10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

or

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

For the transition period from _________ to __________

Commission file number: 0-4408

RESOURCE AMERICA, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

Large accelerated filer                    ¨		Accelerated filer                     x
Non-accelerated filer                      ¨	(Do not check if a smaller reporting Company)	Smaller reporting company   ¨

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

The number of outstanding shares of the registrant’s common stock on August 5, 2008 was 18,165,933.

QUARTERLY REPORT ON FORM 10-Q

For the fiscal quarter ended June 30, 2008

EXPLANATORY NOTE

On May 19, 2008, Resource America, Inc. filed Amendment No. 1 to its Annual Report on Form 10-K/A (the “Amendment”) that included restated quarterly financial information for the periods ended December 31, 2006, March 31, 2007 and June 30, 2007, which was originally filed on February 11, 2008.  The Company’s consolidated statements of operations, shareholders’ equity and cash flows for the three and nine months ended June 30, 2007, including the applicable notes as presented in this report reflect that restatement.

For more detailed information about the restatement, please see Note 2, “Restatement of Consolidated Financial Statements for the fiscal year ended September 30, 2007 and as of and for the three and nine months ended June 30, 2007” in the accompanying consolidated financial statements and “Restatement of Previously Issued Financial Results” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this report.

In addition, management concluded that the Company had a material weakness in our internal control over financial reporting relating to our effective monitoring of the Company’s investments in the Trapeza entities, that led to the restatement.  As described in more detail in Item 9A of our Annual Report on Form 10-K/A, the Company has identified the causes of this material weakness and have implemented measures designed to remedy them.

RESOURCE AMERICA, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

		PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2008 (unaudited) and September 30, 2007	3
	Consolidated Statements of Operations − Three Months and Nine Months Ended June 30, 2008 and 2007 (unaudited)	4
	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income − Nine Months Ended June 30, 2008 (unaudited)	5
	Consolidated Statements of Cash Flows − Nine Months Ended June 30, 2008 and 2007 (unaudited)	6
	Notes to Consolidated Financial Statements – June 30, 2008 (unaudited)	7 − 35
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36 − 56
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.	Controls and Procedures	58
PART II	OTHER INFORMATION
Item 6.	Exhibits	59
SIGNATURES		60

PART I.                      FINANCIAL INFORMATION

Item 1.                 Financial Statements

RESOURCE AMERICA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	June 30, 2008			September 30, 2007
	(unaudited)			(restated)
ASSETS
Cash	$	7,797		$	14,624
Restricted cash		24,270			19,340
Receivables		3,692			21,255
Receivables from managed entities		32,321			20,177
Loans sold, not settled		1,990			152,706
Loans held for investment, net		222,123			285,928
Investments in commercial finance, net		305,501			243,391
Investments in real estate, net		49,563			49,041
Investment securities available-for-sale, at fair value		30,481			51,777
Investments in unconsolidated entities		20,942			39,342
Property and equipment, net		28,167			12,286
Deferred income taxes		38,822			29,877
Goodwill		7,969			7,941
Intangible assets, net		4,474			4,774
Other assets		23,701			18,664
Total assets	$	801,813		$	971,123
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accrued expenses and other liabilities	$	53,801		$	60,546
Payables to managed entities		1,003			1,163
Borrowings		574,496			706,372
Deferred income tax liabilities		11,124			11,124
Minority interests		4,829			6,571
Total liabilities		645,253			785,776
Commitments and contingencies		−			−
Stockholders’ equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding		-			-
Common stock, $.01 par value, 49,000,000 shares authorized; 27,480,825 and 26,986,975 shares issued, respectively (including nonvested restricted stock of 582,655 and 199,708, respectively)		269			268
Additional paid-in capital		268,038			264,747
Retained earnings		6,476			27,171
Treasury stock, at cost; 9,322,571 and 9,369,960 shares, respectively		(101,553	)		(102,014	)
ESOP loan receivable		(205	)		(223	)
Accumulated other comprehensive loss		(16,465	)		(4,602	)
Total stockholders’ equity		156,560			185,347
	$	801,813		$	971,123

The accompanying notes are an integral part of these statements

3

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
				(restated)						(restated)
REVENUES
Commercial finance	$	21,803		$	12,808		$	82,434		$	28,461
Real estate		5,626			7,008			18,790			18,580
Financial fund management		2,017			18,635			22,662			48,065
		29,446			38,451			123,886			95,106
COSTS AND EXPENSES
Commercial finance		10,967			5,416			32,751			13,607
Real estate		5,672			3,971			16,464			10,179
Financial fund management		7,122			5,925			20,020			15,878
General and administrative		3,954			3,413			11,169			8,956
Provision for credit losses		1,550			113			5,770			158
Depreciation and amortization		1,309			728			3,264			2,156
		30,574			19,566			89,438			50,934
OPERATING (LOSS) INCOME		(1,128	)		18,885			34,448			44,172
Interest expense		(9,776	)		(10,176	)		(39,048	)		(22,461	)
Minority interest income (expense), net		2,590			(980	)		(677	)		(2,255	)
Other (expense) income, net		(5,530	)		2,079			(22,606	)		6,418
		(12,716	)		(9,077	)		(62,331	)		(18,298	)
(Loss) income from continuingoperations before taxes		(13,844	)		9,808			(27,883	)		25,874
(Benefit) provision for income taxes		(5,820	)		4,119			(10,874	)		9,704
(Loss) income from continuing operations		(8,024	)		5,689			(17,009	)		16,170
Loss from discontinued operations, net of tax		(1	)		(1,450	)		(10	)		(1,506	)
NET (LOSS) INCOME	$	(8,025	)	$	4,239		$	(17,019	)	$	14,664
Basic (loss) earnings per common share:
Continuing operations	$	(0.46	)	$	0.32		$	(0.97	)	$	0.93
Discontinued operations		−			(0.08	)		−			(0.09	)
Net (loss) income	$	(0.46	)	$	0.24		$	(0.97	)	$	0.84
Weighted average shares outstanding		17,549			17,569			17,493			17,463
Diluted (loss) earnings per common share:
Continuing operations	$	(0.46	)	$	0.29		$	(0.97	)	$	0.84
Discontinued operations		−			(0.07	)		−			(0.08	)
Net (loss) income	$	(0.46	)	$	0.22		$	(0.97	)	$	0.76
Weighted average shares outstanding		17,549			19,210			17,493			19,215
Dividends declared per common share	$	0.07		$	0.07		$	0.21		$	0.20

The accompanying notes are an integral part of these statements

4

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

NINE MONTHS ENDED JUNE 30, 2008

(in thousands)

(unaudited)

	Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			ESOP Loan Receivable			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Comprehensive Loss
					(restated)												(restated)
Balance, October 1, 2007	$	268	$	264,747	$	27,171		$	(102,014	)	$	(223	)	$	(4,602	)	$	185,347
Net loss		-		−		(17,019	)		-			-			-			(17,019	)	$	(17,019	)
Treasury shares issued		-		108		-			698			-			-			806
Stock-based compensation		-		744		-			-			-			-			744
Restricted stock awards		-		2,258		-			-			-			-			2,258
Issuance of common shares		1		181		-			-			-			-			182
Purchase of treasury shares		-		-					(237	)		-			-			(237	)
Cash dividends		-		-		(3,676	)		-			-			-			(3,676	)
Other comprehensive loss		-		-		-			−			-			(11,863	)		(11,863	)		(11,863	)
Total comprehensive loss		-		-		-			−			-			−			−		$	(28,882	)
Repayment of ESOP loan		-		-		-			-			18			-			18
Balance, June 30, 2008	$	269	$	268,038	$	6,476		$	(101,553	)	$	(205	)	$	(16,465	)	$	156,560

The accompanying notes are an integral part of this statement

5

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended June 30,
	2008			2007
				(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(17,019	)	$	14,664
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities, net of acquisitions:
Impairment charge on collateralized debt obligation investments		8,123			−
Depreciation and amortization		4,299			2,712
Provision for credit losses		5,770			158
Minority interests		677			2,255
Equity in losses (earnings) of unconsolidated entities		10,260			(12,191	)
Distributions from unconsolidated entities		14,651			12,995
Loss on sales of loans		17,674			−
Gains on sales of assets		(2,033	)		(6,783	)
Deferred income tax benefit		(13,689	)		(6,657	)
Non-cash compensation on long-term incentive plans		3,808			1,983
Non-cash compensation issued		107			1,630
Non-cash compensation received		359			(1,550	)
Decrease (increase) in commercial finance investments		35,842			(137,620	)
Changes in operating assets and liabilities		(14,627	)		(42	)
Net cash provided by (used in) operating activities of continuing operations		54,202			(128,446	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(5,621	)		(3,406	)
Payments received on real estate loans and real estate		8,109			15,703
Investments in real estate, including properties		(8,380	)		(16,245	)
Purchases of investments		(247,067	)		(19,821	)
Proceeds from sale of investments		27,701			6,158
Principal payments received on loans		10,071			−
Net cash paid for acquisitions		(8,022	)		(20,708	)
Increase in other assets		(17,352	)		(3,423	)
Net cash used in investing activities of continuing operations		(240,561	)		(41,742	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings		780,898			559,278
Principal payments on borrowings		(568,617	)		(395,169	)
Minority interest contributions		315			−
Minority interest distributions		(1,394	)		(2,040	)
Dividends paid		(3,676	)		(3,533	)
Increase in restricted cash		(27,948	)		(7,166	)
Proceeds from issuance of stock		182			927
Purchase of treasury stock		(237	)		(2,777	)
Tax benefit from the exercise of stock options		−			1,887
Net cash provided by financing activities of continuing operations		179,523			151,407
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities		9			(527	)
Financing activities		−			(1,145	)
Net cash provided by (used in) discontinued operations		9			(1,672	)
Decrease in cash		(6,827	)		(20,453	)
Cash at beginning of period		14,624			37,622
Cash at end of period	$	7,797		$	17,169

The accompanying notes are an integral part of these statements

6

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008

(unaudited)

NOTE 1 – MANAGEMENT’S OPINION REGARDING INTERIM FINANCIAL STATEMENTS

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

The consolidated financial statements and the information and tables contained in the notes thereto as of June 30, 2008 and for the three and nine months ended June 30, 2008 and 2007 are unaudited.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.  However, in the opinion of management, these interim financial statements include all the necessary adjustments to present fairly the results of the interim periods presented.  The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s amended Annual Report on Form 10-K/A for the fiscal year ended September 30, 2007 (“fiscal 2007”).  The results of operations for the three and nine months ended June 30, 2008 may not necessarily be indicative of the results of operations for the full fiscal year ending September 30, 2008 (“fiscal 2008”).

NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR

ENDED SEPTEMBER 30, 2007 AND AS OF AND FOR THE THREE AND NINE MONTHS ENDED

JUNE 30, 2007

The Company’s consolidated financial statements for the quarters ended December 31, 2006, March 31, 2007 and June 30, 2007 and for the fiscal year ended September 30, 2007 have been restated because of errors found in the financial statements of five limited partnerships (the “Trapeza Partnerships”) in which the Company has an original investment of $8.4 million, owns 8% of the limited partner interests and owns 50% of the general partner.  The overall impact of the adjustments was a cumulative reduction of net income by approximately $3.2 million, net of tax.  The financial information of the Trapeza Partnerships is included in the Company’s financial statements in accordance with the application of Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.”

The Trapeza Partnerships were formed between July 2002 and December 2003 for the purpose of investing in the preference shares, or equity, of collateralized debt obligation issuers whose collateralized debt obligations, or CDOs, are secured by approximately $1.4 billion (at fair value) of trust preferred securities of public and non-public banks and bank holding companies.  In preparing the financial statements of the Trapeza Partnerships for the year ended December 31, 2007, the independent auditors for the Trapeza Partnerships concluded that certain additional valuation procedures should have been applied to the privately issued trust preferred securities held by the CDO issuers based on the nature of the collateral and an evaluation of credit and market spread trends and that the unconsolidated equity interests held by certain of the partnerships should have been valued in accordance with Emerging Issues Task Force (“EITF”) 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.”  The application of these procedures resulted in a non-cash, mark-to-market adjustment of a positive $1.4 million (the Company’s share) and a negative $4.6 million, net of tax (the Company’s share) on a cumulative basis through September 30, 2007 and for the three months ended December 31, 2007, respectively.  The Company recognized the unrealized non-cash, mark-to-market adjustments impacting periods prior to September 30, 2004 as an adjustment to the opening retained earnings for the fiscal year ended September 30, 2005 in the amount of $2.0 million, and thereafter recognized these adjustments in its consolidated statements of income on a quarterly basis.

The impact on net income for the three and nine months ended June 30, 2007 was a reduction of net income by approximately $266,000 for the three months ended June 30, 2007 and an increase in net income of approximately $327,000 for the nine months ended June 30, 2007.  Net income as reported in the Company’s Form 10-Q for the three and nine months ended June 30, 2007 was $4.5 million and $14.3 million, respectively, whereas the restated amounts are approximately $4.2 million and $14.7 million, respectively.

7

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for certain financial fund management entities and LEAF Financial Corp. (“LEAF”) in which the senior executives of LEAF hold a 14.9% interest.  Additionally, in March 2008, the Company sold a 19.99% interest in an indirect subsidiary that holds a hotel property in Savannah, Georgia, resulting in minority interest in that subsidiary.

The Company is the general and a limited partner in two Structured Finance Funds (the “SFF entities”).  The limited partners do not have the substantive ability to remove the general partner without cause based on a simple majority vote.  In accordance with EITF 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”), the Company, as the general partner, is presumed to control these entities, and therefore consolidates the limited partnerships.  Investment securities available-for-sale contain the interests in unconsolidated CDOs owned by the Company and interests owned by the SFF entities that the Company controls and as a result, are consolidated in its financial statements.  The Company's combined general and limited partner interests in the SFF entities of 15% and 36% and the interests owned by third parties are reflected as minority interest.

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

Through December 31, 2007 in certain CDO transactions sponsored by the Company, the Company provided credit support in the form of a first loss guarantee to the warehouse lender, typically an investment banking firm that provided the warehouse facility to a CDO issuer while the CDO issuer accumulated assets.  If the warehouse lender disposed of the assets it held at a loss, the Company reimbursed the lender for its losses up to a specified amount.  Generally, the first loss amount ranged from 3% to 6% of the total assets accumulated in the warehouse facility during the accumulation phase.  The Company often was required to deposit an amount into an account held by the warehouse lender as assets were being accumulated.  The Company reflected these amounts as restricted cash on its consolidated balance sheets.  In these cases, the Company generally determined that the CDO issuer was a VIE, the first loss guarantee was a variable interest and that the Company was the primary beneficiary and required to consolidate the CDO issuer’s assets and liabilities, which generally consisted of leveraged and commercial loans and a warehouse facility.

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

In January 2008, the Company terminated the warehouse agreements for two CDO issuers it had sponsored, Apidos CDO VII and Resource Europe II.  The underlying loans were sold in late January and early February 2008.  Accordingly, the Company reclassified these loans and recorded a loss on the reclassification in the quarter ended December 31, 2007.  The loss was included in other income (expense) in the consolidated statements of operations.  The assets and liabilities of those CDO issuers, which were included in the Company’s consolidated balance sheets at September 30 and December 31, 2007 in accordance with FIN 46-R, are no longer consolidated as a result of the sale.  The restricted cash securing the warehouse agreements was retained by the warehouse lender.  The Company has no additional warehouse loss exposure under these facilities.

8

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Principles of Consolidation − (Continued)

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

Investments in Unconsolidated Entities

The Company accounts for its investments in financial fund management, real estate and commercial finance investment vehicles under the equity method of accounting since the Company has the ability to exercise significant influence over operating and financial decisions of these entities.

Financial Fund Management

As an owner of limited and general partner interests in the Trapeza entities, the Company has the ability to exercise significant influence over their operating and financial decisions.  The Company's combined general and limited partner interests in these entities range from 13% to 50%.

The Company has interests in five other company-sponsored partnerships.  Four of these partnerships invest in regional banks and the other is organized as a hedge fund that the Company manages.  The Company’s combined general and limited partner interests in these partnerships range from approximately 5% to 10%.

Real Estate

The Company has sponsored and manages six real estate limited partnerships, five limited liability companies and seven TIC property interests that invest in multi-family residential properties.

In May 2008, the Company created a wholly-owned indirect subsidiary which was a special purpose entity (“SPE”) for the purpose of acquiring distressed real estate loans with a partner.  The entity was determined to be a VIE.  While the Company owns 100% of the equity interests of the SPE, it does not consolidate it since the partner was determined to be the primary beneficiary as defined by FIN 46-R.

Commercial Finance

The Company has interests in three company-sponsored partnerships.  The Company’s combined general and limited partner interests in these partnerships range from approximately 1% to 5%.

Allowance for Credit Losses

Loans held for investment are generally evaluated for impairment individually, but loans purchased on a pooled basis with relatively smaller balances and substantially similar characteristics may be evaluated collectively for impairment.  The Company considers a loan to be impaired when, based on current information and events, management believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  When a loan is impaired, the allowance for loan losses is increased by the amount of the excess of the amortized cost basis of the loan over its fair value.  Fair value may be determined based on market price, if available; the fair value of the collateral less estimated disposition costs; or the present value of estimated cash flows.  Increases in the allowance for credit losses are recognized in the statements of operations as a provision for credit losses.  When a loan, or a portion thereof, is considered uncollectible and pursuit of the collection is not warranted, then the Company will record a charge-off or write-down of the loan against the allowance for credit losses.  The Company periodically evaluates its loan portfolio, and in particular, any loans that are not current with respect to scheduled payments of principal and interest.  In reviewing its portfolio of loans held for investment and the observable secondary market prices, the Company determined that its reserves were understated and accordingly, recorded a provision for credit losses of $839,000 and $1.3 million for the three and nine months ended June 30, 2008, respectively.

9

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Allowance for Credit Losses − (Continued)

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

An impaired real estate loan may remain on accrual status during the period in which the Company is pursuing repayment of the loan; however, the loan would be placed on non-accrual status at such time as either (1) management believes that scheduled debt service payments will not be met within the coming 12 months; (2) the loan becomes 90 days delinquent; (3) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment; or (4) the net realizable value of the loan’s underlying collateral approximates the Company’s carrying value of such loan.  While on non-accrual status, the Company recognizes interest income only when an actual payment is received.  The Company recorded no provision for credit losses on its portfolio of real estate loans for the three and nine months ended June 30, 2008 and 2007.

The Company evaluates the adequacy of the allowance for credit losses in commercial finance (including investments in leases, notes and future payment card receivables) based upon, among other factors, management’s experience of portfolio default rates, subsequent collectability and economic conditions and trends.  The Company discontinues the recognition of revenue for leases and notes for which payments are more than 90 days past due.  Management has determined that an allowance for credit losses was needed at June 30, 2008 and recorded a provision of $711,000 and $4.5 million for the three and nine months ended June 30, 2008, respectively.  In the three and nine months ended June 30, 2007, the Company recorded a provision of $113,000 and $158,000, respectively.

Generally, during the lease terms of existing operating leases, the Company will not recover all of the cost and related expenses of its rental equipment and, therefore, it is prepared to remarket the equipment in future years.  The Company’s policy is to review, on a continual basis, the expected economic life of its rental equipment in order to determine the recoverability of its undepreciated cost.  The Company writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds such value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment.  There were no writedowns of equipment during the three and nine months ended June 30, 2008 and 2007.

Investment Securities Available-for-Sale

The Company’s investment securities available-for-sale, including its investments in CDOs, are carried at fair value.  The fair value of these CDO investments is based primarily on internally generated expected cash flow models that require significant management judgment and estimation due to the lack of market activity and unobservable pricing inputs.

The Company’s interests in CDOs are accounted for in accordance with EITF 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets,” (“EITF 99-20”).  In accordance with EITF 99-20, when adverse changes in estimated cash flows occur as a result of declining net spread, prepayments or credit loss experience, an other-than-temporary impairment is deemed to have occurred.  Accordingly, the security is written down to fair value, and the unrealized loss is transferred from accumulated other comprehensive loss as a reduction of current earnings.  The cost basis adjustment for other-than-temporary impairment is recoverable only upon the sale or maturity of the security.

10

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Recently Issued Financial Accounting Standards

In June 2008, the FASB issued Staff Position (“FSP”) EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings per Share.”  Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and must be included in the computation of earnings per share pursuant to the two-class method.  FSP EITF 03-6-1 is effective for the Company in fiscal 2010. All prior-period earnings per share data presented must be adjusted retrospectively.  The Company is currently evaluating the potential impact of adopting FSP EITF 03-6-1.

In May 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective 60 days following the Securities and Exchange Commission’s (“SEC”) approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards.  The Company does not expect its adoption of SFAS 162 will have a material impact on its financial statements.

In April 2008, the FASB issued FSP FAS 142-3,“Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing a renewal or extension of assumptions used for purposes of determining the useful life of a recognized intangible asset under SFAS 142,“Goodwill and Other Intangible Assets.”.  FSP FAS 142-3 is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and GAAP standards.  FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 or for the Company in fiscal 2010. The Company is currently evaluating the potential impact of adopting FSP FAS 142-3.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS 133” (“SFAS 161”).  This new standard requires enhanced disclosures for derivative instruments, including those used in hedging activities.  It is effective for fiscal years and interim periods beginning after November 15, 2008 and will be applicable to the Company in the second quarter of fiscal 2009.  The Company is assessing the potential impact that the adoption of SFAS 161 may have on its financial statements.

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

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

11

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Recently Issued Financial Accounting Standards − (Continued)

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

In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position (“SOP”) 07-1, “Clarification of the Scope of the Audit and Accounting Guide ‘Investment Companies’ and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies,” (“SOP 07-1”).  SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the “Guide”).  Additionally, it provides guidance as to whether a parent company or an equity method investor can apply the specialized industry accounting principles of the Guide (referred to as investment company accounting).  In October 2007, the FASB issued FSP SOP 07-1-1, which indefinitely deferred the effective date of this SOP.

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

In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of SFAS 115," (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value option established by SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates.  Entities choosing the fair value option would be required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Adoption is required for fiscal years beginning after November 15, 2007 (for the Company, its fiscal year beginning October 1, 2008).  The Company is currently evaluating the expected effect, if any; SFAS 159 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” which provides guidance on measuring the fair value of assets and liabilities (“SFAS 157”). SFAS 157 will apply to other accounting pronouncements that require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances.  This standard will also require additional disclosures in both annual and quarterly reports.  SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007 (for the Company, its fiscal year beginning October 1, 2008).  In November 2007, the FASB announced that it would defer the effective date of SFAS 157 for one year for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis.  The Company is currently determining the effect, if any; the adoption of SFAS 157 will have on its consolidated financial statements.

12

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of periodic temporary investments of cash and restricted cash. The Company places its temporary cash investments and restricted cash in high quality short-term money market instruments with high-quality financial institutions and brokerage firms.  At June 30, 2008, the Company had $14.9 million (excluding restricted cash) in deposits at various banks, of which $12.4 million was over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such investments.

NOTE 4 − SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents supplemental cash flow information (in thousands):

	Nine Months Ended June 30,
	2008			2007
Cash paid during the period for:
Interest	$	45,494		$	14,161
Income taxes	$	3,101		$	1,614
Non-cash activities include the following:
Transfer of loans held for investment (see Note 13):
Reduction of loans held for investment	$	325,365		$	418,809
Termination of associated secured warehouse credit facilities	$	(337,276	)	$	(418,292	)
Activity on secured warehouse facilities related to secured bank loans:
Purchase of loans	$	(51,524	)	$	(881,126	)
Proceeds from sale of loans	$	7,366		$	78,576
Principal payments on loans	$	6,322		$	49,608
Settlement of loans traded, not settled, including use of escrow funds	$	152,706		$	−
(Repayments of) borrowings on associated secured warehouse credit facilities	$	(100,368	)	$	763,226
Acquisitions of commercial finance assets (see Note 8):
Commercial finance assets acquired	$	412,439		$	−
Purchase of building and other assets	$	7,835		$	−
Debt incurred for acquisition	$	(391,176	)	$	−
Liabilities assumed	$	(21,176	)	$	−
Receipt of a note upon the partial sale of a real estate investment	$	1,500		$	−

13

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 5 − EARNINGS PER SHARE

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

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

	Three Months Ended June 30,				Nine Months Ended June 30,
	2008		2007		2008		2007
Shares
Basic shares outstanding		17,549		17,569		17,493		17,463
Dilutive effect of stock options and other equity awards (1)		−		1,641		−		1,752
Dilutive shares outstanding		17,549		19,210		17,493		19,215

(1) For the three and nine months ended June 30, 2008, all outstanding options and other equity awards were antidilutive due to the loss for the periods and, therefore, were excluded from the computation of Diluted EPS.  As of June 30, 2008, there were 1,003,757 outstanding options at exercise prices that exceeded the average market price of the Company’s stock for the three months then ended.  The exercise prices on those options were between $10.04 and $27.84 per share.  As of June 30, 2007, options to purchase 57,500 shares were outstanding but were excluded from the computation of Diluted EPS as their effect would have been antidilutive.  The exercise prices on those options ranged from $24.28 to $27.84 per share.

NOTE 6 − RESTRICTED CASH

The Company’s restricted cash includes the following (in thousands):

	June 30, 2008			September 30, 2007
	(unaudited)
Escrow funds − financial fund management	$	15,690	(1)	$	12,282
Collection accounts – commercial finance		7,530	(2)		5,884
Other		1,050			1,174
	$	24,270		$	19,340

(1) At June 30, 2008, Apidos CDO VI held $15.7 million of cash in a trust account.

(2) Credit facilities for the Company’s commercial finance operations require it to maintain collection accounts.

NOTE 7 − LOANS

Loans Traded, Not Settled

The Company entered into a trade to sell a $2.0 million bank loan position prior to June 30, 2008 which had not settled at that date.  The gross proceeds of this trade totaled $1.9 million and resulted in a realized loss of $59,000.  The final proceeds from this trade were received in July 2008.

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

14

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 7 − LOANS − (Continued)

Loans Held for Investment, net

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

	June 30, 2008			September 30, 2007
Bank loans:
Principal	$	224,872		$	284,906
Unamortized premium		243			1,160
Unamortized discount		(2,534	)		(138	)
		222,581			285,928
Allowance for credit losses		(458	)		−
Loans held for investment, net	$	222,123		$	285,928

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

Balance, October 1, 2007	$	−
Provision for credit losses		1,297
Charge-offs, net of recoveries		(839	)
Balance, June 30, 2008	$	458

In December 2007, the Company closed Apidos CDO VI, a $240.0 million securitization of corporate loans, and provided the equity of $21.3 million for this investment.  At June 30, 2008, this portfolio consisted of floating rate loans at various London Inter-Bank Offered Rates (“LIBOR”) plus 1.38% to 9.50%, with maturity dates ranging from December 2010 to June 2022.

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

There were no fixed rate loans as of June 30, 2008 or September 30, 2007.

NOTE 8 − INVESTMENTS IN COMMERCIAL FINANCE

Portfolio Acquisitions

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

NetBank Business Finance.  On November 7, 2007, the Company acquired a portfolio of over 10,000 equipment leases and loans to small businesses of NetBank Business Finance, a division of NetBank, from the Federal Deposit Insurance Corporation which held it in receivership, at a discount for $412.5 million.  Financing for this transaction was provided by borrowings under the Company’s existing warehouse credit facility and a new facility with Morgan Stanley Bank (“Morgan Stanley”) and Morgan Stanley Asset Funding Inc.  On April 22, 2008, LEAF completed the transfer of its NetBank portfolio by the sale to LEAF Equipment Leasing Income Fund III, L.P. (“LEAF Fund III”) of its 51% membership interest in the special purpose entity that owns the portfolio.  The sale was for $9.4 million, representing the net book value of the assets transferred. LEAF had previously transferred a 49% membership interest in this special purpose entity to LEAF Fund III on January 31, 2008 for its net book value of $6.8 million. This entity that owns the portfolio, which is wholly-owned by LEAF Fund III as a result of these sales, remains the borrower on the Morgan Stanley bridge financing. Accordingly, a total of $311.0 million of commercial finance assets were transferred by LEAF to LEAF Fund III together with $301.0 million of related debt financing (see Note 13).

15

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 8 − INVESTMENTS IN COMMERCIAL FINANCE − (Continued)

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

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

Commercial Finance Assets

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

	June 30, 2008			September 30, 2007
Notes receivable	$	209,546		$	192,262
Direct financing leases, net		78,104			44,100
Future payment card receivables, net		17,009			6,899
Assets subject to operating leases, net of accumulated depreciation of $50 and $7		1,407			250
Allowance for credit losses		(565	)		(120	)
Investments in commercial finance, net	$	305,501		$	243,391

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

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

	June 30, 2008			September 30, 2007
Total future minimum lease payments receivables	$	90,613		$	50,196
Initial direct costs, net of amortization		1,922			658
Unguaranteed residuals		694			442
Unearned income		(15,125	)		(7,196	)
Investments in direct financing leases, net	$	78,104		$	44,100

The Company typically sells without recourse all of the leases and notes it acquires or originates to the investment entities it manages within two to three months after their acquisition or origination.  However, the Company has accumulated and is holding a $144.6 million portfolio of leases and notes that it anticipates it will sell to a new investment entity that it will manage and consolidate.

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

	June 30, 2008			September 30, 2007
Total future payment card receivables	$	22,985		$	8,135
Unearned income		(5,976	)		(1,236	)
Investments in future payment card receivables	$	17,009		$	6,899

16

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 8 – INVESTMENTS IN COMMERCIAL FINANCE − (Continued)

Commercial Finance Assets − (Continued)

The following table summarizes the activity in the allowance for credit losses for the Company’s commercial finance portfolio (in thousands):

	LEAF			Merit			Total
Balance, October 1, 2007	$	−		$	120		$	120
Provision for credit losses		2,152			2,321			4,473
Charge-offs, net of recoveries		(1,772	)		(2,256	)		(4,028	)
Balance, June 30, 2008	$	380		$	185		$	565

NOTE 9 – INVESTMENTS IN REAL ESTATE

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

	June 30,			September 30,
	2008			2007
Real estate loans (see Note 22):
Balance, beginning of period	$	27,765		$	28,739
New loans		1,500			1,597
Additions to existing loans		−			42
Collection of principal		(1,618	)		(3,373	)
Other		538			760
Balance, end of period		28,185			27,765
Less allowance for credit losses		(629	)		(629	)
Net real estate loans		27,556			27,136
Real estate:
Ventures		8,208			9,769
Owned, net of accumulated depreciation of $2,417, $2,028 and $2,125		13,799			12,136
Total real estate		22,007			21,905
Investments in real estate, net	$	49,563		$	49,041

17

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 10 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The Company has invested in two affiliated publicly-traded companies, Resource Capital Corp. (“RCC”) (NYSE: RSO), and The Bancorp, Inc. (“TBBK”) (Nasdaq: TBBK) (see Note 18), in addition to its investments in CDO issuers it has sponsored and manages, as follows (in thousands):

	June 30,		September 30,
	2008		2007
RCC stock, including unrealized losses of $15,444 and $7,344	$	14,279	$	22,099
TBBK stock, including unrealized losses of $273 and gains of $1,010		901		2,184
CDO securities, including net unrealized losses of $11,172 and $7,543		15,301		27,494
Investment securities available-for-sale	$	30,481	$	51,777

The Company held approximately 2.0 million shares of RCC common stock at June 30, 2008 and September 30, 2007.  In addition, the Company has options to acquire 2,166 shares (at an average price per share of $15.00) and warrants to acquire an additional 100,088 shares (at $15.00 per share; expire in January 2009) of RCC common stock.

The Company held 118,290 shares of TBBK at June 30, 2008 and September 30, 2007.  The Company’s supplemental employment retirement plan for the Company’s former Chief Executive Officer, which is reflected in other assets, held an additional 123,719 shares of TBBK valued at $943,000 and $2.3 million at June 30, 2008 and September 30, 2007, respectively, as well as $1.1 million and $1.2 million, respectively, of other equity securities at June 30, 2008 and September 30, 2007.

Investments in CDO securities represent investments in the CDO issuers that the Company sponsored and manages.  Investments in 18 CDOs at June 30, 2008 and September 30, 2007 were held directly through the Company’s financial fund management entities and indirectly through the consolidation of two investment partnerships, the SFF entities, that the Company manages as the general partner.  As of June 30, 2008 and September 30, 2007, the Company had fully impaired seven and four CDO investments, respectively.  The Company will utilize the cost-recovery method to realize any future income in these investments.  Interests owned by third parties in the SFF entities, reflected as minority interest, totaled $2.7 million and $3.6 million as of June 30, 2008 and September 30, 2007, respectively.  The investments held by the respective CDOs are sensitive to interest rate fluctuations, which accordingly impact their fair value.  Unrealized losses are generally caused by changes in interest rates on those securities.

Unrealized Losses

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

	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
June 30, 2008	$	57,370	$	−	$	(26,889	)	$	30,481
June 30, 2007	$	75,265	$	2,488	$	(10,266	)	$	67,487

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

	Estimated Fair Value		Less than 12 Months			Estimated Fair Value		More than 12 Months
June 30, 2008	$	4,325	$	(2,135	)	$	26,156	$	(24,754	)
June 30, 2007	$	19,973	$	(1,594	)	$	39,092	$	(8,672	)

18

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 10 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE − (Continued)

Realized Losses

The global credit markets have been subject to substantial volatility and reduction in liquidity, principally as a result of conditions in the residential mortgage sector, particularly in the subprime sector.  This volatility and reduction in liquidity has affected banks, thrifts and other financial institutions as well as direct and indirect real estate investments.  In the three and nine months ended June 30, 2008, the Company recorded charges of $7.0 million and $8.1 million, respectively, for the other–than-temporary impairment of certain of its investments in CDOs. In the three months ended June 30, 2008, the $7.0 million charge reflects impairments on two regional bank investments and one thrift investment.  In addition to these impairments, the $1.1 million charge prior to the three months ended June 30, 2008 reflects impairments on investments in a real estate asset-backed security (“ABS”), a commercial mortgage-backed security (“CMBS”), as well as an impairment of an investment in a state bank and a subprime investor.  There were no impairment charges during the three and nine months ended June 30, 2007.

NOTE 11 − INVESTMENTS IN UNCONSOLIDATED ENTITIES

As a specialized asset manager, the Company develops various types of investment vehicles which it manages under long-term management agreements or similar arrangements.  The following table details the Company’s investments in these vehicles, including the range of partnership interests owned (in thousands, except percentages):

	June 30, 2008		September 30, 2007		Range of Combined Partnership Interests
			(restated)
Trapeza entities	$	4,828	$	18,755		13% − 50%
Financial fund management partnerships		4,964		7,185		5% − 10%
Real estate investment partnerships		9,392		7,926		3% – 11%
Commercial finance investment partnerships		1,758		2,109		1% − 5%
Tenant-in-Common (“TIC”) property interest (1)		−		3,367		N/A
Investments in unconsolidated entities	$	20,942	$	39,342

(1) The Company’s interest in a TIC property as of September 30, 2007 was subsequently sold to investors.

The Company is entitled to incentive distributions (carried interests) in four of the Trapeza partnerships it manages. Within two such partnerships, the incentive distributions are subject to potential clawbacks to the extent that such distributions exceed cumulative net profits, as defined in the respective partnership agreements.  As of June 30, 2008, the Company has recorded a clawback liability of $4.3 million based on the performance of two of the Trapeza partnerships.  As of September 30, 2007 based on the performance of these partnerships, no such clawback liability was recorded.

The Trapeza entities include the Company’s 50% equity interest in one of the managers of the Trapeza CDO entities, Trapeza Capital Management, LLC (“TCM”).  The Company does not control TCM and, accordingly, does not consolidate it.

Summarized operating data for TCM is presented in the following table (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2008			2007			2008			2007
Management fees	$	649	(1)	$	2,648		$	6,461	(1)	$	10,322
Operating expenses		(421	)		(585	)		(1,939	)		(2,256	)
Other expense		(58	)		(69	)		(198	)		(57	)
Net income	$	170		$	1,994		$	4,324		$	8,009

(1) Reflects the discount recorded in June 30, 2008 in connection with subordinate and incentive management fees that the Company expects to receive in the future.

19

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 12 − PROPERTY AND EQUIPMENT

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

	Estimated Useful Lives		June 30, 2008			September 30, 2007
Land (1)		−	$	200		$	−
Building (1)	39 years			1,667			−
Leasehold improvements	1-15 years			6,167			4,420
Real estate assets − FIN 46-R	40 years			3,900			3,900
Furniture and equipment	3-10 years			11,283			9,438
				23,217			17,758
Accumulated depreciation and amortization				(6,688	)		(5,472	)
Held-for-sale (2)				11,638			−
Property and equipment, net			$	28,167		$	12,286

(1) Reflects $1.9 million for the land and a building located in Moberly, Missouri which the Company acquired from Dolphin Capital Corp. (see Notes 8 and 13).

(2) Reflects $1.5 million for the land and $10.1 million for an apartment building located in Portland, Maine.  The property was sold to one of the Company’s real estate investment partnerships in July 2008.

NOTE 13 – BORROWINGS

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

	As of June 30, 2008					As of September 30, 2007
	Amount of Facility		Balance			Balance
	(in millions)		(in thousands)			(in thousands)
Commercial finance:
Secured revolving credit facilities	$	150.0	$	139,200		$	83,900
		250.0		135,599			137,637
Subtotal – Commercial finance	$	400.0		274,799			221,537
Financial fund management:
Consolidated under FIN 46-R:
CDO senior notes, net	$	218.0		213,186	(1)		−
Secured warehouse credit facilities		−		−			439,539
Subtotal – Financial fund management	$	218.0		213,186			439,539
Corporate:
Secured revolving credit facilities	$	75.0		52,600			29,600
		14.0		7,450			−
Subtotal – Corporate	$	89.0		60,050			29,600
Other debt				26,461	(2)		15,696
Total borrowings outstanding			$	574,496		$	706,372

(1) Reflected net of deferred issuance costs of $4.8 million.

(2) Includes a $9.9 million mortgage secured by property in Portland, Maine.  In July 2008, the property was sold and the mortgage was transferred to one of the Company’s real estate investment partnerships.

20

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 13 – BORROWINGS − (Continued)

Commercial finance - Secured revolving credit facilities

In July 2006, LEAF entered into a $150.0 million revolving warehouse credit facility with a group of banks led by National City Bank that expires on July 31, 2009.  Interest is charged at one of two rates: (i) LIBOR plus 1.5%, or (ii) the prime rate.  The underlying equipment being leased or financed collateralizes the borrowings.  Weighted average borrowings for the three months ended June 30, 2008 and 2007 were $141.5 million and $68.4 million, respectively, at an effective interest rate of 5.4% and 7.4%, respectively.  Weighted average borrowings for the nine months ended June 30, 2008 and 2007 were $135.0 million and $82.8 million, respectively, at an effective interest rate of 5.9% and 7.5%, respectively.

In December 2006, LEAF assumed an unused $250.0 million line of credit with Morgan Stanley from Resource Capital Corp (“RCC”), a real estate investment trust managed by the Company.  In May 2008, the Company paid a $500,000 amendment fee to modify the terms of this facility for the purpose of transferring the facility to a new investment entity that the Company will manage and consolidate.  The facility is non-recourse to the Company and matures in October 2009.  However, any outstanding borrowings as of that date will continue to amortize until fully repaid, at a higher rate of interest.  The underlying equipment being leased or financed collateralizes the borrowings.  Interest and principal payments are due monthly.  Prior to June 1, 2008, interest was charged at one of two rates based on the utilization of the facility:  (i) one-month LIBOR plus 60 basis points on borrowings up to $100.0 million and (ii) one-month LIBOR plus 75 basis points on borrowings in excess of $100.0 million.  As of June 1, 2008, the interest rate is one-month LIBOR plus 1.15% on all the borrowings.  The borrowing availability on the line may be increased at any time with the lender’s consent.  If the lender agrees to increase the availability, the Company must pay a fee in an amount equal to 0.20% of the principal amount of the increase.  The Company is also required to pay unused facility fees on the available balance of the line and is subject to a prepayment penalty if loans are repaid prior to maturity.  Weighted average borrowings for the three months ended June 30, 2008 and 2007 were $128.3 million and $117.1 million, respectively, at an effective interest rate of 6.0%.  Weighted average borrowings for the nine months ended June 30, 2008 and 2007 were $128.3 million and $66.1 million, respectively, at effective interest rates of 5.9%.

The Company utilizes interest rate swap agreements and interest rate caps to mitigate the negative effect of fluctuations in LIBOR (see Note 15).  The swap agreements terminate at various dates ranging from November 2011 to November 2020.

Commercial finance – Terminated bridge loans

In November 2007, LEAF obtained $368.1 million of bridge financing from Morgan Stanley to fund the NetBank acquisition.  The financing agreement provided for two loans − a $333.4 million class A loan and a $34.7 million class B loan which were secured by the NetBank assets acquired.  This facility and the $311.0 million of outstanding loans effectively were transferred to LEAF Fund III in April 2008.  The interest rate on the class A loan was the adjusted eurodollar rate (defined as the 30 day LIBOR rate) plus 2.00%.  The interest rate on the class B loan was the adjusted eurodollar rate plus 10.00%.  Weighted average borrowings on these loans for the three and nine months ended June 30, 2008 were $72.7 million and $209.3 million, respectively, at an effective interest rate of 7.2%.

Financial Fund Management – CDO senior notes

In December 2007, the Company closed and acquired all of the equity interests in Apidos CDO VI, which issued $218.0 million of its senior notes at par.  The investments held by Apidos CDO VI collateralize the debt and, as a result, are not available to the Company, its creditors or stockholders.  The senior notes, which are non-recourse to the Company, consist of the following classes: (i) $181.5 million of class A-1 notes bearing interest at LIBOR plus 0.64%; (ii) $6.0 million of class A-2 notes bearing interest at LIBOR plus 1.25%; (iii) $13.0 million of class B notes bearing interest at LIBOR plus 2.25%; (iv) $8.0 million of class C notes bearing interest at LIBOR plus 4.00%; and (v) $9.5 million of class D notes bearing interest at LIBOR plus 6.75%.  All of the notes issued mature on December 13, 2019, although the noteholders have the right to call the notes anytime after January 4, 2012, or in the case of a refinancing, anytime after January 4, 2011.  The weighted average interest rate on the senior notes was 5.94% for the three and nine months ended June 30, 2008.

21

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 13 – BORROWINGS − (Continued)

Financial fund management – Terminated secured warehouse credit facilities

The Company was a party to various warehouse credit agreements for facilities which provided funding for the purchase of bank loans in the U.S. and Europe.  Borrowings under these facilities were consolidated by the Company in accordance with FIN 46-R while the assets accumulated prior to the completion of the CDO.  Upon the closing of the CDO, the facilities were terminated and the interest was paid.  The following warehouse credit facilities were terminated during the nine months ended June 30, 2008:

· In July 2007, a $300.0 million facility was opened with affiliates of Morgan Stanley with interest at LIBOR plus 75 basis points.  The Company determined to end this facility at its maturity date on January 16,2008.  The Company recorded a loss as of December 31, 2007 from the subsequent sale and reclassification of the underlying loans in the portfolio (see Note 19).  The Company has no further exposure under this facility.  Average borrowings for the nine months ended June 30, 2007 were $17.0 million, at an average interest rate of 5.76%.

· In January 2007, a EUR 400.0 million facility was opened with Morgan Stanley with interest at European LIBOR plus 75 basis points.  The Company also determined to end this facility at its maturity date on January 11, 2008.  The Company recorded a loss as of December 31, 2007 from the subsequent sale and reclassification of the underlying loans (see Note 19).  The Company has no further exposure under this facility.  Average borrowings for the nine months ended June 30, 2008 were $47.7 million, at an average interest rate of 5.34%.  Average borrowings for the three and nine months ended June 30, 2007 were $141.6 million and $58.5 million, respectively, at an average rate of 4.98% and 4.94%, respectively.

· In connection with the closing of Apidos CDO VI, a $400.0 million facility opened in August 2006 with affiliates of Credit Suisse Securities (USA) LLC (“Credit Suisse”) was terminated in December 2007.  The interest rate was LIBOR plus 62.5 basis points.  Average borrowings for the nine months ended June 30, 2008 were $48.4 million at an average interest rate of 5.70%.  Average borrowings for the three and nine months ended June 30, 2007 were $167.1 million and $125.0 million, respectively, at an average rate of 5.98% for both periods.

Corporate – Secured revolving credit facilities

TD Bank, N.A. (successor by merger to Commerce Bank, N.A.) (“Commerce Bank”).  In May 2007, the Company entered into a $75.0 million revolving credit facility with Commerce Bank expiring on May 23, 2012.  Up to $7.5 million of borrowings may be in the form of standby letters of credit.  Borrowings are secured by a first priority security interest in certain assets of the Company and certain subsidiary guarantors, including (i) the present and future fees and investment income earned in connection with the management of, and investments in, sponsored CDOs, (ii) a pledge of 12,972 shares of TBBK, and (iii) the pledge of 1,279,418 shares of RCC.  Availability under the facility is limited to the lesser of (a) 75% of the net present value of future management fees to be earned plus 70% of the market value of the listed stock pledged or (b) $75.0 million.  As of June 30, 2008, availability on this line was limited to $12.7 million based on the value of the collateral.  Borrowings bear interest at one of two rates at the Company’s election: (i) the prime rate plus 1%, or (ii) LIBOR plus 2.25%.  The Company is also required to pay an unused facility fee of 25 basis points per annum, payable quarterly in arrears.  Weighted average borrowings for the three months ended June 30, 2008 and 2007 were $55.6 million and $3.0 million, respectively, at an effective interest rate of 5.55% and 15.8%, respectively.  Weighted average borrowings were $52.1 million and $1.0 million for the nine months ended June 30, 2008 and 2007, respectively, at an average rate of 6.72% and 22.2%, respectively.

Sovereign Bank.  The Company has a $14.0 million revolving line of credit with Sovereign Bank that expires in July 2009.  The facility is secured by certain real estate collateral and certain investment securities available-for-sale.  Availability, based on the value of the collateral, was limited to $113,000 as of June 30, 2008.  Interest is charged at one of two rates elected at the Company’s option: (i) LIBOR plus 2.0%, or (ii) the prime rate.  Weighted average borrowings for the three months ended June 30, 2008 and 2007 were $7.5 million and $6.8 million, respectively, at an effective interest rate of 6.0% and 8.3%, respectively.  Weighted average borrowings for the nine months ended June 30, 2008 and 2007 were $5.5 million and $3.4 million, respectively, at an effective interest rate of 7.0% and 9.4%, respectively.

22

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 13 – BORROWINGS − (Continued)

Other debt − Mortgage loans

As of June 30, 2008, a VIE consolidated by the Company in accordance with FIN 46-R is the obligor under an outstanding first mortgage secured by real estate with an outstanding balance totaling $1.3 million.  The mortgage requires monthly payments of principal and interest at a fixed interest rate of 8.8% and matures in July 2014.  The mortgage is not a legal obligation of the Company; however, it is senior to the VIE’s obligation to the Company.  Mortgage payments are paid from the cash flows of the VIE.

In April 2008, the Company borrowed $9.9 million under two separate mortgages to purchase an apartment building in Portland, Maine.  The apartment building is the collateral for both mortgages.  The first mortgage, in the amount of $8.9 million, requires interest only payments at a fixed rate of 4.92% until its maturity in May 2015 but may be extended for an additional year at a variable rate of interest.  The second mortgage of $1.0 million requires monthly payments of principal and interest of $6,225 a month at a fixed rate of 6.12%, and may also be extended for an additional year at a variable rate of interest.  In July 2008, the Company sold the property and transferred the mortgages to one of its real estate investment partnerships.

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

In June 2006, the Company obtained a $12.5 million first mortgage on a hotel property in Savannah, Georgia.  The mortgage matures on July 6, 2011, has a 7.1% fixed rate, and requires monthly payments of principal and interest of $84,220.  The principal balance as of June 30, 2008 was $12.3 million.

Other debt − Secured notes

At June 30, 2008, the Company also had an outstanding balance of $546,000 on a secured note with Sovereign Bank.  The note, secured by the furniture and computer equipment of the Company’s commercial finance business, requires monthly payments of principal and interestof $18,796 over five years at a fixed interest rate of 6.9%.

In June 2006, the Company borrowed $1.5 million from JP Morgan under a promissory note for the purchase of its equity investment in a CDO issuer the Company sponsored and manages.  The note requires quarterly payments of principal and interest at LIBOR plus 100 basis points (3.7% at June 30, 2008) and matures in July 2010.  The Company’s share of the equity distributions and its share of the collateral management fees from the CDO issuer collaterize the note.  The outstanding balance as of June 30, 2008 was $844,000.

Debt repayments

Annual principal payments on the Company’s aggregate borrowings over the next five years ending June 30 and thereafter are as follows (in thousands):

2009	$	174,363
2010		39,044
2011		243,312	(1)
2012		27,221
2013		62,018
Thereafter		33,352
	$	579,310	(2)

(1) Includes the repayment of $218.0 million of senior notes issued by Apidos CDO VI which the Company consolidates under FIN 46-R.  These notes are subject to an early call feature beginning in January 2011 based on certain conditions being met and a majority vote by the note holders.

(2) Reflects gross principal repayments excluding reduction for unamortized deferred issuance costs of $4.8 million for Apidos CDO VI.

Included in the debt repayments table are principal repayments of $11,465 in 2009, $12,197 in 2010, $12,976 in 2011, $13,635 in 2012, $14,675 in 2013 and $9.9 million thereafter on two mortgages for an apartment building in Maine.  This property was sold and the mortgages were transferred to one of the Company’s real estate investment partnerships in July 2008.

23

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 13 – BORROWINGS − (Continued)

Covenants

The Company is subject to certain financial covenants which are customary for the type and size of its related debt facilities and include among others a consolidated net worth requirement of $160.0 million as well as specified debt service coverage and leverage ratios.  At June 30, 2008, the Company was not in compliance with its net worth financial covenant under its Commerce Bank corporate secured revolving credit facility.  On August 7, 2008, the Company and the lender banks amended the credit facility to reduce the minimum consolidated net worth covenant to $150.0 million at June 30, 2008 and waived the consolidated net worth covenant violation at that date.  In consideration for the amendment, the Company and the lenders agreed to reduce the outstanding commitment of $75.0 million under the facility as follows:  On August 7, 2008, the outstanding commitment was reduced to $60.0 million, on September 30, 2008 the outstanding commitment reduces to $55.0 million, on December 31, 2008 the outstanding commitment reduces to $45.0 million; and on March 31, 2009 the outstanding commitment reduces to $30.0 million.  The Company was in compliance with all other debt covenants.

NOTE 14 − COMPREHENSIVE (LOSS) INCOME

Comprehensive (loss) income includes net (loss) income and all other changes in the equity of a business from transactions and other events and circumstances from non-owner sources.  These changes, other than net (loss) income, are referred to as “other comprehensive (loss) income” and for the Company include primarily changes in the fair value, net of taxes, of investment securities available-for-sale and hedging contracts.

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

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
				(restated)						(restated)
Net (loss) income	$	(8,025	)	$	4,239		$	(17,019	)	$	14,664
Other comprehensive (loss) income:
Unrealized losses on investment securities available-for-sale, net of tax of $(4,070), $(3,137), $(8,312) and $(3,571)		(4,528	)		(4,332	)		(15,283	)		(5,505	)
Less:  reclassification for realized losses (gains), net of tax of $2,754, $(363), $3,175 and $(1,269)		4,218			(501	)		4,965			(1,753	)
		(310	)		(4,833	)		(10,318	)		(7,258	)
Minimum pension liability adjustment, net of tax of $15, $0, $(50) and $0		15			−			(50	)		−
Unrealized gains (losses) on hedging contracts, net of tax of $1,281, $383, $1,159 and $199		3,102			530			(1,753	)		275
Transfer of interest rate swaps to LEAF Fund III, net of tax of $3,083, $0, $0 and $0 (1)		5,480			−			−			−
Foreign currency translation (loss) gain		(40	)		(133	)		258			90
Comprehensive (loss) income	$	222		$	(197	)	$	(28,882	)	$	7,771

(1) In April 2008, the Company sold a portfolio of leases and its related debt and interest rate swaps to LEAF Fund III (see Notes 8, 13 and 15).

24

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 14 − COMPREHENSIVE (LOSS) INCOME − (Continued)

The changes in accumulated other comprehensive (loss) income associated with cash flow hedge activities (see Note 15) were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
				(restated)						(restated)
Balance at beginning of period	$	(11,067	)	$	(255	)	$	(732	)	$	−
Current period changes in fair value, net of tax of $1,281, $383, $(1,159) and $199		3,102			530			(1,753	)		275
Transfers of interest rate swaps to LEAF Fund III, net of tax of $3,083, $0, $0 and $0		5,480			−			−			−
Balance at end of period	$	(2,485	)	$	275		$	(2,485	)	$	275

NOTE 15 – DERIVATIVE INSTRUMENTS

The Company’s hedging strategy is to use derivative financial instruments, including interest rate swaps and interest rate caps, designated as cash flow hedges.  The Company does not use derivative financial instruments for trading or speculative purposes.  The Company manages the credit risk of possible counterparty default in these derivative transactions by dealing exclusively with counterparties with investment grade ratings.

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

At June 30, 2008, the notional amount of the interest rate swaps was $109.5 million.  As of June 30, 2008, included in accumulated other comprehensive income were unrealized net losses of $4.3 million (net of tax of $1.9 million) on these interest rate swaps.  The Company recognized no gain or loss during the three and nine months ended June 30, 2008 for hedge ineffectiveness.  Assuming market rates remain constant with the rates at June 30, 2008, the Company estimates that approximately $2.0 million of the loss in accumulated other comprehensive income is projected to be recognized in earnings over the next 12 months.  The $304.7 million notional amount of interest rate swaps on the Morgan Stanley bridge financing were transferred to LEAF Fund III in April 2008.

In the third quarter, the Company entered into interest rate caps on its debt facility with Morgan Stanley.  The notional amount of interest rate caps at June 30, 2008 was $20.7 million.  The agreements expire in May and June 2015.

NOTE 16 - INCOME TAXES

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

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2008			2007		2008			2007
				(restated)					(restated)
(Benefit) provision for income taxes, at estimated effective rate	$	(5,820	)	$	4,119	$	(10,874	)	$	10,861
Deferred tax benefit		−			−		−			(58	)
Change in valuation allowance		−			−		−			(1,099	)
(Benefit) provision for income taxes	$	(5,820	)	$	4,119	$	(10,874	)	$	9,704

25

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 16 - INCOME TAXES − (Continued)

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

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainties in Income Taxes - an Interpretation of SFAS 109,”  which provides guidance on the measurement, recognition and disclosure of tax positions taken or expected to be taken in a tax return.  FIN 48 also provides guidance on derecognition and classification.  FIN 48 prescribes that a tax position should only be recognized if it is more likely than not that the position will be sustained upon examination by the appropriate taxing authority.  A tax position that meets this threshold is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.  The cumulative effect of applying the provisions of FIN 48 is to be reported as an adjustment to the beginning balance of retained earnings in the period of adoption.  Effective October 1, 2007, the Company adopted the provisions of FIN 48, which did not have an impact on its consolidated balance sheets on the date of adoption nor as of June 30, 2008.  In addition, the Company does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.

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

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

NOTE 17 − STOCK−BASED COMPENSATION

Employee Stock Options

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

During the three and nine months ended June 30, 2008, the Company granted 89,500 and 99,500 employee stock options, respectively.  The Company granted 30,000 and 57,500 employee stock options, respectively, during the three and nine months ended June 30, 2007.  There was no tax benefit recorded at the grant date since the options issued were ISOs and employees have typically held the stock received on exercise for the requisite holding period.

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

	Nine Months Ended June 30,
	2008		2007
Fair value of stock options granted	$	3.47	$	10.59
Expected life (years)		6.25		6.25
Expected stock volatility		47.3%		31.5%
Risk-free interest rate		3.9%		4.7%
Dividend yield		3.0%		1.3%

26

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 17 − STOCK−BASED COMPENSATION − (Continued)

As of June 30, 2008, there was $1.4 million of unrecognized compensation costs related to nonvested stock options.  These costs are expected to be recognized over a weighted-average period of 1.5 years.  Option compensation expense for the three and nine months ended June 30, 2008 was $252,000 and $744,000, respectively, and $235,000 and $685,000 for the three and nine months ended June 30, 2007, respectively.

Restricted Stock

During the three and nine months ended June 30, 2008, the Company awarded 2,336 and 464,749 shares of restricted stock, respectively, valued at $20,000 and $6.0 million, respectively, which primarily vest at 25% per year through January 2012.  During fiscal 2007, the Company awarded 137,446 shares of restricted stock valued at $3.5 million, which primarily vested 25% in January 2008 and 6.25% on a quarterly basis thereafter through January 2011.  In fiscal 2006, the Company awarded 84,580 shares of restricted stock valued at $1.5 million, which primarily vest 25% per year commencing in January 2007.  For the three and nine months ended June 30, 2008, the Company recorded compensation expense related to these restricted stock awards of $897,000 and $2.2 million, respectively.  For the three and nine months ended June 30, 2007, the Company recorded compensation expense related to these restricted stock awards of $303,000 and $690,000, respectively.

