Definitive Proxy Statement

Notice is hereby given that the annual meeting (the “Annual Meeting”) of shareholders of RAIT FINANCIAL TRUST, a Maryland real estate investment trust (“RAIT”), will be held in the Baldwin Room located in the Hub at the Cira Centre, 2929 Arch Street, Philadelphia, Pennsylvania, on Tuesday , May 17, 2011, at 9:00 A.M., Philadelphia time, for the following purposes:

1. To elect eight trustees to serve until the next annual meeting of shareholders in 2012.

2. To approve the selection of Grant Thornton LLP as the independent registered public accounting firm for RAIT for the fiscal year ending December 31, 2011.

3. To approve the amendment and restatement of the RAIT Financial Trust 2008 Incentive Award Plan, including renaming the plan as the RAIT Financial Trust 2011 Incentive Award Plan (the “Incentive Award Plan”), increasing the number of RAIT’s common shares authorized for issuance under the Incentive Award Plan and extending the term of the Incentive Award Plan.

4. To approve, on an advisory basis, the compensation of the named executive officers, as disclosed in RAIT’s Proxy Statement for the Annual Meeting pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2010 Summary Compensation Table and the other related tables and disclosure.

5. To determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation of RAIT’s named executive officers as set forth in RAIT’s proxy statement should be every year, every two years, or every three years.

6. To transact such other business as may properly be brought before the Annual Meeting and any adjournment, postponement or continuation thereof.

Only shareholders of record on the books of RAIT at the close of business on March 1, 2011 will be entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. A list of shareholders entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting and at the offices of RAIT at 2929 Arch Street, 17^thFloor, Philadelphia, Pennsylvania 19104. The stock transfer books will not be closed.

SHAREHOLDERS CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO ASSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE ITS USE.

By order of the Board of Trustees,

/s/ RAPHAEL LICHT

Raphael Licht

Secretary

The 2011 annual meeting of shareholders of RAIT Financial Trust, or the annual meeting, will be held on Tuesday, May 17, 2011, at 9:00 A.M., Philadelphia time, in the Baldwin Room located in the Hub at the Cira Centre, 2929 Arch Street, Philadelphia, Pennsylvania, for the purposes set forth in the accompanying notice. Only shareholders of record at the close of business on March 1, 2011 will be entitled to notice of and to vote at the annual meeting. Unless we have indicated otherwise, or the context otherwise requires, references in this proxy statement to “RAIT,” “we,” “us,” and “our” or similar terms are to RAIT Financial Trust and its subsidiaries. If you wish to attend the annual meeting and vote in person, you may contact RAIT’s Investor Relations at (215) 243-9000 for directions.

This statement is furnished in connection with the solicitation by the board of trustees of RAIT of proxies from holders of our common shares of beneficial interest, par value $0.01 per share, or common shares, to be used at the annual meeting, and at any and all adjournments thereof. Proxies in the accompanying form, properly executed and duly returned to RAIT, and not revoked, will be voted at the annual meeting and any and all adjournments thereof.

We will send this proxy statement and the accompanying form of proxy on or about March 30, 2011 to shareholders of record of common shares as of March 1, 2011.

If a proxy in the accompanying form is executed and returned, it may nevertheless be revoked at any time before its exercise by giving written notice of revocation to our secretary at the address given at the top of this page, by submitting a later dated proxy or by attending the annual meeting and voting in person.

We will bear the cost of soliciting proxies. Our trustees, officers and regular employees may solicit proxies either personally, by letter or by telephone. We will not specifically compensate our trustees, officers or employees for soliciting proxies. We expect to reimburse banks, brokers, and other persons for their reasonable out-of-pocket expenses in handling proxy materials for beneficial owners of our common shares. We also have made arrangements with Phoenix Advisory Partners to assist in soliciting proxies for the annual meeting and in communicating with shareholders and have agreed to pay Phoenix Advisory Partners $7,500 plus expenses for its services.

At the annual meeting, only those holders of common shares at the close of business on March 1, 2011, the record date, will be entitled to vote. As of the record date, 111,711,987 common shares were outstanding. Each holder is entitled to one vote per share on each matter of business properly brought before the annual meeting. Shareholders do not have cumulative voting rights. RAIT has an authorized capitalization of 225,000,000 shares of beneficial interest, consisting of 200,000,000 common shares and 25,000,000 preferred shares of beneficial interest, par value $0.01 per share.

The presence at the annual meeting in person or by proxy of holders of outstanding common shares entitled to cast a majority of all the votes entitled to be cast at the annual meeting will constitute a quorum. The presence of a quorum for any proposal establishes a quorum for all of the proposals, even if holders of outstanding common shares entitled to cast a majority of all the votes entitled to be cast at the annual meeting do not vote on all of the proposals.

Common shares represented at the annual meeting in person or by proxy but not voted on one or more proposals will be included in determining the presence of a quorum for all of the proposals, but will not be considered cast on any proposal on which they were not voted. A failure by brokers to vote in person or by proxy common shares held by them in nominee name will mean that such common shares will not be counted for the purposes of establishing a quorum and will not be voted.

We refer to the situation where a broker does not receive voting instructions from the beneficial owner of common shares on a particular matter and indicates on the proxy delivered with respect to such common shares that it does not have discretionary authority to vote on that matter as a broker “non-vote.” For broker non-votes, those common shares will be considered as present for the purpose of determining whether a quorum exists, but will not be considered cast on any proposal on which they were not voted. With respect to abstentions, those common shares will be considered as present for the purpose of determining whether a quorum exists, but will not be considered cast on any matter.

Brokers that are member firms of the New York Stock Exchange, or NYSE, and who hold common shares in street name for customers generally may vote their customers’ shares on proposals considered a “routine” matter under the NYSE rules and may not vote their customers’ shares on proposals that are not considered a “routine” matter under the NYSE rules if the customers have not furnished voting instructions within a specified period of time prior to the annual meeting. Proposals One, Three, Four and Five described below are not considered “routine” matters under the NYSE rules. Proposal Two described below is considered a “routine” matter under the NYSE rules.

Proposal 1. The number of votes required in order to be elected as a trustee is dependent on whether an election is contested or uncontested. Our bylaws define an election as uncontested if no shareholder provides proper notice of an intention to nominate one or more candidates to compete with the board of trustees’ nominees in a trustee election, or if any such shareholders have withdrawn all such nominations at least five days prior to the mailing of notice of the meeting to shareholders. As no such notice has been provided, the trustee election described in Proposal 1 below is an uncontested election. In order to be elected as a trustee in an uncontested election as described in Proposal 1 below, each trustee is elected by a majority of votes cast with respect to such trustee nominee at a meeting of shareholders duly called and at which a quorum is present. A “majority of votes cast” means that the number of shares voted “for” a trustee’s election exceeds 50% of the total number of votes cast with respect to that trustee’s election. Votes “cast” includes votes “for”, votes to withhold authority and votes “against” and “no” votes, but excludes abstentions with respect to a trustee’s election or with respect to the election of trustees in general. In the case of any contested election, our bylaws provide that trustees shall be elected by a plurality of votes cast at a meeting of shareholders duly called and at which a quorum is present.

If an incumbent trustee nominated for election as a trustee receives a greater number of “withhold”, “against” or “no” votes for his or her election than votes “for” such election, or a majority against vote, then that trustee, as a holdover trustee under Maryland law, shall tender an offer of his or her resignation to the board of trustees for consideration promptly following certification of such vote. The nominating and governance committee, or the nominating committee, shall promptly consider any resignation offer so tendered and a range of possible responses, based on any facts or circumstances they consider relevant, and make a recommendation to the board of trustees as to the response to the resignation offer. If each member of the nominating committee received a majority against vote at the same election, then the independent trustees (as defined in our declaration of trust) who did not receive a majority against vote shall appoint a committee among themselves to consider the resignation offers and to recommend to the board of trustees a response to the resignation offers. The board of

trustees shall take action on the nominating committee’s recommendation (or committee of independent trustees’ recommendation) within 90 days following certification of the shareholder vote. Any trustee whose resignation is under consideration shall abstain from participating in any board or committee deliberations regarding the acceptance of his or her offer of resignation or the offer of resignation of any other trustee tendered because that trustee received a majority against vote.

If an incumbent trustee’s offer of resignation is accepted by the board of trustees, then such trustee shall cease to be a member of the board of trustees upon the effective date of acceptance by the board of trustees of the offer of resignation. If an incumbent trustee’s offer of resignation is not accepted by the board of trustees, then such trustee shall continue to serve until the earlier of the next annual meeting and until his or her successor is elected and qualifies and his or her subsequent resignation or removal.

If any nominee for trustee who is not an incumbent fails in an uncontested election to receive a majority of votes cast at a meeting of shareholders duly called and at which a quorum is present, such nominee shall not be elected and shall not take office. All of the board of trustees’ nominees for election as a trustee at the annual meeting are incumbents. If an incumbent trustee’s offer of resignation is accepted by the board of trustees, or if a non-incumbent nominee for trustee is not elected, the board of trustees may fill any resulting vacancy pursuant to our bylaws or may decrease the size of the board of trustees pursuant to our declaration of trust.

Proposal 2. The affirmative vote of the holders of at least a majority of the votes cast at the annual meeting at which a quorum is present is required to approve the selection of Grant Thornton LLP, or Grant Thornton, as our independent registered public accounting firm as described in our discussion of Proposal 2 below.

Proposal 3. The affirmative vote of the holders of at least a majority of the votes cast at the annual meeting at which a quorum is present is required to approve the amendment and restatement of the 2008 RAIT Financial Trust Incentive Award Plan, or the incentive award plan, as described in our discussion of Proposal 3 below. In addition, under NYSE rules, in order to list the additional common shares that would be issuable under the incentive award plan on the NYSE if the proposed amendment and restatement is approved, the total votes cast on Proposal 3 must represent over 50% in interest of all common shares.

Proposal 4. The affirmative vote of the holders of at least a majority of the votes cast at the annual meeting at which a quorum is present is required to approve the compensation of our named executive officers as described in Proposal 4 below. Because the vote is advisory, it will not be binding on the board of trustees or RAIT.

Proposal 5.The affirmative vote of the holders of a plurality of the votes cast at the annual meeting at which a quorum is present is required to determine, in a non-binding vote, whether the advisory and non-binding vote to approve the compensation of our named executive officers will occur every three years, every two years or every one year. Because the vote is advisory, it will not be binding on the board of trustees or RAIT.

Proposal 6. For any other matter which may properly come before the annual meeting as described in our discussion of Proposal 6 below, the affirmative vote of the holders of at least a majority of the votes cast at the annual meeting at which a quorum is present is required, either in person or by proxy, for approval, unless otherwise required by law.

Any proxy not specifying to the contrary, and not designated as a broker non-vote, will be voted FOR:

Should any matters not described above be properly presented at the meeting, the persons named in the proxy will vote in accordance with their judgment. The proxy authorizes these persons, in their discretion, to vote upon such matters as may properly be brought before the meeting or any adjournment, postponement or continuation thereof.

Our by-laws provide that the number of trustees shall be fixed by resolution of the board of trustees, provided that there shall be a minimum of three and a maximum of nine trustees. The board of trustees has fixed the number of trustees at eight. All trustees are elected for a term of one year or until their successors are elected and qualified. The board of trustees, upon the recommendation of its nominating committee, has nominated Scott F. Schaeffer, Edward S. Brown, Frank A. Farnesi, S. Kristin Kim, Arthur Makadon, Daniel Promislo, John F. Quigley, III and Murray Stempel, III for election at the annual meeting for a term to expire at the 2012 annual meeting or until their successors are elected or appointed.

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED IN PROPOSAL 1.

It is the intention of the persons named in the enclosed proxy, in the absence of a contrary direction, to vote for the election of all of the nominees named in Proposal 1. Should any of the nominees become unable or refuse to accept nomination or election as a trustee, the persons named as proxies intend to vote for the election of such other person as the nominating committee may recommend. The board of trustees knows of no reason why any of the nominees might be unable or refuse to accept nomination or election.

Information is set forth below regarding the principal occupation of each nominee.

Scott F. Schaeffer, age 48, has served as our chairman of the board and as a trustee since December 2010, chief executive officer since February 2009, our president since February 2008, our chief operating officer from February 2008 to February 2009, our co-president and co-chief operating officer from December 2006 to February 2008 and our president and chief operating officer from September 2000 to December 2006. Mr. Schaeffer has served as the chairman of the board of directors and as a director of RAIT’s subsidiary, Independence Realty Trust, Inc., or Independence, since we acquired Independence in January 2011. Independence files reports under the Securities Exchange Act of 1934, or the Exchange Act. Mr. Schaeffer served as the vice chairman of the board of directors of Resource America, Inc. (a specialty finance company) from 1998 to 2000, the executive vice president of Resource America from 1997 to 1998, and a senior vice president of Resource America from 1995 to 1997. Mr. Schaeffer also served as President of Resource Properties, Inc. (a wholly owned real estate subsidiary of Resource America) from 1992 to 2000. Mr. Schaeffer was, until October 2002, a director of Resource America.

Edward S. Brown, age 70, has served as a trustee of RAIT since June 1999. Mr. Brown has been president of The Edward S. Brown Group (a real estate development company) since 1985.

Frank A. Farnesi, age 63, has served as a trustee of RAIT since December 2006 when he joined the board of trustees in connection with our acquisition of Taberna Realty Finance Trust in December 2006, or the Taberna acquisition. He was a member of Taberna’s board of trustees from April 2005 until the Taberna acquisition in December 2006. Mr. Farnesi serves as an advisor or board member to several privately held companies. He is a retired partner of the international accounting firm of KPMG LLP, where he worked from 1969 to 2001. Before retiring from KPMG, he was the Pennsylvania business unit partner in charge of tax. He also served as national partner in charge of tax compliance and worked with a wide variety of clients in the banking, real estate, technology and private equity fields. He currently serves on the board of trustees of Immaculata University and the board of directors of Beneficial Mutual Bancorp, Inc., a publicly held federally chartered stock holding company for Beneficial Mutual Savings Bank.

S. Kristin Kim, age 47, has served as a trustee of RAIT since October 2003. Ms. Kim is the founder of Sansori, which provides educational programs for social entrepreneurs and strategic planning services for social ventures. Prior to Sansori, Ms. Kim was president of AllLearn, an online education venture among Oxford, Stanford, and Yale Universities from November 2002 until 2006, having joined AllLearn in January 2001 as its general counsel. From 1999 to 2001, Ms. Kim held several senior positions at Harvard University’s John F. Kennedy School of Government, including Director for New Initiatives. From 1989 to 1999, she was an attorney at the law firm of Simpson Thacher & Bartlett.

Arthur Makadon, age 68, has served as trustee of RAIT since July 2002. Mr. Makadon has served as the chairman of Ballard, Spahr LLP, or Ballard Spahr, (a law firm) since July 2002. Before that, since 1984, Mr. Makadon had been chairman of Ballard Spahr’s litigation department.

Daniel Promislo, age 78, has served as a trustee of RAIT since its founding in August 1997. Mr. Promislo has been president since 1991 and a director since 1975 of Historical Documents Co. and was the founder and has been president of Historical Souvenir Co. (souvenir manufacturers) since its inception in 1957. He has also served as managing director (from 1998 to 2001) and was a past partner (from 1977 to 1994) of Wolf, Block, Schorr and Solis-Cohen, or Wolf Block (a law firm), and retired from Wolf Block in 2002. From 1994 to 2003, he served as a director, and from 1996 to October 1997 was the chairman of the board of directors, of WHYY, Inc. (the principal public television station in the Philadelphia metropolitan area).

John F. Quigley, III, age 48, has served as a trustee of RAIT since December 2006 when he joined the board of trustees in connection with the Taberna acquisition. He was a member of Taberna’s board of trustees from April 2005 until the Taberna acquisition in December 2006. Since February 2006, he has been a vice president with Patriarch Management Company, a commercial real estate company in suburban Philadelphia. From 2004 to January 2006, he was the chief financial officer and chief administrative officer of Storecast Merchandising Corp., an in-store merchandising services company. From 2003 to 2004, Mr. Quigley was a financial consultant with LeBus Bakery, Inc. and Patriarch Management Company. From 1999 to 2003, Mr. Quigley was the co-founder and co-managing partner of Harron Capital, LP, a private equity fund. From 1998 to 2003, Mr. Quigley was co-founder, principal and chief financial officer of Metrocast Cablevision of New Hampshire, LLC, a cable television company. From 1991 to 1999, Mr. Quigley served in various capacities, including as chief financial officer, vice president of finance/administration and treasurer of Harron Communications Corp., a privately held cable television, broadcast television and direct broadcast satellite company.

Murray Stempel, III, age 56, has served as a trustee of RAIT since December 2006 when he joined the board of trustees in connection with the Taberna acquisition. He was a member of Taberna’s board of trustees from April 2005 until the Taberna acquisition in December 2006. Mr. Stempel has served since 2008 as the vice chairman of Royal Bancshares of Pennsylvania, Inc., or Royal Bancshares, a publicly traded bank holding company. Mr. Stempel is a director of Royal Bancshares. From 2004 until 2008 he served as executive vice president and chief lending officer at Royal Bank America, a wholly-owned bank subsidiary of Royal Bancshares, responsible for the day-to-day management of the bank. From 2000 to 2004, he was a senior vice president at Royal Bank America.

Our nominating committee has not adopted specific, minimum qualifications or specific qualities or skills that must be met by a nominating committee-recommended nominee. For a discussion of the methods the nominating committee uses for identifying and evaluating nominees for trustee, see “Information Concerning Our Board of Trustees, Committees and Governance-Nominating and Governance Committee.” Set forth below is a brief discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that each person listed above should serve as a trustee of RAIT:

Mr. Schaeffer has served as an executive officer of RAIT for the past ten years and currently serves as our chairman of the board, chief executive officer and president. He has spent the past 25 years with RAIT and other businesses focused on investing in commercial real estate, which gives him broad knowledge of, and experience addressing, the operational, financial and strategic issues and opportunities facing specialty finance companies like RAIT.

Mr. Brown has over 25 years experience as president of a company focused on investing in commercial real estate, which gives him a broad understanding of the challenges and opportunities relating to RAIT’s investment portfolio and new business initiatives in this sector. His experience is coupled with knowledge of financial matters and financial reporting.

Mr. Farnesi’s experience in leadership roles within KPMG, including his position as national partner in charge of tax compliance, and his years of experience providing advisory services to a wide variety of clients give him a significant financial, accounting and tax background.

Ms. Kim has significant experience founding, leading or having senior roles in organizations focused on leadership and education. She also has broad legal experience in the international capital markets.

Mr. Makadon serves as the chairman of a large law firm and has broad legal experience with respect to business and financial matters.

Mr. Promislo has a wide variety of business and legal experience. He was a senior partner in the business department of a large law firm and at various times served on the law firm’s administrative committee and executive committee, and subsequently served as the managing director of the firm.

Mr. Quigley has extensive experience in finance and investment management and has served in senior management positions and as the chief financial officer of several privately owned businesses.

Mr. Stempel is the vice chairman, and previously served as a senior officer, of a publicly traded bank holding company with broad finance and operational experience, including real estate and real estate lending experience.

Our common shares are listed on the New York Stock Exchange, or the NYSE, under the symbol “RAS” and we are subject to the NYSE’s listing standards. We have adopted trust governance guidelines and charters for the audit, compensation and nominating committees of the board of trustees intended to satisfy NYSE listing standards. We have also adopted a code of business conduct and ethics, or the code, for our trustees, officers and employees intended to satisfy NYSE listing standards and the definition of a “code of ethics” set forth in applicable Securities and Exchange Commission, or SEC, rules. Our trust governance guidelines, code and these charters are available on our website at www.raitft.com .

Our trust governance guidelines provide that the board has no policy in principle with respect to the separation of the offices of chairman and the chief executive officer and that this issue is part of the succession planning process within the scope of the board’s authority to decide. Since December 31, 2010, Scott F. Schaeffer has served as both chairman and chief executive officer. Betsy Z. Cohen served as chairman of the board in the period from December 2006 through Mrs. Cohen’s retirement as chairman of the board and as a trustee effective December 31, 2010; Mr. Schaeffer served as chief executive officer in this period. Prior to December 2006, Mrs. Cohen served as both chairman and chief executive officer. In the periods when the positions of chairman and chief executive officer have been held by the same person, including the current time, no lead independent trustee has been designated. The board believes that the trust governance guidelines provide it with appropriate flexibility to determine from time to time the leadership structure for RAIT that best enables it to pursue its business strategies and goals. The board considered Mr. Schaeffer’s significant experience in the industry and with RAIT as part of its rationale for deciding to combine the roles. The board believes that its current leadership structure is appropriate at this time because it enhances Mr. Schaeffer’s ability to provide strong and consistent leadership and a unified voice for RAIT and because the board believes its governance

processes, as reflected in RAIT’s trust governance guidelines and board committee charters, preserve board independence by ensuring independent discussion among trustees and independent evaluation of, and communication with, members of senior management.

Our trust governance guidelines provide that, at all times, a majority of the board must be comprised of persons who shall be independent within the meaning of RAIT’s trustee independence standards, or the independence standards, set forth in our trust governance guidelines, which are available on our website at the address given above. Among the requirements in our independence standards is the requirement that the trustee must meet all applicable requirements for independence under the listing standards of the primary exchange on which RAIT’s common shares trade and that the trustee must be an independent trustee as that term is defined in our declaration of trust. The board of trustees has determined that Mr. Brown, Mr. Farnesi, Ms. Kim, Mr. Makadon, Mr. Promislo, Mr. Quigley and Mr. Stempel each satisfy the independence standards, including the requirements for independence set out in Section 303A.02 of the rules of the NYSE, and that each of these trustees has no material relationships with RAIT (other than being a trustee and/or a shareholder of RAIT). Interested parties may communicate directly with the non-employee or independent trustees by sending their communications to our counsel, Ledgewood, P.C., or Ledgewood, at 1900 Market Street, Suite 750, Philadelphia, PA 19103. Shareholders may send communications to the board of trustees by sending them to Ledgewood as well. Ledgewood will forward these communications to the chairman of the audit committee who will distribute them as appropriate.

As set forth in our trust governance guidelines and in accordance with NYSE listing standards, the non-employee trustees meet in executive session quarterly without management. Mrs. Cohen’s son, Daniel G. Cohen, was our chief executive officer from the date of the Taberna acquisition until his resignation from that position on February 22, 2009. Mr. Cohen was a trustee of RAIT from the date of the Taberna acquisition until his resignation from that position on February 26, 2010. In the period when Mr. Cohen was a non-employee trustee who did not meet the independence standards, the independent trustees also met in executive session quarterly. The trustee who presides at these executive sessions is rotated each meeting among the chairs of the audit committee, compensation committee and nominating committee.

The board of trustees held a total of nine meetings during 2010. The board of trustees currently has a standing audit committee, compensation committee and nominating committee. The trustees which serve on these committees, the current chairman of these committees and the number of meetings these committees held during 2010 are set forth below:

During fiscal 2010, all incumbent trustees attended at least 75% of the aggregate of:

It is the policy of the board of trustees that all trustees attend the annual meeting of shareholders of RAIT, if practicable. Seven of the eight trustees of RAIT serving at the time attended our 2010 annual meeting of shareholders.

