LEAF EQUIPMENT LEASING INCOME FUND III, L.P. DEALER-MANAGER AGREEMENT WITH CHADWICK SECURITIES, INC.

Page

  1.

Description of Units

1

  2.

Representations, Warranties and Covenants of the Partnership and General Partner

2

  3.

Grant of Authority to the Dealer-Manager

3

  4.

Compensation and Fees

3

  5.

Representations, Warranties and Covenants of the Dealer-Manager

6

  6.

State Securities Registration

11

  7.

Expense of Sale

12

  8.

Conditions of the Dealer-Manager’s Duties

12

  9.

Conditions of the Partnership’s and the General Partner’s Duties

12

10.

Indemnification and Contribution

12

11.

Representations and Agreements to Survive Delivery

15

12.

Termination

15

13.

Notices

15

14.

Format of Checks/Escrow Agent

16

15.

Transmittal Procedures

16

16.

Parties

17

17.

Relationship

17

18.

Effective Date

17

19.

Entire Agreement, Waiver

17

20.

Governing Law

17

21.

Complaints

17

22.

Privacy

18

23.

Anti-Money Laundering Provision

18

24.

Acceptance

18

RE:

LEAF EQUIPMENT LEASING INCOME FUND III, L.P.

1.

Description of Units.

(a)

The Partnership proposes to issue and sell limited partner interests in the Partnership (the “Units”) at a price of $100 per Unit, subject to the discounts set forth in Section 4(c) for certain investors (the “Offering”). Except as provided in Section 4(f) relating to the Iowa and Pennsylvania Escrow Account, as that term is defined therein, the proceeds of any sales of the Units will be held in an escrow account (the “Escrow Account”) under an escrow agreement, a form of which is attached to this Agreement as Exhibit “A” (the “Escrow Agreement”), until the Partnership has received and accepted subscriptions for the Minimum Offering Amount, as that term is defined in paragraph (b) below. At that time, the Escrow Account will terminate and the subscription proceeds will be delivered to the Partnership.

(b)

No subscriptions to the Partnership will be accepted after whichever of the following events occurs first (the “Offering Termination Date”):

(i)

receipt and acceptance of subscriptions for 1,200,000 Units ($120 million);

(ii)

___________, 200__, if subscriptions for 20,000 Units ($2 million), excluding Units sold to the General Partner and its “Affiliates,” as that term is defined in the Partnership Agreement, Units sold to Iowa and Pennsylvania residents and the subscription price discounts set forth in Section 4(c) for certain investors (the “Minimum Offering Amount”), have not been received and accepted by that date; or

(iii)

___________, 200__;

2.

Representations, Warranties and Covenants of the Partnership and General Partner. The Partnership and General Partner represent, warrant and covenant to you that:

(a)

The Partnership has prepared and filed with the Securities and Exchange Commission (the “Commission”) in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the “1933 Act”), a registration statement on Form S-1, including a prospectus relating to the offer and sale of the Units, (the “Registration Statement”). The term “Prospectus” means the prospectus in the form included in the Registration Statement. The Registration Statement has been declared effective by the Commission, and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the Commission.

(b)

The Prospectus, as supplemented or amended, does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(c)

The Partnership will advise you before it files any amendment to the Registration Statement or makes any amendment or supplement to the Prospectus.

(d)

As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for as long as, in the opinion of your counsel, a prospectus is required by the 1933 Act to be delivered in connection with sales by any dealer, the Partnership will expeditiously deliver to you and each Selling Dealer, as that term is defined in Section 3(a), without charge, as many copies of the Prospectus (and of any amendment or supplement to the Prospectus) as you may reasonably request. If during the offering period any event occurs that in the judgment of the Partnership or in the opinion of your counsel is required to be set forth in the Prospectus (as then amended or supplemented) or should be set forth in the Prospectus in order to make the statements in the Prospectus, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Prospectus to comply with the 1933 Act or any other law, the Partnership will promptly prepare and file with the Commission an appropriate supplement or amendment to the Prospectus, and will expeditiously furnish a reasonable number of copies thereof to you and the Selling Dealers, as that term is defined in Section 3(a).

(e)

The Units when issued will conform, in all material respects, to all statements concerning them contained in the Prospectus.

(f)

The Units when issued will be duly authorized and validly issued as set forth in the Amended and Restated Agreement of Limited Partnership of the Partnership included as Appendix A to the Prospectus (the “Partnership Agreement”), subject only to the rights and obligations set forth in the Partnership Agreement or imposed by the laws of the state of the Partnership’s formation or of any jurisdiction to the laws of which the Partnership is subject.

(g)

The Partnership was duly formed and is validly existing as a limited partnership in good standing under the laws of the State of Delaware, with full power and authority to own its properties and conduct its business as described in the Prospectus. The Partnership will be qualified to do business as a limited partnership or similar entity offering limited liability in those jurisdictions where the General Partner deems the qualification necessary to assure limited liability of the limited partners.

(h)

The consummation of the transactions contemplated by this Agreement will not result in the following:

(i)

any breach of any of the terms of, or a default under the articles of organization or the operating agreement of the General Partner, the certificate of limited partnership or Partnership Agreement of the Partnership or any other indenture, agreement or instrument to which either of them is a party or by which either of them is bound; or

(ii)

any violation of any order applicable to either of them of any court or any governmental regulatory body or administrative agency having jurisdiction over either of them or their affiliates.

3.

Grant of Authority to the Dealer-Manager.

(a)

Based on the representations and warranties contained in this Agreement, and subject to the terms and conditions set forth in this Agreement, the General Partner appoints you as the Dealer-Manager for the Partnership and gives you the exclusive right to solicit subscriptions for the Units on a “best efforts” basis in all states, and to form and manage a selling group composed of soliciting broker/dealers (the “Selling Dealers”). Each Selling Dealer shall be duly registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and in the jurisdictions where it is required to be registered in order to offer and sell the Units, shall be a member in good standing of the National Association of Securities Dealers, Inc. (the “NASD”), and shall enter into a “Selling Dealer Agreement” in substantially the form attached to this Agreement as Exhibit “B.”

(b)

The General Partner shall have three business days after the receipt of an executed Selling Dealer Agreement to refuse that Selling Dealer’s participation.

4.

Compensation and Fees.

(a)

Subject to Section 4(c), as Dealer-Manager you shall receive from the General Partner the following compensation, based on the purchase price of each Unit sold to investors and whose subscriptions for Units are accepted by the General Partner:

(i)

a 3% Dealer-Manager fee;

(ii)

a 7% sales commission; and

(iii)

an up to .5% reimbursement of the Selling Dealers’ bona fide accountable due diligence expenses.

(i)

an accountable reimbursement for bona fide training and education meetings for associated persons of the Selling Dealers;

(ii)

gifts that do not exceed $100 per person per year and are not preconditioned on achievement of a sales target;

(iii) 

(iv)

contributions to a non-cash compensation arrangement between a Selling Dealer and its associated persons, provided that neither the Partnership, the General Partner nor you directly or indirectly participates in the Selling Dealer’s organization of a permissible non-cash compensation arrangement.