During fiscal 2007, LEAF issued 135,000 shares of its restricted stock valued at $39,000, which vest 25% per year commencing April 2008.  During fiscal 2006, LEAF issued 300,000 shares of its restricted stock valued at $69,000, which vest at 50% per year commencing in February 2007.  In March 2007, a majority-owned subsidiary of LEAF issued 8% of its units valued at $53,000.  For the three and nine months ended June 30, 2008, the Company recorded stock-based compensation for the LEAF restricted stock of $3,300 and $13,700, respectively.  For the three and nine months ended June 30, 2007, the Company recorded stock-based compensation for the LEAF restricted stock of $13,000 and $22,000, respectively.

Performance–Based Awards

During the three and nine months ended June 30, 2008, the Company granted 0 and 99,000 shares of restricted stock, respectively, that will vest based on the achievement of certain performance goals.  No expense has been recorded relative to these units.

Aggregate information regarding the Company’s employee stock options as of June 30, 2008 is as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
Stock Options Outstanding	Shares			Price		Term (in years)		Value
Balance – beginning of year		3,316,761		$	8.49
Granted		99,500		$	9.20
Exercised		(30,062	)	$	6.03
Forfeited		(1,750	)	$	17.26
Balance - end of period		3,384,449		$	8.53		4.19	$	10,105,234
Exercisable - end of period		3,107,077
Available for grant		453,753	(1)

(1) Reduced for restricted stock awards granted under the Company’s amended and restated 2005 Omnibus Equity Compensation Plan.

27

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 17 − STOCK−BASED COMPENSATION − (Continued)

The following table summarizes the activity for nonvested employee stock options and restricted stock during the nine months ended June 30, 2008:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Nonvested Stock Options
Outstanding − beginning of year		297,870		$	7.70
Granted		99,500		$	3.47
Vested		(118,248	)	$	7.51
Forfeited		(1,750	)	$	6.75
Outstanding – end of period		277,372		$	6.27
Nonvested Restricted Stock
Outstanding − beginning of year		199,708		$	22.50
Granted		464,749		$	13.48
Vested		(80,841	)	$	14.66
Forfeited		(961	)	$	25.99
Outstanding – end of period		582,655		$	16.38

The outstanding shares of nonvested restricted stock are eligible to receive cash dividends declared by the Company and have voting rights with the exception of 100,422 shares.  Additionally, the nonvested shares outstanding at June 30, 2008 exclude 481,000 restricted shares issued pursuant to performance-based awards where the performance criteria have not yet been met.

NOTE 18 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

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

	June 30,		September 30,
	2008		2007
Receivables from managed entities and related parties:
Commercial finance investment partnerships	$	18,261	$	9,229
Financial fund management entities		4,627		5,341
Real estate investment partnerships and TIC property interests		6,903		3,439
RCC		2,317		2,034
Other		213		134
Receivables from managed entities and related parties, net	$	32,321	$	20,177
Payables due to managed entities and related parties:
Real estate investment partnerships and TIC property interests	$	713	$	1,163
TBBK		200		−
BCMI		90		−
Payables to managed entities	$	1,003	$	1,163

28

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 18 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

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

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
				(restated)						(restated)
Financial Fund Management- fees from managed entities (1)	$	1,226		$	2,900		$	7,064		$	10,319
Real Estate – fees from investment partnerships and TIC property interests		2,290			3,089			7,516			6,911
Commercial finance − fees from investment partnerships		9,194			6,509			27,243			11,283
RCC:
Management, incentive and servicing fees		1,465			2,179			5,113			7,549
Reimbursement of expenses from RCC		337			(11	)		531			1,263
Dividends received		812			794			2,421			2,368
Atlas America, Inc. − reimbursement of net costs and expenses		184			225			926			868
1845 Walnut Associates Ltd - payment of rent and operating expenses		(108	)		(76	)		(386	)		(347	)
9 Henmar LLC – payment of broker/consulting fees		(137	)		(176	)		(364	)		(392	)
Ledgewood P.C. – payment of legal services		(406	)		(249	)		(1,110	)		(395	)

(1) Excludes the non-cash adjustment on the unrealized depreciation in the book value of Trapeza partnership securities totaling $4.4 million and $330,000 for the quarters ended June 30, 2008 and 2007, respectively, and $9.3 million and $360,000 for the nine months ended June 30, 2008 and 2007, respectively.

Relationship with The Bancorp, Inc.  Daniel G. Cohen (“D. Cohen”) is chairman of the board and Betsy Z. Cohen (“B. Cohen”) is the CEO of TBBK and its subsidiary bank.  D. Cohen is the son of Edward E. Cohen (“E. Cohen,” the Company’s Chairman of the Board) and the brother of Jonathan Z. Cohen (“J. Cohen,” the Company’s CEO and President) and B. Cohen is the wife of E. Cohen and mother of J. Cohen and D. Cohen.  During the three and nine months ended June 30, 2008, the Company did not sell any of its shares of TBBK stock.  During the three and nine months ended June 30, 2007, the Company sold 60,000 and 190,000, respectively, of its shares of TBBK stock for $1.5 million and $4.8 million, respectively, and realized gains of $864,000 and $3.0 million, respectively.  On June 15, 2007, Merit (a subsidiary of LEAF) entered into an agreement with TBBK under which TBBK provides banking and operational services to Merit.  For the three and nine months ended June 30, 2008, $24,400 and $44,700, respectively, in fees had been paid to TBBK.  At June 30, 2008, the Company has accrued a fee of $200,000 due to TBBK for advisory services related to the acquisition of NetBank.  At June 30, 2008, the Company had $523,000 in cash on deposit at TBBK.

Relationship with Retirement Trust.  In February 2008, the Company received $298,000 in full repayment of a loan in accordance with its terms from a limited partnership in which E. Cohen and D. Cohen own beneficial interests.  The loan had been included in a trust that the Company established to fund the supplemental employment retirement plan of E. Cohen.

Transactions between LEAF and RCC.  LEAF originates and manages commercial finance assets on behalf of RCC.  The leases and notes are sold to RCC at book value plus an origination fee not to exceed 1%.  During the three and nine months ended June 30, 2008, LEAF sold $8.1 million and $37.0 million, respectively, of leases and notes to RCC.  During the three and nine months ended June 30, 2007, LEAF sold $3.0 million and $19.3 million, respectively, of leases and notes to RCC.  In addition, from time to time LEAF repurchases leases and loans from RCC as an accommodation under certain circumstances, which include the consolidation of multiple customer accounts, originations of new leases when equipment is upgraded and to facilitate the timely resolution of problem accounts when collection is considered likely.  During the three and nine months ended June 30, 2008, LEAF purchased $2.6 million and $5.9 million, respectively, of leases from RCC at a price equal to their book value.  During the three and nine months ended June 30, 2007, LEAF purchased $600,000 and $9.1 million, respectively, of leases from RCC at a price equal to their book value.

29

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 18 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

Transactions between LEAF and its Investment Partnerships.  LEAF originates and manages commercial finance assets on behalf of its investment partnerships (the “LEAF Funds”) for which it also is the general partner.  The leases and notes are sold to the LEAF Funds at book value plus an origination fee not to exceed 2%.  During the three and nine months ended June 30, 2008, LEAF sold $401.8 million and $1.1 billion, respectively, of leases and notes to the LEAF Funds.  During the three and nine months ended June 30, 2007, LEAF sold $259.0 million and $382.2 million, respectively, of leases and notes to the LEAF Funds.  In addition, from time to time LEAF repurchases leases and loans from the LEAF Funds as an accommodation under certain circumstances, which include the consolidation of multiple customer accounts, originations of new leases when equipment is upgraded and to facilitate the timely resolution of problem accounts.  During the three and nine months ended June 30, 2008, LEAF purchased $0 and $1.4 million, respectively, of leases and notes back from the LEAF Funds at a price equal to their book value.  During the three and nine months ended June 30, 2007, LEAF purchased $315,000 and $1.7 million, respectively, of leases and notes back from the LEAF Funds at a price equal to their book value.

Relationship with RCC.  On June 30, 2008, the Company and RCC entered into an amended and restated management agreement that must be in effect until March 31, 2009 and will automatically renew for one-year terms unless at least two-thirds of the independent directors or a majority of the outstanding common shares agree to not automatically renew.  The amended and restated agreement revised the calculation of the Company’s incentive compensation so that it will equal (i) twenty-five percent (25%) of the dollar amount by which (A) RCC’s adjusted operating earnings (as defined in the agreement) of RCC (before incentive compensation but after the base management fee) for such quarter per Common Share (based on the weighted average number of common shares outstanding for such quarter) exceeds (B) an amount equal to (1) the weighted average of the price per share of RCC’s common shares in the initial offering by RCC and the prices per share of the common shares in any subsequent offerings of RCC, in each case at the time of issuance thereof, multiplied by (2) the greater of (a) 2.00% and (b) 0.50% plus one-fourth of the ten year treasury rate (as defined in the agreement) for such quarter, multiplied by (ii) the weighted average number of common shares outstanding during such quarter; provided, that the foregoing calculation of incentive compensation will be adjusted to exclude events pursuant to changes in GAAP or the application of GAAP, as well as non-recurring or unusual transactions or events, after discussion between the Company, RCC and its directors and the approval of the majority of RCC’s directors in the case of non-recurring or unusual transactions or events.

Transaction with Officer of Brandywine Construction Management, Inc. (“BCMI”) and BCMI.  In March 2008, the Company sold a 19.99% interest in an indirect subsidiary that holds its hotel property in Savannah, Georgia to a limited liability company owned by Adam Kauffman for $1.0 million plus $130,000 in fees and recognized a gain of $612,000.  Mr. Kauffman is the president of Brandywine Construction Management, Inc., (“BCMI”) the property manager for the hotel and several other legacy properties of the Company.  The terms of the sale agreement provide for a purchase option by Mr. Kauffman to purchase up to the balance of the Company’s interest in the hotel for $50,000 per 1% interest purchased. The purchase option expires in July 2011, at which time Mr. Kauffman has a right of first offer to purchase the balance of the Company’s interest in the hotel.

In addition, the Company has accrued a $90,000 fee to BCMI in connection with the final resolution of a legacy asset.

Transaction with Cohen & Company.  In May 2008, the Company received a fee of $231,000 for acting as the Introducing Agent for a transaction in which Cohen & Company purchased securities from an investment bank.  D. Cohen is the Chairman of Cohen & Company.

30

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 19 − OTHER (EXPENSE) INCOME, NET

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

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2008			2007		2008			2007
Gain (loss) on loan sales related to terminated warehouse facilities	$	346		$	−	$	(17,674	)	$	−
Impairment charge on CDO investments		(6,974	)		−		(8,123	)		−
RCC dividend income		812			794		2,421			2,368
Gain on sale of investment securities available-for-sale		−			864		−			3,016
Interest income and other income		286			421		770			1,034
Other (expense) income, net	$	(5,530	)	$	2,079	$	(22,606	)	$	6,418

In connection with the substantial volatility and reduction in liquidity in the global credit markets which commenced in July 2007, the Company recorded the following during the three and nine months ended June 30, 2008:

· a gain of $346,000 for the three months ended June 30, 2008 and a loss of $17.7 million for the nine months ended June 30, 2008, from the sales of loans held for investment due to the termination of the related warehouse facilities in January 2008; and

· a charge of $7.0 million and $8.1 million, respectively, reflecting the other-than-temporary impairment of certain of the Company’s investments in CDOs.  During the three months ended June 30, 2008, the $7.0 million charge reflects impairments on two regional bank investments, one thrift investment and an investment in real estate ABS and CMBS.  In addition to these impairments, the $1.1 million charge prior to the three months ended June 30, 2008 reflects an impairment on a real estate ABS and CMBS investment, as well as an impairment on an investment in a state bank and a subprime investor.

NOTE 20 - COMMITMENTS AND CONTINGENCIES

Real estate carveouts

The Company obtains senior lien financing with respect to certain acquired properties, TIC investment programs and real estate loans on a non-recourse basis, with the lender’s remedies limited to the properties securing the senior lien financing.  Although non-recourse in nature, these loans are subject to limited standard exceptions, which the Company has guaranteed (“carveouts”).  These carveouts relate to a total of $625.9 million in financing and expire as the related indebtedness is paid down over the next ten years.

Financial fund management clawbacks

Two of the Trapeza entities have incentive distributions (carried interest) that are subject to a potential clawback to the extent that such distributions exceed cumulative net profits, as defined in the respective partnership agreements. As of June 30, 2008, the Company’s total potential clawback obligation was $7.5 million of which $4.3 million has been recorded as a liability in the consolidated financial statements.

Real estate capital improvements

The Company entered into a master lease agreement with one of the TIC programs it sponsored and manages.  This agreement requires that the Company fund up to $1.0 million for capital improvements for the TIC property over the next 19 years.  To date, the Company has funded approximately $200,000 of capital improvements.

31

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 20 - COMMITMENTS AND CONTINGENCIES − (Continued)

General corporate commitments

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

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

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

As of June 30, 2008, except for the clawback liability recorded for the Trapeza entities, the Company does not believe it is probable that any payments will be required under any of its indemnifications and, accordingly, no liabilities for these obligations have been recorded in the consolidated financial statements.

32

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 21 − OPERATING SEGMENTS

The Company’s operations include three reportable operating segments that reflect the way the Company manages its operations and makes business decisions.  In addition to its reporting operating segments, certain other activities are reported in the “all other” category.  Summarized operating segment data are as follows (in thousands):

	Commercial finance			Real estate			Financial fund management			All other (1)			Total
Three Months Ended June 30, 2008
Revenues from external customers	$	22,010		$	6,172		$	10,151		$	−		$	38,333
Equity in losses of unconsolidated entities		(207	)		(546	)		(8,134	)		−			(8,887	)
Total revenues		21,803			5,626			2,017			−			29,446
Segment operating expenses		(10,967	)		(5,672	)		(7,122	)		−			(23,761	)
Depreciation and amortization		(709	)		(324	)		(59	)		(217	)		(1,309	)
Interest expense		(5,229	)		(375	)		(3,284	)		(888	)		(9,776	)
Provision for credit losses		(711	)		−			(839	)		−			(1,550	)
Other (expense) income, net		(96	)		20			(6,816	)		(2,592	)		(9,484	)
Minority interest (expense) income, net		(627	)		(50	)		3,267			−			2,590
Income (loss) before intercompany interest expense and income taxes		3,464			(775	)		(12,836	)		(3,697	)		(13,844	)
Intercompany interest expense		(1,280	)		−			−			1,280			−
Income (loss) from continuing operations before income taxes	$	2,184		$	(775	)	$	(12,836	)	$	(2,417	)	$	(13,844	)
Nine Months Ended June 30, 2008							(restated)						(restated)
Revenues from external customers	$	82,559		$	19,956		$	31,631		$	−		$	134,146
Equity in losses of unconsolidated entities		(125	)		(1,166	)		(8,969	)		−			(10,260	)
Total revenues		82,434			18,790			22,662			−			123,886
Segment operating expenses		(32,751	)		(16,464	)		(20,020	)		−			(69,235	)
Depreciation and amortization		(1,692	)		(701	)		(198	)		(673	)		(3,264	)
Interest expense		(23,320	)		(894	)		(11,841	)		(2,993	)		(39,048	)
Provision for credit losses		(4,473	)		−			(1,297	)		−			(5,770	)
Other (expense) income, net		50			155			(26,007	)		(7,973	)		(33,775	)
Minority interest (expense) income, net		(3,259	)		(50	)		2,632			−			(677	)
Income (loss) before intercompany interest expense and income taxes		16,989			836			(34,069	)		(11,639	)		(27,883	)
Intercompany interest expense		(4,330	)		−			−			4,330			−
Income (loss) from continuing operations before income taxes	$	12,659		$	836		$	(34,069	)	$	(7,309	)	$	(27,883	)

33

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 21 − OPERATING SEGMENTS − (Continued)

	Commercial finance			Real estate			Financial fund management			All other (1)			Total
							(restated)						(restated)
Three Months Ended June 30, 2007
Revenues from external customers	$	12,807		$	6,974		$	15,418		$	−		$	35,199
Equity in earnings of unconsolidated entities		1			34			3,217			−			3,252
Total revenues		12,808			7,008			18,635			−			38,451
Segment operating expenses		(5,416	)		(3,971	)		(5,925	)					(15,312	)
Depreciation and amortization		(286	)		(186	)		(16	)		(240	)		(728	)
Interest expense		(3,395	)		(252	)		(6,256	)		(273	)		(10,176	)
Provision for credit losses		(113	)		−			−			−			(113	)
Other (expense) income, net		10			(6	)		(211	)		(1,127	)		(1,334	)
Minority interest expense, net		(316	)		−			(664	)		−			(980	)
Income (loss) before intercompany interest expense and income taxes		3,292			2,593			5,563			(1,640	)		9,808
Intercompany interest expense		(690	)		−			(1,554	)		2,244			−
Income from continuing operations before income taxes	$	2,602		$	2,593		$	4,009		$	604		$	9,808
Nine Months Ended June 30, 2007							(restated)						(restated)
Revenues from external customers	$	28,483		$	18,662		$	35,770		$	−		$	82,915
Equity in (losses) earnings of unconsolidated entities		(22	)		(82	)		12,295			−			12,191
Total revenues		28,461			18,580			48,065			−			95,106
Segment operating expenses		(13,607	)		(10,179	)		(15,878	)		−			(39,664	)
Depreciation and amortization		(920	)		(549	)		(44	)		(643	)		(2,156	)
Interest expense		(8,076	)		(774	)		(13,184	)		(427	)		(22,461	)
Provision for credit losses		(158	)		−			−			−			(158	)
Other (expense) income, net		(53	)		87			(830	)		(1,742	)		(2,538	)
Minority interest expense, net		(422	)		−			(1,833	)		−			(2,255	)
Income (loss) before intercompany interest expense and income taxes		5,225			7,165			16,296			(2,812	)		25,874
Intercompany interest expense		(1,739	)		−			(4,500	)		6,239			−
Income from continuing operations before income taxes	$	3,486		$	7,165		$	11,796		$	3,427		$	25,874
Segment assets
June 30, 2008	$	363,893		$	155,268		$	295,089		$	(12,437	)	$	801,813
							(restated)			(restated)			(restated)
June 30, 2007	$	355,166		$	144,622		$	542,154		$	(19,779	)	$	1,022,163

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

Geographic Information.  Revenues generated from the Company’s European operations totaled $931,000 and $4.9 million for the three and nine months ended June 30, 2008, respectively, and $5.6 million and $11.2 million for the three and nine months ended June 30, 2007, respectively.  Included in segment assets as of June 30, 2008 and 2007 were $8.0 million and $229.2 million, respectively, of European assets.

34

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2008

(unaudited)

NOTE 22 – SUBSEQUENT EVENT

 On July 31, 2008, we collected approximately $18.4 million in connection with the substantial settlement of a discounted loan, which was secured by the Evening Star Building (“ESA”) in Washington, D.C.  As a result of this repayment, we anticipate recognizing a pre-tax gain in the quarter ending September 30, 2008 of approximately $7.5 million.  Our remaining investment is a discounted mezzanine note with a carrying value of $3.6 million, which is secured by a 5% interest in the property.  Previously, D. Cohen (see Note 18) owned a 15% partnership interest in ESA which secured the discounted note.  Additionally, he had a right-of-first-offer and a right-of-first-refusal (“Rights”) on a sale of the property.  On July 31, 2008, D. Cohen sold his interest to the 80% partner in ESA for $19.5 million.  In connection with the repayment of the loan, D. Cohen was paid $625,000 to relinquish his Rights. 

35

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

This report contains certain forward-looking statements.  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.  Such statements are subject to the risks and uncertainties more particularly described in Item 1A, under the caption “Risk Factors,” in our Annual Report on Form 10-K/A for the period ended September 30, 2007.  These risks and uncertainties could cause actual results to differ materially.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  We undertake no obligation to publicly release the results of any revisions to forward-looking statements which we may make to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable law.

Restatement of Previously Issued Financial Results

On May 19, 2008, we filed Amendment No. 1 to our Annual Report on Form 10-K/A, or the Amendment, that included restated quarterly financial information for the periods ended December 31, 2006, March 31, 2007 and June 30, 2007, which was originally filed on February 11, 2008.  Our consolidated statements of operations, shareholders’ equity and cash flows for the three and nine months ended June 30, 2007, including the applicable notes as presented in this report reflect that restatement.

For more detailed information about the restatement, please see Note 2, “Restatement of Consolidated Financial Statements for the fiscal year ended September 30, 2007 and as of and for the three and nine months ended June 30, 2007” in the accompanying consolidated financial statements and “Restatement of Previously Issued Financial Results” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this report.

The following discussion and analysis of our financial condition and results of operations incorporates the restated amounts.

Overview of the Three and Nine Months Ended June 30, 2008 and 2007

We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities in the commercial finance, real estate and financial fund management sectors.  As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services.  We typically maintain an investment in the investment vehicles we sponsor.  As of June 30, 2008, we managed $18.8 billion of assets.

           We limit our services to asset classes in which we have specific expertise.  We believe this strategy enhances the return on investment we can achieve.  In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial notes secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment.  In our real estate operations, we concentrate on investments in distressed real estate loans, the ownership, operation and management of multi-family and commercial real estate, and originating or purchasing real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans (known as A notes) and, to a lesser extent, subordinated interests in first mortgage loans and mezzanine loans.  In our financial fund management operations, we concentrate on trust preferred securities of banks, bank holding companies, insurance companies and other financial companies, bank loans and asset-backed securities.  We have continued to develop our existing operations with the sponsorship of new investment funds and have expanded the distribution of our products through a large broker/dealer/financial planner network that we have developed.

During the later half of 2007 and continuing in 2008, credit markets in the United States and throughout much of the rest of the world have been extremely volatile and challenging.  We believe that such credit market conditions have created opportunities for us, principally in our commercial finance and real estate businesses, as demonstrated by the acquisitions we have made since June 2007 totaling $990.1 million.

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Due to the current status of global credit markets, we continue to believe that the collateralized debt obligation, or CDO, markets have slowed substantially in 2008, limiting our ability to generate additional assets under management through this channel.  Our CDO vehicles have been significantly affected by these conditions and, in particular, have been impacted by continued credit market turbulence and reduction in global liquidity.  Specifically, two secured warehouse credit facilities which we consolidated under FIN 46-R were impacted.  Accordingly, we determined to end these facilities on their expiration dates in January 2008.  We had provided limited guarantees totaling $18.8 million under these facilities which were supported by escrow deposits of $14.8 million.  The expiration of these facilities necessitated the sale of the loans securing them in late January and early February 2008 which resulted in a reclassification and caused us to record a $11.2 million charge, net of tax, in the quarter ended December 31, 2007 which triggered our guarantee.  As a result, our escrow deposits were retained by the warehouse lenders and we paid an additional $5.4 million to cover our guarantee through July 2008.  As of June 30, 2008, we have no further commitments under these credit facilities.

     In addition, the five Trapeza partnerships in which we made an original investment of $8.4 million, owns 8% of the limited partner interests and owns a 50% interest in the general partner, were adversely impacted by credit market turbulence and reduction in global liquidity which affected market spreads and impacted underlying issuers.  This resulted in a reduction in revenues from limited and general partners’ interests of $8.9 million and $16.9 million in the three and nine months ended June 30, 2008, respectively.  The after-tax impact of these credit market conditions to increase the net loss by $5.1 million and $10.3 million for the three and nine months ended June 30, 2008.  We expect that the turbulence in the credit markets may continue to impact our future operating results.

Assets Under Management

We increased our assets under management by $2.0 billion to $18.8 billion at June 30, 2008 from $16.8 billion at June 30, 2007.  The growth in our assets under management was the result of:

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

· an increase in real estate assets managed on behalf of RCC, joint ventures and limited partnerships and Tenant in Common, or TIC, property interests that we sponsor; and

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

The following table sets forth information relating to our assets under management by operating segment and their growth from June 30, 2007 to June 30, 2008 (in millions):

	As of June 30,				Increase
	2008		2007		Amount		Percentage
Financial fund management	$	15,375	$	14,211	$	1,164		8%
Real estate		1,750		1,497		253		17%
Commercial finance		1,630		1,069		561		52%
	$	18,755	$	16,777	$	1,978		12%

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

	CDOs		Limited Partnerships		TIC Property Interests		Other Investment Funds
As of June 30, 2008 (1)
Financial fund management		35		13		−		−
Real estate		2		6		7		5
Commercial finance		−		3		−		−
		37		22		7		5
As of June 30, 2007 (1)
Financial fund management		28		12		−		−
Real estate		2		6		7		−
Commercial finance		−		3		−		1
		30		21		7		1

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

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As of June 30, 2008 and 2007, we managed $18.8 billion and $16.8 billion of assets, respectively, for the accounts of institutional and individual investors and RCC, a REIT we sponsored and manage for our own account and on warehouse facilities in the following asset classes (in millions):

	As of June 30, 2008								As of June 30, 2007
	Institutional and Individual Investors		RCC		Company		Total		Total
Trust preferred securities (1)	$	5,032	$	−	$	−	$	5,032	$	5,114
Bank loans (1)		3,209		964		226		4,399		3,305
Asset-backed securities (1)		5,497		377		−		5,874		5,439
Real properties (2)		613		−		−		613		499
Mortgage and other real estate-related loans (2)		−		948		189		1,137		998
Commercial finance assets (3)		1,232		92		306		1,630		1,069
REIT trust preferred securities		−		−		−		−		267
Private equity and hedge fund assets (1)		70		−		−		70		86
	$	15,653	$	2,381	$	721	$	18,755	$	16,777

For the purposes of calculating our assets under management, we value our assets as follows:

(1) Structured finance assets at their amortized cost.

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

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

Employees

As of June 30, 2008, we employed 817 full-time workers, an increase of 426, or 109%, from 391 employees at June 30, 2007.  The following table summarizes our employees by operating segment:

	Total		Financial Fund Management		Real Estate			Commercial Finance			Corporate/ Other
June 30, 2008
Investment professionals		192		41		27			119			5
Other		625		18		243	(1)		325			39
Total		817		59		270			444	(2)		44
June 30, 2007
Investment professionals		129		43		31			53			2
Other		262		24		16			184			38
Total		391		67		47			237			40

(1) Includes 227 employees related to our new property management company, of which 205 are being paid through the individual properties they manage.

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

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Revenues

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Fund management revenues (1)	$	10,361	$	21,094	$	44,539	$	48,536
Finance and rental revenues (2)		16,564		14,450		67,384		33,790
RCC management fees		1,162		2,016		4,107		5,749
Gains on resolutions of loans and other property interests (3)		−		280		1,633		2,991
Net gains on sale of TIC property interests (4)		−		229		373		315
Other (5)		1,359		382		5,850		3,725
	$	29,446	$	38,451	$	123,886	$	95,106

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

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

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

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

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

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

Results of Operations: Commercial Finance

During the three and nine months ended June 30, 2008, our commercial finance operations increased assets under management to $1.6 billion as compared to $1.1 billion at June 30, 2007, an increase of $561.0 million (52%).  Originations of new equipment financing for the three and nine months ended June 30, 2008 were $147.9 million and $1.0 billion, respectively, as compared to $396.9 million and $655.9 million for the three and nine months ended June 30, 2007, respectively, a decrease of $249.0 million (63%) and an increase of $391.0 million (60%), respectively.  We have not yet commenced marketing LEAF Equipment Finance Fund 4, L.P. to investors.  LEAF Fund III closed its offering in April 2008.  Our growth for the nine months ended June 30, 2008 was driven by our first quarter fiscal 2008 acquisitions of the net business assets of Dolphin Capital Corp and NetBank Business Finance, or NetBank, our continued growth in new and existing vendor programs, the introduction of new commercial finance products and the expansion of our sales staff.  As of June 30, 2008, we managed approximately 96,000 leases and notes that had an average original finance value of $24,000 with an average term of 50 months.

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

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On April 22, 2008, we completed the transfer of a portfolio of leases and notes which were acquired in the NetBank portfolio acquisition by the sale to LEAF Fund III of its remaining 51% membership interest in the special purpose entity that owns the portfolio.  The sale was for $9.4 million, representing the net book value of the assets transferred.  We had previously transferred a 49% membership interest in the special purpose entity to LEAF Fund III on January 31, 2008 for its net book value of $6.8 million.  The special purpose entity which became a wholly-owned by LEAF Fund III as a result of these sales, remains the borrower on the Morgan Stanley bridge financing.  As a result of these transactions, a total of $311.0 million of commercial finance assets were transferred by us to LEAF Fund III together with $301.0 million of related debt financing.  We earned asset acquisition fees on these transfers of $3.4 million and $3.3 million in January and April 2008, respectively.

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

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

	As of June 30,
	2008		2007
LEAF Financial	$	289	$	314
Merit Capital Advance		17		−
LEAF I		109		89
LEAF II		320		350
LEAF Fund III		803		222
RCC		92		83
Other		−		11
	$	1,630	$	1,069

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Revenues: (1)
Finance revenues − LEAF	$	8,863	$	4,269	$	40,353	$	10,991
Finance revenues − Merit		1,177		12		5,453		12
Acquisition fees		5,249		5,019		16,702		7,252
Fund management fees		5,242		3,209		14,059		8,656
Other		1,272		299		5,867		1,550
	$	21,803	$	12,808	$	82,434	$	28,461
Costs and expenses:
LEAF costs and expenses	$	10,162	$	4,696	$	29,135	$	12,650
Merit costs and expenses		805		720		3,616		957
	$	10,967	$	5,416	$	32,751	$	13,607

(1) Total revenues include RCC servicing and originations fees of $321,000 and $1.1 million for the three and nine months ended June 30, 2008, respectively, and $254,000 and $919,000 for the three and nine months ended June 30, 2007, respectively.

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Revenues - - Three and Nine Months Ended June 30, 2008 as Compared to the Three and Nine Months Ended June 30, 2007

Revenues increased $9.0 million (70%) and $54.0 million (190%) for the three and nine months ended June 30, 2008, respectively, as compared to the prior year period.  We attribute these increases to the following:

· a $4.6 million (108%) and $29.4 million (267%) increase, respectively, in LEAF commercial finance revenues primarily as a result of the NetBank assets acquired and the growth in lease originations.  In January and April 2008, we sold 49% and 51%, respectively, of the NetBank portfolio to LEAF Fund III.  As a result of these sales, our finance revenues and interest expense will decrease significantly; however, we will earn ongoing fund asset management fees;

· Merit Capital Advance, or Merit, provides small businesses through a credit card receipt advance program.  For the three and nine months ended June 30, 2008, Merit posted revenues of $1.2 million and $5.5 million.  No revenues were recorded for the nine months ended June 30, 2007.

· a $230,000 (5%) and $9.5 million (130%) increase, respectively, in asset acquisition fees resulting from the increase in leases sold.  Sales of leases increased by $148.0 million (56%) to $409.9 million and $775.5 million (193%) to $1.2 billion for the three and nine months ended June 30, 2008, respectively, principally related to commercial assets sold to our investment entities as a result of the NetBank and Dolphin Capital Corp. portfolio acquisitions;

· a $2.0 million (63%) and $5.4 million (62%) increase, respectively, in fund management fees resulting from the $561.0 million increase in assets under management; and

· a $973,000 (325%) and a $4.3 million (279%) increase, respectively, in other income, primarily reflecting net gains on equipment finance dispositions, which typically vary widely from period to period, but increased as a result of holding the NetBank acquired lease portfolio on our books.

Costs and Expenses − Three and Nine Months Ended June 30, 2008 as Compared to the Three and Nine Months Ended June 30, 2007

Costs and expenses from our commercial finance operations increased $5.6 million (102%) and $19.1 million (141%), respectively.  We attribute this increase primarily to the following:

· an increase of $5.1 million (134%) and $14.4 million (146%) in wages and benefit costs, respectively.  The number of full-time employees increased to 444 as of June 30, 2008 from 237 as of June 30, 2007 due to our recent acquisitions and to support our expanding operations; and

· an increase of $419,000 (26%) and $4.8 million (128%) in operating expenses, respectively, as a result of our increase in origination capabilities, primarily due to our recent acquisitions.

Results of Operations: Real Estate

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

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

· real estate investment fund assets, primarily multifamily apartments;

· a portfolio of real estate assets acquired through joint ventures with institutional investors;

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

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

	As of June 30,
	2008		2007
	(in millions)
Assets under management:
Commercial real estate debt	$	953	$	899
Real estate investment funds and programs		498		412
Institutional portfolios		116		87
Legacy portfolio		112		99
Distressed portfolios (including HUD portfolio)		71		−
	$	1,750	$	1,497

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During the three and nine months ended June 30, 2008, our real estate operations continued to be affected by the following principal trends or events:

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

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

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

· continued growth in our real estate business through the sponsorship of real estate investment partnerships;

· an agreement executed for a $500.0 million credit facility with an existing joint venture partner.  The first asset under this facility was purchased on June 30, 2008; and

· two value-added properties acquired with a new joint venture partner.

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

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

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

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2008			2007		2008			2007
Revenues:
Fee income from sponsorship of partnership and TIC property interests	$	686		$	2,555	$	3,314		$	5,258
REIT management fees from RCC		866			1,540		3,072			4,125
Rental property income and FIN 46-R revenues		2,806			1,444		6,615			3,659
Property management fees		1,364			144		3,546			997
Interest, including accreted loan discount		449			367		1,244			824
Gains and fees on resolutions of loans and other property interests		−			280		1,633			2,991
(Loss) equity earnings of unconsolidated entities		(545	)		449		(1,007	)		411
Net gains on sales of TIC property interests		−			229		373			315
	$	5,626		$	7,008	$	18,790		$	18,580
Costs and expenses:
General and administrative	$	4,159		$	3,102	$	12,640		$	7,816
FIN 46-R operating and rental property expenses		1,513			869		3,824			2,363
	$	5,672		$	3,971	$	16,464		$	10,179

Revenues – Three Months Ended June 30, 2008 as Compared to the Three Months Ended June 30, 2007

Revenues decreased $1.4 million (20%) for the three months ended June 30, 2008 as compared to the prior year period.  We attribute the decrease to the following:

· a $1.9 million decrease in fee income; during the three months ended June 30, 2008, we acquired two value added properties, with an aggregate purchase price of $29.5 million, as compared to the three months ended June 30, 2007 during which we acquired four properties, with an aggregate purchase price of $80.4 million;

· a $674,000 decrease in REIT management fees, primarily due to reduced RCC income;

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· a $1.4 million increase in rental property income due to the inclusion of rental income of one TIC asset as a result of having executed a master lease for a residential property and rental income from a bridge investment acquired in April 2008;

· a $1.2 million increase in property management fees due to both an increase in the number of properties under management to 39 at June 30, 2008 from 30 at June 30, 2007, as well as the increase in fees related to properties now managed internally;

· an $82,000 increase in interest income attributable to a higher payment rate on a note under a forbearance agreement and income on a new note related to the sale on March 31, 2008 of a 10% interest in a real estate venture;

· a $280,000 decrease in gains and fees on resolution.  We sold one asset during the three months ended June 30, 2007.  No assets were sold during the three months ended June 30, 2008.

· a $994,000 increase in our equity losses primarily related to losses incurred by one real estate venture; and

· a $229,000 decrease in net gain on sales of TIC property interests.  We did not hold any interests in TIC properties during the three months ended June 30, 2008.  We sold our remaining interest in a $33.0 million TIC property during the three months ended June 30, 2007.

Costs and Expenses – Three Months Ended June 30, 2008 as Compared to the Three Months Ended June 30, 2007

Costs and expenses of our real estate operations were $5.7 million for the three months ended June 30, 2008, an increase of $1.7 million (43%) as compared to the three months ended June 30, 2007, primarily due to increased wages and benefits corresponding to our expanded real estate operations, principally our new property management subsidiary, Resource Residential.  Total employees, which increased by 223 to 270 at June 30, 2008 from 47 at June 30, 2007, includes 205 employees who are paid directly by the properties managed by Resource Residential.  The increase in rental property expenses reflects the additional operating expenses from the execution of a master lease for one of the TIC programs we manage.

Revenues - - Nine Months Ended June 30, 2008 as Compared to the Nine Months Ended June 30, 2007

Revenues increased $210,000 (1%) to $18.8 million for the nine months ended June 30, 2008 as compared to the prior year period.  We attribute the increase to the following:

· a $1.9 million decrease in fee income related to the purchase and third-party financing of property through the sponsorship of real estate investment partnerships and TIC property interests; during the nine months ended June 30, 2008, we acquired seven assets with an aggregate purchase price of $89.7 million, as compared to the nine months ended June 30, 2007 during which we acquired nine assets, with an aggregate purchase price of $154.1 million.

· a $1.1 million decrease in REIT management fees, due principally to lower RCC net income;

· a $3.0 million increase in rental property income due to the inclusion of rental income of one TIC asset as a result of having executed a master lease for a residential property;

· a $2.5 million increase in property management fees due to both an increase in the number of properties under management to 39 at June 30, 2008 from 30 at June 30, 2007, as well as the increase in fees related to properties now managed internally;

· a $420,000 increase in interest income attributable to a higher payment rate on a note under a forbearance agreement, income on a new note related to the sale on March 31, 2008 of a 10% interest in a real estate venture and income on a note held temporarily to facilitate its acquisition by a related real estate investment fund;

· a $1.4 million decrease in gains and fees on resolutions.  In the nine months ended June 30, 2008, we received $1.0 million in net proceeds plus a $130,000 structuring fee from the sale of a 19.99% interest in a hotel property resulting in a gain of $612,000.  We also received $1.9 million in net proceeds from the sale of a 10% interest in a real estate venture resulting in a gain of $891,000.  For the nine months ended June 30, 2007 we received $2.9 million from the sale of a 15% interest in the same real estate venture, resulting in a gain of $2.7 million;

· a $1.4 million increase in our equity losses primarily due to an increase in the loss from an office building in Washington, DC; and

· a $58,000 increase in net gain on sales of TIC property interests.  We sold our interests in a $50.0 million TIC property during the nine months ended June 30, 2008 as compared to a $33.0 million TIC property during the nine months ended June 30, 2007.

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Costs and Expenses − Nine Months Ended June 30, 2008 as Compared to the Nine Months Ended June 30, 2007

Costs and expenses of our real estate operations were $16.5 million for the nine months ended June 30, 2008, an increase of $6.3 million (62%) as compared to the nine months ended June 30, 2007.  General and administrative expenses increased by $4.8 million primarily due to increased wages and benefits corresponding primarily to Resource Residential.

Results of Operations: Financial Fund Management

We conduct our financial fund management operations through six operating activities:

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

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

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

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

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

· Resource Capital Markets, Inc. acts as an agent in the primary and secondary markets for trust preferred securities of banks, bank holding companies, insurance companies, other financial companies, real estate companies, REITS, and other real estate related companies as well as securities of CDOs.

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

	As of June 30, 2008
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total by Type
Apidos	$	2,976	$	964	$	−	$	3,940
Ischus		5,497		377		−		5,874
Trapeza		5,032		−		−		5,032
Resource Europe		459		−		−		459
Other Company sponsored partnerships		70		−		−		70
	$	14,034	$	1,341	$	−	$	15,375

	As of June 30, 2007
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total by Type
Apidos	$	1,507	$	938	$	243	$	2,688
Ischus		5,048		391		−		5,439
Trapeza		4,497		−		617		5,114
Resource Europe		351		−		266		617
Coredo		−		−		267		267
Other Company sponsored partnerships		86		−		−		86
	$	11,489	$	1,329	$	1,393	$	14,211

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

· Collateral management fees − we receive fees for managing the assets held by CDOs we sponsor.  Certain of the management fees are senior and certain are subordinated to debt service payments on the CDOs.  These fees vary by CDO, with our annual fee ranging between 0.04% and 0.75% of the aggregate principal balance of the collateral securities owned by the CDO issuers.

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

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

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

Trapeza

We have co-sponsored, structured and currently co-manage 13 CDO issuers holding approximately $5.0 billion in trust preferred securities of banks, bank holding companies, insurance companies and other financial companies.

We own a 50% interest in an entity that manages 11 Trapeza CDO issuers and a 33.33% interest in another entity that manages two Trapeza CDO issuers.  We also own a 50% interest in the general partners of the limited partnerships that own the equity interests of five Trapeza CDO issuers.  We also have invested as a limited partner in each of these limited partnerships.

We derive revenues from our Trapeza operations through base and incentive management and administration fees.  We also receive distributions on amounts we have invested in limited partnerships.  Management fees, including incentive fees, vary by CDO issuer but have ranged from between 0.25% and 0.60% of the aggregate principal balance of the collateral held by the CDO issuers of which a portion is subordinated.  These fees are also shared with our co-sponsors.  We are also entitled to incentive distributions in four of the partnerships we manage.  We currently do not receive subordinated management fees on eight CDO issuers.  We expect to receive subordinated management fees from seven of these issuers in the future.

Apidos

We sponsored, structured and currently manage 12 CDO issuers for institutional and individual investors, RCC and ourselves which hold approximately $3.9 billion in bank loans at June 30, 2008, of which $964.5 million are managed on behalf of RCC through three CDOs.

We derive revenues from our Apidos operations through base and incentive management fees ranging from 0.18% and 0.75% of the aggregate principal balance of the collateral held by the CDO issuers, of which a portion is subordinated to debt service payments on the CDOs.  We also derive revenues from the interest spread earned on the assets of certain issuers that accumulated during the warehousing period prior to the execution of a CDO and Apidos CDO VI.  Apidos CDO VI closed in December 2007 and we purchased 100% of the equity of this investment.

Ischus

We sponsored, structured and currently manage nine CDO issuers for institutional and individual investors and RCC which hold approximately $5.9 billion in primarily real estate ABS including RMBS, CMBS and credit default swaps, of which $377.1 million is managed on behalf of RCC.

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

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We derive revenues from our Ischus operations through management and administration fees.  We also receive distributions on amounts we invest in the limited partnerships.  Management fees vary by CDO issuer, ranging from between 0.04% and 0.35% of the aggregate principal balance of the collateral held by the CDO issuer of which a portion is subordinated to debt service payments on the CDOs.  We no longer receive subordinated management fees on four CDO issuers.

Resource Europe

We sponsored, structured and currently manage one CDO issuer holding $458.9 million in European bank loans at June 30, 2008.

We derive revenues from our Resource Europe operations through base and incentive management fees of up to 0.60% of the aggregate principal balance of the collateral held by the CDO issuer, of which a portion is subordinated to debt service payments on the CDO.

Other Company-Sponsored Partnerships

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

We have also sponsored, structured and currently manage another affiliated partnership organized as a hedge fund.  We have invested as a limited partner in this partnership.  In March 2008, we decided to liquidate this partnership, which we expect to dissolve during the last two quarters of fiscal 2008.

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

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues:				(restated)						(restated)
Limited and general partner interests:
Mark-to-market adjustments (1)	$	(9,674	)	$	(636	)	$	(17,501	)	$	(610	)
Operations (non mark-to-market)		341			1,411			2,469			4,964
Total limited and general partner interests		(9,333	)		775			(15,032	)		4,354
Fund and RCC management fees		5,208			6,250			18,340			18,976
Interest income on loans		3,269			8,358			13,719			18,304
Due diligence and introductory agent fees		1,751			1,863			1,751			1,901
Earnings from unconsolidated CDOs		611			729			2,064			1,753
Earnings of Structured Finance Fund partnerships		424			507			1,337			1,567
Other		87			153			483			1,210
	$	2,017		$	18,635		$	22,662		$	48,065
Costs and expenses:
General and administrative expenses	$	7,067		$	5,505		$	19,857		$	14,266
Equity compensation expense		45			415			107			1,589
Expenses of Structured Finance Fund partnerships		10			5			56			23
	$	7,122		$	5,925		$	20,020		$	15,878

(1) Includes realized mark-to-market adjustments of ($6.2 million) and ($6.8 million) for the three and nine months ended June 30, 2008, respectively.  No realized mark-to-market adjustments occurred during the three and nine months ended June 30, 2007, respectively.

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

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Revenues - Three Months Ended June 30, 2008 as Compared to the Three Months Ended June 30, 2007

Revenues decreased $16.6 million (89%) to $2.0 million for the three months ended June 30, 2008 from $18.6 million for the three months ended June 30, 2007.  We attribute the decrease to the following:

· a $10.1 million decrease in limited and general partner interests, primarily from the following:

- a $9.0 million decrease in mark-to-market adjustments, primarily as a result of the following:

- a $6.2 million decrease as a result of the permanent impairment of two Trapeza partnership securities;

- a $2.1 million decrease in net unrealized appreciation in the book value of the Trapeza partnership securities and swap agreements to reflect current market value; and

- a $731,00 decrease in net unrealized appreciation in the book value of the other company-sponsored partnerships securities to reflect current market value.

- a $1.1 million decrease in operations (non mark-to-market) primarily as a result of the following:

- a $936,000 decrease from our limited and general partner share of the operating results of the unconsolidated Trapeza partnerships we have sponsored; and

- a $134,000 decrease from our limited and general partner share of the operating results of the unconsolidated other company-sponsored partnerships.

· a $1.0 million decrease in fund and RCC management fees, primarily from the following:

- a $1.2 million decrease due to a discount recorded in connection with subordinate and incentive management fees we expect to receive in the future; and

- a $106,000 decrease in RCC management fees and equity compensation, reflecting a $176,000 decrease in management fees and a $70,000 increase in equity compensation;

These decreases were partially offset by:

- a $441,000 net increase in collateral management fees principally as a result of the following:

- a $287,000 increase in collateral management fees resulting from the assumption of management of four bank loan CDOs from an unaffiliated third-party asset manager; and

- a $154,000 increase in collateral management fees resulting from the completion of two new CDOs coupled with a full quarter of collateral management fees for three previously completed CDOs.

· a $5.1 million decrease in interest income on loans held for investment, resulting primarily from the following:

- a $5.1 million decrease from the consolidation in our financial statements of two Resource Europe CDO issuers during the three months ended June 30, 2007 while they accumulated assets through separate warehouse facilities.  These facilities did not consolidate during the three months ended June 30, 2008.  The weighted average loan balance of CDO issuers we consolidated through warehouse facilities for the three months ended June 30, 2007 was $304.6 million at a weighted average interest rate of 6.53%;

· a $112,000 decrease in due diligence and introductory agent fees as a result of the following:

- during the three months ended June 30, 2008, we received $1.8 million in introductory agent fees earned in connection with four trust preferred security transactions; and

- during the three months ended June 30, 2007, we received $1.9 million in due diligence fees in connection with ten bank trust preferred and REIT trust preferred security transactions.  We do not expect to earn similar due diligence fees in the future due to market conditions.

· a $118,000 decrease in our earnings from unconsolidated CDOs as a result of a net decrease in earnings from investments in 15 previously sponsored CDO issuers.  Through June 30, 2008, we have fully impaired seven CDO investments.  We will utilize the cost-recovery method to realize any future income on these investments.

· an $83,000 decrease in our earnings from SFF partnerships related to a decrease in earnings from four CDO investments.  Through June 30, 2008, we have fully impaired one CDO investment and we will utilize the cost-recovery method to realize any future income on this investment.

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Costs and Expenses – Three Months Ended June 30, 2008 as Compared to the Three Months Ended June 30, 2007

Costs and expenses of our financial fund management operations increased $1.2 million (20%) for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007.  We attribute the increase to the following:

· a $1.6 million increase in general and administrative expenses, primarily from the following:

- a $1.0 million decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations; the amount of reimbursed expenses is primarily dependent upon the terms of the transaction;

- a $900,000 increase in compensation expense due to higher wages and benefits;

- a $70,000 increase in financial software programs and publications as a result of the growth of our assets under management;

- a $20,000 decrease in reimbursed RCC operating expenses, partially offset by

- a $403,000 decrease in professional fees primarily due to a decrease in consulting fees related to our European operations;

· a $370,000 decrease in equity compensation expense related to the award of RCC restricted stock and options to members of management.

Revenues - Nine Months Ended June 30, 2008 as Compared to the Nine Months Ended June 30, 2007

Revenues decreased $25.4 million (53%) to $22.7 million for the nine months ended June 30, 2008 from $48.1 million for the nine months ended June 30, 2007.  We attribute the decrease to the following:

· a $19.4 million decrease in limited and general partner interests, primarily from the following:

- a $16.9 million decrease in mark-to-market adjustments, primarily as a result of the following;

- a $9.6 million decrease in net unrealized appreciation in the book value of the Trapeza partnership securities and swap agreements to reflect current market value;

- a $6.7 million decrease due to the permanent impairment of two Trapeza partnership securities;

- a $479,000 decrease in net unrealized appreciation in the book value of the other company-sponsored partnerships securities to reflect current market value; and

- a $76,000 decrease due to the loss on the sale of a Trapeza partnership security.

- a $2.5 million decrease in operations (non mark-to-market) primarily as a result of the following:

- a $2.1 million decrease from our limited and general partner share of the operating results of the unconsolidated Trapeza partnerships we have sponsored; and

- a $417,000 decrease from our limited and general partner share of the operating results of the unconsolidated other company-sponsored partnerships.

· a $636,000 decrease in fund and RCC management fees, primarily from the following:

- a $2.0 million decrease in RCC management fees and equity compensation, reflecting a $552,000 decrease in management fees and a $1.5 million decrease in equity compensation;

- a $1.7 million decrease in portfolio management fees received in connection with the formation of Trapeza CDO XI and Trapeza CDO XII during the nine months ended June 30, 2007.  No such fee was received during the nine months ended June 30, 2008; and

- a $1.2 million decrease due to a discount recorded in connection with subordinate and incentive management fees we expect to receive in the future.

These decreases were partially offset by:

- a $4.0 million increase in collateral management fees resulting from the completion of two new CDOs coupled with a full nine months of collateral management fees for eight previously completed CDOs; and

- a $287,000 increase in collateral management fees resulting from the assumption of management of four new bank loan CDOs from an unaffiliated third-party asset manager.

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· a $4.6 million decrease in interest income on loans held for investment, resulting primarily from the following:

- a $7.9 million decrease from the consolidation in our financial statements of one Apidos CDO issuer and one Resource Europe CDO issuer during the nine months ended June 30, 2008 as compared to two Resource Europe CDO issuers and one Apidos CDO issuer during the nine months ended June 30, 2007 while they accumulated assets through separate warehouse facilities.  The weighted average loan balances of CDO issuers we consolidated through warehouse facilities for the nine months ended June 30, 2008 and 2007 were $65.9 million and $224.9 million, respectively, at weighted average interest rates of 6.31% and 6.46%, respectively; offset in part by

- a $3.3 million increase from the consolidation in our financial statements of Apidos CDO VI during the nine months ended June 30, 2008 as compared to the nine months ended June 30, 2007 while it accumulated assets through a warehouse facility.  In December 2007, we closed Apidos CDO VI, repaid all borrowings under the warehouse facility and purchased 100% of the subordinated notes.  The weighted average loan balances of Apidos CDO VI for the nine months ended June 30, 2008 and 2007 were $207.0 million and $123.0 million, respectively, at weighted average interest rates of 6.67% and 7.65%, respectively.

· a $150,000 decrease in due diligence and introductory agent fees as a result of the following;

- during the nine months ended June 30, 2008, we received $1.8 million in introductory agent fees earned in connection with four trust preferred security transactions,

- during the nine months ended June 30, 2007, we received $1.9 million in due diligence fees in connection with 11 bank trust preferred and REIT trust preferred security transactions.  We do not expect to earn similar due diligence fees in the future due to market conditions.

· a $311,000 increase in our earnings in unconsolidated CDOs as a result of a net increase in earnings from investments in 15 previously sponsored CDO issuers.  Through June 30, 2008, we have fully impaired seven CDO investments.  We will utilize the cost-recovery method to realize any future income on these investments.

· a $230,000 decrease in our earnings from SFF partnerships related to a decrease in earnings from four CDO investments.  Through June 30, 2008, we have fully impaired one CDO investment.  We will utilize the cost-recovery method to realize any future income on this investment.

· a $727,000 decrease in other revenue primarily from the following:

- a $582,000 decrease from the interest spread earned on loans and ABS assets accumulating on warehouse facilities with third parties based on the terms of warehousing agreements during the nine months ended June 30, 2007.  No such spread was received during the nine months ended June 30, 2008; and

- a $300,000 decrease from the gain on the sale of a security during the nine months ended June 30, 2007.  No such gain occurred during the nine months ended June 30, 2008; partially offset by

- a $134,000 net increase in interest income on cash accounts.

Costs and Expenses − Nine Months Ended June 30, 2008 as Compared to the Nine Months Ended June 30, 2007

Costs and expenses of our financial fund management operations increased $4.1 million (26%) for the nine months ended June 30, 2008 as compared to the nine months ended June 30, 2007.  We attribute the increase to the following:

· a $5.6 million increase in general and administrative expenses, primarily from the following:

- a $2.3 million decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations; the amount of reimbursed expenses is primarily dependent upon the terms of the transaction;

- a $2.2 million increase in compensation expense due to higher wages and benefits;

- a $573,000 increase in professional fees primarily due to an increase in consulting fees related to our European operations;

- a $287,000 increase in financial software programs and publications as a result of the growth of our assets under management; and

- a $151,000 decrease in reimbursed RCC operating expenses.

· a $1.5 million decrease in equity compensation expense related to the award of RCC restricted stock and options to members of management.

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

General and administrative costs were $4.0 million and $11.2 million for the three and nine months ended June 30, 2008, respectively, an increase of $541,000 (16%) and $2.2 million (25%) as compared to $3.4 million and $9.0 million for the three and nine months ended June 30, 2007, respectively.  Wages and benefits, principally, compensation expense related to the vesting of restricted stock awards given to our employees increased by $532,000 and $2.7 million for the three and nine months ended June 30, 2008, respectively.  This increase was offset by decreases in various other administrative expenses, for the nine months ended June 30, 2008.

Provision for credit losses was $1.6 million and $5.8 million for the three and nine months ended June 30, 2008, respectively, as compared to $113,000 and $158,000 for the three and nine months ended June 30, 2007, respectively.  The increase in the provision for credit losses is a result of the following:

· in our commercial finance business, we held the NetBank portfolio of leases and notes for an extended period of time prior to completing the sale to LEAF Fund III in April 2008.  In addition, we have accumulated and are holding a $144.6 million portfolio of leases and notes that is anticipated to be sold to a new entity that we will manage and consolidate.  The increase in the amount of leases and notes we held on our balance sheet along with the growth in our originations for the nine months ended June 30, 2008 as compared to the nine months ended June 30, 2007 as well as the economic downturn in the United States has increased the likelihood that credit problems could occur prior to completing the sale of those assets to one of our investment partnerships.  Accordingly, we recorded a provision for credit losses in our commercial finance business of $711,000 and $4.5 million for the three and nine months ended June 30, 2008, respectively; and

· in our financial fund management business, our evaluation of the creditworthiness of the portfolio of loans held by Apidos CDO VI included an analysis of observable secondary market prices and general market conditions, and as a result, concluded that a provision for credit losses of $839,000 and $1.3 million was needed for the three and nine months ended June 30, 2008, respectively.

Depreciation and amortization expense was $1.3 million and $3.3 million for the three and nine months ended June 30, 2008, respectively, an increase of $581,000 (80%) and $1.1 million (51%) as compared to $728,000 and $2.2 million for the three and nine months ended June 30, 2007, respectively.  This increase relates primarily to the addition of $4.7 million of leaseholds and equipment and $1.7 million of buildings over the past twelve months in conjunction with our growth in operations.

Interest expense was $9.8 million and $39.0 million for the three and nine months ended June 30, 2008, respectively, a decrease of $400,000 (4%) and an increase of $16.6 million (74%) as compared to $10.2 million and $22.5 million for the three and nine months ended June 30, 2007, respectively.  The following table reflects interest expenses (exclusive of intercompany interest charges) as reported by segment (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Commercial finance	$	5,229	$	3,395	$	23,320	$	8,076
Financial fund management		3,284		6,256		11,841		13,184
Real estate		375		252		894		774
All other		888		273		2,993		427
	$	9,776	$	10,176	$	39,048	$	22,461

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The increase in interest expense for the nine months ended June 30, 2008 primarily reflects the increased borrowings by our commercial finance business and borrowings on our corporate lines of credit to support our expanded operations, offset by decreased borrowings in our financial fund management business.  Facility utilization and interest rates for these operations were as follows:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Commercial finance
Average borrowings (in millions)	$	342.6	$	191.5	$	472.6	$	150.9
Average interest rates		6.0%		6.5%		6.5%		6.8%
Financial fund management
Average borrowings (in millions)	$	218.0	$	470.6	$	268.2	$	339.8
Average interest rates		5.9%		5.2%		5.8%		5.1%
Corporate − secured credit facilities
Average borrowings (in millions)	$	63.1	$	9.7	$	57.6	$	4.4
Average interest rates (1)		5.5%		10.6%		6.7%		12.3%

(1) The three and nine months ended June 30, 2007 are higher due to the inclusion of the amortization of deferred finance cost, unused fees and higher interest rates relative to lower borrowings.

Interest expense incurred by our commercial finance operations increased by $1.8 million and $15.2 million for the three and nine months ended June 30, 2008, respectively, due to an increase in average borrowings of $151.1 million and $321.7 million, respectively, in part, offset by a reduction of interest rates as a result of our use of interest rate swaps and caps to fix rates.  LEAF’s growth in borrowings was driven by the recent acquisitions, continued growth in new and existing vendor programs and the introduction of new commercial finance products.

Interest expense incurred by our financial fund management operations decreased $3.0 million for the three months ended June 30, 2008 due to the termination in January 2008 of outstanding warehouse facilities that were used to purchase loans held for investment.  These facilities, and their associated loans, were held by CDO issuers that we consolidated while the assets were being accumulated.  For the three months ended June 30, 2008, we had no outstanding borrowings on these facilities.  Interest expense for the nine months ended June 30, 2008 decreased by $1.3 million primarily due to a decrease in average borrowings on the warehouse facilities, offset by the senior notes issued by Apidos CDO VI in December 2007.

