EMPLOYMENT AGREEMENT


      AGREEMENT  made as of the 13th day of  August,  2003 by and between  DELTA
FINANCIAL CORPORATION,  a Delaware corporation (the "Corporation"),  and Randall
F. Michaels (the "Executive").

                              W I T N E S S E T H:
                              --------------------

      In consideration of the representations, warranties and conditions
contained herein, the parties hereto agree as follows:

            1.   POSITION AND RESPONSIBILITIES
                 -----------------------------

            1.1. The Executive shall serve in an executive capacity as Executive
Vice President of the  Corporation.  The Executive  shall perform such functions
and undertake such  responsibilities  as are  customarily  associated  with such
capacity. The Executive shall hold such directorships and executive officerships
in the  Corporation  and any  subsidiary to which,  from time to time, he may be
elected or appointed during the term of this Agreement.

            1.2. The   Executive shall  devote his full time and best efforts to
the  business  and  affairs  of the  Corporation  and to  the  promotion  of its
interests.

            2.   TERM OF EMPLOYMENT
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            2.1. The term of  employment  shall be three years, commencing  with
the date hereof,  unless sooner  terminated as provided in this  Agreement.  The
initial term of employment  and any extension  thereof is herein  referred to as
the "Term."
            2.2. Notwithstanding   the  provisions  of Section 2.1  hereof,  the
Corporation  shall  have the  right,  on  written  notice to the  Executive,  to
terminate the Executive's  employment for Reasonable  Cause, such termination to
be  effective  as of the date on which  notice is given or as of such later date
otherwise specified in the notice.

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            2.3. For  purposes of this  Agreement,  the term "Reasonable  Cause"
shall mean any of the following actions by the Executive:  (a) failure to comply
with any of the  material  terms of this  Agreement,  which  shall  not be cured
within 30 days after the Executive's receipt of written notice from the Board of
Directors; (b) engagement in gross misconduct injurious to the Corporation or an
affiliate of the Corporation,  which shall not be cured within 30 days after the
Executive's  receipt of written notice from the Board of Directors;  (c) knowing
and  willful  neglect  or refusal to attend to the  material  duties  reasonably
assigned to him by the Board of  Directors,  which shall not be cured  within 30
days after the Executive's receipt of written notice from the Board of Directors
or the  President  of  the  Corporation;  (d)  intentional  misappropriation  of
property  of  the  Corporation  or  an  affiliate  of  the  Corporation  to  the
Executive's  own  use;  (e)  the  commission  by  the  Executive  of an  act  of
embezzlement;  (f) Executive's  conviction for a felony or if criminal penalties
are imposed on Executive  relating to any individual  income taxes due and owing
by Executive; or (g) Executive's engaging in any activity which would constitute
a material  conflict of interest with the  Corporation  which shall not be cured
within 30 days after the Executive's receipt of written notice from the Board of
Directors. If the provisions contained in subsections (a), (b), (c) or (g) above
cannot be cured within 30 days due to the nature of the breach,  the cure period
shall then be extended for a reasonable period of time;  provided,  however, the
Executive undertakes and continues in good faith to cure the same.

            2.4.  If the Executive's employment  with the  Corporation  shall be
terminated  by the  Corporation  other than pursuant to Sections 2.2, 4.1 or 4.2
hereof, then the Corporation shall pay to the Executive: (a) if such termination
occurs within the first two (2) years of the Term of this Agreement,  the sum of
(i) one (1) year's salary,  less  withholding  and payroll taxes and (ii) twelve
times the average commissions per month earned by the Executive pursuant to this
Agreement  over  the six  calendar  months  immediately  preceding  the  date of
termination,  less  withholding  and payroll taxes,  or (b) if such  termination
occurs after the second year of the Term of this  Agreement,  an amount equal to
the sum of (i) the lesser of six  month's  salary and the total

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salary due over the remaining  Term, in each case less  withholding  and payroll
taxes  and (ii) six  times  the  average  commissions  per  month  earned by the
Executive  pursuant to this Agreement over the six calendar  months  immediately
preceding the date of  termination,  less  withholding  and payroll  taxes.  Any
payments  made under clause  (a)(i) or (b)(i) of this Section 2.4 shall be based
upon the Executive's salary as it existed immediately prior to such termination,
and any payments  made under clause  (a)(i),  (b)(i),  (b)(i) or (b)(ii) of this
Section 2.4 shall be paid in equal  installments  over the six months  following
any such  termination;  provided,  however  that  the  Executive  shall  only be
entitled to such payments  under either clause (a) or clause (b) of this Section
2.4 as long as he is in compliance with the provisions of Section 5 below.

