10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 10-K

(Mark One)

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

For the fiscal year ended September 30, 2010

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)
(215) 546-5005
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.01 per share	NASDAQ
Title of class	Name of exchange on which registered

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(a) of the Act.  Yes o No R

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.  Yes R No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R

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                        R
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 Act). Yes o No R

The aggregate market value of the voting common equity held by non-affiliates of the registrant, based on the closing price of such stock on the last business day of the registrant’s most recently completed second fiscal quarter (March 31, 2010) was approximately $40,888,000.

The number of outstanding shares of the registrant’s common stock on December 2, 2010 was 19,047,282 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement to be filed with the Commission in connection with the 2011 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

RESOURCE AMERICA, INC. AND SUBSIDIARIES

INDEX TO ANNUAL REPORT

ON FORM 10-K

			Page
PART I
	Item 1:	Business	3
	Item 1A:	Risk Factors	10
	Item 1B:	Unresolved Staff Comments	15
	Item 2:	Properties	15
	Item 3:	Legal Proceedings	15
	Item 4:	[Removed and Reserved]	15
PART II
	Item 5:	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
	Item 6:	Selected Financial Data	18
	Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	45
	Item 8:	Financial Statements and Supplementary Data	46
	Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	92
	Item 9A:	Controls and Procedures	92
	Item 9B:	Other Information	94
PART III
	Item 10:	Directors, Executive Officers and Corporate Governance	94
	Item 11:	Executive Compensation	94
	Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	94
	Item 13:	Certain Relationships and Related Transactions, and Director Independence	94
	Item 14:	Principal Accounting Fees and Services	94
PART IV
	Item 15:	Exhibits and Financial Statement Schedules	95
SIGNATURES			98

PART I

ITEM 1. BUSINESS.

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 mo re particularly described in Item 1A, under the caption “Risk Factors.”  These risks and uncertainties could cause actual results and financial position to differ materially from those anticipated in such statements.  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 revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.  We make references to the fiscal years ended September 30, 2010, 2009 and 2008 as fiscal 2010, fiscal 2009 and fiscal 2008, respectively.

General

              We are a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through our real estate, commercial finance and financial fund management subsidiaries.  As a specialized asset manager, we seek to develop investment funds for outside investors for which we provide asset management services, typically under long-term management arrangements either through a contract with, or as the manager or general partner of, our sponsored funds.  We typically maintain an investment in the funds we sponsor.  As of September 30, 2010, we managed $12.4 billion of assets.

               We limit our fund development and management services to asset classes where we own existing operating companies or have specific expertise.  We believe this strategy enhances the return on investment we can achieve for our funds.  In our real estate operations, we concentrate on the ownership, operation and management of multifamily and commercial real estate and real estate mortgage loans including whole mortgage loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, mezzanine loans, investments in discounted and distressed real estate loans and investments in “value-added” properties (properties which, alth ough not distressed, need substantial improvements to reach their full investment potential).  In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial loans secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment.  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, or ABS.

We have developed and manage public and private investment entities, a real estate investment trust, or REIT, and, historically, collateralized debt obligation, or CDO, issuers.  Our funds are marketed principally through an extensive broker-dealer/financial planner network that we have developed.  During fiscal 2010, we focused on developing investment opportunities in our real estate segment:

● In July 2009, Resource Real Estate, Inc., or Resource Real Estate, our wholly-owned real estate subsidiary, filed a registration statement with the Securities and Exchange Commission, or SEC, for Resource Real Estate Opportunity REIT, Inc., or RRE Opportunity REIT, which will seek to obtain up to $750.0 million in investor funding.  The registration statement became effective during June 2010 and $16.1 million of investor funds have been raised through September 30, 2010.

● In December 2009, Resource Real Estate closed its real estate opportunity fund, which focuses on acquiring discounted real estate assets and related debt, having raised $41.4 million.

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Assets Under Management

     As of September 30, 2010 and 2009, we managed $12.4 billion and $13.8 billion of assets, respectively, for the accounts of institutional and individual investors, Resource Capital Corp., or RCC (our sponsored REIT), and for our own account in the following asset classes (in millions):

									September 30,
	September 30, 2010								2009
	Institutional and Individual Investors		RCC		Company		Total		Total
Trust preferred securities (1)	$	4,213	$	−	$	−	$	4,213	$	4,458
Bank loans (1)		3,083		954		−		4,037		4,016
Asset-backed securities (1)		1,689		−		−		1,689		2,186
Real properties (2)		588		13		−		601		643
Mortgage and other real estate-related loans (2)		29		748		179		956		1,039
Commercial finance assets (3)		751		115		12		878		1,361
Private equity and other assets (1)		70		−		−		70		66
	$	10,423	$	1,830	$	191	$	12,444	$	13,769

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

(2) We value our managed real estate assets as the sum of:  (i) the amortized cost of our commercial real estate loans; and (ii) the book value of each of the following: (a) real estate and other assets held by our real estate investment entities, (b) our outstanding legacy loan portfolio, and (c) our interests in real estate.

(3) We value our commercial finance assets as the sum of the book value of the equipment, leases and notes and future payment card receivables financed by us.

Our assets under management are primarily managed through the investment entities we sponsor.  The following table sets forth the number of entities we manage by operating segment, including tenant in common, or TIC, property interests:

	CDOs		Limited Partnerships		TIC Programs		Other Investment Funds
As of September 30, 2010 (1)
Financial fund management		32		13		−		−
Real estate		2		8		7		4
Commercial finance		−		4		−		1
		34		25		7		5
As of September 30, 2009 (1)
Financial fund management		32		13		−		−
Real estate		2		8		7		5
Commercial finance		−		4		−		1
		34		25		7		6

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

Real Estate

General.  Through our real estate segment, we focus on four different areas:

● the acquisition, ownership and management of portfolios of discounted real estate and real estate related debt, which we have acquired through two sponsored real estate investment entities as well as through joint ventures with institutional investors;

● the sponsorship and management of real estate investment entities that principally invest in multifamily housing;

● the management, principally for RCC, of general investments in commercial real estate debt, including first mortgage debt, whole loans, mortgage participations, B notes, mezzanine debt and related commercial real estate securities; and

● to a lesser extent, the management and resolution of a portfolio of real estate loans and property interests that we acquired at various times between 1991 and 1999, which we collectively refer to as our legacy portfolio.

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Discounted Real Estate Operations.  In September 2007, we entered into a joint venture with an institutional partner that acquired a pool of eleven mortgage loans from the United States Department of Housing and Urban Development.  This portfolio was acquired at an overall discount of 51% to the approximately $75.0 million face value of the mortgage loans.  Through September 30, 2010, we have sold three of the mortgages, foreclosed on the properties underlying eight of the mortgage loans and sold four of the foreclosed properties.

In May 2008, we entered into a second joint venture, structured as a credit facility, with the same institutional investor, that makes available up to $500.0 million to finance the acquisition of distressed properties and mortgage loans and that has the objective of repositioning both the directly owned properties and the properties underlying the mortgage loans to enhance their value.  On December 1, 2009, we sold our joint venture interest to RCC at its book value, while retaining management of the assets and continue to receive fees in connection with the acquisition, investment management and disposition of new assets acquired.  Through September 30, 2010, the joint venture had acquired 11 distressed loans and two properties for an a ggregate of $119.4 million.  As of September 30, 2010, we had foreclosed on three of the loans and sold one of those properties.

In June 2010, the registration statement filed with the U.S. Securities and Exchange Commission for RRE Opportunity REIT became effective.  RRE Opportunity REIT intends to purchase a diversified portfolio of U.S. commercial real estate and real estate related debt that has been significantly discounted due to the effects of economic events and high levels of leverage, including properties that may benefit from extensive renovations intended to increase their long-term values.

Real Estate Investment Entities.  Since 2003, we have sponsored and manage 18 real estate investment entities (two of which have since been merged into a single entity and excluding the two real estate CDOs) having raised a total of $335.5 million in investor funds.  Through September 30, 2010, these entities have acquired interests in 46 multifamily apartment complexes comprising 11,373 units with a combined acquisition cost of $630.6 million, including interests owned by third parties and excluding properties sold.

We receive acquisition and debt placement fees from the investment entities in their acquisition stage.  These fees, in the aggregate, have ranged from 1% to 2% of the acquisition costs of the properties and 0.5% to 5.0% of the debt financing in the case of debt placement fees.  In their operational stage, we receive property management fees of 4.5% to 5% of gross revenues.

Additionally, we record an annual investment management fee from our limited partnerships equal to 1% of the gross offering proceeds of each partnership for our services.  We record an annual asset management fee from our TIC programs equal to 1% to 2% of the gross revenues from the property in connection with our performance of our asset management responsibilities.  We record an annual asset management fee from one limited liability company equal to 1.5% of the gross revenues of the underlying properties.  These investment management fees and asset management fees are recognized monthly when earned and are discounted to the extent that these fees are deferred.

We record quarterly asset management fees from our joint ventures with an institutional partner equal to 1% of the gross funds invested in distressed real estate loans and assets.  We recognize these fees monthly.

Resource Capital Corp.  As of September 30, 2010, our real estate operations managed approximately $761.4 million of commercial real estate loan assets on behalf of RCC, including $873.0 million held in CDOs we sponsored in which RCC holds the equity interests.  We discuss RCC in more detail in “− Resource Capital Corp.,” below.

Resource Residential.  In October 2007, we established our internal property management division, Resource Real Estate Management, Inc., or Resource Residential.  Our property management division has provided us with a source of stable revenues for our real estate operations.  Furthermore, we believe that having direct management control over the properties in our investment programs has not only enabled us to enhance their profitability, but also provides us with a competitive edge in marketing our funds by distinguishing us from other sponsors of real estate investment funds.  As of September 30, 2010, our property management division manages all of our fund multifamily properties located in 10 states, with the excep tion of one property, in addition to managing the distressed/value-added properties in our joint ventures.  Resource Residential had 333 employees as of September 30, 2010.

Legacy Portfolio of Loan and Property Interests.  Between fiscal 1991 and 1999, our real estate operations focused on the purchase of commercial real estate loans at a discount to their outstanding loan balances and the appraised value of their underlying properties.  Since 1999, management has focused on resolving and disposing of these assets.  During fiscal 2009, the number of loans in this portfolio decreased from eight to five through the payoff of two loans and the foreclosure of another loan.  During fiscal 2010, we sold two more of the legacy loans.  At September 30, 2010, our remaining legacy portfolio consisted of two loans with a book value of $1.0 million and six property interests with a book val ue of $25.5 million.

5

Commercial Finance

General.  Through LEAF Financial Corporation, or LEAF, we focus our commercial finance operations on equipment leases and equipment-secured notes to small and mid-sized companies.  Our financing is generally for “business-essential” equipment including technology, commercial, industrial and medical equipment, with a primary financed transaction size of under $500,000 and an average size of $20,000 to $75,000.

During fiscal 2010, we originated $115.7 million in commercial finance assets.  As of September 30, 2010, we managed an $878.1 million commercial finance portfolio, of which $734.5 million were on behalf of four investment entities we sponsored.

Since we originate equipment leases and loans to sell to our investment entities, our originations primarily depend on the purchasing capacity of those entities.  The purchasing capacity of our investment entities depends upon their ability to raise equity capital, to obtain debt and the payments received on existing leases and loans.  In recent years, the credit market conditions have limited our ability to obtain new debt facilities for our investment entities, and we anticipate that this trend may continue during fiscal 2011 and, if so, our originations and accordingly, our revenues, may decline further.

We receive acquisition fees, management fees and reimbursements of our operating and administrative expenses incurred from the investment entities we manage.  Acquisition fees range from 1% to 2% of the value of the equipment leases and loans sold.  Management fees range from 1% to 4% of gross rental or loan payments.

Financial Fund Management

     General.  We conduct our financial fund management operations primarily through seven separate operating entities:

● Apidos Capital Management, LLC, or Apidos, finances, structures and manages investments in bank loans, high yield bonds and equity investments;

● Trapeza Capital Management, LLC, or TCM, a joint venture between us and an unrelated third-party, 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 through CDO issuers and related partnerships.  TCM together with the Trapeza CDO issuers and Trapeza Partnerships are collectively referred to as Trapeza

● Resource Capital Markets, Inc., through our registered broker-dealer subsidiary, Chadwick Securities, Inc., or Chadwick, acts as an agent in the primary and secondary markets for trust preferred in the financial services and real estate sectors and manages accounts for institutional investors;

● Resource Europe Management Ltd., or Resource Europe, structures and manages investments in international bank loans;

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

● Ischus Capital Management, LLC, or Ischus, 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; and

● Resource Capital Manager, Inc., or RCM, an indirect wholly-owned subsidiary, provides investment management and administrative services to RCC under a management agreement between RCM and RCC.

We derive revenues from our existing financial fund management operations through management fees.  We are also entitled to receive distributions on amounts we have invested directly in CDOs or in limited partnerships we formed that purchased equity in the CDO issuers we sponsored.  Our CDO management fees generally consist of base and subordinated management fees.  For the Trapeza CDO issuers we sponsored and manage, we share base management fees with our co-sponsors.  For CDO issuers we sponsored and manage on behalf of RCC, we receive fees directly from RCC pursuant to our management agreement in lieu of asset management fees from the CDO issuers.  We describe the management fees we receive from RCC in “W 22; Resource Capital Corp” below.  Base management fees generally are a fixed percentage of the aggregate principal balance of eligible collateral held by the CDO.  Our base management fees range from 0.10% to 0.25% of a managed CDO’s assets.  Subordinated management fees are also a percentage of the aggregate principal balance of eligible collateral held by the CDO, and range from 0.08% to 0.45%, but typically are subordinated to debt service payments on the CDOs.  The management fees are payable monthly, quarterly or semi-annually, as long as we continue to manage portfolio assets on behalf of the CDO issuer.

Additionally, we record fees for managing the assets held by the partnerships we have sponsored and for managing their general operations.  These fees, which vary by limited partnership, range between 0.75% and 2.00% of the partnership capital balance.

6

CDOs.  We expect that we will continue to focus on managing the assets of our existing CDOs in fiscal 2011 while we will also seek opportunities to manage additional assets where we can use our existing financial fund management platform and personnel with little or no equity investment exposure.  No such opportunities became available to us in fiscal 2010, and we may be unable to identify any such opportunities in fiscal 2011.

As of September 30, 2010, our financial fund management operations have sponsored and manage 32 CDO issuers (three of which we manage on behalf of RCC) holding approximately $9.9 billion in assets as set forth in the following table:

Sponsor/Manager	Asset Class	Number of CDO Issuers		Assets Under Management (1)
				(in billions)
Trapeza (2)(3)	Trust preferred securities		13	$	4.2
Apidos	Bank loans		11		3.6
Ischus (2)	RMBS/CMBS/ABS		7		1.7
Resource Europe	Bank loans		1		0.4
			32	$	9.9

(1) Calculated as set forth in “Assets Under Management,” above.

(2) We also own a 50% interest in the general partners of the limited partnerships that own a portion of the equity interests in each of five Trapeza CDO issuers.

(3) Through Trapeza, we own a 50% interest in an entity that manages 11 of the Trapeza CDO issuers and a 33.33% interest in another entity that manages two of the Trapeza CDO issuers.

Resource Capital Corp.  As of September 30, 2010, our financial fund management operations manage $953.6 million of bank loans on behalf of RCC, all of which are in Apidos CDOs we sponsored in which RCC holds the equity interests.  We discuss RCC in more detail in “ − Resource Capital Corp.,” below.

Company-Sponsored Partnerships.  We sponsored, structured and currently manage eight investment entities for individual and institutional investors, seven of which invest in banks and other financial institutions and one of which has been organized as a credit opportunities fund.  At September 30, 2010, these partnerships held $70.3 million of assets.

Resource Capital Corp.

RCC, a publicly-traded (NYSE: RSO) REIT that we sponsored and manage, invests in a diversified portfolio of whole loans, B notes, CMBS and other real estate-related loans and commercial finance assets.  At September 30, 2010, we owned 2.4 million shares of RCC common stock, or approximately 4.4% of RCC’s outstanding common stock, and held options to acquire 2,166 shares (at an exercise price of $15.00 per share and expiring in March 2015).

We manage RCC through RCM.  At September 30, 2010, we managed a total of $1.8 billion of assets on behalf of RCC.  Under our management agreement with RCC, RCM receives a base management fee, incentive compensation and a reimbursement for out-of-pocket expenses.  The base management fee is 1/12th of 1.50% of RCC’s equity per month.  The management agreement defines “equity” as, essentially, shareholders’ equity, subject to adjustment for non-cash equity compensation expense and non-recurring charges to which the parties agree.  The incentive compensation is 25% of (i) the amount by which RCC’s adjusted operatin g 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 (ii) an amount equal to (a) 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 (b) the greater of (1) 2.00% and (2) 0.50% plus one-fourth of the ten year treasury rate (as defined in the agreement) for such quarter, multiplied by the weighted average number of common shares outstanding during such quarter; provided, that the foregoing calculation of incentive compensation will be adjusted (i) to exclude events pursuant to changes in accounting principles generally accepted in the United States, or U.S. GAAP, or the application of U.S. GAAP, as well as non-recurring or unusual transactions or events, after discussion between us, RCC and the approval of a majority of RCC’s directors in the case of non-recurring or unusual transactions or events and (ii) by deducting any fees paid directly by RCC to our employees, agents and/or affiliates with respect to profits earned by a taxable REIT subsidiary of RCC (calculated as if such fees were payable quarterly) not previously used to offset incentive compensation.  RCM receives at least 25% of its incentive compensation in additional shares of RCC common stock and has the option to receive more of its incentive compensation in stock under the management agreement.  We also receive an acquisition fee of 1% of the carrying value of the commercial finance assets we sell to RCC.  For fiscal 2010, the management, incentive, servicing and acquisition fees we received from RCC across all of our operating segments were $10.9 million, or 12% of our consolidated revenues.

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Credit Facility and Notes

As of September 30, 2010, we had one outstanding credit facility, which we established with TD Bank in May 2007 as a revolving facility.  The September 30, 2010 principal balance on the line was $14.1 million and the line was fully utilized.  We repaid $10.6 million of the line from proceeds of the offering of our 12% senior notes, or the Senior Notes (as discussed below), and agreed to reduce availability under the line.  Availability is further reduced by $150,000 in monthly principal repayments.  The current interest rate on the line is, based on our election, at either (i) the prime rate of interest plus 3% with a floor of 7% or (ii) London Interbank Offered Rate, or LIBOR, plus 4.5% with a floor of 7.5%.  In add ition, we have a $401,000 letter of credit outstanding, which reduces our availability on the facility, and for which we are charged a 5.25% fee.  The line matures on October 15, 2011.

Borrowings are secured by a first priority security interest in specified assets and guarantees by certain subsidiaries, including (i) the present and future fees and investment income earned in connection with the management of, and investments in, sponsored CDO issuers, (ii) a pledge of 18,972 shares of The Bancorp, Inc. or TBBK, (NASDAQ: TBBK) common stock, and (iii) the pledge of 1,321,657 shares of RCC common stock.  Availability under the facility is limited to the lesser of (a) 75% of the net present value of future management fees to be earned or (b) the maximum revolving credit facility amount.  Weighted average borrowings for fiscal 2010 and 2009 were $17.8 million and $39.6 million, respectively, at an effective interest rate of 10.7% a nd 8.7%, respectively.

On September and October 2009, we completed a private offering to certain senior executives and shareholders with the sale of $18.8 million of Senior Notes due 2012 with 5-year detachable warrants to purchase 3,690,195 shares (at a weighted average exercise price of approximately $5.11 per share).  The Senior Notes require quarterly payments of interest in arrears beginning December 31, 2009.  The notes are unsecured, senior obligations and are junior to our existing and future secured indebtedness.

Our commercial finance segment also has a short-term bridge loan to which we may borrow up to $21.5 million in the form of notes which are asset-backed debt.  Guggenheim Securities, LLC and its affiliate are the lenders under the notes.  The blended interest rate of the notes is 6.98% on the amounts outstanding and the maturity date of the notes is February 20, 2011.  Interest and principal are due on each class of notes on a monthly basis.

Asset Sourcing for Commercial Finance and Real Estate

Commercial finance.  LEAF is responsible for sourcing commercial finance investments primarily through program relationships with manufacturers and dealers of essential use equipment and software as well as through acquisitions of existing portfolios originated by third parties.  LEAF’s strategy for originations involves integrating its finance products into the sales and marketing organizations of manufacturers and dealers.  By developing and maintaining program its relationships with these manufacturers and dealers, LEAF is able to leverage and utilize their sales organizations to market its commercial finance products and services to the highly dispersed population of smal l- to medium-sized businesses, which is LEAF’s targeted demographic.  On acquisitions, LEAF seeks organizations with a portfolio of financing contracts that provide acceptable returns for its investment entities coupled with proven origination teams.

Real estate.  Resource Real Estate is responsible for sourcing investments for our real estate operations and managing CDOs.  We maintain relationships with asset owners, institutions, existing partners and borrowers, who often source investment opportunities directly to us.  We maintain offices in Philadelphia, New York, Denver and Los Angeles that provide us with a national platform of acquisition and loan origination specialists that source deals from key intermediaries such as commercial real estate brokers, mortgage brokers and specialists in selling discounted and foreclosed assets.  We systematically work to exchange market data and asset knowledge across the platf orm to provide instant market feedback on potential investments that is based on empirical data as well as on our $1.6 billion portfolio of assets under management.

8

Employees

     As of September 30, 2010, excluding our property management team, we employed 323 full-time workers, a decrease of 128, or 28%, from 451 employees at September 30, 2009.  The following table summarizes our employees by operating segment:

	Total		Real Estate		Commercial Finance		Financial Fund Management		Corporate/ Other
September 30, 2010
Investment professionals		101		32		37		30		2
Other		222		15		158		13		36
		323		47		195		43		38
Property management		333		333		−		−		−
Total		656		380		195		43		38
September 30, 2009
Investment professionals		121		26		61		32		2
Other		330		17		259		16		38
		451		43		320		48		40
Property management		318		318		−		−		−
Total		769		361		320		48		40

Operating Segments and Geographic Information

     We provide operating segment and geographic information about foreign operations in Note 24 of notes to our consolidated financial statements included in Item 8 of this report.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC.  Our internet address is http://www.resourceamerica.com.  We make our SEC filings available free of charge on or through our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  We are not incorporating by reference in this report any material from our website.

9

ITEM 1A. RISK FACTORS.

You should carefully consider the following risks together with all of the other information contained in this report in evaluating our company.  If any of these risks develop into actual events, our business, financial condition and results of operations could be materially adversely affected and the trading price of our common stock could decline.

Risks Related to Our Business Generally

Our business depends upon our ability to sponsor, and raise debt and equity capital for, our investment funds.

Our business as a specialized asset manager depends upon our ability to sponsor investment funds, raise sufficient debt financing for these funds and to generate management fees by managing those funds and the assets they hold.  If we are unable to raise capital or obtain financing through these funds, we will not be able to increase our assets under management and, accordingly, our revenues from management fees will be significantly reduced.  Our ability to raise capital and obtain financing through these funds depends upon numerous factors, many of which are beyond our control, including:

● existing capital markets conditions.  As a result of the ongoing credit market turmoil, we may not be able to obtain debt financing on attractive terms.  As a result, we may be required to use a greater proportion of our equity funds to complete asset acquisitions and originations, reducing the number of investments we would otherwise make.  If the current capital markets environment persists, we may modify our investment strategy in order to optimize our portfolio performance.  Our options would include limiting or eliminating the use of debt and focusing on those investments that do not require the use of leverage to meet our portfolio goals.  During fiscal 2010, the market constraints on our ability to obtain debt financing caused our commercial finance operations to reduce originations of leases and loans held for our investment entities, as well as for our a ccount, which reduced our operating revenues.  For our financial fund management operations, the availability of financing has been largely halted;

● market acceptance of the types of funds we sponsor and market perceptions about the types of assets which we seek to acquire for our funds which has been impaired by current market conditions;

● the willingness or ability of retail investors, a principal source of investment funds for our commercial finance and real estate investment funds, to invest in long-term, relatively illiquid investments of the type sponsored by us;

● the performance of our existing funds.  During fiscal 2010, several of our funds reduced or ceased to make equity distributions as a result of reduced operations.  Accordingly, we have waived our management fees and anticipate waiving these fees in the future;

● the availability of qualified personnel to manage our funds;

● the availability of suitable investments in the types of loans, real estate, commercial finance assets and other assets that we seek to acquire for our funds; and

● interest rate changes and their effect on both the assets we seek to acquire for our funds, and the amount, cost and availability of acquisition financing.

Declines in the market values of our investments may reduce our earnings and the availability of credit.

We classify a material portion of our assets for accounting purposes as “available-for-sale.”  As a result, changes in the market values of those assets are directly charged or credited to stockholders’ equity.  A decline in these values will reduce the book value of our assets.  Moreover, if the decline in value of an available-for-sale asset is other-than-temporary, such decline will reduce earnings.  As a result of market conditions, the market value of many of our assets has declined.  We cannot assure you that there will not be further declines in the value of our assets, or that the declines will not be material.

A decline in the market value of our assets may also adversely affect us in instances where we have borrowed money based on the market value of those assets.  If the market value of those assets declines, the lender may require us to post additional collateral to support the loan.  If we were unable to post the additional collateral, we could have to sell the assets under adverse market conditions which could result in losses and which could result in us failing our debt covenants.

Interest rate changes may reduce the value of our assets, our returns on these assets and our ability to generate and increase our management fee revenues.

Changes in interest rates will affect the market value of assets we hold for our own account and our returns from such assets.  In general, as interest rates rise, the value of fixed-rate investments, such as equipment leases and loans, will decrease, while as interest rates fall, the return on variable rate assets will fall.  In addition, changes in interest rates may affect the value and return on assets we manage for our investment funds, thereby affecting both our management fees from those funds as well as our ability to sponsor additional investment funds, which, in turn, may affect our ability to generate and increase our management fee revenues.

10

Increases in interest rates will increase our operating costs.

As of September 30, 2010, we had one corporate credit facility at a variable interest rate.  We may seek to obtain other credit facilities depending upon capital markets conditions.  Any facilities that we may be able to obtain may also be at variable rates.  As a result, increases in interest rates on such credit facilities, to the extent they are with recourse to us and are not matched by increased interest rates or other income from the assets whose acquisition was financed by these facilities, or are not subject to effective hedging arrangements, will increase our interest costs, which would reduce our net income or cause us to sustain losses.  In addition, any financing we obtain may require us to maintain a specified rati o of the amount of the loan to the value of the underlying assets.  A decrease in the value of these assets may lead to margin calls or calls for the pledge to, or deposit with, the lender of additional assets.  We may not have sufficient funds or unpledged assets to satisfy these calls.  While losses sustained by CDOs or other VIEs we consolidate are typically without recourse to us, financing we obtain may impose financial covenants calculated pursuant to U.S. GAAP, which would include the effects of the these consolidated VIEs.  As a result, asset value declines or other adverse occurrences in the CDOs may cause us to breach these covenants, which could lead to margin calls or, possibly, constitute events of default under our corporate or other credit facilities.

Changes in interest rates may impair the operating results of our investment funds and thereby impair our operating results.

The investments made by many of our funds are interest rate sensitive.  As a result, changes in interest rates could reduce the value of the assets held and the returns to investors, thereby impairing our ability to raise capital, reducing the management and other fees from those funds and reducing our returns on, and the value of, amounts we have invested in those funds.

If we cannot generate sufficient cash to fund our participations in our investment funds, our ability to maintain and increase our revenues may be impaired.

We typically participate in our investment funds along with our investors, and believe that our participation enhances our ability to raise capital from investors.  We typically fund our participations through cash derived from operations or from financing.  If our cash from operations is insufficient to fund our participation in future investment funds we sponsor, and we cannot arrange for financing, our continuing ability to raise funds from investors and, thus, our ability to maintain and increase the revenues we receive from fund management, will be impaired.

Termination of management arrangements with one or more of our investment funds could harm our business.

We provide management services to our investment funds through management agreements, through our position as the sole or managing general partner of partnership funds, through our position as the operating manager of other fund entities, or combinations thereof.  Our arrangements are long-term, and frequently have no specified termination dates.  However, our management arrangements with, or our position as general partner or operating manager of, an investment fund typically may be terminated by action taken by the investors.  Upon any such termination, our management fees, after payment of any termination payments required, would cease, thereby reducing our expected revenues.  Moreover, under our credit facility with TD Bank , the borrowing base depends upon the value of the collateral pledged, which includes management fees from our financial fund management segment.  As a result, termination of one or more management arrangements would reduce our collateral which could reduce our borrowing base.  If the borrowing base were reduced below amounts outstanding on the facility, we would be required to repay the excess.  To the extent we do not have cash available to repay the excess, we may be required to sell assets to obtain the necessary cash; any such sale may not be on economically attractive terms, particularly under current economic condition.

We may have difficulty managing our asset portfolios under current market conditions.

Current market conditions have increased the complexity of managing the assets held by us and our investment funds.  As a result, we depend on the ability of our officers and key employees to continue to implement and improve our operational, financial and management controls, reporting systems and procedures to deal effectively with the complexity of the conditions under which we operate.  We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.  Consequently, we may experience strains on our administrative and operations infrastructure, increasing our costs or reducing or eliminating our profitability.< /font>

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Our allowance for credit losses may not be sufficient to cover future losses.

At September 30, 2010, our allowances for possible credit losses were $900,000 in commercial finance (7% of the book value of our leases and loans held for investment in our commercial finance segment) and $1.1 million allowance for possible credit losses on receivables from managed entities (3% of the book value of commercial finance managed receivables).  We cannot assure you that these allowances will prove to be sufficient to cover future losses, or that future provisions for credit losses will not be materially greater than those we have recorded to date.  Losses that exceed our allowance for credit losses, or cause an increase in our provision for credit losses, could materially reduce our earnings.