(b)

All of the sales commissions shall be reallowed to the Selling Dealers except for Units sold directly by you, and all of the up to .5% reimbursement of the Selling Dealers’ bona fide accountable due diligence expenses shall be reallowed to the Selling Dealers. Wholesaling fees, expense reimbursements and any salaries for the wholesalers in connection with the Partnership shall be reallowed to the wholesalers from the 3% Dealer-Manager fee for subscriptions obtained through their efforts, however, the Dealer-Manager shall have no liability at any time to the wholesalers for any of those items in connection with the Partnership to the extent, if any, the wholesaling fees, expense reimbursements and salaries to the wholesalers exceed, in the aggregate, the 3% Dealer-Manager fee. You, as Dealer-Manager, shall retain any Dealer-Manager fee not used for the Selling Dealers’ marketing fees or reallowed to the wholesalers, which may be used for such items as Permissible Non-Cash Compensation, legal fees associated with the underwriting and salaries of dual employees of you and the Managing General Partner which are required to be included in underwriting compensation under NASD Conduct Rule 2810 as determined jointly by the General Partner and you.

(i)

the registered representative obtains his Selling Dealer’s prior approval to attend the meeting and attendance by the registered representative is not conditioned by the Selling Dealer on the achievement of a sales target;

(ii)

the location of the bona fide training and education meeting is appropriate to the purpose of the meeting as defined in NASD Conduct Rule 2810;

(iii)

the payment or reimbursement is not applied to the expenses of guests of the registered representative;

(iv)

the payment or reimbursement by you or the General Partner is not conditioned by you or the General Partner on the achievement of a sales target; and

(v)

the recordkeeping requirements are met.

(c)

Notwithstanding the foregoing:

(i)(A)

the General Partner, its officers, directors and Affiliates, including you;

(B)

investors who buy Units through the officers and directors of the General Partner;

(C)

registered investment advisors and their clients; and

(D)

Selling Dealers and their registered representatives and principals;

(ii)

the up to .5% reimbursement of the Selling Dealers’ bona fide accountable due diligence expenses shall not be paid to you for Units sold to:

(A)

the General Partner, its officers, directors or Affiliates, including you; or

(B)

investors who buy Units through the officers and directors of the General Partner; and

(1)

additional Units sold at the Distribution Investment Unit Price to investors who previously purchased at least 50 Units ($5,000) and elected to use distributions to them from the Partnership before the Offering Termination Date to purchase the additional Units and without a minimum number of additional Units required to be purchased; and

(2)

Units sold at the Distribution Investment Unit Price to investors (other than residents of Ohio) who previously invested in Lease Equity Appreciation Fund I, L.P. (“LEAF I”) or Lease Equity Appreciation Fund II, L.P. (“LEAF II”) and elected to use distributions to them from LEAF I, LEAF II, or both, before the Offering Termination Date as provided in the Letter of Direction and Authorization to LEAF Financial Corporation, to purchase the Units and without a minimum number of Units required to be purchased.

(d)

Subject to Section 4(f), pending receipt and acceptance by the General Partner of subscriptions for the Minimum Offering Amount, all proceeds received by you from the sale of Units shall be held in the Escrow Account as provided in Section 14.

(i)

the Dealer-Manager fee, the sales commission and the up to .5% reimbursement of the Selling Dealers’ bona fide accountable due diligence expenses shall not be payable to you;

(ii)

all funds advanced by subscribers shall be returned to them with interest earned, if any, and without deduction for any fees; and

(iii)

you shall deliver a termination letter in the form provided to you by the General Partner to each of the subscribers and to each of the offerees previously solicited by you and the Selling Dealers in connection with the offering of the Units.

(e)

Except as otherwise provided below, the fees, reimbursements, and sales commissions set forth in Section 4(a) shall be paid to you within five business days after the following:

(i)

at least the Minimum Offering Amount has been received and accepted by the Partnership; and

(ii)

the subscription proceeds have been released from the Escrow Account to the Partnership.

(i)

the Minimum Offering Amount shall not include Units subscribed for by Iowa or Pennsylvania investors;

(ii)

the subscription proceeds from Iowa and Pennsylvania investors shall be deposited in a separate escrow account (the “Iowa and Pennsylvania Escrow Account”) by the Escrow Agent; and

(iii)

no subscription proceeds shall be released from the Iowa and Pennsylvania Escrow Account, and no fees, reimbursements or commissions shall be payable with respect to Units sold to Iowa and Pennsylvania investors, until an aggregate of $6,000,000 of subscription proceeds, including the subscription proceeds of Iowa and Pennsylvania investors and after any discounts set forth in paragraph (c) above for certain investors, have been received and accepted by the General Partner.

5.

Representations, Warranties and Covenants of the Dealer-Manager. You represent, warrant and covenant to the General Partner and the Partnership that:

(a)

You are a corporation duly organized, validly existing and in good standing under the laws of the state of your formation or of any jurisdiction in which your ownership of property or conduct of business requires you to be so qualified. You have all requisite power and authority to enter into this Agreement and to carry out your obligations under this Agreement.

(b)

This Agreement, when executed by you, will be duly authorized, executed and delivered by you and a valid and binding agreement on your part and enforceable in accordance with its terms except as may be limited by the effect of bankruptcy, insolvency, moratorium, preferential or fraudulent conveyance or other similar laws or equitable principles relating to or affecting the rights of creditors generally, by general principles of equity, and by public policy relating to claims for indemnification for securities laws violations.

(c)

The consummation of the transactions contemplated by this Agreement will not result in the following:

(i)

any breach of any of the terms or conditions of, or a default under your Articles of Incorporation or Bylaws, or any other indenture, agreement or instrument to which you are a party or by which you are bound; or

(ii)

any violation of any order applicable to you of any court, regulatory body or administrative agency having jurisdiction over you or your affiliates.

(d)

You are duly registered under the 1934 Act as a broker and dealer, and you are a member in good standing of the NASD. You are duly registered as a broker and dealer in the states where you are required to be registered in order to carry out your obligations as contemplated by this Agreement and the Prospectus. You agree to maintain all the foregoing registrations in good standing throughout the term of the offer and sale of the Units, and you agree to comply with all statutes and other requirements applicable to you as a broker or dealer under those registrations.

(A)

A member or person associated with a member shall not underwrite or participate in a public offering of a direct participation program unless standards of suitability have been established by the program for participants therein and such standards are fully disclosed in the prospectus and are consistent with the provisions of subparagraph (B) of this section.

(B)

In recommending to a participant the purchase, sale or exchange of an interest in a direct participation program, a member or person associated with a member shall:

(i)

have reasonable grounds to believe, on the basis of information obtained from the participant concerning his investment objectives, other investments, financial situation and needs, and any other information known by the member or associated person, that:

(a)

the participant is or will be in a financial position appropriate to enable him to realize to a significant extent the benefits described in the prospectus, including the tax benefits where they are a significant aspect of the program;

(b)

the participant has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and

(c)

the program is otherwise suitable for the participant; and

(ii)

maintain in the files of the member documents disclosing the basis upon which the determination of suitability was reached as to each participant.

(C)

Notwithstanding the provisions of subparagraphs (A) and (B) hereof, no member shall execute any transaction in a direct participation program in a discretionary account without prior written approval of the transaction by the customer.

(A)

Prior to participating in a public offering of a direct participation program, a member or person associated with a member shall have reasonable grounds to believe, based on information made available to him by the sponsor through a prospectus or other materials, that all material facts are adequately and accurately disclosed and provide a basis for evaluating the program.

(B)

In determining the adequacy of disclosed facts pursuant to subparagraph (A) hereof, a member or person associated with a member shall obtain information on material facts relating at a minimum to the following, if relevant in view of the nature of the program:

(i)

items of compensation;

(ii)

physical properties;

(iii)

tax aspects;

(iv)

financial stability and experience of the sponsor;

(v)

the program’s conflicts and risk factors; and

(vi)

appraisals and other pertinent reports.