The board oversees RAIT’s risk management process. At each regularly scheduled board meeting, the board receives a risk management report from the executive vice president-risk management, including an update on credit risk and management’s risk mitigation efforts, where appropriate. Risk management, led by the executive vice president-risk management who reports to the chairman of the board, is a company-wide function that is responsible for an integrated effort to identify, assess and manage risks that may affect our ability to execute on our business strategy and fulfill our business objectives. The board’s role is to oversee this function. The audit committee enhances the board’s oversight of risk management. The audit committee’s role is also one of oversight, recognizing that management is responsible for executing RAIT’s risk management policies. The audit committee’s responsibilities include discussing with management RAIT’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including RAIT’s risk assessment and risk management policies. The audit committee also discusses guidelines and policies to govern the process by which risk assessment and management is undertaken. The compensation committee also enhances the board’s oversight of risk management by considering the impact of RAIT’s compensation plans, and the incentives created by RAIT’s compensation plans, on RAIT’s risk profile.

The audit committee is appointed by the board of trustees to assist board oversight of:

For a discussion of the audit committee’s role in RAIT’s risk oversight, see “Board Role in Risk Oversight” above. For a discussion of the audit committee’s role serving as the conflicts committee in the oversight of related party transactions, see “Certain Relationships and Related Party Transactions” below. The audit committee also prepares the audit committee report required by the rules of the SEC to be included in our annual proxy statement. The audit committee has adopted the audit and non-audit services pre-approval guidelines attached as Appendix A to this proxy statement. The board of trustees has determined that Mr. Brown, Mr. Farnesi and Ms. Kim meet the independence standards, including the independence standards for audit committee members set forth in the listing standards of the NYSE and those set forth in Rule 10A-3(b)(1) of the Exchange Act, and that Mr. Brown qualifies as an “audit committee financial expert” as that term is defined in applicable rules and regulations under the Exchange Act.

In connection with the preparation and filing of RAIT Financial Trust’s, or RAIT, annual report on Form 10-K for the year ended December 31, 2010, or the annual report:

The audit committee has provided this report. This report shall not be deemed incorporated by reference by any general statement incorporating this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, except to the extent RAIT specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act.

The Audit Committee of the Board of Trustees:

Edward S. Brown, Chairman

Frank A. Farnesi

S. Kristin Kim

The compensation committee is appointed by the board of trustees and has direct responsibility for approving the compensation of our chief executive officer, our other executive officers and the non-employee trustees of RAIT. The compensation committee also has direct responsibility for administering our equity-based compensation plans and reviewing any extraordinary compensatory payments to any of our employees. Pursuant to these responsibilities, in 2010 the compensation committee reviewed the compensation of seven executive officers and one other highly-compensated employee of RAIT and grants to officers and other employees of equity compensation under the incentive award plan.

In 2010, our chairman and our chief executive officer both set the compensation of anyone whose compensation was not set by the compensation committee and, if requested by the compensation committee, reported to the compensation committee on the basis for any such compensation decision. With respect to equity compensation awards granted to non-executive officers, in 2010, our chairman and our chief executive officer jointly made recommendations to the compensation committee for consideration. Our chief financial officer included management’s estimate of bonus amounts in budgets for RAIT, and these estimates were reviewed by our chairman and our chief executive officer. These estimates of bonus amounts were necessary for budget purposes and therefore were established early in the year. In addition, with respect to officers whose compensation is set by the compensation committee, in 2010, the chairman and chief executive officer suggested bonus amounts to the compensation committee at year-end which were advisory and played a significant role in evaluating individual performance. The compensation committee exercised final authority to determine all compensation decisions for which it was responsible, and was not restricted by these recommendations, estimates and suggestions. As noted above, our chairman, Betsy Z. Cohen, retired effective December 31, 2010 and the board appointed Scott F. Schaeffer, our chief executive officer and president, to also serve as our chairman. As a result, the role in setting compensation previously done jointly by Mrs. Cohen and Mr. Schaeffer is now done by Mr. Schaeffer alone.

Under its charter, the compensation committee has authority to retain compensation consultants, outside counsel, and other advisors that the committee deems appropriate, in its sole discretion, to assist it in discharging its duties, and to approve the terms of retention and fees to be paid to such consultants. Since December 2007, the compensation committee has directly retained an independent compensation consultant, Pearl Meyer & Partners, or PM&P, to periodically assist the committee in establishing and implementing executive and trustee compensation strategy, interpreting competitive compensation data and trends, designing individual executive compensation packages, including but not limited to the amount and form of total compensation and its individual components, and compliance and disclosure matters relating to executive and trustee compensation. In 2010, Pearl Meyer & Partners was consulted regarding competitive compensation data and trends for certain named executives and trustee compensation advice.

The compensation consultant reports directly and exclusively to the compensation committee and receives no other fees from RAIT apart from its role as advisor to the compensation committee. PM&P periodically interacts with RAIT management or employees to gather and review information related to the executive compensation program, but such work is done only at the direction of the compensation committee. PM&P does not perform any services unrelated to executive and trustee compensation. Accordingly, the compensation committee considers PM&P to be independent from our management.

All of the members of the compensation committee have been determined by the board of trustees to be independent under our independence standards, including applicable NYSE listing standards. The compensation committee is comprised of Mr. Promislo, as Chairman, Mr. Quigley and Mr. Stempel.

Under the Dodd-Frank Act, further guidance will soon be available as to appropriate independence standards for the compensation committee and its advisors. At the time such guidance is available, we will reassess the independence of compensation committee members and its advisors against the new standards.

The nominating and governance committee uses a variety of methods for identifying and evaluating nominees for trustee. In recommending trustee nominees to the board, the nominating committee solicits candidate recommendations from its own members, other trustees and management. It also may engage the services and pay the fees of a professional search firm to assist it in identifying potential trustee nominees. The nominating committee assesses the appropriate size of the board and whether any vacancies on the board are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, the nominating committee considers whether to fill those vacancies and, if applicable, considers various potential trustee candidates. These candidates are evaluated at regular or special meetings of the nominating committee, and may be considered at any point during the year. The nominating committee seeks to make its recommendations for trustee nominees for each annual meeting to the board of trustees at its first meeting held each year.

The nominating committee has not adopted specific, minimum qualifications or specific qualities or skills that must be met by a nominating committee-recommended nominee. The nominating committee seeks to ensure that the membership of the board of trustees and each committee of the board of trustees satisfies all relevant listing standard requirements of the NYSE and applicable laws and regulations and all requirements of our governance documents, as well as to provide trustees who have a mixture of skills relevant to our business. The nature of the specific qualifications, qualities, experience or skills (including international versus domestic background, diversity, age, and legal and regulatory requirements) that the nominating committee may look for in any particular trustee nominee depends on the qualifications, qualities, experience and skills of the rest of the trustees at the time of any vacancy on the board of trustees. The nominating committee does not have a formal policy regarding the consideration of diversity in identifying trustee nominees beyond being committed to ensuring that no person would be excluded from consideration for service as a trustee of RAIT as a result of their sex, race, religion, creed, sexual orientation or disability.

Our trust governance guidelines provide that no trustee may be nominated to a new term if he or she would be age 75 or older on the date of the election. Upon the recommendation of our nominating committee, the board of trustees granted Mr. Promislo a permanent waiver from this provision.

The nominating committee will consider candidates for nomination as a trustee recommended by shareholders, trustees, officers, third party search firms and other sources. In evaluating candidates, the nominating committee considers the attributes of the candidate and the needs of the board, and will review all candidates in the same manner, regardless of the source of the recommendation. The nominating committee will consider individuals recommended by shareholders for nomination as a trustee in accordance with the procedures described under “Shareholder Proposals and Nominations.”

All of the members of the nominating committee have been determined by the board of trustees to be independent under the independence standards, including applicable NYSE listing standards. The nominating committee is comprised of Mr. Stempel, as Chairman, Ms. Kim and Mr. Quigley.

We are asking our shareholders to approve the selection of Grant Thornton, LLP, or Grant Thornton, as our independent registered public accounting firm to audit our financial statements for the fiscal year ending December 31, 2011. Although approval is not required by our bylaws or otherwise, the board of trustees is submitting the selection of Grant Thornton to our shareholders for approval as a matter of good corporate practice. The audit committee has engaged Grant Thornton to review our financial statements for the first quarter of 2011 but has not yet engaged an independent registered public accounting firm to review our financial statements for the second and third quarters of 2011 or to audit our financial statements for the fiscal year ending December 31, 2011. If Grant Thornton is not approved, the audit committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if Grant Thornton is approved, the audit committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of RAIT and our shareholders.

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE SELECTION OF GRANT THORNTON TO AUDIT THE FINANCIAL STATEMENTS OF RAIT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2011.

We expect that representatives of Grant Thornton will be present at the annual meeting. These representatives will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

The following table presents the aggregate fees billed by Grant Thornton for each of the services listed below for each of our last two fiscal years.

Exchange Act rules generally require any engagement by a public company of an accountant to provide audit or non-audit services to be pre-approved by the audit committee of that public company. This pre-approval requirement is waived with respect to the provision of services other than audit, review or attest services if certain conditions set forth in Rule 2-01(c)(7)(i)(C) under the Exchange Act are met. All of the audit and audit- related services described above were pre-approved by the audit committee and, as a consequence, such services were not provided pursuant to a waiver of the pre-approval requirement set forth in this Rule. The audit committee has adopted the audit and non-audit services pre-approval guidelines attached as Appendix A to this proxy statement.

In March 2011, the compensation committee adopted, subject to shareholder approval at the annual meeting, an amendment and restatement of RAIT’s 2008 Incentive Award Plan that would include the following changes:

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE INCENTIVE AWARD PLAN IN PROPOSAL 3.

Shareholder approval is being sought (i) so that the compensation attributable to grants under the incentive award plan (including cash awards) may qualify for the exemption from the $1 million deduction limit under section 162(m) of the Internal Revenue Code, or IRC (see discussion of section 162(m) under the section entitled “Federal Income Tax Consequences” below), (ii) in order for incentive stock options to meet the requirements of section 422 of the IRC, and (iii) in order to meet the New York Stock Exchange listing standards.

The material features of the incentive award plan, as proposed to be amended and restated, are summarized below. A copy of the full text of the incentive award plan, as proposed to be amended and restated, is attached to this Proxy Statement as Appendix B. This summary of the incentive award plan is not intended to be a complete description of the incentive award plan and is qualified in its entirety by the actual text of the incentive award plan in Appendix B.

The board of trustees has directed that the proposal to approve the amendment and restatement of the incentive award plan, which includes the increase in the number of common shares that may be issued under the incentive award plan, be submitted to RAIT’s shareholders for their approval at the annual meeting. The board of trustees and compensation committee believe that the approval of the proposed amendment and restatement of the incentive award plan by the shareholders will further RAIT’s ability to attract, retain and motivate top quality management, employees, non-employee trustees and consultants. The board of trustees and compensation committee believe RAIT’s compensation structure and overall compensation strategy, including the ability of RAIT’s employees, non-employee trustees and consultants to acquire or increase their equity stake in RAIT, are material to RAIT’s success, and the board of trustees and compensation committee have concluded that these would be enhanced by the proposed amendment and restatement of the incentive award plan.

General. The proposed amendment and restatement of the incentive award plan would change the name of the incentive award plan from the “RAIT Financial Trust 2008 Incentive Award Plan.” to the “RAIT Financial Trust 2011 Incentive Award Plan.” The incentive award plan currently provides for the grant of nonqualified options, incentive stock options, share appreciation rights, or SARs, units, share awards, dividend equivalents, cash awards and other share-based awards.

The proposed amendment and restatement of the incentive award plan would increase the total number of common shares authorized for issuance under the incentive award plan from 4,500,000 common shares (of which 680,147 common shares remain available for issuance) to 9,500,000 common shares, an increase of 5,000,000 common shares. This number is subject to adjustment in certain circumstances as described below. The common shares may be authorized but unissued common shares or reacquired common shares, including common shares purchased by RAIT on the open market for purposes of the incentive award plan. Except for SARs settled in cash, to the extent that any grants are paid in cash and not in common shares, such grants will not count against the foregoing common share limit.

If and to the extent options or SARs granted under the incentive award plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any share awards, units, dividend equivalents or other share-based awards are forfeited or terminated, or otherwise not paid in full, the common shares subject to such grants which have not been issued will again be available for purposes of the incentive award plan. Common shares surrendered in payment of the option price of an option or withheld for purposes of satisfying RAIT’s minimum tax withholding obligations with respect to grants under the plan will not be available for re-issuance or transfer under the plan. Upon the exercise of a SAR, for purposes of calculating the number of common shares remaining available for issuance under the incentive award plan and the number of common shares remaining available for exercise under the SAR, the number of shares will be reduced by the gross number of shares for which the SAR is exercised, without regard to any cash settlement of a SAR.

The maximum aggregate number of common shares with respect to which all grants, other than dividend equivalents and cash awards, may be made under the incentive award plan to any individual during any calendar year is 1,000,000 common shares, subject to adjustment as described below. The maximum aggregate number of common shares with respect to which all grants, other than options, SARs, dividend equivalents and cash awards, that may be made under the incentive award plan to any individual in any calendar year is 500,000 common shares, subject to adjustment as described below. A grantee may not accrue dividend equivalents during any calendar year in excess of $5,000,000. The maximum cash award that an employee may be paid under the incentive award plan in any twelve month period is $2,500,000. These individual limits apply without regard to whether the grants are to be paid in common shares or in cash. All cash payments (other than dividend equivalents and cash awards) will equal the fair market value of the common shares to which the cash payment relates.

The proposed amendment and restatement of the incentive award plan would extend the term of the incentive award plan so that the incentive award plan would terminate on May 16, 2021, as opposed to May 19, 2018. If approved by the shareholders, the incentive award plan, as amended and restated, will become effective on May 17, 2011.

Administration. The incentive award plan is administered and interpreted by the compensation committee. Ministerial functions relating to the incentive award plan may be performed by employees designated with such authority by the compensation committee. The compensation committee has the authority to (a) designate the employees, non-employee trustees and consultants who are eligible to participate in the incentive award plan; (b) make grants provided in the incentive award plan in such form and amount as the compensation committee determines; (c) impose such limitations, restrictions and conditions upon any such grant as the compensation

committee deems appropriate; and (d) interpret the incentive award plan and any grant under the incentive award plan, adopt, amend and rescind rules and regulations relating to the incentive award plan and any grant under the incentive award plan, and make all other determinations and take all other actions necessary or advisable for the implementation and administration of the incentive award plan. No member of the compensation committee will be liable for any action taken or decision made in good faith relating to the incentive award plan or any grant thereunder.

Eligibility for Participation. All of the employees (including officers and employees who are trustees) of RAIT or its subsidiaries and affiliates will be eligible for grants under the incentive award plan. In addition, non-employee trustees and consultants and advisors who have contributed to the success of RAIT or its subsidiaries and affiliates will be eligible to participate in the incentive award plan. As of February 15, 2011, all of RAIT’s 405 employees and seven non-employee trustees would be eligible to receive grants under the incentive award plan. It is not possible to specify in advance the number of advisors and consultants who may be eligible for grants.

The compensation committee may grant options intended to qualify as incentive stock options, or ISOs, within the meaning of Section 422 of the IRC, so-called “nonqualified stock options” that are not intended to so qualify, or NQSOs, or any combination of ISOs and NQSOs. Anyone eligible to participate in the incentive award plan may receive a grant of NQSOs. Only employees of RAIT and certain of its subsidiaries may receive a grant of ISOs.

The compensation committee fixes the exercise price per share for options on the date of grant. The exercise price of any option granted under the incentive award plan may not be less than the fair market value of the underlying common shares on the date of grant. However, if the grantee of an ISO is a person who holds more than ten percent of the total combined voting power of all classes of outstanding shares of beneficial interest of RAIT, the ISO exercise price per share must be at least 110% of the fair market value of a common share on the date of grant. To the extent that the aggregate fair market value of common shares, determined on the date of grant, with respect to which ISOs become exercisable for the first time by a grantee during any calendar year exceeds $100,000, such ISOs will be treated as NQSOs.

The compensation committee determines the term of each option; provided, however, that the term may not exceed ten years from the date of grant and, if the grantee of an ISO is a person who holds more than 10% of the combined voting power of all classes of outstanding shares of beneficial interest of RAIT, may not exceed five years from the date of grant. The vesting period for options commences on the date of grant and ends on such date as is determined by the compensation committee, in its sole discretion, which is specified in the grant agreement. The compensation committee may accelerate the exercisability of options at any time for any reason and may also provide that options will become exercisable before the date they become vested. The compensation committee will also determine the period, if any, after a grantee terminates employment or service during which vested options will remain exercisable. A grantee may exercise an option by delivering notice of exercise to RAIT or its designated agent. The grantee must pay the exercise price and any withholding taxes for the option: (a) in cash or by certified check, (b) with the approval of the compensation committee, by delivering common shares already owned by the grantee and having a fair market value on the date of exercise equal to the exercise price or attestation to ownership of such shares, (c) with the approval of the compensation committee, in cash, on the settlement date that occurs after the exercise date specified in the notice of exercise, provided that the grantee exercises the option through an irrevocable agreement with a registered broker and the payment is made in accordance with the procedures permitted by Regulation T of the Federal Reserve Board and such procedures do not violate applicable law, or (d) by such other method as the compensation committee may approve, to the extent permitted by applicable law. The compensation committee may provide that if a grantee uses common shares to exercise an option, the grantee will receive an additional option to purchase a number of

common shares equal to the number of common shares used to exercise the option and withheld to pay any taxes. These additional options will have an exercise price no less than the fair market value of the common shares on the date of grant of the additional option and will have a term no longer than the term of the original option.

The compensation committee may grant SARs, which may be granted in connection with, or independently of, any option granted under the incentive award plan. Upon exercise of a SAR, the grantee will receive an amount equal to the excess of the fair market value of the common shares on the date of exercise over the base amount set forth in the grant agreement. Such payment to the grantee will be in cash, in common shares, or in a combination of cash and common shares, as determined by the compensation committee. The compensation committee will determine the period when SARs vest and become exercisable, the base amount for SARs (which will not be less than the fair market value of the corresponding common shares on the date of grant) and whether SARs will be granted in connection with, or independently of, any options The compensation committee determines the terms and conditions of SARs and may grant SARs separately from or in tandem with any option (for all or a portion of the applicable option); provided, however, that the term of any SAR may not exceed ten years from the date of grant. The compensation committee may grant SARs to anyone eligible to participate in the incentive award plan.

The compensation committee may grant units to anyone eligible to participate in the incentive award plan. Each unit provides the grantee with the right to receive a Common Share or an amount based on the value of a Common Share at a future redemption date. The compensation committee determines the number of units that will be granted, whether units will become redeemable if specified performance goals or other conditions are met, or under other circumstances, and the other terms and conditions applicable to the units. Units may be paid at the end of a specified period or deferred to a date authorized by the compensation committee. If a unit becomes redeemable, it will be paid to the grantee in cash, in common shares, or in a combination of cash and common shares, as determined by the compensation committee. The compensation committee may determine that a grantee’s entitlement to dividends or other distributions with respect to share awards will be subject to the achievement of performance goals or other conditions.

The compensation committee may grant share awards to anyone eligible to participate in the incentive award plan. Share awards are an award of common shares, subject to certain terms and conditions specified by the compensation committee. The compensation committee may require that grantees pay consideration for the share awards and may impose restrictions on the share awards. If restrictions are imposed on share awards, the compensation committee will determine whether they will lapse over a period of time or according to such other criteria as the compensation committee determines appropriate. The compensation committee determines the number of common shares subject to the grant of share awards and the other terms and conditions of the grant. The compensation committee will determine to what extent and under what conditions grantees will have the right to vote common shares and to receive dividends or other distributions paid on such shares during the restriction period. The compensation committee may determine that a grantee’s entitlement to dividends or other distributions with respect to share awards will be subject to the achievement of performance goals or other conditions.

The compensation committee may grant dividend equivalents to anyone eligible to participate in the incentive award plan. Dividend equivalents are the right to receive an amount equal to the value of dividends

paid on the common shares, as if the grant under the incentive award plan were common shares at the time of the dividend. Dividend equivalents may be granted separately from any other grants. In addition, when the compensation committee makes a grant under the incentive award plan, the compensation committee may grant dividend equivalents in connection with such grants, under such terms and conditions as , the compensation committee deems appropriate; provided, however, that , the compensation committee may not grant dividend equivalents in connection with grants of options or SARs. Dividend equivalents are payable in cash or common shares and may be paid currently or accrued as contingent obligations. The terms and conditions of dividend equivalents are determined by the compensation committee. The compensation committee may provide that dividend equivalents will be payable based on the achievement of specific performance goals. Any dividend equivalents with respect to performance-based grants will vest and be paid only to the extent the underlying grant vests and is paid.

The compensation committee may grant other share-based awards, which are awards that are based on, measured by or payable in common shares to any grantee, on such terms and conditions as the compensation committee will determine. Other share-based awards may be awarded subject to the achievement of performance goals or other conditions and may be payable in cash, common shares or any combination of the foregoing, as the compensation committee will determine in the grant agreement. Common shares needed to satisfy RAIT’s obligations under the existing RAIT Investment Trust Phantom Share Plan, or the phantom share plan, to grantees in the phantom share plan, will be issued under the incentive award plan as an “other share-based award.” The rights of phantom shares granted under the phantom share plan may be substantially similar to the rights of units granted pursuant to the incentive award plan. The compensation committee may determine, in its discretion, whether to grant phantom shares under the phantom share plan or units under the incentive award plan in the event the compensation committee determines to grant such rights to any eligible person.

The compensation committee may grant cash awards under the incentive award plan to any employee who is eligible to receive a grant under the incentive award plan. The terms, conditions and restriction of any such cash awards will be determined by the compensation committee. Cash awards granted under the incentive award plan will be awarded subject to achievement of performance goals, as determined by the compensation committee and set forth in the employee’s grant agreement. All cash awards will be paid solely in cash.

Qualified Performance-Based Compensation. The incentive award plan provides that the compensation committee may determine that units, share awards, dividend equivalents, other share-based awards and cash awards granted to an employee will constitute “qualified performance-based compensation” under Section 162(m) of the IRC. See “Federal Income Tax Consequences” below for a discussion of Section 162(m) of the IRC.

When units, share awards, dividend equivalents, other share-based awards or cash awards that are to constitute “qualified performance-based compensation” are granted, the compensation committee establishes (a) the objective performance goals that must be met, (b) the period during which performance will be measured, (c) the maximum amounts that may be paid if the performance goals are met, and (d) any other conditions that the compensation committee deems appropriate and consistent with the incentive award plan and the requirements of Section 162(m) of the IRC for “qualified performance-based compensation.” The performance goals established by the compensation committee for this purpose will be intended to satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The compensation committee will not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals, but the compensation

committee may reduce the amount of compensation that is payable upon achievement of the designated performance goals.