Many of the assets we hold in our portfolios are illiquid, and we may not be able to divest them in response to changing economic, financial and investment conditions.

Many of the assets in our portfolio, including those of VIEs included in our consolidated financial statements, do not have ready markets.  Moreover, we believe that the market for many of the assets in our portfolio, particularly real estate and CDO interests, have been severely constricted as a result of current economic conditions.  As a result, many of our portfolio assets are relatively illiquid investments.  We may be unable to vary our portfolio in response to changing economic, financial and investment conditions or to sell our investments on acceptable terms should we desire to do so.

We are subject to substantial competition in all aspects of our business.

Our ability to sponsor investment funds is highly dependent on our access to various distribution systems of national, regional and local securities firms, and our ability to locate and acquire appropriate assets for our investment funds.  We are subject to substantial competition in each area.  In the distribution area, our investment funds compete with those sponsored by other asset managers, which are being distributed through the same networks, as well as investments sponsored by the securities firms themselves.  While we have been successful in maintaining access to these distribution channels, we cannot assure you that we will continue to do so.  The inability to have continued access to our distribution channels could re duce the number of funds we sponsor and assets we manage, thereby impeding and possibly impairing our revenues and revenue growth.

In acquiring appropriate assets for our investment funds, we compete with numerous public and private investment entities, commercial banks, investment banks and other financial institutions, as well as industry participants in each of our separate asset management areas.  Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do.  Competition for desirable investments may result in higher costs and lower investment returns, and may delay our sponsorship of investment funds.

There are few economic barriers to entry in the asset management business.

Our investment funds compete against an ever-increasing number of investment and asset management products and services sponsored by investment banks, banks, insurance companies, financial services companies and others.  There are few economic barriers to entry into the investment or asset management industries and, as a result, we expect that competition for access to distribution channels and appropriate assets to acquire will increase.

Our ability to realize our deferred tax asset may be reduced, which may adversely impact results of operations.

Realization of a deferred tax asset requires us to exercise significant judgment and is inherently uncertain because it requires the prediction of future occurrences.  Our deferred tax asset may be reduced in the future if estimates of future income or our tax planning strategies do not support the amount of the deferred tax asset.  If it is determined that a valuation allowance of our deferred tax asset is necessary, we may incur a charge to earnings.

Reductions in the borrowing capacity under our credit facility may reduce our ability to acquire assets, may require us to sell assets and, as a result, reduce our earnings or cause us to incur losses.

We have a corporate credit facility with TD Bank that was fully utilized at September 30, 2010.  Under the terms of the TD Bank facility, the maximum facility amount was reduced to $15.0 million at June 30, 2010, and matures on October 15, 2011.  Any reductions that may occur in the future, and the maturity of the facility in 2011 could require us to sell assets to repay amounts outstanding or seek alternative financing arrangements to meet our obligations, which may be on less favorable terms or unavailable.  As a result, our financing costs could increase and our net operating income and earnings could decrease.  We could also incur losses upon the sale of assets.

12

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) may detrimentally affect our business.

We expect that the Dodd-Frank Act will have a significant impact on the financial services industry, and may particularly impact us with respect to hedging activities, our broker-dealer operations and, possibly, our ability to obtain financing to increase our assets under management or revenues.  Because much of the Dodd-Frank Act creates a framework through which regulatory reform will be promulgated, rather than providing regulatory reform itself, we cannot predict the magnitude of the effect that the Dodd-Frank Act will ultimately have on us.

Risks Relating to Particular Aspects of Our Real Estate, Commercial Finance and Financial Fund Management Operations

If we are unable to obtain a new credit facility for our commercial finance business, the commercial finance business may be impaired.

Our commercial finance business depends upon our ability to obtain financing to acquire and carry equipment leases and loans.  Our commercial finance subsidiary, LEAF, currently has short-term bridge financing for up to $21.5 million that matures February 20, 2011.  We are seeking to obtain new longer term financing, but can offer no assurance that we will be able to obtain such financing.  Failure to obtain replacement financing would limit our ability to originate new leases and loans.  In that event, our commercial finance business could incur losses, which could be significant, and our ability to conduct that business could be impaired.

We may incur impairments to goodwill.

At September 30, 2010, we had $8.0 million recorded as goodwill in our commercial finance business.  We review our goodwill at least annually.  Significant negative industry or economic trends, including the lack of recovery in the market price of the our common stock, reduced estimates of future cash flows or disruptions to the commercial finance business, could indicate that goodwill might be impaired.  Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely on projections of future operating performance.  Our commercial finance business operates in competitive environments and projections of future operating results and cash flows ma y vary significantly from actual results.  If our analysis results in an impairment to goodwill, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist.  Any such change could have a material adverse effect on our results of operation and our stock price.

Our equipment leases and loans may have significant risk of default.

Many of the entities seeking equipment financing from us are small- to middle-size businesses which may have fewer resources than larger businesses and which may be disproportionally affected by current economic conditions.  As a result, we, and the investment funds we sponsor (from which we derive management and other fees) may be subject to higher risks of a default than if we provided equipment financing to larger businesses.  While we will seek to repossess and re-lease or sell the equipment subject to a defaulted lease or other commercial finance instrument, we may not be able to do so on advantageous terms.  If a borrower files for protection under the bankruptcy laws, we may experience difficulties and delays in recovering the equ ipment.  Moreover, the equipment may be returned in poor condition and we may be unable to enforce important lease or loan provisions against an insolvent borrower, including the contract provisions that require the borrower to return the equipment in good condition.  In some cases, the deteriorating financial condition of a borrower may make trying to recover what it owes impractical.  The costs of recovering equipment upon a default, enforcing obligations under the lease or loan, and transporting, storing, repairing and finding a new borrower or purchaser for the equipment may be high.  All the foregoing risks may be heightened by economic conditions currently existing in the United States.  Higher than expected lease defaults will result in a loss of anticipated revenues and will reduce our ability to operate LEAF at a profit.

As a result of recent conditions in the global credit markets, our ability to sponsor investment entities and increase our assets under management may be limited.

Our financial fund management business has largely consisted of the sponsorship and management of CDO issuers.  As a result of conditions in the global credit markets, sponsorship of new CDOs was impracticable in fiscal 2009 and 2010 and likely will continue to be impracticable in fiscal 2011.  Moreover, our ability to sponsor investment funds in our commercial finance and real estate segments depends to a significant extent on our ability to obtain financing.  Our ability to obtain new financing, and refinance existing financing, both for us and for our investment funds, was adversely impacted by credit market conditions in fiscal 2010.  We cannot assure you that we will be able to obtain new financing or refinance existing fi nancing in the future on acceptable financial terms, or at all.  An inability to obtain financing could limit or eliminate our ability to sponsor investment entities and increase our assets under management and, accordingly, impair our ability to generate asset management fees.

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We typically have retained some portion or all of the equity in the CDOs we sponsored.  CDO equity receives distributions from the CDO only if the CDO generates enough income to first pay the holders of the debt securities and the CDO’s expenses.

We typically have retained some portion or all of the equity interest in CDOs we sponsored either directly or through limited partnership investments.  The equity is usually entitled to all of the income generated by the CDO after the CDO pays all of the interest due on the debt securities and its other expenses, and is entitled to a return on capital only when the principal amount and accrued interest of all of the debt securities has been paid.  However, there will be little or no income available to the CDO equity if covenants regarding the operations of a CDO (primarily relating to the value of collateral and interest coverage) are not met, or if there are excessive payment defaults, payment deferrals or rating agency downgrades by the issuers of the underlying collateral, and there may be little or no amounts available to return our capital.  In that event, the value of our direct or indirect investment in the CDO’s equity, which for all CDOs was approximately $6.2 million at September 30, 2010, could decrease substantially or be eliminated.  In addition, the equity securities of CDOs are generally illiquid, and because they represent a leveraged investment in the CDO’s assets, the value of the equity securities will generally have greater fluctuations than the value of the underlying collateral.

In some of our investment funds, a portion of our management fees may depend upon the performance of the fund and, as a result, our management fee income may be volatile.

As of September 30, 2010, a portion of our management fees is subordinated to the investors’ receipt of specified returns in 11 of the CDOs we manage.  In addition, with respect to RCC and eight of our investment entities, we receive incentive or subordinated compensation in addition to our base management fee, depending upon whether RCC or those partnerships achieve returns above specified levels.  During fiscal 2010 and 2009, we earned incentive and subordinated management fees from RCC and from 11 and 21 CDOs, respectively, which constituted 22% and 17%, respectively, of our aggregate management fee income for both periods.  As a result of current economic conditions, the amount of incentive or subordinated management fee income we receive may be reduced, and any such reduction may be material.

Real estate loans in our portfolio are subject to a higher risk of loss than conventional mortgage loans.

Real estate loans in our portfolio differ significantly from conventional mortgage loans.  In particular, these loans:

● are junior mortgage loans;

● involve payment structures other than equal periodic payments that retire a loan over its term;

● require the borrower to pay a large lump sum at loan maturity (which will depend upon the borrower’s ability to obtain financing or otherwise raise a substantial amount of cash at maturity); and

● while producing income, do not generate sufficient revenues to pay the full amount of debt service on the loan as originally structured.

As a result, real estate loans in our portfolio may have a higher risk of default and loss than conventional mortgage loans, and may require us to become involved in expensive and time-consuming workouts, or bankruptcy, reorganization or foreclosure proceedings.

In addition, the principal or sole source of recovery for our real estate loans is typically the underlying property and, accordingly, the value of our loans, and our ability to collect loan payments will depend upon local, regional and national economic conditions, and conditions affecting the property specifically, including the cost of compliance with, and liability under environmental, health and safety laws, changes in interest rates and the availability of financing, casualty losses, the attractiveness of the property, the availability of tenants, the ability of tenants to pay rent, competition from similar properties in the area and neighborhood values.  Operating and other expenses of real properties, particularly significant expenses such as real e state taxes, insurance and maintenance costs, generally do not decrease when revenues decrease and, even if revenues increase, operating and other expenses may increase faster than revenues.

We may not be able to raise sufficient funds for our Real Estate Opportunity REIT, Inc. (or RRE Opportunity REIT).

During the offering period of RRE Opportunity REIT, we are advancing funds to pay certain of its operating expenses and organization and offering costs.  As of September 30, 2010, we had advances of $3.3 million to RRE Opportunity REIT, which is included in receivables from managed entities and related parties. We anticipate that we will continue to provide additional funding.  If the RRE Opportunity REIT fails to raise enough funds through its public stock offering, we would be required to charge amounts due from it to expense.

14

We have identified a material weakness in our internal control over accounting for income taxes that, if not remediated, could affect our ability to prepare timely and accurate financial reports, which could cause investors to lose confidence in our reported financial information and could have a negative effect on the trading price of our stock.

In connection with the preparation of this report, we identified and reported a material weakness in our internal controls over accounting for income taxes. As a result of this material weakness, we were unable to conclude that our internal control over financial reporting relating to income taxes was effective as of September 30, 2010. Although we have instituted new controls to remediate this weakness, if these controls are not effective, our ability to prepare timely and accurate financial reports could be affected, which could cause investors to lose confidence in our reported financial information and could have a negative effect on the trading price of our common stock or our ability to obtain financing for our operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None

ITEM 2. PROPERTIES.

Philadelphia, Pennsylvania:

     We maintain our executive and corporate offices at One Crescent Drive in the Philadelphia Navy Yard under a lease for 13,484 square feet that expires in May 2019.  Certain of our financial fund management and real estate operations are also located in these offices.  We lease 21,554 square feet for additional executive office space and for certain of our real estate operations at 1845 Walnut Street, Philadelphia, Pennsylvania.  We sublease a portion of this space to Atlas Energy, Inc. (formerly Atlas America, Inc., or Atlas Energy,our former energy subsidiary).  This lease, which expires in May 2013, is in an office build ing in which we own a 5% equity interest.  Our commercial finance operations are located in another office building at One Commerce Square, 2005 Market Street, 15th Floor, Philadelphia, Pennsylvania under a lease for 59,448 square feet that expires in August 2013.

New York, New York:

     We maintain additional executive offices in a 10,303 square foot location at 712 5th Avenue, New York, New York under a lease agreement that expires in July 2020.

Other Locations:

Our commercial finance operations own a 29,500 square foot building at 1720A Crete Street, Moberly, Missouri.  In addition, we maintain various office leases in the following cities:  Omaha, Nebraska; Los Angeles and Santa Ana, California; and Denver, Colorado.  We also lease office space in London, England for our European operations.

As of September 30, 2010, we believe that the properties we lease are suitable for our operations and adequate for our needs.

ITEM 3. LEGAL PROCEEDINGS.

In August 2009, Riverside National Bank of Florida, or Riverside, initiated a lawsuit now captioned Federal Deposit Insurance Corporation v. The McGraw-Hill Companies, Inc. et al., United States District Court, Southern District of New York, No. 10 Civ. 4421, against several investment banks, rating agencies, and collateral managers of CDOs, including Trapeza Capital Management, LLC, or TCM.  We own a 50% interest in TCM, and an unaffiliated third-party owns the other 50% interest.

The complaint seeks monetary damages in an unspecified amount against TCM arising out of Riverside’s investment in certain CDOs between 2005 and 2007.  Riverside’s claims against TCM stem from its role as collateral manager for various Trapeza CDOs, which were sold by various investment banks.  The complaint alleges that the offering materials for the CDOs were prepared in part by TCM and were false and misleading.  The complaint further alleges that TCM breached fiduciary and contractual obligations by failing to properly monitor the collateral for the CDOs, failing to mitigate losses and failing to disclose known quality and performance problems with the underlying collateral.  TCM believes that none of the claims have merit and intends to vigorously defend itself in this matter.

We are also a party to various routine legal proceedings arising out of the ordinary course of our business.  Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations.

ITEM 4. [Removed and Reserved.]

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PART II

ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
	MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

     Our common stock is quoted on the NASDAQ Global Select Market under the symbol "REXI."  The following table sets forth the high and low sale prices as reported by NASDAQ on a quarterly basis for our last two fiscal years:

	As Reported
	High		Low
Fiscal 2010
Fourth Quarter	$	5.68	$	3.59
Third Quarter	$	6.30	$	3.59
Second Quarter	$	5.39	$	3.81
First Quarter	$	5.17	$	3.69
Fiscal 2009
Fourth Quarter	$	6.23	$	4.68
Third Quarter	$	6.60	$	3.42
Second Quarter	$	4.19	$	2.76
First Quarter	$	9.36	$	3.25

As of December 2, 2010, there were 19,047,282 shares of common stock outstanding held by 356 holders of record.

We have paid regular quarterly cash dividends since the fourth quarter of fiscal 1995.  Commencing with the dividend payable in the first quarter of fiscal 2006, we increased our quarterly dividend by 20% to $0.06 per common share and, beginning with the dividend payable in the first quarter of fiscal 2007 and continuing to the second quarter of fiscal 2009, we further increased our quarterly dividend by 17% to $0.07 per common share.  In the third quarter of fiscal 2009, we reduced the dividend to $0.03 per common share, a decrease of 57%, in part due to the impact on us of the volatility and reduction in liquidity in the global credit markets. We have continued to declare a $0.03 quarterly dividend through the remainder of fiscal 2009 and for fi scal 2010.

Until our 12% senior notes (due in 2012) are paid in full, retired or repurchased, we cannot declare or pay future quarterly cash dividends in excess of $0.03 per share without the prior approval of all the holders of the senior notes unless basic earnings per share from continuing operations from the preceding fiscal quarter exceeds $0.25 per share.  There are no restrictions imposed on the declaration of dividends under our credit facility.

Securities Authorized for Issuance under Equity Compensation Plans

	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
Equity compensation plans approved by security holders	3,281,736	$9.05	259,426

Issuer Sales of Equity Securities

In connection with the sale of $18.8 million of our 12% senior notes which was completed on October 6, 2009, we issued five-year detachable warrants which provide purchasers with the right to acquire 3,690,195 shares of our common stock at a weighted average exercise price of approximately $5.11 per share.  No separate consideration was paid by the purchasers for the warrants.  See Note 12 to our consolidated financial statements included in Item 8 of this report.  We relied upon the exemption from registration provided by Section 4(2) and Regulation D under the Securities Exchange Act of 1933, as amended.  The proceeds of the offering were used to pay down our credit facility with TD Bank by $10.6 million and for general corp orate purposes.

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Issuer Purchases of Equity Securities

On July 26, 2007, the Board of Directors approved a share repurchase program under which we may buy up to $50.0 million of our outstanding common stock from time to time, replacing a similar plan that had been approved by the Board in September 2004.  Through September 30, 2008, we had repurchased an aggregate of 188,123 shares at a total cost of $2.8 million, at an average cost of $14.99 per share.  We did not repurchase any additional shares under this program during fiscal 2010 or 2009.

Performance Graph

     The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of two other stock market indices:  the NASDAQ United States Composite and the NASDAQ Financial 100.

                                  Comparison of Five Year Cumulative Total Return*

 Assumes $100 was invested on October 1, 2005 in our common stock or in the indicated index and that all cash dividends were reinvested as received.

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ITEM 6. SELECTED FINANCIAL DATA.

     The following selected financial data should be read together with our consolidated financial statements, the notes to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report.  We derived the selected consolidated financial data for each of the fiscal years ended September 30, 2010, 2009 and 2008, and as of September 30, 2010 and 2009 from our consolidated financial statements appearing elsewhere in this report, which have been audited by Grant Thornton LLP, an independent registered public accounting firm.  We derived the selected financial data for the years ended September 30, 2007 and 2006 and as of September 30, 2008, 2007 and 2006 from our consolidated internal financial statements for those periods.  The following table sets forth selected operating and balance sheet data (in thousands, except per share data):

	As of and for the Years Ended September 30,
	2010			2009			2008			2007			2006
Statement of operations data:
Revenues:
Real estate	$	31,911		$	25,417		$	31,519		$	22,987		$	23,076
Commercial finance		23,677			48,767			93,016			40,124			23,842
Financial fund management		33,140			33,344			27,536			63,089			28,457
Total revenues	$	88,728		$	107,528		$	152,071		$	126,200		$	75,375
(Loss) income from continuing operations before cumulative effect of a change in accounting principle	$	(17,297	)	$	(16,090	)	$	(29,949	)	$	7,211		$	17,402
Income (loss) from discontinued operations, net of tax		622			(444	)		(1,299	)		(1,558	)		1,231
Cumulative effect of a change in accounting principle, net of tax		−			−			−			−			1,074
Net (loss) income		(16,675	)		(16,534	)		(31,248	)		5,653			19,707
Less:  Net loss (income) attributable to noncontrolling interests		3,224			1,603			5,005			(1,957	)		(1,734	)
Net (loss) income attributable to common shareholders	$	(13,451	)	$	(14,931	)	$	(26,243	)	$	3,696		$	17,973
Basic (loss) earnings per share attributable to common shareholders:
Continuing operations	$	(0.74	)	$	(0.78	)	$	(1.40	)	$	0.30		$	0.89
Discontinued operations		0.03			(0.03	)		(0.07	)		(0.09	)		0.07
Cumulative effect of a change in accounting principle		−			−			−			−			0.06
Net (loss) income	$	(0.71	)	$	(0.81	)	$	(1.47	)	$	0.21		$	1.02
Diluted (loss) earnings per share attributable   to common shareholders:
Continuing operations	$	(0.74	)	$	(0.78	)	$	(1.40	)	$	0.27		$	0.80
Discontinued operations		0.03			(0.03	)		(0.07	)		(0.08	)		0.06
Cumulative effect of a change in accounting principle		−			−			−			−			0.06
Net (loss) income	$	(0.71	)	$	(0.81	)	$	(1.47	)	$	0.19		$	0.92
Dividends declared per common share	$	0.09		$	0.20		$	0.28		$	0.27		$	0.24
Amounts attributable to common shareholders:
(Loss) income from continuing operations	$	(14,073	)	$	(14,487	)	$	(24,944	)	$	5,254		$	15,668
Discontinued operations		622			(444	)		(1,299	)		(1,558	)		1,231
Cumulative effect of a change in accounting principle		−			−			−			−			1,074
Net (loss) income	$	(13,451	)	$	(14,931	)	$	(26,243	)	$	3,696		$	17,973
Balance sheet data:
Total assets	$	234,253		$	375,840		$	758,357		$	966,452		$	418,858
Borrowings	$	66,110		$	191,383		$	554,059		$	706,372		$	172,238
Total equity	$	129,084		$	140,141		$	146,343		$	191,918		$	204,769

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ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
	AND RESULTS OF OPERATIONS.

Overview

     We are a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage 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, typically under long-term management arrangements either through a contract with, or as the manager or general partner of, our sponsored investment funds.  We typically maintain an investment in the funds we sponsor.  Assets under management have grown from $7.1 billion at September 30, 2005 to $12.4 billion at September 30, 2010.< /font>

We limit our fund development and management services to asset classes where we own existing operating companies or have specific expertise.  We believe this strategy enhances the return on investment we can achieve for our funds.  In our real estate operations, we concentrate on the ownership, operation and management of multifamily and commercial real estate and real estate mortgage loans including whole mortgage loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, mezzanine loans, investments in discounted and distressed real estate loans and investments in “value-added” properties (properties which, although not distressed, need substantia l improvements to reach their full investment potential).  In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial loans secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment.  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, or ABS.

As a specialized asset manager, we are affected by conditions in the financial markets and, in particular, the continued volatility and reduced liquidity in the global credit markets which have reduced our revenues from, and the values of, many of the types of financial assets which we manage or own and have reduced our ability to access debt financing for our operations.  For fiscal 2011, given the constraints imposed by current economic and market conditions, we expect to focus on managing our existing assets, which provides us with substantial fee income, and raising investor funds through our retail broker channel for investment programs, particularly in our real estate business.  In our real estate segment, we continue to redirect the focus f rom acquiring and managing performing multifamily assets to acquiring and managing a diversified portfolio of commercial real estate and real estate related debt that has been significantly discounted due to the effects of the economic events and high levels of leverage.  In financial fund management, we continue to manage and receive fees from the collateralized debt obligation, or CDO, issuers that we had previously formed and sponsored, but do not expect to sponsor any new CDO issuers.

In our commercial finance segment, we have reduced our originations during fiscal 2010 in conjunction with the reduced availability of debt financing.  During the third and fourth quarters of fiscal 2010, we sold approximately $116.0 million of leases and loans to our affiliate, Resource Capital Corp., or RCC, and recognized a loss of $7.5 million.  The proceeds of the sale were primarily used to pay off and terminate our warehouse credit facility with PNC Bank, N.A.  In September, we obtained a $21.5 million short-term bridge loan (matures in February 2011) in order to originate leases and loans.  We are in the process of seeking longer term financing for future lease and loan originations.  We cannot assure you that we will be able to obtain financing in sufficient amounts to resume our prior origination volumes, upon acceptable terms, or at all.  In addition, during fiscal 2010, four of our commercial finance investment entities reduced their equity distributions to their partners as a result of the impact of the recession on the cash flow of these entities.  As a result, we waived $3.8 million of management fees from these funds and recorded a $1.1 million reserve for doubtful accounts on amounts owed to us.  We anticipate waiving these management fees in the future, which will accordingly reduce our revenues.

Principally as a result of these charges, we recorded a net loss attributable to common shareholders of $13.5 million in fiscal 2010 as compared to net losses attributable to common shareholders of $14.9 million and $26.2 million for fiscal 2009 and 2008, respectively.

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Assets Under Management

     We decreased our assets under management by $1.3 billion to $12.4 billion at September 30, 2010 from $13.8 billion at September 30, 2009.The following table sets forth information relating to our assets under management by operating segment (in millions) (1):

	September 30,				Decrease
	2010		2009		Amount			Percentage
Financial fund management	$	10,009	$	10,726	$	(717	) (2)		(7)%
Real estate		1,557		1,682		(125	)		(7)%
Commercial finance		878		1,361		(483	) (3)		(35)%
	$	12,444	$	13,769	$	(1,325	)		(10)%

(1) For information on how we calculate assets under management, see Item 1, “Business-Assets Under Management.”

(2) Reduction primarily due to a decrease in the eligible collateral bases of our ABS ($497.1 million) and trust preferred portfolios ($245.4 million) resulting from defaults, paydowns, sales and calls.

(3) Reduction primarily reflects the decrease in new originations and paydowns of existing loans and leases.

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

	CDOs		Limited Partnerships		TIC Programs		Other Investment Funds
As of September 30, 2010 (1)
Financial fund management		32		13		−		−
Real estate		2		8		7		4
Commercial finance		−		4		−		1
		34		25		7		5
As of September 30, 2009 (1)
Financial fund management		32		13		−		−
Real estate		2		8		7		5
Commercial finance		−		4		−		1
		34		25		7		6

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

The revenues in each of our operating segments are generated by the fees we earn for structuring and managing the investment entities we sponsored 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 information about our revenue sources (in thousands):

	Years Ended September 30,
	2010		2009		2008
Finance and rental revenues (1)	$	20,281	$	38,491	$	80,660
Fund management revenues (2)		51,411		57,588		51,182
RCC management fees		10,649		7,357		6,021
Gains on resolution of loans (3)		2,870		1,030		9,571
Other (4)		3,517		3,062		4,637
	$	88,728	$	107,528	$	152,071

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

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

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

(4) Includes primarily insurance fees, documentation fees and other charges from our commercial finance operations and for fiscal 2010, includes a break-up fee related to an unsuccessful bank transaction for our financial fund management operations.

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

Results of Operations:  Real Estate

During fiscal 2010, we continue to redirect the focus of our real estate subsidiary, Resource Real Estate, Inc., from acquiring and managing performing multifamily assets to (a) acquiring and managing a diversified portfolio of commercial real estate and real estate related debt that have been significantly discounted due to the effects of economic events and high levels of leverage and (b) managing existing assets for our real estate programs.  In December 2009, we closed Resource Real Estate Opportunity Fund L.P., a limited partnership, which invests in discounted real estate and real estate related debt, after raising a total of $41.4 million.  Additionally, we formed Resource Real Estate Opportunity REIT, Inc., or RRE Opportunity REIT, which w ill further invest in discounted commercial real estate and real estate related debt.  The registration statement for this fund became effective in June 2010.  For fiscal 2011, our primary fundraising efforts will be focused on the RRE Opportunity REIT.

Through our real estate segment, we focus on four different areas:

● the acquisition, ownership and management of portfolios of discounted real estate and real estate related debt, which we have acquired through two sponsored real estate investment entities as well as through joint ventures with institutional investors;

● the sponsorship and management of real estate investment entities that principally invest in multifamily housing;

● the management, principally for RCC, of general investments in commercial real estate debt, including first mortgage debt, whole loans, mortgage participations, B notes, mezzanine debt and related commercial real estate securities; and

● to a lesser extent, the management and resolution of a portfolio of real estate loans and property interests that we acquired at various times between 1991 and 1999, which we collectively refer to as our legacy portfolio.

The following table sets forth information related to real estate assets managed (1) (in millions):

	September 30,
	2010		2009
	(in millions)
Assets under management (1):
Commercial real estate debt	$	761	$	864
Real estate investment funds and programs		566		547
Institutional portfolios		51		105
Distressed portfolios		149		88
Legacy portfolio		30		78
	$	1,557	$	1,682

(1) For information on how we calculate assets under management, see Item 1, “Business − “Assets under Management.”

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

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

	Years Ended September 30,
	2010		2009			2008
Revenues:
Management fees:
Asset management fees	$	4,842	$	3,935		$	2,407
Resource Residential property management fees		5,296		4,362			2,682
REIT management fees from RCC		7,775		5,321			4,465
		17,913		13,618			9,554
Other revenue:
Fee income from sponsorship of partnerships, joint ventures and other property interests		1,500		1,929			3,583
Master lease revenues		4,002		3,994			3,660
Rental property income and revenues of consolidated VIEs (1)		4,644		5,014			5,208
Interest, including accreted loan discount		113		492			1,549
Gains and fees on resolution of loans and other property interests		2,870		1,030			9,571
Equity in earnings (losses) of unconsolidated entities		869		(660	)		(1,606	)
	$	31,911	$	25,417		$	31,519
Cost and expenses:
General and administrative expenses	$	7,718	$	9,276		$	12,278
Resource Residential expenses		4,870		4,459			3,043
Master lease expenses		4,791		4,577			4,081
Rental property expenses and expenses of consolidated VIEs (1)		3,401		3,726			3,200
	$	20,780	$	22,038		$	22,602

(1) We generally consolidate a variable interest entity, or VIE, when we are deemed to be the primary beneficiary or, for non-VIEs, where we control the entity.

Revenues − Fiscal 2010 Compared to Fiscal 2009

Revenues from our real estate operations increased $6.5 million (26%) to $31.9 million for fiscal 2010 from $25.4 million in fiscal 2009.  We attribute the increase primarily to the following:

Management fees:

● a $907,000 increase in asset management fees due to an increase in equity deployed in properties in our investment entities, primarily the assets acquired by Resource Real Estate Opportunity Fund, L.P.

● a $934,000 increase in property management fees earned by Resource Residential, reflecting the 728 unit increase (6%) in multifamily units under management to 13,522 units at September 30, 2010 from 12,794 at September 30, 2009; and

● a $2.5 million increase in REIT management fees from RCC as a result of an increase in incentive management fees and in equity capital (upon which our base management fee is calculated) resulting from RCC’s success in raising capital through common stock offerings.