(C)

For purposes of subparagraphs (A) and (B) hereof, a member or person associated with a member may rely upon the results of an inquiry conducted by another member or members, provided that:

(i)

the member or person associated with a member has reasonable grounds to believe that such inquiry was conducted with due care;

(ii)

the results of the inquiry were provided to the member or person associated with a member with the consent of the member or members conducting or directing the inquiry; and

(iii)

no member that participated in the inquiry is a sponsor of the program or an affiliate of such sponsor.

(D)

Prior to executing a purchase transaction in a direct participation program, a member or person associated with a member shall inform the prospective participant of all pertinent facts relating to the liquidity and marketability of the program during the term of investment.

(f)

You agree to advise the General Partner in writing of each jurisdiction in which you and the Selling Dealers propose to offer or sell the Units; and you shall not nor shall you permit any Selling Dealer to offer or sell the Units in any jurisdiction until you have been advised in writing by the General Partner, or the General Partner’s special counsel, that the offer or sale of the Units:

(i)

has been qualified in the jurisdiction;

(ii)

is exempt from the qualification requirements imposed by such jurisdiction; or

(iii)

is otherwise not required to be qualified.

(g)

You and the Selling Dealers have received copies of the Prospectus relating to the Units and you and the Selling Dealers have relied only on the statements contained in the Prospectus and not on any other statements whatsoever, either written or oral, with respect to the details of the Offering.

(i)

a copy of the Prospectus; and

(ii)

any supplement or amendment to the Prospectus.

(i)

a brochure entitled “LEAF Equipment Leasing Income Fund III, L.P.”;

(ii)

an investor slide show presentation and script entitled “LEAF Equipment Leasing Income Fund III, L.P.”; and

(iii)

any additional investor-use materials prepared by the Partnership or the General Partner.

(h)

If a supplement or amendment to the Prospectus is prepared and delivered to you by the Partnership, you agree and shall require any Selling Dealer to agree as follows:

(i)

to distribute each supplement or amendment to the Prospectus to every person who has previously received a copy of the Prospectus from you and/or the Selling Dealer; and

(ii)

to include each supplement or amendment in all future deliveries of the Prospectus.

(i)

In connection with any offer or sale of the Units you agree and shall require any Selling Dealer to agree to the following:

(i)

to comply in all respects with statements set forth in the Prospectus, the Partnership Agreement, and any supplements or amendments to the Prospectus;

(ii)

not to make any statement inconsistent with the statements in the Prospectus, the Partnership Agreement, and any supplements or amendments to the Prospectus;

(iii)

not to make any untrue or misleading statements of a material fact in connection with the Offering; and

(iv)

not to provide any written information, statements, or sales materials other than the Prospectus, the Sales Literature, and any supplements or amendments to the Prospectus unless approved in writing by the General Partner.

(j)

You agree to use your best efforts in the solicitation and sale of the Units and to coordinate and supervise the efforts of the Selling Dealers, and you shall require any Selling Dealer to agree to use its best efforts in the solicitation and sale of the Units, including that:

(i)

the prospective purchasers meet the suitability requirements set forth in the Prospectus, the Subscription Agreement and this Agreement; and

(ii)

the prospective purchasers properly complete the Subscription Agreement, together with any additional forms provided in any supplement or amendment to the Prospectus, or otherwise provided to you by the General Partner to be completed by prospective purchasers.

(k)

Although not anticipated, if you assist in any transfers of the Units, then you shall comply, and you shall require any Selling Dealer to comply, with the requirements of Rule 2810(b)(2)(B) and (b)(3)(D) of the NASD Conduct Rules.

(l)

You agree and covenant that:

(i)

the representations and warranties you make in this Agreement are and shall be true and correct at the applicable closing date; and

(ii)

you shall have fulfilled all your obligations under this Agreement at the applicable closing date.

6.

State Securities Registration. Incident to the offer and sale of the Units, the Partnership shall use its best efforts either in taking:

(a)

all necessary action and filing all necessary forms and documents deemed reasonable by it in order to qualify or register Units for sale under the securities laws of the jurisdictions requested by you; or

(b)

any necessary action and filing any necessary forms deemed reasonable by it in order to obtain an exemption from qualification or registration in those jurisdictions.

7.

Expense of Sale. Except as otherwise specifically set forth in this Agreement, the expenses in connection with the offer and sale of the Units shall be payable as set forth below.

(a)

The Partnership shall pay all expenses incident to the performance of its obligations under this Agreement, including the fees and expenses of its attorneys and accountants and all fees and expenses of registering or qualifying the Units for offer and sale in the states and jurisdictions as set forth in this Agreement, or obtaining exemptions from qualification or registration, even if this Offering is not successfully completed.

(b)

You shall pay all expenses incident to the performance of your obligations under this Agreement, including the formation and management of the selling group and the fees and expenses of your own counsel and accountants, even if this Offering is not successfully completed.

8.

Conditions of the Dealer-Manager’s Duties. Your obligations under this Agreement shall be subject to the accuracy, as of the date of this Agreement and at each applicable closing date of:

(a)

the representations and warranties of the Partnership and the General Partner made in this Agreement and

(b)

to the performance by the Partnership and the General Partner of their obligations under this Agreement.

(a)

the accuracy, as of the date of this Agreement and at each applicable closing date, of your representations and warranties made in this Agreement;

(b)

the performance by you of your obligations under this Agreement; and

(c)

the General Partner’s receipt, at or before the applicable closing date, of fully executed subscription documents for each prospective purchaser as required by this Agreement.

10.

Indemnification and Contribution.

(a)

The General Partner agrees to indemnify, hold harmless and defend you and your affiliates (within the meaning of Rule 405 of the ▇▇▇▇ ▇▇▇) and your respective directors, officers, employees, agents and controlling persons (within the meaning of Section 15 of the 1933 Act or Section 20 of the ▇▇▇▇ ▇▇▇) (each, an “Underwriter Indemnified Party”) from and against any and all losses, claims, damages, liabilities and expenses (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation) ( “Losses”) which any such Underwriter Indemnified Party may incur under any applicable federal or state law, or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except to the extent but only to the extent that such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information furnished in writing to the Partnership or the General Partner by or on behalf of you expressly for use in connection therewith; provided, further, that the indemnification contained in this paragraph (a) with respect to any Prospectus shall not inure to the benefit of any Underwriter Indemnified Party on account of any such Loss arising from the sale of the Units by such Underwriter Indemnified Party to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the 1933 Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Prospectus was corrected in an amendment to the Prospectus.

(b)

If any action, suit or proceeding is brought against any Underwriter Indemnified Party with respect to which indemnity may be sought under Section 10 (a), the Underwriter Indemnified Party shall promptly notify the General Partner in writing, and the General Partner may elect to assume the defense thereof, including the employment of counsel (which counsel shall be reasonably acceptable to the Underwriter Indemnified Party) and payment of all reasonable fees and expenses. The failure or delay by an Underwriter Indemnified Party to notify the General Partner shall not relieve it from liability which it may have to an Underwriter Indemnified Party unless the failure or delay materially prejudices the General Partner’s ability to defend the action, suit or proceeding on behalf of the Underwriter Indemnified Party. The Underwriter Indemnified Party shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in (but not control) the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Underwriter Indemnified Party unless:

(ii)

the General Partner has failed to assume the defense or employ counsel reasonably satisfactory to the Underwriter Indemnified Party; or

(iii)

the named parties to any such action, suit or proceeding (including any impleaded parties) include both the Underwriter Indemnified Party and/or the Partnership and the General Partner, and the Underwriter Indemnified Party has been advised by its counsel that representation of the Underwriter Indemnified Party and/or the Partnership and the General Partner by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the General Partner shall not have the right to assume the defense of the action, suit or proceeding on behalf of the Underwriter Indemnified Party) or that there may be legal defenses available to the Underwriter Indemnified Party that are different from or in addition to those available to the Partnership and/or the General Partner.

