note 14).  The swap agreement matures in September 2011.

The class A loan ($333.4 million) has varying rates of interest as follows:  (i) from the closing date through August 7, 2008, the rate is the adjusted eurodollar rate (defined as the 30 day LIBOR rate) plus 2.00%; (ii) from August 8, 2008 through the termination date, the rate is the adjusted eurodollar rate plus 2.50%; and (iii) from and after the termination date or during any event of default, the adjusted eurodollar rate plus 3.00%.

The class B loan ($34.7 million) has varying rates of interest as follows:  (i) from the closing date through August 7, 2008, the rate is the adjusted eurodollar rate plus 10.00%; (ii) from August 8, 2008 through the termination date, the rate is the adjusted eurodollar rate plus 12.50%; and (iii) from and after the termination date or during any event of default, the adjusted eurodollar rate plus 15.00%.

Weighted average borrowings on these loans were $217.5 million at an effective interest rate of 7.5% for the three months ended December 31, 2007.

22

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 12 – BORROWINGS − (Continued)

Corporate – Secured revolving credit facilities

Commerce Bank, N.A.  In May 2007, the Company entered into a $75.0 million revolving credit facility with Commerce Bank, N.A. expiring on May 23, 2012 which replaced an existing $25.0 million facility.  Up to $7.5 million of borrowings may be in the form of standby letters of credit.  Borrowings are secured by a first priority security interest in certain assets of the Company and certain subsidiary guarantors, including (i) the present and future fees and investment income earned in connection with the management of, and investments in, sponsored CDOs, (ii) a pledge of 12,972 shares of TBBK, and (iii) the pledge of an aggregate of 1,261,579 shares of RCC.  Availability under the facility is limited to the lesser value of (a) 75% of the net present value of future management fees to be earned plus 70% of the market value of the listed stock pledged or (b) $75.0 million.  Borrowing base availability was limited to $50.0 million until July 17, 2007, when it was increased to $75.0 million with the addition of U.S. Bank, N.A. as a participating lender.

Borrowings bear interest at one of two rates at the Company’s election: (i) the prime rate plus 1%; or (ii) LIBOR plus 2.25%.  The Company is also required to pay an unused facility fee of 25 basis points per annum, payable quarterly in arrears.  Average borrowings for the three months ended December 31, 2007 were $40.7 million at an average rate of 8.34%.  As of December 31, 2007, availability on this line was limited to $16.4 million.  There were no outstanding borrowings on this facility in the first quarter of fiscal 2007.

Sovereign Bank.  The Company has a $14.0 million revolving line of credit with Sovereign Bank that expires in July 2009.  The facility is secured by certain real estate collateral and certain investment securities available-for-sale.  Availability, limited based on the value of the collateral, was $1.0 million as of December 31, 2007.

Interest is charged at one of two rates elected at the Company’s option: (i) LIBOR plus 2.0%, or (ii) the prime rate.  Weighted average borrowings for the three months ended December 31, 2007 were $1.3 million at an effective interest rate of 11.9%.  There were no outstanding borrowings on this facility in the first quarter of fiscal 2007.

Other debt − Mortgage loans

In June 2006, the Company obtained a $12.5 million first mortgage on a hotel property in Savannah, Georgia.  The mortgage is due on July 6, 2011, has a 7.1% fixed rate, and requires monthly payments of principal and interest of $84,220.  The principal balance as of December 31, 2007 was $12.4 million.

As of December 31, 2007, a VIE consolidated by the Company in accordance with FIN 46-R is the obligor under an outstanding first mortgage secured by real estate with an outstanding balance totaling $1.3 million.  The mortgage requires monthly payments of principal and interest at a fixed interest rate of 8.8% and matures in July 2014.  The mortgage is not a legal obligation of the Company; however, it is senior to the VIE’s obligation to the Company.  Mortgage payments are paid from the cash flows of the VIE.

In November 2007, in conjunction with the acquisition of the net business assets of Dolphin Capital Corp., the Company obtained a $1.5 million first mortgage on an office building in Moberly, Missouri.  The mortgage is due in December 2037, has an 8% fixed rate and requires monthly payments of principal and interest of $11,077 (see Note 7).

23

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 12 – BORROWINGS − (Continued)

Other debt − Notes

Secured Notes.  In June 2006, the Company borrowed $1.5 million from JP Morgan under a promissory note for the purchase of its equity investment in a CDO issuer the Company sponsored and manages.  The note requires quarterly payments of principal and interest at LIBOR plus 100 basis points (6.2% at December 31, 2007) and matures in July 2010.  The Company’s share of the equity distributions and its share of the collateral management fees from the CDO issuer collaterized the borrowings under the note.  The outstanding balance as of December 31, 2007 was $1.0 million.

At December 31, 2007, the Company also had an outstanding balance of $638,000 on a secured note with Sovereign Bank.  The note, secured by the furniture and computer equipment of the Company’s commercial finance business, requires monthly payments of principal and interestof $18,796 over five years at a fixed interest rate of 6.9%.

Debt repayments

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

2008	$	334,448	(1)
2009		164,301
2010		103,194
2011		284,017	(2)
2012		6,231
Thereafter		20,267
	$	912,458

(1) Excludes $143.1 million related to borrowings under financial fund management secured warehouse credit facilities which the Company terminated in January 2008 and which will be net settled with the proceeds from the sale of collateral.

(2) Includes the repayment of $218.0 million of senior notes for Apidos CDO VI which the Company consolidates under FIN 46-R.

Covenants

At December 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.

24

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 13 − COMPREHENSIVE (LOSS) INCOME

Comprehensive (loss) 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 (loss) income” and for the Company include changes in the fair value, net of taxes, of investment securities available-for-sale and hedging contracts.

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

	Three Months Ended December 31,
	2007			2006
Net (loss) income	$	(6,374	)	$	4,449
Other comprehensive (loss) income:
Unrealized (losses) gains on investment securities available-for-sale net of tax of $(3,100) and $2,292		(3,544	)		2,300
Less: reclassification for losses (gains) realized in net income, net of tax of $495 and $(579)		536			(768	)
		(3,008	)		1,532
Minimum pension liability adjustment, net of tax of $5 and $0		(5	)		−
Unrealized (losses) gains on hedging contracts, net of tax $(2,901) and $9		(3,172	)		13
Foreign currency translation gain		496			187
Comprehensive (loss) income	$	(12,063	)	$	6,181

The changes in accumulated other comprehensive (loss) income associated with cash flow hedge activities (see Note 14) were as follows (in thousands):

	Three Months Ended December 31,
	2007			2006
Balance at beginning of period	$	(732	)	$	−
Current period changes in fair value, net of tax of $(2,901) and $9		(2,440	)		13
Balance at end of period	$	(3,172	)	$	13

NOTE 14 – DERIVATIVE INSTRUMENTS

The Company’s hedging strategy is to use derivative financial instruments, including interest rate swaps, designated as cash flow hedges.  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.

Before entering into a derivative transaction for hedging purposes, the Company determines whether a high degree of initial effectiveness exists 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.

25

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 14 – DERIVATIVE INSTRUMENTS − (Continued)

At December 31, 2007, the notional amount of outstanding interest rate swaps was $546.0 million.  Assuming that market rates remain constant with the rates at December 31, 2007, $1.8 million of the net losses in accumulated other comprehensive loss would be recognized in earnings over the next 12 months.

NOTE 15 - INCOME TAXES

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

	Three Months Ended  December 31,
	2007			2006
(Benefit) provision for income taxes, at estimated effective rates	$	(5,873	)	$	2,872
Net decrease in valuation allowance		−			(662	)
(Benefit) provision for income taxes	$	(5,873	)	$	2,210

The tax rates used to determine deferred tax assets or liabilities are the enacted tax rates in effect for the year in which the differences are expected to reverse.  The future realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  The Company continually evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing forecasted taxable income using both historical and projected future operating results, the reversal of existing temporary differences, taxable income in prior carryback years (if permitted) and the availability of tax planning strategies.  A valuation allowance is required to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset.

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainties in Income Taxes - an Interpretation of SFAS 109,”  which provides guidance on the measurement and recognition and disclosure of tax positions taken or expected to be taken in a tax return.  The Interpretation also provides guidance on derecognition and classification.  FIN 48 prescribes that a tax position should only be recognized if it is more likely than not that the position will be sustained upon examination by the appropriate taxing authority.  A tax position that meets this threshold is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.  The cumulative effect of applying the provisions of FIN 48 is to be reported as an adjustment to the beginning balance of retained earnings in the period of adoption.  Effective October 1, 2007, the Company adopted the provisions of FIN 48, which did not have an impact on its consolidated balance sheets on date of adoption nor as of December 31, 2007.  In addition, the Company does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.

The Company is subject to examination by the U.S. Internal Revenue Service (“IRS”) and other taxing authorities in certain states in which the Company has significant business operations, such as Pennsylvania and New York.  The IRS is currently examining the Company's 2005 tax year.  The Company anticipates that the 2005 examination will be concluded in the current fiscal year and has recorded a liability and corresponding deferred tax asset for what the Company's believes to be the proposed examination adjustments based upon the results from its 2004 IRS examination.  The Company is no longer subject to U.S. federal income tax examinations for fiscal years before 2004 and is no longer subject to state and local income tax examinations by tax authorities for fiscal years before 2001.

26

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 15 - INCOME TAXES − (Continued)

The Company is also required under FIN 48 to disclose its accounting policy for classifying interest and penalties, the amount of interest and penalties charged to expense each period as well as the cumulative amounts recorded in the consolidated balance sheets.  The Company will continue to classify any tax penalties as other operating expenses and any interest as interest expense.

NOTE 16 − STOCK−BASED COMPENSATION

Employee Stock Options

The Company’s employee stock plans allow for grants of the Company’s common stock in the form of incentive stock options (“ISOs”), non-qualified stock options, and stock appreciation rights.  Under the 2005 employee stock plan, the Company may also grant restricted stock, stock units, performance shares, stock awards, dividend equivalents and other stock-based awards.

During the three months ended December 31, 2007, the Company granted 10,000 employee stock options.  No grants were made in the first quarter of fiscal 2007.  There was no tax benefit recorded at the grant date since the options issued were ISOs and employees have typically held the stock received on exercise for the requisite holding period.

The calculation of the fair value of options granted was made using the Black-Scholes option pricing model with the following weighted average assumptions:

	Three Months Ended December 31, 2007
Fair value of stock option granted	$	3.56
Expected life (years)		6.25
Expected stock volatility		28.9%
Risk-free interest rate		4.8%
Dividend yield		1.7%

As of December 31, 2007, there was a total of $1.6 million of unrecognized compensation cost related to nonvested stock options.  This cost is expected to be recognized over a weighted-average period of 1.1 years.  The Company recorded option compensation expense during the three months ended December 31, 2007 and 2006 of $250,000 and $217,000, respectively.

Restricted Stock

During the quarter ended December 31, 2007, the Company issued 107,969 shares of restricted stock valued at $1.8 million, which vest primarily over 39 months.  During fiscal 2007, the Company issued 137,446 shares of restricted stock valued at $3.5 million, which primarily vest 25% in January 2008 and 6.25% on a quarterly basis thereafter through January 2011.  In fiscal 2006, the Company issued 84,580 shares of restricted stock valued at $1.5 million, which primarily vest 25% per year commencing in January 2007.  For the three months ended December 31, 2007 and 2006, the Company recorded compensation expense related to these restricted stock awards of $515,000 and $90,000, respectively.

27

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 16 – STOCK-BASED COMPENSATION − (Continued)

Restricted Stock − (Continued)

During fiscal 2007, LEAF issued 135,000 shares of its restricted stock valued at $39,000, which vest 25% per year commencing April 2008.  During fiscal 2006, LEAF issued 300,000 shares of its restricted stock valued at $69,000, which vest at 50% per year commencing in February 2007.  In March 2007, a majority-owned subsidiary of LEAF issued 8% of its units valued at $53,000.  The Company recorded compensation expense related to these awards of $6,000 and $12,000 for the three months ended December 31, 2007 and 2006, respectively.

Performance–Based Awards

During the quarter ended December 31, 2007, the Company granted 99,000 shares of restricted stock that will vest based on the achievement of certain performance goals.  No expense was recorded relative to these units.

Aggregate information regarding the Company’s employee stock options as of December 31, 2007 is as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
Stock Options Outstanding	Shares			Price		Term (in years)		Value
Balance – beginning of year		3,316,761		$	8.49
Granted		10,000		$	16.49
Exercised		(23,125	)	$	6.84
Forfeited		(1,000	)	$	17.26
Balance - end of period		3,302,636		$	8.53		4.5	$	22,554,077
Exercisable - end of period		2,995,267		$	7.55
Available for grant		883,011	(1)

(1) Reduced for other equity shares awards that have been granted under the 2005 employee stock plan.

28

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 16 – STOCK-BASED COMPENSATION − (Continued)

The following table summarizes the activity for nonvested employee stock options and restricted stock during the three months ended December 31, 2007:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Nonvested Stock Options
Outstanding − beginning of year		297,870		$	7.70
Granted		10,000		$	5.87
Vested		−		$	−
Forfeited		(500	)	$	6.75
Outstanding – end of period		307,370		$	7.57
Nonvested Restricted Stock
Outstanding − beginning of year		199,708		$	22.50
Granted		107,969		$	16.30
Vested		−		$	−
Forfeited		(961	)	$	25.99
Outstanding – end of period		306,716		$	20.66

NOTE 17 - 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):

	December 31,		September 30,
	2007		2007
Receivables from managed entities and related parties:
Commercial finance investment partnerships	$	7,544	$	9,229
Financial fund management entities		4,788		5,341
Real estate investment partnerships and TIC property interests		4,868		3,439
RCC		3,199		2,034
Other		79		134
Receivables from managed entities and related parties, net	$	20,478	$	20,177
Payables due to managed entities and related parties:
Real estate investment partnerships and TIC property interests	$	2,361	$	1,163
TBBK		200		−
Payables to managed entities	$	2,561	$	1,163

29

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 17 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

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

	Three Months Ended
	December 31,
	2007			2006
Financial Fund Management - fees from managed entities	$	2,827		$	2,611
Real Estate - fees from investment partnerships and TIC property interests		2,222			2,338
Commercial finance - fees from investment partnerships		8,503			2,128
RCC:
Management, incentive and servicing fees		2,776			2,828
Reimbursement of expenses from RCC		93			264
Dividends received		804			823
Atlas America − reimbursement of net costs and expenses		155			196
Anthem Securities:
Payment of operating expenses		−			(198	)
Reimbursement of costs and expenses		−			201
1845 Walnut Associates Ltd - payment of rent and operating expenses		(120	)		(159	)
9 Henmar LLC - payment of broker/consulting fees		(167	)		(158	)
Ledgewood P.C. – payment of legal services		(160	)		(57	)

Relationship with The Bancorp, Inc.  Daniel G. Cohen (“D. Cohen”) is chairman of the board and Betsy Z. Cohen (“B. Cohen”) is the CEO of TBBK and its subsidiary bank.  D. Cohen is the son of Edward E. Cohen (“E. Cohen,” the Company’s Chairman of the Board) and the brother of Jonathan Z. Cohen (“J. Cohen,” the Company’s CEO and President) and B. Cohen is the wife of E. Cohen and mother of J. Cohen and D. Cohen.  During the three months ended December 31, 2006, the Company sold 80,000 of its shares of TBBK stock for $2.0 million and realized gains of $1.3 million.  On June 15, 2007, Merit (a subsidiary of LEAF) entered into an agreement with TBBK under which TBBK provides banking and operational services to Merit.  For the three months ended December 31, 2007, $14,000 in fees had been paid to TBBK.  In addition, the Company has accrued a fee of $200,000 due to TBBK for advisory services related to the acquisition of NetBank.  At December 31, 2007, the Company had $2.2 million in cash on deposit at TBBK.

Transactions between LEAF and RCC.  LEAF originates and manages commercial finance assets on behalf of RCC.  The leases and notes are sold to RCC at book value plus an origination fee not to exceed 1%.  LEAF sold $22.7 million and $9.6 million of leases and notes to RCC during three months ended December 31, 2007 and 2006, respectively.  In addition, from time to time LEAF repurchases leases and loans from RCC as an accommodation under certain circumstances, which include the consolidation of multiple customer accounts, originations of new leases when equipment is upgraded and to facilitate the timely resolution of problem accounts when collection is considered likely.  LEAF purchased $3.3 million and $7.3 million during the three months ended December 31, 2007 and 2006, respectively, of leases from RCC at a price equal to their book value.

30

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 17 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

Transactions between LEAF and its Investment Partnerships.  LEAF originates and manages commercial finance assets on behalf of its investment partnerships (the “LEAF Funds”) for which it also is the general partner.  The leases and notes are sold to the LEAF Funds at book value plus an originations fee not to exceed 2%.  LEAF sold $282.1 million and $55.2 million of leases and notes to the LEAF Funds during the three months ended December 31, 2007 and 2006, respectively.  In addition, from time to time LEAF repurchases leases and loans from the LEAF Funds as an accommodation under certain circumstances, which include the consolidation of multiple customer accounts, originations of new leases when equipment is upgraded and to facilitate the timely resolution of problem accounts when collection is considered likely.  LEAF purchased $1.4 million of leases and notes back from the LEAF Funds at a price equal to their book value for each of the three months ended December 31, 2007 and 2006.

NOTE 18 − OTHER (EXPENSE) INCOME, NET

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

	Three Months Ended
	December 31,
	2007			2006
Other expense:
Loss on loans held-for-sale	$	(18,332	)	$	−
Impairment charge on CDO investments		(1,017	)		−
		(19,349	)		−
Other income:
RCC dividend income		804			823
Gain on sale of TBBK shares		−			1,347
Interest income and other income, net		177			358
		981			2,528
Other (expense) income, net	$	(18,368	)	$	2,528

In connection with the substantial volatility and reduction in liquidity in the global credit markets which commenced in July 2007, the Company recorded the following charges during the three months ended December 31, 2007:

· an $18.3 million net loss from the reclassification of corporate loans held for investment to loans held-for-sale due to the termination of the related warehouse facilities in January 2008; and

· a $1.0 million charge reflecting the other-than-temporary impairment of certain of the Company’s investments in CDOs, primarily those with investments in real estate ABS and CMBS, and trust preferred securities of a residential mortgage lender and a subprime investor.

NOTE 19 - COMMITMENTS AND CONTINGENCIES

The Company entered into a master lease agreement with one of the TIC programs it sponsored and manages.  This agreement requires that the Company fund up to $1.0 million for capital improvements for the TIC property over the next 19 years.

31

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 19 - COMMITMENTS AND CONTINGENCIES − (Continued)

Senior lien financing obtained with respect to certain acquired properties, TIC investment programs and real estate loans are obtained on a non-recourse basis, with the lender’s remedies limited to the properties securing the senior lien financing.  Although non-recourse in nature, these loans are subject to limited standard exceptions, which the Company has guaranteed (“carveouts”).  These carveouts relate to a total of $576.0 million in financing and 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 in two CDOs secured by trust preferred securities which are currently in their warehouse stage.  The estimated equity commitments, approximately $3.5 million in the aggregate as of December 31, 2007, are contingent upon the successful completion of the respective CDOs, which is uncertain due to current market conditions.  The amount of equity the Company actually purchases may differ from the originally estimated commitment.

The warehouse agreements with Morgan Stanley for Resource Europe II and Apidos CDO VII provide for guarantees by the Company of potential losses on a portfolio of bank loans.  These guarantees, which totaled $18.8 million at December 31, 2007, were eliminated upon the termination of the warehouse agreements and the sale of the underlying loans in late January and early February 2008 (see Notes 5, 6, 12 and 18).

As a specialized asset manager, the Company sponsors investment funds in which it may make an equity investment along with outside investors.  This equity investment is generally based on a percentage of funds raised and varies among investment programs.

The Company is party to employment agreements with certain executives that provide for compensation and certain other benefits.  The agreements also provide for severance payments under certain circumstances.

The Company is 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.

As of December 31, 2007, the Company does not believe it is probable that any payments will be required under any of its indemnifications and, accordingly, no liabilities for these obligations have been recorded in the consolidated financial statements.

32

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 20 - 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.  Summarized operating segment data are as follows (in thousands):

	Commercial finance			Real estate			Financial fund management			All other (1)			Total
Three Months Ended December 31, 2007
Revenues from external customers	$	28,002		$	6,677		$	12,441		$	−		$	47,120
Equity in (losses) earnings of unconsolidated entities		(37	)		(205	)		3,851			−			3,609
Total revenues		27,965			6,472			16,292			−			50,729
Segment operating expenses		(9,551	)		(5,466	)		(6,614	)		−			(21,631	)
Depreciation and amortization		(468	)		(185	)		(81	)		(232	)		(966	)
Interest expense		(8,220	)		(260	)		(5,232	)		(965	)		(14,677	)
Provision for credit losses		(2,315	)		−			(458	)		−			(2,773	)
Other income (expense), net		53			95			(19,397	)		(2,577	)		(21,826	)
Minority interests		(655	)		−			(436	)		−			(1,091	)
Income (loss) before intercompany interest expense and income taxes		6,809			656			(15,926	)		(3,774	)		(12,235	)
Intercompany interest expense		(1,527	)		−			−			1,527			−
Income (loss) from continuing operations before income taxes	$	5,282		$	656		$	(15,926	)	$	(2,247	)	$	(12,235	)
Three Months Ended December 31, 2006
Revenues from external customers	$	7,095		$	4,732		$	8,232		$	−		$	20,059
Equity in (losses) earnings of unconsolidated entities		(6	)		(168	)		4,155			−			3,981
Total revenues		7,089			4,564			12,387			−			24,040
Segment operating expenses		(3,631	)		(3,013	)		(4,552	)		−			(11,196	)
Depreciation and amortization		(327	)		(169	)		(14	)		(199	)		(709	)
Interest expense		(2,013	)		(261	)		(2,275	)		(42	)		(4,591	)
Provision for credit losses		(45	)		−			−			−			(45	)
Other (expense) income, net		(42	)		43			(241	)		(21	)		(261	)
Minority interests		(58	)		−			(502	)		−			(560	)
Income (loss) before intercompany interest expense and income taxes		973			1,164			4,803			(262	)		6,678
Intercompany interest expense		(506	)		−			(1,422	)		1,928			−
Income from continuing operations before income taxes	$	467		$	1,164		$	3,381		$	1,666		$	6,678

33

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

December 31, 2007

(unaudited)

NOTE 20 - OPERATING SEGMENTS − (Continued)

	Commercial finance		Real estate		Financial fund management		All other (1)			Total
Segment assets
December 31, 2007	$	721,214	$	146,335	$	470,573	$	(14,659	)	$	1,323,463
December 31, 2006	$	192,668	$	145,074	$	396,866	$	(30,787	)	$	703,821

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

Geographic Information.  Revenues generated from the Company’s European operations totaled $3.2 million and $1.5 million for the three months ended December 31, 2007 and 2006, respectively.  Included in segment assets as of December 31, 2007 and 2006 were $106.4 million and $130.9 million, respectively, of European assets, primarily loans held for sale and investment.

Major Customer.  In December 31, 2007 and 2006, the management and acquisition fees that the Company received from RCC were $2.8 million and $2.8 million, respectively, or 5.5% and 11.8%, respectively, of its consolidated revenues.  These fees have been reported as revenues by each of the Company’s operating segments.

34

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 the period ended September 30, 2007.  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 Months Ended December 31, 2007 and 2006

 We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities in the commercial finance, real estate and financial fund management sectors.  As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services.  We typically maintain an investment in the investment vehicles we sponsor.  As of December 31, 2007, we managed $17.9 billion of assets.

           We limit our services to asset classes in which we have specific expertise.  We believe this strategy enhances the return on investment we can achieve.  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.  In our real estate operations, we concentrate on investments in distressed real estate loans, ownership operation and management of multi-family and commercial real estate, and originating or purchasing real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans (known as A notes) and, to a lesser extent, subordinated interests in first mortgage loans, known as B notes, and mezzanine loans.  In our financial fund management operations, we concentrate on trust preferred securities of banks, bank holding companies, insurance companies and other financial companies, bank loans and asset-backed securities.

We have continued to develop our existing operations with the sponsorship of new investment funds and have expanded the distribution of our products through a large broker/dealer/financial planner network that we have developed.  Additionally, we have undertaken several initiatives to further expand the scope of our asset management operations, in particular through the sponsorship of RAI Acquisition Corp., a specialty purpose acquisition corporation formed for the purpose of acquiring one or more businesses.

During the later half of 2007 and continuing in 2008, credit markets in the United States and throughout much of the rest of the world have been extremely volatile and challenging.  We believe that such credit market conditions have created opportunities for us, principally in our commercial finance and real estate businesses, as demonstrated by the four acquisitions we have made since June 30, 2007 totaling $940.2 million.

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Due to the current status of global credit markets, we continue to believe that the CDO markets will slow substantially in 2008, limiting our ability to generate additional assets under management through this channel.  Our CDO vehicles have been significantly affected by these conditions and, in particular, have been impacted by continued credit market turbulence and reduction in global liquidity.  Specifically, two secured warehouse credit facilities which we consolidated under FIN 46-R have been impacted.  We determined to end these facilities on their expiration dates of January 11 and January 16, 2008, respectively.  We had provided limited guarantees totaling $18.8 million under these facilities which were supported by escrow deposits of $14.8 million.  The expiration of these facilities necessitated the sale of the loans securing them in late January and early February 2008 which resulted in the reclassification and caused a $10.2 million charge, net of tax, to be recorded in the quarter ended December 31, 2007 and triggered our guarantee.  As a result, our escrow deposits have been retained by the warehouse lenders and we will be required to pay an additional $4.6 million to cover our guarantee in February 2008.  As of February 2008, we have no further commitments under these credit facilities.  In addition to the $10.2 million charge, net of tax, our loans held-for-sale, our assets under management, our borrowings and our restricted cash will decrease by $112.6 million, $134.4 million, $143.1 million and $14.8 million, respectively.

Assets Under Management

We increased our assets under management by $4.3 billion to $17.9 billion at December 31, 2007 from $13.6 billion at December 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, RCC and us, 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.

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

	As of December 31,				Increase
	2007		2006		Amount		Percentage
Financial fund management	$	14,556	$	11,775	$	2,781		24%
Real estate		1,644		1,159		485		42%
Commercial finance		1,699		682		1,017		149%
	$	17,899	$	13,616	$	4,283		31%

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		TIC Property Interests		Other Investment Funds
As of December 31, 2007(a)
Financial fund management		31		12		−		−
Real estate		2		6		7		2
Commercial finance		−		3		−		1
		33		21		7		3
As of December 31, 2006(a)
Financial fund management		22		11		−		−
Real estate		1		5		6		−
Commercial finance		−		2		−		1
		23		18		6		1

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

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As of December 31, 2007 and 2006, we managed $17.9 billion and $13.6 billion of assets, respectively, for the accounts of institutional and individual investors and RCC, a REIT we sponsored and manage for our own account and on warehouse facilities in the following asset classes (in millions):

	As of December 31, 2007										As of December 31, 2006
	Institutional and Individual Investors		RCC		Company		Assets Held on Warehouse Facilities		Total		Total
Trust preferred securities (1) (4)	$	5,101	$	−	$	−	$	90	$	5,191	$	4,328
Bank loans (1) (5)		1,855		931		198		134		3,118		2,509
Asset-backed securities(1)		5,752		395		−		−		6,147		4,860
Real properties (2)		535		−		−		−		535		403
Mortgage and other real estate-related loans (2)		−		929		180		−		1,109		756
Commercial finance assets (3)		958		95		646		−		1,699		682
Private equity and hedge fund assets (1)		100		−		−		−		100		78
	$	14,301	$	2,350	$	1,024	$	224	$	17,899	$	13,616

(1) We value these assets at their amortized cost.

(2) We value our managed real estate assets as the sum of: the amortized cost of our commercial real estate loans; the book value of real estate and other assets held by our real estate investment partnerships and tenant-in-common, or TIC, property interests; the amount of our outstanding legacy loan portfolio; and the book value of our interests in real estate.

(3) We value our commercial finance assets as the sum of the book value of the equipment and notes and future receivable advances financed by us.

(4) The trust preferred securities are being held on warehouse facilities which is without recourse to us.

(5) The bank loans were being held on two separate warehouse facilities which were consolidated on our balance sheets at December 31, 2007 and for which we have a guarantor liability of $18.8 million in the aggregate.  We terminated the related warehouse facilities in January 2008 and the bank loans were sold in late January and early February 2008.  We have no further exposure under these warehouse facilities.

Employees

As of December 31, 2007, we employed 719 full-time workers, an increase of 482, or 203%, from 237 employees at December 31, 2006.  The following table summarizes our employees by operating segment:

	Total		Financial Fund Management		Real Estate		Commercial Finance		Corporate/ Other
December 31, 2007
Investment professionals		208		44		29		133		2
Other		511		18		183 (1)		270		40
Total		719		62		212		403 (2)		42
December 31, 2006
Investment professionals		82		34		23		24		1
Other		155		20		9		95		31
Total		237		54		32		119		32

(1) Includes 167 employees related to our new property management company.

(2) Reflects the additional employees hired in connection with the acquisition of NetBank and Dolphin Capital Corp.

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Revenues

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

	Three Months Ended
	December 31,
	2007		2006
Fund management revenues (1)	$	20,913	$	12,820
Finance and rental revenues (2)		25,412		7,595
RCC management fees		2,371		1,706
Net gain from TIC property interests (3)		171		91
Other (4)		1,862		1,828
	$	50,729	$	24,040

(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 and real estate operations.

(2) Includes interest income on bank loans from our financial fund management operations, 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) Reflects net gains recognized by our real estate segment on the sale of TIC interests to outside investors.

(4) Includes the equity compensation 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.

We provide a more detailed discussion of the revenues generated by each of our business segments under “ − Results of Operations:  Commercial Finance”, “ −Results of Operations:  Real Estate” and “ − Results of Operations:  Financial Fund Management.”

Results of Operations: Commercial Finance

During the three months ended December 31, 2007, our commercial finance operations increased assets under management to $1.7 billion as compared to $681.6 million at December 31, 2006, an increase of $1.0 billion (149%).  Originations of new equipment financing for the three months ended December 31, 2007 increased by $601.0 million (466%) to $730.1 million from $129.1 million for the three months ended December 31, 2006.  Our growth was driven by our recent acquisitions of the net business assets of Dolphin Capital Corp, the acquisition of the $412.5 million NetBank Business Finance leasing portfolio from the Federal Deposit Insurance Corporation, or FDIC, our continued growth in new and existing vendor programs, the introduction of new commercial finance products and the expansion of our sales staff.  As of December 31, 2007, we managed approximately 89,300 leases and notes that had an average original finance value of $24,000 with an average term of 49 months.

The November 2007 acquisition of Dolphin Capital Corp., an equipment finance subsidiary of Lehman Brothers Bank, significantly expanded our commercial finance operations origination capability and assets under management.  The total purchase price of $170.5 million included a $169.0 million portfolio of small ticket leases acquired directly by LEAF Equipment Leasing Income Fund III, L.P., or LEAF III.  In addition, we retained Dolphin Capital Corp.’s team of 70 highly experienced personnel, including senior management, origination and operations.

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In November 2007, we also acquired a $412.5 million portfolio, at a discount, comprised of over 10,000 leases and small business loans originated by NetBank Business Finance, the equipment leasing division of NetBank which was being operated in receivership by the FDIC.  In addition, we hired approximately 70 of the former NetBank Business Finance employees in Columbia, South Carolina.  These employees have further expanded our third party funding business unit which we established with our June 2007 acquisition of the leasing division of Pacific Capital Bank.  Financing for this acquisition was provided principally by Morgan Stanley Bank.  We intend to sell the NetBank portfolio to our investment partnerships by April 2008.  Until then, we expect to carry the leases and loans and related debt on our consolidated balance sheets, thereby increasing our investment in commercial finance assets, borrowings, finance revenues, interest expense and provision for credit losses.

During the three months ended December 31, 2007, we earned acquisition fees on $304.8 million in commercial financing assets acquired for our investment entities as compared to $88.0 million for the three months ended December 31, 2006, an increase of $216.8 million (246%).

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

	As of December 31,
	2007		2006
LEAF Financial	$	623	$	172
Merit Capital Advance		23		−
LEAF I		102		90
LEAF II		343		321
LEAF III		502		−
RCC		95		89
Merrill Lynch		11		10
	$	1,699	$	682

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
	December 31,
	2007		2006
Revenues: (1)
Finance revenues − LEAF	$	14,259	$	2,938
Finance revenues − Merit		2,168		−
Acquisition fees		5,704		1,006
Fund management fees		3,997		2,458
Other		1,837		687
	$	27,965	$	7,089
Cost and expenses:
LEAF costs and expenses	$	8,160	$	3,631
Merit costs and expenses		1,391		−
	$	9,551	$	3,631

(1) Total revenues include RCC servicing and originations fees of $426,000 and $348,000 for the three months ended December 31, 2007 and 2006, respectively.

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Revenues in our commercial finance operations increased $20.9 million (295%) to $28.0 million in the three months ended December 31, 2007 as compared to the three months ended December 31, 2006.  We attribute this increase primarily to the following:

· an $11.3 million increase in commercial finance revenues primarily as a result of the NetBank assets acquired from the FDIC and the growth in lease originations.  We intend to sell the NetBank portfolio to our investment partnerships by April 2008.  The sale is predicated on LEAF III raising sufficient capital to acquire this portfolio and assuming our existing Morgan Stanley debt.  Upon the sale, our finance revenues and interest expense will decrease significantly; however, we will earn asset acquisition fees at the time of sale in addition to ongoing fund asset management fees;

· Merit, which began operations in March 2007, generated revenue of $2.2 million for three months ended December 31, 2007;

· a $4.7 million (467%) increase in asset acquisition fees resulting from the increase in leases sold.  Sales of leases increased by $216.8 million to $304.8 million for the three months ended December 31, 2007, principally related to Dolphin Capital Corp. leases and notes acquired by LEAF III in November 2007;

· a $1.5 million (63%) increase in fund management fees resulting from the $1.0 billion increase in assets under management; and

· a $1.2 million (167%) increase in other income, primarily reflecting net gains on equipment finance dispositions, which vary widely from period to period.

Costs and Expenses − Three Months Ended December 31, 2007 as Compared to the

Three Months Ended December 31, 2006

Costs and expenses from our commercial finance operations increased $5.9 million (163%) to $9.6 million in the three months ended December 31, 2007 as compared to three months ended December 31, 2006.  We attribute this increase primarily to the following:

· an increase of $2.9 million in wages and benefit costs.  The number of full-time employees increased to 366 (208%) as of December 31, 2007 from 119 as of December 31, 2006 due to our recent acquisitions of Pacific Capital Bank, NetBank and Dolphin Capital Corp. and to support our expanded operations.  Wages and benefit costs will increase in future periods with the full quarter’s impact of the new employees;

· an increase of $1.6 million in operating expenses as a result of our increase in origination capabilities, primarily due to our recent acquisitions; and

· an increase of $1.4 million for Merit which began operations in March 2007, of which $600,000 was related to wages and benefits for 37 employees and $800,00 related to general and administrative expenses.

Results of Operations: Real Estate

In real estate, we manage four classes of assets:

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

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

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

· a portfolio of real estate loans, acquired at a discount from the U.S. Department of Housing and Urban Development, or HUD.

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	As of December 31,
	2007		2006
	(in millions)
Assets under management:
Commercial real estate debt	$	935	$	656
Real estate investment entities		534		403
Legacy portfolio		100		100
HUD portfolio		75		−
	$	1,644	$	1,159

During the three months ended December 31, 2007, our real estate operations were affected by four principal trends or events:

· the transition of property management from third party managers to our internal multi-family manager, Resource Residential, which commenced operations in October 2007;

· the continuing volatility and reduction in liquidity in global credit markets have decreased transactions and financings which affect our commercial real estate debt platform;

· an increased number of distressed real estate opportunities that are available to purchase; and

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

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 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.

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
	December 31,
	2007			2006
Revenues:
Fee income from sponsorship of partnerships and TIC property interests	$	1,299		$	1,783
REIT management fees from RCC		1,776			1,010
Rental property income and FIN 46-R revenues		1,986			1,220
Property management fees		881			395
Interest, including accreted loan discount		419			225
Equity in loss of unconsolidated entities		(60	)		(160	)
Net gains on sale of TIC property interests		171			91
	$	6,472		$	4,564
Costs and expenses:
General and administrative	$	4,263		$	2,253
FIN 46-R operating and rental property expenses		1,203			760
	$	5,466		$	3,013

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

Three Months Ended December 31, 2006

Revenues increased $1.9 million (42%) to $6.5 million for the three months ended December 31, 2007 from $4.6 million for the three months ended December 31, 2006.  We attribute the increase to the following:

· a $484,000 decrease in fee income due to the purchase of two properties worth $22.6 million for one of our investment partnerships during the three months ended December 31, 2007 as compared to the similar purchase of two larger properties worth $57.9 million during the three months ended December 31, 2006;

· a $766,000 increase in REIT management fees reflecting an increase of $279.0 million in the commercial real estate debt assets we managed to $935.0 million at December 31, 2007;

· a $766,000 increase in rental property income due to the inclusion of rental income of one TIC asset as a result of our master leasing a residential property from one of the TIC programs that we manage;

· a $486,000 increase in property management fees due to both an increase in the number of properties under management from 19 at December 31, 2006 to 27 at December 31, 2007, as well as the increase in fees related to properties now managed internally;

· a $194,000 increase in interest due to the resumption of accretion on one loan during the second quarter of the fiscal year ended September 30, 2007;

· a $100,000 decrease in equity loss of unconsolidated entities due to the reallocation of partnership income from a real estate venture; and

· an $80,000 increase in net gains on sale of TIC property interests due to the increased volume of TIC program activity.

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

Three Months Ended December 31, 2006

Costs and expenses increased by $2.5 million (81%) to $5.5 million for the three months ended December 31, 2007 as compared to $3.0 million for the three months ended December 31, 2006, primarily due to increased wages and benefits corresponding to our expanded real estate operations, principally our new property management company, Resource Residential, which resulted in a full quarter of costs, while revenues were transferred ratably over the quarter.  The increase in rental property expenses is due to the inclusion of operating expenses of one TIC asset as a result of our master leasing a residential property from one of the TIC programs that we manage.

Results of Operations:  Financial Fund Management

We conduct our financial fund management operations through five subsidiaries:

· 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.

· 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.

· 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.

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The following table sets forth information relating to assets managed by us on behalf of institutional and individual investors, RCC and ourselves (in millions):

	As of December 31, 2007
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total
Trapeza	$	5,101	$	−	$	90	$	5,191
Apidos		1,620		931		54		2,605
Ischus		5,752		395		−		6,147
Resource Europe		433		−		80		513
Other company-sponsored partnerships		100		−		−		100
	$	13,006	$	1,326	$	224	$	14,556

	As of December 31, 2006
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total
Trapeza	$	4,017	$	−	$	311	$	4,328
Apidos		1,067		614		583		2,264
Ischus		3,597		396		867		4,860
Resource Europe		−		−		245		245
Other company-sponsored partnerships		78		−		−		78
	$	8,759	$	1,010	$	2,006	$	11,775

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.  Certain of the management fees are senior and certain are subordinated to debt service payments on the CDOs.  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.

· 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.

Our financial fund management operations have depended upon our ability to sponsor CDO issuers and sell their CDOs.  As a result of recent conditions in the global credit markets, our ability to sponsor CDOs in the future may be limited.  As a consequence, while we expect that the existing CDO issuers we manage will continue to provide us with a stream of management fee revenues, we may be unable to increase those revenues during fiscal 2008 or they may decrease.  For risks applicable to our financial fund management operations, see our Annual Report on Form 10-K for the fiscal year ended September 30, 2007; Item 1A “Risk Factors – Risks Relating to Particular Aspects of our Financial Fund Management, Real Estate and Commercial Finance Operations.”

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Trapeza

We have co-sponsored, structured and currently co-manage 13 CDO issuers holding approximately $5.1 billion in trust preferred securities of banks, bank holding companies, insurance companies and other financial companies.  In addition, at December 31, 2007, we managed $89.5 million in trust preferred securities for two CDOs currently in their accumulation stage.  The closing of these CDOs is uncertain due to the current market conditions.

We own a 50% interest in an entity that manages 11 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.  We no longer receive subordinated management fees on one CDO issuer.

Apidos

We sponsored, structured and currently manage eight CDO issuers for institutional and individual investors, RCC and ourselves which hold approximately $2.6 billion in bank loans at December 31, 2007, of which $930.9 million are managed on behalf of RCC through three CDOs.

We derive revenues from our Apidos operations through base and incentive management fees ranging from 0.5% and 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 nine CDO issuers for institutional and individual investors and RCC which hold approximately $6.1 billion in primarily real estate ABS including RMBS, CMBS and credit default swaps, of which $394.7 million is managed on behalf of RCC.

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.  We no longer receive subordinated management fees on three CDO issuers.

Resource Europe

We sponsored, structured and currently manage one CDO issuer holding $432.3 million in European bank loans at December 31, 2007.

We derive revenues from our Resource Europe operations through base and incentive management fees of up to 0.60% 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 CDO.

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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 1/12th 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
	December 31,
	2007		2006
Revenues:
Fund management fees	$	6,447	$	4,908
Interest income on loans		6,580		3,212
Limited and general partner interests		1,390		1,479
Earnings on unconsolidated CDOs		813		445
Earnings of Structured Finance Fund partnerships		463		529
RCC management fees and equity compensation		434		1,470
Other		165		344
	$	16,292	$	12,387
Costs and expenses:
General and administrative expenses	$	6,493	$	3,878
Equity compensation expense		110		673
Expenses of Structured Finance Fund partnerships		11		1
	$	6,614	$	4,552

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 December 31, 2007 as Compared to the

Three Months Ended December 31, 2006

Revenues increased $3.9 million (32%) for the three months ended December 31, 2007.  We attribute the increase to the following:

· a $1.5 million increase in fund management fees, primarily from the following;

- a $2.4 million increase in collateral management fees principally as a result of the completion of seven new CDOs since December 31, 2006 coupled with a full quarter of collateral management fees from three previously completed CDOs; offset in part by

- a $909,000 decrease in portfolio management fees received in connection with the formation of Trapeza CDO XI during the three months ended December 31, 2006.  No such fee was received during the three months ended December 31, 2007.

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· a $3.4 million increase in interest income on loans held for investment, resulting primarily from the following:

- a $1.7 million increase from the consolidation in our financial statements of one Apidos CDO issuer and one Resource Europe CDO issuer during the three months ended December 31, 2007 as compared to one Apidos CDO issuer and one Resource Europe CDO issuer during the three months ended December 31, 2006 while they accumulated assets through separate warehouse facilities.  The weighted average loan balances of CDO issuers we consolidated through warehouse facilities in the three months ended December 31, 2007 and 2006 were $196.3 million and $99.9 million, respectively, at weighted average interest rates of 6.31% and 6.10%, respectively; and

- a $1.7 million increase from the consolidation in our financial statements of Apidos CDO VI during the three months ended December 31, 2007 as compared to the three months ended December 31, 2006 while it accumulated assets through a warehouse facility.  In December 2007, we closed Apidos CDO VI, repaid all borrowings under the warehouse facility and purchased 100% of the subordinated notes.  The weighted average loan balance of Apidos CDO VI in the three months ended December 31, 2007 and 2006 was $171.3 million and $81.4 million, respectively, at weighted average interest rates of 7.20% and 7.77%, respectively.

· an $89,000 decrease in revenues from our limited and general partner interests, primarily from the following:

- a $347,000 decrease from our share of the operating results of unconsolidated partnerships we have sponsored; offset in part by

- a $258,000 increase in net unrealized appreciation in the book value of the partnership securities and swap agreements to reflect current market value.

· a $368,000 increase in our earnings in unconsolidated CDOs as a result of a net increase in earnings from investments in fourteen previously sponsored CDO issuers;

· a $1.0 million decrease in RCC management fees and equity compensation, reflecting a $99,000 decrease in management fees and a $937,000 decrease in equity compensation; and

· a $179,000 decrease in other revenue, resulting primarily from the interest spread earned on loans and ABS assets accumulating on warehouse facilities with third parties based on the terms of warehousing agreements during the three months ended December 31, 2006.  No such spread was received during the three months ended December 31, 2007.

Costs and Expenses − Three Months Ended December 31, 2007 as Compared to the

Three Months Ended December 31, 2006

Costs and expenses of our financial fund management operations increased $2.1 million (45%) for the three months ended December 31, 2007 as compared to the three months ended December 31, 2006.  We attribute the increase to the following:

· a $2.6 million increase in general and administrative expenses, primarily from the following:

- a $1.3 million increase in wages and benefits as a result of additional personnel in response to growth in our assets under management;

- a $551,000 decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations, which vary depending on the terms of the transactions; and

- a $493,000 increase in professional fees primarily due to an increase in consulting fees related to our European operations.

· a $563,000 decrease in equity compensation expense related to the award of RCC restricted stock and options to members of management.

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

General and administrative costs were $3.5 million for the three months ended December 31, 2007, an increase of $669,000 (24%) as compared to $2.8 million for the three months ended December 31, 2006.  We attribute the increase primarily to the following:

· a $1.0 million increase in wages and benefits, of which $425,000 was compensation expense related to the vesting of restricted stock awards given to employees in fiscal 2007 and 2006; offset in part by

· a $306,000 decrease in accounting and auditing fees.

Provision for credit losses was $2.8 million for the three months ended December 31, 2007 as compared to $45,000 for the three months ended December 31, 2006.  The increase in the provision for credit losses is a result of the following:

· in our commercial finance business, we typically sell without recourse all the leases and notes we acquire or originate to investment entities we manage within two to three months after their acquisition or origination.  The significant volume of leases and loans remaining from the NetBank acquisition ($383.0 million at December 31, 2007) are not expected to be sold until April 2008.  In addition, we accumulated a $130.0 million portfolio of leases and notes that we anticipated selling to a new entity that we have formed, which is currently in the offering stage.  The increase in the amount of lease and notes held on our consolidated balance sheets along with the significant growth in originations has increased the likelihood that a credit problem may occur prior to the sale of those assets to one of our investment partnerships.  Accordingly, we recorded a provision for credit losses in our commercial finance business of $2.3 million; and

· in our financial fund management business, we closed Apidos CDO VI in December 2007, a $240.0 million securitization of corporate loans and for which we provided equity of $21.3 million.  We reviewed this portfolio of loans, the observable secondary market prices and evaluated general market conditions, and as a result, recorded a provision for credit losses of $458,000.

Depreciation and amortization expense was $966,000 for the three months ended December 31, 2007, an increase of $257,000 (36%) as compared to $709,000 for the three months ended December 31, 2006.  This increase relates primarily to the addition of $8.2 million of leasehold improvements and equipment over the past twelve months as we continued to expand our operations.

Interest expense increased by $10.1 million (220%) for the three months ended December 31, 2007.  The following table reflects interest expense (exclusive of intercompany interest charges) as reported by segment (in thousands):

	Three Months Ended
	December 31,
	2007		2006
Commercial finance	$	8,220	$	2,013
Financial fund management		5,232		2,275
Real estate		260		261
All other		965		42
	$	14,677	$	4,591

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The increase in interest expense primarily reflects the increased borrowings by our commercial finance and financial fund management businesses to fund their expanded operations.  Facility utilizations and interest rates for our commercial finance and financial fund management operations were as follows:

	Three Months Ended
	December 31,
	2007			2006
Commercial finance
Average borrowings (in millions)	$	473.7		$	107.8
Average interest rates		6.8	%		7.3	%
Financial fund management
Average borrowings (in millions)	$	365.0		$	185.3
Average interest rates		5.6	%		4.8	%

Interest expense incurred by our commercial finance operations increased by $6.2 million for the three months ended December 31, 2007 due to an increase in average borrowings of $365.9 million offset, in part, due to a reduction of interest rates as a result of our use of interest rate swaps to fix the rates.  LEAF’s growth in borrowings was driven by recent acquisitions, continued growth in new and existing vendor programs and the introduction of new commercial finance products.

Interest expense incurred by our financial fund management operations increased by $3.0 million for the three months ended December 31, 2007, reflecting an increase in average borrowings of $179.7 million, primarily to fund the purchase of loans held for investment.  These loans, and their associated debt, are held by CDO issuers which we consolidate while the assets accumulate on the warehouse facilities.  In January 2008, the two warehouse agreements outstanding at December 31, 2007 were terminated.  In addition, we closed Apidos CDO VI in December 2007, which issued $218.0 million of its senior notes at a weighted average interest rate of 5.94%.

The following table sets forth certain information relating to the increase in minority interest expense of $531,000 (95%) for the three months ended December 31, 2007 (in thousands):

	Three Months Ended
	December 31,
	2007		2006
Commercial finance minority ownership (1)	$	655	$	58
SFF partnerships (2)		339		391
Warehouse providers (2)		97		111
	$	1,091	$	560

(1) Senior executives of LEAF hold a 14.9% interest in LEAF, reflecting the LEAF stock issued upon the conversion of a note in fiscal 2006 and the issuance of LEAF’s restricted stock in fiscal 2007 and 2006.  The increase in minority interest expense for LEAF for the three months ended December 31, 2007 is a result of the increase in LEAF’s income from continuing operations before income taxes and minority interest of $5.4 million.

(2) At December 31, 2007, we owned a 15% and 36% limited partner interest in SFF I and SFF II, respectively, which invest in the equity of certain of the CDO issuers we have formed.  In addition, certain warehouse providers are entitled to receive 10% to 15% of the interest spread earned on their respective warehouse facilities which hold Apidos and Resource Europe bank loan assets during their accumulation stage.  As of August 23, 2007, the right of one of these warehouse providers to receive a 15% share of the interest spread on the Resource Europe bank loans terminated.

Other expense, net was $18.4 million for the three months ended December 31, 2007 as compared to other income, net, of $2.5 million for the three months ended December 31, 2006.  The reduction in other income is a result of the following:

· an $18.3 million loss on sale of secured bank loans in Europe and the United States in late January and early February 2008 as a result of the termination in January 2008 of two secured warehouse credit facilities consolidated under FIN 46-R, for which we had provided limited guarantees;

· a $1.3 million decrease in gains on sales of TBBK common stock.  During the three months ended December 31, 2006, we sold 80,000 shares of stock recognizing a gain of $1.3 million.  There were no sales during the three months ended December 31, 2007; and

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· a $1.0 million charge for the other-than-temporary impairment of certain of our investments in CDOs during the three months ended December 31, 2007, primarily those with investments in real estate ABS and CMBS, and trust preferred securities of a residential mortgage lender and a subprime investor.  There were no other-than-temporary impairments in the three months ended December 31, 2006.

Our effective income tax rate (income taxes as a percentage of income from continuing operations, before taxes) was 48% for the three months ended December 31, 2007 compared to a 33% effective rate for the three months ended December 31, 2006.  The increase in the effective income tax rate primarily relates to a reduction in our available tax credits as well as the prior year reversal of the valuation allowance by $662,000.

We currently project our effective tax rate to be between 46% and 49% for the remainder of fiscal 2008.  Our effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings and the level of our tax credits.  Certain of these and other factors, including our history of pre-tax earnings, are taken into account in assessing our ability to realize our net deferred tax assets.  See Note 15 to our consolidated financial statements for further information regarding our provision for taxes.

We are subject to examination by the U.S. Internal Revenue Service, or IRS, and other taxing authorities in certain states in which we have significant business operations, such as Pennsylvania and New York.  The IRS is currently examining our 2005 tax year, which we anticipate will be concluded in the current fiscal year.  We have recorded a liability and corresponding deferred tax asset for what we believe to be the proposed examination adjustments based upon the results of our 2004 IRS examination.

We adopted FASB 48, “Accounting for Uncertainty in Income Taxes − an interpretation of SFAS 109,” effective October 1, 2007.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority.  The adoption of FIN 48 did not have a material impact on our consolidated balance sheets or statements of operations (See Note 15 to our consolidated financial statements for further information).

Liquidity and Capital Resources

General.  Our major sources of liquidity have been from borrowings under our existing credit facilities and the resolution of our real estate legacy portfolio, and to a lesser extent, proceeds from the sale of our TBBK shares.  We have employed these funds principally to expand our specialized asset management operations.  We expect to fund our asset management businesses from a combination of expanded borrowings under our existing credit facilities, cash generated by operations, and the continued resolution of our legacy portfolio.

The following table sets forth our sources and uses of cash (in thousands):

	Three Months Ended
	December 31,
	2007			2006
Provided by (used in) operating activities of continuing operations	$	20,890		$	(67,043	)
Used in investing activities of continuing operations		(210,636	)		(7,796	)
Provided by financing activities of continuing operations		194,923			57,099
Used in discontinued operations		(11	)		(14	)
Increase (decrease) in cash	$	5,166		$	(17,754	)

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We had $19.8 million in cash at December 31, 2007, an increase of $5.2 million (35%) as compared to $14.6 million at September 30, 2007.  Our ratio of earnings from continuing operations before income taxes, minority interest and interest expense to fixed charges was 0.3 to 1.0 for the three months ended December 31, 2007 as compared to 2.4 to 1.0 for the three months ended December 31, 2006.  The decrease in this ratio primarily reflects a pre-tax loss of $12.2 million in the three months ended December 31, 2007 as compared to pre-tax income of $6.7 million in the three months ended December 31, 2006, in addition to increased interest expense.  Our increased borrowings principally reflect the $213.0 million of senior notes issued by Apidos CDO VI; we acquired all of the equity interests in Apidos CDO VI in December 2007 and in accordance with FIN 46-R, consolidated its assets and liabilities.  In addition, we increased our utilization of secured credit facilities, primarily to fund the NetBank acquisition.  Correspondingly, this increase in borrowings is further reflected by our ratio of debt to equity, which increased to 613% for the three months ended December 31, 2007 from 168% for the three months ended December 31, 2006.

Cash Flows from Operating Activities.Net cash provided by operating activities of continuing operations was $20.9 million, an increase of $87.9 million as compared to the $67.0 million use of cash for the three months ended December 31, 2006, substantially as a result of the following:

· a $71.0 million decrease in investments in commercial finance assets, reflecting the sale of notes and leases to our investment partnerships.  This decrease does not reflect the $583.0 million of commercial finance assets that were acquired in two deals we closed in November 2007 using direct bank financing; and

· a $15.0 million increase in cash provided from continuing operations, reflecting the $10.8 million reduction in net income, as adjusted to exclude $25.8 million of non-cash charges, including a $19.5 million increase in losses on sales and impairment charges recorded on secured bank loans, $2.7 million of reserves provided for credit losses   and $3.6 million of increases in other non-cash charges.

Cash Flows from Investing Activities.Net cash used by our investing activities of continuing operations increased by $202.8 million for the three months ended December 31, 2007 as compared to the three months ended December 31, 2006, primarily reflecting the following:

· a $192.1 million net increase in investments, including the $200.3 million net increase in loans held for investment,  principally the loans held by Apidos CDO VI;  and

· the $8.0 million of funds used in the acquisition of NetBank.

Cash Flows from Financing Activities.  Net cash provided by our financing activities of continuing operations increased by $137.8 million for the three months ended December 31, 2007 as compared to the three months ended December 31, 2006, principally related to the following:

· a $190.7 million of funding provided by our credit facilities, net of repayments, reflecting primarily the consolidation of the Apidos CDO VI senior notes; offset, in part by

· a $51.7 million increase in escrow deposits (see Note 5 to our consolidated financial statements).

Capital Requirements

Our capital needs consist principally of funds to make investments in the investment vehicles we sponsor or for our own account and to provide bridge financing or other temporary financial support to facilitate asset acquisitions by our sponsored investment vehicles.  Accordingly, the amount of capital we require will depend to a significant extent upon our level of activity in making investments for our own account or in sponsoring investment vehicles, all of which is largely within our discretion.

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Contractual Obligations and Other Commercial Commitments

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

			Payments Due By Period
Contractual obligations:	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Other debt (1) (3)	$	590,051	$	134,139	$	185,698	$	268,373	$	1,841
Capital lease obligations (1)		110		42		68		−		−
Secured credit facilities (1) (2)		322,297		200,267		81,729		21,875		18,426
Operating lease obligations		18,296		3,317		5,052		3,512		6,415
Other long-term liabilities		6,035		1,106		1,667		1,458		1,804
Total contractual obligations	$	936,789	$	338,871	$	274,214	$	295,218	$	28,486

(1) Not included in the table above are estimated interest payments calculated at rates in effect at December 31, 2007; Less than 1 year:  $50.8 million; 1-3 years:  $61.4 million; 4-5 years:  $19.9 million; and after 5 years: $2.6 million.

(2) Excludes $143.1 million related to borrowings under financial fund management secured warehouse facilities which were terminated in January 2008.

(3) Includes the repayment of $218.0 million of senior notes for Apidos CDO VI which we consolidated under FIN 46-R.

			Amount of Commitment Expiration Per Period
Other commercial commitments:	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Guarantees (1)	$	23,446	$	23,446	$	−	$	−	$	−
Standby letters of credit		246		246		−		−		−
Other commercial commitments (2) (3)		580,547		67,133		109,169		8,214		396,031
Total commercial commitments (4)	$	604,239	$	90,825	$	109,169	$	8,214	$	396,031

(1) Our two warehouse agreements with Morgan Stanley secured by $14.8 million in escrow deposits provide for guarantees by us totaling $18.8 million for potential losses on two portfolios of bank loans.  These guarantees were eliminated upon the termination of the warehouse agreements and the sale of the underlying loans in late January and early February 2008.

(2) Senior lien financing obtained with respect to certain acquired properties, TIC investment programs and real estate loans are obtained on a non-recourse basis, with the lender’s remedies limited to the properties securing the senior lien financing.  Although non-recourse in nature, these loans are subject to limited standard exceptions, which we have guaranteed (“carveouts”).  These carveouts relate to a total of $576.0 million in financing and expire as the related indebtedness is paid down over the next ten years.

(3) Through our financial fund management subsidiary, we have commitments to purchase an equity interest in all of the CDOs currently in their warehouse stage.  These equity commitments, which total approximately $3.5 million as of December 31, 2007, are contingent upon the successful completion of the respective CDOs which are anticipated over the next twelve months.  Upon the close of each CDO, the amount of equity we actually purchase may be less or possibly more than the originally estimated commitment.

(4) All other credit facilities remained substantially unchanged from what was previously disclosed in our Annual Report on Form 10-K for fiscal 2007.

 We entered into a master lease agreement with one of our TIC programs.  This agreement requires that we fund up to $1.0 million for capital improvements over the next 19 years.

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Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to 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 credit losses, deferred tax assets and liabilities, and identifiable intangible assets, 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 2007, at Note 2 of the “Notes to Consolidated Financial Statements.”

Recently Issued Financial Accounting Standards

In December 2007, the Securities and Exchange Commission, or SEC issued Staff Accounting Bulletin No. 110, or SAB 110.  SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin series.  Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of “plain vanilla” share options and allows usage of the “simplified” method for share option grants prior to December 31, 2007.  SAB 110 allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007.  We will continue to use the “simplified” method until we have sufficient historical experience to provide a reasonable estimate of expected term in accordance with SAB 110.

In December 2007, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, 141-R, “Business Combinations.”  SFAS 141-R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination.  It also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141-R will apply prospectively to business combinations for which the acquisition date is on or after our fiscal year beginning October 1, 2009.  While we have not yet evaluated the impact, if any, that SFAS 141-R will have on our consolidated financial statements, we will be required to expense costs related to any acquisitions after September 30, 2009.

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements.”  This Statement amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  We have not yet determined the impact, if any, that SFAS 160 will have on our consolidated financial statements.  SFAS 160 is effective for our fiscal year beginning October 1, 2009.

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In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants, or AICPA issued Statement of Position, or SOP 07-1, “Clarification of the Scope of the Audit and Accounting Guide ‘Investment Companies’ and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.”  SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the “Guide”).  Additionally, it provides guidance as to whether a parent company or an equity method investor can apply the specialized industry accounting principles of the Guide (referred to as investment company accounting).  This SOP is effective for fiscal years beginning on or after December 15, 2007, with early application encouraged (for us, our fiscal year beginning October 1, 2008).  In October 2007, the FASB issued an exposure draft indefinitely deferring the effective date of this SOP.