The following table sets forth certain information relating to the changes in minority interest income (expense), net of $3.6 million (364%) and $1.6 million (70%) for the three and nine months ended June 30, 2008, respectively, (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Commercial finance minority ownership (1)	$	66		$	(316	)	$	(1,045	)	$	(422	)
SFF Partnerships (2)		3,267			(378	)		2,729			(1,150	)
Warehouse providers (3)		−			(286	)		(97	)		(683	)
Real estate  minority holder (4)		(50	)		−			(50	)		−
Commercial finance fund participation (5)		(693	)		−			(2,214	)		−
	$	2,590		$	(980	)	$	(677	)	$	(2,255	)

(1) Senior executives of LEAF hold a 14.9% interest in LEAF, reflecting the LEAF stock issued upon the conversion of a note in fiscal 2006 and the issuance of LEAF’s restricted stock in fiscal 2007 and 2006.  The increase in minority interest expense for the nine months ended June 30, 2008 reflects the increase in LEAF’s income from continuing operations before income taxes and minority interest.

(2) At June 30, 2008, we owned a 15% and 36% limited partner interest in SFF I and SFF II, respectively, which invest in the equity of certain of the CDO issuers we have formed.

(3) Certain warehouse providers were entitled to receive 10% to 15% of the interest spread earned on their respective warehouse facilities which held Apidos and Resource Europe bank loan assets during their accumulation stage.  As of January 2008, all warehouse facilities have been terminated.

(4) In March 2008, we sold a 19.99% interest in an indirect subsidiary that holds a hotel property in Savannah, Georgia.

(5) In January 2008, LEAF sold a 49% participation interest in one of its subsidiaries that holds a portfolio of leases acquired from NetBank to LEAF Fund III.  In April 2008, the remaining 51% was sold to LEAF Fund III.

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Other (expense) income, net was a net loss of $5.6 million and $22.6 million for the three and nine months ended June 30, 2008, respectively, as compared to other income, net, of $2.1 million and $6.4 million for the three and nine months ended June 30, 2007, respectively.  The reduction in other income is a result of the following:

· a gain of $346,000 for the three months ended June 30, 2008 and a loss of $17.7 million for the nine months ended June 30, 2008, primarily on the settlement of the sale of secured bank loans in Europe and the United States in late January and early February 2008 as a result of the termination in January 2008 of two secured warehouse credit facilities consolidated under FIN 46-R, for which we had provided limited guarantees;

· a $7.0 and $8.1 million charge for the other-than-temporary impairment of certain of our investments in CDOs during the three and nine months ended June 30, 2008, respectively, primarily those with investments in real estate ABS and CMBS, and trust preferred securities of two regional banks and one thrift bank.  There were no other-than-temporary impairments in the three and nine months ended June 30, 2007; and

· an $864,000 and $3.0 million decrease in gains on sales of TBBK common stock during the three and nine months ended June 30, 2008, respectively.  During the three and nine months ended June 30, 2007, we sold 60,000 and 190,000 shares of TBBK common stock, respectively.  There were no sales during the three and nine months ended June 30, 2008.

Our effective income tax rate (income taxes as a percentage of income from continuing operation, before taxes) was 42% and 39% for the three and nine months ended June 30, 2008, respectively, compared to a 42% and 38%, respectively, effective rate for the three and nine months ended June 30, 2007.  The increase in the rate primarily relates to the greater impact of permanent items due to lower pre-tax earnings for fiscal 2008 and the reversal of a $1.2 million valuation allowance in the nine months ended June 30, 2007.

We currently project our effective tax rate to be between 36% and 40% for the remainder of fiscal 2008.  This rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings and the level of our tax credits.  Certain of these and other factors, including our history of pre-tax earnings, are taken into account in assessing our ability to realize our net deferred tax assets.  See Note 16 to our consolidated financial statements for further information regarding our provision for taxes.

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

We adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes−an interpretation of FASB Statement No. 109,” or FIN 48, effective October 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. The adoption of FIN 48 did not have a material impact on our consolidated balance sheet or statement of income (see Note 16 to our consolidated financial statements for further information).

Liquidity and Capital Resources

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

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

	Nine Months Ended
	June 30,
	2008			2007
				(restated)
Provided by (used in) operating activities of continuing operations	$	54,202		$	(128,446	)
Used in investing activities of continuing operations		(240,561	)		(41,742	)
Provided by financing activities of continuing operations		179,523			151,407
Provided by (used in) discontinued operations		9			(1,672	)

Decrease in cash $ (6,827 ) $ (20,453 )

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We had $7.8 million in cash at June 30, 2008, a decrease of $6.8 million (47%) as compared to $14.6 million at September 30, 2007, primarily reflecting a pre-tax loss of $27.9 million for the nine months ended June 30, 2008 as compared to income of $25.9 million for the nine months ended June 30, 2007.

Cash Flows from Operating Activities.Net cash provided by operating activities of continuing operations was $54.2 million for the nine months ended June 30, 2008, an increase of $182.6 million as compared to the nine months ended June 30, 2007, substantially as a result of the following:

· a $173.5 million decrease in our cash investments in commercial finance assets, reflecting the sale of notes and leases to the investment partnerships we sponsored and manage; and

· a $30.7 million increase in cash provided from continuing operations, reflecting a $31.7 million decrease in net income as adjusted to exclude $62.4 million of increases in non-cash charges.  The increase in these non-cash charges included a $31.2 million increase in losses on the sales of loans held for investment and impairment charges on secured bank loans, $4.8 million of increased credit loss reserves due to current market conditions and $26.4 million of increases in other charges; offset in part by

· a $21.6 million increase in other operating assets and liabilities.

Cash Flows from Investing Activities.Net cash used by our investing activities of continuing operations increased by $198.8 million for the nine months ended June 30, 2008 as compared to the nine months ended June 30, 2007, primarily reflecting the following:

· a $197.8 million net increase in investments and other assets, principally reflecting the $210.8 million net increase in loans held for investment as a result of the consolidation of Apidos CDO VI in accordance with FIN 46-R.

Cash Flows from Financing Activities.  Net cash provided by our financing activities of continuing operations increased by $28.1 million for the nine months ended June 30, 2008 as compared to the nine months ended June 30, 2007, principally as a result of the following:

· a $48.2 million of funding was provided by our existing credit facilities, net of repayments, reflecting primarily the issuance and consolidation of the Apidos CDO VI senior notes; offset, in part by

· a $20.8 million net increase in restricted cash and escrow deposits, principally monies withheld by our commercial finance credit facilities to repay our borrowings under those facilities.

Capital Requirements

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

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Contractual Obligations and Other Commercial Commitments

The following tables summarize our contractual obligations and other commercial commitments at June 30, 2008 (in thousands):

Certain of the Company’s incentive distributions (carried interest) are subject to a potential clawback to the extent that such distributions exceed cumulative net profits, as defined in the respective partnership agreements. As of June 30, 2008, the Company’s total potential clawback obligation was $7.5 million of which $4.3 million has been recorded as a liability in the consolidated financial statements at June 30, 2008.

			Payments Due By Period
Contractual obligations:	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Other debt (1) (2)	$	244,371	$	884	$	219,522	$	12,378	$	11,587
Secured credit facilities (1) (2)		334,849		173,436		62,787		76,861		21,765
Capital lease obligation (1)		90		43		47		−		−
Operating lease obligations		17,283		3,108		4,870		4,028		5,277
Other long-term liabilities		13,423		1,059		1,573		1,458		9,333
Total contractual obligations	$	610,016	$	178,530	$	288,799	$	94,725	$	47,962

(1) Not included in the table above are estimated interest payments calculated at rates in effect at June 30, 2008; Less than 1 year:  $24.1 million; 1-3 years:  $32.9 million; 4-5 years:  $11.3 million; and after 5 years: $2.1 million.

(2) Includes the repayment of $218.0 million of senior notes for Apidos CDO VI which we consolidated under FIN 46-R.  These notes are subject to an early call feature beginning in January 2011 based on certain conditions being met and a majority vote by the note holders.

			Amount of Commitment Expiration Per Period
Other commercial commitments:	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Guarantees	$	4,092	$	4,092	$	−	$	−	$	−
Standby letters of credit		246		246		−		−		−
Other commercial commitments (1)		626,688		62,921		110,171		32,496		421,100
Total commercial commitments (2)	$	631,026	$	67,259	$	110,171	$	32,496	$	421,100

(1) We obtained senior lien financing with respect to certain acquired properties, TIC investment programs and real estate loans on a non-recourse basis, with the lender’s remedies limited to the properties securing the senior lien financing.  Although non-recourse in nature, these loans are subject to limited standard exceptions, which the Company has guaranteed (“carveouts”).  These carveouts relate to a total of $625.9 million in financing and expire as the related indebtedness is paid down over the next ten years.

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

We entered into a master lease agreement with one of our TIC programs.  This agreement requires that we fund up to $1.0 million for capital improvements over the next 19 years.  As of June 30, 2008, we have funded approximately $200,000 of capital improvements.

Critical Accounting Policies

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

For a detailed discussion on the application of policies critical to our business operations and other accounting policies, see our Annual Report on Form 10-K/A for fiscal 2007, at Note 2 of the “Notes to Consolidated Financial Statements.”

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Recently Issued Financial Accounting Standards

In June 2008, the FASB issued Staff Position, or FSP, EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.”  FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings per Share.”  Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and must be included in the computation of earnings per share pursuant to the two-class method.  FSP EITF 03-6-1 is effective for us in fiscal 2010. All prior-period earnings per share data presented must be adjusted retrospectively.  We are currently evaluating the potential impact of adopting FSP EITF 03-6-1.

In May 2008, the FASB issued Statement of Financial Accounting Standards, or SFAS, 162, “The Hierarchy of Generally Accepted Accounting Principles,” or SFAS 162. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective 60 days following the Securities and Exchange Commission’s, or SEC, approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards.  We do not expect our adoption of SFAS 162 will have a material impact on our financial statements.

In April 2008, the FASB issued FSP FAS 142-3,“Determination of the Useful Life of Intangible Assets,” or FSP FAS 142-3. FSP FAS 142-3 amends the factors that should be considered in developing a renewal or extension assumptions used for purposes of determining the useful life of a recognized intangible asset under SFAS 142,“Goodwill and Other Intangible Assets,” or  SFAS 142.  FSP FAS 142-3 is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and GAAP standards.  FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 or for us in fiscal 2010.  We are currently evaluating the potential impact of adopting FSP FAS 142-3.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS 133,” or SFAS 161.  This new standard requires enhanced disclosures for derivative instruments, including those used in hedging activities.  It is effective for fiscal years and interim periods beginning after November 15, 2008 and will be applicable to us in the second quarter of fiscal 2009.  We are assessing the potential impact that the adoption of SFAS 161 may have on our financial statements.

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

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

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

55

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

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

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

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

Recent Developments

On July 31, 2008, we collected approximately $18.4 million in connection with the substantial settlement of a discounted loan, which was secured by the Evening Star Building (“ESA”) in Washington, D.C.  As a result of this repayment, we anticipate recognizing a pre-tax gain in the quarter ending September 30, 2008 of approximately $7.5 million.  Our remaining investment is a discounted mezzanine note with a carrying value of $3.6 million, which is secured by a 5% interest in the property.  Previously, D. Cohen owned a 15% partnership interest in ESA which secured the discounted note.  Additionally, he had a right-of-first-offer and a right-of-first-refusal (“Rights”) on a sale of the property.  On July 31, 2008, D. Cohen sold his interest to the 80% partner in ESA for $19.5 million.  In connection with the repayment of the loan, D. Cohen was paid $625,000 to relinquish his rights. 

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ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

General

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

The following analysis presents the effect on our earnings, cash flows and financial position as if hypothetical changes in market risk factors occurred at June 30, 2008.  We analyze only the potential impacts of hypothetical assumptions.  Our analysis does not consider other possible effects that could impact our business.

Commercial Finance

At June 30, 2008, we held $305.5 million in commercial finance assets, comprised of notes, leases and future payment card receivables at fixed rates of interest.  We periodically sell these assets to the investment partnerships we sponsored and manage at our cost basis, typically within three months from the date acquired.  Accordingly, our exposure to changes in market interest rates on these assets is minimized.  Further, we, along with our investment partnerships, maintain swap and cap agreements to effectively fix the interest rates on the related debt, as discussed below.

We had weighted average borrowings of $128.3 million under a secured revolving credit facility with Morgan Stanley for the nine months ended June 30, 2008 at an effective interest rate of 5.9%.  This facility is not subject to fluctuation in interest rates because we have entered into interest rate swaps and cap agreements which create a fixed rate on the entire balance.

In addition, we had weighted average borrowings of $209.3 million under a bridge loan with Morgan Stanley for the nine months ended June 30, 2008.  In April, 2008, this facility, its related interest rate swaps along with $311.0 million of loans was effectively transferred to Leaf Fund III.

In addition, we had weighted average borrowings of $135.0 million for the nine months ended June 30, 2008 at an effective interest rate of 5.9% under a secured revolving credit facility with National City.  We entered into an interest rate swap agreement for $75.0 million of the borrowings outstanding.  Advances on this facility are required to be repaid within nine months, which further reduces our interest rate risk on this facility.

Real Estate

Portfolio Loans and Related Senior Liens.  As of June 30, 2008, we believe that none of the three loans held in our portfolio that have senior liens are sensitive to changes in interest rates since:

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

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

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

Other Loans.  A mortgage that we consolidate at June 30, 2008 as a result of FIN 46-R and two other notes are at fixed interest rates and, therefore, not subject to interest rate fluctuations.

Other

At June 30, 2008, we had two secured revolving credit facilities for general business use.  Weighted average borrowings on these two facilities were $57.6 million for the nine months ended June 30, 2008 at an effective interest rate of 6.7%.  A hypothetical 10% change in the interest rate on these facilities would change our annual interest expense by $377,000.

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ITEM 4.                      CONTROLS AND PROCEDURES

Disclosure Controls

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

Under the supervision of our Chief Executive Officer and Chief Financial Officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based upon that evaluation, we concluded that there was a control deficiency in our internal control over financial reporting which constituted a material weakness.  Due to this material weakness, our disclosure controls and procedures were not effective as of March 31, 2008 to assure that information required to be disclosed by us in reports we file or submit pursuant to the Exchange Act is properly disclosed.  We discuss this material weakness and our remediation of such weakness in Item 9A of our amended Annual Report on Form 10-K/A for the year ended September 30, 2007, which is incorporated herein by this reference, and included as Exhibit 99.1 to this Quarterly Report on Form 10-Q.

Internal Financial Control

During the three months ended June 30, 2008, there were changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting except for the matters referred to, and incorporated by reference in the preceding paragraph of this report.  We have reviewed the monitoring policies related to our asset valuation policy to require confirmation that the Trapeza Partnerships have properly considered and applied all market-based criteria and adopted EITF 99-20 for the unconsolidated equity interests we hold in two of the Trapeza Partnerships to which EITF 99-20 pertains.

58

PART II − OTHER INFORMATION

ITEM 6.                      EXHIBITS

Exhibit No.         Description

3.1	Restated Certificate of Incorporation of Resource America. (1)
3.2	Amended and Restated Bylaws of Resource America. (1)
2.1	Asset Purchase Agreement by and among LEAF Financial Corporation, LEAF Funding, Inc., Dolphin Capital Corp. and Lehman Brothers Bank, FSB, dated November 19, 2007. (2)
2.2	Loan Sale Agreement by and between Federal Deposit Insurance Corporation as receiver of NetBank, Alpharetta, Georgia and LEAF Funding, LLC, dated November 2007. (2)
10.1	Receivables Loan and Security Agreement, dated November 1, 2007 among LEAF Capital Funding III, LLC as Borrower; LEAF Financial Corporation as Servicer, Morgan Stanley Bank as Class A Lender and Collateral Agent and Morgan Stanley Asset Funding, Inc. as Class B Lender, U.S. Bank National Association as Custodian and Lender’s Bank and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services as Backup Servicer.) (2)
10.2	Agreement of Purchase and Sale of Limited Liability Company Membership Interests between Resource America, Inc. and RSI Associates, LLC, dated February 21, 2008. (3)
10.3	First Amendment to Agreement of Purchase and Sale of Limited Liability Company Membership Interests between Resource America, Inc. and RSI Associates, LLC, dated March 2008. (3)
10.4	First Amendment to Receivables Loan and Security Agreement, dated May 23, 2008.
10.5	Amended and Restated Fee Letter, dated May 23, 2008.
10.6	Third Amendment to Loan and Secuirty Agreement, dated August 7, 2008
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Item 9A as filed in Form 10-K/A for the fiscal year ended September 30, 2007.

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

(2) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2007 and by this reference incorporated herein.

(3) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and by this reference incorporated herein.

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SIGNATURES

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

	RESOURCE AMERICA, INC.
	(Registrant)
Date: August 8, 2008	By:           /s/ Steven J. Kessler
	STEVEN J. KESSLER
	Executive Vice President and Chief Financial Officer

Date: August 8, 2008	By:           /s/ Arthur J. Miller
	ARTHUR J. MILLER
	Vice President and Chief Accounting Officer

60
 

EX-10.4

EXECUTION COPY

FIFTH AMENDMENT TO RECEIVABLES LOAN AND SECURITY AGREEMENT

THIS FIFTH AMENDMENT TO THE RECEIVABLES LOAN AND SECURITY AGREEMENT, dated as of May 23, 2008 (this “Amendment”), is entered into by RESOURCE CAPITAL FUNDING II, LLC (the “Borrower”), LEAF FINANCIAL CORPORATION (the “Servicer”) and MORGAN STANLEY BANK (“Morgan Stanley”), as a Lender (the “Lender”).

R E C I T A L S

A.           The Borrower, the Servicer, Morgan Stanley, U.S. Bank National Association and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) are parties to the Receivables Loan and Security Agreement, dated as of October 31, 2006 (as amended, supplemented or otherwise modified from time to time, the “Agreement”);

B.           The parties hereto desire to amend the Agreement on the terms and conditions set forth herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.           Certain Defined Terms.  Capitalized terms used but not defined herein shall have the meanings set forth for such terms in Section 1.01 of the Agreement.

2.           Amendments to the Agreement.  The Agreement is hereby amended to incorporate the changes reflected on Exhibit A hereto.

3.           Conditions Precedent.  The effectiveness of this Amendment is expressly conditioned upon the receipt by Morgan Stanley of (i) executed signature pages to this Amendment from each of the parties hereto, (ii) executed signature pages to that certain Amended and Restated Fee Letter, dated as of the date hereof, between the Borrower and Morgan Stanley (the “Fee Letter”) from each of the parties thereto, (iii) executed signature pages to that certain No Proceedings Letter Agreement, dated as of the date hereof, among LEAF Commercial Finance Fund, LLC (“LEAF Commercial”), each of the parties hereto,U.S. Bank National Association and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) from each of the parties thereto, (iv) executed signature pages to Third Amendment to Purchase and Sale Agreement, dated as of the date hereof, between the Borrower and the Originator from each of the parties thereto, (v) payment by the Borrower of the First Installment under and as defined in the Fee Letter, (vi) favorable legal opinions and/or reliance letters of Thacher Proffitt & Wood LLP, counsel to the Borrower and LEAF Commercial, with respect to certain bankruptcy matters in form and substance satisfactory to Morgan Stanley and (vii) such other documents, instruments and opinions as Morgan Stanley may request.

4.           Representations and Warranties.  Each of the Borrower and the Servicer represents and warrants to Morgan Stanley that:

(a)           this Amendment has been duly authorized, executed and delivered on its behalf, and the Agreement, as so amended, constitutes its legal, valid and binding obligation enforceable against it in accordance with the terms hereof or thereof;

(b)           the representations and warranties made by it in the Agreement (as amended by this Amendment) are true and correct as of the date hereof (except to the extent such representations and warranties speak as a prior date or have been the subject of any prior notice or waiver); and

(c)           after giving effect to this Amendment, no Program Termination Event, Event of Default, or Unmatured Event of Default shall exist on the date hereof.

5.           Effect of Amendment.  Except as expressly amended and modified by this Amendment, all provisions of the Agreement shall remain in full force and effect.  After the date hereof, all references in the Agreement to “this Agreement”, “hereof”, or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment.  This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Agreement other than as set forth herein.

6.           Counterparts.  This Amendment may be executed in any number of counterparts and by different parties on separate counterparts (including by facsimile or electronic transmission), each of which shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.

7.           Governing Law; Severability.  THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).  Wherever possible each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable laws, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

8.           Section Headings.  The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof.

9.           Continued Effectiveness.  Except as specifically provided herein, the Agreement shall remain unmodified and is specifically confirmed to be in full force and effect.  Upon the effectiveness of this Amendment, all references in the Agreement and in the other Transaction Documents to the Agreement or the like shall refer to the Agreement as hereby amended.

[Signature pages follow]

2

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

THE BORROWER:	RESOURCE CAPITAL FUNDING II, LLC By:______________________________ Name: Title:
THE SERVICER:	LEAF FINANCIAL CORPORATION By:______________________________ Name: Title:

S-1

THE LENDER: MORGAN STANLEY BANK By:______________________________ Name: Title:  

S-2

Exhibit A

Exh. A

 [incorporates First Amendment, dated as

of December 21, 2006, Second Amendment,

dated as of February 28, 2007, Third

Amendment, dated as of September 28, 2007 and2007,

Fourth Amendment, dated as of December 27, 20072007,

Consent to Receivables Loan and Security Agreement

and Custodial Agreement, dated May 9, 2008,

and Fifth Amendment, dated as of May 23, 2008]

U.S. $250,000,000

RECEIVABLES LOAN AND SECURITY AGREEMENT

Dated as of October 31, 2006

Among

RESOURCE CAPITAL FUNDING II, LLC,

as the Borrower

and

LEAF FINANCIAL CORPORATION,

as the Servicer

and

MORGAN STANLEY BANK,

as a Lender and Collateral Agent

and

U.S. BANK NATIONAL ASSOCIATION,

as the Custodian and the Lender’s Bank

and

LYON FINANCIAL SERVICES, INC. (D/B/A U.S. BANK PORTFOLIO SERVICES),

as the Backup Servicer

This RECEIVABLES LOAN AND SECURITY AGREEMENT is made as of October 31, 2006, among:

(1)           RESOURCE CAPITAL FUNDING II, LLC, a Delaware limited liability company (the “Borrower”);

(2)           LEAF FINANCIAL CORPORATION, a Delaware corporation (“LEAF Financial” or the “initial Servicer”), as the Servicer (as defined herein);

(3)           MORGAN STANLEY BANK (“Morgan Stanley”), as a Lender and Collateral Agent (as defined herein);

(4)           U.S. BANK NATIONAL ASSOCIATION, as the Custodian and the Lender’s Bank (as each such term is defined herein); and

(5)           LYON FINANCIAL SERVICES, INC. (d/b/a U.S. Bank Portfolio Services), a Minnesota corporation, as the Backup Servicer (as defined herein).

IT IS AGREED as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.01  Certain Defined Terms.  a) Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.01.

(b)  As used in this Agreement and the exhibits and schedules thereto (each of which is hereby incorporated herein and made a part hereof), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Accountants’ Report” has the meaning assigned to that term in Section 6.11(b).

“Active Backup Servicer’s Fee” means, for any Fee Period or portion thereof after the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the greater of (i) the Active Backup Servicing Fee Rate, multiplied by the Net Eligible Receivables Balance as of the first day of such Fee Period, multiplied by a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360, and (ii) $5,000.  The Active Backup Servicer’s Fees shall also include reasonable out-of-pocket expenses incurred by the Backup Servicer in performing its duties as Servicer.

“Active Backup Servicing Fee Rate” means 1.00%.

“Active Backup Servicer’s Indemnified Amounts” has the meaning assigned to that term in Section 6.09.

“Adjusted Eurodollar Rate” means, with respect to any Interest Period for any Loan allocated to such Interest Period, an interest rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate Margin and (ii) an interest rate per annum equal to the average of the interest rates per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) reported during such Interest Period on Telerate Access Service Page 3750 (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits having a term of thirty (30) days and in a principal amount of $1,000,000 or more (or, if such page shall cease to be publicly available or, if the information contained on such page, in the Lender’s sole judgment, shall cease to accurately reflect such London Interbank Offered Rate, such rate as reported by any publicly available recognized source of similar market data selected by the Lender that, in the Lender’s reasonable judgment, accurately reflects such London Interbank Offered Rate).

“Adjusted Eurodollar Rate Margin” has the meaning ascribed thereto in the Fee Letter.

“Adverse Claim” means a lien, security interest, charge, encumbrance or other right or claim of any Person other than, with (i) respect to the Pledged Assets, any lien, security interest, charge, encumbrance or other right or claim in favor of the Collateral Agent or (ii) any Permitted Lien.

“Affected Party” has the meaning assigned to that term in Section 2.09.

“Affiliate” when used with respect to a Person, means any other Person controlling, controlled by or under common control with such Person.  For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” means this Receivables Loan and Security Agreement, as the same may be amended, restated, supplemented and/or otherwise modified from time to time hereafter in accordance with its terms.

“Allonge” means an allonge in the form attached hereto as Exhibit G.

“Amortized Equipment Cost” means, as of any date of determination, (i) for any Pool A Receivable, the net investment with respect to such Pool A Receivables, where “net investment” means (a) the present value of the remaining Scheduled Payments under the related Contract, discounted at the rate at which the present value of all Scheduled Payments under the related Contract, including any Balloon Payment or Put Payment, equals the original equipment cost related to such Receivable, plus (b) the associated amortized indirect costs related to the applicable equipment, amortized using the interest method over the life of the related Contract and (ii) for any Pool B Receivable, the net investment with respect to such Pool B Receivable, where “net investment” means (a) the sum of the present values of the remaining Underlying Scheduled Payments under each related Eligible Underlying Contract, discounted at the rate at which the present value of all scheduled payments under such Eligible Underlying Contract, including any Balloon Payment or Put Payment, equals the original equipment cost related to such Eligible Underlying Contract, plus (b) the associated amortized indirect costs related to the applicable equipment, amortized using the interest method over the life of the related Underlying Contract.

“Annualized Default Rate” means, as of any date of determination after the end of the first Collection Period following the date hereof, an amount (expressed as a percentage) equal to (i) the product of (A) the aggregate Discounted Balances of all Pledged Receivables which were Eligible Receivables at the time of their Pledge hereunder and which became Defaulted Receivables during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods and (B) 2 (if six or more Collection Periods have occurred since the date hereof), 2.4 (if five Collection Periods have occurred since the date hereof), 3 (if four Collection Periods have occurred since the date hereof), 4 (if three Collection Periods have occurred since the date hereof), 6 (if two Collection Periods have occurred since the date hereof) or 12 (if one Collection Period has occurred since the date hereof) divided by (ii) the average Eligible Receivables Balance as of the first Business Day of each of the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods.

“Annualized Net Loss Rate” means, as of any date of determination after the end of the first Collection Period following the date hereof, an amount (expressed as a percentage) equal to (i) the product of (A) (x) the aggregate Discounted Balances of all Pledged Receivables which were Eligible Receivables at the time of their Pledge hereunder and which became Defaulted Receivables during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods minus (y) Recoveries received during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods and (B) 2 (if six or more Collection Periods have occurred since the date hereof), 2.4 (if five Collection Periods have occurred since the date hereof), 3 (if four Collection Periods have occurred since the date hereof), 4 (if three Collection Periods have occurred since the date hereof), 6 (if two Collection Periods have occurred since the date hereof) or 12 (if one Collection Period has occurred since the date hereof) divided by (ii) the Eligible Receivables Balance as of the first Business Day of the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods.

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“Applicable Date” has the meaning set forth in definition of Pool B Annualized Net Loss Rate.

“Approved Lienholder” means any Person that (i) has entered into a Nominee Lienholder Agreement, a copy of which has been delivered by the Collateral Agent to the Custodian and (ii) appears on the list of approved lienholders provided by LEAF Financial Corporation to the Custodian from time to time.

“Assigned Documents” has the meaning assigned to that term in Section 2.10.

“Assignment” has the meaning set forth in the Purchase and Sale Agreement.

“Assignment and Acceptance” has the meaning assigned to that term in Section 9.04.

“Available Funds” has the meaning assigned to that term in Section 2.04(c).

“Backup Servicer” means Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) or any successor Backup Servicer appointed by the Lender pursuant to Section 6.13.

“Backup Servicer Delivery Date” has the meaning assigned to that term in Section 6.10(d).

“Balloon Payment” means a payment due, or which may be required, at the end of the term of a Contract or Underlying Contract (which constitutes a loan) equal to the principal amount under such Contract or Underlying Contract which remains outstanding after the payment of all regular scheduled payments of principal during the term of such Contract or Underlying Contract.

“Bankruptcy Code” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq., as amended.

“Bankruptcy Event” shall be deemed to have occurred with respect to a Person if either:

(a)(c)  a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or

(b)(d)  such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors or members shall vote to implement any of the foregoing.

“Base Rate” means, on any date, a fluctuating rate of interest per annum equal to the arithmetic average of the rates of interest publicly announced by JPMorgan Chase Bank and Citibank, N.A. (or their respective successors) as their respective prime commercial lending rates (or, as to any such bank that does not announce such a rate, such bank’s “base” or other rate determined by the Lender to be the equivalent rate announced by such bank), except that, if any such bank shall, for any period, cease to announce publicly its prime commercial lending (or equivalent) rate, the Lender shall, during such period, determine the Base Rate based upon the prime commercial lending (or equivalent) rates announced publicly by the other such bank or, if each such bank ceases to announce publicly its prime commercial lending (or equivalent) rate, based upon the prime commercial lending (or equivalent) rate or rates announced publicly by one or more other banks selected by the Lender.  The prime commercial lending (or equivalent) rates used in computing the Base Rate are not intended to be the lowest rates of interest charged by  such banks in connection with extensions of credit to debtors.  The Base Rate shall change as and when such banks’ prime commercial lending (or equivalent) rates change.

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“Borrower” has the meaning assigned to that term in the preamble hereto.

“Borrower Pension Plan” means a “pension plan” as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA and to which the Borrower or any ERISA Affiliate of Borrower may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“Borrowing” means a borrowing of Loans under this Agreement.

“Borrowing Base” means, at any time, the sum of the Pool A Borrowing Base plus the Pool B Borrowing Base at such time.

“Borrowing Base Certificate” means a report, in substantially the form of Exhibit A, prepared by the Borrower (or the initial Servicer on its behalf) for the benefit of Lender pursuant to Section 6.10(c).

“Borrowing Base Deficiency” means, at any time, that the Borrowing Base is less than the Facility Amount, an amount equal to the amount of such deficiency.

“Borrowing Base Surplus” means, at any time, that the Borrowing Base exceeds the Facility Amount, an amount equal to the amount of such excess.

“Borrowing Date” means, with respect to any Borrowing, the date on which such Borrowing is funded, which date, other than in the case of the initial Borrowing, shall be a Subsequent Borrowing Date.

“Borrowing Limit” means $250,000,000, as such amount may be increased pursuant to Section 2.16; provided, however, that at all times, on or after the Program Termination Date, the Borrowing Limit shall mean the aggregate outstanding principal balance of the Loans.

“Breakage Fee” means, for Loans allocated to any Interest Period during which such Loans are repaid (in whole or in part) prior to the end of such Interest Period, the breakage costs, if any, related to such repayment plus the amount, if any, by which (i) interest (calculated without taking into account any Breakage Fee), which would have accrued on the amount of the payment of such Loans during such Interest Period (as so computed) if such payment had not been made, as the case may be, exceeds (ii) the sum of (A) interest actually received by the Lender in respect of such Loans for such Interest Period and, if applicable, (B) the income, if any, received by the Lender from the Lender’s investing the proceeds of such payments on such Loans.

“Business Day” means a day of the year other than a Saturday or a Sunday or any other day on which banks are authorized or required to close in New York City, St. Paul, Minnesota or Salt Lake City, Utah; provided, that, if any determination of a Business Day shall relate to a Loan bearing interest at the Adjusted Eurodollar Rate, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Calculated Swap Amortizing Balance” means, with respect to a Qualifying Interest Rate Swap and as of any date of determination, the projected scheduled amortizing balance of the Pledged Receivables which were Pledged during the period ending on the Remittance Date on which such Qualifying Interest Rate Swap became effective and beginning on the day following the immediately preceding Remittance Date, determined by the Servicer and accepted by the Lender based upon the Discounted Balance of such Pledged Receivables as of such date of determination, adjusted for prepayments using an absolute prepayment speed which, in the judgment of the Lender, is consistent with the speed with which the Pledged Receivables have prepaid in the past.

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“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, contingent share issuances, participations or other equivalents of or interest in equity (however designated) of such Person.

 “Cash Reserve” means any amount paid to the Originator, the Servicer or the Borrower by an Obligor that is an Underlying Originator as a cash reserve which may be drawn upon if amounts due under the related Underlying Originator Loan Contract are not paid when due (or by the end of any cure period related thereto), which has not previously been refunded to such Obligor or applied toward such Obligor’s obligations under such Underlying Originator Loan Contract.

“Cash Reserve Account” has the meaning assigned to that term in Section 2.06.

“Cash Reserve Account Agreement” means any Securities Account Agreement with respect to any Cash Reserve Account established by an Originator, among the Borrower, the Servicer, the Lender’s Bank and the Lender, in form and substance satisfactory to the parties thereto, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“Certificate of Title” means with respect to a Vehicle, (i) if such Vehicle is registered in Florida, (x) to the extent the related Receivable has been originated by an Originator, an original certificate of title or (y) to the extent the related Receivable has been Originated by a Person other than an Originator, (A) an original certificate of title or (B) if the original certificate of title has been sent to the registered owner of such Vehicle, an original computer confirmation of lien, (ii) if such Vehicle is registered in Kansas, a true copy of the application for certificate of  title and registration, (iii) if such Vehicle is registered in Kentucky, an original notice of lien, (iv) if such Vehicle is registered in Maryland, an original notice of security interest filing, (v) if such Vehicle is registered in Minnesota, an original lien card, (vi) if such Vehicle is registered in Missouri, an original notice of recorded lien, (vii) if such Vehicle is registered in Montana, a true copy of the application for certificate of title, (viii) if such Vehicle is registered in New York, an original notice of lien, (ix) if such Vehicle is registered in Oklahoma, an original, file-stamped lien entry form, (x) if such Vehicle is registered in Wisconsin, an original lien confirmation card or (xi) if such Vehicle is registered in any other State, an original certificate of title, in each case issued by the Registrar of Titles of the applicable State listing the lienholder of record with respect to such Vehicle (it being understood and agreed that solely for purposes of clauses (i) through (x) above (other than clauses (i)(x) and (i)(y)(A)), the “original” of any document required thereby shall consist of whatever documentation has been issued by the Registrar of Titles of the related State to the lienholder).

“Change of Control” means that at any time (i) Owner shall own directly or indirectly less than 100% of all membership interests of the Borrower, (ii) Resource America shall own directly or indirectly less than 50.1% of all Capital Stock or voting power of the initial Servicer, (iii) the initial Servicer shall own directly or indirectly less than 80% of all Capital Stock or voting power of Originator and Owner, (iv) Resource America, Owner, the Originator or the Borrower merges or consolidates with any other Person without the prior written consent of the Lender, (v) the initial Servicer, the Owner or the Originator merges or consolidates with any other Person and the initial Servicer, the Owner or the Originator, as applicable, is not the surviving entity or (vi) either of Crit DeMent or Miles Herman is not employed in a senior management position at the initial Servicer, is not involved in the day-to-day operations of the initial Servicer or is not able to perform substantially all of his duties as an employee of the initial Servicer during any three month period and, in each case, has not been replaced by a person approved by the Lender in writing within 90 days of any such event.

 “Closing Date” means October 31, 2006.

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

“Collateral Agent” means the Lender in its capacity as collateral agent on behalf of the Secured Parties.

“Collateral Receipt” has the meaning assigned to that term in the Custodial Agreement.

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“Collection Account” means a special trust account (account number 106682000 at the Lender’s Bank) in the name of the Borrower and under the control of the Lender; provided, that the funds deposited therein (including any interest and earnings thereon) from time to time shall constitute the property and assets of the Borrower and the Borrower shall be solely liable for any taxes payable with respect to the Collection Account.

“Collection Account Agreement” means that certain Collection Account Agreement, dated the date of this Agreement, among the Borrower, the Servicer, the Lender’s Bank and the Lender, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“Collection Date” means the date on which the aggregate outstanding principal amount of the Loans have been repaid in full and all interest and Fees and all other Obligations have been paid in full, and the Lender shall have no further obligation to make any additional Loans.

“Collection Period” means, (i) with respect to any Remittance Date (including the initial Remittance Date), the period beginning on, and including, the first day of the most recently ended calendar month and ending on, and including, the last day of the most recently ended calendar month; provided, that the final Collection Period shall begin on, and include, the first day of the then current calendar month and shall end on the Collection Date and (ii) in any context other than with respect to any Remittance Date, a calendar month.

“Collections” means, without duplication, with respect to any Pledged Receivable, all Scheduled Payments (and, in the case of a Pledged Pool B Receivable after a Pool B Termination Event has occurred with respect to the related Underlying Originator, all Underlying Scheduled Payments) related to such Receivable, all prepayments and related penalty payments with respect to the Contract (and any related Underlying Contract related to a Pledged Pool B Receivable after a Pool B Termination Event has occurred with respect to the related Underlying Originator) related to such Receivable, all overdue payments and related interest and penalty payments with respect to the Contract (and any related Underlying Contract related to a Pledged Pool B Receivable after a Pool B Termination Event has occurred with respect to the related Underlying Originator) related to such Receivable, all Guaranty Amounts, all Insurance Proceeds, all Servicing Charges, all proceeds under “buyout letters” or other prepayment/termination agreements and all Recoveries related to such Receivable, all amounts paid to the Borrower related to such Receivable pursuant to the terms of the Purchase and Sale Agreement, all amounts paid by the Servicer related to such Receivable in connection with its obligations under Section 6.20 hereof, and all other payments received with respect to the Contract (and, if applicable, Underlying Contract) related to such Receivable, all cash receipts and proceeds in respect of the Other Conveyed Property or Related Security (including, without limitation, the Obligor Collateral) related to such Receivable, any Servicer Advances related to such Receivable, and any amounts paid to the Borrower under or in connection with any Qualifying Interest Rate Swap or the hedging arrangements contemplated thereunder.

“Commitment Percentage” has the meaning assigned to that term in Section 9.04(b).

“Computer Tape or Listing” means the computer tape or listing (whether in electronic form or otherwise) generated by the Servicer on behalf of the Borrower, which provides information relating to the Receivables included in the Net Eligible Receivables Balance.

“Contract” means a Pool A Contract or a Pool B Contract.

“Credit and Collection Policy” means (i) collectively, the “Operations Policies & Procedures”  memorandum, the “Limited Recourse Term Debt Facility” memorandum of the Servicer, and certain other items, as annexed hereto as Schedule IV as such policy may hereafter be amended, modified or supplemented from time to time in compliance with this Agreement and (ii) with respect to any Servicer other than LEAF Financial, that Servicer’s collection policies for similar assets in effect from time to time.

“Critical Defaults” has the meaning assigned to that term in Section 5.01(u) hereof.

“Custodial Agreement” means that certain Custodial Agreement dated as of the date hereof among the Servicer, the Borrower, the Lender and the Custodian, together with all instruments, documents and agreements executed in connection therewith, as such Custodial Agreement may from time to time be amended, restated, supplemented and/or otherwise modified in accordance with the terms thereof.

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“Custodian” means U.S. Bank National Association (or a sub-custodian on its behalf) or any substitute Custodian appointed by the Lender pursuant to the Custodial Agreement.

“Custodian’s Fee” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the aggregate fees listed in that certain “Schedule of Fees” letter dated October 19, 2006 between U.S. Bank National Association and Leaf Financial Corporation which relate to such Fee Period.

“Debt” of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments related to transactions that are classified as financings under GAAP, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations secured by an Adverse Claim upon property or assets owned (under GAAP) by such Person, even though such Person has not assumed or become liable for the payment of such obligations and (vi) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor, against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above.

“Default Funding Rate” means an interest rate per annum equal to 1.50% plus the Base Rate.

“Defaulted Receivable” means, as of any date of determination, any Pledged Receivable:

(i) with respect to which any part of any Scheduled Payment, or any tax-related payment, owed by the applicable Obligor under the terms of the related Contract remains unpaid for more than 120 days after the due date therefor set forth in such Contract;

(ii) with respect to which the first or second Scheduled Payment is not paid in full when due under the related Contract;

(iii) with respect to which any payment or other material terms of the related Contract have been modified due to credit related reasons after such Contract was acquired by the Borrower pursuant to the Purchase and Sale Agreement;

(iv) which has been or should be charged off as a result of the occurrence of a Bankruptcy Event with respect to the related Obligor or Underlying Obligor, if any, or which has been or should otherwise be deemed uncollectible by the Servicer, in each case, in accordance with the Credit and Collection Policy; or

(v) with respect to which the Servicer has repossessed the related Equipment.

“Delinquency Rate” means, as of any date of determination, an amount (expressed as a percentage) equal to (i) the aggregate Discounted Balances of all Delinquent Receivables as of the last day of the immediately preceding Collection Period divided by (ii) the Net Eligible Receivables Balance as of such day.

“Delinquent Receivable” means, as of any date of determination, any Pledged Receivable (other than a Defaulted Receivable) with respect to which any part of any Scheduled Payment (or other amount payable under the terms of the related Contract) remains unpaid for more than 60 days but not more than 120 days after the due date therefor set forth in such Contract.

“Depository Institution” means a depository institution or trust company, incorporated under the laws of the United States or any State thereof, that is subject to supervision and examination by federal and/or State banking authorities.

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“Discount Rate” means, as of any date of determination, a percentage equal to the sum of (i) the Weighted Average Swapped Rate as of such date of determination, (ii) the Adjusted Eurodollar Rate Margin, (iii) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, the Servicing Fee Rate and the Standby Backup Servicing Fee Rate, (iv) at any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, the Active Backup Servicing Fee Rate and (vi) a rate per annum equal to 0.05%.

“Discounted Balance” means, with respect to any Contract or Underlying Contract, as of any date of determination, the present value of the aggregate amount of Scheduled Payments or, in the case of an Underlying Contract, Underlying Scheduled Payments (including any Balloon Payment or Put Payment but, in any event, calculated without giving effect to any booked residual value with respect to any related Equipment) due or to become due under the terms of the related Contract or Underlying Contract after the Cut-Off Date applicable to the Receivable related thereto, which remain unpaid as of such date of determination, calculated by discounting such aggregate amount of such Scheduled Payments or, in the case of an Underlying Contract, such Underlying Scheduled Payments to such date of determination at an annual rate equal to the Discount Rate.

“Dollar Purchase Option Contract” means a Contract or an Underlying Contract, as applicable, (i) in connection with which an agreement was executed which grants the related Obligor or Underlying Obligor, as applicable, a right to purchase the Equipment or Underlying Equipment leased under such Contract or Underlying Contract for $1.00 or other nominal consideration at the end of the initial term of such Contract or Underlying Contract or (ii) grants the related Obligor or Underlying Obligor, as applicable, a right to purchase the Equipment or Underlying Equipment leased under such Contract for $1.00 or other nominal consideration at the end of the initial term of such Contract.

“Eligible Depository Institution” means a Depository Institution the short term unsecured senior indebtedness of which is rated at least Prime-1 by Moody’s, A-1 by S&P, and F1 by Fitch, if rated by Fitch.

“Eligible Pool A Receivable” means, at any time, a Pledged Pool A Receivable with respect to which each of the representations and warranties regarding the Contract related to such Pledged Pool A Receivable contained in Schedule III-A hereto is true and correct at such time.

“Eligible Pool A Receivables Balance” means, at any time, the aggregate Discounted Balances of all Eligible Pool A Receivables which are Pledged hereunder to secure Loans at such time.

“Eligible Pool B Receivable” means, at any time, a Pledged Pool B Receivable with respect to which each of the representations and warranties regarding the Contract related to such Pledged Pool B Receivable contained in Schedule III-B hereto is true and correct at such time.

“Eligible Pool B Receivables Balance” means, at any time, the aggregate Discounted Balances of all Eligible Pool B Receivables which are Pledged hereunder to secure Loans at such time.

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“Eligible Pool B Underlying Lease Contract” means, at any time, an Underlying Lease Contract with respect to which each of the representations and warranties contained in Schedule III-C hereto is true and correct at such time.

“Eligible Pool B Underlying Loan Contract” means, at any time, an Underlying Loan Contract with respect to which each of the representations and warranties contained in Schedule III-C hereto is true and correct at such time.

“Eligible Receivable” means, at any time, a Pledged Receivable which is an Eligible Pool A Receivable or an Eligible Pool B Receivable at such time.

“Eligible Receivables Balance” means, at any time, the aggregate Discounted Balances of all Eligible Receivables which are Pledged hereunder to secure Loans at such time.

“Eligible Underlying Contract” means an Eligible Pool B Underlying Lease Contract or Eligible Pool B Underlying Loan Contract.

“Eligible Underlying Originator” means an Underlying Originator that has been approved by the initial Servicer in accordance with the Credit and Collection Policy.

“Equipment” means the equipment or Vehicle (i) leased to an Obligor, or serving as collateral for a loan to an Obligor, under a Contract together with any replacement parts, additions and repairs thereof, and any accessories incorporated therein and/or affixed thereto or (ii) leased to an Underlying Obligor, or serving as collateral for a loan to an Underlying Obligor, under a Underlying Contract together with any replacement parts, additions and repairs thereof, and any accessories incorporated therein and/or affixed thereto.

“Equipment Category” means any of the Equipment Categories set forth on Schedule V hereto, as such schedule may be updated from time to time by the Borrower with the consent of the Lender (which such consent shall not be unreasonably withheld).

“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means a corporation, trade or business that is, along with any Person, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414 of the Internal Revenue Code of 1986, as amended, or section 4001 of ERISA.

“Eurodollar Disruption Event” means any of the following:  (i) a determination by the Lender that it would be contrary to law or to the directive of any central bank or other governmental authority (whether or not having the force of law) to obtain United States dollars in the London interbank market to make, fund or maintain any Loan, (ii) a determination by the Lender that the rate at which deposits of United States dollars are being offered in the London interbank market does not accurately reflect the cost to the Lender of making, funding or maintaining any Loan or (iii) the inability of the Lender to obtain United States dollars in the London interbank market to make, fund or maintain any Loan.

“Eurodollar Index” means an index based upon an interest rate reported on Telerate Access Service Page 3750 (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for United States dollar deposits.

“Event of Default” has the meaning assigned to that term in Section 7.01.

“Exception Sublimit Receivable” means a Pool A Receivable arising under a Lease Contract related to Equipment having an original cost of less than $100,000 as to which the original, executed Lease Contract has not been forwarded to the Custodian for inclusion in the related Receivable File.

“Facility Amount” means, at any time, the sum of the aggregate Loans Outstanding hereunder bearing interest at the Interest Rate, plus accrued interest and Fees with respect to such amounts.

“Facility Maturity Date” means the third anniversary of the date of this Agreement.

“Fee Letter” has the meaning assigned to that term in Section 2.08(a).

“Fee Period” means a period commencing on (and including) a Remittance Date and ending on (and including) the day prior to the next Remittance Date; provided, that, the initial Fee Period hereunder shall commence on (and include) the date hereof and end on (and include) December 22, 2006.

“Fees” has the meaning assigned to that term in Section 2.08(a).

“Fitch” means Fitch, Inc. (or its successors in interest).

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“FMV Contract” means a Contract or an Underlying Contract, as applicable, which (i) in connection with which any agreement was executed which grants the related Obligor or Underlying Obligor, as applicable, a right to purchase the Equipment or Underlying Equipment leased under such Contract or Underlying Contract for the fair market value thereof at the end of the initial term of such Contract or Underlying Contract or (ii) grants the related Obligor or Underlying Obligor, as applicable, a right to purchase the Equipment or Underlying Equipment leased under such Contract for the fair market value thereof at the end of the initial term of such Contract.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States.

“Global Overconcentration Amount” means, at any time (x) after the first anniversary of the Closing Date or (y) the aggregate outstanding principal balance of the Loans is greater than $35,000,000, without duplication, the sum of:

(i) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables related to any one Obligor (or any Affiliate thereof) at such time exceeds $3,000,000;

(ii) the amount by which the sum of the Discounted Balances at such time of all Eligible Pool A Receivables related to the three Obligors which, together with any Affiliates thereof, owe the greatest amounts under their respective Contracts, in the aggregate, exceeds $9,500,000;

(iii) the amount by which the sum of the Discounted Balances of all Eligible Receivables with respect to which the related Contract is a Non-Level Payment Contract exceeds 20% of the sum of the Discounted Balances of all Eligible Receivables at such time;

(iv) the amount by which the sum of the Discounted Balances of all Eligible Receivables with respect to which the related Contract provides for Scheduled Payments to be paid for any period other than monthly exceeds 10% of the sum of the Discounted Balances of all Eligible Receivables at such time;

(v) the amount by which the sum of the Discounted Balances of all Eligible Receivables related to Obligor Collateral located in the State of California at such time exceeds 30% of the sum of the Discounted Balances of all Eligible Receivables at such time;

(vi) the amount by which the sum of the Discounted Balances of all Eligible Receivables related to Obligor Collateral located in any State other than the State of California exceeds 20% of the sum of the Discounted Balances of all Eligible Receivables at such time;

(vii) the amount by which the sum of the Discounted Balances of all Eligible Receivables related to Equipment within any one Equipment Category exceeds the sum of the Discounted Balances of all Eligible Receivables at such time multiplied by 50%;

(viii) the amount by which the sum of the Discounted Balances of all Eligible Receivables, with respect to which the related Obligor Collateral is a Vehicle or other type of equipment which requires a security interest therein to be noted on the Certificate of Title with respect thereto in order to be perfected, exceeds 50% of the sum of the Discounted Balances of all Eligible Receivables at such time;

(ix) [reserved];

(x) the amount by which the sum of the Discounted Balances of all Eligible Receivables, with respect to which the related Obligor is a Government Entity, exceeds 10% of the sum of the Discounted Balances of all Eligible Receivables at such time;

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(xi) the amount by which the sum of the Discounted Balances of all Eligible Receivables, which are Exception Sublimit Receivables, exceeds 10% of the sum of the Discounted Balances of all Eligible Receivables at such time (it being understood and agreed that, notwithstanding anything herein to the contrary (including clauses (x) and (y) above), this component of the Global Overconcentration Amount shall apply at all times on and after the Closing Date); and

(xii) the amount by which the sum of the Discounted Balances of all Eligible Receivables with respect to which the related Obligor Collateral is a work vehicle exceeds 20% of the sum of the Discounted Balances of all Eligible Receivables at such time.

“Government Entity” means the United States, any State, any political subdivision of a State and any agency or instrumentality of the United States or any State or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guaranty Amounts” means any and all amounts paid by any guarantor with respect to the applicable Contract.

“Holdback Amount” means, with respect to any Pool B Receivable, the amount of any loan principal or purchase price which would otherwise be advanced by the Originator to the applicable Obligor pursuant to the terms of such Contract, but which was held back by the Originator as a liquidity reserve or similar reserve.

“Included Repurchased Receivable” means any Receivable repurchased by the Originator pursuant to Section 6.1(b) of the Purchase and Sale Agreement with respect to which, as of the date of repurchase, any part of any Scheduled Payment (or other amount payable under the terms of the related Contract) remained unpaid after the due date therefor set forth in such Contract.

“Indemnified Amounts” has the meaning assigned to that term in Section 8.01.

“Independent Accountants” has the meaning assigned to that term in Section 6.11(b).

“Initial Qualified Swap Counterparty” means Morgan Stanley Capital Services Inc., a Delaware corporation and its successors and permitted assigns.

“Insurance Certificate” means the insurance certificate related to the Insurance Policy with respect to such Receivable (which insurance certificate shall list the Servicer or the Originator as a loss payee).

“Insurance Policy” means, with respect to any Obligor Collateral, the insurance policy maintained by or on behalf of the Obligor pursuant to the related Contract that covers physical damage to the related Equipment (in an amount sufficient to insure completely the value of such Equipment) and general liability (including policies procured by the Borrower or the Servicer, or any agent thereof, on behalf of the Obligor).

“Insurance Proceeds” means, with respect to an item of Obligor Collateral and a related Contract, any amount paid under an Insurance Policy or an Underlying Insurance Policy issued with respect to such Obligor Collateral and/or the related Contract.

“Interest Period” means, for any outstanding Loans, a period determined pursuant to Section 2.03(a).

“Interest Rate” has the meaning assigned to such term in Section 2.03(b).

“LEAF Financial” has the meaning assigned to that term in the preamble hereto.

“Lease Contract” means (i) a “Master Lease Schedule” in the form attached hereto as Exhibit D-1(b), Exhibit D-1(c), Exhibit D-1(d), together with a “Master Lease Agreement” in the form attached hereto as Exhibit D-1(a) which is related to, and incorporated by reference into, a “Master Lease Schedule” (as such exhibits may be updated from time to time by the Borrower with the consent of the Lender), (ii) a “Lease Agreement” in the

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form attached hereto as Exhibit D-1(e) or (iii) a lease agreement otherwise approved by the Servicer in compliance with the Credit and Collection Policy, pursuant to which Equipment is leased to an Obligor by Originator, together with all schedules, supplements and amendments thereto and each other document and instrument related to such lease.

“Lender” means, collectively, Morgan Stanley and/or any other Person that is an Affiliate of Morgan Stanley and/or, with the consent of the Borrower (which such consent shall not be unreasonably withheld) at any time prior to the occurrence of a Program Termination Event (and without the consent of the Borrower at any time after the occurrence of a Program Termination Event), any other Person that is not an Affiliate of Morgan Stanley, in each case, that agrees, pursuant to the pertinent Assignment and Acceptance, to make Loans secured by Pledged Assets pursuant to Article II of this Agreement.

“Lender’s Bank” means U.S. Bank National Association and its successors and assigns that are Eligible Depository Institutions.

“Lender’s Bank Fee” means an annual fee paid in advance, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to $7,000.  The “Lender’s Bank Fee” shall also include (i) a one-time acceptance fee of $4,500 payable on the Closing Date and (ii) reasonable out-of-pocket expenses incurred by the Lender’s Bank in the performance of its duties.

“Liquidation Proceeds” means, with respect to a Receivable with respect to which the related Obligor Collateral has been repossessed or foreclosed upon by the Servicer, all amounts realized with respect to such Receivable net of (i) reasonable expenses of the Servicer incurred in connection with the collection, repossession, foreclosure and/or disposition of the related Obligor Collateral and (ii) amounts that are required to be refunded to the Obligor on such Receivable; provided, however, that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero.

“Loan” means each loan advanced by the Lender to the Borrower on a Borrowing Date pursuant to Article II.

“Loan Contract” means, collectively, (i) a “Term Note (Level Payments)” together with the “Master Loan and Security Agreement” related thereto and incorporated by reference therein, each in the form attached hereto as Exhibit D-2(a) (as such exhibit may be updated from time to time by the Borrower with the consent of the Lender), (ii) a “Term Note (Level Payments)” or “Term Note (Step Payments)” together with the “Master Loan and Security Agreement” related thereto and incorporated by reference therein, each in the form attached hereto as Exhibit D-2(b) (as such exhibit may be updated from time to time by the Borrower with the consent of the Lender) or (iii, (iii) a “Finance Agreement” in one of the forms attached as Exhibit D-2(c) or similar agreement approved in writing by the Lender (in its reasonable discretion), or (iv) a loan agreement and promissory note otherwise approved by the Servicer in compliance with the Credit and Collection Policy as to which the Servicer has notified the Collateral Agent in writing, in each case, pursuant to which the Originator makes a loan to an Obligor secured by Equipment purchased by such Obligor, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“Loans Outstanding” means the sum of the principal amounts of Loans loaned to the Borrower for the initial and any subsequent borrowings pursuant to Sections 2.01 and 2.02, reduced from time to time by Collections with respect to any Pledged Receivable received and distributed as repayment of principal amounts of Loans outstanding pursuant to Section 2.04 and any other amounts received by the Lender to repay the principal amounts of Loans outstanding pursuant to Section 2.15 or otherwise; provided, however, that the principal amounts of Loans outstanding shall not be reduced by any Collections with respect to any Pledged Receivable or other amounts if at any time such Collections or other amounts are rescinded or must be returned for any reason.

“Lockbox” means a post office box to which Collections with respect to any Pledged Receivable are remitted for retrieval by the Lockbox Bank and for deposit by the Lockbox Bank into the Lockbox Account.

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“Lockbox Account” means the deposit account (account number 153910088597at the Lockbox Bank) in the name of “U.S. Bank NA as Securities Intermediary for LEAF Financial and various lenders”.

“Lockbox Bank” means U.S. Bank National Association and its successors in interest.

“Lockbox Intercreditor Agreement” means the Amended and Restated Lockbox Intercreditor Agreement, dated as of April 18, 2005, among the Lockbox Bank, the Servicer, the Borrower, and certain other parties.

“Material Adverse Effect” means a material adverse effect on (i) the ability of the Borrower, the Originator and/or the Servicer to conduct its business, (ii) the ability of the Borrower, the Originator and/or the Servicer to perform its respective obligations under this Agreement and/or any other Transaction Document to which it is a party, (iii) the validity or enforceability of this Agreement and/or any other Transaction Document to which the Borrower, the Originator and/or the Servicer is a party, (iv) the rights and remedies of the Lender under this Agreement and/or any of the Transaction Documents and/or (v) the validity, enforceability or collectibility of all or any portion of the Pledged Receivables.