(c)

You agree to indemnify, hold harmless and defend the General Partner, the Partnership, their respective directors and officers who sign the Registration Statement, any person who controls the General Partner or the Partnership within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the Partnership’s attorneys (each, a “Partnership Indemnified Party”), to the same extent as the foregoing indemnity to you and the Selling Dealers, with respect to information furnished in writing by or on behalf of you expressly for use in the Registration Statement, the Prospectus or any amendment or supplement thereto or with respect to a breach of your duties, obligations, representations or warranties under this Agreement. If any action, suit or proceeding is brought against a Partnership Indemnified Party in respect of which indemnity may be sought under this Section 10(c), you shall have the rights and duties given to the General Partner under Section 10(b).

(i)

in the proportion that is appropriate to reflect the relative benefits received by the General Partner and the Partnership on the one hand and you and the Selling Dealers on the other hand from the Offering; or

(ii)

if, but only if, the allocation provided by clause (i) above is not permitted by applicable law, in the proportion that is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the General Partner and the Partnership on the one hand and you and the Selling Dealers on the other hand in connection with the statements or omissions that resulted in those Losses, as well as any other relevant equitable considerations.

(e)

No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action, suit or proceeding with respect to which any indemnified party is or could have been a party and indemnity could have been sought under this Section 10 by the indemnified party, unless the settlement includes an unconditional release of the indemnified party from all liability on the claims that are the subject matter of the action, suit or proceeding.

(f)

Any Losses for which an indemnified party is entitled to indemnification or contribution under this Section 10 shall be paid by the indemnifying party to the indemnified party as the Losses are incurred.

11.

Representations and Agreements to Survive Delivery. All representations, warranties, and agreements of the Partnership, the General Partner and you in this Agreement, including the indemnity agreements contained in Section 10, shall:

(a)

survive the delivery, execution and closing of this Agreement;

(b)

remain operative and in full force and effect regardless of any investigation made by or on behalf of: you or any person who controls you within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act; the General Partner, or any of its officers, directors or any person who controls the General Partner within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act; or any other indemnified party; and

(c)

survive the delivery of the Units.

12.

Termination.

(a)

You shall have the right to terminate this Agreement, other than the indemnification provisions of Section 10, by giving written notice any time at or before a closing date if:

(i)

the Partnership and the General Partner have failed, refused, or been unable at or before the closing date, to perform any of their obligations under this Agreement; or

(ii)

an event has materially and adversely affected the value of the Units.

(b)

The Partnership and the General Partner may terminate this Agreement, other than the indemnification provisions of Section 10, for any reason and at any time, by promptly giving written notice to you at or before a closing date.

13.

Notices.

(a)

Any notice, request or consent provided for or permitted to be given under this Agreement must be in writing and must be given by depositing it in the United States mail, addressed to the party to be notified, postpaid, and registered or certified with return receipt requested, or by delivering it in person or by telecopier to that party. Notice given by personal delivery or mail shall be effective on actual receipt. Notice given by telecopier shall be effective on actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours.

(b)

All notices to be sent to you shall be sent to ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇^▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President.

(c)

All notices to be sent to the General Partner or the Partnership shall be sent c/o LEAF Asset Management, LLC, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇^▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; or at such other address as such party may stipulate to the other parties in the manner provided in this Section.

14.

Format of Checks/Escrow Agent. Subject to Section 4(f) with respect to the deposit in escrow of subscriptions of Iowa and Pennsylvania residents before receipt and acceptance of $6,000,000 of subscriptions, until receipt of the Minimum Offering Amount of $2,000,000 the General Partner and you and the Selling Dealers, including customer carrying broker/dealers, agree that all subscribers shall be instructed to make their checks, drafts, or money orders payable solely to “LEAF Equipment Leasing Income Fund III, L.P. Escrow Account” for the Partnership under the Escrow Agreement, and you agree and shall require the Selling Dealers, including customer carrying broker/dealers, to agree to comply with Rule 15c2-4 adopted under the ▇▇▇▇ ▇▇▇.

15.

Transmittal Procedures. You and each Selling Dealer shall transmit received investor funds in accordance with the following procedures. For purposes of the following, the term “Selling Dealer” shall also include you as Dealer-Manager when you receive subscriptions from investors.

(a)

Pending receipt of the Minimum Offering Amount, but subject to Section 4(f) with respect to subscriptions from Iowa and Pennsylvania residents, the Selling Dealers on receipt of any check, draft or money order from a subscriber shall promptly transmit the check, draft, or money order and the original executed subscription documents to you, as Dealer-Manager, by the end of the next business day following receipt of the check, draft, or money order by the Selling Dealer. By the end of the next business day following your receipt of the check, draft, or money order and the original executed subscription documents, you, as Dealer-Manager, shall transmit the check, draft, or money order and a copy of the executed subscription agreement to the Escrow Agent, and the original executed subscription documents and a copy of the check, draft, or money order to the General Partner.

(b)

On receipt by you, as Dealer-Manager, of notice from the General Partner that the Minimum Offering Amount has been received, the General Partner, you, and the Selling Dealers agree that, subject to Section 4(f) with respect to subscriptions from Iowa and Pennsylvania residents, all subscribers then may be instructed, in the General Partner’s sole discretion, to make their checks, drafts, or money orders payable solely to “LEAF Equipment Leasing Income Fund III, L.P. Subscription Account.”

16.

Parties. This Agreement shall inure to the benefit of and be binding on you, the Partnership, the General Partner and any respective successors and assigns. This Agreement shall also inure to the benefit of the indemnified parties and their successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit of the parties to this Agreement, and their respective successors and assigns, and the indemnified parties and their successors and assigns, and for the benefit of no other person. No other person shall have any legal or equitable right, remedy or claim under or with respect to this Agreement. No purchaser of any of the Units from you or a Selling Dealer shall be construed to be a successor or assign merely by reason of the purchase.

17.

Relationship. This Agreement shall not constitute you a partner of the General Partner, the Partnership, or any general partner of the Partnership, nor render the General Partner, the Partnership, or any general partner of the Partnership liable for any of your obligations.

18.

Effective Date. This Agreement is made effective among the parties to this Agreement as of the date accepted by you as indicated by your signature to this Agreement.

19.

Entire Agreement, Waiver.

(a)

This Agreement constitutes the entire agreement among the parties to this Agreement, and shall not be amended or modified in any way except by subsequent agreement executed in writing.

(b)

Any party to this agreement may waive, but only in writing, any term, condition, or requirement under this Agreement that is intended for its benefit. However, any written waiver of any term or condition of this Agreement shall not operate as a waiver of any other breach of that term or condition. Also, any failure to enforce any provision of this Agreement shall not operate as a waiver of that provision or any other provision of this Agreement.

20.

Governing Law. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. Unless the context otherwise requires, “Section” references in this Agreement are references to Sections of this Agreement.

21.

Complaints. The General Partner and you, as Dealer-Manager, agree as follows:

(a)

to notify the other if either receives an investor complaint in connection with the offer or sale of Units by you or a Selling Dealer;

(b)

to cooperate with the other in resolving the complaint; and

(c)

to cooperate in any regulatory examination of the other to the extent it involves this Agreement or the offer or sale of Units by you or a Selling Dealer.

22.