            3.    COMPENSATION
                  ------------

            3.1.  (a)  The   Corporation   shall  pay  or  cause  Delta  Funding
Corporation  to pay to the  Executive  for the  services  to be  rendered by the
Executive hereunder a salary at the rate of $200,000 per annum. The salary shall
be payable in equal  installments  in accordance with the  Corporation's  normal
payroll  practices.  Such salary will be reviewed at least annually and shall be
increased  (but not  decreased) by the Board of Directors of the  Corporation in
such amount as determined in its sole discretion.

                  (b) In addition to the salary, the Corporation will pay to the
Executive  commissions  and  bonuses  as  agreed  to by the  Executive  and  the
Corporation in writing from time to time.

                  (c) In addition, the Corporation may also pay the Executive an
annual bonus with respect to each fiscal year of the  Corporation,  either on an
"ad hoc" basis or pursuant to a bonus plan or  arrangement as may be established
at  the   Corporation's   discretion  for  Executive  Vice  Presidents  of  this
Corporation.  Nothing herein contained shall, however,  obligate the Corporation
to pay any annual  bonus to the  Executive,  it being  understood  that any such
bonus shall be in the sole  discretion  of the Board of  Directors  and that the
amount  thereof,  if any,

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may vary depending upon actual  performance of the Corporation and the Executive
as determined in the discretion of the Board.

            3.2.  In   consideration  of  entering  into  this  Agreement,   the
Executive shall be entitled to receive on the date hereof:

                  (a) A  sign-up  bonus  of  One  Hundred  Fifty  Five  Thousand
($155,000) dollars in cash (less lawful deductions), payable upon the signing of
this Agreement; and

                  (b) a grant a  non-qualified  option  pursuant to the terms of
Delta Financial  Corporation's  1996 Stock Option Plan to purchase 50,000 shares
of Delta  Financial  Corporation  Common  Stock,  par value  $.01 per share (the
"Common  Stock") at a price per share equal to the  closing  price of the Common
Stock on the American Stock Exchange on the date hereof, which option shall have
a term of seven years and shall vest 20% per year.

            3.3.  The Executive shall be entitled to participate in, and receive
benefits from, any insurance, medical, disability, bonus, incentive compensation
(including  grants of non-  qualified  stock  options  under  Delta's 1996 Stock
Option Plan, as determined by the  Corporation) or other employee  benefit plan,
if any are adopted,  of the Corporation or any subsidiary which may be in effect
at any time during the course of his  employment  by the  Corporation  and which
shall be generally available to the Executive on terms no less favorable than to
other senior  executives  of the  Corporation  or its  subsidiaries,  including,
without  limitation,  Delta's current  disability  insurance policy covering the
Executive, as the same may be amended from time to time.

            3.4. Upon the occurrence of a Change in Control (as defined herein),
all stock  options held by the  Executive  beneficially  (in trust or otherwise)
and/or of record shall vest and become  immediately  exercisable  on the date of
the Change of Control.  For  purposes of this  Section  3.4, the term "Change of
Control"  shall be deemed to have  occurred if (i) any "person" (as such term is
used in Section 13 (d) and 14 (d) (2) of the  Securities  Exchange Act of 1934),
becomes the  beneficial  owner,  directly or  indirectly,  of  securities of the
Corporation  representing

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50% or more of the combined voting power of the  Corporation's  then outstanding
securities,  (ii)  during  any  period  of 12  months,  individuals  who  at the
beginning of such period  constitute  the Board of Directors of the  Corporation
cease for any reason to constitute a majority  thereof  unless the election,  or
the nomination for the election by the  Corporation's  stockholders  of each new
director  was  approved by a vote of at least a majority of the  directors  then
still in office who were  directors  at the  beginning  of the period or (iii) a
person (as defined in clause (i) above) acquires (or, during the 12-month period
ending on the date of the most  recent  acquisition  by such  person or group or
persons, has acquired) all or substantially all of the Corporation's assets.

            3.5. The  Corporation  agrees to  reimburse  the  Executive  for all
reasonable  and  necessary  business  expenses  incurred by him on behalf of the
Corporation in the course of his duties  hereunder upon the  presentation by the
Executive of appropriate vouchers therefor.

            3.6. The Executive will be entitled each year of this Agreement to a
paid vacation of four weeks.

            3.7. Upon  termination of this Agreement for Reasonable Cause or due
to the death or incapacity  of the  Executive  (as defined in Section 4.1),  the
Executive shall be entitled to all  compensation and benefits accrued and unpaid
up to the date of termination.

            3.8. The Executive shall not be required to mitigate  damages or the
amount of any payment  provided  to him under this  Agreement  by seeking  other
employment or otherwise.