“Minimum Tangible Net Worth means, (i) with respect to Resource America, a Tangible Net Worth (measured as of each fiscal quarter end) of not less than $125,000,000.125,000,000 and (ii) with respect to the Owner, a Tangible Net Worth (measured as of each fiscal quarter end) of not less than (x) $2,500,000 plus, (y) only if the Owner Issuance Condition has been satisfied, the product of 50.00%, times the aggregate outstanding principal balance of the Owner Secured Recourse Promissory Notes held by Persons that are not Affiliates of the Owner.

“Monthly Remittance Report” means a report, in substantially the form of Exhibit C, furnished by the Servicer to the Lender pursuant to Section 6.10(b).

“Moody’s” means Moody’s Investors Service, Inc. (or its successors in interest).

“Morgan Stanley” has the meaning assigned to that term in the preamble hereto.

“Netbank Facility” means the facility evidenced by the Receivables Loan and Security Agreement, dated as of November 1, 2007, among Leaf Capital Funding III, LLC, as borrower, LEAF Financial, Morgan Stanley, Morgan Stanley Asset Funding Inc., The Royal Bank of Scotland, U.S. Bank National Association and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services), as the same may be modified, amended, or supplemented from time to time.

“Net Eligible Receivables Balance” means, at any time, (i) the Eligible Receivables Balance at such time, minus (ii) the Overconcentration Amount at such time.

“Nominee Lienholder Agreement” means either (i) a “Vehicle Lienholder Nominee Agreement” in the form attached hereto as Exhibit E (with such modifications as the Collateral Agent may approve) or (ii) any other nominee lienholder agreement or collateral agency agreement approved in writing by the Collateral Agent.

“Non-Level Payment Contract” means a Contract that does not provide for level Scheduled Payments during the term of such Contract.

“Notice of Borrowing” has the meaning assigned to that term in Section 2.02(b) hereof.

“Notice of Pledge” has the meaning assigned to that term in the Custodial Agreement.

“Obligations” means all present and future indebtedness and other liabilities and obligations (howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or due or to become due) of the Borrower to the Secured Parties arising under this Agreement and/or any other Transaction Document and shall include, without limitation, all liability for principal of and interest on the Loans, indemnifications and other amounts due or to become due by the Borrower to the Secured Parties under this Agreement and/or any other Transaction Document, including, without limitation, interest, fees and other obligations that accrue after the commencement of an insolvency proceeding (in each case whether or not allowed as a claim in such insolvency proceeding).

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“Obligor” means, collectively, each Person obligated to make payments under a Contract.

“Obligor Collateral” means (i) the Equipment leased to an Obligor under a Lease Contract, (ii) the Equipment and other property pledged by an Obligor to secure its obligations under a Loan Contract, (iii) the Equipment and other property pledged by an Obligor to secure its obligations under a Practice Acquisition Loan Contract and (iv) the Underlying Originator Loan Collateral and other property pledged by an Obligor to secure its obligations under an Underlying Originator Loan Contract.

“Obligor Financing Statement” means a UCC financing statement filed by Originator against an Obligor under a Contract which evidences a security interest in the related Obligor Collateral.

“Officer’s Certificate” means a certificate signed by the president, the secretary, the chief financial officer or any vice president of any Person.

“Opinion of Counsel” means a written opinion of independent counsel acceptable to the Lender, which opinion, if such opinion or a copy thereof is required by the provisions of this Agreement or any other Transaction Document to be delivered to the Borrower or the Lender, is acceptable in form and substance to the Lender.

“Originator” means LEAF Funding, Inc., a Delaware corporation.

“Originator Insurance Agreement” means that certain letter agreement regarding the Originator’s obligations as named loss payee under Insurance Policies and Underlying Insurance Policies, dated as of the date hereof, among the Originator, the Servicer, the Borrower and the Lender, as such agreement may from time to time be amended, restated, supplemented and/or otherwise modified in accordance with the terms thereof.

“Other Commercial Contract” means any agreement approved by the Servicer in compliance with the Credit and Collection Policy, in each case, pursuant to which the commercial Obligor thereunder agrees to make periodic payments in connection with any loan, services, rental or sale, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“Other Conveyed Property” means, with respect to any Receivable, all of the Borrower’s right, title and interest in, to and under (i) all Collections and other monies at any time received or receivable with respect to such Receivable after the applicable Cut-Off Date (as defined in the Purchase and Sale Agreement), (ii) the Equipment or Underlying Equipment related to such Receivable (to the extent of the Borrower’s ownership rights, if any, therein), (iii) in the case of a Receivable related to any Contract, any and all agreements, documents, certificates and instruments evidencing the Borrower’s security interest or other interest in and to the related Obligor Collateral or any intercreditor agreement with respect thereto, including, without limitation, any Certificate of Title, (iv) the Obligor Collateral related to such Receivable including, without limitation, the security interest in such Obligor Collateral granted by the related Obligor to Originator under the related Contract and assigned by Originator to the Borrower under the Purchase and Sale Agreement, (v) the Obligor Financing Statement, if any, related to such Receivable, (vi) the Insurance Policy and any proceeds from the Insurance Policy relating to such Receivable, including rebates of premiums not otherwise due to an Obligor, (vii) the related Contract and all other items required to be contained in the related Receivable File, any and all other documents or electronic records that the Borrower keeps on file in accordance with its customary procedures relating to such Receivable, the related Obligor Collateral or the related Obligor, (viii) any Security Deposits or Cash Reserve related to such Receivable, (ix) all property (including the right to receive future Liquidation Proceeds) that secures such Receivable and that has been acquired by or on behalf of the Borrower pursuant to the liquidation of such Receivable, and (x) all present and future rights, claims, demands, causes and chooses in action in respect of any or all of the foregoing and all payments on or under and all proceeds and investments of any kind and nature in respect of any of the foregoing.

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“Overconcentration Amount” means, at any time, the sum of the Pool A Overconcentration Amount at such time and the Pool B Overconcentration Amount at such time.

“Overdue Payment” means, with respect to a Collection Period, all payments due in a prior Collection Period that the Servicer receives from or on behalf of an Obligor during such Collection Period, including any Servicing Charges.

“Owner” means (i) the Originator or (ii) subject to the prior written consent of the Lender (such consent not to be unreasonably withheld), any other subsidiary of the initial Servicer which acquires all or part of the membership interests of the Borrower.

“Owner” means LEAF Commercial Finance Fund, LLC.

“Owner Issuance Condition” shall be deemed to be satisfied if, on or prior to October 1, 2008 or such other date, not later than June 1, 2009, as the Owner shall have provided by prior written notice to the Lender, (i) the Owner has received offering proceeds of at least $1,000,000 from the issuance of the Owner Secured Recourse Promissory Notes and (ii) such proceeds have been released to the Owner (and not returned to the subscribers of the Owner Secured Recourse Promissory Notes) from the escrow account described in the Owner Private Placement Memorandum.

“Owner Private Placement Memorandum” means that certain Private Placement Memorandum, dated October 1, 2007, as supplemented or restated from time to time, and titled “Leaf Commercial Finance Fund, LLC Secured Recourse Promissory Notes”, a copy of which has been provided to the Collateral Agent by the Owner.

“Owner Secured Promissory Notes” means the Secured Recourse Promissory Notes issued by the Owner pursuant to the Indenture described in Owner Private Placement Memorandum.

“Parallel Defaults” has the meaning assigned to that term in Section 5.01(u) hereof.

“Permitted Investments” means any one or more of the following:

(i) direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States;

(ii) repurchase obligations (the collateral for which is held by a third party or the Trustee), with respect to any security described in clause (i) above, provided that the long-term unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by Moody’s and S&P in one of their two highest long-term rating categories and if rated by Fitch, in one of its two highest long-term rating categories;

(iii) certificates of deposit, time deposits, demand deposits and bankers’ acceptances of any bank or trust company incorporated under the laws of the United States or any State thereof or the District of Columbia, provided that the short-term commercial paper of such bank or trust company (or, in the case of the principal depository institution in a depository institution holding company, the long-term unsecured debt obligations of the depository institution holding company) at the date of acquisition thereof has been rated by Moody’s and S&P in their highest short-term rating category, and if rated by Fitch, in its highest short-term rating category;

(iv) commercial paper (having original maturities of not more than 270 days) of any corporation incorporated under the laws of the United States or any State thereof or the District of Columbia, having a rating, on the date of acquisition thereof, of no less than A-1 by Moody’s, P-1 by S&P and F-1 if rated by Fitch;

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(v) money market mutual funds, including funds managed by the Lender’s Bank or its Affiliates, registered under the Investment Company Act of 1940, as amended, having a rating, at the time of such investment, of no less than Aaa by Moody’s, AAA by S&P and AAA if rated by Fitch; and

(vi) any other investments approved in writing by the Lender.

provided, that no such instrument shall be a Permitted Investment if such instrument evidences the right to receive either (a) interest only payments with respect to the obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument, where the principal and interest payments with respect to such instrument provide a yield to maturity exceeding 120% of the yield to maturity at par of such underlying obligation.  Each Permitted Investment may be purchased by the Lender’s Bank or through an Affiliate of the Lender’s Bank.

“Permitted Liens” means:

(i) with respect to Obligor Collateral, (A) liens and security interests in favor of the Collateral Agent, granted pursuant to the Transaction Documents, (B) the interests of an Obligor arising under the Contract to which it is a party in the Obligor Collateral related to such Contract, (C) liens for taxes, assessments, levies, fees and other governmental and similar charges either not yet due or being contested in good faith and by appropriate proceedings, provided, that appropriate reserves shall have been established with respect to any such taxes either not yet due or being contested in good faith and by appropriate proceedings, (D) any liens with respect to any mechanics, suppliers, materialmen, laborers, employees, repairmen and other like liens arising in the ordinary course of a servicer’s, lessor’s/lender’s or lessee’s/borrower’s business securing obligations which are not due and payable, and (E) salvage rights of insurers with respect to the equipment subject to a Contract under insurance policies maintained pursuant to the Transaction Documents or a Contract; and

(ii) with respect to Underlying Collateral, in addition to the Permitted Liens described in clause (i) above, (x) liens in favor of Originator or the Borrower, granted by the applicable Underlying Obligor, in each case, solely to the extent assigned to the Collateral Agent and (y) the interests of an Underlying Obligor arising under the Underlying Contract to which it is a party in the Underlying Originator Loan Collateral related to such Underlying Contract.

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

“Pledge” means the pledge of any Receivable pursuant to Article II.

“Pledged Assets” has the meaning assigned to that term in Section 2.11.

“Pledged Receivables” means Pledged Pool A Receivables and Pledged Pool B Receivables.

“Pledged Pool A Receivables” has the meaning assigned to that term in Section 2.11(a).

“Pledged Pool B Receivables” has the meaning assigned to that term in Section 2.11(a).

“Pledged Receivables Balance” means, at any time, the aggregate Discounted Balances of all Receivables which are Pledged hereunder to secure Loans at such time.

“Pool A Annualized Net Loss Rate” means, as of any date of determination after the end of the third Collection Period following the date hereof, an amount (expressed as a percentage) equal to (i) the product of (A) (x) the aggregate Discounted Balances of all Pledged Pool A Receivables which were Eligible Pool A Receivables at the time of their Pledge hereunder and which became Defaulted Receivables during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods minus (y) Recoveries related to Pool A Receivable received during the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods and (B) 2 (if six or more Collection Periods have occurred since the date hereof), 2.4 (if five Collection Periods have occurred since the date hereof), 3 (if four Collection Periods have occurred since the date hereof), 4 (if three Collection Periods have occurred since the date hereof), 6 (if two Collection Periods have occurred since the date hereof) or 12 (if one Collection Period has occurred since the date hereof) divided by (ii) the Eligible Pool A Receivables Balance as of the first Business Day of the six (or such lesser number of Collection Periods since the date hereof) immediately preceding Collection Periods.

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“Pool A Borrowing Base” means, at any time, the lowest of:

(i) 98% of the Amortized Equipment Cost with respect to all Eligible Pool A Receivables; and

(ii) an amount equal to the Pool A Net Eligible Receivables Balance multiplied by a percentage equal to 92%.

“Pool A Contract” means a Lease Contract, a Loan Contract, a Practice Acquisition Loan Contract, a Real Estate Contract or an Other Commercial Contract.

“Pool A Lease File” has the meaning assigned to that term in clause (a) of the definition of “Receivable File”.

“Pool A Loan” has the meaning assigned to that term in Section 2.01.

“Pool A Loan File” has the meaning assigned to that term in clause (b) of the definition of “Receivable File”.

“Pool A Net Eligible Receivables Balance” means, at any time, (i) the Eligible Pool A Receivables Balance at such time minus (ii) the Pool A Overconcentration Amount at such time.

“Pool A Overconcentration Amount” means, at any time, (x) after the first anniversary of the Closing Date or (y) the aggregate outstanding principal balance of the Loans is greater than $35,000,000, without duplication, the sum of:

(i) an amount equal to the Global Overconcentration Amount at such time multiplied by a fraction the numerator of which is the aggregate Discounted Balances of all Eligible Pool A Receivables at such time and the denominator of which is the aggregate Discounted Balances of all Eligible Receivables at such time;

(ii) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables with respect to which the related Contract has a remaining term greater than 85 months and equal to or less than 120 months exceeds 50% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time;

(iii) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables with respect to which the related Contract has a remaining term greater than 120 months exceeds 15% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time;

(iv) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables with respect to which the related Contract has a Discounted Balance greater than $1,000,000 exceeds 50% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time;

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(v) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables related to any one vendor of Equipment (or Affiliate thereof) at such time exceeds 35% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time;

(vi) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables arising under a Contract which provides for a Balloon Payment or Put Payment, the amount of which is in excess of 34% of the original amount of the Scheduled Payments to be made under such Contract, exceeds 20% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time;

(vii) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables arising from Practice Acquisition Loan Contracts at such time exceeds 50% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time; and

(viii) the amount by which the sum of the Discounted Balances of all Eligible Pool A Receivables that are Stand Alone Working Capital Loans at such time exceeds 15% of the sum of the Discounted Balances of all Eligible Pool A Receivables at such time.

“Pool A Receivable” means the rights to all payments from an Obligor under a Pool A Contract, including, without limitation, any right to the payment with respect to (i) Scheduled Payments, (ii) any prepayments or overdue payments made with respect to such Scheduled Payments, (iii) any Guaranty Amounts, (iv) any Insurance Proceeds, (v) any Servicing Charges and (vi) any Recoveries.

“Pool A Termination Event” means the occurrence of any of the following events:

(i) the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods, calculated by the Lender solely with respect to Pool A Receivables, exceeds 3.5%;

(ii) the Annualized Default Rate, calculated by (or in a manner satisfactory to) the Lender solely with respect to Pool A Receivables, exceeds 4.0%; or

(iii) the Pool A Annualized Net Loss Rate exceeds 3.5%.

“Pool B Annualized Net Loss Rate” means with respect to any Underlying Originator, as of any date of determination at least three Collection Periods after the date that the Pool B Receivable related to such Underlying Originator is Pledged hereunder (the “Applicable Date”), an amount (expressed as a percentage) equal to (i) the product of (A) (x) the aggregate Discounted Balances of all Underlying Contracts related to such Underlying Originator which were Eligible Underlying Contracts at the time of the Pledge of the related Pool B Receivable hereunder and as to which an Underlying Contract Event of Default has occurred during the six (or such lesser number of Collection Periods since the Applicable Date) immediately preceding Collection Periods minus (y) recoveries received by the Underlying Originator during the six (or such lesser number of Collection Periods since the Applicable Date) immediately preceding Collection Periods and (B) 2 (if six or more Collection Periods have occurred since the Applicable Date), 2.4 (if five Collection Periods have occurred since the Applicable Date), 3 (if four Collection Periods have occurred since the Applicable Date), 4 (if three Collection Periods have occurred since the Applicable Date), 6 (if two Collection Periods have occurred since the Applicable Date) or 12 (if one Collection Period has occurred since the Applicable Date) divided by (ii) the aggregate Discounted Balances of all Underlying Contracts related to such Underlying Originator which are Eligible Underlying Contracts as of the first Business Day of the six (or such lesser number of Collection Periods since the Applicable Date) immediately preceding Collection Periods.

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“Pool B Borrowing Base” means, at any time, (x) the sum of the amounts calculated with respect to each Eligible Pool B Receivable, equal to the least of:

       (i)     the sum of (A) 92% of the aggregate Discounted Balance of all related Underlying Contracts and (B) the amount of funds on deposit in the Cash Reserve Account related to such Eligible Pool B Receivable;

(ii) 100% of the Amortized Equipment Cost with respect to such Eligible Pool B Receivable at such time (calculated without giving effect to any associated amortized indirect costs related to the applicable Equipment) minus the Holdback Amount for such Eligible Pool B Receivable; or

(iii) the Discounted Balance of such Eligible Pool B Receivable

minus (y) the Pool B Overconcentration Amount.

“Pool B Contract” means an Underlying Originator Loan Contract.

“Pool B Loan” has the meaning assigned to that term in Section 2.01.

“Pool B Master Receivable File” has the meaning assigned to that term in clause (c) of the definition of “Receivable File”.

“Pool B Micro Ticket Receivables” means a Pool B Receivable related to equipment with an original cost of less than $3000 and with respect to which the related Obligor is an Obligor approved in writing by the Lender in its sole discretion.

“Pool B Net Eligible Receivables Balance” means, at any time, (i) the Eligible Pool B Receivables Balance at such time minus (ii) the Pool B Overconcentration Amount at such time.

“Pool B Overconcentration Amount” means, at any time, (x) after the first anniversary of the Closing Date or (y) the aggregate outstanding principal balance of the Loans is greater than $35,000,000, without duplication, the sum of:

(i) an amount equal to the Global Overconcentration Amount at such time multiplied by a fraction the numerator of which is the aggregate Discounted Balances of all Eligible Pool B Receivables at such time and the denominator of which is the aggregate Discounted Balances of all Eligible Receivables at such time;

(ii) the amount by which the sum of the Discounted Balances of all Eligible Pool B Receivables related to any one Underlying Originator (or Affiliate thereof) at such time exceeds $25,000,000;

(iii) the amount by which the sum of the Discounted Balances of all Eligible Pool B Receivables related to any one Underlying Obligor (or Affiliate thereof) at such time exceeds $1,000,000;

(iv) the amount by which the sum of the Discounted Balances of all Eligible Pool B Receivables with respect which the related Contract has a remaining term greater than 84 months exceeds 20% of the sum of the Discounted Balances of all Eligible Pool B Receivables at such time; and

(v) the amount by which the sum of the Discounted Balances of all Eligible Pool B Receivables that are Pool B Micro Ticket Receivables at such time exceeds $15,000,000.

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“Pool B Receivable” means the rights to all payments from an Obligor under a Pool B Contract, including, without limitation, any right to the payment with respect to (i) Scheduled Payments and Underlying Scheduled Payments, (ii) any prepayments or overdue payments made with respect to such Scheduled Payments and Underlying Scheduled Payments, (iii) any Guaranty Amounts, (iv) any Insurance Proceeds, (v) any Servicing Charges and (vi) any Recoveries.

“Pool B Termination Event” means, with respect to an Underlying Originator, the occurrence of any of the following events:

(i) other than with respect to Pool B Micro Ticket Receivables, the rolling weighted average of the Underlying Delinquency Rates with respect to such Underlying Originator in respect of any three consecutive Collection Periods exceeds 8%;

(ii) other than with respect to Pool B Micro Ticket Receivables, the Pool B Annualized Net Loss Rate with respect to such Underlying Originator in respect of any Collection Period exceeds 6%;

(iii) other than with respect to Pool B Micro Ticket Receivables, the current amount of recourse, if any, against such Underlying Originator with respect to its obligations under the related Underlying Originator Loan Contract is less than 5% of the maximum amount of such recourse;

(iv) with respect to Pool B Micro Ticket Receivables only, the rolling weighted average of the Underlying Delinquency Rates with respect to such Underlying Originator in respect of any three consecutive Collection Periods exceeds 10%;

(v) with respect to Pool B Micro Ticket Receivables only, the Pool B Annualized Net Loss Rate with respect to such Underlying Originator in respect of any Collection Period exceeds 25%;

(vi) with respect to Pool B Micro Ticket Receivables only, the current amount of recourse, if any, against such Underlying Originator with respect to its obligations under the related Underlying Originator Loan Contract is less than 5% of the maximum amount of such recourse; or

(vii) the occurrence of any Bankruptcy Event in respect of such Underlying Originator.

“Pool B Underlying Lease File” has the meaning assigned to that term in clause (d) of the definition of “Receivable File”.

“Pool B Underlying Loan File” has the meaning assigned to that term in clause (e) of the definition of “Receivable File”.

“Practice Acquisition Loan Contract” means, collectively, (i) a “Term Note (Level Payments)” together with the “Master Loan and Security Agreement” related thereto and incorporated by reference therein, each in the form attached hereto as Exhibit D-3 (as such exhibit may be updated from time to time by the Borrower with the consent of the Lender) or a “Finance Agreement” in one of the forms attached as Exhibit D-2(c) (as such exhibit may be updated from time to time by the Borrower with the consent of the Lender) or (ii) a loan agreement and promissory note otherwise approved by the Servicer in compliance with the Credit and Collection Policy as to which the Servicer has notified the Collateral Agent in writing, in each case, pursuant to which Originator makes a loan to an Obligor to enable such Obligor to acquire a dental, medical, osteopathic medical, optometric or veterinary practice, secured by Equipment related to the practice of dentistry, medicine or veterinary medicine and certain non-equipment assets, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“Prepayment Amount” means the principal amount of Loans repaid by the Borrower in connection with an optional prepayment of Loans made by the Borrower pursuant to Section 2.15 hereof.

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“Prepayment Date” means any date on which an optional prepayment of Loans is made by the Borrower pursuant to Section 2.15 hereof.

“Prepayment Premium” has the meaning ascribed thereto in the Fee Letter.

“Program Termination Cure Event” means the occurrence of any of the following events:

       (i)     following the occurrence of a Program Termination Event described in clause (iv), (v), (vi), (vii), (viii) or (ix) of the definition thereof, such Program Termination Event is cured within the following two Collection Periods and two further Collection Periods pass without the occurrence of such a Program Termination Event; or

(ii) following the occurrence of a Program Termination Event described in clause (xi) of the definition thereof, such Program Termination Event is cured;

provided that, in any event, no other Program Termination Event shall have occurred and be continuing.

“Program Termination Date” means the earliest of (i) the date of occurrence of any event described in Section 7.01(a) hereof, (ii) the date of the declaration of the Program Termination Date pursuant to any other subsection of Section 7.01 or (iii) the date of the declaration of the Program Termination Date by, and at the option of, the Lender upon the occurrence of a Program Termination Event.

“Program Termination Event” means the occurrence of any of the following events:

(i) a regulatory, tax or accounting body has ordered that the activities of the Lender or any Affiliate thereof contemplated hereby be terminated or, as a result of any other event or circumstance, the activities of the Lender or any Affiliate contemplated hereby may reasonably be expected to cause the Lender or the Person, if any, then acting as the administrator or the manager for the Lender or any of its Affiliates to suffer materially adverse regulatory, accounting or tax consequences;

(ii) an Event of Default has occurred and is continuing;

(iii) the Facility Maturity Date shall have occurred;

(iv) other than with respect to Pool B Micro Ticket Receivables,the Annualized Default Rate exceeds 4.5%;

(v) other than with respect to Pool B Micro Ticket Receivables, the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods exceeds 4.0%;

(vi) other than with respect to Pool B Micro Ticket Receivables, the Annualized Net Loss Rate exceeds 4.0%;

(vii) with respect to Pool B Micro Ticket Receivables only, the Annualized Default Rate exceeds 25.0%;

(viii) with respect to Pool B Micro Ticket Receivables only, the rolling weighted average of the Delinquency Rates in respect of any three consecutive Collection Periods exceeds 10.0%;

(ix) with respect to Pool B Micro Ticket Receivables only, the Annualized Net Loss Rate exceeds 25.0%;

(x) a Servicer Default has occurred and is continuing; or

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(xi) (1) any Qualifying Swap Counterparty ceases to maintain the long-term debt ratings required of a Qualifying Swap Counterparty and (A) does not post cash collateral in a manner acceptable to the Lender within 45 days and (B) is not replaced within 45 days by a replacement acceptable to the Lender or (2) the Borrower fails to comply with any term, covenant or agreement hereunder related to the maintenance of any Qualifying Interest Rate Swaps; or

(xii) the occurrence of three or more Pool A Termination Events and/or Pool B Termination Events.

“Purchase and Sale Agreement” means that certain Purchase and Sale Agreement, dated as of the date hereof, between the Originator, as seller, and the Borrower, as purchaser, together with all instruments, documents and agreements executed in connection therewith, as such Purchase and Sale Agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms hereof.

“Purchase Date” has the meaning set forth in the Purchase and Sale Agreement.

“Put Payment” means with respect to any Contract or Underlying Contract constituting a lease, the payment, if any, required to be made by the Obligor under the terms of such lease in connection with the required purchase by such Obligor or Underlying Obligor of the related Equipment or Underlying Equipment at the end of the term of such lease.

“QSC Subordinated Termination Payment” means a termination payment required to be made by  the Borrower to a Qualifying Swap Counterparty upon the termination of the related Qualifying Interest Rate Swap pursuant to an event of default or termination event (other than Illegality or Tax Event) (each as defined in the related Qualifying Interest Rate Swap) as to which the Qualifying Swap Counterparty was the defaulting party or the sole affected party under the Qualifying Interest Rate Swap.

“Qualifying Interest Rate Swap” means (X) an interest rate swap agreement (i) between the Borrower and a Qualifying Swap Counterparty, (ii) under which the Borrower shall receive a floating rate of interest based on a Eurodollar Index acceptable to the Lender in exchange for the payment by the Borrower of a fixed rate of interest equal to the applicable Swapped Rate, (iii) the effective date of which is a Borrowing Date, (iv) having a varying notional balance which is, as of the effective date thereof, in an amount equal to the aggregate principal amount of the Loans advanced on such effective date and (v) which shall otherwise be on such terms and conditions and pursuant to such documentation as shall be acceptable to the Lender or (Y) an alternative interest rate hedging agreement agreed to in writing by the Borrower and the Lender.

“Qualifying Swap Counterparty” means Morgan Stanley Capital Services Inc. (or any successors or permitted assigns) or any other financial institution that is in the business of entering into interest rate swap transactions, is acceptable to the Lender and has a long-term senior unsecured debt rating of “A” or higher (or the equivalent) by each Rating Agency then rating such long-term senior unsecured debt) or posts cash collateral in a manner and amount satisfactory to the Lender.

“Rating Agencies” means Moody’s, S&P and Fitch, or any other nationally recognized statistical rating organizations as may be designated by the Lender.

“Real Estate Contract” means a loan agreement and promissory note, finance agreement or similar agreement, in each case, (i) in a form approved by the Servicer in compliancein writing by the Lender (in its reasonable discretion) and that is consistent with the Credit and Collection Policy, in each case, and (ii) pursuant to which the Originator makes a loan to an Obligor secured by rentals or other receivables arising from the use of real property, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“Receivable” means a Pool A Receivable or a Pool B Receivable.

“Receivable File” means with respect to each Receivable:

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(a) if such Receivable is related to a Lease Contract the following items (collectively, a “Pool A Lease File”):

(i) (1) the related original, executed Lease Contract (or, in the case of a Lease Contract under a master lease, a machine or facsimile copy of the related master lease certified by an authorized officer of the Borrower and stamped “I hereby certify that this is a true and exact copy of the original” and an original, executed schedule thereto describing the related Equipment) unless such Lease Contract is related to an Exception Sublimit Receivable, in which event the executed Lease Contract (or, in the case of Lease Contracts under a master lease, the related schedule) may be a machine or facsimile copy certified in the manner described above, (2) a true, executed copy of the related delivery/installation certificate or acknowledgment and acceptance of delivery certificate if such Receivable is related to Equipment with an original cost in excess of $50,000, (3) a true copy of the  Insurance Certificate if such Receivable is related to Equipment with an original cost in excess of $100,000, (4) other than with respect to a Lease Contract related to Equipment which has an original cost of less than $25,000 if such Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Lease Contract is a FMV Contract, a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement and (5) vendor order(s) or invoice(s); and

(ii) copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable;

(b) if such Receivable is related to a Loan Contract or a Practice Acquisition Loan Contract  the following items (collectively, a “Pool A Loan File”):

(i) (1) the original, if a promissory note was executed by the related Obligor in connection with such Loan Contract or Practice Acquisition Loan Contract, the original of such executed promissory note (with a fully executed, original Allonge attached thereto); provided that, with regard to any “Finance Agreement”, no executed promissory note or fully executed, original Allonge need be included, (2) a true, executed copy of the related “Master Loan and Security Agreement”, “Finance Agreement” or similar agreement pursuant to which the Originator made the related loan to the related Obligor (and any amendments thereto), (3) a true copy of the related Insurance Certificate if such Receivable is related to Equipment with an original cost in excess of $100,000 and (4) other than with respect to a Receivable related to Equipment which has an original cost of less than $25,000, a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement; and

(ii) copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable;

(c) if such Receivable is related to an Underlying Originator Loan Contract the following items (collectively, a “Pool B Master Receivable File”):

(i) (1) the original,if a promissory note was executed by the related Obligor in connection with such Underlying Originator Loan Contract, the original of such executed promissory note (with a fully executed, original Allonge attached thereto) unless such Underlying Originator Loan Contract is in the form of a “Master Purchase and Sale Agreement,; provided that, with regard to any “Finance Agreement”, no executed promissory note or fully executed, original Allonge need be included, (2) a true, executed copy of the related security agreement unless such Underlying Originator Loan Contract is in the form of a “Master Purchase and Sale Agreement” that, “Finance Agreement” or such other form of agreement approved in writing by the Lender (in its reasonable discretion) that, in any case, includes language granting to the purchaser thereunder a security interest in all the related Underlying Originator Loan Collateral and other property pledged by the related Obligor to secure its obligations under such Underlying Originator Loan Contract, and (3) a “transmittal order” from the Servicer to a filing service company and an “in process report” from such filing service company to the Servicer (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement; and

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(ii) copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable;

(d) if such Receivable is related to a Underlying Originator Loan Contract which finances an Underlying Lease Contract the following items (collectively, a “Pool B Underlying Lease File”):

(i) (1) the related original, executed Underlying Lease Contract (or, in the case of an Underlying Lease Contract under a master lease, a machine or facsimile copy of the related master lease certified by an authorized officer of the Borrower and stamped “I hereby certify that this is a true and exact copy of the original” and an original, executed schedule thereto describing the related Equipment) and (2) other than with respect to an Underlying Lease Contract related to Equipment which has an original cost of less than $25,000 if such Underlying Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Underlying Lease Contract is a FMV Contract, a “transmittal order” from the Underlying Originator to a filing service company and an “in process report” from such filing service company to the Underlying Originator (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Underlying Lease Contract being executed, a file-stamped copy of the related UCC financing statement; and

(ii) copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable;

(e) if such Receivable is related to an Underlying Originator Loan Contract which finances an Underlying Loan Contract the following items (collectively, a “Pool B Underlying Loan File”):

(i) (1) the original, executed promissory note (with fully executed, original Allonge attached thereto), (2) a true, executed copy of the related security agreement and (3) other than with respect to an Underlying Loan Contract related to Equipment which has an original cost of less than $25,000 a “transmittal order” from the Underlying Originator to a filing service company and an “in process report” from such filing service company to the Underlying Originator (or other evidence of the submission of the related UCC financing statement for filing in the appropriate filing office) and, within 45 days of the related Contract being executed, a file-stamped copy of the related UCC financing statement; and

(ii) copies of any additional documents, other than servicing related documents, that the Borrower keeps on file with respect to such Receivable.

In addition, if the Obligor Collateral related to such Receivable is a Vehicle, the related Receivable File shall include the original copy of the Certificate of Title with respect to such Vehicle, which such Certificate of Title satisfies the Titling Requirements or (prior to the 90th day after such Receivable was first included in the calculation of the Eligible Receivables Balance, if such Certificate of Title has not yet been received by the Servicer or the Borrower) a copy of the application for such Certificate of Title.

“Receivables Schedule” has the meaning assigned to that term in the Custodial Agreement.

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“Records” means all documents, books, records and other information (including, without limitation, tapes, disks, punch cards and related property and rights) maintained with respect to Receivables and the related Obligors which the Borrower has itself generated, in which the Borrower has acquired an interest pursuant to the Purchase and Sale Agreement or in which the Borrower has otherwise obtained an interest.

“Recoveries” means, for any Collection Period during which, or any Collection Period after the date on which, any Receivable becomes a Defaulted Receivable and with respect to such Defaulted Receivable, all payments

that the Servicer received from or on behalf of the related Obligor during such Collection Period in respect of such Defaulted Receivable or from the repossession, liquidation or re-leasing of the related Obligor Collateral, including but not limited to Scheduled Payments, Overdue Payments, Guaranty Amounts and Insurance Proceeds.

“Registrar of Titles” means with respect to any State, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.

“Related Security” means with respect to any Receivable:

(i) any and all security interests or liens and property subject thereto from time to time securing or purporting to secure payment of such Receivable;

(ii) all guarantees, indemnities, warranties, letters of credit, insurance policies and proceeds and premium refunds thereof and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable; and

(iii) all proceeds of the foregoing.

“Release Price” means, with respect to a Pledged Receivable to be released hereunder, an amount equal to the Discounted Balance of such Pledged Receivable at the time of such release plus interest accrued thereon at the Discount Rate from and including the Remittance Date immediately preceding the date such Pledged Receivable is to be released through (but not including) the next succeeding Remittance Date.

“Remittance Date” means the twenty-third (23rd) day of each month beginning December, 2006, or, if such date is not a Business Day, the next succeeding Business Day; provided, that the final Remittance Date shall occur on the Collection Date.

“Resource America” means Resource America, Inc., a Delaware corporation.

“Rollover Interest Period” means any Interest Period other than any Interest Period (i) applicable to the Loan arising as a result of the Borrowing on the initial Borrowing Date or (ii) applicable to any new Loan arising as a result of a Borrowing on a Subsequent Borrowing Date.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (or its successors in interest).

“Scheduled Payments” means, with respect to any Receivable, the periodic payments payable under the terms of the related Contract (but not including any such periodic payment to the extent paid in advance by the related Obligor).

“Secured Parties” means the Lender, the Servicer, the Backup Servicer, the Custodian, the Lender’s Bank, each Qualified Swap Counterparty and their respective successors and assigns.

“Security Deposit” means any amount paid to the Servicer or the Borrower by an Obligor as a security deposit or as a payment in advance of any amounts to become due under a Contract, which has not previously been refunded to such Obligor or applied toward such Obligor’s obligations under such Contract (for purposes of clarification, a Cash Reserve shall not be deemed to constitute a Security Deposit).

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“Security Deposit Account” has the meaning assigned to that term in Section 2.05.

“Security Deposit Account Agreement” means that certain Securities Account Agreement, dated the date of this Agreement, among the Borrower, the Servicer, the Lender’s Bank and the Lender, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“Servicer” means, at any time, LEAF Financial or any other Person then authorized, pursuant to Section 6.01, to service, administer and collect Pledged Receivables.

“Servicer Advance” has the meaning assigned to such term in Section 6.19.

“Servicer Default” means the occurrence of any of the following events:

(i) the failure of the Servicer to deliver any payments, collections or proceeds which it is obligated to deliver under the terms hereof or of any other Transaction Document at the times it is obligated to make such deliveries under the terms hereof or of any other Transaction Document, and such failure remains unremedied for two Business Days;

(ii) the failure of the Servicer to satisfy any of its reporting, certification, notification or documentation requirements under the terms hereof or of any other Transaction Document or the failure of the Servicer to observe or perform any material term, covenant or agreement hereunder or under any other Transaction Document (other than those described in clause (i) above) and such failure shall remain unremedied for 10 days after the Servicer first has knowledge, whether constructive or actual, of such failure;

(iii) any representation, warranty or statement of the Servicer made herein or in any other Transaction Document shall prove to be incorrect in any material respect, and, solely if such incorrect representation, warranty or statement can be remedied, such representation, warranty or statement is not made true within 15 days;

(iv) the occurrence of an Event of Default;

(v) the occurrence of a Program Termination Event described in clauses (iv), (v), (vi), (vii), (viii), (ix) or (xii) of the definition of Program Termination Events; or

(vi) the occurrence of any Bankruptcy Event in respect of the Servicer.

“Servicer Pension Plan” means a “pension plan” as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA and to which the Servicer or any ERISA Affiliate of Servicer may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“Servicing Charges” means the sum of (a) all late payment charges paid by Obligors under Contracts after payment in full of any Scheduled Payments due in a prior Collection Period and Scheduled Payments for the related Collection Period and (b) any other incidental charges or fees received from an Obligor, including, but not limited to, late fees, collection fees, taxes and charges for insufficient funds.

“Servicing Fee” means, for any Fee Period, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to (i) the Servicing Fee Rate multiplied by (ii) the Net Eligible Receivables Balance as of the first day of such Fee Period multiplied by (iii) a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360.  Upon assuming the duties of the Servicer hereunder, the Backup Servicer shall also be entitled to receive a one-time acceptance fee of $60,000, which shall be considered part of the “Servicing Fee” hereunder but shall be in addition to the amount set forth in the sentence above.

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“Servicing Fee Rate” means 1.00%.

“Stand Alone Working Capital Loan” means a loan to a dental, medical, osteopathic medical, optometric or veterinary practice that may be secured by all assets of such dental, medical, osteopathic medical, optometric or veterinary practice or that might be unsecured.

“Standby Backup Servicer’s Fee” means, for any Fee Period or portion thereof prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder, an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to the greater of (i) the Standby Backup Servicing Fee Rate, multiplied by the Net Eligible Receivables Balance as of the first day of such Fee Period, multiplied by a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360, or (ii) $1,500.  The “Standby Backup Servicer’s Fee” shall also include (i) a one-time acceptance fee of $4,000 payable on the Closing Date and (ii) reasonable out-of-pocket expenses incurred by the Standby Backup Servicer in the performance of its duties.

“Standby Backup Servicing Fee Rate” means .0215%.

“State” means one of the fifty states of the United States or the District of Columbia.

“Subsequent Borrowing” means a Borrowing which occurs on a Subsequent Borrowing Date.

“Subsequent Borrowing Date” means each Business Day occurring after the initial Borrowing Date on an additional Borrowing is funded from the Lender to the Borrower.

“Swapped Rate” means, with respect to any Qualifying Interest Rate Swap, the annual rate of interest (expressed as a percentage) which the Borrower, as the fixed-rate payor, is required to pay under such Qualifying Interest Rate Swap in order to receive the floating rate of interest provided for under such Qualifying Interest Rate Swap.

“Tangible Net Worth” means, with respect to any Person, the amount calculated in accordance with GAAP as (i) the consolidated net worth of such Person and its consolidated subsidiaries (excluding, solely with respect to the Owner and only to the extent otherwise included in such consolidated net worth, any mark-to-market gain or loss on any swap or other hedge transaction of the Owner and its consolidated subsidiaries), plus (ii) to the extent not otherwise included in such consolidated net worth, unsecured subordinated Debt of such Person (and, solely with respect to the Owner and only to the extent not otherwise included in such consolidated net worth, (x) intercompany Debt of the Owner and (y) the aggregate outstanding principal balance of the Owner Secured Recourse Promissory Notes held by Persons that are not Affiliates of the Owner) and its consolidated subsidiaries, the terms and conditions of which are reasonably satisfactory to the Lender, minus (iii) the consolidated intangibles of such Person and its consolidated subsidiaries, including, without limitation, goodwill, trademarks, tradenames, copyrights, patents, patent allocations, licenses and rights in any of the foregoing and other items treated as intangibles in accordance with GAAP.

“Titling Requirements” means that:

(i) in the case of any Vehicle leased or sold to an Obligor pursuant to a Pool A Contract, the Certificate of Title for such Vehicle indicates the Obligor, as owner, and the Borrower or an Approved Lienholder, as lienholder;

(ii) in the case of any Vehicle leased or sold to an Underlying Obligor pursuant to an Underlying Contract, the Certificate of Title for such Vehicle indicates the Underlying Obligor, as owner, and an Approved Lienholder, as lienholder.

 “Transaction Documents” means this Agreement, the Purchase and Sale Agreement, the Lockbox Intercreditor Agreement,the Collection Account Agreement, the Security Deposit Account Agreement, each Cash Reserve Account Agreement, the Fee Letter, the Custodial Agreement, the Originator Insurance Agreement, any lease bailment agreement with a sub-custodian and each Qualifying Interest Rate Swap and each document and instrument related to any of the foregoing.

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“Transition Costs” means any documented expenses and allocated cost of personnel reasonably incurred by the Backup Servicer in connection with a transfer of servicing from the Servicer to the Backup Servicer as the successor Servicer; provided, that such expenses and allocated costs do not exceed $60,000.

“UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“Underlying Collateral” means the Underlying Equipment leased or sold to an Underlying Obligor, or serving otherwise as collateral for a loan to an Underlying Obligor under an Underlying Contract.

“Underlying Contract” means an Underlying Lease Contract or an Underlying Loan Contract.

“Underlying Contract Event of Default” means, as of any time of determination, the occurrence and continuation of any of the following events with respect to any Underlying Contract:

(i) any Underlying Scheduled Payment (or other amount payable under the terms of the related Underlying Contract) remains unpaid for more than 120 days after the due date therefor set forth in such Underlying Contract;

(ii) the first or second Underlying Scheduled Payment is not paid in full when due under the related Underlying Contract;

(iii) any payment or other material terms of the related Underlying Contract have been modified due to credit related reasons after such Underlying Contract was acquired by Originator;

(iv) such Underlying Contract has been or should be charged off as a result of the occurrence of a Bankruptcy Event with respect to the related Underlying Obligor, if any, or has been or should otherwise be deemed uncollectible by the Underlying Originator in accordance with its credit and collection policy; or

(v) the related Underlying Equipment has been repossessed.

“Underlying Delinquency Rate” means with respect to any Underlying Originator, as of any date of determination, an amount (expressed as a percentage) equal to (i) the aggregate Discounted Balances of all Underlying Contracts related to such Underlying Originator as to which any part of any Underlying Scheduled Payment (or other amount payable under the terms of the related Underlying Contract) remains unpaid for more than 30 days but not more than 120 days after the due date therefor set forth in such Underlying Contract as of the last day of the immediately preceding Collection Period divided by (ii) the aggregate Discounted Balances with respect to all Eligible Pool B Underlying Lease Contracts and Eligible Pool B Underlying Loan Contracts related to such Underlying Originator as of such day.

“Underlying Equipment” means the equipment or Vehicle leased or sold to an Underlying Obligor by an Underlying Originator, or serving as collateral for a loan to an Underlying Obligor by an Underlying Originator, under an Underlying Contract together with any replacement parts, additions and repairs thereof, and any accessories incorporated therein and/or affixed thereto.

“Underlying Insurance Certificate” means with respect to any Pool B Receivable, the insurance certificate related to the Underlying Insurance Policy with respect to the Underlying Contract relating to such Receivable (which insurance certificate shall list the Originatoror the Underlying Originator as the loss payee).

“Underlying Insurance Policy” means, with respect to any Underlying Collateral, the insurance policy maintained by or on behalf of the Obligor pursuant to the related Contract that covers physical damage to the related Equipment (in an amount sufficient to insure completely the value of such Equipment) and general liability (including policies procured by the Borrower or the Servicer, or any agent thereof, on behalf of the Obligor).

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“Underlying Lease Contract” means a lease contract, finance agreement and/or similar agreement(s) (in any case, which is in the form of a lease) pursuant to which Underlying Equipment is leased to an Underlying Obligor by an Underlying Originator, together with all schedules, supplements and amendments thereto and each other document and instrument related to such lease contract.

“Underlying Lease Documents” means, with respect to any Pool B Receivable, the Underlying Lease Contract and all agreements, documents or instruments evidencing, securing, guaranteeing or otherwise relating to the obligations of the Underlying Obligor thereunder.

“Underlying Loan Contract” means, collectively, a promissory note, a loan agreement and a, finance agreement, security agreement and/or similar agreement(s), pursuant to which an Underlying Originator makes a loan to an Underlying Obligor secured by Underlying Equipment owned by such Underlying Obligor, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“Underlying Loan Documents” means, with respect to any Pool B Receivable, the Underlying Loan Contract and all agreements, documents or instruments evidencing, securing, guaranteeing or otherwise relating to the obligations of the Underlying Obligor thereunder, including, without limitation, the note or notes evidencing such indebtedness.

“Underlying Obligor” means, collectively, each Person obligated to make payments under an Underlying Contract.

“Underlying Originator” means an Obligor engaged, in the ordinary course of business in providing financing to Underlying Obligors for the purposes of acquiring Underlying Equipment.

“Underlying Originator Credit and Collection Policy” means the credit and collection policy of an Underlying Originator, as such policy may hereafter be amended, modified or supplemented from time to time in compliance with this Agreement.

“Underlying Originator Loan Collateral” means Underlying Loan Contracts and Underlying Lease Contracts and all other assets of the Underlying Originators which secure the obligations of Underlying Originators under an Underlying Originator Loan Contract, or which are sold to the Originator by Underlying Originators under an Underlying Originator Loan Contract, in each case whether now owned or hereafter acquired, and including without limitation the Underlying Loan Documents, the Underlying Lease Documents, Underlying Security Deposit (if any) and the Underlying Equipment related thereto, together with all proceeds of every kind and nature, including proceeds of proceeds, of any and all of the foregoing.

“Underlying Originator Loan Contract” means, collectively, a “Master Purchase and Sale Agreement,” a “Master Loan and Security Agreement,” or a “Loan and Security Agreement,” a “Finance Agreement” or similar agreement in a form approved in writing by the Lender (in its reasonable discretion), each of which complies with all of the criteria set forth in Exhibit D-4 hereto (as such exhibit may be updated from time to time by the Borrower with the consent of the Lender), pursuant to which Originator makes a purchase of Underlying Originator Loan Collateral from an Underlying Originator or makes a loan to an Underlying Originator secured by Underlying Originator Loan Collateral, together with all schedules, supplements and amendments thereto and each other document and instrument related thereto.

“Underlying Scheduled Payments” means, with respect to any Underlying Contract, the periodic payments payable under the terms of such Underlying Contract (but not including any such periodic payment to the extent paid in advance by the related Underlying Obligor).

“Underlying Security Deposit” means any amount paid to an Underlying Originator by an Underlying Obligor as a security deposit or as a payment in advance of any amounts to become due under an Underlying Contract, which has not previously been refunded to such Underlying Obligor or applied toward such Underlying Obligor’s obligations under such Underlying Contract.

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“United States” means the United States of America.

“Unmatured Event of Default” means any event that, if it continues uncured, will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default.

“Vehicle” means a new or a used automobile, minivan, sports utility vehicle, light duty truck or heavy duty truck.

“Weighted Average Swapped Rate” means, as of any date of determination, the weighted average (weighted solely based on the Calculated Swap Amortizing Balances of such Qualifying Interest Rate Swaps as of such date of determination) of the Swapped Rates of the Qualifying Interest Rate Swaps in effect on such date of determination.

SECTION 1.02 Other Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP.  All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9.

SECTION 1.03 Computation of Time Periods.  Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

ARTICLE II.

THE RECEIVABLES FACILITY

SECTION 2.01 Borrowings.  On the terms and conditions hereinafter set forth, the Lender shall make loans (“Loans”) to the Borrower secured by Pledged Assets from time to time during the period from the date hereof until the earlier of the Program Termination Date or the Facility Maturity Date. Separate Loans will be made to finance the Borrower’s acquisition of (x) Pool A Receivables (“Pool A Loans”) and (y) Pool B Receivables (“Pool B Loans”), and no Loan shall finance both Pool A Receivables and Pool B Receivables.  Under no circumstances shall the Lender make, or the Borrower request, any Loan if (a) the principal amount of such Loan is less than (i) with respect to the initial Borrowing only, $10,000,000 and (ii) with respect to any Subsequent Borrowing, $500,000, or (b) after giving effect to the Borrowing of such Loan, either (i) a Program Termination Event or an event that but for notice or lapse of time or both would constitute a Program Termination Event has occurred and is continuing or (ii) the aggregate Facility Amount hereunder would exceed the lesser of (A) the Borrowing Limit and (B) the Borrowing Base.  Under no circumstances shall the Lender make, or the Borrower request, any Loan secured by Pool A Receivables if after giving effect to the Borrowing of such Loan, either (1) the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool A Receivables, would exceed the Pool A Borrowing Base or (2) a Pool A Termination Event shall exist.  Under no circumstances shall the Lender make, or the Borrower request, any Loan secured by any Pool B Receivable if after giving effect to the Borrowing of such Loan, either (1) the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool B Receivables, would exceed the Pool B Borrowing Base or (2) a Pool B Termination Event shall exist with respect to the Underlying Originator related to such Pool B Receivable.

SECTION 2.02 The Initial Borrowing and Subsequent Borrowings.

(a) Until the occurrence of the earlier of the Program Termination Date and the Facility Maturity Date, the Lender will make Loans on any Business Day at the request of the Borrower, subject to and in accordance with the terms and conditions of Sections 2.01 and 2.02 and subject to the provisions of Article III hereof.

(b) (i)   The initial Borrowing shall be made on at least five (5) Business Days’ irrevocable written notice from the Borrower to the Lender and each Subsequent Borrowing shall be made on at least three (3) Business Days’ irrevocable written notice from the Borrower to the Lender (any such written notice, a “Notice of Borrowing”), provided that such Notice of Borrowing is received by the Lender no later than 12:00 noon (New York City time) on the Business Day of receipt.  Any Notice of Borrowing received after 12:00 noon (New York City time) shall be deemed received prior to 12:00 noon (New York City time) on the following Business Day.  Each such Notice of Borrowing shall specify (A) the aggregate amount of such Borrowing, (B) the date of such Borrowing, (C) the allocation of the Loans as Pool A Loans and Pool B Loans, and (D) the Eligible Pool A Receivables and the Eligible Pool B Receivables to be Pledged in connection with such Borrowing (and upon such Borrowing, such Receivables shall be Pledged Receivables hereunder).  On the date of each Borrowing, the Lender shall, upon satisfaction of the applicable conditions set forth in Article III, make available to the Borrower on the applicable Borrowing Date, no later than 2:00 P.M. (New York City time), in same day funds, the amount of such Borrowing (net of amounts payable to or for the benefit of the Lender), by payment into the account which the Borrower has designated in writing.

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(ii) Each Notice of Borrowing delivered to the Lender pursuant to this Section 2.02(b) shall be in an electronic file format acceptable to the Lender (A) accompanied by a copy of the Notice of Pledge (and the Receivables Schedule attached thereto), which was sent to the Custodian pursuant to the terms of the Custodial Agreement in connection with the pledge of Eligible Receivables to be made in connection therewith and (B) specifying for each Receivables pledged therein the information set forth on Exhibit B hereto.

(iii) The Loans shall bear interest at the Interest Rate.

(iv) Subject to Section 2.15 and the other terms, conditions, provisions and limitations set forth herein, the Borrower may borrow, repay or prepay and reborrow Loans, on and after the date hereof and prior to the earlier to occur of the Facility Maturity Date and the Program Termination Date.

(v) Determinations by the Lender of the existence of any Eurodollar Disruption Event (any such determination to be communicated to the Borrower by written notice from the Lender promptly after the Lender learns of such event), or of the effect of any Eurodollar Disruption Event on its making or maintaining Loans at the Adjusted Eurodollar Rate, shall be conclusive absent manifest error.

SECTION 2.03 Determination of Interest Periods and Interest Rates.

(a) The initial Interest Period applicable to any new Loan arising as a result of a Borrowing shall commence on, and include, the date of such Borrowing and shall terminate on, and include, the day immediately prior to the next occurring Remittance Date or such earlier date as the Lender may determine (an “Early Interest Period Termination Date”).  All outstanding Pool A Loans allocated to one or more initial Interest Periods or Rollover Interest Periods maturing on the same date shall be combined and allocated to a single Rollover Interest Period at the end of such initial Interest Periods or Rollover Interest Periods.  All outstanding Pool B Loans allocated to one or more initial Interest Periods or Rollover Interest Periods maturing on the same date shall be combined and allocated to a single Rollover Interest Period at the end of such initial Interest Periods or Rollover Interest Periods.  Each Rollover Interest Period shall commence on, and include, the Remittance Date following the last day of the immediately preceding Interest Period (or, if applicable, on an Early Interest Period Termination Date) and shall terminate on, and include, the day immediately prior to the next occurring Remittance Date.

(b) The interest rate per annum (the “Interest Rate”) applicable to any Loan for any Interest Period shall be equal to the Adjusted Eurodollar Rate; provided, however, that if the Lender shall have notified the Borrower that a Eurodollar Disruption Event has occurred, the Interest Rate for such Loan shall be equal to the Base Rate until such Eurodollar Disruption Event has ceased, at which time the Interest Rate shall again be equal to the Adjusted Eurodollar Rate.  Notwithstanding the foregoing:

(c) upon the occurrence and during the continuance of any Program Termination Event, the applicable Interest Rate for all Interest Periods in effect at the time of such occurrence shall convert to, and for all Interest Periods that come into effect during the continuance of any Event of Default shall be, the Default Funding Rate;

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(d) upon the occurrence and during the continuance of any Pool A Termination Event, the applicable Interest Rate for all Interest Periods with respect to all Pool A Loans in effect at the time of such occurrence shall

convert to, and for all Interest Periods with respect to all Pool A Loans that come into effect during the continuance of any Pool A Termination Event shall be, the Default Funding Rate; and

(e) upon the occurrence and during the continuance of any Pool B Termination Event, the applicable Interest Rate for all Interest Periods with respect to all Pool B Loans in effect at the time of such occurrence shall convert to, and for all Interest Periods with respect to all Pool B Loans that come into effect during the continuance of any Pool B Termination Event shall be, the Default Funding Rate.

SECTION 2.04 Remittance Procedures.  The Servicer, as agent for the Lender, shall instruct the Lender’s Bank and, if the Servicer fails to do so, the Collateral Agent shall instruct the Lender’s Bank, to apply funds on deposit in the Collection Account as described in this Section 2.04.

(a) Interest and Breakage Fees.  On each Business Day (including any Remittance Date), the Servicer shall, and, if the Servicer fails to do so, the Lender may direct the Lender’s Bank to, retain in the Collection Account for transfer at the further direction of the Lender or any duly authorized agent of the Lender (whether on such day or on a subsequent day) collected funds in an amount equal to accrued and unpaid interest through such day on the Loans not so previously retained and the amount of any accrued and unpaid Breakage Fees owed to the Lender on such day.  On or before the last day of each Interest Period, the Lender shall notify the Servicer of the accrued and unpaid interest for such Interest Period and the Servicer shall, on the last day of each Interest Period, direct the Lender’s Bank to pay collected funds set aside in respect of accrued and unpaid interest pursuant to this Section 2.04(a) to the Lender (or the designee of the Lender) in respect of payment of such accrued and unpaid interest for such Interest Period.  On any Business Day on which an amount is set aside in respect of Breakage Fees pursuant to this Section 2.04(a), the Servicer shall direct the Lender’s Bank to pay such funds to the Lender in payment of such Breakage Fees.

(b) Interest Period Loan Principal Repayment.  The Servicer shall, and if the Servicer fails to do so the Lender may, by 10:00 a.m. (St. Paul, Minnesota time) on the last day of each Interest Period that is not a Remittance Date, direct the Lender’s Bank to transfer collected funds held by the Lender’s Bank in the Collection Account on such date, to pay the Lender in payment (or partial payment) of the outstanding principal amount of all Loans allocated to such Interest Period, in an amount equal to the least of (i) the amount of such collected funds held in the Collection Account other than funds set aside pursuant to Section 2.04(a), (ii) the aggregate outstanding principal amount of Loans allocated to such Interest Period, (iii) if no Program Termination Event shall have occurred and be continuing, an amount equal to the sum of (A) the excess, if any, of the Facility Amount immediately prior to such distribution, calculated solely with respect to Loans secured by Pool A Receivables over the Pool A Borrowing Base and (B) the excess, if any, of the Facility Amount immediately prior to such distribution, calculated solely with respect to Loans secured by Pool B Receivables over the Pool B Borrowing Base (with respect to Pool A Loans and Pool B Loans collectively, after giving effect to any Borrowing made on such date and any distributions of amounts on deposit in the Collection Account made on such date) or (iv) if no Program Termination Event shall have occurred and be continuing, an amount equal to the excess, if any, of the Facility Amount immediately prior to such distribution over the lesser of (A) the Borrowing Base and (B) the Borrowing Limit (after giving effect to any Borrowing made on such date and any distributions of amounts on deposit in the Collection Account made on such date).