Privacy. Each of the General Partner, the Partnership and you acknowledge that certain information made available to the other under this Agreement may be deemed nonpublic personal information under the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, other federal or state privacy laws (as amended), and the rules and regulations promulgated thereunder, which are referred to collectively, as the “Privacy Laws.” Each of the General Partner, the Partnership and you agree as follows:

(a)

not to disclose or use the information except as required to carry out each party’s respective duties under this Agreement or as otherwise permitted by law in the ordinary course of business;

(b)

to establish and maintain procedures reasonably designed to assure the security and privacy of all the information; and

(c)

to cooperate with the other and provide reasonable assistance in ensuring compliance with the Privacy Laws to the extent applicable to any of them.

23.

Anti-Money Laundering Provision. You and the Selling Dealers represent and warrant to the General Partner that each of you has in place and will maintain suitable and adequate “know your customer” policies and procedures and that each of you will comply with all applicable laws and regulations regarding anti-money laundering activity and will provide documentation of the foregoing to the General Partner on written request.

24.

Acceptance. Please confirm your agreement to the terms and conditions set forth above by signing and returning the enclosed duplicate copy of this Agreement to us at the address set forth above.

DEALER-MANAGER:

▇▇▇▇▇▇▇▇ SECURITIES, INC.

, 200__

By:

Date

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President

•

receipt and acceptance of subscriptions for 1,200,000 Units; or

•

_________________, 200__, if the Minimum Offering Amount has not been received and accepted by that date; or

•

__________________, 200__, if the Minimum Offering Amount has been received and accepted by ______________, 200__;

2.

Deposit of Subscription Proceeds. Pending receipt of the Minimum Offering Amount, and subject to Section 6, the Dealer-Manager and the General Partner shall deposit the Subscription Proceeds of each Subscriber to whom they sell Units with the Escrow Agent and shall deliver to the Escrow Agent a copy of the Subscription Agreement. A “Subscription Agreement” is the execution and subscription instrument signed by the Subscriber to evidence his agreement to purchase Units in the Partnership. Payment for each subscription for Units shall be in the form of a check made payable to “LEAF Equipment Leasing Income Fund III, L.P. Escrow Account.” Verification of the Subscription Proceeds by the Escrow Agent will be available via direct, on­line access, telecopier, or other electronic media as soon as practicable after receipt.

3.

Investment of Subscription Proceeds. Subject to Section 6, the Escrow Agent shall deposit all Subscription Proceeds in interest-bearing savings or bank money market accounts (other than mutual funds). The interest earned shall be added to the Subscription Proceeds and disbursed in accordance with the provisions of Section 4 or 5, as the case may be.

4.

Distribution of Subscription Proceeds. Subject to Section 6, if the Escrow Agent:

(a)

receives written notice from an authorized officer of the General Partner that at least the Minimum Offering Amount has been received and accepted by the General Partner; and

(b)

determines that the Minimum Offering Amount has cleared the banking system and constitutes good funds;

6.

Subscriptions of Pennsylvania or Iowa Residents.

(a)

The Escrow Agent shall deposit Subscription Proceeds from Pennsylvania or Iowa residents into a separate escrow account to be held in escrow pursuant to this Agreement for up to 120 days after the respective Subscription Proceeds of each investor are received, except as provided in (b) below. Funds shall be released from that account in accordance with Section 4 (and Subscription Proceeds from Pennsylvania or Iowa residents may be deposited in a separate Partnership account in accordance with Section 5) only if the aggregate of all Subscription Proceeds received and accepted by the General Partner, including those from Pennsylvania or Iowa residents, total $6,000,000 or more. The Dealer-Manager and the General Partner will specifically identify subscriptions of Pennsylvania or Iowa residents to the Escrow Agent and will not commingle those subscriptions with subscriptions of residents of other states.

7.

Distributions to Subscribers.

(a)

If the Minimum Offering Amount has not been received and accepted by the General Partner by 12:00 p.m. (noon), local time, on the Offering Termination Date, or if the offering is terminated before then for any other reason, then the General Partner shall notify the Escrow Agent, in writing, and the Escrow Agent shall promptly distribute to each Subscriber a refund check made payable to the Subscriber in an amount equal to the Subscription Proceeds of the Subscriber plus any interest paid or investment income earned on the Subscriber’s Subscription Proceeds while held by the Escrow Agent in the escrow account, all as calculated by the Escrow Agent.

8.

Compensation and Expenses of Escrow Agent. The General Partner shall be solely responsible for and shall pay the compensation of the Escrow Agent for its services under this Agreement, as provided in Appendix 1 to this Agreement and made a part of this Agreement, and the charges, expenses (including any reasonable attorneys’ fees), and other out-of-pocket expenses incurred by the Escrow Agent in connection with the administration of the provisions of this Agreement. The Escrow Agent shall have no lien on the Subscription Proceeds deposited in the escrow account.

10.

Liability of Escrow Agent. The Escrow Agent shall not be liable for any damages, or have any obligations other than the duties prescribed in this Agreement, in carrying out or executing the purposes and intent of this Agreement. However, nothing in this Agreement shall relieve the Escrow Agent from liability arising out of its own willful misconduct or gross negligence. The Escrow Agent’s duties and obligations under this Agreement shall be entirely administrative and not discretionary. The Escrow Agent shall not be liable to any party to this Agreement or to any third-party as a result of any action or omission taken or made by the Escrow Agent in good faith. The parties to this Agreement will indemnify the Escrow Agent, hold the Escrow Agent harmless, and reimburse the Escrow Agent from, against and for, any and all liabilities, costs, fees and expenses (including reasonable attorney’s fees) the Escrow Agent may suffer or incur by reason of its execution and performance of this Agreement. If any legal questions arise concerning the Escrow Agent’s duties and obligations under this Agreement, then the Escrow Agent may consult with its counsel and rely without liability on written opinions given to it by its counsel.

13.

Notice. Any notices or instructions, or both, to be given under this Agreement shall be validly given if set forth in writing and mailed by certified mail, return receipt requested, as follows:

14.

Miscellaneous.

(a)

This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.

(b)

This Agreement shall be binding on and shall inure to the benefit of the undersigned and their respective successors and assigns.

(c)

This Agreement may be executed in multiple copies, each executed copy to serve as an original.

(d)

References in this Agreement to “Sections” are references to Sections of this Agreement unless the context clearly indicates otherwise.

COMMERCE BANK, NA,

As Escrow Agent

By: 

(Authorized Officer)

LEAF ASSET MANAGEMENT, LLC

By: 

▇▇▇▇▇ ▇▇▇▇▇▇, President and Chief Operating Officer

▇▇▇▇▇▇▇▇ SECURITIES, INC.

By: 

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President

LEAF EQUIPMENT LEASING INCOME FUND III, L.P.

By: 

LEAF Asset Management, LLC

By: 

▇▇▇▇▇ ▇▇▇▇▇▇, President and Chief Operating Officer

Re:

Escrow Agent Services for Leaf Financial Corporation

A.

Acceptance Fee:

$1,000

This is a one-time fee to establish the account on our records.

B.

Administration Fee: (2)

$4,000

This is a one-time fee to maintain your account on our system.

If the subscription should fail, there is an additional fee

$10 per check

To return funds to the investors.

Additional fee for calculation of interest and prepare checks.

$1,000

C.

Out of Pocket Expenses (annually in arrears): (3)

At Cost

(1)

All fees are due and payable upon the signing of the account agreements.

(2)

The Administration fee includes up to 300 subscribers.

(3)

Out of Pocket Expenses shall be billed at cost which may include, but is not limited to, postage, stationery, communication charges, counsel fees and expenses or other experts as may be required from time to time.