In May 2007, the FASB issued Staff Position, or FSP FIN 46-R(7), “Application of FASB Interpretation 46-R to Investment Companies,” or FSP FIN 46-R(7).  FSP FIN 46-R(7) amends the scope of the exception to FIN 46-R to state that investments accounted for at fair value in accordance with investment company accounting are not subject to consolidation under FIN 46-R.  This interpretation is effective for fiscal years beginning on or after December 15, 2007 (for us, our fiscal year beginning October 1, 2008).  Certain consolidated subsidiaries currently apply investment company accounting.  We are currently evaluating the impact, if any; the adoption of this interpretation will have on our consolidated financial statements.

In February 2007, the FASB issued 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, or SFAS 159.  The fair value option established by SFAS 159 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 (for us, our fiscal year beginning October 1, 2008).  We are currently evaluating the expected effect, if any; SFAS 159 will have 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 (for our, its fiscal year beginning October 1, 2008).  In November 2007, the FASB announced that it would defer the effective date of SFAS 157 for one year for all non financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis.  We are currently determining the effect, if any; the adoption of SFAS 157 will have on our consolidated 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 credit 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 December 31, 2007.  We analyze only the potential impacts of hypothetical assumptions.  Our analysis does not consider other possible effects that could impact our business.

Commercial Finance

At December 31, 2007, we held $646.4 million in commercial finance assets, comprised of notes, leases and future payment card receivables at fixed rates of interest.  We periodically sell these assets to the investment partnerships we sponsored and manage at our cost basis, typically within three months from the date acquired.  Accordingly, our exposure to changes in market interest rates on these assets is minimized.  Further, we, along with our investment partnerships, maintain swap agreements to effectively fix the interest rates on the related debt, as discussed below.

We had weighted average borrowings of $135.2 million and $217.5 million under a secured revolving credit facility and a bridge loan with Morgan Stanley at December 31, 2007 at effective interest rates of 5.8% and 7.5%, respectively.  These facilities are not subject to fluctuation in interest rates because we have entered into interest rate swap agreements which create a fixed interest rate on the entire balances.

Real Estate

Portfolio Loans and Related Senior Liens.  As of December 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 Loan.  A mortgage that we consolidate at December 31, 2007 as a result of FIN 46-R is at a fixed interest rate and, therefore, not subject to interest rate fluctuations.

Financial Fund Management

At December 31, 2007, we had two outstanding secured warehouse facilities to purchase bank loans with balances of $54.0 million and $89.1 million.  In January 2008, we determined to end these facilities.

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Other

At December 31, 2007, we had two secured revolving credit facilities for general business use.  Weighted average borrowings on these two facilities were $42.0 million for the three months ended December 31, 2007 at an effective interest rate of 8.5%.  A hypothetical 10% change in the interest rate on these facilities would change our annual interest expense by $80,000.

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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 December 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 2.                      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases by us during the three months ended December 31, 2007 of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 1 to October 31, 2007		−	$	−		−	$	47,416,279
November 1 to November 30, 2007		16,648	$	14.16		16,648	$	47,180,493
December 1 to December 31, 2007		−	$	14.16		−	$	47,180,493
Total		16,648				16,648

(1) In July 2007, the Board of Directors authorized a share repurchase plan under which we may repurchase up to $50.0 million of our outstanding common stock.  This plan replaces the previous plan authorized in September 2004.  These purchases may be made at any time in the open market or through privately-negotiated transactions.

(2) Through December 31, 2007, we have repurchased an aggregate of 188,123shares at a total cost of approximately $2.8 million pursuant to our July 2007 stock repurchase program, at an average cost of $14.99 per share.

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)
2.1	Asset Purchase Agreement by and among LEAF Financial Corporation, LEAF Funding, Inc., Dolphin Capital Corp. and Lehman Brothers Bank, FSB, dated November 19, 2007.
2.2	Loan Sale Agreement by and between Federal Deposit Insurance Corporation as receiver of NetBank, Alpharetta, Georgia and LEAF Funding, LLC, dated November 2007.
10.1	Receivables Loan and Security Agreement, dated November 1, 2007 among LEAF Capital Funding III, LLC as Borrower; LEAF Financial Corporation as Servicer, Morgan Stanley Bank as Class A Lender and Collateral Agent and Morgan Stanley Asset Funding, Inc. as Class B Lender, U.S. Bank National Association as Custodian and Lender’s Bank and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services as Backup Servicer).
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.

57

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: February 11, 2008	By:           /s/ Steven J. Kessler
	STEVEN J. KESSLER
	Executive Vice President and Chief Financial Officer

Date: February 11, 2008	By:           /s/ Arthur J. Miller
	ARTHUR J. MILLER
	Vice President and Chief Accounting Officer

58

EX-2.1

ASSET PURCHASE AGREEMENT

BY AND AMONG

LEAF FINANCIAL CORPORATION,

LEAF FUNDING, INC.,

DOLPHIN CAPITAL CORP.

AND

LEHMAN BROTHERS BANK, FSB

Dated as of November 19, 2007

TABLE OF CONTENTS

			Page
ARTICLE I		DEFINITIONS	1
	1.1	Certain Definitions	1
	1.2	Terms Defined Elsewhere in this Agreement	9
	1.3	Other Definitional and Interpretive Matters	10
ARTICLE II		SALE AND PURCHASE OF ASSETS	11
	2.1	Sale and Purchase of Assets	11
	2.2	Assumed Liabilities	11
	2.3	Retained Assets	12
	2.4	Retained Liabilities	12
ARTICLE III		PURCHASE PRICE	12
	3.1	Purchase Price	12
	3.2	Payment of Purchase Price.	12
	3.3	Purchase Price Adjustment	12
ARTICLE IV		CLOSING AND TERMINATION	15
	4.1	Closing Date	15
	4.2	Termination of Agreement	15
	4.3	Procedure Upon Termination	16
	4.4	Effect of Termination	16
ARTICLE V		REPRESENTATIONS AND WARRANTIES OF THE COMPANY	16
	5.1	Organization and Good Standing	16
	5.2	Authorization of Agreement	17
	5.3	Conflicts; Consents of Third Parties	17
	5.4	Balance Sheets	18
	5.5	Financing Contracts	18
	5.6	Financial Statements	21
	5.7	Absence of Certain Developments	22
	5.8	Title	22
	5.9	Taxes	22
	5.10	Real Property	22

ii

	5.11	Tangible Personal Property	23
	5.12	Intellectual Property	23
	5.13	Material Contracts	23
	5.14	Employees	24
	5.15	Labor	24
	5.16	Litigation	24
	5.17	Compliance with Laws; Permits	24
	5.18	Environmental Matters	25
	5.19	Financial Advisors	26
	5.20	Sufficiency of Assets, Excluded Assets	26
	5.21	Intentionally Deleted	26
	5.22	No Other Representations or Warranties; Schedules	26
ARTICLE VI		REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER	27
	6.1	Organization and Good Standing	27
	6.2	Authorization of Agreement	27
	6.3	Conflicts; Consents of Third Parties	27
	6.4	Litigation	28
	6.5	Financial Advisors	28
ARTICLE VII		REPRESENTATIONS AND WARRANTIES OF PURCHASER	28
	7.1	Organization and Good Standing	28
	7.2	Authorization of Agreement	28
	7.3	Conflicts; Consents of Third Parties	29
	7.4	Litigation	29
	7.5	Financial Advisors	29
	7.6	Financial Capability	29
	7.7	Condition of the Business	29
	7.8	Closing Date Balance Sheet	30
ARTICLE VIII		COVENANTS	30

iii

	8.1	Access to Information	30
	8.2	Conduct of the Business Pending the Closing	31
	8.3	Consents	32
	8.4	Regulatory Approvals	32
	8.5	Further Assurances	34
	8.6	Non-Competition; Non-Solicitation; Confidentiality, Etc	34
	8.7	Preservation of Records	35
	8.8	Publicity	35
	8.9	Use of Name	36
	8.10	Employment and Employee Benefits	36
	8.11	Disclosure Schedules; Supplementation and Amendment of Schedules	37
	8.12	Notification	37
	8.13	No Negotiation	37
	8.14	Commercially Reasonable Efforts	38
	8.15	Payment of Retained Liabilities	38
ARTICLE IX		CONDITIONS TO CLOSING	38
	9.1	Conditions Precedent to Obligations of Purchaser	38
	9.2	Conditions Precedent to Obligations of the Stockholder	39
	9.3	Frustration of Closing Conditions	40
ARTICLE X		INDEMNIFICATION	40
	10.1	Survival of Representations and Warranties	40
	10.2	Indemnification by Stockholder	41
	10.3	Indemnification by Purchaser	41
	10.4	Indemnification Procedures	42
	10.5	Certain Limitations on Indemnification.	43
	10.6	Calculation of Losses	44
	10.7	Tax Treatment of Indemnity Payments	44
	10.8	Exclusive Remedy	44
ARTICLE XI		MISCELLANEOUS	45

11.1	Tax Matters	45
11.2	Expenses	45
11.3	Submission to Jurisdiction; Consent to Service of Process	45
11.4	Entire Agreement; Amendments and Waivers	45
11.5	Governing Law	46
11.6	Notices	46
11.7	Severability	47
11.8	Binding Effect; Assignment	47
11.9	Non-Recourse	47
11.10	Counterparts	48

iv

Schedules

Schedule 1.1(a)	Knowledge of the Company
Schedule 1.1(d)	Backlog Transactions
Schedule 1.1(g)	Other Assets
Schedule 1.1(h)	Fixed Assets
Schedule 1.1(i)	Employee Listing
Schedule 1.1(l)	Additional Contracts
Schedule 2.2	Assumed Liabilities
Schedule 2.3	Company Contracts
Schedule 3.1	Balance Sheet Format
Schedule 3.3(h)	Purchase Price Allocation
Schedule 5.3(a)	No Conflicts
Schedule 5.3(b)	Consents
Schedule 5.5(a)	Financing Contracts
Schedule 5.5(b)	Status of Certain Financing Contracts
Schedule 5.5(c)	Status of Certain Financing Contracts
Schedule 5.5(e)	Financing Contracts Sold With Recourse
Schedule 5.5(f)	Delinquent or Non-Accrual Financing Contracts
Schedule 5.5(g)	Governing Law
Schedule 5.5(n)	Delivery of Property
Schedule 5.5(o)	Title to Property
Schedule 5.5(q)	Defaults with Respect to Certain Financing Contracts
Schedule 5.5(t)	Final Payments
Schedule 5.5(u)	Payment Obligations
Schedule 5.6	Financial Statements
Schedule 5.7	Absence of Certain Changes
Schedule 5.8	Title
Schedule 5.9	Taxes
Schedule 5.10	Real Property
Schedule 5.11	Tangible Personal Property
Schedule 5.12	Intellectual Property
Schedule 5.13(a)	Material Contracts
Schedule 5.13(b)	Material Contracts in Default
Schedule 5.15(a)	Labor and Collective Bargaining Agreements
Schedule 5.15(b)	Labor
Schedule 5.16	Litigation
Schedule 5.18	Environmental Matters
Schedule 5.20	Excluded Assets
Schedule 7.3(a)	No Conflicts
Schedule 8.2	Conduct of Business Pending Closing
Schedule 8.3	Contracts to be Assigned
Schedule 9.2(d)	Consents, Waivers and Approvals
Exhibit A	Form of Legal Opinion

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT, (the “Agreement”), dated as of November 19, 2007, by and among LEAF Financial Corporation, a corporation existing under the laws of Delaware, and LEAF Funding, Inc., a corporation existing under the laws of Delaware (collectively, “Purchaser”), Dolphin Capital Corp., a Massachusetts corporation (the “Company”), and Lehman Brothers Bank, FSB (the “Stockholder”).

W I T N E S S E T H:

WHEREAS, the Stockholder owns all of the issued and outstanding shares of capital stock of the Company;

WHEREAS, the Company is engaged in the micro-ticket equipment leasing and financing business (the “Business”);

WHEREAS, the Company desires to sell to Purchaser, and Purchaser desires to purchase from the Company, certain of the assets of the Company relating to the Business for the purchase price and upon the terms and conditions hereinafter set forth;

WHEREAS, Purchaser has agreed to assume certain specific liabilities related to the Business; and

WHEREAS, certain terms used in this Agreement are defined in Section 1.1;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1           Certain Definitions.

(a)           For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

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“Assets” means collectively, all of Company’s:

(a)           Financing Contracts;

(b)           right, title and interest in the Portfolio Property, collateral, or Residual with respect to each Financing Contract;

(c)           files pertaining to each Financing Contract;

(d)           transactions that have been approved, but for which no Financing Contract has been finally executed (the “Backlog”) (Schedule 1.1(d) sets forth the Backlog as of October 31, 2007 and shall be updated as of the Closing Date);

(e)           rights of the Company under any existing customer agreement relating to any Financing Contract or the Backlog;

(f)           intangible rights and property associated with the Business and the name “Dolphin Capital Corp.”, including but not limited to, Intellectual Property used in or related to the Business, going concern value, goodwill, telephone numbers, facsimile numbers, websites, email addresses, processes, trade dress, business and product names, logos, slogans, trade secrets, industrial models, designs, methodologies, technical information, and know-how relating to the origination and servicing of the Financing Contracts;

(g)           rights of the Company in guaranties, reserve accounts, security deposits and other collateral posted by any Person in connection with the Business or the Assets;

(h)           fixed assets, as set forth on Schedule 1.1(h), including all real property described in Section 5.10, located at the Moberly, Missouri office of the Company and any field sales person’s office, including all equipment, furniture, computer hardware and Software, Technology, improvements, fixtures and other tangible personal property owned by the Company in connection with the Business;

(i)           books, records and other documents and information related to the Business or the Assets, including all customer, prospect, third party originator and distributor lists, sales literature, price lists, quotes and bids, promotional programs, product catalogs and brochures, inventory records, product data, purchase orders and invoices, sales orders and sales order log books, commission records, customer information, correspondence and all personnel records and other records of the Company related to its employees listed on Schedule 1.1(i) to the extent their transfer is permitted by law;

(j)           insurance benefits, including rights and proceeds, arising from or relating to the Assets or Assumed Liabilities prior to the Closing Date, unless expended in accordance with this Agreement;

2

(k)           claims of the Company against third parties relating to the Business or the Assets, whether choate or inchoate, known or unknown, contingent or noncontingent, including equipment warranties; and

(l)           the additional contracts set forth on Schedule 1.1(l).

“Assumed Liabilities” means (i) all liabilities as of the Closing Date which are set forth on Schedule 2.2 attached hereto as liabilities to be assumed by Purchaser, (ii) all liabilities for Taxes relating to the Assets for all taxable periods (or portions thereof) beginning after the Closing Date (determined in accordance with Section 11.1(b)), and (iii) all liabilities and obligations of Purchaser under Section 8.10. The Assumed Liabilities set forth on Schedule 2.2 as presented on the Closing Date Balance Sheet are the only liabilities being assumed by Purchaser pursuant to clause (i) of the preceding sentence, and any other liabilities (including any liabilities relating to the period prior to the Closing Date that relate to liabilities listed in Schedule 2.2, but which were not presented in the Closing Date Balance Sheet) other than those set forth in clauses (ii) and (iii) of the preceding sentence, shall continue to be the responsibility of the Company.

“Baseline Balance Sheet” means the itemized balance sheet attached hereto on Schedule 3.1.

“Baseline Balance Sheet Date” means September 30, 2007.

“Business Day” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.

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

“Company Benefit Plan” means each material “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended) and any other material employee compensation or benefit plan or agreement, in each case, maintained by the Company.

“Contract” means any written contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, or license.

“Customer” means any lessee, obligor, third party originator, client, customer, vendor or supplier, as applicable, in connection with the Assets.

“Environmental Law” means any applicable Law currently in effect relating to the protection of the environment or natural resources, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 etseq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 etseq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 etseq.), the Clean Water Act (33 U.S.C. § 1251 etseq.), the Clean Air Act (42 U.S.C. § 7401 etseq.) the Toxic Substances Control Act (15 U.S.C. § 2601 etseq.), and the Federal Insecticide,

3

Fungicide, and Rodenticide Act (7 U.S.C. § 136 etseq.), as each has been amended and the regulations promulgated pursuant thereto.

“Final Contractual Payment” means a final payment which is a firm, mandatory payment made by the obligor under a Financing Contract, and which payment is not the Residual.

“Financing Contract” means any Contract (including any schedule or amendment thereto or assignment, assumption, renewal or novation thereof) in existence on the date hereof (and not included in the Retained Assets) and any ancillary agreements relating thereto, in the form of (a) a lease of or rental agreement with respect to Portfolio Property, or (b) a sale contract (including an installment sale contract or conditional sale agreement) arising out of the sale of Portfolio Property, or (c) a secured or unsecured financing of Portfolio Property, or (d) a secured or unsecured loan, and in each case, which with respect thereto:  (i) the Company is the lessor, seller, lender, secured party or obligee (whether initially or as an assignee), or (ii) is between an obligor, on the one hand, and a lessor, seller, obligee, secured party or assignee of any of the foregoing, on the other hand, and (A) which would be a Financing Contract if the Company were the lessor, seller, obligee, secured party or assignee of any of the foregoing thereunder and (B) with respect to which the Company is an assignee of the revenues or claims with respect thereto.

“Financing Statements” means the financing statements covering all property subject to those Financing Contracts involving amounts over $25,000 necessary to duly perfect a first lien security interest therein.

“GAAP” means generally accepted accounting principles in the United States as of the date hereof consistently applied.

“Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).

“Hazardous Material” means any substance, material or waste which is regulated or defined as a “hazardous waste,” “hazardous substance,” “hazardous material,” “restricted hazardous waste,” “contaminant,” “pollutant,” “toxic waste” or “toxic substance” under any provision of any Environmental Law including petroleum and its by-products and asbestos.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the rules and regulations promulgated thereunder.

4

“Indebtedness” of any Person means, without duplication, (i) the principal of, and accreted value and accrued and unpaid interest in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities); (iii) all obligations of the type referred to in clauses (i) and (ii) of any Persons the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise; and (iv) all obligations of the type referred to in clauses (i) through (iii) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).

“Independent Accounting Firm Guidelines” means an accounting firm that is an eligible accountant for the purposes of Securities and Exchange Commission rules and regulations.

“Intellectual Property” means all intellectual property rights used by the Company arising from or in respect of the following: (i) all patents and applications therefor, including continuations, divisionals, continuations-in-part, or reissues of patent applications and patents issuing thereon (collectively, “Patents”), (ii) all trademarks, service marks, trade names, service names, brand names, trade dress rights, logos, Internet domain names and corporate names, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof, (collectively, “Marks”), (iii) copyrights and registrations and applications therefor, works of authorship and mask work rights (collectively, “Copyrights”) and (iv) all Software and Technology of the Company.

“IRS” means the United States Internal Revenue Service and, to the extent relevant, the United States Department of Treasury.

“Knowledge of the Company” means the actual knowledge of those Persons identified on Schedule 1.1 (a), which persons shall have made due inquiries of their direct reports.

“Law” means any foreign, federal, state, local law, common law, statute, code, ordinance, rule or regulation including any stock exchange regulation.

“Legal Proceeding” means any judicial, administrative or arbitral actions, suits or proceedings (public or private) by or before a Governmental Body.

“Liability” means any debt, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due) and including all costs and expenses relating thereto.

“Lien” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude or transfer restriction.

5

“Material Adverse Effect” means a material adverse effect on (i) the business, assets, properties, results of operations or financial condition of the Company or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement, other than an effect resulting from an Excluded Matter.  “Excluded Matter” means any one or more of the following: (i) changes in conditions in the U.S. or global economy or capital or financial markets generally except to the extent that such change has a materially disproportionate impact on the industry in which the Company operates or the Business as compared to other similarly situated companies in the same industry; (ii) the effect of any change arising in connection with earthquakes, hurricanes or other natural disasters, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway as of the date hereof; (iii) the effect of any action taken by Purchaser or its Affiliates with respect to the transactions contemplated hereby or with respect to the Business; (iv) the failure of the Company to meet any of its internal projections; and (v) any effect resulting from the public announcement of this Agreement, compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement.

“Non-Accrual Financing Contracts” means any Financing Contract that is either (i) 120 days or more delinquent or (ii) classified by the Company as a delinquent or non-performing Finance Contract.

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.

“Ordinary Course of Business” means the ordinary and usual course of normal day-to-day operations of the Company, substantially in accordance with past practice.

“Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.

“Permitted Exceptions”  means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances with respect to real property or interests therein disclosed in policies of title insurance delivered to Purchaser; (ii) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body; (v) title of a lessor under a capital or operating lease; and (vi) such other imperfections in title, charges, easements, restrictions and encumbrances which would not, individually or in the aggregate, result in a Material Adverse Effect.

“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

“Portfolio Property” means any asset with respect to which the Company is the lessor, seller or secured party, as the case may be, pursuant to the terms of a Financing Contract (whether initially or as an assignee) or any such asset which is held by the Company.

6

“Record Date” means the date six (6) Business Days prior to the Closing Date.

“Record Date Balance Sheet” means the itemized balance sheet of the Company as of the Record Date prepared in accordance with GAAP and in the format set forth on Schedule 3.1.

“Release” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, migration or leaching into the environment.

“Remedial Action” means all actions required under Environmental Laws to (i) clean up, remove, treat or address any Hazardous Material in the environment at levels exceeding those allowed by applicable Environmental Laws, including pre-remedial studies and investigations or post-remedial monitoring and care.

“Residual” means, with respect to any item of Portfolio Property, its estimated value upon expiration of the Financing Contract to which it is subject, as determined by the Company and established on its books and records at the inception of such Financing Contract.

“Retained Assets” means the following assets of the Company which are not part of the sale and purchase contemplated hereunder, and are excluded from the Assets and shall remain the property of the Company after the Closing:

(a)           all cash, cash equivalents and short-term investments;

(b)           all minute books, stock records and corporate seals;

(c)           such Contracts listed in Schedule 2.3 including any and all rights associated therewith;

(d)           all personnel records and other records that the Company is required by law to retain in its possession;

(e)           all rights in connection with and assets of the Company Benefit Plans;

(f)           all Tax Returns of the Company and any claim, right or interest in or to any refund, rebate, abatement or other recovery for Taxes relating to all taxable periods (or portions thereof) ending on or before the Closing Date (as determined in accordance with Section 11.1(b)), together with any interest due thereon or penalty rebate arising therefrom; and

(g)           all such other assets set forth on Schedule 1.1(g).

7

“Retained Liabilities” means any other Liabilities or Indebtedness of the Company whatsoever not included in the Assumed Liabilities.

“Securities Laws” means the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended.

“Software” means any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, and (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise.

“Subsidiary” means, in respect of any Person, any Person in which such first Person, directly or indirectly, beneficially owns more than 50% of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof.

“Tax” or “Taxes” means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i).

“Taxing Authority” means the IRS and any other Governmental Body responsible for the administration of any Tax.

“Tax Return” means any return, report or statement required to be filed with respect to any Tax (including any attachments thereto, and any amendment thereof), including any information return, claim for refund, amended return or declaration of estimated Tax, and including, where permitted or required, combined, consolidated or unitary returns for any group of entities that includes the Company or any Affiliates.

“Technology” means, collectively, all information, designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, displayed by or relate to, or are used by the Company.

“Threat of Release” means a reasonable likelihood of a Release that may require action in order to prevent or mitigate damage to the environment that may result from such Release.

8

1.2           Terms Defined Elsewhere in this Agreement.  For purposes of this Agreement, the following terms have meanings set forth in the sections indicated:

Term	Section
Agreement	Recitals
Antitrust Laws	8.4(b)
Asset Acquisition Statement	3.3(h)
Balance Sheet	5.6
Balance Sheet Date	5.6
Cap	10.5(a)
Claim	8.7(c)
Closing	4.1
Closing Date	4.1
Closing Date Balance Sheet	3.3(b)
Closing Date Purchase Price Adjustment	3.2
Common Stock	5.4(a)
Company	Recitals
Company Documents	5.2
Company Property	5.10
Company Properties	5.10
Confidentiality Agreement	8.6(a)
Continuing Employees	8.12(a)
Copyrights	1.1 (in Intellectual Property definition)
Environmental Permits	5.18(a)
Estimated Closing Statement	3.3(a)
Excluded Matter	1.1 (in definition of Material Adverse Effect)
Final Purchase Price Adjustment	3.3(b)
Financial Statements	5.6
Indemnification Claim	10.4(b)
Indemnitees	8.7(a)
Independent Accountant	3.3(d)
Loss	10.2(a)
Losses	10.2(a)

Marks	1.1 (in Intellectual Property definition)
Material Contracts	5.13(a)
Old Plans	8.12(b)(ii)
Owned Property	5.10
Owned Properties	5.10
Patents	1.1 (in Intellectual Property definition)
Personal Property Leases	5.11
Purchase Price	3.1
Purchase Price Adjustment	3.3(b)
Purchaser	Recitals
Purchaser Documents	7.2
Purchaser Indemnified Parties	10.2(a)

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Term	Section
Purchaser Plans	8.12(b)(ii)
Real Property Lease	5.10
Reference Date	3.3(a)
Reference Statement	3.3(a)
Restricted Business	8.6
Revised Statement	3.3(h)
Seller Indemnified Parties	10.3(a)
Seller Marks	8.10
Stockholder	Recitals
Stockholder Documents	6.2
Survival Period	10.1

1.3           Other Definitional and Interpretive Matters.

(a)           Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

Calculation of Time Period.  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

Dollars.  Any reference in this Agreement to $ shall mean U.S. dollars.

Exhibits/Schedules.

(b)           The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any matter or item disclosed on one Schedule shall be deemed to have been disclosed on each other Schedule.  Disclosure of any item on any Schedule shall not constitute an admission or indication that such item or matter is material or would have a Material Adverse Effect.  No disclosure on a Schedule relating to a possible breach or violation of any Contract, Law or Order shall be construed as an admission or indication that breach or violation exists or has actually occurred.  Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement.

(c)           Notwithstanding paragraph (a) above and Section 4.2(d), the parties agree that the any updates to the Schedules between the date hereof and Closing shall be taken into account in determining Purchase Price under Section 3.3 in accordance with normal Company policy.

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                                Gender and Number.  Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

Headings.  The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.  All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.

Herein.  The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

Including.  The word “including” or any variation thereof means (unless the context of its usage otherwise requires) “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

Reflected On or Set Forth In.  An item arising with respect to a specific representation or warranty shall be deemed to be “reflected on” or “set forth in” a balance sheet or financial statements, to the extent any such phrase appears in such representation or warranty, if (a) there is a reserve, accrual or other similar item underlying a number on such balance sheet or financial statements that related to the subject matter of such representation, (b) such item is otherwise specifically set forth on the balance sheet or financial statements or (c) such item is reflected on the balance sheet or financial statements and is specifically set forth in the notes thereto.

(b)           The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

ARTICLE II

SALE AND PURCHASE OF ASSETS

2.1           Sale and Purchase of Assets.  Upon the terms and subject to the conditions contained herein, on the Closing Date, the Company agrees to sell to Purchaser, and Purchaser agrees to purchase from the Company, the Assets.  Any other assets of the Company not included in the definition of Assets, including the Retained Assets, shall remain the property of the Company.

2.2           Assumed Liabilities.  Upon the terms and subject to the conditions contained herein, on the Closing Date, Purchaser agrees to pay, perform, discharge or otherwise satisfy in accordance with their respective terms, all of the Assumed Liabilities.

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2.3           Retained Assets.  The Company shall retain, and Purchaser is not acquiring, the Retained Assets.

2.4           Retained Liabilities.  Except as otherwise provided in this Agreement, Purchaser will not assume or be responsible for any, and the Company and/or the Stockholder shall remain liable and responsible for, all Retained Liabilities.

ARTICLE III

PURCHASE PRICE

3.1           Purchase Price.  Subject to adjustment as provided in Section 3.3, the purchase price payable by Purchaser for the Assets (the “Purchase Price”) shall be an amount equal to (i) the book value of the Assets as of the Record Date, plus (ii) a business premium of $250,000, reduced by (iii) the amount of the Assumed Liabilities as of the Record Date, (to the extent not taken into account in clause (i)); provided, however, that such amount shall be increased or decreased pursuant to Sections 3.2 and 3.3 below. Notwithstanding anything to the contrary in this Agreement, in no event shall the Purchase Price be increased for any reason other than an increase in the value of the Financing Contracts between the Baseline Balance Sheet Date and the Closing Date.  By way of example, the Purchase Price on September 30, 2007 would have been $166,805,471, as set forth on the Baseline Balance Sheet.

3.2           Payment of Purchase Price. On the Closing Date, Purchaser shall pay to Company the Purchase Price. Each balance sheet prepared pursuant to any provision of Article 3 shall conform to the format set forth in Schedule 3.1, in which balance sheet items are classified as Assets, Assumed Liabilities, Retained Assets or Retained Liabilities, as the case may be.

3.3           Purchase Price Adjustment.

(a)           As promptly as practicable, but no later than four (4) Business Days prior to Closing, the Company shall deliver to Purchaser the Record Date Balance Sheet together with the Company’s calculation of the Closing Date Purchase Price Adjustment.

(b)           As promptly as practicable, but no later than thirty (30) days after the Closing Date, Purchaser shall cause to be prepared and delivered to Stockholder a balance sheet (the “Closing Date Balance Sheet”) and a certificate based on such Closing Date Balance Sheet setting forth Purchaser’s calculation of the changes in the net value of the Assets and Liabilities for the balance sheet categories specified in Schedule 3.1 (but not for any other balance sheet categories) between the Baseline Balance Sheet Date and the Closing Date (the “Final Purchase Price Adjustment”).

(c)           If Stockholder disagrees with Purchaser’s calculation of the Final Purchase Price Adjustment delivered pursuant to Section 3.3(b), Stockholder may, within 15 days after delivery of the Closing Date Balance Sheet, deliver a notice to Purchaser stating that Stockholder disagrees with such calculation and specifying in reasonable detail those items or amounts as to which Stockholder disagrees and the basis therefor.  Stockholder shall be deemed to have agreed with all other items and amounts contained in the Closing Date Balance Sheet and the calculation of the Final Purchase Price Adjustment delivered pursuant to Section 3.3(b).

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(d)           If a notice of disagreement shall be duly delivered pursuant to Section 3.3(c), Stockholder and Purchaser shall, during the 15 days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the amount of the Final Purchase Price Adjustment.  If during such period, Stockholder and Purchaser are unable to reach such agreement, they shall promptly thereafter cause an independent accounting firm meeting the Independent Accounting Firm Guidelines (the “Independent Accountant”) (or if Stockholder and Purchaser are unable to agree upon such a firm within ten (10) Business Days after the notice of disagreement is received, then within an additional ten (10) Business Days, Stockholder and Purchaser shall each select one such firm and those two firms shall select a third such firm, in which event “Independent Accountant” shall mean such third firm), to review this Agreement and the disputed items or amounts for the purpose of calculating the Final Purchase Price Adjustment (it being understood that in making such calculation, the Independent Accountant shall be functioning as an expert and not as an arbitrator).  Each of Purchaser and Stockholder agree that it shall not engage, or agree to engage the Independent Accountant to perform any services other than as the Independent Accountant pursuant hereto until the Closing Balance Sheet and the Final Purchase Price Adjustment have been finally determined pursuant to this Section 3.3.  Each party agrees to execute, if requested by the Independent Accountant, a reasonable engagement letter.  Purchaser and Stockholder shall cooperate with the Independent Accountant and promptly provide all documents and information requested by the Independent Accountant.  In making such calculation, the Independent Accountant shall consider only those items or amounts in the Closing Balance Sheet and Purchaser’s calculation of the Final Purchase Price Adjustment as to which Stockholder has disagreed in its notice of disagreement duly delivered pursuant to Section 3.3(c).  The Independent Accountant shall deliver to Stockholder and Purchaser, as promptly as practicable (but in any case no later than 30 days from the date of engagement of the Independent Accountant), a report setting forth such calculation.  Such report shall be final and binding upon Stockholder and Purchaser, shall be deemed a final arbitration award that is binding on Purchaser and Stockholder, and neither Purchaser nor Stockholder shall seek further recourse to courts or other tribunals, other than to enforce such report.  Judgment may be entered to enforce such report in any court of competent jurisdiction.  The Independent Accountant will determine the allocation of the cost of its review and report based on the inverse of the percentage its determination (before such allocation) bears to the total amount of the total items in dispute as originally submitted to the Independent Accountant.  For example, should the items in dispute total in amount to $1,000 and the Independent Accountant awards $600 in favor of Stockholder’s position, 60% of the costs of its review would be borne by Purchaser and 40% of the costs would be borne by Stockholder.

(e)           Stockholder, Purchaser and the Company shall, and shall cause their respective representatives to, cooperate and assist in the preparation of the Closing Balance Sheet and the calculation of the Final Purchase Price Adjustment and in the conduct of the review referred to in this Section 3.3, including the making available to the extent necessary of books, records, work papers and personnel.

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(f)           If the amount to be paid to Stockholder as a result of the Final Purchase Price Adjustment exceeds the amount to be paid to Stockholder as a result of the Closing Date Purchase Price Adjustment, Purchaser shall pay to Stockholder, in the manner and with interest as provided in Section 3.3(g), the amount of such excess and, if the amount to be paid to Stockholder as a result of Final Purchase Price Adjustment is less than the amount to be paid to Stockholder as a result of the Closing Date Purchase Price Adjustment, Stockholder shall pay to Purchaser, as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 3.3(g), the amount of such shortfall. The Final Purchase Price Adjustment shall be computed (i) as shown in Purchaser’s calculation delivered pursuant to Section 3.3(b) if no notice of disagreement with respect thereto is duly delivered pursuant to Section 3.3(c); or (ii) if such a notice of disagreement is delivered, (A) as agreed by Stockholder and Purchaser pursuant to Section 3.3(d) or (B) in the absence of such agreement, as shown in the Independent Accountant’s calculation delivered pursuant to Section 3.3(d); provided, however, that in no event shall Final Purchase Price Adjustment be more than Purchaser’s calculation of Final Purchase Price Adjustment delivered pursuant to Section 3.3(b) or less than Stockholder’s calculation of Closing Date Purchase Price Adjustment delivered pursuant to Section 3.3(c).

(g)           Any payment pursuant to Section 3.3(e) shall be made at a mutually convenient time and place within five (5) Business Days after Final Purchase Price Adjustment has been determined by wire transfer by Purchaser or Stockholder, as the case may be, of immediately available funds to the account of such other party as may be designated in writing by such other party.  The amount of any payment to be made pursuant to this Section 3.3 shall bear interest from and including the Closing Date to but excluding the date of payment at a rate per annum equal to the rate of interest published from time to time by The Wall Street Journal, Eastern Edition, as the “prime rate” at large U.S. money center banks during the period from the Closing Date to the date of payment.  Such interest shall be payable at the same time as the payment to which it relates and shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed.

(h)           The Company and Purchaser shall allocate the Purchase Price and any Assumed Liabilities required to be taken into account for income tax purposes among the Assets and the covenants in Section 8.6 as reflected on Schedule 3.3(h) as such Schedule will be updated as of Closing and, in accordance with such allocation, the Company shall prepare and deliver to Purchaser copies of Form 8594 and any required exhibits thereto (the “Asset Acquisition Statement”).  The Asset Acquisition Statement shall be prepared in accordance with Section 1060 of the Code and the treasury regulations promulgated thereunder.  The Company shall prepare and deliver to Purchaser from time to time revised copies of the Asset Acquisition Statement (the “Revised Statements”) so as to report any matters on the Asset Acquisition Statement that need updating (including purchase price adjustments, if any) consistent with the agreed upon allocation.  Purchase Price (plus the Assumed Liabilities, as applicable) shall be allocated in accordance with the Asset Acquisition Statement or, if

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 applicable, the last Revised Statements, provided by the Company to Purchaser, and all income Tax Returns and reports filed by Purchaser and the Company shall be prepared consistently with such allocation.  Neither Purchaser nor the Company shall, nor shall they permit their respective Affiliates to, take any position inconsistent with the Asset Acquisition Statement or the then-applicable Revised Statements.

ARTICLE IV

CLOSING AND TERMINATION

4.1           Closing Date.  The closing of the sale and purchase of the Assets provided for in Section 2.1 hereof (the “Closing”) shall take place at the offices of Weil, Gotshal & Manges LLP located at 767 Fifth Avenue, New York, New York, 10153 at 10:00 a.m. (New York City time) on a date to be specified by the parties (the “Closing Date”), which date shall be no later than the tenth Business Day after the satisfaction or waiver of the conditions set forth in Article IX (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time), unless (i) the Company elects to have the Closing take place on the last Business Day of the month during which such conditions shall have been satisfied or waived, or (ii) the time, date or place is otherwise agreed to in writing by the parties hereto. Notwithstanding the foregoing, the parties shall use reasonable best efforts to effectuate the Closing on or before November 30, 2007.

4.2           Termination of Agreement.  This Agreement may be terminated prior to the Closing as follows:

(a)           At the election of the Company or Purchaser on or after February 29, 2008, (such date, as it may be extended under clause (A) of this Section 4.2(a), the “Termination Date”), if the Closing shall not have occurred by the close of business on such date, provided that the terminating party is not in breach in any material respect of any of its obligations hereunder;

(b)           by mutual written consent of the Company and Purchaser;

(c)           by the Company or Purchaser if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that subject to the last sentence of Section 7.3(b) hereof, the parties hereto shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal with reasonable diligence); provided, however, that the right to terminate this Agreement under this Section 4.2(c) shall not be available to a party if such Order was primarily due to the failure of such party to perform any of its obligations under this Agreement; or

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(d)           by Purchaser if there has been an event, change, occurrence or circumstance individually or in the aggregate with any such events, changes, occurrences or circumstances that have had a Material Adverse Effect.

4.3           Procedure Upon Termination.  In the event of termination and abandonment by Purchaser or the Company, or both, pursuant to Section 4.2 hereof, written notice thereof shall forthwith be given to the other party or parties, and this Agreement shall terminate, and the purchase of the Assets hereunder shall be abandoned, without further action by Purchaser or the Company.

4.4           Effect of Termination.  a)  In the event that this Agreement is validly terminated in accordance with Section 4.2 and 4.3, then each of the parties shall be relieved of their duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to Purchaser, the Company or the Stockholder; provided, that no such termination shall relieve any party hereto from liability for any willful breach of this Agreement and, provided, further, that the obligations of the parties set forth in Articles X and XI hereof shall survive any such termination and shall be enforceable hereunder.

(b)           Nothing in this Section 4.4 shall relieve the Company, the Stockholder or Purchaser of any liability for a breach of any of its covenants or agreements or willful breach of its representations and warranties contained in this Agreement prior to the date of termination.  The damages recoverable by the non-breaching party shall include all attorneys’ fees reasonably incurred by such party in connection with the transactions contemplated hereby.

(c)           The Confidentiality Agreement shall survive any termination of this Agreement and nothing in this Section 4.4 shall relieve the Stockholder or Purchaser of their obligations under the Confidentiality Agreement.  If this Agreement is terminated in accordance with Sections 4.2 and 4.3, Purchaser agrees that the prohibition in the Confidentiality Agreement restricting Purchaser’s ability to (i) solicit any employee of the Company to join the employ of Purchaser or any if its Affiliates, or (ii) actually employ any employee of the Company, shall be extended to a period of one year from the date of this Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Purchaser that:

5.1           Organization and Good Standing.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted.  The Company is duly qualified or authorized to do business and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other

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jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a Material Adverse Effect.

5.2           Authorization of Agreement.  The Company has all requisite power and authority to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated to be executed by the Company in connection with the consummation of the transactions contemplated by this Agreement (together with this Agreement, the “Company Documents”), and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the Company Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Company.  This Agreement has been, and each of the Company Documents will be at or prior to the Closing, duly and validly executed and delivered by the Company and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) the Company Documents constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

5.3           Conflicts; Consents of Third Parties.

(a)           Except as set forth on Schedule 5.3(a), none of the execution and delivery by the Company of this Agreement or the Company Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by the Company with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the certificate of incorporation and by-laws of the Company; (ii) any Contract, or Permit to which the Company is a party or by which any of the properties or assets of the Company are bound; (iii) any Order of any Governmental Body applicable to the Company or by which any of the properties or assets of the Company are bound; or (iv) any applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations or cancellations, that would not have a Material Adverse Effect.

(b)           Except as set forth on Schedule 5.3(b), no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Company in connection with the execution and delivery of this Agreement or the Company Documents or the compliance by the Company with any of the provisions hereof or thereof, or the consummation of the transactions contemplated hereby or thereby, or the transfer of any Asset to Purchaser except for (i) compliance with the requirements of the HSR Act, if applicable, and (ii) such other consents, waivers, approvals, Orders, Permits or authorizations the failure of which to obtain would not have a Material Adverse Effect.

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5.4           Balance Sheets. The Company has prepared the Baseline Balance Sheet, and will prepare the Record Date Balance Sheet, in accordance in all material respects with GAAP.  The Baseline Balance Sheet fairly presents, and the Record Date Balance Sheet will fairly present, the financial position of the Company in all material respects as of the Baseline Balance Sheet Date and the Record Date respectively.

5.5           Financing Contracts.

(a)           The Company has previously made available to Purchaser a complete and accurate list of all Financing Contracts held by the Company as of the date shown on the Schedule.  Schedule 5.5(a) sets forth all of the Financing Contracts as of such date and will be updated as of the Closing Date.

(b)           Except as set forth Schedule 5.5(b), as such Schedule will be updated as of the Closing Date, to the Knowledge of the Company, each Financing Contract (i) is valid, binding and enforceable by the Company against the lessee, obligor or borrower thereunder in accordance with its written terms, except as may be limited by any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar Law affecting creditors’ rights and remedies generally and, with respect to the enforceability of any Financing Contract by general principles of equity, including principles of commercial reasonableness, good faith and fair dealing, and (ii) constitutes and arose out of a bona fide business transaction entered into in the ordinary and usual course of business of the Company consistent with its past practices.

(c)           Except as set forth in Schedule 5.5(c), as such Schedule will be updated as of the Closing Date, (i) each Financing Contract is, or will be at the Closing Date, in full force and effect, free and clear of Liens other than Permitted Exceptions, and not subject to any defense, offset, claim, right of rescission or counterclaim by the obligor under such Financing Contract, or any Person claiming under any such right (subject to applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent transfer and other Laws relating to or affecting creditors’ rights generally, to general equitable principles and to the Servicemembers Civil Relief Act); (ii) the Company is not in material breach of or default under any Financing Contract, except as set forth in Schedule 5.5(c), no other party is in payment breach thereof of more than sixty (60) days or material default thereunder and to the Knowledge of the Company, and no other event has occurred which, with notice and/or lapse of time, would constitute a default by the Company or any other party thereunder; (iii) the Company shall be the owner and holder of all right, title and interest in each Financing Contract; (iv) no obligor under any Financing Contract (A) has acquired any Portfolio Property, any interest in any Portfolio Property or the use of any Portfolio Property pursuant to such Financing Contract for personal, family or household use or for agricultural purposes or (B) is a director, executive officer or five percent or greater shareholder of the Company, or to the Knowledge of the Company, any Person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing; (v) the Company has in its possession a fully executed original or copy of any lease or note (and an executed original or a true and correct copy of all other documents) comprising each Financing Contract and all other documents required by the Company’s credit or investment approval with respect to each Financing

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Contract; (vi) the Company has in its possession documentation sufficient to establish the original cost or value (as used by the Company) of all Portfolio Property for purposes of determining personal property Tax Liability; (vii) except with respect to private label arrangements, all payments pursuant to each Financing Contract are made for the benefit of the Company; (viii) the Company has approved credit applications and otherwise entered into commitments with respect to Financing Contracts in a manner consistent in all material respects with the Company’s credit policies, collateral eligibility standards and credit quality classifications in effect at the time and otherwise complied in all material respects with standards of evaluating originating, underwriting and funding new businesses which are in all material respects consistent with its past practices; and (ix) the Company is not and is not committed to become a party to any contract with respect to the Residual as to any Portfolio Property.

(d)           Each Financing Contract, now held or at any time previously held by the Company (whether or not currently held by the Company and whether or not outstanding), has been administered and serviced (if serviced by the Company), and the relevant Financing Contract files are being maintained in all material respects in accordance with the relevant loan documents and the Company’s underwriting standards and was originated, solicited or acquired, as the case may be, in all material respects in accordance with the Company’s policies, practices and procedures regarding such matters as in effect at the time of such origination, solicitation or acquisition, which policies, practices and procedures have been previously disclosed to Purchaser.

(e)           Except as set forth in Schedule 5.5(e), as such Schedule will be updated as of the Closing Date, all Financing Contracts purchased or originated by the Company and subsequently sold by Company have been sold without recourse to the Company (other than for breach of representations or warranties by the Company set forth in the conveyance documents and which, to the Knowledge of the Company, there are no such breaches) and without any obligation to repurchase such Financing Contracts or Liability under any yield maintenance or similar obligation.  Each outstanding participation sold by the Company was sold with the risk of non-payment of all or any portion of that underlying Financing Contract to be shared by each participant (including the Company) and except as set forth in Schedule 5.5(e) without any recourse of such other lender or participant to the Company for payment or repurchase of the amount of such Financing Contract represented by the participation or Liability under any yield maintenance or similar obligation.

(f)           Schedule 5.5(f), as such Schedule will be updated as of the Closing Date, sets forth a list of all Non-Accrual Financing Contracts.  The Company has not received any written notice from any other Person indicating that the Company is presently in material default under or in material breach of any Financing Contract.

(g)           Except as set forth in Schedule 5.5(g), as such Schedule will be updated as of the Closing Date, each Financing Contract is expressly governed by the Laws of the State of Missouri.  To the Knowledge of the Company, each obligor under a Financing Contract is located in the United States.  All amendments, modifications, waivers, extensions, cancellations and releases in respect of any Financing Contract are in writing and are maintained in hard copy or are stored electronically in the documentation for such Financing Contract.

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(h)           The Financing Contract files maintained by the Company are in good order and contain all originals or copies of all material documents relating to the origination and enforcement of the Financing Contracts.

(i)           Each Finance Contract is evidenced by a written agreement, and there are no material understandings, agreements, undertakings or arrangements between any of the Company and the lessees or transferees under any Financing Contract which are not set forth therein or in a written agreement included in the Financing Contract files relating to such Financing Contract.  The entries made on Company’s system and on the Closing Statement with respect to each Financing Contract are consistent with the Financing Contract files relating thereto.  Each such Financing Contract and any Financing Contract files pertaining thereto shall be supplied by the Company to Purchaser as promptly as possible but in any event at the Closing Date.

(j)           No payments required to be made under any Financing Contract have been paid, in advance of the due dates thereof except for payments reflected in the related Financing Contract receivable.

(k)           The Company has not acted, or failed to act, in a manner which would materially alter or reduce any of its rights or benefits under any manufacturers’ or vendors’ warranties or guarantees relating to property covered by any Financing Contract.

(l)           The Company has properly prepared and filed Financing Statements for each Financing Contract involving $25,000 or more, and each such Financing Statement is current.

(m)           Each Financing Contract (and any related guarantees) is a valid, binding and enforceable, non-cancelable obligation of the obligor thereunder (and guarantors thereof) in accordance with its terms, except as the same may be affected by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally.  Each of such obligors and guarantors is a bona fide party thereto and, to the Knowledge of the Company, has the requisite legal capacity to enter into the respective agreements to which it is a party.

(n)           Except as set forth in Schedule 5.5(n), as such Schedule will be updated as of the Closing Date, the property that is the subject of each Financing Contract has been delivered to the obligor thereunder, and accepted by such obligor.

(o)           Except as set forth in Schedule 5.5(o), as such Schedule will be updated as of the Closing Date, the Company has absolute, complete and indefeasible title to the property subject to each Financing Contract (or a duly perfected first-lien security interest in the property subject to such Financing Contract) and all sums due thereunder, free and clear of any and Liens or claims of any Person; and except as set forth on such Schedule as will be updated as of Closing, the supplier or vendor of said property has received payment in full for said property.

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(p)           The Company is not in material breach of any obligation under any Financing Contract.

(q)           The Company has received no notice of any event other than a payment default listed on Schedule 5.5(q), as such Schedule will be updated as of the Closing Date, which is, or with notice and/or lapse of time is likely, to constitute a material default under any Financing Contract or of any claim by an obligor or guarantor of a right of offset or counterclaim.

(r)           Except as set forth in Schedule 5.5(o), as such Schedule will be updated as of the Closing Date, the Company has proof of payment (either by copies of canceled checks or confirmations of wire transfers or by such other evidence, all as shall be satisfactory to Purchaser in its sole discretion) for the Portfolio Property underlying each Financing Contract, and shall deliver such proof of payment to Purchaser on or before the Closing Date.

(s)           The descriptions of each Financing Contract set forth on Schedule 5.5(a), as such Schedule will be updated as of the Closing Date, are, and on the Closing Statement will be, properly coded with respect to each of the following items of data: (i) the number of payments remaining, (ii) the periodic payment amount, (iii) the security deposit amount, (iv) the end of lease disposition, (v) the Residual or the Final Contractual Payment.

(t)           Except as set forth on Schedule 5.5(t), as such Schedule will be updated as of the Closing Date, the Final Contractual Payment on each Financing Contract is a contractual obligation and not an optional payment.

(u)           All payment obligations by any obligors pursuant to each Financing Contract are due to the Company, and no payments are made to any third party originator.  Except as set forth on Schedule 5.5(u), as such Schedule will be updated as of the Closing Date, no Financing Contract requires any current or future payment to a third party originator.

5.6           Financial Statements.  The Company has made available to Purchaser copies of (i) the audited consolidated balance sheets of the Company as at December 31, 2006, 2005 and 2004 and the related audited consolidated statements of income and of cash flows of the Company for the years then ended and (ii) the unaudited consolidated balance sheet of the Company as at September 30, 2007 and the related consolidated statements of income and cash flows of the Company for the nine month period then ended (such audited and unaudited statements, including the related notes and schedules thereto, are referred to herein as the “Financial Statements”).  Except as set forth in the notes thereto and as disclosed in Schedule 5.6, each of the Financial Statements has been prepared in accordance with GAAP consistently applied and presents fairly in all material respects the consolidated financial position, results of operations and cash flows of the Company as at the dates and for the periods indicated therein.

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For the purposes hereof, the unaudited consolidated balance sheet of the Company as at September 30, 2007 is referred to as the “Balance Sheet” and September 30, 2007 is referred to as the “Balance Sheet Date”.

5.7           Absence of Certain Developments.  Except as contemplated by this Agreement or as set forth on Schedule 5.7, since the Balance Sheet Date (i) the Company has conducted its business only in the Ordinary Course of Business and (ii) there has not been any event, change, occurrence or circumstance that has had a Material Adverse Effect.

5.8           Title.  The Company will deliver good and marketable title to the Assets owned by the Company free and clear of any Liens, except (i) as set forth on Schedule 5.8, (ii) that no representation is made in this Section 5.8 as to the Assets covered by Sections 5.5, 5.10 and 5.12 (as to which such Sections shall govern), and (iii) in the case of Portfolio Property, the Lien of the Financing Contracts themselves.

5.9           Taxes.  Except as set forth on Schedule 5.9, the Company has timely filed all material Federal, state and foreign Tax Returns and reports required to be filed by it, and all Taxes required to be paid by it have either been paid by it or are reflected in accordance with GAAP as a reserve for Taxes on the most recent Financial Statements, and all such returns and reports are correct and complete in all material respects, or requests for extensions to file such returns or reports have been timely filed, granted and have not expired, except to the extent that such failures to file, to pay or to have extensions granted that remain in effect individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect, and the Financial Statements reflect an adequate reserve for all Taxes payable by the Company for all taxable periods and portions thereof through the date of such financial statements.  All material Taxes required to be withheld by the Company have been withheld and have been duly and timely paid to the proper Taxing Authority, except for such failure as would not have a Material Adverse Effect.  No deficiencies for any Taxes have been proposed, asserted or assessed against the Company that are still pending. No income Tax Return of the Company is under current examination by the IRS or by any state or foreign tax authority.  All assessments for Taxes due with respect to any concluded litigation have been fully paid or have been adequately reserved on the Financial Statements in accordance with GAAP.  This Section 5.9 represents the sole and exclusive representation and warranty of the Company regarding tax matters.

5.10           Real Property.  Schedule 5.10 sets forth a complete list of (i) all material real property and interests in real property owned in fee by the Company (individually, an “Owned Property” and collectively, the “Owned Properties”), and (ii) all leases of real property by the Company (individually, a “Real Property Lease” and collectively, the “Real Property Leases” and, together with the Owned Properties, being referred to herein individually as a “Company Property” and collectively as the “Company Properties”) as lessee or lessor.  To the Knowledge of the Company, the Company has fee title to all Owned Property, free and clear of all Liens of any nature whatsoever except (A) Liens set forth on Schedule 5.10 and (B) Permitted Exceptions.  Except as set forth in Schedule 5.10, the Company has not received any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by the Company under any of the Real Property Leases.

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5.11           Tangible Personal Property.  Schedule 5.11 sets forth all leases of personal property by the Company (“Personal Property Leases”).  Except as set forth in Schedule 5.11, the Company has not received any written notice of any default or any event that with notice or lapse of time, or both, would constitute a default, by the Company under any of the Personal Property Leases.

5.12           Intellectual Property.  To the Knowledge of the Company, Schedule 5.12 sets forth the Company’s Intellectual Property.  Except as set forth on Schedule 5.12, the Company owns or has valid licenses to use all material Intellectual Property used by it in the Ordinary Course of Business, except to the extent the failure to be the owner or the valid licensee would not be material.  Except as set forth on Schedule 5.12, to the Knowledge of the Company, (i) the material Intellectual Property used by the Company is not the subject of any challenge received by the Company in writing and (ii) the Company has not received any written notice of any default or any event that with notice or lapse of time, or both, would constitute a default under any material Intellectual Property license to which the Company is a party or by which it is bound.

5.13           Material Contracts.

(a)           Schedule 5.13(a) sets forth all of the following Contracts to which the Company is a party or by which it is bound (collectively, the “Material Contracts”) and that are included in the Assets:

(i)           Contracts with the Stockholder or any current officer or director of the Company (other than Contracts with the Stockholder or any of its affiliates made in the Ordinary Course of Business on terms generally available to similarly situated non-affiliated parties);

(ii)           Contracts relating to loan origination or servicing systems;

(iii)           Contracts for the sale of any of the assets of the Company other than in the Ordinary Course of Business, for consideration in excess of $50,000;

(iv)           Contracts relating to any acquisition to be made by the Company of any operating business or the capital stock of any other Person, in each case for consideration in excess of $50,000;

(v)           Contracts relating to the incurrence of Indebtedness, or the making of any loans, in each case involving amounts in excess of $ 50,000;

(vi)           Contracts which involve the expenditure of more than $50,000 in the aggregate or require performance by any party more than one year from the date hereof that, in either case, are not terminable by the Company without penalty on notice of 180 days’ or less.

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(b)           Except as set forth on Schedule 5.13(b), as such Schedule will be updated as of Closing, to the Knowledge of the Company, the Company has not received any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by the Company under any Material Contract, except for defaults that would not have a Material Adverse Effect.

5.14           Employees.  All records and reports provided by the Company to the Purchaser with respect to the employees of the Company are complete and accurate in all material respects.

5.15           Labor.

(a)           Except as set forth on Schedule 5.15(a), the Company is not a party to any labor or collective bargaining agreement.

(b)           Except as set forth on Schedule 5.15(b), there are no (i) strikes, work stoppages, work slowdowns or lockouts pending or, to the Knowledge of the Company, threatened against or involving the Company, or (ii) unfair labor practice charges, grievances or complaints pending or, to the Knowledge of the Company, threatened by or on behalf of any employee or group of employees of the Company, except in each case as would not have a Material Adverse Effect.

5.16           Litigation.  Schedule 5.16 sets forth all Legal Proceedings pending or, to the Knowledge of the Company threatened against the Company before any Governmental Body as of the date hereof.  The Company is not subject to any Order of any Governmental Body except to the extent the same would not reasonably be expected to have a Material Adverse Effect.

5.17           Compliance with Laws; Permits.

(a)           The Company is in compliance with all Laws of any Governmental Body applicable to its businesses or operations, except where the failure to be in compliance would not have a Material Adverse Effect.  The Company has not received any written notice of or been charged with the violation of any Laws, except where such violation would not have a Material Adverse Effect.

(b)           The Company currently has all Permits which are required for the operation of its businesses as presently conducted, other than those the failure of which to possess would not have a Material Adverse Effect.  The Company is not in default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of any Permit to which it is a party, except where such default or violation would not have a Material Adverse Effect.

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5.18           Environmental Matters.  The representations and warranties contained in this Section 5.18 are the sole and exclusive representations and warranties of the Company or the Stockholder pertaining or relating to any environmental, health or safety matters, including any arising under any Environmental Laws.  Except as set forth on Schedule 5.18 hereto and except in each case as would not have a Material Adverse Effect:

(a)           the Company is, and at all times has been, in compliance with, and has not been and is not in violation of, any Environmental Laws. Such compliance includes obtaining, maintaining and complying with any Permits required under all applicable Environmental Laws necessary to operate the Business.

(b)           Neither the Company nor the Stockholder has any reasonable basis to expect, nor has any of them received, any actual or threatened Order, notice or other communication from any Governmental Body or Person, alleging any violation of or Liability under any Environmental Law or of any obligation to undertake or bear the cost of any with respect to any Company Property or other property or asset (whether real, personal or mixed) in which the Company has or had an interest;

(c)           there are no pending or, to the Knowledge of the Company, threatened claims, Liens, or other restrictions of any nature resulting from any Liabilities, arising under or pursuant to any Environmental Law with respect to or affecting any Company Property or any other property or asset (whether real, personal or mixed) in which the Company has or had an interest;

(d)           neither the Company nor Stockholder has any knowledge of or any reasonable basis to expect, nor has either of them, received, any citation, directive, inquiry, notice, Order, summons, warning or other written communication that relates to a Remedial Action, or any alleged, actual, or potential violation or failure to comply with any Environmental Laws at any Company Property or property or asset (whether real, personal or mixed) in which the Company has or had an interest, or with respect to any property or facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used or processed by the Company have been transported, treated, stored, handled, transferred, disposed, recycled or received;

(e)           the Company is not responsible for any Liabilities arising under Environmental Laws with respect to any Company Property or, to the Knowledge of the Company, with respect to any other property or asset (whether real, personal or mixed) in which the Company (or any predecessor) has or had an interest or at any property geologically or hydrologically adjoining any Company Property or any such other property or asset;

(f)           there are no Hazardous Materials present on or in the environment at any Company Property at concentrations exceeding those allowed by applicable Environmental Laws including any Hazardous Materials contained in barrels, aboveground or underground storage tanks, landfills, land deposits, dumps, equipment (whether movable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Company Property.  The Company has not permitted or conducted, or is aware of, any Remedial Action conducted with respect to any Company Property or any other property or assets (whether real, personal or mixed) in which the Company has or had an interest in a manner that would reasonably be expected to result in the Company incurring Liabilities under Environmental Laws;

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(g)           There has been no Release or, to the Knowledge of the Company, Threat of Release, of any Hazardous Materials at or from any Company Property or at any other location where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by any Company Property, or from any other property or asset (whether real, personal or mixed) in which Stockholder has or had an interest in a manner that would reasonably be expected to result in the Company incurring Liabilities under Environmental Laws; and

(h)           Stockholder has to the knowledge of the Stockholder, made available to Purchaser true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by Stockholder pertaining to Hazardous Materials or Remedial Action in, on, or under the Company Property, or concerning compliance, by Stockholder with Environmental Laws.

5.19           Financial Advisors.  No Person, other than Lehman Brothers Inc., has acted, directly or indirectly, as a broker, finder or financial advisor for the Stockholder or the Company in connection with the transactions contemplated by this Agreement and no other such Person is entitled to any fee or commission or like payment from Purchaser in respect thereof.

5.20           Sufficiency of Assets, Excluded Assets.  Except for the assets, insurance and corporate services described on Schedule 5.20, the Company’s assets constitute all of the assets necessary together with the Stockholder’s agreements hereunder for Purchaser to operate the Company as of the Closing Date without interruption and in the Ordinary Course of Business.