(c) Remittance Date Transfers From Collection Account.  The Servicer shall, and if the Servicer fails to do so the Collateral Agent shall, by 10:00 a.m. (St. Paul, Minnesota time) on each Remittance Date, direct the Lender’s Bank to transfer collected funds held by the Lender’s Bank in the Collection Account which were remitted to the Collection Account during the Collection Period with respect to such Remittance Date (“Available Funds”), in the following amounts and priority:

(i) to the Borrower, in an amount equal to such funds which were paid by Obligors with respect to their obligation under the related Contracts to pay any taxes (it being agreed by the Borrower that such amount shall be promptly paid to the taxing authorities entitled thereto);

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(ii) to the related Qualifying Swap Counterparty under each Qualifying Interest Rate Swap, in an amount equal to (and for the payment of) all amounts which are due and payable by the Borrower to such Qualifying Swap Counterparty on such Remittance Date, pursuant to the terms of the applicable Qualifying Interest Rate Swap or this Agreement, other than any QSC Subordinated Termination Amounts which are due and payable by the Borrower pursuant to the applicable Qualifying Interest Rate Swap;

(iii) on a pro rata basis, to (x) the Backup Servicer in an amount equal to the Standby Backup Servicer’s Fee (to the extent accrued and unpaid as of the last day of the immediately preceding Fee Period) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder and (y) the Custodian, the Custodian’s Fee and (z) the Lender’s Bank, the Lender’s Bank Fee;

(iv) at any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, to the Backup Servicer in an amount equal to (1) the Active Backup Servicer’s Fees which are accrued and unpaid as of the last day of the immediately preceding Fee Period plus (2) any Transition Costs not previously reimbursed to the Backup Servicer plus (3) the Active Backup Servicer’s Indemnified Amounts;

(v) to the Lender in an amount equal to (and for the pro rata payment of) (A) the Fees which are due and payable on such Remittance Date pursuant to the terms of the Fee Letter and (B) any interest on any Loan which is accrued and unpaid as of the last day of the immediately preceding Fee Period;

(vi) at any time prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, to the Servicer in an amount equal to the Servicing Fee which is accrued and unpaid as the last day of the immediately preceding Fee Period;

(vii) to the Lender (for application to the repayment of Loans Outstanding) in an amount equal to the sum (in the following order, if the available amount should be insufficient to pay in full such sum), without duplication, of:

                           (x)           any Borrowing Base Deficiency;

           (y)           the excess of the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool A Receivables, over the Pool A Borrowing Base; and

           (z)           the excess of the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool B Receivables, over the Pool B Borrowing Base;

(viii) on a pro rata basis, (A) to the Servicer in an amount equal to any Servicer Advances (and amounts to be reimbursed as Servicer Advances pursuant to Section 6.03) not previously reimbursed to the Servicer and (B) to the Lender in an amount equal to the aggregate amount of all other Obligations then due from the Borrower to the Lender or any Affected Party hereunder for the account of such parties as applicable (other than those specified in clauses (ix) through (xii) below);

(ix) on or after the occurrence of the Program Termination Date (but prior to any Program Termination Cure Event with respect to the Program Termination Event related to such Program Termination Date), to the Lender for the repayment of Loans Outstanding in an amount equal to the lesser of (A) all remaining Available Funds in the Collection Account and (B) an amount necessary to repay the outstanding principal amount of all Loans in full;

(x) on or after the occurrence of a Pool A Termination Event, to the Lender for the repayment of Pool A Loans in an amount equal to the lesser of (A) all remaining Available Funds in the Collection Account and (B) an amount necessary to repay the outstanding principal amount of all Pool A Loans in full;

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(xi) on or after the occurrence of a Pool B Termination Event with respect to any Underlying Originator, to the Lender for the repayment of Pool B Loans related to such Underlying Originator in an amount equal to the lesser of (A) all remaining Available Funds in the Collection Account and (B) an amount necessary to repay the outstanding principal amount of all Pool B Loans related to such Underlying Originator in full;

(xii) to the related Qualifying Swap Counterparty under each Qualifying Interest Rate Swap in an amount equal to (and for the payment of) any QSC Subordinated Termination Payments which are due and payable by the Borrower to such Qualifying Swap Counterparty on such Remittance Date pursuant to the applicable Qualifying Interest Rate Swap; and

(xiii) to the order of the Borrower, any remaining amounts.

(d) Borrower Deficiency Payments.  Notwithstanding anything to the contrary contained in this Section 2.04 or in any other provision in this Agreement, if, on any day prior to the Collection Date, the Facility Amount shall exceed the Borrowing Limit, then the Borrower shall remit to the Lender, prior to any Borrowing and in any event no later than the close of business of the Lender on such day (or if such day is not a Business Day, no later than the close of business of the Lender on the next succeeding Business Day), a payment (to be applied by the Lender to repay Loans selected by the Lender, in its sole discretion), in such amount as may be necessary to reduce the Facility Amount to an amount less than or equal to the Borrowing Limit.  Notwithstanding anything to the contrary contained in this Section 2.04 or in any other provision in this Agreement, if, on any day prior to the Collection Date, the Facility Amount shall exceed the Borrowing Base, then the Borrower shall (X) remit to the Lender, prior to any Borrowing and in any event no later than the close of business of the Lender on such day (or if such day is not a Business Day, no later than the close of business of the Lender on the next succeeding Business Day), a payment (to be applied by the Lender to repay Loans selected by the Lender, in its sole discretion), in such amount as may be necessary to reduce the Facility Amount to an amount less than or equal to the Borrowing Base or (Y) Pledge additional Eligible Receivables hereunder, prior to any Borrowing and in any event no later than the close of business of the Lender on such day (or if such day is not a Business Day, no later than the close of business of the Lender on the next succeeding Business Day) in such amount as may be necessary to increase the Borrowing Base to an amount equal to or greater than the Facility Amount.

(e) Pool A Deficiency Payments.  Notwithstanding anything to the contrary contained in this Section 2.04 or in any other provision in this Agreement, if, on any day prior to the Collection Date, the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool A Receivables, would exceed the Pool A Borrowing Base, then the Borrower shall remit to the Lender, prior to any Borrowing and in any event no later than the close of business of the Lender on such day (or if such day is not a Business Day, no later than the close of business of the Lender on the next succeeding Business Day), a payment (to be applied by the Lender to repay Loans with respect to Pool A Receivables selected by the Lender, in its sole discretion), in such amount as may be necessary to reduce such excess to zero.

(f) Pool B Deficiency Payments.  Notwithstanding anything to the contrary contained in this Section 2.04 or in any other provision in this Agreement, if, on any day prior to the Collection Date, the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool B Receivables, would exceed the Pool B Borrowing Base, then the Borrower shall remit to the Lender, prior to any Borrowing and in any event no later than the close of business of the Lender on such day (or if such day is not a Business Day, no later than the close of business of the Lender on the next succeeding Business Day), a payment (to be applied by the Lender to repay Loans with respect to Pool B Receivables selected by the Lender, in its sole discretion), in such amount as may be necessary to reduce such excess to zero.

(g) Instructions to the Lender’s Bank.  All instructions and directions given to the Lender’s Bank by the Servicer, the Borrower or the Lender pursuant to this Section 2.04 shall be in writing (including instructions and directions transmitted to the Lender’s Bank in electronic format), and such written instructions and directions shall be delivered with a written certification that such instructions and directions are in compliance with the provisions of this Section 2.04.  The Servicer and the Borrower shall immediately transmit to the Lender by telecopy a copy of all instructions and directions given to the Lender’s Bank by such party pursuant to this Section 2.04.  The Lender shall immediately transmit to the Servicer and the Borrower by telecopy a copy of all instructions and directions given to the Lender’s Bank by the Lender, pursuant to this Section 2.04.

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SECTION 2.05 Security Deposit Account.

(a) On or before the date hereof, the Borrower shall enter into a Security Deposit Account Agreement and open and maintain a segregated trust account (the “Security Deposit Account”) at the Lender’s Bank, for the receipt of amounts representing any Security Deposits with respect to any Pool A Contract by the related Obligor.  The Servicer shall promptly deposit into the Security Deposit Account, all Security Deposits related to Pledged Pool A Receivables which are in the possession of, or come into the possession of, the Servicer or the Originator.  Monies received in the Security Deposit Account shall be invested in Permitted Investments at the written direction of the Servicer or the Lender (as determined in accordance with the Security Deposit Account Agreement) during the term of this Agreement, and any income or other gain realized from such investment shall be held in the Security Deposit Account, subject to disbursement and withdrawal as herein provided.  No such Permitted Investment shall mature later than the Business Day preceding the next following Remittance Date and shall not be sold or disposed of prior to its maturity.  Monies shall be subject to withdrawal in accordance with Section 2.05(d) hereof.

(b) The Servicer shall provide to the Borrower monthly written confirmation of investments of funds held in the Security Deposit Account, describing the Permitted Investments in which such amounts have been invested.  Any funds not so invested shall be insured by the Federal Deposit Insurance Corporation.

(c) If any amounts invested as provided in Section 2.05(a) hereof shall be subject to disbursement from the Security Deposit Account as set forth in Section 2.05(d) hereof, the Servicer shall cause such investments of such Security Deposit Account to be sold or otherwise converted to cash to the credit of such Security Deposit Account.  The Servicer shall not be liable for any investment loss resulting from investment of money in the Security Deposit Account in any Permitted Investment in accordance with the terms hereof (other than in its capacity as obligor under any Permitted Investment and other than to the extent such loss results from the gross negligence or wilful misconduct of the Servicer).

(d) Disbursements from the Security Deposit Account shall be made, to the extent funds therefore are available, only as follows:

(i) for deposit in the Collection Account in accordance with the direction of the Servicer prior to 2:00 p.m. New York time on the Business Day prior to any Remittance Date to the extent that the Servicer, in accordance with the terms of a Pool A Contract, has determined that amounts in respect of a Security Deposit shall be applied as full or partial Recoveries or, in its discretion, as a full or partial Scheduled Payment under such Pool A Contract;

(ii) the Security Deposit with respect to a Pledged Pool A Receivable shall be paid to or upon the order of the Servicer at any time that the Pool A Contract with respect to which such Security Deposit has been made is no longer a Pledged Pool A Receivable, whether through maturity of such Pool A Contract or repurchase by the Servicer, for further disposition by the Servicer in accordance with the terms of the related Pool A Contract or applicable law; and

(iii) any amounts remaining in the Security Deposit Account upon the Collection Date shall be distributed to or at the direction of the Servicer for further disposition in accordance with the terms of the related Contract or applicable law.

SECTION 2.06 Cash Reserve Account.

(a) From time to time after the date hereof, the Borrower may enter into one or more Cash Reserve Account Agreements and open and maintain a segregated trust account (any such account, a “Cash Reserve Account”) at the Lender’s Bank, for the receipt of amounts representing any Cash Reserves funded with respect to any Pool B Contract. The Servicer shall promptly deposit into the Cash Reserve Account, all Cash Reserves related to Pledged Pool B Receivables which are in the possession of, or come into the possession of, the Servicer or the Originator.  Monies received in any Cash Reserve Account shall be invested in Permitted Investments at the written direction of the Servicer or the Lender (as determined in accordance with the Cash Reserve Account Agreement) during the term of this Agreement, and any income or other gain realized from such investment shall be held in such Cash Reserve Account, subject to disbursement and withdrawal as herein provided.  No such Permitted Investment shall mature later than the Business Day preceding the next following Remittance Date and shall not be sold or disposed of prior to its maturity.  Monies shall be subject to withdrawal in accordance with Section 2.06(d) hereof.

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(b) The Servicer shall provide to the Borrower monthly written confirmation of investments of funds held in each Cash Reserve Account, describing the Permitted Investments in which such amounts have been invested.  Any funds not so invested shall be insured by the Federal Deposit Insurance Corporation.

(c) If any amounts invested as provided in Section 2.06(a) hereof shall be subject to disbursement from a Cash Reserve Account as set forth in Section 2.06(d) hereof, the Servicer shall cause such investments of such Cash Reserve Account to be sold or otherwise converted to cash to the credit of such Cash Reserve Account.  The Servicer shall not be liable for any investment loss resulting from investment of money in the Cash Reserve Account in any Permitted Investment in accordance with the terms hereof (other than in its capacity as obligor under any Permitted Investment and other than to the extent such loss results from the gross negligence or willful misconduct of the Servicer).

(d) Disbursements from any Cash Reserve Account shall be made, to the extent funds therefore are available, only as follows:

(i) for deposit in the Collection Account in accordance with the direction of the Servicer prior to 2:00 p.m. New York time on the Business Day prior to any Remittance Date to the extent that the Servicer, in accordance with the terms of a Pool B Contract, has determined that amounts in respect of a Cash Reserve shall be applied as full or partial Recoveries or, in its discretion, as a full or partial Scheduled Payment under such Pool B Contract;

(ii) the Cash Reserve with respect to a Pool B Contract shall be paid to or upon the order of the Servicer at any time that the related Pool B Loan has been repaid in full and the Pool B Contract with respect to which such Cash Reserve has been made is no longer a Pledged Receivable, whether through maturity of such Contract or repurchase by the Servicer, for further disposition by the Servicer in accordance with the terms of the related Pool B Contract or applicable law; and

(iii) any amounts remaining in the Cash Reserve Account upon the Collection Date shall be distributed to or at the direction of the Servicer for further disposition in accordance with the terms of the related Pool B Contract or applicable law.

SECTION 2.07 Payments and Computations, Etc.  a) All amounts to be deposited or paid by the Borrower or the Servicer to the Lender hereunder shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (New York City time) on the day when due in lawful money of the United States in immediately available funds to the Collection Account or such other account as is designated by the Lender.  The Borrower shall, to the extent permitted by law, pay to the Lender interest on all amounts not paid or deposited when due hereunder (whether owing by the Borrower or the Servicer) at the Base Rate, plus 2%, payable on demand; provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law.  Such interest shall be for the account of the Lender.  Any Obligation hereunder shall not be reduced by any distribution of any portion of Collections with respect to any Pledged Receivable if at any time such distribution is rescinded or returned by the Lender to the Borrower or any other Person for any reason.  All computations of interest and all computations of Breakage Fee and other fees hereunder (including, without limitation, the Fees, the Active Backup Servicer’s Fee, the Standby Backup Servicer’s Fee, the Custodian’s Fee and the Servicing Fee) shall be made on the basis of a year of 360 days (or 365 or 366 days for interest calculated at the Base Rate) for the actual number of days (including the first but excluding the last day) elapsed.

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(b) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be

included in the computation of payment of interest or any fee payable hereunder, as the case may be; provided, however, that with respect to the calculation of interest, such extension of time shall not be included in more than one Interest Period.

(c) If any Borrowing requested by the Borrower and approved by the Lender pursuant to Section 2.02 is not for any reason whatsoever, except as a result of the gross negligence or wilful misconduct of the Lender or an Affiliate thereof, made or effectuated, as the case may be, on the date specified therefor, the Borrower shall indemnify the Lender against any loss, cost or expense incurred by the Lender related thereto (other than any such loss, cost or expense solely due to the gross negligence or willful misconduct of the Lender or an Affiliate thereof), including, without limitation, any loss (including cost of funds and reasonable out-of-pocket expenses), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lender to fund Loans or maintain Loans during such Interest Period.  The Lender shall provide to the Borrower documentation setting forth the amounts of any loss, cost or expense referred to in the previous sentence, such documentation to be conclusive absent manifest error.

SECTION 2.08 Fees.  a) The Borrower shall pay the Lender certain fees (the “Fees”) in the amounts and on the dates set forth in a fee letter (the “Fee Letter”), dated the date hereof, among the Borrower and the Lender, as may be amended, restated, supplemented or otherwise modified from time to time.

(b) All of the Fees payable pursuant to this Section 2.08 (other than Fees payable on the date hereof) shall be payable solely from amounts available for application pursuant to, and subject to the priority of, payment set forth in, Section 2.04.

SECTION 2.09 Increased Costs; Capital Adequacy.  a) If, due to either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation (including, without limitation, any law or regulation resulting in any interest payments paid to a Lender under this Agreement being subject to United States withholding tax) or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Lender or any Affiliate, successor or assign or participant thereof (each of which shall be an “Affected Party”) of agreeing to make or making, funding or maintaining any Loan (or any reduction of the amount of any payment (whether of principal, interest, fee, compensation or otherwise) to any Affected Party hereunder), as the case may be, the Borrower shall, from time to time, within ten days after written demand complying with Section 2.09(c) by the Lender, on behalf of such Affected Party, pay to the Lender, on behalf of such Affected Party, additional amounts sufficient to compensate such Affected Party for such increased costs or reduced payments.

(b) If either (i) the introduction of or any change in or in the interpretation of any law, guideline, rule or regulation, directive, request or accounting principle or (ii) the compliance by any Affected Party with any law, guideline, rule, regulation, directive, request or accounting principle from any central bank, other governmental authority, agency or accounting authority (whether or not having the force of law), including, without limitation, compliance by an Affected Party with any request or directive regarding capital adequacy, has or would have the effect of reducing the rate of return on the capital of any Affected Party, as a consequence of its obligations hereunder or any related document or arising in connection herewith or therewith to a level below that which any such Affected Party could have achieved but for such introduction, change or compliance (taking into consideration the policies of such Affected Party with respect to capital adequacy), by an amount deemed by such Affected Party to be material, then, from time to time, after demand by such Affected Party (which demand shall be accompanied by a statement setting forth the basis of such demand), the Lender shall be paid, on behalf of such Affected Party (from Collections with respect to Pledged Receivables pursuant to, and subject to the priority of payment set forth in, Section 2.04), such additional amounts as will compensate such Affected Party for such reduction.

(c) In determining any amount provided for in this Section 2.09, the Affected Party may use any reasonable averaging and attribution methods.  The Lender, on behalf of any Affected Party making a claim under this Section 2.09, shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of such additional or increased costs, which certificate shall be conclusive absent demonstrable error.

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(d) If, as a result of any event or circumstance similar to those described in Section 2.09(a) or 2.09(b), any Affected Party (that is a Lender) is required to compensate a bank or other financial institution (including, without limitation, any Affiliate of Morgan Stanley) providing liquidity support, credit enhancement or other similar support to such Affected Party in connection with this Agreement, then, upon demand by such Affected Party, the Borrower shall pay, in accordance with Section 2.04, to such Affected Party such additional amount or amounts as may be necessary to reimburse such Affected Party for any amounts paid by it, and shall notify each Qualified Swap Counterparty of such payment.

SECTION 2.10 Collateral Assignment of Agreements.  The Borrower hereby collaterally assigns to the Collateral Agent (and its successors and assigns) for the benefit of the Secured Parties, all of the Borrower’s right and title to and interest in, to and under (but not any obligations under) the Purchase and Sale Agreement, each Qualifying Interest Rate Swap, the Contract related to each Pledged Receivable, all other agreements, documents and instruments evidencing, securing or guarantying any Pledged Receivable and all other agreements, documents and instruments related to any of the foregoing (the “Assigned Documents”).  Without limiting any obligation of the Servicer hereunder, the Borrower confirms and agrees that the Collateral Agent (or any designee thereof, including, without limitation, the Servicer), following an Event of Default or a Program Termination Event, shall have the right to enforce the Borrower’s rights and remedies under each Assigned Document, but without any obligation on the part of the Collateral Agent or any of its Affiliates to perform any of the obligations of the Borrower under any such Assigned Document.  In addition, each of the Servicer and the Borrower confirms and agrees that the Servicer and the Borrower will, upon receipt of notice or discovery thereof, promptly send to the Collateral Agent a notice of (i) any breach of any representation, warranty, agreement or covenant under any such Assigned Document or (ii) any event or occurrence that, upon notice, or upon the passage of time or both, would constitute such a breach, in each case, immediately upon learning thereof.  The parties hereto agree that such assignment to the Collateral Agent shall terminate upon the Collection Date.

SECTION 2.11 Grant of a Security Interest.  To secure the prompt and complete payment when due of the Obligations and the performance by the Borrower of all of the covenants and obligations to be performed by it pursuant to this Agreement, the Borrower hereby (i) collaterally assigns and pledges to the Collateral Agent (and its successors and assigns), for the benefit of the Secured Parties, and (ii) grants a security interest to the Collateral Agent (and its successors and assigns), for the benefit of the Secured Parties, in all property of the Borrower, whether tangible or intangible and whether now owned or existing or hereafter arising or acquired and wheresoever located (collectively, the “Pledged Assets”), including, without limitation, all of the Borrower’s right, title and interest in, to and under:

(a) all Pool A Receivables and Pool B Receivables purchased by (or otherwise transferred or pledged pursuant to the terms of the Purchase and Sale Agreement) to the Borrower under the Purchase and Sale Agreement from time to time (such Pool A Receivables, the “Pledged Pool A Receivables”, and such Pool B Receivables, the “Pledged Pool B Receivables”), all Other Conveyed Property related to the Pledged Receivables purchased by (or otherwise transferred or pledged pursuant to the terms of the Purchase and Sale Agreement) to the Borrower under the Purchase and Sale Agreement, all Related Security related to the Pledged Receivables, all interest of the Borrower in all Obligor Collateral related to the Pledged Receivables (together with all security interests in and insurance proceeds related to such Obligor Collateral and all proceeds from the disposition of such Obligor Collateral, whether by sale to the related Obligors or otherwise), any Security Deposits or Cash Reserve related to such Pledged Receivables, all Collections and other monies due and to become due under the Contracts (and, if applicable, Underlying Contracts) related to the Pledged Receivables received on or after the date such Pledged Receivables were purchased by (or purportedly purchased by) the Borrower under the Purchase and Sale Agreement;

(b) the Assigned Documents, including, in each case, without limitation, all monies due and to become due to the Borrower under or in connection therewith;

(c) the Collection Account, the Lockbox, the Lockbox Account, the Security Deposit Account, each Cash Reserve Account and all other bank and similar accounts relating to Collections with respect to Pledged Receivables (whether now existing or hereafter established) and all funds held therein, and all investments in and all income from the investment of funds in the Collection Account, the Lockbox Account, the Security Deposit Account, each Cash Reserve Account and such other accounts;

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(d) the Records relating to any Pledged Receivables;

(e) all UCC financing statements filed by the Borrower against the Originator under or in connection with the Purchase and Sale Agreement;

(f) [Reserved];

(g) each Qualifying Interest Rate Swap, any other interest rate protection agreement entered into with respect to the transactions contemplated under the RLSA and, in each case, all payments thereunder;

(h) all Liquidation Proceeds relating to any Pledged Receivables; and

(i) all proceeds of the foregoing property described in clauses (a) through (g) above, including interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for or on account of the sale or other disposition of any or all of the then existing Pledged Receivables.

The Borrower hereby authorizes the Collateral Agent to file financing statements describing as the collateral covered thereby as "all of the debtor's personal property or assets" or words to that effect, notwithstanding that such wording may be broader in scope than the collateral described in this Agreement.

SECTION 2.12 Evidence of Debt.  The Lender shall maintain an account or accounts evidencing the indebtedness of the Borrower to the Lender resulting from each Loan owing to the Lender from time to time, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder.  The entries made in such account(s) of the Lender shall be conclusive and binding for all purposes, absent manifest error.

SECTION 2.13 Release of Pledged Receivables.  a) Subject to Section 2.15 hereof, upon the repayment of any Loan, the Borrower may obtain the release of any Pledged Receivable and the related Other Conveyed Property or Related Security securing such Loan (including, without limitation, the release of any security interest of the Collateral Agent or the Borrower therein) by depositing into an account designated by the Lender the Release Price therefor on the date of such repayment; provided, that the foregoing release shall only be available if, after giving effect thereto and the application of the proceeds thereof in accordance with the terms hereof, there shall not be a Borrowing Base Deficiency, Program Termination Event, Pool A Termination Event or a Pool B Termination Event (and such Pool B Termination Event is related to such Pledged Receivable), or an event that but for notice or lapse of time or both would constitute any of the foregoing events.

(b) The Borrower shall notify the Collateral Agent of any Release Price to be paid pursuant to this Section 2.13 on the Business Day on which such Release Price shall be paid specifying the Pledged Receivables to be released and the Release Price.

(c) Promptly after the Collection Date has occurred, the Collateral Agent shall re-assign and transfer to the Borrower, for no consideration but at the sole expense of the Borrower, their respective remaining interests in the Pledged Assets, free and clear of any Adverse Claim resulting solely from an act by the Collateral Agent but without any other representation or warranty, express or implied, by or recourse against the Collateral Agent.

SECTION 2.14 Treatment of Amounts Paid by the Borrower.  Amounts paid by the Borrower pursuant to Section 2.13 on account of Pledged Receivables shall be treated as payments on Pledged Receivables hereunder.

SECTION 2.15 Prepayment; Certain Indemnification Rights; Termination.  a) The Borrower may prepay, in whole or in part, the outstanding principal amount of any Loans advanced hereunder.  Any amounts so prepaid shall be applied to repay the outstanding principal amount of Loans allocated to an Interest Period or Interest Periods selected by the Lender.  Amounts prepaid pursuant to this Section 2.15(a) may be reborrowed in accordance with the terms of this Agreement.  If the Borrower intends to make an optional prepayment pursuant to this Section 2.15(a), the Borrower shall give five (5) Business Days' prior written notice thereof to the Lender, specifying the intended Prepayment Date, the intended Prepayment Amount, whether the Loans being prepaid are Pool A Loans or Pool B Loans, a calculation of any applicable Breakage Fee and the Pledged Receivables that the Borrower shall request to

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have released pursuant to Section 2.13 in connection with such prepayment (and the Discounted Balance thereof).  Any such optional prepayment of the outstanding principal amount of any Loans advanced hereunder shall be accompanied by all interest accrued with respect thereto and the Prepayment Premium with respect to the applicable Prepayment Amount and Prepayment Date.  If such notice is given, the principal amount specified in such notice (together with all interest accrued with respect thereto and the Prepayment Premium related thereto) shall be due and payable on the Prepayment Date specified therein.  Notwithstanding the foregoing, any payment by the Borrower required pursuant to Section 2.04(c)(vii), Section 2.04(d),(e) or (f) or, in connection with the occurrence of an Event of Default, pursuant to Section 7.01 hereof shall not be considered an optional prepayment and no Prepayment Premium shall be required to be paid in respect thereof.

(b) Without limiting any other provision hereof, the Borrower agrees to indemnify the Lender, the Qualifying Swap Counterparty and any Affiliate thereof and to hold each such Person harmless from any cost, loss or expense which it may sustain or incur as a consequence of (i) the Borrower making any optional prepayment pursuant to Section 2.15(a) hereof, (ii) any default by the Borrower in making any optional prepayment pursuant to Section 2.15(a) hereof after notice of such prepayment has been given, (iii) any failure by the Borrower to take a Loan hereunder after notice of such Loan has been given pursuant to this Agreement, (iv) any acceleration of the maturity of any Loans by the Lender in accordance with the terms of this Agreement, including, but not limited to, any Breakage Fees, any cost, loss or expense arising related to the termination (in whole or in part) or amendment of any Qualifying Interest Rate Swap and from interest or fees payable by the Lender to lenders of funds obtained by it in order to advance or maintain the Loans hereunder.  Indemnification pursuant to this Section shall survive the termination of this Agreement and shall include reasonable fees and expenses of counsel and expenses of litigation.

(c) Notwithstanding any other provision hereof, the Borrower shall not terminate or amend this Agreement or any other Transaction Document or reduce the Borrowing Limit prior to the Facility Maturity Date without the Lender’s prior written consent, which consent may be withheld in the Lender’s sole discretion.

SECTION 2.16 Increase of Borrowing Limit.  The Borrower may, upon 30 days’ prior written notice to the Lender (with a simultaneous copy to the Initial Qualifying Swap Counterparty), request that the Borrowing Limit be increased, which request may be granted in the sole discretion, and with the written consent, of the Lender, it being agreed that the Borrower shall pay to the Lender the fee related to such increase that is required pursuant to the terms of the Fee Letter.

ARTICLE III.

CONDITIONS OF LOANS

SECTION 3.01 Conditions Precedent to Initial Borrowing.  The initial Borrowing hereunder is subject to the conditions precedent that:

(a) the Arrangement Fee (as such term is defined in the Fee Letter) shall have been paid in full and all other acts and conditions (including, without limitation, the obtaining of any necessary regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened prior to the execution, delivery and performance of this Agreement and all related documents and to constitute the same legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all applicable laws; and

(b) the Lender shall have received on or before the date of such Borrowing the items listed in Schedule I hereto, each in form and substance satisfactory to the Lender.

SECTION 3.02 Conditions Precedent to All Borrowings.  Each Borrowing (including the initial Borrowing, except as explicitly set forth below) by the Borrower from the Lender shall be subject to the further conditions precedent that:

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(a)  With respect to any such Borrowing (other than the initial Borrowing), on or prior to the date of such Borrowing, the Servicer shall have delivered to the Lender, in form and substance satisfactory to the Lender, the most recent Monthly Remittance Report required by the terms of Section 6.10(b);

(b) After giving effect to such Borrowing requested by the Borrower the following statements shall be true (and the Borrower shall be deemed to have certified that):

(i) the Facility Amount will not exceed the lesser of the (x) Borrowing Limit and (y) the Borrowing Base;

(ii) the Facility Amount, calculated solely with respect to Loans secured by Pool A Receivables, will not exceed the Pool A Borrowing Base; and

(iii) the Facility Amount, calculated solely with respect to Loans secured by Pool B Receivables, will not exceed the Pool B Borrowing Base;

(c) On the Borrowing Date of such Borrowing, the following statements shall be true and correct, and the Borrower by accepting any amount of such Borrowing shall be deemed to have represented that:

(i) the representations and warranties contained in Section 4.01 are true and correct in all material respects, before and after giving effect to the Borrowing to take place on such Borrowing Date and to the application of proceeds therefrom, on and as of such day as though made on and as of such date;

(ii) no event has occurred and is continuing, or would result from such Borrowing, which constitutes a Program Termination Event hereunder or an event that but for notice or lapse of time or both would constitute a Program Termination Event;

(iii) with respect to any Borrowing of a Pool A Loan, no event has occurred and is continuing, or would result from such Borrowing, which constitutes a Pool A Termination Event hereunder or an event that but for notice or lapse of time or both would constitute a Pool A Termination Event;

(iv) with respect to any Borrowing of a Pool B Loan, no event has occurred and is continuing, or would result from such Borrowing, which constitutes a Pool B Termination Event with respect to the Underlying Originator related to the Pool B Receivable securing such Pool B Loan or an event that but for notice or lapse of time or both would constitute such a Pool B Termination Event;

(v) (A) the principal amount of such Loan being advanced on such Borrowing Date is not less than $500,000, (b) on and as of such Borrowing Date, after giving effect to such Borrowing, the Facility Amount does not exceed the lesser of (A) the Borrowing Limit and (B) the Borrowing Base, (c) on and as of such Borrowing Date, after giving effect to such Borrowing, the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool A Receivables, does not exceed the Pool A Borrowing Base, and (d) on and as of such Borrowing Date, after giving effect to such Borrowing, the aggregate Facility Amount hereunder, calculated solely with respect to Loans secured by Pool B Receivables, does not exceed the Pool B Borrowing Base;

(vi) (A) the Borrower has delivered to the Lender a copy of the Notice of Borrowing and the related Notice of Pledge (together with the attached Receivables Schedule) pursuant to Section 2.02, each appropriately completed and executed by the Borrower, (B) the Borrower has delivered or caused to have been delivered to the Custodian the Notice of Pledge and each item listed in the definition of Receivable File with respect to the Receivables being Pledged hereunder three (3) or, in the case of the initial Borrowing Date hereunder, four (4) Business Days prior to such Borrowing Date, (C) the Contract related to each Receivable being Pledged hereunder on such Borrowing Date has been duly assigned by the Originator to the Borrower and duly assigned

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by the Borrower to the Collateral Agent and (D) by 2:00 P.M. (New York City time) on the Business Day immediately preceding such Borrowing Date, a Collateral Receipt from the Custodian confirming that, inter alia, the Receivable Files received on or before such Business Day conform with the Receivables Schedule delivered to the Custodian and the Lender pursuant to Section 2.02;

(vii) all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of each Receivable being Pledged hereunder on such Borrowing Date (and the Other Conveyed Property and Related Security related thereto), including, without limitation, the perfection of the Borrower’s interests therein (other than with respect to Equipment which has a value of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts), shall have been satisfied in full, and all filings (including, without limitation, UCC filings) required to be made by any Person and all actions required to be taken or performed by any Person in any jurisdiction to give the Collateral Agent a first priority perfected security interest in such Receivables, Related Security and the Other Conveyed Property related thereto and the proceeds thereof shall have been made, taken or performed;

(viii) (A) the initial Servicer shall have taken or caused to be taken all steps necessary under all applicable law (including the filing of an Obligor Financing Statement) in order to cause a valid, subsisting and enforceable perfected, first priority security interest to exist in Originator’s favor in the Obligor Collateral securing each Receivable being Pledged hereunder on such Borrowing Date (other than with respect to Equipment which has a value of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts), (B) the Originator shall have assigned the perfected, first priority security interest in the Obligor Collateral to the Borrower pursuant to the Purchase and Sale Agreement and (C) the Borrower shall have assigned the perfected, first priority security interest in the Obligor Collateral (and the proceeds thereof) referred to in clause (A) above to the Collateral Agent, pursuant to Section 2.11 hereof;

(ix) if the Obligor Collateral related to any Receivable securing such Borrowing is a Vehicle, the Borrower shall have delivered to the applicable Registrar of Titles an application for a Certificate of Title for such Vehicle satisfying the Titling Requirements; and

(x) the Borrower shall have taken all steps necessary under all applicable law in order to cause to exist in favor of the Collateral Agent a valid, subsisting and enforceable first priority perfected security interest in the Borrower’s interest in the Obligor Collateral related to each Receivable being Pledged hereunder on such Borrowing Date (other than with respect to Underlying Equipment which has a value of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts);

(d) No law or regulation shall prohibit, and no order, judgment or decree of any federal, state or local court or governmental body, agency or instrumentality shall prohibit or enjoin, the making of such Loans by the Lender in accordance with the provisions hereof; and

(e) The Lender shall have received and found to be satisfactory with respect to Pledged Receivables being Pledged in connection with such Borrowing, which have been previously pledged to any lender by the Originator, the Borrower or any Affiliate thereof under any other financing facility, evidence of the release of any liens granted in connection with such financing with respect to any such Pledged Receivables.

(f) Unless a credit agreement and/or security agreement, including but not limited to any such agreement with National City Bank, as agent, related to Receivables being Pledged by the Borrower in connection with such Borrowing, shall have provided for an automatic release of the Agent’s or Collateral Agent’s, as applicable, lien and security interest in such Receivables granted thereunder, the applicable agent or lender shall have executed and delivered to the Borrower and the Collateral Agent a partial release letter and the Borrower shall have duly filed with the appropriate filing office a UCC-3 partial release evidencing the release contained in such release letter, in each case in a form satisfactory to the Collateral Agent.

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       SECTION 3.03  Advances Do Not Constitute a Waiver.  No advance of a Loan hereunder shall constitute a waiver of any condition to the Lender’s obligation to make such an advance unless such waiver is in writing and executed by the Lender.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

SECTION 4.01 Representations and Warranties of the Borrower.  The Borrower hereby represents and warrants, as of the date hereof, on each Borrowing Date and on the first day of each Rollover Interest Period, as follows:

(a) Each Receivable designated as an Eligible Receivable on any Borrowing Base Certificate or Monthly Remittance Report is an Eligible Receivable.  Each Receivable included as an Eligible Receivable in any calculation of the Borrowing Base or the Eligible Receivables Balance is an Eligible Receivable.

(b) The Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the power and all licenses necessary to own its assets and to transact the business in which it is engaged and is duly qualified and in good standing under the laws of each jurisdiction where the transaction of such business or its ownership of the Pledged Receivables requires such qualification.

(c) The Borrower has the power, authority and legal right to make, deliver and perform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the Transaction Documents to which it is a party, and to grant to the Collateral Agent a first priority perfected security interest in the Pledged Assets on the terms and conditions of this Agreement.  This Agreement and each of the Transaction Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against it in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application affecting creditors’ rights generally and by general principles of equity (whether such enforceability is considered in a proceeding in equity or at law).  No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance by the Borrower of this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document or the Pledged Receivables, other than such as have been met or obtained.

(d) The execution, delivery and performance of this Agreement and all other agreements and instruments executed and delivered or to be executed and delivered pursuant hereto or thereto in connection with the Pledge of the Pledged Assets will not (i) create any Adverse Claim on the Pledged Assets or (ii) violate any provision of any existing law or regulation or any order or decree of any court, regulatory body or administrative agency or the certificate of formation or limited liability company agreement of the Borrower or any contract or other agreement to which or the Borrower is a party or by which the Borrower or any property or assets of the Borrower may be bound.

(e) No litigation or administrative proceeding of or before any court, tribunal or governmental body is presently pending or, to the knowledge of the Borrower, threatened against the Borrower or any properties of Borrower or with respect to this Agreement, which, if adversely determined, could have a Material Adverse Effect.

(f) In selecting the Receivables to be Pledged pursuant to this Agreement, no selection procedures were employed which are intended to be adverse to the interests of the Lender.

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(g) The grant of the security interest in the Pledged Assets by the Borrower to the Collateral Agent pursuant to this Agreement, is in the ordinary course of business for the Borrower and is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction.  No such Pledged Assets have been sold, transferred, assigned or pledged by the Borrower to any Person, other than the Pledge of such Assets to the Collateral Agent pursuant to the terms of this Agreement.

(h) The Borrower has no Debt or other indebtedness which, in the aggregate, exceeds $10,000, other than Debt incurred under the terms of the Transaction Documents.

(i) The Borrower has been formed solely for the purpose of engaging in the transactions contemplated by this Agreement and the other Transaction Documents.

(j) No injunction, writ, restraining order or other order of any nature adversely affects the Borrower’s performance of its obligations under this Agreement or any Transaction Document to which the Borrower is a party.

(k) The Borrower has filed (on a consolidated basis or otherwise) on a timely basis all tax returns (including, without limitation, all foreign, federal, state, local and other tax returns) required to be filed, is not liable for taxes payable by any other Person and has paid or made adequate provisions for the payment of all taxes, assessments and other governmental charges due from the Borrower except for those taxes being contested in good faith by appropriate proceedings and in respect of which no penalty may be assessed from such contest and it has established proper reserves on its books.  No tax lien or similar adverse claim has been filed, and no claim is being asserted, with respect to any such tax, assessment or other governmental charge.  Any taxes, fees and other governmental charges payable by the Borrower, as applicable, in connection with the execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated hereby or thereby have been paid or shall have been paid if and when due.

(l) The chief executive office of the Borrower (is located at 110 Poplar Street, Suite 101, Wilmington, DE 19801 and the location of the Borrower’s records regarding the Pledged Receivables (other than those delivered to the Custodian)) is located at 1818at One Commerce Square, 2005 Market Street, 915th Floor, Philadelphia, PA 19103.

(m) The Borrower’s legal name is as set forth in this Agreement; other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lender upon receipt of a notice delivered to the Lender pursuant to Section 6.18), the Borrower has not changed its name since its formation; the Borrower does not have tradenames, fictitious names, assumed names or “doing business as” names other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lender upon receipt of a notice delivered to the Lender pursuant to Section 6.18).

(n) The Borrower is solvent and will not become insolvent after giving effect to the transactions contemplated hereby; the Borrower is paying its debts as they become due; and the Borrower, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business.

(o) The Borrower has no subsidiaries.

(p) The Borrower has given fair consideration and reasonably equivalent value in exchange for the sale of the Pledged Receivables by the Originator under the Purchase and Sale Agreement.

(q) No Monthly Remittance Report or Borrowing Base Certificate (each if prepared by the Borrower or to the extent that information contained therein is supplied by the Borrower), information, exhibit, financial statement, document, book, record or report furnished or to be furnished by the Borrower to the Lender in connection with this Agreement is or will be inaccurate in any material respect as of the date it is or shall be dated or (except as otherwise disclosed in writing to the Lender, as the case may be, at such time) as of the date so furnished, and no such document contains or will contain any material misstatement of fact or omits or shall omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

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(r) No proceeds of any Loans will be used by the Borrower to acquire any security in any transaction, which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(s) There are no agreements in effect adversely affecting the rights of the Borrower to make, or cause to be made, the grant of the security interest in the Pledged Assets contemplated by Section 2.10.

(t) The Borrower is not an “investment company” or an “affiliated person” of or “promoter” or “principal underwriter” for an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended, nor is the Borrower otherwise subject to regulation thereunder.

(u) No Event of Default or Unmatured Event of Default has occurred and is continuing.

(v) Each of the Pledged Receivables was underwritten and is being serviced in conformance with Originator’s standard underwriting, credit, collection, operating and reporting procedures and systems (including, without limitation, the Credit and Collection Policy).

(w) The Borrower is in compliance with ERISA in all material respects. No steps have been taken to terminate any Borrower Pension Plan which could result in material liability, and no contribution failure has occurred with respect to any Borrower Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA.  No condition exists or event or transaction has occurred with respect to any Borrower Pension Plan which could result in the Borrower or any ERISA Affiliate of Borrower incurring any material liability, fine or penalty.

(x) There is not now, nor will there be at any time in the future, any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein), providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges.

(y)  Notwithstanding anything to the contrary in the Netbank Facility, no Pledged Receivable constitutes (for purposes of the Netbank Facility) an “Eligible Receivable” as defined under the Netbank Facility.

SECTION 4.02 Representations and Warranties of the Servicer.  The Servicer (so long as the Servicer is not the Backup Servicer as successor Servicer) hereby represents and warrants, as of the date hereof, on each Borrowing Date, on each Remittance Date and on the first day of each Rollover Interest Period, as follows:

(a) Each Receivable designated as an Eligible Receivable on any Borrowing Base Certificate or Monthly Remittance Report is an Eligible Receivable.  Each Receivable included as an Eligible Receivable in any calculation of the Borrowing Base or the Eligible Receivables Balance is an Eligible Receivable.

(b) The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the power and all licenses necessary to own its assets and to transact the business in which it is engaged (which includes servicing Receivables on behalf of third parties and itself) and is duly qualified and in good standing under the laws of each jurisdiction where its servicing of the Pledged Receivables requires such qualification.

(c) The Servicer has the power, authority and legal right to make, deliver and perform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the Transaction Documents to which it is a party.  This Agreement and each of the Transaction Documents to which the Servicer is a party constitutes the legal, valid and binding obligation of the Servicer, enforceable against it in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application affecting creditors’ rights generally and by general principles of equity (whether such enforceability is considered in a proceeding in equity or at law).  No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance by the Servicer of this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document, other than such as have been met or obtained.

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(d) The execution, delivery and performance of this Agreement by the Servicer and all other agreements and instruments executed and delivered or to be executed and delivered by the Servicer pursuant hereto or thereto in connection with the Pledge of the Pledged Assets will not (i) create any Adverse Claim on the Pledged Assets or (ii) violate any provision of any existing law or regulation or any order or decree of any court, regulatory body or administrative agency or the certificate of incorporation or bylaws of the Servicer or any material contract or other agreement to which the Servicer is a party or by which the Servicer or any of its property or assets may be bound.

(e) No litigation or administrative proceeding of or before any court, tribunal or governmental body is presently pending or, to the knowledge of the Servicer, threatened against the Servicer or any properties of the Servicer or with respect to this Agreement, which, if adversely determined, could have a Material Adverse Effect.

(f) No injunction, writ, restraining order or other order of any nature adversely affects the Servicer’s performance of its obligations under this Agreement or any Transaction Document to which the Servicer is a party.

(g) The Servicer has filed (on a consolidated basis or otherwise) on a timely basis all tax returns (including, without limitation, all foreign, federal, state, local and other tax returns) required to be filed, is not liable for taxes payable by any other Person and has paid or made adequate provisions for the payment of all taxes, assessments and other governmental charges due from the Servicer except for those taxes being contested in good faith by appropriate proceedings and in respect of which it has established proper reserves on its books.  No tax lien or similar adverse claim has been filed, and no claim is being asserted, with respect to any such tax, assessment or other governmental charge.  Any taxes, fees and other governmental charges payable by the Servicer in connection with the execution and delivery of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby or thereby have been paid or shall have been paid if and when due.

(h) The chief executive office of the Servicer (and the location of the Servicer’s records regarding the Pledged Receivables (other than those delivered to the Custodian)) is located at 1818One Commerce Square, 2005 Market Street, 915th Floor, Philadelphia, PA 19103.

(i) The Servicer’s legal name is as set forth in this Agreement; other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lender upon receipt of a notice delivered to the Lender pursuant to Section 6.18), the Servicer has not changed its name since its formation; the Servicer does not have tradenames, fictitious names, assumed names or “doing business as” names other than as disclosed on Schedule II hereto (as such schedule may be updated from time to by the Lender upon receipt of a notice delivered to the Lender pursuant to Section 6.18).

(j) The Servicer is solvent and will not become insolvent after giving effect to the transactions contemplated hereby; the Servicer is paying its debts as they become due; and the Servicer, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business.

(k) As of the date hereof and as of the date of delivery of any Monthly Remittance Report or Borrowing Base Certificate, no Monthly Remittance Report or Borrowing Base Certificate (each if prepared by the Servicer or to the extent that information contained therein is supplied by the Servicer), information, exhibit, financial statement, document, book, record or report furnished or to be furnished by the Servicer to the Lender in connection with this Agreement is or will be inaccurate in any material respect, and no such document contains or will contain any material misstatement of fact or omits or shall omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

(l) The Servicer is not an “investment company” or an “affiliated person” of or “promoter” or “principal underwriter” for an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended, nor is the Servicer otherwise subject to regulation thereunder.

(m) No Event of Default or Unmatured Event of Default has occurred and is continuing.

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(n) Each of the Pledged Receivables was underwritten and is being serviced in conformance with Originator’s and the Servicer’s standard underwriting, credit, collection, operating and reporting procedures and systems (including, without limitation, the Credit and Collection Policy).

(o) Any Computer Tape or Listing made available by the Servicer to the Lender was complete and accurate in all material respects as of the date on which such Computer Tape or Listing was made available.

(p) The Servicer is in compliance with ERISA in all material respects. No steps have been taken to terminate any Servicer Pension Plan which could result in material liability, and no contribution failure has occurred with respect to any Servicer Pension Plan sufficient to give rise to a lien under section 302(f) of ERISA.  No condition exists or event or transaction has occurred with respect to any Servicer Pension Plan which could result in the Servicer or any ERISA Affiliate of Servicer incurring any material liability, fine or penalty.

(q) There is not now, nor will there be at any time in the future, any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein), providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges.

(r)  Notwithstanding anything to the contrary in the Netbank Facility, no Pledged Receivable constitutes (for purposes of the Netbank Facility) an “Eligible Receivable” as defined under the Netbank Facility.

SECTION 4.03 Resale of Receivables Upon Breach of Covenant or Representation and Warranty by Borrower.  The Borrower or the Servicer, as the case may be, shall inform the other parties to this Agreement and the Qualifying Swap Counterparty promptly, in writing, upon the discovery of any breach of the representations, warranties and/or covenants contained in Section 4.01, Section 4.02 or Section 5.01; provided, however, that the failure to provide any such notice shall not diminish, in any manner whatsoever, any obligation of the Borrower under this Section 4.03 to sell any Pledged Receivable.  Upon the discovery by or notice to the Borrower of any such breach that also constitutes a LEAF Purchase Event under and as defined in the Purchase and Sale Agreement, the Borrower shall have an obligation to, and the Borrower shall, resell to the Originator pursuant to the Purchase and Sale Agreement (and the Collateral Agent may enforce such obligation of the Borrower to sell) any Pledged Receivable adversely affected by any such breach.  The Servicer shall notify the Collateral Agent promptly, in writing, of any failure by the Borrower to so resell any such Pledged Receivable.  In connection with the resale of such Pledged Receivable, the Borrower shall remit funds in an amount equal to the Release Price for such Pledged Receivable to the Collection Account on the date of such resale. It is understood and agreed that the obligation of the Borrower to resell to the Originator, and the obligation of the Originator to purchase, any Receivables which are adversely effected by a LEAF Purchase Event is not intended to, and shall not, constitute a guaranty of the collectibility or payment of any Receivable which is not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the related Obligor.

SECTION 4.04 Representations and Warranties of the Lender.  The Lender hereby represents and warrants, as of the date hereof, on each Borrowing Date and on the first day of each Rollover Interest Period, that it is a “qualified purchaser” within the meaning of Section 3(c)(7) of the Investment Company Act.

ARTICLE V.

GENERAL COVENANTS OF THE BORROWER AND THE SERVICER

SECTION 5.01 General Covenants.  vii) The Borrower will observe all corporate procedures required by its certificate of formation, limited liability company agreement and the laws of its jurisdiction of formation.  The Borrower will maintain its limited liability company existence in good standing under the laws of its jurisdiction of formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign limited liability company in any other state in which it does business and in which it is required to so qualify under applicable law.

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(b) The Borrower will at all times ensure that (i) its members act independently and in its interests and in the interests of its creditors, (ii) it shall at all times maintain at least one independent manager who (A) is not currently and has not been during the five years preceding the date of this Agreement an officer, director or employee of the Borrower or an Affiliate thereof (other than acting as independent manager or in a similar capacity) and (B) is not a member of the Borrower or an Affiliate thereof (other than a special independent member of the Borrower or a limited purpose corporation, business trust, partnership or other entity organized for the purpose of acquiring, financing or otherwise investing, directly or indirectly, in assets or receivables originated, owned or serviced by Originator or an Affiliate of any of them), (iii) its assets are not commingled with those of Originator or any other Affiliate of the Borrower, (iv) its members duly authorize all of its limited liability company actions, (v) it maintains separate and accurate records and books of account and such books and records are kept separate from those of Originator and any other Affiliate of the Borrower and (vi) it maintains minutes of the meetings and other proceedings of the members.  Where necessary, the Borrower will obtain proper authorization from its members for limited liability company action.

(c) The Borrower will pay its operating expenses and liabilities from its own assets.

(d) The Borrower will not have any of its indebtedness guaranteed by Originator or any Affiliate thereof.  Furthermore, the Borrower will not hold itself out, or permit itself to be held out, as having agreed to pay or as being liable for the debts of Originator, and the Borrower will not engage in business transactions with Originator, except on an arm’s-length basis.  The Borrower will not hold Originator out to third parties as other than an entity with assets and liabilities distinct from the Borrower.  The Borrower will cause any of its financial statements consolidated with those of Originator to state that the Borrower is a separate corporate entity with its own separate creditors who, in any liquidation of the Borrower, will be entitled to be satisfied out of the Borrower’s assets prior to any value in the Borrower becoming available to the Borrower’s equity holders.  The Borrower will not act in any other matter that could foreseeably mislead others with respect to the Borrower’s separate identity.

(e) In its capacity as Servicer, LEAF Financial will, to the extent necessary, maintain separate records on behalf of and for the benefit of the Lender, act in accordance with instructions and directions, delivered in accordance with the terms hereof, from the Borrower, and/or the Lender in connection with its servicing of the Pledged Receivables hereunder, and will ensure that, at all times when it is dealing with or in connection with the Pledged Receivables in its capacity as Servicer, it holds itself out as Servicer, and not in any other capacity.

(f) The Servicer (if LEAF Financial or an Affiliate thereof) shall, to the extent required by applicable law, disclose all material transactions associated with this transaction in appropriate regulatory filings and public announcements.  The annual financial statements of Resource America (including any consolidated financial statements) shall disclose the effects of the transactions contemplated by the Purchase and Sale Agreement as a sale of Receivables, Related Security and Other Conveyed Property to the Borrower, and the annual financial statements of the Borrower shall disclose the effects of the transactions contemplated by this Agreement as a loan to the extent required by and in accordance with GAAP, it being understood that the Loans to the Borrower under this Agreement will be treated as debt on the consolidated financial statements of Resource America.

(g) The Borrower shall take all other actions necessary to maintain the accuracy of the factual assumptions set forth in the legal opinions of Thacher Proffitt & Wood LLP, as special counsel to the Originator and the Borrower, issued in connection with the Purchase and Sale Agreement and relating to the issues of substantive consolidation and true conveyance of the Pledged Receivables.

(h) Except as otherwise provided herein or in any other Transaction Document, neither the Borrower nor the Servicer shall sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or (if the Servicer is LEAF Financial or an Affiliate thereof) suffer to exist any Adverse Claim upon or with respect to, any Pledged Receivable, any Collections related thereto or any other Pledged Assets related thereto, or upon or with respect to any account to which any Collections of any Receivable are sent, or assign any right to receive income in respect thereof.  Except as otherwise provided herein or in any other Transaction Document, the Borrower shall not create or suffer to exist any Adverse Claim upon or with respect to any of the Borrower’s assets.  Except as otherwise provided herein or in any other Transaction Document, the Servicer shall not create, or (if the Servicer is LEAF Financial or an Affiliate thereof) permit any action to be taken by any Person to create, any Adverse Claim upon or with respect to any of the Borrower’s assets.

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(i) The Borrower will not merge or consolidate with, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) other than with respect to asset dispositions in connection with an optional prepayment pursuant to Section 2.15(a) hereof, or acquire all or substantially all of the assets or capital stock or other ownership interest of any Person without the prior written consent of the Lender.

(j) The Borrower will not account for or treat (whether in financial statements or otherwise) the transactions contemplated by the Purchase and Sale Agreement in any manner other than a sale and absolute assignment of Receivables, Related Security and Other Conveyed Property by Originator to the Borrower constituting a “true conveyance” for bankruptcy purposes.

(k) The Borrower will not amend, modify, waive or terminate any terms or conditions of the Purchase and Sale Agreement without the written consent of the Lender, and shall perform its obligations thereunder.

(l) The Borrower will not make any amendment, modification or other change to its certificate of formation or limited liability company agreement that would materially and adversely affect the Lender without the Lender’s prior written consent, and shall notify the Lender prior to making any amendment, modification or other change to its certificate of formation or limited liability company agreement prior to the effectiveness thereof.

(m) Neither the Borrower nor (if the Servicer is LEAF Financial or an Affiliate thereof) the Servicer will make or allow to be made any material amendment to the Credit and Collection Policy without the prior written consent of the Lender (and the Lender hereby agrees to take commercially reasonable efforts to respond to any request for such consent in a timely manner).  Neither the Borrower nor (if the Servicer is LEAF Financial or an Affiliate thereof) the Servicer will make or allow to be made any non-material amendment to the Credit and Collection Policy without the prior written consent of the Lender; provided, that if the Lender has not responded to a written  request for such consent within ten (10) Business Days of receipt thereof, the Lender shall be deemed to have consented to such request.

(n) If the Borrower or the Servicer receives any Collections with respect to any Pledged Receivable, the Borrower or the Servicer, as applicable, will remit such Collections to the Collection Account within one (1) Business Day of the Borrower’s or the Servicer’s identification thereof.

(o) The Servicer shall cause:

(i) the Obligor under each Contract to remit all payments owed or otherwise payable (including, without limitation, amounts payable by the Obligor in its role as a servicer of Underlying Contracts sold to the Originator) by such Obligor under such Contract (or any servicer on its behalf) to the Lockbox or by wire transfer to the Lockbox Account;

(ii) the Lockbox Bank to deposit all Collections with respect to any Pledged Receivable in the Lockbox into the Lockbox Account on each Business Day; and

(iii) the Lockbox Bank to remit all Collections with respect to any Pledged Receivable on deposit in the Lockbox Account (or any sub-account thereof or any related account) to the Collection Account on each Business Day.

(p) The Borrower shall deliver or cause to be delivered to the Custodian four (4) Business Days prior to the initial Borrowing Date hereunder and three (3) Business Days prior to any other Borrowing Date hereunder a Notice of Pledge and each item listed in the definition of Receivable File with respect to the Receivables being Pledged hereunder on such Borrowing Date.

(q) The Borrower shall deliver to the Lender on each Purchase Date a copy of the Assignment delivered to it on such Purchase Date.

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(r) Each of the Servicer (and, if the Servicer is not LEAF Financial or an Affiliate thereof, upon the Servicer gaining knowledge thereof) and the Borrower shall promptly notify the Lender of the occurrence of any Servicer Default, Event of Default, Program Termination Event, Pool A Termination Event or Pool B Termination Event (any event that, if it continues uncured, would, with lapse of time or notice or lapse of time and notice, constitute any Servicer Default, Event of Default, Program Termination Event, Pool A Termination Event or Pool B Termination Event).

(s) Each of the Servicer (if the Servicer is LEAF Financial or an Affiliate thereof) and the Borrower shall take all actions (in the case of Obligor Collateral with an original cost over $100,000) and all commercially reasonable actions (in the case of Obligor Collateral with an original cost of $100,000 or less) necessary to ensure that the Originator is at all times named as loss payee under each Insurance Policy with respect to Obligor Collateral related to a Pledged Receivable.

(t) On each Borrowing Date, a Qualifying Interest Rate Swap, in form and substance satisfactory to the Lender, shall be duly executed by the Borrower and a Qualifying Swap Counterparty, and any amounts required to have been paid thereunder as of such Remittance Date shall have been paid and any obligations required to have been performed thereunder as of such Remittance Date shall have been performed.

(u) Each of the Servicer (if the Servicer is LEAF Financial or an Affiliate thereof) and the Borrower shall take all actions necessary to ensure that each Pool B Contract purchased by the Borrower under the Purchase and Sale Agreement contains “Seller Events of Default” or similar events of default (“Parallel Defaults”) which (i) would occur if a Pool B Termination Event with respect to the related Underlying Originator occurred, (ii) would entitle the Borrower, as assignee of the Originator’s rights under such Contract, to deliver, or cause the delivery of, redirection notices which would require all Underlying Obligors to make all payments under Underlying Contracts sold or pledged to the Originator under such Contract to the Lockbox Account or an account designated by the Borrower or such Servicer and (iii) would entitle the Borrower, as assignee of the Originator’s rights under the Contract, to receive 100% of all payments under the Underlying Contracts sold or pledged to the Originator under such Contract in the event of such a Parallel Default.  If a Parallel Default or any “Seller Events of Default” or similar events of default under a Pool B Contract related to the financial condition of the applicable Underlying Originator, the tangible net worth of the applicable Underlying Originator or any cross default (a Parallel Default or any such “Seller Events of Default” or similar events of default being referred to herein as “Critical Defaults”) shall occur, then each of the Servicer (if the Servicer is LEAF Financial or an Affiliate thereof) and the Borrower shall take all actions necessary to ensure (x) that no such Critical Default is waived and (y) the prompt delivery to all related Underlying Obligors of a redirection notice which would require such Underlying Obligors to make all payments under Underlying Contracts sold or pledged to the Originator under such Contract to the Lockbox Account.  Each of the Servicer and the Borrower shall notify the Lender promptly upon learning of the occurrence of any “Seller Event of Default” or similar event of default under any Pool B Contract.