The compensation committee must use objectively determinable performance goals based on one or more of the following criteria: common share price, earnings per common share, net earnings, operating earnings, return on assets, shareholder return, return on equity, growth in assets, unit volume, sales, market share, or strategic business criteria consisting of one or more objectives based on meeting specific revenue goals, market penetration goals, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures, adjusted earnings, total fees generated, assets under management, economic book value, REIT taxable income, capital gains, capital losses, funds from operations, enterprise value, market capitalization (of the common shares, any series of RAIT’s preferred shares or any combination of any or all classes or series of RAIT’s equity securities) and return on capital. The performance goals may relate to the grantee’s business unit or the performance of RAIT, a subsidiary or affiliate of RAIT or RAIT and its subsidiaries and affiliates as a whole, or any combination of the foregoing. For purposes of measuring the performance goals, the goals may exclude any or all of the following, as determined by the compensation committee at the time of establishing the performance goals, capital gains and capital losses. Performance goals need not be uniform as among grantees.

Deferrals. The compensation committee may permit or require grantees to defer receipt of the payment of cash or the delivery of common shares that would otherwise be due to the grantee in connection with a grant under the incentive award plan. The compensation committee will establish the rules and procedures applicable to any such deferrals.

Adjustment Provisions. In the event of any change in the number or kind of outstanding common shares by reason of a share dividend, spinoff, recapitalization, stock split or combination or exchange of common shares; a merger, reorganization or consolidation; a reclassification or change in par value; or any other extraordinary or unusual event affecting outstanding common shares as a class without RAIT’s receipt of consideration, the compensation committee will equitably adjust, in such manner as the compensation committee deems appropriate, the maximum number of common shares which may be issued under the incentive award plan, the maximum number of common shares for which any individual may receive pursuant to grants (other than dividend equivalents and cash awards) in any year, the kind and number of common shares subject to outstanding grants, the kind and number of shares issued or to be issued under the incentive award plan, and the price per common share or the applicable market value of such grants, to reflect any increase or decrease in the number of, or change in the kind or value of, the issued common shares to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the incentive award plan and such outstanding grants. Prior to the amendment and restatement this adjustment was at the discretion of the compensation committee. Any adjustments determined by the compensation committee will be final, binding and conclusive.

Change of Control. The incentive award plan provides that if a change of control occurs where RAIT is not the surviving entity (or survives only as a subsidiary of another entity), unless the compensation committee determines otherwise, all outstanding options and SARs that are not exercised will be assumed by, or replaced with comparable options and rights, by the surviving entity (or a parent or subsidiary of the surviving entity), and other grants that remain outstanding will be converted to similar grants of the surviving entity (or a parent or subsidiary of the surviving entity).

In the event of a change of control, the compensation committee may also take any of the following actions with respect to outstanding grants: (a) determine that outstanding options and SARs will accelerate and become exercisable, in whole or in part, upon the change of control or upon such other event as the compensation committee determines, (b) determine that the restrictions and conditions on outstanding share awards will lapse, in whole or in part, upon the change of control or upon such other event as the compensation committee determines, (c) determine that grantees holding units will receive a redemption in settlement of such units and that dividend equivalents and other share-based awards will become fully payable in cash or common shares in amounts determined by the compensation committee, (d) require that grantees surrender their outstanding options and SARs in exchange for a payment by RAIT, in cash or common shares as determined by the compensation

committee, in an amount equal to the amount by which the then fair market value of the common shares subject to the grantee’s unexercised options and SARs exceeds the option price of the options or the base amount of SARs, as applicable, or (e) after giving grantees an opportunity to exercise their outstanding options and SARs, terminate any or all unexercised options and SARs at such time as the compensation committee deems appropriate. In addition, consequences of a change of control of RAIT to awards under the incentive award plan, and the applicable definition of a change in control, may be varied by the terms of any employment agreement approved by the compensation committee.

Foreign Grantees. If the amendment and restatement of the incentive award plan is approved, if any individual who receives a grant under the incentive award plan is subject to taxation in countries other than the United States, the compensation committee may make grants to such individuals on such terms and conditions as the compensation committee determines appropriate to comply with the laws of the applicable country.

No Repricing without Shareholder Approval. Notwithstanding anything in the incentive award plan to the contrary, except in connection with an extraordinary transaction involving RAIT (including, without limitation, any common share dividend, common share split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the compensation committee may not reprice Options or SARs, nor may the compensation committee amend the incentive award plan to permit repricing of Options or SARs, unless the shareholders of RAIT provide prior approval for such repricing. “Repricing” subject to this approval requirement includes (a) amending the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) canceling outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs.

Transferability. The compensation committee may permit the transferability of NQSOs in limited circumstances.

Amendment and Termination of the Incentive Award Plan. The compensation committee may amend or terminate the incentive award plan at any time; provided, however, that the compensation committee will not amend the incentive award plan without shareholder approval if such approval is required in order to comply with the IRC or applicable laws, to comply with applicable stock exchange requirements or to approve repricing of options or SARs as described above. The compensation committee may also condition or modify grants under the incentive award plan in response to changes in securities, tax or other laws or rules, regulations or regulatory interpretations thereof applicable to the incentive award plan or to comply with the rules or requirements of any stock exchange on which the common shares are listed or quoted. The compensation committee may at any time and from time to time terminate or modify or amend the incentive award plan in any respect, except that without shareholder approval the compensation committee may not (i) increase the maximum number of common shares which may be issued under the incentive award plan, (ii) extend the maximum period during which any grant may be granted or exercised, or (iii) extend the term of the incentive award plan. The termination or any modification or amendment of the incentive award plan, except as provided above, will not, without the consent of a participant, adversely affect his or her rights under a grant previously awarded to him or her. If the proposed amendment and restatement of the incentive award plan is approved, no grants may be issued under the incentive award plan after May 16, 2021.

RAIT Policies. All grants under the incentive award plan will be subject to the applicable provisions of any applicable clawback or recoupment policies, share trading policies and other policies that may be approved by the board of trustees or the compensation committee, as such policies may be in effect from time to time.

Current Incentive Award Plan Information. The maximum number of common shares that may be issued under the incentive award plan currently is 4,500,000 common shares. As of March 1, 2011, an aggregate of 2,335,009 common shares remain reserved for issuance under the incentive award plan, of which 168,800 are currently reserved for issuance under outstanding options and 2,166,209 are currently reserved for issuance under

outstanding phantom units. The number of common shares available as of March 1, 2011 for new grants under the current incentive award plan is 680,147 common shares. If the proposed amendment and restatement of the incentive award plan is approved by shareholders at the annual meeting, the total number of common shares that may be issued under the incentive award plan will be 9,500,000 common shares, with 5,680,147 common shares available for new grants.

Grants Under the Incentive Award Plan. It is currently not possible to predict the number of common shares that will be granted or who will receive any grants under the incentive award plan after the annual meeting.

The last sales price of RAIT’s common shares on March 18, 2011, was $2.29 per share.

The Federal income tax consequences arising with respect to awards granted under the incentive award plan will depend on the type of the award. The following provides only a general description of the application of federal income tax laws to certain awards under the incentive award plan. This discussion is intended for the information of shareholders considering how to vote at the annual meeting and not as tax guidance to grantees in the incentive award plan, as the consequences may vary with the types of awards made, the identity of the recipients and the method of payment or settlement. The summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local, or foreign tax laws.

From the recipients’ standpoint, as a general rule, ordinary income will be recognized at the time of payment of cash, or delivery of actual common shares. Future appreciation on common shares held beyond the ordinary income recognition event will be taxable at capital gains rates when the common shares are sold. RAIT, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the recipient, and RAIT will not be entitled to any tax deduction in respect of capital gain income recognized by the recipient.

Exceptions to these general rules may arise under the following circumstances: (a) if common shares, when delivered, are subject to a substantial risk of forfeiture by reason of failure to satisfy any employment or performance-related condition, ordinary income taxation and RAIT’s tax deduction will be delayed until the risk of forfeiture lapses (unless the recipient makes a special election to ignore the risk of forfeiture); (b) if an employee is granted an option that qualifies as an “incentive stock option,” no ordinary income will be recognized, and RAIT will not be entitled to any tax deduction, if common shares acquired upon exercise of such option are held more than the longer of one year from the date of exercise and two years from the date of grant; (c) RAIT will not be entitled to a tax deduction for compensation attributable to awards granted to its chief executive officer and certain other of its executive officers, if and to the extent such compensation does not qualify as “performance-based” compensation under Section 162(m) of the IRC, and such compensation, along with any other non-performance-based compensation paid in the same calendar year, exceeds $1,000,000, and (d) an award may be taxable to the recipient at 20 percentage points above ordinary income tax rates at the time it becomes vested, plus interest, even if that is before the delivery of the cash or shares in settlement of the award, if the award constitutes “deferred compensation” under Section 409A of the IRC, and the requirements of Section 409A of the IRC are not satisfied.

Section 162(m) of the IRC generally disallows a publicly-held corporation’s tax deduction for compensation paid to its chief executive officer and the next three highest paid executive officers (excluding the chief financial officer) in excess of $1,000,000 in any year. Compensation that qualifies as “performance-based compensation” is excluded from the $1,000,000 deductibility cap, and therefore remains fully deductible by the company that pays it. Options and SARs generally qualify if they are granted at fair market value and there is an individual limit under the incentive award plan. Share awards, units, dividend equivalents, other share-based awards and cash awards will generally qualify for the performance-based exception under section 162(m) of the IRC if such

grants are contingent on the attainment of one or more objective performance goals. However, there is no requirement that these awards meet these requirements if they are granted under the incentive award plan. If they do not meet these requirements, the value of such awards will count toward the $1,000,000 limit for the affected individual. As a real estate investment company, or REIT, the consequences of Section 162(m) of the IRC for RAIT are limited. One requirement that must be met in order to qualify as a REIT is that, generally, a REIT must distribute at least 90% of the sum of its taxable income. To the extent that a REIT retains income, it must pay tax on such income just like any other corporation. As a result, to the extent executive compensation is not deductible for a REIT under Section 162(m) of the IRC, the REIT cannot deduct such compensation from income subject to the 90% distribution rule and the REIT cannot deduct such compensation from undistributed income subject to taxation. Options and SARs granted under the incentive award plan are generally intended to meet the requirements of Section 162(m) of the IRC. Share awards, units, dividend equivalents and other share-based awards granted under the incentive award plan will only qualify as “performance-based compensation” when the compensation committee conditions such grants on the achievement of specific performance goals in accordance with the requirements of Section 162(m) of the IRC as described above.

The incentive award plan provides that RAIT has the right to require the grantee of any award under the incentive award plan to pay to the grantee’s employer an amount necessary for such employer to satisfy its federal, state or local tax withholding obligations with respect to such grants. RAIT may withhold from other amounts payable to such individual an amount necessary to satisfy these obligations. The compensation committee may permit a grantee to satisfy RAIT’s withholding obligation by having shares acquired pursuant to the grant withheld, provided that the number of shares withheld does not exceed the individual’s minimum applicable withholding tax rate for federal, state and local tax liabilities. The incentive award plan also provides that the compensation committee may permit a grantee to satisfy the grantee’s withholding obligation that exceeds the minimum applicable withholding rate by transferring to RAIT previously acquired common shares.

The following table sets forth certain information regarding RAIT’s equity compensation plans as of December 31, 2010.

The following table sets forth certain information regarding RAIT’s equity compensation plans as of March 1, 2011.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission.

As described in detail under the heading “Compensation Discussion and Analysis” below, we seek to closely align the interests of our named executive officers with the interests of our shareholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.

The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission. The vote is advisory, which means that the vote is not binding on RAIT, our board of trustees or the compensation committee. To the extent there is any significant vote against our named executive officer compensation as disclosed in this proxy statement, the compensation committee will evaluate whether any actions are necessary to address the concerns of shareholders.

Accordingly, we ask our shareholders to vote on the following resolution at the Annual Meeting:

“RESOLVED, that RAIT’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in RAIT’s Proxy Statement for the 2011 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2010 Summary Compensation Table and the other related tables and disclosure.”

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

PROPOSAL 5. ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Dodd-Frank Wall Street Reform and Consumer Protection Act also provides that shareholders must be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers as disclosed in accordance with the compensation disclosure rules of the Securities and Exchange Commission, which we refer to as an advisory vote on executive compensation. By voting with respect to this Proposal 5, shareholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every one, two, or three years. Shareholders also may, if they wish, abstain from casting a vote on this proposal.

Our board of trustees has determined that an advisory vote on executive compensation that occurs once every three years is the most appropriate alternative for RAIT and therefore our Board recommends that you vote for a three-year interval for the advisory vote on executive compensation. In determining to recommend that shareholders vote for a frequency of once every three years, the Board considered how an advisory vote at this frequency will provide our shareholders with sufficient time to evaluate the effectiveness of our overall compensation philosophy, policies and practices in the context of our long-term business results for the corresponding period, while avoiding over-emphasis on short term variations in compensation and business results. An advisory vote occurring once every three years will also permit our shareholders to observe and evaluate the impact of any changes to our executive compensation policies and practices which have occurred since the last advisory vote on executive compensation, including changes made in response to the outcome of a prior advisory vote on executive compensation. We will continue to engage with our shareholders regarding our executive compensation program during the period between advisory votes on executive compensation.

RAIT recognizes that the shareholders may have different views as to the best approach for RAIT, and therefore we look forward to hearing from our shareholders as to their preferences on the frequency of an advisory vote on executive compensation. This vote is advisory and not binding on RAIT or our board of trustees. The board of trustees will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive compensation. The board may decide that it is in the best interests of our shareholders and RAIT to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by our shareholders.

Shareholders may cast a vote on the preferred voting frequency by selecting the option of one year, two years, or three years (or abstain) when voting in response to the resolution set forth below.

“RESOLVED, that the shareholders determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation of RAIT’s named executive officers as set forth in RAIT’s proxy statement should be every year, every two years, or every three years.”

The proxy card provides shareholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining) and, therefore, shareholders will not be voting to approve or disapprove the recommendation of the Board of trustees.

THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE OPTION OF ONCE EVERY THREE YEARS AS THE PREFERRED FREQUENCY FOR ADVISORY VOTES ON EXECUTIVE COMPENSATION.

As of the date of this proxy statement, the board of trustees does not intend to present and has not been informed that any other person intends to present any other matters for action at the annual meeting. However, if other matters do properly come before the annual meeting or any adjournment, postponement or continuation thereof, it is the intention of the persons named as proxies to vote upon them in accordance with their best judgment. For any other matter which may properly come before the annual meeting, the affirmative vote of the holders of at least a majority of the votes cast at the annual meeting at which a quorum is present is required, either in person or by proxy, for approval, unless otherwise required by law.

Except as set forth in this section, all common shares represented by valid proxies received will be voted in accordance with the provisions of the proxy.

The following table sets forth the number and percentage owned by each person who, to the knowledge of RAIT as of March 1, 2011, is the beneficial owner of more than 5% of the outstanding:

Holders of our preferred shares generally have no voting rights and will have no voting rights at the annual meeting. The holders of these shares only obtain voting rights in limited circumstances, none of which have occurred. In particular, in the event dividends on any series of preferred shares were in arrears for six or more quarterly periods (whether or not consecutive), the holders of that series (voting together as a single class with all other shares of any class or series of shares ranking on a parity with any series which is entitled to similar voting rights, if any) would be entitled to vote for the election of two additional trustees to serve on the board of trustees until all such dividends in arrears have been paid or declared and set apart for payment. In addition, the issuance of future senior shares or certain changes to the terms of any series of preferred shares that would be materially adverse to the rights of holders of that series of preferred shares cannot be made without the affirmative vote of the holders of at least two-thirds of the outstanding shares of that series of preferred shares.

The following tables set forth the number and percentage owned as of March 1, 2011 by each of our present trustees, each of our present named executives, as defined in “Executive Officer Compensation” below, and all of our present executive officers (whether or not deemed to be named executives) and trustees as a group of:

This information is reported in accordance with the beneficial ownership rules of the SEC under which a person is deemed to be the beneficial owner of a security if that person has or shares voting power or investment power with respect to such security or has the right to acquire such ownership within 60 days. Common shares issuable pursuant to vested options or warrants are deemed to be outstanding for purposes of computing the percentage ownership of the person or group holding such options or warrants but are not deemed to be outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated in footnotes to the table, each person listed has sole voting and dispositive power with respect to the securities owned by such person.

Information is set forth below regarding the background of each of our executive officers who is not also a trustee. For our officer who is also a trustee, Scott F. Schaeffer, this information can be found above under “Proposal 1. Election of Trustees—Names of Trustees, Principal Occupations and Other Information.”

Jack E. Salmon, age 56, has served as our chief financial officer and treasurer since December 2006. Mr. Salmon joined RAIT in connection with the Taberna acquisition having served as Taberna’s executive vice president, chief financial officer and treasurer since March 2005. Mr. Salmon has served as the president and chief financial officer and as a director of Independence since January 2011. Mr. Salmon was employed by Cohen & Company, an investment bank, from January 2005 until April 2005. From 2003 until joining Cohen & Company, he was a vice president and chief accounting officer of The Rubenstein Company, L.P., a diversified privately-owned real estate company. From 1975 to 2003, Mr. Salmon worked in public accounting serving a variety of real estate and financial services companies, including public and privately held REITs, major real estate opportunity funds, developers and institutional investors in real estate. From 2002 to 2003, Mr. Salmon was a partner with KPMG LLP, an accounting firm. Mr. Salmon was a partner with Arthur Andersen LLP, an accounting firm, from 1989 to 2002. As an audit partner with Arthur Andersen LLP, Mr. Salmon had responsibility for REIT initial public offerings and due diligence engagements. He also advised multiple REITs on mergers and acquisitions, portfolio transactions and SEC matters.

Raphael Licht, age 43, has served as our chief operating officer since February 2009, our secretary since December 2006, and our chief legal officer and chief administrative officer from December 2006 to February 2009. Mr. Licht joined RAIT in connection with the Taberna acquisition having served as Taberna’s chief legal officer and secretary since March 2005 and executive vice president and chief administrative officer since April 2006. Mr. Licht served as a director of Independence from January 2011 to March 2011. Mr. Licht also served as the chief legal officer of Cohen & Company from 2001 until April 2006. From 2000 until 2001, Mr. Licht served as general counsel at iATM global.net Corporation, an ATM software joint venture between TRM Corporation and NCR Corporation. From 1997 until 2000, Mr. Licht was an associate with Morgan Lewis & Bockius LLP, a law firm, specializing in structured finance and securitizations. From 1996 until 1997, Mr. Licht was an associate at Ledgewood, P.C., a law firm, specializing in real estate and securities law. See “Certain Relationships and Related Party Transactions” regarding Cohen & Company.

Plamen M. Mitrikov, age 37, has served as our executive vice president-asset management since December 2006. Mr. Mitrikov joined RAIT in connection with the Taberna acquisition having served as Taberna’s executive vice president-asset management since April 2006. From April 2003 to February 2006, Mr. Mitrikov held various positions, including that of vice president and director, in the structured credit products group at Merrill Lynch specializing in trust preferred and asset-backed securities and collateralized debt obligations, or CDOs. Prior to joining Merrill Lynch, Mr. Mitrikov worked at Credit Suisse First Boston from January 2001 to March 2003 and Prudential Securities Asset Finance from November 1999 to December 2000. While at Credit Suisse First Boston, Mr. Mitrikov worked on structuring home-equity transactions in the Asset Finance Group until 2002, when he joined the CDO group and concentrated on trust preferred CDOs.

Ken R. Frappier, age 58, has served as our executive vice president-risk management since February 2008, our chief credit officer from December 2006 to February 2008 and served as our senior vice president-portfolio and risk management from April 2002 to December 2006. From December 1999 until he joined RAIT, Mr. Frappier was a senior vice president and regional chairman of the senior officers’ loan committee in Pennsylvania and Southern New Jersey for Hudson United Bank (a commercial bank), following the merger of Hudson United Bancorp (a bank holding company) and JeffBanks, Inc., (a bank holding company) of which Mr. Frappier had been senior vice president since 1993. Before 1993, Mr. Frappier was an executive vice president for Dominion Bancshares Corporation’s, or Dominion, Greater Washington Region (Northern Virginia, Washington, D.C. & Maryland) and, before the acquisition of State National Bank, or State, by Dominion in 1987, he was senior vice president and senior lender at State. Before 1977, he was a national bank examiner for the Comptroller of the Currency, a bureau of the U.S. Treasury Department.

James J. Sebra, age 35, has served as our senior vice president-finance and chief accounting officer since May 2007. Mr. Sebra joined RAIT in connection with the Taberna acquisition having served as Taberna’s vice president and chief accounting officer since June 2005. Mr. Sebra has served as the treasurer of Independence since January 2011. Prior to joining Taberna, Mr. Sebra was the controller of Brandywine Realty Trust, a publicly held real estate investment trust, from 2004 through 2005. From 1998 through 2004, Mr. Sebra worked with Arthur Andersen LLP and KPMG LLP, public accounting firms, serving a variety of publicly held and privately held real estate companies and professional service firms.

Our compensation policies are intended to compensate and reward executive officers who build long-term value for our shareholders and to provide appropriate compensation packages to attract, motivate, reward and retain talented and experienced executive officers. RAIT’s compensation committee has designed executive compensation programs to carry out these policies by rewarding performance that is directly relevant to our long-term success and goals relating to building value and generating distributions to our shareholders. The primary components of executive pay include base salary, annual cash bonuses and equity-based compensation. Our compensation committee is also responsible for applying our compensation policies by setting the base salary, annual bonuses and equity-based compensation for our executive officers, including our named executives, as well as setting equity-based compensation for all employees. Our named executives during 2010 were Mr. Schaeffer, Mr. Salmon, Mrs. Cohen, Mr. Licht and Mr. Frappier. See “Executive Officer Compensation” below. The role of our compensation committee, its use of a compensation consultant and the participation of executive officers in the compensation process are discussed above in “Information Concerning Our Board of Trustees, Committees and Governance-Compensation Committee.”

In applying our compensation policies to the named executives in 2010, the compensation committee sought to recognize the executive management team’s financial and strategic accomplishments during 2010 in adapting RAIT’s business platform to address risks and respond to opportunities in commercial real estate markets. RAIT reported annual income from continuing operations for 2010 of $110.6 million after having reported annual losses in each of the three prior years. RAIT reported REIT taxable income in 2010 after a REIT taxable loss in the prior year and declared a dividend on the common shares in January 2011 for the first time since 2008. RAIT continued to improve the operating performance of properties in its commercial real estate property portfolio and address the credit performance of loans in its commercial real estate loan portfolio. RAIT made significant progress in deleveraging its balance sheets through repurchases of its 6.875% convertible senior notes due 2027, or the convertible senior notes, and CDO notes payable that generated gains on extinguishment of debt. RAIT continued to implement its strategy of focusing on its commercial real estate portfolios by transferring its management rights to $5.9 billion in total assets under management comprised of debt securities. In addition, the executive management team implemented a number of new business initiatives in 2010 that it believes have the potential to become new sources of financing for RAIT and to contribute to RAIT’s fee income in the future. RAIT provides an analysis of its financial and operational performance and describes these new business initiatives in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of RAIT’s 2010 Annual Report on Form 10-K, or the 2010 annual report, filed with the SEC.

We believe that RAIT has an outstanding management team and that their long-term commitment is crucial to our future performance. We had previously negotiated and entered into employment agreements with all of our executive officers, including the named executives. In December 2010, Mrs. Cohen retired as chairman of the board of RAIT and as a trustee. The compensation committee feels that RAIT’s ability to implement a succession plan by promoting Mr. Schaeffer to serve as the new chairman of the board demonstrates the depth of RAIT’s management team and the benefit of compensation policies intended to maintain the long-term commitment of that team.