5.21           Intentionally Deleted.

5.22           No Other Representations or Warranties; Schedules.  Except for the representations and warranties contained in this Article V (as modified by the Schedules hereto), neither the Company nor any other Person makes any other express or implied representation or warranty with respect the Company or the transactions contemplated by this Agreement, and the Company disclaims any and all other representations or warranties, whether made by the Company, the Stockholder or any of their respective Affiliates, officers, directors, employees, agents or representatives.  Except for the representations and warranties contained in Article V hereof (as modified by the Schedules hereto as supplemented or amended), the Company and the Stockholder hereby disclaim all liability and responsibility for any representation, warranty, projection, forecast, statement, or information made, communicated, or furnished (orally or in writing) to Purchaser or its Affiliates or representatives (including any opinion, information, projection, or advice that may have been or may be provided to Purchaser by any director, officer, employee, agent, consultant, or representative of the Company or the Stockholder or any of their respective Affiliates).  The Company and the Stockholder make no representations or warranties to Purchaser regarding the probable success or profitability of the Company.  The disclosure of any matter or item in any schedule hereto shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed.

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

The Stockholder hereby represents to Purchaser that:

6.1           Organization and Good Standing.  The Stockholder is a federal savings bank duly incorporated, validly existing and in good standing under the laws of the United States and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business.

6.2           Authorization of Agreement.  The Stockholder has all requisite corporate power, authority and legal capacity to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by the Stockholder in connection with the consummation of the transactions contemplated by this Agreement (together with this Agreement, the “Stockholder Documents”), and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and each of the Stockholder Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required corporate  action on the part of the Stockholder.  This Agreement has been, and each of the Stockholder Documents will be at or prior to the Closing, duly and validly executed and delivered by the Stockholder, and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each Stockholder Document, when so executed and delivered will constitute, the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

6.3           Conflicts; Consents of Third Parties.

(a)           None of the execution and delivery by the Stockholder of this Agreement or the Stockholder Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by the Stockholder with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the charter documents of the Stockholder; (ii) any Contract, or Permit to which the Stockholder is a party or by which any of the properties or assets of the Stockholder are bound; (iii) any Order of any Governmental Body applicable to the Stockholder or by which any of the properties or assets of the Stockholder are bound; or (iv) any applicable Law, except where the failure to do so would not result in a Material Adverse Effect.

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(b)           No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Stockholder in connection with the execution and delivery of this Agreement or the Stockholder Documents, or the compliance by such Stockholder with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby and thereby, except for (A) compliance with the requirements of the HSR Act, if applicable, and (B) for such other consents, waivers, approvals, Orders, permits or authorizations  the failure of which to obtain would not have a material adverse effect on the Stockholder’s ability to consummate the transactions contemplated hereby.

6.4           Litigation.  There are no Legal Proceedings pending or, to the knowledge of the Stockholder, threatened that are reasonably likely to prohibit or restrain the ability of the Stockholder to enter into this Agreement or consummate the transactions contemplated hereby.

6.5           Financial Advisors.  No Person, other than Lehman Brothers Inc., has acted, directly or indirectly, as a broker, finder or financial advisor for the Stockholder in connection with the transactions contemplated by this Agreement, and no other such Person is entitled to any fee or commission or like payment in respect thereof.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to the Stockholder that:

7.1           Organization and Good Standing.  Each Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate properties and carry on its business.

7.2           Authorization of Agreement.  Each Purchaser has full corporate power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by such Purchaser in connection with the consummation of the transactions contemplated hereby and thereby (the “Purchaser Documents”), and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance by each Purchaser of this Agreement and each Purchaser Document have been duly authorized by all necessary corporate action on behalf of such Purchaser.  This Agreement has been, and each Purchaser Document will be at or prior to the Closing, duly executed and delivered by each Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each Purchaser Document when so executed and delivered will constitute, the legal, valid and binding obligation of each Purchaser, enforceable against each Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

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7.3           Conflicts; Consents of Third Parties.

(a)           Except as set forth on Schedule 7.3(a) hereto, none of the execution and delivery by each Purchaser of this Agreement or the Purchaser Documents, the consummation of the transactions contemplated hereby or thereby, or the compliance by each Purchaser with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the certificate of incorporation and by-laws of such Purchaser; (ii) any Contract or Permit to which such Purchaser is a party or by which Purchaser or its properties or assets are bound; (iii) any Order of any Governmental Body applicable to such Purchaser or by which any of the properties or assets of such Purchaser are bound; or (iv) any applicable Law.

(b)           No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of either Purchaser in connection with the execution and delivery of this Agreement or the Purchaser Documents, the compliance by each Purchaser with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby or the taking by each Purchaser of any other action contemplated hereby, except for compliance with the requirements of the HSR Act, if applicable.

7.4           Litigation.  There are no Legal Proceedings pending or, to the knowledge of each Purchaser, threatened that are reasonably likely to prohibit or restrain the ability of such Purchaser to enter into this Agreement or consummate the transactions contemplated hereby.

7.5           Financial Advisors.  Except for Fairview Advisors, LLC, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for either Purchaser in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof.

7.6           Financial Capability.  At the Closing the Purchaser will have, sufficient funds available to pay the Purchase Price and any expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement.

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7.7           Condition of the Business.  Notwithstanding anything contained in this Agreement to the contrary, each Purchaser acknowledges and agrees that neither the Company nor the Stockholder is making any representations or warranties whatsoever, express or implied, beyond those expressly given by the Company and the Stockholder, as the case may be, in Article V and Article VI, respectively (as modified by the Schedules hereto as supplemented or amended), and each Purchaser acknowledges and agrees that, except for the representations and warranties contained therein, the assets and the business of the Company is being transferred on a “where is” and, as to condition, “as is” basis.  Any claims either Purchaser may have for breach of representation or warranty shall be based solely on the representations and warranties of the Company or the Stockholder set forth in Article V or Article VI, respectively (as modified by the Schedules hereto as supplemented or amended).  Each Purchaser further represents that none of the Company, any Stockholder or any of their respective Affiliates nor any other Person has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding the Company or the Stockholder, or the transactions contemplated by this Agreement not expressly set forth in this Agreement, and none of the Company, the Stockholder, any of their respective Affiliates or any other Person will have or be subject to any Liability to either Purchaser or any other Person resulting from the distribution to either Purchaser or its representatives or Purchaser’s use of, any such information, including any confidential memoranda distributed on behalf of the Company relating to the Company or other publications or data room information provided to either Purchaser or its representatives, or any other document or information in any form provided to either Purchaser or its representatives in connection with the sale of the Company and the transactions contemplated hereby.  Each Purchaser acknowledges that it has conducted to its satisfaction, its own independent investigation of the condition, operations and business of the Company and, in making its determination to proceed with the transactions contemplated by this Agreement, each Purchaser has relied on the results of its own independent investigation.

7.8           Closing Date Balance Sheet. The Purchaser will prepare the Closing Date Balance Sheet in accordance in all material respects with GAAP.  The Closing Date Balance Sheet will fairly present, the financial position of the Company in all material respects as of the Closing Date.

ARTICLE VIII

COVENANTS

8.1           Access to Information.  Prior to the Closing, Purchaser shall be entitled, through its officers, employees and representatives (including its legal advisors and accountants), to make such investigation of the properties, businesses and operations of the Company and such examination of the books and records of the Company as it reasonably requests and to make extracts and copies of such books and records.  Any such investigation and examination shall be conducted during regular business hours upon reasonable advance notice and under reasonable circumstances and shall be subject to restrictions under applicable Law.  The Company shall cause the officers, employees, consultants, agents, accountants, attorneys and other representatives of the Company to cooperate with Purchaser and Purchaser’s representatives in connection with such investigation and examination,

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and Purchaser and its representatives shall cooperate with the Company and its representatives and shall use their reasonable efforts to minimize any disruption to the business.  Notwithstanding anything herein to the contrary, no such investigation or examination shall be permitted to the extent that it would require the Company to disclose information subject to attorney-client privilege or conflict with any confidentiality obligations to which the Company is bound.  Notwithstanding anything to the contrary contained herein, prior to the Closing, without the prior written consent of the Company, which may be withheld for any reason, (i) Purchaser shall not contact any suppliers to, or customers of, the Company, and (ii) Purchaser shall have no right to perform invasive or subsurface investigations of the properties or facilities of the Company.

8.2           Conduct of the Business Pending the Closing.

(a)           Prior to the Closing, except (I) as set forth on Schedule 8.2, (II) as required by applicable Law, (III) as otherwise contemplated by this Agreement or (IV) with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), the Company shall:

(i)           conduct the Business only in the Ordinary Course of Business;

(ii)           use its commercially reasonable efforts to (A) preserve the present business operations, organization and goodwill of the Company, and (B) preserve the present relationships with customers and suppliers of the Company;

(iii)           except as otherwise directed by Purchaser in writing, and without making any commitment on Purchaser’s behalf, use commercially reasonable efforts to preserve intact the current business organization of the Business, keep available the services of the officers, employees and agents of the Business and maintain the relations and good will of the Business with suppliers, customers, landlords, creditors, employees, agents and others having business relationships with it;

(iv)           confer with Purchaser prior to implementing operational decisions of a material nature with respect to the Business;

(v)           otherwise report periodically to Purchaser concerning the status of the business, operations and finances of the Business;

(vi)           use its commercially reasonable efforts to keep in full force and effect, without amendment, all material rights relating to the Business;

(vii)           comply with all Laws and contractual obligations applicable to the operations of the Business;

(viii)                      use its commercially reasonable efforts to continue in full force and effect all insurance coverage pertaining to the Business under its existing policies or substantially equivalent policies;

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(ix)           upon request from time to time, use its commercially reasonable efforts to execute and deliver all documents, make all truthful oaths, testify in any Legal Proceedings and do all other acts that may be reasonably necessary or desirable in the opinion of Purchaser to consummate the transactions contemplated hereunder, all without further consideration; and

(x)           maintain all books and records of the Company relating to the Business in the Ordinary Course of Business.

(b)           Except (I) as set forth on Schedule 8.2, (II) as required by applicable Law, (III) as otherwise contemplated by this Agreement or (IV) with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), the Company shall not:

(i)           subject to any Lien, any of the Assets;

(ii)           permit the Company to enter into or agree to enter into any merger, consolidation or sale of any of the Assets to any other Person; or

(iii)           agree to do anything prohibited by this Section 8.2.

8.3           Consents.  The Company shall apply for any consents requested by the Purchaser, and the Company and the Stockholder shall cooperate with Purchaser and use their commercially reasonable efforts to obtain at the earliest practicable date all consents and approvals required to consummate the transactions contemplated by this Agreement, including, without limitation, the consents and approvals referred to in Sections 5.3(b), 6.3(b) and 7.3(b) hereof, and to assign the Contracts set forth on Schedule 8.3 to Purchaser at the Closing.

8.4           Regulatory Approvals.

(a)           Each of Purchaser, the Company and the Stockholder (if necessary) shall (i) make or cause to be made all filings required of each of them or any of their respective Subsidiaries or Affiliates under the HSR Act or other Antitrust Laws with respect to the transactions contemplated hereby as promptly as practicable and, in any event, within 20 Business Days after the date of this Agreement in the case of all filings required under the HSR Act and within four weeks in the case of all other filings required by other Antitrust Laws, (ii) comply at the earliest practicable date with any request under the HSR Act or other Antitrust Laws for additional information, documents, or other materials received by each of them or any of their respective subsidiaries or Affiliates from the FTC, the Antitrust Division or any other Governmental Body in respect of such filings or such transactions, and (iii) cooperate with each other in connection with any such filing (including, to the extent permitted by applicable law, providing copies of all such documents to the non-filing parties prior to filing and considering all reasonable additions, deletions or changes suggested in connection therewith) and in connection with resolving any investigation or other inquiry of any of the FTC, the Antitrust Division or other Governmental Body under any Antitrust Laws with respect to any such filing or any such transaction.  Each such party shall use its best

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efforts to furnish to each other all information required for any application or other filing to be made pursuant to any applicable law in connection with the transactions contemplated by this Agreement.  Each such party shall promptly inform the other parties hereto of any oral communication with, and provide copies of written communications with, any Governmental Body regarding any such filings or any such transaction.  No party hereto shall independently participate in any formal meeting with any Governmental Body in respect of any such filings, investigation, or other inquiry without giving the other parties hereto prior notice of the meeting and, to the extent permitted by such Governmental Body, the opportunity to attend and/or participate.  Subject to applicable Law, the parties hereto will consult and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto relating to proceedings under the HSR Act or other Antitrust Laws.  Any party may, as it deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other parties under this Section 8.4 as “outside counsel only.”  Such materials and the information contained therein shall be given only to the outside legal counsel of the recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient, unless express written permission is obtained in advance from the source of the materials.

(b)           Each of Purchaser and the Company shall use its best efforts to resolve such objections, if any, as may be asserted by any Governmental Body with respect to the transactions contemplated by this Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other United States federal or state or foreign statutes, rules, regulations, orders, decrees, administrative or judicial doctrines or other laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, the “Antitrust Laws”).  In connection therewith, if any Legal Proceeding is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as in violation of any Antitrust Law, each of Purchaser and the Company shall cooperate and use its best efforts to contest and resist any such Legal Proceeding, and to have vacated, lifted, reversed, or overturned any decree, judgment, injunction or other Order whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the transactions contemplated by this Agreement, including by pursuing all available avenues of administrative and judicial appeal, unless by mutual agreement, Purchaser and the Company decide that litigation is not in their respective best interests.  Each of Purchaser and the Company shall use commercially reasonable efforts to take such action as may be required to cause the expiration of the notice periods under the HSR Act or other Antitrust Laws with respect to such transactions as promptly as possible after the execution of this Agreement. In connection with and without limiting the foregoing, each of Purchaser and the Company agree to use its best efforts to take promptly any and all steps necessary to avoid or eliminate each and every impediment under any Antitrust Laws that may be asserted by any Federal, state and local and non-United States antitrust or competition authority, so as to enable the parties to close the transactions contemplated by this Agreement as

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expeditiously as possible, including effecting or committing to effect, by consent decree, hold separate orders, trust or otherwise the sale or disposition of such of its assets or businesses as are required to be divested in order to avoid the entry of, or to effect the dissolution of, any decree, Order, judgment, injunction, temporary restraining order or other order in any suit or preceding, that would otherwise have the effect of preventing or materially delaying the consummation of the transactions contemplated by this Agreement.

8.5           Further Assurances.  Subject to, and not in limitation of, Section 8.4, each of Purchaser and the Company shall use its commercially reasonable efforts to (i) take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement and (ii) cause the fulfillment at the earliest practicable date of all of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement.

8.6           Non-Competition; Non-Solicitation; Confidentiality, Etc.

(a)           For a period of three (3) years from and after the Closing Date, neither the Company nor the Stockholder shall directly or indirectly, own, manage, engage in, operate, control, work for, consult with, render services for, do business with, maintain any interest in (proprietary, financial or otherwise) or participate in the ownership, management, operation or control of, any business, whether in corporate, proprietorship or partnership form or otherwise, engaged in the micro-ticket equipment lease financing business or that otherwise competes with the Business (a “Restricted Business”); provided, however, that the restrictions contained in this Section 8.6(a) shall not restrict the acquisition by the Stockholder, directly or indirectly, of (i) less than 5% of the outstanding capital stock of any publicly traded company engaged in a Restricted Business, (ii) any company of which a Restricted Business is not the principal operation or purpose; or (iii) any distressed assets acquired in a secondary market, and provided, further, that the restrictions contained in this Section 8.6(a) shall not restrict the Stockholder from directly or indirectly (x) engaging in any Restricted Business in which it was engaged as of the Closing Date, or (y) disposing of, servicing or dealing in any way with the Retained Assets.

(b)           Purchaser acknowledges that the information provided to it in connection with this Agreement and the transactions contemplated hereby is subject to the terms of the confidentiality agreement between Purchaser and the Company dated July 16, 2007 (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference.  Effective upon, and only upon, the Closing Date, the Confidentiality Agreement shall terminate.

(c)           Neither the Company nor the Stockholder shall disparage the Business, Purchaser, Purchaser’s business or any of Purchaser’s shareholders, directors, officers, employees or agents.  Purchaser will not disparage Stockholder, Stockholder’s business or any of Stockholder’s shareholders, directors, officers, employees or agents.

(d)           If a final judgment of a court or tribunal of competent jurisdiction determines that any term or provision contained in Section 8.6 is invalid or unenforceable, then the parties agree that the court or tribunal will have the power to reduce the scope, duration or geographic area of the term or provision, to delete specific words or phrases or to

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delete any invalid or unenforceable term or provision.  This Section 8.6 will be enforceable as so modified after the expiration of the time within which the judgment may be appealed.  This Section 8.6 is reasonable and necessary to protect and preserve parties legitimate business interests and to prevent any unfair advantage.  The parties hereto acknowledge and agree that any remedy at law for any breach of the provisions of this Section 8.6 would be inadequate, and hereby consent to the granting by any court of an injunction or other equitable relief, without the necessity of actual monetary loss being proved, in order that the breach or threatened breach of such provisions may be effectively restrained.

8.7           Preservation of Records.  The Stockholder and Purchaser agree that each of them shall preserve and keep the records held by them or their Affiliates relating to the respective businesses of the Company for a period of seven years from the Closing Date and shall make such books, records and personnel available to the other as may be reasonably required by such party (i) in connection with the preparation of financial statements, regulatory filings or Tax returns of the Company and the Stockholder or their Affiliates in respect of periods ending on or prior to Closing, (ii) in connection with any insurance claims by, Legal Proceedings or tax audits against or governmental investigations of the Stockholder or Purchaser or any of their Affiliates, (iii) in order to enable the Stockholder or Purchaser to comply with their respective obligations under this Agreement and each other agreement, document or instrument contemplated hereby or thereby, or (iv) for the purposes of administering the Assets, the Assumed Liabilities, the Retained Assets and/or the Retained Liabilities.  In the event the Stockholder or Purchaser wishes to destroy such records after that time, such party shall first give 90 days prior written notice to the other and such other party shall have the right at its option and expense, upon prior written notice given to such party within that 90 day period, to take possession of the records within 180 days after the date of such notice.  The Purchaser and the Stockholder shall be entitled, at their sole cost and expense, to make copies of the books and records to which they are entitled to access pursuant to this Section 8.7.

8.8           Publicity.  

(a)           None of the Stockholder, the Company or Purchaser shall issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other party hereto, which approval will not be unreasonably withheld, conditioned or delayed, unless, in the sole judgment of the Stockholder, the Company or Purchaser, as applicable, disclosure is otherwise required by applicable Law or by the applicable rules of any stock exchange or interdealer automated quotation system on which the Stockholder, the Company, Purchaser or Affiliate of Purchaser lists securities, provided that, to the extent required by applicable Law, the party intending to make such release shall use its commercially reasonable efforts consistent with such applicable Law to consult with the other party with respect to the timing and content thereof.

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(b)           The parties acknowledge that a copy of this Agreement is required to be filed by Purchaser under Securities Laws, and that such disclosure shall be limited to the extent required by such Securities Laws.

8.9           Use of Name.

(a)           Purchaser agrees that (i) it shall have no right to use or exploit the names “Lehman Brothers Bank”, “Lehman Brothers”, “Capital Crossing” or any service marks, trademarks, trade names, identifying symbols, logos, emblems, signs or insignia related thereto or containing or comprising the foregoing, including any name or mark confusingly similar thereto (collectively, the “Subject Marks”), and (ii) will not at any time hold itself out as having any affiliation with the Stockholder or any of its Affiliates.  In furtherance thereof, as promptly as practicable but in no event later than 45 days following the Closing Date, Purchaser shall remove, strike over or otherwise obliterate all Subject Marks from all materials including, without limitation, any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, computer software and other materials.

(b)           Notwithstanding any other provision in this Agreement, Purchaser agrees that for a period of 30 days following the Closing Date, Stockholder shall have a right to continue to use the name “Dolphin Capital Corp.” and any service marks, trademarks, trade names, identifying symbols, logos, emblems, signs or insignia related thereto in connection with the wind down and transition of the Retained Assets and Retained Liabilities from the Company to the Stockholder.

8.10           Employment and Employee Benefits.

(a)           Employees. Within 10 days following the date hereof, Purchaser shall extend offers of employment to at least 90% of the current employees of the Company (the “Continuing Employees”). Notwithstanding the foregoing, Purchaser is not obligated to extend an offer of employment to any current employee that either (i) the Company would have cause to terminate, or (ii) is underperforming at his or her current position, and such employees shall not be counted in making the calculation in the preceding sentence. Prior to extending offers of employment to the Continuing Employees, Purchaser shall consult with Stockholder regarding selection of such Continuing Employees and criteria for such selection, including without limitation to ensure compliance with any applicable Laws.

(b)           Compensation and Benefits.

(i)           Purchaser hereby agrees that all offers of employment to the Continuing Employees shall provide the Continuing Employees with initial salary and wages no less than a similarly qualified employee of Purchaser as of the date hereof.

(ii)           Continuing Employees shall have the right to participate in Purchaser’s benefits plans on a basis no less favorable than other comparable employees of Purchaser, including but not limited to, health insurance, prescription drug coverage, life insurance, short term disability insurance, long term disability insurance, paid

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vacations, 401(k) retirement plan with company match, and any other plans or arrangements offered by Purchaser (the “Purchaser Plans”). To the extent permissible by applicable Law, for purposes of eligibility and vesting (but not benefit accrual), under the Purchaser Plans, Purchaser shall credit each Continuing Employee with his or her years of service with the Company and any predecessor entities, to the same extent as such Continuing Employee was entitled immediately prior to the Closing to credit for such service under any similar Company Benefit Plan. The Purchaser Plans shall not deny Continuing Employees coverage on the basis of pre-existing conditions and shall credit such Continuing Employees for any deductibles and out-of-pocket expenses paid in the same calendar year as the Closing (unless coverage was denied under the corresponding Company Benefit Plan).

8.11           Disclosure Schedules; Supplementation and Amendment of Schedules.  The Company and the Stockholder may, at their option, include in the Schedules items that are not material in order to avoid any misunderstanding, and such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgement or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement.  Information disclosed in the Schedules shall constitute a disclosure for all purposes under this Agreement notwithstanding any reference to a specific section, and all such information shall be deemed to qualify the entire Agreement and not just such section.  From time to time prior to the Closing, the Company shall have the right to supplement or amend the Schedules with respect to any matter hereafter arising or discovered after the delivery of the Schedules pursuant to this Agreement.  No such supplement or amendment shall have any effect on the satisfaction of the condition to closing set forth in Section 9.1(a), nor shall it effect the indemnification obligations of the Stockholder under Article X to the extent that the changes to the Schedules have not already been reflected in the Purchase Price (as adjusted pursuant to Section 3.3).

8.12           Notification.  The Company or the Stockholder shall promptly notify Purchaser of the occurrence of any event that is reasonably expected to cause the satisfaction of the condition in Section 9.1(a) not to occur.

8.13           No Negotiation.  Until such time as this Agreement shall be terminated pursuant to Section 4.2, except for actions taken at the direction of the board of directors of the Company in fulfilling its fiduciary duties to shareholders, or as may be required by law, the Company shall not, nor shall it knowingly permit any of its representatives to, directly or indirectly, solicit, initiate, encourage or knowingly facilitate discussions or negotiations with any other person, or furnish to any other person any information concerning, (i) any sale, transfer or other disposition of all or a material portion of the Assets or stock of the Company to any person other than Purchaser, (ii) any merger or consolidation of the Company with or into any person other than Purchaser, or (iii) any issuance or sale of voting securities of the Company to any person other than Purchaser.

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8.14           Commercially Reasonable Efforts.  The Company and the Stockholder shall use commercially reasonable efforts to cause the conditions in Section 9.1 to be satisfied.  Purchaser shall use commercially reasonable efforts to cause the conditions in Section 9.2 to be satisfied.

8.15           Payment of Retained Liabilities.  If the failure to make any payments with respect to the Retained Liabilities will materially impair Purchaser’s use or enjoyment of or title to the Assets or conduct of the Business, Purchaser may, at any time after the Closing Date, elect to pay the amounts owed directly (but shall have no obligation to do so) and Stockholder shall reimburse Purchaser for such amounts; provided, that (i) Purchaser has provided Stockholder with at least thirty (30) days written notice of its intention to pay the amounts, and (ii) the payments are not being disputed by the Stockholder in good faith.

ARTICLE IX

CONDITIONS TO CLOSING

9.1           Conditions Precedent to Obligations of Purchaser.  The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser in whole or in part to the extent permitted by applicable Law):

(a)           the representations and warranties of the Company and the Stockholder set forth in this Agreement (including the Schedules as of the date hereof) shall be true and correct at and as of the Closing, except to the extent such representations and warranties relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date); provided however, that in the event of a breach of a representation or warranty, the condition set forth in this Section 9.1(a) shall be deemed satisfied unless the effect of all such breaches of representations and warranties taken together result in a Material Adverse Effect or unless permitted updates to the Schedules shall, together with any breaches of representations and warranties, result in a Material Adverse Effect, and Purchaser shall have received a certificate signed by an authorized officer of the Company, dated the Closing Date, to the foregoing effect;

(b)           the Company and the Stockholder shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by them on or prior to the Closing Date, and Purchaser shall have received a certificate signed by an authorized officer of the Company, dated the Closing Date, to the foregoing effect;

(c)           there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;

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(d)           the waiting period, if applicable, to the transactions contemplated by this Agreement under the HSR Act shall have expired or early termination shall have been granted;

(e)           delivery to Purchaser of a bill of sale executed by a duly authorized officer of the Company;

(f)           delivery to Purchaser of a good standing certificate for each of the Company and the Stockholder, issued by the state in which each of the foregoing is organized or incorporated, as the case may be, dated not more than five Business Days prior to the Closing Date;

(g)           delivery to Purchaser of a title report from First American Title Insurance Company dated October 17, 2007, subject to the exceptions detailed on Schedule 5.10;

(h)           delivery to Purchaser of a certificate, in customary form, certifying that the Company is not a foreign Person;

(i)           the Company and the Stockholder shall have delivered, or caused to be delivered, to Purchaser a legal opinion of internal counsel of Stockholder (as to authority only) substantially in the form attached hereto as Exhibit A;

(j)           certificates in customary form, of the Secretary or Assistant Secretary of each of the Company and the Stockholder, certifying and attaching all requisite resolutions or actions of the Company and the Stockholder approving the consummation of the transactions contemplated hereunder and certifying to the incumbency and signatures of the officers of the Company and the Stockholder;

(k)           delivery to Purchaser of such other deeds, bills of sale, assignments, certificates of title, other instruments of transfer and conveyance and other documents or certificates as may reasonably be requested by Purchaser, each in a form and substance satisfactory to Purchaser and its legal counsel and executed by a duly executed officer of the Company and/or the Stockholder; and

(l)           Purchaser shall have received a commercial mortgage loan offer from the Stockholder or one of its Affiliates in an amount equal to 80% of the book value of the Owned Property as of the Closing on standard market terms and conditions. For example, if the book value of the building comprising a portion of the Owned Property (without regard to accumulated depreciation as of the Closing) is equal to $1,700,067, depreciation as of the Closing is equal to $22,250 and the book value of the land comprising a portion of the Owned Property as of the Closing is equal to $200,000, for a total net book value of $1,877,817, then the amount of such loan offer shall be $1,502,000.

9.2           Conditions Precedent to Obligations of the Stockholder.  The obligations of the Stockholder to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by the Stockholder in whole or in part to the extent permitted by applicable Law):

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(a)           the representations and warranties of Purchaser set forth in this Agreement qualified as to materiality shall be true and correct (including the Schedules as of the date hereof), and those not so qualified shall be true and correct in all material respects, at and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date), and the Stockholder shall have received a certificate signed by an authorized officer of Purchaser, dated the Closing Date, to the foregoing effect;

(b)           Purchaser shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by Purchaser on or prior to the Closing Date, and the Stockholder shall have received a certificate signed by an authorized officer of Purchaser, dated the Closing Date, to the foregoing effect;

(c)           there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;

(d)           all consents, waivers and approvals listed on Schedule 9.2(d) shall have been received;

(e)           the waiting period, if applicable, to the transactions contemplated by this Agreement under the HSR Act shall have expired or early termination shall have been granted; and

(f)           Purchaser shall have delivered, or caused to be delivered, to the Stockholder evidence of the wire transfer in respect of the Purchase Price.

9.3           Frustration of Closing Conditions.  None of the Company, Purchaser or the Stockholder may rely on the failure of any condition set forth in Sections 9.1 or 9.2, as the case may be, if such failure was caused by such party’s failure to comply with any provision of this Agreement.

ARTICLE X

INDEMNIFICATION

10.1           Survival of Representations and Warranties.  The representations and warranties of the parties contained in this Agreement shall survive the Closing through and including the two (2) year anniversary of the Closing Date; provided, however, that the representations and warranties of the Company set forth in (a) Sections 5.9 (Taxes) and 5.18 (Environmental Matters) shall survive the Closing until 90 days following the expiration of the applicable statute of limitations with respect to the

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particular matter that is the subject matter thereof, and (b) Section 5.5 (Financing Contracts) shall survive the Closing through and including the date of expiration or termination in respect of the particular Financing Contract that is the subject matter thereof (in each case, the “Survival Period”); provided, however, that any obligations under Sections 10.2(a) and 10.3(a) shall not terminate with respect to any Losses as to which the Person to be indemnified shall have given notice in writing setting forth the specific claim and the basis therefor to the indemnifying party in accordance with Section 10.4(a) before the termination of the applicable Survival Period.

10.2           Indemnification by Stockholder.

(a)           Subject to Sections 8.10 and 10.5 hereof, the Stockholder hereby agrees to indemnify and hold Purchaser and its directors, officers, employees, Affiliates, stockholders, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Purchaser Indemnified Parties”) harmless from and against any and all losses, liabilities, claims, demands, judgments, damages (excluding incidental and consequential damages), fines, suits, actions, costs and expenses (individually, a “Loss” and, collectively, “Losses”):

(i)           based upon or resulting from the failure of any of the representations or warranties made by the Stockholder or the Company in this Agreement other than the representations of the Company set forth in Section 5.5 hereof, to be true and correct in all respects at and as of the date hereof;

(ii)           based upon or resulting from the failure of any of the representations or warranties made by the Company in Section 5.5 of this Agreement, to be true and correct in all respects at and as of the date hereof; and

(iii)           based upon or resulting from the breach of any covenant on the part of the Stockholder or the Company under this Agreement.

(b)           For the purposes of calculating any Losses hereunder, any materiality or Material Adverse Effect qualifications in the representations, warranties, covenants and agreements shall be disregarded.

(c)           Purchaser acknowledges and agrees that the Stockholder shall not have any Liability under any provision of this Agreement for any Loss to the extent that such Loss is caused by action taken by Purchaser or any other Person (other than the Stockholder or the Company in breach of this Agreement) after the Closing Date.  Purchaser shall take and shall cause its Affiliates to take all reasonable steps to mitigate any Loss upon becoming aware of any event which would reasonably be expected to, or does, give rise thereto.

10.3           Indemnification by Purchaser.

(a)           Subject to Section 10.5, Purchaser hereby agrees to indemnify and hold Company, the Stockholder and their respective directors, officers, employees, Affiliates, stockholders, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Seller Indemnified Parties”) harmless from and against, and pay to the applicable Seller Indemnified Parties the amount of, any and all Losses:

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(i)           based upon or resulting from the failure of any of the representations and warranties made by Purchaser in this Agreement to be true and correct in all respects at the date hereof; and

(ii)           based upon or resulting from the breach of any covenant on the part of Purchaser under this Agreement.

(b)           The Stockholder shall take and cause its Affiliates to take all reasonable steps to mitigate any Loss upon becoming aware of any event which would reasonably be expected to, or does, give rise thereto.

10.4           Indemnification Procedures.

(a)           A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought.

(b)           In the event that any Legal Proceedings shall be instituted, or that any claim shall be asserted, by any third party in respect of which payment may be sought under Sections 10.2 and 10.3 hereof (regardless of the limitations set forth in Section 10.5) ( an “Indemnification Claim”), the indemnified party shall promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party.  The failure of the indemnified party to give reasonably prompt notice of any Indemnification Claim shall not release, waive or otherwise affect the indemnifying party’s obligations with respect thereto except to the extent that the indemnifying party is prejudiced as a result of such failure.  The indemnifying party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the indemnified party, and to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against by it hereunder.  If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against by it hereunder, it shall within 30 days (or sooner, if the nature of the Indemnification Claim so requires) notify the indemnified party of its intent to do so.  If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, the indemnified party may defend against, negotiate, settle or otherwise deal with such Indemnification Claim.  If the indemnifying party shall assume the defense of any Indemnification Claim, the indemnified party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided, however, that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if, (i) so requested by the indemnifying party to participate or (ii) in the reasonable opinion of counsel to the indemnified party, a conflict or potential conflict exists between the indemnified party and the indemnifying

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party that would make such separate representation advisable; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel (plus any appropriate local counsel) for all indemnified parties in connection with any Indemnification Claim.  The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Indemnification Claim.  Notwithstanding anything in this Section 10.4 to the contrary, neither the indemnifying party nor the indemnified party shall, without the written consent of the other party, settle or compromise any Indemnification Claim or permit a default or consent to entry of any judgment unless the claimant and such party provide to such other party an unqualified release from all Liability in respect of the Indemnification Claim.  Notwithstanding the foregoing, if a settlement offer solely for money damages is made by the applicable third party claimant, and the indemnifying party notifies the indemnified party in writing of the indemnifying party’s willingness to accept the settlement offer and, subject to the applicable limitations of Sections 10.5 and 10.6, pay the amount called for by such offer, and the indemnified party declines to accept such offer, the indemnified party may continue to contest such Indemnification Claim, free of any participation by the indemnifying party, and the amount of any ultimate Liability with respect to such Indemnification Claim that the indemnifying party has an obligation to pay hereunder shall be limited to the lesser of (A) the amount of the settlement offer that the indemnified party declined to accept plus the Losses of the indemnified party relating to such Indemnification Claim through the date of its rejection of the settlement offer or (B) the aggregate Losses of the indemnified party with respect to such Indemnification Claim.

(c)           After any final decision, judgment or award shall have been rendered by a Governmental Body of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have arrived at a mutually binding agreement with respect to an Indemnification Claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter.

10.5           Certain Limitations on Indemnification.

(a)           Notwithstanding the provisions of this Article X, neither the Stockholder nor Purchaser shall have any indemnification obligations for Losses under Sections 10.2(a)(i) or (iii) or Sections 10.3(a) unless the aggregate amount of all such Losses exceeds $50,000, in which event the indemnifying party shall be obligated to pay the entire amount of all such Losses; provided however, that Purchaser shall not make such claims more often than quarterly.  For clarification purposes, in the event the aggregate amount of all such Losses exceeds $50,000 and an initial claim is made by a Purchaser Indemnified Party pursuant to this Section 10.2(a), any Purchaser Indemnified Party shall be entitled to make subsequent claims for indemnification in amounts less than or greater than $50,000.

(b)           In no event shall the aggregate indemnification to be paid by the Stockholder under this Article X exceed an amount equal to fifty percent (50%) of the Purchase Price (the “Cap”).

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(c)           Purchaser shall not be entitled to indemnification pursuant to Section 10.2(a)(ii) unless the related breach is one which materially impairs the value of any Financing Contract or Financing Contracts, in which case, Stockholder shall have the option to, within thirty (30) days of notification of an indemnification claim with respect to any Financing Contract(s), (i) repurchase such Financing Contract or Financing Contracts in question from Purchaser for 101% of the book value of the Financing Contract or Financing Contracts in question as of the date of the repurchase, or (ii) indemnify the Purchaser in accordance with the provisions of Section 10.4. For the purposes of this Section 10.4(c), a material impairment is one in which either damages on any Financing Contract exceed $500, or damages on multiple Financing Contracts exceed $5,000.

(d)           Purchaser shall not make any claim for indemnification under this Article X in respect of any matter that is taken into account in the calculation of any adjustment to the Purchase Price pursuant to Section 3.3.

10.6           Calculation of Losses.  Notwithstanding anything to the contrary elsewhere in this Agreement, no party shall, in any event, be liable to any other Person for any consequential, incidental, indirect, special or punitive damages of such other Person, including loss of future revenue, income or profits, diminution of value or loss of business reputation or opportunity relating to the breach or alleged breach hereof (provided that such limitation with respect to profits shall not limit the Stockholder’s right to recover contract damages in connection with Purchaser’s failure to close in violation of this Agreement).

10.7           Tax Treatment of Indemnity Payments.  The Company and Purchaser agree to treat any indemnity payment made pursuant to this Article X as an adjustment to the Purchase Price for federal, state, local and foreign income tax purposes.

10.8           Exclusive Remedy.  From and after the Closing the sole and exclusive remedy for any breach or failure (whether in contract, in tort or otherwise) to be true and correct, or alleged breach or failure to be true and correct, of any representation or warranty or any covenant or agreement in this Agreement, shall be indemnification in accordance with this Article X.  In furtherance of the foregoing, the parties hereby waive, to the fullest extent permitted by applicable Law, any and all other rights, claims and causes of action (including rights of contributions, if any) known or unknown, foreseen or unforeseen, which exist or may arise in the future, that it may have against the Stockholder or Purchaser, as the case may be, arising under or based upon any federal, state or local Law (including any such Law relating to environmental matters or arising under or based upon any securities Law, common Law or otherwise).  Notwithstanding the foregoing, this Section 10.8 shall not operate to interfere with or impede the operation of the provisions of Article III providing for the (i) resolution of certain disputes relating to the Purchase Price between the parties and/or by an Independent Accountant and (ii) limit the rights of the parties to seek equitable remedies (including specific performance or injunctive relief).

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ARTICLE XI

MISCELLANEOUS

11.1           Tax Matters.

(a)           All sales, use, transfer, intangible, recordation, documentary stamp or similar Taxes or charges, of any nature whatsoever, applicable to, or resulting from, the transactions contemplated by this Agreement shall be borne equally by the Purchaser on the one hand and by the Company and the Stockholder on the other hand.

(b)           For purposes of the definitions of Assumed Liabilities and Retained Assets, in the case of a taxable period that includes the Closing Date, Taxes shall be allocated to the periods before and after the Closing Date as follows:  (i) in the case of Taxes such as property taxes, such Taxes shall be allocated to periods before and after the Closing Date on a per diem basis and (ii) in the case of Taxes based on net or gross income, or transactional taxes such as sales taxes, the portion of such Taxes allocable to the period before the Closing Date shall be computed on the assumption that the taxable period ended on the Closing Date.

11.2           Expenses.  Except as otherwise provided in this Agreement, each of the Stockholder, the Company and Purchaser shall bear its own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby.

11.3           Submission to Jurisdiction; Consent to Service of Process.

(a)           The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the borough of Manhattan of the City, County and State of New York over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action proceeding related thereto may be heard and determined in such courts.  The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b)           Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by the delivery of a copy thereof in accordance with the provisions of Section 11.6.

11.4           Entire Agreement; Amendments and Waivers.  This Agreement (including the schedules and exhibits hereto) and the Confidentiality Agreement represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof.  This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought.  No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

45

11.5           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such State without giving effect to the choice of law principles of such state that would require or permit the application of the laws of another jurisdiction.

11.6           Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally by hand (with written confirmation of receipt), (ii) when sent by facsimile (with written confirmation of transmission) or (iii) one Business Day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following addresses and facsimile numbers (or to such other address or facsimile number as a party may have specified by notice given to the other party pursuant to this provision):

If to the Company or the Stockholder, to:

Lehman Brothers Bank

745 Seventh Avenue, 24th Floor

New York, NY   10019

Facsimile: (212) 548-9009

Attention: General Counsel

With a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY   10153

Facsimile: (212) 310-8007

Attention: Michael A. King, Esq. and Michael Bond, Esq.

If to Purchaser, to:

46

LEAF Financial Corporation

LEAF Funding, Inc. (c/o LEAF Financial Corporation)

1818 Market Street, 9^th Floor

Philadelphia, PA  19103

Facsimile: (215) 640-6363

Attention:  Crit DeMent

With a copy (which shall not constitute notice) to:

Ledgewood, P.C.

1900 Market Street, Suite 750

Philadelphia, PA 19103

Facsimile: (215) 735-2513

Attention:  J. Baur Whittlesey, Esq.

11.7           Severability.  If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

11.8           Binding Effect; Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person or entity not a party to this Agreement except as provided below.  No assignment of this Agreement or of any rights or obligations hereunder may be made by either the Stockholder or the Company, directly or indirectly (by operation of law or otherwise), without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void.  Purchaser may assign its rights and obligations hereunder to any Affiliate of Purchaser.  No assignment of any obligations hereunder shall relieve the parties hereto of any such obligations.  Upon any such permitted assignment, the references in this Agreement to Purchaser shall also apply to any such assignee unless the context otherwise requires.

11.9           Non-Recourse.  Except as specifically set forth in this Agreement, no past, present or future director, officer, employee, incorporator, member, partner, stockholder, agent, attorney or representative of the Stockholder or the Company or any of their respective Affiliates shall have any Liability for any obligations or liabilities of the Stockholder or the Company under this Agreement of or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby and thereby.

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11.10                      Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **

48

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

LEAF FINANCIAL CORPORATION

By:

Name:

Title:

                 LEAF FUNDING, INC.

By:

Name:

Title:

DOLPHIN CAPITAL CORP.

By:

Name:

Title:

LEHMAN BROTHERS BANK, FSB

By:

Name:

Title:

49

EX-2.2

LOAN SALE AGREEMENT

BY AND BETWEEN

FEDERAL DEPOSIT INSURANCE CORPORATION

AS RECEIVER OF NETBANK, ALPHARETTA, GEORGIA

AND

LEAF FUNDING, LLC

TABLE OF CONTENTS

Article I

Definitions

1. Definitions 1

Article II

Purchase and Sale of Loans

2.1.	Terms and Conditions of Sale	10
2.2.	Closing and Payment of Purchase Price	10
2.3.	Allocation of Payments Made on Loans	10
2.4.	Adjustments to Purchase Price; Offsets Against Deposits	10
2.5.	Rebates and Refunds	11
2.6.	Interest Conveyed	11
2.7.	Retained Claims and Release	12
2.8.	Other Taxes	12

Article III

Transfer of Loan(s), Collateral Documents and Servicing

3.1.	Delivery of Documents	13
3.2.	Recordation of Documents	16
3.3.	Transfer of Servicing	16

Article IV

Representation and Warranties of Buyer

4.1.	Buyer's Authorization	18
4.2.	Compliance with Law	18
4.3.	Execution and Enforceability	18
4.4.	Representations Remain True	18

Article V

Covenants, Duties and Obligations of Buyer

5.1.	Servicing of Loans	19
5.2.	Assumption of Obligations	19
5.3.	Collection Agency/Contingency Fee Agreements	19
5.4.	Insured or Guaranteed Loans	19
5.5.	Buyer's Due Diligence	20
5.6.	Reporting to or for the Applicable Taxing Authorities	20
5.7.	Loans in Litigation	20
5.8.	Loans in Bankruptcy		21

i

5.9.	Loan Related Insurance	22
5.10.	Loans with Escrow Accounts and Security Deposits	22
5.11.	Loans in which Seller was the Lead Lender in a Participated Loan	22
5.12.	Contracts for Deed	22
5.13	Leases	22
5.14.	Files and Records	22
5.15.	Reimbursement for Use of Seller's Employees	23
5.16.	Notice to Borrowers	23
5.17.	Notice of Claim	24
5.18.	Use of the FDIC's Name and Reservation of Statutory Powers	24
5.19.	Prior Servicer Information	24
5.20.	Release of Seller	24
5.21.	Indemnification	25
5.22.	Borrower as Buyer	25
5.23.	Accounts Payable/Brokerage Commissions	25
5.24.	Payment of Taxes	26
5.25.	Assignment of Servicing Agreements	26
5.26.	Purchase of Platform-related Assets and Liabilities	26

Article VI

Loans Sold "As Is" and Without Recourse

6.1.	Loans Sold "As Is"	27
6.2.	No Warranties or Representations with Respect to Escrow Accounts and Security Deposits	27
6.3.	No Warranties or Representations as to Amounts of Unfunded Principal	27
6.4.	Disclaimer Regarding Calculation or Adjustment of Interest on any Loan	27
6.5.	No Warranties or Representations with Regard to Due Diligence Data	27
6.6.	Buyer's Waiver of Cause of Action	27
6.7.	Intervening or Missing Assignments	28
6.8.	No Warranties or Representations as to Documents	28

Article VII

Repurchase by Seller at Buyer's Option

7.1.	Repurchases at Buyer's Option	29
7.2.	Securities Laws Right of Rescission	30
7.3.	Defects not Qualifying for Repurchase	30
7.4.	Notice to Seller	30
7.5.	Re-delivery of Note(s), Files and Documents	31
7.6.	Waiver of Buyer's Repurchase Option	31

Article VIII

Notices

ii

8.1.	Notices	32
8.2.	Article VII Notice	32
8.3.	All Other Notices	32

Article IX

Forfeiture of Earnest Money and Other Remedies

9.1. Failure to Close 34

Article X

Miscellaneous Provisions

10.1.	Severability	35
10.2.	Construction	35
10.3.	Survival	35
10.4.	Governing Law	35
10.5.	Cost, Fees and Expenses	35
10.6.	Nonwaiver, Amendment and Assignment	35
10.7.	Drafting Presumption	35
10.8.	Controlling Agreement	35
10.9.	Venue	36
10.10.	Counterparts	36
10.11.	Waiver of Jury Trial	36
10.12.	Incorporation by Reference	36

Attachments

Attachment "A"---Schedule of Loans	A-1
Attachment "A-1"-Schedule of Loans	A-2
Attachment “A-2”-Schedule of Inchoate Agreements	A-3
Attachment "B"---Repurchase Percentages	B-1
Attachment "C"---Bill of Sale	C-1
Attachment "D"---Assignment and Assumption of Interests and Obligations	D-1
Attachment "E"---Assignment and Lost Instrument Affidavit	E-1
Attachment "F"---Affidavit and Assignment of Claim	F-1
Attachment "G"---Limited Power of Attorney	G-1
Attachment “H”---Servicing Agreements	H-1
Attachment “I”---Assignment of Leases	I-1
Attachment “J”---Master Assignment of Certain Loans and Leases	J-1

iii

LOAN SALE AGREEMENT

LOAN POOL NUMBER: NBF-1-07-010

THIS AGREEMENT, entered into this ___ day of November, 2007 by and between the Federal Deposit Insurance Corporation ("FDIC") as Receiver of NetBank, Alpharetta, Georgia (“Seller”) and LEAF Funding, LLC ("Buyer") sets forth the terms and conditions whereby Seller agrees to sell and Buyer agrees to purchase all those Loans set forth in the attached Schedule of Loans for the consideration herein stated.

NOW THEREFORE, Seller and Buyer agree and represent as follows:

Article I

Definitions

For purposes of this Agreement the following terms shall have the meanings indicated:

"Accounting Records" means the general ledger and supporting subsidiary ledgers and schedules.

"Advances" means the sum of all unreimbursed amounts advanced by or on behalf of the Failed Bank, Seller or Buyer for the benefit of a Borrower or a third-party advanced to meet required scheduled payments, or to protect the Noteholder's lien position or the Collateral, including payment of ad valorem taxes and hazard and forced placed insurance as permitted by the terms of any Loan sold hereunder.  Advances do not include Disbursements of Principal or Corporate Advances.

"Affidavit and Assignment of Claim" means an Affidavit and Assignment of Claim in the form of Attachment "F" to this Agreement.

"Agreement" means this Loan Sale Agreement and the Attachments hereto.

"Assignment and Assumption of Interests and Obligations" means an Assignment and Assumption of Interests and Obligations in the form of Attachment "D" to this Agreement.

"Assignment and Lost Instrument Affidavit" means an Assignment and Lost Instrument Affidavit in the form of Attachment "E" to this Agreement.

"Attachment" means any of the attachments to this Agreement.

"Bank Closing Date" means the close of business of the Failed Bank on the date on which the Chartering Authority closed such institution.

"Bid" means the offer to purchase one or more Loan Pool(s) that was submitted by Buyer and accepted by the Seller.

1

"Bid Amount" means, with respect to a Loan Pool, an amount equal to (i) the sum of the Book Values for all Loans in a Loan Pool, multiplied by (ii) the corresponding Bid Percentage.

"Bid Award Date" means the date the Bid Confirmation Letter is sent to Buyer by Seller.

“Bid Certification” means the document under such title provided to bidders and potential bidders as part of the Bid Package and executed or assented to by Buyer in connection with submitting a Bid.

"Bid Confirmation Letter" means the letter sent to Buyer by Seller confirming acceptance of a Bid submitted by Buyer.

"Bid Instructions" means the document under such title provided to bidders and potential bidders.

“Bid Package” means the documents that were provided to bidders and potential bidders for the sale of the Loans, including but not limited to the following:  (i) Invitation to Bid, (ii) Bid Instructions, (iii) Bid Certification, (iv) Purchaser Eligibility Certification, (v) this Agreement with all Attachments, and (vi) Loan Spreadsheet(s), all as the same may be modified, amended, revised or supplemented from time to time.

"Bid Percentage" means Buyer's offer, expressed as a percentage of Book Value, to purchase a Loan Pool.

"Bill of Sale" means a Bill of Sale in the form of Attachment "C" to this Agreement.

“Book Value” for Loans which are leases means the outstanding balance of "gross lease receivables" and "gross lease residuals" net of "unearned discount" as reflected on the books and records of NBBF as of the Calculation Date.

"Book Value" for Loans which are not leases means a Loan's unpaid principal balance as stated on the books and records of NBBF as of Bank Closing Date and adjusted by (i) subtracting payments of principal received by Seller or its predecessor on or before the Calculation Date (including any adjustments made as a result of a foreclosure sale on or before the Calculation Date as to which the Redemption Period, if any, expired on or before the Calculation Date), (ii) adding Disbursements of Principal made by Seller or its predecessor on or before the Calculation Date, and (iii) adding back any principal previously charged or written off by NBBF.  Book Value for pre-computed interest Loans shall include, in addition, the amount of outstanding earned and unearned interest for such Loans.  The Book Value shall not include any general or specific reserves on the books and records of NBBF.

"Borrower" means any obligor, guarantor or surety of any Loan or any other party liable for the performance of obligations associated with any Loan.

2

     "Business Day" means any day other than a Saturday, Sunday or federal legal holiday.

"Calculation Date" means October 31, 2007, which date shall be used to calculate the Purchase Price.

"Certificate re Other Taxes" means a certificate signed by the chief financial officer, chief accounting officer or other executive officer with knowledge of tax matters, or the general counsel, of Buyer certifying that under the applicable laws of (a) each relevant Foreign Jurisdiction, (b) any jurisdiction in which Buyer, its lending or other relevant office or agents may be located, or (c) any other jurisdiction,  (i) no Other Taxes are payable by Seller or Buyer, or if any such Other Taxes are payable, certifying the type and amount of such taxes, the party responsible for the payment thereof, the relevant taxing authority to which payment of such Other Taxes must be made and the timing for such payment as required by applicable law, and (ii) no tax forms or other information reports are required of the Seller, or if any such forms or reports are required, certifying the type of form, the relevant taxing authority and the deadline for such form or other report.

"Chartering Authority" means (i) with respect to a national bank, the Office of the Comptroller of the Currency, (ii) with respect to a federal savings association or savings bank, the Office of Thrift Supervision, (iii) with respect to a bank or savings institution chartered by a state, the agency of such state charged with primary responsibility for regulating and/or closing banks or savings institutions, as the case may be, (iv) the Corporation in accordance with 12 U.S.C. Section 1821(c), with regard to self appointment, or (v) the appropriate federal banking agency in accordance with 12 U.S.C. 1821(c)(9).

"Closing" means the simultaneous delivery by Seller and Buyer of documents and funds and the performance of the other acts herein provided to be performed on the Loan Sale Closing Date in order to effect the consummation of the Loan Sale.

"Collateral" means any and all collateral securing a Loan, including without limitation, any accounts receivable, inventory, property of any kind, whether real or personal (including but not limited to equipment and other physical assets), and any contract and other rights and interests of a Borrower pledged pursuant to or otherwise subject to any Collateral Document. Collateral does not include collateral which has been foreclosed on or before the Calculation Date and the Redemption Period, if any, has expired on or before the Calculation Date.

"Collateral Document" means each deed of trust, mortgage, assignment of production, security agreement, assignment of security interest, personal guaranty, corporate guaranty, letter of credit, pledge agreement, collateral agreement, loan agreement or other agreement or document, whether an original or copy or whether similar to or different from those enumerated, securing in any manner the performance or payment by any Borrower of its obligations or the obligations of any other Borrower under any Note evidencing a Loan.  Collateral Document does not include a deed of trust, mortgage, assignment of production, security agreement, assignment of security interest, pledge agreement or collateral agreement insofar as the collateral encumbered by such agreement has been foreclosed under such agreement on or before the

Calculation Date, and the Redemption Period, if any, has expired on or before the Calculation Date.

3

"Confidentiality Agreement" means the confidentiality agreement executed or assented to by Buyer in anticipation of gaining access to the documents  comprising the Bid Package and other documents related to the sale of the Loans.

"Contract for Deed" means an executory contract with a third party to convey real property.

"Corporate Advances" means the payment of appraisal fees, broker opinion fees, attorney fees and associated legal fees, foreclosure fees, trustee fees, property inspection fees, property preservation and operating cost fees, tax penalties, title policies, lien search fees or any other cost that can be directly associated with the collection and servicing of a Note.

"Corporation" means the Federal Deposit Insurance Corporation in its corporate capacity.

"Deconversion Date" means the date Loan servicing records are transferred to the system of records of the Buyer of Pool NBF-1-07-020, which date shall be a Business Day not later than sixty (60) calendar days after the Loan Sale Closing Date.

"Deficiency Balance" means the remaining unpaid principal balance of any Note purchased hereunder after crediting to it the proceeds of a foreclosure sale which occurred on or before the Calculation Date, and for which the Redemption Period, if any, expired on or before the Calculation Date.

"Disbursement of Principal" means incremental funding of loan proceeds under a Note, such as in the case of a revolving credit loan or a construction loan.

“Earnest Money Deposit” means the monies paid by or on behalf of Buyer to Seller prior to Loan Sale Closing Date in the amount and manner specified in the Bid Instructions contained in the Bid Package.

“Failed Bank” means any depository institution (i) which owned a Loan on the date on which the Chartering Authority closed such institution and (ii) for which the Corporation has been appointed Receiver.

"Foreign Loan" means a Loan regarding which the Borrower or any of the Collateral concerning the Loan is located in a country other than the United States.

"Foreign Jurisdiction" means any country, other than the United States, and any subdivision or other jurisdiction of or in such other country in which a Borrower or any Collateral is located.

4

“Inchoate Agreements” means those certain loans and leases set out in Attachment “A-2” to this Agreement.  The Inchoate Agreements are commercial non-real estate loans and equipment leases which, as of November 1, 2007 had not been funded by NBBF, but which, prior to November 1, 2007 either (a) have been formalized by the execution of loan, lease or other documents in which NBBF is lender, lessor or secured party, or (b) have been otherwise committed to or in the process of being committed to by NBBF as lender, lessor, or secured party.

"Internal Revenue Code" means the Internal Revenue Code of 1986 of the United States, as it may be amended from time to time.

“Invitation to Bid” means the document under such title provided to bidders and potential bidders as part of the Bid Package.

"Limited Power of Attorney" means the Limited Power of Attorney in the form of Attachment “G” to this Agreement.

"Loan(s)" means and includes: (a) any obligation evidenced by a Note or other evidence of indebtedness; (b) all rights, powers, liens or security interests of Seller in or under the Collateral Document(s); (c) any judgment founded upon a note to the extent attributable thereto and any lien arising therefrom; (d) any Contract for Deed and the real property which is subject to such Contract for Deed; (e) any lease and the related leased property, including, but not limited to, in the case of the purchase of Loan Pool NBF-1-07-010, those leases described in Attachment “I” to this Agreement; (f) all right, title and interest in and to any Deficiency Balance; and (g) any other asset or liability of whatever kind or type, all as identified on the attached Schedule of Loans, including without limitation, all rights arising therefrom or appurtenant thereto. Loan(s) do not include repossessed or foreclosed collateral (i) which was foreclosed on or before the Calculation Date and (ii) for which the Redemption Period, if any, expired on or before the Calculation Date.

"Loan File" means (i) all Failed Bank documents pertaining to any Loan, either copies or originals, that are in the possession of Seller excluding the Note, renewals of the Note and Collateral Documents and (ii) any files with respect to a Loan established and maintained by Seller's employee(s) or contractor(s) responsible for the management of that Loan following the closing of the Failed Bank, excluding Seller's internal memoranda and confidential communications between Seller and its legal counsel. The Loan File does not include other files maintained by other employees or agents of Seller, such as Seller's legal counsel.

"Loan Pool(s)" means one (or more) of the groups of Loans identified in the Schedule of Loans.

"Loan Sale" means the sale of Loans of the Failed Bank by Seller as described in the Bid Package.

5

"Loan Sale Closing Date" means a date selected by Seller, which date shall not be later than ten (10) Business Days after the Bid Award Date.

“Loan Spreadsheets” means information on the Loans provided to bidders and potential bidders as part of the Bid Package.

"Mortgaged Property" means the land, fixtures and improvements, if any, securing any Loan sold to Buyer under the terms and conditions of this Agreement.  Mortgaged Property does not include property repossessed or foreclosed on or before the Calculation Date as to which the Redemption Period, if any, expired on or before the Calculation Date.

“NBBF” means NetBank Business Finance, a division of NetBank, Alpharetta, Georgia.

"Non-Foreign Loan" means any Loan which is not a Foreign Loan.

"Non-Performing Loan(s)" means any Loan which is not a lease, other than a Performing Loan.

"Note" means each agreement, document and instrument evidencing a Loan, including without limitation, each promissory note, loan agreement, shared credit or participation agreement, inter-creditor agreement, letter of credit, reimbursement agreement, draft, bankers' acceptance, transmission system confirmation of transaction or other evidence of indebtedness of any kind evidencing each Loan (including loan histories, affidavits, general collection information, correspondence and comments pertaining to such obligation).

"Noteholder" means the holder of a Note.

"Obligations" means all obligations and commitments of Seller relating to a Loan and arising under and in accordance with the relevant Note(s) or Collateral Documents relating thereto, including without limitation the commitment to make advances of funds to or for the benefit of a Borrower.

"Other Taxes" means any taxes, assessments, levies, imposts, duties, deductions, fees, withholdings or other charges of whatever nature, including interest and penalties thereon, required to be paid to any taxing authority of or in (a) any Foreign Jurisdiction, (b) any jurisdiction in which Buyer, its lending or other relevant office or agents may be located under the applicable laws of such Foreign Jurisdiction or (c) any other jurisdiction, with respect to the sale and transfer of the Loans, the Collateral Documents or the rights in the Collateral or the assignment and assumption of Obligations thereunder, including without limitation any withholding taxes payable by virtue of the sale of the Loans at a discount from Book Value and any value-added taxes.  The term “Other Taxes” does not encompass the defined term “Taxes.”

"Participated Loan" means any Loan subject to a shared credit, participation or similar inter-creditor agreement under which the Failed Bank was lead or agent financial depository institution or otherwise managed the credit or sold participations, or under which the Failed Bank

was a participating financial depository institution or purchased participations in a credit managed by another.

6

"Platform-related Assets and Liabilities" means the assets and liabilities listed on Attachment "A-1" to this Agreement.

"Performing Loan" means any Loan which is not a lease, for which the last payment of principal, interest and any escrow amounts that is required to be paid by the terms of the Note or Collateral Documents is less than sixty days past due (for matured loans, less than thirty days past due) as of the Calculation Date as shown on the Schedule of Loans attached hereto as Attachment "A," regardless of whether such Loan is in a Loan Pool consisting primarily of Performing Loans or consisting primarily of Non-Performing Loans.

"Property" means the real or personal property securing any Loan contained in a Loan Pool.   Property does not include property repossessed or foreclosed on or before the Calculation Date as to which the Redemption Period, if any, expired on or before the Calculation Date.