Other revenues:

● a $429,000 decrease in fee income in connection with the purchase and third-party financing of property through our real estate investment entities.  During fiscal 2010, we earned fees from the acquisition of six distressed notes for $81.1 million and four property acquisitions with an aggregate purchase price of $19.3 million, as compared to the acquisition of seven properties with an aggregate purchase price of $62.7 million during fiscal 2009.  Since we do not place financing on our distressed note acquisitions, the decrease is primarily attributable to the reduction in debt placement fees for the properties we acquired in fiscal 2010 as compared to fiscal 2009;

● a $370,000 decrease in rental property income and revenues of consolidated VIEs due to the sale of a consolidated VIE interest in January 2010;

● a $379,000 decrease in interest income attributable to the payoff of one loan in June 2010 (book value of $2.8 million);

● a $1.8 million increase in gains and fees on the resolution of loans and other property interests.  During fiscal 2010, we recorded a gain of $1.9 million (proceeds of $4.8 million) on the settlement of one loan.  We also received proceeds of $2.1 million, including a cost reimbursement of $101,000, from the sale of a joint venture interest to RCC and recorded a gain of $145,000 from another asset sale (proceeds of $260,000).  In addition, we recorded a gain of $642,000 (proceeds of $642,000) from the sale of an asset by a joint venture; and

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● a $1.5 million increase in equity earnings primarily reflecting a $700,000 increase due to a favorable change in an interest rate swap held by one of our investment entities and a $500,000 increase in income in the underlying investment held by another entity, reflecting primarily increased rental income and lease termination fees.

Costs and Expenses − Fiscal 2010 Compared to Fiscal 2009

Costs and expenses of our real estate operations decreased $1.3 million (6%) to $20.8 million for fiscal 2010 from $22.0 million for fiscal 2009.  We attribute the decrease primarily to the following:

● a $1.6 million decrease in general and administrative expenses, primarily reflecting the $1.5 million allocation of wages and benefits to RRE Opportunity REIT; and

● a $325,000 decrease in rental property expenses and consolidated VIE expenses due to the sale of our interests in a consolidated VIE entity which held a property.

Revenues − Fiscal 2009 Compared to Fiscal 2008

Revenues decreased $6.1 million (19%) to $25.4 million for fiscal 2009 from $31.5 million in fiscal 2008.  We attribute the decrease primarily to the following:

Management fees:

● a $1.5 million increase in asset management fees due to an increase in equity deployed in properties that we manage in our investment entities;

● a $1.7 million increase in fees earned by Resource Residential.  Multifamily units under management increased to 12,794 at September 30, 2009 from 10,877 at September 30, 2008; and

● an $856,000 increase in REIT management fees due principally to higher RCC net income which increased the incentive management fee.

Other revenues:

● a $1.7 million decrease in fee income.  During fiscal 2009, we earned fees from the acquisition of four distressed notes for $31.9 million and seven property acquisitions with an aggregate purchase price of $62.7 million, as compared to the acquisition of seven properties with an aggregate purchase price of $89.7 million during fiscal 2008.  During fiscal 2009, the fees earned were 1.0% to 1.75% of the acquisition price as compared to 1.75% of the acquisition price during fiscal 2008;

● a $334,000 increase in master lease revenues from one TIC property due to improved occupancy;

● a $194,000 decrease in rental property income and revenues of consolidated VIEs due to a 17% reduction in the daily rate charged at the Savannah, Georgia hotel we own in addition to the sale of our entire interest in another asset to one of our real estate investment funds;

● a $1.1 million decrease in interest income attributable to the principal paydown of two loans and the foreclosure of another loan;

● an $8.5 million decrease in gains and fees on the resolution of loans and other property interests.  During fiscal 2009, we received proceeds of $9.9 million from the payoff of one loan, resulting in a gain of $991,000, received discounted proceeds of $1.2 million from the payoff of another loan resulting in a loss of $313,000 and recorded a $330,000 gain on an asset sold in the prior year.  In fiscal 2008, we collected $18.4 million in connection with a substantial settlement of a discounted loan, which was secured by an office building in Washington, D.C.  As a result of this repayment, we recognized a pre-tax gain in the quarter ended September 30, 2008 of approximately $7.5 million.  Also, in fiscal 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 partnership that owns a hotel property resulting in a gain of $574,000, and 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; and

● a $946,000 decrease in equity losses of unconsolidated entities due to a favorable change in an interest rate swap.

Costs and Expenses − Fiscal 2009 Compared to Fiscal 2008

Costs and expenses of our real estate operations decreased $564,000 (2%) to $22.0 million for fiscal 2009 from $22.6 million for fiscal 2008.  We attribute the decrease primarily to the following:

● a $3.0 million decrease in general and administrative expenses, primarily $1.7 million of wages and benefits, of which $1.2 million related to reduced bonuses;

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● a $1.4 million increase in Resource Residential expenses due to an increase in wages and benefits related to an increase in the number of employees required to manage the increase in properties; and

● a $496,000 increase in master lease expenses from one TIC asset due to turnover costs related to occupancy.

Results of Operations:  Commercial Finance

During fiscal 2010, we focused our efforts on improving the financial condition of our commercial finance segment primarily by:

● terminating debt that had unfavorable terms by selling investments;

● lowering our overhead expenses by eliminating operating redundancies following the integration of our fiscal 2009 acquisitions; and

● reducing staff in conjunction with the reduced origination capabilities brought on by the recession and tight debt markets.

As asset managers for our investment partnerships, our goal is to preserve partnership capital and to achieve the best possible results for those investors.  In fiscal 2010, we took the following actions on behalf of those investment partnerships:

● ceased raising new funds when it became apparent that the debt markets were not improving rapidly enough;

● deferred expense reimbursement to us;

● for fiscal 2010, we waived $3.8 million of our asset management fees for our sponsored leasing partnerships, and anticipate that we will continue to waive our fees in the future which, accordingly, will reduce our revenues.  We believe that, as a result, cash flow in these partnerships will improve significantly, which will help pay down loans and generate liquidity for investments in new leases;

● negotiated with the partnerships’ lenders to keep them from foreclosing on partnership collateral; and

● paid down existing debt and reduced exposure with lenders that had unfavorable terms in part by completing three securitizations in fiscal 2010 totaling $380 million.

     During fiscal 2010, our commercial finance assets under management decreased $483.0 million (35%) to $878.0 million as compared to $1.4 billion in fiscal 2009.  Originations of new equipment financing decreased by $285.3 million (71%) to $115.7 million in fiscal 2010 from $401.0 million in fiscal 2009.  Our originations have been and we expect they will continue to be impacted by the state of the credit markets and the reduced ability of our managed investment entities to obtain financing to acquire portfolios of leases and loans from us.

During fiscal 2010, we sold approximately $126.2 million of our portfolio of leases and loans to RCC.  In connection with the sale, the balance on the PNC Bank warehouse line of credit used to acquire these leases and loans was repaid and the line was terminated.  As a result, we expect that our commercial finance revenues will continue to decline due to the reduction in the size of the portfolio of leases and loans that we originate and hold on our balance sheet prior to selling them to our investment entities and to RCC.  The commercial finance assets we managed for our own account during fiscal 2010 decreased by $135.0 million to $12.0 million as compared to $147.0 million during fiscal 2009, reflecting the reduction in our warehouse borrowings and the sale of commercial finance assets to RCC and our investment entities.  The assets we managed for others during fiscal 2010 decreased by $348.0 million to $866.0 million from $1.2 billion at September 30, 2009 reflecting primarily the decrease in assets acquired by us and purchased by our investment entities due to the lack of available financing.

As of September 30, 2010, we managed approximately 82,000 leases and loans that had an average original finance value of $25,000 with an average term of 56 months as compared to approximately 100,000 leases and loans with an average original finance value of $25,000 and an average term of 52 months as of September 30, 2009.

In March 2009, two of the public equipment leasing partnerships we sponsored and manage formed a joint venture.  The joint venture subsequently acquired a portion of our interest in LEAF Commercial Finance Fund, LLC, or LCFF, an investment fund we formed to acquire and finance leases and loans we originate.  As a result of the transaction, LCFF became a VIE for which the joint venture was determined to be the primary beneficiary and, therefore, we ceased to consolidate LCFF as of March 1, 2009.  Accordingly, a total of $195.0 million of commercial finance assets and $187.6 million of debt financing were transferred to the joint venture and removed from our financial statements.

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The following table sets forth information related to commercial finance assets we manage (1) (in millions):

	September 30,
	2010		2009
Managed for our own account	$	12	$	147
Managed for others:
LEAF investment entities		735		1,181
RCC		115		2
Other		16		31
		866		1,214
	$	878	$	1,361

(1) For information on how we calculate assets under management, see Item 1, “Business − “Assets under Management.”

The revenues from our commercial finance operations historically have consisted primarily of finance revenues from leases and loans held by us prior to being sold, asset acquisition fees which we earn when commercial finance assets are sold to one of our investment partnerships and asset management fees we earn over the life of the leases or loans after sale to our investment partnerships.  We expect that our revenues will continue to decline until we are able to access financing on acceptable terms.  Failure to obtain replacement financing will continue to limit our ability to originate new leases and loans and further reduce operations.  The following table sets forth certain information relating to the revenues recognized and costs an d expenses incurred in our commercial finance operations (in thousands):

	Years Ended September 30,
	2010			2009			2008
Revenues:(1)
Finance revenues	$	10,662		$	22,974		$	53,680
Acquisition fees		1,327			4,943			18,466
Fund management fees		10,905			19,133			18,275
Equity in losses of unconsolidated partnerships		(1,896	)		(1,133	)		(333	)
Other		2,679			2,850			2,928
	$	23,677		$	48,767		$	93,016
Costs and expenses:
Wages and benefit costs	$	9,245		$	13,263		$	24,212
Other costs and expenses		8,919			11,916			18,529
	$	18,164		$	25,179		$	42,741

(1) Total revenues include RCC servicing and origination fees of $444,000, $1.0 million and $1.5 million for fiscal 2010, 2009 and 2008, respectively.

Revenues − Fiscal 2010 Compared to Fiscal 2009

Revenues decreased $25.0 million (51%) from $23.7 million for fiscal 2010 as compared $48.8 million for fiscal 2009.  We attribute these decreases primarily to the following:

● a $12.3 million decrease in commercial finance revenues during fiscal 2010.  The decreases were caused by the reduction in the size of the portfolio of commercial finance assets managed for our own account primarily due to the sale to RCC;

● a $3.6 million decrease in asset acquisition fees during fiscal 2010.  The difficulty in obtaining and maintaining debt financing by the investment funds we manage has limited their ability to acquire equipment financings from us.  Consequently, we have reduced our commercial finance originations to match their asset acquisition capabilities;

● a $8.2 million decrease in management fees during fiscal 2010.  Our management fees include fees we receive to service the commercial finance assets we manage, offering fees earned for raising capital in our investment entities as well as fees received for originating loans for those entities.  The decline in fund management fees during fiscal 2010 was caused primarily by a waiver of the fees we earn to manage the commercial finance assets, lower offering fees received as LEAF Equipment Finance Fund 4, our most recently sponsored investment entity, closed its offering in October 2009, and finally, due to the lower fees as a result of the previously discussed reduction in the portfolio of leases and loans held by our investment entities.

● a $763,000 increase in equity losses during fiscal 2010, reflecting an increase in the provision for credit losses recorded by our investment entities.  The negative impact of the economic recession in the United States on the ability of our investment funds’ customers to make payments on their leases and loans, has accordingly, increased our exposure from non-performing assets; and

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● other income decreased $171,000 during fiscal 2010 principally due to the decrease in customer service charges.  These fees typically vary widely from period to period and are driven by the amount and seasoning of commercial finance assets held by us.

Costs and Expenses − Fiscal 2010 Compared to Fiscal 2009

Costs and expenses from our commercial finance operations decreased by $7.0 million (28%) for fiscal 2010.  We attribute this decrease primarily to the following:

● a $4.0 million reduction in wage and benefit costs during fiscal 2010.  In response to lower origination volume and assets under management, we have reduced payroll and other overhead costs and have continued to eliminate redundant positions.  In total, we have reduced the number of full-time employees in our commercial finance operations by 125 to 195 at September 30, 2010 from 320 at September 30, 2009; and

● a reduction in other costs and expenses of $3.0 million during fiscal 2010.  The decrease reflects the reduction in costs, primarily legal, to service our smaller portfolio of assets, as well as our ongoing cost saving and consolidation efforts which targeted eliminating overhead redundancies and increasing operating efficiencies.

Revenues − Fiscal 2009 Compared to Fiscal 2008

Revenues decreased $44.2 million (48%) to $48.8 million for fiscal 2009 from $93.0 million for fiscal 2008.  We attribute these decreases primarily to the following:

● a $30.7 million decrease in commercial finance revenues.  In fiscal 2008, we held a significantly higher portfolio balance of leases and loans as a result of the $412.5 million NetBank portfolio acquired in November 2007 and held by us until being completely sold in April 2008.  In addition, as of March 2009, we no longer consolidated LCFF, a $195.0 million portfolio.  As a result of the deconsolidation of LCFF, our finance revenues significantly decreased, offset in part by $1.1 million of management fees earned after deconsolidation.  For the period subsequent to the deconsolidation (March 2009 to September 2009), LCFF generated $8.8 million of revenues which, because LCFF was no longer consolidated with us, were not recorded in our consolidated statement of operations.  Similarly, we did not record LCFF’s costs and expenses which aggregated $6.9 million in addition to $5.5 million of interest expense;

● a $13.5 million decrease in acquisition fees resulting from the $1.0 billion decrease in the amount of leases sold to our funds and RCC to $281.3 million.  This decrease reflects the portfolio acquisitions we sold to our investment entities in fiscal 2008.  Additionally, the difficulty in obtaining debt financing by our investment funds has limited their ability to acquire equipment financings from us.  Consequently, we have reduced our commercial finance originations to match the asset acquisition capabilities of our funds;

● an $858,000 increase in fund management fees.  Our management fees include fees we receive to service the commercial finance assets we manage, offering fees earned for raising capital in our investment entities as well as fees received for originating loans for those entities.  During fiscal 2009, management fees earned to service leases increased by $816,000 due to the growth in assets under management created by the $1.2 billion of lease originations in fiscal 2008.  These increases were offset, in part, by decreased offering fees of $136,000 related to the time between the closing of one investment fund and the opening of another investment fund.  In addition, during fiscal 2009, we waived $425,000 of fund management fees in one of our investment entities when we reduced that entity’s monthly cash distribution to its partners; and

● a $78,000 decrease in other income, primarily due to reduction in late fees derived from commercial finance assets held by us.  These fees typically vary widely from period to period and are driven by the amount and seasoning of commercial finance assets held by us.  The large decrease in fiscal 2009 was due to the sale of the well-seasoned NetBank portfolio in fiscal 2008.

Costs and Expenses − Fiscal 2009 Compared to Fiscal 2008

     Costs and expenses from our commercial finance operations decreased by $17.6 million (41%) for fiscal 2009.  We attribute this decrease primarily to:

● a $10.9 million reduction in wages and benefits.  Our costs have decreased due to several factors: (i) in fiscal 2008, we held significantly higher assets and accordingly, incurred higher servicing costs; (ii) for fiscal 2009, many of these costs were reimbursed by the investment entities to whom we have sold these assets; and (iii) in conjunction with converting the operations we acquired in fiscal 2008 onto the LEAF platform, we have reduced overhead costs by eliminating redundant positions.  Furthermore, in response to the ongoing recession and reduced originations, we have increased collection and customer service staff, while to a greater extent, we have decreased sales, credit and lease processing staff.  In total, we reduced the number of full-time employees in our commercial finance operations by 78 to 320 as of September 30, 2009 from 398 at September 30, 2008; and

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● a $6.7 million reduction in other costs and expenses.  This decrease is due to the decline in assets managed for our own account, which resulted in reduced costs to service our portfolio, primarily legal costs, and to our ongoing cost saving and consolidation efforts.  These efforts targeted eliminating overhead redundancies occurring through our acquisitions and taking advantage of efficiencies obtained by operating on a single platform.  In addition, fiscal 2008 included costs related to the portfolio acquisitions we made, which did not recur in fiscal 2009.

Results of Operations:  Financial Fund Management

     General.  We conduct our financial fund management operations principally through seven separate operating entities:

● Apidos Capital Management, LLC, or Apidos, finances, structures and manages investments in bank loans, high yield bonds and equity investments;

● Trapeza Capital Management, LLC, or TCM, a joint venture between us and an unrelated third-party, 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 through CDO issuers and related partnerships.  TCM, together with the Trapeza CDO issuers and Trapeza partnerships, are collectively referred to as Trapeza;

● Resource Capital Markets, Inc., through our registered broker-dealer subsidiary, Chadwick Securities, Inc., or Chadwick, acts as an agent in the primary and secondary markets for trust preferred in the financial services and real estate sectors and manages accounts for institutional investors;

● Resource Europe Management, Ltd., or Resource Europe, structures and manages investments in international bank loans;

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

● Ischus Capital Management, LLC, or Ischus, 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; and

● Resource Capital Manager, Inc., or RCM, an indirect wholly-owned subsidiary, provides investment management and administrative services to RCC under a management agreement between us, RCM and RCC.

The following table sets forth information relating to assets managed by us on behalf of institutional and individual investors, RCC and ourselves (in millions) (1):

	September 30, 2010
	Institutional and Individual Investors		RCC		Total by Type
Trapeza	$	4,213	$	−	$	4,213
Apidos		2,672		954		3,626
Ischus		1,689		−		1,689
Resource Europe		411		−		411
Other company-sponsored partnerships		70		−		70
	$	9,055	$	954	$	10,009

	September 30, 2009
	Institutional and Individual Investors		RCC		Total by Type
Trapeza	$	4,458	$	−	$	4,458
Apidos		2,643		937		3,580
Ischus		2,186		−		2,186
Resource Europe		436		−		436
Other company-sponsored partnerships		66		−		66
	$	9,789	$	937	$	10,726

(1) For information on how we calculate assets under management, see the table and related notes at the end of “Assets under Management,” as presented earlier in this section.

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In our financial fund management operating segment, we earn monthly 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 CDO issuers we have sponsored, including incentive and subordinated fees.  These fees vary by CDO issuer, with our annual fees ranging between 0.10% and 0.60% of the aggregate principal balance of the eligible collateral owned by the CDO issuers.  CDO indentures require the maintenance of certain overcollateralization test ratios, or O/C ratios, which measure the ratio of assets (collateral) to liabilities (notes) of a given CDO issuer.  Losses incurred on collateral due to payment defaults, payment deferrals or rating agency downgrades reduce the O/C ratios.  If O/C ratios are not met, incentive or subordinate management fees, which are discussed in the following sections, are deferred and interest collections from collateral are appl ied to outstanding principal note balances.

● Management fees − we receive fees for managing the assets held by our company-sponsored partnerships and credit opportunities fund.  These fees vary by limited partnership, with our annual fee ranging between 0.75% and 2.00% of the partnership capital balance.

Based on the terms of our general partner interests, two of the Trapeza partnerships we manage as general partner include a clawback provision.  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.  Although we continue to manage and receive fees from CDO issuers that we formed and sponsored, we do not expect to sponsor any new CDO issuers as a result of current conditions in the global credit markets.  Accordingly, we expect that these management fee revenues will continue to decline.  For risks applicable to our financial fund management operations, see our Item 1A “Risk Factors – Risks Relating to Particular Aspects of our Financial Fund Management, Real Estate and Commercial Finance Operations.”

Apidos

We sponsored, structured and/or currently manage 11 CDO issuers for institutional and individual investors and RCC which hold approximately $3.6 billion in bank loans at September 30, 2010, of which $953.6 million are managed on behalf of RCC through three CDO issuers.  We also sponsored, structured and currently manage one CDO issuer holding $411.1 million in international bank loans at September 30, 2010.

We derive revenues from our Apidos operations through base and subordinate management fees.  Base management fees vary by CDO issuer, but range from between 0.10% and 0.15% of the aggregate principal balance of eligible collateral held by the CDO issuers.  Subordinate management fees vary by CDO issuer, but range from between 0.08% and 0.45% of the aggregate principal balance of eligible collateral held by the CDO issuers, all of which are subordinated to debt service payments on the CDOs.  We are also entitled to receive incentive management fees; however, we did not receive any such fees in fiscal 2010.  Incentive management fees are subordinated to debt service payments on the CDOs.

Trapeza

We sponsored, structured and currently co-manage 13 CDO issuers holding approximately $4.2 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.  Additionally, we have invested as a limited partner in each of these limited partnerships.  On November 1, 2009 and January 28, 2010, the general partners, owned equally by us and our co-managing partner, repurchased substantially all of the remaining limited partnership interests in two of the Trapeza entities.

We derive revenues from our Trapeza operations through base management fees.  Base management fees vary by CDO issuer, but range from between 0.10% and 0.25% of the aggregate principal balance of the eligible collateral held by the CDO issuers.  These fees are also shared with our co-sponsors.

Company-Sponsored Partnerships

We sponsored, structured and, through RFIG, currently manage seven affiliated partnerships for individual and institutional investors which hold approximately $56.6 million of investments in financial institutions.  We derive revenues from these operations through annual management fees, based on 2.0% of equity.  We also have invested as a general and limited partner in these partnerships.  We may receive a carried interest of up to 20% upon meeting specific investor return rates.

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In March 2009, we sponsored, structured and currently manage an affiliated partnership organized as a credit opportunities fund which holds approximately $13.8 million in bank loans, high yield bonds and uninvested capital.  We have invested as a general and limited partner in this partnership.  We derive revenues from this partnership through base and incentive management fees.  Base management fees are calculated at 1.5% of the partnership’s net assets and are payable quarterly in advance.  Incentive management fees are calculated annually at 20% of the partnership’s annual net profits, but are subject to a loss carryforward provision and an investor hurdle rate.

Ischus

We sponsored, structured and currently manage seven CDO issuers for institutional and individual investors, which hold approximately $1.7 billion in primarily real estate ABS including RMBS, CMBS and credit default swaps.

We owned 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.  The SFF partnerships were dissolved as of March 31, 2010.  These partnerships previously owned a portion of the equity interests of three Trapeza CDO issuers and one of the Ischus CDO issuers.  This will not have a material effect on our future revenues.

We derive revenues from our Ischus operations through base management fees.  Base management fees vary by CDO issuer, ranging from between 0.10% and 0.20% of the aggregate principal balance of eligible collateral held by the CDO issuer.

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):

	Years Ended September 30,
	2010			2009			2008
Revenues:
Fund and RCC management fees	$	19,137		$	20,673		$	24,232
Introductory agent fees		7,713			5,166			2,593
Earnings from unconsolidated CDOs		2,118			1,610			2,670
Interest income on loans		860			6,017			16,563
Other		838			212			2,209
		30,666			33,678			48,267
Limited and general partner interests:
Fair value adjustments		2,490			(266	)		(23,483	)
Operations		(16	)		(68	)		2,752
Total limited and general partner interests		2,474			(334	)		(20,731	)
	$	33,140		$	33,344		$	27,536
Costs and expenses:
General and administrative	$	20,799		$	20,399		$	27,539
Equity compensation expense − RCC		200			3			134
Other		29			66			64
	$	21,028		$	20,468		$	27,737

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

Revenues − Fiscal 2010 Compared to Fiscal 2009

Revenues decreased $204,000 (1%) to $33.1 million in fiscal 2010 from $33.3 million in fiscal 2009.  We attribute the decrease to the following:

● a $1.5 million decrease in fund and RCC management fees, primarily from the following:

– a $2.3 million decrease in collateral management fees from our Ischus operations primarily as a result of rating agency downgrades which had the effect of reducing the eligible collateral base upon which our management fees are calculated.  In addition, two of the CDO issuers managed by Ischus were liquidated during fiscal 2009;

– a $552,000 net decrease in base, subordinated and incentive management fees from our Trapeza operations, primarily from the following:

– a $292,000 decrease in base management fees as a result of portfolio defaults which reduced the eligible collateral base upon which our management fees are calculated;

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– a $648,000 increase in our share of expenses for TCM, including a $389,000 allowance against advances made to certain Trapeza partnerships and a $132,000 increase in legal fees.

These decreases were partially offset by:

– a $277,000 increase in subordinated management fees.  During fiscal 2010 and 2009, we recorded subordinated management fees of $34,000 and ($243,000) on one and 11 CDO issuers, respectively.  The loss recorded during fiscal 2009 was primarily the result of the write-off of cumulative accrued fees on nine CDO issuers; and

– a $57,000 increase in incentive management fees.  During fiscal 2009, we recorded a loss of $57,000 on two CDO issuers principally due to the write-off of cumulative accrued fees.  There was no write-off of fees in fiscal 2010.

– a $259,000 decrease in collateral management fees from the European CDO issuer we manage due to the variance in foreign currency exchange rates.

These decreases were partially offset by:

– a $809,000 increase in RCC management fees primarily due to an increase in incentive management fees and in RCC’s equity capital (upon which our base management fee is calculated) resulting primarily from RCC’s success in raising capital through common stock offerings;

– a $484,000 increase in management and incentive fees earned on separate managed accounts.  No such fees were earned during fiscal 2009; and

– a $308,000 increase in management fees for the credit opportunities fund primarily due to a $220,000 incentive fee we earned after exceeding certain investor hurdle returns;

● a $2.5 million increase in introductory agent fees as a result of fees earned in connection with 103 trust preferred security transactions with an average fee of $75,000 for fiscal 2010 as compared to 91 transactions with an average fee of $57,000 for fiscal 2009;

● a $508,000 net increase in earnings from nine unconsolidated CDO issuers we previously sponsored and manage.  In March 2010, we sold one of our CDO equity investments and in June 2010, we sold the majority of our interest in another CDO equity investment.  As of September 30, 2010, we have fully impaired four of these CDO investments and will utilize the cost-recovery method to realize any future income;

●   a $508,000 net increase in earnings from nine unconsolidated CDO issuers we previously sponsored and manage. In March 2010, we sold one of our CDO equity investments and in June 2010, we sold the majority of our interest in another CDO equity investment. As of September 30, 2010, we have fully impaired four of these CDO investments and will utilize the cost-recovery method to realize any future income;

● a $5.2 million decrease in interest income on loans, primarily as a result of the following:

– a $6.0 million decrease in interest from Apidos CDO VI due to the sale of our interests in March 2009, at which time we ceased to consolidate that entity.  This decrease was partially offset by:

– an $860,000 increase due to the recovery of excess interest spread earned on loan assets accumulating during the warehouse period of the European CDO issuer we sponsored and manage.  We do not expect to receive any additional income from this source in the future;

● a $626,000 increase in other income, primarily related to the following:

– an $800,000 break-up fee received in connection with an unsuccessful bank transaction to reimburse us for a significant portion of our costs.  We do not anticipate receiving such a fee in the future; partially offset by

– a $158,000 decrease in earnings from SFF partnerships relating to four CDO investments which have been fully impaired.  As of December 31, 2009, the SFF partnerships assigned their interest in these investments to an affiliated third party.  The SFF partnerships were dissolved in March 2010;

● Limited and general partner interests:

– during fiscal 2010, we repurchased, along with the co-manager of the general partners, substantially all the remaining limited partner interests in two Trapeza partnerships which reduced our clawback liability and recorded a gain of $2.3 million.  During fiscal 2009, we had reduced our clawback liability and recorded a gain of $1.6 million; and

– during fiscal 2010 and 2009, we recorded $229,000 and ($1.9 million), respectively, in realized and unrealized fair value adjustments in the book value of securities we hold in unconsolidated other company-sponsored partnerships.

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Costs and Expenses − Fiscal 2010 Compared to Fiscal 2009

Costs and expenses of our financial fund management operations increased $560,000 (3%) in fiscal 2010.  This increase was principally due to a $1.8 million increase in commission expense incurred in connection with certain trust preferred security transactions, a $1.2 million increase in legal and consulting expenses primarily relating to an unsuccessful bank transaction and a $197,000 increase in equity compensation expense due to an adjustment related to previously issued RCC restricted stock and options awarded to members of management.  These increases were partially offset by decreases in compensation ($2.0 million), financial software ($388,000) and rent expense ($287,000) as a result of a reduction in asset management and support personnel reflecting our efforts to realign costs with exi sting operations.

Revenues − Fiscal 2009 Compared to Fiscal 2008

Revenues increased $5.8 million (21%) to $33.3 million in fiscal 2009 from $27.5 million in fiscal 2008.  We attribute the increase primarily to the following:

● a $3.6 million decrease in fund and RCC management fees, primarily from the following:

– a $3.8 million net decrease in collateral management fees from our Ischus operations primarily due to a reduction in subordinated management fees as a result of an increase in rating agency downgrades which reduced our collateral base and the liquidation of two of our CDO issuers during fiscal 2009;

– a $1.3 million net decrease in senior, subordinated and incentive management fees from our Trapeza operations, primarily from the following:

– a $2.6 million decrease in subordinated management fees.  During fiscal 2009 and 2008, we recorded subordinated management fees of ($242,000) and $2.3 million, respectively, on 11 CDO issuers.  The loss recorded during fiscal 2009 was primarily the result of the write-off of cumulative accrued subordinated management fees that we no longer expect to receive from nine CDO issuers; and

– a $278,000 decrease in senior management fees as a result of portfolio defaults which reduced our collateral base.

These decreases were partially offset by:

– an $851,000 decrease in our share of expenses for the management of Trapeza Capital Management LLC and Trapeza Management Group LLC, primarily due to a decrease in asset management personnel and state taxes; and

– a $738,000 increase in incentive management fees.  During fiscal 2009, we wrote-off $57,000 in incentive management fees from two CDO issuers as compared to a write-off of $795,000 of similar fees from three CDO issuers during fiscal 2008.