Equity Compensation: The compensation committee made modest increases in the total compensation of each of the named executives in 2010 over 2009 primarily by making equity compensation awards to each of the named executives. The compensation committee made new equity compensation awards to RAIT’s executive

officers, including the named executives, in January 2010. The executive officers had voluntarily forfeited previous equity compensation awards in December 2007 of phantom units awarded to them in January 2007 in an acknowledgement of the changed market conditions in the second half of 2007. As a result, prior to the awards made in January 2010, the remaining outstanding equity compensation awards held by the executive officers had been granted in 2006 or earlier. As the compensation committee continues to focus on equity compensation, it recommended to the board that the board propose to the shareholders the amendment and restatement of the incentive award plan described in Proposal 3 of this proxy statement. The compensation committee believes increasing the number of common shares available under the plan is important to enable the compensation committee to be able to continue to consider offering equity-based compensation. The compensation committee believes equity-based compensation is important to align the interests of our named executives with our shareholders. Given the extended period since the executive officers’ prior equity compensation award and the compensation committee’s belief in the benefits to our shareholders of having our executive officers own RAIT’s securities, the vesting period for the January 2010 awards was shortened from historical levels. Half of the January 2010 awards vested immediately and the reminder vested in one year, as compared to historical vesting periods ranging from two to four years. Once vested, the awards will be redeemed on the earlier of the first anniversary of the applicable vesting date or the date of the participant’s death.

Cash Compensation: The compensation committee maintained or reduced the cash portion of the compensation of each of the named executives in 2010 over 2009. The compensation committee maintained the base salary of the named executives in 2010 from 2009. Decreases in the amounts of base salary paid in 2010 from 2009 shown in the Summary Compensation Table for the named executives result from RAIT’s decrease in the number of annual payroll periods from 26 in 2008 to 24 in 2009, and not from any change in the annual rate of base salary paid.

The compensation committee awarded discretionary bonuses for 2010 to the five named executives. The discretionary bonuses for three of the named executive officers for 2010 were equal to their discretionary bonuses for 2009 and the discretionary bonuses for two of the named executive officers for 2010 were reduced 50% from their discretionary bonuses for 2009. The compensation committee did not establish a quantitative criteria-based bonus program for 2010 due to the difficulty and risk of setting fixed goals in a volatile economic environment. The compensation committee continues to consider whether to use discretionary bonuses, quantitative criteria-based bonus programs, other forms of cash awards or some combination of these alternatives in order to appropriately incentivize and reward RAIT’s executive officers.

RAIT seeks to maintain pay practices that foster good governance, which are demonstrated by:

Our compensation policies for our named executives have the following objectives:

We seek to attract and retain key executives, including the named executives, by motivating them to achieve superior performance and rewarding them for that performance. Key elements of compensation may include one or more of the following:

We seek to align the interests of our named executives with our shareholders through long-term incentives in the form of equity-based compensation. As discussed above in “Overview,” the compensation committee believes equity-based compensation is important to align the interests of our named executives with our shareholders and the compensation committee recommended to the board that the board propose to the shareholders the amendment and restatement of the incentive award plan described in Proposal 3 of this proxy statement.

Determining Compensation. The compensation committee applies its business judgment in making compensation decisions and has sole discretion in making such decisions. In 2010, in light of the challenging and volatile business environment, the compensation committee did not use pre-set formulas or weights for the factors it considered in determining the amount and mix of compensation elements, but the compensation committee reviewed RAIT’s financial, operating, strategic and stock performance and carefully evaluated each executive’s performance during the year against anticipated results, leadership qualities, operational performance, business responsibilities, career with RAIT, current compensation arrangements and long-term potential to enhance shareholder value. Specific factors affecting compensation decisions in 2010 for the named executives included:

No Reliance on Comparison Group. In years prior to 2009, the compensation committee had used compensation information concerning a comparison group of real estate investment trusts as a reference point to obtain a general understanding of then-current compensation practices. In making compensation decisions for

2010, while the compensation committee had access to market data about pay practices at certain real estate investment trusts as general reference points for levels and structures, it did not materially rely on any of this data in making compensation decisions. As RAIT’s business strategy evolves and as the business models and compensation programs for the real estate industry change, the compensation committee expects to consider whether to resume using a comparison group in any material fashion. For 2010, the compensation committee emphasized comparisons with historical pay levels and internal pay equity in setting the compensation for the executive officers, without placing any specific weight on each factor. In addition, the compensation committee reviewed broad-based information about trends in real estate financing and /or asset management businesses in compensation practices as general context for its compensation determinations.

Allocation Between Equity Compensation and Cash Payments. The compensation committee strives to achieve an appropriate mix between base salary, cash bonuses and equity incentive awards in order to meet RAIT’s compensation objectives. However, any pay mix objective is not applied rigidly and does not control the compensation committee’s compensation decisions; it serves as another tool to assess an executive’s total pay opportunities and whether appropriate incentives have been provided in order to accomplish our compensation objectives. The compensation committee also seeks to balance compensation elements that are based on individual contributions toward achieving RAIT’s financial, operational and strategic goals with others that are based on the performance of our common shares and our dividend record.

Allocation Between Types of Equity Compensation. From RAIT’s initial public offering in 1998 until 2004, the compensation committee granted stock options under the incentive award plan to RAIT’s executive officers and employees. Beginning in 2005, the compensation committee began granting phantom units to RAIT’s executive officers and employees under the incentive award plan. The compensation committee made this change because it viewed phantom units with dividend equivalents as a tangible and more effective compensation award. In connection with the Taberna acquisition, RAIT assumed the Taberna 2005 Equity Incentive Plan, or the Taberna equity compensation plan. This was done primarily to accommodate outstanding restricted Taberna common share awards to Taberna employees that were exchanged for RAIT common shares in connection with the Taberna acquisition. RAIT does not intend to make further awards pursuant to the Taberna equity compensation plan. All phantom units awarded to the executive officers in 2007 were voluntarily forfeited by the executive officers, including the named executives, in December 2007. As discussed above in “Overview,” the compensation committee made new equity compensation awards to the executive officers in January 2010.

Equity Grant Practices. In October 2009, the compensation committee adopted an equity award grant policy providing that awards under the incentive award plan will be made only on a date that corresponds to the date of any quarterly meeting of the board. The compensation committee considers exceptions to this practice when a new non-employee trustee is appointed to the board or when an employee or executive officer is hired or promoted by RAIT. In that event, an award may also be made on any date in the period beginning when the appointment, hiring or promotion occurs and ending one month thereafter. The compensation committee charter provides that non-employee trustees are not eligible to receive compensatory payments triggered by a change in control of RAIT, other than pursuant to change in control provisions in equity awards, which may be comprised of options, phantom units, restricted stock units, or any other equity compensation awards. Fees and expense reimbursement relating to service on the Board are not considered change in control payments. Also, the charter provides trustee options are to be priced based upon the market price of common shares on the grant date and will not be granted during blackout periods (as defined in RAIT’s insider trading policy as in effect from time to time), except that new trustees are eligible for a grant of options priced based upon the market price of common shares during a defined period of time after their appointment. When the compensation committee makes cash awards to non-management trustees to be used to make purchases of common shares on the open market, such purchases are historically scheduled to commence on the trading day immediately following the end of any “blackout period” then in effect, as defined in RAIT’s Insider Trading Policy.

Stock Ownership Guidelines. In March 2011, the compensation committee adopted stock ownership guidelines, or the stock ownership guidelines with the intent of encouraging close alignment of the interests of our trustees and senior management with our shareholders. The stock ownership guidelines apply to the following persons, including the named executives:

The guideline for each trustee is to own eligible RAIT securities with a value equal to or exceeding five times the trustee’s annual cash retainer then in effect. Each trustee who is also an officer subject to the guidelines is subject to the stock ownership guidelines for officers. The guideline for each officer subject to the guidelines is to own eligible securities with a value equal to or exceeding the multiple of the annual base salary then in effect of the officer set forth below opposite the category the officer is in:

As noted above, Mr. Schaeffer is our chairman of the board, president and chief executive officer. There are currently five other Section 16 officers who are identified above, see “Non-Trustee Executive Officers.” There are not currently any designated officers.

Officers subject to the guidelines who do not meet the stock ownership guidelines as of March 2011 must hold 100% of the net shares received from any awards made after the adoption of these stock ownership guidelines, including (a) 100% of net after-tax shares received upon vesting of full value share awards, and (b) 100% of net after-tax shares received upon option exercise. Current trustees and senior officers are expected to be in compliance with the stock ownership guidelines by March 2016. Once achieved, compliance is expected for so long as the individual is subject to the stock ownership guidelines. Upon any increase in the trustee’s annual retainer, in the case of a trustee, or a senior officer’s base salary, in the case of such senior officer, the individual will have five years from the date of such increase to achieve compliance based on the increased level of annual retainer or base salary. Any trustee or senior officer becoming subject to the stock ownership guidelines for the first time in the future will be expected to achieve compliance within five years. If a trustee or senior officer achieves his or her guideline at any time during the specified five-year period, then such trustee or senior officer will be considered to be in compliance as long as he or she continues to own the same number of eligible securities that were sufficient to meet the stock ownership guidelines. Compliance with the stock ownership guidelines is expected, but not mandatory. However, in the event of non-compliance by any senior officer or trustee, any subsequent equity-based compensation awarded to such senior officer or trustee may be structured in a manner that would result in compliance with the stock ownership guidelines.

Employment Agreements. All of RAIT’s executive officers, including the named executives, have employment agreements with RAIT. The employment agreements set floor amounts for base salary and, in certain cases, bonus opportunities. In addition, these employment agreements have change-in-control and non-change in control severance protection for these executives. See “Executive Compensation—Narrative to Summary Compensation Table and Plan-Based Awards Table—Employment Agreements” and “Executive

Compensation—Potential Payments upon Termination or Change in Control.” The compensation committee viewed these agreements as important components of a market-competitive executive compensation program and as critical compensation elements in support of the long-term retention of key executives. There were no changes in these employment agreements in 2010. The committee regularly reviews these employment agreements and severance protections and will periodically seek to make adjustments as competitive market practices evolve.

Risk Management and RAIT’s Compensation Policies and Procedures. The compensation committee considers the impact of RAIT’s compensation plans, and the incentives created by RAIT’s compensation plans, on RAIT’s risk profile. The compensation committee considers the impact of RAIT’s compensation plans, policies and practices, and the incentives created by the same, with respect to all employees, including executive officers, on RAIT’s risk profile. Based on this consideration, the compensation committee concluded that RAIT’s compensation policies and procedures are not reasonably likely to have a material adverse effect on RAIT.

IRC Section 162(m). The compensation committee periodically reviews the potential implications of Section 162(m) of the Internal Revenue Code, or IRC. This section generally disallows a publicly-held corporation’s tax deduction for compensation paid to its chief executive officer and the next three highest paid executive officers (excluding the chief financial officer) in excess of $1,000,000 in any year unless the compensation is performance-based within the meaning of Section 162(m). Although the compensation committee will consider various alternatives for preserving the deductibility of compensation payments, the compensation committee reserves the right to award compensation to our executives that may not qualify under Section 162(m) as deductible compensation. Because of the discretionary cash bonuses and equity awards granted and vesting in 2010, a portion of our executive compensation expenses for two or more of our named executives may not be deductible for tax purposes in 2010. It is also likely that even if we were to adopt performance-based cash awards and performance-based equity awards in subsequent years, certain payments made to the named executives, such as previously awarded equity grants that vest in a subsequent year and discretionary cash awards, may not qualify for tax deduction under the provisions of Section 162(m). We do not expect that the payment of compensation that does not satisfy the requirements of Section 162(m) of the Code will have a material adverse federal income tax consequence to us.

IRC Section 409A. Section 409A of the IRC applies to all forms of nonqualified deferred compensation. The compensation committee takes Section 409A into account in determining the form and timing of compensation paid to our executives. RAIT intends to operate and administer its compensation arrangements in accordance with Section 409A.

IRC Sections 280G and 4999. IRC Section 280G limits our ability to take a tax deduction for certain “excess parachute payments” (as defined in Section 280G) and IRC Section 4999 imposes excise taxes on each executive that receives “excess parachute payments” paid by RAIT in connection with a change in control. Certain of our employment agreements provide for RAIT to pay amounts equal to the sum of any excise taxes payable by the executive officer by reason of the executive officer receiving any excess parachute payments plus the amount necessary to put the executive officer in the same after-tax position as if no excise taxes had been paid. In 2010, we did not enter into any new agreements or materially amend any existing agreements that include a Section 280G make whole provision. The compensation committee considers the adverse tax liabilities imposed by Sections 280G and 4999, as well as other competitive factors, when it structures compensation payable to our named executives in connection with a change of control. The potential adverse tax consequences to RAIT and/or the named executive, however, are not necessarily determinative factors in such decisions.

Accounting Rules. Various rules under generally accepted accounting principles determine the manner in which RAIT accounts for grants of equity-based compensation to our employees in our financial statements. The compensation committee takes into consideration the accounting treatment of alternative grant proposals under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, “Stock

Compensation” (formerly, FASB Statement 123R), when determining the form and timing of equity compensation grants to employees, including our named executives. The accounting treatment of such grants, however, is not determinative of the type, timing, or amount of any particular grant of equity-based compensation to our employees.

Potential Impact on Compensation from Executive Misconduct. If the board of trustees determines that an executive officer has engaged in fraudulent or intentional misconduct, the board would take action to remedy the misconduct, prevent its recurrence, and impose such discipline on the officer as would be appropriate. Discipline would vary depending on the facts and circumstances, and may include, without limit, termination of employment, initiating an action for breach of fiduciary duty and, if the misconduct resulted in a significant restatement of RAIT’s financial results, seeking reimbursement of any portion of performance-based or incentive compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the restated financial results. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities. Under the Dodd-Frank Act, additional guidance will be forthcoming regarding mandatory recoupment of compensation. When such guidance is available, the company intends to adopt additional policies to implement the new requirements,

Base Salary. Base salaries are not intended to compensate individuals for extraordinary performance or for above-average performance by RAIT. Base salaries for executive officers are determined in part based on the compensation committees’ general understanding of current compensation practices in other real estate financing and/or asset management businesses and REITs, and in part by prior compensation and by an assessment of individual performance relative to responsibilities and objectives for performance. Base salaries are reviewed annually by the compensation committee. All of our executive officers, including the named executives, have employment agreements with RAIT. These employment agreements set their base salary and provide that base salary may be increased but not decreased during the term of the agreement. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table in 2010-Employment Agreements.”

Bonus Plan. Executive officers are eligible to receive annual bonuses, which have historically been based generally on our overall performance during the preceding year and the individual’s specific contribution to that performance. RAIT does not currently have a defined bonus pool. The compensation committee, in its discretion, determines the allocation and amount of annual bonus payments to executive officers based on company performance. The salaries paid and the annual bonuses awarded to the named executives in 2010 are discussed below and shown in the Summary Compensation Table below. The compensation committee considers various alternatives in structuring bonus programs, including discretionary bonuses, quantitative criteria-based bonus programs, other forms of cash awards or some combination of these alternatives, that is based on the compensation committee’s assessment of the named executive’s duties and performance within the context of the performance of RAIT or some designated portion of RAIT and whether quantitative criteria can be set that relate to the executive’s duties and performance and the performance of RAIT or some designated portion of RAIT. For 2010, the compensation committee has made annual cash bonus payments based on criteria that, in its judgment and experience, most appropriately reflect the overall performance of RAIT and the relative bonus compensation performance of the respective officers.

Equity-based compensation awards are designed to focus executive officers on the long-term goals and performance of RAIT. Since 2005, the compensation committee has only awarded equity compensation in the form of phantom units to our executive officers, including the named executives. These phantom units vest over time, are redeemable for the equivalent number of our common shares on the date of redemption which occurs

after vesting and provide for the payment of dividend equivalents prior to redemption. All terms of phantom units issued to employees are determined by the compensation committee at the time of grant. Participation in the incentive award plan is at the discretion of the compensation committee and is determined by potential contribution to, or impact upon, the performance of RAIT or some designated portion of RAIT by the employee. Phantom units offer executives the opportunity to receive common shares on the relevant redemption date. In this regard, phantom units serve both to reward and retain executives, as the value of the phantom unit is linked to the price of common shares on the relevant redemption date. The phantom units granted to the named executives in 2010 are described below. See “Compensation Decisions for the Named Executives in 2010” and the “Grants of Plan-Based Awards in 2010” table below.

RAIT provides certain other forms of compensation and benefits to the named executives, including perquisites and 401(k) matching contributions, as discussed below. The compensation committee has reviewed these other components of compensation in relation to the total compensation of the named executives, and determined that they are reasonable and appropriate.

Perquisites. None of our named executives received perquisites equal to or greater than $10,000 in 2010. In general, we do not emphasize perquisites as part of the compensation packages we offer and seek to emphasize other elements.

401(k)Plan. The RAIT 401(k) plan offers eligible employees the opportunity on the same terms and conditions to make long-term investments on a regular basis through salary contributions, which are supplemented by our matching cash contributions and potential profit sharing payments. Since January 1, 2008, RAIT has provided a cash match of 4% of the employee contributions and may provide an additional cash match of 2% of eligible compensation as discretionary cash profit sharing payments. No discretionary profit sharing payments were made in 2010. Any matching contribution made by RAIT pursuant to the RAIT 401(k) plan vests 33% per year of service. As of January 1, 2008, all of the named executives participated in the RAIT Financial Trust 401(k) Plan. RAIT contributed employer matches on behalf of the named executives as set forth in footnote 4 in the Summary Compensation Table. Under the RAIT 401(k) plan during 2010, RAIT matched 4% of employee’s eligible compensation but did not provide a 2% discretionary profit sharing match.

Post-Termination Compensation. We have employment agreements with members of our senior management team, including the named executives. Each of these agreements provides for payments and other benefits if the executive’s employment terminates under specified circumstances, including in the event of a “change in control”. See “Executive Compensation—Narrative to Summary Compensation Table and Plan-Based Awards Table—Employment Agreements” and “Executive Compensation—Potential Payments upon Termination or Change in Control” for a description of these severance and change in control benefits.

The compensation committee believes that these severance and change in control arrangements, which were entered into at the inception of the employment agreements by RAIT in 2002 for Mrs. Cohen and Mr. Schaeffer and in 2008 for Mr. Frappier and by Taberna in 2006 for Mr. Salmon and Mr. Licht, are an important part of overall compensation for these named executives because they help to secure the continued employment and dedication of these named executives, notwithstanding any concern that they might have regarding their own continued employment prior to or following a change in control. The compensation committee also believes that these arrangements are important as a recruitment and retention device, as most of the companies with which we compete for executive talent have customarily had similar agreements in place for their senior employees.

The executive employment agreements also contain provisions that prohibit the executive from disclosing RAIT’s confidential information and, for some named executives, prohibit the executive from engaging in certain competitive activities or soliciting any of our employees or customers. An executive will forfeit his right to receive post-termination compensation if he breaches these or other restrictive covenants in the employment agreements. We believe that these provisions help ensure the long-term success of RAIT.

The specific compensation decisions made for each of the named executives for 2010 reflect the conditions and considerations described above in “Overview.” The compensation committee decided that base salaries would be maintained, that the aggregate discretionary bonuses for the named executives for 2010 would be maintained or reduced by 50% from the discretionary bonuses for 2009, and that there would be aggregate equity awards of 1,000,000 phantom units to named executives in January 2010. This resulted in increases to the total compensation of each named executive in 2010 as compared to 2009. Compensation decisions for each of the named executives were tailored to their specific situations and are separately discussed.

Scott F. Schaeffer. In 2010, Mr. Schaeffer’s salary was maintained at an annual rate of $550,000, the level required by his employment agreement. In January 2011, the compensation committee awarded Mr. Schaeffer a discretionary cash bonus of $325,000 in recognition of his performance for RAIT in 2010. In January 2010, the compensation committee awarded Mr. Schaeffer 270,000 phantom units. Mr. Schaeffer’s cash bonus for 2010 was equal to his prior year’s bonus and his equity grants were greater than all other named officers except Mrs. Cohen to reflect Mr. Schaeffer’s critical role as chief executive officer in the long term success of RAIT. Mr. Schaeffer was primarily responsible for developing the strategy for and managing the core commercial mortgage business that generated, and continues to generate, a considerable portion of RAIT’s cash flow. The compensation committee believes that it has been Mr. Schaeffer’s overall management skill and leadership that has enabled RAIT to fund core commercial mortgage transactions that generate fees and continuing income through existing securitizations and loans that remain on RAIT’s books and properties that RAIT has taken back from defaulting borrowers and now owns and manages. Effective upon Mrs. Cohen’s retirement on December 31, 2010, the board appointed Mr. Schaeffer to serve as RAIT’s chairman of the board. Mr. Schaeffer also continues to serve as RAIT’s chief executive officer and president. In connection with Mr. Schaeffer’s appointment, the compensation committee did not adjust Mr. Schaeffer’s compensation but expects to consider his additional responsibilities in making compensation decisions for Mr. Schaeffer in 2011.

Jack E. Salmon. In 2010, Mr. Salmon’s salary was maintained at an annual rate of $484,000, the level required by his employment agreement. In January 2011, the compensation committee awarded Mr. Salmon a discretionary cash bonus of $120,000 in recognition of his performance for RAIT in 2010. In January 2010, the compensation committee awarded Mr. Salmon 160,000 phantom units. Mr. Salmon’s share of the cash bonus and equity grant were consistent with the importance of his position and performance. While Mr. Salmon’s discretionary bonus was 50% of his prior year’s bonus, because of equity grants his total compensation reported for 2010 increased. Mr. Salmon has borne the responsibility of maintaining the financial affairs of RAIT in a time of enormous pressure and was directly involved with raising and managing new sources of capital and liquidity. He continues to be particularly involved in strengthening RAIT’s balance sheet by negotiating and successfully concluding exchange offers for a portion of RAIT’s outstanding convertible senior debt. He has also taken the lead in filing an amended registration statement for our proposed sale of shares in Independence.

Betsy Z. Cohen. In 2010, Mrs. Cohen’s salary was maintained at an annual rate of $550,000, the level required by her employment agreement. In January 2011, the compensation committee awarded Mrs. Cohen a discretionary cash bonus of $325,000 in recognition of her performance for RAIT in 2010. In January 2010, the compensation committee awarded Mrs. Cohen 290,000 phantom units. Mrs. Cohen’s cash bonus for 2010 was equal to her prior year’s bonus and her equity grants were greater than all other named officers to reflect the importance of Mrs. Cohen’s leadership in the extraordinary operating environment for real estate finance companies. Mrs. Cohen has played a key role in creating and implementing the strategies that have maintained RAIT’s financial stability and its dealings with lenders throughout the financial crisis. Mrs. Cohen retired as RAIT’s chairman of the board and as a trustee effective December 31, 2010. The compensation committee authorized a consulting agreement with Mrs. Cohen for the three months following her retirement and the earlier redemption of her remaining vested phantom units as described below. See “Potential Payments on Termination or Change-In-Control-Betsy Z. Cohen.”