            3.9. Nothing  contained herein shall prohibit the Board of Directors
of the  Corporation,  in its sole  discretion,  from increasing the compensation
payable to the Executive  pursuant to this Agreement  and/or making available to
the  Executive  other  benefits in addition to those to which the  Executive  is
entitled hereunder.

            4.   INCAPACITY; DEATH
                 -----------------

            4.1.  If,  during the  period of  employment  hereunder,  because of
illness  or other  incapacity,  the  Executive  shall  fail  for a period  of 90
consecutive  days, or for shorter periods  aggregating  more than 90 days during
any twelve month period, to render the services

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contemplated hereunder,  then the Corporation,  at its option, may terminate the
term of employment hereunder, upon not less than 30 days written notice from the
Corporation  to the  Executive,  effective  on the 30th day after giving of such
notice;  PROVIDED,  HOWEVER, that no such termination will be effective if prior
to the 30th day after giving such notice, the Executive's  illness or incapacity
shall have  terminated  and he shall be physically  and mentally able to perform
the services required hereunder and shall be performing such services.

            4.2.  In the event of the  death of the  Executive  during  the term
hereof,  the employment  hereunder  shall  terminate on the date of death of the
Executive.

            4.3.  The  Corporation  (or its  designee)  shall  have the right to
obtain for its benefit an appropriate  life insurance  policy on the life of the
Executive,  naming the  Corporation  (or its  designee) as the  beneficiary.  If
requested  by the  Corporation,  the  Executive  agrees  to  cooperate  with the
Corporation in obtaining such policy.

            4.4.  In the event the  employment of Executive is terminated by the
Corporation  as the  result of the death or  incapacity  of the  Executive,  the
Corporation  agrees to continue to pay the  Executive (or his estate) one year's
salary at his then rate of salary,  less  withholding  and payroll  taxes,  plus
twelve times the average  commissions per month earned by the Executive pursuant
to the Commission  Agreement over the six calendar months immediately  preceding
the date of termination,  less  withholding and payroll taxes. Any payments made
under this Section 4.4 shall be paid in equal  installments over a period of one
year after such termination.


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            5.    OTHER  ACTIVITIES    DURING    EMPLOYMENT;    NON-COMPETITION;
                  --------------------------------------------------------------
SOLICITATION.
-------------

            5.1.  The  Executive  shall not  during  the term of this  Agreement
undertake  or engage in other  employment,  occupation  or business  enterprise.
Subject to compliance with the provisions of this  Agreement,  the Executive may
engage in  reasonable  activities  with respect to personal  investments  of the
Executive.

            5.2.  During  the  Term of this  Agreement,  and for the  Restricted
Period  (hereinafter  defined),  if any, neither the Executive nor any entity in
which he may be interested as a partner, trustee,  director,  officer, employee,
shareholder,  option holder, lender of money, guarantor or consultant,  shall be
engaged  directly or indirectly in any business engaged in by the Corporation in
any area where the Corporation, or any subsidiary, conducts such business at any
time during this Agreement;  provided  however,  that the foregoing shall not be
deemed to prevent the  Executive  from  investing in securities if such class of
securities in which the investment is so made is listed on a national securities
exchange  or is  issued  by a  company  registered  under  Section  12(g) of the
Securities  Exchange Act of 1934, so long as such investment holdings do not, in
the  aggregate,  constitute  more than 5% of the voting  stock of any  company's
securities. For purposes of this Section 5.2, the term "Restricted Period" shall
mean  : (i) in  the  event  that  the  Corporation  terminates  the  Executive's
employment with the  Corporation  pursuant to Section 4.1 at any time during the
Term of this  Agreement,  or the Executive  terminates his  employment  with the
Corporation for any reason,  a period of one year after the Executive leaves the
employ of the Corporation.  The Restricted  Period shall not be in effect if the
Executive's employment is terminated pursuant to Section 2.2 or 2.4 hereof.

            5.3. The Executive will not at any time during his  employment  with
the  Corporation,  and for a  period  of one year  after  Executive  leaves  the
Corporation's  employ  for any  reason,  solicit  (or  assist or  encourage  the
solicitation  of) any employee of the Corporation or any of its  subsidiaries or
affiliates to work for Executive or for any business,  firm corporation or other
entity in which the Executive, directly or indirectly, in any capacity described
in Section 5.2

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hereof, participates or engages (or expects to participate or engage) or has (or
expects to have) a financial interest or management position.

            5.4.  The  Executive shall not at any time during this  Agreement or
after the  termination  hereof  directly or indirectly  divulge,  furnish,  use,
publish or make accessible to any person or entity any Confidential  Information
(as hereinafter  defined).  Any records of Confidential  Information prepared by
the Executive or which come into  Executive's  possession  during this Agreement
are  and  remain  the  property  of the  Corporation  and  upon  termination  of
Executive's  employment all such records and copies thereof shall be either left
with or returned to the Corporation.