– a $481,000 decrease in management fees from other company-sponsored partnerships primarily due to the liquidation of our previously sponsored hedge fund and a decline in fair values of other company-sponsored partnership investments.  These management fees are net asset based; and

– a $262,000 decrease in collateral management fees from the European CDO issuer we manage due to a decrease in the euro to dollar exchange rate.

These decreases were partially offset by:

– a $1.4 million increase in collateral management fees resulting from a full year of fees on four bank loan CDO issuers whose management we assumed from an unaffiliated third-party asset manager in May 2008; and

– a $940,000 increase in RCC management fees and equity compensation, reflecting a $440,000 increase in management fees and a $500,000 increase in equity compensation.

● a $2.6 million increase in introductory agent fees as a result of fees earned in connection with 91 trust preferred security transactions with an average fee of $57,000 for fiscal 2009 as compared to 16 transactions with an average of $162,000 for fiscal 2008.

● a $1.1 million net decrease in earnings from 12 unconsolidated CDO issuers we previously sponsored and manage.  Through fiscal 2009, we have fully impaired nine CDO investments.  The cost-recovery method will be used to realize any future income on these investments;

● a $10.5 million decrease in interest income on loans held for investment, resulting primarily from the following:

– a $3.2 million decrease in interest income from CDO issuers whose loan assets were held by us in warehouse facilities and consolidated in our financial statements for fiscal 2008, including one Apidos and one Resource Europe CDO issuer.  The weighted average loan balance was $49.3 million at a weighted average interest rate of 7.16%.  We had no outstanding warehouse facilities during fiscal 2009; and

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– a $7.3 million decrease from Apidos CDO VI.  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 fiscal 2009 and 2008 was $115.5 million and $221.0 million, respectively, at an effective interest rate of 4.38% and 5.81%, respectively.  As of March 31, 2009, we agreed to sell our interest in Apidos CDO VI and no longer consolidated it.  This transaction settled on May 6, 2009.

● a $2.0 million decrease in other income, primarily as a result of following:

– a $1.5 million decrease in the earnings of our SFF partnerships related to a decrease in earnings from four CDO investments which we have fully impaired.  We will utilize the cost-recovery method to realize any future income on these investments; and

– a $514,000 decrease in interest income we earned on the restricted cash balances of Apidos CDO VI.

● Limited and general partner interests:

– during fiscal 2009 and 2008, we recorded $1.6 million and ($23.2 million), respectively, in realized and unrealized fair value adjustments on Trapeza partnership securities and swap agreements and ($1.9 million) and ($287,000), respectively, in realized and unrealized fair value adjustments in the book value of securities we hold in unconsolidated other company-sponsored partnerships; and

– during fiscal 2009 and 2008, we recorded ($4,000) and $3.2 million, respectively, in revenues (other than fair value adjustments) from our limited and general partner share of operating results of the unconsolidated Trapeza partnerships and ($64,000) and ($402,000), respectively, from our share of operating results of unconsolidated other company-sponsored partnerships.

Costs and Expenses − Fiscal 2009 Compared to Fiscal 2008

Costs and expenses of our financial fund management operations decreased $7.3 million (26%) in fiscal 2009.  This decrease was principally due to our efforts to realign costs with existing operations and resulted in decreases in compensation ($6.1 million) and financial software expense ($581,000) primarily as a result of a reduction in asset management and support personnel.  In addition, we had decreases in professional fees of $1.6 million, related to a reduction in consulting fees for our European operations and an overall decrease in general legal expenses.  These decreases were partially offset by a $1.4 million increase in commission expense incurred in connection with certain trust preferred security transactions.

Results of Operations:  Other Costs and Expenses

General and Administrative Expenses

     Fiscal 2010 Compared to Fiscal 2009.  General and administrative costs were $13.0 million in fiscal 2010, a decrease of $1.4 million (10%) as compared to $14.4 million in fiscal 2009.  Wages and benefits decreased by $1.2 million, principally reflecting a $1.1 million decrease in equity-based compensation expense.

     Fiscal 2009 Compared to Fiscal 2008.  General and administrative costs were $14.4 million in fiscal 2009, a decrease of $1.7 million (11%) as compared to $16.1 million in fiscal 2008, primarily reflecting a $1.5 million decrease in wages and benefits.

(Loss) Gain on the Sales of Leases and Loans

Fiscal 2010 Compared to Fiscal 2009.  During fiscal 2010, availability on our PNC warehouse facility for our commercial finance operations declined and the facility was terminated in May 2010.  Due to lack of other available financing, loans and leases were sold to third parties as well as to RCC at a loss of $8.1 million.

Fiscal 2009 Compared to Fiscal 2008.  During fiscal 2008, we recognized a $3.9 million gain on the sale to the LEAF investment entities of a $412.5 million portfolio of leases and loans that we acquired from NetBank.

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Provision for Credit Losses

The provisions for credit losses recorded in fiscal 2010, 2009 and 2008 are reflective of the weakness in the United States economy and the write-offs and write-downs of assets affected by that weakness.  The following table reflects our provision for credit losses as reported by segment (in thousands):

	Years Ended September 30,
	2010		2009		2008
Commercial finance	$	5,159	$	6,410	$	7,505
Financial fund management		1		1,738		2,622
Real estate		49		456		500
	$	5,209	$	8,604	$	10,627

Fiscal 2010 Compared to Fiscal 2009.  The provision for credit losses decreased by $3.4 million in fiscal 2010 primarily due to the sale of Apidos VI and the continued decline in assets we held for LEAF during fiscal 2010. The $2.0 million decrease in our provision for credit losses in fiscal 2009 as compared to fiscal 2008 was due to the significant write-offs and write-downs of assets which were affected by the weakness in the United States economy during fiscal 2008.

Specifically, our provision by operating segment was impacted by the following:

● Commercial finance – The year over year provisions for credit losses in fiscal 2010 and 2009 decreased by $1.3 million and $1.1 million, respectively, due primarily to the decrease in the assets we held.   During fiscal 2010, we sold a portfolio of commercial assets to RCC and in March 2009, we sold our interests in LCFF, which held a $195.0 million portfolio of leases and loans, inclusive of a $900,000 credit loss reserve.  In fiscal 2008, we had recorded a provision of $4.1 million on our Merit future credit card payment business, which had higher interest rate spreads and a greater risk of credit loss;

● Financial fund management – The year over year provisions in fiscal 2010 and 2009 decreased by $1.7 million and $884,000, respectively, due primarily to the sale in March 2009 of our investment in Apidos CDO VI, a $240.0 million securitization of corporate loans, for which we had recorded a $1.7 million and $2.6 million provision for credit losses during fiscal 2009 and fiscal 2008, respectively; and

● Real estate - While we continued to monetize our legacy loan portfolio to reduce our overall exposure, we determined that economic conditions continued to negatively impact one of the remaining loans in the portfolio.  Accordingly, we recorded a provision for credit losses of $456,000 and $500,000 during fiscal 2009 and 2008, respectively, which fully reserved that loan.

Depreciation and Amortization

Fiscal 2010 Compared to Fiscal 2009.  Depreciation and amortization expense was $7.8 million in fiscal 2010, an increase of $920,000 (13%) as compared to $6.9 million in fiscal 2009.  The increase relates primarily to $1.4 million of additional depreciation expense on operating leases held.  While we decreased the total portfolio of leases and loans held by our commercial finance business, the average amount of the portfolio held as operating leases increased by $3.2 million in fiscal 2010.

Fiscal 2009 Compared to Fiscal 2008.  Depreciation and amortization expense was $6.9 million in fiscal 2009, an increase of $2.3 million (49%) as compared to $4.7 million in fiscal 2008.  The increase relates primarily to acquisitions made by our commercial finance operations during fiscal 2008, including increased depreciation on operating leases of $1.3 million and capital assets of $345,000 in addition to $247,000 of amortization of intangible assets.

Interest Expense

Interest expense includes the non-cash amortization of (a) debt issuance costs (and in some cases, the acceleration of those costs for facilities which were significantly amended or terminated prior to their stated maturity) and (b) the discount related to the value of warrants issued to investors who invested in our senior notes.  The following table reflects interest expense as reported by segment (in thousands):

	Years Ended September 30,
	2010		2009		2008
Commercial finance	$	6,271	$	10,524	$	27,466
Financial fund management		3		5,014		14,559
Real estate		1,074		966		1,222
Corporate		5,738		3,695		4,019
	$	13,086	$	20,199	$	47,266

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Facility utilization (in millions) and interest rates for our commercial finance, financial fund management and corporate borrowings were as follows:

	Years Ended September 30,
	2010	2009	2008
Corporate – secured credit facilities:
Average borrowings	$18.2	$42.8	$56.8
Average interest rates	10.5%	11.1%	6.9%
Corporate – Senior Notes:
Average borrowings	$18.8	−	−
Average interest rates	20.0%	−	−
Commercial finance – secured credit facility:
Average borrowings	$77.0	$201.2	$423.6
Average interest rates	7.7%	5.0%	6.4%
Commercial finance – short-term bridge facility:
Average borrowings	$1.6	−	−
Average interest rates	8.2%	−	−
Financial fund management:
Average borrowings	−	$108.7	$255.6
Average interest rates	−	4.6%	5.6%

Fiscal 2010 Compared to Fiscal 2009.  Interest expense incurred by our commercial finance operations decreased by $4.3 million for fiscal 2010, primarily reflecting a decrease in average borrowings of $122.6 million.  During fiscal 2010, our borrowing capacity on our PNC warehouse facility decreased and in May 2010, the line was fully repaid and terminated.  In March 2009, we sold a $195.0 million portfolio of leases, and thereby eliminated $187.6 million of debt.  The decrease in average borrowings was offset, in part, by a $1.6 million increase in amortization of deferred finance fees for the commercial finance facilities.

Corporate interest expense increased by $2.0 million for fiscal 2010, principally reflecting $3.8 million of interest expense related to the 12% Senior Notes issued in September and October 2009, of which $1.5 million was amortization of the debt discount related to the cost of the warrants issued with the notes.  This increase was offset, in part, by a $24.6 million decrease in fiscal 2010 average borrowings under our corporate secured credit facilities resulting in a $1.7 million decrease in interest expense.

The sale of our equity interest and resulting deconsolidation of Apidos CDO VI in March 2009 removed its senior notes from our balance sheet.  Accordingly, there was no interest expense for our financial fund management operations for fiscal 2010 as compared to $5.0 million of interest expense for fiscal 2009.

Fiscal 2009 Compared to Fiscal 2008.  Interest expense decreased by $27.1 million (57%) for fiscal 2009.  The decrease primarily reflects the $362.7 million decrease in borrowings by all of our operating segments.

Commercial finance interest expense decreased by $16.9 million due to a $222.4 million decrease in average borrowings in combination with lower interest rates.  In March 2009, we sold LCFF thereby eliminating $187.6 million of debt.

Interest expense incurred by our financial fund management operations decreased by $9.5 million for fiscal 2009.  As a result of the sale of Apidos CDO VI, there was no interest expense on the $218.0 million of its senior notes for the last six months of fiscal 2009.

Corporate interest expense decreased by $324,000 due to reduced average borrowings of $14.0 million, reflecting the paydown of borrowings on our TD Bank facility with proceeds from the senior notes offering, offset in part, by an increase in the interest rate on borrowings.

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Net Other-than-Temporary Impairment Charges on Investment Securities

In connection with the volatility in the global credit markets and reduction in liquidity affecting banks, thrifts, other financial institutions, as well as direct and indirect real estate investments, we have incurred other-than-temporary impairment charges with respect to CDO securities.   These charges have significantly decreased to $480,000 in fiscal 2010, from $8.5 million and $14.5 million for fiscal 2009 and 2008, respectively.  During fiscal 2010, we recorded a $183,000 charge related to bank loans ($166,000 for European loans) and a $297,000 charge related to CDO investments in the securities of financial institutions.  The fiscal 2009 charges were primarily with investments in bank loans ($5.2 million, of which $2.3 milli on related to European loans) and financial institutions ($3.2 million).  The charges for fiscal 2008 were primarily in CDOs with investments in financial institutions ($8.9 million) and real estate asset-backed securities, including RMBS and CMBS ($5.5 million).  Additionally, in fiscal 2010, we recorded a $329,000 other-than-temporary impairment loss on our investment in TBBK stock held in a retirement account for a former executive as management intends to sell the securities during fiscal 2011.  In fiscal 2009, we recorded a $73,000 other-than-temporary impairment loss on our TBBK stock held for investment purposes as management no longer had the intention to hold the security until we could recover our cost basis.

Loss on Sale of Loans and Investment Securities, Net

In June 2010, we received proceeds of $1.2 million from the sale of our equity investment in Apidos CDO II and recognized a loss on the sale of $27,000.  Earlier, in March 2010, we received $1.5 million in proceeds from the sale of our equity investment in Apidos CDO V and realized a loss of $424,000.

During fiscal 2009, in conjunction with the deconsolidation and sale of our interest in Apidos CDO VI, we received proceeds of $7.2 million and recognized a loss of $11.6 million ($7.2 million, net of tax).  During fiscal 2008, we incurred a $17.7 million loss from the termination of two secured CDO warehouse facilities for which we provided limited guarantees.

Other Income

The following table details our other income, net of other expenses (in thousands):

	Years Ended September 30,
	2010			2009			2008
RCC dividend income (1)	$	2,278		$	3,405		$	2,421
Loss on sale of equity securities (2)		−			(393	)		−
Interest income (3)		434			340			547
Other (expense) income, net (4)		(121	)		(196	)		68
Other income, net	$	2,591		$	3,156		$	3,036

(1) In fiscal 2009, we recognized five dividend payments on our investment in RCC as compared to four and three dividend payments in fiscal 2010 and 2008, respectively.

(2) In fiscal 2009, we sold 99,318 shares of common stock of TBBK, at loss of $393,000.  No shares of TBBK were sold during fiscal 2010 and 2008.

(3) Interest income decreased in fiscal 2009 by $207,000, principally as a result of lower cash balances due to the deconsolidation of LCFF.

(4) Included in other (expense) income, net for fiscal 2010 and 2009 is $263,000 and $192,000, respectively, of amortized losses in the securities held in the retirement plan for our former CEO.

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Net Loss (Income) Allocable to Noncontrolling Interests

Third-party interests in our earnings are recorded as amounts allocable to noncontrolling interests.  The following table sets forth the net loss (income) applicable to noncontrolling interests (in thousands):

	Years Ended September 30,
	2010		2009		2008
Commercial finance minority ownership, net of tax of $(1,699), $0 and $520 (1)	$	3,155	$	−	$	(965	)
Real estate minority holder (2)		61		54		(61	)
SFF partnerships (3)		8		1,549		6,578
Commercial finance fund participation, net of tax of $0, $0 and $242 (4)		−		−		(451	)
Other (5)		−		−		(96	)
	$	3,224	$	1,603	$	5,005

(1) Senior executives of LEAF hold a 14.1% interest in LEAF.

(2) A related party holds a 19.99% interest in our investment in a hotel property in Savannah, Georgia.

(3) Limited partners, excluding us, owned an 85% and 64% limited partner interest in SFF I and SFF II, respectively, which invested in the equity of certain of the CDO issuers we sponsored.  As of March 31, 2010, the SFF partnerships were dissolved.

(4) During fiscal 2008, LEAF sold (in two separate transactions) its interest in a subsidiary that held a portfolio leases and loans acquired from NetBank to one of its investment entities.

(5) Included the interest spread earned by warehouse providers while assets were in the accumulation stage.  As of January 2008, all warehouse facilities were terminated.

Income Taxes

Fiscal 2010 Compared to Fiscal 2009.Our effective income tax rate (income taxes as a percentage of income from continuing operations, before taxes) was 13% for fiscal 2010 as compared to 40% for fiscal 2009.  The decrease in the income tax benefit and accordingly, the tax rate, relates primarily to an increase in the valuation allowance on state benefits not able to be utilized for fiscal 2010 and the write-off of unrealizable deferred tax assets.  Additionally, during the fourth quarter of fiscal 2010, we recorded an adjustment to reconcile the deferred taxes in the amount of $1.6 million of which, $892,000 related to prior years.  Our effective income tax rate, as adjusted to exclude adjustments primarily related to discrete items, would have been 46% for fiscal 2010.

We expect our effective tax rate to be between 34% and 40% for fiscal 2011.  Our effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings and the level of our tax credits.  Certain of these and other factors, including our history of pre-tax earnings, are taken into account in assessing our ability to realize our net deferred tax assets. 

We are subject to examination by the U.S. Internal Revenue Service, or IRS, and by the taxing authorities in other states in which we have significant business operations, such as Pennsylvania and New York.  We are currently undergoing an IRS examination for fiscal year 2008.  We are no longer subject to U.S. federal income tax examinations for fiscal years before 2007 and are no longer subject to state and local income tax examinations by tax authorities for fiscal years before 2005.

Fiscal 2009 Compared to Fiscal 2008.Our effective income tax rate (income taxes as a percentage of income from continuing operations, before taxes) was 40% for fiscal 2009 as compared to 33% for fiscal 2008.  The increase in the rate primarily relates to the greater impact of permanent items relative to the pre-tax loss for fiscal 2009.  Our effective income tax rate excluding adjustments for discrete items would have been 36% for fiscal 2009.

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Discontinued Operations

Our decision to dispose of certain entities has resulted in the presentation of these operations as discontinued.  Income (losses) from discontinued operations for fiscal 2010, 2009 and 2008 primarily reflect a reversal of $626,000 and charges of $433,000 and $1.1 million, respectively, of interest and penalty assessments related to the 2004 and 2005 IRS tax examinations.  In addition, in fiscal 2008 we closed an operating subsidiary within the commercial finance operating segment and have reflected its results as discontinued.

The discontinued operations within our real estate operating segment were as follows (in thousands):

	Years Ended September 30,
	2010		2009			2008
Income (loss) from discontinued operations before taxes	$	626	$	(370	)	$	(1,104	)
Income tax (provision) benefit		−		(70	)		386
Discontinued income (loss), net of tax	$	626	$	(440	)	$	(718	)

The discontinued operations of the operating subsidiary within our commercial finance operating segment were as follows (in thousands):

	Years Ending September 30,
	2010		2009			2008
Loss from discontinued operations before taxes	$	−	$	(14	)	$	(856	)
Benefit for income taxes		−		5			300
Loss from discontinued operations, net of tax	$	−	$	(9	)	$	(556	)

Liquidity and Capital Resources

As an asset management company, our liquidity needs consist principally of capital needed to make investments and to pay our operating expenses (primarily wages and benefits and interest expense).  Our ability to meet our liquidity needs will be subject to our ability to generate cash from operations, and, with respect to our investments, our ability to raise investor funds and to obtain debt financing.  However, the availability of any such financing will depend on market conditions which, as we discuss in “- Overview”, continues to be subject to substantial volatility and reduced availability.  We also may seek to obtain liquidity through the disposition of non-strategic investments, including our legacy portfolio.

In general, if we are unable to renew, replace or expand our sources of financing on acceptable terms, or raise investor funds (which may depend, in part, on our ability to obtain financing for the investment entities we sponsor), we may be unable to implement our investment strategies successfully and may be required to liquidate portfolio investments other than non-strategic investments to generate liquidity.  Any sale of portfolio investments could be at prices lower than the carrying value of such investments, which could result in losses and reduced income. Moreover, even if we are able to renew or replace our facilities, the interest rate we are able to obtain, and the other costs of those facilities, may be materially higher than those previously ava ilable to us, which could reduce our net revenues and earnings.  Also, if we cannot expand our overall financing capacity under those facilities or add new facilities, or if we are unable to raise other funds, including third-party investments in our investment funds, our ability to expand the amount of assets we own or which are under management will be limited, and our ability to increase net revenues and earnings will be impaired.

At September 30, 2010, our liquidity consisted of two primary sources:

● cash on hand of $11.2 million; and

● cash generated from operations, including asset and property management fees as well as payments received on leases and loans, sales of equipment and the continued resolution of our real estate legacy portfolio.

In October 2009, we completed our private placement offering of three-year 12% Senior Notes and generated $18.8 million in cash.  We used a portion of the offering proceeds to pay down our corporate line of credit borrowings under the TD Bank facility.  In November 2009, we amended the TD Bank facility to provide additional flexibility and reduce our debt costs.  In particular, the amendment lowered the minimum interest rate on borrowings, reinstated the LIBOR rate option on borrowings, lowered the required monthly principal paydowns from $850,000 to $150,000, and extended the facility term to October 2011.  We anticipate that we will be able to extend this facility.  In the event we are unable to extend this facility , we will seek alternative financing. Upon the maturity of the Sovereign Bank revolving line of credit on February 28, 2010, we repaid the remaining balance and the facility was terminated.

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At September 30, 2010, borrowings outstanding of $66.1 million included $20.8 bridge financing for commercial finance, $14.1 million of corporate revolving debt, $14.3 million of Senior Notes (net of a discount), and $16.9 million of other debt, of which $13.5 million is in mortgage debt secured by the underlying properties.  Borrowings outstanding decreased $125.3 million (65%) from $191.4 million at September 30, 2009.  The decrease primarily reflects the $136.5 million reduction in LEAF’s borrowings on the PNC warehouse facility, offset in part by $20.8 million in bridge financing. The tight credit market continues to limit the ability of LEAF and its investment entities to obtain debt financing and, as such, reduces its opportunitie s to grow our commercial finance business.  In May 2010, the $99.4 million of outstanding borrowings with PNC Bank were repaid and the warehouse facility was closed.  In September 2010, LEAF obtained a $21.5 million six-month bridge loan to purchase leases and loans.  The facility matures on February 20, 2011.  Until we are able to secure long term financing, LEAF expects that it will continue to monitor and scale back its commercial finance business to accommodate the current lack of availability of debt financing to it and its investment entities, including, if necessary, the sale of portfolio assets.  Failure to obtain replacement financing will continue to limit our ability to originate new leases and loans and further reduce operations.  In any such event, our commercial finance business could incur losses which could be significant.

     In the third and fourth quarters of fiscal 2010, we sold approximately $116.0 million of leases and loans to RCC.  In connection with these sales, we are obligated to repurchase or provide replacement leases and loans for up to a maximum of approximately $5.9 million of delinquent assets.

Furthermore, we may defer or discount our fees from our investment entities based upon current economic conditions.  In certain circumstances, we may also waive all or part of these fees based upon required priority distributions to our investors.  Based on changes in the projected cash distributions to be made to the limited partners of one of our managed partnerships, we determined that we will not be able to collect our management fees for the LEAF investment entities for fiscal 2010 and, accordingly, recorded a provision of $1.1 million.

Our legacy real estate portfolio at September 30, 2010 consisted of six property interests and two loans.  In January and June 2010, we received proceeds of $811,000 and $4.6 million, respectively, from the settlement of two legacy loans.  Because of current economic conditions, the amount of cash we may be able to derive from resolution of our remaining legacy portfolio and other non-strategic investments in the future may be limited; in any event, the amount of cash we may derive from them is subject to significant variations.  Accordingly, we cannot assure you that our remaining legacy portfolio will be a source of significant ongoing cash generation.

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.

Dividends

For fiscal 2010, 2009 and 2008, we paid cash dividends of $1.6 million, $3.6 million and $4.9 million, respectively.  We have paid quarterly cash dividends since August 1995.

Our 12% senior notes limit the amount of future cash dividends to $0.03 per share unless our basic earnings per common share from continuing operations from the preceding fiscal quarter exceeds $0.25 per share.  Subject to the limitations imposed by our 12% senior notes, the determination of the amount of future cash dividends, if any, is at the discretion of our board of directors and will depend on the various factors affecting our financial condition and other matters the board of directors deems relevant.

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Contractual Obligations and Other Commercial Commitments

The following tables summarize our contractual obligations and other commercial commitments at September 30, 2010 (in thousands):

			Payments Due By Period
	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Contractual obligations:
Recourse to RAI:
Other debt (1)	$	35,341	$	13,143	$	18,858	$	1,985	$	1,355
Capital lease obligations (1)		395		282		98		15		−
Secured credit facilities (1)		14,127		1,800		12,327		−		−
Operating lease obligations		13,736		2,415		4,001		2,167		5,153
Other long-term liabilities		10,047		1,310		4,398		1,438		2,901
	$	73,646	$	18,950	$	39,682	$	5,605	$	9,409
Non-recourse to RAI:
Secured short-term bridge facility (2)		20,750		20,750		−		−		−
Total contractual obligations	$	94,396	$	39,700	$	39,682	$	5,605	$	9,409

(1) Not included in the table above are estimated interest payments calculated at rates in effect at September 30, 2010; less than 1 year: $4.3 million; 1-3 years:  $2.9 million; 4-5 years:  $454,000; and after 5 years: $1.5 million.

(2) Not included in the table above are estimated interest payments at rates in effect at September 30, 2010; less than 1 year:  $562,000.

			Amount of Commitment Expiration Per Period
	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Other commercial commitments:
Guarantees	$	3,458	$	3,458	$	−	$	−	$	−
Standby letters of credit		701		701		−		−		−
Total commercial commitments	$	4,159	$	4,159	$	−	$	−	$	−

Broker-Dealer Capital Requirement.Chadwick Securities, Inc., a subsidiary of ours, is a registered broker-dealer and serves as a dealer-manager for the sale of securities of direct participation investment programs, both public and private, sponsored by our subsidiaries who also serve as general partners and/or managers of these programs.  Additionally, Chadwick serves as an introducing agent for transactions involving sales of securities of financial services companies, REITs and insurance companies us and for RCC.  As a broker-dealer, Chadwick is required to maintain minimum net capital, as defined in regula tions under the Securities Exchange Act of 1934, as amended, which was $116,000 and $121,000 as of September 30, 2010 and 2009, respectively.  As of September 30, 2010 and 2009, Chadwick’s net capital was $393,000 and $1.2 million, respectively, which exceeded the minimum requirements by $277,000 and $1.1 million, respectively.

Clawback Liability.Two financial fund management investment entities that have incentive distributions, also known as carried interests, are subject to a potential clawback to the extent that such distributions exceed the cumulative net profits of the entities, as defined in the respective partnership agreements.  On November 1, 2009 and January 28, 2010, we, along with the co-manager of the general partner of those investment entities, repurchased substantially all the remaining limited partnership interests in these two partnerships and accordingly reduced our clawback liability to $1.2 million at September 30, 2010.

Reserve for lease and loan repurchase commitment.In the third and fourth quarters of fiscal 2010, we sold a portfolio of leases and loans to RCC in which RCC has the option to return, and we have the obligation to repurchase, up to a maximum of approximately $5.9 million in delinquent leases and loans as specified in the sale agreement.  In conjunction with this option, we recorded a $3.0 million estimated liability based on historical default rates.

Legal Proceedings.In August 2009, Riverside National Bank of Florida, or Riverside, initiated a lawsuit now captioned Federal Deposit Insurance Corporation v. The McGraw-Hill Companies, Inc. et al., United States District Court, Southern District of New York, No. 10 Civ. 4421, against several investment banks, rating agencies, and collateral managers of CDOs, including Trapeza Capital Management, LLC, or TCM.  We own a 50% interest in TCM, and an unaffiliated third-party owns the other 50% interest.

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The complaint seeks monetary damages in an unspecified amount against TCM arising out of Riverside’s investment in certain CDOs between 2005 and 2007.  Riverside’s claims against TCM stem from its role as collateral manager for various Trapeza CDOs, which were sold by various investment banks.  The complaint alleges that the offering materials for the CDOs were prepared in part by TCM and were false and misleading.  The complaint further alleges that TCM breached fiduciary and contractual obligations by failing to properly monitor the collateral for the CDOs, failing to mitigate losses and failing to disclose known quality and performance problems with the underlying collateral.  TCM believes that none of the claims have merit and intends to vigorously defend itself in this matter.

Real Estate Commitments.  In connection with the sale of a real estate loan in March 2006, we agreed that in exchange for the current property owner relinquishing certain control rights, we would make payments to the current property owner under stipulated circumstances, including the sale or foreclosure of the property or a subsequent resale of the loan.  A payment of $2.6 million, increasing $16,234 per month to a maximum of $3.6 million, would be due upon the occurrence of specified events.  In addition, the current property owner has the right to receive collateral as security for this obligation equal to or greater than 105% of the value of the obligat ion upon the occurrence of certain specified events or if our net worth falls below $80.0 million.  Our obligation runs through December 31, 2014.  In addition, we agreed to partially indemnify the purchaser of the loan for a portion of the difference between ordinary income tax rates and capital gain rates on accrued interest on the note between the date of sale of the loan in March 2006 and December 31, 2011.  To date, we have not been required to make any payments resulting from these agreements.

We are also committed to invest 1% of the equity raised by RRE Opportunity REIT to a maximum amount of $2.5 million.

General corporate commitments.  As a specialized asset manager, we sponsor investment funds in which we 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.

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

As of September 30, 2010, except for the clawback liability recorded for the two Trapeza entities, the reserve for lease and loan repurchase commitment and executive compensation, we do not believe it is probable that any payments will be required under any of our commitments and contingencies, and accordingly, no liabilities for these obligations have been recorded in the consolidated financial statements.

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, costs and expenses, and related disclosure of contingent assets and liabilities.  We make estimates of our allowance for credit losses, the valuation allowance against our deferred tax assets, discounts and collectability of management fees, the valuation of stock-based compensation, servic ing liability and repurchase obligation, allowance for lease and loan losses, and in determining whether a decrease in the fair value of an investment is an other-than-temporary impairment.  Significant estimates for the commercial finance segment include the unguaranteed residual values of leased equipment, impairment of long-lived assets and goodwill and the fair value and effectiveness of interest rate swaps.  The financial fund management segment makes assumptions in determining the fair value of our investments in securities available-for-sale and in estimating the liability, if any, for clawback provisions on certain of our partnership interests.  We used assumptions, specifically inputs to the Black-Scholes pricing model and the discounted cash flow model, in computing the fair value of the 12% senior notes and warrants.  On an on-going basis, we evaluate our estimates, which are based on historical experience and on various other assumptions that we believe rea sonable 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.