(v) The Borrower shall not acquire any debt obligation or interest therein if, after giving effect to such acquisition, more than 40 percent of the debt obligations or interests therein held by the Borrower (as determined under the rules of Treasury Regulation 301.7701(i)-1(c)) would consist of real estate mortgages or interests therein (as defined in Treasury Regulation 301.7701(i)-1(d)).

(w)(w)  In connection with satisfying the Titling Requirements, the Servicer shall take commercially reasonable efforts to deliver or cause to be delivered to the Custodian in accordance with this Agreement and the Custodial Agreement, the original certificate of title for each Vehicle registered in Florida.

 (x)  The Pledged Receivables shall not be refinanced with any proceeds of the Netbank Facility.

ARTICLE VI.

ADMINISTRATION AND SERVICING; CERTAIN COVENANTS

SECTION 6.01 Appointment and Designation of the Servicer.  a) The Borrower and the Lender hereby appoint the Person designated by the Lender from time to time, pursuant to this Section 6.01 (the “Servicer”), as their agent to service, administer and collect the Pledged Receivables and otherwise to enforce their respective rights

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and interests in and under the Pledged Receivables and the other Pledged Assets.  The Servicer shall collect such Pledged Receivables under the conditions referred to above by means of the collection procedures as set forth in the Credit and Collection Policy, to the extent consistent with the provisions of this Article VI.  Unless otherwise specified by the Borrower, the Servicer’s authorization under this Agreement shall terminate on the Collection Date.  Until the Lender gives notice to the Borrower of a designation of a new Servicer upon the occurrence and during the continuance of any Servicer Default, or consents in writing to the appointment by the Borrower of a new Servicer, LEAF Financial is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer, pursuant to the terms hereof at all times until the earlier of the Lender’s designation of the Backup Servicer or any other Person as the new Servicer (upon the occurrence and during the continuance of any Servicer Default), the delivery by the Lender of its written consent to the appointment by the Borrower of a new Servicer or the Collection Date.  Upon the occurrence and during the continuance of any Servicer Default, the Lender may at any time designate as Servicer the Backup Servicer, or any other Person with demonstrated experience in servicing equipment leases and loans, to succeed LEAF Financial or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof.  Each of the Borrower and LEAF Financial hereby grants to any successor Servicer an irrevocable power of attorney to take any and all steps in the Borrower’s, LEAF Financial’s or the Servicer’s name, as applicable, and on behalf of the Borrower or LEAF Financial, necessary or desirable, in the determination of such successor Servicer, to service, administer or collect any and all Pledged Receivables including, without limitation, to make withdrawals from the Security Deposit Account pursuant to Section 2.05 and any Cash Reserve Account pursuant to Section 2.06.

(b) The Servicer is hereby authorized to act for the Borrower and the Lender and, in such capacity, shall manage, service, administer and arrange collections on the Pledged Receivables and perform the other actions required by the Servicer under this Agreement for the benefit of the Lender.  The Servicer agrees that its servicing of the Pledged Receivables shall be carried out in accordance with customary and usual procedures of institutions which service equipment lease and loan contracts and receivables and, to the extent more exacting, the degree of skill and attention that the Servicer exercises from time to time, with respect to all comparable equipment lease and loan contracts and receivables that it services for itself or others in accordance with the Credit and Collection Policy (or if the Backup Servicer has been appointed as Servicer, the Backup Servicer’s customary collection policies) and, to the extent more exacting, the requirements of this Article VI.  The Servicer’s duties shall include, without limitation, collecting and posting of all Collections with respect to any Pledged Receivable, responding to inquiries of Obligors on the Pledged Receivables, investigating delinquencies, sending invoices, payment statements or payment books to Obligors, reporting any required tax information to Obligors, policing the collateral, enforcing the terms of the Contracts (and any documents related thereto) related to any Pledged Receivables, complying with the terms of the Lockbox Agreement, accounting for Collections with respect to any Pledged Receivable, furnishing monthly and annual statements to the Lender with respect to distributions and performing the other duties specified herein.

(c) The Servicer will require each Underlying Originator to (i) service all Underlying Contracts in a manner consistent with the applicable Underlying Originator Credit and Collection Policy (which the Servicer has reviewed and approved in accordance with the Credit and Collection Policy) and (ii) provide to the Servicer a monthly data feed, which shall be in form and content satisfactory to the Servicer.  The Servicer shall, or shall cause a third party servicer appointed by the Servicer and approved by the Lender (such approval not to be unreasonably withheld) to, provide servicing similar to the servicing that the Servicer is obligated to provide hereunder with respect to any Underlying Contracts to the extent that the related Underlying Originator fails to service such Underlying Contracts in a manner consistent with the applicable Underlying Originator Credit and Collection Policy.

(d) To the extent consistent with the standards, policies and procedures otherwise required hereby, the Servicer shall have full power and authority, acting alone, to do any and all things in connection with such managing, servicing, administration and collection that it may deem necessary or desirable.  The Servicer is authorized to release liens on Obligor Collateral in order to collect insurance proceeds with respect thereto and to liquidate such Obligor Collateral in accordance with its customary standards, policies and procedures; provided, however, that, notwithstanding the foregoing, the Servicer shall not, (i) except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount under any Pledged Receivable or (ii) waive the right to collect the unpaid balance of any Pledged Receivable from such Obligor, except that, subject to Section 6.02(a), the Servicer may forego collection efforts if the amount which the Servicer, in its reasonable

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judgment, expects to realize in connection with such collection efforts is determined by the Servicer, in its reasonable judgment, to be less than the reasonably expected costs of pursuing such collection efforts and if the Servicer would forego such collection efforts in accordance with its customary procedures.  The Servicer is hereby authorized to commence, in its own name (in its capacity as Servicer), if possible, or in the name of the Borrower or the Lender (provided that if the Servicer is acting in the name of the Borrower or the Lender, the Servicer shall have obtained the Borrower’s or the Lender’s consent, as the case may be, which consent shall not be unreasonably withheld), a legal proceeding to enforce any Pledged Receivable (or any terms or provisions of the related Contract) or to commence or participate in any other legal proceeding (including, without limitation, a bankruptcy proceeding) relating to or involving a Pledged Receivable or any related Contract, Obligor or Obligor Collateral.  If the Servicer commences or participates in such a legal proceeding in its own name, the Borrower or the Lender, as the case may be, shall thereupon be deemed to have automatically assigned such Pledged Receivable to the Servicer solely for purposes of commencing or participating in any such proceeding as a party or claimant, and the Servicer is authorized and empowered by the Borrower or the Lender, as the case may be, to execute and deliver in the Servicer’s name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding.  The Borrower or the Lender, as the case may be, shall furnish the Servicer with any powers of attorney and other documents which the Servicer may reasonably request in writing and which the Servicer deems necessary or appropriate and take any other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement.  If, however, in any suit or legal proceeding it is held that the Servicer may not prosecute such suit or legal proceeding on the grounds that it is not an actual party in interest or a holder entitled to enforce such suit or legal proceeding, the Borrower shall take such steps as the Servicer deems necessary to prosecute such suit or legal proceeding, including bringing suit in its name.

SECTION 6.02 Collection of Receivable Payments; Modification and Amendment of Receivables; Lockbox Agreements.  a) Consistent with and subject to the standards, policies and procedures required by this Agreement, the Servicer shall collect all payments called for under the terms and provisions of the Contracts related to the Pledged Receivables (and the terms and provisions of any documents related thereto) as and when the same shall become due and shall follow such collection procedures with respect to the Pledged Receivables and the related Contracts and Insurance Policies as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Borrower and the Lender with respect thereto.

(b) The Servicer shall remit all payments by or on behalf of the Obligors received directly by the Servicer to the Collection Account, without deposit into any intervening account as soon as practicable, but in no event later than the end of business on the Business Day of identification thereof as payments by or on behalf of the Obligors.

SECTION 6.03 Realization Upon Receivables.  Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall use its best efforts to repossess (or otherwise comparably convert the ownership of) and liquidate any Obligor Collateral securing a Pledged Receivable within a number of days consistent with the Credit and Collection Policy of an uncured failure of the related Obligor to make any payment which it is obligated to make under the related Contract or an earlier date that would be customary under the circumstances involved (as determined in accordance with the Credit and Collection Policy) and, in any case, in a manner as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Borrower and the Lender with respect thereto; provided, however, that the Servicer need not repossess (or otherwise comparably convert the ownership of) and liquidate the Obligor Collateral securing such a Pledged Receivable if, in the reasonable opinion of the Servicer, the value of such Obligor Collateral does not exceed by more than an insignificant amount the cost to repossess (or otherwise comparably convert the ownership of) and liquidate such Obligor Collateral.  The Servicer is authorized to follow such customary practices and procedures as it shall deem necessary or advisable, consistent with the standard of care required by Section 6.01, which practices and procedures may include reasonable efforts to realize upon any guaranties, selling the related Obligor Collateral at public or private sale, the submission of claims under an Insurance Policy and other actions by the Servicer in order to realize upon such Pledged Receivable.  The foregoing is subject to the provision that, in any case in which the Obligor Collateral shall have suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Obligor Collateral, unless it shall determine in its discretion that such repair and/or repossession shall increase the proceeds of liquidation of the related Pledged Receivable by an amount greater than the amount of such expenses.  All Liquidation Proceeds shall be remitted directly by the Servicer to the Collection Account without deposit into any intervening account as soon as practicable, but in no event later than one (1)

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Business Day after identification thereof as Liquidation Proceeds.  The Servicer shall pay on behalf of the Borrower any personal property taxes assessed on repossessed Obligor Collateral, and the Servicer shall be entitled to reimbursement of any such tax as a Servicer Advance.

SECTION 6.04 Insurance Regarding Equipment.  a) At the time of the Pledge of any Receivable hereunder, the Servicer shall require each Obligor to obtain and maintain (or with respect to an Underlying Originator, cause the Underlying Obligor to obtain and maintain) Insurance Policies in accordance with the terms of the Credit and Collection Policy and its customary servicing procedures and shall furnish evidence of such insurance (except if the Equipment or Underlying Equipment relating to such Obligor or Underlying Obligor, as applicable, has an aggregate original cost of $100,000 or less) to the Lender.

(b) The Servicer may, and upon the request of the Lender shall, sue to enforce or collect upon the Insurance Policies, in its own name (but in its capacity as Servicer), if possible, or as agent of the Borrower and the Lender.  If the Servicer elects to commence a legal proceeding to enforce an Insurance Policy, the act of commencement shall be deemed to be an automatic assignment of the rights of the Borrower and the Lender under such Insurance Policy to the Servicer for purposes of collection only.  If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce an Insurance Policy on the grounds that it is not an actual party in interest or a holder entitled to enforce the Insurance Policy, the Borrower shall take such steps as the Servicer deems necessary to enforce such Insurance Policy, including bringing suit in its name.

SECTION 6.05 Maintenance of Security Interests in Obligor Collateral.  a) The initial Servicer and the Borrower shall take all steps necessary, under all applicable law, in order to (i) cause a valid, subsisting and enforceable first priority perfected security interest to exist in favor of the Collateral Agent in the Borrower’s interests in the Obligor Collateral, all Other Conveyed Property and all Related Security related to each Receivable (and the proceeds thereof) being Pledged hereunder, to secure a Loan on the Borrowing Date thereof including (A) the filing of a UCC financing statement in the applicable jurisdiction adequately describing the Obligor Collateral, Other Conveyed Property and all Related Security and naming the Borrower as debtor and the Collateral Agent as the secured party, (B) filing Obligor Financing Statements against all Obligors purchasing or leasing Obligor Collateral, (C) other than with respect to an Underlying Lease Contract related to Equipment which has an original cost of less than $25,000 if such Underlying Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Underlying Lease Contract is a FMV Contract, causing the filing of UCC-3 assignment statements in the applicable jurisdictions adequately describing the Underlying Originator Loan Collateral being transferred thereunder and naming the applicable Underlying Originator as the assignor and Originator as the assignee, and (D) other than with respect to an Underlying Lease Contract related to Equipment which has an original cost of less than $25,000 if such Underlying Lease Contract is a Dollar Purchase Option Contract or $50,000 if such Underlying Lease Contract is a FMV Contract, causing the filing of UCC-3 assignment statements in the applicable jurisdictions adequately describing the Underlying Originator Loan Collateral being transferred thereunder and naming the applicable Underlying Originator as the assignor and Originator as the assignee (ii) ensure that such security interest is and shall be prior to all other liens upon and security interests in the Borrower’s interests in such Obligor Collateral, Other Conveyed Property and Related Security (and the proceeds thereof) that now exist, or may hereafter arise or be created other than Permitted Liens, and (iii) ensure that immediately prior to the Pledge of such Receivable by the Borrower to the Collateral Agent, such Obligor Collateral, Other Conveyed Property and Related Security is free and clear of all Adverse Claims other than Permitted Liens; and

(b) The initial Servicer shall take all steps, as are necessary (subject to Section 6.05(a)), to maintain perfection of the security interest in the Borrower’s interests in the Obligor Collateral, Other Conveyed Property and Related Security related to each Pledged Receivable (and the proceeds thereof) in favor of the Collateral Agent including but not limited to, obtaining the execution by the Borrower and the recording, registering, filing, rerecording, refiling, and reregistering of all security agreements, financing statements and continuation statements as are necessary to maintain and/or perfect such security interests granted by the Borrower and the recordation of the Borrower’s or the applicable Approved Lienholder’s lien on the Certificate of Title for any Vehicle included in such Obligor Collateral, all in accordance with the Titling Requirements.  Without limiting the generality of the foregoing, the Borrower and the Lender each hereby authorizes the initial Servicer, and the initial Servicer agrees, to take any and all steps necessary (subject to Section 6.05(a)) to re-perfect the security interest in the Borrower’s interests in any Obligor Collateral (and the Borrower’s interests therein), Other Conveyed Property and Related Security related to each Pledged Receivable (and the proceeds thereof) in favor of the Collateral Agent as may be necessary, due to the relocation of such Obligor Collateral or for any other reason.

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SECTION 6.06 Pledged Receivable Receipts.  The Servicer shall make a deposit into the Collection Account in an amount equal to the Collections with respect to any Pledged Receivable received, or made by, or on behalf of it, within one Business Day of such Collections being received, or made by, or on behalf of it.

SECTION 6.07 No Rights of Withdrawal.  Until the Collection Date, the Borrower shall have no rights of direction or withdrawal, with respect to amounts held in the Collection Account or the Lockbox Account, except with respect to funds not related to any Pledged Assets, which were incorrectly deposited into any such account.

SECTION 6.08 Permitted Investments.  The Borrower shall, pursuant to written instruction, direct the Lender’s Bank (and if the Borrower fails to do so, the Lender may, pursuant to written instruction, direct the Lender’s Bank) to invest, or cause the investment of, funds on deposit in the Collection Account in Permitted Investments, from the date of this Agreement until the Collection Date.  Absent any such written instruction, the Lender’s Bank shall invest, or cause the investment of, such funds in Permitted Investments described in clause (v) of the definition thereof.  A Permitted Investment acquired with funds deposited in the Collection Account shall mature not later than the Business Day immediately preceding any Remittance Date, and shall not be sold or disposed of prior to its maturity.  All such Permitted Investments shall be registered in the name of the Securities Intermediary (as defined in the Securities Account Agreement) or its nominee for the benefit of the Lender, and otherwise comply with assumptions of the legal opinion of Thacher Proffitt & Wood LLP, delivered in connection with this Agreement.  All income and gain realized from any such investment, as well as any interest earned on deposits in the Collection Account, shall be distributed in accordance with the provisions of Article II hereof.  The Borrower shall deposit in the Collection Account, as the case may be (with respect to investments made hereunder of funds held therein), an amount equal to the amount of any actual loss incurred, in respect of any such investment, immediately upon realization of such loss.  None of the Lender’s Bank or the Lender shall be liable for the amount of any loss incurred, in respect of any investment, or lack of investment, of funds held in the Collection Account.

SECTION 6.09 Servicing Compensation.  As compensation for its activities hereunder, the Servicer shall be entitled to be paid the Servicing Fee from the Collection Account as provided in Section 2.04(c).  The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor, except with respect to reasonable expenses of the Servicer incurred in connection with the repossession and disposition of any Obligor Collateral (which the Servicer may retain from the proceeds of the disposition of such Obligor Collateral) and any Servicer Advances made by the Servicer pursuant hereto.  The Servicing Fee may not be transferred in whole, or in part, except in connection with the transfer of all the Servicer’s responsibilities and obligations under this Agreement.  At any time after the occurrence of a Servicer Default and the appointment of the Backup Servicer as the Servicer hereunder, the Backup Servicer shall be entitled to receive an amount, payable out of Collections on the Pledged Receivables and amounts applied to the payment of, or treated as payments on, the Pledged Receivables, equal to expenses incurred by the Backup Servicer, acting in its capacity as the Servicer, in connection with its obligations under Sections 6.05(a), (b) and (c) hereof (such expenses, the “Active Backup Servicer’s Indemnified Amounts”).

SECTION 6.10 Reports to the Lender; Account Statements; Servicing Information.  a) The Borrower will deliver to the Lender and each Qualifying Swap Counterparty, (i) on the Program Termination Date, a report identifying the Pledged Receivables (and any information with respect thereto requested by the Lender) on the day immediately preceding the Program Termination Date, and (ii) upon the Lender’s reasonable request and upon reasonable notice, on any other Business Day, a report identifying the Pledged Receivables (and any information with respect thereto, reasonably requested by the Lender) as of such day.

(b) At least four (4) Business Days prior to each Remittance Date, the Servicer shall prepare and deliver, or have delivered to the Lender and each Qualifying Swap Counterparty, (i) a Monthly Remittance Report and any other information reasonably requested by the Lender, relating to all Pledged Receivables (including, if requested, a Computer Tape or Listing), all information in the Monthly Remittance Report and all other such information to be accurate as of the last day of the immediately preceding Collection Period, and (ii) in an electronic format mutually acceptable to the Servicer and the Lender, all information reasonably requested by the Lender relating to all Pledged Receivables.  If any Monthly Remittance Report indicates the existence of a Borrowing Base Deficiency, the Borrower shall, on the date of delivery of such Monthly Remittance Report, prepay to the Lender, for the account of the Lender, a portion of the Loans as is necessary to cure such Borrowing Base Deficiency (or otherwise cure such Borrowing Base Deficiency).

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(c) By no later than 12:00 noon (New York City time) on the third Business Day immediately preceding a Borrowing, the Borrower (or the initial Servicer on its behalf) shall also prepare and deliver to the Lender a Borrowing Base Certificate containing information accurate as of the date of delivery of such Borrowing Base Certificate.  If any Borrowing Base Certificate indicates the existence of a Borrowing Base Deficiency, the Borrower shall on the date of delivery of such Borrowing Base Certificate prepay to the Lender, for the account of the Lender, a portion of the Loans or Pledge additional Eligible Receivables, in either case, to the extent necessary to cure such Borrowing Base Deficiency.

(d) At least four (4) Business Days prior to each Remittance Date (each such day, a “Backup Servicer Delivery Date”), the Servicer shall prepare and deliver, or have delivered, to the Backup Servicer (i) a Monthly Remittance Report in respect of the immediately-preceding Collection Period and (ii) a computer tape or a diskette or any other electronic transmission in a format acceptable to the Backup Servicer containing the information with respect to the Pledged Receivables during such Collection Period which was necessary for preparation of such Monthly Remittance Report or is reasonably requested by the Backup Servicer.

(e) The Borrower shall deliver to the Lender all reports it receives pursuant to the Purchase and Sale Agreement within one Business Day of the receipt thereof.

SECTION 6.11 Statements as to Compliance; Financial Statements.  a) The Servicer shall deliver to the Backup Servicer, the Borrower and the Lender on or before March 31st of each year, beginning with 2007, an Officers’ Certificate stating, as to each signatory thereof, that (x) a review of the activities of the Servicer during the preceding calendar year (or the portion of the preceding calendar year commencing on the date of this Agreement and ending December 31, 2006 in the case of the first such review) and of its performance under this Agreement has been made under such officer’s supervision, and (y) to the best of such officers’ knowledge, based on such review, the Servicer has fulfilled all of its obligations under this Agreement throughout such calendar year (or portion thereof, as the case may be) or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officers and the nature and status thereof and the action being taken to cure such default.

(b) The Servicer (if LEAF Financial or an Affiliate thereof) shall, at its expense, cause a firm of nationally recognized independent certified public accountants acceptable to the Lender (the “Independent Accountants”), who may also render other services to the Servicer, the Backup Servicer or to the Borrower, to deliver to the Borrower and the Lender, on or before March 31st of each year, beginning 2007, with respect to the twelve (12) months ended the immediately preceding December 31, a statement (the “Accountant’s Report”) addressed to the Board of Directors of the Servicer and to the Lender, to the effect that such firm has examined such Borrowing Base Certificates and Monthly Remittance Reports prepared by the Servicer during the twelve (12) months ended the immediately preceding December 31 as it deemed necessary in order to issue the Accountants’ Report and issued its report thereon, and that such examination was made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances.  The Accountants’ Report shall further state that (i) a review in accordance with agreed upon procedures was made; and (ii) except as disclosed in the Accountant’s Report, no exceptions or errors in the Borrowing Base Certificates and Monthly Remittance Reports examined were found except for (A) such exceptions as the Independent Accountants believe to be immaterial and (B) such other exceptions as shall be set forth in the Accountants’ Report.  The Accountants’ Report shall also indicate that the firm is independent of the Borrower and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

(c) As soon as available and no later than forty-five (45) days after the end of each calendar quarter in each fiscal year of the Borrower or Resource America, the Borrower shall deliver to the Lender two copies of:

(i) a balance sheet of the Borrower and Resource America as of the end of such calendar quarter, setting forth in comparative form the corresponding figures for the most recent year-end for which an audited balance sheet has been prepared, which balance sheet shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial office or controller of the Borrower or Resource America, as applicable, stating that such balance sheet presents fairly the financial condition of the Borrower or Resource America, as the case may be, and has been prepared in accordance with GAAP consistently applied; and

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(ii) statements of income, stockholders’ equity and cash flow of the Borrower and Resource America for such calendar quarter setting forth in comparative form the corresponding figures for the comparable period one year prior thereto (subject to normal year-end adjustments), which such statements shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of the Borrower or Resource America, as applicable, stating that such financial statements present fairly the financial condition and results of operations of the Borrower or Resource America, as the case may be, and have been prepared in accordance with GAAP consistently applied.

(d) As soon as available and no later than forty-five (45) days after the end of each calendar quarter in each fiscal year of Resource America, LEAF Financial shall deliver to the Lender two copies of:

(i) a consolidated balance sheet of Resource America and its consolidated subsidiaries (including Originator and Servicer) as of the end of such calendar quarter, setting forth in comparative form the corresponding figures for the most recent year-end for which an audited balance sheet has been prepared, which such balance sheet shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of Resource America stating that such balance sheet presents fairly the financial condition of the companies being reported upon and has been prepared in accordance with GAAP consistently applied; and

(ii) consolidated statements of income, stockholders’ equity and cash flow of Resource America and its consolidated subsidiaries (including Originator and Servicer) for such calendar quarter, in each case, setting forth in comparative form the corresponding figures for the comparable period one year prior thereto (subject to normal year-end adjustments), which such statements shall be prepared and presented in accordance with, and provide all necessary disclosure required by, GAAP and shall be accompanied by a certificate signed by the financial vice president, treasurer, chief financial officer or controller of Resource America stating that such financial statements present fairly the financial condition and results of operations of the companies being reported upon and have been prepared in accordance with GAAP consistently applied.

(e) As soon as available and no later than ninety (90) days after the end of each fiscal year of the Borrower or Resource America, LEAF Financial shall deliver to the Lender two copies of:

(i) a balance sheet of the Borrower and Resource America as of the end of the fiscal year, setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lender stating that such balance sheet presents fairly the financial condition of the Borrower or Resource America, as applicable, and has been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur); and

(ii) statements of income, stockholders’ equity and cash flow of the Borrower and Resource America for such fiscal year, setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lender stating that such financial statements present fairly the financial condition of the Borrower or Resource America, as applicable, and have been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur).

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(f)  As soon as available and no later than ninety (90) days after the end of each fiscal year of Resource America, LEAF Financial shall deliver to the Lender two copies of:

(i) a consolidated and consolidating balance sheet of Resource America and its consolidated subsidiaries (including Originator and Servicer) as of the end of the fiscal year, setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lender stating that such balance sheet presents fairly the financial condition of the companies being reported upon and has been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur); and

(ii) consolidated and consolidating statements of income, stockholders’ equity and cash flow of Resource America and its consolidated subsidiaries (including Originator) for such fiscal year; in each case setting forth in comparative form the figures for the previous fiscal year and accompanied by an opinion of a firm of independent certified public accountants of nationally recognized standing acceptable to the Lender stating that such financial statements present fairly the financial condition of the companies being reported upon and have been prepared in accordance with GAAP consistently applied (except for changes in application in which such accountants concur).

SECTION 6.12 Access to Certain Documentation; Obligors; Background Check.  a) The Lender (and its agents or professional advisors) shall at the expense of the Borrower, have the right under this Agreement, once during each calendar quarter until the first anniversary of the date hereof, and semi-annually thereafter, to examine and audit, during business hours or at such other times as might be reasonable under applicable circumstances, any and all of the books, records, financial statements or other information of the Servicer and the Borrower, or held by another for the Servicer or the Borrower or on its behalf, concerning this Agreement, provided, that, prior to the occurrence of an Event of Default, the Borrower shall not be responsible for the expenses of the Lender to the extent that such expenses exceed $25,000 in the aggregate in any calendar year.  The Lender (and its agents or professional advisors) shall, at the expense of the Borrower and as frequently as the Lender may desire, have the right under this Agreement after the occurrence and during the continuance of an Event of Default, to examine and audit, during business hours or at such other times as might be reasonable under applicable circumstances, any and all of the books, records or other information of the Servicer or the Borrower, or held by another for the Servicer or the Borrower or on its behalf, concerning this Agreement.  The Lender (and its agents and professional advisors) shall coordinate examinations and audits under this Section 6.12(a) in order to minimize expense and inconvenience to the Borrower.  The Lender (and its agents and professional advisors) shall treat as confidential any information obtained during the aforementioned examinations which is not already publicly known or available; provided, however, that the Lender may disclose such information if required to do so by law or by any regulatory authority.

(b) The Lender (and its agents or professional advisors) shall, at its own expense, have the right under this Agreement to contact Pool A Obligors and Pool B Obligors once with respect to any Receivable which is Pledged hereunder to request that each such Obligor verify and confirm by return letter the existence and amount of such Receivable, the type of Equipment leased under or securing the related Contract and such other information as the Lender deems reasonable under the circumstances (each such return letter to be mailed to a post office box established by the Lender).  The Servicer and the Borrower hereby agree to cooperate with the Lender (and its agents or professional advisors) in connection with any attempt thereby to contact any such Obligor and shall provide to the Lender such information as is needed in order to facilitate such contact.  The Lender (and its agents and professional advisors) shall treat as confidential any information obtained during any such contact with any such Obligor which is not already publicly known or available; provided, however, that the Lender (and its agents or professional advisors) may disclose such information if required to do so by law or by any regulatory authority.

(c) The Lender (or its agents and/or third party professional advisors) may, from time to time, cause comprehensive background checks on newly-hired senior management, key employees and principals of each of Resource Capital Corp., the initial Servicer and Originator to be completed by an investigation service acceptable to the Lender, at the Borrower’s expense.

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SECTION 6.13  Backup Servicer.  If a Servicer Default shall occur, then the Lender may, by notice to the Servicer, the Borrower and the Backup Servicer, terminate all of the rights and obligations of the Servicer under this Agreement.  Upon the delivery to the Servicer of such notice, all authority and power of the Servicer under this Agreement, whether with respect to the Pledged Assets or otherwise, shall pass to and be vested in the Backup Servicer pursuant to and under this Section (unless the Lender shall have appointed a different successor Servicer pursuant to Section 6.01 hereof or the Backup Servicer is unable to act as Servicer and a successor is appointed as provided in the fourth paragraph of this Section 6.13), and, without limitation, the Backup Servicer is hereby authorized and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination or to perform the duties of the Servicer under this Agreement including, without limitation, to make withdrawals from the Security Deposit Account pursuant to Section 2.05 and any Cash Reserve Account pursuant to Section 2.06.  The Servicer agrees to cooperate with the Lender and the Backup Servicer in effecting the termination of the Servicer’s responsibilities and rights hereunder, including, without limitation, providing notification to the Obligors of the assignment of the servicing function, providing notification to the Lender’s Bank of the Backup Servicer’s right to make withdrawals from the Security Deposit Account pursuant to Section 2.05 and any Cash Reserve Account pursuant to Section 2.06, providing the Backup Servicer, at the Servicer's expense, with all records, in electronic or other form, reasonably requested by the Backup Servicer, in such form as the Backup Servicer may reasonably request and at such times as the Backup Servicer may reasonably request, to enable the Backup Servicer to assume the servicing functions hereunder and the transfer to the Backup Servicer for administration by it of all cash amounts which at the time should be or should have been deposited by the Servicer in the Collection Account or thereafter be received by the Servicer with respect to the Pledged Receivables.  Additionally, the Servicer agrees to cooperate in providing, at the Servicer’s expense, the Backup Servicer as successor Servicer, with reasonable access (including at the premises of the Servicer) to Servicer’s employees and any and all books, records or other information reasonably requested by it to enable the Backup Servicer, as successor Servicer, to assume the servicing functions hereunder.  Neither the Lender nor the Backup Servicer shall be deemed to have breached any obligation hereunder as a result of a failure to make or delay in making any distribution as and when required hereunder caused by the failure of the Servicer to remit any amounts received by it or to deliver any documents held by it with respect to the Pledged Assets.  The Backup Servicer (including as successor Servicer) undertakes to perform only such duties and obligations as are specifically set forth in this Agreement, it being understood by all parties hereto that there are no implied duties or obligations of the Backup Servicer hereunder.

The Active Backup Servicer’s Fees and Transition Costs shall be paid out of Collections with respect to any Pledged Receivable as set forth in Section 2.04(c) on and after the date, if any, that the Backup Servicer assumes the responsibilities of the Servicer pursuant to this Section.  The Standby Backup Servicer’s Fees and Transition Costs shall be paid out of Collections with respect to any Pledged Receivable as set forth in Section 2.04(c) prior to the date, if any, that the Backup Servicer assumes the responsibilities of the Servicer pursuant to this Section.

Any obligations of LEAF Financial under any Transaction Document other than in its capacity as Servicer shall continue in effect notwithstanding LEAF Financial’s termination as Servicer.

On and after the time the Servicer receives a notice of termination pursuant to this Section 6.13, the Backup Servicer shall be (and the Backup Servicer hereby agrees to be) the successor in all respects to the Servicer in its capacity as Servicer under this Agreement and the transactions set forth or provided for herein and shall have all the rights and powers and be subject thereafter to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof; provided, however, that any failure to perform such duties or responsibilities caused by the Servicer’s failure to provide information required by this Section 6.13 shall not be considered a default by the Backup Servicer hereunder; provided, further, however, that the Backup Servicer, as successor Servicer, shall have (i) no liability with respect to any obligation which was required to be performed by the terminated Servicer prior to the date that the Backup Servicer becomes the successor to the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer, (ii) no obligation to perform any repurchase or advancing obligations, if any, of the Servicer, (iii) no obligation to pay any taxes required to be paid by the Servicer (provided that the Backup Servicer shall pay any income taxes for which it is liable), (iv) no obligation to pay any of the fees and expenses of any other party to the transactions contemplated hereby, and (v) no liability or obligation with respect to any Servicer indemnification obligations of any prior Servicer, including the original Servicer.  The indemnification obligations of the Backup Servicer, upon becoming a successor Servicer, are

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expressly limited to those arising on account of its failure to act in good faith and with reasonable care under the circumstances.  In addition, the Backup Servicer shall have no liability relating to the representations and warranties of the Servicer contained in Article IV.  Notwithstanding the above, the Lender may, or shall, if the Backup Servicer is unable to so act, appoint itself, or appoint any other established servicing institution acceptable to the Lender in its sole discretion, as the successor to the Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder.  Pending appointment of a successor to the Servicer hereunder, and after the Lender notifies the Servicer to discontinue performing servicing functions under this Agreement, the Backup Servicer (or the Lender if there is no Backup Servicer) shall act in such capacity as hereinabove provided.  In connection with such appointment and assumption, the Lender may make such arrangements for the compensation of such successor out of payments on Pledged Receivables as it and such successor shall agree; provided, however, that, except as provided herein, no such compensation shall be in excess of that permitted the Servicer hereunder, unless (i) agreed to by the Lender and (ii) such compensation shall be on commercially competitive terms and rates.  The Borrower, the Lender and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession.  The parties hereto agree that in no event will the Backup Servicer be liable for any special, indirect or consequential damages.

The Backup Servicer hereby agrees that it shall, and shall take all actions necessary so that it shall at all times be ready to, assume all the rights and powers and all of the responsibilities, obligations and duties of the Servicer hereunder, within ten (10) Business Days of receiving from the Lender a notice requesting the Backup Servicer to do so.

Notwithstanding anything contained in this Agreement to the contrary, absent specific knowledge by any Lyon Financial Services, Inc. account representative assigned to this transaction from time to time, or written notice detailing specific Errors (as defined below) or other deficiencies, Lyon Financial Services, Inc., as successor Servicer, is authorized to accept and rely on all accounting records (including computer records) and work product of the prior Servicer hereunder relating to the Contracts (collectively, the “Predecessor Servicer Work Product”) without any audit or other examination thereof, and Lyon Financial Services, Inc. shall have no duty, responsibility, obligation or liability for the acts and omissions of the prior Servicer.  If any error, inaccuracy, commission or incorrect or nonstandard practice or procedure (collectively, “Errors”) exists in any Predecessor Servicer Work Product and such Errors cause Lyon Financial Services, Inc. to make or continue any errors (collectively, “Continued Errors”), Lyon Financial Services, Inc. shall have no liability for such Continued Errors; provided, however, that Lyon Financial Services, Inc. agrees to use its best efforts to prevent Continued Errors.  In the event that Lyon Financial Services, Inc. becomes aware of Errors or Continued Errors, Lyon Financial Services, Inc. shall, with the prior consent of the Lender, use its best efforts to reconstruct and reconcile any affected data as is commercially reasonable to correct such Errors and Continued Errors and to prevent future Continued Errors.  Lyon Financial Services, Inc. shall be entitled to recover its costs thereby expended as Servicer Advances in accordance with Section 2.04(c) hereof.

Within four (4) Business Days after each Remittance Date, provided that the Backup Servicer shall have received the information specified in Section 6.10(d) within the time specified therein, the Backup Servicer shall compare the information on the computer tape or diskette (or other means of electronic transmission acceptable to the Backup Servicer) most recently delivered to the Backup Servicer by the Servicer pursuant to Section 6.10(d) with respect to such Remittance Date to the corresponding Monthly Remittance Report delivered to the Backup Servicer by the Servicer pursuant to Section 6.10(d) and shall:

(a) confirm that such Monthly Remittance Report is complete on its face;

(b) confirm the distributions to be made on such Remittance Date pursuant to Section 2.04(c) hereof to the extent the Backup Servicer is able to do so given the information provided to it by the Servicer (it being hereby agreed that the Backup Servicer shall promptly notify the Servicer and the Lender if such information is insufficient and that the Servicer shall promptly provide to the Backup Servicer any additional information required by the Backup Servicer);

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(c) confirm the mathematical computations of information in such Monthly Remittance Report; and

(d) confirm such other information as the Backup Servicer and the Lender may agree;

In the event of any discrepancy between the information set forth in subparagraphs (b) or (c) above as calculated by the Servicer and that determined or calculated by the Backup Servicer, the Backup Servicer shall promptly report such discrepancy to the Servicer and the Lender.  In the event of a discrepancy as described in the preceding sentence, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancy within five (5) Business Days after reporting such discrepancy, but in the absence of a reconciliation, distributions on the related Remittance Date shall be made consistent with the information calculated by the Servicer, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancy prior to the next Remittance Date, and the Servicer shall promptly report to the Lender regarding the progress, if any, which shall have been made in reconciling such discrepancy.  If the Backup Servicer and the Servicer are unable to reconcile such discrepancy with respect to such Monthly Remittance Report by the next Remittance Date that falls in April, July, October or January, the Servicer shall cause independent accountants acceptable to the Lender, at the Servicer’s expense, to examine such Monthly Remittance Report and attempt to reconcile such discrepancy at the earliest possible date (and the Servicer shall promptly provide the Lender with a report regarding such event).  The effect, if any, of such reconciliation shall be reflected in the Monthly Remittance Report for the next succeeding Remittance Date.

Other than as specifically set forth in this Agreement, the Backup Servicer shall have no obligation to supervise, verify, monitor or administer the performance of the Servicer and shall have no liability for any action taken or omitted by the Servicer.

The Backup Servicer may allow a subservicer to perform any and all of its duties and responsibilities hereunder, including but not limited to its duties as successor Servicer hereunder, should the Backup Servicer become the successor Servicer pursuant to the terms of this Agreement; provided, however, that the Backup Servicer shall remain liable for the performance of all of its duties and obligations hereunder to the same extent as if no such subservicing had occurred.

In no event shall the Backup Servicer (either prior to or after its  appointment hereunder as Servicer) be responsible or liable for any  failure or delay in the performance of its obligations hereunder  arising out of or caused by, directly or indirectly, forces beyond its control, including without limitation, acts of terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God.

SECTION 6.14 Additional Remedies of Lender Upon Event of Default.  During the continuance of any Event of Default, the Lender, in addition to the rights specified in Section 7.01, shall have the right to take all actions now or hereafter existing at law, in equity or by statute to protect its interests and enforce its rights and remedies (including the institution and prosecution of all judicial, administrative and other proceedings and the filings of proofs of claim and debt in connection therewith).  Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Event of Default.

SECTION 6.15 Waiver of Defaults.  The Lender may waive any default by the Servicer in the performance of its obligations hereunder and its consequences.  Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement.  No such waiver shall be effective unless it shall be in writing and signed by the Lender and no such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived.

SECTION 6.16 Maintenance of Certain Insurance.  On the date hereof the Servicer shall obtain, and at all times thereafter during the term of its service as Servicer the Servicer shall maintain, in force an “errors and omissions” insurance policy in an amount not less than $1,000,000 naming the Lender as loss payee and with an insurance company reasonably acceptable to the Lender.

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The Servicer shall deliver a copy of the insurance policy required under this Section 6.16 to the Lender on the date hereof together with a certification from the applicable insurance company that such policy is in force on the date hereof.

The Servicer shall prepare and present, on behalf of itself and the Lender, claims under any such policy in a timely fashion in accordance with the terms of such policy, and upon, the filing of any claim on any policy described in this Section, the Servicer shall promptly notify the Lender of such claim.

SECTION 6.17 Segregation of Collections.  The Servicer shall not commingle funds constituting Collections with respect to any Pledged Receivable with any other funds of the Servicer; provided, that such commingling may occur in the Lockbox Account so long as the Lockbox Intercreditor Agreement is in full force and effect.

SECTION 6.18 UCC Matters; Protection and Perfection of Pledged Assets.  The Borrower will not change the jurisdiction of its formation, make any change to its corporate name or use any tradenames, fictitious names, assumed names, “doing business as” names or other names (other than those listed on Schedule II hereto, as such schedule may be revised from time to time to reflect name changes and name usage permitted under the terms of this Section 6.18 after compliance with all terms and conditions of this Section 6.18 related thereto) unless, prior to the effective date of any such jurisdiction change, name change or use, the Borrower notifies the Collateral Agent of such change in writing and delivers to the Collateral Agent such executed financing statements as the Collateral Agent may request to reflect such jurisdiction, name change or use, together with such other documents and instruments as the Collateral Agent may request in connection therewith.  The Borrower will not change the location of its chief executive office or the location of its records regarding the Pledged Receivables unless, prior to the effective date of any such change of location, the Borrower notifies the Collateral Agent of such change of location in writing and delivers to the Collateral Agent such executed financing statements as the Collateral Agent may reasonably request to reflect such change of location, together with such Opinions of Counsel, documents and instruments as the Collateral Agent may request in connection therewith.  The Borrower agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action that the Collateral Agent may reasonably request in order to perfect, protect or more fully evidence the Collateral Agent’s interest in the Pledged Assets acquired hereunder, or to enable the Collateral Agent to exercise or enforce any of its respective rights hereunder.  Without limiting the generality of the foregoing, the Borrower will, upon the request of the Collateral Agent:  (i) execute (if necessary) and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate or as the Collateral Agent may request, and (ii) mark its master data processing records evidencing such Pledged Receivables with a legend acceptable to the Collateral Agent, evidencing that the Collateral Agent has acquired an interest therein as provided in this Agreement.  The Collateral Agent shall be entitled to conclusively rely on the filings or registrations made by or on behalf of the Borrower without any independent investigation and the Borrower’s obligation to make such filings as evidence that such filings have been made.  The Borrower hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto and assignments thereof, relative to all or any of the Pledged Receivables and the Other Conveyed Property and the Related Security related thereto and the proceeds of the foregoing now existing or hereafter arising, without the signature of the Borrower where permitted by law.  The Borrower hereby ratifies and authorizes the filing by the Collateral Agent of any such financing statement made prior to the date hereof.  A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Pledged Receivables, or any part thereof, shall be sufficient as a financing statement.  The Borrower shall, upon the request of the Collateral Agent at any time after the occurrence of an Event of Default and at the Borrower’s expense, notify the Obligors obligated to pay any Pledged Receivables, or any of them, of the security interest of the Collateral Agent in the Pledged Assets.  If the Borrower fails to perform any of its agreements or obligations under this Section 6.18, the Collateral Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Borrower upon the Collateral Agent’s demand therefor.  For purposes of enabling the Collateral Agent to exercise its rights described in the preceding sentence and elsewhere in this Article VI, the Borrower hereby authorizes the Collateral Agent and its successors and assigns to take any and all steps in the Borrower’s name and on behalf of the Borrower necessary or desirable, in the determination of the Collateral Agent, to collect all amounts due under any and all Pledged Receivables, including, without limitation, endorsing the Borrower’s name on checks and other instruments representing Collections with respect to any Pledged Receivable and enforcing such Pledged Receivables and the related Contracts and, if any, the related guarantees.

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SECTION 6.19 Servicer Advances.  The Servicer may, in its sole discretion, make an advance in respect of any payment due on a Pledged Receivable (other than a Defaulted Receivable) to the extent such payment has not been received by the Servicer as of its due date and the Servicer reasonably expects such payment will be ultimately recoverable (a “Servicer Advance”).  The Servicer shall deposit into the Collection Account in immediately available funds the aggregate of all Servicer Advances to be made during a Fee Period on or prior to the Business Day immediately preceding the related Remittance Date.  The Servicer shall be entitled to reimbursement for such Servicer Advances from monies in the Collection Account as provided in Section 2.04(c) hereof.

SECTION 6.20 Repurchase of Receivables Upon Breach of Covenant or Representation and Warranty by Servicer.  The Borrower or the Servicer, as the case may be, shall inform the other parties to this Agreement and the Initial Qualifying Swap Counterparty promptly, in writing, upon the discovery of any breach of the Servicer’s representations, warranties and/or covenants pursuant to Section 4.02, Section 6.05 or Article V; provided, however, that the failure to provide any such notice shall not diminish, in any manner whatsoever, any obligation of the Servicer hereunder to repurchase any Pledged Receivable.  Unless such breach shall have been cured by the last day of the first full calendar month following the discovery by or notice to the Servicer of such breach (and provided that a Borrowing Base Deficiency exists on such last day), the Servicer (if LEAF Financial or an Affiliate thereof) shall have an obligation, and the Borrower shall and the Collateral Agent may, enforce such obligation of the Servicer (if LEAF Financial or an Affiliate thereof), to repurchase any Pledged Receivable materially and adversely affected by such breach.  The Borrower shall notify the Collateral Agent promptly, in writing, of any failure by the Servicer to so repurchase any such Pledged Receivable.  In consideration of the repurchase of such Pledged Receivable, the Servicer shall remit funds in an amount equal to the Release Price for such Pledged Receivable to the Collection Account on the date of such repurchase.  The obligations of the Servicer under this Section 6.20 are in addition to, and in no way limit, any obligations of the Servicer in its individual capacity under the Purchase and Sale Agreement.  It is understood and agreed that the obligation of the Servicer to purchase any Receivables is not intended to, and shall not, constitute a guaranty of the collectibility or payment of any Receivable which is not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the related Obligor.

SECTION 6.21 Compliance with Applicable Law.  The Servicer and the Borrower shall at all times comply in all material respects with all requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations “B” and “Z”, the Soldiers’ and Sailors’ Civil Relief Act of 1940 and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and all other consumer credit laws and equal credit opportunity and disclosure laws) in the conduct of its business.

SECTION 6.22 Receipt of Certificates of Title.  Any Receivable with respect to which the Obligor Collateral includes a Vehicle and for which the Servicer shall not have (i) received a Certificate of Title satisfying the Titling Requirements and (ii) delivered such Certificate of Title to the Custodian within 90 days of the first day of inclusion of such Pledged Receivable in the calculation of the Eligible Receivables Balance, shall no longer be deemed to be an Eligible Receivable and, therefore, shall no longer be included in the calculation of the Eligible Receivables Balance.  In the case of any Receivable excluded from the calculation of the Eligible Receivables Balance pursuant to the previous sentence, the Receivable so excluded from the calculation of the Eligible Receivables Balance may at a later time be included in the calculation of the Eligible Receivables Balance, provided, that (i) the Custodian shall have received the Certificate of Title described above with respect to such Receivable from the applicable Registrar of Titles and delivered such Certificate of Title to the Custodian and (ii) such Receivable is otherwise an Eligible Receivable at such time.

SECTION 6.23 Lender’s Bank Limitation of Liability.  a) The Lender’s Bank undertakes to perform only such duties and obligations as are specifically set forth in this Agreement, it being expressly understood by the parties hereto that there are no implied duties or obligations under this Agreement.  Neither the Lender’s Bank nor any of its officers, directors, employees or agents shall be liable, directly or indirectly, for any damages or expenses arising out of the services performed under this Agreement other than damages which result from the gross negligence or willful misconduct of it or them.  In no event will the Lender’s Bank or any of its officers, directors, employees or agents be liable for any consequential, indirect or special damages.

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       (b)  The Lender’s Bank shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or for any mistakes of fact or law, or for anything which it may do or refrain from doing in connection herewith.

(c) The Lender’s Bank may rely on and shall be protected in acting upon any certificate, instrument, opinion, notice, letter, telegram or other document delivered to it by any other Person and which in good faith it believes to be genuine and which has been signed by the proper party or parties.  The Lender’s Bank may rely on and shall be protected in acting upon the written instructions of any designated officer of the Borrower, the Servicer or the Lender.

(d) The Lender’s Bank may consult with counsel reasonably satisfactory to it and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion of such counsel.

(e) The Lender’s Bank shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if the Lender’s Bank believes that repayment of such funds (repaid in accordance with the terms of this Agreement) or adequate indemnity against such risk or liability is not reasonably assured to it.

(f) The Lender’s Bank shall not be deemed to be a fiduciary of any party hereto.

(g) The parties hereto agree that in no event will the Lender’s Bank be liable for special, indirect or consequential damages.

ARTICLE VII.

EVENTS OF DEFAULT

SECTION 7.01 Events of Default.  If any of the following events (“Events of Default”) shall occur:

(a) the occurrence of any Bankruptcy Event with respect to the Borrower, Owner, Resource America, the Originator or the Servicer; or

(b) any representation or warranty made or deemed to be made by the Borrower or the Servicer (or any of its officers) under or in connection with this Agreement (or any remittance report or other information or report delivered pursuant hereto) or any other Transaction Document shall prove to be false or incorrect in any respect and shall remain false or incorrect for a period fifteen (15) Business Days after the Servicer or the Borrower become aware, or are notified by the Lender, the Custodian or any other Person, that such representation or warranty is false or incorrect; provided, however, that if any breach described above is cured by the repurchase of Receivables pursuant to Article VI of the Purchase and Sale Agreement or by a repayment hereunder, or repurchase pursuant to Sections 4.03 or 6.20 hereof, such breach shall cease to constitute an Event of Default; or

(c) (i) the Borrower or the Servicer shall fail to perform or observe any term, covenant or agreement hereunder or under any other Transaction Document (other than described in clause (ii) below) in any material respect and such failure remains unremedied for fifteen (15) Business Days or (ii) either the Servicer or the Borrower shall fail to make any payment or deposit to be made by it when due hereunder or under any other Transaction Document and such failure remains unremedied for two (2) Business Days; or

(d) the Borrower, Owner, the Originator, Resource America or the Servicer shall fail to pay (and such failure remains unremedied for two (2) Business Days) any principal of or premium or interest on any Debt in an amount in excess of $10,000,000, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other default under any agreement or instrument relating to any Debt of the Borrower, the Owner or the Servicer or any other event, shall occur if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof; or

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(e) the Originator, the Borrower or any of their respective subsidiaries shall have suffered any material adverse change to its business, financial condition or any other condition which, in Lender’s sole discretion, constitutes a material impairment of the Originator or the Borrower’s ability to perform its Obligations; or

(f) (i) the Collateral Agent shall at any time fail to have a valid, perfected, first priority security interest in any of the Pledged Assets (other than Equipment which has a value of less than (x) $25,000 if such Equipment is leased under Dollar Purchase Option Contracts or (y) $50,000 if such Equipment is leased under FMV Contracts) or (ii) any purchase by the Borrower of a Receivable and the Collections, Related Security and Other Conveyed Property with respect thereto under the Purchase and Sale Agreement shall, for any reason, cease to create in favor of the Borrower a perfected ownership interest in such Receivable and the Collections, Related Security and the Other Conveyed Property with respect thereto; provided, however, that if an event described in the foregoing clause (i) or (ii) is cured by the repurchase of Receivables pursuant to Article VI of the Purchase and Sale Agreement or by a repayment hereunder or repurchase pursuant to Sections 4.03 or 6.20 hereof, within five Business Days, such event shall cease to constitute an Event of Default; or

(g) the Borrower or the Servicer shall have suffered any material adverse change to its financial condition or operations which would affect the collectibility of the Pledged Receivables or the Borrower’s or the Servicer’s ability to conduct its business or fulfill its obligations hereunder or under any other Transaction Document; or

(h) the Servicer’s or the Borrower’s activities are terminated for any reason, including any termination thereof by a regulatory, tax or accounting body; or

(i) the occurrence of a Change of Control; or

(j) the Purchase and Sale Agreement or any other Transaction Document or any material provision of any of them shall cease to be in full force and effect and enforceable in accordance with its terms, or the Servicer, the Borrower, or any Affiliate of the Servicer or the Borrower shall so assert in writing; or

(k) the occurrence of a Servicer Default; or

(l) (i) the Facility Amount exceeds the lesser of (x) the Borrowing Limit and such event shall remain unremedied for one Business Day or (y) the Borrowing Base and such event shall remain unremedied for two Business Days; (ii) the aggregate Facility Amount hereunder, calculated solely with respect to Loans made with respect to Pool A Receivables, exceeds the Pool A Borrowing Base and such event shall remain unremedied for two Business Days or (iii) the aggregate Facility Amount hereunder, calculated solely with respect to Loans made with respect to Pool B Receivables, exceeds the Pool B Borrowing Base and such event shall remain unremedied for two Business Days; or

(m) the auditor’s opinion accompanying the audited annual financial statements of the Servicer or the Borrower is qualified in any manner; or

(n) (i) any Qualifying Interest Rate Swap shall cease to be in full force and effect, (ii) the Borrower or the Servicer fail to comply with any hedging requirement hereunder or (iii) the counterparty under any Qualifying Interest Rate Swap or former or purported Qualifying Interest Rate Swap fails to qualify as a Qualifying Swap Counterparty and does not post cash collateral in a manner satisfactory to the Lender is not replaced by a Qualifying Swap Counterparty within 45 days of such counterparty’s failure to so qualify, (iv) the occurrence of any default by the Borrower or Servicer in the observance or performance of any of the terms or provisions of any Qualifying Interest Rate Swap or (v) any interest rate swap agreement represented by the Borrower or the Servicer to be a Qualifying Interest Rate Swap shall fail to be, or cease to be, a Qualifying Interest Rate Swap; or

(o) Resource America or the Owner shall, at any time, permit its respective Tangible Net Worth to be less than the applicable Minimum Tangible Net Worth; or

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(p) either (i) the provisions of the Transaction Documents relating to the Backup Servicer or its duties under any of the Transaction Documents cease to be in full force and effect and enforceable in accordance with their terms, or the Backup Servicer shall so assert in writing, (ii) Lyon Financial Services, Inc. or any successor Backup Servicer resigns, is removed by the Lender, or otherwise ceases to act as the Backup Servicer, and such Backup Servicer is not replaced by a new Backup Servicer satisfactory to the Lender within 45 days of such resignation, removal or other event;

then the Lender may, by notice to the Borrower and each Qualifying Swap Counterparty, declare the Program Termination Date to have occurred; provided, that, in the case of any event described in Section 7.01(a) above, the Program Termination Date shall be deemed to have occurred automatically upon the occurrence of such event.  Upon any such declaration or automatic occurrence, (i) the Borrower shall cease purchasing Receivables from Originator under the Purchase and Sale Agreement, (ii) at the option of the Lender in its sole discretion, the Lender may declare the Loans made to the Borrower hereunder and all interest and all Fees accrued on such Loans and any other Obligations to be immediately due and payable (and the Borrower shall pay such Loans and all such amounts and Obligations immediately), (iii) the Lender, in its sole discretion, may direct the Obligors to make all payments under the Pledged Receivables directly to the Backup Servicer, the Lender or any lockbox or account established by any of such parties.  Any Collections received in any such account (or received directly by the Lender) shall be applied to the Obligations in accordance with the priority of payments set forth in Section 2.04(c).  In addition, upon any such declaration or upon any such automatic occurrence, the Lender and the Collateral Agent shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and other applicable laws, which rights shall be cumulative.  If any Event of Default shall have occurred, the Interest Rate shall be increased to the Default Funding Rate, effective as of the date of the occurrence of such Event of Default, and shall remain at the Default Funding Rate.

SECTION 7.02 Additional Remedies of the Lender.  a) If, (i) upon the Lender’s declaration that the Loans made to the Borrower hereunder are immediately due and payable pursuant to Section 7.01 or (ii) on the Facility Maturity Date, the aggregate outstanding principal amount of the Loans, all accrued Fees and interest and any other Obligations are not immediately paid in full, then the Collateral Agent, in addition to all other rights specified hereunder, shall have the right to immediately sell in a commercially reasonable manner, in a recognized market (if one exists) at such price or prices as the Collateral Agent may reasonably deem satisfactory, any or all Pledged Assets and shall apply the proceeds thereof to the Obligations in accordance with the priority of payments set forth in Section 2.04(c).

(b) The parties recognize that it may not be possible to sell all of the Pledged Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Pledged Assets may not be liquid.  Accordingly, the Collateral Agent may elect, in its sole discretion, the time and manner of liquidating any Pledged Assets, and nothing contained herein shall obligate the Collateral Agent to liquidate any Pledged Assets on the date the Lender declares the Loans made to the Borrower hereunder to be immediately due and payable pursuant to Section 7.01 or to liquidate all Pledged Assets in the same manner or on the same Business Day.

(c) Any amounts received from any sale or liquidation of the Pledged Assets pursuant to this Section 7.02 in excess of the Obligations will be returned to the Borrower, its successors or assigns, or to whosoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may otherwise direct.

(d) Each of the Lender, Collateral Agent and the Initial Qualifying Swap Counterparty shall have, in addition to all the rights and remedies provided herein and provided by applicable federal, state, foreign, and local laws (including, without limitation, the rights and remedies of a secured party under the Uniform Commercial Code of any applicable state, to the extent that the Uniform Commercial Code is applicable, and the right to offset any mutual debt and claim), all rights and remedies available to such Person at law, in equity or under any other agreement between such Person and the Borrower.

(e) Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Program Termination Event or Event of Default.

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ARTICLE VIII.