Name and Title

Signature

Crit ▇▇▇▇▇▇, Chairman of Board of Directors, CEO

▇▇▇▇▇ ▇▇▇▇▇▇, President, COO

LEAF Asset Management, LLC

By:

Title:

ATTEST:

LEAF Asset Management, LLC

By:

Title:

1.

Representations, Warranties and Covenants of Selling Dealer. You represent, warrant and covenant to the Dealer-Manager that:

(a)

You are a corporation or other entity duly organized, validly existing and in good standing under the laws of the state of your formation and are duly qualified to do business and in good standing under the laws of any jurisdiction in which your ownership of property or conduct of business requires you to be so qualified. You have all requisite power and authority to enter into this Agreement and to carry out your obligations under this Agreement.

(b)

This Agreement when executed by you will be duly authorized, executed and delivered by you and will be a valid and binding agreement on your part and enforceable in accordance with its terms except as may be limited by the effect of bankruptcy, insolvency, moratorium, preferential or fraudulent conveyance or other similar laws or equitable principles relating to or affecting the rights of creditors generally, by general principles of equity, and by public policy relating to claims for indemnification for securities laws violations.

(c)

The consummation of the transactions contemplated by this Agreement and the Prospectus will not result in:

(i)

any breach of any of the terms or conditions of, or constitute a default under, your organizational documents, bylaws, any indenture, agreement or other instrument to which you are a party or by which you are bound; or

(ii)

any violation of any order applicable to you of any court, regulatory body or administrative agency having jurisdiction over you or your affiliates.

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(d)

You are duly registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and you are a member in good standing of the NASD. You are duly registered as a broker-dealer in the jurisdictions where you are required to be registered in order to carry out your obligations as contemplated by this Agreement and the Prospectus. You agree to maintain all the foregoing registrations in good standing throughout the term of the offer and sale of the Units and you agree to comply with all statutes and other requirements applicable to you as a broker-dealer under those registrations.

(e)

Pursuant to your appointment as a Selling Dealer, you shall comply with all the provisions of the Securities Act of 1933, as amended (the “1933 Act”), insofar as the 1933 Act applies to your activities under this Agreement. Further, you shall not engage in any activity which would cause the offer and/or sale of the Units not to comply with the 1933 Act, the 1934 Act, the applicable rules and regulations of the Securities and Exchange Commission, which is referred to as the “Commission,” the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules including Rules 2420, 2730, 2740 and 2750, and Rule 2810(b)(2) and (b)(3), which provide as follows:

(A)

A member or person associated with a member shall not underwrite or participate in a public offering of a direct participation program unless standards of suitability have been established by the program for participants therein and such standards are fully disclosed in the prospectus and are consistent with the provisions of subparagraph (B) of this section.

(B)

In recommending to a participant the purchase, sale or exchange of an interest in a direct participation program, a member or person associated with a member shall:

(i)

have reasonable grounds to believe, on the basis of information obtained from the participant concerning his investment objectives, other investments, financial situation and needs, and any other information known by the member or associated person, that:

(a)

the participant is or will be in a financial position appropriate to enable him to realize to a significant extent the benefits described in the prospectus, including the tax benefits where they are a significant aspect of the program;

(b)

the participant has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and

(c)

the program is otherwise suitable for the participant; and

▇▇▇▇▇▇▇▇ Securities, Inc.

(ii)

maintain in the files of the member documents disclosing the basis upon which the determination of suitability was reached as to each participant.

(C)

Notwithstanding the provisions of subparagraphs (A) and (B) hereof, no member shall execute any transaction in a direct participation program in a discretionary account without prior written approval of the transaction by the customer.

(A)

Prior to participating in a public offering of a direct participation program, a member or person associated with a member shall have reasonable grounds to believe, based on information made available to him by the sponsor through a prospectus or other materials, that all material facts are adequately and accurately disclosed and provide a basis for evaluating the program.

(B)

In determining the adequacy of disclosed facts pursuant to subparagraph (A) hereof, a member or person associated with a member shall obtain information on material facts relating at a minimum to the following, if relevant in view of the nature of the program:

(i)

items of compensation;

(ii)

physical properties;

(iii)

tax aspects;

(iv)

financial stability and experience of the sponsor;

(v)

the program’s conflicts and risk factors; and

(vi)

appraisals and other pertinent reports.

(C)

For purposes of subparagraphs (A) and (B) hereof, a member or person associated with a member may rely upon the results of an inquiry conducted by another member or members, provided that:

(i)

the member or person associated with a member has reasonable grounds to believe that such inquiry was conducted with due care;

▇▇▇▇▇▇▇▇ Securities, Inc.

(iii)

no member that participated in the inquiry is a sponsor of the program or an affiliate of such sponsor.

(D)

Prior to executing a purchase transaction in a direct participation program, a member or person associated with a member shall inform the prospective participant of all pertinent facts relating to the liquidity and marketability of the program during the term of investment.

(f)

You shall not offer or sell the Units in any jurisdiction until you have been advised in writing by the General Partner, or the General Partner’s special counsel, that the offer or sale of the Units:

(i)

has been qualified in the jurisdiction;

(ii)

is exempt from the qualification requirements imposed by the jurisdiction; or

(iii)

is otherwise not required to be qualified.

(g)

You have received copies of the Prospectus and you have relied only on the statements contained in the Prospectus and not on any other statements whatsoever, either written or oral, with respect to the offering of Units to prospective investors. While you have relied on other information pursuant to your due diligence review in reaching your decision to enter into this Agreement, you agree that investors can rely only on the statements contained in the Prospectus in making their investment decisions. Accordingly, the information you can provide to prospective investors in offering the Units is limited to the statements contained in the Prospectus.

(i)

an investor-use brochure reviewed by the NASD;

(ii)

an investor slide show presentation and script reviewed by the NASD; and

▇▇▇▇▇▇▇▇ Securities, Inc.

(h)

You agree that you shall not place any advertisement or other solicitation with respect to the Units (including, without limitation, any material for use in any newspaper, magazine, radio or television commercial, telephone recording, motion picture, or other public media) without:

(i)

the prior written approval of the Partnership; and

(ii)

the prior filing with and review of the form and content of the advertisement or solicitation by the Commission, the NASD and the securities authorities of the states where the advertisement or solicitation is to be circulated.

(i)

If a supplement or amendment to the Prospectus (each, a “Supplement”) is prepared and delivered to you by the Partnership or the Dealer-Manager, you agree as follows:

(i)

to distribute the Supplement to every person who has previously received a copy of the Prospectus from you; and

(ii)

to include the Supplement in all future deliveries of the Prospectus by you.

(j)

In connection with any offer or sale of the Units, you agree to the following:

(i)

to comply in all respects with restrictions and procedures set forth in the Prospectus and the Partnership’s Amended and Restated Agreement of Limited Partnership, included as Appendix A to the Prospectus (the “Partnership Agreement”);

(ii)

not to make any statement inconsistent with the statements in the Prospectus, any Supplement or the Partnership Agreement;

(iii)

not to provide any written information, statements or sales literature other than the Prospectus, the Sales Literature, any Supplement and any other material that is provided to you by the Partnership or specifically authorized in writing by the Partnership; and

(iv)

not to make any untrue statement of a material fact or omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading in connection with the Partnership, the Units or the offering of the Units.

(k)

You agree that as you solicit and sell the Units:

(i)

you will comply with all the provisions of the 1933 Act, the Act of 1934, the applicable rules and regulations of the Commission, the applicable state securities laws and regulations, this Agreement, and the NASD Conduct Rules;

(ii)

the prospective purchasers will meet the suitability requirements set forth in the Prospectus, the subscription agreement, a form of which is included in Appendix C to the Prospectus (the “Subscription Agreement”), and this Agreement; and

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(l)

Although not anticipated, if you assist in any transfers of the Units, then you shall comply with the requirements of Rules 2810(b)(2)(B) and (b)(3)(D) of the NASD Conduct Rules.