We have identified the following policies as critical to our business operations and the understanding of our results of operations.

Stock-Based Compensation

Employee Stock Options.We expense employee option grants over the respective vesting periods, based on the estimated fair value of the award as determined on the date of grant.

Restricted Common Stock.  We value the restricted stock we issue based on the closing price of our stock on the date of grant and amortize this cost to compensation expense over the respective vesting period.

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Loans

Real estate loans.Real estate loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, reduced by unearned income and an allowance for credit losses, if necessary.  These loans are included in investments in real estate in the consolidated balance sheets. Interest on these loans is calculated based upon the principal amount outstanding.  Accrual of interest is stopped on a loan when management believes, after considering economic factors, business conditions and collection efforts, that the borrower’s fina ncial condition is such that collection of interest is doubtful.

An impaired real estate loan may remain on accrual status during the period in which we are pursuing repayment of the loan; however, the loan is placed on non-accrual status at such time as either (i) management believes that contractual debt service payments will not be met; (ii) the loan becomes 90 days delinquent; and (iii) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment.  While on non-accrual status, we recognize interest income only when an actual payment is received.  Loans are charged-off after being on non-accrual for a period of one year.

We maintain an allowance for real estate loans at a level deemed sufficient to absorb probable losses.  We consider general and local economic conditions, the financial condition of our borrowers and, with respect to properties underlying our loans, neighborhood values, competitive overbuilding, and casualty losses as well as other factors that may affect the value of real estate loans.  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.  We review all credits on a quarterly basis, continually monitor collections and payments from our borrowers and maintain an allowance for credit losses based upon our historical experience and our knowledge of specific borrower collection issues.  We reduce our investments in real estate loans and real estate by an allowance for amounts that may become unrealizable in the future.

Investments in Commercial Finance

Our investments in commercial finance consist primarily of loans, direct financing leases and operating leases.  We reflected those investments that we are holding for sale to our investment entities separately at fair value as held for sale in the consolidated balance sheets.

Loans. For term loans, the investment consists of the sum of the total future minimum loan payments receivable less unearned finance income.  Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted payments over the original cost of the loan.  For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Direct financing leases.Certain of our lease transactions are accounted for as direct financing leases (as distinguished from operating leases).  Such leases transfer substantially all benefits and risks of equipment ownership to the customer.  Our investment in direct financing leases consists of the sum of the total future minimum contracted payments receivable and the estimated unguaranteed residual value of leased equipment, less unearned finance income.  Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess o f the total future minimum lease payments plus the estimated unguaranteed residual value expected to be realized at the end of the lease term over the cost of the related equipment.  Initial direct costs incurred in the consummation of the lease are capitalized as part of the investment in lease receivables and amortized over the lease term as a reduction of the yield.  We discontinue recognizing revenue for leases and loans for which payments are more than 90 days past due.  Fees from delinquent payments are recognized when received.

Operating leases.Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases.  Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years.  Rental income consists primarily of monthly periodic rental payments due under the terms of the leases.  We recognize rental income on a straight-line basis.

During the lease term of existing operating leases, we may not recover all of the cost and related expenses of our rental equipment and, therefore, we are prepared to remarket the equipment in future years.  Our policy is to review, on at least a quarterly basis, the expected economic life of our rental equipment in order to determine the recoverability of our undepreciated cost.  We write down our rental equipment to estimated net realizable value when it is probable that our 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 write-downs of equipment during fiscal 2010, 2009 and 2008.

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Future payment card receivables.Additionally, we have provided capital advances to small businesses based on future credit card receipts.  The future payment card receivables in the portfolio have risk characteristics that are different than those in other portfolios we originated.  In fiscal 2009, the entire portfolio of future payment card receivables was put on the cost recovery method of accounting whereby no income is recognized until the basis of the future payment card receivable has been fully recovered.

Allowance for credit losses. We evaluate the adequacy of the allowance for credit losses in commercial finance (including investments in leases and loans and future payment card receivables) based upon, among other factors, management’s historical experience with the commercial finance portfolios it manages, an analysis of contractual delinquencies, economic conditions and trends, industry statistics and equipment finance portfolio characteristics, as adjusted for expected recoveries.  In evaluating historic performance of leases and loans, we perform a migration analysis, which estimates the likelihood that an acc ount progresses through delinquency stages to ultimate write-off.  We fully reserve, net of recoveries, all leases and loans after they are 180 days past due.

Additionally, we review the collectability of our receivables from managed entities.  We have estimated that based on current projections, one of the commercial finance funds will not have sufficient funds to pay a portion of its accrued management fees to us as of September 30, 2010.  Accordingly, we recorded a provision of $1.1 million in fiscal 2010 with a corresponding reduction to the receivables from managed entities.

Investments in commercial finance assets - held for sale.  Commercial finance assets, which we do not have the intent to hold until maturity, are classified as commercial finance assets held for sale.  These investments, which primarily consist of loans and direct financing leases, are carried at the lower of cost or fair value.  Cost basis includes deferred origination fees and costs.  Fair value is determined based upon discounted cash flow models.

Investment Securities

Our investment securities available-for-sale, including our investments in CDO issuers we sponsor, which are owned directly 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.  Our investments in affiliates, including holdings in TBBK and RCC, are valued at the closing price of the respective stock.  The fair value of the cumulative net unrealized gains and losses on these investment securities, net of tax, are reported through accumulated other comprehensive income (loss).  Realized gains and losses on the sale of inv estments are determined on the basis of specific identification and are included in results of operations.

We recognize a realized loss when it is probable there has been an adverse change in the estimated cash flows of the security holder from what had been previously estimated.  The security is then written down to fair value, and the unrealized loss is transferred from accumulated other comprehensive loss to the consolidated statements of operations as a reduction of current earnings.  The cost basis adjustment for other-than-temporary impairment would be recoverable only upon the sale or maturity of the security.

     Periodically, we review the carrying value of our available-for-sale securities.  If we deem an unrealized loss to be other-than-temporary, we will record an impairment charge.  Our process for identifying declines in the fair value of investments that are other-than-temporary involves consideration of several factors.  These factors include (i) the duration of a significant decline in value, (ii) the liquidity, business prospects and overall financial condition of the issuer, (iii) the magnitude of the decline, (iv) the collateral structure and other credit support, as applicable, and (v) our more-than-likely intention to hold the investment until the value recovers.  When the analysis of the above factors results in a conclusion that a decline in fair value is other-than-temporary, the cost of the investment is written down to fair value.

     Our trading securities are recorded at fair value with unrealized holding gains and losses included in earnings and reported in other income, net.  We value these securities using quoted market prices.

     We recognize dividend income on securities classified as available-for-sale on the ex-dividend date.

Accounting for Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the our consolidated financial statements or tax returns.

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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 effects of tax rate changes on deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period during which such changes are enacted.  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.  We continually evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing forecasted taxable income using both historical and projected future operating re sults, 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 we determine that it is more likely than not that we will ultimately realize the tax benefit associated with a deferred tax asset.

Servicing and Repurchase Liabilities

We routinely sell our investments in commercial finance assets held for sale to our affiliated leasing partnerships and RCC, as well as to third parties. Leases and loans are accounted for as sold when control of the lease is surrendered.  Control over the leases is deemed surrendered when (1) the leases have been transferred to the leasing partnership, RCC or third party, (2) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the leases and (3) we do not maintain effective control over the leases through either (a) an agreement that entitles and obligates us to repurchase or redeem the leases before maturity, or (b) the ability to unilaterally cause the buyer to return spe cific leases.  Subsequent to these sales, we typically remain as the servicer for the leases and loans sold for which we generally receive a servicing fee of approximately 1% of the book value of the serviced portfolio.  The assets and liabilities associated with the respective servicing agreements are typically not material and are offsetting and; accordingly, are not reflected in our consolidated financial statements.

During fiscal 2010, however, we sold a portfolio of leases and loans to RCC with servicing retained for which we will not be receiving any servicing fees.  Accordingly, we recorded a $2.5 million liability for the present value of the estimated cost to service the portfolio.  Additionally, RCC has the option to return, and we have the obligation to repurchase, up to a maximum of approximately $5.9 million in delinquent leases and loans as specified in the sale agreement.  In conjunction with this option, we recorded a $3.0 million estimated liability based on historical default rates.

Goodwill and Intangible Assets

Goodwill and other intangible assets with indefinite lives are not amortized.  Instead, a review for impairment is performed at least annually or more frequently if events and circumstances indicate impairment might have occurred.  Goodwill is tested at the reporting unit level using a two-step process.  The first step is a screen for potential impairment by comparing the fair value of a reporting unit to our carrying value.  If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required.  If the fair value is less than the carrying value, step two is completed to measure the amount of impairment, i f any.  In step two, the implied fair value of goodwill is compared to its carrying amount.  The implied fair value of goodwill is computed by subtracting the sum of the fair values of the individual asset categories (tangible and intangible) from the indicated fair value of the reporting unit as determined under step one.  An impairment is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.

We utilize several approaches, including discounted expected cash flows, market approach and comparable sales transactions to estimate the fair value of our reporting unit for our impairment review of goodwill.  These approaches require assumptions and estimates of many critical factors, including revenue and market growth, operating cash flows, market multiples, and discount rates, which are based on the current economic environment and credit market conditions.

Our commercial finance operating segment has goodwill of $8.0 million, which is tested annually on May 31st for impairment.  During the fourth quarter of fiscal 2010, the commercial finance operations incurred significant losses, inclusive of the write-off of the customer related intangible asset (as discussed below) and the waiver of management fees from its investment entities.  Accordingly, we determined that a triggering event had occurred and performed, as of September 30, 2010, an interim assessment of goodwill for impairment at the commercial finance reporting unit.  Based on a third-party valuation as of May 31, 2010 as well as test results that were internally generated as of September 30, 2010 as a result of the triggering event in the fourth quarter, we concluded that there has been no impairment of our goodwill.

43

Long-lived assets and identifiable intangibles with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

We acquired customer relationships with third-party originators, classified as a customer related intangible asset.  The value of the intangible asset consisted of the estimated excess of future cash inflows over the related cash outflows generated by the acquired customer base and relationships with third-party originators.  We had been amortizing the intangible asset over the expected useful life of the asset and continually monitored events and changes in circumstances that could indicate carrying amounts of the intangible asset may not be recoverable.  Due to the elimination of the management fees from the LEAF investment partnerships, there is no future expected benefit to be derived from the intangible asset.  Therefore, the customer list became entirely impaired and, accordingly, we recorded an impairment loss for the entire carrying balance of $2.8 million as of September 30, 2010.

Recent Accounting Standards

Accounting Standard Issued But Not Yet Effective

The Financial Accounting Standards Board, or FASB, has issued the following accounting standards which are not yet effective for us as of September 30, 2010:

Transfers of financial assets - In June 2009, the FASB amended prior guidance on accounting for transfers of financial assets.  The new pronouncement changes the derecognition guidance for the transferors of financial assets, eliminates the exemption from consolidation for qualifying special-purpose entities and requires additional disclosures about all transfers of financial assets.  This guidance will be effective for us in fiscal 2011.  We do not anticipate that this guidance will have a material impact on our consolidated financial statements.

Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses - In July 2010, the FASB issued guidance that will require companies to provide more information about the credit quality of their financing receivables in the disclosures to financial statements including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. We will provide the required disclosure in our first fiscal quarter of 2011.

Variable Interest Entities (or VIEs) - In June 2009, the FASB issued guidance to revise the approach to determine when a VIE should be consolidated.  The new consolidation model for VIEs considers whether we have the power to direct the activities that most significantly impact the VIE’s economic performance and shares in the significant risks and rewards of the entity.  The guidance on VIEs requires companies to continually reassess VIEs to determine if consolidation is appropriate and to provide additional disclosures.  This guidance will be effective for us in fiscal 2011.  We have determined that this guidance will not have a significant effect on our consolida ted financial statements and will make the necessary VIE disclosures.

Newly Adopted Accounting Principles

We adopted the following accounting standards during fiscal 2010:

Subsequent Events.  In February 2010, the FASB issued guidance which removes the requirement to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This guidance was effective upon issuance.

Fair Value Measurements.  In January 2010, the FASB issued guidance that requires new disclosures and clarifies some existing disclosure requirements about fair value measurements.  The new pronouncement requires a reporting entity: (1) to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and (2) to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs. In addition, it clarifies the requirements of the following existing disclosures: (1) disclosures regard ing the need to use judgment in determining the appropriate classes of assets and liabilities, and (2) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.  The new guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements which will be effective for us in fiscal 2011.

Our adoption of these standards did not have a material impact on our consolidated financial position, results of operations or cash flows.

44

Participating Securities.  In June 2008, the FASB issued guidance which requires nonvested equity awards that contain non-forfeitable rights to dividends or dividend equivalents, or participating securities, to be included in computing earnings per share pursuant to the two-class method.  We have, accordingly, adjusted all historical earnings per share data presented.

Noncontrolling Interests.  In December 2007, the FASB established accounting and reporting guidance for a noncontrolling (minority) interest in a subsidiary which requires that the noncontrolling interest be reported as a separate component of stockholders’ equity and that net income (loss) attributable to noncontrolling interests and net income (loss) attributable to common shareholders be presented separately in the consolidated statements of operations.  We adopted the provisions of this guidance at the beginning of fiscal 2010, by reclassifying noncontrolling interests as a separate component of equity and recording losses attributable to the noncontrolling interests even when the carrying value of the noncontrolling interest has been reduced to zero. Reference is made to Note 15 of Notes to Consolidated Financial Statements included in Item 8 of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

We are exposed to various market risks from changes in interest rates.  Fluctuations in interest rates can impact our results of operations, cash flows and financial position.  We manage this risk through regular operating and financing activities.  We have not entered into any market sensitive instruments for trading purposes.  The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.  The range of changes presented reflects our view of changes that are reasonably possible over a one-year period and provides indicators of how we view and manage our ongoing market risk exposures.

The following analyzes the potential impact of a hypothetical change in interest rates as of September 30, 2010.  Our analysis does not consider other possible effects that could impact our business.

Corporate

At September 30, 2010, we have a secured revolving credit facility which is for general business use.  Weighted average borrowings on this facility were $17.8 million for fiscal 2010 at an effective interest rate of 10.7%.  A hypothetical 10% change in the interest rate on this facility would change our annual interest expense by $134,000.

Our $18.8 million of 12% senior notes are at fixed rates of interest and, therefore, are not subject to fluctuation.

Commercial finance

We hold commercial finance assets which are comprised of loans and leases at fixed rates of interest.  To finance these assets, we obtained a $21.5 million short-term bridge facility at a fixed rate of interest.  We are seeking a new longer- term facility in which the rate may differ from our current facility.

Foreign Exchange Rate Risk

We have not entered into any forward exchange contracts to hedge our foreign currency rate risk because we do not believe our foreign exchange exposure is material.

45

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

RESOURCE AMERICA, INC.

We have audited the accompanying consolidated balance sheets of Resource America, Inc. (a Delaware corporation) and subsidiaries (the Company) as of September 30, 2010 and 2009, and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended September 30, 2010.  Our audits of the basic financial statements include the financial schedules listed in the index appearing under Item 15(2).  These financial statements and financial statement schedules are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Resource America, Inc. and subsidiaries as of September 30, 2010 and 2009 and the consolidated results of their operations and cash flows for each of the three years in the period ended September 30, 2010 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Resource America, Inc. and subsidiaries internal control over financial reporting as of September 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 13, 2010, expressed an adverse opinion on internal control over financial reporting as a result of the material weakness described in that report. 

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

December 13, 2010

47

RESOURCE AMERICA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	September 30,
	2010			2009
ASSETS
Cash	$	11,243		$	26,197
Restricted cash		12,018			2,741
Receivables		1,671			1,358
Receivables from managed entities and related parties, net		66,416			55,047
Investments in commercial finance - held for investment, net		12,176			2,429
Investments in commercial finance - held for sale, net		−			142,701
Investments in real estate, net		27,114			28,923
Investment securities, at fair value		22,358			19,500
Investments in unconsolidated entities		13,825			16,241
Property and equipment, net		9,984			13,435
Deferred tax assets		43,703			45,656
Goodwill		7,969			7,969
Intangible assets, net		−			3,637
Other assets		5,776			10,006
Total assets	$	234,253		$	375,840
LIABILITIES AND EQUITY
Liabilities:
Accrued expenses and other liabilities	$	38,492		$	40,986
Payables to managed entities and related parties		156			1,284
Borrowings		66,110			191,383
Deferred tax liabilities		411			2,046
Total liabilities		105,169			235,699
Commitments and contingencies
Equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding		–			–
Common stock, $.01 par value, 49,000,000 shares authorized; 28,167,909 and 27,757,849 shares issued, respectively (including nonvested restricted stock of 741,086 and 552,461, respectively)		274			272
Additional paid-in capital		281,378			277,944
Accumulated deficit		(37,558	)		(22,471	)
Treasury stock, at cost; 9,125,253 and 9,213,665 shares, respectively		(99,330	)		(100,367	)
Accumulated other comprehensive loss		(12,807	)		(15,560	)
Total stockholders’ equity		131,957			139,818
Noncontrolling interests		(2,873	)		323
Total equity		129,084			140,141
	$	234,253		$	375,840

The accompanying notes are an integral part of these statements

48

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended September 30,
	2010			2009			2008
REVENUES
Real estate	$	31,911		$	25,417		$	31,519
Commercial finance		23,677			48,767			93,016
Financial fund management		33,140			33,344			27,536
		88,728			107,528			152,071
COSTS AND EXPENSES
Real estate		20,780			22,038			22,602
Commercial finance		18,164			25,179			42,741
Financial fund management		21,028			20,468			27,737
General and administrative		12,972			14,369			16,080
Loss (gain) on sale of leases and loans		8,097			(628	)		(3,865	)
Impairment of intangibles		2,828			−			−
Provision for credit losses		5,209			8,604			10,627
Depreciation and amortization		7,842			6,922			4,660
		96,920			96,952			120,582
OPERATING (LOSS) INCOME		(8,192	)		10,576			31,489
OTHER (EXPENSE) INCOME
Total other-than-temporary impairment losses on investment securities		(809	)		(8,539	)		(14,467	)
Portion recognized in other comprehensive loss		−			−			−
Net other-than-temporary impairment losses recognized in earnings		(809	)		(8,539	)		(14,467	)
Loss on sale of loans and investment securities, net		(451	)		(11,588	)		(17,674	)
Interest expense		(13,086	)		(20,199	)		(47,266	)
Other income, net		2,591			3,156			3,036
		(11,755	)		(37,170	)		(76,371	)
Loss from continuing operations before taxes		(19,947	)		(26,594	)		(44,882	)
Income tax benefit		(2,650	)		(10,504	)		(14,933	)
Loss from continuing operations		(17,297	)		(16,090	)		(29,949	)
Income (loss) from discontinued operations, net of tax		622			(444	)		(1,299	)
Net loss		(16,675	)		(16,534	)		(31,248	)
Less:  Net loss attributable to noncontrolling interests		3,224			1,603			5,005
Net loss attributable to common shareholders	$	(13,451	)	$	(14,931	)	$	(26,243	)
Basic loss per share attributable to common shareholders:
Continuing operations	$	(0.74	)	$	(0.78	)	$	(1.40	)
Discontinued operations		0.03			(0.03	)		(0.07	)
Net loss	$	(0.71	)	$	(0.81	)	$	(1.47	)
Weighted average shares outstanding		18,942			18,507			17,804
Diluted loss per share attributable to common shareholders:
Continuing operations	$	(0.74	)	$	(0.78	)	$	(1.40	)
Discontinued operations		0.03			(0.03	)		(0.07	)
Net loss	$	(0.71	)	$	(0.81	)	$	(1.47	)
Weighted average shares outstanding		18,942			18,507			17,804
Amounts attributable to common shareholders:
Loss from continuing operations, net of tax	$	(14,073	)	$	(14,487	)	$	(24,944	)
Discontinued operations, net of tax		622			(444	)		(1,299	)
Net loss	$	(13,451	)	$	(14,931	)	$	(26,243	)
Dividends declared per common share	$	0.09		$	0.20		$	0.28

The accompanying notes are an integral part of these statements

49

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

YEARS ENDED SEPTEMBER 30, 2010, 2009 AND 2008

(in thousands)

	Attributable to Common Shareholders
						Retained									Accumulated
			Additional			Earnings						ESOP			Other			Total
	Common		Paid-In			(Accumulated			Treasury			Loan			Comprehensive			Stockholders’			Noncontrolling			Total			Comprehensive
	Stock		Capital			Deficit)			Stock			Receivable			Income (Loss)			Equity			Interest			Equity			Income (Loss)
Balance, October 1, 2007	$	268	$	264,747		$	27,171		$	(102,014	)	$	(223	)	$	(4,602	)	$	185,347		$	6,571		$	191,918
Net loss		−		−			(26,243	)		−			−			−			(26,243	)		(5,005	)		(31,248	)	$	(31,248	)
Treasury shares issued		−		306			−			811			−			−			1,117			−			1,117
Stock-based compensation		−		1,007			−			−			−			−			1,007			−			1,007
Restricted stock awards		−		3,448			−			−			−			−			3,448			3			3,451
Issuance of common shares		1		181			−			−			−			−			182			−			182
Purchase of treasury shares		−		−			−			(237	)		−			−			(237	)		−			(237	)
Cash dividends		−		−			(4,908	)		−			−			−			(4,908	)		−			(4,908	)
Distributions		−		−			−			−			−			−			−			(1,509	)		(1,509	)
Sale/repurchase of partial ownership of entity, net		−		−			−			−			−			−			−			(48	)		(48	)
Other comprehensive loss		−		−			−			−			−			(16,203	)		(16,203	)		2,598			(13,605	)		(13,605	)
Repayment of ESOP loan		−		−			−			−			223			−			223			−			223
Balance, September 30, 2008		269		269,689			(3,980	)		(101,440	)		−			(20,805	)		143,733			2,610			146,343		$	(44,853	)
Net loss		−		−			(14,931	)		−			−			−			(14,931	)		(1,603	)		(16,534	)	$	(16,534	)
Treasury shares issued		−		(650	)		−			1,073			−			−			423			−			423
Stock-based compensation		−		613			−			−			−			−			613			−			613
Restricted stock awards		−		3,615			−			−			−			−			3,615			2			3,617
Issuance of warrants in Senior Notes offering		−		4,941			−			−			−			−			4,941			−			4,941
Issuance of common shares		3		−			−			−			−			−			3			−			3
Purchase of subsidiary     stock held by a     noncontrolling     stockholder		−		(264	)		−			−			−			−			(264	)		−			(264	)
Cash dividends		−		−			(3,560	)		−			−			−			(3,560	)		−			(3,560	)
Distributions		−		−			−			−			−			−			−			(72	)		(72	)
Other		−		−			−			−			−			−			−			(1,831	)		(1,831	)
Other comprehensive income		−		−			−			−			−			5,245			5,245			1,217			6,462			6,462
Balance, September 30, 2009		272		277,944			(22,471	)		(100,367	)		−			(15,560	)		139,818			323			140,141		$	(10,072	)
Net loss		−		−			(13,451	)		−			−			−			(13,451	)		(3,224	)		(16,675	)	$	(16,675	)
Treasury shares issued		−		(655	)		−			1,037			−			−			382			−			382
Stock-based compensation		−		226			−			−			−			−			226			−			226
Restricted stock awards		−		2,765			−			−			−			−			2,765			46			2,811
Issuance of warrants		−		1,042			−			−			−			−			1,042			−			1,042
Issuance of common shares		2		56			−			−			−			−			58			−			58
Cash dividends		−		−			(1,636	)		−			−			−			(1,636	)		−			(1,636	)
Other		−		−			−			−			−			−			−			7			7
Other comprehensive      income (loss)		−		−			−			−			−			2,753			2,753			(25	)		2,728			2,728
Balance, September 30, 2010	$	274	$	281,378		$	(37,558	)	$	(99,330	)		−		$	(12,807	)	$	131,957		$	(2,873	)	$	129,084		$	(13,947	)

The accompanying notes are an integral part of these statements

50

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended September 30,
	2010			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(16,675	)	$	(16,534	)	$	(31,248	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on sale of loans and investment securities, net		451			11,588			17,674
Net other-than-temporary impairment losses recognized in earnings		3,637			8,539			14,467
Depreciation and amortization		12,088			8,876			6,024
Provision for credit losses		5,209			8,604			10,627
Equity in (earnings) losses of unconsolidated entities		(4,870	)		(1,279	)		15,656
Distributions from unconsolidated entities		5,104			6,128			15,647
Loss (gain) on sale of leases and loans		8,097			(628	)		(3,865	)
Gain on sale of assets		(2,420	)		(642	)		(9,488	)
Deferred income tax benefits		(4,564	)		(13,249	)		(16,031	)
Equity-based compensation issued		3,573			4,654			5,708
Equity-based compensation received		(1,441	)		(867	)		159
Decrease (increase) in commercial finance investments − held for sale		17,603			(37,330	)		65,297
Changes in operating assets and liabilities		1,289			(19,016	)		(15,331	)
Net cash provided by (used in) operating activities		27,081			(41,156	)		75,296
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(782	)		(335	)		(6,401	)
Payments received on real estate loans and real estate		8,563			10,052			23,182
Investments in unconsolidated real estate entities		(1,821	)		(4,694	)		(9,802	)
Purchase of commercial finance assets − held for investment		(11,771	)		(41,942	)		(111,700	)
Payments received on commercial finance assets − held for investment		−			46,246			74,332
Purchase of loans and investment		(1,445	)		(19,290	)		(251,585	)
Proceeds from sale of loans and investment securities		4,094			5,367			40,360
Principal payments received on loans		−			4,061			13,931
Net cash paid for acquisitions		−			−			(8,022	)
Other		−			−			(17,050	)
Net cash used in investing activities		(3,162	)		(535	)		(252,755	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings		103,401			438,897			930,731
Principal payments on borrowings		(128,767	)		(395,905	)		(715,914	)
Repayment from managed entity on RCC lease portfolio purchase		−			4,500			−
Dividends paid		(1,636	)		(3,560	)		(4,908	)
(Increase) decrease in restricted cash		(9,277	)		10,297			(31,194	)
Other		(2,594	)		(809	)		260
Net cash (used in) provided by financing activities		(38,873	)		53,420			178,975
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities		−			(2	)		(494	)
Financing activities		−			(440	)		(736	)
Net cash used in discontinued operations		−			(442	)		(1,230	)
(Decrease) increase in cash		(14,954	)		11,287			286
Cash, beginning of year		26,197			14,910			14,624
Cash, end of year	$	11,243		$	26,197		$	14,910

The accompanying notes are an integral part of these statements

51

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010

NOTE 1 - NATURE OF OPERATIONS

Resource America, Inc. (the "Company") (NASDAQ: REXI) is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities through its real estate, commercial finance and financial fund management operating segments.  As a specialized asset manager, the Company seeks to develop investment funds for outside investors for which the Company provides asset management services, typically under long-term management and operating arrangements either through a contract with, or as the manager or general partner of, the sponsored fund.  The Company limits its investment funds to investment areas where it owns existing operating companies or has specific expertise.  The Company manages assets on behalf of institutional and individual investors and Resource Capital Corp. (“RCC”) (NYSE: RSO), a diversified real estate finance company that qualifies as a real estate investment trust (“REIT”).

All references to “fiscal”, unless otherwise noted, refer to the Company’s fiscal year, which ends on September 30.  For example, a reference to “fiscal 2010” means the 12-month period that ended on September 30, 2010.  All references to quarters, unless otherwise noted, refer to the quarters of the Company’s fiscal year.

The Company conducts real estate operations through the following subsidiaries:

● Resource Capital Partners, Inc. acts as the general partner for most of the Company’s real estate investment entities and provides asset management services to the entire portfolio;

● Resource Real Estate Management, Inc. (“Resource Residential”) provides property management services to the entire multifamily apartment portfolio, including fund assets, distressed assets and joint venture assets;

● Resource Real Estate Funding, Inc., on behalf of RCC, manages the commercial real estate debt portfolio comprised principally of A notes, whole mortgage loans, mortgage participations, B notes, mezzanine debt and related commercial real estate securities.  In addition, it manages a separate portfolio of discounted real estate and real estate loans; and

● Resource Real Estate manages loans, owned assets and ventures, which are collectively referred to as the “legacy portfolio.”

The Company conducts its commercial finance operations through LEAF Financial Corporation (“LEAF”).  LEAF sponsored and manages four publicly-held investment entities as the general and limited partner or managing member, and originates and acts as the servicer of the leases and loans sold to those entities and to RCC.

     The Company conducts its financial fund management operations primarily through the following subsidiaries:

● Apidos Capital Management, LLC (“Apidos”), finances, structures and manages investments in bank loans, high yield bonds and equity investments;

● Trapeza Capital Management, LLC (“TCM”), a joint venture between us with an unrelated third-party, 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 through collateralized debt obligation (“CDO”)  issuers and related partnerships.  TCM together with the Trapeza CDO issuers and Trapeza partnerships, are collectively referred to as Trapeza;

● Resource Capital Markets, Inc., through the Company’s registered broker-dealer subsidiary, Chadwick Securities, Inc., (“Chadwick”) acts as an agent in the primary and secondary markets for trust preferred in the financial services and real estate sectors and manages accounts for institutional investors;

● Resource Europe Management, Ltd. (“Resource Europe”), structures and manages investments in international bank loans;

● Resource Financial Institutions Group, Inc. (“RFIG”), serves as the general partner for seven company-sponsored affiliated partnerships which invest in financial institutions;

● Ischus Capital Management, LLC (“Ischus”), finances, structures and manages investments in asset-backed securities (“ABS”) including residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”); and

● Resource Capital Manager, Inc. (“RCM”), an indirect wholly-owned subsidiary, provides investment management and administrative services to RCC under a management agreement between RCM and RCC.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

SEPTEMBER 30, 2010

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries.