"Purchase Price" means an amount equal to the sum of (i) the Bid Amount, plus (ii)   any Advances made by NBBF, the Failed Bank or Seller, plus, as regards Loans which are not leases (iii) Disbursements of Principal made by Seller that are not included in the Book Value,  plus (iv) interest calculated on the Book Value and at the rate payable for each Performing Loan (except those with pre-computed interest) from the interest "paid-to date" to, but not including, the Loan Sale Closing Date, plus, as regards the Loans, (v) a credit for any assumption of the liability for security deposits and escrow deposits as provided in Section 5.10, plus (vi) a credit for any net liabilities (liabilities less assets) assumed by Buyer pursuant to Sections 5.23 and 5.24, and plus or minus, only in the event of the purchase of Loan Pool NBF-1-07-010 (vii) any debit or credit, as applicable, with respect to the Platform-related Assets and Liabilities as set forth in Section 5.26.  No amount with respect to unpaid interest shall be due for Non-Performing Loans.

"Purchaser Eligibility Certification" means the document under such title provided to bidders and potential bidders as part of the Bid Package and executed by Buyer in connection with the Loan Sale.

“Receiver” means the Federal Deposit Insurance Corporation as Receiver of NetBank.

"Redemption Period" means the applicable state statutory time period, if any, during which a foreclosed owner may buy back foreclosed real property from the foreclosure sale purchaser.  Not all states provide for a Redemption Period.  The length of a Redemption Period may vary among the states which do provide for a Redemption Period.  The law of the state in which the real property is located is the applicable law in determining whether there is a Redemption Period and if so, how long it is.

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"Related Party" means any party related to the Borrower in the manner delineated in 26 U.S.C.A 267(b) and the regulations promulgated thereunder, as such law and regulations may be amended from time to time.

"Repurchase Percentage" means the Repurchase Percentage indicated on Attachment "B" to this Agreement.

"Repurchase Price" means, with respect to any Loan, an amount equal to the sum of (i) the Bid Amount, adjusted to reflect changes to Book Value in accordance with Section 2.4 hereof, for the Loan Pool containing such Loan, multiplied by the Repurchase Percentage, plus (ii) any Advances on such Loan included in the Purchase Price, plus (iii) any interest on such Loan that is not a lease included in the Purchase Price, minus (iv) the total of amounts received after the Calculation Date by Buyer for such Loan, regardless of how applied, plus (v) Advances made by Buyer, plus (vi) total Disbursements of Principal regarding such Loan which is not a lease made by Seller that are not included in the Book Value, minus, as regards the Loans, (vii) any amount credited to Buyer by Seller for security deposits and escrow deposits as provided in Section 5.10, accounts payable and brokerage commissions as provided in Section 5.23 and Taxes as provided in Section 5.24 which is attributable to the repurchased Loan.  The amount to be subtracted for security deposits, escrow deposits, accounts payable, brokerage commissions and Taxes as provided in this paragraph will not be subtracted in the event Buyer has actually paid such amounts on the repurchased Loan and Buyer provides evidence satisfactory to Seller that such amounts have been paid.

"Schedule of Loans" means the list of all Loans that are the subject of this transaction appended to this Agreement as Attachment "A" and in addition, if the Buyer purchases Loan Pool NBF-1-07-010, the list of Loans appended to this Agreement as Attachment "A-1."

“Servicing Agreements” means the two Servicing Agreements described on Attachment “H” to this Agreement.

"Settlement Date" means a date determined by Seller upon which final adjustments will be made to the Purchase Price pursuant to Section 2.4 hereof. Any Settlement Date determined by Seller shall be a Business Day not later than one hundred eighty (180) calendar days after the Loan Sale Closing Date.

"Significant Environmental Contamination" means the presence at, in or under a Mortgaged Property, at a level or in an amount that poses a threat to human health or the environment sufficient to prompt a regulator to require remediation under any federal or state law, of any substance defined as a "hazardous substance" under Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601(14), and including lead-based paint and petroleum, including crude oil or any fraction thereof that is liquid at standard conditions of temperature and pressure.

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“Taxes” means sales taxes and personal property taxes assessed against Seller regarding the Loans, which sales taxes and personal property taxes remain unpaid by the Seller as of the Calculation Date, or become due and payable after the Calculation Date.

"Transfer Documents" means the endorsements and allonges to Notes, Assignment and Lost Instrument Affidavits (if applicable), assignments, deeds and other documents of assignment, conveyance or transfer required under the laws of any jurisdiction within the United States to evidence the transfer to Buyer of the Loans, the Collateral Documents and Seller’s rights with respect to the Loans and the Collateral. Transfer Documents do not include this Agreement, the Bill of Sale, and the Assignment and Assumption of Interests and Obligations.

"Uniform Commercial Code" means the uniform law governing commercial transactions as adopted by the State of New York.

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Article II

Purchase and Sale of Loans

2.1. Terms and Conditions of Sale. Seller agrees to sell, assign, transfer and convey to Buyer, and Buyer agrees to purchase and accept from Seller, all the right, title and interest of Seller, subject to the provisions of Section 3.3, as of the Loan Sale Closing Date, in and to each Loan in the Loan Pool(s) on a servicing-released basis, and all rights in the Property pursuant to the Collateral Documents.  Seller agrees to assign and Buyer agrees to assume (a) all of the Obligations of the Failed Bank or Seller under and with respect to all the Notes and Collateral Documents and (b) all the other obligations of Buyer set out in this Agreement. Such sale, assignment, transfer and conveyance by Seller and the purchase, acceptance and assumption by Buyer shall occur at and as of the Loan Sale Closing Date, and shall be on the terms and subject to the conditions set forth in this Agreement, including without limitation, the payment by Buyer of the Purchase Price.

NBBF will not enter into any new loan or lease beginning November 1, 2007.  Beginning November 1, 2007, NBBF will refer to the Buyer all inquiries it receives from potential borrowers or lessees regarding new loans or leases.  It will be the Buyer’s decision as to whether to enter into a loan or lease with the inquirer and whether to fund such loan or lease.

NBBF will assign the Inchoate Agreements to Buyer by an assignment in the form of Attachment "J" to this Agreement.  The Buyer has no right to call upon Seller to repurchase the Inchoate Agreements under the provisions of Article VII of the Agreement.

2.2. Closing and Payment of Purchase Price. The Closing shall occur on the Loan Sale Closing Date, and, at Seller's option, be either by mail or conducted in person at a place designated by Seller. Buyer shall pay to Seller at the Closing, by wire transfer of immediately available funds the amount of the Purchase Price less the Earnest Money Deposit previously paid by Buyer. Wire transfers shall be made to Seller's account in accordance with such instructions as Seller shall notify to Buyer in writing on or prior to the Loan Sale Closing Date.

2.3. Allocation of Payments Made on Loans. All payments received by Seller on account of any of the Loans on or before the Calculation Date shall belong to Seller. All payments received by Seller on account of the Loans after the Calculation Date shall belong to Buyer. In the event that a check Seller has received with respect to a Loan on or before the Calculation Date is dishonored before or after the Calculation Date, an adjustment to the Purchase Price in Seller's favor in the amount of the dishonored check shall be made within ten (10) days of notification by Seller to Buyer that a check has been dishonored. In the event Seller deposits a check received after the Calculation Date and issues a check or other payment therefor to Buyer, Buyer shall bear the risk that any such check will be dishonored and Buyer shall reimburse Seller within ten (10) Business Days after receipt of notice by Seller to Buyer that such check was dishonored.

2.4. Adjustments to Purchase Price; Offsets Against Deposits.

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(a) On or before the Settlement Date, Seller shall provide Buyer with a statement(s) setting forth adjustments to the Purchase Price that Buyer or Seller discovers reflecting (1) any changes in the Book Value (i) because of miscalculations, misapplied payments, unapplied payments, unrecorded Disbursements of Principal disbursed on or before the Calculation Date, or other accounting errors; or (ii) resulting from a final court decree, unappealable regulatory enforcement order or other similar action of a legal or regulatory nature effective on or before the Calculation Date, or (iii) resulting from a foreclosure sale which occurred on or before the Calculation Date for which the Redemption Period, if any, expired on or before the Calculation Date; and (2) any unreimbursed Advances or Disbursements of Principal disbursed after the Calculation Date that were not previously included in the Purchase Price. No adjustment to Purchase Price will be made for (a) any changes resulting from any calculation or adjustment of interest on any Loan as provided in Section 6.4 hereof, or (b) any payment of Taxes as provided in Section 5.24. Any monies due Buyer or Seller as a result of any adjustments made pursuant to Section 2.4(a)(1) hereof will be calculated by multiplying the resulting net change in Book Value by the Bid Percentage. Any monies due Seller as a result of any adjustments made pursuant to Section 2.4(a)(2) will be equal to 100% of the aggregate amount of payments not previously included in the Purchase Price. The total aggregate amount owed to Seller shall be subtracted from the total aggregate amount owed to Buyer. If the resulting amount is a positive number, Seller shall pay such amount to Buyer, and if the resulting amount is a negative number, Buyer shall pay such amount to Seller as if such number were a positive number. Any monies due Buyer or Seller will be paid no later than ten (10) Business Days after the Settlement Date. Buyer shall adjust its servicing records to reflect any changes to the unpaid principal balance of any Loan made pursuant to this Section 2.4(a).

(b) With respect to any Loan, Seller reserves the right to permit or require offsets against deposit accounts of the Failed Bank. If allowed by Seller, such offsets will be retroactive to the date such Failed Bank closed. At such time as an offset is effected, Seller will give notice of such to Buyer and pay Buyer the amount of the offset on a dollar-for-dollar basis and Buyer shall credit such amount to the Loan according to the terms and conditions of the applicable Note(s) as of Bank Closing Date.

2.5. Rebates and Refunds. Buyer is not entitled to any rebates or refunds from Seller from any pre-computed interest Loan regardless of when the Note matures. Further, on pre-computed interest Loans, Seller will not refund any unearned discount amounts to Buyer.

2.6. Interest Conveyed. Seller shall convey all of its right, title and interest in and to each Loan.  In the event a foreclosure occurs after the Calculation Date, or occurred on or before the Calculation Date, but the Redemption Period had not expired on or before the Calculation Date, Seller shall convey to Buyer the Deficiency Balance, if any, together with the net proceeds, if any, of such foreclosure sale. If Seller was the purchaser at such foreclosure sale, Seller shall convey to Buyer the Deficiency Balance, if any, together with a quitclaim deed to the property purchased at such foreclosure sale. Buyer acknowledges and agrees that Buyer shall not acquire any interest in or to any such property which was foreclosed by Seller or any of its predecessors-in-interest on or before the Calculation Date and for which the Redemption Period, if any, had

expired on or before the Calculation Date; nor shall Buyer acquire any interest in or to any performance or completion bond filed with any governmental entity for the purpose of ensuring that improvements constructed or to be constructed on such property are completed in accordance with any governmental regulation(s) or building requirement(s) applicable to the proposed or completed improvement.

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2.7. Retained Claims and Release. Buyer and Seller agree that the sale of the Loans pursuant to this Agreement will exclude the transfer to Buyer of all right, title and interest of Seller in and to any and all claims of any nature whatsoever that might now exist or hereafter arise, whether known or unknown, that Seller has or might have (a) against officers, directors, employees, insiders, accountants, attorneys, other persons employed by Seller or the Failed Bank and any of its predecessors, underwriters or any other similar persons who have caused a loss to Seller or the Failed Bank and any of its predecessors in connection with the initiation, origination or administration of a Loan, (b) against any appraisers, accountants, auditors, attorneys, investment bankers or brokers, loan brokers, deposit brokers, securities dealers or other professional individuals or entities who performed services for the Seller or the Failed Bank or any of its predecessors, relative to a Loan, (c) against any third parties involved in any alleged fraud or other misconduct relating to the making or servicing of a Loan or (d) against any appraiser or other party from whom Seller or any servicing agent contracted for services or title insurance in connection with the making, insuring or servicing of a Loan.

2.8. Other Taxes. Notwithstanding that Other Taxes may, under applicable law, be assessed against and payable by Seller, Buyer hereby agrees to accept responsibility for and to pay, on its own behalf or on behalf of Seller, as the case may be, any and all Other Taxes, and Seller shall have no obligation to reimburse Buyer therefor. Payment of Other Taxes shall not affect the Purchase Price.  Within thirty days after the Loan Sale Closing Date, Buyer shall deliver to Seller a Certificate re Other Taxes in accordance with Section 3.1 hereof. In the event that the Certificate re Other Taxes shall prove to have been incorrect or for any other reason Buyer becomes aware of Other Taxes due, Buyer shall promptly notify Seller and shall pay such Other Taxes in accordance with the provisions of this Section 2.8. In the event that Other Taxes shall be payable, Buyer shall make payment thereof to the relevant taxing authorities when due, identifying to such authorities in appropriate manner and in accordance with applicable law the nature of the payment and identifying the party on whose behalf the payment is being made. In the event that, under applicable law, Buyer shall be unable to make payment of Other Taxes on behalf of Seller, then Buyer shall promptly notify Seller thereof and Seller may, at its sole option, grant to Buyer a limited power of attorney, in such form as Seller shall determine, solely for the purpose of making payment of such Other Taxes and filing information returns with respect thereto as agent for Seller. Buyer shall notify Seller, in accordance with the provisions of Article VIII of this Agreement, promptly after payment of any Other Taxes that such payment has been made.

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Article III

Transfer of Loan(s), Collateral Documents and Servicing

3.1. Delivery of Documents. Buyer and Seller agree to execute and deliver to one another the following files and documents:

(a)           At Closing, Buyer shall deliver to Seller:

1.           Two originals of the Assignment and Assumption of Interests and Obligations, in the form of Attachment "D" to this Agreement, executed by Buyer.

2.           A corporate resolution certified by Buyer's corporate secretary or,

if Buyer is not a corporation, other evidence satisfactory to Seller as to Buyer's authority: (i) to purchase the Loans and assume the Obligations thereunder, and (ii) to execute and deliver this Agreement and all related instruments required to consummate the transactions contemplated hereby and to carry out all of its obligations hereunder (including a certificate of incumbency of any person who executes any document on behalf of Buyer).

3.           Two originals of this Agreement executed by Buyer.

4. Two originals of the Assignment of Leases, in the form of Attachment “I” to this Agreement, executed by Buyer.

5. Two originals of an Assignment of Servicing Agreements as described in Section 5.25 of this Agreement, executed by Buyer.

6.           Other documents as Seller may reasonably require as evidence of

Buyer's good standing, existence or authority.

(b)           At Closing, Seller shall deliver to Buyer:

1.           A Bill of Sale transferring all of Seller's right, title and interest in

and to the Loans to Buyer, in the form of Attachment "C" to this Agreement, executed by Seller.

2.           Two originals of the Assignment and Assumption of Interests and Obligations, in the form of Attachment "D" to this Agreement, executed by Seller.

3.           Two originals of this Agreement executed by Seller.

4. Two originals of the Assignment of Leases, in the form of Attachment “I” to this Agreement, executed by Seller.

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5. Two originals of an Assignment of Servicing Agreements as described in Section 5.25 of this Agreement, executed by Seller.

6.           Such Transfer Documents executed by Seller as Seller elects to deliver at Closing.

(c)           Within thirty days after the Loan Sale Closing Date, Buyer shall deliver the Certificate re Other Taxes to Seller, if applicable.

(d)           Within a reasonable time after the Loan Sale Closing Date, Seller shall deliver to Buyer the Note, the Loan File(s) and Collateral Document(s) pertaining to the Loan(s) sold.

(e)           After Closing, Seller, in Seller’s sole discretion, may elect to grant a Limited Power of Attorney to selected Buyer employees.  If Seller elects to grant such a Limited Power of Attorney, Seller will provide it to Buyer within a reasonable time after the Loan Sale Closing Date.  If Buyer is granted such a Limited Power of Attorney, Buyer, at Buyer’s expense, will prepare and execute on behalf of Seller, within a reasonable time after the Loan Sale Closing Date, all Transfer Documents not delivered by Seller to Buyer at Closing.  All Transfer Documents prepared by Buyer shall be in appropriate form suitable for filing or recording (if applicable) in the relevant jurisdiction and otherwise subject to the limitations set forth herein, and Buyer shall be solely responsible for the preparation, contents and form of such documents.  Buyer hereby releases Seller from any loss or damage incurred by Buyer due to the contents and form of any documents prepared by Buyer and shall indemnify and hold Seller harmless for any action or cause of action by any person, including Buyer, arising out of the contents or form of the Transfer Documents, including without limitation, any claim relating to the adequacy or inadequacy of any of such documents or instruments for the purposes thereof.

The form which Buyer shall use for endorsing promissory notes or preparing allonges to promissory notes is as follows:

Pay to the order of

Without Recourse

FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER OF NETBANK

By:                                                           

Name:                                                                        

Title:                      Attorney-in-Fact

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All other documents of assignment, conveyance or transfer shall contain this sentence:  “This assignment is made without recourse, representation or warranty, express or implied, by the FDIC in its corporate capacity or as Receiver.”

(f)           In the event Seller elects not to provide Buyer with a Limited Power of Attorney in accordance with Section 3.1(e), then all Transfer Documents not delivered by Seller to Buyer at Closing shall be prepared and executed by one of the following methods, at Seller’s option:

1.           Seller, at Seller’s expense, will prepare and execute all endorsements and allonges to Notes or Assignment and Lost Instrument Affidavits (if applicable) not delivered by Seller to Buyer at Closing and provide them to Buyer within a reasonable time after the Loan Sale Closing Date.  Buyer, at Buyer’s expense, will prepare all other Transfer Documents not delivered by Seller to Buyer at Closing and shall deliver such documents to Seller for execution within a reasonable time after the Loan Sale Closing Date.  All Transfer Documents prepared by Buyer shall be subject to the terms and conditions for Transfer Documents specified in Section 3.1(e) above.  If any Transfer Document delivered by Buyer to Seller for execution is unacceptable to Seller for any reason whatsoever, Seller may return such document to Buyer along with an explanation as to why the document is unacceptable to Seller.  When requesting execution of any such document, Buyer shall furnish Seller with the Loan Pool and the Loan numbers set forth on the Schedule of Loans, and a copy of the Note(s), a copy of the Collateral Document(s) or other document(s) to be transferred, and copies of any previous assignments of the applicable Collateral Document or other document; or

2.           Seller, at Seller’s expense, will prepare and execute all Transfer Documents not delivered by Seller to Buyer at Closing and provide them to Buyer within a reasonable time after the Loan Sale Closing Date.  Seller shall furnish all such documents to Buyer in appropriate form suitable for filing or recording (if applicable) in the relevant jurisdiction and otherwise subject to the limitations set forth herein.

(g)           As to Foreign Loans, Buyer, at its own expense, must retain counsel who are licensed in the Foreign Jurisdiction(s) involved with the Foreign Loans.  Such foreign counsel must draft the documents necessary to assign the Foreign Loans to Buyer.  Documents presented to Seller to assign Foreign Loans to Buyer must be accompanied by a letter on the foreign counsel's letterhead, signed by the foreign counsel preparing those documents, certifying that those documents conform to all the laws of the Foreign Jurisdiction.  Each such document and instrument shall be delivered to Seller in the English language, provided, however, that any document required for its purposes to be executed by Seller in a language other than the English language shall be delivered to Seller in such language, accompanied by a translation thereof in the English language, certified as to its accuracy by an executive officer or general counsel of Buyer and, if such executive officer or general counsel shall not be fluently bilingual, by the translator thereof.

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(h)           Nothing contained herein or elsewhere in this Agreement shall require Seller to make any agreement, representation or warranty or provide any indemnity in any such document or instrument or otherwise, nor is Seller obligated to obtain any consents or approval to the sale or transfer of (i) the Loans or the related servicing rights, if any, (ii) the Servicing Agreements described in Attachment “H,” or (iii) the assumption by the Buyer of the Obligations or any of the other obligations described in this Agreement.

(i)           Seller agrees to execute any additional documents required by applicable law or necessary to effectively transfer and assign any and all Loans to Buyer.  Seller shall have no obligation to provide, review or execute any such additional documents unless the same shall have been requested of Seller within 365 calendar days of the Loan Sale Closing Date.

3.2.           Recordation of Documents. Buyer shall be responsible for, and agrees to promptly deliver, at its sole cost and expense, all appropriate documents and instruments with respect to each Loan for recordation or filing in the appropriate land, chattel, Uniform Commercial Code, and other records of the appropriate county, state and/or other jurisdiction(s) or Foreign Jurisdiction to effect the transfer of the Loans and the Collateral Documents and all rights in Collateral, and to render legal, valid and enforceable the obligations of the Borrower(s) to the Buyer and the assumption by the Buyer of any Obligations related to a Loan arising under and in accordance with the relevant Note and Collateral Documents.  Seller shall, if such is affirmatively required under the applicable laws of a relevant Foreign Jurisdiction, take such actions as are necessary in such Foreign Jurisdiction to effect the purposes of this Article III.  In accordance with Section 2.8 hereof, Buyer shall be responsible for and shall pay any and all Other Taxes, fees, costs and expenses incurred in connection therewith, including without limitation notarization fees and stamp, transfer and similar Other Taxes or fees.

3.3.           Transfer of Servicing. The Loans are hereby sold and conveyed to Buyer on a servicing-released basis.  In the event a successful bidder acquires Loan Pool NBF-1-07-010, the servicing will be transferred to the Buyer on the Loan Sale Closing Date.

In the event a successful bidder acquires Loan Pool NBF-1-07-020, Seller will provide interim servicing of the Loans on Buyer’s behalf from the Loan Sale Closing Date through the Deconversion Date.  The interim servicing provided by Seller will conform to industry standards.   Seller’s performance of this interim servicing shall cease on the Deconversion Date.

Seller will appoint Buyer as its subservicer, and Buyer will serve as Seller’s subservicer during the interim servicing period from Loan Sale Closing Date through the Deconversion Date.  On the Loan Sale Closing Date Seller will make available to Buyer or will provide Buyer with the NBBF system(s) used to service Loans.  Seller will pay Buyer to subservice the Loans only for the thirty (30) calendar-day period beginning on the Loan Sale Closing Date.  Seller will not pay Buyer for subservicing beginning the thirty-first (31^st) day from the Loan Sale Closing Date (the Loan Sale Closing Date being the first day of the thirty-one days) through the Deconversion Date.  Seller will pay Buyer for subservicing for the thirty (30)

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 calendar period beginning on the Loan Sale Closing Date on the following basis:  Seller will reimburse Buyer for expenses incurred by Buyer in connection with Buyer’s subservicing duties which the Seller reasonably determines are actual, reasonable and necessary, including expenses of photocopying, postage and express mail, data processing and employee services (based upon the number of hours spent performing subservicing duties) but not including overhead or other administrative expenses related to such employee services.  All of such subservicing expenses submitted to Seller for reimbursement must be documented by evidence, satisfactory to Seller, supporting the basis for such expenses.  Promptly upon request by Seller, Buyer shall supply Seller with any additional evidence that Seller may request.

From and after the Loan Sale Closing Date, all rights, obligations, liabilities and responsibilities with respect to the servicing of the Loans shall pass to the Buyer, and Seller shall be discharged from all liability therefor, including any liability arising from any interim servicing provided by Seller pursuant to this Section 3.3.

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Article IV

Representation and Warranties of Buyer

Buyer hereby represents and warrants to Seller as of the date of this Agreement and as of the Loan Sale Closing Date:

4.1.           Buyer's Authorization. Buyer and the undersigned duly authorized representative of Buyer, acting individually, represent that Buyer is authorized to enter into this Agreement and that all laws, rules, regulations, charter provisions and bylaws to which Buyer may be subject have been duly complied with, and that such representative is authorized to act upon behalf of and bind Buyer to the terms of this Agreement.

4.2.           Compliance with Law. Neither Buyer nor any of its subsidiaries is in violation of any statute, regulation, order, decision, judgment or decree of, or any restriction imposed by, the United States of America, any State, municipality or other political subdivision or any agency of any of the foregoing, or any court or other tribunal having jurisdiction over Buyer or any of its subsidiaries or any assets of any such person, or any foreign government or agency thereof having such jurisdiction, with respect to the conduct of the business of Buyer or of its subsidiaries, or the ownership of the properties of Buyer or any of its subsidiaries, which, either individually or in the aggregate with all other such violations, would materially and adversely affect the business, operations or condition (financial or otherwise) of Buyer or the ability of Buyer to perform, satisfy or observe any obligation or condition under this Agreement. Neither the execution and delivery nor the performance by Buyer of this Agreement will result in any violation by Buyer of, or be in conflict with, any provision of any applicable law or regulation, or any order, writ or decree of any court or governmental authority.

4.3.           Execution and Enforceability. This Agreement has been duly executed and delivered by Buyer and when duly authorized, executed and delivered by Seller, this Agreement will constitute a legal, valid and binding obligation of Buyer, enforceable in accordance with its terms.

4.4.           Representations Remain True. Buyer represents and warrants that all information and documents provided to Seller or its agents by or on behalf of Buyer in connection with this Agreement and the transactions contemplated hereby, including, but not limited to, the Purchaser Eligibility Certification, the Bid Certification, and the Confidentiality Agreement, are true and correct in all material respects and do not fail to state any fact necessary to make the information contained therein not misleading.

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Article V

Covenants, Duties and Obligations of Buyer

5.1.           Servicing of Loans.From and after the Loan Sale Closing Date if the Buyer purchases Loan Pool NBF-1-07-010, or the Deconversion Date if the Buyer purchases Loan Pool NBF-1-07-120, Buyer shall comply with all state and federal laws and the laws of any Foreign Jurisdiction applicable with respect to the ownership and/or servicing of the Loans, including, without limitation, the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq., as amended) and similar state requirements, rules and regulations, and shall abide by and be subject to all of the terms and conditions of the Collateral Documents and other instruments and documents governing or relating to the Loans and/or the servicing rights and other rights thereunder.

5.2.           Assumption of Obligations. Buyer accepts and assumes and expressly agrees to perform in accordance with the terms, all Obligations related to the Loans and Collateral Documents, including without limitation, all Obligations for Disbursements of Principal, and Buyer hereby expressly agrees to indemnify, defend and hold harmless the Failed Bank, Seller and Seller's agents and employees from and against any claims, demands and causes of action arising out of claims of breach or default by Buyer of such Obligations.

5.3.           Collection Agency/Contingency Fee Agreements. Buyer takes the Loan(s) subject to any agreements with collection agencies currently in force or contingency fee agreements with attorneys and agrees to fulfill all Obligations of Seller thereunder. Buyer hereby indemnifies and agrees to hold Seller harmless from and against any and all claims, demands, losses, damages, penalties, forfeitures or judgments made or rendered against Seller or any legal fees or other costs, fees or expenses incurred by Seller arising out of or based upon such agreements with collection agencies or contingency fee agreements with attorneys. Buyer agrees to notify Seller within ten (10) Business Days of notice or knowledge of any such claim or demand.

5.4.           Insured or Guaranteed Loans. If any Loans being transferred pursuant to this Agreement are insured or guaranteed by any department or agency of any governmental unit, federal, state or local and such insurance or guaranty is not being specifically terminated by Seller, Buyer represents that Buyer has been approved by such agency and is an approved lender or mortgagee, as appropriate, if such approval is required or, if Buyer has not been approved, Buyer recognizes that any such insurance or guarantees may be terminated. Buyer further assumes full responsibility for determining whether or not such insurance or guarantees are in full force and effect on the date of this Agreement and with respect to those Loans whose insurance or guaranty is in full force and effect on the date of this Agreement, Buyer assumes full responsibility for doing all things necessary to insure such insurance or guarantees remain in full force and effect. Buyer agrees to assume all of Seller's Obligations under the contract(s) of insurance or guaranty, agrees to indemnify and hold Seller harmless from and against any claims of breach thereof after the Closing and agrees to cooperate with Seller where necessary to complete forms required by the insuring or guaranteeing department or agency to effect or complete the transfer to Buyer.

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5.5.           Buyer's Due Diligence. Buyer represents that it has made an independent evaluation of the Loans and Loan Files and/or any electronic data made available to it pertaining to the Loans being purchased hereunder. Buyer also represents that it has conducted such other investigations as it deems appropriate and as are consistent with the terms of the Confidentiality Agreement executed or assented to by Buyer in connection with this transaction, including, without limitation, searches of Uniform Commercial Code, title, court, bankruptcy and other public records. Buyer agrees and represents that it is entering into this Agreement solely on the basis of its own investigations and its judgment as to the nature, validity, enforceability, collectibility and value of the Loans and all other facts material to their purchase, including, but not limited to the legal matters and risks relating to the collection and enforcement, and the performance of Obligations in any Foreign Jurisdiction. Buyer further acknowledges that no employee or representative of Seller has been authorized to make any statements or representations other than those specifically contained in this Agreement.

5.6           Reporting to or for the Applicable Taxing Authorities.   The Buyer of Loan Pool NBF-1-07-010 or NBF-1-07-020 will be responsible for submitting all Internal Revenue Service information returns related to the Loans sold hereunder for all of 2007.  The Buyer of Loan Pool NBF-1-07-010 will prepare and submit those returns at its own expense.  The Buyer of Loan Pool NBF-1-07-020 will be reimbursed by the Seller for the Buyer’s reasonable costs attributable to preparing and submitting the returns for 2007 on the following basis:   the Seller will reimburse Buyer for expenses which the Seller reasonably determines are actual, reasonable and necessary, including expenses of photocopying, postage and express mail, data processing and employee services (based upon the number of hours spent performing such duties) but not including overhead or other administrative expenses related to such employee services.  All of such expenses submitted to Seller for reimbursement must be documented by evidence, satisfactory to Seller, supporting the basis for such expenses.  Promptly upon request by Seller, Buyer shall supply Seller with any additional evidence that Seller may request.

Buyer shall be responsible for submitting all information returns required under applicable laws of any Foreign Jurisdiction, to the extent such are required to be filed by Buyer or Seller under such laws, relating to the Loans, for the calendar or tax year in which the Closing occurs and thereafter.

5.7.           Loans in Litigation. With respect to any Loan sold pursuant to this Agreement, which is the subject of any type of pending litigation, Buyer shall notify Seller's Regional Counsel, 1601 Bryan Street, Dallas, Texas 75201, within fifteen (15) Business Days of the  Loan Sale Closing Date of the name of the attorney selected by Buyer to represent Buyer's interests in the litigation. Buyer shall, within fifteen (15) Business Days of the Loan Sale Closing Date, notify the clerk of the court or other appropriate official and all counsel of record that ownership of the Loan was transferred from Seller to Buyer. Buyer shall have its attorney file appropriate pleadings and other documents and instruments with the court or other appropriate body within twenty (20) Business Days of the Loan Sale Closing Date, substituting Buyer's attorney for Seller's attorney and also removing Seller as a party to the litigation and substituting Buyer as the real party-in-interest. Except as provided in the next succeeding sentence, should Buyer fail to

comply with the provisions of this section within twenty (20) Business Days after the Loan Sale Closing Date, Seller may, at its option, dismiss with or without prejudice or withdraw from, any such pending litigation.

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In the event that Buyer shall be unable, as a matter of applicable law, to cause Seller to be replaced by Buyer as party-in-interest in any such litigation, Buyer shall provide to Seller's Regional Counsel at the address specified above within twenty (20) Business Days of the Loan Sale Closing Date a legal opinion of Buyer's legal counsel, qualified in the relevant jurisdiction, to such effect and stating the reasons for such failure.  In such event, (i) Buyer shall cause its attorney to conduct such litigation at Buyer's sole cost and expense; (ii) Buyer shall cause the removal of Seller and substitution of Buyer as party-in-interest in such litigation at the earliest time possible under applicable law; (iii) Buyer shall use its best efforts to cause such litigation to be resolved by judgment or settlement in as reasonably efficient a manner as practical; (iv) Seller shall cooperate with Buyer and Buyer's attorney as reasonably required in Seller's sole judgment to bring such litigation or any settlement relating thereto to a reasonable and prompt conclusion; (v) no settlement shall be agreed upon by Buyer or its agents or counsel without the express prior written consent of Seller, unless such settlement includes an irrevocable and complete waiver and release of any and all potential claims against Seller in relation to such litigation or the subject Loans or Obligations by any person, including without limitation Buyer and any Borrower, and any and all losses, liabilities, claims, causes of action, damages, demands, taxes, fees, costs and expenses relating thereto are expressly agreed, duly, validly and enforceably, to be paid by Buyer without recourse of any kind to Seller; and (vi) Buyer shall pay all costs and expenses of Seller and Seller's counsel, if any, engaged in connection with such litigation as provided for in the next succeeding sentence.

Buyer agrees to reimburse Seller, upon demand, for Seller's legal expenses in such litigation. Buyer shall pay all of the costs and expenses incurred by it in connection with the actions provided for in this Section 5.7, including, without limitation, all legal fees and expenses and court costs, and agrees to pay or reimburse Seller, upon demand, for Seller's legal expenses in connection with such litigation incurred on or after the Loan Sale Closing Date, including the dismissal thereof or withdrawal therefrom.

5.8.           Loans in Bankruptcy. In accordance with Bankruptcy Rule 3001(e), Buyer agrees to take all actions necessary to file within thirty (30) Business Days of the Loan Sale Closing Date, (i) proofs of claims in pending bankruptcy cases involving any Loans purchased for which Seller has not already filed a proof of claim, and (ii) all documents required by Rule 3001(e)(2) of the Federal Rules of Bankruptcy Procedure and to take all such similar actions as may be required in any relevant jurisdiction in any pending bankruptcy or insolvency case or proceeding in such jurisdiction involving any Loans purchased in order to evidence and assert Buyer's rights. Buyer shall prepare and provide to Seller within thirty (30) Business Days of the Loan Sale Closing Date, an Affidavit and Assignment of Claim or any similar forms as may be required in any relevant Foreign Jurisdiction and shall be acceptable to Seller, for each Loan purchased pursuant to this Agreement where a Borrower under such Loan is in bankruptcy at Closing. Buyer releases Seller from any claim, demand, suit or cause of action Buyer may have as a result of any action or inaction on the part of the Failed Bank or the Seller with respect to

such Loan and Buyer further agrees to reimburse Seller for any cost or expense incurred by Seller as a result of Buyer's failure to file an Affidavit and Assignment of Claim or similar forms as required herein.

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5.9.           Loan Related Insurance. As of the Loan Sale Closing Date, Buyer is responsible for having itself substituted as loss payee on all Loan related insurance in which the Failed Bank or Seller is currently listed as a loss payee. Any loss after the Loan Sale Closing Date to a Borrower, a participant in a Participated Loan, or to Buyer or to the value or collectibility of any Loan due to Seller's cancellation of any insurance is the sole responsibility of Buyer.

5.10.         Loans with Escrow Accounts and Security Deposits. Buyer agrees to assume, undertake and discharge any and all Obligations of the holder of the Loans with respect to any security deposit, escrow, maintenance of escrow and payments from escrow of monies paid by or on account of the Borrower, including monies held in account 215050 of NBBF's books and records.  If the successful bidder acquires Loan Pool NBF-1-07-010, Seller shall transfer to Buyer on the Loan Sale Closing Date that sum of monies held by Seller which represents undisbursed security deposits and escrow payments as of such date.  If the successful bidder acquires Loan Pool NBF-1-07-020, Seller shall transfer to Buyer on the Deconversion Date that sum of monies held by Seller which represents undisbursed security deposits and escrow payments as of that date.  Buyer shall be given a credit against the Purchase Price for the assumption of the liability for the security deposits and escrow deposits, as such liability appears on the books and records of NBBF as of the Calculation Date.

5.11.        Loans in which Seller was the Lead Lender in a Participated Loan. Buyer hereby agrees to assume the role of lead lender for any Loan in which a portion of the Loan was participated to one or more other entities and in which Seller was the lead lender as of the Loan Sale Closing Date. Buyer hereby agrees to accept any such Participated Loan subject to all participants' right, title and interest in such Participated Loan.

5.12.         Contracts for Deed. Buyer agrees to comply with all Obligations set forth in any Contract for Deed contained in any Loan Pool subject to this Agreement. Pursuant to the provisions of Section 3.1 hereof, Seller may require Buyer to prepare and furnish Special Warranty Deed(s) for Seller's approval and execution, conveying the real property subject to any such contract to Buyer. Title curative work, if required, shall be at Buyer's sole cost and expense.

5.13.          Leases.  Buyer agrees to comply with all Obligations set forth in any lease related to any Loan Pool subject to this Agreement.  Pursuant to the provisions of Section 3.1 hereof, Seller may require Buyer to prepare and furnish applicable Transfer Documents for Seller’s approval and execution.

5.14.         Files and Records. Buyer agrees to abide by all applicable state, federal and Foreign Jurisdiction laws, rules and regulations regarding the handling and maintenance of all documents and records relating to the Loans purchased hereunder including, but not limited to, the length of time such documents and records are to be retained. Buyer further agrees to:

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(a)           Allow Seller the continuing right to use, inspect and make extracts from or copies of any such documents or records upon Seller's reasonable notice to Buyer.

(b)           Allow Seller the possession, custody and use of original documents for any lawful purpose and upon reasonable terms and conditions.

(c)           Give reasonable notice to Seller of Buyer's intention to destroy or dispose of any documents or files and to allow Seller, at its own expense, to recover the same from Buyer.

5.15.         Reimbursement for Use of Seller's Employees. In the event of litigation with respect to the Loans purchased by Buyer in which Seller or its employees are requested or required by subpoena, court order or otherwise, to perform any acts including, but not limited to, testifying in litigation, preparing responses to subpoenas or other legal process or pleadings, and/or performing any review of public or private records such as tracing funds, whether said litigation is commenced by Buyer or any other party, Seller shall be reimbursed by Buyer for the time expended by each of Seller's employees involved in the performance of said acts at the rate of the greater of $75.00 per hour per employee or the then prevailing hourly rate per employee charged by the Seller or the FDIC to perform such services, plus all associated travel, lodging and per diem costs. Seller shall, in its sole and absolute discretion, determine and assign the personnel necessary to perform said acts. Buyer also agrees to reimburse Seller for copies made in the course of performing said acts at the rate of 25 cents ($.25) per copy. Nothing in this section shall require Seller to provide Buyer with any information or service in this regard.

5.16.         Notice to Borrowers. Buyer or, at Seller's option, Seller shall promptly after the Loan Sale Closing Date, but in no event later than thirty (30) calendar days after the Loan Sale Closing Date, at its own cost and expense, give notice of this transfer to all Borrowers or Loan servicers, in the case of Borrowers located in the United States, by first class U.S. mail at their current or last known address of record or, in the case of Borrowers located in a Foreign Jurisdiction, in such manner as may be required under the laws of such jurisdiction in order to effectively give notice to such Borrowers of the transfer of the Loans. In the event there is no known address for a Borrower, no personal notice to that Borrower shall be necessary. Upon subsequently locating such Borrower, Buyer shall send such notice to such Borrower. Buyer shall be liable to Seller for any and all costs and expenses incurred by Seller as a result of Buyer's failure to comply with the provisions of this section. Such costs and expenses shall include, but not be limited to, salaries of Seller's personnel and other administrative expenses, the time expended by each of Seller's employees involved in the performance of said acts at the rate of the greater of $75.00 per hour per employee or the then prevailing hourly rate per employee charged by the Seller or the FDIC to perform such services, plus all associated travel, lodging and per diem costs. Seller shall, in its sole and absolute discretion, determine and assign the personnel necessary to perform said acts. Buyer also agrees to reimburse Seller for copies made in the course of performing said acts at the rate of 25 cents ($.25) per copy. Nothing in this section shall require Seller to provide Buyer with any information or service in this regard.

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5.17.          Notice of Claim. Buyer shall immediately notify Seller of any claim, threatened claim or litigation against Seller or the Failed Bank arising out of any Loan contained in a Loan Pool purchased by Buyer that may come to its attention.

5.18.           Use of the FDIC's Name and Reservation of Statutory Powers. Buyer agrees that it will not use or permit the use by its agents, successors or assigns of any name or combination of letters that is similar to the FDIC or the Federal Deposit Insurance Corporation. Buyer will not represent or imply that it is affiliated with, authorized by or in any way related to the FDIC. Seller specifically permits Buyer to assert the statute of limitations established under 12 U.S.C. § l82l(d)(14) pursuant to the terms of the Assignment and Assumption of Interests and Obligations. However, Buyer acknowledges and agrees that the assignment of any Loan or Collateral Document pursuant to the terms of this Agreement shall not constitute the assignment of any other rights, powers or privileges granted to Seller pursuant to the provisions the Federal Deposit Insurance Act, including, without limitation, those granted pursuant to 12 U.S.C. § 182l(d), 12 U.S.C. § l823(e) and 12 U.S.C. § 1825, all such rights and powers being expressly reserved by Seller; nor, shall Buyer assert or attempt to assert any such right, power or privilege in any pending or future litigation involving any Loan purchased hereunder. Buyer and Seller agree and stipulate that breach of the provisions of this section will result in actual and substantial damages to Seller in an amount that cannot be determined with precision. It is therefore agreed that in the event of such breach, Buyer shall pay the sum of $25,000.00 to Seller for each such breach as liquidated damages, together with such fees and expenses as Seller may incur in preventing further or continuing breach of said provision and recovering liquidated damages. Notwithstanding the provisions of this section, the FDIC may also pursue any equitable remedy it may have for Buyer's breach of this covenant.

5.19.          Prior Servicer Information. Buyer acknowledges and agrees that Seller might not have access to information from prior servicers of a Loan and that Seller has not requested any information not in the possession of Seller or its servicing contractor from any prior servicer of a Loan. Buyer acknowledges and agrees that Seller will not be required under the terms of this Agreement to request any information from any prior servicer.

5.20.          Release of Seller. (a)  Except as otherwise specifically provided in Article VII of this Agreement, Buyer hereby releases and forever discharges Seller, the Failed Bank and the FDIC, all of their officers, directors, employees, agents, attorneys, contractors and representatives, and their successors, assigns and affiliates, from any and all claims (including any counterclaim or defensive claim), demands, causes of action, judgments or legal proceedings and remedies of whatever kind or nature that Buyer now has or might have in the future, whether now known or unknown, which are related in any manner whatsoever to the Loans and this Agreement.

(b)           Buyer agrees that it will not renew, extend, renegotiate, compromise, settle or release any Note or Loan or any right of Buyer founded upon or growing out of this Agreement, except upon payment in full thereof, unless all Borrowers on said Note or Loan shall first release and discharge the Failed Bank(s) and Seller and its agents and assigns (the "Released Parties") from all claims, demands and causes of action which any such Borrower may have against any such Released Party arising from or growing out of any act or omission occurring prior to the date of such release. If Buyer fails to obtain such release, Buyer agrees to protect, save and hold Seller harmless from any expense or damage Seller suffers that might have been prevented had Buyer obtained the release.

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5.21.         Indemnification. Buyer agrees to pay, or reimburse to Seller, and to protect, indemnify, save and hold harmless Seller, Seller's agents and financial services advisor engaged in connection with the Loan Sale from and against any and all losses, liabilities, claims, causes of action, damages, demands, taxes, fees, costs and expenses of whatever kind, arising out of, incurred in connection with or otherwise relating to Buyer's actions or inactions in performing, or failure to perform, the obligations of Buyer set forth in this Agreement. Buyer further agrees to pay when due or promptly reimburse Seller for any fees, taxes, costs and expenses incurred by Seller in connection with the performance or nonperformance by Buyer of all of the obligations of Buyer specified herein.   Buyer further agrees to indemnify and hold Seller harmless against any and all claims, losses, liabilities, causes of action, damages, demands, taxes, fees, costs and expenses whatsoever arising from or related to the Inchoate Agreements, whether such claims are now known, arise after the date of the Agreement, or are discovered after the date of the Agreement.

5.22.         Borrower as Buyer. In the event that Buyer is the Borrower or a Related Party with respect to any Loan in the Loan Pool, then Buyer, on its own behalf and on behalf of any Related Party, agrees that it shall, and hereby does, release and discharge and agrees to indemnify, defend and hold harmless the Failed Bank(s), Seller and Seller's agents and employees from and against all claims, demands and causes of action arising out of any act or omission related to said Loan. Buyer acknowledges and agrees that it shall have no repurchase option on any Loan for which Buyer or a Related Party is the Borrower pursuant to Article VII of this Agreement. At Buyer's request, and upon preparation of appropriate documentation by Buyer in conformance with Section 3.1, Seller will release and discharge a Loan for which Buyer is the Borrower in lieu of assigning the same to Buyer. In any event, Seller will issue a 1099 to report any discharge of indebtedness in connection with the sale or release of the Loan to the Borrower or a Related Party in accordance with IRS regulations and FDIC policy.  Notwithstanding the foregoing, any failure by the FDIC to issue a 1099 does not relieve the Buyer of its responsibility to report the discharge of indebtedness in accordance with applicable federal tax law.

5.23.         Accounts Payable/Brokerage Commissions.  Buyer shall assume and be solely responsible for (i) all accounts payable by NBBF to suppliers of equipment as reflected in account number 207110 of NBBF's books and records, and (ii) all liabilities reflected in account number 290010 of NBBF's books and records which liabilities are primarily brokerage commissions payable by NBBF to equipment lease brokers.  Buyer shall be given a credit against the Purchase Price for the net liabilities assumed pursuant to this section as such net liabilities are calculated by netting assets against liabilities as they appear on the books and records of NBBF in account numbers 207110 and 290010 as of the Calculation Date.

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5.24.           Payment of Taxes.   Buyer shall be responsible for payment of all Taxes.  Buyer shall be given a credit against the Purchase Price for the net liabilities for Taxes assumed pursuant to this section as such Taxes are calculated by netting assets against liabilities as they appear on the books and records of NBBF in account numbers 207100 and 207105 as of the Calculation Date.

5.25.          Assignment of Servicing Agreements.   Buyer will accept assignment of the Servicing Agreements, thereby becoming the servicer under the Servicing Agreements for loans serviced for third parties.  Buyer agrees to assume all obligations of the Servicer under the Servicing Agreements.  Seller will assign the Servicing Agreements to Buyer at no charge.

5.26.          Purchase of Platform-related Assets and Liabilities.    The Buyer of Loan Pool NBF-1-07-010 will purchase the Platform-related Assets and Liabilities from the Seller.  If the net balance of the Platform-related Assets and Liabilities as such items appear on the books and records of NBBF as of the Calculation Date is positive, the Buyer shall purchase the Platform-related Assets and Liabilities at their net Book Value, which shall be in addition to the Purchase Price, or if the net balance of the Platform-related Assets and Liabilities is negative, Buyer shall be given a credit against the Purchase Price for the Platform-related Assets and Liabilities assumed pursuant to this section.

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Article VI

Loans Sold “As Is” and Without Recourse

6.1.           Loans Sold “As Is.” THE LOANS ARE SOLD "AS IS" AND "WITH ALL FAULTS," WITHOUT ANY REPRESENTATION, WARRANTY OR RECOURSE WHATSOEVER AS TO EITHER COLLECTIBILITY, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING THE LOANS, THE STRATIFICATION OR PACKAGING OF THE LOANS, THE COLLATERAL OR THE  COLLATERAL DOCUMENTS.

6.2.           No Warranties or Representations with Respect to Escrow Accounts and Security Deposits. Seller makes no warranties or representation of any kind or nature as to (i) the sufficiency of funds held in any escrow account or security deposit to discharge any obligations related in any manner to an escrow obligation or a lease, (ii) the accuracy of the amount of any monies held in any escrow account or security deposit,  or (iii) the propriety of any previous disbursements or payments from any escrow account or security deposit.

6.3.           No Warranties or Representations as to Amounts of Unfunded Principal. Seller further makes no warranties or representation of any kind or nature as to the amount of any additional or future Disbursements of Principal Buyer is obligated to make.

6.4.           Disclaimer Regarding Calculation or Adjustment of Interest on any Loan. Seller makes no warranties or representation of any kind as to the accuracy of any calculation or adjustment of interest on any Loan, including, without limitation, any adjustable rate mortgage Loan, whether such calculation or adjustment is made by the Failed Bank, Seller, any agent or contractor of Seller, or any predecessor-in-interest of Seller or any other party.

6.5.           No Warranties or Representations With Regard to Due Diligence Data. Seller makes no warranties or representation of any kind as to the completeness or accuracy of any information provided by Seller with respect to any Loan. Buyer's exclusive remedies with respect to any inaccurate or incomplete information provided by Seller are an adjustment to the Purchase Price in accordance with Section 2.4 hereof or an option to repurchase under Article VII, and such exclusive remedies are available only if all other conditions therefor expressed in this Agreement have been met.

6.6.           Buyer’s Waiver of Cause of Action. Buyer hereby waives any right or cause of action it might now or in the future have against the Failed Bank(s) or Seller as a result of its purchase of the Loan Pool(s) subject to this Agreement; provided, however, that this waiver does not include any action taken as a result of Seller's failure to perform under the terms of this Agreement.

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6.7.           Intervening or Missing Assignments. Buyer acknowledges and agrees that Seller shall have no obligation to secure or obtain any missing intervening assignment or any assignment to Seller that is not contained in the Loan File or among the Collateral Documents. Buyer shall have the sole responsibility and expense of securing any intervening assignment or any assignment to Seller that may be missing from the Collateral Documents from the appropriate source.

6.8           No Warranties or Representations as to Documents.  Seller makes no warranties or representations of any kind or nature as to the effectiveness or enforceability in any Foreign Jurisdiction of this Agreement, the Bill of Sale, the Assignment and Assumption of Interests and Obligations or any other document or instrument prepared in connection herewith, whether or not prepared and executed in the forms provided herewith, all of such forms being provided for reference only.

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Article VII

Repurchase by Seller at Buyer's Option

7.1.           Repurchases at Buyer's Option. Buyer may, at its option, and upon satisfaction of the procedures and other requirements set forth below, require Seller to repurchase a Loan other than an Inchoate Agreement, if, and only if, prior to the Loan Sale Closing Date one of the following events set forth below has occurred. IN NO EVENT SHALL THE OCCURRENCE OF ANY SUCH EVENT BE EVIDENCE OF BAD FAITH, MISCONDUCT OR FRAUD EVEN IN THE EVENT THAT IT IS SHOWN THAT SELLER, IN ANY CAPACITY, ANY AGENT OF SELLER, ANY FAILED BANK OR ANY OF THEIR RESPECTIVE DIRECTORS, EMPLOYEES, OFFICERS OR AGENTS KNEW OR SHOULD HAVE KNOWN OF THE EXISTENCE OF ANY FACTS RELATING TO THE OCCURRENCE OF SUCH EVENT:

(a)           The Borrower had been discharged in a no asset bankruptcy proceeding and no collateral exists out of which the Loan may be satisfied and all guarantors or sureties of the Note, if any, or the obligations contained therein, have similarly been discharged in no asset bankruptcies.

(b)           A court of competent jurisdiction had entered a final judgment (other than a bankruptcy decree or judicial foreclosure order) holding that neither the Borrower nor any guarantors or sureties owe an enforceable obligation to pay the holder of the Note or its assignee(s).

(c)           The Failed Bank or Seller had executed and delivered to the Borrower a release of liability from all obligations under the Note.

(d)           A title defect exists in connection with the property which is the subject of a Contract for Deed and which title defect requires a prior order or judgment of a court to enable Buyer to convey title to such property in accordance with the terms and conditions set forth in the Contract for Deed.

(e)           Seller is not the owner of the Loan (or, in the case of a participation interest in a Loan, Seller is not the owner of the pro rata interest in such participation interest set forth on the attached Schedule of Loans).

(f)           The Mortgaged Property securing any Loan sold hereunder has Significant Environmental Contamination. Buyer's recourse with respect to this Section 7.1(f) shall be conditioned upon: (i) the presence of Significant Environmental Contamination not being disclosed in the Loan, Loan File or other material made available by Seller to Buyer prior to submission of a Bid; (ii) such Loan having a Book Value greater than $250,000.00 as of the Loan Sale Closing Date; and, (iii) Buyer delivering, along with the notice required by Section 7.4 hereof, the following, each of which must be satisfactory in form and substance to Seller in its sole discretion:

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1.           A Phase I environmental assessment, from a qualified and reputable firm, of the Mortgaged Property securing the Loan; and,

2.           A Phase II environmental assessment or lead-based paint survey of such Mortgaged Property from a qualified and reputable firm, which assessment shall confirm (i) the existence of Significant Environmental Contamination on such Mortgaged Property and (ii) that the regulator is likely to require such remediation; and,

3.           Buyer shall have submitted a written certification of Buyer under penalty of perjury that no action has been taken by or on behalf of Buyer (i) to initiate foreclosure proceedings or (ii) to accept a deed-in-lieu-of-foreclosure in connection with such Loan.

(g)           The Failed Bank, its officers, directors or employees fraudulently caused the Borrower to receive less than all of the proceeds and benefits of a Note. Buyer's recourse with respect to this Section 7.1(g) shall be conditioned upon Buyer delivering, along with the notice required by Section 7.4 hereof, written evidence of such fraud, which evidence must be satisfactory in form and substance to Seller in its sole discretion.

7.2.           Securities Laws Right of Rescission. In the event that Buyer is entitled to and wishes to exercise its rescission rights under any federal or state securities law, Buyer shall deliver the notice required by Section 7.4 hereof, together with written evidence of the circumstances giving rise to Buyer's right to rescission, which evidence must be satisfactory in form and substance to Seller in its sole discretion.

7.3.           Defects not Qualifying for Repurchase. Neither the absence of any intervening assignment or any assignment to Seller, nor the existence of any lien, claim or encumbrance on the Loan or its Collateral, nor any defect in the lien or priority of Seller's security interest in the Collateral shall give rise to any claim for repurchase under this Article VII.

7.4.           Notice to Seller. Buyer shall notify Seller of each Loan with respect to which Buyer seeks repurchase. Such notice shall be on Buyer's letterhead paper and include the following information: (a) Buyer's tax identification number, (b) Buyer's wire transfer instructions, (c) the subsection under Section 7.1 hereof for which Buyer is seeking repurchase and (d) a summary of the reasons Buyer believes that the Loan(s) should be repurchased. The notice shall be accompanied by evidence supporting the basis for repurchase of such Loan. Promptly upon request by Seller, Buyer shall supply Seller with any additional evidence that Seller may require. Seller shall have no obligation to repurchase any Loan pursuant to this Article VII for which notice and all supporting evidence reasonably required by Seller have not been received by Seller at the addresses specified in Sections 8.2 and 8.3 hereof no later than the first Business Day after the expiration of 180 calendar days after the Loan Sale Closing Date, or in the case of a Contract for Deed, the first Business Day after the expiration of 360 calendar days after the Loan Sale Closing Date.

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7.5.           Re-delivery of Note(s), Files and Documents. For any Loan that qualifies for repurchase under this Article, Buyer shall: (a) re-endorse or reassign and deliver the Note(s) to Seller, (b) reassign all Collateral Documents associated with such Loan and reconvey any real property subject to a Contract for Deed or transferred by quitclaim deed pursuant to Section 2.6 hereof, together with such other documents or instruments as shall be necessary or appropriate to convey the Loan back to Seller, (c) re-deliver to Seller the Loan File, along with any additional records compiled or accumulated by Buyer pertaining to the Loan, and (d) deliver to Seller a certification, notarized and executed under penalty of perjury by a duly authorized representative of Buyer, certifying that as of the date of repurchase none of the conditions relieving Seller of its obligation to repurchase the Loan(s) as specified in Section 7.6 hereof has occurred. The documents evidencing such reconveyance shall be substantially the same as those executed as of Closing pursuant to Article III of this Agreement. In all cases where Buyer recorded or filed among public records any document or instrument evidencing a transfer of the Loan to Buyer, Buyer shall cause to be recorded or filed among such records a similar document or instrument evidencing the reconveyance of the Loan to Seller. Upon compliance by Buyer with the provisions hereof, Seller shall pay to Buyer the Repurchase Price.

7.6.           Waiver of Buyer's Repurchase Option. Seller will be relieved of its obligation to repurchase any Loan for any reason set forth in subsections (a) through (g) of Section 7.1 hereof, if Buyer: (a) modifies any of the terms of the Loan (including the terms of any Collateral Document or Contract for Deed); (b) exercises forbearance with respect to any scheduled payment on the Loan; (c) accepts or executes new or modified lease documents assigned by Seller to Buyer; (d) sells, assigns or transfers the Loan or any interest therein; (e) fails to employ usual and customary care in the maintenance, collection, servicing and preservation of the Loan, including usual and customary delinquency prevention, collection procedures and protection of collateral as warranted; (f) initiates any litigation in connection with the Loan or the Mortgaged Property securing the Loan other than litigation to force payment or to realize on the Collateral securing the Loan; (g) completes any action with respect to foreclosure on, or accepts a deed-in-lieu of foreclosure for any Property securing the Loan; (h) causes, by action or inaction, the priority of title to the Loan, Mortgaged Property and other security for the Loan to be less than that conveyed by Seller; (i) causes, by action or inaction, the security for the Loan to be different than that conveyed by Seller, except as may be required by the terms of the Collateral Documents; (j) causes, by action or inaction, a claim of third parties to arise against Buyer that, as a result of repurchase under this Agreement, might be asserted against Seller; (k) causes, by action or inaction, a security interest, lien, pledge or charge of any nature to encumber the Loan to arise; (l) is the Borrower or any Related Party under such Loan; or (m) makes a disbursement other than an Advance.

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Article VIII

Notices

8.1.           Notices. All notices or deliveries required or permitted hereunder shall be in writing and shall be deemed given when personally delivered to the individual hereinafter designated or when actually received by means of e-mail, facsimile, overnight mail or certified mail, return receipt requested, at the following address or such other address as either party may hereafter designate by notice to the other party, making specific reference to this Article VIII of this Agreement.  Any notice sent by facsimile must be confirmed by submission of an original or hard copy on the next Business Day following such notification.

8.2.           Article VII Notice. Notice required by Article VII (Repurchases at Buyer's Option) shall be delivered to:

SELLER:                Manager, Asset Claims Administration

FDIC Asset Claims Administration

550 17th Street, NW, (Rm. F-3054)

Washington, D.C. 20429-002

Facsimile: (202) 898-8916

Senior Counsel

FDIC Legal Division

Litigation Branch, Receivership Section

Special Issues Unit

3501 Fairfax Drive (Room E-7056)

Arlington, VA  22226

8.3.           All Other Notices.   Notice required by any other provision(s) of this Agreement shall be delivered to:

BUYER:                                LEAF Funding, LLC

       1818 Market Street, 9^th Floor

Philadelphia, PA  19103

Attention:                             Mr. Crit DeMent, CEO

                                                Telephone Number:            215-717-3357

Facsimile Number:               215-569-0675

E-mail  Address:                  cdement@leaf-finacial.com

SELLER:                 Federal Deposit Insurance Corporation

Franchise and Asset Marketing Branch

1601 Bryan Street

Dallas, Texas 75201

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Federal Deposit Insurance Corporation

Regional Counsel, Litigation Branch

1601 Bryan Street

Dallas, Texas 75201

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Article IX

Forfeiture of Earnest Money and Other Remedies

9.1           Failure to Close.  If for any reason, without fault of Seller, Buyer fails to consummate a purchase on the Loan Sale Closing Date, upon the terms and conditions set forth in this Agreement, Seller’s liquidated damages shall be the Earnest Money Deposit and all other funds deposited with Seller.  Buyer and Seller agree that the failure or refusal of Seller to alter or modify in any way, the terms or conditions of this Agreement or any other documents contained in the Bid Instructions shall not constitute fault on the part of Seller.  Nothing contained herein is intended to, nor shall it be construed to limit, in any way the right of Seller to seek any other right, remedy, relief or damages provided by law or equity.  Buyer shall not be liable for any of the foregoing damages if Buyer is forced to withdraw its Bid after award as the result of a supervisory directive given by the FDIC or other federal or state financial regulatory agency, provided that Seller shall be satisfied that such supervisory directive is legally effective.  In such event, Seller shall refund the Earnest Money Deposit and any other funds deposited with Seller.

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 Article X

Miscellaneous Provisions

10.1.                      Severability. Each part of this Agreement is intended to be severable. If any term, covenant, condition or provision hereof is unlawful, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of the remaining parts of this Agreement and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the invalid or unenforceable part had not been included.

10.2.                      Construction. Unless the context otherwise requires, singular nouns and pronouns when used herein, shall be deemed to include the plural and vice versa and impersonal pronouns shall be deemed to include the personal pronoun of the appropriate gender.