(m)

You agree and covenant that:

(i)

the representations and warranties made in this Agreement are and shall be true and correct at each applicable closing date on Unit sales; and

(ii)

you shall have fulfilled all your obligations under this Agreement at the applicable closing date.

2.

Commissions.

(ii)

Selling Dealers and their registered representatives and principals;

(iii)

registered investment advisors and their clients;

(iv)

investors who buy Units through the officers and directors of the General Partner; and

(v)

sales of:

(A)

additional Units to investors who elected to purchase the additional Units using their respective distributions from the Partnership during the Offering Period after first purchasing at least 50 Units ($5,000); and

(B)

Units to investors (other than residents of Ohio) who elected to purchase the Units using their respective distributions from Lease Equity Appreciation Fund I, L.P. and/or Lease Equity Appreciation Fund II, L.P. during the Offering Period;

▇▇▇▇▇▇▇▇ Securities, Inc.

(i)

a 7% Sales Commission; and

(ii)

up to a .5% reimbursement of your bona fide accountable due diligence expenses per Unit. With respect to the up to .5% reimbursement of your bona fide accountable due diligence expenses, any ▇▇▇▇ presented by you to the Dealer-Manager for reimbursement of costs associated with your due diligence activities must be for actual costs and may not include a profit margin. Although the Dealer-Manager is not required to obtain an itemized expense statement before paying out due diligence expenses, any ▇▇▇▇ for due diligence submitted by you must be based on your actual expenses incurred in conducting due diligence. If the Dealer-Manager receives a non-itemized ▇▇▇▇ for due diligence that it has reason to question, then it has the obligation to ensure your compliance by requesting an itemized statement to support the ▇▇▇▇ submitted by you. If such a due diligence ▇▇▇▇ cannot be justified, any excess over actual due diligence expenses that is paid is considered by the NASD to be undisclosed underwriting compensation, and is required to be included within its 10% compensation guideline and reflected on your books and records. Notwithstanding, if you provide an itemized ▇▇▇▇ in excess of .5%, then the excess will not be included within the 10% compensation guideline, but instead will be included within the NASD’s 4.5% guideline.

(iii)

In addition, the Dealer-Manager or the General Partner may make certain non-cash compensation arrangements with you or your registered representatives which will be included in the Permissible Non-Cash Compensation described in the second paragraph of this Section 2(a). The Dealer-Manager is responsible for ensuring that all non-cash compensation arrangements comply with the restrictions on non-cash compensation in connection with direct participation programs as set forth in NASD Conduct Rule 2810. For example, if the General Partner or the Dealer-Manager pays or reimburses you in connection with bona fide meetings held by the General Partner or the Dealer-Manager for the purpose of training or educating your registered representatives, then the following conditions must be met:

▇▇▇▇▇▇▇▇ Securities, Inc.

(B)

the location must be appropriate to the purpose of the meeting as defined in NASD Conduct Rule 2810;

(C)

the payment or reimbursement must not be applied to the expenses of guests of the registered representative;

(D)

the payment or reimbursement by the General Partner or the Dealer-Manager must not be conditioned by the General Partner or the Dealer-Manager on the achievement of a sales target; and

(E)

the appropriate records must be maintained.

(iv)

Your compensation and reimbursements which are owed to you as set forth above shall be paid to you within seven business days after the Dealer-Manager has received the related amounts owed to it under the Dealer-Manager Agreement, which the Dealer-Manager is entitled to receive within five business days after the conditions described in Section 4(e) of the Dealer-Manager Agreement are satisfied, and approximately every week thereafter until the Partnership’s “Offering Termination Date,” which is defined in Section 1(b) of the Dealer-Manager Agreement. The balance shall be paid to the Dealer-Manager within fourteen business days after the Offering Termination Date.

(b)

Notwithstanding anything in this Agreement to the contrary, you agree to waive payment of your compensation and reimbursements which are owed to you as set forth above until the Dealer-Manager receives the related amounts owed to it under the Dealer-Manager Agreement, and you further agree that the Dealer-Manager’s liability to you for those amounts is limited solely to the proceeds of the related amounts owed to and received by it under the Dealer-Manager Agreement.

(c)

If the Partnership does not receive the Minimum Offering Amount, nothing will be payable to you and all funds advanced by subscribers will be returned to them with interest earned, if any.

3.

State Securities Registration. The Partnership may elect not to qualify or register Units in any state or jurisdiction for any reason in its sole discretion. The Dealer-Manager shall advise you when the Units have been qualified for sale or are exempt from qualification.

4.

Expenses of Sale. Except as otherwise specifically set forth in this Agreement, the expenses in connection with the offer and sale of the Units shall be payable as set forth below.

▇▇▇▇▇▇▇▇ Securities, Inc.

(b)

You shall pay all expenses incident to the performance of your obligations under this Agreement, including the fees and expenses of your own counsel and accountants, even if this offering is not successfully completed.

5.

Conditions of Your Duties. Your obligations under this Agreement, as of the date of this Agreement and at each applicable closing date, shall be subject to the following:

(a)

the performance by the Dealer-Manager of its obligations under this Agreement; and

(b)

the performance by the Partnership of its obligations under the Dealer-Manager Agreement.

6.

Conditions of Dealer-Manager’s Duties. The Dealer-Manager’s obligations under this Agreement, including the duty to pay compensation and reimbursements to you as set forth in Section 2 of this Agreement, shall be subject to the following:

(a)

the accuracy, as of the date of this Agreement and at each applicable closing date (as if made at such closing date) of your representations and warranties made in this Agreement;

(b)

the performance by you of your obligations under this Agreement; and

(c)

the Dealer-Manager’s receipt at or before the applicable closing date, of a fully executed Subscription Agreement for each purchaser as required by this Agreement.

7.

Indemnification.

(a)

You agree to indemnify, defend and hold harmless the Dealer-Manager, the General Partner, the Partnership, its attorneys, and any person who controls the Dealer-Manager, the General Partner and the Partnership within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from and against any and all losses, claims, damages, liabilities and expenses (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation) (“Losses”) which the indemnified party or parties may incur under federal or state law, or otherwise, arising out of or based upon any breach by you of any of your representations, warranties, covenants, duties or obligations contained in this Agreement.

(b)

If any action, suit or proceeding is brought against any indemnified party with respect to which indemnity may be sought under Section 7(a), the indemnified party shall promptly notify you in writing, and you may elect to assume the defense thereof, including the employment of counsel (which counsel shall be reasonably acceptable to the indemnified party) and payment of all reasonable fees and expenses. The failure or delay by an indemnified party to notify you shall not relieve you from liability which you may have to an indemnified party unless the failure or delay materially prejudices your ability to defend the action, suit or proceeding on behalf of the indemnified party. The indemnified party shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in (but not control) the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless:

(i)

you have agreed in writing to pay such fees and expenses;

▇▇▇▇▇▇▇▇ Securities, Inc.

(ii)

you have failed to assume the defense or employ counsel reasonably satisfactory to the indemnified party; or

(iii)

the named parties to any such action, suit or proceeding (including any impleaded parties) include both the indemnified party and you, and the indemnified party has been advised by its counsel that representation of the indemnified party and you by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between it and you (in which case you shall not have the right to assume the defense of the action, suit or proceeding on behalf of the indemnified party) or that there may be legal defenses available to the indemnified party that are different from or in addition to those available to you.