             5.5. The term  "Confidential  Information"  shall mean  information
disclosed to the  Executive or known,  learned,  created or observed by him as a
consequence of or through his employment by the Corporation, not generally known
in the  relevant  trade  or  industry,  about  the  Corporation's  or any of its
subsidiaries'  or  affiliates'  business  activities,  services  and  processes,
including  but  not  limited  to  information  concerning   advertising,   sales
promotion,  publicity,  sales data,  research,  finances,  accounting,  methods,
processes,  business  plans,  broker  or  correspondent  lists and  records  and
potential broker or correspondent lists and records.

            6.    ASSIGNMENT.  The  Corporation  shall  require any successor or
                  -----------
assign to all or  substantially  all the assets of the  Corporation  (whether by
merger or by acquisition of stock, assets or otherwise) prior to consummation of
any transaction  therewith,  to expressly assume and agree to perform in writing
this  Agreement  in the same manner and to the same extent that the  Corporation
would be required to perform it if no such  succession or  assignment  had taken
place.  This  Agreement  shall inure to the  benefit of and be binding  upon the
Corporation,  its successors and assigns,  and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.

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            7. NO THIRD PARTY BENEFICIARIES. This Agreement does not create, and
               -----------------------------
shall not be construed as creating,  any rights  enforceable by any person not a
party to this Agreement, except as provided in Section 7 hereof.

            8. HEADINGS.   The headings of the sections  hereof are inserted for
               ---------
convenience  only and shall not be deemed to  constitute  a part  hereof  nor to
affect the meaning thereof.

            9. INTERPRETATION.   In  case  any  one or  more  of the  provisions
               ---------------
contained  in this  Agreement  shall,  for any  reason,  be held to be  invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other  provisions of this Agreement,  and
this Agreement shall be construed as if such invalid,  illegal or  unenforceable
provision had never been contained herein. If, moreover,  any one or more of the
provisions  contained in this Agreement  shall for any reason be held by a court
of competent jurisdiction to be unenforceable because it is excessively broad as
to duration,  geographical scope,  activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent  compatible with
the applicable law as it shall then appear.

            10. NOTICES.   All notices under this Agreement  shall be in writing
                --------
and shall be deemed to have been given at the time when mailed by  registered or
certified  mail,  addressed to the address below stated party to which notice is
given, or to such changed address as such party may have fixed by notice:

            To the Corporation:

            Delta Financial Corporation
            1000 Woodbury Road
            Suite 200
            Woodbury, New York 11797
            Attn: President

                  And

            To the Executive:

            Randall F. Michaels

                                       9

            114 Asharoken Road
            Northport, NY 11768

provided,  however, that any notice of change of address shall be effective only
upon receipt.

            11.  WAIVERS.  If  either  party  should  waive  any  breach  of any
                 --------
provision of this Agreement, he or it shall not thereby be deemed to have waived
any  preceding or succeeding  breach of the same or any other  provision of this
Agreement.
            12.  COMPLETE  AGREEMENT;  AMENDMENTS.  The  foregoing is the entire
                 ---------------------------------
agreement of the parties with respect to the subject  matter  hereof and may not
be amended,  supplemented,  canceled or discharged except by written  instrument
executed by both parties hereto.

            13. EQUITABLE REMEDIES.  The Executive acknowledges that he has been
                -------------------
employed  for his  unique  talents  and  that  his  leaving  the  employ  of the
Corporation  would seriously hamper the business of the Corporation and that the
Corporation will suffer irreparable damage if any provisions of Section 5 hereof
are not  performed  strictly in  accordance  with their  terms or are  otherwise
breached.  The Executive hereby  expressly agrees that the Corporation  shall be
entitled to seek injunctive or other equitable  relief, in addition to all other
remedies permitted by law, to prevent a breach or violation by the Executive and
to secure  enforcement  of the provisions of Section 5. Resort to such equitable
relief,  however, shall not constitute a waiver or any other rights or remedies,
which the Corporation may have.

            14. GOVERNING LAW. This Agreement is to be governed by and construed
                --------------
in accordance  with the laws of the State of New York,  without giving effect to
principles of conflicts of law.

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<PAGE>


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

                                          DELTA FINANCIAL CORPORATION

                                          By: /S/ HUGH MILLER
                                          -------------------------------------
                                          Name:  Hugh Miller
                                          Title: President and Chief Executive
                                          Officer

                                          By: /S/ RANDALL F. MICHAELS
                                          --------------------------------
                                          Name:  Randall F. Michaels
                                          Title: Executive Vice President





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