10.3.                      Survival. Each and every covenant made by Buyer or Seller in this Agreement shall survive the Closing and shall not merge into the closing documents, but instead shall be independently enforceable.

10.4.                      Governing Law. Federal law of the United States shall control this Agreement. To the extent that federal law does not supply a rule of decision, this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. Nothing in this Agreement will require any unlawful action or inaction by either party.

10.5.                      Cost, Fees and Expenses.   Except as otherwise provided herein, each party hereto agrees to pay all costs, fees and expenses which it has incurred in connection with or incidental to the matters contained in this Agreement, including without limitation any fees and disbursements to its accountants and counsel; provided that Buyer shall pay all fees, costs and expenses (other than attorneys' fees incurred by Seller) incurred in connection with the transfer to it of any Loan hereunder.

10.6.                      Nonwaiver, Amendment and Assignment.   No provision of this Agreement may be amended or waived except in writing executed by all of the parties to this Agreement. This Agreement and the terms, covenants, conditions, provisions, obligations, undertakings, rights and benefits hereof, including the Attachments to this Agreement, shall be binding upon, and shall inure to the benefit of the undersigned parties and their respective heirs, executors, administrators, representatives, successors and assigns. Notwithstanding the foregoing, this Agreement may not be transferred or assigned without the express prior written consent of Seller (and any attempted assignment without such consent shall be void).

10.7.                      Drafting Presumption. This Agreement will be construed fairly as to each party regardless of which party drafted it.

10.8.                      Controlling Agreement. Seller and Buyer hereby acknowledge and agree that this Agreement shall in all instances be the controlling document with respect to the terms of the sale and transfer of the Loans, Collateral Documents and Collateral, and the assignment and assumption of all obligations thereunder. In the event of a conflict between the terms of this Agreement and the terms of any other document or instrument executed in connection herewith and with the transactions contemplated hereby, including, without limitation, any translation into a foreign language of this Agreement, any Collateral Document, or any other document or instrument executed in connection herewith which is prepared for notarization, filing or any other purpose, the terms of this Agreement shall control, and furthermore, the terms of this Agreement shall in no way be or be deemed to be amended, modified or otherwise affected in any manner by the terms of such other document or instrument.

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10.9.                      Venue.   Buyer and Seller each hereby irrevocably and unconditionally agree that any legal action arising under or in connection with the sale, this Agreement or the transactions contemplated hereby are to be instituted in the United States District Court in and for the District of Columbia.

10.10.                      Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

10.11.                      Waiver of Jury Trial.   Buyer and Seller each hereby irrevocably and unconditionally waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise, arising out of or relating to or in connection with the sale of the Loans, this Agreement or any transaction contemplated hereby.

10.12.                      Incorporation by Reference.  The Bid Package shall be considered part of this Agreement as if fully set forth herein.

BUYER:                                                                SELLER

            FEDERAL DEPOSIT INSURANCE

LEAF FUNDING, LLC                                       CORPORATION AS RECEIVER OF

                           NETBANK

By:                                                      By:                                                                

Name:                                                                Name:                          

Title:                                 Title:                  Attorney-in-Fact

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EX-10.10

EXECUTION VERSION

RECEIVABLES LOAN AND SECURITY AGREEMENT

Dated as of November 1, 2007

Among

LEAF CAPITAL FUNDING III, LLC,

as the Borrower

and

LEAF FINANCIAL CORPORATION,

as the Servicer

and

MORGAN STANLEY BANK

as Class A Lender and Collateral Agent

and

MORGAN STANLEY ASSET FUNDING INC.

as Class B Lender

and

U.S. BANK NATIONAL ASSOCIATION,

as the Custodian and the Lenders’ Bank

and

LYON FINANCIAL SERVICES, INC. (D/B/A U.S. BANK PORTFOLIO SERVICES),

as the Backup Servicer

This RECEIVABLES LOAN AND SECURITY AGREEMENT is made as of November 1, 2007, among:

(1)           LEAF CAPITAL FUNDING III, LLC, a Delaware limited liability company (the “Borrower”);

(2)           LEAF FINANCIAL CORPORATION, a Delaware corporation (“LEAF Financial” or the “Initial Servicer”), as the Servicer (as defined herein);

(3)           MORGAN STANLEY BANK, as Class A Lender (“Morgan Stanley” and a “Lender” hereunder) and Collateral Agent (as defined herein);

(4)           MORGAN STANLEY ASSET FUNDING INC., as Class B Lender (a “Lender” hereunder and, together with Morgan Stanley, the “Lenders”);

(5)           U.S. BANK NATIONAL ASSOCIATION, as the Custodian and the Lenders’ Bank (as each such term is defined herein); and

(6)           LYON FINANCIAL SERVICES, INC. (d/b/a U.S. Bank Portfolio Services), a Minnesota corporation, as the Backup Servicer (as defined herein).

IT IS AGREED as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01                                Certain Defined Terms.  a)  Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.01.

(b)           As used in this Agreement and the exhibits and schedules thereto (each of which is hereby incorporated herein and made a part hereof), 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):

“Accountants’ Report” has the meaning assigned to that term in Section 6.11(b).

“Active Backup Servicer’s Fee” means, for any Fee Period or portion thereof after the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the greater of (i) the Active Backup Servicing Fee Rate, multiplied by the Eligible Receivables Balance as of the first day of such Fee Period, multiplied by a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360, and (ii) $7,000.  The Active Backup Servicer’s Fees shall also include reasonable out-of-pocket expenses incurred by the Backup Servicer in performing its duties as Servicer.

“Active Backup Servicing Fee Rate” means 1.50%.

“Active Backup Servicer’s Indemnified Amounts” has the meaning assigned to that term in Section 6.09.

“Adjusted Eurodollar Rate” means, with respect to any Interest Period for any Loan (or portion thereof) allocated to such Interest Period, an interest rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate Margin and (ii) an interest rate per annum equal to the average of the interest rates per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) reported during such Interest Period on Reuters LIBOR01 Page (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits having a term of thirty (30) days and in a principal amount of $1,000,000 or more (or, if such page shall cease to be publicly available or, if the information contained on such page, in  each applicable Lender’s sole judgment, shall cease to accurately reflect such London Interbank Offered Rate, such rate as reported by any publicly available recognized source of similar market data selected by such Lender that, in such Lender’s reasonable judgment, accurately reflects such London Interbank Offered Rate).

“Adjusted Eurodollar Rate Margin” has the meaning ascribed thereto in the Fee Letter.

“Adverse Claim” means a lien, security interest, charge, encumbrance or other right or claim of any Person other than, with (i) respect to the Pledged Assets, any lien, security interest, charge, encumbrance or other right or claim in favor of the Collateral Agent or (ii) any Permitted Lien.

“Affected Party” has the meaning assigned to that term in Section 2.09.

“Affiliate” when used with respect to a Person, means any other Person controlling, controlled by or under common control with such Person.  For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Aggregate Advance Amount” means the Class A Advance Amount plus the Class B Advance Amount.

“Agreement” means this Receivables Loan and Security Agreement, as the same may be amended, restated, supplemented and/or otherwise modified from time to time hereafter in accordance with its terms.

“Amortized Equipment Cost” means, (i) with respect to all Eligible Receivables (a) as of the Borrowing Date, the present value of the remaining Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment), discounted monthly at the rate at which the present value of all Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment) equals the Purchase Price and, (b) as of any subsequent date of determination, shall mean the present value of the then remaining Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment) discounted monthly at the aforementioned discount rate, and (ii) with respect to an Eligible Receivable (a) as of the Borrowing Date, the present value of the remaining

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 Scheduled Payments under such Eligible Receivable (including any Balloon Payment or Put Payment), discounted monthly at the rate at which the present value of all Scheduled Payments under all Eligible Receivables (including any Balloon Payment or Put Payment) equals the Purchase Price and, (b) as of any subsequent date of determination, shall mean the present value of the then remaining Scheduled Payments under such Eligible Receivable (including any Balloon Payment or Put Payment) discounted monthly at the aforementioned discount rate.

“Annualized Default Rate” means, as of any date of determination after the end of the first Collection Period following the date hereof, an amount (expressed as a percentage) equal to (i) the product of (A) the aggregate Discounted Balances of all Pledged Receivables which were Eligible Receivables at the time of their Pledge hereunder and which became Defaulted Receivables during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods and (B) 2 (if six or more Collection Periods have occurred since the date hereof), 2.4 (if five Collection Periods have occurred since the date hereof), 3 (if four Collection Periods have occurred since the date hereof), 4 (if three Collection Periods have occurred since the date hereof), 6 (if two Collection Periods have occurred since the date hereof) or 12 (if one Collection Period has occurred since the date hereof) divided by (ii) the average Eligible Receivables Balance as of the first Business Day of each of the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods.

“Annualized Net Loss Rate” means, as of any date of determination after the end of the first Collection Period following the date hereof, an amount (expressed as a percentage) equal to (i) the product of (A) (x) the aggregate Discounted Balances of all Pledged Receivables which were Eligible Receivables at the time of their Pledge hereunder and which became Defaulted Receivables during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods minus (y) Recoveries received during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods and (B) 2 (if six or more Collection Periods have occurred since the date hereof), 2.4 (if five Collection Periods have occurred since the date hereof), 3 (if four Collection Periods have occurred since the date hereof), 4 (if three Collection Periods have occurred since the date hereof), 6 (if two Collection Periods have occurred since the date hereof) or 12 (if one Collection Period has occurred since the date hereof) divided by (ii) the Eligible Receivables Balance as of the first Business Day of the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods.

“Approved Lienholder” means any Person that (i) has entered into a Nominee Lienholder Agreement, a copy of which has been delivered by the Collateral Agent to the Custodian and (ii) appears on the list of approved lienholders provided by LEAF Financial Corporation to the Custodian from time to time.  

“Assigned Documents” has the meaning assigned to that term in Section 2.10.

“Assignment” has the meaning set forth in the Purchase and Sale Agreement.

“Assignment and Acceptance” has the meaning assigned to that term in Section 9.04.

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“Available Funds” has the meaning assigned to that term in Section 2.04(c).

“Backup Servicer” means Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) or any successor Backup Servicer appointed by the Lenders pursuant to Section 6.13.

“Backup Servicer Delivery Date” has the meaning assigned to that term in Section 6.10(d).

“Balloon Payment” means a payment due, or which may be required, at the end of the term of a Contract (which constitutes a loan) equal to the principal amount under such Contract which remains outstanding after the payment of all regular scheduled payments of principal during the term of such Contract.

“Bankruptcy Code” means Title 11, United States Code, 11 U.S.C. §§ 101 etseq., as amended.

“Bankruptcy Event” shall be deemed to have occurred with respect to a Person if either:

(c)           a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or

(d)           such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors or members shall vote to implement any of the foregoing.

“Base Rate” means, on any date, a fluctuating rate of interest per annum equal to the arithmetic average of the rates of interest publicly announced by JPMorgan Chase Bank and Citibank, N.A. (or their respective successors) as their respective prime commercial lending rates (or, as to any such bank that does not announce such a rate, such bank’s “base” or other rate determined by the Class A Lender to be the equivalent rate announced by such bank), except that, if any such bank shall, for any period, cease to announce publicly its prime commercial lending (or equivalent) rate, the Class A Lender shall, during such period, determine the Base Rate based upon the prime commercial lending (or equivalent) rates announced publicly by the other such bank or, if each such bank ceases to announce publicly its prime commercial lending (or equivalent) rate, based upon the prime commercial lending (or equivalent) rate or rates announced publicly by one or more other banks selected by the Class A Lender.  The prime commercial lending (or equivalent) rates used in computing the Base Rate are not intended to be the lowest rates of interest charged by such banks in connection with extensions of credit to debtors.  The Base Rate shall change as and when such banks’ prime commercial lending (or equivalent) rates change.

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“Borrower” has the meaning assigned to that term in the preamble hereto.

“Borrower Pension Plan” means a “pension plan” as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA and to which the Borrower or any ERISA Affiliate of Borrower may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“Borrowing” means the borrowing of the Class A Loan and the Class B Loan under this Agreement.

“Borrowing Date” means, with respect to the Borrowing, the date on which the Borrowing is funded.

“Borrowing Limit” means on the Borrowing Date, the lesser of (i) the Facility Limit and (ii) the Maximum Advance Amount, and at any time the Aggregate Advance Amount, as such amount may be increased pursuant to Section 2.16; provided, however, that at all times, on or after the Program Termination Date, the Borrowing Limit shall mean the aggregate outstanding principal balance of the Loans.

“Breakage Fee” means, for Loans allocated to any Interest Period during which such Loans are repaid (in whole or in part) prior to the end of such Interest Period, the breakage costs, if any, related to such repayment plus the amount, if any, by which (i) interest (calculated without taking into account any Breakage Fee), which would have accrued on the amount of the payment of such Loans during such Interest Period (as so computed) if such payment had not been made, as the case may be, exceeds (ii) the sum of (A) interest actually received by each Lender in respect of such Loans for such Interest Period and, if applicable, (B) the income, if any, received by the Lenders from each Lender’s investing the proceeds of such payments on such Loans.

“Business Day” means a day of the year other than a Saturday or a Sunday or any other day on which banks are authorized or required to close in New York City, St. Paul, Minnesota or Salt Lake City, Utah; provided, that, if any determination of a Business Day shall relate to a Loan bearing interest at the Adjusted Eurodollar Rate, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

 “Calculated Swap Amortizing Balance” means, with respect to a Qualifying Interest Rate Swap and as of any date of determination, the projected scheduled amortizing balance of the Pledged Receivables which were Pledged during the period ending on the Remittance Date on which such Qualifying Interest Rate Swap became effective and beginning on the day following the immediately preceding Remittance Date, determined by the Servicer and accepted by the Lenders based upon the Discounted Balance of such Pledged Receivables as of such date of determination, adjusted for prepayments using an absolute prepayment speed which, in the judgment of the Lenders, is consistent with the speed with which the Pledged Receivables have prepaid in the past.

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“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, contingent share issuances, participations or other equivalents of or interest in equity (however designated) of such Person.

“Certificate of Title” means with respect to a Vehicle, an original certificate of title issued by the Registrar of Titles of the applicable State.

“Change of Control” means that at any time (i) Owner shall own directly or indirectly less than 100% of all membership interests of the Borrower, (ii) Resource America shall own directly or indirectly less than 50.1% of all Capital Stock or voting power of the initial Servicer, (iii) the initial Servicer shall own directly or indirectly less than 80% of all Capital Stock or voting power of Originator and Owner, (iv) Resource America, Owner or the Borrower merges or consolidates with any other Person without the prior written consent of the Lenders, (v) the initial Servicer or the Originator merges or consolidates with any other Person and the initial Servicer or the Originator, as applicable, is not the surviving entity or (vi) either of Crit DeMent or Miles Herman is not employed in a senior management position at the initial Servicer, is not involved in the day-to-day operations of the initial Servicer or is not able to perform substantially all of his duties as an employee of the initial Servicer during any three month period and, in each case, has not been replaced by a person approved by the Lenders in writing within 90 days of any such event.

“Check-in Repurchase Event” has the meaning set forth in Section 5.02(e).

“Check-in Requirements” means the procedures set forth in Section 5.02 of this Agreement.

“Class A Advance Amount” means $333,380,316.91.

“Class A Facility Limit” means, at any time, with respect to the Class A Notes, the product of (x) 97.10%, (y) 89%, and (z) the Amortized Equipment Cost with respect to all Pledged Receivables that are Eligible Receivables.

 “Class A Interest Rate” means (i) from the Closing Date through August 7, 2008, the Adjusted Eurodollar Rate plus 2.00%; (ii) from August 8, 2008 through the Facility Maturity Date, the Adjusted Eurodollar Rate plus 2.50%; and (iii) from and after the Facility Maturity Date or at any time upon the occurrence and continuation of any Event of Default or any Termination Event, the Adjusted Eurodollar Rate plus 3.00%.

“Class A Lender” means the Lender in respect of the Class A Loan.

“Class A Loan” has the meaning set forth in Section 2.01(a).

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“Class A Note” has the meaning set forth in Section 2.01(b).

“Class B Advance Amount” means $33,712,616.32.

“Class B Interest Rate” means (i) from the Closing Date through August 7, 2008, the Adjusted Eurodollar Rate plus 10.00%; (ii) from August 8, 2008 through the Facility Maturity Date, the Adjusted Eurodollar Rate plus 12.50%; and (iii) from and after the Facility Maturity Date or at any time upon the occurrence and continuation of any Event of Default or any Termination Event, the Adjusted Eurodollar Rate plus 15.00%.

“Class B Lender” means the Lender in respect of the Class B Loan.

“Class B Loan” means the sum of the Class B Advance Amount plus $1,000,000.

“Class B Note” has the meaning set forth in Section 2.01(b).

“Closing Date” means November 7, 2007.

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

“Collateral Agent” means the Class A Lender, in its capacity as collateral agent on behalf of the Secured Parties.

“Collateral Agent’s Fee” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the amount listed in the Fee Letter.

“Collateral Receipt” has the meaning assigned to that term in the Custodial Agreement.

“Collection Account” means a special trust account (account number 119320000 at the Lenders’ Bank) in the name of the Borrower and under the control of the Lender; provided, that the funds deposited therein (including any interest and earnings thereon) from time to time shall constitute the property and assets of the Borrower and the Borrower shall be solely liable for any taxes payable with respect to the Collection Account.

“Collection Account Agreement” means that certain Collection Account Agreement, dated the date of this Agreement, among the Borrower, the Servicer, the Lenders’ Bank and the Lenders, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“Collection Date” means the date on which the aggregate outstanding principal amount of the Loans have been repaid in full and all interest and Fees and all other Obligations have been paid in full.

“Collection Period” means, (i) with respect to any Remittance Date (including the initial Remittance Date), the period beginning on, and including, the first day of the most recently ended calendar month and ending on, and including, the last day of the most recently ended calendar month; provided, that the final Collection Period shall begin on, and include, the first day of the then current calendar month and shall end on the Collection Date and (ii) in any context other than with respect to any Remittance Date, a calendar month.

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“Collections” means, without duplication, with respect to any Pledged Receivable, all Scheduled Payments related to such Receivable, all prepayments and related penalty payments with respect to the Contract related to such Receivable, all overdue payments and related interest and penalty payments with respect to the Contract related to such Receivable, all Guaranty Amounts, all Insurance Proceeds, all Servicing Charges, all proceeds under “buyout letters” or other prepayment/termination agreements and all Recoveries related to such Receivable, all amounts paid to the Borrower related to such Receivable pursuant to the terms of the Purchase and Sale Agreement, all amounts paid by the Servicer related to such Receivable in connection with its obligations under Section 6.20 hereof, and all other payments received with respect to the Contract related to such Receivable, all cash receipts and proceeds in respect of the Other Conveyed Property or Related Security (including, without limitation, the Obligor Collateral) related to such Receivable, any Servicer Advances related to such Receivable, and any amounts paid to the Borrower under or in connection with any Qualifying Interest Rate Swap or the hedging arrangements contemplated thereunder.

“Commitment Percentage” has the meaning assigned to that term in Section 9.04(b).

“Computer Tape or Listing” means the computer tape or listing (whether in electronic form or otherwise) generated by the Servicer on behalf of the Borrower, which provides information relating to the Receivables included in the Eligible Receivables Balance.

“Contract” means a Lease Contract or a Loan Contract.

“Controlling Holders” means, so long as any amounts payable hereunder to the holders of the Class A Notes remain outstanding, the holders of a majority of the aggregate outstanding principal amount of the Class A Notes, and thereafter, so long as any amounts payable hereunder to the holders of the Class B Notes remain outstanding, the holders of the aggregate outstanding principal amount of the Class B Notes.

“Credit and Collection Policy” means (i) collectively, the “Operations Policies & Procedures” memorandum and certain other items, as annexed hereto as Schedule IV as such policy may hereafter be amended, modified or supplemented from time to time in compliance with this Agreement and (ii) with respect to any Servicer other than LEAF Financial, that Servicer’s collection policies for similar assets in effect from time to time.

“Custodial Agreement” means that certain Custodial Agreement dated as of the date hereof among the Servicer, the Borrower, the Lenders  and the Custodian, together with all instruments, documents and agreements executed in connection therewith, as such Custodial Agreement may from time to time be amended, restated, supplemented and/or otherwise modified in accordance with the terms thereof.

“Custodian” means U.S. Bank National Association (or a sub-custodian on its behalf) or any substitute Custodian appointed by the Lenders pursuant to the Custodial Agreement.

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“Custodian’s Fee” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the aggregate fees listed in that certain “Schedule of Fees” letter dated October 23, 2007 between U.S. Bank National Association and LEAF Financial Corporation which relate to such Fee Period.

“Debt” of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments related to transactions that are classified as financings under GAAP, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations secured by an Adverse Claim upon property or assets owned (under GAAP) by such Person, even though such Person has not assumed or become liable for the payment of such obligations and (vi) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor, against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above.

“Defaulted Receivable” means, as of any date of determination, any Pledged Receivable:

(i)           with respect to which any part of any Scheduled Payment, or any tax-related payment, owed by the applicable Obligor under the terms of the related Contract remains unpaid for more than 120 days after the due date therefor set forth in such Contract;

(ii)           with respect to which the first or second Scheduled Payment is not paid in full when due under the related Contract;

(iii)           with respect to which any payment or other material terms of the related Contract have been modified due to credit related reasons after such Contract was acquired by the Borrower pursuant to the Purchase and Sale Agreement;

(iv)           which has been or should be charged off as a result of the occurrence of a Bankruptcy Event with respect to the related Obligor, if any, or which has been or should otherwise be deemed uncollectible by the Servicer, in each case, in accordance with the Credit and Collection Policy; or

(v)           with respect to which the Servicer has repossessed the related Equipment.

“Deficiency” has the meaning assigned to that term in the Custodial Agreement.

“Delinquency Rate” means, as of any date of determination, an amount (expressed as a percentage) equal to (i) the aggregate Discounted Balances of all Delinquent Receivables as of the last day of the immediately preceding Collection Period divided by (ii) aggregate Discounted Balances of all Pledged Receivables which are Eligible Receivables as of such day.

“Delinquent Receivable” means, as of any date of determination, any Pledged Receivable (other than a Defaulted Receivable) with respect to which any part of any Scheduled Payment (or other amount payable under the terms of the related Contract) remains unpaid for more than 60 days but not more than 120 days after the due date therefor set forth in such Contract.

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“Depository Institution” means a depository institution or trust company, incorporated under the laws of the United States or any State thereof, that is subject to supervision and examination by federal and/or State banking authorities.

“Discount Rate” means, as of any date of determination, a percentage equal to the sum of (i) 7.20% per annum, (ii) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, the Servicing Fee Rate and the Standby Backup Servicing Fee Rate, (iii) at any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, the Active Backup Servicing Fee Rate and (iv) a rate per annum equal to 0.05%.

“Discounted Balance” means, with respect to any Contract, as of any date of determination, the present value of the aggregate amount of Scheduled Payments (including any Balloon Payment or Put Payment but, in any event, calculated without giving effect to any booked residual value with respect to any related Equipment) due or to become due under the terms of the related Contract after the Cut-Off Date applicable to the Receivable related thereto, which remain unpaid as of such date of determination, calculated by discounting such aggregate amount of such Scheduled Payments to such date of determination at an annual rate equal to the Discount Rate.

“Dollar Purchase Option Contract” means a Contract (i) in connection with which an agreement was executed which grants the related Obligor a right to purchase the Equipment leased under such Contract for $1.00 or other nominal consideration at the end of the initial term of such Contract or (ii) grants the related Obligor a right to purchase the Equipment leased under such Contract for $1.00 or other nominal consideration at the end of the initial term of such Contract.

“Eligible Depository Institution” means a Depository Institution the short term unsecured senior indebtedness of which is rated at least Prime-1 by Moody’s, A-1 by S&P, and F1 by Fitch, if rated by Fitch.

“Eligible Receivable” means, at any time, a Pledged Receivable with respect to which each of the representations and warranties regarding the Contract related to such Pledged Receivable contained in Schedule III hereto is true and correct at such time.

“Eligible Receivables Balance” means, at any time, the aggregate Discounted Balances of all Eligible Receivables which are Pledged Receivables hereunder to secure Loans at such time.

“Equipment” means the equipment or Vehicle leased to an Obligor, or serving as collateral for a loan to an Obligor, under a Contract together with any replacement parts, additions and repairs thereof, and any accessories incorporated therein and/or affixed thereto.

“Equipment Category” means any of the Equipment Categories set forth on Schedule V hereto, as such schedule may be updated from time to time by the Borrower with the consent of the Lenders (which such consent shall not be unreasonably withheld).

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“Equity Investment” means $10,210,637.42.

“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means a corporation, trade or business that is, along with any Person, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414 of the Internal Revenue Code of 1986, as amended, or section 4001 of ERISA.

“Eurodollar Disruption Event” means any of the following:  (i) a determination by any Lender that it would be contrary to law or to the directive of any central bank or other governmental authority (whether or not having the force of law) to obtain United States dollars in the London interbank market to make, fund or maintain any Loan, (ii) a determination by any Lender that the rate at which deposits of United States dollars are being offered in the London interbank market does not accurately reflect the cost to such Lender of making, funding or maintaining any Loan or (iii) the inability of any Lender to obtain United States dollars in the London interbank market to make, fund or maintain any Loan.

“Eurodollar Index” means an index based upon an interest rate reported on Reuters LIBOR01 Page (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits.

“Event of Default” has the meaning assigned to that term in Section 7.01.

“Exception Report” has the meaning set forth in the Custodial Agreement.

“Exception Sublimit Receivable” means a Receivable arising under a Lease Contract related to Equipment having an Amortized Equipment Cost of less than $100,000 as to which the original, executed Lease Contract has not been forwarded to the Custodian for inclusion in the related Receivable File.

“Excluded Assets” means all Receivables and other assets acquired by the Originator pursuant to the FDIC Purchase Agreement which are not Pledged Assets.

“Exit Fee” has the meaning set forth in the Fee Letter.

“Facility Amount” means, at any time, the difference between the aggregate Loans Outstanding hereunder minus $1,000,000 (the deferred, capitalized portion of the Class B Arrangement Fee (as defined in the Fee Letter) payable by the Borrower to the Class B Lender).

“Facility Deficiency” means, at any time, that either: (i) the Class A Facility Limit is less than the aggregate outstanding principal balance of the Class A Notes, or (ii) the Facility Limit is less than the Facility Amount; an amount equal to the amount of such deficiency, respectively.

“Facility Limit” means, at any time, with respect to the Class A Notes and the Class B Notes, collectively, the product of (x) 97.10%, (y) 98%, and (z) the Amortized Equipment Cost with respect to all Pledged Receivables that are Eligible Receivables.

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“Facility Limit Certificate” means a report, in substantially the form of Exhibit A, prepared by the Borrower (or the initial Servicer on its behalf) for the benefit of Lenders pursuant to Section 6.10(c).

“Facility Maturity Date” means November 1, 2008, unless extended by the Lenders in their sole discretion, at the written request of the Borrower, by written notice to the other parties hereto.

“FDIC Documents” has the meaning specified in the Purchase and Sale Agreement.

“FDIC Purchase Agreement” means the Loan Sale Agreement between Federal Deposit Insurance Corporation, as Receiver of Netbank and the Originator with respect to the Pledged Receivables and other assets.

“Fee Letter” has the meaning assigned to that term in Section 2.08(a).

“Fee Period” means a period commencing on (and including) a Remittance Date and ending on (and including) the day prior to the next Remittance Date; provided, that, the initial Fee Period hereunder shall commence on (and include) the date hereof and end on (and include) December 7, 2007.

“Fees” has the meaning assigned to that term in Section 2.08(a).

“Fitch” means Fitch, Inc. (or its successors in interest).

“FMV Contract” means a Contract which (i) in connection with which any agreement was executed which grants the related Obligor a right to purchase the Equipment leased under such Contract for the fair market value thereof at the end of the initial term of such Contract or (ii) grants the related Obligor a right to purchase the Equipment leased under such Contract for the fair market value thereof at the end of the initial term of such Contract.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States.

“Government Entity” means the United States, any State, any political subdivision of a State and any agency or instrumentality of the United States or any State or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guaranty Amounts” means any and all amounts paid by any guarantor with respect to the applicable Contract.

“Included Repurchased Receivable” means any Receivable repurchased by the Originator pursuant to Section 6.1(b) of the Purchase and Sale Agreement with respect to which, as of the date of repurchase, any part of any Scheduled Payment (or other amount payable under the terms of the related Contract) remained unpaid after the due date therefor set forth in such Contract.

“Indemnified Amounts” has the meaning assigned to that term in Section 8.01.

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“Independent Accountants” has the meaning assigned to that term in Section 6.11(b).

“Initial Qualified Swap Counterparty” means Morgan Stanley Capital Services Inc., a Delaware corporation, and its successors and permitted assigns.

“Insurance Certificate” means the insurance certificate related to the Insurance Policy with respect to such Receivable (which insurance certificate shall list the Originator as a loss payee).

“Insurance Policy” means, with respect to any Obligor Collateral, the insurance policy maintained by or on behalf of the Obligor pursuant to the related Contract that covers physical damage to the related Equipment (in an amount sufficient to insure completely the value of such Equipment) and general liability (including policies procured by the Borrower or the Servicer, or any agent thereof, on behalf of the Obligor).

“Insurance Proceeds” means, with respect to an item of Obligor Collateral and a related Contract, any amount paid under an Insurance Policy issued with respect to such Obligor Collateral and/or the related Contract.

“Interest Period” means, for any outstanding Loans, a period determined pursuant to Section 2.03(a).

“Interest Rate” has the meaning assigned to such term in Section 2.03(b).

“LEAF Financial” has the meaning assigned to that term in the preamble hereto.

“Lease Contract” means (i) the standard form equipment lease contract of NBBF in the form delivered to the Servicer and the Lenders and which shall be deemed incorporated herein as Exhibit D-1 attached hereto or (ii) a lease agreement otherwise approved by the Servicer in compliance with the Credit and Collection Policy, pursuant to which Equipment is leased to an Obligor by NBBF or Originator, together with all schedules, supplements and amendments thereto and each other document and instrument related to such lease.

“Lease File” has the meaning assigned to that term in clause (a) of the definition of “Receivable File”.

“Lender” means, any one of and “Lenders” means all of, the Class A Lender and the Class B Lender, and each such Person’s successors and assigns.

“Lenders’ Bank” means U.S. Bank National Association and its successors and assigns that are Eligible Depository Institutions.

“Lenders’ Bank Fee” means an annual fee paid in advance, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to $6,000.  The “Lenders’ Bank Fee” shall also include (i) a one-time acceptance fee of $4,500 payable on the Closing Date and (ii) reasonable out-of-pocket expenses incurred by the Lenders’ Bank in the performance of its duties.

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“Liquidation Proceeds” means, with respect to a Receivable with respect to which the related Obligor Collateral has been repossessed or foreclosed upon by the Servicer, all amounts realized with respect to such Receivable net of (i) reasonable expenses of the Servicer incurred in connection with the collection, repossession, foreclosure and/or disposition of the related Obligor Collateral and (ii) amounts that are required to be refunded to the Obligor on such Receivable; provided, however, that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero.

“Loan” means either of the Class A Loan or the Class B Loan and “Loans” means the Class A Loan and the Class B Loan.

“Loan Contract” means, (i) the standard form equipment loan/security contract of NBBF delivered to the Servicer and the Lenders and which shall be deemed incorporated herein as Exhibit D-2 and Exhibit D-3 or (ii) a loan/security agreement and promissory note otherwise approved by the Servicer in compliance with the Credit and Collection Policy, in each case, pursuant to which NBBF or the Originator makes a loan to an Obligor secured by Equipment purchased by such Obligor, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

 “Loan File” has the meaning assigned to that term in clause (b) of the definition of “Receivable File”.

 “Loans Outstanding” means the sum of the principal amounts of all Loans, as reduced from time to time by Collections with respect to any Pledged Receivable received and distributed as repayment of principal amounts of Loans outstanding pursuant to Section 2.04 and any other amounts received by the Lenders to repay the principal amounts of Loans outstanding pursuant to Section 2.15 or otherwise; provided, however, that the principal amounts of Loans outstanding shall

not be reduced by any Collections with respect to any Pledged Receivable or other amounts if at any time such Collections or other amounts are rescinded or must be returned for any reason.

“Lockbox” means a post office box to which Collections with respect to any Pledged Receivable are remitted for retrieval by the Lockbox Bank and for deposit by the Lockbox Bank into the Lockbox Account.

“Lockbox Account” means the deposit account (account number 153910088597 at the Lockbox Bank) in the name of “U.S. Bank NA as Securities Intermediary for LEAF Financial and various lenders”.

“Lockbox Bank” means U.S. Bank National Association and its successors in interest.

“Lockbox Intercreditor Agreement” means the Amended and Restated Lockbox Intercreditor Agreement, dated as of April 18, 2005, among the Lockbox Bank, the Servicer, the Borrower, and certain other parties.

“Material Adverse Effect” means a material adverse effect on (i) the ability of the Borrower, the Originator and/or the Servicer to conduct its business, (ii) the ability of the Borrower, the Originator and/or the Servicer to perform its respective obligations under this Agreement and/or any other Transaction Document to which it is a party, (iii) the validity or enforceability of this Agreement and/or any other Transaction Document to which the Borrower, the Originator and/or the Servicer is a party, (iv) the rights and remedies of any Lender under this Agreement and/or any of the Transaction Documents and/or (v) the validity, enforceability or collectibility of all or any portion of the Pledged Receivables.

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“Maximum Advance Amount” means, on the Borrowing Date, $367,092,933.23.

“Minimum Equity Requirement” means $10,000,000.

“Minimum Tangible Net Worth” means, with respect to Resource America, a Tangible Net Worth (measured as of each fiscal quarter end) of not less than $125,000,000.

“Monthly Remittance Report” means a report, in substantially the form of Exhibit C, furnished by the Servicer to the Lenders pursuant to Section 6.10(b).

“Moody’s” means Moody’s Investors Service, Inc. (or its successors in interest).

“Morgan Stanley” has the meaning assigned to that term in the preamble hereto.

“NetBank” means NetBank, FSB, Alpharetta, Georgia, a federally chartered savings bank.

“NBBF” means NetBank Business Finance, a division of NetBank.  All references to NBBF shall also mean NetBank or any other applicable division thereof.

“Nominee Lienholder Agreement” means either (i) a “Vehicle Lienholder Nominee Agreement” in the form attached hereto as Exhibit E (with such modifications as the Collateral Agent may approve) or (ii) any other nominee lienholder agreement or collateral agency agreement approved in writing by the Collateral Agent.

“Non-Level Payment Contract” means a Contract that does not provide for level Scheduled Payments during the term of such Contract.

“Notes” has the meaning assigned to that term in Section 2.01(b) hereof.

“Notice of Borrowing” has the meaning assigned to that term in Section 2.02(b) hereof.

“Notice of Pledge” has the meaning assigned to that term in the Custodial Agreement.

“Obligations” means all present and future indebtedness and other liabilities and obligations (howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or due or to become due) of the Borrower to the Secured Parties arising under this Agreement, the Notes and/or any other Transaction Document and shall include, without limitation, all liability for principal of and interest on the Loans, indemnifications and other amounts due or to become due by the Borrower to the Secured Parties under this Agreement and/or any other Transaction Document, including, without limitation, interest, fees and other obligations that accrue after the commencement of an insolvency proceeding (in each case whether or not allowed as a claim in such insolvency proceeding).

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“Obligor” means, collectively, each Person obligated to make payments under a Contract.

“Obligor Collateral” means (i) the Equipment leased to an Obligor under a Lease Contract, (ii) the Equipment and other property pledged by an Obligor to secure its obligations under a Loan Contract and (iii) any other property pledged by an Obligor to secure its obligations under a Loan Contract.

“Obligor Financing Statement” means a UCC financing statement filed by Originator or the Underlying Originator against an Obligor under a Contract which evidences a security interest in the related Obligor Collateral.

“Officer’s Certificate” means a certificate signed by the president, the secretary, the chief financial officer or any vice president of any Person.

“Opinion of Counsel” means a written opinion of independent counsel acceptable to the Lenders, which opinion, if such opinion or a copy thereof is required by the provisions of this Agreement or any other Transaction Document to be delivered to the Borrower or the Lenders, is acceptable in form and substance to the Lenders.

“Originator” means LEAF Funding, LLC, a Delaware limited liability company and/or the Partnership.

“Originator Insurance Agreement” means that certain letter agreement regarding the Originator’s obligations as named loss payee under Insurance Policies, dated as of the date hereof, among the Originator, the Servicer, the Borrower and the Lenders, as such agreement may from time to time be amended, restated, supplemented and/or otherwise modified in accordance with the terms thereof.

“Other Conveyed Property” means, with respect to any Receivable, all of the Borrower’s right, title and interest in, to and under (i) all Collections and other monies at any time received orreceivable with respect to such Receivable after the applicable Cut-Off Date (as defined in the Purchase and Sale Agreement), (ii) the Equipment related to such Receivable (to the extent of the Borrower’s ownership rights, if any, therein), (iii) in the case of a Receivable related to any Contract, any and all agreements, documents, certificates and instruments evidencing the Borrower’s security interest or other interest in and to the related Obligor Collateral or any intercreditor agreement with respect thereto, including, without limitation, any Certificate of Title, (iv) the Obligor Collateral related to such Receivable including, without limitation, the security interest in such Obligor Collateral granted by the related Obligor to Originator under the related Contract and assigned by Originator to the Borrower under the Purchase and Sale Agreement, (v) the Obligor Financing Statement, if any, related to such Receivable, (vi) the Insurance Policy and any proceeds from the Insurance Policy relating to such Receivable, including rebates of premiums not otherwise due to an Obligor, (vii) the related Contract and all other items required to be contained in the related Receivable File, any and all other documents or electronic records that the Borrower keeps on file in accordance with its customary procedures relating to such Receivable, the related Obligor Collateral or the related Obligor, (viii) all property (including the right to receive future Liquidation Proceeds) that secures such Receivable and that has been acquired by or on behalf of the Borrower pursuant to the liquidation of such Receivable, and (ix) all present and future rights, claims, demands, causes and chooses in action in respect of any or all of the foregoing and all payments on or under and all proceeds and investments of any kind and nature in respect of any of the foregoing.

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“Other Swap Breakage Cost” has the meaning assigned to that term in Section 2.15 hereof.

“Overdue Payment” means, with respect to a Collection Period, all payments due in a prior Collection Period that the Servicer receives from or on behalf of an Obligor during such Collection Period, including any Servicing Charges.

“Owner” means (i) the Originator or (ii) subject to the prior written consent of the Lenders (such consent not to be unreasonably withheld), the Partnership or any subsidiary thereof or of the initial Servicer (each, a “Permitted Transferee”) which acquires all of the membership interests of the Borrower.

“Partnership” means, LEAF Equipment Leasing Income Fund III, L.P., a Delaware limited partnership.

“Permitted Investments” means any one or more of the following:

(i)           direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States;

(ii)           repurchase obligations (the collateral for which is held by a third party or the Collateral Agent), with respect to any security described in clause (i) above, provided that the long-term unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by Moody’s and S&P in one of their two highest long-term rating categories and if rated by Fitch, in one of its two highest long-term rating categories;

(iii)           certificates of deposit, time deposits, demand deposits and bankers’ acceptances of any bank or trust company incorporated under the laws of the United States

or any State thereof or the District of Columbia, provided that the short-term commercial paper of such bank or trust company (or, in the case of the principal depository institution in a depository institution holding company, the long-term unsecured debt obligations of the depository institution holding company) at the date of acquisition thereof has been rated by Moody’s and S&P in their highest short-term rating category, and if rated by Fitch, in its highest short-term rating category;

(iv)           commercial paper (having original maturities of not more than 270 days) of any corporation incorporated under the laws of the United States or any State thereof or the District of Columbia, having a rating, on the date of acquisition thereof, of no less than A-1 by Moody’s, P-1 by S&P and F-1 if rated by Fitch;

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(v)           money market mutual funds, including funds managed by the Lenders’ Bank or its Affiliates, registered under the Investment Company Act of 1940, as amended, having a rating, at the time of such investment, of no less than Aaa by Moody’s, AAA by S&P and AAA if rated by Fitch; and

(vi)           any other investments approved in writing by the Lenders.

provided, that no such instrument shall be a Permitted Investment if such instrument evidences the right to receive either (a) interest only payments with respect to the obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument, where the principal and interest payments with respect to such instrument provide a yield to maturity exceeding 120% of the yield to maturity at par of such underlying obligation.  Each Permitted Investment may be purchased by the Lenders’ Bank or through an Affiliate of the Lenders’ Bank.

“Permitted Liens” means with respect to Obligor Collateral, (A) liens and security interests in favor of the Collateral Agent, granted pursuant to the Transaction Documents, (B) the interests of an Obligor arising under the Contract to which it is a party in the Obligor Collateral related to such Contract, (C) liens for taxes, assessments, levies, fees and other governmental and similar charges either not yet due or being contested in good faith and by appropriate proceedings, provided, that appropriate reserves shall have been established with respect to any such taxes either not yet due or being contested in good faith and by appropriate proceedings, (D) any liens with respect to any mechanics, suppliers, materialmen, laborers, employees, repairmen and other like liens arising in the ordinary course of a servicer’s, lessor’s/lender’s or lessee’s/borrower’s business securing obligations which are not due and payable, and (E) salvage rights of insurers with respect to the equipment subject to a Contract under insurance policies maintained pursuant to the Transaction Documents or a Contract.

“Permitted Transferee” has the meaning given to such term in the definition of “Owner” herein.

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

“Pledge” means the pledge of any Receivable pursuant to Article II.

“Pledged Assets” has the meaning assigned to that term in Section 2.11.

“Pledged Receivables” has the meaning assigned to that term in Section 2.11(a).

“Prepayment Amount” means the principal amount of Loans repaid by the Borrower in connection with an optional prepayment of Loans made by the Borrower pursuant to Section 2.15 hereof.

“Prepayment Date” means any date on which an optional prepayment of Loans is made by the Borrower pursuant to Section 2.15 hereof.

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“Priority Documents” means, (i) with respect to a Lease Contract, the related original, executed Lease Contract (or, in the case of a Lease Contract under a master lease, a machine or facsimile copy of the related master lease certified by an authorized officer of the Borrower and stamped “I hereby certify that this is a true and exact copy of the original” and an original, executed schedule thereto describing the related Equipment) and the item listed in clause (4) of subsection (a)(i) of the definition of Receivable File, and (ii) with respect to a Loan Contract, the items listed in clauses (1), (2) and (4) of subsection (b)(i) of the definition of Receivable File.  The term “Priority Documents” shall also include a machine copy of the existing Certificate of Title with respect to any Vehicle subject to a Contract.

“Program Termination Date” means the earliest of (i) the date of occurrence of any event described in Section 7.01(a) hereof, (ii) the date of the declaration of the Program Termination Date pursuant to any other subsection of Section 7.01 or (iii) the date of the declaration of the Program Termination Date by, and at the option of, the Lenders upon the occurrence of a Program Termination Event.

“Program Termination Event” means the occurrence of any of the following events:

(i)           a regulatory, tax or accounting body has ordered that the activities of any Lender or any Affiliate thereof contemplated hereby be terminated or, as a result of any other event or circumstance, the activities of any Lender or any Affiliate contemplated hereby may reasonably be expected to cause such Lender or the Person, if any, then acting as the administrator or the manager for such Lender or any of its Affiliates to suffer materially adverse regulatory, accounting or tax consequences;

(ii)           an Event of Default has occurred and is continuing;

(iii)           Reserved;

(iv)           the Annualized Default Rate exceeds 3.5%;

(v)           the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods exceeds 4.0%;

(vi)           the Annualized Net Loss Rate exceeds 3.5%;

(vii)           Reserved;

(viii)          Reserved;

(ix)           Reserved;

(x)           a Servicer Default has occurred and is continuing; or

(xi)            (1) any Qualifying Swap Counterparty ceases to maintain the long-term debt ratings required of a Qualifying Swap Counterparty and (A) does not post cash collateral in a manner acceptable to the Lenders within 45 days and (B) is not replaced within 45 days by a replacement acceptable to the Lenders or (2) the Borrower fails to comply with any term, covenant or agreement hereunder related to the maintenance of any Qualifying Interest Rate Swaps; or

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(xii)           the occurrence of three or more Termination Events.

“Purchase and Sale Agreement” means that certain Purchase and Sale Agreement, dated as of the date hereof, between the Originator, as seller, and the Borrower, as purchaser, together with all instruments, documents and agreements executed in connection therewith, as such Purchase and Sale Agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms hereof.

“Purchase Date” has the meaning set forth in the Purchase and Sale Agreement.

“Purchase Price” means $385,772,014.15.

“Put Payment” means with respect to any Contract constituting a lease, the payment, if any, required to be made by the Obligor under the terms of such lease in connection with the required purchase by such Obligor of the related Equipment at the end of the term of such lease.

“Qualifying Interest Rate Swap” means (X) an interest rate swap agreement (i) between the Borrower and a Qualifying Swap Counterparty, (ii) under which the Borrower shall receive a floating rate of interest based on a Eurodollar Index acceptable to the Lenders in exchange for the payment by the Borrower of a fixed rate of interest equal to the applicable Swapped Rate, (iii) the effective date of which is the Borrowing Date, (iv) having a varying notional balance which is, as of the effective date thereof, in an amount equal to the aggregate principal amount of the Loans advanced on such effective date and (v) which shall otherwise be on such terms and conditions and pursuant to such documentation as shall be acceptable to the Lenders or (Y) an alternative interest rate hedging agreement agreed to in writing by the Borrower and the Lenders.

“Qualifying Swap Counterparty” means Morgan Stanley Capital Services Inc. (or any successors or permitted assigns), any Lender or any Affiliate of a Lender.

“Rating Agencies” means Moody’s, S&P and Fitch, or any other nationally recognized statistical rating organizations as may be designated by the Lenders.

“Receivable” means the rights to all payments from an Obligor under a Contract, including, without limitation, any right to the payment with respect to (i) Scheduled Payments, (ii) any prepayments or overdue payments made with respect to such Scheduled Payments, (iii) any

Guaranty Amounts, (iv) any Insurance Proceeds, (v) any Servicing Charges and (vi) any Recoveries.

 “Receivable File” means with respect to each Receivable:

(a)           if such Receivable is related to a Lease Contract the following items (collectively, a “Lease File”):

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(i)           (1) the related original, executed Lease Contract (or, in the case of a Lease Contract under a master lease, a machine or facsimile copy of the related master lease certified by an authorized officer of the Borrower and stamped “I hereby certify that this is a true and exact copy of the original” and an original, executed schedule thereto describing the related Equipment) unless such Lease Contract is related to an Exception Sublimit Receivable, in which event the executed Lease Contract (or, in the case of Lease Contracts under a master lease, the related schedule) may be a machine or facsimile copy certified in the manner described above, (2) a true, executed copy of the related delivery/installation certificate or acknowledgment and acceptance of delivery certificate if such Receivable is related to Equipment with an Amortized Equipment Cost in excess of $50,000, (3) a true copy of the  Insurance Certificate if such Receivable is related to Equipment with an Amortized Equipment Cost in excess of $100,000, (4) other than with respect to a Lease Contract related to Equipment which has an Amortized Equipment Cost of less than $25,000 if such Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Lease Contract is a FMV Contract, a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement and (5) vendor order(s) or invoice(s); and

(ii)           copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable;

(b)           if such Receivable is related to a Loan Contract the following items (collectively, a “Loan File”):

(i)           (1) the original, executed payment schedule or promissory note (if any), (2) a true, executed copy of the related “Master Agreement” or “Finance Agreement”, (3) a true copy of the related Insurance Certificate if such Receivable is related to Equipment with an Amortized Equipment Cost in excess of $100,000 and (4) other than with respect to a Receivable related to Equipment which has an Amortized Equipment Cost of less than $25,000, a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement; and

(ii)           copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable;

In addition, if the Obligor Collateral related to such Receivable is a Vehicle, the related Receivable File shall include the original copy of the Certificate of Title with respect to such Vehicle, which such Certificate of Title satisfies the Titling Requirements or (prior to the 90th day after such Receivable was first included in the calculation of the Eligible Receivables Balance, if such Certificate of Title has not yet been received by the Servicer or the Borrower) a copy of the application for such Certificate of Title.

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“Receivables Schedule” has the meaning assigned to that term in the Custodial Agreement.

“Records” means all documents, books, records and other information (including, without limitation, tapes, disks, punch cards and related property and rights) maintained with respect to Receivables and the related Obligors which the Borrower has itself generated, in which the Borrower has acquired an interest pursuant to the Purchase and Sale Agreement or in which the Borrower has otherwise obtained an interest.

“Recoveries” means, for any Collection Period during which, or any Collection Period after the date on which, any Receivable becomes a Defaulted Receivable and with respect to such Defaulted Receivable, all payments that the Servicer received from or on behalf of the related Obligor during such Collection Period in respect of such Defaulted Receivable or from the repossession, liquidation or re-leasing of the related Obligor Collateral, including but not limited to Scheduled Payments, Overdue Payments, Guaranty Amounts and Insurance Proceeds.

“Registrar of Titles” means with respect to any State, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.

“Related Security” means with respect to any Receivable:

(i)           any and all security interests or liens and property subject thereto from time to time securing or purporting to secure payment of such Receivable;

(ii)           all guarantees, indemnities, warranties, letters of credit, insurance policies and proceeds and premium refunds thereof and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable; and

(iii)           all proceeds of the foregoing.

“Release Price” means, with respect to a Pledged Receivable to be released hereunder, an amount equal to the present value of the then remaining Scheduled Payments under such Pledged Receivables (including any Balloon Payment or Put Payment) discounted monthly at the discount rate used in calculating the Amortized Equipment Cost, plus interest accrued thereon from and including the Remittance Date immediately preceding the date such Pledged Receivable is to be released through (but not including) the next succeeding Remittance Date.

“Remittance Date” means the (7^th) day of each month beginning December, 2007, or, if such date is not a Business Day, the next succeeding Business Day; provided, that the final Remittance Date shall occur on the Collection Date.

“Reuters LIBOR01 Page” means the display page so designated on the Reuters Monitor Money Rates Service or any other page that may replace that page on that service for the purpose of displaying comparable rates or prices.

“Resource America” means Resource America, Inc., a Delaware corporation.

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“Rollover Interest Period” means any Interest Period other than any Interest Period applicable to the Loan arising as a result of the Borrowing on the Borrowing Date.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (or its successors in interest).

“Scheduled Payments” means, with respect to any Receivable, the periodic payments payable under the terms of the related Contract (but not including any such periodic payment to the extent paid in advance by the related Obligor).

“Secured Parties” means the Class A Lender, the Class B Lender, the Servicer, the Backup Servicer, the Custodian, the Lenders’ Bank, each Qualified Swap Counterparty and their respective successors and assigns.

“Servicer” means, at any time, LEAF Financial or any other Person then authorized, pursuant to Section 6.01, to service, administer and collect Pledged Receivables.

“Servicer Advance” has the meaning assigned to such term in Section 6.19.

“Servicer Default” means the occurrence of any of the following events:

(i)           the failure of the Servicer to deliver any payments, collections or proceeds which it is obligated to deliver under the terms hereof or of any other Transaction Document at the times it is obligated to make such deliveries under the terms hereof or of any other Transaction Document, and such failure remains unremedied for two Business Days;

(ii)           the failure of the Servicer to satisfy any of its reporting, certification, notification or documentation requirements under the terms hereof or of any other Transaction Document or the failure of the Servicer to observe or perform any material term, covenant or agreement hereunder or under any other Transaction Document (other than those described in clause (i) above) and such failure shall remain unremedied for 10 days after the Servicer first has knowledge, whether constructive or actual, of such failure;

(iii)           any representation, warranty or statement of the Servicer made herein or in any other Transaction Document shall prove to be incorrect in any material respect, and, solely if such incorrect representation, warranty or statement can be remedied, such representation, warranty or statement is not made true within 15 days;

(iv)           the occurrence of an Event of Default;

(v)           the occurrence of a Program Termination Event described in clauses (iv), (v), (vi) or (xii) of the definition of Program Termination Events; or

(vi)           the occurrence of any Bankruptcy Event in respect of the Servicer.

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“Servicer Pension Plan” means a “pension plan” as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA and to which the Servicer or any ERISA Affiliate of Servicer may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“Servicing Charges” means the sum of (a) all late payment charges paid by Obligors under Contracts after payment in full of any Scheduled Payments due in a prior Collection Period and Scheduled Payments for the related Collection Period and (b) any other incidental charges or fees received from an Obligor, including, but not limited to, late fees, collection fees, taxes and charges for insufficient funds.

“Servicing Fee” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to (i) the Servicing Fee Rate multiplied by (ii) the Eligible Receivables Balance as of the first day of such Fee Period multiplied by (iii) a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360.  Upon assuming the duties of the Servicer hereunder, the Backup Servicer shall also be entitled to receive a one-time acceptance fee of $60,000, which shall be considered part of the “Servicing Fee” hereunder but shall be in addition to the amount set forth in the sentence above.

“Servicing Fee Rate” means 1.00%.

“Standby Backup Servicer’s Fee” means, for any Fee Period or portion thereof prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the greater of (i) the Standby Backup Servicing Fee Rate, multiplied by the Eligible Receivables Balance as of the first day of such Fee Period, multiplied by a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360, or (ii) $2,000.  The “Standby Backup Servicer’s Fee” shall also include (i) a one-time acceptance fee of $5,000 payable on the Closing Date and (ii) reasonable out-of-pocket expenses incurred by the Standby Backup Servicer in the performance of its duties.

“Standby Backup Servicing Fee Rate” means .0150%.

“State” means one of the fifty states of the United States or the District of Columbia.

 “Swapped Rate” means, with respect to any Qualifying Interest Rate Swap, the annual rate of interest (expressed as a percentage) which the Borrower, as the fixed-rate payor, is required to pay under such Qualifying Interest Rate Swap in order to receive the floating rate of interest provided for under such Qualifying Interest Rate Swap.

“Tangible Net Worth” means, with respect to any Person, the amount calculated in accordance with GAAP as (i) the consolidated net worth of such Person and its consolidated subsidiaries, plus (ii) to the extent not otherwise included in such consolidated net worth, unsecured subordinated Debt of such Person and its consolidated subsidiaries, the terms and conditions of which are reasonably satisfactory to the Lenders, minus (iii) the consolidated intangibles of such Person and its consolidated subsidiaries, including, without limitation, goodwill, trademarks, tradenames, copyrights, patents, patent allocations, licenses and rights in any of the foregoing and other items treated as intangibles in accordance with GAAP.

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“Termination Event” means the occurrence, on or after 60 days after the Borrowing Date, of any of the following events:

(i)           the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods, calculated by the Lenders solely with respect to Receivables, exceeds 3.5%;

(ii)           the Annualized Default Rate, calculated by (or in a manner satisfactory to) the Lenders solely with respect to Receivables, exceeds 4.0%; or

(iii)           the Annualized Net Loss Rate exceeds 3.5%.

“Titling Requirements” means, (i) in the case of any Vehicle leased or sold to an Obligor pursuant to a Contract, the Certificate of Title for such Vehicle indicates the Obligor, as owner, and the Borrower or an Approved Lienholder, as lienholder, or (ii) in the event that any Vehicle leased or sold to an Obligor pursuant to a Contract indicates NBBF, as owner, on the related Certificate of Title, then within 90 days after the Closing Date the Certificate of Title for such Vehicle shall indicate the Borrower, as owner, and an Approved Lienholder, as lienholder.

“Transaction Documents” means this Agreement, the Purchase and Sale Agreement, the Lockbox Intercreditor Agreement, the Collection Account Agreement, the Fee Letter, the Custodial Agreement, the Originator Insurance Agreement, the FDIC Documents, the Class A Notes, the Class B Notes, each lease bailment agreement with a sub-custodian, each Qualifying Interest Rate Swap and each document and instrument related to any of the foregoing.

“Transition Costs” means any documented expenses and allocated cost of personnel reasonably incurred by the Backup Servicer in connection with a transfer of servicing from the Servicer to the Backup Servicer as the successor Servicer; provided, that such expenses and allocated costs do not exceed $60,000.

“UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“Underlying Originator” means Netbank or other originator of a Contract, other than the Originator, engaged, in the ordinary course of business in providing financing to Obligors for the purposes of acquiring or leasing the related Equipment.

“Underlying Originator Credit and Collection Policy” means the credit and collection policy of an Underlying Originator, as such policy may hereafter be amended, modified or supplemented from time to time in compliance with this Agreement.

“United States” means the United States of America.

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“Unmatured Event of Default” means any event that, if it continues uncured, will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default.

“Vehicle” means a new or a used automobile, minivan, sports utility vehicle, light duty truck or heavy duty truck, or any other equipment, ownership of which is subject to a motor vehicle certificate of title statute.

“Warehouse Facility” means the facility in the aggregate amount of up to $250,000,000, as evidenced by the Receivables Loan and Security Agreement, dated as of October 31, 2006, among Resource Capital Funding II, LLC as borrower, LEAF Financial, Morgan Stanley Bank, as lender and U.S. Bank National Association, as same may be modified, amended, or supplemented from time to time.

 “Weighted Average Swapped Rate” means, as of any date of determination, the weighted average (weighted solely based on the Calculated Swap Amortizing Balances of such Qualifying Interest Rate Swaps as of such date of determination) of the Swapped Rates of the Qualifying Interest Rate Swaps in effect on such date of determination.

SECTION 1.02                                Other Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP.  All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.

SECTION 1.03                                Computation of Time Periods.  Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

ARTICLE II

THE RECEIVABLES FACILITY

SECTION 2.01                                Borrowings.  b)  On the Borrowing Date, subject to the terms and conditions hereinafter set forth, the Class A Lender and the Class B Lender shall make the term loan in principal amounts equal to (i) in the case of the Class A Lender, the Class A Advance Amount (the “Class A Loan” and a “Loan”), and (ii) in the case of the Class B Lender, the Class B Advance Amount, respectively, to the Borrower secured by Pledged Assets. On the Borrowing Date, no Loan shall be made if (i) the Aggregate Advance Amount shall exceed the Maximum Advance Amount, (ii) any Program Termination Event or an event that but for notice or lapse of time or both would constitute a Program Termination Event shall have occurred and be continuing or (iii) the Facility Amount, after giving effect to such Borrowing, would exceed the Borrowing Limit.

(b)           The Class A Loan shall be evidenced by a promissory note substantially in the form of Exhibit H-1 (a “Class A Note” and collectively the “Class A Notes”) and the Class B Loan shall be evidenced by a promissory note substantially in the form of Exhibit H-2 (a “Class B Note” and collectively the “Class B Notes” and, together with the Class A Notes, collectively, the “Notes”).

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SECTION 2.02                                The Borrowing.

(a)           [Reserved]

(b)           i)           The Borrowing shall be made on at least two (2) Business Days’ irrevocable written notice from the Borrower to the applicable Lender (such written notice, the “Notice of Borrowing”), provided that such Notice of Borrowing is received by such Lender no later than 12:00 noon (New York City time) on the Business Day of receipt.  Any Notice of Borrowing received after 12:00 noon (New York City time) shall be deemed received prior to 12:00 noon (New York City time) on the following Business Day.  The Notice of Borrowing shall specify (A) the aggregate amount of the Borrowing, (B) the date of the Borrowing, (C) the allocation of the Loans as Class A Loans and Class B Loans and (D) in an electronic file acceptable to the Lenders, the Eligible Receivables to be Pledged in connection with the Borrowing (and upon the Borrowing, such Receivables shall be Pledged Receivables hereunder).  On the date of the Borrowing, upon satisfaction of the applicable conditions set forth in Article III the Class A Lender and the Class B Lender shall make available to the Borrower the portion of the Borrowing constituting the Class A Advance Amount and the Class B Advance Amount, respectively, on the Borrowing Date, no later than 2:00 P.M. (New York City time), in same day funds (net of amounts payable to or for the benefit of each related Lender), by payment into the account which the Borrower has designated in writing.

(ii)           The Notice of Borrowing delivered to a Lender pursuant to this Section 2.02(b) shall be in an electronic file format acceptable to such Lender (A) accompanied by a copy of the Notice of Pledge (and the Receivables Schedule attached thereto), which was sent to the Custodian pursuant to the terms of the Custodial Agreement in connection with the pledge of Eligible Receivables to be made in connection therewith and (B) specifying for each Receivables pledged therein the information set forth on Exhibit B hereto.