INDEMNIFICATION

SECTION 8.01 Indemnities by the Borrower.  Without limiting any other rights which the Lender, the Collateral Agent, the Backup Servicer (whether in its capacity as Backup Servicer or successor Servicer), the Lender’s Bank, the Custodian, the Initial Qualifying Swap Counterparty or any of their respective Affiliates may have hereunder or under applicable law, the Borrower hereby agrees to indemnify the Lender, the Collateral Agent, the Custodian, the Backup Servicer, the Lender’s Bank, the Initial Qualifying Swap Counterparty and each of their respective Affiliates (each, an “Indemnified Party” for purposes of this Article VIII) from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”), awarded against or incurred by any of them arising out of or as a result of this Agreement or in respect of any Pledged Assets, excluding, however, (A) Indemnified Amounts to the extent resulting solely from gross negligence, bad faith or willful misconduct on the part of an Indemnified Party, (B) taxes (including interest and penalties imposed thereon) imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located, on or measured by the overall net income of such Indemnified Party or (C) Indemnified Amounts to the extent that they are or result from lost profits (other than principal, interest and Fees with respect to the Loans).  Without limiting the foregoing, the Borrower shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from any of the following (to the extent not resulting solely from gross negligence, bad faith or willful misconduct on the part of an Indemnified Party):

(i) any Pledged Receivable treated as or represented by the Borrower to be an Eligible Receivable which is not at the applicable time an Eligible Receivable;

(ii) reliance on any representation or warranty made or deemed made by the Borrower or any of its officers under or in connection with this Agreement, which shall have been false or incorrect in any material respect when made or deemed made or delivered;

(iii) the failure by the Borrower to comply with any term, provision or covenant contained in this Agreement or any agreement executed in connection with this Agreement, or with any applicable law, rule or regulation with respect to any Pledged Assets, or the nonconformity of any Pledged Assets with any such applicable law, rule or regulation;

(iv) the failure to vest and maintain vested in the Collateral Agent or to transfer to the Collateral Agent a first priority perfected security interest in the Receivables which are, or are purported to be, Pledged Receivables, together with all related Other Conveyed Property, Collections, Related Security and other Pledged Assets related thereto (including, without limitation, the Borrower’s interest in and to any and all Obligor Collateral with respect to such Receivables), free and clear of any Adverse Claim whether existing at the time of the related Borrowing or at any time thereafter;

(v) the failure to maintain, as of the close of business on each Business Day prior to the Collection Date, a Facility Amount which is less than or equal to the lesser of (x) the Borrowing Limit on such Business Day and (y) the Borrowing Base on such Business Day;

(vi) the failure to maintain, as of the close of business on each Business Day prior to the Collection Date, a Facility Amount, calculated solely with respect to Loans secured by Pool A Receivables, which is less than or equal to the Pool A Borrowing Base;

(vii) the failure to maintain, as of the close of business on each Business Day prior to the Collection Date, a Facility Amount, calculated solely with respect to Loans secured by Pool B Receivables, which is less than or equal to the Pool B Borrowing Base;

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(viii) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables which are, or are purported to be, Pledged Receivables or the other Pledged Assets related thereto, whether at the time of any Borrowing or at any subsequent time;

(ix) any dispute, claim, offset or defense (other than the discharge in bankruptcy of an Obligor) to the payment of any Receivable which is, or is purported to be, a Pledged Receivable (including, without limitation, a defense based on such Receivable (or the Contract evidencing such Receivable) not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms);

(x) any failure of the Borrower to perform its duties or obligations in accordance with the provisions of this Agreement or any other Transaction Document;

(xi) the failure of the Borrower to pay when due any taxes payable in connection with the Pledged Receivables or the Pledged Assets related thereto;

(xii) any repayment by the Lender of any amount previously distributed in payment of Loans or payment of interest or Fees or any other amount due hereunder, in each case which amount the Lender believes in good faith is required to be repaid;

(xiii) the commingling by the Borrower of Collections of Pledged Receivables at any time with other funds;

(xiv) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Loans or the Pledged Assets;

(xv) any failure by the Borrower to give reasonably equivalent value to Originator in consideration for the transfer by Originator to the Borrower of any Receivable or any attempt by any Person to void or otherwise avoid any such transfer under any statutory provision or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code;

(xvi) [Reserved];

(xvii) any failure of the Borrower or any of its agents or representatives to remit to the Collection Account, Collections of Pledged Receivables remitted to the Borrower or any such agent or representative;

(xviii) any failure on the part of the Borrower duly to observe or perform in any material respect any covenant or agreement under any Qualifying Interest Rate Swap; and/or

(xix) any Contract related to any Pledged Receivable being rejected by an Obligor under Section 365 of the Bankruptcy Code in the event that a Bankruptcy Event has occurred with respect to such Obligor.

Any amounts subject to the indemnification provisions of this Section 8.01 shall be paid by the Borrower to the Lender on behalf of the applicable Indemnified Party within two (2) Business Days following the Lender’s written demand therefor on behalf of the applicable Indemnified Party (and the Lender shall pay such amounts to the applicable Indemnified Party promptly after the receipt by the Lender of such amounts).  The Lender, on behalf of any Indemnified Party making a request for indemnification under this Section 8.01, shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of the Indemnified Amounts with respect to which such indemnification is requested, which certificate shall be conclusive absent demonstrable error.

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If the Borrower has made any payments in respect of Indemnified Amounts to the Lender, on behalf of an Indemnified Party pursuant to this Section 8.01 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Borrower, without interest.

SECTION 8.02  Indemnities by Servicer.  a) Without limiting any other rights which any Indemnified Party may have hereunder or under applicable law, the Servicer (if LEAF Financial or one of its Affiliates) hereby agrees to indemnify each Indemnified Party from and against any and all damages, losses, claims, liabilities and related costs and expenses (including reasonable attorneys’ fees and disbursements) (all of the foregoing being collectively referred to as “Servicer Indemnified Amounts”) suffered or sustained by any Indemnified Party as a consequence of any of the following, excluding, however, Servicer Indemnified Amounts resulting solely from (A) any gross negligence, bad faith or willful misconduct of any Indemnified Party claiming indemnification hereunder, (B) taxes (including interest and penalties imposed thereon) imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located, on or measured by the overall net income of such Indemnified Party; (C) Indemnified Amounts to the extent that they are or result from lost profits (other than principal, interest and Fees with respect to the Loans); and (D) Indemnified Amounts to the extent the same includes losses that arise solely due to Receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor or would constitute recourse to Servicer for such losses:

(i) the inclusion, in any computations made by it in connection with any Borrowing Base Certificate or Monthly Remittance Report or other report prepared by it hereunder, of any Pledged Receivables which were not Eligible Receivables as of the date of any such computation;

(ii) reliance on any representation or warranty made by the Servicer (if LEAF Financial or one of its Affiliates) or any of its officers under or in connection with this Agreement, which shall have been false or incorrect in any material respect when made  or delivered;

(iii) the failure by the Servicer (if LEAF Financial or any of its Affiliates) to comply with (A) any term, provision or covenant contained in this Agreement, or any agreement executed in connection with this Agreement, or (B) any applicable law, rule or regulation applicable to it with respect to any Pledged Assets;

(iv) any action or inaction by the Servicer (if LEAF Financial or one of its Affiliates) that causes the Collateral Agent not to have a first priority perfected security interest in the Receivables that are, or are purported to be, Pledged Receivables, together with all related Other Conveyed Property, Collections, Related Security and other Pledged Assets related thereto (including without limitation, the Borrower’s interest in and to any and all Obligor Collateral with respect to such Receivables), free and clear of any Adverse Claim whether existing at the time of the related Borrowing or any time thereafter;

(v) the commingling by the Servicer (if LEAF Financial or one of its Affiliates) of the Collections of Pledged Receivables at any time with any other funds;

(vi) any failure of the Servicer (if LEAF Financial or one of its Affiliates) or any of its agents or representatives (including, without limitation, agents, representatives and employees of the Servicer acting pursuant to authority granted under Section 6.01 hereof) to remit to Collection Account, Collections of Pledged Receivables remitted to the Servicer or any such agent or representative;

(vii) the failure by the Servicer (if LEAF Financial or any of its Affiliates) to perform any of its duties or obligations in accordance with the provisions of this Agreement or errors or omissions related to such duties; and/or

(viii) notwithstanding whether any Pledged Receivable shall have been repurchased by the Servicer pursuant to Section 6.20, any of the events or facts giving rise to a breach of any of the Servicer’s representations, warranties, agreements and/or covenants set forth in Article V or Article VI.

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(b) Any Servicer Indemnified Amounts shall be paid by the Servicer (if LEAF Financial or one of its Affiliates) to the Lender, for the benefit of the applicable Indemnified Party, within two (2) Business Days following receipt by the Servicer of the Lender’s written demand therefor (and the Lender shall pay such amounts to the applicable Indemnified Party promptly after the receipt by the Lender of such amounts).

(c) If the Servicer has made any indemnity payments to the Lender, on behalf of an Indemnified Party pursuant to this Section 8.02 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Servicer, without interest.

Each applicable Indemnified Party shall deliver to the indemnifying party under Section 8.01 and Section 8.02, within a reasonable time after such Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by such Indemnified Party relating to the claim giving rise to the Indemnified Amounts.

ARTICLE IX.

MISCELLANEOUS

SECTION 9.01 Amendments and Waivers.  a) Except as provided in Section 9.01(b), no amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Borrower, the Servicer, the Lender and, to the extent any of their rights or obligations hereunder are adversely affected thereby, the Backup Servicer, the Custodian, the Lender’s Bank, and/or each Qualifying Swap Counterparty, and no termination or waiver of any provision of this Agreement or consent to any departure therefrom by the Borrower or the Servicer shall be effective without the written concurrence of the Backup Servicer and the Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(b) Notwithstanding the provisions of Section 9.01(a), in the event that there is more than one Lender, the written consent of each Lender shall be required for any amendment, modification or waiver (i) reducing any outstanding Loans, or the interest thereon, (ii) postponing any date for any payment of any Loan, or the interest thereon, (iii) modifying the provisions of this Section 9.01, or (iv) increasing the Borrowing Base or the Borrowing Limit.

SECTION 9.02 Notices, Etc.  All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex communication, communication by facsimile copy or electronic mail) and mailed, telexed, transmitted or delivered, as to each party hereto, at its address set forth on Schedule VI hereto or specified in such party’s Assignment and Acceptance or at such other address (including, without limitation, an electronic mail address) as shall be designated by such party in a written notice to the other parties hereto.  All such notices and communications shall be effective, upon receipt, or in the case of  notice by facsimile copy or electronic mail, when verbal communication of receipt is obtained, except that notices and communications pursuant to Article II shall not be effective until received.

SECTION 9.03 No Waiver; Remedies.  No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 9.04 Binding Effect; Assignability; Multiple Lenders.  a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Servicer, the Lender, the Backup Servicer, the Custodian, the Lender’s Bank and their respective successors and permitted assigns.  This Agreement and the Lender’s rights and obligations hereunder and interest herein shall be assignable in whole or in part (including by way of the sale of participation interests therein) by the Lender and its successors and assigns.  None of the Borrower, the Servicer or the Backup Servicer may assign any of its rights and obligations hereunder or any interest herein without the prior written

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consent of the Lender.  The parties to each assignment or participation made pursuant to this Section 9.04 shall execute and deliver to the Lender, for its acceptance and recording in its books and records, an assignment and acceptance agreement (an “Assignment and Acceptance”) or a participation agreement or other transfer instrument reasonably satisfactory in form and substance to the Lender and the Borrower.  Each such assignment or participation shall be effective as of the date specified in the applicable Assignment and Acceptance or other agreement or instrument only after the execution, delivery, acceptance and recording thereof as described in the preceding sentence.  The Lender shall notify the Borrower of any assignment or participation thereof made pursuant to this Section 9.04.  The Lender may, in connection with any assignment or participation or any proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower and the Pledged Assets furnished to the Lender by or on behalf of the Borrower or the Servicer; provided, however, that the Lender shall not disclose any such information until it has obtained an agreement from such assignee or participant or proposed assignee or participant that it shall treat as confidential (under terms mutually satisfactory to the Lender, the Borrower, the Servicer and such assignee or participant or proposed assignee or participant) any information obtained which is not already publicly known or available.

(b) Whenever the term “Lender” is used herein, it shall mean Morgan Stanley and/or any other Person which shall have executed an Assignment and Acceptance; provided, however, that each such party shall have a pro rata share of the rights and obligations of the Lender hereunder in such percentage amount (the “Commitment Percentage”) as shall be obtained by dividing such party’s commitment to fund Loans hereunder by the total commitment of all parties to fund Loans hereunder.  Unless otherwise specified herein, any right at any time of the Lender to enforce any remedy, shall be exercised by the Lender only upon direction by such parties that hold a majority of the Commitment Percentages at such time.

(c) Subject to Section 9.04(a), each of the parties hereto hereby agrees to execute any amendment to this Agreement that is required in order to facilitate the addition of any new Lender hereunder as contemplated by this Section 9.04 and which does not have any adverse effect on the Borrower, the Originator, the Servicer or any Affiliate thereof.

SECTION 9.05 Term of This Agreement.  This Agreement including, without limitation, the Borrower’s obligation to observe its covenants set forth in Articles V and VI and the Servicer’s obligation to observe its covenants set forth in Articles V and VI, shall remain in full force and effect until the Collection Date; provided, however, that the rights and remedies with respect to any breach of any representation and warranty made or deemed made by the Borrower or the Servicer pursuant to Articles III and IV and the indemnification and payment provisions of Article VIII and Article IX and the provisions of Section 9.08 and Section 9.09 shall be continuing and shall survive any termination of this Agreement.

SECTION 9.06 GOVERNING LAW; JURY WAIVER; CONSENT TO JURISDICTION.  a) THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE LENDER IN THE PLEDGED RECEIVABLES, OR REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.  

(b) EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

(c) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

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SECTION 9.07 Costs, Expenses and Taxes.  a) In addition to the rights of indemnification granted to the Backup Servicer (whether in its capacity as Backup Servicer or successor Servicer), the Custodian, the Lender’s Bank, the Lender and its Affiliates under Section 8.01 hereof, the Borrower agrees to pay on demand all reasonable (and reasonably documented) costs and expenses of the Backup Servicer, the Custodian, the Lender’s Bank and the Lender incurred in connection with the preparation, execution or delivery of, or any waiver or consent issued or amendment prepared in connection with, this Agreement, the other Transaction Documents and the other documents to be delivered hereunder or in connection herewith or therewith or incurred in connection with any amendment, waiver or modification of this Agreement, any other Transaction Document, and any other documents to be delivered hereunder or thereunder or in connection herewith or therewith that is necessary or requested (and, with respect to the Lender, actually entered into) by any of the Borrower, the Servicer, the Lender or made necessary or desirable as a result of the actions of any regulatory, tax or accounting body affecting the Lender and its Affiliates, or which is related to an Event of Default, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Backup Servicer, the Custodian, the Lender’s Bank and the Lender with respect thereto and with respect to advising the Backup Servicer, the Custodian, the Lender’s Bank and the Lender as to their respective rights and remedies under this Agreement and the other documents to be delivered hereunder or in connection herewith, and all costs and expenses, if any (including reasonable counsel fees and expenses), incurred by the Backup Servicer, the Custodian, the Lender’s Bank or the Lender in connection with the enforcement of this Agreement and the other documents to be delivered hereunder or in connection herewith.

(b) The Borrower shall pay on demand any and all stamp, sales, excise and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, the other documents to be delivered hereunder or any agreement or other document providing liquidity support, credit enhancement or other similar support to the Lender which is specific to this Agreement or the funding or maintenance of Loans hereunder.

(c) The Borrower shall pay on demand all other costs, expenses and taxes (excluding franchise and income taxes) incurred by the Lender or the Initial Qualifying Swap Counterparty or any shareholder thereof related to this Agreement, any other Transaction Document or any Qualifying Interest Rate Swap or similar interest rate cap agreement (“Other Costs”), including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender or the Initial Qualifying Swap Counterparty with respect to (i) advising such Person as to its rights and remedies under this Agreement and the other documents to be delivered hereunder or in connection herewith and (ii) the enforcement of this Agreement and the other documents to be delivered hereunder or in connection herewith; provided, however, that the Borrower shall have no obligation to pay the fees and out-of-pocket expenses of counsel to the Initial Qualifying Swap Counterparty related to the initial negotiation, execution and delivery of any Qualifying Interest Rate Swap.

(d) Without limiting any other provision hereof, the Borrower shall pay on demand all costs, expenses and fees of the Backup Servicer prior to the occurrence of a Servicer Default and the appointment of the Backup Servicer as Servicer hereunder related to its duties under this Agreement.

(e) Any Person making a claim under this Section 9.07 shall submit to the Borrower a notice setting forth in reasonable detail the basis for and the computations of the applicable costs, expenses, taxes or similar items.

SECTION 9.08 No Proceedings.  The Servicer, the Backup Servicer, the Custodian, the Lender and the Lender’s Bank each hereby agree that it will not institute against, or join any other Person in instituting against, the Borrower any proceedings of the type referred to in the definition of Bankruptcy Event prior to the date that is one year and one day following the Collection Date.

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SECTION 9.09 Recourse Against Certain Parties.  No recourse under or with respect to any obligation, covenant or agreement (including, without limitation, the payment of any fees or any other obligations) of the Lender as contained in this Agreement or any other agreement, instrument or document entered into by the Borrower or the Lender pursuant hereto or in connection herewith shall be had against any administrator of the Borrower or the Lender or any incorporator, affiliate, stockholder, officer, employee or director of the Borrower or the Lender or of any such administrator, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that the agreements of each party hereto contained in this Agreement and all of the other agreements, instruments and documents entered into by the Borrower or the Lender pursuant hereto or in connection herewith are, in each case, solely the corporate obligations of such party (and nothing in this Section 9.09 shall be construed to diminish in any way such corporate obligations of such party), and that no personal liability whatsoever shall attach to or be incurred by any administrator of the Borrower or the Lender or any incorporator, stockholder, affiliate, officer, employee or director of the Borrower or the Lender or of any such administrator, as such, or any of them, under or by reason of any of the obligations, covenants or agreements of the Borrower or the Lender contained in this Agreement or in any other such instruments, documents or agreements, or which are implied therefrom, and that any and all personal liability of every such administrator of the Borrower or the Lender and each incorporator, stockholder, affiliate, officer, employee or director of the Borrower or the Lender or of any such administrator, or any of them, for breaches by the Borrower or the Lender of any such obligations, covenants or agreements, which liability may arise either at common law or in equity, by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in consideration for the execution of this Agreement.  The provisions of this Section 9.09 shall survive the termination of this Agreement.

SECTION 9.10 Execution in Counterparts; Severability; Integration.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.  In the event that any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.  This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings other than the Fee Letter.

SECTION 9.11 Tax Characterization.  Notwithstanding any provision of this Agreement, the parties hereto intend that the Loans advanced hereunder shall constitute indebtedness of the Borrower for federal income tax purposes.

SECTION 9.12 Calculation of Performance Triggers.  Notwithstanding anything to the contrary herein, Included Repurchased Receivables shall be treated as Pool Receivables for purposes of each calculation of the Annualized Default Rate, Annualized Net Loss Rate, Delinquency Rate, Pool A Annualized Net Loss Rate and the Pool B Annualized Net Loss Rate required to be made hereunder (but for no other purpose).

ARTICLE X.

THE COLLATERAL AGENT

SECTION 10.01 No Implied Duties.  The Collateral Agent shall be obligated to perform only the duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Collateral Agent.

SECTION 10.02 Limits on Liability.  The Collateral Agent shall not be liable for any acts, omissions, errors of judgment or mistakes of fact or law made, taken or omitted to be made or taken by it in accordance with this Agreement and the other Transaction Documents (including acts, omissions, errors or mistakes with respect to the Collateral), except for those arising out of or in connection with the Collateral Agent’s gross negligence or willful

72

misconduct.  The Collateral Agent may consult with counsel, accountants and other experts, and any opinion or advice of any such counsel, any such accountant and any such other expert shall be full and complete authorization and protection in respect of any action taken or suffered by the Collateral Agent hereunder in accordance therewith. The Collateral Agent shall have the right at any time to seek instructions concerning the administration of the Pledged Assets from any court of competent jurisdiction.  The Collateral Agent may conclusively rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document which it has no reasonable reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by the proper party or parties.  Absent its gross negligence or willful misconduct, the Collateral Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Collateral Agent and conforming to the requirements of this Agreement and the other Transaction Documents, if any.

SECTION 10.03 Acknowledgement.  The Lender hereby acknowledges and agrees that its rights and obligations as “Lender” under the Collection Account Agreement, Security Deposit Account Agreement and each Cash Reserve Account Agreement are being held in its capacity as Collateral Agent for the benefit of the Secured Parties.

[Signature page to follow.]

73

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

THE BORROWER:	RESOURCE CAPITAL FUNDING II, LLC By:_______________________________________ Name: Title:
THE SERVICER:	LEAF FINANCIAL CORPORATION By:_______________________________________ Name: Title:
THE LENDER:	MORGAN STANLEY BANK By:_______________________________________ Name: Title:
THE CUSTODIAN AND THE LENDER’S BANK:	U.S. BANK NATIONAL ASSOCIATION By:_______________________________________ Name: Title:
THE BACKUP SERVICER	LYON FINANCIAL SERVICES, INC. (D/B/A U.S. BANK PORTFOLIO SERVICES) By:_______________________________________ Name: Title:

S-1

SCHEDULE I

CONDITION PRECEDENT DOCUMENTS

As required by Section 3.01 of the Agreement, each of the following items must be delivered to the Lender prior to the date of the initial Borrowing:

(a) A copy of this Agreement duly executed by each of the parties hereto;

(b) A certificate of the Secretary or Assistant Secretary of each of the Borrower, the Originator and the Servicer, dated the date of this Agreement, certifying (i) the names and true signatures of the incumbent officers authorized to sign on behalf of the such Person each Transaction Document to which it is a party (on which certificate the Lender may conclusively rely until such time as the Lender shall receive from such Person a revised certificate meeting the requirements of this paragraph (b)), (ii) that the copy of the certificate of incorporation or formation of each such Person attached thereto is a complete and correct copy and that such certificate of incorporation or formation has not been amended, modified or supplemented and is in full force and effect, (iii) that the copy of the organizational documents of such Person attached thereto is a complete and correct copy, and that such organizational documents have not been amended, modified or supplemented and is in full force and effect, and (iv) the resolutions of the board of directors or members of such Person approving and authorizing the execution, delivery and performance by such Person of each Transaction Document to which it is a party;

(c) Good standing certificate, dated as of a recent date for each of the Borrower, the Originator and the Servicer, issued by its jurisdiction of organization;

(d) Executed, original copies of proper financing statements (the “Facility Financing Statements”) describing the Pledged Receivables, Other Conveyed Property, Related Security and other Pledged Assets, and (a) filed against Originator in favor of the Borrower as assignor secured party and naming the Collateral Agent as total assignee and (b) filed against the Borrower and in favor of the Collateral Agent, as secured party, and other, similar instruments or documents, as may be necessary or, in the opinion of the Collateral Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the Collateral Agent’s interests in all Pledged Receivables, Other Conveyed Property, Related Security and other Pledged Assets;

(e) Executed, original copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Pledged Receivables, Other Conveyed Property, Related Security and other Pledged Assets previously granted by Originator or the Borrower;

(f) Certified copies of requests for information or copies (or a similar UCC search report certified by a party acceptable to the Lender), dated a date reasonably near to the date of the initial Borrowing, listing all effective financing statements (including the Facility Financing Statements), which name any of the Borrower or the Originator (under such party’s present name and any previous name) as debtor and which are filed in the jurisdictions in which the Facility Financing Statements were filed, together with copies of such financing statements (none of which, other than the Facility Financing Statements, shall cover any Pledged Assets);

(g) One or more favorable Opinions of Counsel, of counsel to the Originator and the Borrower, with respect to such matters as the Lender may reasonably request (including an opinion, with respect to the creation, perfection and first priority of the security interest of the Borrower and the Collateral Agent in the property described in such Opinion of Counsel);

(h) One or more favorable Opinions of Counsel, of counsel to the Originator and the Borrower, with respect to the true conveyance of the Receivables under the Purchase and Sale Agreement, and issues of substantive consolidation;

Sch. I-1

(i) One or more favorable Opinions of Counsel, of counsel to the Originator, the Borrower, the Custodian and the Backup Servicer with respect to, among other things, the due authorization, execution and delivery of, and enforceability of, this Agreement and the other Transaction Documents;

(j) A favorable Opinion of Counsel of counsel to the Borrower, with respect to the first priority perfected security interest of the Collateral Agent in the Collection Account, the Security Deposit Account and the Cash Reserve Account and the funds therein;

(k) Any necessary third party consents to the closing of the transactions contemplated hereby;

(l) A copy of each of the other Transaction Documents duly executed by the parties thereto;

(m) A copy of the fidelity insurance policy referred to in Section 6.16 hereof together with a certification from the applicable insurance company that such policy is in full force and effect on the date hereof; and

(n) The results of comprehensive background checks (completed by an investigation service acceptable to the Lender) on the senior management, key employees and principals of each of Resource America and LEAF Financial.

Sch. I-2

SCHEDULE II

PRIOR NAMES, TRADENAMES, FICTITIOUS NAMES

AND “DOING BUSINESS AS” NAMES

1.           Borrower:  None

2.           Servicer:  LEAF Financial Corp.

LEAF Financial Corporation was previously named Fidelity Leasing Corporation.  Effective February 28, 1996, Fidelity Leasing Corporation changed its name to F.L. Partnership Management, Inc.  Effective May 1, 2000, F.L. Partnership Management, Inc. and FL Financial Services, Inc. merged, with F.L. Partnership Management, Inc. as the surviving entity.  Effective December 13, 2001, F.L. Partnership Management, Inc. changed its name to LEAF Financial Corporation.  Effective June 29, 2004, LEAF Asset Management, Inc. and LEAF Financial Corp. merged, with LEAF Financial Corp. as the surviving entity.  None

Sch. II-1

SCHEDULE III-A

REPRESENTATIONS AND WARRANTIES WITH

RESPECT TO ELIGIBLE POOL A RECEIVABLES

The following representations and warranties are made by the Borrower with respect to the Pool A Contracts related to Pledged Pool A Receivables which are designated as being Eligible Pool A Receivables on a Borrowing Base Certificate or a Monthly Remittance Report, or are otherwise represented to the Lender as being Eligible Pool A Receivables, or are included as Eligible Pool A Receivables in any calculation set forth herein.

1.                                      Each such Contract represents the genuine, legal, valid, binding and full recourse payment obligation of the Obligor thereunder, enforceable by the Borrower in accordance with its terms and the Obligor, with respect to such Contract (and any guarantor of the Obligor’s obligations thereunder), had full legal capacity to execute and deliver such Contract and any other documents related thereto.

2.                                      [Intentionally omitted.]

3.                                      To the extent that such Contract consists of a “Term Note (Level Payments)” or “Term Note (Step Payments)” or similar promissory note, together with the “Master Loan and Security Agreement”, “Finance Agreement” or similar agreement related thereto and incorporated by reference therein, each other “Term Note (Level Payments)” or “Term Note (Step Payments)” or similar promissory note related to the same “Master Loan and Security Agreement”, “Finance Agreement” or similar agreement is also a Contract related to a Pledged Receivable.  To the extent that such Contract consists of a “Master Lease Schedule”  or similar agreement together with a “Master Lease Agreement” or similar agreement which is related to, and incorporated by reference therein, each other “Master Lease Schedule” or similar agreement related to the same “Master Lease Agreement” or similar agreement  is also a Contract related to a Pledged Receivable.

4.                                      Each such Contract, at the time of origination and at all times thereafter, conformed to all requirements of the Credit and Collection Policy applicable to such Contract and, in any case, no such Contract would be required to be written off pursuant to the Credit and Collection Policy.

5.                                      Each such Contract (i) was (a) originated by Originator in the ordinary course of Originator’s business and Originator had all necessary licenses and permits to originate Contracts in the State where the related Obligor and the related Obligor Collateral were located or (b) purchased by Originator, in a transaction that would constitute a “true sale” for bankruptcy purposes, from a Person (a “Seller”) (other than Northern Leasing Systems, Inc. or any Affiliate thereof) who originated such Contract in the ordinary course of Seller’s business and who had all necessary licenses and permits to originate Contracts in the State where the related Obligor and the related Obligor Collateral were located, (ii) was sold by Originator to the Borrower under the Purchase and Sale Agreement and the Borrower has all necessary licenses and permits to own Receivables and enter into Contracts in the state where the related Obligor and the related Obligor Collateral are located, (iii) contains customary and enforceable provisions, such as to render the rights and remedies of the Borrower (and any assignee thereof)

Sch. III-A-1

adequate for realization against the collateral security related thereto and (iv) provides for level Scheduled Payments during the term of such Contract or such Contract is a Non-Level Payment Contract.

6.                                      Each such Contract was originated by Originator or the Seller without any fraud or material misrepresentation on the part of the related Obligor or Originator or the Seller.  Each such Contract was sold by Originator to the Borrower without any fraud or material misrepresentation on the part of Originator.

7.                                      No such Contract is the subject of any litigation, nor is it subject to any right of rescission, setoff, counterclaim or defense on the part of the Obligor thereunder.

8.                                      Each such Contract has had no provision thereof waived, amended, altered or modified in any respect since its origination except in conformity with the Credit and Collection Policy.

9.                                      The Obligor, with respect to each such Contract, has a billing address in the United States and, except as otherwise permitted in writing by the Lender from time to time, the Equipment which is the subject of each such Contract and all other Obligor Collateral with respect thereto is located in the United States.

10.                                      Each such Contract (i) is calculated at a fixed yield, (ii) is fully amortizing in periodic installments over its remaining term (which may include a Balloon Payment or Put Payment not in excess of 45% of the Discounted Balance of such Contract at the time of origination), (iii) has a remaining term of 180 months or less and does not permit renewal or extension, (iv) provides for acceleration of the Scheduled Payments thereunder if the related Obligor is in default under or has otherwise violated or breached any material provision of such Contract, (v) prohibits the related Obligor from applying any part of the Security Deposit or cash collateral paid under such Contract to the Scheduled Payments due under such Contract (and neither the Originator, the Servicer, the Borrower or any other Person has applied any part of the Security Deposit or cash collateral paid under such Contract to any of the Scheduled Payments due under such Contract) and (vi) has not been assigned by the related Obligor nor has there been any sub-lease of the Obligor Collateral.

11.                                      [Intentionally omitted.]

12.                                      Each such Contract (i) is payable by a single Obligor, that is a corporate  Person, or, if the collateral is Equipment used in a business, an individual and (ii) provides for the financing or lease of Obligor Collateral to be used in the business of the related Obligor.

13.                                      Each such Contract was originated in the United States and is denominated and payable solely in United States Dollars.

14.                                      Each such Contract (i) if a Lease Contract, contains “hell or high water” provisions, (ii) requires the related Obligor to assume all risk of loss or malfunction of the related Obligor Collateral; (iii) requires the related Obligor to pay all maintenance, repair,

Sch. III-A-2

insurance and taxes, together with all other ancillary costs and expenses, with respect to the related Obligor Collateral; and (iv) requires the related Obligor to pay, in full, when due, all Scheduled Payments notwithstanding any casualty, loss or other damage to the related Obligor Collateral.

15.                                      Each such Contract is by its terms an absolute and unconditional obligation of the related Obligor and is non-cancelable (in the case of a Lease Contract) and non-cancelable and non-prepayable without the payment in full of principal and accrued interest and finance charges prior to the expiration of the term of such Contract; such Contract does not provide for the substitution, exchange or addition of any other items of Obligor Collateral related to such Contract if the effect thereof would be to reduce or extend the Scheduled Payments related thereto; and the rights with respect to such Contract are assignable by Originator (and its successors and assigns, including the Borrower) without the consent of or notice to any Person.

16.                                      Each such Contract is in the form of one of the form contracts attached hereto as Exhibit D-1, Exhibit D-2 or Exhibit D-3 or in a form otherwise approved by the Servicer in compliance with the Credit and Collection Policy.

17.                                      The Security Deposit, if any, related to such Contract has been deposited into the Security Deposit Account within ten Business Days of the Pledge of the related Receivable.

18.                                      All material requirements of applicable federal, state and local laws, and regulations thereunder in respect of each such Contract, the origination thereof, and the Obligor Collateral related thereto, have been complied with in all respects.

19.                                      The applicable Obligor (other than a lessee under a Lease Contract that is a “true lease”) has good and marketable title to the Equipment which is the subject of each such Contract and such Equipment is free and clear of all Adverse Claims.

20.                                      Each such Contract constitutes either an “Instrument” or “Chattel Paper” or a “Payment Intangible” within the meaning of the UCC.

21.                                      Each such Contract contains language by which the related Obligor grants a security interest to Originator in the Obligor Collateral which is the subject of each such Contract.

22.                                      (A) The Originator shall have taken or caused to be taken all steps necessary under all applicable law (including the filing of an Obligor Financing Statement with respect to each such Contract) in order to cause a valid, subsisting and enforceable perfected, first priority security interest to exist in Originator’s favor in the Obligor Collateral securing each such Contract (other than with respect to Equipment which has a value of less than $25,000 if such Equipment is leased under Dollar Purchase Option Contracts or $50,000 if such Equipment is leased under FMV Contracts), (B) Originator shall have assigned the perfected, first priority security interest in the Obligor Collateral referred to in clause (A) above to the Borrower pursuant to the Purchase and Sale Agreement and (C) the Borrower shall have

Sch. III-A-3

assigned the perfected, first priority security interest in the Obligor Collateral referred to in clause (A) above to the Collateral Agent pursuant to Section 2.11 hereof.

23.                                      The Borrower has taken all steps necessary under all applicable law in order to perfect the security interest of the Collateral Agent in (i) the Borrower’s interest in the Obligor Collateral related to each such Contract (other than Equipment which has a value of less than $25,000 if such Equipment is leased under Dollar Purchase Option Contracts or $50,000 if such Equipment is leased under FMV Contracts) and (ii) each such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof), and there exists in favor of the Collateral Agent as secured party, a valid, subsisting and enforceable first priority perfected security interest in (i) the Borrower’s interest in such Obligor Collateral and (ii) such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof) and such security interest is and shall be prior to all other liens upon and security interests in (i) the Borrower’s interest in such Obligor Collateral and (ii) such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof) that now exist or may hereafter arise or be created (other than Permitted Liens).

24.                                      If the Obligor Collateral related to such Contract includes a Vehicle, such Contract shall be a Loan Contract or a Dollar Purchase Option Contract, and the Borrower or the Servicer shall have delivered to the applicable Registrar of Titles an application for a Certificate of Title for such Vehicle satisfying the Titling Requirements.

25.                                      No such Contract is a Defaulted Receivable or, at the time of its Pledge hereunder, a Delinquent Receivable.

26.                                      Each such Contract is payable by an Obligor which is not subject to any bankruptcy, insolvency, reorganization or similar proceeding.

27.                                      The information pertaining to each such Contract set forth in the Schedule of Contracts (as defined in the Purchase and Sale Agreement), the related Assignment and each Borrowing Base Certificate and Monthly Remittance Report is true and correct in all respects.

28.                                      With respect to each such Contract, by the Borrowing Date on which such Contract is Pledged hereunder and on each relevant date thereafter, Originator will have caused its master computer records relating to such Contract to be clearly and unambiguously marked to show that such Contract has been Pledged under this Agreement.

29.                                      With respect to each such Contract there exists a Receivable File and such Receivable File contains each item listed in the definition of Receivable File with respect to such Contract and such Receivable File has been delivered to the Custodian.

30.                                      No such Contract has been repaid, prepaid, satisfied, subordinated or rescinded, and the Obligor Collateral securing such Contract has not been released from the lien of the Lender in whole or in part (except for releases of Equipment from a Contract prior to the date of the Pledge thereof and which releases have been noted in the Collateral Receipt related to such document).

Sch. III-A-4

31.                                      No such Contract was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer, pledge and/or assignment of such Contract under this Agreement or the Purchase and Sale Agreement, and Originator has not entered into any agreement with any Obligor that prohibits, restricts or conditions the sale, transfer, pledge and/or assignment of such Contract.

32.                                      [Intentionally Omitted].

33.                                      No such Contract has been sold, transferred, assigned or pledged by Originator to any Person other than the Borrower.  Borrower has not taken any action to convey any right to any Person that would result in such Person having a right to payments due under any such Contract or payments received under the related Insurance Policy or otherwise to impair the rights of the Borrower or the Lender in such Contract, the related Insurance Policy or any proceeds thereof.  There is an Insurance Policy in full force and effect with respect to the Equipment related to such Contract if such Equipment had an original cost over $100,000.

34.                                      No such Contract is assumable by another Person in a manner which would release the Obligor thereof from such Obligor’s obligations to Originator or the Borrower.

35.                                      There has been no default, breach, violation or event permitting acceleration under the terms of any such Contract, and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any such Contract, and there has been no waiver of any of the foregoing.

36.                                      No selection procedures adverse to the Borrower or the Lender have been utilized in selecting any such Contract from all other similar Contracts originated or purchased by Originator.

37.                                      The Obligor Collateral related to any such Contract is not subject to any tax or mechanic’s lien or any other Adverse Claim.

38.                                      [Intentionally omitted.]

39.                                      The Borrower has delivered to the Custodian the sole original counterpart of each such Contract (or a true and correct copy thereof) and such document constitutes the entire agreement between the parties thereto in respect of the related Obligor Collateral.

40.                                      Each such Contract is in full force and effect in accordance with its terms and neither the Borrower nor the Obligor has or will have suspended or reduced any payments or obligations due or to become due thereunder by reason of a default by any other party to such Contract; there are no proceedings pending or threatened asserting insolvency of such Obligor; there are no proceedings pending or threatened wherein such Obligor, any other obligated party or any governmental agency has alleged that such Contract is illegal or unenforceable.

Sch. III-A-5

41.                                      The origination and collection practices used by the Servicer with respect to each such Contract have been in all respects customary in the equipment financing and servicing business.

42.                                      The Obligor Collateral related to each such Contract was properly delivered to the Obligor in good repair and is in proper working order. Each Obligor has accepted the related Equipment.  The related Obligor is the end user of the Equipment that is the subject of any such Contract and no Obligor has sublet the Equipment to any other party.

43.                                      The Obligor with respect to any such Contract is not a merchant with respect to the Equipment related to such Contract.

44.                                      Except with respect to a breach of an Obligor’s right of quiet enjoyment of the related Equipment, neither the operation of any of the terms of any such Contract nor the exercise by the Borrower, the Servicer or the Obligor of any right under any such Contract will render such Contract unenforceable in whole or in part nor subject to any right of rescission, setoff, claim, counterclaim or defense, and no such right of rescission, set-off, claim, counterclaim or defense, including a defense arising out of a breach of the Obligor’s right of quiet enjoyment of the Equipment, has been asserted with respect thereto.

45.                                      The Borrower and the Servicer have duly fulfilled all obligations on their part to be fulfilled under or in connection with the origination, acquisition and assignment of such Contract, including, without limitation, giving any notices and obtaining any consents necessary to effect the acquisition of such Contract by the Borrower, and have done nothing to impair the rights of the Borrower or the Lender in the Contract or payments with respect thereto.

46.                                      Originator and the Servicer have duly fulfilled all obligations on their part to be fulfilled under or in connection with the origination, acquisition and assignment of such Contract, and have done nothing to impair the rights of the Borrower in such Contract or payments with respect thereto.  Originator, the Servicer and Borrower have duly fulfilled all continuing obligations on their part to be fulfilled under or in connection with such Contract.

47.                                      [Intentionally Omitted].

48.                                      The sale from the Originator to the Borrower of each such Contract and the Other Conveyed Property and Related Security related thereto does not violate the terms or provisions of any agreement to which the Borrower is a party or by which it is bound.

49.                                      The transfer, assignment and conveyance of the Contract and the related Related Security and Other Conveyed Property from the Originator to the Borrower pursuant to the Purchase and Sale Agreement is not subject to nor will result in any tax, fee or governmental charge payable by the Borrower or any other Person to any federal, state or local government.

Sch. III-A-6

50.                                      No such Contract may be (i) an executory contract or (ii) in any event, deemed to be an executory contract or unexpired lease subject to rejection by an Obligor under Section 365 of the Bankruptcy Code in the event that a Bankruptcy Event has occurred with respect to such Obligor.

51.                                      Each such Contract contains enforceability provisions (i) permitting the acceleration of the payments thereunder if the Obligor is in default under such Contract and (ii) sufficient to enable the Borrower to repossess or foreclose upon the Obligor Collateral related thereto.

52.                                      Each such Contract generally contains provisions requiring the payment of both interest and principal (or, in the case of a Lease Contract, lease payments) in each calendar month or quarter during the term of such Contract.

53.                                      The promissory note, if any, related to each such Contract (i) was payable to the Originator immediately prior to its transfer to the Borrower under the Purchase and Sale Agreement, and (ii) was payable to the Borrower immediately prior to its Pledge hereunder and has not been endorsed by Originator to any Person other than the Borrower.

54.                                      The final Scheduled Payment required by each such Contract is less than or equal to the Discounted Balance of such Contract at the time of origination.

55.                                      The Obligor Collateral related to such Contract is not one or more Vehicles regularly engaged in the long-haul transportation of goods.

56.                                      The Obligor with respect to any such Contract which is a lease of, or is secured by, Equipment related to the practice of dentistry, medicine or veterinary medicine is a dentist, doctor or veterinarian.

57.                                      The vendor of the Equipment relating to such Receivable has received payment in full from the Obligor prior to the Pledge of such Receivable hereunder and has no remaining obligations with respect to such Equipment except for any applicable warranty.

Sch. III-A-7

SCHEDULE III-B

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO

ELIGIBLE POOL B RECEIVABLES

The following representations and warranties are made by the Borrower with respect to the Pool B Contracts related to Pledged Pool B Receivables which are designated as being Eligible Pool B Receivables on a Borrowing Base Certificate or a Monthly Remittance Report, or are otherwise represented to the Lender as being Eligible Pool B Receivables, or are included as Eligible Pool B Receivables in any calculation set forth herein.

1.                                      Each such Contract represents the genuine, legal, valid, binding and full recourse payment obligation of the Obligor thereunder, enforceable by the Borrower in accordance with its terms and the Obligor, with respect to such Contract (and any guarantor of the Obligor’s obligations thereunder), had full legal capacity to execute and deliver such Contract and any other documents related thereto.

2.                                      [Intentionally omitted.]

3.                                      The Obligor under such Contract has been continuously originating lease or loan agreements related to equipment with an original cost of less than $100,000 for at least three (3) complete calendar years unless such Obligor is Pentech Financial Services, Inc.

4.                                      Each such Contract, at the time of origination and at all times thereafter, conformed to all requirements of the Credit and Collection Policy applicable to such Contract and, in any case, no such Contract would be required to be written off pursuant to the Credit and Collection Policy.

5.                                      Each such Contract (i) was originated by Originator in the ordinary course of Originator’s business and Originator had all necessary licenses and permits to originate Contracts in the State where the related Obligor and the related Obligor Collateral were located, (ii) was sold by Originator to the Borrower under the Purchase and Sale Agreement and the Borrower has all necessary licenses and permits to own Receivables and enter into Contracts in the state where the related Obligor and the related Obligor Collateral are located, (iii) contains customary and enforceable provisions, such as to render the rights and remedies of the Borrower (and any assignee thereof) adequate for realization against the collateral security related thereto and (iv) provides for level Scheduled Payments during the term of such Contract or such Contract is a Non-Level Payment Contract.

6.                                      Each such Contract was originated by Originator without any fraud or material misrepresentation on the part of the related Obligor or Originator.  Each such Contract was sold by Originator to the Borrower without any fraud or material misrepresentation on the part of Originator.

7.                                      No such Contract is the subject of any litigation, nor is it subject to any right of rescission, setoff, counterclaim or defense on the part of the Obligor thereunder.

Sch. III-B-1

8.                                      Each such Contract has had no provision thereof waived, amended, altered or modified in any respect since its origination except in conformity with the Credit and Collection Policy.

9.                                      The Obligor with respect to each such Contract has a billing address in the United States and, except as otherwise permitted in writing by the Lender from time to time, all Obligor Collateral with respect thereto is located in the United States.

10.                                      Each such Contract (i) is calculated at a fixed yield, (ii) is fully amortizing in periodic installments over its remaining term (which amortization may include a Balloon Payment or Put Payment not in excess of 10% of the aggregate original cost of the related Underlying Equipment), (iii) has a remaining term of 120 months or less and does not permit renewal or extension, (iv) provides for acceleration of the Scheduled Payments thereunder if the related Obligor is in default under or has otherwise violated or breached any material provision of such Contract, (v) prohibits the related Obligor from applying any part of the Cash Reserve (if any) paid under such Contract to the Scheduled Payments due under such Contract (and neither the Originator, the Servicer, the Borrower or any other Person has applied any part of the Cash Reserve paid under such Contract to any of the Scheduled Payments due under such Contract) and (vi) has not been assigned by the related Obligor nor has there been any sub-lease of the Obligor Collateral.

11.                                      The obligations of the Obligor under each such Contract are secured by Underlying Originator Loan Collateral which includes Eligible Pool B Underlying Lease Contracts and Eligible Pool B Underlying Loan Contracts with aggregate Discounted Balances equal to or greater than the Discounted Balance of such Contract.

12.                                      Each such Contract (i) is payable by a single Obligor, that is a corporate Person or, if the collateral is Equipment used in a business, an individual and (ii) provides for the financing or lease of Obligor Collateral to be used in the business of the related Obligor.

13.                                      Each such Contract was originated in the United States and is denominated and payable solely in United States Dollars.

14.                                      [Intentionally omitted.]

15.                                      Each such Contract is by its terms an absolute and unconditional obligation of the related Obligor and is non-cancelable and non-prepayable without the payment in full of principal and accrued interest and finance charges prior to the expiration of the term of such Contract; such Contract does not provide for the substitution, exchange or addition of any other items of Underlying Originator Loan Collateral related to such Contract if the effect thereof would be to reduce or extend the Scheduled Payments related thereto; and the rights with respect to such Contract are assignable by Originator (and its successors and assigns, including the Borrower) without the consent of or notice to any Person.

16.                                      Each such Contract conforms with the criteria set forth in Exhibit D-4 hereto.

Sch. III-B-2

17.                                      The Cash Reserve, if any, related to such Contract has been deposited into a Cash Reserve Account within ten Business Days of the Pledge of the related Receivable.

18.                                      All material requirements of applicable federal, state and local laws, and regulations thereunder in respect of each such Contract, the origination thereof, and the Obligor Collateral related thereto, have been complied with in all respects.

19.                                      The applicable Underlying Obligor (other than a lessee under an Underlying Lease Contract that is a “true lease”) has good and marketable title to Underlying Originator Loan Collateral related to such Contract and such Underlying Originator Loan Collateral is free and clear of all Adverse Claims.

20.                                      Each such Contract constitutes either an “Instrument” or “Chattel Paper” or a “Payment Intangible” within the meaning of the UCC.

21.                                      Each such Contract contains language by which the related Obligor grants a security interest to Originator in the Obligor Collateral which is the subject of each such Contract.

22.                                      (A) The Originator shall have taken or caused to be taken all steps necessary under all applicable law (including the filing of an Obligor Financing Statement with respect to each such Contract) in order to cause a valid, subsisting and enforceable perfected, first priority security interest to exist in Originator’s favor in the Obligor Collateral securing each such Contract (other than with respect to Underlying Equipment relating to such Contract which has an original value of less than $25,000 if such Underlying Equipment is leased under Dollar Purchase Option Contracts or $50,000 if such Underlying Equipment is leased under FMV Contracts), (B) Originator shall have assigned the perfected, first priority security interest in the Obligor Collateral referred to in clause (A) above to the Borrower pursuant to the Purchase and Sale Agreement and (C) the Borrower shall have assigned the perfected, first priority security interest in the Obligor Collateral referred to in clause (A) above to the Collateral Agent pursuant to Section 2.13 hereof.

23.                                      The Borrower has taken all steps necessary under all applicable law in order to perfect the security interest of the Collateral Agent in (i) the Borrower’s interest in the Obligor Collateral related to each such Contract (other than with respect to Underlying Equipment relating to such Contract which has an original value of less than $25,000 if such Underlying Equipment is leased under Dollar Purchase Option Contracts or $50,000 if such Underlying Equipment is leased under FMV Contracts) and (ii) each such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof), and there exists in favor of the Collateral Agent as secured party, a valid, subsisting and enforceable first priority perfected security interest in (i) the Borrower’s interest in such Obligor Collateral and (ii) such Contract and the Receivable, Related Security and Other Conveyed Property related thereto (and the proceeds thereof) and such security interest is and shall be prior to all other liens upon and security interests in (i) the Borrower’s interest in such Obligor Collateral and (ii) such Contract and the Receivable, Related Security and Other Conveyed

Sch. III-B-3

Property related thereto (and the proceeds thereof) that now exist or may hereafter arise or be created (other than Permitted Liens).

24.                                      [Intentionally omitted.]

25.                                      No such Contract is a Defaulted Receivable or, at the time of its Pledge hereunder, a Delinquent Receivable.

26.                                      Each such Contract is payable by an Obligor which is not subject to any bankruptcy, insolvency, reorganization or similar proceeding.

27.                                      The information pertaining to each such Contract set forth in the Schedule of Contracts (as defined in the Purchase and Sale Agreement), the related Assignment and each Borrowing Base Certificate and Monthly Remittance Report is true and correct in all respects.

28.                                      With respect to each such Contract, by the Borrowing Date on which such Contract is Pledged hereunder and on each relevant date thereafter, Originator will have caused its master computer records relating to such Contract to be clearly and unambiguously marked to show that such Contract has been Pledged under this Agreement.

29.                                      With respect to each such Contract there exists a Receivable File and such Receivable File contains each item listed in the definition of Receivable File with respect to such Contract and such Receivable File is in the possession of the Custodian.

30.                                      No such Contract has been repaid, prepaid, satisfied, subordinated or rescinded, and the Obligor Collateral securing such Contract has not been released from the lien of the Lender in whole or in part.

31.                                      No such Contract was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer, pledge and/or assignment of such Contract under this Agreement or the Purchase and Sale Agreement, and the Originator has not entered into any agreement with any Obligor that prohibits, restricts or conditions the sale, transfer, pledge and/or assignment of such Contract.

32.                                      [Intentionally Omitted].

33.                                      No such Contract has been sold, transferred, assigned or pledged by the Originator to any Person other than the Borrower.  Borrower has not taken any action to convey any right to any Person that would result in such Person having a right to payments due under any such Contract or payments received under the related Insurance Policy or otherwise to impair the rights of the Borrower or the Lender in such Contract, the related Insurance Policy or any proceeds thereof.

34.                                      No such Contract is assumable by another Person in a manner which would release the Obligor thereof from such Obligor’s obligations to Originator or the Borrower.

Sch. III-B-4

35.                                      There has been no default, breach, violation or event permitting acceleration under the terms of any such Contract, and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any such Contract, and there has been no waiver of any of the foregoing.

36.                                      No selection procedures adverse to the Borrower or the Lender have been utilized in selecting any such Contract from all other similar Contracts originated or purchased by Originator.

37.                                      The Obligor Collateral related to any such Contract is not subject to any  Adverse Claim.

38.                                      [Intentionally omitted.]

39.                                      The Borrower has delivered to the Custodian the sole original counterpart (or a true and correct copy) of each such Contract and such document constitutes the entire agreement between the parties thereto in respect of the related Obligor Collateral.

40.                                      Each such Contract is in full force and effect in accordance with its terms and neither the Borrower nor the Obligor has or will have suspended or reduced any payments or obligations due or to become due thereunder by reason of a default by any other party to such Contract; there are no proceedings pending or threatened asserting insolvency of such Obligor; there are no proceedings pending or threatened wherein such Obligor, any other obligated party or any governmental agency has alleged that such Contract is illegal or unenforceable.

41.                                      The origination and collection practices used by the Servicer with respect to each such Contract have been in all respects customary in the equipment financing and servicing business.

42.                                      [Intentionally omitted.]

43.                                      [Intentionally omitted.]

44.                                      Neither the operation of any of the terms of any such Contract nor the exercise by the Borrower, the Servicer or the Obligor of any right under any such Contract will render such Contract unenforceable in whole or in part nor subject to any right of rescission, setoff, claim, counterclaim or defense, and no such right of rescission, set-off, claim, counterclaim or defense has been asserted with respect thereto.

45.                                      The Borrower and the Servicer have duly fulfilled all obligations on their part to be fulfilled under or in connection with the origination, acquisition and assignment of the Contract, including, without limitation, giving any notices and obtaining any consents necessary to effect the acquisition of the Contract by the Borrower, and have done nothing to impair the rights of the Borrower or the Lender in the Contract or payments with respect thereto.

Sch. III-B-5

46.                                      The Originator and the Servicer have duly fulfilled all obligations on their part to be fulfilled under or in connection with the origination, acquisition and assignment of the Contract, including, without limitation, giving any notices and obtaining any consents necessary to effect the acquisition of the Contract by the Borrower pursuant to the Purchase and Sale Agreement, and have done nothing to impair the rights of the Borrower in the Contract or payments with respect thereto.  Originator, the Servicer and Borrower have duly fulfilled all continuing obligations on their part to be fulfilled under or in connection with such Contract.

47.                                      The sale from the Originator to the Borrower of each such Contract and the Other Conveyed Property and Related Security related thereto does not violate the terms or provisions of any agreement to which the Borrower is a party or by which it is bound.

48.                                      The transfer, assignment and conveyance of the Contract and the related Related Security and Other Conveyed Property from Originator to the Borrower pursuant to the Purchase and Sale Agreement is not subject to nor will result in any tax, fee or governmental charge payable by the Borrower or any other Person to any federal, state or local government.

49.                                      No such Contract may be (i) an executory contract or (ii) in any event, deemed to be an executory contract or unexpired lease subject to rejection by an Obligor under Section 365 of the Bankruptcy Code in the event that a Bankruptcy Event has occurred with respect to such Obligor.

50.                                      Each such Contract contains enforceability provisions (i) permitting the acceleration of the payments thereunder if the Obligor is in default under such Contract and (ii) sufficient to enable the Borrower to repossess or foreclose upon the Obligor Collateral related thereto.

51.                                      [Intentionally omitted.]

52.                                      The promissory note, if any, related to each such Contract (i) was payable to the Originator immediately prior to its transfer to the Borrower under the Purchase and Sale Agreement, and (ii) was payable to the Borrower immediately prior to its Pledge hereunder and has not been endorsed by Originator to any Person other than the Borrower.

53.                                      The final Scheduled Payment required by each such Contract is less than or equal to the Discounted Balance of such Contract at the time of origination.

54.                                      [Intentionally omitted.]

55.                                      [Intentionally omitted.]

56.                                      Such Contract contains “Seller Events of Default” or similar events of default which (i) would occur if a Pool B Termination Event with respect to the related Underlying Originator occurred, (ii) would entitle the Borrower, as assignee of the Originator’s

Sch. III-B-6

rights under the Contract, to deliver, or cause the delivery of, a redirection notice which would require all Underlying Obligors to make all payments under Underlying Contracts sold or pledged to the Originator under such Contract to Lockbox Account or an account designated by the Borrower or the Servicer and (iii) would entitle the Borrower, as assignee of the Originator’s rights under the Contract, to receive 100% of all payments under the Underlying Contracts sold or pledged to the Originator under such Contract.

57.                                      Each such Contract shall require all amounts payable thereunder to be paid before the return to the applicable Obligor of, and without setoff with respect to, the amount of any loan principal or purchase price which would otherwise have been advanced by the Originator to the applicable Obligor pursuant to the terms of such Contract, but which was held back by the Originator as a liquidity reserve or similar reserve.

58.                                      The Obligor with respect to such Contract is not Northern Leasing Systems, Inc. or any Affiliate thereof.

Sch. III-B-7

SCHEDULE III-C

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO

ELIGIBLE POOL B UNDERLYING CONTRACTS

The following representations and warranties are made by the Borrower with respect to the Underlying Contracts related to Pledged Pool B Receivables, which are designated as being Eligible Pool B Receivables on a Borrowing Base Certificate or a Monthly Remittance Report, or are otherwise represented to the Lender as being Eligible Pool B Receivables, or are included as Eligible Pool B Receivables in any calculation set forth herein.

1.                                      Each such Underlying Contract represents the genuine, legal, valid, binding and full recourse payment obligation of the Underlying Obligor thereunder, enforceable by the Underlying Originator in accordance with its terms and the Underlying Obligor, with respect to such Underlying Contract (and any guarantor of the Underlying Obligor’s obligations thereunder), had full legal capacity to execute and deliver such Underlying Contract and any other documents related thereto.

2.                                      [Intentionally omitted.]

3.                                      [Intentionally omitted.]

4.                                      Each such Underlying Contract at the time of origination and at all times thereafter, conformed to all requirements of the credit and collection policy of the applicable Underlying Originator applicable to such Underlying Contract and, in any case, no such Underlying Contract would be required to be written off pursuant to such credit and collection policy.

5.                                      Each such Underlying Contract (i) was originated by an Eligible Underlying Originator in the ordinary course of its business and such Underlying Originator had all necessary licenses and permits to originate Underlying Contracts in the State where the related Underlying Obligor and the related Underlying Collateral were located, (ii) was pledged by such Underlying Originator to the Originator under the applicable Pool B Contract and (iii) contains customary and enforceable provisions, such as to render the rights and remedies of such Underlying Originator (and any assignee thereof, including, without limitation, the Borrower) adequate for realization against the collateral security related thereto.

6.                                      Each such Underlying Contract was originated by the applicable Underlying Originator without any fraud or material misrepresentation on the part of the related Underlying Obligor or Underlying Originator.  Each such Underlying Contract was pledged by such Underlying Originator to Originator without any fraud or material misrepresentation on the part of such Underlying Originator or Originator, as applicable.

7.                                      No such Underlying Contract is the subject of any litigation, nor is it subject to any right of rescission, setoff, counterclaim or defense on the part of the Underlying Obligor thereunder.