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.  Generally, the Company consolidates VIEs for which the Company is deemed to be the primary beneficiary or 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.

Variable interests in the Company’s real estate segment primarily relate to subordinated financings in the form of mezzanine loans or unconsolidated real estate interests.  As of September 30, 2010 and 2009, the Company had one and two such interests for which it is deemed to be the primary beneficiary of the VIE.  Accordingly, these entities were included in the consolidated financial statements.

All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements.

Deconsolidation of Entities

Apidos CDO VI.  In December 2007, the Company acquired for $21.3 million all of the equity interest of Apidos CDO VI and consolidated it.  In March 2009, the Company agreed to all the terms and conditions to sell its interest in Apidos CDO VI and assign its investment management responsibilities to the buyer.  This transaction settled on May 6, 2009.  As a result of the agreement and sale, the Company deconsolidated Apidos CDO VI from its consolidated financial statements as of March 31, 2009.  The Company received proceeds of $7.2 million and recognized a loss of $11.6 million on the transaction.  The Company has no further loss exposure with respect to Apidos CDO VI.

LEAF Commercial Finance Fund (“LCFF”).  LCFF was a single member limited liability company that owned a portfolio of $195.0 million of leases and loans and had a $250.0 million line of credit with Morgan Stanley Bank (“Morgan Stanley”).  It was formed as a vehicle to hold leases pending their sale to LEAF’s investment funds.  As of February 28, 2009, LEAF was the sole member and the managing member of LCFF and, accordingly, consolidated LCFF.  In March 2009, to effectuate the sale of the LCFF portfolio to its investment funds, LEAF created a second class of membership units, Class B units, re-designated its original interest as Class A units, and sold the Class A units to a limited liability company jointly owned by two of its investment funds for approximately $2.5 million in cash.  The Class A units have a preferred equity interest, which the Company concluded transferred the entire economic interest in LCFF to the jointly owned limited liability company.  The Company determined that LCFF was a VIE for which the primary beneficiary was the limited liability company and, accordingly, no longer consolidates LCFF with the Company’s financial statements.  Because the sale was at book value, the Company recognized no gain or loss as a result of the transaction.  LEAF continues to be the servicer of the LCFF leases. Accordingly, $195.0 million of commercial finance assets and $187.6 million of debt financing in addition to the associated interest rate swaps and caps on the debt were removed from the consolidated balance sheets.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Use of Estimates

Preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting period.  The Company makes estimates of its allowance for credit losses, the valuation allowance against its deferred tax assets, discounts and collectability of management fees, the valuation of stock-based compensation, servicing liability and repurchase obligation, allowance for le ase and loan losses, and in determining whether a decrease in the fair value of an investment is an other-than-temporary impairment.  Significant estimates for the commercial finance segment include the unguaranteed residual values of leased equipment, impairment of long-lived assets and goodwill and the fair value and effectiveness of interest rate swaps.  The financial fund management segment makes assumptions in determining the fair value of its investments in securities available-for-sale and in estimating the liability, if any, for clawback provisions on certain of its partnership interests.  The Company used assumptions, specifically inputs to the Black-Scholes pricing model and the discounted cash flow model, in computing the fair value of the 12% senior notes and warrants that it issued and sold in September and October 2009.  Actual results could differ from these estimates.

Investments in Unconsolidated Entities

The Company accounts for the investments it has in the real estate, commercial finance and financial fund management investment entities it has sponsored and manages under the equity method of accounting since the Company has the ability to exercise significant influence over the operating and financial decisions of these entities.  To the extent that there is a negative balance in the investment for any of these entities, these balances are reclassified to reduce the receivable from such entities.

Real estate. The Company has sponsored and manages eight real estate limited partnerships, five limited liability companies, a corporation operating as a REIT and seven tenant in common (“TIC”) property interest programs that invest in multifamily residential properties.  The Company’s combined interests in these investment entities range from approximately 2% to 10%.

Commercial finance.  The Company has interests in four company-sponsored commercial finance investment partnerships.  The Company’s combined general and limited partner interests in these partnerships range from approximately 1% to 6%.

Financial fund management.  The Company has general and limited partnership interests in seven company-sponsored and managed partnerships that invest in regional banks.  The Company’s combined general and limited partnership interests in these partnerships range from 5% to 11%.  The Company also manages and has a combined 6% general and limited partnership interest in an affiliated partnership organized as a credit opportunities fund that invests in bank loans and high yield bonds.

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 September 30, 2010, the Company had $12.4 million (excluding restricted cash) in deposits at various banks, of which $8.9 million was over the temporary insurance limit of the Federal Deposit Insurance Corporation (“FDIC”) of $250,000.  No losses have been experienced on such investments.

In addition, the Company’s receivables from managed entities are comprised of unsecured amounts due from its investment entities and other affiliated entities which the Company has sponsored and manages.  The Company evaluates the collectability of these receivables and records a an allowance to the extent any portion of that receivable is determined to be uncollectible.  Additionally, the Company records a discount where it determines that any of the entities will be unable to repay the Company in the near term.  In the event that any of these entities fail, the corresponding receivable balance would be at risk.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Restricted Cash

     Restricted cash at September 30, 2010 of $12.0 million primarily included $10.1 million of proceeds from the $21.5 million commercial finance bridge loan held for the purchase of leases and loans and $1.4 million held in escrow for a real estate property investment.  The restricted cash balance of $2.7 million at September 30, 2009 primarily reflected payments made by LEAF customers to a lockbox which were being processed by the bank as well $1.2 million held in escrow for a real estate property investment.

Foreign Currency Translation

Foreign currency transaction gains and losses of the Company’s European operations are recognized in the determination of net income.  Foreign currency translation adjustments related to these foreign operations are included in accumulated other comprehensive loss, a separate component of shareholders’ equity.  The amount included in accumulated other comprehensive loss related to foreign currency translation adjustments was a net loss of $368,000 and a gain of $16,000 as of September 30, 2010 and 2009, respectively.

Revenue Recognition – Fee Income

RCC management fees.  The Company earns a base management and incentive management fee for managing RCC.  In addition, the Company is reimbursed for its expenses incurred on behalf of RCC and its operations.  Management fees and reimbursed expenses are recognized monthly when earned.

The quarterly incentive compensation to the Company is payable seventy-five percent (75%) in cash and twenty-five percent (25%) in restricted shares of RCC common stock.  The Company may elect to receive more than 25% of its incentive compensation in RCC restricted stock.  However, the Company’s ownership percentage in RCC, direct and indirect, cannot exceed 15%.  All shares are fully vested upon issuance, provided that the Company may not sell such shares for one year after the incentive compensation becomes due and payable.  The restricted stock is valued at the average of the closing prices of RCC common stock over the thirty-day period ending three days prior to the issuance of such shares.

In fiscal 2010, 2009 and 2008, the management, incentive, servicing and acquisition fees that the Company received from RCC were 12%, 8% and 5%, respectively, of the Company’s consolidated revenues.  These fees have been allocated and, accordingly, reported as revenues by each of the Company’s operating segments.

     Real estate fees.  The Company records acquisition fees of 1% to 2% of the net purchase price of properties acquired by real estate investment entities it sponsors and financing fees equal to 0.5% to 5.0% of the debt obtained or assumed related to the properties acquired.  The Company recognizes these fees when its sponsored entities acquire the properties and obtain the related financing.  In conjunction with the TIC properties acquired in fiscal 2008, the Company had also recorded bridge equity fees.

The Company records a monthly property management fee equal to 4.5% to 5% of the gross operating revenues from the underlying properties and a monthly debt management fee equal to 0.167% (2% per year) of the gross offering proceeds deployed in debt investments.  The Company recognizes these fees monthly when earned.

Additionally, the Company records an annual investment management fee from its limited partnerships equal to 1% of the gross offering proceeds of each partnership for its services.  The Company records an annual asset management fee from its TIC programs equal to 1% to 2% of the gross revenues from the property in connection with its performance of its asset management responsibilities.  The Company records an annual asset management fee from one limited liability company equal to 1.5% of the gross revenues of the underlying properties.  These investment management fees and asset management fees are recognized monthly when earned and are discounted to the extent that these fees are deferred.

The Company records quarterly asset management fees from its joint ventures with an institutional partner equal to 1% of the gross funds invested in distressed real estate loans and assets.  The Company recognizes these fees monthly.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Revenue Recognition – Fee Income – (Continued)

Commercial finance fees.  The Company records acquisition fees from its leasing investment entities (based on a percentage of the cost of the leased equipment acquired) as compensation for expenses incurred by the Company related to the lease acquisition.  Acquisition fees, which range from 1% to 2%, are earned at the time of the sale of the related leased equipment to the investment entities.  The Company also records management fees from its investment entities for managing and servicing the leased assets acquired when the service is performed.  The payment of such fees to the Company by each entity is contingent upon the partners receiving their specified annual distri butions by each entity. During fiscal 2010, the Company waived $3.8 million of management fees from four of its investment entities since the actual distributions to the partners were less than the annual specified amounts.  The ability of these entities to pay future management fees is uncertain, a discount is recorded where payment will not be received timely and an allowance is recorded where payment is determined to be uncollectible.  However, the Company is paid for the operating and administrative expenses it incurs to manage these entities.

Financial fund management fees.  The Company earns monthly investment and management fees on assets held in CDOs on behalf of institutional and individual investors.  These fees, which vary by CDO, range between 0.10% and 0.60% of the aggregate principal balance of eligible collateral held by the CDO issuers.  These investment management fees and asset management fees are recognized monthly when earned and are discounted to the extent that these fees are deferred.  Additionally, the Company records fees for managing the assets held by the partnerships it has sponsored and for managing their general operations.  These fees, which vary by limited partnership, rang e between 0.75% and 2.00% of the partnership capital balance.

The Company also enters into management or advisory agreements for managing the assets held by third-parties.  These fees, which vary by agreement, are recognized monthly when earned.

Introductory agent fees.  The Company earns fees for acting as an introducing agent for transactions involving sales of securities of financial services companies, REITs and insurance companies.  The Company recognizes these fees monthly when earned.

Stock-Based Compensation

Employee stock options.  The Company expenses the employee stock options it grants over the respective vesting periods, based on the estimated fair value of the award as determined on the date of grant.

Restricted common stock.  The Company values the restricted stock it issues based on the closing price of its stock on the date of grant and amortizes this cost to compensation expense over the respective vesting period less an estimate for forfeitures.

Earnings (Loss) Per Share

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

Receivables from Managed Entities

The Company reviews the collectability of its receivables from managed entities.  The Company has estimated that based on current projections, one of the commercial finance funds will not have sufficient funds to pay a portion of its accrued management fees to the Company as of September 30, 2010.  Accordingly, the Company recorded a provision of $1.1 million in fiscal 2010 with a corresponding reduction to the receivables from managed entities.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Loans

Real estate loans.  Real estate loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the amount of unpaid principal, reduced by unearned income and an allowance for credit losses, if necessary.  These loans are included in investments in real estate in the consolidated balance sheets. Interest on these loans is calculated based upon the principal amount outstanding.  Accrual of interest is stopped on a loan when management believes, after considering economic factors, business conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful.

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 is placed on non-accrual status at such time as (i) management believes that contractual debt service payments will not be met; or (ii) the loan becomes 90 days delinquent; and (iii) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment.  While on non-accrual status, the Company recognizes interest income only when an actual payment is received.  Loans are charged off after being on non-accrual for a period of one year.

The Company maintains an allowance for credit losses for real estate loans at a level deemed sufficient to absorb probable losses.  The Company considers general and local economic conditions, neighborhood values, competitive overbuilding, casualty losses and other factors that may affect the value of real estate loans.  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 revi ews all credits on a quarterly basis and continually monitors collections and payments from its borrowers and maintains an allowance for credit 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.

Investments in Commercial Finance

The Company’s investments in commercial finance consist primarily of equipment loans, direct financing leases and operating leases.  Those investments that the Company is holding for sale to its investment entities are reflected separately at fair value as held for sale in the consolidated balance sheets.

Loans. For term loans, the investment consists of the sum of the total future minimum loan payments receivable less unearned finance income.  Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted payments over the original cost of the loan.  For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Direct financing leases.  Certain of the Company’s lease transactions are accounted for as direct financing leases (as distinguished from operating leases).  Such leases transfer substantially all benefits and risks of equipment ownership to the customer.  The Company’s investment in direct financing leases consists of the sum of the total future minimum contracted payments receivable and the estimated unguaranteed residual value of leased equipment, less unearned finance income.  Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum lease payme nts plus the estimated unguaranteed residual value expected to be realized at the end of the lease term over the cost of the related equipment.  Initial direct costs incurred in the consummation of the lease are capitalized as part of the investment in lease receivables and amortized over the lease term as a reduction of the yield.  The Company discontinues recognizing revenue for lease and loans for which payments are more than 90 days past due.  Fees from delinquent payments are recognized when received.

Operating leases.  Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases.  Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years.  Rental income consists primarily of monthly periodic rental payments due under the terms of the leases.  The Company recognizes rental income on a straight-line basis.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Investments in Commercial Finance – (Continued)

During the lease term of existing operating leases, the Company may 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 at least a quarterly 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 write-downs of equipment during fiscal 2010, 2009 and 2008.

Future payment card receivables.  Additionally, the Company has provided capital advances to small businesses based on future credit card receipts.  The entire portfolio of future payment card receivables is on the cost recovery method whereby no income is recognized until the basis of the future payment card receivable has been fully recovered.

Allowance for credit losses.  The Company evaluates the adequacy of the allowance for credit losses in commercial finance (including investments in leases and loans and future payment card receivables) based upon, among other factors, management’s historical experience with the commercial finance portfolios it manages, an analysis of contractual delinquencies, economic conditions and trends, industry statistics and equipment finance portfolio characteristics, as adjusted for expected recoveries.  In evaluating historic performance of leases and loans, the Company performs a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ulti mate write-off.  The Company fully reserves, net of recoveries, all leases and loans after they are 180 days past due.

     Investments in commercial finance assets - held for sale.  Commercial finance assets, which the Company does not have the intent to hold until maturity, are classified as held for sale.  These investments, which primarily consist of loans and direct financing leases, are carried at the lower of cost or fair value.  Cost basis includes deferred origination fees and costs.  Fair value is determined based upon discounted cash flow models.

Investment Securities

The Company’s investment securities available-for-sale, including investments in the CDO issuers it sponsored, are carried at fair value.  The fair value of the CDO investments is based primarily on internally-generated expected cash flow models that require significant management judgment and estimates due to the lack of market activity and the use of unobservable pricing inputs.  Investments in affiliated entities, including holdings in The Bancorp, Inc. (“TBBK”) (NASDAQ: TBBK) and RCC, are valued at the closing price of the respective publicly-traded stock.  The fair value of the cumulative net unrealized gains and losses on these investment securities, net of tax, is reported through accumulated other comprehensive income and loss.  Realized gains and losses on the sale of investments are determined on the trade date on the basis of specific identification and are included in net operating results.

The Company recognizes a realized loss when it is probable there has been an adverse change in estimated cash flows of the security holder from what had been previously estimated.  The security is then written down to fair value, and the unrealized loss is transferred from accumulated other comprehensive loss to the consolidated statements of operations as a charge to current earnings.  The cost basis adjustment for an other-than-temporary impairment would be recoverable only upon the sale or maturity of the security.

     Periodically, the Company reviews the carrying value of its available-for-sale securities.  If the Company deems an unrealized loss to be other-than-temporary, it will record an impairment charge.  The Company’s process for identifying other-than-temporary declines in the fair value of its investments involves consideration of (i) the duration of a significant decline in value, (ii) the liquidity, business prospects and overall financial condition of the issuer, (iii) the magnitude of the decline, (iv) the collateral structure and other credit support, as applicable, and (v) the more-than-likely intention of the Company to hold the investment until the value recovers.  Additionally, with respect to its evaluation of its investment in RCC, the Company also takes into consideration its role as the external manager and the value of its management contract, which includes a substantial fee for termination of the manager.  When the analysis of the above factors results in a conclusion that a decline in fair value is other-than-temporary, an impairment charge is recorded and the cost of the investment is written down to fair value.

      The Company’s trading securities are recorded at fair value with unrealized holding gains and losses included in earnings and reported in other income.  These securities are valued at the closing price of the respective publicly-traded stock.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Investment Securities – (Continued)

     The Company recognizes dividend income on its investment securities classified as available-for-sale on the ex-dividend date.

Property and Equipment

Property and equipment, which includes amounts recorded under capital leases, are stated at cost.  Depreciation and amortization are based on cost, less estimated salvage value, using the straight-line method over the asset’s estimated useful life.  Maintenance and repairs are expensed as incurred.  Major renewals and improvements that extend the useful lives of property and equipment are capitalized.  The amortization of assets classified under capital leases is included in depreciation expense.

Accounting for Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns.

The Company adjusts the balance of its deferred taxes to reflect the tax rates at which future taxable amounts will likely be settled or realized.  The effects of tax rate changes on deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period during which such changes are enacted.  Valuation allowances are established and adjusted, when necessary, to reduce deferred tax assets to the amounts expected to be realized.  The Company assesses its ability to realize deferred tax assets primarily based on the earnings history and future earnings potential of the legal entities through which the deferred tax assets will be realized.

Servicing and Repurchase Liabilities

The Company routinely has sold its investments in commercial finance assets held for sale to its affiliated leasing partnerships and RCC, as well as to third parties. Leases and loans are accounted for as sold when control of the lease is surrendered.  Control over the leases is deemed surrendered when (1) the leases have been transferred to the leasing partnership, RCC or third party, (2) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the leases and (3) the Company does not maintain effective control over the leases through either (a) an agreement that entitles and obligates the Company to repurchase or redeem the leases before maturity, or (b) the ability to unilatera lly cause the buyer to return specific leases.  Subsequent to these sales, the Company typically remains as the servicer for the leases and loans sold for which it generally receives a servicing fee of approximately 1% of the book value of the serviced portfolio.  The assets and liabilities associated with the respective servicing agreements are typically not material and are offsetting, and accordingly, are not reflected in the Company’s consolidated financial statements.

However, during fiscal 2010, the Company sold to RCC and will retain servicing for a portfolio of leases and loans for which it will not receive any servicing fees.  Accordingly, the Company recorded a $2.5 million liability for the present value of the estimated cost to service the portfolio.  At September 30, 2010, the unamortized servicing liability approximated $2.4 million.  Additionally, RCC has the option to return, and the Company has the obligation to repurchase, up to a maximum of approximately $5.9 million in delinquent leases and loans as specified in the sale agreement.  In conjunction with this option, the Company recorded a $3.0 million estimated liability based on historical default rates.

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RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Goodwill and Intangible Assets

Goodwill and other intangible assets with indefinite lives are not amortized.  Instead, a review for impairment is performed at least annually or more frequently if events and circumstances indicate impairment might have occurred.  Goodwill is tested at the reporting unit level using a two-step process.  The first step is a screen for potential impairment by comparing the fair value of a reporting unit to its carrying value.  If the fair value of a reporting unit exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required.  If the fair value is less than the carrying value, step two is completed to measure the amount of impairment, i f any.  In step two, the implied fair value of goodwill is compared to its carrying amount.  The implied fair value of goodwill is computed by subtracting the sum of the fair values of the individual asset categories (tangible and intangible) from the indicated fair value of the reporting unit as determined under step one.  An impairment is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.

The Company utilizes several approaches, including discounted expected cash flows, market approach and comparable sales transactions to estimate the fair value of its reporting unit for its impairment review of goodwill.  These approaches require assumptions and estimates of many critical factors, including revenue and market growth, operating cash flows, market multiples, and discount rates, which are based on the current economic environment and credit market conditions.

The Company’s commercial finance operating segment has goodwill of $8.0 million, which is tested annually on May 31st for impairment.  During the fourth quarter of fiscal 2010, the commercial finance operations incurred significant losses, inclusive of the write-off of the customer related intangible asset (as discussed below) and the waiver of management fees from its investment entities.  Accordingly, the Company determined that a triggering event had occurred and performed, as of September 30, 2010, an interim assessment of goodwill for impairment at the commercial finance reporting unit.  Based on a third-party valuation as of May 31, 2010 as well as test results that were internally generated as of September 30, 2010 as a result of the triggering event in the fourth quarter, management concluded that there has been no impairment of goodwill.

Long-lived assets and identifiable intangibles with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  ; Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

In fiscal 2007, the Company acquired customer relationships with third-party originators, classified as a customer related intangible asset.  The value of the intangible asset consists of the estimated excess of future cash inflows over the related cash outflows generated by the acquired customer base and relationships with third-party originators.  The Company has been amortizing the intangible asset over the expected useful life of the asset and has continually monitored events and changes in circumstances that could indicate carrying amounts of the intangible asset may not be recoverable.  Due to the uncertainty of payment of the management fees in the future from the LEAF investment partnerships, there is no future expected benefit t o be derived from the intangible asset. Therefore, the Company impaired the entire unamortized balance and, accordingly, recorded an impairment loss of $2.8 million during the three months ended September 30, 2010.

Recent Accounting Standards

Accounting Standard Issued But Not Yet Effective

The Financial Accounting Standards Board (“FASB”) has issued the following accounting standards which are not yet effective for the Company as of September 30, 2010:

Transfers of financial assets - In June 2009, the FASB amended prior guidance on Accounting for Transfers of Financial Assets.  The new pronouncement changes the derecognition guidance for the transferors of financial assets, eliminates the exemption from consolidation for qualifying special-purpose entities and requires additional disclosures about all transfers of financial assets.  This guidance will be effective for the Company in fiscal 2011.  The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

60

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

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

Recent Accounting Standards – (Continued)

Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses - In July 2010, the FASB issued guidance that will require companies to provide more information about the credit quality of their financing receivables in the disclosures to financial statements including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. The Company will provide the required disclosures in its first fiscal quarter of 2011.

Variable Interest Entities - In June 2009, the FASB issued guidance to revise the approach to determine when a VIE should be consolidated.  The new consolidation model for VIEs considers whether the Company has the power to direct the activities that most significantly impact the VIE’s economic performance and shares in the significant risks and rewards of the entity.  The guidance on VIEs requires companies to continually reassess VIEs to determine if consolidation is appropriate and to provide additional disclosures.  This guidance will be effective for the Company in fiscal 2011.  The Company has determined that this guidance will not have a significant effect o n its consolidated financial statements.

Newly Adopted Accounting Principles

The Company adopted the following accounting standards during fiscal 2010:

Subsequent Events.  In February 2010, the FASB issued guidance which removes the requirement to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This guidance was effective upon issuance.

Fair Value Measurements.  In January 2010, the FASB issued guidance that requires new disclosures and clarifies some existing disclosure requirements about fair value measurements.  The new pronouncement requires a reporting entity: (1) to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and (2) to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs. In addition, it clarifies the requirements of the following existing disclosures: (1) disclosures regard ing the need to use judgment in determining the appropriate classes of assets and liabilities, and (2) disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.  The new guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements which will be effective for the Company in fiscal 2011.

The adoption of these standards did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Participating Securities.  In June 2008, the FASB issued guidance which requires nonvested equity awards that contain non-forfeitable rights to dividends or dividend equivalents, or participating securities, to be included in computing earnings per share pursuant to the two-class method.  The Company has, accordingly, adjusted all historical earnings per share data presented.

Noncontrolling Interests.  In December 2007, the FASB established accounting and reporting guidance for a noncontrolling (minority) interest in a subsidiary which requires that the noncontrolling interest be reported as a separate component of stockholders’ equity and that net income (loss) attributable to noncontrolling interests and net income (loss) attributable to the Company be presented separately in the consolidated statements of operations.  The Company adopted the provisions of this guidance at the beginning of fiscal 2010 and disclosed the impact on its results of operations in Note 15.

61

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 3 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosure of cash flow information (in thousands):

	Years Ended September 30,
	2010			2009			2008
Cash paid for:
Interest	$	(9,433	)	$	(18,975	)	$	(57,845	)
Income taxes	$	(1,325	)	$	(2,638	)	$	(3,880	)
Refunds of income tax	$	2,860		$	−		$	−
Non-cash activities include the following:
Sale of commercial finance assets to RCC (see Note 4):
Reduction of investments in commercial finance assets	$	99,386		$	−		$	−
Termination of associated secured warehouse facility	$	(99,386	)	$	−		$	−
Fair value of warrants recorded as a discount to the Senior Notes	$	2,339		$	4,941		$	−
Leasehold improvements paid by the landlord	$	668		$	−		$	−
Transfer of loans held for investment:
Reduction of investments in commercial finance assets	$	−		$	−		$	325,365
Termination of associated secured warehouse facility	$	−		$	−		$	(337,276	)
Activity on secured warehouse facilities related to bank loans:
Purchase of loans	$	−		$	−		$	(51,524	)
Repayments of borrowings to fund purchases of loans	$	−		$	−		$	(100,368	)
Proceeds from sale of loans	$	−		$	−		$	7,366
Principal payments received on loans	$	−		$	−		$	6,322
Settlement of loans traded, including use of escrow funds	$	−		$	−		$	(152,706	)
Acquisition of commercial finance assets:
Commercial finance assets acquired	$	−		$	−		$	412,439
Purchase of building and other assets	$	−		$	−		$	7,835
Goodwill acquired	$	−		$	−		$	28
Debt incurred for acquisitions	$	−		$	−		$	(391,176	)
Liabilities assumed	$	−		$	−		$	(21,176	)
Receipt of notes upon the resolution of real estate investments	$	−		$	−		$	1,500
Property received on foreclosure of a real estate loan:
Investment in real estate loan	$			$	(2,837	)	$	−
Investment in real estate owned	$			$	2,837		$	−
Effects from the deconsolidation of entities (1):
Cash	$	43		$	959		$	−
Restricted cash	$	−		$	10,651		$	−
Due from affiliates	$	−		$	(8,410	)	$	−
Receivables	$	9		$	(6,564	)	$	−
Loans held for investment	$	−		$	229,097		$	−
Investments in commercial finance-held for investment, net	$	−		$	185,784		$	−
Investments in unconsolidated entities	$	6		$	−		$	−
Property and equipment, net	$	1,638		$	−		$	−
Other assets	$	749		$	4,230		$	−
Accrued expense and other liabilities	$	(174	)	$	(7,540	)	$	−
Borrowings	$	(1,013	)	$	(401,162	)	$	−
Equity	$	(1,258	)	$	(7,045	)	$	−

(1) Reflects the deconsolidation of a real estate entity and two financial fund management partnerships during fiscal 2010 and two entities, Apidos CDO VI and LCFF, during fiscal 2009.  As a result of the deconsolidation of these entities, the amounts noted above were removed from the Company’s consolidated balance sheets.  The sum of the assets removed equates to the sum of the liabilities and equity that were similarly eliminated and, as such, there was no change in the Company’s net assets.

62

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 4 – INVESTMENTS IN COMMERCIAL FINANCE

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

	September 30, 2010								September 30, 2009
	Held for Investment			Held for Sale		Total			Held for Investment			Held for Sale		Total
Loans (1)	$	1,661		$	−	$	1,661		$	385		$	60,441	$	60,826
Direct financing leases, net		8,888			−		8,888			1,480			72,236		73,716
Future payment card receivables, net		316			−		316			3,774			−		3,774
Assets subject to operating leases, net (2)		2,211			−		2,211			−			10,024		10,024
Allowance for credit losses		(900	)		−		(900	)		(3,210	)		−		(3,210	)
Investments in commercial finance, net	$	12,176		$	−	$	12,176		$	2,429		$	142,701	$	145,130

(1) The interest rates on notes receivable generally range from 8% to 14%.

(2) Net of accumulated depreciation of $0 and $737,000 for commercial finance assets held for sale as of September 30, 2010 and 2009, respectively, and $96,000 and $0 for those commercial assets held for investment as of September 30, 2010 and 2009, respectively.

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

	September 30, 2010								September 30, 2009
	Held for Investment			Held for Sale		Total			Held for Investment			Held for Sale			Total
Total future minimum lease payments receivables	$	10,467		$	−	$	10,467		$	1,959		$	84,534		$	86,493
Initial direct costs, net of amortization		156			−		156			6			1,157			1,163
Unguaranteed residuals		421			−		421			17			3,376			3,393
Security deposits		(102	)		−		(102	)		(87	)		(69	)		(156	)
Unearned income		(2,054	)		−		(2,054	)		(415	)		(16,762	)		(17,177	)
Investments in direct financing leases, net	$	8,888		$	−	$	8,888		$	1,480		$	72,236		$	73,716

The following table summarizes the activity in the allowance for credit losses for commercial finance assets held for investment (in thousands):

	Years Ended September 30,
	2010			2009			2008
Balance, beginning of year	$	3,210		$	1,750		$	120
Provision for credit losses		3,307			6,410			7,505
Charge-offs		(5,704	)		(3,557	)		(6,099	)
Recoveries		87			107			224
Reduction due to sale of LCFF		−			(1,500	)		−
Balance, end of year	$	900		$	3,210		$	1,750

During the three months ended March 31, 2010, the Company revised its method of calculating credit losses on commercial finance assets to fully reserve, net of recoveries, all leases and loans over 180 days past due.