(iii)           The Class A Loan shall bear interest at the Class A Interest Rate and the Class B Loan shall bear interest at the Class B Interest Rate.

(iv)           The Borrower may not reborrow any amounts that are repaid with respect to the Loans.

(v)           Determinations by any Lender of the existence of any Eurodollar Disruption Event (any such determination to be communicated to the Borrower and the other Lender by written notice from such Lender promptly after such Lender learns of such event), or of the effect of any Eurodollar Disruption Event on its making or maintaining Loans at the Adjusted Eurodollar Rate or the Base Rate, shall be conclusive absent manifest error.

SECTION 2.03                                Determination of Interest Periods and Interest Rates.

(a)           The initial Interest Period applicable to the Borrowing shall commence on, and include, the date of the Borrowing and shall terminate on, and include, the day immediately prior to the next occurring Remittance Date or such earlier date as the Lenders may determine (an “Early Interest Period Termination Date”).  All outstanding Loans allocated to one or more initial Interest Periods or Rollover

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Interest Periods maturing on the same date shall be combined and allocated to a single Rollover Interest Period at the end of such initial Interest Periods or Rollover Interest Periods.  Each Rollover Interest Period shall commence on, and include, the Remittance Date following the last day of the immediately preceding Interest Period (or, if applicable, on an Early Interest Period Termination Date) and shall terminate on, and include, the day immediately prior to the next occurring Remittance Date.

(b)           The interest rate per annum (the “Interest Rate”) applicable to any Loan for any Interest Period shall be equal to the applicable Class A Interest Rate (for the Class A Notes) or the applicable Class B Interest Rate (for the Class B Notes); provided, however, that if a Lender shall have notified the Borrower that a Eurodollar Disruption Event has occurred, the Interest Rate for all Loans shall be equal to the Base Rate until such Eurodollar Disruption Event has ceased, at which time the Interest Rate shall again be equal to the applicable Class A Interest Rate and applicable Class B Interest Rate.

SECTION 2.04                                Remittance Procedures.  The Servicer, as agent for the Lenders, shall instruct the Lenders’ Bank and, if the Servicer fails to do so, the Collateral Agent shall instruct the Lenders’ Bank, to apply funds on deposit in the Collection Account as described in this Section 2.04.

(a)           Interest and Breakage Fees.  On each Business Day (including any Remittance Date), the Servicer shall, and, if the Servicer fails to do so, the Lenders may direct the Lenders’ Bank to, retain in the Collection Account for transfer at the further direction of the Lenders or any duly authorized agent of the Lenders (whether on such day or on a subsequent day) collected funds in an amount equal to accrued and unpaid interest through such day on the Loans not so previously retained and the amount of any accrued and unpaid Breakage Fees owed to each Lender on such day.  On or before the last day of each Interest Period, the Lenders shall notify the Servicer of the accrued and unpaid interest for such Interest Period and the Servicer shall, on the last day of each Interest Period, direct the Lenders’ Bank to pay collected funds set aside in respect of accrued and unpaid interest pursuant to this Section 2.04(a) to each Lender (or the designee of such Lender) in respect of payment of such accrued and unpaid interest for such Interest Period.  On any Business Day on which an amount is set aside in respect of Breakage Fees pursuant to this Section 2.04(a), the Servicer shall direct the Lenders’ Bank to pay such funds to the Lenders in payment of such Breakage Fees.

(b)           Interest Period Loan Principal Repayment.  The Servicer shall, and if the Servicer fails to do so the Lenders may, by 10:00 a.m. (St. Paul, Minnesota time) on the last day of each Interest Period that is not a Remittance Date, direct the Lenders’ Bank to transfer collected funds held by the Lenders’ Bank in the Collection Account on such date, to pay the Lenders in payment (or partial payment) of the outstanding principal amount of all Loans allocated to such Interest Period, in an amount equal to the least of (i) the amount of such collected funds held in the Collection Account other than funds set aside pursuant to Section 2.04(a), (ii) the aggregate outstanding principal amount of Loans allocated to such Interest Period, or (iii)  if no Program Termination Event shall have occurred and be continuing, an amount equal to the excess, if any, of the Facility Amount immediately prior to such distribution over the lesser of (A) the Facility Limit and (B) the Borrowing Limit (after giving effect to the Borrowing and any distributions of amounts on deposit in the Collection Account made on such date).

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(c)           Remittance Date Transfers From Collection Account.  The Servicer shall, and if the Servicer fails to do so the Collateral Agent shall, by 10:00 a.m. (St. Paul, Minnesota time) on each Remittance Date, direct the Lenders’ Bank to transfer collected funds held by the Lenders’ Bank in

the Collection Account which were remitted to the Collection Account during the Collection Period with respect to such Remittance Date (“Available Funds”), in the following amounts and priority:

(i)           to the Borrower, in an amount equal to such funds which were paid by Obligors with respect to their obligation under the related Contracts to pay any taxes (it being agreed by the Borrower that such amount shall be promptly paid to the taxing authorities entitled thereto), together with (provided the current Scheduled Payment has been paid in full) late fees, interest on overdue amounts and other amounts not in respect of Scheduled Payments;

(ii)           to the related Qualifying Swap Counterparty under each Qualifying Interest Rate Swap, in an amount equal to (and for the payment of) all amounts which are due and payable by the Borrower to such Qualifying Swap Counterparty on such Remittance Date, pursuant to the terms of the applicable Qualifying Interest Rate Swap or this Agreement;

(iii)           on a prorata basis, to (w) the Backup Servicer in an amount equal to the Standby Backup Servicer’s Fee (to the extent accrued and unpaid as of the last day of the immediately preceding Fee Period) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder and (x) the Custodian, the Custodian’s Fee (y) the Collateral Agent, the Collateral Agent’s Fee and (z) the Lenders’ Bank, the Lenders’ Bank Fee;

(iv)           at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, to the Servicer in an amount equal to the Servicing Fee which is accrued and unpaid as of the last day of the immediately preceding Fee Period and, at any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, to the Backup Servicer in an amount equal to (1) the Active Backup Servicer’s Fees which are accrued and unpaid as of the last day of the immediately preceding Fee Period plus (2) any Transition Costs not previously reimbursed to the Backup Servicer plus (3) the Active Backup Servicer’s Indemnified Amounts;

(v)           on a prorata basis, (x) to the Collateral Agent, any indemnification amounts then due and payable to the Collateral Agent and (y) to the Custodian, any indemnification amounts then due and payable to the Custodian;

(vi)           [Reserved];

(vii)           (A) first, to the Class A Lender in an amount equal to (and for the prorata payment of) the Fees which are due and payable to it on such Remittance Date pursuant to the terms of the Fee Letter, including (without duplication) interest on the Class A Loan which is accrued and unpaid as of the last day of the immediately preceding Fee Period; and then (B) to the Class B Lender, in

  an amount equal to (and for the prorata payment of) the Fees which are due and payable to it on such Remittance Date pursuant to the term of the Fee Letter, including (without duplication) interest     

             on the Class B Loan which is accrued and unpaid as of the last day of the immediately preceding Fee Period.

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(viii)        to the Servicer in an amount equal to any Servicer Advances (and amounts to be reimbursed as Servicer Advances pursuant to Section 6.19) not previously reimbursed to the Servicer;

(ix)           to the Owner (if the Owner is a Permitted Transferee), so long as no Termination Event or Event of Default has occurred and is continuing, the amount then required to be paid by the Partnership (pursuant to its partnership agreement) to its limited partners, provided that the aggregate amount payable to the Owner in any twelve-month period shall not exceed the product of 8.5% times the arithmetic average monthly Equity Investment for such period;

(x)           so long as no Termination Event or Event of Default has occurred and is continuing, and prior to the Facility Maturity Date, to the holders of the Class A Notes and Class B Notes, prorata and paripassu, all remaining amounts to pay principal on the Notes until the principal amount of all Notes shall have been paid in full;

(xi)           if an Event of Default or Termination Event has occurred and is continuing, or if the Facility Maturity Date has occurred, then (A) to the holders of the Class A Notes, all remaining amounts to pay principal on the Class A Notes until the principal amount of all Class A Notes shall have been paid in full, and (B) thereafter, to the holders of the Class B Notes until the principal amount of all Class B Notes shall have been paid in full;

(xii)           (A) first, to the Class A Lender in an amount equal to the aggregate amount of all other Obligations then due from the Borrower to the Class A Lender or any Affected Party hereunder related to the Class A Lender for the account of such parties as applicable; and then (B) second, to the Class B Lender in an amount equal to the aggregate amount of all other Obligations then due from the Borrower to the Class B Lender or any Affected Party hereunder related to the Class B Lender for the account of such parties as applicable; and

(xiii)         to the order of the Borrower, any remaining amounts.

(d)           Subordination.  Except as otherwise provided in this Agreement or as otherwise agreed in a writing signed by the Class A Lender and the Class B Lender, the payment of all principal, interest or other amounts due under or in connection with the Class B Notes (collectively, the “Junior Obligations”) is hereby postponed and subordinated to the payment in full in cash of all principal and interest due in respect of the Class A Notes, and, notwithstanding anything herein to the contrary, all payments or other distributions whatsoever in respect of any Junior Obligations owed to a holder of a Class B Note shall be made in accordance with the priority of payments set forth in Section 2.04(c).  Without limiting the generality of the foregoing, the holders of the Class B Notes agree that all liens and security interests which secure the payment or performance of the Junior Obligations are hereby subordinated to any lien or security interest now or hereafter securing the payment or performance of any liability or other obligation owed to the holders of the Class A Notes (regardless of the order or manner of perfection thereof or any non-perfection thereof).

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(e)           Deficiency Payments.  Notwithstanding anything to the contrary contained in this Section 2.04 or in any other provision in this Agreement, if, on any day prior to the Collection Date, a Facility Deficiency shall have occurred, then the Borrower shall remit to the respective Lenders,

no later than the close of business of such Lender on such day (or if such day is not a Business Day, no later than the close of business of such Lender on the next succeeding Business Day), (i) so long as no Termination Event or Event of Default shall have occurred and be continuing, the amount required to eliminate any Facility Deficiency or (ii) if any Termination Event or Event of Default shall have occurred and is continuing, the entire outstanding Facility Amount, first to the Class A Notes until paid in full, and then to the Class B Notes until paid in full.

(f)           Remittance Reports.  On each Remittance Date, the Servicer shall deliver to the Lenders an electronic file, in a form acceptable to the Lenders, setting forth all of the information set forth on Schedule VII.

(g)           Instructions to the Lenders’ Bank.  All instructions and directions given to the Lenders’ Bank by the Servicer, the Borrower or the Lenders pursuant to this Section 2.04 shall be in writing (including instructions and directions transmitted to the Lenders’ Bank in electronic format), and such written instructions and directions shall be delivered with a written certification that such instructions and directions are in compliance with the provisions of this Section 2.04.  The Servicer and the Borrower shall immediately transmit to the Lenders by telecopy a copy of all instructions and directions given to the Lenders’ Bank by such party pursuant to this Section 2.04.  The Lender shall immediately transmit to the Servicer and the Borrower by telecopy a copy of all instructions and directions given to the Lenders’ Bank by the Lenders, pursuant to this Section 2.04.

SECTION 2.05                                Reserved.

SECTION 2.06                                Reserved.

SECTION 2.07                                Payments and Computations, Etc.  c) All amounts to be deposited or paid by the Borrower or the Servicer to any Lender hereunder shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (New York City time) on the day when due in lawful money of the United States in immediately available funds to the Collection Account or such other account as is designated by such Lender.  The Borrower shall, to the extent permitted by law, pay to each applicable Lender interest on all amounts not paid or deposited when due hereunder (whether owing by the Borrower or the Servicer) at the Base Rate, plus 2%, payable on demand; provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law.  Such interest shall be for the account of such Lender in respect of each of the Class A Note and the Class B Note and shall be paid in accordance with Section 2.04(c).  Any Obligation hereunder shall not be reduced by any distribution of any portion of Collections with respect to any Pledged Receivable if at any time such distribution is rescinded or returned by a Lender to the Borrower or any other Person for any reason.  All computations of interest and all computations of Breakage Fee and other fees hereunder (including, without limitation, the Fees, the Active Backup Servicer’s Fee, the Standby Backup Servicer’s Fee, the Custodian’s Fee and the Servicing Fee) shall be made on the basis of a year of 360 days (or 365 or 366 days for interest calculated at the Base Rate) for the actual number of days (including the first but excluding the last day) elapsed.

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(b)           Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or any fee

payable hereunder, as the case may be; provided, however, that with respect to the calculation of interest, such extension of time shall not be included in more than one Interest Period.

(c)           If the Borrowing requested by the Borrower and approved by the Lenders pursuant to Section 2.02 is not for any reason whatsoever, except as a result of the gross negligence or willful misconduct of a Lender or an Affiliate thereof, made or effectuated, as the case may be, on the date specified therefor, the Borrower shall indemnify such Lender against any loss, cost or expense incurred by such Lender related thereto (other than any such loss, cost or expense solely due to the gross negligence or willful misconduct of such Lender or an Affiliate thereof), including, without limitation, any loss (including cost of funds and reasonable out-of-pocket expenses), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund Loans or maintain Loans made by such Lender during such Interest Period.  The applicable Lender shall provide to the Borrower documentation setting forth the amounts of any loss, cost or expense referred to in the previous sentence, such documentation to be conclusive absent manifest error.

SECTION 2.08                                Fees.  d) The Borrower shall pay each Lender certain fees, including the Exit Fee, (the “Fees”) in the amounts and on the dates set forth in a fee letter (the “Fee Letter”), dated the date hereof, among the Borrower and the Lenders.

(b)           All of the Fees payable pursuant to this Section 2.08 (other than Fees payable on or prior to the Borrowing Date) shall be payable solely from amounts available for application pursuant to, and subject to the priority of, payment set forth in, Section 2.04.

SECTION 2.09                                Increased Costs; Capital Adequacy.  e) If, due to either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation (including, without limitation, any law or regulation resulting in any interest payments paid to any Lender under this Agreement being subject to United States withholding tax) or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender or any Affiliate, successor or assign or participant thereof (each of which shall be an “Affected Party”) of agreeing to make or making, funding or maintaining any Loan (or any reduction of the amount of any payment (whether of principal, interest, fee, compensation or otherwise) to any Affected Party hereunder), as the case may be, the Borrower shall, from time to time, within ten days after written demand complying with Section 2.09(c) by such Lender, on behalf of such Affected Party, pay to such Lender, on behalf of such Affected Party, additional amounts sufficient to compensate such Affected Party for such increased costs or reduced payments.

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(b)           If either (i) the introduction of or any change in or in the interpretation of any law, guideline, rule or regulation, directive, request or accounting principle or (ii) the compliance by any Affected Party with any law, guideline, rule, regulation, directive, request or accounting principle from any central bank, other governmental authority, agency or accounting authority (whether or not having the force of law), including, without limitation, compliance by an Affected Party with any request or directive regarding capital adequacy, has or would have the effect of reducing the rate of return on the capital of any Affected Party, as a consequence of its obligations hereunder or any related document or arising in connection herewith or therewith to a level below that which any such Affected Party could have achieved but for such introduction, change or compliance (taking into consideration the policies of such Affected Party with respect to capital adequacy), by an amount deemed by such Affected Party to be material, then, from time to time, after demand by such Affected Party (which demand shall be accompanied by a statement setting forth the basis of such demand), each Lender shall be paid, on behalf of such Affected Party (from Collections with respect to Pledged Receivables pursuant to, and subject to the priority of payment set forth in, Section 2.04), such additional amounts as will compensate such Affected Party for such reduction.

(c)           In determining any amount provided for in this Section 2.09, the Affected Party may use any reasonable averaging and attribution methods.  Each Lender, on behalf of any Affected Party making a claim under this Section 2.09, shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of such additional or increased costs, which certificate shall be conclusive absent demonstrable error.

(d)           If, as a result of any event or circumstance similar to those described in Section 2.09(a) or 2.09(b), any Affected Party (that is a Lender) is required to compensate a bank or other financial institution (including, without limitation, any Affiliate of Morgan Stanley) providing liquidity support, credit enhancement or other similar support to such Affected Party in connection with this Agreement, then, upon demand by such Affected Party, the Borrower shall pay, in accordance with Section 2.04, to such Affected Party such additional amount or amounts as may be necessary to reimburse such Affected Party for any amounts paid by it, and shall notify each Qualified Swap Counterparty of such payment.

SECTION 2.10                                Collateral Assignment of Agreements.  The Borrower hereby collaterally assigns to the Collateral Agent (and its successors and assigns) for the benefit of the Secured Parties, all of the Borrower’s right and title to and interest in, to and under (but not any obligations under) the Purchase and Sale Agreement, each Qualifying Interest Rate Swap, the Contract related to each Pledged Receivable, all other agreements, documents and instruments evidencing, securing or guarantying any Pledged Receivable and all other agreements, documents and instruments related to any of the foregoing (the “Assigned Documents”).  Without limiting any obligation of the Servicer hereunder, the Borrower confirms and agrees that the Collateral Agent (or any designee thereof, including, without limitation, the Servicer), following an Event of Default or a Program Termination Event, shall have the right to enforce the Borrower’s rights and remedies under each Assigned Document, but without any obligation on the part of the Collateral Agent or any of its Affiliates to perform any of the obligations of the Borrower under any such Assigned Document.  In addition, each of the Servicer and the Borrower confirms and agrees that the Servicer and the Borrower will, upon receipt of notice or discovery thereof, promptly send to the Collateral Agent a notice of (i) any breach of any representation, warranty, agreement or covenant under any such Assigned Document or (ii) any event or occurrence that, upon notice, or upon the passage of time or both, would constitute such a breach, in each case, immediately upon learning thereof.  The parties hereto agree that such assignment to the Collateral Agent shall terminate upon the Collection Date.

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SECTION 2.11                                Grant of a Security Interest.  To secure the prompt and complete payment when due of the Obligations and the performance by the Borrower of all of the covenants and obligations to be performed by it pursuant to this Agreement, the Borrower hereby (i) collaterally assigns and pledges to the Collateral Agent (and its successors and assigns), for the benefit of the Secured Parties, and (ii) grants a security interest to the Collateral Agent (and its successors and assigns), for the benefit of the Secured Parties, in all property of the Borrower, whether tangible or intangible and whether now owned or existing or hereafter arising or acquired and wheresoever located (collectively, the “Pledged Assets”), including, without limitation, all of the Borrower’s right, title and interest in, to and under:

(a)           all Receivables purchased by, or otherwise transferred or pledged to (pursuant to the terms of the Purchase and Sale Agreement) the Borrower under the Purchase and Sale Agreement from time to time (such Receivables, the “Pledged Receivables”, all Other Conveyed Property related to the Pledged Receivables purchased by (or otherwise transferred or pledged pursuant to the terms of the Purchase and Sale Agreement) to the Borrower under the Purchase and Sale Agreement, all Related Security related to the Pledged Receivables, all interest of the Borrower in all Obligor Collateral related to the Pledged Receivables (together with all security interests in and Insurance Proceeds related to such Obligor Collateral and all proceeds from the disposition of such Obligor Collateral, whether by sale to the related Obligors or otherwise), all Collections and other monies due and to become due under the Contracts related to the Pledged Receivables received on or after the date such Pledged Receivables were purchased by (or purportedly purchased by) the Borrower under the Purchase and Sale Agreement;

(b)           the Assigned Documents, including, in each case, without limitation, all monies due and to become due to the Borrower under or in connection therewith;

(c)           the Collection Account, the Lockbox, the Lockbox Account, and all other bank and similar accounts relating to Collections with respect to Pledged Receivables (whether now existing or hereafter established) and all funds held therein, and all investments in and all income from the investment of funds in the Collection Account, the Lockbox Account, and such other accounts;

(d)           the Records relating to any Pledged Receivables;

(e)           all UCC financing statements filed by the Borrower against the Originator under or in connection with the Purchase and Sale Agreement;

(f)           [Reserved];

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(g)           each Qualifying Interest Rate Swap, any other interest rate protection agreement entered into with respect to the transactions contemplated under the RLSA and, in each case, all payments thereunder;

(h)           all Liquidation Proceeds relating to any Pledged Receivables; and

(i)           all proceeds of the foregoing property described in clauses (a) through (g) above, including interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for or on account of the sale or other disposition of any or all of the then existing Pledged Receivables.

The Borrower hereby authorizes the Collateral Agent to file financing statements describing as the collateral covered thereby as "all of the debtor's personal property or assets" or words to that effect, notwithstanding that such wording may be broader in scope than the collateral described in this Agreement.

               SECTION 2.12                                Evidence of Debt.  Each Lender shall maintain an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from the related Loan (and related Class A Note and Class B Note) owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.  The entries made in such account(s) of such Lender shall be conclusive and binding for all purposes, absent manifest error.

SECTION 2.13                                Release of Pledged Receivables.  f) Subject to Section 2.15 hereof, upon the repayment of the Loans and all other amounts payable to each Lender under this Agreement and any other Transaction Document, the security interest of the Collateral Agent in each Pledged Receivable and the related Other Conveyed Property and Related Security shall be released and the Borrower hereby authorized to file, on behalf of the Collateral Agent, UCC termination statements in respect thereof.

(b)           The Borrower shall notify the Collateral Agent of any Release Price to be paid pursuant to this Section 2.13 on the Business Day on which such Release Price shall be paid specifying the Pledged Receivables to be released and the Release Price.

(c)           Promptly after the Collection Date has occurred, the Collateral Agent shall re-assign and transfer to the Borrower, for no consideration but at the sole expense of the Borrower, their respective remaining interests in the Pledged Assets, free and clear of any Adverse Claim resulting solely from an act by the Collateral Agent but without any other representation or warranty, express or implied, by or recourse against the Collateral Agent.

SECTION 2.14                                Treatment of Amounts Paid by the Borrower.  Amounts paid by the Borrower pursuant to Section 2.13 on account of Pledged Receivables shall be treated as payments on Pledged Receivables hereunder.

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SECTION 2.15                                Prepayment; Certain Indemnification Rights; Termination.  g) The Borrower may prepay, in whole or in part, the outstanding principal amount of any Class A Notes and/or Class B Notes.  Any amounts so prepaid shall be applied to repay the outstanding principal amount of Loans allocated to an Interest Period or Interest Periods selected by the related Lender.  If the Borrower intends to make an optional prepayment pursuant to this Section 2.15(a), the Borrower shall give five (5) Business Days' prior written notice thereof to the Lenders, specifying the intended Prepayment Date, the intended Prepayment Amount, a calculation of any applicable Breakage Fee and any other breakage costs in connection with a Qualified Interest Rate Swap (such cost, an “Other Swap Breakage Cost”).  Any such optional prepayment shall be accompanied by all interest accrued with respect thereto and the Breakage Fee and Other Swap Breakage Cost with respect to the applicable Prepayment Amount and Prepayment Date.  If such notice is given, the principal amount specified in such notice (together with all interest accrued with respect thereto and the Breakage Fee and Other Swap Breakage Cost related thereto) shall be due and payable on the Prepayment Date specified therein.  Notwithstanding the foregoing, any payment by the Borrower required pursuant to Section 2.04(e) or (f) or, in connection with the occurrence of an Event of Default, pursuant to Section 7.01 hereof shall not be considered an optional prepayment and no Breakage Fee or Other Swap Breakage Cost shall be required to be paid in respect thereof.

(b)           Without limiting any other provision hereof, the Borrower agrees to indemnify each Lender, the Qualifying Swap Counterparty and any Affiliate thereof and to hold each such Person harmless from any cost, loss or expense which it may sustain or incur as a consequence of (i) the Borrower making any optional prepayment pursuant to Section 2.15(a) hereof, (ii) any default by the Borrower in making any optional prepayment pursuant to Section 2.15(a) hereof after notice of such prepayment has been given, (iii) any failure by the Borrower to take a Loan hereunder after notice of such Loan has been given pursuant to this Agreement, (iv) any acceleration of the maturity of any Loans by any Lender in accordance with the terms of this Agreement, including, but not limited to, any Breakage Fees, any cost, loss or expense arising related to the termination (in whole or in part) or amendment of any Qualifying Interest Rate Swap and from interest or fees payable by such Lender to lenders of funds obtained by it in order to advance or maintain the Loans hereunder.  Indemnification pursuant to this Section shall survive the termination of this Agreement and shall include reasonable fees and expenses of counsel and expenses of litigation.

(c)           Notwithstanding any other provision hereof, the Borrower shall not terminate or amend this Agreement or any other Transaction Document or reduce the Borrowing Limit prior to the Facility Maturity Date without the Lenders’ prior written consent, which consent may be withheld in each Lender’s sole discretion.

(d)           At any time prior to the occurrence of a Termination Event or an Event of Default, the Borrower shall have the right to deliver written notice, which notice shall be sent to the  Lenders and the holders of the Class B Notes (the “Class B Buyout Notice”) designating a purchaser for (without recourse, warranty or representation (other than the holders of such Class B Notes own such Class B Notes free and clear of any liens created or granted by the holders of such Class B Notes)) the entire (but not less than the entire) outstanding principal amount of Class B Notes (and all associated rights, titles, claims and privileges associated therewith, including rights under this Agreement) for an amount (the “Class B Buyout Price”) equal to the outstanding principal amount of, and accrued but unpaid interest on, the Class B Notes (including any make-whole premium payable) and all other amounts then payable to the holder(s) of the Class B Notes under this Agreement.  The purchase of the Class B Notes pursuant to this Section shall close no later than the date specified in such Class B Buyout Notice, which date shall be subject to the prior written approval of the holder of the Class B Notes.  The Class B Buyout Price shall be remitted by wire transfer in immediately available federal funds to the holder(s) of the Class B Notes to account(s) specified by such holder(s).  Interest shall be calculated to but excluding the Business Day on which such purchase shall occur if the Class B Buyout Price is wired to the holder(s) of the Class B Notes prior to 1:00 pm New York time and interest shall be calculated to and including such Business Day if the Class B Notes Buyout Price is wired to the holder(s) of the Class B Notes later than 1:00 pm New York time.

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SECTION 2.16                                Increase of Borrowing Limit.  The Borrower may, upon 30 days’ prior written notice to the Lenders (with a simultaneous copy to the Initial Qualifying Swap Counterparty), request that the Borrowing Limit be increased, which request may be granted in the sole discretion, and with the written consent, of the Lenders, it being agreed that the Borrower shall pay to each Lender the fee related to such increase that is required pursuant to the terms of the Fee Letter and any other costs, fees and expenses pursuant to Section 9.07.

ARTICLE III

CONDITIONS OF LOANS

SECTION 3.01                                Conditions Precedent to Borrowing.  The Borrowing hereunder is subject to the conditions precedent that:

(a)           the Arrangement Fee (as such term is defined in the Fee Letter) shall have been paid in full and all other acts and conditions (including, without limitation, the obtaining of any necessary regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened prior to the execution, delivery and performance of this Agreement and all related documents and to constitute the same legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all applicable laws; and

(b)           each Lender shall have received on or before the date of the Borrowing the items listed in Schedule I hereto, each in form and substance satisfactory to such Lender.

SECTION 3.02                                Conditions Precedent to All Borrowings.  The Borrowing by the Borrower from the Lenders shall be subject to the further conditions precedent that:

(a)           Reserved;

(b)           After giving effect to the Borrowing requested by the Borrower the following statements shall be true (and the Borrower shall be deemed to have certified that):

(i)           the Facility Amount will not exceed the Borrowing Limit; and

(ii)           the Facility Amount will not exceed the Facility Limit.

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(c)           On the Borrowing Date, the following statements shall be true and correct, and the Borrower by accepting any amount of the Borrowing shall be deemed to have represented that:

(i)           the representations and warranties contained in Section 4.01 are true and correct in all material respects, before and after giving effect to the Borrowing to take place on the Borrowing Date and to the application of proceeds therefrom, on and as of such day as though made on and as of such date;

(ii)           no event has occurred and is continuing, or would result from the Borrowing, which constitutes a Program Termination Event hereunder or an event that but for notice or lapse of time or both would constitute a Program Termination Event;

(iii)           no event has occurred and is continuing, or would result from the Borrowing, which constitutes a Termination Event hereunder or an event that but for notice or lapse of time or both would constitute a Termination Event;

(iv)           Reserved;

(v)           1.2.the requirements set forth in Section 2.01(a) hereof shall have been complied with;

(vi)           3.(a) the Borrower has delivered to each Lender a copy of the applicable Notice of Borrowing and the related Notice of Pledge (together with the attached Receivables Schedule) pursuant to Section 2.02, each appropriately completed and executed by the Borrower, (b) the Borrower has delivered or caused to have been delivered to the Custodian the Notice of Pledge with respect to the Receivables being Pledged hereunder three (3) Business Days prior to the Borrowing Date, and (c) the Contract related to each Receivable being Pledged hereunder on the Borrowing Date has been duly assigned by the Originator to the Borrower and duly assigned by the Borrower to the Collateral Agent;

(vii)           all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of each Receivable being Pledged hereunder on the Borrowing Date (and the Other Conveyed Property and Related Security related thereto), including, without limitation, the perfection of the Borrower’s interests therein (other than with respect to Equipment which has an Amortized Equipment Cost of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts), shall have been satisfied in full, and all filings (including, without limitation, UCC filings) required to be made by any Person and all actions required to be taken or performed by any Person in any jurisdiction to give the Collateral Agent a first priority perfected security interest in such Receivables, Related Security and the Other Conveyed Property related thereto and the proceeds thereof shall have been made, taken or performed;

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(viii)                     (A)                      the initial Servicer shall have taken or caused to be taken all steps necessary under all applicable law (including the filing of an Obligor Financing Statement) in order to cause a valid, subsisting and enforceable perfected, first priority security interest to exist in Originator’s favor in the Obligor Collateral securing each Receivable being Pledged hereunder on the Borrowing Date (other than with respect to Equipment which has an Amortized Equipment Cost of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts), (B) the Originator shall have assigned the perfected, first priority security interest in the Obligor Collateral to the Borrower pursuant to the Purchase and Sale Agreement and (C) the Borrower shall have assigned the perfected, first priority security interest in the Obligor Collateral (and the proceeds thereof) referred to in clause (A) above to the Collateral Agent, pursuant to Section 2.11 hereof;

(ix)           [Reserved]; and

(x)           the Borrower shall have taken all steps necessary under all applicable law in order to cause to exist in favor of the Collateral Agent a valid, subsisting and enforceable first priority perfected security interest in the Borrower’s interest in the Obligor Collateral related to each Receivable being Pledged hereunder on the Borrowing Date (other than with respect to Equipment which has an Amortized Equipment Cost of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts);

(d)           No law or regulation shall prohibit, and no order, judgment or decree of any Government Entity shall prohibit or enjoin, the making of such Loans by any Lender in accordance with the provisions hereof; and

(e)           The Lenders shall have received and found to be satisfactory with respect to Pledged Receivables being Pledged in connection with the Borrowing, which have been previously pledged to any lender by the Originator, the Borrower or any Affiliate thereof under any other financing facility, evidence of the release of any liens granted in connection with such financing with respect to any such Pledged Receivables.

(f)           Unless a credit agreement and/or security agreement, including but not limited to any such agreement with National City Bank, as agent, related to Receivables being Pledged by the Borrower in connection with the Borrowing, shall have provided for an automatic release of the Agent’s or Collateral Agent’s, as applicable, lien and security interest in such Receivables granted thereunder, the applicable agent or lender shall have executed and delivered to the Borrower and the Collateral Agent a partial release letter and the Borrower shall have duly filed with the appropriate filing office a UCC-3 partial release evidencing the release contained in such release letter, in each case in a form satisfactory to the Collateral Agent.

SECTION 3.03                                Advances Do Not Constitute a Waiver.  No advance of a Loan by any Lender hereunder shall constitute a waiver of any condition to such Lender’s obligation to make such an advance unless such waiver is in writing and executed by such Lender.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01                                Representations and Warranties of the Borrower.  The Borrower hereby represents and warrants, as of the date hereof, on the Borrowing Date and on the first day of each Rollover Interest Period, as follows:

(a)           Each Receivable designated as an Eligible Receivable on any Facility Limit Certificate or Monthly Remittance Report is an Eligible Receivable.  Each Receivable included as an Eligible Receivable in any calculation of the Facility Limit or the Eligible Receivables Balance is an Eligible Receivable.

(b)           The Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the power and all licenses necessary to own its assets and to transact the business in which it is engaged and is duly qualified and in good standing under the laws of each jurisdiction where the transaction of such business or its ownership of the Pledged Receivables requires such qualification.

(c)           The Borrower has the power, authority and legal right to make, deliver and perform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the Transaction Documents to which it is a party, and to grant to the Collateral Agent a first priority perfected security interest in the Pledged Assets on the terms and conditions of this Agreement.  This Agreement and each of the Transaction Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against it in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application affecting creditors’ rights generally and by general principles of equity (whether such enforceability is considered in a proceeding in equity or at law).  No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any Government Entity, bureau or agency is required in connection with the execution, delivery or performance by the Borrower of this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document or the Pledged Receivables, other than such as have been met or obtained.

(d)           The execution, delivery and performance of this Agreement and all other agreements and instruments executed and delivered or to be executed and delivered pursuant hereto or thereto in connection with the Pledge of the Pledged Assets will not (i) create any Adverse Claim on the Pledged Assets or (ii) violate any provision of any existing law or regulation or any order or decree of any court, regulatory body or administrative agency or the certificate of formation or limited liability company agreement of the Borrower or any contract or other agreement to which or the Borrower is a party or by which the Borrower or any property or assets of the Borrower may be bound.

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(e)           No litigation or administrative proceeding of or before any court, tribunal or governmental body is presently pending or, to the knowledge of the Borrower, threatened against the Borrower or any properties of Borrower or with respect to this Agreement, which, if adversely determined, could have a Material Adverse Effect.

(f)           In selecting the Receivables to be Pledged pursuant to this Agreement, no selection procedures were employed which are intended to be adverse to the interests of any Lender.

(g)           The grant of the security interest in the Pledged Assets by the Borrower to the Collateral Agent pursuant to this Agreement, is in the ordinary course of business for the Borrower and is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction.  No such Pledged Assets have been sold, transferred, assigned or pledged by the Borrower to any Person, other than the Pledge of such Assets to the Collateral Agent pursuant to the terms of this Agreement.

(h)           The Borrower has no Debt or other indebtedness which, in the aggregate, exceeds $10,000, other than Debt incurred under the terms of the Transaction Documents.

(i)           The Borrower has been formed solely for the purpose of engaging in the transactions contemplated by this Agreement and the other Transaction Documents.

(j)           No injunction, writ, restraining order or other order of any nature adversely affects the Borrower’s performance of its obligations under this Agreement or any Transaction Document to which the Borrower is a party.

(k)           The Borrower has filed (on a consolidated basis or otherwise) on a timely basis all tax returns (including, without limitation, all foreign, federal, state, local and other tax returns) required to be filed, is not liable for taxes payable by any other Person and has paid or made adequate provisions for the payment of all taxes, assessments and other governmental charges due from the Borrower except for those taxes being contested in good faith by appropriate proceedings and in respect of which no penalty may be assessed from such contest and it has established proper reserves on its books.  No tax lien or similar adverse claim has been filed, and no claim is being asserted, with respect to any such tax, assessment or other governmental charge.  Any taxes, fees and other governmental charges payable by the Borrower, as applicable, in connection with the execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated hereby or thereby have been paid or shall have been paid if and when due.

(l)           The chief executive office of the Borrower (and the location of the Borrower’s records regarding the Pledged Receivables (other than those delivered to the Custodian)) is located at 1818 Market Street, 9th Floor, Philadelphia, PA 19103.

(m)           The Borrower’s legal name is as set forth in this Agreement; other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lenders upon receipt of a notice delivered to the Lenders pursuant to Section 6.18), the Borrower has not changed its name since its formation; the Borrower does not have tradenames, fictitious names, assumed names or “doing business as” names other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lenders upon receipt of a notice delivered to the Lenders pursuant to Section 6.18).

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(n)           The Borrower is solvent and will not become insolvent after giving effect to the transactions contemplated hereby; the Borrower is paying its debts as they become due; and the Borrower, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business.

(o)           The Borrower has no subsidiaries.

(p)           The Borrower has given fair consideration and reasonably equivalent value in exchange for the sale of the Pledged Receivables by the Originator under the Purchase and Sale Agreement.

(q)           No Monthly Remittance Report or Facility Limit Certificate (each if prepared by the Borrower or to the extent that information contained therein is supplied by the Borrower), information, exhibit, financial statement, document, book, record or report furnished or to be furnished by the Borrower to the Lenders in connection with this Agreement is or will be inaccurate in any material respect as of the date it is or shall be dated or (except as otherwise disclosed in writing to the Lenders, as the case may be, at such time) as of the date so furnished, and no such document contains or will contain any material misstatement of fact or omits or shall omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

(r)           No proceeds of the Loans will be used by the Borrower to acquire any security in any transaction, which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(s)           There are no agreements in effect adversely affecting the rights of the Borrower to make, or cause to be made, the grant of the security interest in the Pledged Assets contemplated by Section 2.11.

(t)           The Borrower is not an “investment company” or an “affiliated person” of or “promoter” or “principal underwriter” for an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended, nor is the Borrower otherwise subject to regulation thereunder.

(u)           No Event of Default or Unmatured Event of Default has occurred and is continuing.

(v)           Reserved.

(w)           The Borrower is in compliance with ERISA in all material respects. No steps have been taken to terminate any Borrower Pension Plan which could result in material liability, and no contribution failure has occurred with respect to any Borrower Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA.  No condition exists or event or transaction has occurred with respect to any Borrower Pension Plan which could result in the Borrower or any ERISA Affiliate of Borrower incurring any material liability, fine or penalty.

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(x)           There is not now, nor will there be at any time in the future, any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein), providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges.

(y)           Notwithstanding anything to the contrary in the Warehouse Facility, no Pledged Receivable will constitute (for purposes of the Warehouse Facility) either an “Eligible Pool A Receivable” or an “Eligible Pool B Receivable”, in each case as defined under the Warehouse Facility.

SECTION 4.02                                Representations and Warranties of the Servicer.  The Servicer (so long as the Servicer is not the Backup Servicer as successor Servicer) hereby represents and warrants, as of the date hereof, on the Borrowing Date, on each Remittance Date and on the first day of each Rollover Interest Period, as follows:

(a)           Each Receivable designated as an Eligible Receivable on any Facility Limit Certificate or Monthly Remittance Report is an Eligible Receivable.  Each Receivable included as an Eligible Receivable in any calculation of the Facility Limit or the Eligible Receivables Balance is an Eligible Receivable.

(b)           The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the power and all licenses necessary to own its assets and to transact the business in which it is engaged (which includes servicing Receivables on behalf of third parties and itself) and is duly qualified and in good standing under the laws of each jurisdiction where its servicing of the Pledged Receivables requires such qualification.

(c)           The Servicer has the power, authority and legal right to make, deliver and perform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the Transaction Documents to which it is a party.  This Agreement and each of the Transaction Documents to which the Servicer is a party constitutes the legal, valid and binding obligation of the Servicer, enforceable against it in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application affecting creditors’ rights generally and by general principles of equity (whether such enforceability is considered in a proceeding in equity or at law).  No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any Government Entity is required in connection with the execution, delivery or performance by the Servicer of this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document, other than such as have been met or obtained.

(d)           The execution, delivery and performance of this Agreement by the Servicer and all other agreements and instruments executed and delivered or to be executed and delivered by the Servicer pursuant hereto or thereto in connection with the Pledge of the Pledged Assets will not (i) create any Adverse Claim on the Pledged Assets or (ii) violate any provision of any existing law or regulation or any order or decree of any court, regulatory body or administrative agency or the certificate of incorporation or bylaws of the Servicer or any material contract or other agreement to which the Servicer is a party or by which the Servicer or any of its property or assets may be bound.

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(e)           No litigation or administrative proceeding of or before any court, tribunal or governmental body is presently pending or, to the knowledge of the Servicer, threatened against the Servicer or any properties of the Servicer or with respect to this Agreement, which, if adversely determined, could have a Material Adverse Effect.

(f)           No injunction, writ, restraining order or other order of any nature adversely affects the Servicer’s performance of its obligations under this Agreement or any Transaction Document to which the Servicer is a party.

(g)           The Servicer has filed (on a consolidated basis or otherwise) on a timely basis all material tax returns (including, without limitation, all foreign, federal, state and local income tax returns) required to be filed, is not liable for taxes payable by any other Person (other than any Person within the Servicer’s consolidated group or similar group) and has paid or made adequate provisions for the payment of all material taxes, assessments and other governmental charges due from the Servicer except for those taxes being contested in good faith by appropriate proceedings and in respect of which it has established proper reserves on its books.  No tax lien or similar adverse claim has been filed, and no claim is being asserted, with respect to any such tax, assessment or other governmental charge.  Any taxes, fees and other governmental charges payable by the Servicer in connection with the execution and delivery of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby or thereby have been paid or shall have been paid if and when due.

(h)           The chief executive office of the Servicer (and the location of the Servicer’s records regarding the Pledged Receivables (other than those delivered to the Custodian)) is located at 1818 Market Street, 9th Floor, Philadelphia, PA 19103.

(i)           The Servicer’s legal name is as set forth in this Agreement; other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lenders upon receipt of a notice delivered to the Lenders pursuant to Section 6.18), the Servicer has not changed its name since its formation; the Servicer does not have tradenames, fictitious names, assumed names or “doing business as” names other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lenders upon receipt of a notice delivered to the Lenders pursuant to Section 6.18).

(j)           The Servicer is solvent and will not become insolvent after giving effect to the transactions contemplated hereby; the Servicer is paying its debts as they become due; and the Servicer, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business.

(k)           As of the date hereof and as of the date of delivery of any Monthly Remittance Report or Facility Limit Certificate, no Monthly Remittance Report or Facility Limit Certificate (each if prepared by the Servicer or to the extent that information contained therein is supplied by the Servicer), information, exhibit, financial statement, document, book, record or report furnished or to be furnished by the Servicer to the Lenders in connection with this Agreement is or will be inaccurate in any material respect, and no such document contains or will contain any material misstatement of fact or omits or shall omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

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(l)           The Servicer is not an “investment company” or an “affiliated person” of or “promoter” or “principal underwriter” for an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended, nor is the Servicer otherwise subject to regulation thereunder.

(m)           No Event of Default or Unmatured Event of Default has occurred and is continuing.

(n)           Each of the Pledged Receivables was underwritten and is being serviced in conformance with Originator’s and the Servicer’s standard underwriting, credit, collection, operating and reporting procedures and systems (including, without limitation, the Credit and Collection Policy).

(o)           Any Computer Tape or Listing made available by the Servicer to the Lenders was complete and accurate in all material respects as of the date on which such Computer Tape or Listing was made available.

(p)           The Servicer is in compliance with ERISA in all material respects. No steps have been taken to terminate any Servicer Pension Plan which could result in material liability, and no contribution failure has occurred with respect to any Servicer Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA.  No condition exists or event or transaction has occurred with respect to any Servicer Pension Plan which could result in the Servicer or any ERISA Affiliate of Servicer incurring any material liability, fine or penalty.

(q)           There is not now, nor will there be at any time in the future, any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein), providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges.

(r)           Notwithstanding anything to the contrary in the Warehouse Facility, no Pledged Receivable will constitute (for purposes of the Warehouse Facility) either an “Eligible Pool A Receivable” or an “Eligible Pool B Receivable”, in each case as defined under the Warehouse Facility.

SECTION 4.03                                Resale of Receivables Upon Breach of Covenant or Representation and Warranty by Borrower.  The Borrower or the Servicer, as the case may be, shall inform the other parties to this Agreement and the Qualifying Swap Counterparty promptly, in writing, upon the discovery of any breach of the representations, warranties and/or covenants contained in Section 4.01, Section 4.02 or Section 5.01; provided, however, that the failure to provide any such notice shall not diminish, in any manner whatsoever, any obligation of the Borrower under this Section 4.03 to sell any Pledged Receivable.  Upon the discovery by or notice to the Borrower of any such breach that also constitutes a LEAF Purchase Event under and as defined in the Purchase and Sale Agreement, the Borrower

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 shall have an obligation to, and the Borrower shall, resell to the Originator pursuant to the Purchase and Sale Agreement (and the Collateral Agent may enforce such obligation of the Borrower to sell) any Pledged Receivable adversely affected by any such breach.  The Servicer shall notify the Collateral Agent promptly, in writing, of any failure by the Borrower to so resell any such Pledged Receivable.  In connection with the resale of such Pledged Receivable, the Borrower shall remit funds in an amount equal to the Release Price for such Pledged Receivable to the Collection Account on the date of such resale and the Collateral Agent, in consideration for payment (and automatically upon deposit in the Collection Account), of the Release Price shall be deemed to have released its security interest in such Pledged Receivables. It is understood and agreed that the obligation of the Borrower to resell to the Originator, and the obligation of the Originator to purchase, any Receivables which are adversely affected by a LEAF Purchase Event is not intended to, and shall not, constitute a guaranty of the collectibility or payment of any Receivable which is not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the related Obligor.

SECTION 4.04                                Representations and Warranties of the Lenders.  Each Lender hereby represents and warrants, on the Borrowing Date and on the first day of each Rollover Interest Period, that it is a “qualified purchaser” within the meaning of Section 3(c)(7) of the Investment Company Act.

ARTICLE V

GENERAL COVENANTS OF THE BORROWER AND THE SERVICER

SECTION 5.01                                General Covenants.  h) The Borrower will observe all corporate procedures required by its certificate of formation, limited liability company agreement and the laws of its jurisdiction of formation.  The Borrower will maintain its limited liability company existence in good standing under the laws of its jurisdiction of formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign limited liability company in any other state in which it does business and in which it is required to so qualify under applicable law.

(b)           The Borrower will at all times ensure that (i) its members act independently and in its interests and in the interests of its creditors, (ii) it shall at all times maintain at least one independent manager who (A) is not currently and has not been during the five years preceding the date of this Agreement an officer, director or employee of the Borrower or an Affiliate thereof (other than acting as independent manager or in a similar capacity) and (B) is not a member of the Borrower or an Affiliate thereof (other than a special independent member of the Borrower or alimited purpose corporation, business trust, partnership or other entity organized for the purpose of acquiring, financing or otherwise investing, directly or indirectly, in assets or receivables originated, owned or serviced by Originator or an Affiliate of any of them), (iii) its assets are not commingled with those of Originator or any other Affiliate of the Borrower, (iv) its members duly authorize all of its limited liability company actions, (v) it maintains separate and accurate records and books of account and such books and records are kept separate from those of Originator and any other Affiliate of the Borrower and (vi) it maintains minutes of the meetings and other proceedings of the members.  Where necessary, the Borrower will obtain proper authorization from its members for limited liability company action.

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(c)           The Borrower will pay its operating expenses and liabilities from its own assets.

(d)           The Borrower will not have any of its indebtedness guaranteed by Originator or any Affiliate thereof.  Furthermore, the Borrower will not hold itself out, or permit itself to be held out, as having agreed to pay or as being liable for the debts of Originator, and the Borrower will not engage in business transactions with Originator, except on an arm’s-length basis.  The Borrower will not hold Originator out to third parties as other than an entity with assets and liabilities distinct from the Borrower.  The Borrower will cause any of its financial statements consolidated with those of Originator to state that the Borrower is a separate corporate entity with its own separate creditors who, in any liquidation of the Borrower, will be entitled to be satisfied out of the Borrower’s assets prior to any value in the Borrower becoming available to the Borrower’s equity holders.  The Borrower will not act in any other matter that could foreseeably mislead others with respect to the Borrower’s separate identity.

(e)           In its capacity as Servicer, LEAF Financial will, to the extent necessary, maintain separate records on behalf of and for the benefit of the Lenders, act in accordance with instructions and directions, delivered in accordance with the terms hereof, from the Borrower, and/or the Lenders in connection with its servicing of the Pledged Receivables hereunder, and will ensure that, at all times when it is dealing with or in connection with the Pledged Receivables in its capacity as Servicer, it holds itself out as Servicer, and not in any other capacity.

(f)           The Servicer (if LEAF Financial or an Affiliate thereof) shall, to the extent required by applicable law, disclose all material transactions associated with this transaction in appropriate regulatory filings and public announcements.  The annual financial statements of Resource America (including any consolidated financial statements) shall disclose the effects of the transactions contemplated by the Purchase and Sale Agreement as a sale of Receivables, Related Security and Other Conveyed Property to the Borrower, and the annual financial statements of the Borrower shall disclose the effects of the transactions contemplated by this Agreement as a loan to the extent required by and in accordance with GAAP, it being understood that the Loans to the Borrower under this Agreement will be treated as debt on the consolidated financial statements of Resource America.

(g)           The Borrower shall take all other actions necessary to maintain the accuracy of the factual assumptions set forth in the legal opinions of Thacher Proffitt & Wood LLP, as special counsel to the Originator and the Borrower, issued in connection with the Purchase and Sale Agreement and relating to the issues of substantive consolidation and true conveyance of the Pledged Receivables.

(h)           Except as otherwise provided herein or in any other Transaction Document, neither the Borrower nor the Servicer shall sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or (if the Servicer is LEAF Financial or an Affiliate thereof) suffer to exist any Adverse Claim upon or with respect to, any Pledged Receivable, any Collections related thereto or any other Pledged Assets related thereto, or upon or with respect to any account to which any Collections of any Receivable are sent, or assign any right to receive income in respect thereof.  Except as otherwise provided herein or in any other Transaction Document, the Borrower shall not create or suffer to exist any Adverse Claim upon or with respect to any of the Borrower’s assets.  Except as otherwise provided herein or in any other Transaction Document, the Servicer shall not create, or (if the Servicer is LEAF Financial or an Affiliate thereof) permit any action to be taken by any Person to create, any Adverse Claim upon or with respect to any of the Borrower’s assets.

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(i)           The Borrower will not merge or consolidate with, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) other than with respect to asset dispositions in connection with an optional prepayment pursuant to Section 2.15(a) hereof, or acquire all or substantially all of the assets or capital stock or other ownership interest of any Person without the prior written consent of the Lenders.

(j)           The Borrower will not account for or treat (whether in financial statements or otherwise) the transactions contemplated by the Purchase and Sale Agreement in any manner other than a sale and absolute assignment of Receivables, Related Security and Other Conveyed Property by Originator to the Borrower constituting a “true conveyance” for bankruptcy purposes.

(k)           The Borrower will not amend, modify, waive or terminate any terms or conditions of the Purchase and Sale Agreement without the written consent of the Lenders, and shall perform its obligations thereunder.

(l)           The Borrower will not make any amendment, modification or other change to its certificate of formation or limited liability company agreement that would materially and adversely affect the Lenders without each Lender’s prior written consent, and shall notify the Lenders prior to making any amendment, modification or other change to its certificate of formation or limited liability company agreement prior to the effectiveness thereof.

(m)           Neither the Borrower nor (if the Servicer is LEAF Financial or an Affiliate thereof) the Servicer will make or allow to be made any material amendment to the Credit and Collection Policy without the prior written consent of the Lenders (and the Lenders hereby agree to take commercially reasonable efforts to respond to any request for such consent in a timely manner).  Neither the Borrower nor (if the Servicer is LEAF Financial or an Affiliate thereof) the Servicer will make or allow to be made any non-material amendment to the Credit and Collection Policy without the prior written consent of the Lenders; provided, that if the Lenders have not responded to a written  request for such consent within ten (10) Business Days of receipt thereof, the Lenders shall be deemed to have consented to such request.

(n)           If the Borrower or the Servicer receives any Collections with respect to any Pledged Receivable, the Borrower or the Servicer, as applicable, will remit such Collections to the Collection Account within one (1) Business Day of the Borrower’s or the Servicer’s identification thereof.

(o)           The Servicer shall cause:

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(i)           the Obligor under each Contract to remit all payments owed or otherwise payable by such Obligor under such Contract (or any servicer on its behalf) to the Lockbox or by wire transfer to the Lockbox Account;

(ii)           the Lockbox Bank to deposit all Collections with respect to any Pledged Receivable in the Lockbox into the Lockbox Account on each Business Day; and

(iii)           the Lockbox Bank to remit all Collections with respect to any Pledged Receivable on deposit in the Lockbox Account (or any sub-account thereof or any related account) to the Collection Account on each Business Day.

(p)           Reserved.

(q)           The Borrower shall deliver to the Lenders on each Purchase Date a copy of the Assignment delivered to it on such Purchase Date.

(r)           Each of the Servicer (and, if the Servicer is not LEAF Financial or an Affiliate thereof, upon the Servicer gaining knowledge thereof) and the Borrower shall promptly notify the Lenders of the occurrence of any Servicer Default, Event of Default, Program Termination Event, Termination Event (and any event that, if it continues uncured, would, with lapse of time or notice or lapse of time and notice, constitute any Servicer Default, Event of Default, Program Termination Event or Termination Event).

(s)           Each of the Servicer (if the Servicer is LEAF Financial or an Affiliate thereof) and the Borrower shall take all actions (in the case of Obligor Collateral with an Amortized Equipment Cost over $100,000) and all commercially reasonable actions (in the case of Obligor Collateral with an Amortized Equipment Cost of $100,000 or less) necessary to ensure that the Originator is at all times named as loss payee under each Insurance Policy with respect to Obligor Collateral related to a Pledged Receivable.

(t)           On the Borrowing Date, a Qualifying Interest Rate Swap, in form and substance satisfactory to the Lenders, shall be duly executed by the Borrower and a Qualifying Swap Counterparty, and any amounts required to have been paid thereunder as of such Remittance Date shall have been paid and any obligations required to have been performed thereunder as of such Remittance Date shall have been performed.

(u)           The Pledged Receivables are ineligible to be refinanced with any proceeds of the Warehouse Facility.

(v)           The Borrower shall not acquire any debt obligation or interest therein if, after giving effect to such acquisition, more than 40 percent of the debt obligations or interests therein held by the Borrower (as determined under the rules of Treasury Regulation 301.7701(i)-1(c)) would consist of real estate mortgages or interests therein (as defined in Treasury Regulation 301.7701(i)-1(d))

(w)           If the Obligor Collateral related to any Receivable securing the Borrowing is a Vehicle, the Borrower shall, within 40 days after the Closing Date, deliver to the applicable Registrar of Titles an application for a Certificate of Title for such Vehicle satisfying the Titling Requirements.

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SECTION 5.02                                Check-in Requirements.

(a)           The Borrower hereby covenants and agrees that, (i) not later than 20 days after the Borrowing Date, it shall cause to be delivered to the Custodian the Priority Documents related to Contracts whose aggregate Amortized Equipment Cost constitutes not less than 50% of the aggregate Amortized Equipment Cost of all Contracts, and (ii) not later than 40 days after the Borrowing Date, it shall cause to be delivered to the Custodian the Priority Documents for each Pledged Receivable; provided, however, that the Borrower shall be permitted to deliver to the Custodian a machine copy of any original, executed Contract (certified as a true copy (a “Certified True Copy”) by an officer of either the Obligor or the Borrower or its predecessor as lessor or lender thereunder) for Contracts whose aggregate Amortized Equipment Cost constitutes not more than 5% of the aggregate Amortized Equipment Cost of all Contracts.

(b)           The Borrower hereby covenants and agrees that if the aggregate Discounted Balance of all Contracts for which the Custodian has received only a Certified True Copy exceeds the aforesaid 5% limit for any period exceeding fifteen days, then on the first Business Day after such fifteenth day it shall resell the Pledged Receivables related to all such Contracts to the Originator, deposit the Release Price for each such Pledged Receivable to the Collection Account and remit to the respective Lenders (no later than the close of business of such Lender on such Business Day), protanto, as a partial prepayment of the outstanding principal amount of the Notes (together with interest accrued and unpaid on such prepayment through such date of prepayment), prorata according to their respective Commitment Percentage, and otherwise comply with the requirements of Section 4.03 hereof with respect to all such Pledged Receivables.

(c)           The Custodian hereby agrees that, within one Business Day (to the extent the number of Receivable Files received on any Business Day is no greater than 1,000 and that such Receivable Files are delivered to the Custodian in the same order as the Receivable Schedule) or within such greater number of Business Days as the parties hereto mutually agree (to the extent the number of Receivable Files received on any Business Day exceeds 1,000), it shall deliver to the Borrower, each Lender and the Servicer (i) a Collateral Receipt for all Receivable Files received on that date and (ii) an Exception Report) covering any Deficiencies noted in such Collateral Receipt. Additionally, on each Business Day, the Custodian hereby agrees to deliver to Borrower, each Lender and the Servicer a cumulative report of any uncured Deficiencies identified in all prior Collateral Receipts.

(d)           The Borrower hereby covenants and agrees that, (i) subject to the proviso in Section 5.02(a) hereof, not later than 60 days after the Borrowing Date,  it shall cause to be delivered to the Custodian every item constituting the Receivable File for each Pledged Receivable, including every item identified in each Exception Report delivered by the Custodian pursuant to Section 5.02(c) hereof and (ii) for each Pledged Receivable with respect to which it shall not have complied with the immediately preceding clause (i), it shall, to the extent it has not complied therewith within fifteen noncomplying days after receipt of an Exception Report with respect to any such Deficiency pursuant to this Section 5.02(d), on the first Business Day after, resell the Pledged Receivables related to all such Contracts to the Originator, deposit the Release Price for each such Pledged Receivable to the Collection Account and remit to the respective Lenders (no later than the close of business of such Lender on such Business Day), protanto, as a partial prepayment of the outstanding principal amount of the Notes (together with interest accrued and unpaid on such prepayment through such date of prepayment), prorata according to their respective Commitment Percentage, and otherwise comply with the requirements of Section 4.03 hereof with respect to all such Pledged Receivables.

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(e)           The events described in subsections (b) and (d)(ii) hereof shall constitute a Check-in Repurchase Event.

ARTICLE VI

ADMINISTRATION AND SERVICING; CERTAIN COVENANTS

SECTION 6.01                                Appointment and Designation of the Servicer.  i) The Borrower and the Lenders hereby appoint the Person designated by the Lenders from time to time, pursuant to this Section 6.01 (the “Servicer”), as their agent to service, administer and collect the Pledged Receivables and otherwise to enforce their respective rights and interests in and under the Pledged Receivables and the other Pledged Assets.  The Servicer shall collect such Pledged Receivables under the conditions referred to above by means of the collection procedures as set forth in the Credit and Collection Policy, to the extent consistent with the provisions of this Article VI.  Unless otherwise specified by the Borrower, the Servicer’s authorization under this Agreement shall terminate on the Collection Date.  Until the Lenders give notice to the Borrower of a designation of a new Servicer upon the occurrence and during the continuance of any Servicer Default, or consents in writing to the appointment by the Borrower of a new Servicer, LEAF Financial is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer, pursuant to the terms hereof at all times until the earlier of the Lenders’ designation of the Backup Servicer or any other Person as the new Servicer (upon the occurrence and during the continuance of any Servicer Default), the delivery by the Lenders of its written consent to the appointment by the Borrower of a new Servicer or the Collection Date.  Upon the occurrence and during the continuance of any Servicer Default, the Lenders may at any time designate as Servicer the Backup Servicer, or any other Person with demonstrated experience in servicing equipment leases and loans, to succeed LEAF Financial or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof.  Each of the Borrower and LEAF Financial hereby grants to any successor Servicer an irrevocable power of attorney to take any and all steps in the Borrower’s, LEAF Financial’s or the Servicer’s name, as applicable, and on behalf of the Borrower or LEAF Financial, necessary or desirable, in the determination of such successor Servicer, to service, administer or collect any and all Pledged Receivables.