Raphael Licht. In 2010, Mr. Licht’s salary was maintained at an annual rate of $480,000, the level required by his employment agreement. In January 2011, the compensation committee awarded Mr. Licht a discretionary cash bonus of $145,000 in recognition of his performance for RAIT in 2010. In January 2010, the compensation committee awarded Mr. Licht 235,000 phantom units. Mr. Licht’s share of the cash bonus and equity grant were consistent with the importance of his position and performance. While Mr. Licht’s discretionary bonus was 50% of his prior year’s bonus, because of equity grants his total compensation reported for 2010 increased. Mr. Licht’s equity grants were greater than all other named officers except Mrs. Cohen and Mr. Schaeffer to reflect the importance of Mr. Licht’s role as chief operating officer in developing operating strategies for the future success of RAIT. In addition to his general management responsibilities, during 2010 Mr. Licht was instrumental in developing and executing RAIT’s strategies to deleverage and improve liquidity and in identifying new business opportunities.

Ken R. Frappier. In 2010, Mr. Frappier’s salary was maintained at an annual rate of $325,000, the level required by his employment agreement. In January 2011, the compensation committee awarded Mr. Frappier a discretionary cash bonus of $250,000 in recognition of his performance for RAIT in 2010. In January 2011, the compensation committee awarded Mr. Frappier 160,000 phantom units. Mr. Frappier’s share of the cash bonus and equity grant were consistent with the importance of his position and performance. Mr. Frappier is responsible for identifying and addressing credit performance issues in RAIT’s investment portfolios, managing the performance of RAIT’s securitizations to ensure, to the extent possible through negotiations for exchanges and modifications, that RAIT’s commercial real estate securitizations continue to pass all performance tests, and managing and participating in management’s review of new investments.

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis and discussed that analysis with management. Based on its review and discussions with management, the compensation committee recommended to RAIT Financial Trust’s (“RAIT”) board of trustees that the Compensation Discussion and Analysis be included in RAIT’s annual report on Form 10-K for 2010 and RAIT’s 2011 proxy statement. This report is provided by the following independent trustees who comprise the committee:

Daniel Promislo, Chairman

John F. Quigley, III

Murray Stempel, III

The following table provides summary information about compensation expensed or accrued by RAIT during the fiscal year ended December 31, 2010, for the following persons, who we refer to as the named executives:

The following table provides information about equity awards granted to the named executives in 2010.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table in 2010

We provide additional disclosure below of factors relating to the Summary Compensation Table and Grants of Plan-Based Awards in 2010, including descriptions of the employment agreements of the named executives.

RAIT has entered into employment agreements with all of the named executives. The post-termination and severance provisions of these agreements are discussed in “Potential Payments on Termination or Change-In-Control” below.

On January 23, 2002, RAIT entered into an employment agreement with Scott F. Schaeffer employing him as its president and chief operating officer. The agreement had an effective date of October 1, 2001. This agreement was amended on December 11, 2006 in connection with the Taberna acquisition. Under his agreement, as amended, Mr. Schaeffer served as the president and chief operating officer of RAIT; the employment agreement has a continuous three year term. Under the agreement, Mr. Schaeffer’s base compensation may be increased by the compensation committee based upon its evaluation of his performance. Mr. Schaeffer is also eligible for bonuses as determined by the compensation committee and is entitled to a car allowance of not less than $500 per month. Effective February 22, 2009, the board promoted Mr. Schaeffer to serve as RAIT’s chief executive officer. Mr. Schaeffer also continued to serve as RAIT’s president. In connection with Mr. Schaeffer’s promotion, on February 22, 2009, the compensation committee approved an amendment to Mr. Schaeffer’s employment agreement to reflect his new position and to increase his base salary. Effective upon Mrs. Cohen’s retirement as chairman of the board of RAIT on December 31, 2010, Mr. Schaeffer was appointed by the board to serve as RAIT’s chairman of the board and to continue to serve as RAIT’s chief executive officer and president. No changes to Mr. Schaeffer’s employment agreement were made in connection with this appointment. Mr. Schaeffer’s base salary, bonuses awarded and equity and other compensation are described above in “Compensation for the Named Executives in 2010.”

On June 8, 2006, RAIT entered into an employment agreement with Mr. Salmon which became effective upon completion of the Taberna acquisition in December 2006. This employment agreement is for a three-year term commencing on the effective date of the Taberna acquisition and renewing automatically for successive one year periods unless either party provides the other party with notice of non-renewal prior to three months before the expiration of the term. It provides that Mr. Salmon shall be chief financial officer (reporting to the chief executive officer) and provides for an initial annual base salary. Any increase in salary shall be subject to the discretion of the compensation committee. The employment agreement provides that Mr. Salmon may be eligible for an annual bonus which will be awarded by the compensation committee in its discretion. The employment agreement further provides that Mr. Salmon is eligible to participate in RAIT’s equity compensation plan and is eligible to receive the same benefits, including medical insurance coverage and retirement plan benefits in a 401(k) plan, to the same extent as other senior executives of RAIT, and such other benefits as are commensurate with his position. Participation in employee benefit plans will be subject to the terms of those benefit plans as in effect from time to time. Mr. Salmon’s base salary, bonuses awarded and equity and other compensation are described above in “Compensation for the Named Executives in 2010.”

On January 23, 2002, RAIT entered into an employment agreement with Mrs. Cohen employing her as its chairman and chief executive officer with an effective date of October 1, 2001. This agreement was amended on December 11, 2006 in connection with the Taberna acquisition. Under her agreement, as amended, Mrs. Cohen

continued as chairman of the board of trustees of RAIT. Mrs. Cohen retired as RAIT’s chairman of the board and as a trustee effective December 31, 2010. On November 4, 2010, Mrs. Cohen delivered notice of her voluntary termination of her employment agreement with RAIT effective December 31, 2010. Mrs. Cohen’s base salary, bonuses awarded and equity and other compensation are described in “Compensation for the Named Executives in 2010.” RAIT entered into a consulting agreement with Mrs. Cohen for the three months following her retirement and amended her remaining vested phantom units to change their redemption date. See “Potential Payments on Termination or Change-In-Control-Betsy Z. Cohen.”

On June 8, 2006, RAIT entered into an employment agreement with Mr. Licht which became effective upon completion of the Taberna acquisition. This employment agreement is for a three-year term commencing on the effective date of the Taberna acquisition and renewing automatically for successive one year periods unless either party provides the other party with notice of non-renewal prior to three months before the expiration of the term. It initially provided that Mr. Licht would serve as our chief legal officer, chief administrative officer and secretary (reporting to the chief executive officer) and provides for an annual base salary. Any increase in salary is subject to the discretion of the compensation committee. The employment agreement provides that Mr. Licht may be eligible for an annual bonus which will be awarded by the compensation committee in its discretion. The employment agreement further provides that Mr. Licht is eligible to participate in the RAIT’s equity compensation plan and eligible to receive the same benefits, including medical insurance coverage and retirement plan benefits in a 401(k) plan, to the same extent as other senior executives of RAIT, and such other benefits as are commensurate with his position. Participation in employee benefit plans will be subject to the terms of those benefit plans as in effect from time to time. Effective February 22, 2009, the board promoted Mr. Licht to serve as RAIT’s chief operating officer. Mr. Licht also continued to serve as RAIT’s secretary. In connection with Mr. Licht’s promotion, on February 22, 2009, the compensation committee approved an amendment to Mr. Licht’s employment agreement to reflect his new position and to increase his base salary. Mr. Licht’s base salary, bonuses awarded and equity and other compensation are described above in “Compensation for the Named Executives in 2010.”

On February 5, 2008, RAIT entered into an employment agreement with Mr. Frappier employing him as its chief credit officer. Subsequently, Mr. Frappier was promoted in February 2008 to Executive Vice President-Risk Management. The employment agreement has a continuous three year term. Under the agreement, Mr. Frappier’s base compensation may be increased by the compensation committee based upon its evaluation of his performance. Mr. Frappier is also eligible for bonuses as determined by the compensation committee. Mr. Frappier’s base salary, bonuses awarded and equity and other compensation are described above in “Compensation for the Named Executives in 2010.”

The vesting schedule of the phantom units granted by the compensation committee pursuant to the RAIT equity compensation plan is described in footnote 1 to the “Grants of Plan-Based Awards in 2010” table above. These phantom units are redeemed one year after vesting. An amount equal to any dividend declared on a common share, or a dividend equivalent, is paid on each vested phantom unit and accrued on each unvested phantom unit to be paid in a lump sum upon vesting.

The following table provides information on the current holdings of stock options, phantom units and restricted stock by the named executives. This table includes unexercised option awards, unvested phantom units, and unvested restricted shares. Each equity grant is shown separately for each named executive. The market value of the stock awards is based on the closing market price of RAIT common shares as of December 31, 2010, which was $2.19. For additional information about the option awards and stock awards, see “Compensation Discussion and Analysis-Equity-Based Compensation” above.

The following table provides information for the named executives with respect to the number of shares acquired upon the vesting of stock awards in the form of phantom units or restricted shares or otherwise and the value realized, based upon the market price of our common shares on the date of vesting, each before payment of any applicable withholding tax and broker commissions. The named executives did not exercise any stock options during 2010 and all outstanding stock options had vested by 2010.

As noted under “Executive Compensation—Narrative to Summary Compensation Table and Grant of Plan-Based Awards Table—Employment Agreements,” we have entered into employment agreements with our named executives. These agreements provide for payments and other benefits if a named executive’s employment with us is terminated under circumstances specified in his or her respective agreement, including a “change in control” of RAIT (as defined in the agreement). A named executive’s rights upon the termination of his or her employment will depend upon the circumstances of the termination. The tables below summarize these rights and the amount of any payments and benefits due under the circumstances specified for the named executive indicated.

Under Mr. Schaeffer’s employment agreement, as amended, if his employment is terminated without “cause” or he resigns for “good reason” during the term of the employment agreement and he executes and does not revoke a mutual release, he will receive: (i) a lump sum cash severance payment equal to one and a half times the sum of his base salary and average annual cash bonus for the three year period immediately prior to his termination of employment, (ii) a pro rata portion of his target bonus for the fiscal year of his termination (if there is no target bonus opportunity for the fiscal year, the target bonus for this purpose will be equal to 100% of his base salary), (iii) continued medical coverage for 18 months for himself and his spouse and dependents as if he had continued in employment with RAIT, or, at our election, the after-tax cost of such coverage if his continued participation is not permitted or would have adverse tax consequences to the plan, and (iv) all other amounts earned, accrued and owing but not yet paid to him. If his employment is terminated on account of his death or disability, he will receive all amounts earned and accrued as of such date and a pro rated bonus for the fiscal year of his death or disability (if there is no target bonus opportunity for the fiscal year, the target bonus for this purpose will be equal to 100% of his base salary). If a “change of control” of RAIT occurs and Mr. Schaeffer receives an excess parachute payment, RAIT will fully gross him up on an after-tax basis for any excise taxes that result under Section 4999 of the Internal Revenue Code from the excess parachute payment.

“Cause” is defined as any of the following: (i) Mr. Schaeffer shall have been convicted of a felony; (ii) Mr. Schaeffer intentionally and continually fails substantially to perform his reasonably assigned material duties to RAIT (other than a failure resulting from his incapacity due to physical or mental illness), which failure has been materially and demonstrably detrimental to RAIT and has continued for a period of at least 30 days after a written notice of demand for substantial performance has been delivered to him; or (iii) Mr. Schaeffer breaches the non-competition, non-solicitation, intellectual property and confidentiality provisions of his employment agreement.

continues as the chief executive officer of the surviving, new or combined entity; or (c) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the board cease for any reason to constitute at least two-thirds thereof, unless the election or nomination for the election by RAIT’s shareholders of each new trustee was approved by a vote of at least two-thirds of the trustees then still in office who were trustees at the beginning of the period; or (d) the transfer of all or substantially all of RAIT’s assets or all or substantially all of the assets of its primary subsidiaries to an unaffiliated entity, other than to a related entity. A related entity means an entity that is an “affiliate” of Mr. Schaeffer or Mrs. Cohen, or any member of Mr. Schaeffer’s or Mrs. Cohen’s immediate family including his or her spouse or children, as determined in accordance with Rule 12b-2 of the under the Exchange Act.

“Disability” means he has been unable to perform the material duties of his employment for a period of ninety (90) consecutive days in any twelve (12) month period because of physical or mental injury or illness.

Mr. Schaeffer’s employment agreement provides that during his employment term and without regard to its termination for any reason which does not constitute a breach of his employment agreement by RAIT, and for a period of twelve (12) months thereafter, he shall not (a) directly or indirectly, own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit his name to be used in connection with any competing business within any state in which RAIT currently engages in any lending activity or any state in which RAIT engaged in any lending activity during the thirty-six month period preceding the date his employment terminates; provided, however, the employment agreement does not prohibit the passive ownership by Mr. Schaeffer of not more than 5% of the capital stock of any corporation which is engaged in any competing business having a class of securities registered pursuant to the Exchange Act; (b) solicit or divert to any competing business any individual or entity which is an active or prospective customer of RAIT or was such an active or prospective customer at any time during the preceding 12 months; or (c) employ, attempt to employ, solicit or assist any competing business in employing any employee of RAIT whether as an employee or consultant. A competing business means any entity or enterprise in the business of providing equity alternatives through lending or other financial devices on residential or commercial property. Under Mr. Schaeffer’s employment agreement, he must transfer to RAIT all intellectual property rights which he has conceived, made or developed, solely or jointly with others, while employed by RAIT and which relate to the business, work or activities of RAIT or result from or are suggested by the carrying out of his duties under his employment agreement or from or by any information that he may receive as an employee of RAIT. Also, both during and after his employment term, he may not disclose any of RAIT’s confidential information to any person (except as his duties as an officer of RAIT may require or as required by law or in a judicial or administrative proceeding) without the prior written authorization of the board. This obligation of confidentiality does not apply to information that becomes generally known to the public through no act of Mr. Schaeffer in breach of his employment agreement.

The table below summarizes these rights and the amount of any payments and benefits due under the indicated circumstances for Mr. Schaeffer assuming the circumstances occurred as of December 31, 2010:

Additionally, Mr. Schaeffer may vest in certain ancillary benefits provided to all employees if he is terminated, including but not limited to the vested portion of our matching contributions to his 401(k) account. If any of the above payments are be deemed to constitute a “parachute payment” as defined in IRC Section 280G, we are required to pay Mr. Schaeffer an amount in cash equal to the sum of the excise taxes payable by him by reason of receiving such payment plus the amount necessary to put him in the same after-tax position as if no excise taxes had been paid. We do not anticipate that any of the above payments would trigger this obligation.

Under Mr. Salmon’s employment agreement, if his employment ends for any reason, RAIT will pay accrued salary, bonuses and incentive payments already awarded but not paid (including a pro rata bonus for the year of termination), and other existing obligations. In addition, if RAIT terminates his employment without “cause” or if he terminates his employment for “good reason,” RAIT will be obligated to pay a lump sum payment of an amount equal to his then current annual base salary plus the highest bonus earned in the one-year period prior to termination times 1.5. Additionally, in the event of a termination by RAIT for any reason other than for cause or by Mr. Salmon for good reason, all of the outstanding equity-based awards (including options and phantom units) granted to him will become fully vested. If RAIT gives notice that Mr. Salmon’s employment agreement will not be renewed at the end of the term, he will be entitled to (i) accrued annual salary and bonus, (ii) a lump sum payment of the sum of (x) 1.5 times his then current annual base salary and (y) his annual bonus for the fiscal year in which non renewal occurs and (iii) the full vesting of all outstanding equity-based awards.

Upon a “change of control” of RAIT, Mr. Salmon will become fully vested in his phantom units, options and restricted shares. In addition, if he terminates employment within six months after a change of control, for any reason, the termination will be deemed to be for good reason. If payments become due as a result of a change of control and the excise tax imposed by Section 4999 of the Internal Revenue Code applies, the terms of the employment agreement require RAIT to pay him a “gross up” payment in the amount of this excise tax plus the amount of income and other taxes due as a result of the gross up payment.

A “change of control” means the happening of any of the following: (i) any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, but excluding RAIT, any entity controlling, controlled by or under common control with RAIT,

any employee benefit plan of RAIT or any such entity, and Mr. Salmon and any “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of which Mr. Salmon is a member) is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of RAIT representing 30% or more of either (A) the combined voting power of RAIT’s then outstanding securities or (B) the then outstanding common shares of RAIT (in either such case other than as a result of an acquisition of securities directly from RAIT) except that no change of control shall be deemed to have occurred upon a public offering of the common shares under the Securities Act of 1933, as amended, or the Securities Act; or (ii) any consolidation or merger of RAIT where the shareholders of RAIT, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any); or (iii) there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of RAIT, other than a sale or disposition by RAIT of all or substantially all of RAIT’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by “persons” (as defined above) in substantially the same proportion as their ownership of RAIT immediately prior to such sale or (B) the approval by shareholders of RAIT of any plan or proposal for the liquidation or dissolution of RAIT; or (iv) the members of the board at the beginning of any consecutive 24-calendar-month period, or the incumbent trustees, cease for any reason other than due to death to constitute at least a majority of the members of the board; provided that any trustee whose election, or nomination for election by RAIT’s shareholders, was approved by a vote of at least a majority of the members of the board then still in office who were members of the board at the beginning of such 24-calendar-month period, shall be deemed to be an incumbent trustee.

“Good reason” is defined as (i) the material reduction of his title, authority, duties and responsibilities or the assignment to him of duties materially inconsistent with his position or positions with RAIT; (ii) a reduction in his annual salary; or (iii) RAIT’s material and willful breach of the agreement.

Mr. Salmon’s employment agreement defines “cause” as Mr. Salmon’s (i) commission of, and indictment for or formal admission to a felony, or any crime of moral turpitude, dishonesty, or breach of RAIT’s code of ethics, or any crime involving RAIT; (ii) engaging in fraud, misappropriation or embezzlement; (iii) continued gross insubordination after written notice thereof by the board; (iv) continued failure to materially adhere to the directions of the board, to adhere to RAIT’s written policies and practices or to devote a substantial majority of his business time and efforts to RAIT and its subsidiaries; or (v) material breach of any of the non-competition or other restrictive covenants in his employment agreement.

The non-competition covenant in Mr. Salmon’s employment agreement provides that, during the employment term and ending 18 months following the date upon which he ceases to be an employee of RAIT and its affiliates, he shall not in the United States, directly or indirectly, (i) engage in RAIT’s type of business, as defined (other than for RAIT or its affiliates), or (ii) render any services in furtherance of RAIT’s type of business to any person, corporation, partnership or other entity engaged in RAIT’s type of business, or who has taken substantial measures, or made investments, evidencing an intention to engage in RAIT’s type of business, other than incidentally as is necessary to engage in its principal business, or for any originator (as defined below); or (iii) become interested in any originator or any person, corporation, partnership or other entity (other than RAIT or its affiliates) principally engaged in RAIT’s type of business as a partner, shareholder, principal, agent, employee, consultant or in any other relationship or capacity. Mr. Salmon may invest in securities of any entity, solely for investment purposes and without participating in the business thereof, if (A) such securities are traded on any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, and (B) he is not a controlling person of, or a member of a group which controls, such entity (except to the extent expressly permitted by the agreement). In addition, the restrictive covenants do not apply to any of Mr. Salmon’s investments or other activities which have been disclosed in writing to and approved by the board prior to entering into his employment agreement. RAIT’s type of business is defined as the structuring,

organization, consulting with, managing, servicing or otherwise engaging in the business of pooling trust preferred securities or providing financing through the issuance of similar debt securities or equity securities issued by REITs or real estate operating companies or their affiliates, wherever located, whether in a “CDO” structure or otherwise. “Originator” means a person corporation, partnership or entity who (x) at any point prior to the date of Mr. Salmon’s termination was paid fees or earned any fees or entered into any agreement with RAIT or its affiliates in respect of the origination of any financing transaction by or placement of securities or issued by REITs, real estate operating companies or their affiliates, wherever located, into or through a CDO transaction or warehouse line in which RAIT or any of its affiliates acted as collateral manager, or (y) which RAIT engaged or plans to engage for the purpose of the placement of securities into a CDO transaction or warehouse line.

The confidentiality restrictive covenant in Mr. Salmon’s employment agreement provides that during and after the period of his employment with RAIT and its affiliates, he will keep secret and retain in strictest confidence all confidential matters relating to RAIT’s business and the business of any of its affiliates and to RAIT and any of its affiliates, learned by him directly or indirectly from RAIT or any of its affiliates and shall not disclose such confidential information to anyone outside of RAIT except with RAIT’s express written consent and except for confidential information which is at the time of receipt or thereafter becomes publicly known through no wrongful act of Mr. Salmon or is received from a third party not under an obligation to keep such information confidential and without breach of his employment agreement.

The non-solicitation restrictive covenant in Mr. Salmon’s employment agreement provides that during the employment term and ending 18 months following the date upon which he ceases to be an employee of RAIT and its affiliates, he will not, directly or indirectly, knowingly (i) solicit or encourage to leave the employment or other service of RAIT, or any of its affiliates, any employee or independent contractor thereof or (ii) hire (on his behalf or any other person or entity) any employee who has left the employment of RAIT or any of its affiliates within the eighteen (18) month period which follows the termination of such employee’s employment with RAIT and its affiliates, and (iii), whether for his own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with RAIT’s or any of its affiliates’ relationship with, or endeavor to entice away from RAIT or any of its affiliates, any person who during his employment term is or was a customer or client of RAIT or any of its affiliates.

Mr. Salmon receives amounts under his employment agreement if his employment terminates due to death or disability. “Disability” means he is unable to perform substantially and continuously the duties assigned to him due to a disability as defined for purposes of RAIT’s long-term disability plan then in effect, or, if no such plan is in effect, by virtue of ill health or other disability for more than 180 consecutive or non-consecutive days out of any consecutive 12-month period.

The table below summarizes these rights and the amount of any payments and benefits due under the indicated circumstances for Mr. Salmon assuming the circumstances occurred as of December 31, 2010:

Additionally, Mr. Salmon may vest in certain ancillary benefits provided to all employees if he is terminated, including but not limited to the vested portion of our matching contributions to his 401(k) account. If any of the above payments are be deemed to constitute a “parachute payment” as defined in IRC Section 280G, we are required to pay Mr. Salmon an amount in cash equal to the sum of the excise taxes payable by him by reason of receiving such payment plus the amount necessary to put him in the same after-tax position as if no excise taxes had been paid. We do not anticipate any of the payments would trigger this obligation.

As described above under “Compensation for the Named Executives in 2010,” Mrs. Cohen retired as chairman of the board and as a trustee of RAIT effective December 31, 2010. On November 4, 2010, Mrs. Cohen delivered notice of her voluntary termination of her employment agreement with RAIT effective December 31, 2010. In accordance with Mrs. Cohen’s employment agreement, Mrs. Cohen received her base salary through December 31, 2010, any benefits accrued and due in accordance with the terms of any applicable benefit plans and programs of RAIT and, in January 2011, the compensation committee authorized paying Mrs. Cohen a bonus of $325,000 for her service in 2010. In connection with Mrs. Cohen’s planned retirement, on November 4, 2010, RAIT entered into a consulting agreement with Mrs. Cohen to be in effect from January 1, 2011 through March 31, 2011. Under the consulting agreement, Mrs. Cohen agreed to consult with the executive officers and Board of RAIT with respect to such matters as may be reasonably requested by RAIT and RAIT agreed to reimburse her for all reasonable travel and other expenses incurred in the performance of her duties under the consulting Agreement and provide her with office space and appropriate secretarial services. On February 22, 2011, the compensation committee amended the terms of the remaining 145,000 vested phantom units held by Mrs. Cohen to provide for their redemption for the equivalent number of common shares on March 31, 2011 instead of January 26, 2012.