(c)

The Dealer-Manager agrees to indemnify, defend and hold harmless you and any person who controls you within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from you, with respect to a breach by the Dealer- Manager of its representations, warranties, covenants, duties or obligations contained in this Agreement. If any action, suit or proceeding is brought against an indemnified party in respect of which indemnity may be sought under this Section 7(c), the Dealer-Manager shall have the rights and duties given to you under Section 7(b).

(d)

If the indemnification provided for in this Section 7 is unavailable to an indemnified party under either Section 7(a) or Section 7(c), as the case may be, with respect to any Losses, then the appropriate indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of those Losses in the proportion that is appropriate to reflect the relative fault of you on the one hand and of the Dealer-Manager on the other hand in connection with the matters which resulted in those Losses, as well as any other relevant equitable considerations.

(e)

No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action, suit or proceeding with respect to which any indemnified party is or could have been a party and indemnity could have been sought under this Section 7 by the indemnified party, unless the settlement includes an unconditional release of the indemnified party from all liability on the claims that are the subject matter of the action, suit or proceeding.

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(f)

Any Losses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the indemnifying party to the indemnified party as the Losses are incurred.

8.

Representations and Agreements to Survive Delivery. All representations, warranties and agreements of the Dealer-Manager and you in this Agreement, including the indemnification agreements contained in Section 7, shall:

(a)

survive the delivery, execution and closing of this Agreement;

(b)

remain operative and in full force and effect regardless of any investigation made by or on behalf of: you or any person who controls you within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act; the Dealer-Manager or any person who controls the Dealer-Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act; or any other indemnified party; and

(c)

survive any sale, acceptance or delivery of Units under this Agreement.

9.

Termination. You shall have the right to terminate this Agreement, other than the indemnification provisions of Section 7, by giving written notice any time at or before a closing date if:

(a)

the Dealer-Manager has failed, refused, or been unable at or before the closing date, to perform any of its obligations under this Agreement; or

(b)

an event has materially and adversely affected the value of the Units.

11.

Transmittal Procedures. You, including if you are a customer carrying broker/dealer, shall transmit received investor funds in accordance with the following procedures.

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12.

Parties. This Agreement shall inure to the benefit of and be binding on you, the Dealer-Manager, and any respective successors and assigns. This Agreement shall also inure to the benefit of the indemnified parties and their successors and assigns. This Agreement is intended to be and is for the sole and exclusive benefit of the parties to this Agreement, and their respective successors and assigns, and the indemnified parties and their successors and assigns, and for the benefit of no other person. No other person shall have any legal or equitable right, remedy or claim under or with respect to this Agreement. No purchaser of any of the Units from you shall be construed to be a successor or assign merely by reason of the purchase.

13.

Relationship. You are not authorized to hold yourself out as an agent of the Dealer-Manager, the General Partner, the Partnership or any other Selling Dealer. This Agreement shall not: constitute you a partner of the General Partner, the Dealer-Manager, the Partnership or any general partner of the Partnership, or any other Selling Dealer; nor render the General Partner, the Dealer-Manager, the Partnership or any general partner of the Partnership, or any other Selling Dealer liable for any of your obligations.

14.

Effective Date. This Agreement is made effective between the parties to this Agreement as of the date accepted by you as indicated by your signature to this Agreement.

15.

Entire Agreement, Waiver.

(a)

This Agreement constitutes the entire agreement between the parties to this Agreement and shall not be amended or modified in any way except by subsequent agreement executed in writing, and no party shall be liable or bound to the other by any agreement, except as specifically set forth in this Agreement.

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(b)

Any party to this Agreement may waive, but only in writing, any term, condition, or requirement under this Agreement that is intended for its benefit. However, any written waiver of any term or condition of this Agreement shall not operate as a waiver of any other breach of that term or condition. Also, any failure to enforce any provision of this Agreement shall not operate as a waiver of that provision or any other provision of this Agreement.

16.

Governing Law. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. Unless the context otherwise requires, “Section” references in this Agreement are references to Sections of this Agreement.

17.

Notices.

(a)

Any notice, request, or consent provided for or permitted to be given under this Agreement must be in writing and must be given by depositing it in the United States mail, addressed to the party to be notified, postpaid, and registered or certified with return receipt requested, or by delivering it in person or by telecopier to that party. Notice given by personal delivery or mail shall be effective on actual receipt. Notice given by telecopier shall be effective on actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours.

(b)

Any communications from you shall be addressed to the Dealer-Manager at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇^▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇.

(c)

Any notice from the Dealer-Manager to you shall be deemed to have been duly given if mailed, telecopied or personally delivered to you at your address shown below.

18.

Complaints. The Dealer-Manager and you agree as follows:

(a)

to notify the other if either receives an investor complaint in connection with the offer or sale of Units by you;

(b)

to cooperate with the other in resolving the complaint; and

(c)

to cooperate in any regulatory examination of the other to the extent it involves this Agreement or the offer or sale of Units by you.

19.

Privacy. The Dealer-Manager and you each acknowledge that certain information made available to the other under this Agreement may be deemed nonpublic personal information under the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, other federal or state privacy laws (as amended), and the rules and regulations promulgated thereunder, which are referred to collectively as the “Privacy Laws.” The Dealer-Manager and you agree as follows:

(a)

not to disclose or use the information except as required to carry out each party’s respective duties under this Agreement or as otherwise permitted by law in the ordinary course of business;

(b)

to establish and maintain procedures reasonably designed to assure the security and privacy of all the information; and

(c)

to cooperate with the other and provide reasonable assistance in ensuring compliance with the Privacy Laws to the extent applicable to either or both the Dealer-Manager and you.

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20.

Anti-Money Laundering Provision. You represent and warrant to the General Partner and the Dealer-Manager that you have in place and will maintain suitable and adequate “know your customer” policies and procedures and that you will comply with all applicable laws and regulations regarding anti-money laundering activity and will provide documentation of the foregoing to the General Partner and the Dealer-Manager on written request.

21.

Acceptance. Please confirm your agreement to become a Selling Dealer under the terms and conditions set forth above by signing and returning the enclosed duplicate copy of this Agreement to us at the address set forth above.

Sincerely,

___________________________________, 200__

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Date

By: 

Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President

ACH ______

Provide: Bank Name ______________

Bank ABA# __________

Account # __________

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___________________________________________, 200__

____________________________________,

 Date

a(n) ______________________ corporation,

By: 

(SEAL)                                                                             Secretary

___________________________, President

(Address)

(Telephone Number)

Your CRD Number is ______________________

Your Tax ID Number is ____________________

Due Diligence

Marketing

Commission

Name:

Address:

City/St/Zip

Telephone:

Fax:

Email:

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•

prominently and promptly announce your participation in the offering as Selling Dealer to your registered representatives, whether by newsletter, e-mail, mail or otherwise, which announcement also shall advise your registered representatives to contact us at (▇▇▇) ▇▇▇-▇▇▇▇, with a copy of the announcement provided concurrently to the Dealer-Manager; and

•

provide the Dealer-Manager with the names, telephone numbers, addresses and e-mail addresses of your registered representatives, which information shall be kept confidential by the Dealer-Manager and the General Partner and shall not be used for any purpose other than the marketing of the offering as set forth in the Dealer-Manager Agreement and the Selling Dealer Agreement. Further, you, as Selling Dealer, agree that the Dealer-Manager and the General Partner may directly contact your registered representatives, in person or otherwise, to:

•

inform them of the offering;

•

explain the merits and risks of the offering; and

•

otherwise assist in your registered representatives’ efforts to solicit and sell Units.

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