(b)           The Servicer is hereby authorized to act for the Borrower and the Lenders and, in such capacity, shall manage, service, administer and arrange collections on the Pledged Receivables and perform the other actions required by the Servicer under this Agreement for the benefit of the Lenders.  The Servicer agrees that its servicing of the Pledged Receivables shall be carried out in accordance with customary and usual procedures of institutions which service equipment lease and loan contracts and receivables and, to the extent more exacting, the degree of skill and attention that the Servicer exercises from time to time, with respect to all comparable equipment lease and loan contracts and receivables that it services for itself or others in accordance with the Credit and Collection Policy (or if the Backup

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 Servicer has been appointed as Servicer, the Backup Servicer’s customary collection policies) and, to the extent more exacting, the requirements of this Article VI.  The Servicer’s duties shall include, without limitation, collecting and posting of all Collections with respect to any Pledged Receivable, responding to inquiries of Obligors on the Pledged Receivables, investigating delinquencies, sending invoices, payment statements or payment books to Obligors, reporting any required tax information to Obligors, policing the collateral, enforcing the terms of the Contracts (and any documents related thereto) related to any Pledged Receivables, complying with the terms of the Lockbox Agreement, accounting for Collections with respect to any Pledged Receivable, furnishing monthly and annual statements to the Lenders with respect to distributions and performing the other duties specified herein.

(c)           Reserved.

(d)           To the extent consistent with the standards, policies and procedures otherwise required hereby, the Servicer shall have full power and authority, acting alone, to do any and all things in connection with such managing, servicing, administration and collection that it may deem necessary or desirable.  The Servicer is authorized to release liens on Obligor Collateral in order to collect Insurance Proceeds with respect thereto and to liquidate such Obligor Collateral in accordance with its customary standards, policies and procedures; provided, however, that, notwithstanding the foregoing, the Servicer shall not, (i) except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount under any Pledged Receivable or (ii) waive the right to collect the unpaid balance of any Pledged Receivable from such Obligor, except that, subject to Section 6.02(a), the Servicer may forego collection efforts if the amount which the Servicer, in its reasonable judgment, expects to realize in connection with such collection efforts is determined by the Servicer, in its reasonable judgment, to be less than the reasonably expected costs of pursuing such collection efforts and if the Servicer would forego such collection efforts in accordance with its customary procedures.  The Servicer is hereby authorized to commence, in its own name (in its capacity as Servicer), if possible, or in the name of the Borrower or the Lenders (provided that if the Servicer is acting in the name of the Borrower or the Lenders, the Servicer shall have obtained the Borrower’s or the Lenders’ consent, as the case may be, which consent shall not be unreasonably withheld), a legal proceeding to enforce any Pledged Receivable (or any terms or provisions of the related Contract) or to commence or participate in any other legal proceeding (including, without limitation, a bankruptcy proceeding) relating to or involving a Pledged Receivable or any related Contract, Obligor or Obligor Collateral.  If the Servicer commences or participates in such a legal proceeding in its own name, the Borrower or the Lenders, as the case may be, shall thereupon be deemed to have automatically assigned such Pledged Receivable to the Servicer solely for purposes of commencing or participating in any such proceeding as a party or claimant, and the Servicer is authorized and empowered by the Borrower or the Lender, as the case may be, to execute and deliver in the Servicer’s name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding.  The Borrower or the Lender, as the case may be, shall furnish the Servicer with any powers of attorney and other documents which the Servicer may reasonably request in writing and which the Servicer deems necessary or appropriate and take any other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement.  If, however, in any suit or legal proceeding it is held that the Servicer may not prosecute such suit or legal proceeding on the grounds that it is not an actual party in interest or a holder entitled to enforce such suit or legal proceeding, the Borrower shall take such steps as the Servicer deems necessary to prosecute such suit or legal proceeding, including bringing suit in its name.

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SECTION 6.02                                Collection of Receivable Payments; Modification and Amendment of Receivables; Lockbox Agreements.  i) Consistent with and subject to the standards, policies and procedures required by this Agreement, the Servicer shall collect all payments called for under the terms and provisions of the Contracts related to the Pledged Receivables (and the terms and provisions of any documents related thereto) as and when the same shall become due and shall follow such collection procedures with respect to the Pledged Receivables and the related Contracts and Insurance Policies as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Borrower and the Lenders with respect thereto.

(b)           The Servicer shall remit all payments by or on behalf of the Obligors received directly by the Servicer to the Collection Account, without deposit into any intervening account as soon as practicable, but in no event later than the end of business on the Business Day of identification thereof as payments by or on behalf of the Obligors.

SECTION 6.03                                Realization Upon Receivables.  Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall use its best efforts to repossess (or otherwise comparably convert the ownership of) and liquidate any Obligor Collateral securing a Pledged Receivable within a number of days consistent with the Credit and Collection Policy of an uncured failure of the related Obligor to make any payment which it is obligated to make under the related Contract or an earlier date that would be customary under the circumstances involved (as determined in accordance with the Credit and Collection Policy) and, in any case, in a manner as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Borrower and the Lenders with respect thereto; provided, however, that the Servicer need not repossess (or otherwise comparably convert the ownership of) and liquidate the Obligor Collateral securing such a Pledged Receivable if, in the reasonable opinion of the Servicer, the value of such Obligor Collateral does not exceed by more than an insignificant amount the cost to repossess (or otherwise comparably convert the ownership of) and liquidate such Obligor Collateral.  The Servicer is authorized to follow such customary practices and procedures as it shall deem necessary or advisable, consistent with the standard of care required by Section 6.01, which practices and procedures may include reasonable efforts to realize upon any guaranties, selling the related Obligor Collateral at public or private sale, the submission of claims under an Insurance Policy and other actions by the Servicer in order to realize upon such Pledged Receivable.  The foregoing is subject to the provision that, in any case in which the Obligor Collateral shall have suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Obligor Collateral, unless it shall determine in its discretion that such repair and/or repossession shall increase the proceeds of liquidation of the related Pledged Receivable by an amount greater than the amount of such expenses.  All Liquidation Proceeds shall be remitted directly by the Servicer to the Collection Account without deposit into any intervening account as soon as practicable, but in no event later than one (1) Business Day after identification thereof as Liquidation Proceeds.  The Servicer shall pay on behalf of the Borrower any personal property taxes assessed on repossessed Obligor Collateral, and the Servicer shall be entitled to reimbursement of any such tax as a Servicer Advance.

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SECTION 6.04                                Insurance Regarding Equipment.  j) At the time of the Pledge of any Receivable hereunder, the Servicer shall require each Obligor to obtain and maintain (or with respect to an Underlying Originator, cause such Underlying Originator to obtain and maintain) Insurance Policies in accordance with the terms of the Credit and Collection Policy and its customary servicing procedures and shall furnish evidence of such insurance (except if the Equipment relating to such Obligor has an aggregate Amortized Equipment Cost of $100,000 or less) to the Lenders.

(b)           The Servicer may, and upon the request of the Lenders shall, sue to enforce or collect upon the Insurance Policies, in its own name (but in its capacity as Servicer), if possible, or as agent of the Borrower and the Lenders.  If the Servicer elects to commence a legal proceeding to enforce an Insurance Policy, the act of commencement shall be deemed to be an automatic assignment of the rights of the Borrower and the Lenders under such Insurance Policy to the Servicer for purposes of collection only.  If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce an Insurance Policy on the grounds that it is not an actual party in interest or a holder entitled to enforce the Insurance Policy, the Borrower shall take such steps as the Servicer deems necessary to enforce such Insurance Policy, including bringing suit in its name.

SECTION 6.05                                Maintenance of Security Interests in Obligor Collateral.  k) The initial Servicer and the Borrower shall take all steps necessary, under all applicable law, in order to (i) cause a valid, subsisting and enforceable first priority perfected security interest to exist in favor of the Collateral Agent in the Borrower’s interests in the Obligor Collateral, all Other Conveyed Property and all Related Security related to each Receivable (and the proceeds thereof) being Pledged hereunder, to secure a Loan on the Borrowing Date thereof including (A) the filing of a UCC financing statement in the applicable jurisdiction adequately describing the Obligor Collateral, Other Conveyed Property and all Related Security and naming the Borrower as debtor and the Collateral Agent as the secured party, (B) filing Obligor Financing Statements against all Obligors purchasing or leasing Obligor Collateral, and (C) other than with respect to a Lease Contract related to Equipment which has an Amortized Equipment Cost of less than $25,000 if such Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Lease Contract is a FMV Contract, causing the filing of UCC-3 assignment statements in the applicable jurisdictions adequately describing the Equipment and other collateral being transferred by the Underlying Originator to the Originator and naming the applicable Underlying Originator as the assignor and Originator as the assignee, (ii) ensure that such security interest is and shall be prior to all other liens upon and security interests in the Borrower’s interests in such Obligor Collateral, Other Conveyed Property and Related Security (and the proceeds thereof) that now exist, or may hereafter arise or be created other than Permitted Liens, and (iii) ensure that immediately prior to the Pledge of such Receivable by the Borrower to the Collateral Agent, such Obligor Collateral, Other Conveyed Property and Related Security is free and clear of all Adverse Claims other than Permitted Liens; and

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(b)           The initial Servicer shall take all steps, as are necessary (subject to Section 6.05(a)), to maintain perfection of the security interest in the Borrower’s interests in the Obligor Collateral, Other Conveyed Property and Related Security related to each Pledged Receivable (and the proceeds thereof) in favor of the Collateral Agent including but not limited to, obtaining the execution by the Borrower and the recording, registering, filing, rerecording, refiling, and reregistering of all security agreements, financing statements and continuation statements as are necessary to maintain and/or perfect such security interests granted by the Borrower and the recordation of the Borrower’s or the applicable Approved Lienholder’s lien on the Certificate of Title for any Vehicle included in such Obligor Collateral, all in accordance with the Titling Requirements.  Without limiting the generality of the foregoing, the Borrower and each Lender each hereby authorizes the initial Servicer, and the initial Servicer agrees, to take any and all steps necessary (subject to Section 6.05(a)) to re-perfect the security interest in the Borrower’s interests in any Obligor Collateral (and the Borrower’s interests therein), Other Conveyed Property and Related Security related to each Pledged Receivable (and the proceeds thereof) in favor of the Collateral Agent as may be necessary, due to the relocation of such Obligor Collateral or for any other reason.

SECTION 6.06                                Pledged Receivable Receipts.  The Servicer shall make a deposit into the Collection Account in an amount equal to the Collections with respect to any Pledged Receivable received, or made by, or on behalf of it, within one Business Day of such Collections being received, or made by, or on behalf of it.

SECTION 6.07                                No Rights of Withdrawal.  Until the Collection Date, the Borrower shall have no rights of direction or withdrawal, with respect to amounts held in the Collection Account or the Lockbox Account, except with respect to funds not related to any Pledged Assets, which were incorrectly deposited into any such account.

SECTION 6.08                                Permitted Investments.  The Borrower shall, pursuant to written instruction, direct the Lenders’ Bank (and if the Borrower fails to do so, the Lenders may, pursuant to written instruction, direct the Lenders’ Bank) to invest, or cause the investment of, funds on deposit in the Collection Account in Permitted Investments, from the date of this Agreement until the Collection Date.  Absent any such written instruction, the Lenders’ Bank shall invest, or cause the investment of, such funds in Permitted Investments described in clause (v) of the definition thereof.  A Permitted Investment acquired with funds deposited in the Collection Account shall mature not later than the Business Day immediately preceding any Remittance Date, and shall not be sold or disposed of prior to its maturity.  All such Permitted Investments shall be registered in the name of a securities intermediary or its nominee for the benefit of the Lenders, and otherwise comply with assumptions of the legal opinion of Thacher Proffitt & Wood LLP, delivered in connection with this Agreement.  All income and gain realized from any such investment, as well as any interest earned on deposits in the Collection Account, shall be distributed in accordance with the provisions of Article II hereof.  The Borrower shall deposit in the Collection Account, as the case may be (with respect to investments made hereunder of funds held therein), an amount equal to the amount of any actual loss incurred, in respect of any such investment, immediately upon realization of such loss.  None of the Lenders’ Bank or any Lender shall be liable for the amount of any loss incurred, in respect of any investment, or lack of investment, of funds held in the Collection Account.

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SECTION 6.09                                Servicing Compensation.  As compensation for its activities hereunder, the Servicer shall be entitled to be paid the Servicing Fee from the Collection Account as provided in Section 2.04(c).  The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor, except with respect to reasonable expenses of the Servicer incurred in connection with the repossession and disposition of any Obligor Collateral (which the Servicer may retain from the proceeds of the disposition of such Obligor Collateral) and any Servicer Advances made by the Servicer pursuant hereto.  The Servicing Fee may not be transferred in whole, or in part, except in connection with the transfer of all the Servicer’s responsibilities and obligations under this Agreement.  At any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, the Backup Servicer shall be entitled to receive an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to expenses incurred by the Backup Servicer, acting in its capacity as the Servicer, in connection with its obligations under Sections 6.05(a) and (b) hereof (such expenses, the “Active Backup Servicer’s Indemnified Amounts”).

SECTION 6.10                                Reports to the Lenders; Account Statements; Servicing Information.  l) The Borrower will deliver to the Lenders and each Qualifying Swap Counterparty, (i) on the Program Termination Date, a report identifying the Pledged Receivables (and any information with respect thereto requested by the Lenders) on the day immediately preceding the Program Termination Date, and (ii) upon a Lender’s reasonable request and upon reasonable notice, on any other Business Day, a report identifying the Pledged Receivables (and any information with respect thereto, reasonably requested by such Lender) as of such day.

(b)           At least four (4) Business Days prior to each Remittance Date, the Servicer shall prepare and deliver, or have delivered to the Lenders and each Qualifying Swap Counterparty, (i) a Monthly Remittance Report and any other information reasonably requested by a Lender, relating to all Pledged Receivables (including, if requested, a Computer Tape or Listing), all information in the Monthly Remittance Report and all other such information to be accurate as of the last day of the immediately preceding Collection Period, and (ii) in an electronic format mutually acceptable to the Servicer and the Lenders, all information reasonably requested by the Lenders relating to all Pledged Receivables.  If any Monthly Remittance Report indicates the existence of a Facility Deficiency, the Borrower shall, on the date of delivery of such Monthly Remittance Report, prepay to the Lenders, for the account of the Lenders, a portion of the Loans as is necessary to cure such Facility Deficiency, in accordance with Section 2.04(e) hereof.

(c)           By no later than the Borrowing Date, the Borrower (or the initial Servicer on its behalf) shall also prepare and deliver to the Lenders a Facility Limit Certificate containing information accurate as of the date of delivery of such Facility Limit Certificate.  If any Facility Limit Certificate indicates the existence of a Facility Deficiency, the Borrower shall on the date of delivery of such Facility Limit Certificate prepay to the Lenders, for the account of the Lenders, a portion of the Loans, to the extent necessary to cure such Facility Deficiency, in accordance with Section 2.04(e) hereof.

(d)           At least four (4) Business Days prior to each Remittance Date (each such day, a “Backup Servicer Delivery Date”), the Servicer shall prepare and deliver, or have delivered, to the Backup Servicer (i) a Monthly Remittance Report in respect of the immediately-preceding Collection Period and (ii) a computer tape or a diskette or any other electronic transmission in a format acceptable to the Backup Servicer containing the information with respect to the Pledged Receivables during such Collection Period which was necessary for preparation of such Monthly Remittance Report or is reasonably requested by the Backup Servicer.

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(e)           The Borrower shall deliver to the Lenders all reports it receives pursuant to the Purchase and Sale Agreement within one Business Day of the receipt thereof.

SECTION 6.11                                Statements as to Compliance; Financial Statements.  m) The Servicer shall deliver to the Backup Servicer, the Borrower and the Lenders on or before March 31st of each year, beginning with 2008, an Officer’s Certificate stating, as to each signatory thereof, that (x) a review of the activities of the Servicer during the preceding calendar year (or the portion of the preceding calendar year commencing on the date of this Agreement and ending December 31, 2007 in the case of the first such review) and of its performance under this Agreement has been made under such officer’s supervision, and (y) to the best of such officer’s knowledge, based on such review, the Servicer has fulfilled all of its obligations under this Agreement throughout such calendar year (or portion thereof, as the case may be) or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof and the action being taken to cure such default.

(b)           The Servicer (if LEAF Financial or an Affiliate thereof) shall, at its expense, cause a firm of nationally recognized independent certified public accountants acceptable to the Lenders (the “Independent Accountants”), who may also render other services to the Servicer, the Backup Servicer or to the Borrower, to deliver to the Borrower and the Lenders, on or before March 31st of each year, beginning 2008, with respect to the twelve (12) months ended the immediately preceding December 31, a statement (the “Accountant’s Report”) addressed to the Board of Directors of the Servicer and to the Lenders, to the effect that such firm has examined such Facility Limit Certificates and Monthly Remittance Reports prepared by the Servicer during the twelve (12) months ended the immediately preceding December 31 as it deemed necessary in order to issue the Accountants’ Report and issued its report thereon, and that such examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances.  The Accountants’ Report shall further state that (i) a review in accordance with agreed upon procedures was made; and (ii) except as disclosed in the Accountant’s Report, no exceptions or errors in the Facility Limit Certificates and Monthly Remittance Reports examined were found except for (A) such exceptions as the Independent Accountants believe to be immaterial and (B) such other exceptions as shall be set forth in the Accountants’ Report.  The Accountants’ Report shall also indicate that the firm is independent of the Borrower and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

(c)           As soon as available and no later than forty-five (45) days after the end of each calendar quarter in each fiscal year of the Borrower or Resource America, the Borrower shall deliver to the Lenders two copies of:

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(i)           a balance sheet of the Borrower and Resource America as of the end of such calendar quarter, setting forth in comparative form the corresponding figures for the most recent year-end for which an audited balance sheet has been prepared, which balance sheet shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of the Borrower or Resource America, as applicable, stating that such balance sheet presents fairly the financial condition of the Borrower or Resource America, as the case may be, and has been prepared in accordance with GAAP consistently applied; and

(ii)           statements of income, stockholders’ equity and cash flow of the Borrower and Resource America for such calendar quarter setting forth in comparative form the corresponding figures for the comparable period one year prior thereto (subject to normal year-end adjustments), which such statements shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of the Borrower or Resource America, as applicable, stating that such financial statements present fairly the financial condition and results of operations of the Borrower or Resource America, as the case may be, and have been prepared in accordance with GAAP consistently applied.

(d)           As soon as available and no later than forty-five (45) days after the end of each calendar quarter in each fiscal year of Resource America, LEAF Financial shall deliver to the Lenders two copies of:

(i)           a consolidated balance sheet of Resource America and its consolidated subsidiaries (including Originator and Servicer) as of the end of such calendar quarter, setting forth in comparative form the corresponding figures for the most recent year-end for which an audited balance sheet has been prepared, which such balance sheet shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of Resource America stating that such balance sheet presents fairly the financial condition of the companies being reported upon and has been prepared in accordance with GAAP consistently applied; and

(ii)           consolidated statements of income, stockholders’ equity and cash flow of Resource America and its consolidated subsidiaries (including Originator and Servicer) for such calendar quarter, in each case, setting forth in comparative form the corresponding figures for the comparable period one year prior thereto (subject to normal year-end adjustments), which such statements shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of Resource America stating that such financial statements present fairly the financial condition and results of operations of the companies being reported upon and have been prepared in accordance with GAAP consistently applied.

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(e)           As soon as available and no later than ninety (90) days after the end of each fiscal year of the Borrower or Resource America, LEAF Financial shall deliver to the Lenders two copies of:

(i)           a balance sheet of the Borrower and Resource America as of the end of the fiscal year, setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lenders stating that such balance sheet presents fairly the financial condition of the Borrower or Resource America, as applicable, and has been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur); and

(ii)           statements of income, stockholders’ equity and cash flow of the Borrower and Resource America for such fiscal year, setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lenders stating that such financial statements present fairly the financial condition of the Borrower or Resource America, as applicable, and have been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur).

(f)           As soon as available and no later than ninety (90) days after the end of each fiscal year of Resource America, LEAF Financial shall deliver to the Lenders two copies of:

(i)           a consolidated and consolidating balance sheet of Resource America and its consolidated subsidiaries (including Originator and Servicer) as of the end of the fiscal year, setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lenders stating that such balance sheet presents fairly the financial condition of the companies being reported upon and has been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur); and

(ii)           consolidated and consolidating statements of income, stockholders’ equity and cash flow of Resource America and its consolidated subsidiaries (including Originator) for such fiscal year; in each case setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lenders stating that such financial statements present fairly the financial condition of the companies being reported upon and have been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur).

SECTION 6.12                                Access to Certain Documentation; Obligors; Background Check.  n) The Collateral Agent (and its agents or professional advisors) shall at the expense of the Borrower, have the right under this Agreement, once during each calendar quarter, to examine and audit, during business hours or at such other times as might be reasonable under applicable circumstances, any and all of

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 the books, records, financial statements or other information of the Servicer and the Borrower, or held by another for the Servicer or the Borrower or on its behalf, concerning this Agreement, provided, that, prior to the occurrence of an Event of Default, the Borrower shall not be responsible for the expenses of the Collateral Agent to the extent that such expenses exceed $25,000 in the aggregate in any calendar year.  Each Lender (and its agents or professional advisors) shall, at the expense of the Borrower and as frequently as such Lender may desire, have the right under this Agreement after the occurrence and during the continuance of an Event of Default, to examine and audit, during business hours or at such other times as might be reasonable under applicable circumstances, any and all of the books, records or other information of the Servicer or the Borrower, or held by another for the Servicer or the Borrower or on its behalf, concerning this Agreement.  Each Lender and the Collateral Agent (and its respective agents and professional advisors) shall coordinate examinations and audits under this Section 6.12(a) in order to minimize expense and inconvenience to the Borrower.  Each Lender and the Collateral Agent (and its respective agents and professional advisors) shall treat as confidential any information obtained during the aforementioned examinations which is not already publicly known or available; provided, however, that each Lender and the Collateral Agent may disclose such information if required to do so by law or by any regulatory authority and may disclose information relevant to the tax treatment and tax structure of the transactions contemplated by this Agreement.

(b)                                Each Lender (and its respective agents or professional advisors) shall, at its own expense, have the right under this Agreement to contact Obligors once with respect to any Receivable which is Pledged hereunder to request that each such Obligor verify and confirm by return letter the existence and amount of such Receivable, the type of Equipment leased under or securing the related Contract and such other information as such Lender deems reasonable under the circumstances (each such return letter to be mailed to a post office box established by such Lender).  The Servicer and the Borrower hereby agree to cooperate with each Lender (and its respective agents or professional advisors) in connection with any attempt thereby to contact any such Obligor and shall provide to each such Lender such information as is needed in order to facilitate such contact.  Each Lender (and its respective agents and professional advisors) shall treat as confidential any information obtained during any such contact with any such Obligor which is not already publicly known or available; provided, however, that each Lender (and its respective agents or professional advisors) may disclose such information if required to do so by law or by any regulatory authority and may disclose information relevant to the tax treatment and tax structure of the transactions contemplated by this Agreement.

(c)           Each Lender (or its respective agents and/or third party professional advisors) may, from time to time, cause comprehensive background checks on newly-hired senior management, key employees and principals of each of Resource Capital Corp., the initial Servicer and Originator to be completed by an investigation service acceptable to such Lender, at the Borrower’s expense.

SECTION 6.13                                Backup Servicer.  If a Servicer Default shall occur, then the Lenders may, by notice to the Servicer, the Borrower and the Backup Servicer, terminate all of the rights and obligations of the Servicer under this Agreement.  Upon the delivery to the Servicer of such notice, all authority and power of the Servicer under this Agreement, whether with respect to the Pledged Assets or otherwise, shall pass to and be vested in the Backup Servicer pursuant to and under this Section (unless the Lenders shall have appointed a different successor Servicer pursuant to Section 6.01 hereof or the

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 Backup Servicer is unable to act as Servicer and a successor is appointed as provided in the fourth paragraph of this Section 6.13), and, without limitation, the Backup Servicer is hereby authorized and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination or to perform the duties of the Servicer under this Agreement.  The Servicer agrees to cooperate with the Lenders and the Backup Servicer in effecting the termination of the Servicer’s responsibilities and rights hereunder, including, without limitation, providing notification to the Obligors of the assignment of the servicing function, providing the Backup Servicer, at the Servicer's expense, with all records, in electronic or other form, reasonably requested by the Backup Servicer, in such form as the Backup Servicer may reasonably request and at such times as the Backup Servicer may reasonably request, to enable the Backup Servicer to assume the servicing functions hereunder and the transfer to the Backup Servicer for administration by it of all cash amounts which at the time should be or should have been deposited by the Servicer in the Collection Account or thereafter be received by the Servicer with respect to the Pledged Receivables.  Additionally, the Servicer agrees to cooperate in providing, at the Servicer’s expense, the Backup Servicer as successor Servicer, with reasonable access (including at the premises of the Servicer) to Servicer’s employees and any and all books, records or other information reasonably requested by it to enable the Backup Servicer, as successor Servicer, to assume the servicing functions hereunder.  Neither any Lender nor the Backup Servicer shall be deemed to have breached any obligation hereunder as a result of a failure to make or delay in making any distribution as and when required hereunder caused by the failure of the Servicer to remit any amounts received by it or to deliver any documents held by it with respect to the Pledged Assets.  The Backup Servicer (including as successor Servicer) undertakes to perform only such duties and obligations as are specifically set forth in this Agreement, it being understood by all parties hereto that there are no implied duties or obligations of the Backup Servicer hereunder.

The Active Backup Servicer’s Fees and Transition Costs shall be paid out of Collections with respect to any Pledged Receivable as set forth in Section 2.04(c) on and after the date, if any, that the Backup Servicer assumes the responsibilities of the Servicer pursuant to this Section.  The Standby Backup Servicer’s Fees and Transition Costs shall be paid out of Collections with respect to any Pledged Receivable as set forth in Section 2.04(c) prior to the date, if any, that the Backup Servicer assumes the responsibilities of the Servicer pursuant to this Section.

Any obligations of LEAF Financial under any Transaction Document other than in its capacity as Servicer shall continue in effect notwithstanding LEAF Financial’s termination as Servicer.

On and after the time the Servicer receives a notice of termination pursuant to this Section 6.13, the Backup Servicer shall be (and the Backup Servicer hereby agrees to be) the successor in all respects to the Servicer in its capacity as Servicer under this Agreement and the transactions set forth or provided for herein and shall have all the rights and powers and be subject thereafter to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof; provided, however, that any failure to perform such duties or responsibilities caused by the Servicer’s failure to

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 provide information required by this Section 6.13 shall not be considered a default by the Backup Servicer hereunder; provided, further, however, that the Backup Servicer, as successor Servicer, shall have (i) no liability with respect to any obligation which was required to be performed by the terminated Servicer prior to the date that the Backup Servicer becomes the successor to the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer, (ii) no obligation to perform any repurchase or advancing obligations, if any, of the Servicer, (iii) no obligation to pay any taxes required to be paid by the Servicer (provided that the Backup Servicer shall pay any income taxes for which it is liable), (iv) no obligation to pay any of the fees and expenses of any other party to the transactions contemplated hereby, and (v) no liability or obligation with respect to any Servicer indemnification obligations of any prior Servicer, including the original Servicer.  The indemnification obligations of the Backup Servicer, upon becoming a successor Servicer, are expressly limited to those arising on account of its failure to act in good faith and with reasonable care under the circumstances.  In addition, the Backup Servicer shall have no liability relating to the representations and warranties of the Servicer contained in Article IV.  Notwithstanding the above, the Class A Lender may, or shall, if the Backup Servicer is unable to so act, appoint itself, or appoint any other established servicing institution acceptable to the Lenders in their sole discretion, as the successor to the Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder.  Pending appointment of a successor to the Servicer hereunder, and after the Lenders notify the Servicer to discontinue performing servicing functions under this Agreement, the Backup Servicer (or the Class A Lender if there is no Backup Servicer) shall act in such capacity as hereinabove provided.  In connection with such appointment and assumption, the Lenders may make such arrangements for the compensation of such successor out of payments on Pledged Receivables as it and such successor shall agree; provided, however, that, except as provided herein, no such compensation shall be in excess of that permitted the Servicer hereunder, unless (i) agreed to by the Lenders and (ii) such compensation shall be on commercially competitive terms and rates.  The Borrower, the Lenders and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession.  The parties hereto agree that in no event will the Backup Servicer be liable for any special, indirect or consequential damages.

The Backup Servicer hereby agrees that it shall, and shall take all actions necessary so that it shall at all times be ready to, assume all the rights and powers and all of the responsibilities, obligations and duties of the Servicer hereunder, within ten (10) Business Days of receiving from a Lender a notice requesting the Backup Servicer to do so.

Notwithstanding anything contained in this Agreement to the contrary, absent specific knowledge by any Lyon Financial Services, Inc. account representative assigned to this transaction from time to time, or written notice detailing specific Errors (as defined below) or other deficiencies, Lyon Financial Services, Inc., as successor Servicer, is authorized to accept and rely on all accounting records (including computer records) and work product of the prior Servicer hereunder relating to the Contracts (collectively, the “Predecessor Servicer Work Product”) without any audit or other examination thereof, and Lyon Financial Services, Inc. shall have no duty, responsibility, obligation or liability for the acts and omissions of the prior Servicer.  If any error, inaccuracy, commission or incorrect or nonstandard practice or procedure (collectively, “Errors”) exists in any Predecessor Servicer Work Product and such Errors cause Lyon Financial Services, Inc. to make or continue any errors (collectively, “Continued Errors”), Lyon

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 Financial Services, Inc. shall have no liability for such Continued Errors; provided, however, that Lyon Financial Services, Inc. agrees to use its best efforts to prevent Continued Errors.  In the event that Lyon Financial Services, Inc. becomes aware of Errors or Continued Errors, Lyon Financial Services, Inc. shall, with the prior consent of the Lenders, use its best efforts to reconstruct and reconcile any affected data as is commercially reasonable to correct such Errors and Continued Errors and to prevent future Continued Errors.  Lyon Financial Services, Inc. shall be entitled to recover its costs thereby expended as Servicer Advances in accordance with Section 2.04(c) hereof.

Within four (4) Business Days after each Remittance Date, provided that the Backup Servicer shall have received the information specified in Section 6.10(d) within the time specified therein, the Backup Servicer shall compare the information on the computer tape or diskette (or other means of electronic transmission acceptable to the Backup Servicer) most recently delivered to the Backup Servicer by the Servicer pursuant to Section 6.10(d) with respect to such Remittance Date to the corresponding Monthly Remittance Report delivered to the Backup Servicer by the Servicer pursuant to Section 6.10(d) and shall:

(a)           confirm that such Monthly Remittance Report is complete on its face;

(b)           confirm the distributions to be made on such Remittance Date pursuant to Section 2.04(c) hereof to the extent the Backup Servicer is able to do so given the information provided to it by the Servicer (it being hereby agreed that the Backup Servicer shall promptly notify the Servicer and the Lenders if such information is insufficient and that the Servicer shall promptly provide to the Backup Servicer any additional information required by the Backup Servicer);

(c)           confirm the mathematical computations of information in such Monthly Remittance Report; and

(d)           confirm such other information as the Backup Servicer and the Lenders may agree;

In the event of any discrepancy between the information set forth in subparagraphs (b) or (c) above as calculated by the Servicer and that determined or calculated by the Backup Servicer, the Backup Servicer shall promptly report such discrepancy to the Servicer and the Lenders.  In the event of a discrepancy as described in the preceding sentence, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancy within five (5) Business Days after reporting such discrepancy, but in the absence of a reconciliation, distributions on the related Remittance Date shall be made consistent with the information calculated by the Servicer, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancy prior to the next Remittance Date, and the Servicer shall promptly report to the Lenders regarding the progress, if any, which shall have been made in reconciling such discrepancy.  If the Backup Servicer and the Servicer are unable to reconcile such discrepancy with respect to such Monthly Remittance Report by the next Remittance Date that falls in April, July, October or January, the Servicer shall cause independent accountants acceptable to the Lenders, at the Servicer’s expense, to examine such Monthly Remittance Report and attempt to reconcile such discrepancy at the earliest possible date (and the Servicer shall promptly provide the Lenders with a report regarding such event).  The effect, if any, of such reconciliation shall be reflected in the Monthly Remittance Report for the next succeeding Remittance Date.

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Other than as specifically set forth in this Agreement, the Backup Servicer shall have no obligation to supervise, verify, monitor or administer the performance of the Servicer and shall have no liability for any action taken or omitted by the Servicer.

The Backup Servicer may allow a subservicer to perform any and all of its duties and responsibilities hereunder, including but not limited to its duties as successor Servicer hereunder, should the Backup Servicer become the successor Servicer pursuant to the terms of this Agreement; provided, however, that the Backup Servicer shall remain liable for the performance of all of its duties and obligations hereunder to the same extent as if no such subservicing had occurred.

In no event shall the Backup Servicer (either prior to or after its appointment hereunder as Servicer) be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including without limitation, acts of terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God.

SECTION 6.14                                Additional Remedies of Lenders Upon Event of Default.  During the continuance of any Event of Default, each Lender, in addition to the rights specified in Section 7.01, shall have the right to take all actions now or hereafter existing at law, in equity or by statute to protect its interests and enforce its rights and remedies (including the institution and prosecution of all judicial, administrative and other proceedings and the filings of proofs of claim and debt in connection therewith).  Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Event of Default.

SECTION 6.15                                Waiver of Defaults.  The Lenders may waive any default by the Servicer in the performance of its obligations hereunder and its consequences.  Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement.  No such waiver shall be effective unless it shall be in writing and signed by the Lenders and no such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived.

SECTION 6.16                                Maintenance of Certain Insurance.  On the date hereof the Servicer shall obtain, and at all times thereafter during the term of its service as Servicer the Servicer shall maintain, in force a directors and officers liability insurance policy in an amount not less than $1,000,000 naming the Collateral Agent as loss payee and with an insurance company reasonably acceptable to the Lenders.

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The Servicer shall deliver a copy of the insurance policy required under this Section 6.16 to the Lenders on the date hereof together with a certification from the applicable insurance company that such policy is in force on the date hereof.

The Servicer shall prepare and present, on behalf of itself and the Lenders, claims under any such policy in a timely fashion in accordance with the terms of such policy, and upon, the filing of any claim on any policy described in this Section, the Servicer shall promptly notify the Lenders of such claim.

SECTION 6.17                                Segregation of Collections.  The Servicer shall not commingle funds constituting Collections with respect to any Pledged Receivable with any other funds of the Servicer; provided, that such commingling may occur in the Lockbox Account so long as the Lockbox Intercreditor Agreement is in full force and effect.

SECTION 6.18                                UCC Matters; Protection and Perfection of Pledged Assets.  The Borrower will not change the jurisdiction of its formation, make any change to its corporate name or use any tradenames, fictitious names, assumed names, “doing business as” names or other names (other than those listed on Schedule II hereto, as such schedule may be revised from time to time to reflect name changes and name usage permitted under the terms of this Section 6.18 after compliance with all terms and conditions of this Section 6.18 related thereto) unless, prior to the effective date of any such jurisdiction change, name change or use, the Borrower notifies the Collateral Agent of such change in writing and delivers to the Collateral Agent such executed financing statements as the Collateral Agent may request to reflect such jurisdiction, name change or use, together with such other documents and instruments as the Collateral Agent may request in connection therewith.  The Borrower will not change the location of its chief executive office or the location of its records regarding the Pledged Receivables unless, prior to the effective date of any such change of location, the Borrower notifies the Collateral Agent of such change of location in writing and delivers to the Collateral Agent such executed financing statements as the Collateral Agent may reasonably request to reflect such change of location, together with such Opinions of Counsel, documents and instruments as the Collateral Agent may request in connection therewith.  The Borrower agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action that the Collateral Agent may reasonably request in order to perfect, protect or more fully evidence the Collateral Agent’s interest in the Pledged Assets acquired hereunder, or to enable the Collateral Agent to exercise or enforce any of its respective rights hereunder.  Without limiting the generality of the foregoing, the Borrower will, upon the request of the Collateral Agent:  (i) execute (if necessary) and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate or as the Collateral Agent may request, and (ii) mark its master data processing records evidencing such Pledged Receivables with a legend acceptable to the Collateral Agent, evidencing that the Collateral Agent has acquired an interest therein as provided in this Agreement.  The Collateral Agent shall be entitled to conclusively rely on the filings or registrations made by or on behalf of the Borrower without any independent investigation and the Borrower’s obligation to make such filings as evidence that such filings have been made.  The Borrower hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto and assignments thereof, relative to all or any of the Pledged Receivables and the Other Conveyed Property and the

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 Related Security related thereto and the proceeds of the foregoing now existing or hereafter arising, without the signature of the Borrower where permitted by law.  The Borrower hereby ratifies and authorizes the filing by the Collateral Agent of any such financing statement made prior to the date hereof.  A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Pledged Receivables, or any part thereof, shall be sufficient as a financing statement.  The Borrower shall, upon the request of the Collateral Agent at any time after the occurrence of an Event of Default and at the Borrower’s expense, notify the Obligors obligated to pay any Pledged Receivables, or any of them, of the security interest of the Collateral Agent in the Pledged Assets.  If the Borrower fails to perform any of its agreements or obligations under this Section 6.18, the Collateral Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Borrower upon the Collateral Agent’s demand therefor.  For purposes of enabling the Collateral Agent to exercise its rights described in the preceding sentence and elsewhere in this Article VI, the Borrower hereby authorizes the Collateral Agent and its successors and assigns to take any and all steps in the Borrower’s name and on behalf of the Borrower necessary or desirable, in the determination of the Collateral Agent, to collect all amounts due under any and all Pledged Receivables, including, without limitation, endorsing the Borrower’s name on checks and other instruments representing Collections with respect to any Pledged Receivable and enforcing such Pledged Receivables and the related Contracts and, if any, the related guarantees.

SECTION 6.19                                Servicer Advances.  The Servicer may, in its sole discretion, make an advance in respect of any payment due on a Pledged Receivable (other than a Defaulted Receivable) to the extent such payment has not been received by the Servicer as of its due date and the Servicer reasonably expects such payment will be ultimately recoverable (a “Servicer Advance”).  The Servicer shall deposit into the Collection Account in immediately available funds the aggregate of all Servicer Advances to be made during a Fee Period on or prior to the Business Day immediately preceding the related Remittance Date.  The Servicer shall be entitled to reimbursement for such Servicer Advances from monies in the Collection Account as provided in Section 2.04(c) hereof.

SECTION 6.20                                Repurchase of Receivables Upon Breach of Covenant or Representation and Warranty by Servicer.  The Borrower or the Servicer, as the case may be, shall inform the other parties to this Agreement and the Initial Qualifying Swap Counterparty promptly, in writing, upon the discovery of any breach of the Servicer’s representations, warranties and/or covenants pursuant to Section 4.02, Section 6.05 or Article V; provided, however, that the failure to provide any such notice shall not diminish, in any manner whatsoever, any obligation of the Servicer hereunder to repurchase any Pledged Receivable.  Unless such breach shall have been cured by the last day of the first full calendar month following the discovery by or notice to the Servicer of such breach (and provided that a Facility Deficiency exists on such last day), the Servicer (if LEAF Financial or an Affiliate thereof) shall have an obligation, and the Borrower shall and the Collateral Agent may, enforce such obligation of the Servicer (if LEAF Financial or an Affiliate thereof), to repurchase any Pledged Receivable materially and adversely affected by such breach.  The Borrower shall notify the Collateral Agent promptly, in writing, of any failure by the Servicer to so repurchase any such Pledged Receivable.  In consideration of the repurchase of such Pledged Receivable, the Servicer shall remit funds in an amount equal to the Release Price for

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 such Pledged Receivable to the Collection Account on the date of such repurchase.  The obligations of the Servicer under this Section 6.20 are in addition to, and in no way limit, any obligations of the Servicer in its individual capacity under the Purchase and Sale Agreement.  It is understood and agreed that the obligation of the Servicer to purchase any Receivables is not intended to, and shall not, constitute a guaranty of the collectibility or payment of any Receivable which is not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the related Obligor.

SECTION 6.21                                Compliance with Applicable Law.  The Servicer and the Borrower shall at all times comply in all material respects with all requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations “B” and “Z”, the Soldiers’ and Sailors’ Civil Relief Act of 1940 and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and all other consumer credit laws and equal credit opportunity and disclosure laws) in the conduct of its business.

SECTION 6.22                                Receipt of Certificates of Title.  Any Receivable with respect to which the Obligor Collateral includes a Vehicle and for which the Servicer shall not have (i) received a Certificate of Title satisfying the Titling Requirements and (ii) delivered such Certificate of Title to the Custodian within 90 days of the first day of inclusion of such Pledged Receivable in the calculation of the Facility Limit, shall no longer be deemed to be an Eligible Receivable and, therefore, shall no longer be included in the calculation of the Facility Limit.  In the case of any Receivable excluded from the calculation of the Facility Limit pursuant to the previous sentence, the Receivable so excluded from the calculation of the Facility Limit may at a later time be included in the calculation of the Facility Limit, provided, that (i) the Custodian shall have received the Certificate of Title described above with respect to such Receivable from the applicable Registrar of Titles and delivered such Certificate of Title to the Custodian and (ii) such Receivable is otherwise an Eligible Receivable at such time.

SECTION 6.23                                Lenders’ Bank Limitation of Liability.  o) The Lenders’ Bank undertakes to perform only such duties and obligations as are specifically set forth in this Agreement, it being expressly understood by the parties hereto that there are no implied duties or obligations under this Agreement.  Neither the Lenders’ Bank nor any of its officers, directors, employees or agents shall be liable, directly or indirectly, for any damages or expenses arising out of the services performed under this Agreement other than damages which result from the gross negligence or willful misconduct of it or them.  In no event will the Lenders’ Bank or any of its officers, directors, employees or agents be liable for any consequential, indirect or special damages.

(b)                                The Lenders’ Bank shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or for any mistakes of fact or law, or for anything which it may do or refrain from doing in connection herewith.

(c)           The Lenders’ Bank may rely on and shall be protected in acting upon any certificate, instrument, opinion, notice, letter, telegram or other document delivered to it by any other Person and which in good faith it believes to be genuine and which has been signed by the proper party or parties.  The Lenders’ Bank may rely on and shall be protected in acting upon the written instructions of any designated officer of the Borrower, the Servicer or the Lender.

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(d)           The Lenders’ Bank may consult with counsel reasonably satisfactory to it and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion of such counsel.

(e)           The Lenders’ Bank shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if the Lenders’ Bank believes that repayment of such funds (repaid in accordance with the terms of this Agreement) or adequate indemnity against such risk or liability is not reasonably assured to it.

(f)           The Lenders’ Bank shall not be deemed to be a fiduciary of any party hereto.

(g)           The parties hereto agree that in no event will the Lenders’ Bank be liable for special, indirect or consequential damages.

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01                                Events of Default.  If any of the following events (each an “Event of Default”) shall occur:

(a)           the occurrence of any Bankruptcy Event with respect to the Borrower, Owner, Resource America, the Originator or the Servicer; or

(b)           any representation or warranty made or deemed to be made by the Borrower or the Servicer (or any of its officers) under or in connection with this Agreement (or any remittance report or other information or report delivered pursuant hereto) or any other Transaction Document shall prove to be false or incorrect in any respect and shall remain false or incorrect for a period fifteen (15) Business Days after the Servicer or the Borrower become aware, or are notified by a Lender, the Custodian or any other Person, that such representation or warranty is false or incorrect; provided, however, that if any breach described above is cured by the repurchase of Receivables pursuant to Article VI of the Purchase and Sale Agreement or by a repayment hereunder, or repurchase pursuant to Sections 4.03 or 6.20 hereof, such breach shall cease to constitute an Event of Default; or

(c)           (i) the Borrower or the Servicer shall fail to perform or observe any term, covenant or agreement hereunder or under any other Transaction Document (other than described in (x) clause (ii) below) in any material respect and such failure remains unremedied for fifteen (15) Business Days or (ii) either the Servicer or the Borrower shall fail to make any payment or deposit to be made by it when due hereunder or under any other Transaction Document and such failure remains unremedied for two (2) Business Days; or

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(d)           the Borrower, Owner, Resource America or the Servicer shall fail to pay (and such failure remains unremedied for two (2) Business Days) any principal of or premium or interest on any Debt in an amount in excess of $10,000,000, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other default under any agreement or instrument relating to any Debt of the Borrower or the Servicer or any other event, shall occur if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof; or

(e)           the Originator, the Borrower or any of their respective subsidiaries shall have suffered any material adverse change to its business, financial condition or any other condition which, in any Lender’s sole discretion, constitutes a material impairment of the Originator or the Borrower’s ability to perform its Obligations; or

(f)           (i) the Collateral Agent shall at any time fail to have a valid, perfected, first priority security interest in any of the Pledged Assets (other than Equipment which has a value of less than (x) $25,000 if such Equipment is leased under Dollar Purchase Option Contracts or (y) $50,000 if such Equipment is leased under FMV Contracts) or (ii) any purchase by the Borrower of a Receivable and the Collections, Related Security and Other Conveyed Property with respect thereto under the Purchase and Sale Agreement shall, for any reason, cease to create in favor of the Borrower a perfected ownership interest in such Receivable and the Collections, Related Security and the Other Conveyed Property with respect thereto; provided, however, that if an event described in the foregoing clause (i) or (ii) is cured by the repurchase of Receivables pursuant to Article VI of the Purchase and Sale Agreement or by a repayment hereunder or repurchase pursuant to Sections 4.03 or 6.20 hereof, within five Business Days, such event shall cease to constitute an Event of Default; or

(g)           the Borrower or the Servicer shall have suffered any material adverse change to its financial condition or operations which would affect the collectibility of the Pledged Receivables or the Borrower’s or the Servicer’s ability to conduct its business or fulfill its obligations hereunder or under any other Transaction Document; or

(h)           the Servicer’s or the Borrower’s activities are terminated for any reason, including any termination thereof by a regulatory, tax or accounting body; or

(i)           the occurrence of a Change of Control; or

(j)           the Purchase and Sale Agreement or any other Transaction Document or any material provision of any of them shall cease to be in full force and effect and enforceable in accordance with its terms, or the Servicer, the Borrower, or any Affiliate of the Servicer or the Borrower shall so assert in writing; or

(k)           the occurrence of a Servicer Default; or

(l)           either (1) the Facility Amount exceeds the Facility Limit or (2) the aggregate outstanding principal amount of the Class A Notes exceeds the Class A Facility Limit; and, in each case, such event shall remain unremedied for two Business Days; or

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(m)           the auditor’s opinion accompanying the audited annual financial statements of the Servicer or the Borrower is qualified in any manner; or

(n)            (i) any Qualifying Interest Rate Swap shall cease to be in full force and effect, (ii) the Borrower or the Servicer fail to comply with any hedging requirement hereunder or (iii) the counterparty under any Qualifying Interest Rate Swap or former or purported Qualifying Interest Rate Swap fails to qualify as a Qualifying Swap Counterparty and does not post cash collateral in a manner satisfactory to the Lenders is not replaced by a Qualifying Swap Counterparty within 45 days of such counterparty’s failure to so qualify, (iv) the occurrence of any default by the Borrower or Servicer in the observance or performance of any of the terms or provisions of any Qualifying Interest Rate Swap or (v) any interest rate swap agreement represented by the Borrower or the Servicer to be a Qualifying Interest Rate Swap shall fail to be, or cease to be, a Qualifying Interest Rate Swap; or

(o)           Resource America shall, at any time, permit its Tangible Net Worth to be less than the Minimum Tangible Net Worth;

(p)           either (i) the provisions of the Transaction Documents relating to the Backup Servicer or its duties under any of the Transaction Documents cease to be in full force and effect and enforceable in accordance with their terms, or the Backup Servicer shall so assert in writing, (ii) Lyon Financial Services, Inc. or any successor Backup Servicer resigns, is removed by the Lenders, or otherwise ceases to act as the Backup Servicer, and such Backup Servicer is not replaced by a new Backup Servicer satisfactory to the Lenders within 45 days of such resignation, removal or other event; or

(q)           the occurrence of three or more Termination Events;

then the Lenders may, by notice to the Borrower and each Qualifying Swap Counterparty, declare the Program Termination Date to have occurred; provided, that, in the case of any event described in Section 7.01(a) above, the Program Termination Date shall be deemed to have occurred automatically upon the occurrence of such event.  Upon any such declaration or automatic occurrence, (i) the Borrower shall cease purchasing Receivables from Originator under the Purchase and Sale Agreement, (ii) at the option of each Lender in its sole discretion, such Lender may declare such Lender’s related Loans made to the Borrower hereunder and all interest and all Fees accrued on such Loans and any other Obligations to be immediately due and payable (and the Borrower shall pay such Loans and all such amounts and Obligations immediately), (iii) the Lenders, jointly and in their sole discretion, may direct the Obligors to make all payments under the Pledged Receivables directly to the Backup Servicer, the Collateral Agent or any lockbox or account established by any of such parties.  Any Collections received in any such account (or received directly by any Lender or the Collateral Agent) shall be applied to the Obligations in accordance with the priority of payments set forth in Section 2.04(c).  In addition, upon any such declaration or upon any such automatic occurrence, the Lenders and the Collateral Agent shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and other applicable laws, which rights shall be cumulative.

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SECTION 7.02                                Additional Remedies of the Lenders.  p) If, (i) upon any Lender’s declaration that such Lender’s related Loans made to the Borrower hereunder are immediately due and payable pursuant to Section 7.01 or (ii) on the Facility Maturity Date, the aggregate outstanding principal amount of the Loans, all accrued Fees and interest and any other Obligations are not immediately paid in full, then the Collateral Agent, in addition to all other rights specified hereunder, shall have the right to immediately sell in a commercially reasonable manner, in a recognized market (if one exists) at such price or prices as the Collateral Agent may reasonably deem satisfactory, any or all Pledged Assets and shall apply the proceeds thereof to the Obligations in accordance with the priority of payments set forth in Section 2.04(c).

(b)           The parties recognize that it may not be possible to sell all of the Pledged Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Pledged Assets may not be liquid.  Accordingly, the Collateral Agent may elect, in its sole discretion, the time and manner of liquidating any Pledged Assets, and nothing contained herein shall obligate the Collateral Agent to liquidate any Pledged Assets on the date a Lender declares the Loans made to the Borrower hereunder to be immediately due and payable pursuant to Section 7.01 or to liquidate all Pledged Assets in the same manner or on the same Business Day.

(c)           Any amounts received from any sale or liquidation of the Pledged Assets pursuant to this Section 7.02 in excess of the Obligations will be returned to the Borrower, its successors or assigns, or to whosoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may otherwise direct.

(d)           Each of the Class A Lender, the Class B Lender, the Collateral Agent and the Initial Qualifying Swap Counterparty shall have, in addition to all the rights and remedies provided herein and provided by applicable federal, state, foreign, and local laws (including, without limitation, the rights and remedies of a secured party under the Uniform Commercial Code of any applicable state, to the extent that the Uniform Commercial Code is applicable, and the right to offset any mutual debt and claim), all rights and remedies available to such Person at law, in equity or under any other agreement between such Person and the Borrower.

(e)           Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Program Termination Event or Event of Default.

ARTICLE VIII

INDEMNIFICATION

SECTION 8.01                                Indemnities by the Borrower.  Without limiting any other rights which the Class A Lender, the Class B Lender, the Collateral Agent, the Backup Servicer (whether in its capacity as Backup Servicer or successor Servicer), the Lenders’ Bank, the Custodian, the Initial Qualifying Swap Counterparty or any of their respective Affiliates may have hereunder or under applicable law,

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the Borrower hereby agrees to indemnify each Lender, the Collateral Agent, the Custodian, the Backup Servicer, the Lenders’ Bank, the Initial Qualifying Swap Counterparty and each of their respective Affiliates (each, an “Indemnified Party” for purposes of this Article VIII) from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”), awarded against or incurred by any of them arising out of or as a result of this Agreement or in respect of any Pledged Assets, excluding, however, (A) Indemnified Amounts to the extent resulting solely from gross negligence, bad faith or willful misconduct on the part of an Indemnified Party, (B) taxes (including interest and penalties imposed thereon) imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located, on or measured by the overall net income of such Indemnified Party or (C) Indemnified Amounts to the extent that they are or result from lost profits (other than principal, interest and Fees with respect to the Loans).  Without limiting the foregoing, the Borrower shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from any of the following (to the extent not resulting solely from gross negligence, bad faith or willful misconduct on the part of an Indemnified Party):

(i)           any Pledged Receivable treated as or represented by the Borrower to be an Eligible Receivable which is not at the applicable time an Eligible Receivable;

(ii)           reliance on any representation or warranty made or deemed made by the Borrower or any of its officers under or in connection with this Agreement, which shall have been false or incorrect in any material respect when made or deemed made or delivered;

(iii)           the failure by the Borrower to comply with any term, provision or covenant contained in this Agreement or any agreement executed in connection with this Agreement, or with any applicable law, rule or regulation with respect to any Pledged Assets, or the nonconformity of any Pledged Assets with any such applicable law, rule or regulation;

(iv)           the failure to vest and maintain vested in the Collateral Agent or to transfer to the Collateral Agent a first priority perfected security interest in the Receivables which are, or are purported to be, Pledged Receivables, together with all related Other Conveyed Property, Collections, Related Security and other Pledged Assets related thereto (including, without limitation, the Borrower’s interest in and to any and all Obligor Collateral with respect to such Receivables), free and clear of any Adverse Claim whether existing at the time of the related Borrowing or at any time thereafter;

(v)           the failure to maintain, as of the close of business on each Business Day prior to the Collection Date, a Facility Amount which is less than or equal to the lesser of (x) the Borrowing Limit on such Business Day and (y) the Facility Limit on such Business Day;

(vi)           the failure to maintain, as of the close of business on each Business Day prior to the Collection Date, a Facility Amount, which is less than or equal to the Facility Limit;

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(vii)           Reserved;

(viii)                      the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables which are, or are purported to be, Pledged Receivables

or the other Pledged Assets related thereto, whether at the time of the Borrowing or at any subsequent time;

(ix)           any dispute, claim, offset or defense (other than the discharge in bankruptcy of an Obligor) to the payment of any Receivable which is, or is purported to be, a Pledged Receivable (including, without limitation, a defense based on such Receivable (or the Contract evidencing such Receivable) not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms);

(x)           any failure of the Borrower to perform its duties or obligations in accordance with the provisions of this Agreement or any other Transaction Document;

(xi)           the failure of the Borrower to pay when due any taxes payable in connection with the Pledged Receivables or the Pledged Assets related thereto;

(xii)           any repayment by a Lender of any amount previously distributed in payment of Loans or payment of interest or Fees or any other amount due hereunder, in each case which amount such Lender believes in good faith is required to be repaid;

(xiii)                      the commingling by the Borrower of Collections of Pledged Receivables at any time with other funds;

(xiv)                      any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Loans or the Pledged Assets;

(xv)           any failure by the Borrower to give reasonably equivalent value to Originator in consideration for the transfer by Originator to the Borrower of any Receivable or any attempt by any Person to void or otherwise avoid any such transfer under any statutory provision or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code;

(xvi)                      [Reserved];

(xvii)                      any failure of the Borrower or any of its agents or representatives to remit to the Collection Account, Collections of Pledged Receivables remitted to the Borrower or any such agent or representative;

(xviii)                      any failure on the part of the Borrower duly to observe or perform in any material respect any covenant or agreement under any Qualifying Interest Rate Swap; and/or

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(xix)                      any Contract related to any Pledged Receivable being rejected by an Obligor under Section 365 of the Bankruptcy Code in the event that a Bankruptcy Event has occurred with respect to such Obligor.

Any amounts subject to the indemnification provisions of this Section 8.01 shall be paid by the Borrower to the applicable Lender on behalf of the applicable Indemnified Party within two (2) Business Days following such Lender’s written demand therefor on behalf of the applicable Indemnified Party (and such Lender shall pay such amounts to the applicable Indemnified Party promptly after the receipt by such Lender of such amounts).  Each Lender, on behalf of any related

Indemnified Party making a request for indemnification under this Section 8.01, shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of the Indemnified Amounts with respect to which such indemnification is requested, which certificate shall be conclusive absent demonstrable error.

If the Borrower has made any payments in respect of Indemnified Amounts to a Lender, on behalf of an Indemnified Party pursuant to this Section 8.01 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Borrower, without interest.

SECTION 8.02                                Indemnities by Servicer.  q) Without limiting any other rights which any Indemnified Party may have hereunder or under applicable law, the Servicer (if LEAF Financial or one of its Affiliates) hereby agrees to indemnify each Indemnified Party from and against any and all damages, losses, claims, liabilities and related costs and expenses (including reasonable attorneys’ fees and disbursements) (all of the foregoing being collectively referred to as “Servicer Indemnified Amounts”) suffered or sustained by any Indemnified Party as a consequence of any of the following, excluding, however, Servicer Indemnified Amounts resulting solely from (A) any gross negligence, bad faith or willful misconduct of any Indemnified Party claiming indemnification hereunder, (B) taxes (including interest and penalties imposed thereon) imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located, on or measured by the overall net income of such Indemnified Party; (C) Indemnified Amounts to the extent that they are or result from lost profits (other than principal, interest and Fees with respect to the Loans); and (D) Indemnified Amounts to the extent the same includes losses that arise solely due to Receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor or would constitute recourse to Servicer for such losses:

(i)           the inclusion, in any computations made by it in connection with any Facility Limit Certificate or Monthly Remittance Report or other report prepared by it hereunder, of any Pledged Receivables which were not Eligible Receivables as of the date of any such computation;

(ii)           reliance on any representation or warranty made by the Servicer (if LEAF Financial or one of its Affiliates) or any of its officers under or in connection with this Agreement, which shall have been false or incorrect in any material respect when made  or delivered;

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(iii)           the failure by the Servicer (if LEAF Financial or any of its Affiliates) to comply with (A) any term, provision or covenant contained in this Agreement, or any agreement executed in connection with this Agreement, or (B) any applicable law, rule or regulation applicable to it with respect to any Pledged Assets;

(iv)           any action or inaction by the Servicer (if LEAF Financial or one of its Affiliates) that causes the Collateral Agent not to have a first priority perfected security interest in the Receivables that are, or are purported to be, Pledged Receivables, together with all related Other Conveyed Property, Collections, Related Security and other Pledged Assets related thereto (including without limitation, the Borrower’s interest in and to any and all Obligor Collateral with respect to such Receivables), free and clear of any Adverse Claim whether existing at the time of the related Borrowing or any time thereafter;

(v)           the commingling by the Servicer (if LEAF Financial or one of its Affiliates) of the Collections of Pledged Receivables at any time with any other funds;

(vi)           any failure of the Servicer (if LEAF Financial or one of its Affiliates) or any of its agents or representatives (including, without limitation, agents, representatives and employees of the Servicer acting pursuant to authority granted under Section 6.01 hereof) to remit to Collection Account, Collections of Pledged Receivables remitted to the Servicer or any such agent or representative;

(vii)           the failure by the Servicer (if LEAF Financial or any of its Affiliates) to perform any of its duties or obligations in accordance with the provisions of this Agreement or errors or omissions related to such duties; and/or

(viii)          notwithstanding whether any Pledged Receivable shall have been repurchased by the Servicer pursuant to Section 6.20, any of the events or facts giving rise to a breach of any of the Servicer’s representations, warranties, agreements and/or covenants set forth in Article V or Article VI.

(b)           Any Servicer Indemnified Amounts shall be paid by the Servicer (if LEAF Financial or one of its Affiliates) to each related Lender, for the benefit of the applicable Indemnified Party, within two (2) Business Days following receipt by the Servicer of such Lender’s written demand therefor (and such Lender shall pay such amounts to the applicable Indemnified Party promptly after the receipt by such Lender of such amounts).

(c)           If the Servicer has made any indemnity payments to a Lender, on behalf of an Indemnified Party pursuant to this Section 8.02 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Servicer, without interest.

Each applicable Indemnified Party shall deliver to the indemnifying party under Section 8.01 and Section 8.02, within a reasonable time after such Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by such Indemnified Party relating to the claim giving rise to the Indemnified Amounts.

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ARTICLE IX

MISCELLANEOUS

SECTION 9.01                                Amendments and Waivers.  No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Borrower, the Servicer, the Lenders and, to the extent any of their rights or obligations hereunder are adversely affected thereby, the Backup Servicer, the Custodian, the Lenders’ Bank, and/or each Qualifying Swap Counterparty, and no termination or waiver of any provision of this Agreement or consent to any departure therefrom by the Borrower or the Servicer shall be effective without the written concurrence of the Backup Servicer and the Lenders.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 9.02                                Notices, Etc.  All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex communication, communication by facsimile copy or electronic mail) and mailed, telexed, transmitted or delivered, as to each party hereto, at its address set forth on Schedule VI hereto or specified in such party’s Assignment and Acceptance or at such other address (including, without limitation, an electronic mail address) as shall be designated by such party in a written notice to the other parties hereto.  All such notices and communications shall be effective, upon receipt, or in the case of notice by facsimile copy or electronic mail, when verbal communication of receipt is obtained, except that notices and communications pursuant to Article II shall not be effective until received.