Under Mr. Licht’s employment agreement, if his employment ends for any reason, RAIT will pay accrued salary, bonuses and incentive payments already awarded but not paid (including a pro rata bonus for the year of termination), and other existing obligations. In addition, if RAIT terminates his employment without “cause,” if he terminates his employment for “good reason” or in the event of any notice of non-renewal of his employment agreement by RAIT, RAIT will be obligated to pay a lump sum payment of an amount equal to 1.5 times the sum

of (x) the highest bonus earned in one year period preceding the date of termination plus (y) the average of the annual salary amounts paid to Mr. Licht over the three calendar years prior to the date of termination. Additionally, in the event of a termination by RAIT for any reason other than for cause, by Mr. Licht for good reason, or in the event of any notice of non-renewal, all of the outstanding equity-based awards (including options and phantom units) granted to him will become fully vested.

Mr. Licht’s employment agreement defines “cause” as Mr. Licht’s (i) commission of, and indictment for or formal admission to a felony, or any crime of moral turpitude, dishonesty, or breach of RAIT’s code of ethics, or any crime involving RAIT; (ii) engagement in fraud, misappropriation or embezzlement; (iii) continued gross insubordination after written notice thereof by the Board; (iv) continued failure to materially adhere to the directions of the Board, to adhere to RAIT’s written policies and practices or to devote a substantial majority of his business time and efforts to RAIT and its subsidiaries; or (v) material breach of any of the non-compete, confidentiality and non-solicitation provisions of the employment agreement.

Upon a “change of control” of RAIT, Mr. Licht will become fully vested in his phantom units, options and restricted shares. In addition, if he terminates employment within six months after a change of control, for any reason, the termination will be deemed to be for good reason. If payments become due as a result of a change of control and the excise tax imposed by Section 4999 of the Internal Revenue Code applies, the terms of the employment agreement require RAIT to pay him a “gross up” payment in the amount of this excise tax plus the amount of income and other taxes due as a result of the gross up payment. The definition of “change of control” in Mr. Licht’s employment agreement is the same as the definition of “change of control” in Mr. Salmon’s employment agreement described above.

The non-competition covenant in Mr. Licht’s employment agreement provides that, during the employment term and ending 18 months following the date upon which he ceases to be an employee of RAIT and its affiliates, he shall not in the United States, directly or indirectly, (i) engage in the structuring, organization, consulting with, managing, servicing or otherwise engaging in the business of pooling trust preferred securities or providing financing through the issuance of similar debt securities or equity securities issued by REITs or real estate operating companies or their affiliates, wherever located, whether in a “CDO” structure or otherwise, or such business (other than for RAIT or its affiliates), or (ii) render any services in furtherance of such business to any person, corporation, partnership or other entity engaged in such business, or who has taken substantial measures, or made investments, evidencing an intention to engage in such business other than incidentally as is necessary to engage in its principal business, or for any originator; or (iii) become interested in any originator or any person, corporation, partnership or other entity (other than RAIT or its affiliates) principally engaged in such business, as a partner, shareholder, principal, agent, employee, consultant or in any other relationship or capacity. Mr. Licht may invest in securities of any entity, solely for investment purposes and without participating in the business thereof, if (A) such securities are traded on any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, and (B) he is not a controlling person of, or a member of a group which controls, such entity (except to the extent expressly permitted by the agreement). In addition, the restrictive covenants shall not apply to any of Mr. Licht’s existing investments or other activities which have been disclosed in writing to and approved by the board prior to entering into his employment agreement. “Originator” means a person corporation, partnership or entity who (x) at any point prior to the date of Mr. Licht’s termination was paid fees or earned any fees or entered into any agreement with RAIT or its affiliates in respect of the origination of any financing transaction by or placement of securities or issued by REITs, real estate operating companies or their affiliates, wherever located, into or through a CDO transaction or warehouse line in which RAIT or any of its affiliates acted as collateral manager, or (y) which RAIT engaged or plans to engage for the purpose of the placement of securities into a CDO transaction or warehouse line.

The confidentiality restrictive covenant in Mr. Licht’s employment agreement provides that during and after the period of his employment with RAIT and its affiliates, he will keep secret and retain in strictest confidence all confidential matters relating to RAIT’s business and the business of any of its affiliates and to RAIT and any of its affiliates, learned by him directly or indirectly from RAIT or any of its affiliates and shall not disclose such confidential information to anyone outside of RAIT except with RAIT’s express written consent and except for confidential information which is at the time of receipt or thereafter becomes publicly known through no wrongful act of Mr. Licht or is received from a third party not under an obligation to keep such information confidential and without breach of his employment agreement.

The non-solicitation restrictive covenant in Mr. Licht’s employment agreement provides that during the employment term and ending 18 months following the date upon which he ceases to be an employee of RAIT and its affiliates, he will not, directly or indirectly, knowingly (i) solicit or encourage to leave the employment or other service of RAIT, or any of its affiliates, any employee or independent contractor thereof or (ii) hire (on his behalf or any other person or entity) any employee who has left the employment of RAIT or any of its affiliates within the eighteen (18) month period which follows the termination of such employee’s employment with RAIT and its affiliates, or (iii) whether for his own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with RAIT’s or any of its affiliates’ relationship with, or endeavor to entice away from RAIT or any of its affiliates, any person who during his employment term is or was a customer or client of RAIT or any of its affiliates.

Mr. Licht receives amounts under his employment agreement if his employment terminates due to death or disability. “Disability” means he is unable to perform substantially and continuously the duties assigned to him due to a disability as defined for purposes of RAIT’s long-term disability plan then in effect, or, if no such plan is in effect, by virtue of ill health or other disability for more than 180 consecutive or non-consecutive days out of any consecutive 12-month period.

The table below summarizes these rights and the amount of any payments and benefits that would have been due under the indicated circumstances for Mr. Licht assuming the circumstances occurred as of December 31, 2010:

Additionally, Mr. Licht would have vested in certain ancillary benefits provided to all employees if he had been terminated, including but not limited to the vested portion of our matching contributions to his 401(k) account. If any of the above payments would have been deemed to constitute a “parachute payment” as defined in IRC Section 280G, we would also have been required to pay Mr. Licht an amount in cash equal to the sum of the excise taxes payable by him by reason of receiving such payment plus the amount necessary to put him in the same after-tax position as if no excise taxes had been paid. We do not anticipate that any of the above payments would trigger this obligation.

Under Mr. Frappier’s employment agreement, as amended, if his employment is terminated without “cause” or he resigns for “good reason” during the term of the employment agreement and he executes and does not revoke a mutual release, he will receive: (i) a lump sum cash severance payment equal to one and a half times the sum of his base salary and average annual cash bonus for the three year period immediately prior to his termination of employment, (ii) a pro rata portion of his target bonus for the fiscal year of his termination (if there is no target bonus opportunity for the fiscal year, the target bonus for this purpose will be equal to 100% of his base salary), (iii) continued medical coverage for 18 months for himself and his spouse and dependents as if he had continued in employment with RAIT, and (iv) all other amounts earned, accrued and owing but not yet paid to him. If his employment is terminated on account of his death or disability, he will receive all amounts earned and accrued as of such date and a pro rated bonus for the fiscal year of his death or disability (if there is no target bonus opportunity for the fiscal year, the target bonus for this purpose will be equal to 100% of his base salary). If a “change of control” of RAIT occurs and Mr. Frappier receives an excess parachute payment, RAIT will fully gross him up on an after-tax basis for any excise taxes that result under Section 4999 of the Internal Revenue Code from the excess parachute payment.

“Cause” is defined as any of the following: (i) Mr. Frappier shall have been convicted of a felony; (ii) Mr. Frappier intentionally and continually fails substantially to perform his reasonably assigned material duties to RAIT (other than a failure resulting from his incapacity due to physical or mental illness), which failure has been materially and demonstrably detrimental to RAIT and has continued for a period of at least 30 days after a written notice of demand for substantial performance has been delivered to him; or (iii) Mr. Frappier breaches the non-competition, non-solicitation, intellectual property and confidentiality provisions of his employment agreement.

“Good reason” is defined as (i) the material reduction of Mr. Frappier’s title, authority, duties and responsibilities or the assignment to Mr. Frappier of duties materially inconsistent with Mr. Frappier’s position or positions with RAIT; (ii) a reduction in Mr. Frappier’s base salary; or (iii) RAIT’s material and willful breach of Mr. Frappier’s employment agreement.

“Change of control” means the occurrence of any of the following: (a) the acquisition of the beneficial ownership, as defined under the Exchange Act, of 25% or more of RAIT’s voting securities or all or substantially all of the assets of RAIT by a single person or entity or group of affiliated persons or entities other than by a related entity; or (b) the merger, consolidation or combination of RAIT with an unaffiliated entity, other than a related entity in which the trustees of RAIT as applicable immediately prior to such merger, consolidation or combination constitute less than a majority of the board of directors of the surviving, new or combined entity unless one-half of the board of directors of the surviving, new or combined entity, were trustees of RAIT immediately prior to such transaction and RAIT’s chief executive officer immediately prior to such transaction continues as the chief executive officer of the surviving, new or combined entity; or (c) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the board cease for any reason to constitute at least two-thirds thereof, unless the election or nomination for the election by RAIT’s shareholders of each new trustee was approved by a vote of at least two-thirds of the trustees then still in office who were trustees at the beginning of the period; or (d) the transfer of all or substantially all of RAIT’s assets or all or substantially all of the assets of its primary subsidiaries to an unaffiliated entity, other than to a related entity. A related entity means an entity that is an “affiliate” of Mrs. Cohen, or any member of Mrs. Cohen’s immediate family including her spouse or children, as determined in accordance with Rule 12b-2 of the under the Exchange Act.

Mr. Frappier’s employment agreement provides that during his employment term and without regard to its termination for any reason which does not constitute a breach of his employment agreement by RAIT, and for a period of twelve (12) months thereafter, he shall not (a) directly or indirectly, own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit his name to be used in connection with any competing business within any state in which RAIT currently engages in any lending activity or any state in which RAIT engaged in any lending activity during the thirty-six month period preceding the date his employment terminates; provided, however, the employment agreement does not prohibit the passive ownership by Mr. Frappier of not more than 5% of the capital stock of any corporation which is engaged in any competing business having a class of securities registered pursuant to the Exchange Act; (b) solicit or divert to any competing business any individual or entity which is an active or prospective customer of RAIT or was such an active or prospective customer at any time during the preceding 12 months; or (c) employ, attempt to employ, solicit or assist any competing business in employing any employee of RAIT whether as an employee or consultant. A competing business means any entity or enterprise in the business of providing equity alternatives through lending or other financial devices on residential or commercial property. Under Mr. Frappier’s employment agreement, he must transfer to RAIT all intellectual property rights which he has conceived, made or developed, solely or jointly with others, while employed by RAIT and which relate to the business, work or activities of RAIT or result from or are suggested by the carrying out of his duties under his employment agreement or from or by any information that he may receive as an employee of RAIT. Also, both during and after his employment term, he may not disclose any of RAIT’s confidential information to any person (except as his duties as an officer of RAIT may require or as required by law or in a judicial or administrative proceeding) without the prior written authorization of the board. This obligation of confidentiality does not apply to information that becomes generally known to the public through no act of Mr. Frappier in breach of his employment agreement.

The table below summarizes these rights and the amount of any payments and benefits due under the indicated circumstances for Mr. Frappier assuming the circumstances occurred as of December 31, 2010:

Additionally, Mr. Frappier may vest in certain ancillary benefits provided to all employees if he is terminated, including but not limited to the vested portion of our matching contributions to his 401(k) account. If any of the above payments are be deemed to constitute a “parachute payment” as defined in IRC Section 280G, we are required to pay Mr. Frappier an amount in cash equal to the sum of the excise taxes payable by him by reason of receiving such payment plus the amount necessary to put him in the same after-tax position as if no excise taxes had been paid. We do not anticipate that any of the above payments would trigger this obligation.

For the period from January 1, 2010 through December 31, 2010, the compensation committee approved the following compensation for each non-employee trustee of RAIT:

In March 2010, each non-employee trustee used the portion of the lump sum cash payments specified by the compensation committee to purchase 19,100 common shares. Each non-employee trustee agreed not to sell these common shares for one year.

The following table sets forth information regarding the compensation paid or accrued by RAIT during 2010 to each of our non-employee trustees:

For the period from January 1, 2011 through December 31, 2011, the compensation committee approved the following compensation for each non-employee trustee of RAIT:

In January 2011, each non-employee trustee used the portion of the lump sum cash payments specified by the compensation committee to purchase 8,099 common shares. Each non-employee trustee agreed not to sell these common shares for one year.

Our trust governance guidelines provide that our board must maintain a conflicts committee, consisting of no fewer than three members and consisting entirely of independent trustees (as defined in the trust governance guidelines). The conflicts committee is responsible, and has the sole authority and full power of the board, to approve or reject all related party transactions on behalf of RAIT. The trust governance guidelines define a related party transaction as any transaction that we would be required to disclose in our financial statement footnotes under FASB ASC Topic 850, “Related Party Disclosures”, or in our proxy statement under Item 404 of Regulation S-K, “Transactions with Related Persons, Promoters and Certain Control Persons,” as amended or interpreted. As permitted by the Trust Governance Guidelines, the board has designated the audit committee to serve as the conflicts committee in the audit committee’s charter.

Our code of business conduct and ethics provides that all related party transactions shall be reviewed and approved or rejected by the audit committee. The code provides that the board has determined that no conflict of interest exists with respect to any investment acquisition, services arrangement, transaction or other matter, including, without limitation, any related party transaction, which is approved by the audit committee and which is determined by the audit committee to be on terms comparable to those available on an arm’s-length basis from an unaffiliated third party or otherwise not creating a conflict of interest. If the audit committee finds a conflict of interest to exist with respect to a particular matter, including a related party transaction, that matter is prohibited unless a waiver of this policy is approved under the waiver process described in the code. Subject to this audit committee review process, the code provides that the board has determined that RAIT may enter into any contract or transaction of any kind with any person subject to the code or agent of RAIT or any of their affiliates, whether or not any of them has a financial interest in the transaction, as permitted by Article IX, Section 5 of our declaration of trust. The code provides that any waiver of the code may be made only by the audit committee. Any such waiver for executive officers, those persons described in Item 5.05 of Form 8-K or trustees will be promptly publicly disclosed to the extent required by law or stock exchange regulation.

The audit committee may, in its discretion, engage independent advisors and legal counsel to assist it in its review when it deems it advisable. Our internal financial and legal staff are primarily responsible for the development and implementation of processes and controls to obtain information from the trustees and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether the transaction needs to be reviewed under the processes described above.

In the ordinary course of our business operations, we have ongoing relationships and have engaged in transactions with several related entities described below. We describe in this section relationships or transactions in which the amount involved exceeds $120,000 since January 1, 2010. All of these relationships and transactions were approved or ratified by the audit committee as being on terms comparable to those available on an arm’s-length basis from an unaffiliated third party or otherwise not creating a conflict of interest.

Mrs. Betsy Z. Cohen retired as our chairman of the board and as a trustee effective December 31, 2010. Mrs. Cohen, is the chief executive officer and a director of The Bancorp, Inc., or Bancorp, and chairman of the board and chief executive officer of its wholly-owned subsidiary, The Bancorp Bank, a commercial bank. Mrs. Cohen’s son, Daniel G. Cohen, was our chief executive officer from the date of the Taberna acquisition until his resignation from that position on February 22, 2009. Mr. Cohen was a trustee of RAIT from the date of the Taberna acquisition until his resignation from that position on February 26, 2010. Mr. Cohen is the chairman of the board of Bancorp and chairman of its executive committee and vice-chairman of the board of Bancorp Bank and chairman of its executive committee. Scott F. Schaeffer is our chairman and a trustee and chief executive officer and president. Mr. Schaeffer’s spouse is a director of Bancorp and she and Mr. Schaeffer own, in the aggregate, less than 1% of Bancorp’s outstanding common shares. Each transaction with Bancorp is described below:

a). Cash and Restricted Cash—We maintain checking and demand deposit accounts at Bancorp. As of December 31, 2010, we had $72,000 of cash and cash equivalents and $985,000 of restricted cash on deposit

at Bancorp. During the year ended December 31, 2010, we received $53,000 of interest income from Bancorp. Restricted cash held at Bancorp relates to borrowers’ escrows for taxes, insurance and capital reserves. Any interest earned on these deposits enures to the benefit of the specific borrower and not to us.

b). Office Leases—We sublease a portion of our downtown Philadelphia office space from Bancorp at an annual rental expense based upon the amount of square footage occupied. We have signed a sublease agreement with a third party for the remaining term of our sublease. Rent paid to Bancorp was $304,000 for the year ended December 31, 2010. Rent received for our sublease was $166,000 for the year ended December 31, 2010.

Mr. Daniel G. Cohen holds controlling positions in various companies with which we conduct business. Mr. Cohen serves as the chairman of the board of directors, chief executive officer and chief investment officer of Institutional Financial Markets, Inc. or, IFMI, and as the chairman of the board of managers, chief executive officer and chief investment officer of IFMI, LLC, or IFMI LLC, a majority owned subsidiary of IFMI. Each transaction between us and IFMI and IFMI LLC is described below:

a). Office Leases—We maintain sub-lease agreements for shared office space and facilities with IFMI. Rent expense during the year ended December 31, 2010 relating to these leases was $50,000. Rent expense has been included in general and administrative expense in our consolidated statements of operations for the year ended December 31, 2010. Future minimum lease payments due over the remaining term of the lease are $258,000.

b). Common Shares— As of December 31, 2009, IFMI and its affiliate entities owned 510,434 of our common shares. During the year ended December 31, 2010, IFMI and its affiliates sold these shares and do not own any of our common shares as of December 31, 2010.

c). Brokerage Services—During 2010, IFMI sold $7,000,000 in aggregate principal amount of debt securities to an unrelated third party using the broker-dealer services of RAIT Securities, LLC, for which we earned $38,000 in principal transaction income.

d). Star Asia— Star Asia is an affiliate of IFMI. During 2010, Star Asia purchased $2,315,000 in aggregate principal of debt securities from an unrelated third party using the broker-dealer services of RAIT Securities, LLC, for which we did not earn any principal transaction income.

e). Kleros Preferred Funding VIII, Ltd.—Kleros Preferred Funding VIII, Ltd., or Kleros VIII, is a securitization managed by IFMI. In June 2007, we purchased approximately $26,400,000 in par amount of bonds rated A through BBB issued by Kleros VIII, for a purchase price of approximately $23,997,000. As of December 31, 2010, the bonds have a current fair value of $0 and have been on non-accrual since December 31, 2007.

Brandywine Construction & Management, Inc., or Brandywine, is an affiliate of Edward E. Cohen, the spouse of Mrs. Cohen and the father of Daniel G. Cohen. Brandywine provided real estate management services to two properties underlying our investments in real estate. During the year ended December 31, 2010, Brandywine earned management fees of $92,000. We believe that the management fees charged by Brandywine are comparable to those that could be obtained from unaffiliated third parties.

Section 16(a) of the Exchange Act requires our officers, trustees and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and to furnish RAIT with copies of all such reports.

Based solely on our review of the reports received by us, or representations from certain reporting persons that no Form 5 filings were required for those persons, we believe that during fiscal 2010, no officers, trustees or beneficial owners failed to file reports of ownership and changes of ownership on a timely basis. As of the date of this proxy statement, we believe that all reports of ownership and changes in ownership required to be filed with the SEC relating to transactions in fiscal 2010 have been filed.

Under rules promulgated by the SEC, holders of common shares who desire to submit proposals for inclusion in the proxy statement of RAIT for its 2012 annual meeting of shareholders, subject to compliance with the eligibility standards specified in such rules, must submit such proposals to the Secretary of RAIT by December 1, 2011. The proxy for the 2012 annual meeting of shareholders may confer discretionary authority to vote on any matters brought before that meeting where:

A shareholder who wishes to submit recommendations for trustee candidates to the nominating committee should send a written recommendation to our executive offices, attention: nominating committee chairman. The shareholder must represent that the shareholder is a shareholder of RAIT and the shareholder will remain so through the date of the relevant annual meeting of shareholders of RAIT and, if the shareholder is not a record owner of common shares, provide such information about the record owner as RAIT may request. The recommendation must also include the written consent of the person so recommended, or the recommended person, to serve as a trustee if nominated and elected. The shareholder and the recommended person must also provide such additional information as the nominating committee may request, including any information requested concerning their respective backgrounds and relationships with one another and RAIT and concerning the qualifications of the recommended person. All shareholder recommendations received by the nominating committee will begin to be reviewed at the first meeting of the nominating committee held after receipt of the recommendation and any additional information requested by the nominating committee. The nominating committee expects to consider nominees recommended by security holders for the 2012 annual meeting if submitted as described above by November 1, 2011 in order that the submission may be considered by the nominating committee in its deliberations to determine its recommendations to the board regarding persons to be nominated by the board for election to the board at such annual meeting.

Our 2010 Annual Report to Shareholders, including the financial statements and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2010, was sent to shareholders of record as of March 1, 2011. Shareholders of record as of March 1, 2011, and beneficial owners of the common shares on that date, may obtain from RAIT, without charge, a copy of our most recent Annual Report on Form 10-K filed with the SEC, exclusive of the exhibits thereto, by a request in writing. We will also furnish any exhibit to the Annual Report upon the payment of reasonable fees relating to our expenses in furnishing the exhibit. Such requests should be directed to RAIT, at its Philadelphia address stated herein, and to the attention of the Secretary. Beneficial owners must include in their written requests a good faith representation that they were beneficial owners of the common shares on March 1, 2011.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting To Be Held on May 17, 2011. The notice of annual meeting, proxy statement and RAIT’s annual report on Form 10-K for the fiscal year ended December 31, 2010 are available on RAIT’s website at http://www.snl.com/irweblinkx/FinancialDocs.aspx?iid=113624.

By order of the Board of Trustees

/s/ RAPHAEL LICHT

Raphael Licht,

Secretary

The Audit Committee (the “Committee”) of RAIT Financial Trust (“RAIT”) has adopted the following guidelines regarding the engagement of RAIT’s independent auditor to perform services for RAIT:

For audit services, the independent auditor will provide the Committee with an engagement letter with respect to any fiscal year sufficiently in advance of the October quarterly meeting of the Committee immediately preceding that fiscal year, if practicable, and otherwise by the January quarterly meeting of the Committee in that fiscal year outlining the scope of the audit services proposed to be performed during that fiscal year, together with a fee proposal which may include a range of fees. If agreed to by the Committee, this engagement letter and associated fee(s) will be formally accepted by the Committee at either its October or January quarterly Committee meeting.

For non-audit services, RAIT management will submit to the Committee for approval any non-audit services that it recommends the Committee engage the independent auditor to provide for any fiscal year. RAIT management and the independent auditor will each confirm to the Committee that any non-audit service so submitted is permissible under all applicable legal requirements, including the listing requirements of the NYSE. In addition to these planned non-audit services, a budget estimating the expense of any such non-audit service for that fiscal year will be provided. The Committee will approve both the permissible non-audit services and the budget for such services. The Committee will be informed routinely as to the non-audit services actually provided by the independent auditor pursuant to this pre-approval process.