63

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 4 – INVESTMENTS IN COMMERCIAL FINANCE – (Continued)

Leases and loans on non-accrual status as of September 30, 2010 and 2009 totaled $930,000 and $1.9 million, respectively.  Future payment card receivables totaling $316,000 and $3.8 million as of September 30, 2010 and 2009, respectively, were all on the cost recovery basis of revenue recognition.

Lease and note terms extend over many years.  The contractual future minimum lease and note payments and related rental payments scheduled to be received on direct financing non-cancelable leases, notes receivable and operating leases that are held for investment for each of the five succeeding annual periods ending September 30, and thereafter, are as follows (in thousands):

	Notes Receivable		Direct Financing Leases		Operating Leases (1)
2011	$	695	$	2,449	$	819
2012		507		2,437		762
2013		318		2,374		677
2014		13		1,897		48
2015		43		1,283		−
Thereafter		85		27		−
	$	1,661	$	10,467	$	2,306

(1) Operating lease amounts as shown are net of the residual value, if any, at the end of the lease term.

NOTE 5 – INVESTMENTS IN REAL ESTATE

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

	September 30,
	2010			2009
Real estate loans:
Balance, beginning of year	$	4,447		$	17,413
Collection of principal		(2,926	)		(9,373	)
Foreclosure		−			(2,837	)
Interest received		−			(1,249	)
Charge-offs		(1,585	)		−
Accreted and accrued interest income		113			493
Balance, end of year		49			4,447
Less allowance for credit losses		(49	)		(1,585	)
Real estate loans, net		−			2,862
Real estate:
Ventures		9,727			8,189
Owned, net of accumulated depreciation of $3,989 and $3,212		17,387			17,872
Total real estate		27,114			26,061
Investments in real estate, net	$	27,114		$	28,923

The following table summarizes the activity in the allowance for credit losses on real estate loans (in thousands):

	Years Ended September 30,
	2010			2009		2008
Balance, beginning of year	$	1,585		$	1,129	$	629
Charge-offs		(1,585	)		−		−
Provision for credit losses		49			456		500
Balance, end of year	$	49		$	1,585	$	1,129

The Company has a $49,000 real estate loan on non-accrual status, which was fully reserved in fiscal 2010.  The interest foregone on this loan for fiscal 2010 and 2009 was $3,500 and $490, respectively.

64

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 6 − INVESTMENT SECURITIES

Components of investment securities are as follows (in thousands):

	September 30,
	2010		2009
Available-for-sale securities	$	21,530	$	19,500
Trading securities		828		−
Total investment securities, at fair value	$	22,358	$	19,500

Trading Securities.  The Company holds 123,719 shares of TBBK common stock valued at $828,000 in a Rabbi Trust for the Supplemental Employment Retirement Plan (“SERP”) for its former Chief Executive Officer (see Note 18).  The Company has decided to sell these shares in the next twelve months to support the SERP and, as such, has reclassified these investments from other assets to trading securities and recorded a charge of $329,000 for the other-than-temporary impairment loss on the TBBK stock in fiscal 2010.

Available-for-sale securities.  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			Fair Value
September 30, 2010:
CDO securities	$	5,515	$	1,047	$	(339	)	$	6,223
Equity securities		31,847		18		(16,558	)		15,307
Total	$	37,362	$	1,065	$	(16,897	)	$	21,530
September 30, 2009:
CDO securities	$	9,777	$	268	$	(1,800	)	$	8,245
Equity securities		30,180		−		(18,925	)		11,255
Total	$	39,957	$	268	$	(20,725	)	$	19,500

The CDO securities represent the Company’s retained equity interest in four and six CDO issuers that it has sponsored and manages at September 30, 2010 and 2009, respectively.  The investments held by the respective CDO issuers are sensitive to interest rate fluctuations and credit quality of the underlying assets held by the CDO issuers which, accordingly, has an impact on their fair value.

The Company holds approximately 2.4 million shares of RCC common stock as well as options to acquire 2,166 shares (exercise price of $15.00 per share; expire March 2015).  The Company also holds 18,972 shares of TBBK common stock in addition to those shares held in the SERP.  A portion of these investments are pledged as collateral on the Company’s secured corporate credit facility.  In September 2009, the Company sold 99,318 shares of TBBK for $601,000 and realized a loss of $393,000.

     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, except number of securities):

	Less than 12 Months						More than 12 Months
	Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses			Number of Securities
September 30, 2010:
CDO securities	$	−	$	−		−	$	3,980	$	(339	)		1
Equity securities		−		−		−		15,181		(16,558	)		1
Total	$	−	$	−		−	$	19,161	$	(16,897	)		2
September 30, 2009:
CDO securities	$	−	$	−		−	$	7,111	$	(1,800	)		4
Equity securities		−		−		−		11,255		(18,925	)		1
Total	$	−	$	−		−	$	18,366	$	(20,725	)		5

65

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 6 − INVESTMENT SECURITIES– (Continued)

The unrealized losses in the above table are considered to be temporary impairments due to market factors and are not reflective of credit deterioration.  The Company has performed credit analyses in relation to these investments and believes the carrying value of these investments to be fully recoverable over their expected holding period.  The Company considers, among other factors, the expected cash flows to be received from investments, recent transactions in the public markets, portfolio quality and industry sector of the investees when determining impairment.  The primary inputs used in producing the internally generated expected cash flows models are as follows:  (i) constant default rate (2%); (ii) loss recovery percen tage (70%); (iii) constant prepayment rate (20%); and (iv) reinvestment price on collateral (98% for the first year, 99% thereafter).  To determine the fair value of these CDO investments, the Company applied discounts rates of 22.5% to the U.S. bank loan CDOs and 27.5% for the European bank loan CDO.  With respect to its evaluation of its investment in RCC, the Company also takes into consideration its role as the external manager and the value of its management contract, which includes a substantial fee for termination of the manager.  Further, because of its more likely than not intent and ability to hold these investments, the Company does not consider these unrealized losses to be other-than-temporary impairments.

Other-than-Temporary Impairment Losses.  The Company has recorded charges for the other-than-temporary impairment of certain of its CDO investments.  In fiscal 2010, 2009 and 2008, the Company recorded charges of $480,000, $8.5 million and $14.5 million, respectively, for the other-than-temporary impairment of certain of its investments in CDOs, primarily those with investments in bank loans, financial institutions, and real estate ABS (which includes RMBS and CMBS).  Additionally, in fiscal 2010, the Company recorded a $329,000 charge for the other-than-temporary impairment of its investment in TBBK common stock held for the SERP as the Company intends to sell these securities during fiscal 2011.  In fiscal 2009, the Company recorded a charge of $73,000 for the other-than-temporary impairment of its investment in TBBK, formerly held for investment purposes, as management no longer had the intent to hold the security to recovery.

NOTE 7 – LOANS

Loans held for investment, net.  In December 2007, the Company closed Apidos CDO VI, a $240.0 million securitization of corporate loans, purchased all of the equity for $21.3 million and consolidated it in its financial statements.  As of March 31, 2009, the Company agreed to sell its interest in Apidos CDO VI, and accordingly, no longer consolidated it.

The following table summarizes the activity in the allowance for credit losses for the loan portfolio for the period prior to the sale of the Company’s interest in Apidos CDO VI (in thousands):

	Years Ended September 30,
	2010		2009			2008
Balance, beginning of year	$	−	$	1,595		$	−
Provision for credit losses		−		1,738			2,622
Charge-offs		−		(715	)		(1,027	)
Reduction due to the sale of interest		−		(2,618	)		−
Balance, end of year	$	−	$	−		$	1,595

NOTE 8 − 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):

	Range of Combined		September 30,
	Partnership Interests		2010		2009
Real estate investment entities		2% – 10%	$	9,317	$	11,918
Financial fund management partnerships		5% − 11%		3,705		3,429
Trapeza entities		33% − 50%		737		894
Commercial finance investment entities		1% − 6%		66		−
Investments in unconsolidated entities			$	13,825	$	16,241

66

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 8 − INVESTMENTS IN UNCONSOLIDATED ENTITIES- (Continued)

Two of the Trapeza entities that have incentive distributions, also known as carried interests, are subject to a potential clawback to the extent that such distributions exceed the cumulative net profits of the entities, as defined in the respective partnership agreements (see Note 22).  The general partner of those entities is equally owned by the Company and its co-managing partner.  Performance-based incentive fees in interim periods are recorded based upon a formula as if the contract were terminated at that date.  On a quarterly basis (interim measurement date), the Company quantifies the cumulative net profits/net losses (as defined under the Trapeza partnership agreements) and allocates income/loss to the limited and general partn ers according to the terms of such agreements.

NOTE 9 − VARIABLE INTEREST ENTITIES

Consolidated VIEs

Variable interests in the Company’s real estate segment primarily relate to subordinated financings in the form of mezzanine loans or unconsolidated real estate interests.  The Company had one and two interests in real estate loans as of September 30, 2010 and 2009, respectively, for which the Company was deemed to be the primary beneficiary of the VIE borrower and, therefore, consolidated the VIEs.  The Company’s maximum loss exposure on the one loan held at September 30, 2010 and the two loans it held at September 30, 2009 was limited to its investment.

The following table reflects the assets and liabilities of the one and two real estate VIEs as of September 30, 2010 and 2009, respectively, that were included in the Company’s consolidated balance sheets (in thousands):

	September 30,
	2010		2009
Cash	$	−	$	42
Property and equipment, net		1,072		2,868
Other assets		−		373
Total assets	$	1,072	$	3,283
Accrued expenses and other liabilities	$	416	$	170
Borrowings		−		1,057
Total liabilities	$	416	$	1,227

VIE Not Consolidated

In May 2008, the Company entered into a joint venture with an institutional partner to originate, invest in and manage distressed real estate assets.  Under the terms of the joint venture agreement, the institutional partner has provided a $500.0 million credit facility to RRE VIP Borrower, LLC (“VIP Borrower”), which was determined to be a VIE, to acquire and then manage discounted/distressed assets. The institutional partner receives the majority of the expected losses/residual returns and, as a result, was determined to be the primary beneficiary.  On December 1, 2009, the Company sold its interests in VIP Borrower to RCC at book value for $2.1 million.  The Company, however, has retained management of the joint venture a ssets and will continue to receive fees in connection with the acquisition, investment management and disposition of assets held by VIP Borrower as well as new assets acquired by the joint venture.

NOTE 10 − PROPERTY AND EQUIPMENT

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

	Estimated Useful	September 30,
	Life	2010			2009
Land		$	200		$	200
Building	39 years		1,666			1,666
Leasehold improvements	1-15 years		6,045			6,185
Furniture and equipment	3-10 years		12,397			12,699
Real estate assets – consolidated VIE	40 years		1,600			3,900
			21,908			24,650
Accumulated depreciation and amortization			(11,924	)		(11,215	)
Property and equipment, net		$	9,984		$	13,435

67

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 10 − PROPERTY AND EQUIPMENT – (Continued)

In January 2010, the Company received full payment of a loan to an entity previously consolidated as a VIE.  Due to the repayment of the loan, the VIE was deconsolidated, thereby eliminating $2.3 million of real estate assets and $633,000 of related accumulated depreciation from the consolidated balance sheet.

NOTE 11 − INTANGIBLE ASSETS

In the fourth quarter of fiscal 2010, the Company recognized a $2.8 million impairment loss for customer lists acquired by its commercial finance operating segment in fiscal 2007 due to the decline in the estimated future cash inflows to be generated by the acquired customer base.  The components of intangible assets consisted of the following (in thousands):

	Estimated Useful	September 30,
	Life	2010		2009
Customer lists	10 years	$	−	$	4,727
Accumulated amortization			−		(1,090	)
Intangible assets, net		$	−	$	3,637

Amortization of intangible assets totaled $809,000, $692,000 and $445,000 for fiscal 2010, 2009 and 2008, respectively.

NOTE 12 – BORROWINGS

The credit facilities and other debt of the Company and related borrowings outstanding are as follows (in thousands):

	As of September 30,
	2010				2009
	Amount of Facility		Borrowings Outstanding		Borrowings Outstanding
Commercial finance:
Short-term bridge financing	$	21,500	$	20,750	$	−
PNC Bank secured warehouse facility		−		−		136,500
	$	21,500		20,750		136,500
Corporate:
Secured revolving credit facilities:
TD Bank (1)	$	14,127		14,127		26,502
Sovereign Bank		−		−		577
	$	14,127		14,127		27,079
Senior Notes, net (2)				14,317		10,629
Note payable to RCC				2,000		−
Other debt				14,916		17,175
Total borrowings outstanding			$	66,110	$	191,383

(1) Borrowings outstanding do not reflect letters of credit of $401,000 and $246,000 at September 30, 2010 and 2009, respectively; rather, the amount of the facility as shown has been reduced by the letter of credit amounts.

(2) The Company’s outstanding Senior Notes are reflected net of an unamortized discount of $4.5 million and $4.9 million at September 30, 2010 and 2009, respectively, related to the fair value of detachable warrants that were issued with the Senior Notes.

68

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 12 – BORROWINGS − (Continued)

Commercial Finance – Short-term Bridge Financing

Guggenheim Securities, LLCand its affiliate(“Guggenheim”).  LEAF has a short-term bridge loan pursuant to which it may borrow up to $21.5 million.  The loan is in the form of a series of notes which mature on February 20, 2011 and are secured by equipment leases and loans.  Guggenheim is the lender under the notes and it releases funds as LEAF originates leases and notes.  Interest and principal are due on each class of notes on a monthly basis.   As of September 30, 2010, the principal balance of notes outstanding was $20.8 million, of which $10.1 million was held in escrow included in restricted cash, and the weighted average interest rate during fiscal 2010 was 8.2%.

Corporate − Secured Revolving Credit Facility

TD Bank, N.A. (“TD Bank”).  The Company has had a revolving credit facility with TD Bank since May 2007.  In November 2009, the facility with TD Bank was amended primarily to (i) extend the maturity date of the facility for an additional year to October 15, 2011, (ii) decrease the borrowing base to $20.0 million as of November 6, 2009, (iii) reduce the interest rate on the loan to (a) the prime rate of interest plus 3% with a floor of 7% or (b) LIBOR plus 4.5% with a floor of 7.5% and (iv) reduce the monthly reduction in maximum credit facility amount from $850,000 to $150,000 per month.  In addition, the Company is charged a 5.25% fee on a $401,000 outstanding letter o f credit.  As further required by the amendment, the Company reduced its outstanding borrowings to $15.0 million as of June 30, 2010.  In consideration for these modifications, the Company paid a fee of $345,000 to the lender.  The September 30, 2010 principal balance on the facility was $14.1 million, the maximum amount available (as reduced for letters of credit).    The line matures on October 15, 2011.

Borrowings are secured by a first priority security interest in certain of the Company’s assets and the guarantees of certain subsidiaries, including (i) the present and future fees and investment income earned in connection with the management of, and investments in, sponsored CDO issuers, (ii) a pledge of 18,972 shares of TBBK common stock, and (iii) the pledge of 1,321,657 shares of RCC common stock.  Availability under the facility is limited to the lesser of (a) 75% of the net present value of future management fees to be earned or (b) the maximum revolving credit facility amount.  Weighted average borrowings for fiscal 2010 and 2009 were $17.8 million and $39.6 million, respectively, at an effective interest rate of 10.7% and 8.7%, res pectively.  As of September 30, 2010, the line was fully utilized.

Corporate – Senior Notes

On September 29, 2009, the Company sold $15.6 million of its 12% senior notes due 2012 (the “Senior Notes”) in a private placement to certain senior executives and shareholders of the Company.  The Senior Notes were sold with detachable 5-year warrants which provide the purchasers the right to acquire 3,052,940 shares of the Company’s common stock at an exercise price of $5.11 per share.  On October 6, 2009, the Company completed the offering with the sale of an additional $3.2 million of Senior Notes and detachable warrants to purchase 637,255 shares with the same terms as the original issue.  In the aggregate, the Company sold $18.8 million of Senior Notes with detachable warrants to purchase 3,690,195 shares. &# 160;The Senior Notes require quarterly payments of interest in arrears beginning December 31, 2009.  The notes are unsecured, senior obligations and are junior to the Company’s existing and future secured indebtedness.  As required by the TD Bank credit agreement, the Company paid down outstanding borrowings on the TD facility with $10.6 million of proceeds from the offering.  In addition, until all of the Senior Notes are paid in full, retired or repurchased, the Company cannot declare or pay future quarterly cash dividends in excess of $0.03 per share without the prior approval of all of the holders of the Senior Notes unless basic earnings per common share from continuing operations from the preceding fiscal quarter exceed $0.25 per share.

The proceeds from the Senior Notes were allocated to the notes and the warrants based on their relative fair values.  The Company used a Black-Scholes pricing model to calculate the fair value of the warrants at $4.9 million for the first issuance and $1.0 million for the subsequent issuance.  The model included assumptions regarding the Company’s dividend yield (2.3%), the Company’s stock price volatility (44.1%) risk-free interest rate (2.3%) and the expected warrant life of three years.  The Company accounted for the warrants as an increase to additional paid in capital with an offsetting discount to the Senior Notes.  The discount is being amortized into interest expense over the 3-year term of the Senior Notes using the effective interest method.  The weighted average interest rate inclusive of the discount was 20.0% for fiscal 2010.

69

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 12 – BORROWINGS − (Continued)

Note payable to RCC

In January 2010, RCC advanced $2.0 million to the Company under an 8% promissory note that matures on January 14, 2015.  Interest is payable quarterly in arrears and requires principal repayments upon the receipt of distributions from one of the Company’s real estate investment funds.  The principal balance of the note was $2.0 million at September 30, 2010.

Other Debt

     Mortgages. In November 2007, in conjunction with the acquisition of Dolphin Capital Corp., an equipment leasing company, the Company entered into a $1.5 million first mortgage due December 2037 on an office building in Moberly, Missouri.  The 8% mortgage, with an outstanding balance of $1.5 million at September 30, 2010 and 2009, requires monthly payments of principal and interest of $11,100.

     In June 2006, the Company obtained a $12.5 million first mortgage on a hotel property in Savannah, Georgia.  The 7.1% mortgage is due on July 6, 2011, and requires monthly payments of principal and interest of $84,200.  The principal balance as of September 30, 2010 and 2009 was $12.0 million and $12.1 million, respectively.

     Secured note.  At September 30, 2010 and 2009, the Company had an outstanding balance of $92,000 and $302,000, respectively, on a secured note with Sovereign Bank.  The 6.9% note, secured by the furniture and computer equipment of the Company’s commercial finance business, requires monthly payments of principal and interestof $18,800 over five years and matures in February 2011.

     Capital leases.  The Company has entered into various capital leases for the purchase of equipment at interest rates ranging from 5.1% to 8.4% and terms ranging from three years to five years.  The principal balance of these leases at September 30, 2010 and 2009 was $395,000 and $684,000, respectively.

     Term notes.  In September 2008, the Company entered into a three-year unsecured term note for $473,000 to finance the purchase of software.  The loan requires 36 monthly principal and interest payments of $14,200.  The outstanding principal balance at September 30, 2010 and 2009 was $165,000 and $323,000, respectively.

In August 2010, the Company entered into two additional term notes totaling $901,000 to finance the payment of various insurance policy premiums.  The notes are secured by the return premiums, dividend payments and certain loss payments of the insurance policies and require nine monthly principal and interest payments of $102,200.  The principal balance outstanding at September 30, 2010 was $803,000.

Facilities & Loans Terminated and/or Transferred

Commercial Finance − PNC, N.A. (“PNC Bank”).  LEAF had a revolving warehouse credit facility with a group of banks led by PNC Bank since July 2006.  Amendments to the credit facility during fiscal 2010 reduced the maximum borrowing capacity from $150.0 million to $100.0 million as of March 24, 2010.  In May 2010, the loan was fully repaid and the line was terminated.  The interest rate on base rate borrowings was the base rate plus 4% and on London Interbank Offered Rate (“LIBOR”) based borrowings was LIBOR plus 5%.  The base rate was the highest of (i) the prime rate, (ii) the federal funds rate plus 0.5%, or (iii) LIBOR plus 1%.&# 160; Weighted average borrowings for fiscal 2010 and 2009 were $77.0 million and $133.7 million, respectively, at an effective interest rate of 7.7% and 5.0%, respectively.

Financial Fund Management − Secured note.  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, which required quarterly payments of principal and interest at LIBOR plus 1.0%, was fully repaid in July 2010.

Corporate – Term notes.  In August and September 2009, the Company entered into three term notes totaling $971,000 to finance the payment of various insurance policies.  The loans, which required nine monthly principal and interest payments of $110,600, were fully repaid in May 2010.

Corporate − Sovereign Bank secured revolving credit facility.  In July 1999, the Company entered into a revolving credit facility with Sovereign Bank.  Upon the maturity of the facility on February 28, 2010, the Company repaid the remaining balance and the facility was terminated.  The interest charged on outstanding borrowings was at the prime rate.  Weighted average borrowings for fiscal 2010 and 2009 were $234,000 and $3.1 million, respectively, at an effective interest rate of 3.0% and 5.1%, respectively.

70

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 12 – BORROWINGS − (Continued)

Facilities & Loans Terminated and/or Transferred- (Continued)

Real Estate − Mortgage. In January 2010, the Company received full payment of a loan from an entity which had previously consolidated as a VIE.  Due to the repayment, the VIE was deconsolidated, thereby eliminating a $1.1 million mortgage held by the VIE from the Company’s consolidated balance sheets.

Commercial Finance – Morgan Stanley secured revolving credit facility and LCFF subordinated notes. In conjunction with the sale of a portion of LCFF in March 2009 and the corresponding deconsolidation of LCFF, a total of $187.6 million of debt financing was eliminated from the balance sheet, as described below:

● a $250.0 million line of credit with Morgan Stanley with an interest rate of one-month LIBOR plus 1.15%.  Weighted average borrowings for fiscal 2009 were $67.5 million, at an effective interest rate of 4.9%;   and

● $9.4 million of LCFF fixed subordinated notes.  Weighted average borrowings for fiscal 2009 were $2.6 million, at an effective interest rate of 10.9%.

Financial Fund Management – Apidos CDO VI senior notes.  Apidos CDO VI issued $218.0 million of its senior notes in December 2007 which were non-recourse to the Company.  The Apidos notes consisted of the following classes/interest rates: (i) $181.5 million of class A-1 notes at LIBOR plus 0.64%; (ii) $6.0 million of class A-2 notes LIBOR plus 1.25%; (iii) $13.0 million of class B notes at LIBOR plus 2.25%; (iv) $8.0 million of class C notes at LIBOR plus 4.0%; and (v) $9.5 million of class D notes at LIBOR plus 6.75%.  For the period prior to the sale of Apidos CDO VI in March 2009, the weighted average interest rate for these notes was 4.6%.  Apidos CDO VI was dec onsolidated as a result of the sale and the notes were eliminated from the consolidated balance sheets.

Debt repayments

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

2011	$	35,975
2012		27,974
2013		3,309
2014		37
2015		1,963
Thereafter		1,355
	$	70,613

Covenants

     The Company’s corporate secured revolving credit facility is subject to certain financial covenants, which are customary for the type and size of its related debt facilities, including debt service coverage and debt to equity ratio requirements.  The debt to equity ratio restricts the amount of recourse debt the Company can incur based on a ratio of recourse debt to net worth.  The Company was in compliance with all of its debt covenants as of September 30, 2010.

71

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 13 – SERVICING LIABILITY – COMMERCIAL FINANCE

During fiscal 2010, the Company sold a portfolio of leases and loans to RCC.  Although it will remain as the servicer for the portfolio, the Company will not receive any servicing fees.  Accordingly, the Company recorded a $2.5 million liability for the present value of the estimated costs to service the portfolio.  The table below summarizes the activity for the servicing liability (in thousands):

	Year Ended
	September 30,
	2010
Balance, beginning of year	$	−
Additions		(2,478	)
Amortization (1)		116
Balance, end of year	$	(2,362	)

(1) Amortization of the servicing liability is included in commercial finance revenues in the consolidated statements of operations.

NOTE 14 – COMPREHENSIVE LOSS

Comprehensive loss includes net loss 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, are referred to as “other comprehensive loss” and for the Company include primarily changes in the fair value, net of tax, of its investment securities available-for-sale and hedging contracts.  Other comprehensive loss also includes the Company’s share of unrealized losses on hedging contracts held by the commercial finance investment partnerships.

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

	Years Ended September 30,
	2010			2009			2008
Net loss	$	(16,675	)	$	(16,534	)	$	(31,248	)
Other comprehensive (loss) income:
Unrealized gain (loss) on investment securities available-for-sale, net of tax of $1,481, $(1,391) and $(11,375)		2,160			638			(25,872	)
Less: reclassification for losses realized, net of tax of $568, $3,484 and $5,524		870			3,844			16,784
		3,030			4,482			(9,088	)
Minimum pension liability adjustments, net of tax of $(223), $(673) and $(941)		(257	)		(569	)		(1,680	)
Less:  reclassification for losses realized, net of tax of $116, $84 and $0		147			108			−
		(110	)		(461	)		(1,680	)
Unrealized gains (losses) on hedging contracts, net of tax of $109, $(2,256), and $(1,101)		192			(768	)		(2,209	)
Transfer of interest rate swaps and caps to affiliated entities, net of tax of $0, $3,574 and $0		−			3,170			−
Swap termination due to expiration, net of tax of $0, $233 and $0		−			319			−
Foreign currency translation loss		(384	)		(280	)		(628	)
Comprehensive loss		(13,947	)		(10,072	)		(44,853	)
Less:  Comprehensive loss attributable to noncontrolling interests		3,249			386			2,407
Comprehensive loss attributable to common shareholders	$	(10,698	)	$	(9,686	)	$	(42,446	)

72

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 14 – COMPREHENSIVE LOSS – (Continued)

The following are changes in accumulated other comprehensive loss by category (in thousands):

	Investment Securities Available-for-Sale			Cash Flow Hedges (1)			Foreign Currency Translation Adjustments			SERP Pension Liability			Total
Balance, September 30, 2008, net of tax of $(10,202), $(1,804), $0 and (1,186)	$	(16,662	)	$	(2,503	)	$	296		$	(1,936	)	$	(20,805	)
Changes during fiscal 2009		3,871			2,115			(280	)		(461	)		5,245
Balance, September 30, 2009, net of tax of $(8,119), $(252), $0 and $(1,859)		(12,791	)		(388	)		16			(2,397	)		(15,560	)
Changes during fiscal 2010		3,030			217			(384	)		(110	)		2,753
Balance, September 30, 2010, net of tax of $(6,071), $(146), $0 and $(1,966)	$	(9,761	)	$	(171	)	$	(368	)	$	(2,507	)	$	(12,807	)

(1) Included in accumulated other comprehensive loss as of September 30, 2010 and 2009 were net unrealized losses of $171,000 (net of tax benefit of $146,000 and noncontrolling interest of $25,000) and $388,000 (net of tax benefit of $253,000), respectively, related to hedging instruments held by the LEAF investment funds in which the Company owns an equity interest.  The Company has no other hedging activity.

NOTE 15 – NONCONTROLLING INTERESTS

     Effective October 1, 2009, minority interests, previously classified as a liability, are now presented as noncontrolling interests as a separate component of equity.  In addition, minority interest expense of $1.6 million and $5.0 million (net of taxes of $0 and $762,000) for fiscal 2009 and 2008, respectively, has been reclassified as and included in noncontrolling interests.

     Additionally, losses are attributed to a noncontrolling interest even when the carrying value of the noncontrolling interest has been reduced to zero.  For fiscal 2010, the Company attributed losses to noncontrolling interests of $3.2 million (net of tax of $1.7 million), respectively, related to its commercial finance and financial fund management operations.  If the Company had not followed the new guidance, net loss attributable to noncontrolling interests, and net loss and per share amounts attributable to common shareholders would have been as follows (in thousands, except per share amounts):

	Year Ended
	September 30,
	2010
Loss from continuing operations, net of tax	$	(17,297	)
Net loss attributable to noncontrolling interests		63
Discontinued operations, net		622
Net loss attributable to common shareholders	$	(16,612	)
Basic loss per share attributable to common shareholders:
Continuing operations	$	(0.91	)
Discontinued operations		0.03
Net loss	$	(0.88	)
Weighted average shares outstanding		18,942
Diluted loss per share attributable to common shareholders:
Continuing operations	$	(0.91	)
Discontinued operations		0.03
Net loss	$	(0.88	)
Weighted average shares outstanding		18,942

73

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 16 - INCOME TAXES

The following table details the components of the Company's benefit for income taxes from continuing operations (in thousands):

	Years Ended September 30,
	2010			2009			2008
Current provision:
Federal	$	1,379		$	2,238		$	1,098
State		535			475			−
Foreign		−			32			−
Total current		1,914			2,745			1,098
Deferred:
Federal		(5,795	)		(10,777	)		(13,707	)
State		(223	)		(2,472	)		(1,770	)
Foreign		1,454			−			(554	)
Total deferred		(4,564	)		(13,249	)		(16,031	)
Income tax benefit	$	(2,650	)	$	(10,504	)	$	(14,933	)

A reconciliation between the federal statutory income tax rate and the Company's effective income tax rate is as follows:

	Years Ended September 30,
	2010		2009		2008
Statutory tax rate		35%		35%		35%
State and local taxes, net of federal benefit		12		5		5
Valuation allowance for deferred tax assets		(18)		4		(4)
Equity compensation expense		(8)		(1)		(1)
Deferred tax assets for state/local net operating leases		−		(5)		1
Deferred tax adjustment		(7)		−		−
Other items		(1)		2		(3)
		13%		40%		33%

Deferred tax assets are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets.  These temporary differences will result in taxable or deductible amounts in future years.The components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	September 30,
	2010			2009
Deferred tax assets related to:
Federal, foreign, state and local loss carryforwards	$	17,540		$	6,533
Capital loss carryforwards		14,319			11,743
Unrealized loss on investments		10,079			11,955
Employee stock option and restricted stock awards		3,456			4,653
Investment in partnership interests		1,756			7,757
Provision for credit losses		−			1,670
Accrued expenses		277			−
Investments in real estate assets		−			2,310
Property and equipment basis differences		774			−
Gross deferred tax assets		48,201			46,621
Less:  valuation allowance		(4,498	)		(965	)
Total deferred tax assets, net	$	43,703		$	45,656
Deferred tax liabilities related to:
Accrued expenses	$	−		$	(484	)
Property and equipment basis differences		−			(1,562	)
Provision for credit losses		(341	)		−
Investments in real estate assets		(70	)		−
Total deferred tax liabilities	$	(411	)	$	(2,046	)

74

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 16 - INCOME TAXES – (Continued)

At September 30, 2010, the Company had federal, foreign, state and local net operating tax loss carryforwards ("NOLs") of $178.3 million that will expire between fiscal 2011 and 2031 which result in a deferred tax asset of $17.5 million.  The Company believes it will be able to utilize up to $93.5 million of these NOLs (tax effected benefit of $13.0 million) prior to their expiration; therefore, it has increased its gross valuation allowance from $64.3 million to $84.8 million (tax effected expense of $4.5 million).  Management will continue to assess its estimate of the amount of NOLs that the Company will be able to utilize.  Furthermore, its estimate of the required valuation allowance could be adjusted in the future if projections of taxable income are revised.  Management believes it is more likely than not that the other net deferred tax assets will be realized based on tax planning strategies that will generate future taxable income during the periods in which these temporary differences become deductible.  