SECTION 9.03                                No Waiver; Remedies.  No failure on the part of any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 9.04                                Binding Effect; Assignability; Multiple Lenders.  r) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Servicer, the Lenders, the Backup Servicer, the Custodian, the Lenders’ Bank and their respective successors and permitted assigns.  This Agreement and each Lender’s rights and obligations hereunder (and under its related Note) and interest herein shall be assignable in whole or in part (including by way of the sale of participation interests therein) by such Lender and its successors and assigns.  None of the Borrower, the Servicer or the Backup Servicer may assign any of its rights and obligations hereunder or any interest herein without the prior written consent of the Lenders; provided that the Borrower shall be permitted, on not less than 10 Business Days’ prior written notice to the other parties hereto and with the prior written consent of the Lenders, to be provided in the sole discretion of the Lenders, to assign all of its rights and obligations hereunder to, and simultaneously with the transfer of all Pledged Assets to, a Permitted Transferee which shall have assumed in a writing satisfactory to the Lenders all such rights and obligations and acquired all such Pledged Assets.  The parties to each assignment or participation made pursuant to this Section 9.04 shall execute and deliver to the applicable Lender, for its acceptance and recording in its books and records, an assignment and acceptance agreement (an “Assignment and Acceptance”) or a participation agreement or other transfer instrument reasonably satisfactory in form and substance to (i) the parties to

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 such Assignment and Acceptance, (ii) in the case of an assignment of the Class B Loan, the Class A Lender and (iii) prior to an Event of Default, the Borrower.  Each such assignment or participation shall be effective as of the date specified in the applicable Assignment and Acceptance or other agreement or instrument only after the execution, delivery, acceptance and recording thereof as described in the preceding sentence.  Each Lender shall notify the Borrower of any assignment or participation thereof made pursuant to this Section 9.04.  Each Lender may, in connection with any assignment or participation or any proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower and the Pledged Assets furnished to such Lender by or on behalf of the Borrower or the Servicer; provided, however, that such Lender shall not disclose any such information until it has obtained an agreement from such assignee or participant or proposed assignee or participant that it shall treat as confidential (under terms mutually satisfactory to such Lender, the Borrower, the Servicer and such assignee or participant or proposed assignee or participant) any information obtained which is not already publicly known or available, and may disclose information relevant to the tax treatment and tax structure of the transactions contemplated by this Agreement.

(b)         Whenever the term “Lender” is used herein, it shall mean the Class A Lender, the Class B Lender and/or any other Person which shall have executed an Assignment and Acceptance, in each case with respect to either the Class A Loan or the Class B Loan; provided, however, that the holders of the Class A Notes collectively, and the holders of the Class B Notes collectively, shall have a prorata share (subject to any provisions of this Agreement which shall subordinate the rights of the holders of the Class B Notes to the holders of the Class A Notes) of the rights and obligations of the Lender(s) hereunder with respect to the Pledged Assets and otherwise in the relative proportions that the outstanding principal amount of the Class A Notes or the Class B Notes, respectively, bears to the sum of the outstanding principal amount of the Class A Notes and the Class B Notes on such date of calculation (its respective “Commitment Percentage”). Unless otherwise specified herein, any right at any time of any Lender to enforce any remedy under this Agreement or any Transaction Document shall be exercised by the Controlling Holders.

(c)           Subject to Section 9.04(a), each of the parties hereto hereby agrees to execute any amendment to this Agreement that is required in order to facilitate the addition of any new Lender hereunder as contemplated by this Section 9.04 and which does not have any adverse effect on the Borrower, the Originator, the Servicer or any Affiliate thereof.

SECTION 9.05                                Term of This Agreement.  This Agreement including, without limitation, the Borrower’s obligation to observe its covenants set forth in Articles V and VI and the Servicer’s obligation to observe its covenants set forth in Articles V and VI, shall remain in full force and effect until the Collection Date; provided, however, that the rights and remedies with respect to any breach of any representation and warranty made or deemed made by the Borrower or the Servicer pursuant to Articles III and IV and the indemnification and payment provisions of Article VIII and Article IX and the provisions of Section 9.08 and Section 9.09 shall be continuing and shall survive any termination of this Agreement.

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SECTION 9.06                                GOVERNING LAW; JURY WAIVER; CONSENT TO JURISDICTION.  s) THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE LENDERS IN THE PLEDGED RECEIVABLES, OR REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

(b)           EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

(c)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

SECTION 9.07                                Costs, Expenses and Taxes.  t) In addition to the rights of indemnification granted to the Backup Servicer (whether in its capacity as Backup Servicer or successor Servicer), the Custodian, the Lenders’ Bank, each Lender and its respective Affiliates under Section 8.01 hereof, the Borrower agrees to pay on demand all reasonable (and reasonably documented) costs and expenses of the Backup Servicer, the Custodian, the Lenders’ Bank and each Lender incurred in connection with the preparation, execution or delivery of, or any waiver or consent issued or amendment prepared in connection with, this Agreement, the other Transaction Documents and the other documents to be delivered hereunder or in connection herewith or therewith or incurred in connection with any amendment, waiver or modification of this Agreement, any other Transaction Document, and any other documents to be delivered hereunder or thereunder or in connection herewith or therewith that is necessary or requested (and, with respect to such Lender, actually entered into) by any of the Borrower, the Servicer, such Lender or made necessary or desirable as a result of the actions of any regulatory, tax or accounting body affecting such Lender and its Affiliates, or which is related to an Event of Default, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Backup

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 Servicer, the Custodian, the Lenders’ Bank and each Lender with respect thereto and with respect to advising the Backup Servicer, the Custodian, the Lenders’ Bank and each Lender as to their respective rights and remedies under this Agreement and the other documents to be delivered hereunder or in connection herewith, and all costs and expenses, if any (including reasonable counsel fees and expenses), incurred by the Backup Servicer, the Custodian, the Lenders’ Bank or any Lender in connection with the enforcement of this Agreement and the other documents to be delivered hereunder or in connection herewith.

(b)           The Borrower shall pay on demand any and all stamp, sales, excise and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, the other documents to be delivered hereunder or any agreement or other document providing liquidity support, credit enhancement or other similar support to any Lender which is specific to this Agreement or the funding or maintenance of Loans hereunder.

(c)           The Borrower shall pay on demand all other costs, expenses and taxes (excluding franchise and income taxes) incurred by any Lender or the Initial Qualifying Swap Counterparty or any shareholder thereof related to this Agreement, any other Transaction Document or any Qualifying Interest Rate Swap or similar interest rate cap agreement (“Other Costs”), including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for such Lender or the Initial Qualifying Swap Counterparty with respect to (i) advising such Person as to its rights and remedies under this Agreement and the other documents to be delivered hereunder or in connection herewith and (ii) the enforcement of this Agreement and the other documents to be delivered hereunder or in connection herewith; provided, however, that the Borrower shall have no obligation

to pay the fees and out-of-pocket expenses of counsel to the Initial Qualifying Swap Counterparty related to the initial negotiation, execution and delivery of any Qualifying Interest Rate Swap.

(d)           Without limiting any other provision hereof, the Borrower shall pay on demand all costs, expenses and fees of the Backup Servicer prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder related to its duties under this Agreement.

(e)           Any Person making a claim under this Section 9.07 shall submit to the Borrower a notice setting forth in reasonable detail the basis for and the computations of the applicable costs, expenses, taxes or similar items.

SECTION 9.08                                No Proceedings.  The Servicer, the Backup Servicer, the Custodian, the Collateral Agent, the Class A Lender, the Class B Lender and the Lenders’ Bank each hereby agree that it will not institute against, or join any other Person in instituting against, the Borrower any proceedings of the type referred to in the definition of Bankruptcy Event prior to two years and one day after the Collection Date.

SECTION 9.09                                Recourse Against Certain Parties.  No recourse under or with respect to any obligation, covenant or agreement (including, without limitation, the payment of any fees or any other obligations) of any Lender as contained in this Agreement or any other agreement, instrument or document entered into by the Borrower or such Lender pursuant hereto or in connection herewith

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 shall be had against any administrator of the Borrower or such Lender or any incorporator, affiliate, stockholder, officer, employee or director of the Borrower or such Lender or of any such administrator, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; itbeingexpresslyagreedandunderstood that the agreements of each party hereto contained in this Agreement and all of the other agreements, instruments and documents entered into by the Borrower or any Lender pursuant hereto or in connection herewith are, in each case, solely the corporate obligations of such party (and nothing in this Section 9.09 shall be construed to diminish in any way such corporate obligations of such party), and that no personal liability whatsoever shall attach to or be incurred by any administrator of the Borrower or any Lender or any incorporator, stockholder, affiliate, officer, employee or director of the Borrower or such Lender or of any such administrator, as such, or any of them, under or by reason of any of the obligations, covenants or agreements of the Borrower or such Lender contained in this Agreement or in any other such instruments, documents or agreements, or which are implied therefrom, and that any and all personal liability of every such administrator of the Borrower or any Lender and each incorporator, stockholder, affiliate, officer, employee or director of the Borrower or such Lender or of any such administrator, or any of them, for breaches by the Borrower or such Lender of any such obligations, covenants or agreements, which liability may arise either at common law or in equity, by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in consideration for the execution of this Agreement.  The provisions of this Section 9.09 shall survive the termination of this Agreement.

SECTION 9.10                                Execution in Counterparts; Severability; Integration.  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 when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.  In the event that any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.  This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings other than the Fee Letter.

SECTION 9.11                                Tax Characterization.  Notwithstanding any provision of this Agreement, the parties hereto intend that the Loans advanced hereunder shall constitute indebtedness of the Borrower for federal income tax purposes.

SECTION 9.12                                Calculation of Performance Triggers.  Notwithstanding anything to the contrary herein, Included Repurchased Receivables shall be treated as Pool Receivables for purposes of each calculation of the Annualized Default Rate, Annualized Net Loss Rate, and Delinquency Rate required to be made hereunder (but for no other purpose).

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ARTICLE X

THE COLLATERAL AGENT

SECTION 10.01                                           No Implied Duties.  The Collateral Agent shall be obligated to perform only the duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Collateral Agent.

SECTION 10.02                                           Limits on Liability.  The Collateral Agent shall not be liable for any acts, omissions, errors of judgment or mistakes of fact or law made, taken or omitted to be made or taken by it in accordance with this Agreement and the other Transaction Documents (including acts, omissions, errors or mistakes with respect to the Collateral), except for those arising out of or in connection with the Collateral Agent’s gross negligence or willful misconduct.  The Collateral Agent may consult with counsel, accountants and other experts, and any opinion or advice of any such counsel, any such accountant and any such other expert shall be full and complete authorization and protection in respect of any action taken or suffered by the Collateral Agent hereunder in accordance therewith. The Collateral Agent shall have the right at any time to seek instructions concerning the administration of the Pledged Assets from any court of competent jurisdiction.  The Collateral Agent may conclusively rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document which it has no reasonable reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by the proper party or parties.  Absent its gross negligence or willful misconduct, the Collateral Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Collateral Agent and conforming to the requirements of this Agreement and the other Transaction Documents, if any.

SECTION 10.03                                           Acknowledgement.  Each Lender hereby acknowledges and agrees that its rights and obligations as a “Lender” under the Collection Account Agreement are being held by Morgan Stanley in its capacity as Collateral Agent for the benefit of the Secured Parties.

[Signature page to follow.]

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

THE BORROWER:	LEAF CAPITAL FUNDING III, LLC By:_______________________________________ Name: Title:
THE SERVICER:	LEAF FINANCIAL CORPORATION By:_______________________________________ Name: Title:
THE CLASS A LENDER AND THE COLLATERAL AGENT	MORGAN STANLEY BANK By:_______________________________________ Name: Title:
THE CLASS B LENDER	MORGAN STANLEY ASSET FUNDING INC. By:_______________________________________ Name: Title:

THE CUSTODIAN AND THE LENDERS’ BANK:	U.S. BANK NATIONAL ASSOCIATION By:_______________________________________ Name: Title:
THE BACKUP SERVICER	LYON FINANCIAL SERVICES, INC. (D/B/A U.S. BANK PORTFOLIO SERVICES) By:_______________________________________ Name: Title:

S-1

SCHEDULE I

CONDITION PRECEDENT DOCUMENTS

As required by Section 3.01 of the Agreement, each of the following items must be delivered to the Lenders prior to the date of the Borrowing:

(a)           A copy of this Agreement duly executed by each of the parties hereto;

(b)           A certificate of the Secretary or Assistant Secretary of each of the Borrower, the Originator and the Servicer, dated the date of this Agreement, certifying (i) the names and true signatures of the incumbent officers authorized to sign on behalf of the such Person each Transaction Document to which it is a party (on which certificate the Lenders may conclusively rely until such time as the Lenders shall receive from such Person a revised certificate meeting the requirements of this paragraph (b)), (ii) that the copy of the certificate of incorporation or formation of each such Person attached thereto is a complete and correct copy and that such certificate of incorporation or formation has not been amended, modified or supplemented and is in full force and effect, (iii) that the copy of the organizational documents of such Person attached thereto is a complete and correct copy, and that such organizational documents have not been amended, modified or supplemented and is in full force and effect, and (iv) the resolutions of the board of directors or members of such Person approving and authorizing the execution, delivery and performance by such Person of each Transaction Document to which it is a party;

(c)           Good standing certificate, dated as of a recent date for each of the Borrower, the Originator and the Servicer, issued by its jurisdiction of organization;

(d)           Executed, original copies of proper financing statements (the “Facility Financing Statements”) describing the Pledged Receivables, Other Conveyed Property, Related Security and other Pledged Assets, and (a) filed against Originator in favor of the Borrower as assignor secured party and naming the Collateral Agent as total assignee and (b) filed against the Borrower and in favor of the Collateral Agent, as secured party, and other, similar instruments or documents, as may be necessary or, in the opinion of the Collateral Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the Collateral Agent’s interests in all Pledged Receivables, Other Conveyed Property, Related Security and other Pledged Assets;

(e)           Executed, original copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Pledged Receivables, Other Conveyed Property, Related Security and other Pledged Assets previously granted by Originator or the Borrower;

(f)           Certified copies of requests for information or copies (or a similar UCC search report certified by a party acceptable to the Lenders), dated a date reasonably near to the date of the initial Borrowing, listing all effective financing statements (including the Facility Financing Statements), which name any of the Borrower or the Originator (under such party’s present name and any previous name) as debtor and which are filed in the jurisdictions in which the Facility Financing Statements were filed, together with copies of such financing statements (none of which, other than the Facility Financing Statements, shall cover any Pledged Assets);

(g)           One or more favorable Opinions of Counsel, of counsel to the Originator and the Borrower, with respect to such matters as any Lender may reasonably request (including an opinion, with respect to the creation, perfection and first priority of the security interest of the Borrower and the Collateral Agent in the property described in such Opinion of Counsel);

(h)           One or more favorable Opinions of Counsel, of counsel to the Originator and the Borrower, with respect to the true conveyance of the Receivables under the Purchase and Sale Agreement, and issues of substantive consolidation;

(i)           One or more favorable Opinions of Counsel, of counsel to the Originator, the Borrower, the Custodian and the Backup Servicer with respect to, among other things, the due authorization, execution and delivery of, and enforceability of, this Agreement and the other Transaction Documents;

(j)           A favorable Opinion of Counsel of counsel to the Borrower, with respect to the first priority perfected security interest of the Collateral Agent in the Collection Account and the funds therein;

(k)           Any necessary third party consents to the closing of the transactions contemplated hereby;

(l)           A copy of each of the other Transaction Documents duly executed by the parties thereto; and

(m)           A copy of the directors and officers liability insurance policy referred to in Section 6.16 hereof together with a certification from the applicable insurance company that such policy is in full force and effect on the date hereof.

(n)           Copies of all other documents referred to in the Closing Checklist attached as Exhibit I hereto, satisfactory in all respect to the Lenders.

SCHEDULE II

PRIOR NAMES, TRADENAMES, FICTITIOUS NAMES

AND “DOING BUSINESS AS” NAMES

1.           Borrower:  None

2.           Servicer:  LEAF Financial Corporation

LEAF Financial Corporation was previously named Fidelity Leasing Corporation.  Effective February 28, 1996, Fidelity Leasing Corporation changed its name to F.L. Partnership Management, Inc.  Effective May 1, 2000, F.L. Partnership Management, Inc. and FL Financial Services, Inc. merged, with F.L. Partnership Management, Inc. as the surviving entity.  Effective December 13, 2001, F.L. Partnership Management, Inc. changed its name to LEAF Financial Corporation.  Effective June 29, 2004, LEAF Asset Management, Inc. and LEAF Financial Corp. merged, with LEAF Financial Corp. as the surviving entity.  LEAF Financial Corporation has no trade names, fictitious names or “doing business as” names.

SCHEDULE III

REPRESENTATIONS AND WARRANTIES WITH

RESPECT TO ELIGIBLE RECEIVABLES

The following representations and warranties are made by the Borrower with respect to the Contracts related to Pledged Receivables which are designated as being Eligible Receivables on a Facility Limit Certificate or a Monthly Remittance Report, or are otherwise represented to the Lenders as being Eligible Receivables, or are included as Eligible Receivables in any calculation set forth herein.

1.           Each such Contract represents the genuine, legal, valid, binding and full recourse payment obligation of the Obligor thereunder, enforceable by the Borrower in accordance with its terms and the Obligor, with respect to such Contract (and any guarantor of the Obligor’s obligations thereunder), had full legal capacity to execute and deliver such Contract and any other documents related thereto.

2.           [Intentionally omitted.]

3.           To the extent that such Contract consists of a payment schedule or promissory note (if any), together with the “Master Agreement”, “Finance Agreement” or similar agreement related thereto and incorporated by reference therein, each other payment schedule or promissory note (if any) related to the same “Master Agreement”, “Finance Agreement” or similar agreement is also a Contract related to a Pledged Receivable.  To the extent that such Contract consists of a “Master Lease Schedule” or similar agreement together with a “Master Lease Agreement” or similar agreement which is related to, and incorporated by reference therein, each other “Master Lease Schedule” or similar agreement related to the same “Master Lease Agreement” or similar agreement is also a Contract related to a Pledged Receivable.

4.           Reserved.

5.           Each such Contract (i) was (a) originated by Originator in the ordinary course of Originator’s business and Originator had all necessary licenses and permits to originate Contracts in the State where the related Obligor and the related Obligor Collateral were located or (b) purchased by Originator, in a transaction that would constitute a “true sale” for bankruptcy purposes, from a Person (a “Seller”) (other than Northern Leasing Systems, Inc. or any Affiliate thereof) who originated such Contract in the ordinary course of Seller’s business and who had all necessary licenses and permits to originate Contracts in the State where the related Obligor and the related Obligor Collateral were located, (ii) was sold by Originator to the Borrower under the Purchase and Sale Agreement and the Borrower has all necessary licenses and permits to own Receivables and enter into Contracts in the state where the related Obligor and the related Obligor Collateral are located, (iii) contains customary and enforceable provisions, such as to render the rights and remedies of the Borrower (and any assignee thereof) adequate for realization against the collateral security related thereto and (iv) provides for level Scheduled Payments during the term of such Contract or such Contract is a Non-Level Payment Contract.

Sch. III-1

6.           Each such Contract was originated by Originator or the Seller without any fraud or material misrepresentation on the part of the related Obligor or Originator or the Seller.  Each such

Contract was sold by Originator to the Borrower without any fraud or material misrepresentation on the part of Originator.

7.           No such Contract is the subject of any litigation (other than as set forth in any of the FDIC Documents or any Schedule thereto), nor is it subject to any right of rescission, setoff, counterclaim or defense on the part of the Obligor thereunder.

8.           Each such Contract has had no provision thereof waived, amended, altered or modified in any respect since its acquisition or origination by LEAF except in conformity with the Credit and Collection Policy.

9.           The Obligor, with respect to each such Contract, has a billing address in the United States and, except as otherwise permitted in writing by the Lenders from time to time, the Equipment which is the subject of each such Contract and all other Obligor Collateral with respect thereto is located in the United States.

10.           Each such Contract (i) is calculated at a fixed yield, (ii) is fully amortizing in periodic installments over its remaining term (which may include a Balloon Payment or Put Payment), (iii) has a remaining term of 180 months or less and does not permit renewal or extension, (iv) provides for acceleration of the Scheduled Payments thereunder if the related Obligor is in default under or has otherwise violated or breached any material provision of such Contract, (v) neither the Originator, the Servicer, the Borrower or any other Person has applied any part of any cash collateral paid under such Contract to any of the Scheduled Payments due under such Contract, and (vi) has not been assigned by the related Obligor nor has there been any sub-lease of the Obligor Collateral.

11.           [Intentionally omitted.]

12.           Each such Contract (i) is payable by a single Obligor, that is a corporate Person, or, if the collateral is Equipment used in a business, an individual and (ii) provides for the financing or lease of Obligor Collateral to be used in the business of the related Obligor.

13.           Each such Contract was originated in the United States and is denominated and payable solely in United States Dollars.

14.           Each such Contract (i) if a Lease Contract, contains “hell or high water” provisions; (ii) requires the related Obligor to assume all risk of loss or malfunction of the related Obligor Collateral; (iii) requires the related Obligor to pay all maintenance, repair, insurance and taxes, together with all other ancillary costs and expenses, with respect to the related Obligor Collateral; and (iv) requires the related Obligor to pay, in full, when due, all Scheduled Payments notwithstanding any casualty, loss or other damage to the related Obligor Collateral.

15.           Each such Contract is by its terms an absolute and unconditional obligation of the related Obligor and is non-cancelable (in the case of a Lease Contract) and non-cancelable and non-prepayable without the payment in full of principal and accrued interest and finance charges prior to the expiration of the term of such Contract; such Contract does not provide for the substitution, exchange or addition of any other items of Obligor Collateral related to such Contract if the effect thereof would be to reduce or extend the Scheduled Payments related thereto; and the rights with respect to such Contract are assignable by Originator (and its successors and assigns, including the Borrower) without the consent of or notice to any Person.

Sch. III-2

16.           Each such Contract is in the form of one of the form contracts attached hereto as Exhibit D-1, Exhibit D-2 or Exhibit D-3 or in a form otherwise approved by the Servicer in compliance with the Credit and Collection Policy.

17.           [Intentionally omitted.]

18.           All material requirements of applicable federal, state and local laws, and regulations thereunder in respect of each such Contract, the origination thereof, and the Obligor Collateral related thereto, have been complied with in all respects.

19.           The applicable Obligor (other than a lessee under a Lease Contract that is a “true lease”) has good and marketable title to the Equipment which is the subject of each such Contract and such Equipment is free and clear of all Adverse Claims.

20.           Each such Contract constitutes either an “Instrument” or “Chattel Paper” or a “Payment Intangible” within the meaning of the UCC.

21.           Each such Contract contains language by which the related Obligor grants a security interest to Originator in the Obligor Collateral which is the subject of each such Contract.

22.           (A) The Originator shall have taken or caused to be taken all steps necessary under all applicable law (including the filing of an Obligor Financing Statement with respect to each such Contract) in order to cause a valid, subsisting and enforceable perfected, first priority security interest to exist in Originator’s favor in the Obligor Collateral securing each such Contract (other than with respect to Equipment which has a value of less than $25,000 if such Equipment is leased under Dollar Purchase Option Contracts or $50,000 if such Equipment is leased under FMV Contracts), (B) Originator shall have assigned the perfected, first priority security interest in the Obligor Collateral referred to in clause (A) above to the Borrower pursuant to the Purchase and Sale Agreement and (C) the Borrower shall have assigned the perfected, first priority security interest in the Obligor Collateral referred to in clause (A) above to the Collateral Agent pursuant to Section 2.11 hereof.

23.           The Borrower has taken all steps necessary under all applicable law in order to perfect the security interest of the Collateral Agent in (i) the Borrower’s interest in the Obligor Collateral related to each such Contract (other than Equipment which has a value of less than $25,000 if such Equipment is leased under Dollar Purchase Option Contracts or $50,000 if such Equipment is leased under FMV Contracts) and (ii) each such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof), and there exists in favor of the Collateral Agent as secured party, a valid, subsisting and enforceable first priority perfected security interest in (i) the Borrower’s interest in such Obligor Collateral and (ii) such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof) and such security interest is and shall be prior to all other liens upon and security interests in (i) the Borrower’s interest in such Obligor Collateral and (ii) such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof) that now exist or may hereafter arise or be created (other than Permitted Liens).

Sch. III-3

24.           If the Obligor Collateral related to such Contract includes a Vehicle, such Contract shall be a Loan Contract or a Dollar Purchase Option Contract, and the Borrower or the Servicer shall have delivered to the applicable Registrar of Titles an application for a Certificate of Title for such Vehicle satisfying the Titling Requirements.

25.           No such Contract is a Defaulted Receivable or, at the time of its Pledge hereunder, a Delinquent Receivable.

26.           Each such Contract is payable by an Obligor which is not subject to any bankruptcy, insolvency, reorganization or similar proceeding.

27.           The information pertaining to each such Contract set forth in the Schedule of Contracts (as defined in the Purchase and Sale Agreement), the related Assignment and each Facility Limit Certificate and Monthly Remittance Report is true and correct in all respects.

28.           With respect to each such Contract, by the Borrowing Date on which such Contract is Pledged hereunder and on each relevant date thereafter, Originator will have caused its master computer records relating to such Contract to be clearly and unambiguously marked to show that such Contract has been Pledged under this Agreement.

29.           With respect to each such Contract there exists a Receivable File and such Receivable File contains each item listed in the definition of Receivable File with respect to such Contract and such Receivable File has been delivered to the Custodian or will have been delivered to the Custodian in accordance with Section 5.02 of the RLSA.

30.           No such Contract has been repaid, prepaid, satisfied, subordinated or rescinded, and the Obligor Collateral securing such Contract has not been released from the lien of the Lenders in whole or in part (except for releases of Equipment from a Contract prior to the date of the Pledge thereof and which releases have been noted in the Collateral Receipt related to such document).

31.           No such Contract was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer, pledge and/or assignment of such Contract under this Agreement or the Purchase and Sale Agreement, and Originator has not entered into any agreement with any Obligor that prohibits, restricts or conditions the sale, transfer, pledge and/or assignment of such Contract.

32.           [Intentionally Omitted].

33.           No such Contract has been sold, transferred, assigned or pledged by Originator to any Person other than the Borrower.  Borrower has not taken any action to convey any right to any Person that would result in such Person having a right to payments due under any such Contract or payments received under the related Insurance Policy or otherwise to impair the rights of the Borrower or the Lenders in such Contract, the related Insurance Policy or any proceeds thereof.  There is an Insurance Policy in full force and effect with respect to the Equipment related to such Contract if such Equipment had an Amortized Equipment Cost over $100,000.

Sch. III-4

34.           No such Contract is assumable by another Person in a manner which would release the Obligor thereof from such Obligor’s obligations to Originator or the Borrower.

35.           There has been no default, breach, violation or event permitting acceleration under the terms of any such Contract, and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any such Contract, and there has been no waiver of any of the foregoing.

36.           No selection procedures adverse to the Borrower or any Lender have been utilized in selecting any such Contract from all other similar Contracts originated or purchased by Originator.

37.           The Obligor Collateral related to any such Contract is not subject to any tax or mechanic’s lien or any other Adverse Claim.

38.           [Intentionally omitted.]

39.           The Borrower has delivered to the Custodian, in accordance with Section 5.02 of the RLSA, the sole original counterpart of each such Contract (or a true and correct copy thereof) and such document constitutes the entire agreement between the parties thereto in respect of the related Obligor Collateral.

40.           Each such Contract is in full force and effect in accordance with its terms and neither the Borrower nor the Obligor has or will have suspended or reduced any payments or obligations due or to become due thereunder by reason of a default by any other party to such Contract; there are no proceedings pending or threatened asserting insolvency of such Obligor; there are no proceedings pending or threatened wherein such Obligor, any other obligated party or any Government Entity has alleged that such Contract is illegal or unenforceable.

41.           The acquisition practices used by the Originator and the origination and collection practices used by the Servicer with respect to each such Contract have been in all respects customary in the equipment financing and servicing business.

42.           The Obligor Collateral related to each such Contract was properly delivered to the Obligor in good repair and is in proper working order. Each Obligor has accepted the related Equipment.  The related Obligor is the end user of the Equipment that is the subject of any such Contract and no Obligor has sublet the Equipment to any other party.

43.           The Obligor with respect to any such Contract is not a merchant with respect to the Equipment related to such Contract.

Sch. III-5

44.           Except with respect to a breach of an Obligor’s right of quiet enjoyment of the related Equipment, neither the operation of any of the terms of any such Contract nor the exercise by the Borrower, the Servicer or the Obligor of any right under any such Contract will render such Contract unenforceable in whole or in part nor subject to any right of rescission, setoff, claim, counterclaim or defense, and no such right of rescission, set-off, claim, counterclaim or defense, including a defense arising out of a breach of the Obligor’s right of quiet enjoyment of the Equipment, has been asserted with respect thereto.

45.           The Borrower and the Servicer have duly fulfilled all obligations on their part to be fulfilled under or in connection with the origination, acquisition and assignment of such Contract, including, without limitation, giving any notices and obtaining any consents necessary to effect the

acquisition of such Contract by the Borrower, and have done nothing to impair the rights of the Borrower or any Lender in the Contract or payments with respect thereto.

46.           Originator and the Servicer have duly fulfilled all obligations on their part to be fulfilled under or in connection with the origination, acquisition and assignment of such Contract, and have done nothing to impair the rights of the Borrower in such Contract or payments with respect thereto.  Originator, the Servicer and Borrower have duly fulfilled all continuing obligations on their part to be fulfilled under or in connection with such Contract.

47.           [Intentionally Omitted].

48.           The sale from the Originator to the Borrower of each such Contract and the Other Conveyed Property and Related Security related thereto does not violate the terms or provisions of any agreement to which the Borrower is a party or by which it is bound.

49.           The transfer, assignment and conveyance of the Contract and the Other Conveyed Property and Related Security related thereto from the Originator to the Borrower pursuant to the Purchase and Sale Agreement is not subject to nor will result in any tax, fee or governmental charge payable by the Borrower or any other Person to any federal, state or local government.

50.           No such Contract (other than a “true lease”) may be (i) an executory contract or (ii) in any event, deemed to be an executory contract or unexpired lease subject to rejection by an Obligor under Section 365 of the Bankruptcy Code in the event that a Bankruptcy Event has occurred with respect to such Obligor.

51.           Each such Contract contains enforceability provisions (i) permitting the acceleration of the payments thereunder if the Obligor is in default under such Contract and (ii) sufficient to enable the Borrower to repossess or foreclose upon the Obligor Collateral related thereto.

52.           Each such Contract generally contains provisions requiring the payment of both interest and principal (or, in the case of a Lease Contract, lease payments) in each calendar month or quarter during the term of such Contract.

53.           The promissory note, if any, related to each such Contract (i) was payable to the Originator immediately prior to its transfer to the Borrower under the Purchase and Sale Agreement, and (ii) was payable to the Borrower immediately prior to its Pledge hereunder and has not been endorsed by Originator to any Person other than the Borrower.

Sch. III-6

54.           [Intentionally Omitted].

55.           [Intentionally Omitted].

56.           [Intentionally Omitted].

57.           The vendor of the Equipment relating to such Receivable has received payment in full from the Obligor prior to the Pledge of such Receivable hereunder and has no remaining obligations with respect to such Equipment except for any applicable warranty.

58.           No such Contract provides for delivery and/or financing of any Equipment after the Closing Date and there are no unperformed purchase or financing commitments thereunder as of the Closing Date, and no such Contract contains any unperformed purchase or financing commitments as of the Closing Date.

59.           No Scheduled Payment under any Contract is delinquent for more than 30 days.

Sch. III-7

SCHEDULE IV

CREDIT AND COLLECTION POLICY

Attached.

Sch. IV-1

SCHEDULE V

EQUIPMENT CATEGORIES

AUTOMOTIVE

AWNINGS

BEAUTY SALON

BOOK OF BUSINESS

CLEANING EQUIPMENT

COMPUTERS

CONSTRUCTION

CONTAINERS

COPIERS

CREMATORIUMS

ELECTRONIC EQUIPMENT

ENGINEERING EQUIPMENT

FARMING EQUIPMENT

FEES

FITNESS & RECREATIONAL EQUIP

FIXTURES

FURNITURE & FURNISHINGS

GAS PUMPS

GOLF CARS

HEATING & AIR EQUIPMENT

INDUSTRIAL CYLINDERS

LANDSCAPE & GARDENING EQUIP

LAUNDRY & DRYCLEANING EQUIP

LEASEHOLD IMPROVEMENTS

LOCK BOXES

MACHINE TOOL EQUIPMENT

MAILING EQUIPMENT

MANUFACTURING EQUIPMENT

MEDICAL EQUIPMENT

MOBILE COMMUNICATIONS

MOBILE/PORTABLE EQUIPMENT

NEW CONSTRUCTION

OFFICE EQUIPMENT

PLUMBING

PORTABLE TOILETS

POS SYSTEMS

PRINTING EQUIPMENT

REFUSE CONTAINERS

RENTAL EQUIPMENT

RENTAL PROPANE TANKS

RENTAL WATER BOTTLES/COOLERS

RESTAURANT EQUIPMENT

RETAIL EQUIPMENT

Sch. V-1

 SECURITY SYSTEMS

 SIGNS

 SOFTWARE 

 TANNING EQUIPMENT

 TELEPHONE SYSTEMS

 TITLE EQUIPMENT

 VENDING

 VIDEO EQUIPMENT

 WATER SYSTEMS

 WORKING CAPITAL LOAN

* The above categories are subject to change based upon LEAF operations.

Sch. V-2

SCHEDULE VI

ADDRESSES FOR NOTICE

LEAF Capital Funding III, LLC

c/o LEAF Funding Inc.

1818 Market Street, 9th Floor

Philadelphia, PA 19103

Attention:  Matthew Goldenberg

Facsimile No.:  (215) 640-6370

Confirmation No.:  (215) 231-7070

LEAF Financial Corporation

1818 Market Street, 9^th Floor,

Philadelphia, PA 19103

Attention:  Miles Herman

Facsimile No.:  (215) 640-6363

Confirmation No.:  (215) 717-3358

Morgan Stanley Capital Services Inc.

Transaction Management Group

1585 Broadway

New York, NY 10036-8293

Attention:  Chief Legal Officer

Facsimile No.: 001-212-507-4022

Morgan Stanley Credit

750 Seventh Avenue

New York, NY 10019

Facsimile No.: (212) 507-5890

E-mail: spvmonthlyreport@morganstanley.com

Morgan Stanley Bank

1221 Avenue of the Americas

New York, NY 10020

Attention:  Peter Woroniecki

Facsimile No.:  (212) 762-6943

Confirmation No.:  (212) 762-6942

Morgan Stanley Asset Funding Inc.

1221 Avenue of the Americas

New York, NY 10020

Attention:  Peter Woroniecki

Facsimile No.:  (212) 762-6943

Confirmation No.:  (212) 762-6942

Sch. VI-1

U.S. Bank National Association

EP-MN-WS3D

60 Livingston Ave.

St. Paul, MN 55107

Attention:  Diane Reynolds

Facsimile No.:  (651) 495-8090

Confirmation No.:  (651) 495-3923

Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services)

U.S. Bank Portfolio Services

1310 Madrid Street

Marshall, MN 56258

Attention:  Joe Andries

Facsimile No.:  (866) 806-0775

Confirmation No.:  (507) 532-7129

Sch. VI-2

SCHEDULE VII

REMITTANCE REPORT INFORMATION

[TO BE AGREED UPON BY COLLATERAL AGENT AND SERVICER]

Sch. VII-1

EXHIBIT A

FORM OF FACILITY LIMIT CERTIFICATE

FACILITY LIMIT CERTIFICATE

__________, 200__

To:           Morgan Stanley Bank/Morgan Stanley Asset Funding Inc.

           1221 Avenue of the Americas

           New York, NY 10020

           Attn: Peter Woroniecki

Ladies and Gentlemen:

Reference is made to the Receivables Loan and Security Agreement dated as of November 1, 2007 (the “Loan Agreement”), among LEAF Capital Funding III, LLC, (the “Borrower”), Leaf Financial Corporation, as the Servicer, Morgan Stanley Bank, as Class A Lender, Morgan Stanley Asset Funding Inc., as Class B Lender, U.S. Bank National Association, as the Custodian and the Lenders’ Bank and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) as the Backup Servicer.  Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Loan Agreement.

In accordance with Section 6.10(c) of the Loan Agreement, the Borrower hereby certifies that, after giving effect to the Borrowing requested to occur on __________, 200__:

(1) (a) the Facility Amount under the Loan Agreement does not exceed the Facility Limit, and (b) the outstanding principal amount of the Class A Notes does not exceed the Class A Facility Limit;

(2) no Program Termination Event or Event of Default exists; and

(3) if the Borrowing is to be secured by Receivables, no Termination Event exists;

Exh.A1

The Borrower hereby further certifies that attached hereto as Schedule A are true and correct calculations evidencing the accuracy of the statements set forth in paragraphs (1) and, as applicable, (2) above.

Very truly yours,

LEAF CAPITAL FUNDING III, LLC

By:                                                                           

Name: Miles Herman

Title:   Vice President

Exh.A2

EXHIBIT B

FORM OF REQUIRED DATA FIELDS

(a)           Obligor lease number;

(b)           Obligor name;

(c)           Reserved;

(d)           Obligor Credit risk rating (if available);

(e)           Collateral location (city and state);

(f)           Reserved;

(g)           Equipment category/type;

(h)           Non Level Payment Contract flag;

(i)           Balloon flag and put payment flag;

(j)           Stand Alone Working Capital Loan Flag;

(k)           New/used flag (if available);

(l)           Lease type (true/installment);

(m)           Serial Number (if available);

(n)           SIC Code (if available);

(o)           Vendor;

(p)           Commencement Date

(q)           Maturity Date;

(r)           Date Next Due;

(s)           Original Term;

(t)           Remaining Term;

(u)           Payment Frequency;

(v)           Original Receivable Balance;

(w)           Current Receivable Balance;

Exh. B-1

(x)           Original Equipment Cost;

(y)           Amortized Equipment Cost;

(z)           Scheduled Payment; and

(aa)           Discounted Balance.

Exh. B-2

EXHIBIT C

FORM OF MONTHLY REMITTANCE REPORT

(See attached.)

Exh.C-1

EXHIBIT D-1

FORM OF LEASE CONTRACT

(See attached.)

Exh. D-1-1

EXHIBIT D-2

FORM OF LOAN CONTRACT

(See attached.)

Exh. D-2-1

EXHIBIT D-3

FORM OF LOAN CONTRACT

(See attached.)

Exh. D-3-1

EXHIBIT E

VEHICLE LIENHOLDER NOMINEE AGREEMENT

This Vehicle Lienholder Nominee Agreement (this “Agreement”) is made as of __________, 2007, among __________ (the “Lienholder”), as Lienholder, LEAF Capital Funding III, LLC (the “Borrower”), Morgan Stanley Bank, as Class A Lender and Morgan Stanley Asset Funding Inc., as Class B Lender (collectively, the “Lenders”).

Whereas, from time to time LEAF Funding, LLC (“Funding”) may acquire an ownership or security interest in certain Contracts;

Whereas, Lienholder appears as the lienholder of record on the Titles for the Vehicles sold or leased under such Contracts;

Whereas, from time to time Funding may sell to the Borrower certain of such Contracts and all of its right, title and interest in the related Vehicles, and

Whereas, the Borrower shall pledge, inter alia, such Contracts and the Borrower’s security interest in each such Vehicle, to the Lenders in order to secure loans being advanced to the Borrower by, and the other obligations of the Borrower to, the Lenders (the “Loan Transactions”); and

Whereas, due to the administrative difficulty and costs of amending the Titles of the Vehicles to note thereon (i) the security interest of the Borrower in such Vehicles and (ii) the security interest of the Lenders in the security interest of the Borrower in such Vehicles, the Titles to the Vehicles will not be amended to note such security interests of the Borrower and the Lenders but instead, from and after the date hereof, the Lienholder will act as the Borrower’s and the Lenders’ respective nominee lienholder with respect to the Vehicles pursuant to the terms hereof;

Now, Therefore, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.           Term.  This Agreement will commence on the date hereof and will remain in full force and effect until the Collection Date.

2.           Appointment of Nominee Lienholder.  The Borrower and the Lenders hereby appoint the Lienholder as their nominee lienholder, in a representative capacity, with respect to the Vehicles, and the Lienholder hereby agrees to serve in such capacity as described herein.  The Lienholder hereby agrees that all of its right, title, interest (which is solely as stated lienholder on the Titles) in and to the

Exh. E-1

 Vehicles shall be solely for the respective benefit of the Borrower and the Lenders.  As stated lienholder on the Titles to all of such Vehicles, the Lienholder agrees to take any and all reasonable actions as the Borrower (with the consent of the Lenders) or the Lenders may request in writing with respect to the Titles including, without limitation, all actions for which the Lienholder’s consent, waiver, release, vote or signature (or other action of similar nature) is necessary or advisable in the judgment of the Borrower or the Lenders in order to maintain, preserve and protect the Borrower’s security interest in such Vehicles and the Lenders’ security interest in the Borrower’s security interest in such Vehicles and if the Lienholder fails to take any or all such actions, the Lenders or any designee of the Lenders may take such actions at the sole expense of the Borrower, and the Lienholder hereby grants to the Lenders and any such designee an irrevocable power of attorney and license to take any and all such actions in the Lienholder’s name and on behalf of the Lienholder.

3.           Interests in the Vehicles.  Notwithstanding the fact that the Lienholder will be and remain noted as first lienholder (which is solely as stated lienholder) on the Titles to the Vehicles from time to time pledged to the Borrower and repledged to the Lenders, each party hereto hereby agrees that, on and after the date hereof:

(i)           except as set forth in subsection (ii) below and subject to the terms of any agreement between the Borrower and the Lenders, the Borrower is entitled to all incidents, benefits and risks of a holder of a first priority perfected security interest or ownership in and lien on the Vehicles;

(ii)           subject to the terms of any agreement between the Borrower and the Lenders, the Lenders is entitled to all incidents, benefits and risks of a holder of a first priority perfected security interest in and lien on the Borrower’s first priority perfected security interest in and lien on the Vehicles and the right to exercise or cause the exercise of all remedies with respect to the Vehicles, including the right to repossess, sell and otherwise transfer and dispose of the Vehicles at the times and subject to the terms of the Contract with the Obligor relating to such Vehicle;

(iii)           the Lienholder has no direct (or indirect) ownership or other rights or interest (including any security interest) in any of the Vehicles;

(iv)           the Lienholder will not take any action with respect to the Vehicles unless such action is consented to by the Lenders; and

(v)           the Lienholder shall not represent to any lender, financing source or other Person, that it has, or in any other manner hold itself out as having, any direct or indirect ownership interest or any other rights or interests (including any security interest) in any of the Vehicles, except for any rights it may have as nominee lienholder hereunder with respect to the Vehicles.

On the Collection Date, the Lienholder shall, at the expense of the Borrower, return the Titles to the Borrower along with a power of attorney, if necessary to substitute Borrower or Lenders as stated lienholder on all Titles, and the Lienholder shall have no further responsibility for removing the Lienholder as stated lienholder on the Titles.

Exh. E-2

4.           Entire Agreement.  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter of this Agreement and supersedes any prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof.

5.           Remittance of Proceeds.  In the event that Lienholder receives any insurance proceeds or other payments or proceeds in respect of the Vehicles, it shall hold the same in trust and notify the Borrower and the Lenders of the receipt thereof, and shall remit promptly such payments or proceeds to the account specified by the Lenders as set forth herein, or as otherwise identified by the Lenders from time to time by written notice, but in no event later than the fifth day following receipt of such payments or proceeds.

6.           Documentation.  From and after the date hereof, to the extent that Lienholder from time to time receives any certificate of title or notifications of lienholder status relating to any Vehicle, Lienholder shall promptly forward the same to U.S. Bank (or, following the delivery of written notice from Lenders to such effect, the Lenders).

7.           Nonpetition.  Lienholder hereby agrees that it will not institute against, or join any other person or entity in instituting against Borrower any proceeding under any bankruptcy, reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction until two years and one day shall have elapsed since the payment in full of all indebtedness and other obligations owed by Borrower to the Lenders, Lenders’ Bank and Collateral Agent with respect to the Loan Transactions.

8.           Succession and Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Neither the Lienholder nor the Borrower may assign either this Agreement or any of its respective rights, interests, or obligations hereunder without the prior written approval of the Lenders.

9.           Counterparts.  This Agreement may be executed in separate counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

10.           Headings.  The section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.

11.           Notices.  All notices, requests, demands, claims and other communications hereunder will be in writing.  Any notice, request, demand, claim, or other communication hereunder will be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to the Lienholder:

Exh. E-3

 If to the Borrower:

LEAF Capital Funding III, LLC

1818 Market Street, 9^th Floor

Philadelphia, Pa  19103

Attention: Miles Herman

Facsimile No.: (215) 640-6363

Confirmation No.: (215) 717-3358

If to the Lenders:

Morgan Stanley Bank

1221 Avenue of the Americas

New York, NY  10020

Attention: Peter Woroniecki

Facsimile No.: (212) 762-6943

Confirmation No.: (212) 762-6942

Morgan Stanley Asset Funding Inc.

1221 Avenue of the Americas

New York, NY  10020

Attention: Peter Woroniecki

Facsimile No.: (212) 762-6943

Confirmation No.: (212) 762-6942

Any party hereto may give written notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it is actually received by the intended recipient.  Any party hereto may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth.

12.           Governing Law.  This agreement shall, in accordance with section 5-1401 and 5-1402 of the General Obligations Law of the State of New York, be governed by the laws of the State of New York, without regard to any conflicts of law principles thereof that would call for the application of the laws of any other jurisdiction.

13.           Consent to Jurisdiction; Waiver of Jury Trial; Etc.  Any legal action or proceeding with respect to this agreement may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this agreement, each party hereto hereby accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts.  The guarantor hereby irrevocably waives, in connection with any such action or proceeding, (i) trial by jury, (ii) to the extent it may effectively do so under applicable law, any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions and (iii) the right to interpose any set-off, counterclaim or cross-claim (unless such set-off, counterclaim or cross-claim could not, by reason of any applicable federal or state procedural laws, be interposed, pleaded or alleged in any other action).

Exh. E-4

14.           Amendments and Waivers.  No amendment of any provision of this Agreement will be valid unless the same will be in writing and signed by each of the parties hereto.  No waiver by the Lenders of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any such prior or subsequent occurrence.

15.           Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

16.           Definitions.  Capitalized terms used herein but not previously defined herein have the following meanings:

(i)           “Collection Date” means the date on which (a) the aggregate outstanding principal amount of the loans under the Loan Transactions have been repaid in full and all interest and fees and all other obligations of the Borrower thereunder have been paid in full, and (b) the Lenders shall have no further obligation to make additional loans.

(ii)           “Contract” means a finance lease contract or a secured loan contract with respect to one or more Vehicles and includes the rights to all payments from the Obligor thereunder.

(iii)           “Obligor” means each person obligated to make payments under a Contract and which is the owner or co-owner of the related Vehicle(s).

(iv)           “Registrar of Titles” means with respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.

(v)           “Servicer” means LEAF Financial Corporation.

(vi)           “Title” means with respect to a Vehicle, an original certificate of title issued by the Registrar of Titles of the applicable state.

(vii)           “Vehicle” means a new or a used automobile, minivan, sports utility vehicle, light duty truck or heavy duty truck in which Borrower or Funding has acquired an ownership or security interest.

[Signature page to follow.]

Exh. E-5

In Witness Whereof, the parties hereto have duly executed this Agreement as of the date first above written.  

[LIENHOLDER]

By:_______________________________

Name:_________________________

Title:__________________________

LEAF CAPITAL FUNDING III, LLC,

as Borrower

By:______________________________

Name:________________________

Title:_________________________

MORGAN STANLEY BANK, as Class A Lender

By:_____________________________

Name:________________________

Title:_________________________

MORGAN STANLEY ASSET FUNDING INC., as Class B Lender

By:_____________________________

Name:________________________

Title:_________________________

Exh. E-6

EXHIBIT F

FORM OF NOTICE OF BORROWING

NOTICE OF BORROWING

                                                                                                           November __, 2007

To:           Morgan Stanley Bank/Morgan Stanley Asset Funding Inc.

           1221 Avenue of the Americas

           New York, NY 10020

           Attn: Peter Woroniecki

Notice of Borrowing No.:  [1]

Gentlemen:

Reference is made to the Receivables Loan and Security Agreement dated as of November 1, 2007 (the “Loan Agreement”), among LEAF Capital Funding III, LLC, (the “Borrower”), Leaf Financial Corporation, as the Servicer, Morgan Stanley Bank, as Class A Lender and Morgan Stanley Asset Funding Inc., as Class B Lender, U.S. Bank National Association, as the Custodian and the Lenders’ Bank and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) as the Backup Servicer.  Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Loan Agreement.

In accordance with Sections 2.02(b) and 6.10(c) of the Loan Agreement, the Borrower hereby certifies that, after giving effect to the Borrowing requested to occur on November 7, 2007:

1. Requested aggregate amount of Borrowing:

Class A Loan: $__________

Class B Loan: $__________

2. Requested date of Borrowing: November 7, 2007

3. In connection with this Borrowing we Pledge to you the Eligible Receivables set forth on the Schedule of Receivables attached hereto.

Exh. F-1

Payments in connection with this Borrowing should be deposited to the following account:  _________________________.

(Signature page to follow)

Exh. F-2

Very truly yours,

LEAF CAPITAL FUNDING III, LLC

By:                                                                           

Name:   Miles Herman

Title:     Vice President

Exh. F-3

EXHIBIT G

Reserved.

Exh. G-1

EXHIBIT H-1

FORM OF CLASS A NOTE

CLASS A NOTE

US $333,380,316.91	New York, New York
	November 7, 2007

FOR VALUE RECEIVED, LEAF Capital Funding III, LLC, a Delaware limited liability company (the “Borrower”), promises to pay to the order of MORGAN STANLEY BANK (the “Lender”) the principal amount of the Class A Loan made by Lender to Borrower pursuant to the Receivables Loan and Security Agreement, dated as of November 1, 2007, as amended or modified (the “RLSA”), among the undersigned, LEAF Financial Corporation, as Servicer, the Lender, in its capacity as Class A Lender, Class B Lender and Collateral Agent, U.S. Bank National Association, as the Custodian and the Lenders’ Bank, and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services).  Such principal payments shall be made in the amounts and on the dates provided for in the RLSA; provided, however, that the entire unpaid principal amount of this Class A Note shall be due and payable on November 1, 2008.  Borrower also promises to pay interest on the unpaid principal amount of the Class A Loan on the dates and at the rate or rates provided for in the RLSA.  All such payments of principal and interest shall be made in the currencies and at the offices required under the RLSA.

This Class A Note is one of the promissory notes referred to in Section 2.01(b) of the RLSA and is subject to all terms of the RLSA.  Terms defined in the RLSA are used herein with the same meanings.

The Borrower hereby expressly waives presentment, demand, notice of protest and all other further demands and further notices in connection with the delivery, acceptance, performance, default or enforcement of this Class A Note and RLSA, and an action for amounts due hereunder or thereunder shall immediately accrue.

The Class A Loan by Lender, the respective dates on which the principal is due and all repayments of the principal thereof shall be recorded by Lender pursuant to its normal business practice; provided that the failure of Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under the first paragraph of this Class A Note or under the RLSA.

[Remainder of page intentionally left blank]

Reference is made to the RLSA for provisions for the prepayment hereof and the acceleration of the maturity hereof.

LEAF CAPITAL FUNDING III, LLC

By: _________________________

Name:

Title:

Exh. H.1-3

EXHIBIT H-2

FORM OF CLASS B NOTE

CLASS B NOTE

US$34,712,616.32	New York, New York
	November 7, 2007

FOR VALUE RECEIVED, LEAF Capital Funding III, LLC, a Delaware limited liability company (the “Borrower”), promises to pay to the order of MORGAN STANLEY ASSET FUNDING INC. (the “Lender”) the principal amount of $34,712,616.32 in accordance with the Receivables Loan and Security Agreement, dated as of November 1, 2007, as amended or modified (the “RLSA”), among the undersigned, LEAF Financial Corporation, as Servicer, Morgan Stanley Bank in its capacity as Class A Lender and Collateral Agent, the Lender as Class B Lender, U.S. Bank National Association, as the Custodian and the Lenders’ Bank, and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services).  Such principal payments shall be made in the amounts and on the dates provided for in the RLSA; provided, however, that the entire unpaid principal amount of this Class B Note shall be due and payable on November 1, 2008.  Borrower also promises to pay interest on the unpaid principal amount of this Class B Note on the dates and at the rate or rates provided for in the RLSA.  All such payments of principal and interest shall be made in the currencies and at the offices required under the RLSA.

This Class B Note is one of the promissory notes referred to in Section 2.01(b) of the RLSA and is subject to all terms of the RLSA.  Terms defined in the RLSA are used herein with the same meanings.

The Borrower hereby expressly waives presentment, demand, notice of protest and all other further demands and further notices in connection with the delivery, acceptance, performance, default or enforcement of this Class B Note and RLSA, and an action for amounts due hereunder or thereunder shall immediately accrue.

The original principal amount of this Class B Note, the respective dates on which the principal is due and all repayments of the principal thereof shall be recorded by Lender pursuant to its normal business practice; provided that the failure of Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under the first paragraph of this Class B Note or under the RLSA.

[Remainder of page intentionally left blank]

Reference is made to the RLSA for provisions for the prepayment hereof and the acceleration of the maturity hereof.

LEAF CAPITAL FUNDING III, LLC

By: _________________________

Name:

Title:

Exh. H-2-2

EXHIBIT I

CLOSING CHECKLIST

Exh. I-1

TABLE OF CONTENTS

		PAGE
ARTICLE I	DEFINITIONS	1
Section 1.01	Certain Defined Terms	1
Section 1.02	Other Terms	26
Section 1.03	Computation of Time Periods	26
ARTICLE II	THE RECEIVABLES FACILITY	26
Section 2.01	Borrowings	26
Section 2.02	The Borrowing.	27
Section 2.03	Determination of Interest Periods and Interest Rates.	27
Section 2.04	Remittance Procedures	28
Section 2.05	Reserved.	31
Section 2.06	Reserved.	31
Section 2.07	Payments and Computations, Etc	31
Section 2.08	Fees	32
Section 2.09	Increased Costs; Capital Adequacy	32
Section 2.10	Collateral Assignment of Agreements	33
Section 2.11	Grant of a Security Interest	34
Section 2.12	Evidence of Debt	35
Section 2.13	Release of Pledged Receivables	35
Section 2.14	Treatment of Amounts Paid by the Borrower	35
Section 2.15	Prepayment; Certain Indemnification Rights; Termination	35
Section 2.16	Increase of Borrowing Limit	37
ARTICLE III	CONDITIONS OF LOANS	37
Section 3.01	Conditions Precedent to Borrowing	37
Section 3.02	Conditions Precedent to All Borrowings	37
Section 3.03	Advances Do Not Constitute a Waiver	39
ARTICLE IV	REPRESENTATIONS AND WARRANTIES	40
Section 4.01	Representations and Warranties of the Borrower	40
Section 4.02	Representations and Warranties of the Servicer	43
Section 4.03	Resale of Receivables Upon Breach of Covenant or Representation and Warranty by Borrower	45
Section 4.04	Representations and Warranties of the Lenders	46
ARTICLE V	GENERAL COVENANTS OF THE BORROWER AND THE SERVICER	46
Section 5.01	General Covenants	46
Section 5.02	Check-in Requirements.	50
ARTICLE VI	ADMINISTRATION AND SERVICING; CERTAIN COVENANTS	51
Section 6.01	Appointment and Designation of the Servicer	51
Section 6.02	Collection of Receivable Payments; Modification and Amendment of Receivables; Lockbox Agreements	53

- i -

		PAGE
Section 6.03	Realization Upon Receivables	53
Section 6.04	Insurance Regarding Equipment	54
Section 6.05	Maintenance of Security Interests in Obligor Collateral	54
Section 6.06	Pledged Receivable Receipts	55
Section 6.07	No Rights of Withdrawal	55
Section 6.08	Permitted Investments	55
Section 6.09	Servicing Compensation	56
Section 6.10	Reports to the Lenders; Account Statements; Servicing Information	56
Section 6.11	Statements as to Compliance; Financial Statements	57
Section 6.12	Access to Certain Documentation; Obligors; Background Check	59
Section 6.13	Backup Servicer	60
Section 6.14	Additional Remedies of Lenders Upon Event of Default	64
Section 6.15	Waiver of Defaults	64
Section 6.16	Maintenance of Certain Insurance	65
Section 6.17	Segregation of Collections	65
Section 6.18	UCC Matters; Protection and Perfection of Pledged Assets	66
Section 6.19	Servicer Advances	66
Section 6.20	Repurchase of Receivables Upon Breach of Covenant or Representation and Warranty by Servicer	66
Section 6.21	Compliance with Applicable Law	67
Section 6.22	Receipt of Certificates of Title	67
Section 6.23	Lenders’ Bank Limitation of Liability	67
ARTICLE VII	EVENTS OF DEFAULT	68
Section 7.01	Events of Default	68
Section 7.02	Additional Remedies of the Lenders	71
ARTICLE VIII	INDEMNIFICATION	71
Section 8.01	Indemnities by the Borrower	71
Section 8.02	Indemnities by Servicer	74
ARTICLE IX	MISCELLANEOUS	76
Section 9.01	Amendments and Waivers	76
Section 9.02	Notices, Etc	76
Section 9.03	No Waiver; Remedies	76
Section 9.04	Binding Effect; Assignability; Multiple Lenders	76
Section 9.05	Term of This Agreement	77
Section 9.06	GOVERNING LAW; JURY WAIVER; CONSENT TO JURISDICTION	78
Section 9.07	Costs, Expenses and Taxes	78
Section 9.08	No Proceedings	79
Section 9.09	Recourse Against Certain Parties	79
Section 9.10	Execution in Counterparts; Severability; Integration	80
Section 9.11	Tax Characterization	80

- ii -

		PAGE
Section 9.12	Calculation of Performance Triggers	80
ARTICLE X	THE COLLATERAL AGENT	81
Section 10.01	No Implied Duties	81
Section 10.02	Limits on Liability	81
Section 10.03	Acknowledgement	81

- iii -

LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

SCHEDULE I Condition Precedent Documents

SCHEDULE II Prior Names, Tradenames, Fictitious Names and “Doing Business As” Names

SCHEDULE III Representations and Warranties with Respect to Eligible Receivables, Eligible Contracts and Eligible Underlying Originators

SCHEDULE IV Credit and Collection Policy

SCHEDULE V Equipment Categories

SCHEDULE VI Addresses for Notice

SCHEDULE VII Remittance Report Information

EXHIBITS

EXHIBIT A Form of Facility Limit Certificate

EXHIBIT B Form of Required Data Fields

EXHIBIT C Form of Monthly Remittance Report

EXHIBIT D-1 Form of Lease Contract

EXHIBIT D-2 Form of Loan Contract

EXHIBIT D-3 Form of Loan Contract

EXHIBIT E Form of Vehicle Lienholder Nominee Agreement

EXHIBIT F Form of Notice of Borrowing

EXHIBIT G Reserved

EXHIBIT H-1 Form of Class A Note

EXHIBIT H-2 Form of Class B Note

EXHIBIT I Closing Checklist

iv

EX-31.1

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 December 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:  February 11, 2008	Jonathan Z. Cohen
	Chief Executive Officer

EX-31.2

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 December 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:  February 11, 2008	Steven J. Kessler
	Executive Vice President and Chief Financial Officer

EX-32.1

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 December 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:  February 11, 2008	Jonathan Z. Cohen
	Chief Executive Officer

EX-32.2

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 December 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:  February 11, 2008	Steven J. Kessler
	Executive Vice President and Chief Financial Officer