To ensure prompt handling of unexpected matters, the Committee delegates to its Chairman or, if the Chairman is not reasonably available, any other member of the Committee, the authority to amend or modify the list of approved permissible non-audit services and fees. The Chairman or such other member, as the case may be, will report action taken to the Committee at the next Committee meeting.

The independent auditor must ensure that all audit and non-audit services provided to RAIT have been approved by the Committee. The Chief Financial Officer will be responsible for tracking all independent auditor fees against the budget for such services and report at least quarterly to the Audit Committee.

1.01 Purpose. The purposes of this Plan are to: (a) closely associate the interests of the management and trustees of the Company with the shareholders of RAIT by reinforcing the relationship between compensation and shareholder gains; (b) provide senior management and trustees of the Company with an equity ownership in RAIT commensurate with RAIT’s performance, as reflected in increased shareholder value; (c) provide the Company the ability to grant Cash Awards to senior management that qualifies for the qualified performance-based compensation exemption under section 162(m) of the Code; (d) maintain competitive compensation levels; and (e) provide an incentive to senior management and trustees for continuous employment or service with the Company.

(a) “Affiliate” means any person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with RAIT.

(c) “Cash Award” means a cash award that is payable on the attainment of specified performance goals over a performance period, as described in Article VIII.

(d) “Change of Control” means the first to occur of any of the following events:

(i) Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of RAIT representing more than 50% of the voting power of the then outstanding securities of RAIT; provided that a Change of Control shall not be deemed to occur as a result of a transaction in which RAIT becomes a subsidiary of another real estate investment trust and in which the shareholders of RAIT, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the parent entity would be entitled in the election of trustees (without consideration of the rights of any class of shares to elect trustees by a separate class vote);

(ii) The consummation of (A) a merger or consolidation of RAIT with another real estate investment trust where the shareholders of RAIT, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving real estate investment trust would be entitled in the election of trustees (without consideration of the rights of any class of shares to elect trustees by a separate class vote), (B) a sale or other disposition of all or substantially all of the assets of RAIT, or (C) a liquidation or dissolution of RAIT; or

(iii) Trustees are elected such that a majority of the members of the Board shall have been members of the Board for less than two years, unless the election or nomination for election of each new trustee who was not a trustee at the beginning of such two-year period was approved by a vote of at least two-thirds of the trustees then still in office who were trustees at the beginning of such period.

Notwithstanding the foregoing, the Committee may provide for a different definition of “Change of Control” in a Grant Agreement if such Grant is subject to the requirements of section 409A of the Code and the Grant will become payable on a Change of Control.

(f) “Committee” means the Compensation Committee of the Board or its successor, or such other committee that the Board has delegated with authority to administer the Plan, subject to any limitations imposed by RAIT’s bylaws and charter and applicable laws, rules and regulations. Notwithstanding the foregoing, the “Committee” may be the Board, to the extent that the Board has retained authority to administer the Plan with respect to all or any specific Grants and the Board may ratify any Grants it deems necessary or appropriate.

(g) “Common Shares” means common shares of beneficial interest, par value $0.01, of RAIT.

(i) “Consultant” means consultants and advisors who perform services for the Company, but does not mean any consultant or advisor who (i) does not render bona fide services to the Company, (ii) performs services that are in connection with the offer and sale of securities in a capital-raising transaction, and (iii) directly or indirectly promotes or maintains a market for RAIT’s securities.

(j) “Date of Grant” means the date a Grant is effective; provided, however, that no retroactive Grants will be made.

(k) “Dividend Equivalent” means an amount determined by multiplying the number of Common Shares or Units subject to a Grant by the per-share cash dividend, or the per-share fair market value (as determined by the Committee) of any dividend in consideration other than cash, paid by RAIT on its Common Shares on a dividend payment date.

(l) “Effective Date” means May 17, 2011. The Plan initially became effective on December 5, 1997 and was last amended and restated May 20, 2008.

(m) “Employee” means an employee of the Company (including any officer or trustee who is an employee).

(o) “Fair Market Value” means (i) the closing price during regular trading hours on the relevant date or on the next business day, if such relevant date is not a business day, of a Common Share reported on the New York Stock Exchange (or any other exchange on which the Common Shares are listed), or (ii) if the Common Shares are not principally traded on such exchange, the mean between the last reported “bid” and “asked” prices of Common Shares on the relevant date, as reported on the OTC Bulletin Board. If the Common Shares are not publicly traded or, if publicly traded, are not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per Common Share shall be as determined by the Committee. In no event shall the Fair Market Value of any Common Share be less than its par value.

(p) “Grant” means an Option, SAR, Unit, Share Award, Dividend Equivalent, Other Share-Based Award or Cash Award granted under the Plan.

(q) “Grant Agreement” means the written agreement that sets forth the terms and conditions of a Grant, including any amendments thereto.

(r) “Non-Employee Trustee” means a member of the Board, or member of the board of trustees of a Subsidiary, who is not an employee of the Company.

(s) “Incentive Stock Option” means an option that is intended to meet the requirements of section 422 of the Code, as described in Article II.

(t) “Nonqualified Option” means a stock option that is not intended to meet the requirements of section 422 of the Code, as described in Article II.

(u) “Option” means an Incentive Stock Option or Nonqualified Option to purchase Common Shares at an Option Price for a specified period of time.

(v) “Option Price” means the purchase price per Common Share deliverable upon the exercise of a Option.

(w) “Other Share-Based Award” means any Grant based on, measured by or payable in Common Shares (other than Grants described in Articles II, III, IV, V, and VI), as described in Article VII.

(y) “Participant” means an Employee, Non-Employee Trustee or Consultant designated by the Committee to receive a Grant under the Plan.

(z) “Phantom Share Plan” means the RAIT Investment Trust Phantom Share Plan.

(aa) “Plan” means this RAIT Financial Trust 2011 Incentive Award Plan (formerly known as the RAIT Financial Trust 2008 Incentive Award Plan).

(bb) “RAIT” means RAIT Financial Trust, a Maryland real estate investment trust (formerly known as RAIT Investment Trust).

(cc) “SAR” means an award of a share appreciation right, as described in Article III.

(dd) “Share Award” means an award of Common Shares, as described in Article V.

(ff) “Ten Percent Shareholder” means a person who on the date the Option is granted owns ten percent (10%) or more of the total combined voting power of RAIT and its Parent or Subsidiaries, taking into account the attribution rules contained in section 424(d) of the Code.

(gg) “Unit” means an award of a phantom unit, representing one or more Common Shares, as described in Article IV.

(a) The Plan shall be administered and interpreted by the Committee. Ministerial functions relating to the Plan may be performed by Employees designated with such authority by the Committee.

(b) The Committee shall have the authority, in its sole discretion and from time to time to:

(i) designate the Employees, Non-Employee Trustees and Consultants who are eligible to participate in the Plan;

(ii) make Grants provided in the Plan in such form and amount as the Committee shall determine;

(iii) impose such limitations, restrictions and conditions upon any such Grant as the Committee shall deem appropriate; and

(iv) interpret the Plan and any Grant, adopt, amend and rescind rules and regulations relating to the Plan and any Grant, and make all other determinations and take all other actions necessary or advisable for the implementation and administration of the Plan.

(c) The Committee shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons who have any interest in the Plan or in any Grants awarded hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of RAIT, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Grant thereunder.

1.04 Eligibility for Participation. Participants in the Plan shall be selected by the Committee from the Employees of the Company. In addition, Non-Employee Trustees and Consultants who have contributed to the success of the Company shall be eligible to participate in the Plan. In making this selection and in determining the form of Grant and number of Common Shares, value of the Cash Award or other rights subject to the Grant, the Committee shall consider any factors deemed relevant, including the individual’s functions, responsibilities, value of services to the Company and past and potential contributions to the Company’s profitability and sound growth.

1.05 Grants. Grants under the Plan may be in the form of any one or more of the following: (a) Options, (b) SARs, (c) Units, (d) Share Awards, (e) Dividend Equivalents, (f) Other Share-Based Awards and (g) Cash Awards. All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with the Plan as the Committee deems appropriate and as are specified in writing by the Committee in separate guidelines or to the Participant in the Grant Agreement or an amendment to the guidelines or Grant Agreement. The Committee shall approve the form and provisions of each Grant Agreement. Grants under a particular Article of the Plan need not be uniform as among Participants. All Grants shall be made conditional upon the Participant’s acknowledgment, in writing or by acceptance of the Grant, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries, and any other person having or claiming an interest under such Grant. Notwithstanding any provision of the Plan to the contrary, the Committee may make Grants that are contingent on, and subject to, shareholder approval of the Plan or an amendment to the Plan.

(a) Shares which may be issued under the Plan shall be Common Shares. The maximum number of Common Shares which may be issued under the Plan shall be 9,500,000 Common Shares, subject to adjustment as described in Section 11.10 below. The Common Shares may be authorized but unissued Common Shares or reacquired Common Shares, including Common Shares purchased by RAIT on the open market for purposes of the Plan. Except for SARs settled in cash, to the extent that any Grants are paid in cash and not in Common Shares, such Grants shall not count against the foregoing Common Share limit.

(b) For administrative purposes, when the Committee makes a Grant payable in Common Shares, the Committee shall reserve Common Shares equal to the maximum number of Common Shares that may be payable under the Grant. If and to the extent Options or SARs granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Share Awards, Units, Dividend Equivalents or Other Share-Based Awards are forfeited or terminated, or otherwise not paid in full, the Common Shares subject to such Grants which have not been issued shall again be available for purposes of the Plan. Common Shares surrendered in payment of the Option Price of an Option or withheld for purposes of satisfying the Company’s minimum tax withholding obligations with respect to Grants under the Plan shall not be available for re-issuance or transfer under the Plan. Upon the exercise of a SAR, for purposes of calculating the number of Common Shares remaining available for issuance under the Plan and the number of Common Shares remaining available for exercise under the SAR, the number of shares shall be reduced by the gross number of shares for which the SAR is exercised, without regard to any cash settlement of a SAR.

(c) All Grants under the Plan, other than Dividend Equivalents and Cash Awards, shall be expressed in Common Shares. The maximum aggregate number of Common Shares with respect to which all Grants, other than Dividend Equivalents and Cash Awards, may be made under the Plan to any individual during any calendar year shall be 1,000,000 Common Shares, subject to adjustment as described in Section 11.10 below. The maximum aggregate number of Common Shares with respect to which all Grants, other than Options, SARs, Dividend Equivalents and Cash Awards, that may be made under the Plan to any individual in any calendar year shall be 500,000 Common Shares, subject to adjustment as described in Section 11.10 below. A Participant may not accrue Dividend Equivalents during any calendar year in excess of $5,000,000. The maximum Cash Award that an Employee may be paid under the Plan in any twelve month

period is $2,500,000. The individual limits of this subsection (c) shall apply without regard to whether the Grants are to be paid in Common Shares or in cash. All cash payments (other than Dividend Equivalents and Cash Awards) shall equal the Fair Market Value of the Common Shares to which the cash payment relates.

(a) This amendment and restatement of the Plan is effective as of the Effective Date, subject to approval by RAIT’s shareholders.

(b) No Grants shall be made under the Plan after the day immediately preceding the tenth anniversary of the Effective Date, provided, however, that the Plan and all Grants made under the Plan prior to such date shall remain in effect until such Grants have been satisfied or terminated in accordance with the Plan and the terms of such Grants.

2.01 Award of Options. The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant in the Plan Options.

2.02 Option Agreements. The Grant of an Option shall be evidenced by a written Grant Agreement, executed by RAIT and the holder of the Option, stating the number of Common Shares subject to the Option, the type of Option, and the terms and conditions of the Option.

(a) The Committee may grant Incentive Stock Options or Nonqualified Options or a combination of Incentive Stock Options and Nonqualified Options. Incentive Stock Options may only be granted to Employees of RAIT or its Parent or Subsidiaries; provided, however, that for purposes of eligibility to receive an Incentive Stock Option, Parent must be a “parent corporation,” as defined in section 424(e) of the Code,” of RAIT, and the Subsidiary must be a “subsidiary corporation,” as defined in section 424(f) of the Code, of RAIT. Nonqualified Options may be granted to Employees, Non-Employee Trustees and Consultants.

(b) The Option Price shall be determined by the Committee and shall not be less than 100% of the Fair Market Value of a Common Share on the Date of Grant of the Option; provided, however, that an Incentive Stock Option may not be granted to an Employee who, at the Date of Grant, is a Ten Percent Shareholder, unless the Option Price is not less than 110% of the Fair Market Value of the Common Shares subject to the Option on the Date of Grant.

(a) The Committee shall determine the term of each Option. The term shall not exceed ten years from the Date of Grant. However, an Incentive Stock Option that is granted to an Employee who, at the Date of Grant, is a Ten Percent Shareholder, may not have a term that exceeds five years from the Date of Grant. No Option shall be exercisable after the expiration of its term.

(b) Each Option shall be fully exercisable from and after the date(s) prescribed by the Committee in the Grant Agreement for the Option, subject to such terms and conditions set forth in the Grant Agreement. The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason. The Committee may also provide in the Grant Agreement that the Participant may elect to exercise all or part of the Option before it otherwise has become exercisable. Any Common Shares so purchased shall be restricted Common Shares and shall be subject to a repurchase right in favor of RAIT during a specified restriction period and shall have such other terms and conditions as determined by the Committee.

2.05 Manner of Exercise. A Participant may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to RAIT or its designated agent. The Participant shall pay the Option Price and any withholding taxes for the Option (a) in cash or by certified check, (b) with the approval of the Committee, by delivering Common Shares owned by the Participant and having a Fair Market Value on the date of exercise equal to the Option Price or by attestation (on a form prescribed by the Committee) to ownership of Common Shares having an aggregate Fair Market Value on the date of exercise equal to the Option Price, (c) subject to approval of the Committee or its designee, in cash, on the T+3 settlement date that occurs after the exercise date specified in the notice of exercise, provided that the Participant exercises the Option through an irrevocable agreement with a registered broker and the payment is made in accordance with procedures permitted by Regulation T of the Federal Reserve Board and such procedures do not violate applicable law, or (d) by such other method as the Committee may approve, to the extent permitted by applicable law. Common Shares used to exercise an Option shall have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to RAIT with respect to the Option. Payment for the Common Shares pursuant to the Option, and any required withholding taxes, must be received by the time specified by the Committee depending on the type of payment being made.

2.06 Termination of Employment or Service. Except as otherwise provided in the Grant Agreement or in this Section 2.06, an Option may only be exercised while the Participant is employed by, or providing service to, the Company.

(a) Unless the Committee determines otherwise, upon the death of the Participant, any Option exercisable on the date of death may be exercised by the optionee’s estate, or by a person who acquires the right to exercise such Option by bequest or inheritance or by reason of the death of the Participant, provided that such exercise occurs within the earlier of (i) the one year period after the Participant’s termination of employment or service or (ii) the remaining effective term of the Option. The provisions of this subsection shall apply notwithstanding the fact that the Participant’s employment may have terminated prior to death, but only to the extent of any rights exercisable on the date of death.

(b) Unless the Committee determines otherwise, upon termination of the Participant’s employment or service by reason of retirement or permanent disability (as each is determined by the Committee), the Participant may, within the earlier of (i) the six month period after the Participant’s termination of employment or service or (ii) the remaining effective term of the Option, exercise any Options to the extent such Options are exercisable at the time of the Participant’s termination of employment or service; provided, however, that if the Option is an Incentive Stock Option, if the termination of employment is on account of retirement, the Option may only be exercised as an Incentive Stock Option within 3 months after the Participant’s termination of employment and if the Incentive Stock Option is exercised after the end of such 3 month period, the Option will be exercised as a Nonqualified Option.

(c) Unless the Committee determines otherwise, if the Participant has a termination of employment or service for any reason other than in subsection (a) or (b), all Options held by the Participant shall terminate upon the termination of the Participant’s employment or service.

2.07 Reload Options. In the event that Common Shares are used to exercise an Option, the terms the Grant Agreement for such Option may provide for a Grant of additional Options, or the Committee may grant additional Options, to purchase a number of Common Shares equal to the number of whole Common Shares used to exercise the Option and the number of whole Common Shares, if any, withheld in payment of any taxes. Such Options shall be granted with an Option Price equal to the Fair Market Value of the Common Shares on the Date of Grant of such additional Options, or at such other Exercise Price as the Committee may establish, provided, that the Option Price shall not be less than the Fair Market Value of the Common Shares on the Date of Grant of such additional Option, and the additional Option shall not have a term longer than the unexpired term of the exercised Option and shall have such other terms as the Committee shall determine.

2.08 Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that if the aggregate Fair Market Value on the Date of Grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year, under the Plan or any other stock option plan of RAIT or a Parent or Subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Option.

3.01 Award of SARs. The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant in the Plan SARs. Each SAR shall represent the right of the Participant to receive, upon settlement of the SAR, as determined by the Committee, in its sole discretion, Common Shares or cash equal to the amount by which the Fair Market Value of a Common Share on the date of exercise of the SAR exceeds the base amount of the SAR as described below in Section 3.04.

3.02 SAR Agreements. The Grant of an SAR shall be evidenced by a written Grant Agreement, executed by RAIT and the holder of a SAR, and shall specify the number of SARs to be granted, the base amount, the vesting and other restrictions applicable to SARs, and the period during which SARs will remain exercisable.

3.03 Terms. The Committee shall determine the terms and conditions of SARs and may grant SARs separately from or in tandem with any Option (for all or a portion of the applicable Option); provided, however, that the term of any SAR shall not exceed ten years from the Date of Grant. Tandem SARs may be granted either at the time the Option is granted or any time thereafter while the Option remains outstanding; provided, however, that in the case of an Incentive Stock Option, SARs may be granted only at the time of the grant of the Incentive Stock Option.

3.04 Base Amount. The Committee shall establish the base amount of the SAR at the time the SAR is granted, but such base amount shall not be less than the Fair Market Value of the corresponding Common Shares on the Date of Grant.

3.05 Payment With Respect to SARs. The Committee shall determine whether the appreciation in an SAR shall be paid in the form of cash, in Common Shares, or in a combination of the two, in such proportion as the Committee deems appropriate. For purposes of calculating the number of Common Shares to be received, Common Shares shall be valued at its Fair Market Value on the date of exercise of the SAR. If Common Shares are to be received upon exercise of an SAR, cash shall be delivered in lieu of any fractional share.

3.06 Termination of Employment or Service. The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain SARs after termination of the Participant’s employment or service, and the circumstances under which SARs may be forfeited.

4.01 Award of Units. The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant in the Plan Units. Each Unit shall represent the right of the Participant to receive, as determined by the Committee, in its sole discretion, a Common Share or an amount based on the value of a Common Share. All Units shall be credited to accounts on RAIT’s records for purposes of the Plan.

4.02 Unit Agreements. The Grant of a Unit shall be evidenced by a written Grant Agreement, executed by RAIT and the holder of a Unit, and shall specify the number of Units to be granted, the vesting date, the redemption date, and the other terms and conditions of the Unit.

4.03 Terms. The Committee may grant Units that are payable if specified performance goals or other conditions are met, or under other circumstances. Units may be redeemed at the end of a specified performance period or other period, or redemption may be deferred to a date authorized by the Committee.

4.04 Redemption With Respect to Units. Redemptions with respect to Units shall be made in cash, in Common Shares, or in a combination of the two, as determined by the Committee.

4.05 Termination of Employment or Service. The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Units after termination of the Participant’s employment or service, and the circumstances under which Units may be forfeited.

5.01 Award of Share Awards. The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, issue or transfer to any Participant in the Plan Share Awards. Each Share Award shall represent the right of the Participant to receive a Common Share if certain conditions are met.

5.02 Share Award Agreements. The Grant of a Share Award shall be evidenced by a written Grant Agreement, executed by RAIT and the holder of a Share Award, and shall specify the number of Common Shares to be granted pursuant to the Share Award, when the restrictions, if any, will lapse, and the other terms and conditions of the Share Award.

5.03 Terms. Common Shares issued or transferred pursuant to Share Awards may be issued or transferred for consideration or for no consideration, and subject to restrictions or no restrictions, as determined by the Committee. The Committee may, but shall not be required to, establish conditions under which restrictions on Share Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including, without limitation, restrictions based upon the achievement of specific performance goals. The period of time during which the Share Awards will remain subject to restrictions will be designated in the Grant Agreement as the “Restriction Period.”

5.04 Termination of Employment or Service. The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Share Awards after termination of the Participant’s employment or service, and the circumstances under which Share Awards may be forfeited.

5.05 Restrictions on Transfer and Legend on Share Certificate. During the Restriction Period, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the Common Shares subject to the Share Award. Each certificate for a Common Share of a Share Award, or electronic book entry equivalent, for a Common Share of a Share Award shall contain a legend giving appropriate notice of the restrictions in the Grant. The Participant shall be entitled to have the legend removed from the share certificate covering the Common Shares subject to restrictions when all restrictions on such Common Shares have lapsed. The Committee may determine that RAIT will not issue certificates for Share Awards until all restrictions on such shares have lapsed, or that RAIT will retain possession of certificates for Common Shares of Share Awards until all restrictions on such shares have lapsed.

5.06 Right to Vote and to Receive Dividends. The Committee shall determine to what extent, and under what conditions, the Participant shall have the right to vote Common Shares of a Share Award and to receive any dividends or other distributions paid on such Common Shares during the Restriction Period. The Committee may determine that a Participant’s entitlement to dividends or other distributions with respect to a Share Award shall be subject to achievement of performance goals or other conditions. The Committee may determine that dividends on Share Awards shall be withheld while the Share Awards are subject to restrictions and that dividends shall be payable only upon the lapse of the restrictions on the Share Awards, or on such other terms as the Committee determines.

6.01 General Requirements. The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant in the Plan Dividend Equivalents separately from any other Grants. In addition, when the Committee makes a Grant under the Plan, the Committee may grant Dividend Equivalents in connection with such Grants, under such terms and conditions as the Committee deems appropriate under this Article VI; provided, however, that the Committee may not grant Dividend Equivalents in connection with Grants of Options or SARs. Dividend Equivalents may be paid to Participants currently or may be deferred, as determined by the Committee. All Dividend Equivalents that are not paid currently shall be credited to accounts on RAIT’s records for purposes of the Plan. Dividend Equivalents may be accrued as a cash obligation, or may be converted to Units for the Participant, as determined by the Committee. Unless otherwise specified in the Grant Agreement, deferred Dividend Equivalents will not accrue interest. The Committee may provide that Dividend Equivalents shall be payable based on the achievement of specific performance goals. Any Dividend Equivalents with respect to performance-based Grants shall vest and be paid only to the extent the underlying Grant vests and is paid.

6.02 Payment with Respect to Dividend Equivalents. Dividend Equivalents may be payable in cash or Common Shares or in a combination of the two, as determined by the Committee.