Sch. III-C-1

8.                                      Each such Underlying Contract has had no provision thereof waived, amended, altered or modified in any respect since its origination except in conformity with the credit and collection policy of the applicable Underlying Originator.

9.                                      The Underlying Obligor, with respect to each such Underlying Contract, has a billing address in the United States and, except as otherwise permitted in writing by the Lender from time to time, the Underlying Equipment which is the subject of each such Underlying Contract and all other Obligor Collateral with respect thereto is located in the United States.

10.                                      Each such Underlying Contract (i) is calculated at a fixed yield, (ii) is fully amortizing in periodic installments over its remaining term (which may include a Balloon Payment or Put Payment not in excess of  10% of the original cost of the related Underlying Equipment), (iii) has an remaining term of 120 months or less and does not permit renewal or extension, (iv) provides for acceleration of the Underlying Scheduled Payments thereunder if the related Underlying Obligor is in default under or has otherwise violated or breached any material provision of such Underlying Contract, (v) prohibits the related Underlying Obligor from applying any part of the Underlying Security Deposit (if any) paid under such Underlying Contract to the Underlying Scheduled Payments due under such Underlying Contract (and neither the Underlying Originator, the Originator, the Servicer, the Borrower or any other Person has applied any part of the Underlying Security Deposit paid under such Underlying Contract to any of the Underlying Scheduled Payments due under such Underlying Contract) and (vi) has not been assigned by the related Underlying Obligor nor has there been any sub-lease of the Underlying Obligor Collateral.

11.                                      Such Underlying Contract has a Discounted Balance of not greater than $800,000.

12.                                      Each such Underlying Contract (i) is payable by a single Underlying Obligor, that is a corporate Person or, if the collateral is Equipment used in a business, an individual and (ii) provides for the financing or lease of Underlying Collateral to be used in the business of the related Underlying Obligor.

13.                                      Each such Underlying Contract was originated in the United States and is denominated and payable solely in United States Dollars.

14.                                      Each such Underlying Contract (i) if an Underlying Lease Contract, contains “hell or high water” provisions, (ii) requires the related Underlying Obligor to assume all risk of loss or malfunction of the related Underlying Collateral; (iii) requires the related Underlying Obligor to pay all maintenance, repair, insurance and taxes, together with all other ancillary costs and expenses, with respect to the related Underlying Collateral; and (iv) requires the related Underlying Obligor to pay, in full, when due, all Underlying Scheduled Payments notwithstanding any casualty, loss or other damage to the related Underlying Collateral.

15.                                      Each such Underlying Contract is by its terms an absolute and unconditional obligation of the related Underlying Obligor and is non-cancelable (in the case of

Sch. III-C-2

an Underlying Lease Contract) and non-cancelable and non-prepayable without the payment in full of principal and accrued interest and finance charges prior to the expiration of the term of such Underlying Contract; such Underlying Contract does not provide for the substitution, exchange or addition of any other items of Underlying Collateral related to such Underlying Contract if the effect thereof would be to reduce or extend the Underlying Scheduled Payments related thereto; and the rights with respect to such Underlying Contract are assignable by the applicable Underlying Originator (and its successors and assigns, including Originator and the Borrower) without the consent of or notice to any Person.

16.                                      [Intentionally omitted.]

17.                                      [Intentionally omitted.]

18.                                      All material requirements of applicable federal, state and local laws, and regulations thereunder in respect of each such Underlying Contract, the origination thereof, and the Underlying Collateral related thereto, have been complied with in all respects.

19.                                      The applicable Underlying Obligor (other than a lessee under an Underlying Lease Contract that is a “true lease”) has good and marketable title to the Underlying Equipment which is the subject of each such Underlying Contract and such Underlying Equipment is free and clear of all Adverse Claims.

20.                                      Each such Underlying Contract constitutes either an “Instrument” or “Chattel Paper” or a “Payment Intangible” within the meaning of the UCC.

21.                                      Each such Underlying Contract contains language by which the related Underlying Obligor grants a security interest to the related Underlying Originator in the Underlying Collateral which is the subject of each such Underlying Contract.

22.                                      (A) The applicable Underlying Originator shall have taken or caused to be taken all steps necessary under all applicable law (including the filing of a sufficient UCC-1 Financing Statement with respect to each such Underlying Contract) in order to cause a valid, subsisting and enforceable perfected, first security interest to exist in such Underlying Contract’s favor in the Underlying Collateral securing each such Underlying Contract (other than with respect to Equipment which has a value of less than $25,000 and is leased under Dollar Purchase Option Contracts or $50,000 and is leased under FMV Contracts) and (B) such Underlying Originator shall have assigned the perfected, first priority security interest in the Underlying Collateral referred to in clause (A) above to Originator pursuant to the applicable Pool B Contract.  Such security interest is and shall be prior to all other liens upon and security interests in (i) the Underlying Originator’s in such Underlying Collateral and (ii) such Underlying Contract (and the proceeds thereof) that now exist or may hereafter arise or be created.

23.                                      [Intentionally omitted.]

24.                                      If the Underlying Collateral related to such Underlying Contract includes a Vehicle, such Underlying Contract shall be an Underlying Loan Contract or a Dollar Purchase Option Contract, and the Borrower or the Servicer shall have delivered to the

Sch. III-C-3

applicable Registrar of Titles an application for a Certificate of Title for such Vehicle satisfying the Titling Requirements.

25.                                      No such Underlying Contract meets any of the following criteria:

(i) any part of any Underlying Scheduled Payment (or other amount payable under the terms of the related Underlying Contract) remains unpaid for more than 120 days after the due date therefor set forth in such Underlying Contract;

(ii) the first or second Underlying Scheduled Payment is not paid in full when due under the related Underlying Contract;

(iii) any payment or other material terms of the related Underlying Contract have been modified due to credit related reasons after such Underlying Contract was acquired by the Originator pursuant to the applicable Pool B Contract;

(iv) a Bankruptcy Event has occurred with respect to the related Underlying Obligor or such Underlying Contract has been or should otherwise be deemed uncollectible by the Underlying Originator in accordance with its credit and collection policy;

(v) with respect to such Underlying Contract the Underlying Originator has repossessed the related Underlying Equipment;

(vi) any Underlying Scheduled Payment (or other amount payable under the terms of such Underlying Contract) remains unpaid for more than 30 days but not more than 120 days after the due date therefor set forth in such Underlying Contract.

26.                                      Each such Underlying Contract is payable by an Underlying Obligor which is not subject to any bankruptcy, insolvency, reorganization or similar proceeding.

27.                                      The information pertaining to each such Underlying Contract set forth in the Schedule of Contracts (as defined in the Purchase and Sale Agreement), the related Assignment and each Borrowing Base Certificate and Monthly Remittance Report is true and correct in all respects.

28.                                      With respect to each such Underlying Contract, by the Borrowing Date on which the related Pool B Contract is Pledged hereunder and on each relevant date thereafter, the related Underlying Originator will have caused its master computer records relating to such Underlying Contract to be clearly and unambiguously marked to show that such Underlying Contract has been pledged to Originator.

29.                                      [Intentionally omitted.]

30.                                      No such Underlying Contract has been repaid, prepaid, satisfied, subordinated or rescinded, and the Underlying Collateral securing such Underlying Contract has not been released from the lien of the related Underlying Originator, in whole or in part.

31.                                      No such Underlying Contract was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale,

Sch. III-C-4

transfer, pledge and/or assignment of such Underlying Contract under this Agreement, the Purchase and Sale Agreement or the related Pool B Contract, and the related Underlying Originator has not entered into any agreement with any Underlying Obligor that prohibits, restricts or conditions the sale, transfer, pledge and/or assignment of such Underlying Contract.

32.                                      No such Underlying Contract has been sold, transferred, assigned or pledged by the related Underlying Originator to any Person other than Originator. Such Underlying Originator has not taken any action to convey any right to any Person that would result in such Person having a right to payments due under any such Underlying Contract or payments received under any related Underlying Insurance Policy or otherwise to impair the rights of Originator in such Underlying Contract, any Underlying Insurance Policy or any proceeds thereof.  There is an Underlying Insurance Policy in full force and effect with respect to the Equipment related to such Underlying Contract if such Equipment had an original cost over $100,000.

33.                                      [Intentionally omitted.]

34.                                      No such Underlying Contract is assumable by another Person in a manner which would release the Underlying Obligor thereof from such Underlying Obligor’s obligations to the Underlying Originator.

35.                                      There has been no default, breach, violation or event permitting acceleration under the terms of any such Underlying Contract, and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any such Underlying Contract, and there has been no waiver of any of the foregoing.

36.                                      No selection procedures adverse to Originator have been utilized in selecting any such Underlying Contract from all other similar Underlying Contracts originated or purchased by the related Underlying Originator.

37.                                      The Underlying Collateral related to any such Underlying Contract is not subject to any Adverse Claim.

38.                                      [Intentionally omitted.]

39.                                      The related Underlying Originator has delivered to the Originator the sole original counterpart (or a true and correct copy) of each such Underlying Contract and such document constitutes the entire agreement of the parties thereto in respect of the related Underlying Collateral.

40.                                      Each such Underlying Contract is in full force and effect in accordance with its terms and neither the related Underlying Originator nor the Underlying Obligor has or will have suspended or reduced any payments or obligations due or to become due thereunder by reason of a default by any other party to such Underlying Contract; there are no proceedings pending or threatened asserting insolvency of such Underlying Obligor; there are no proceedings pending or threatened wherein such Underlying Obligor, any other obligated party or any governmental agency has alleged that such Underlying Contract is illegal or unenforceable.

Sch. III-C-5

41.                                      The origination and collection practices used by the related Underlying Originator with respect to each such Underlying Contract have been in all respects customary in the equipment financing and servicing business.

42.                                      The Underlying Collateral related to each such Underlying Contract was properly delivered to the Underlying Obligor in good repair and is in proper working order. Each Underlying Obligor has accepted the related Underlying Equipment.  The related Underlying Obligor is the end user of the Underlying Equipment that is the subject of any such Underlying Contract and no Underlying Obligor has sublet the Underlying Equipment to any other party.

43.                                      The Underlying Obligor with respect to any such Underlying Contract is not a merchant with respect to the Underlying Equipment related to such Underlying Contract and is not a partner, member or Affiliate of the Underlying Originator.

44.                                      Except with respect to a breach of an Underlying Obligor’s right of quiet enjoyment of the related Underlying Equipment, neither the operation of any of the terms of any such Underlying Contract nor the exercise by the Underlying Originator, the Borrower, the Servicer or the Obligor of any right under any such Underlying Contract will render such Underlying Contract unenforceable in whole or in part nor subject to any right of rescission, setoff, claim, counterclaim or defense, and no such right of rescission, set-off, claim, counterclaim or defense, including a defense arising out of a breach of the Underlying Obligor’s right of quiet enjoyment of the Underlying Equipment, has been asserted with respect thereto.

45.                                      The Underlying Originator has duly fulfilled all obligations on its part to be fulfilled under or in connection with the origination, acquisition and assignment of the Underlying Contract, including, without limitation, giving any notices and obtaining any consents necessary to effect, as applicable, the acquisition of the Underlying Contract by, or the pledge of the Underlying Contract to, the Originator, and has done nothing to impair the rights of Originator in the Underlying Contract or payments with respect thereto.  The Underlying Originator, Originator, the Servicer and Borrower, as applicable, have duly fulfilled all continuing obligations on their part to be fulfilled under or in connection with such Underlying Contract.

46.                                      [Intentionally omitted.]

47.                                      The sale from the related Underlying Originator to Originator of each such Underlying Contract does not violate the terms or provisions of any agreement to which either of them is a party or by which it is bound.

48.                                      [Intentionally omitted.]

49.                                      The pledge of the Underlying Contract from the related Underlying Originator to Originator pursuant to the related Pool B Contract is not subject to or will result in any tax, fee or governmental charge payable by Originator or any other Person to any federal, state or local government.

Sch. III-C-6

50.                                      No such Underlying Contract may be (i) an executory contract  or (ii) in any event, deemed to be an executory contract or unexpired lease subject to rejection by an Underlying Obligor under Section 365 of the Bankruptcy Code in the event that a Bankruptcy Event has occurred with respect to such Underlying Obligor.

51.                                      Each such Underlying Contract contains enforceability provisions (i) permitting the acceleration of the payments thereunder if the Underlying Obligor is in default under such Underlying Contract and (ii) sufficient to enable the related Underlying Originator (or any assignee thereof) to repossess or foreclose upon the Underlying Collateral related thereto.

52.                                      Each such Underlying Contract generally contains provisions requiring the payment of both interest and principal (or, in the case of an Underlying Lease Contract, lease payments) in each calendar month or quarter during the term of such Underlying Contract.

53.                                      The promissory note, if any, related to each such Underlying Contract (i) was payable to the related Underlying Originator immediately prior to its transfer to Originator pursuant to the related Pool B Contract and has not been endorsed by the related Underlying Originator to any Person other than Originator.

54.                                      The final Underlying Scheduled Payment required by each such Underlying Contract is less than or equal to the Discounted Balance of such Underlying Contract at the time of origination.

55.                                      The Underlying Collateral related to such Underlying Contract is not one or more Vehicles regularly engaged in the long-haul transportation of goods.

56.                                      The related Underlying Originator is not a guarantor under any Underlying Contract.

57.                                      The vendor of the Underlying Equipment relating to such Underlying Contract has received payment in full from the Underlying Obligor prior to the pledge of such Underlying Contract under the related Pool B Contract and has no remaining obligations with respect to such Underlying Equipment except for any applicable warranty.

58.                                      Such Underlying Contract was not originated by Northern Leasing Systems, Inc. or any Affiliate thereof.

Sch. III-C-7

SCHEDULE IV

CREDIT AND COLLECTION POLICY

Attached.

Sch. IV-1

SCHEDULE V

EQUIPMENT CATEGORIES

Sch. V-1

SCHEDULE VI

ADDRESSES FOR NOTICE

Resource Capital Funding II, LLC

c/o Leaf Funding Inc.

c/o LEAF Commercial Finance Fund, LLC

One Commerce Square

18182005 Market Street, 915th Floor

Philadelphia, PA 19103

Attention:  Matthew Goldenberg

Facsimile No.:  (215) 640-6370

Confirmation No.:  (215) 231-7070

LEAF Financial Corporation

One Commerce Square

18182005 Market Street, 915th Floor,

Philadelphia, PA 19103

Attention:  Miles Herman

Facsimile No.:  (215) 640-6363

Confirmation No.:  (215) 717-3358

Morgan Stanley Capital Services Inc.

Transaction Management Group

1585 Broadway

New York, NY 10236-8293

Attention:  Chief Legal Officer

Facsimile No.: 001-212-507-4022

Morgan Stanley Credit

750 Seventh Avenue

New York, NY 10019

Facsimile No.: (212) 507-5890

E-mail: spvmonthlyreport@morganstanley.com

Morgan Stanley Bank

1221 Avenue of the Americas

New York, NY 10020

Attention:  Peter Woroniecki

Facsimile No.:  (212) 762-6943

Confirmation No.:  (212) 762-6942

Sch. VI-1

U.S. Bank National Association

EP-MN-WS3D

60 Livingston Ave.

St. Paul, MN 55107

Attention:  Diane Reynolds

Facsimile No.:  (651) 495-8090

Confirmation No.:  (651) 495-3923

Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services)

U.S. Bank Portfolio Services

1310 Madrid Street

Marshall, MN 56258

Attention:  Joe Andries

Facsimile No.:  (866) 806-0775

Confirmation No.:  (507) 532-7129

Sch. VI-2

EXHIBIT A

FORM OF BORROWING BASE CERTIFICATE

BORROWING BASE CERTIFICATE

                                                                                                           __________, 200__

To:     Morgan Stanley Bank

           1221 Avenue of the Americas

           New York, NY 10020

           Attn: Peter Woroniecki

Ladies and Gentlemen:

Reference is made to the Receivables Loan and Security Agreement dated as of October 31, 2006 (the “Loan Agreement”), among Resource Capital Funding II, LLC, (the “Borrower”), Leaf Financial Corporation, as the Servicer, Morgan Stanley Bank, as Lender, U.S. Bank National Association, as the Custodian and the Lender’s Bank and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) as the Backup Servicer.  Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Loan Agreement.

In accordance with Section 6.10(c) of the Loan Agreement, the Borrower hereby certifies that, after giving effect to the Borrowing requested to occur on __________, 200__:

(1)           the aggregate Facility Amount under the Loan Agreement does not exceed the lesser of (A) the Borrowing Limit and (B) the Borrowing Base;

(2)           if such Borrowing is to be secured by Pool A Receivables, the aggregate Facility Amount under the Loan Agreement, calculated solely with respect to Loans secured by Pool A Receivables, does not exceed the Pool A Borrowing Base;

(3)           if such Borrowing is to be secured by Pool B Receivables, the aggregate Facility Amount under the Loan Agreement, calculated solely with respect to Loans secured by Pool B Receivables, does not exceed the Pool B Borrowing Base;

(4)           no Program Termination Event exists;

(5)           if such Borrowing is to be secured by Pool A Receivables, no Pool A Termination Event exists;

(6)           if such Borrowing is to be secured by Pool B Receivables, no Pool B Termination Event exists; and

The Borrower hereby further certifies that attached hereto as Schedule A are true and correct calculations evidencing the accuracy of the statements set forth in paragraphs (1) and, as applicable, (2) or (3) above.

Very truly yours,

RESOURCE CAPITAL FUNDING II, LLC

By:                 /s/ Miles Herman                                              

                                                                          Name:            Miles Herman

                                                                          Title:              Vice President

Exh. A-1

EXHIBIT B

FORM OF REQUIRED DATA FIELDS

(a)           Obligor lease number;

(b)           Obligor name;

(c)           Underlying Obligor name;

(d)           Obligor Credit risk rating (if available);

(e)           Collateral location (city and state);

(f)           Contract type (pool A or B);

(g)           Equipment category/type;

(h)           Non Level Payment Contract flag;

(i)           Balloon flag and put payment flag;

(j)           Stand Alone Working Capital Loan Flag;

(k)           New/used flag (if available);

(l)           Lease type (true/installment);

(m)           Serial Number (if available);

(n)           SIC Code (if available);

(o)           Vendor;

(p)           Commencement Date

(q)           Maturity Date;

(r)           Date Next Due;

(s)           Original Term;

(t)           Remaining Term;

(u)           Payment Frequency;

(v)           Original Receivable Balance;

(w)           Current Receivable Balance;

(x)           Original Equipment Cost;

(y)           Amortized Equipment Cost;

Exh. B-1

(z)           Scheduled Payment; and

(aa)           Discounted Balance.

Exh. B-2

EXHIBIT C

FORM OF MONTHLY REMITTANCE REPORT

(See attached.)

Exh. C-1

EXHIBIT D

FORMS OF CONTRACT

(See attached.)

Exh. D-1

EXHIBIT E

Vehicle Lienholder Nominee Agreement

This Vehicle Lienholder Nominee Agreement (this “Agreement”) is made as of __________, 2007, among __________ (the “Lienholder”), as Lienholder, Resource Capital Funding II, LLC (the “Borrower”) and Morgan Stanley Bank, as Lender (the “Lender”).

Whereas, from time to time LEAF Funding, Inc. (“Funding”) may acquire an ownership or security interest in certain Contracts;

WHEREAS, Lienholder appears as the lienholder of record on the Titles for the Vehicles sold or leased under such Contracts;

Whereas, from time to time Funding may sell to the Borrower certain of such Contracts and all of its right, title and interest in the related Vehicles, and

Whereas, the Borrower shall pledge, inter alia, such Contracts and the Borrower’s security interest in each such Vehicle, to the Lender in order to secure loans being advanced to the Borrower by, and the other obligations of the Borrower to, the Lender (the “Loan Transactions”); and

Whereas, due to the administrative difficulty and costs of amending the Titles of the Vehicles to note thereon (i) the security interest of the Borrower in such Vehicles and (ii) the security interest of the Lender in the security interest of the Borrower in such Vehicles, the Titles to the Vehicles will not be amended to note such security interests of the Borrower and the Lender but instead, from and after the date hereof, the Lienholder will act as the Borrower’s and the Lender’s respective nominee lienholder with respect to the Vehicles pursuant to the terms hereof;

Now, Therefore, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

     1. Term.  This Agreement will commence on the date hereof and will remain in full force and effect until the Collection Date.

     2. Appointment of Nominee Lienholder.  The Borrower and the Lender hereby appoint the Lienholder as their nominee lienholder, in a representative capacity, with respect to the Vehicles, and the Lienholder hereby agrees to serve in such capacity as described herein.  The Lienholder hereby agrees that all of its right, title, interest [Add for Pool A: (which is solely as stated lienholder on the Titles)] in and to the Vehicles shall be solely for the respective benefit of the Borrower and the Lender.  As stated lienholder on the Titles to all of such Vehicles, the Lienholder agrees to take any and all reasonable actions as the Borrower (with the consent of the Lender) or the Lender may request in writing with respect to the Titles including, without limitation, all actions for which the Lienholder’s consent, waiver, release, vote or signature (or other action of similar nature) is necessary or advisable in the judgment of the Borrower or the Lender in order to maintain, preserve and protect the Borrower’s security

Exh. E-1

interest in such Vehicles and the Lender’s security interest in the Borrower’s security interest in such Vehicles and if the Lienholder fails to take any or all such actions, the Lender or any designee of the Lender may take such actions at the sole expense of the Borrower, and the Lienholder hereby grants to the Lender and any such designee an irrevocable power of attorney and license to take any and all such actions in the Lienholder’s name and on behalf of the Lienholder.

                3. Interests in the Vehicles.  Notwithstanding the fact that the Lienholder will be and remain noted as first lienholder [Add for Pool A: (which is solely as stated lienholder)] on the Titles to the Vehicles from time to time pledged to the Borrower and repledged to the Lender, each party hereto hereby agrees that, on and after the date hereof:

 (i) except as set forth in subsection (ii) below and subject to the terms of any agreement between the Borrower and the Lender, the Borrower is entitled to all incidents, benefits and risks of a holder of a first priority perfected security interest or ownership in and lien on the Vehicles;

 (ii) subject to the terms of any agreement between the Borrower and the Lender, the Lender is entitled to all incidents, benefits and risks of a holder of a first priority perfected security interest in and lien on the Borrower’s first priority perfected security interest in and lien on the Vehicles and the right to exercise or cause the exercise of all remedies with respect to the Vehicles, including the right to repossess, sell and otherwise transfer and dispose of the Vehicles at the times and subject to the terms of the Contract with the Obligor relating to such Vehicle;

 (iii) the Lienholder has no direct (or indirect) ownership or other rights or interest (including any security interest) in any of the Vehicles [Pool B add-on: (except its security interest in the Vehicles, which is to be held under this Agreement solely for the benefit of the Borrower and the Lender)];

 (iv) the Lienholder will not take any action with respect to the Vehicles unless such action is consented to by the Lender; and

Exh. E-2

                  (v)           the Lienholder shall not represent to any lender, financing source or other Person, that it has, or in any other manner hold itself out as having, any direct or indirect ownership interest or any other rights or interests (including any security interest) in any of the Vehicles, except for any rights it may have as nominee lienholder hereunder with respect to the Vehicles [Pool B alternative: , except for its security interest in the Vehicles, which is to be held under this Agreement solely for the benefit of the Borrower and the Lender].

On the Collection Date, the Lienholder shall, at the expense of the Borrower, return the Titles to the Borrower along with a power of attorney, if necessary to substitute Borrower or Lender as stated lienholder on all Titles, and the Lienholder shall have no further responsibility for removing the Lienholder as stated lienholder on the Titles.

4.           Entire Agreement.  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter of this Agreement and supersedes any prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof.

5.           Remittance of Proceeds.  In the event that Lienholder receives any insurance proceeds or other payments or proceeds in respect of the Vehicles, it shall hold the same in trust and notify the Borrower and the Lender of the receipt thereof, and shall remit promptly such payments or proceeds to the account specified by the

Lender as set forth herein, or as otherwise identified by the Lender from time to time by written notice, but in no event later than the fifth day following receipt of such payments or proceeds.

6.           Documentation.  From and after the date hereof, to the extent that Lienholder from time to time receives any certificate of title or notifications of lienholder status relating to any Vehicle, Lienholder shall promptly forward the same to U.S. Bank (or, following the delivery of written notice from Lender to such effect, the Lender).

7.           Nonpetition.  Lienholder hereby agrees that it will not institute against, or join any other person or entity in instituting against Borrower any proceeding under any bankruptcy, reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction until one year and one day shall have elapsed since the payment in full of all indebtedness and other obligations owed by Borrower to the Lender, Lender’s Bank and Collateral Agent with respect to the Loan Transactions.

8.           Succession and Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Neither the Lienholder nor the Borrower may assign either this Agreement or any of its respective rights, interests, or obligations hereunder without the prior written approval of the Lender.

9.           Counterparts.  This Agreement may be executed in separate counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

10.           Headings.  The section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.

                11.           Notices.  All notices, requests, demands, claims and other communications hereunder will be in writing.  Any notice, request, demand, claim, or other communication hereunder will be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to the Lienholder:

Exh. E-3

If to the Borrower:

Resource Capital Funding II, LLC

1818One Commerce Square

2005 Market Street, 915th Floor

Philadelphia, Pa  19103

Attention: Miles Herman

Facsimile No.: (215) 640-6363

Confirmation No.: (215) 717-3358

If to the Lender:

Morgan Stanley Bank

1221 Avenue of the Americas

New York, NY  10020

Attention: Peter Woroniecki

Facsimile No.: (212) 762-6943

Confirmation No.: (212) 762-6942

Any party hereto may give written notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it is actually received by the intended recipient.  Any party hereto may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth.

 12. Governing Law. This agreement shall, in accordance with section 5-1401 and 5-1402 of the General Obligations Law of the State of New York, be governed by the laws of the State of New York, without regard to any conflicts of law principles thereof that would call for the application of the laws of any other jurisdiction.

 13. Consent to Jurisdiction; Waiver of Jury Trial; Etc.  Any legal action or proceeding with respect to this agreement may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this agreement, each party hereto hereby accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts.  Each party hereby irrevocably waives, in connection with any such action or proceeding, (i) trial by jury, (ii) to the extent it may effectively do so under applicable law, any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions and (iii) the right to interpose any set-off, counterclaim or cross-claim (unless such set-off, counterclaim or cross-claim could not, by reason of any applicable federal or state procedural laws, be interposed, pleaded or alleged in any other action)

 14. Amendments and Waivers.  No amendment of any provision of this Agreement will be valid unless the same will be in writing and signed by each of the parties hereto.  No waiver by the Lender of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any such prior or subsequent occurrence.

Exh. E-4

 15. Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 16. Definitions.  Capitalized terms used herein but not previously defined herein have the following meanings:

(i) “Collection Date” means the date on which (a) the aggregate outstanding principal amount of the loans under the Loan Transactions have been repaid in full and all interest and fees and all other obligations of the Borrower thereunder have been paid in full, and (b) the Lender shall have no further obligation to make additional loans.

(ii) “Contract” means a finance lease contract or a secured loan contract with respect to one or more Vehicles and  includes the rights to all payments from the Obligor thereunder.

(iii)“Obligor” means each person obligated to make payments under a Contract and which is the owner or co-owner of the related Vehicle(s).

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

(v)“Registrar of Titles” means with respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.

(vi)“Servicer” means LEAF Financial Corporation.

Exh. E-5

(vii) “State” means one of the fifty states of the United States of America or the District of Columbia.

(viii) “Title” means with respect to a Vehicle, (i) if such Vehicle is registered in Florida, (x) to the extent the related Receivable has been originated by Funding, an original certificate of title or (y) to the extent the related Receivable has been originated by a Person other than Funding, (A) an original certificate of title or (B) if the original certificate of title has been sent to the registered owner of such Vehicle, an original computer confirmation of lien, (ii) if such Vehicle is registered in Kansas, a true copy of the application for certificate of  title and registration, (iii) if such Vehicle is registered in Kentucky, an original notice of lien, (iv) if such Vehicle is registered in Maryland, an original notice of security interest filing, (v) if such Vehicle is registered in Minnesota, an original lien card, (vi) if such Vehicle is registered in Missouri, an original notice of recorded lien, (vii) if such Vehicle is registered in Montana, a true copy of the application for certificate of title, (viii) if such Vehicle is registered in New York, an original notice of lien, (ix) if such Vehicle is registered in Oklahoma, an original, file-stamped lien entry form, (x) if such Vehicle is registered in Wisconsin, an original lien confirmation card or (xi) if such Vehicle is registered in any other State, an original certificate of title, in each case issued by the Registrar of Titles of the applicable State listing the lienholder of record with respect to such Vehicle (it being understood and agreed that solely for purposes of clauses (i) through (x) above (other than clauses (i)(x) and (i)(y)(A)), the “original” of any document required thereby shall consist of whatever documentation has been issued by the Registrar of Titles of the related State to the lienholder).

(ix)“Vehicle” means a new or a used automobile, minivan, sports utility vehicle, light duty truck or heavy duty truck in which Borrower or Funding has acquired an ownership or security interest.

[Signature page to follow.]

Exh. E-6

 In Witness Whereof, the parties hereto have duly executed this Agreement as of the date first above written.

[LIENHOLDER]
By:	/s/
	Name
	Title

RESOURCE CAPITAL FUNDING II, LLC, as Borrower
By:	/s/
	Name
	Title

MORGAN STANLEY BANK, as Lender
By:	/s/
	Name
	Title

Exh. E-7

EXHIBIT F

FORM OF NOTICE OF BORROWING

NOTICE OF BORROWING

                                                                                                           __________, 200__

To:           Morgan Stanley Bank

           1221 Avenue of the Americas

           New York, NY 10020

           Attn: Peter Woroniecki

Notice of Borrowing No.:  [1]

Gentlemen:

Reference is made to the Receivables Loan and Security Agreement dated as of October 31, 2006 (the “Loan Agreement”), among Resource Capital Funding II, LLC, (the “Borrower”), Leaf Financial Corporation, as the Servicer, Morgan Stanley Bank, as Lender, U.S. Bank National Association, as the Custodian and the Lender’s Bank and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) as the Backup Servicer.  Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Loan Agreement.

In accordance with Sections 2.02(c) and 6.10(c) of the Loan Agreement, the Borrower hereby certifies that, after giving effect to the Borrowing requested to occur on __________, 200__:

1. 1. Requested aggregate amount of Borrowing:                                                                                     $__________

           To be comprised of

a. a. Requested Pool A Loans                                                      $__________

                      and;

b. b. Requested Pool B Loans;                                                      $__________

2. 2. Requested date of Borrowing: __________, 200__

3. 3. In connection with this Borrowing we Pledge to you the Eligible Pool A Receivables and the Eligible Pool B Receivables set forth on the Schedule of Receivables attached hereto.

Exh. F-1

Payments in connection with this Borrowing should be deposited to the following account:  _________________________.

(Signature page to follow)

Exh. F-2

 Very truly yours

RESOURCE CAPITAL FUNDING II, LLC  

 By:  

  Name:  Miles Herman

  Title:    Vice President

Exh. F-3

EXHIBIT G

FORM OF ALLONGE

(See attached.)

Exh. G-1

TABLE OF CONTENTS

                                                                  Page

ARTICLE I. DEFINITIONS  1

SECTION 1.01 Certain Defined Terms  1

SECTION 1.02 Other Terms  3730

SECTION 1.03 Computation of Time Periods  3730

ARTICLE II. THE RECEIVABLES FACILITY  3730

SECTION 2.01 Borrowings  3730

SECTION 2.02 The Initial Borrowing and Subsequent Borrowings  3730

SECTION 2.03 Determination of Interest Periods and Interest Rates                     3831

SECTION 2.04 Remittance Procedures  3932

SECTION 2.05 Security Deposit Account  4334

SECTION 2.06 Cash Reserve Account  4435

SECTION 2.07 Payments and Computations, Etc  4536

SECTION 2.08 Fees  4637

SECTION 2.09 Increased Costs; Capital Adequacy  4637

SECTION 2.10 Collateral Assignment of Agreements  4738

SECTION 2.11 Grant of a Security Interest  4838

SECTION 2.12 Evidence of Debt  4939

SECTION 2.13 Release of Pledged Receivables  4939

SECTION 2.14 Treatment of Amounts Paid by the Borrower  5039

SECTION 2.15 Prepayment; Certain Indemnification Rights; Termination  5039

SECTION 2.16 Increase of Borrowing Limit  5140

ARTICLE III. CONDITIONS OF LOANS  5140

SECTION 3.01 Conditions Precedent to Initial Borrowing  5140

SECTION 3.02 Conditions Precedent to All Borrowings  5140

SECTION 3.03 Advances Do Not Constitute a Waiver  5442

ARTICLE IV. REPRESENTATIONS AND WARRANTIES  5443

SECTION 4.01 Representations and Warranties of the Borrower  5443

SECTION 4.02 Representations and Warranties of the Servicer  5745

SECTION 4.03 Resale of Receivables Upon Breach of Covenant or Representation and Warranty by Borrower  6047

SECTION 4.04 Representations and Warranties of the Lender  6047

ARTICLE V. GENERAL COVENANTS OF THE BORROWER AND THE SERVICER  6047

SECTION 5.01 General Covenants  6047

ARTICLE VI. ADMINISTRATION AND SERVICING; CERTAIN COVENANTS  6450

SECTION 6.01 Appointment and Designation of the Servicer  6450

-i-

TABLE OF CONTENTS

(continued)

                                          0;                           Page

SECTION 6.02 Collection of Receivable Payments; Modification and Amendment of Receivables; Lockbox Agreements  6652

SECTION 6.03 Realization Upon Receivables  6752

SECTION 6.04 Insurance Regarding Equipment  6752

SECTION 6.05 Maintenance of Security Interests in Obligor Collateral                                            6853

SECTION 6.06 Pledged Receivable Receipts  6953

SECTION 6.07 No Rights of Withdrawal  6953

SECTION 6.08 Permitted Investments  6953

SECTION 6.09 Servicing Compensation  7054

SECTION 6.10 Reports to the Lender; Account Statements; Servicing Information  7054

SECTION 6.11 Statements as to Compliance; Financial Statements                               7155

SECTION 6.12 Access to Certain Documentation; Obligors; Background Check  7457

SECTION 6.13 Backup Servicer  7557

SECTION 6.14 Additional Remedies of Lender Upon Event of Default                                                                  7860

SECTION 6.15 Waiver of Defaults  7960

SECTION 6.16 Maintenance of Certain Insurance  7960

SECTION 6.17 Segregation of Collections  7960

SECTION 6.18 UCC Matters; Protection and Perfection of Pledged Assets  7960

SECTION 6.19 Servicer Advances  8061

SECTION 6.20 Repurchase of Receivables Upon Breach of Covenant or Representation and Warranty by Servicer  8061

SECTION 6.21 Compliance with Applicable Law  8162

SECTION 6.22 Receipt of Certificates of Title  8162

SECTION 6.23 Lender’s Bank Limitation of Liability  8162

ARTICLE VII. EVENTS OF DEFAULT  8263

SECTION 7.01 Events of Default  8263

SECTION 7.02 Additional Remedies of the Lender  8565

ARTICLE VIII.INDEMNIFICATION                      8665

SECTION 8.01 Indemnities by the Borrower  8665

SECTION 8.02 Indemnities by Servicer  8867

ARTICLE IX. MISCELLANEOUS  9069

SECTION 9.01 Amendments and Waivers  9069

SECTION 9.02 Notices, Etc  9069

SECTION 9.03 No Waiver; Remedies  9169

SECTION 9.04 Binding Effect; Assignability; Multiple Lenders  9169

-ii-

TABLE OF CONTENTS

(continued)

                                         &# 160;                           Page

SECTION 9.05 Term of This Agreement  9270

SECTION 9.06 GOVERNING LAW; JURY WAIVER; CONSENT TO JURISDICTION  9270

SECTION 9.07 Costs, Expenses and Taxes  9270

SECTION 9.08 No Proceedings  9371

SECTION 9.09 Recourse Against Certain Parties  9471

SECTION 9.10 Execution in Counterparts; Severability; Integration                                                                                                                                                                        0;                                                      9472

SECTION 9.11 Tax Characterization  9472

SECTION 9.12 Calculation of Performance Triggers  9572

ARTICLE X. THE COLLATERAL AGENT  9572

SECTION 10.01 No Implied Duties  9572

SECTION 10.02 Limits on Liability  9672

SECTION 10.03 Acknowledgment 96     Acknowledgement  72

-iii-

LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

SCHEDULE I Condition Precedent Documents

SCHEDULE II Prior Names, Tradenames, Fictitious Names and “Doing Business As” Names

SCHEDULE III Representations and Warranties with Respect to Eligible Receivables, Eligible Underlying Contracts and Eligible Underlying Originators

SCHEDULE IV Credit and Collection Policy

SCHEDULE V Equipment Categories

SCHEDULE VI Addresses for Notice

EXHIBITS

EXHIBIT A Form of Borrowing Base Certificate

EXHIBIT B Form of Required Data Fields

EXHIBIT C Form of Monthly Remittance Report

EXHIBIT D-1(a) Form of Master Lease Agreement

EXHIBIT D-1(b) Form of Master Lease Schedule (Dollar Purchase Option)

EXHIBIT D-1(c) Form of Master Lease Schedule (FMV Purchase Option)

EXHIBIT D-1(d) Form of Master Lease Schedule (Put)

EXHIBIT D-1(e) Form of Stand Alone Lease Agreement

EXHIBIT D-2(a) Form of Loan Contract

EXHIBIT D-2(b) Form of Loan Contract

EXHIBIT D-2(c) Form of Finance Agreement

EXHIBIT D-3 Form of Practice Acquisition Loan Contract

EXHIBIT D-4 Eligibility Requirements for Pool B Transactions (Documentation  Criteria)

EXHIBIT E Form of Vehicle Lienholder Nominee Agreement

EXHIBIT F Form of Notice of Borrowing

EXHIBIT G Form of Allonge

iv

EX-10.5

MORGAN STANLEY BANK

May 23, 2008

Resource Capital Funding II, LLC

c/o LEAF Financial Corporation

2005 Market Street, 15th Floor

Philadelphia, PA 19103

Re:           Amended and Restated Fee Letter

Ladies and Gentlemen:

Reference is made to the Receivables Loan and Security Agreement dated as of October 31, 2006 (as such may be amended, restated and/or otherwise modified from time to time, the “RLSA”) among Resource Capital Funding II, LLC, as Borrower (the “Borrower”), LEAF Financial Corporation (“LEAF Financial”), as Servicer, Morgan Stanley Bank (“Morgan Stanley”) and the other Lenders party thereto from time to time, U.S. Bank National Association, as Custodian and the Lender’s Bank, and Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services). Terms defined in the RLSA are used in this amended and restated fee letter (this “Fee Letter”) as therein defined.

This Fee Letter is the fee letter referred to in Section 2.08(a) of the RLSA and sets forth the understanding of the parties hereto with respect to certain fees that are payable by the Borrower in connection with the financing provided by the Lenders pursuant to the RLSA. This Fee Letter amends and restates that certain fee letter, dated as of October 31, 2006, among the parties hereto (the “Existing Fee Letter”), and after the date hereof, all references in any Transaction Document to the Fee Letter shall be deemed references to this Fee Letter. This Fee Letter is not intended to constitute a novation of the Existing Fee Letter, and all fees that have accrued under the Existing Fee Letter up to the date hereof shall be payable as and when required in accordance with the terms thereof.

The parties hereto agree as follows:

l.           The Borrower previously has paid to Morgan Stanley four installments of an Arrangement Fee (as defined in the Existing Fee Letter) on October 15, 2006, January 15, 2007, April 15, 2007 and July 15, 2007, each in the amount of $125,000.  LEAF Financial hereby agrees to pay to Morgan Stanley on or prior to the date hereof, a one-time, up-front, fully-earned and non-refundable due diligence fee (the “Due Diligence Fee”), in the amount of $25,000.

1

2.           In consideration of Morgan Stanley executing this Fee Letter, the consent to the Membership Interest Purchase Agreement, dated on or about the date hereof, between LEAF Funding, Inc. and LEAF Commercial Finance Fund, LLC, and the fifth amendment to the RLSA, dated as of the date hereof, the Borrower hereby agrees to pay to Morgan Stanley an amendment fee in the amount of $500,000 (the “Amendment Fee”), which such fee shall have been earned, in its entirety, as of the date hereof.  The Amendment Fee is payable in two (2) equal installments according to the following schedule:  1st payment of $250,000 (the “First Installment”) on or prior to the date hereof; and 2nd payment of $250,000 on or prior to June 30, 2008.

3.           The Borrower hereby agrees that, in the event that the Lender increases the Borrowing Limit pursuant to Section 2.16 of the RLSA, the Borrower shall pay to the Agent, for its own account, immediately prior to the effectiveness of such increase, a fee (the “Increase Fee”) in an amount equal to 0.20% of the principal amount of such increase, which such fee shall have been earned, in its entirety, on the date of such increase.

4.           (a)           During the period commencing on the date hereof and ending on the Collection Date, the Borrower shall pay Morgan Stanley, a fee (the “Unused Fee”) in respect of each Fee Period (other than the Fee Period commencing on the date hereof and the five following Fee Periods) which shall be equal to (A) 0.10%, if the Facility Amount is equal to or less than $100,000,000, and 0.25%, if the Facility Amount is greater than $100,000,000, multiplied by (B) an amount equal to (i) the Borrowing Limit (or, if more than one Borrowing Limit was in effect during such Fee Period, the daily average Borrowing Limit) in effect during such Fee Period minus (ii) the daily average Facility Amount during such Fee Period, as determined by the Lender, multiplied by (C) a fraction, the numerator of which shall be the actual number of days in such Fee Period and the denominator of which shall be 360 days.

(b)           The Unused Fee shall be payable by the Borrower in arrears on each Remittance Date commencing on the seventh (7th) Remittance Date after the Closing Date with respect to the Fee Period immediately preceding such Remittance Date, and on the Collection Date.  The Unused Fee shall not be payable with respect to any Fee Period during interest in respect of the Loans Outstanding is computed by reference to the Default Funding Rate.

5.           If the Borrower exercises its right to prepay, in whole or in part, the outstanding principal amount of the Loans in accordance with Section 2.15 of the RLSA, the Borrower shall pay Morgan Stanley a fee (the “Prepayment Premium”) in an amount equal to 0.50% multiplied by the principal amount of the Loans then being prepaid.  Notwithstanding the foregoing, such Prepayment Premium shall be credited against any fees paid to Morgan Stanley in connection with a securitization transaction.

6.           Whenever any payment hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment; provided, that no day shall be included in more than one Fee Period.

2

7.           For all purposes under the RLSA, “Adjusted Eurodollar Rate Margin” shall mean (a) prior to June 1, 2008, (i) 0.60% per annum on the portion of the Facility Amount equal to or less than $100,000,000 and (ii) 0.75% per annum on the portion of the Facility Amount in excess of $100,000,000 (if any), and (b) on and after June 1, 2008, 1.15% per annum on the Facility Amount.

8.           Unless otherwise required by applicable law, each party hereto agrees to maintain the confidentiality of this Fee Letter in communications with third parties and otherwise; provided, that, this Fee Letter may be disclosed by each party to its respective legal counsel and auditors, any rating agency and any provider of liquidity support or credit enhancement, if they agree to hold it confidential. The terms and provisions of this Fee Letter shall be binding upon, and shall inure to the benefit of, the successors and assigns of the parties hereof. THIS FEE LETTER SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

[Remainder of page intentionally left blank.]

3

This Fee Letter may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Fee Letter by facsimile shall be effective as delivery of a manually executed counterpart of this Fee Letter.

Very truly yours,

MORGAN STANLEY BANK, as Lender

By:           ________________________________

Name:

Title:

Agreed and accepted as of

the date first above written:

RESOURCE CAPITAL FUNDING II, LLC,

as Borrower

By:           ___________________________

Name:

Title:

LEAF FINANCIAL CORPORATION

By:           ___________________________

Name:

Title:

S-1

EX-10.6

THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (“Amendment”), dated August 7, 2008, but effective as of June 30, 2008, is among Resource America, Inc., a Delaware corporation (“Borrower”), TD BANK, N.A. (successor by merger to Commerce Bank, N.A.), a national banking association, in its capacity as agent (“Agent”), TD BANK, N.A. (successor by merger to Commerce Bank, N.A.), a national banking association, in its capacity as issuing bank (“Issuing Bank”) and each of the financial institutions which are now or hereafter identified as Lenders on Schedule A (as such Schedule may be amended, modified or replaced from time to time) attached to the Loan Agreement (as defined below), (each such  financial institution, individually each being a “Lender” and collectively all being “Lenders”).

BACKGROUND

A.           Pursuant to the terms of a certain Loan and Security Agreement dated May 24, 2007 among Borrower, Agent and Lenders (as the same has been or may be supplemented, restated, superseded, amended or replaced from time to time, the “Loan Agreement”), Lenders made available to Borrower, inter alia, a revolving line of credit not to exceed Seventy Five Million Dollars ($75,000,000) (the “Loans”).  All capitalized terms used herein without further definition shall have the respective meaning set forth in the Loan Agreement and all other Loan Documents.

B.           The Loans are secured by, inter alia, continuing perfected security interests in the Collateral.

C.           An Event of Default exists under the Loan Agreement, and Borrower has requested Lenders’ waiver of such Event of Default.  Lenders have agreed to waive such Event of Default in accordance with and subject to the satisfaction of the conditions hereof.

D.           Borrower has requested that Agent and Lenders also modify, in certain respects, the terms of the Loan Agreement and Agent and Lenders have agreed to such modifications in accordance with and subject to the satisfaction of the conditions hereof.

NOW, THEREFORE, with the foregoing Background incorporated by reference and intending to be legally bound hereby, the parties agree as follows:

1.           Waiver of Existing Default.  Borrower acknowledges that Borrower failed to maintain the minimum Consolidated Net Worth required under Section 6.8(a) of the Loan Agreement for the fiscal quarter ending June 30, 2008 (the “Existing Default”) and that such failure constitutes an Event of Default under the Loan Agreement.  Upon satisfaction of each of the Effectiveness Conditions set forth in Section 8 of this Amendment, Lenders shall be deemed to have waived the Existing Default as of the date of this Amendment.  Lenders’ waiver of the Existing Default shall in no way be construed as an agreement to waive any Default or Event of Default that may have occurred prior to the date hereof other than the Existing Default nor to waive any Default or Event of Default arising after the date hereof, and Agent and Lenders reserve all rights and remedies under the Loan Agreement and the Loan Documents as to any Default or Event of Default other than the Existing Default.  The granting of the waiver of the

Existing Default under this Amendment shall not be construed as a course of conduct or dealing on the part of Agent and Lenders.

2.           Amendments to Loan Agreement.

a.           Section 1 of the Loan Agreement shall be amended by deleting the definition of Maximum Revolving Credit Amount and replacing it as follows:

Maximum Revolving Credit Amount – Subject to Section 2.9(b), the aggregate sum of each Lender’s Revolving Credit Pro Rata Share, which in no event shall exceed in the aggregate:

(a) from August 7, 2008 through September 29, 2008, Sixty Million Dollars ($60,000,000);

(b) from September 30, 2008 through December 30, 2008, Fifty-Five Million Dollars ($55,000,000);

(c) from December 31, 2008 through March 30, 2009, Forty-Five Million Dollars ($45,000,000); and

(d) After March 30, 2009, Thirty Million Dollars ($30,000,000); provided that notwithstanding any other provision of this Agreement, after March 30, 2009, the Revolving Credit Pro Rata Share of U.S. Bank, National Association shall be reduced to Zero Dollars ($0) and U.S. Bank, National Association shall no longer be a Lender under this Agreement. ..

b.           Schedule A to the Loan Agreement shall be replaced in its entirety with Schedule A as attached to this Amendment.

c.           Section 6.8 of the Loan Agreement shall be amended by deleting subsection (a) and replacing it as follows:

(a) Consolidated Net Worth - Borrower shall maintain at all times Consolidated Net Worth, to be tested quarterly at the end of each fiscal quarter, of not less than the following amounts for the following periods:

June 30, 2008 through September 29, 2008                                                                                                           $150,000,000

September 30, 2008 through September 29, 2009                                                                                                           $170,000,000

September 30, 2009 through September 29, 2010                                                                                                           $180,000,000

September 30, 2010 through September 29, 2011                                                                                                           $190,000,000

September 30, 2011 through September 29, 2012                                                                                                           $200,000,000

3.           Further Amendments. Each of Borrower and Lenders, as consideration for the waiver of the Existing Default, hereby agree to negotiate in good faith a future amendment (the “Future Amendment”) to Section 6.8(a) of the Loan Agreement, and to execute and deliver such Future Amendment, along with Borrower’s payment of all of Agent’s expenses and such other

items as Agent may reasonably require in connection with the preparation, execution and delivery of the Future Amendment, to Agent no later than sixty (60) days after the date hereof.

4.           Representations and Warranties.  Borrower warrants and represents to Agent and Lenders that:

a.           Prior Representations. Borrower, by its execution of this Amendment, reconfirms all warranties and representations made to Lenders under the Loan Agreement and the other Loan Documents and restates such warranties and representations as of the date hereof, all of which shall be deemed continuing until all of the obligations due to Secured Parties are indefeasibly paid and satisfied in full.

b.           Authorization. The execution and delivery by Borrower of this Amendment and the performance by Borrower of the transactions herein contemplated (i) are and will be within its powers, (ii) have been duly authorized by all necessary action on behalf of Borrower and (iii) are not and will not be in contravention of any order of court or other agency of government, of law or of any indenture, agreement or undertaking to which Borrower is a party or by which the property of Borrower is bound, or be in conflict with, result in a breach of or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or undertaking, or result in the imposition of any lien, charge or encumbrance of  any nature on any of the properties of the Borrower.

c.           Valid, Binding and Enforceable. This Amendment and any assignment or other instrument, document or agreement executed and delivered in connection herewith, will be valid, binding and enforceable in accordance with their respective terms.

d.           No Default.  After giving effect to this Amendment, no Default or Event of Default exists.

5.           Ratification of Loan Documents.  This Amendment is hereby incorporated into and made a part of the Loan Agreement and all other Loan Documents respectively, the terms and provisions of which, except to the extent modified by this Amendment are each ratified and confirmed and continue unchanged in full force and effect.  Any reference to the Loan Agreement and all other Loan Documents respectively in this or any other instrument, document or agreement related thereto or executed in connection therewith shall mean the Loan Agreement and all other Loan Documents respectively as amended by this Amendment.  As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in the Loan Agreement, Borrower hereby confirms its prior grant to Agent, for the ratable benefit of Secured Parties, of a continuing first lien on and security interest in, upon and to all of Borrower's now owned or hereafter acquired, created or arising Collateral as described in Section 3 of the Loan Agreement.

6.           Confirmation of Indebtedness. Borrower confirms and acknowledges that as of the close of business on August 6, 2008, it is indebted to Agent and Lenders under the Loan Documents in the aggregate principal amount of $43,600,000 without any deduction, defense, setoff, claim or counterclaim, of any nature as of the date of this Amendment, plus all fees, costs and Expenses incurred to date in connection with the Loan Documents.

7.           Confirmation of Subsidiary Guarantors.  By its signature below, each Subsidiary Guarantor hereby consents to and acknowledges the terms and conditions of this Amendment and agrees that its Surety and Guaranty Agreement dated May 24, 2007 is ratified and confirmed and shall continue in full force and effect and shall continue to cover all obligations of Borrower outstanding from time to time under the Loan Agreement as amended hereby.

8.           Effectiveness Conditions.  This Amendment shall become effective upon the satisfaction of the following conditions:

a.           Execution and delivery of this Amendment by the parties hereto;

b.           Payment by Borrower of all of Agent’s Expenses;

c.           Payment by Borrower to Agent, for the benefit of Lenders, of a non-refundable waiver fee in the amount of Ten Thousand Dollars ($10,000); and

d.           Such other items as Agent may reasonably require.

9.           Governing Law.  THIS AMENDMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS AMENDMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.

10.           Modification.  No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Agent or Lenders, as required under the Loan Agreement.

11.           Duplicate Originals:  Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.

12.           Waiver of Jury Trial:  BORROWER, AGENT AND EACH LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS EACH MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.

[Signature Pages to Follow]

IN WITNESS WHEREOF, the undersigned parties have executed this Amendment the day and year first above written.

BORROWER:

Resource America, Inc.

By:      

Name:                 

Title:                 

AGENT:

TD BANK, N.A. (successor by merger to Commerce Bank, N.A.)

By:      

Name:                 

Title:                 

LENDERS:

TD BANK, N.A. (successor by merger to Commerce Bank, N.A.), as Lender

By:      

Name:                 

Title:                 

U.S. Bank, National Association, as Lender

By:      

Name:                 

Title:                 

AGREED TO AND ACCEPTED:

SURETIES:

Apidos Capital Management, LLC

By:      

Name:                 

Title:                 

Chesterfield Mortgage Investors, Inc.

By:      

Name:                 

Title:                 

Coredo Capital Management, LLC

By:      

Name:                 

Title:                 

Ischus Capital Management, LLC

By:      

Name:                 

Title:                 

RAI Ventures, Inc.

By:      

Name:                 

Title:                 

      RCP Financial, LLC

By:      

Name:                 

Title:                 

Resource Credit Management, LLC

By:      

Name:                 

Title:                 

Resource Capital Manager, Inc.

By:      

Name:                 

Title:                 

Resource Capital Investor, Inc.

By:      

Name:                 

Title:                 

Resource Capital Partners, Inc.

By:      

Name:                 

Title:                 

Resource Credit Partners GP, Inc.

By:      

Name:                 

Title:                 

                                       Resource Financial Institutions Group,  Inc.

By:      

Name:                 

Title:                 

Resource Financial Fund Management, Inc.

By:      

Name:                 

Title:                 

Resource Housing Investors I, Inc.

By:      

Name:                 

Title:                 

Resource Housing Investors II, Inc.

By:      

Name:                 

Title:                 

Resource Housing Investors III, Inc.

By:      

Name:                 

Title:                 

Resource Housing Investors IV, Inc.

By:      

Name:                 

Title:                 

             Resource Leasing, Inc.

By:      

Name:                 

Title:                 

Resource Programs, Inc.

By:      

Name:                 

Title:                 

Resource Properties VIII, Inc.

By:      

Name:                 

Title:                 

Resource Properties XIV, Inc.

By:      

Name:                 

Title:                 

Resource Properties XVII, Inc.

By:      

Name:                 

Title:                 

Resource Properties XXIV, Inc.

By:      

Name:                 

Title:                 

        Resource Properties XXV, Inc.

By:      

Name:                 

Title:                 

Resource Properties XXVI, Inc.

By:      

Name:                 

Title:                 

Resource Properties XXX, Inc.

By:      

Name:                 

Title:                 

Resource Properties XXXI, Inc.

By:      

Name:                 

Title:                 

Resource Properties XXXIII, Inc.

By:      

Name:                 

Title:                 

Resource Properties XL, Inc.

By:      

Name:                 

Title:                 

Resource Properties XLI, Inc.

By:      

Name:                 

Title:                 

Resource Properties XLIX, Inc.

By:      

Name:                 

Title:                 

Resource Properties 54, Inc.

By:      

Name:                 

Title:                 

Resource Properties XLVII, Inc.

By:      

Name:                 

Title:                 

Resource Real Estate, Inc.

By:      

Name:                 

Title:                 

Resource Real Estate Funding, Inc.

By:      

Name:                 

Title:                 

Resource Real Estate Holdings, Inc.

By:      

Name:                 

Title:                 

Resource Rittenhouse, Inc.

By:      

Name:                 

Title:                 

Resource Real Estate Management, LLC

By:      

Name:                 

Title:                 

RRE1 Duraleigh Member, LLC

By:      

Name:                 

Title:                 

RRE2 Duraleigh Member, LLC

By:      

Name:                 

Title:                 

SCHEDULE “A”

Lenders	Pro Rata Percentage	Revolving Credit Pro Rata Share
From August 7, 2008 through September 29, 2008:
TD Bank, N.A. (successor by merger to Commerce Bank, N.A.)	66.66666666%	$40,000,000.00
U.S. Bank, National Association	33.33333334%	$20,000,000.00
From September 30, 2008 through December 30, 2008:
TD Bank, N.A.	66.66666666%	$36,666,667.00
U.S. Bank, National Association	33.33333334%	$18,333,333.00
From December 31, 2008 through March 30, 2009:
TD Bank, N.A.	66.66666666%	$30,000,000.00
U.S. Bank, National Association	33.33333334%	$15,000,000.00
After March 30, 2009:
TD Bank, N.A.	100%	$30,000,000.00

(Schedule A to Loan and Security Agreement)

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Jonathan Z. Cohen, certify that:

1)   I have reviewed this report on Form 10-Q for the quarterly period ended June 30, 2008 of Resource America, Inc.;

2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5)   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Jonathan Z. Cohen
Date:  August 8, 2008	Jonathan Z. Cohen
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Steven J. Kessler, certify that:

1)   I have reviewed this report on Form 10-Q for the quarterly period ended June 30, 2008 of Resource America, Inc.;

2)   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5)   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Steven J. Kessler
Date:  August 8, 2008	Steven J. Kessler
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resource America, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jonathan Z. Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Jonathan Z. Cohen
Date:  August 8, 2008	Jonathan Z. Cohen
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Resource America, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven J. Kessler, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Steven J. Kessler
Date:  August 8, 2008	Steven J. Kessler
	Executive Vice President and Chief Financial Officer