The Committee may grant Other Share-Based Awards, which are awards that are based on, measured by or payable in Common Shares to any Participant, on such terms and conditions as the Committee shall determine. Other Share-Based Awards may be awarded subject to the achievement of performance goals or other conditions and may be payable in cash, Common Shares or any combination of the foregoing, as the Committee shall determine in the Grant Agreement. Common Shares to be issued under the Phantom Share Plan to participants in the Phantom Share Plan shall be issued under the Plan pursuant to this Article VII.

The Committee may grant Cash Awards to any Employee, subject to such terms, conditions and restrictions as the Committee shall determine. Cash Awards shall be awarded subject to the achievement of performance goals, as the Committee shall determine in the Grant Agreement, over the performance period, as determined by the Committee and set in the Grant Agreement. All Cash Awards shall be payable solely in cash.

9.01 Designation as Qualified Performance-Based Compensation. The Committee may determine that Units, Share Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards granted to an Employee shall be considered “qualified performance-based compensation” under section 162(m) of the Code. The provisions of this Article IX shall apply to any such Grants that are to be considered “qualified performance-based compensation” under section 162(m) of the Code. To the extent that Grants of Units, Share Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards designated as “qualified performance-based compensation” under section 162(m) of the Code are made, no such Grant may be made as an alternative to another Grant that is not designated as “qualified performance based compensation” but instead must be separate and apart from all other Grants made.

9.02 Performance Goals. When Units, Share Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards that are to be considered “qualified performance-based compensation” are granted, the Committee shall establish in writing (a) the objective performance goals that must be met, (b) the period during which performance will be measured, (c) the maximum amounts that may be paid if the performance goals are met, and (d) any other conditions that the Committee deems appropriate and consistent with the Plan and the requirements of section 162(m) of the Code for “qualified performance-based compensation.” The performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals, but the Committee may reduce the amount of compensation that is payable upon achievement of the designated performance goals.

9.03 Criteria Used for Objective Performance Goals. The Committee shall use objectively determinable performance goals based on one or more of the following criteria: Common Share price, earnings per Common Share, net earnings, operating earnings, adjusted earnings, total fees generated, assets under management, economic book value, REIT taxable income, capital gains, capital losses, funds from operations, enterprise value, market capitalization (of the Common Shares, any series of the Company’s preferred shares or any combination of any or all classes or series of the Company’s equity securities), return on capital, return on assets, shareholder return, return on equity, growth in assets, unit volume, sales, market share, or strategic business criteria consisting of one or more objectives based on meeting specific revenue goals, market penetration goals, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. The performance goals may relate to the Participant’s business unit or the performance of RAIT, a Subsidiary, a Parent, or Affiliate or RAIT and its Parent, Subsidiaries and Affiliates as a whole, or any combination of the foregoing. For purposes of measuring the performance goals, the goals may exclude any or all of the following, as determined by the Committee at the time of establishing the performance goals: capital gains and capital losses. Performance goals need not be uniform as among Participants.

9.04 Timing of Establishment of Goals. The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (a) 90 days after the beginning of the performance period or (b) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.

9.05 Certification of Results. The Committee shall certify and announce the results for the performance period to all Participants after RAIT announces RAIT’s financial results for the performance period. The Committee shall determine the amount, if any, to be paid pursuant to each Grant based on the achievement of the performance goals and the terms of each Grant Agreement.

9.06 Death, Disability or Other Circumstances. The Committee may provide in the Grant Agreement that Grants shall be payable, in whole or in part, in the event of the Participant’s death or disability, a Change of Control or under other circumstances consistent with the Treasury regulations and rulings under section 162(m) of the Code.

9.07 Shareholder Approval for “Qualified Performance Based Compensation”. If Units, Share Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards are granted as “qualified performance-based compensation” under this Article IX, the Plan must be reapproved by RAIT’s shareholders no later than the first shareholders meeting that occurs in the fifth year following the year in which the shareholders previously approved the provisions of Article IX, if additional Grants are to be made under Article IX and if required by section 162(m) of the Code or the regulations thereunder.

10.01 Assumption of Grants. Upon a Change of Control where RAIT is not the surviving entity (or survives only as a subsidiary of another entity), unless the Committee determines otherwise, all outstanding Options and SARs that are not exercised shall be assumed, or replaced with comparable options or rights, by the surviving entity (or a parent or subsidiary of the surviving entity), and other outstanding Grants shall be converted to similar grants of the surviving entity (or a parent or subsidiary of the surviving entity).

10.02 Other Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, the Committee may take any of the following actions with respect to any or all outstanding Grants: the Committee may (a) determine that outstanding Options and SARs shall accelerate and become exercisable, in whole or in part, upon the Change of Control or upon such other event as the Committee determines, (b) determine that the restrictions and conditions on outstanding Share Awards shall lapse, in whole or in part, upon the Change of Control or upon such other event as the Committee determines, (c) determine that Participants holding Units shall receive a redemption in settlement of such Units and that Dividend Equivalents and Other Share-Based Awards shall become fully payable in cash or Common Shares in amounts determined by the Committee, (d) require that Participants surrender their outstanding Options and SARs in exchange for a payment by RAIT, in cash or Common Shares as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the Common Shares subject to the Participant’s unexercised Options and SARs exceeds the Option Price of the Options or the base amount of SARs, as applicable, or (e) after giving Participants an opportunity to exercise their outstanding Options and SARs, terminate any or all unexercised Options and SARs at such time as the Committee deems appropriate. Such surrender, termination or settlement shall take place as of the date of the Change of Control or such other date as the Committee may specify. The Committee shall have no obligation to take any of the foregoing actions, and, in the absence of any such actions, outstanding Grants shall continue in effect according to their terms (subject to any assumption pursuant to Section 10.01).

11.01 General Restriction. Each Grant under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that (a) the listing, registration or qualification of the Common Shares subject or related thereto upon any securities exchange or under any state or Federal law, (b) the consent or approval of any government regulatory body, or (iii) an agreement by the recipient of a Grant with respect to the disposition of Common Shares, is necessary or desirable as a condition of, or in connection with, the granting of such Grant or the issue or purchase of Common Shares thereunder, such Grant may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

11.02 No Repricing without Shareholder Approval. Notwithstanding anything in the Plan to the contrary, except in connection with an extraordinary transaction involving the Company (including, without limitation, any Common Share dividend, Common Share split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the Committee may not reprice Options or SARs, nor may the Committee amend the Plan to permit repricing of Options or SARs, unless the shareholders of the Company provide prior approval for such repricing. "Repricing" subject to this approval requirement includes (a) amending the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs or (b) canceling outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs.

11.03 Non-Assignability. No Grant under the Plan shall be assignable or transferable by the recipient thereof, except by will or by the laws of descent and distribution. During the life of the recipient, such Grant shall be exercisable only by such person or by such person’s guardian or legal representative. Notwithstanding the foregoing, the Committee may provide in a Grant Agreement, or amend an otherwise outstanding Grant Agreement to provide, that a Participant may transfer Nonqualified Options to family members of the Participant, one or more trusts in which family members of the Participant have more than 50% of the beneficial interest, foundations in which family members of the Participant (or the Participant) control the management of assets, or any other entity in which family members of the Participant (or the Participant) own more than 50% of the voting interests, consistent with applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of a Nonqualified Option and the transferred Nonqualified Option shall continue to be subject to the same terms and conditions as were applicable to the Nonqualified Option immediately before the transfer.

11.04 Withholding Taxes. Whenever RAIT proposes or is required to issue or transfer Common Shares under the Plan, the Company shall have the right to require the Participant to remit to the Company an amount sufficient to satisfy any Federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. The Company may also deduct from the payment of cash payable pursuant to a Grant or other wages paid by the Company to the Participant the amount of any withholding taxes due with respect to such Grants. Alternatively, if the Committee so permits, a Participant may elect to satisfy the Company’s tax withholding obligation with respect to Grants paid in Common Shares by having shares withheld at the time such Grants become taxable, up to an amount that does not exceed the Participant’s minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. In addition, with respect to any required tax withholding amount that exceeds the minimum applicable withholding tax rate, the Committee may permit a Participant to satisfy such withholding obligation with respect to such excess amount by providing that the Participant may elect to deliver to RAIT the Common Shares owned by the Participant that have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to RAIT. The elections described in this Section 11.04 must be in a form and manner prescribed by the Committee and may be subject to the prior approval of the Committee. For withholding tax purposes, the Common Shares shall be valued on the date the withholding obligation is incurred.

(a) Nothing in the Plan or in any Grant Agreement entered into pursuant to the Plan shall confer upon any Participant the right to continue in the employment or service of the Company or effect any right which the Company may have to terminate the employment or service of such Participant.

(b) The terms “employ” or “employment” shall, where the context requires, be deemed to include the hiring, continuation or termination of the services of any Consultant participating in the Plan.

11.06 Non-Uniform Determinations. The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive Grants, the form, amount and timing of such Grants, the terms and provisions of such Grants and the Grant Agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Grants under the Plan, whether or not such persons are similarly situated.

11.07 Rights as a Shareholder. The recipient of any Grant under the Plan shall have no rights as a shareholder with respect thereto unless and until certificates for Common Shares are issued to him.

11.08 Leaves of Absence. The Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any Grant. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall constitute a termination of employment or service within the meaning of the Plan and (ii) the impact, if any, of any such leave of absence on Grants under the Plan theretofore made to any recipient who takes such leave of absence.

11.09 Newly Eligible Persons. The Committee shall be entitled to make such rules, regulations, determinations and Grants as it deems appropriate in respect of any person who becomes eligible to participate in the Plan or any portion thereof after the commencement of a Grant or incentive period.

11.10 Adjustments. If there is any change in the number or kind of Common Shares outstanding (a) by reason of a Common Share dividend, spinoff, recapitalization, Common Share split or combination or exchange of Common Shares, (b) by reason of a merger, reorganization or consolidation, (c) by reason of a reclassification or change in par value, or (d) by reason of any other extraordinary or unusual event affecting the outstanding Common Shares as a class without RAIT’s receipt of consideration, or if the value of outstanding Common Shares is substantially reduced as a result of a spinoff or RAIT’s payment of an extraordinary dividend or distribution, the maximum number of Common Shares available for issuance under the Plan, the maximum number of Common Shares for which any individual may receive pursuant to Grants (other than Dividend Equivalents and Cash Awards) in any year, the kind and number of shares covered by outstanding Grants, the kind and number of shares issued and to be issued under the Plan, and the price per share or the applicable market value of such Grants shall be equitably adjusted by the Committee, in such manner as the Committee deems appropriate, to reflect any increase or decrease in the number of, or change in the kind or value of, the issued Common Shares to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding Grants; provided, however, that any fractional shares resulting from such adjustment will be eliminated. In addition, in the event of a Change of Control, the provisions of Article X of the Plan shall apply. Any adjustments to outstanding Grants shall be consistent with section 409A or 422 of the Code, to the extent applicable. Any adjustments determined by the Committee shall be final, binding and conclusive.

(a) The Committee may amend or terminate this Plan at any time; provided, however, that the Committee shall not amend the Plan without shareholder approval if such approval is required in order to comply with the Code or applicable laws, to comply with applicable stock exchange requirements or pursuant to Section 11.02. The Committee may also condition or modify Grants under this Plan in response to changes in securities, tax or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or to comply with the rules or requirements of any stock exchange on which the Common Shares are listed or quoted.

(b) The Committee may at any time and from time to time terminate or modify or amend the Plan in any respect, except that without shareholder approval the Committee may not (i) increase the maximum number of Common Shares which may be issued under the Plan (other than increases pursuant to Section 11.10), (ii) extend the maximum period during which any Grant may be granted or exercised, or (iii) extend the term of the Plan. The termination or any modification or amendment of the Plan, except as provided in subsection (a), shall not without the consent of a Participant, adversely affect his or her rights under a Grant previously awarded to him or her.

11.12 Deferrals. The Committee may permit or require a Participant to defer receipt of the payment of cash or the delivery of Common Shares that would otherwise be due to the Participant in connection with any Grant. The Committee shall establish rules and procedures for such deferrals taking into account the terms of the Plan and section 409A of the Code.

11.13 Grants in Connection with Transactions and Otherwise. Nothing contained in this Plan shall be construed to (a) limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, real estate investment trust, firm or association, including Grants to employees thereof who become Employees, or for other proper purposes, or (b) limit the right of RAIT to grant options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make a Grant to an employee of another real estate investment trust who becomes an Employee by reason of a merger, consolidation, acquisition of shares or property, reorganization or liquidation involving RAIT in substitution for a grant made by such real estate investment trust. The terms and conditions of the substitute Grants may vary from the terms and conditions required by the Plan and from those of the substituted share incentives. The Committee shall prescribe the provisions of the substitute Grants.

(a) The Plan, the exercise of Options and the obligations of RAIT to issue or transfer Common Shares under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, it is the intent of RAIT that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of RAIT that the Plan and applicable Grants comply with the applicable provisions of sections 162(m) and 422 of the Code and any deferrals under the Plan comply with section 409A of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or sections 162(m), 409A or 422 of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Act or sections 162(m), 409A or 422 of the Code, that Plan provision shall cease to apply. The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Participants. The Committee may, in its sole discretion, agree to limit its authority under this Section.

(b) The Plan is intended to comply with the requirements of section 409A of the Code, to the extent applicable. Each Grant shall be construed and administered such that the Grant either (i) qualifies for an exemption from the requirements of section 409A of the Code or (ii) satisfies the requirements of section 409A of the Code. If a Grant is subject to section 409A of the Code, (A) distributions shall only be made in a manner and upon an event permitted under section 409A of the Code, (B) payments to be made upon a termination of employment shall only be made upon a “separation from service” under section 409A of the Code, (C) unless the Grant specifies otherwise, each installment payment shall be treated as a separate payment for purposes of section 409A of the Code, and (D) in no event shall a Participant, directly or indirectly, designate the calendar year in which a distribution is made except in accordance with section 409A of the Code. Any Grant that is subject to section 409A of the Code and that is to be distributed to a “specified employee” (within the meaning of section 409A of the Code and its corresponding regulations) upon separation from service shall be administered so that any distribution with respect to such Grant shall be postponed for six months following the date of the Participant’s separation from service, if required by section 409A of the Code.

11.15. Company Policies. All Grants under the Plan shall be subject to the applicable provisions of any applicable clawback or recoupment policies, share trading policies and other policies that may be approved by the Board or the Committee, as such policies may be in effect from time to time.

11.16 Enforceability. The Plan shall be binding upon and enforceable against RAIT and its successors and assigns.

11.17 Funding of the Plan; Limitation on Rights. This Plan shall be unfunded. Neither RAIT nor any other Company shall be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. Nothing contained in the Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between RAIT or any other Company and any Participant or any other person. No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of RAIT or any other Company. To the extent that any person acquires a right to receive payment from RAIT hereunder, such right shall be no greater than the right of any unsecured general creditor of RAIT.

11.18 Rights of Participants. Nothing in this Plan shall entitle any Employee, Non-Employee Trustee, Consultant or other person to any claim or right to receive a Grant under this Plan.

11.19 No Fractional Common Shares. No fractional Common Shares shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

11.20 Participants Subject to Taxation outside the United States. With respect to Participants who are subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

11.21 Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of State of Maryland, without giving effect to the conflict of laws provisions thereof.

PLEASE MARK, SIGN, DATE AND MAIL YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.

The undersigned hereby appoints Scott F. Schaeffer, Jack E. Salmon and Raphael Licht, and each of them, as and for the proxies of the undersigned, each with the power to appoint such proxy’s substitute, and hereby authorizes them, or any of them, to vote all of the Common Shares of Beneficial Interest of RAIT Financial Trust held of record by the undersigned on March 1, 2011 at the Annual Meeting of Shareholders of RAIT Financial Trust, to be held at 9:00 A.M. on Tuesday, May 17, 2011 in the Baldwin Room located in the Hub, the Cira Centre, 2929 Arch Street, Philadelphia, Pennsylvania, and at any and all adjournments, postponements or continuations thereof as set forth on the reverse side hereof. If you wish to attend the annual meeting and vote in person, you may contact RAIT’s Investor Relations at (215) 243-9000 for directions. Each of the Proposals in this proxy is proposed by RAIT Financial Trust. These Proposals are not related to or conditioned on the approval of other matters.


	2010		2009
Audit Fees(1)	$	987,377	$	1,245,674
Audit-Related Fees(2)		148,007		70,752
Tax Fees(3)		—		—
All Other Fees(4)		—		—

Total	$	1,135,384	$	1,316,426


Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights		(b) Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights		(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a))
Equity compensation plans approved by security holders
Options		168,800	$	22.50
Phantom units		2,791,371		n/a

Total equity compensation plans approved by security holders		2,960,171				680,147
Equity compensation plans not approved by security holders		—		n/a		—

Total		2,960,171				680,147


Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights		(b) Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights		(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a))
Equity compensation plans approved by security holders
Options		168,800	$	22.50
Phantom units		2,166,209		n/a

Total equity compensation plans approved by security holders		2,335,009				680,147
Equity compensation plans not approved by security holders		—		n/a		—

Total		2,335,009				680,147


Title of Class	Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class
Common Shares	BlackRock, Inc.		6,159,587	(1)		5.6	%


Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class
Common shares	Trustees:
	Scott F. Schaeffer		351,358	(1)		*
	Betsy Z. Cohen		1,244,468	(2)		1.1	%
	Edward S. Brown		95,044	(3)		*
	Frank A. Farnesi		92,088			*
	S. Kristin Kim		96,461	(4)		*
	Arthur Makadon		84,461	(5)		*
	Daniel Promislo		97,544			*
	John F. Quigley III		83,423			*
	Murray Stempel III		93,814	(6)		*

	Non-Trustee Executive Officers:
	Jack E. Salmon		160,321	(7)		*
	Raphael Licht		119,004	(8)		*
	Ken R. Frappier		76,899	(9)		*
	All trustees and executive officers as a group (14 persons)		2,330,919			2.1	%


• chairman of the board, president and chief executive officer			4x salary
• all other Section 16 officers			2x salary
• all designated officers			1x salary


Name and Principal Position	Year		Salary ($)(1)		Bonus ($)		Stock Awards ($)(2)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)(3)		Total ($)
Scott F. Schaeffer Chief Executive Officer		2010		550,000		325,000		342,900		—		—		9,800		1,227,700
		2009		563,401		325,000		—		—		—		9,800		898,201
		2008		500,000		—		—		588,000		—		11,625		1,099,625

Jack E. Salmon Chief Financial Officer		2010		484,000		120,000		203,200		—		—		9,800		817,000
		2009		498,892		240,000		—		—		—		9,800		748,692
		2008		482,985		—		—		479,160		—		13,800		975,945

Betsy Z. Cohen Chairman of the Board of Trustees (retired effective December 31, 2010)		2009		550,000		325,000		368,300		—		—		9,800		1,253,100
		2008		567,972		325,000		—		—		—		9,800		902,772
		2007		545,962		—		—		646,800		798,088		13,800		2,004,650

Raphael Licht Chief Operating Officer		2010		480,000		145,000		298,450		—		—		9,800		933,250
Raphael Licht Chief Operating Officer		2009		484,791		290,000		—		—		—		9,800		784,591

Ken R. Frappier Executive Vice- President—Risk Management		2010		325,000		250,000		203,200		—		—		9,800		788,000


Name	Year		Company Contributions to Retirement and 401(k) Plans ($)(a)		Total ($)(b)
Scott F. Schaeffer		2010		9,800		9,800
		2009		9,800		9,800
		2008		11,625		11,625
Jack E. Salmon		2010		9,800		9,800
		2009		9,800		9,800
		2008		13,800		13,800
Betsy Z. Cohen		2010		9,800		9,800
		2009		9,800		9,800
		2008		13,800		13,800
Raphael Licht		2010 2009		9,800 9,800		9,800 9,800
Ken R. Frappier		2010		9,800		9,800


Name	Grant Date		All Other Stock Awards: Number of Shares of Stock or Units (#)(1)		Grant Date Fair Value of Stock and Option Awards ($)(2)
Scott F. Schaeffer		1/26/2010		270,000	$	342,900
Jack E. Salmon		1/26/2010		160,000		203,200
Betsy Z. Cohen		1/26/2010		290,000		368,300
Raphael Licht		1/26/2010		235,000		298,450
Ken R. Frappier		1/26/2010		160,000		203,200


	Option Awards						Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)
Scott F. Schaeffer		37,500		23.15		10/21/2013		135,000	(1)		295,650
Jack E. Salmon		—		—		—		80,000	(1)		175,200
Betsy Z. Cohen		45,000		23.15		10/21/2013		145,000	(1)		317,550
Raphael Licht		—		—		—		117,500	(1)		153,925
Ken R. Frappier		9,000 2,500		19.85 26.40		4/3/2012 1/29/2014		80,000	(1)		175,200


	Stock Awards
Name	Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Scott F. Schaeffer(1)		135,000		171,450
Jack E. Salmon(2)		80,000		101,600
Betsy Z. Cohen(3)		145,000		184,150
Raphael Licht(4)		117,500		149,225
Ken R. Frappier(5)		80,000		101,600


	Resignation without Good Reason		Termination with Cause (2)		Termination without Cause (1)(2)		Resignation for Good Reason (1)(2)		Disability (2)		Death (2)
Bonus for Prior Periods(3)	$	325,000	$	325,000	$	325,000	$	325,000	$	325,000	$	325,000
Severance Payment(4)		—		—		1,444,000		1,444,000		—		—
Equity Compensation Awards(5)		—		—		295,650		295,650		—		—
Medical Coverage(6)		—		—		16,069		16,069		—		—

Total	$	325,000	$	325,000	$	2,080,719	$	2,080,719	$	325,000	$	325,000


	Resignation without Good Reason (1)		Termination with Cause (1)		Termination without Cause (1)			Resignation for Good Reason (1)(2)			Non-Renewal (1)			Disability (1)(3)		Death (1)(3)
Bonus for Prior Periods(4)	$	120,000	$	120,000	$	120,000		$	120,000		$	120,000		$	120,000	$	120,000
Severance Payment(5)		—		—		906,000	(6)		906,000	(6)		906,000	(7)		—		—
Equity Compensation Awards(8)		—		—		175,200			175,200			175,200			175,200		175,200

Total	$	120,000	$	120,000	$	1,201,200		$	1,201,200		$	1,201,200		$	295,200	$	295,200


	Resignation without Good Reason (1)		Termination with Cause (1)		Termination without Cause or Non-Renewal (1)		Resignation for Good Reason (1)(2)		Disability (1)(3)		Death (1)(3)
Bonus for Prior Periods(4)	$	145,000	$	145,000	$	145,000	$	145,000	$	145,000	$	145,000
Severance Payment(5)		—		—		909,250		909,250		—		—
Equity Compensation Awards(6)		—		—		257,325		257,325		257,325		257,325

Total	$	145,000	$	145,000	$	1,311,575	$	1,311,575	$	402,325	$	402,325


Name	Fees Earned or Paid in Cash($)		All Other Compensation ($)(1)		Total($)
Edward S. Brown	$	60,000	$	50,000	$	110,000
Daniel G. Cohen (2)		16,222		50,000		66,222
Frank A. Farnesi		50,000		50,000		100,000
S. Kristin Kim		52,000		50,000		102,000
Arthur Makadon		40,000		50,000		90,000
Daniel Promislo		60,000		50,000		110,000
John F. Quigley, III		52,000		50,000		102,000
Murray Stempel, III		54,000		50,000		104,000

	$	384,222	$	400,000	$	784,222


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