The Company is subject to examination by the U.S. Internal Revenue Service (“IRS”) and by the taxing authorities in states in which the Company has significant business operations, such as Pennsylvania and New York.  The Company is currently undergoing an IRS examination for fiscal 2008.  The Company is not subject to IRS examination for fiscal years before 2007 and is not subject to state and local income tax examinations for fiscal years before 2004.

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 Company classifies any tax penalties as general and administrative expenses and any interest as interest expense.  The Company does not have any unrecognized tax benefits that would affect the effective tax rate.

NOTE 17 – EARNINGS (LOSS) PER SHARE

Basic (loss) earnings per share (“Basic EPS”) is computed using the weighted average number of common shares outstanding during the period.  The diluted EPS computation (“Diluted EPS”) takes into account the effect of potential dilutive common shares, consisting primarily of stock options, warrants and director deferred shares.

Effective October 1, 2009, the Company adopted and retrospectively applied a FASB-issued standard that requires nonvested share-based awards that contain rights to receive non-forfeitable dividends or dividend equivalents to be included in computing earnings per share.  The adoption of this standard increased the weighted average number of shares by 672,000 for fiscal 2009, which reduced the loss per common share by $0.03 from the previously reported loss per common share of $0.84 to $0.81, as revised.  The impact to fiscal 2008 was an increase in the weighted average shares by 286,000, which reduced the loss per common share by $0.03 from the previously reported loss per common share of $1.50 to $1.47, as revised.

     For fiscal 2010, 2009 and 2008, Diluted EPS shares were the same as Basic EPS shares because the effect of potential securities would have been antidilutive.  As of September 30, 2010, 2009 and 2008, outstanding options to purchase 2.5 million, 2.5 million and 3.4 million shares of common stock at a weighted average price of $9.03, $9.04 and $8.49 per share, respectively, were excluded from the Dilutive EPS calculation along with warrants to purchase 3,690,000 and 3,053,000 shares of common at a weighted average exercise price of approximately $5.11 per share as of September 30, 2010 and 2009, respectively.  Additionally as of September 30, 2010, 2009 and 2008, there were 69,300, 69,300 and 99,548 share s, respectively, of restricted stock (at a fair value of $16.42 per share) outstanding that did not have participating rights and, as such, were also excluded from Diluted EPS shares.

NOTE 18 - BENEFIT PLANS

Employee stock options.  As of September 30, 2010, the Company has four employee stock plans: the 1997 Plan, the 1999 Plan, the 2002 Plan and the 2005 Plan.  Equity awards from these plans generally become exercisable 25% per year after the date of grant but may vest immediately at management’s discretion and expire no later than ten years from the date of grant.

The 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 Plan, the Company may also grant restricted stock, stock units, performance shares, stock awards, dividend equivalents and other stock-based awards.  The Company does not record a tax benefit for option awards at the grant date since the options it issues are generally ISOs and employees have typically held the stock received on exercise for the requisite holding period.

75

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 18 - BENEFIT PLANS − (Continued)

The Company did not grant any options during fiscal 2010 or 2009.  In fiscal 2008, the Company granted 102,000 employee stock options and computed their fair value as of the grant date using the Black-Scholes pricing model with the following assumptions:

	Year Ended September 30,
	2008
Fair value of stock options granted	$	3.49
Expected life (years)		6.3
Expected stock volatility		47.4%
Risk-free interest rate		3.9%
Dividend yield		2.9%

At September 30, 2010, 2009 and 2008, the Company had unamortized compensation expense related to unvested stock options of $202,000, $453,000 and $1.1 million, respectively.  For fiscal 2010, 2009 and 2008, the Company recorded option compensation expense of $226,000, $613,000, and $1.0 million, respectively.

Restricted stock.  During fiscal 2010, 2009 and 2008, the Company issued 399,156, 225,839 and 505,817 shares of restricted stock, respectively, valued at $1.7 million, $828,000 and $6.8 million, respectively, and recorded compensation expense of $2.7 million, $3.4 million and $3.4 million (including $232,000, $600,000 and $468,000 of expense related to the accelerated vesting of awards for certain terminated employees), respectively.

In April 2009, LEAF granted to its senior management 215,000 shares of its restricted stock valued at $189,000, of which half vested immediately and 25% vested at one and two years after the grant date.  These shares were issued from the 300,000 restricted shares that LEAF had repurchased in December 2008.  The Company recorded compensation expense related to the LEAF restricted stock and subsidiary units of $57,000, $142,000 and $17,000 for fiscal 2010, 2009 and 2008, respectively.

Performance-based awards.  The Company also issues performance-based awards which are earned based on the achievement of specified goals as of a designated measurement date.  The goals typically include such measures as earnings per share, return on equity, revenues and assets under management.  No performance shares were awarded in fiscal 2010.  During fiscal 2009 and 2008, the Company awarded 100,000 and 222,203 performance-based restricted stock awards, respectively, and recorded compensation expense of $96,000 and $113,000 during fiscal 2010 and 2009, respectively.  No compensation expense for performance-based awards was recorded in fiscal 2008.

Unearned Performance-based Restricted Stock	Shares
Outstanding, beginning of year		260,364
Awarded		−
Earned		(20,589	)
Forfeited		(139,775	)
Outstanding, end of year		100,000

Nonvested Performance-based Restricted Stock	Shares
Outstanding, beginning of year		20,589
Earned		−
Issued		(20,589	)
Forfeited		−
Outstanding, end of year		−

76

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 18 - BENEFIT PLANS − (Continued)

Aggregate information regarding the Company’s employee stock options as of September 30, 2010 is as follows:

				Weighted			Weighted
				Average			Average		Aggregate
				Exercise			Contractual		Intrinsic
Stock Options Outstanding	Shares			Price			Life		Value
Balance, beginning of year		2,538,616		$	9.04
Granted		−		$	−
Exercised		(14,453	)	$	(3.91	)
Forfeited		(17,563	)	$	(15.58	)
Balance, end of year		2,506,600		$	9.03			3.0	$	1,298,000
Exercisable, September 30, 2010		2,446,100		$	8.93
Available for grant		220,407	(1)

(1) Reduced for restricted stock awards granted, net of forfeitures, under the Company’s 2005 Plan.

The following table summarizes the activity for nonvested employee stock options and restricted stock (excluding performance-based awards) during fiscal 2010:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Stock Options
Outstanding, beginning of year		103,938		$	5.47
Granted		−		$	−
Vested		(41,438	)	$	(4.92	)
Exercised		−		$	−
Forfeited		(2,000	)	$	(2.64	)
Outstanding, end of year		60,500		$	(5.06	)
Nonvested Restricted Stock
Outstanding, beginning of year (1)		552,461		$	11.32
Granted		399,156		$	10.25
Vested		(186,608	)	$	(12.57	)
Forfeited		(23,923	)	$	(4.18	)
Outstanding, end of year (1)		741,086		$	10.66

(1) At September 30, 2010 and 2009, includes 69,300 shares of nonvested restricted stock that do not have dividend equivalent rights and, therefore, were excluded from the shares reflected as outstanding in the consolidated balance sheets.

Deferred stock and deferred compensation plans.  In addition to the employee stock plans, the Company has two plans for its non-employee directors (“Eligible Directors”), the 1997 Director Plan and the 2002 Director Plan.  Each unit granted under these plans represents the right to receive one share of the Company’s common stock.

The 1997 Director Plan has issued all of its authorized 173,450 units.  As of September 30, 2010 and 2009, there were 104,070 units vested and outstanding under this plan.

     Eligible Directors are eligible to participate in the 2002 Director Plan.  Upon becoming a director, each Eligible Director receives units equal to a share compensation amount divided by the closing price of the Company’s common stock on the date of grant.  Eligible Directors receive an additional unit award on each anniversary of the date of initial grant equal to their share compensation divided by the closing price of the Company’s common stock on the date of grant.  Units vest on the later of: (i) the fifth anniversary of the date the recipient became an Eligible Director and (ii) the first anniversary of the grant of those units, except that units will vest sooner upon a change in control or death or disability of an Eligible D irector, provided the Eligible Director has completed at least six months of service.  Upon termination of service by an Eligible Director, shares of common stock are issued for vested units and all nonvested units are forfeited.  The 2002 Director Plan provides for the issuance of 173,450 units and terminates on April 29, 2012.  As of September 30, 2010, there were 113,437 units outstanding of which 79,387 were vested.

77

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 18 - BENEFIT PLANS − (Continued)

Aggregate information regarding the Company’s two director plans at September 30, 2010 is as follows:

	Shares		Weighted Average Grant Date Fair Value
Director Units
Outstanding, beginning of year		191,275	$	6.63
Granted		26,232	$	5.15
Outstanding, end of year		217,507	$	6.57
Vested units		183,457	$	6.59
Available for grant		39,019

The following table summarizes the activity for outstanding nonvested director units during fiscal 2010:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Director Units
Outstanding, beginning of year		43,519		$	8.61
Granted		26,232		$	5.15
Vested		(35,701	)	$	(6.93	)
Forfeited		−		$	−
Outstanding, end of year		34,050		$	7.71

Employee Stock Ownership Plan.  The Company sponsors an Employee Stock Ownership Plan (“ESOP”) which is a qualified non-contributory retirement plan established to acquire shares of the Company’s common stock for the benefit of its employees who are 21 years of age or older, have completed 1,000 hours of service and been employed by the Company for one year.  Contributions to the ESOP were funded by the Company as set forth in the plan.  The ESOP used a loan from the Company to acquire 105,000 shares of the Company's common stock.  The loan was fully repaid in fiscal 2008 and all shares held by the Plan have been allocated to participants’ accounts.  Compensation expense related to the plan was $497,000 for fiscal 2008 (none in fiscal 2010 or 2009).  Vested shares held by the plan are distributed upon the termination of the participant’s employment with the Company or upon the termination of the ESOP.  In December 2008, the Company filed an application under the voluntary correction program ("VCP") with the Internal Revenue Service (“IRS”) in order to correct certain compliance errors that were made with respect to the ESOP.  The IRS has concluded the VCP process and the Company is currently making the necessary corrections pursuant to the final compliance statement.  Additionally, in April 2010, the Company reached a settlement with the U.S. Department of Labor (“DOL”) relating to the ESOP annual report for fiscal 2007.  Furthermore, the DOL audited the ESOP and is auditing the Resource America, Inc. Investment Savings Plan (“401k Plan”) for the plan years from 2005 to 2009 (the "DOL Audit").  The DOL has closed the portion of the DOL Audit with respect to the ESOP and issued a formal closing letter.

Employee 401(k) Plan.  The Company sponsors a qualified 401(k) Plan to enable employees to save for their retirement on a tax deferred basis.  Employees are eligible to make elective deferrals commencing on the first day of the month after their date of hire.  The Company will match 50% of such deferrals, limited to 10% of an employee’s annual compensation, after the completion of 1,000 hours of service and having been employed by the Company for one year.  The match contribution vests over a period of five years.  In May 2010, the Company discovered errors in the calculation of the employer match and the calculation of the vested percentages for some employees .  The Company is working to quantify the extent of the correction needed, and intends to file under the VCP program to correct these compliance errors.  The Company recorded compensation expense of $1.1 million, $951,000 and $968,000 for matching contributions for fiscal 2010, 2009 and 2008, respectively.

SERP. The Company established a SERP, which has Rabbi and Secular Trust components, for Edward E. Cohen (“E. Cohen”), while he was the Company’s Chief Executive Officer.  The Company pays an annual benefit equal to $838,000 during his lifetime or for a period of 10 years from June 2004, whichever is longer.  The 1999 Trust, a secular trust, purchased and holds 100,000 shares of the common stock of TBBK ($669,000 fair value at September 30, 2010).  The Company holds an additional 123,719 shares of TBBK common stock as well as $50,000 in cash at September 30, 2010 to support the Rabbi Trust portion of the SERP.  At September 30, 2009, the Company held $850 ,000 of other equity securities in the Rabbi Trust which were sold during fiscal 2010.

78

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 18 - BENEFIT PLANS − (Continued)

The components of net periodic benefit costs for the SERP were as follows (in thousands):

	Years Ended September 30,
	2010			2009			2008
Interest cost	$	430		$	484		$	499
Less: expected return on plan assets		(59	)		(53	)		(190	)
Plus: Amortization of unrecognized loss		263			192			−
Net cost	$	634		$	623		$	309

The reconciliation of the beginning and ending balances for the SERP benefit obligation and fair value of plan assets, comprised entirely of equity securities, as well as the funded status of the Company’s SERP liability, is as follows (in thousands):

	September 30,
	2010			2009
Projected benefit obligation, beginning of year	$	7,486		$	6,472
Interest cost		430			484
Actuarial loss		548			1,368
Benefit payments		(838	)		(838	)
Projected benefit obligation, end of year	$	7,626		$	7,486
Fair value of plan assets, beginning of year	$	979		$	884
Actual gain (loss) on plan assets		127			95
Fair value of plan assets, end of year	$	1,106		$	979
Unfunded status	$	(6,520	)	$	(6,507	)
Unrecognized net actuarial loss		4,473			4,256
Net accrued cost	$	(2,047	)	$	(2,251	)
Amounts recognized in the consolidated balance sheets consist of:
Accrued benefit liability	$	(6,520	)	$	(6,507	)
Accumulated other comprehensive loss		2,507	(1)		2,397
Deferred tax assets		1,966			1,859
Net liability recognized	$	(2,047	)	$	(2,251	)

(1) The estimated net loss for the plan that is expected to be amortized from accumulated other comprehensive loss into net periodic pension benefit cost over the next fiscal year is $297,000.  The unrealized loss included in accumulated other comprehensive loss related to the SERP was $2.5 million and $2.4 million as of September 30, 2010 and 2009, respectively.

The SERP is expected to make benefit payments based on the same assumptions used to measure the Company’s benefit obligation at September 30, 2010 (5% discount rate, 6% expected return on assets) as follows (in thousands):

2011	$	824
2012		796
2013		767
2014		736
2015		702
Thereafter		1,653
	$	5,478

79

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 19 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

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

	September 30,
	2010		2009
Receivables from managed entities and related parties, net:
Commercial finance investment entities (1)	$	41,722	$	36,285
Real estate investment entities		18,491		10,905
Financial fund management investment entities, net		3,065		3,523
RCC		2,811		4,101
Other		327		233
Receivables from managed entities and related parties	$	66,416	$	55,047
Payables due to managed entities and related parties, net:
Real estate investment entities	$	122	$	1,284
RCC		34		−
Payables to managed entities and related parties	$	156	$	1,284

(1) Reflects discounts of $30,000 and $263,000 recorded in fiscal 2010 and 2009, respectively, in connection with management fees and reimbursed expenses that the Company expects to receive in the future.  In addition, the Company recorded a $1.1 million reserve for credit losses during fiscal 2010 related to management fees owed from one of its investment entities that, based on a change in estimated cash distributions, is not expected to be collectible.

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

	Years Ended September 30,
	2010			2009			2008
Fees from unconsolidated investment entities:
Real estate(1)	$	12,637		$	11,343		$	9,407
Commercial finance (2)		10,637			20,168			35,193
Financial fund management(3)		3,445			3,105			7,996	(4)
RCC:
Management, incentive and servicing fees		10,938			8,181			7,480
Dividends		2,278			3,405			2,421
Reimbursement of costs and expenses		1,794			600			636
Commitment fee		−			180			−
Resource Real Estate Opportunity REIT, Inc. – reimbursement of costs and expenses		1,824			−			−
Atlas Energy - reimbursement of net costs and expenses		871			1,369			1,269
1845 Walnut Associates Ltd. - payment of rent and operating expenses		(567	)		(475	)		(549	)
Ledgewood P.C. - payment for legal services		(295	)		(549	)		(1,255	)
9 Henmar LLC - payment of broker/consulting fees		(55	)		(81	)		(417	)

(1) Reflects discounts of $463,000, $394,000 and $956,000 recorded in fiscal 2010, 2009 and 2008 in connection with management fees the Company expects to receive in future periods.

(2) During fiscal 2010 and 2009, the Company waived $3.8 million and $425,000, respectively, of its fund management fees from four and one of its investment entities, respectively.

(3) For fiscal 2010, excludes a $2.3 million gain on the repurchase of limited partner interests in two of the Trapeza partnerships.  For fiscal 2009, excludes a $1.7 million reduction in the Company’s clawback liability associated with two Trapeza partnerships.  For fiscal 2008, excludes the $11.2 million non-cash incentive fee on the unrealized appreciation in the book value of Trapeza partnerships.

(4) Reflects a $2.3 million discount recorded in fiscal 2008 in connection with subordinate and incentive management fees that the Company expects to receive in future periods.

80

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 19 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

Relationship with RCC. Since March 2005, the Company has had a management agreement with RCC pursuant to which it provides certain services, including investment management and certain administrative services to RCC.  The agreement, which had an original maturity date of March 31, 2009, continues to automatically renew for one-year terms unless at least two-thirds of the independent directors or a majority of the outstanding common shareholders agree to not renew it.  The Company receives a base management fee, incentive compensation and reimbursement for out-of-pocket expenses.  The base management fee is equal to 1/12th of the amount of RCC’s equity, as defined by the management agreement, multiplied by 1.50%.  In October 2009 and January 2010, the management agreement was further amended such that RCC will directly reimburse the Company for the wages and benefits for its Chief Financial Officer, an executive officer who devotes all of his time to serve as RCC’s Chairman of the Board, and three accounting professionals, each of whom will be exclusively dedicated to the operations of RCC and a director of investor relations who will be 50% dedicated to RCC's operations.  In August 2010, the agreement was further amended to reduce the incentive management fee earned by the Company for any fees paid directly by RCC to employees, agents and/or affiliates of the Company with respect to profits earned by a taxable REIT subsidiary of RCC.

In January 2010, RCC advanced $2.0 million to the Company under an 8% promissory note that matures on January 14, 2015.  Interest is payable quarterly in arrears and requires principal repayments upon the receipt of distributions from one of the Company’s real estate investment entities.

In May 2009, the Company loaned RCC $4.5 million.  RCC repaid the loan the same day and paid the Company a commitment fee of $180,000.

LEAF originates and manages leases and loans on behalf of RCC.  The leases and loans are typically sold to RCC at fair value plus an acquisition fee of 1%.  LEAF also typically receives a 1% fee to then service the assets.  However, during fiscal 2010, LEAF sold approximately $116.0 million of leases and loans to RCC for which it LEAF will not receive acquisition or servicing fees and, accordingly, recognized a loss of $7.5 million.  The loss included an estimated loss reserve of $3.0 million (up to a maximum of approximately $5.9 million of delinquent assets can be returned), a servicing liability of $2.5 million and a $2.0 million write-off of previously unreimbursed capitalized costs associated with the portfolio.   ;During fiscal 2010, LEAF also sold an additional $10.3 million of leases and loans to RCC.  In fiscal 2009 and 2008, LEAF sold $6.1 million and $59.1 million, respectively, of leases and loans to RCC.  In addition, from time to time, LEAF repurchases leases and loans from RCC at a price equal to their fair value as an accommodation under certain circumstances, which include the consolidation of multiple customer accounts, originations of new leases when equipment is upgraded and facilitation of the timely resolution of problem accounts when collection is considered likely.  LEAF repurchased $140,000, $1.4 million and $9.0 million of leases and loans from RCC during fiscal 2010, 2009 and 2008, respectively.

In June 2009, one of the LEAF investment partnerships acquired net assets of $89.8 million, primarily a pool of leases, and assumed $82.3 million in related debt from a subsidiary of RCC.  No gain or loss was recognized by any of the parties on the acquisition or sale.  In relation to this transaction, the Company owed $7.5 million to RCC under a promissory note bearing interest at LIBOR plus 3%.  In addition, the Company was due $3.0 million from the investment partnership for this transaction.  The note was repaid in full to RCC and the Company received full repayment from the investment partnership in August 2009.

In December 2009, the Company recorded an adjustment of $200,000 ($173,000 net of tax) related to equity compensation expense for previously issued RCC restricted stock and options awarded to members of the Company’s management.  The Company determined that the amounts that related to prior fiscal years and quarters were immaterial to all prior fiscal years and quarters, including the impact on earnings per share and, therefore, recognized the full adjustment during the first quarter of fiscal 2010.  Additionally, the impact on full-year net earnings for fiscal 2010 was immaterial.

Chadwick has periodically facilitated transactions for RCC.  No fees have been charged by Chadwick for these transactions.

Transactions between LEAF and its Investment Entities.  LEAF originates and manages leases and loans on behalf of its investment entities (collectively, the “LEAF Funds”) for which it also is the general partner.  The leases and loans are sold to the LEAF Funds at fair value plus an origination fee not to exceed 2%.  During fiscal 2010, 2009 and 2008, LEAF sold $65.9 million, $275.2 million and $1.2 billion, respectively, of leases and loans to the LEAF Funds.  In addition, from time to time LEAF repurchases leases and loans from the LEAF Funds in the same manner as it does from RCC.  During fiscal 2010, 2009 and 2008, LEAF repurchased $6.0 million, $1.2 million and $1.4 million, respectively, of leases and loans from the LEAF Funds at a price equal to their fair value.

81

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 19 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

Relationship with Resource Real Estate Opportunity REIT, Inc. (“RRE Opportunity REIT”).  The Company formed RRE Opportunity REIT in fiscal 2009 and the registration statement for this fund became effective with the U.S. Securities and Exchange Commission in June 2010.  The Company is entitled to receive reimbursements for costs associated with the formation and operating expenses of RRE Opportunity REIT.  During fiscal 2010, the Company recorded a $1.8 million receivable due from RRE Opportunity REIT offsetting the Company’s operating expenses for that entity.

Relationship with Atlas Energy.  On June 30, 2005, the Company completed the spin-off of its subsidiary, Atlas Energy.  E. Cohen is chairman of the board and chief executive officer (“CEO”) of Atlas Energy and Jonathan Z. Cohen (“J. Cohen”), the Company’s CEO and President, is its vice chairman.  Pursuant to a master separation and distribution agreement, Atlas Energy reimburses the Company for various costs and expenses it continues to incur on behalf of Atlas Energy, primarily payroll and rent.  At September 30, 2010, the Company has a $68,000 receivable balance from Atlas Energy.

Relationship with 1845 Walnut Associates Ltd.  The Company owns a 5% investment in a real estate partnership that owns a building at 1845 Walnut Street, Philadelphia in which the Company also leases office space.  In February 2009, the Company amended its lease for its offices in this building to extend the lease termination date through May 2013, with an option to extend the term for up to 15 additional years.  The property is managed by another related party, Brandywine Construction and Management, Inc. (“BCMI”), as further described below.

     Relationship with Ledgewood P.C. (“Ledgewood”).  Until March 2006, Jeffrey F. Brotman was the managing member of Ledgewood, which provides legal services to the Company.  Mr. Brotman remained of counsel to Ledgewood through June 2007, at which time he became an Executive Vice President of the Company.  In addition, Mr. Brotman was a trustee of the SERP retirement trusts until he joined the Company.  In connection with his separation, Mr. Brotman will receive payments from Ledgewood through 2013.

Until April 1996, E. Cohen was of counsel to Ledgewood.  E. Cohen receives certain debt service payments from Ledgewood related to the termination of his affiliation with Ledgewood and its redemption of his interest in the firm.

Relationship with retirement trusts.  The Company has established two trusts to fund the SERP for E. Cohen.  The 1999 Trust, a secular trust, purchased 100,000 shares of the common stock of TBBK ($669,000 fair value at September 30, 2010).  See “Relationship with TBBK,” below. This trust and its assets are not included in the Company’s consolidated balance sheets.  However, trust assets are considered in determining the amount of the Company’s liability under the SERP.  The 2000 Trust, a “Rabbi Trust,” holds 123,719 shares of common stock of TBBK carried at fair value ($828,000 at September 30, 2010).  The carrying v alue of the assets in the 2000 Trust was approximately $878,000 and $1.6 million at September 30, 2010 and 2009, respectively.  The Company intends to sell the remaining assets in the Rabbi 2000 Trust in order to fund benefit payments.  The Company reclassed the assets from other assets to trading securities in the consolidated balance sheets in fiscal 2010; and the SERP liability of $6.5 million is included in accrued expenses and other liabilities.

In April 2001, the 2000 Trust acquired a loan to a limited partnership in which E. Cohen and Daniel G. Cohen (“D. Cohen”) own the beneficial interests for its outstanding balance from a corporation in which E. Cohen was the chairman and J. Cohen was the president.  E. Cohen and Betsy Z.  Cohen (“B. Cohen,” who is the wife of E. Cohen) are the parents of D. Cohen and J. Cohen.  In February 2008, the Company received full repayment of the loan.

Relationship with 9 Henmar LLC (“9 Henmar”).  The Company owns interests in the Trapeza entities that have sponsored CDO issuers and manage pools of trust preferred securities acquired by the CDO issuers.  The Trapeza entities and CDO issuers were originated and developed in large part by D. Cohen.  The Company agreed to pay D. Cohen’s company, 9 Henmar, 10% of the fees the Company receives, before expenses, in connection with the first four Trapeza CDOs that the Company sponsored and manages.  In fiscal 2010, 2009 and 2008, the Company paid 9 Henmar $55,000, $81,000 and $417,000, respectively.

Relationship with TBBK.  D. Cohen is the chairman of the board and B. Cohen is the chief executive officer of TBBK and its subsidiary bank.  In fiscal 2009, the Company sold 99,318 of its shares of TBBK common stock for $601,000 and realized a loss of $393,000.  The Company did not sell any of its TBBK stock in fiscal 2010 or fiscal 2008.  In addition, TBBK provides banking and operational services for one of LEAF’s subsidiaries.  During fiscal 2010, 2009 and 2008, the Company paid $13,000, $57,000 and $76,000, respectively, in fees to TBBK.  Additionally, the Company had $31,000 and $98,000 in deposit accounts at TBBK at September 30, 2010 and 2 009, respectively.

82

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 19 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

Relationship with certain directors, officers, employees and other related parties.  The Company serves as the general partner of seven partnerships that invest in regional domestic banks.  The general partner may receive a carried interest of up to 20% upon meeting specific investor return rates.  Some of the partnerships’ investors wanted to ensure that certain individuals who are critical to the success of the partnerships participate in the carried interest.  The total participation authorized by the Company’s compensation committee was 48.5% of the 20% carried interest, of which E. Cohen, B. Cohen and J. Cohen are entitled to receive 10%, 5% and 2.5%, re spectively.  Seven individuals, four of whom are employees of the Company, are entitled to received the remaining 31%.  No carried interest has been earned by any of the individuals through September 30, 2010.

Relationship with Brandywine Construction & Management, Inc. (“BCMI”).  BCMI manages the properties underlying three of the Company’s real estate loans and certain other real estate assets.  Adam Kauffman, president of BCMI, or an entity affiliated with him, has also acted as the general partner, president or trustee of one of the borrowers of the loans.  E. Cohen is the chairman of BCMI.

During fiscal 2009, the Company paid a $90,000 fee to BCMI in connection with the final resolution of one of its legacy real estate assets.

In March 2008, the Company sold a 19.99% interest in an indirect subsidiary that holds a 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.  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; thereafter, Mr. Kauffman has a right-of-first-offer to purchase the balance of the Company’s interest in the hotel.

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.

Evening Star (“ESA”).  In fiscal 2008, the Company collected $18.4 million in connection with the substantial settlement of a discounted loan, which was secured by the ESA office building in Washington, D.C.  D. Cohen owned a 15% partnership interest in ESA which secured the original discounted note and had a right-of-first-offer and a right-of-first-refusal (“Rights”) on a sale of the property.  In conjunction with the settlement of the ESA loan in July 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.

Transactions with real estate investment entities.  During fiscal 2008, the Company loaned affiliated real estate limited partnerships approximately $9.0 million to facilitate acquisitions.  Interest paid to the Company by these affiliated partnerships during fiscal 2008 totaled approximately $76,000.  The partnerships repaid these loans in full as they raised equity funds.

During the fiscal 2008, the Company agreed to advance up to $2.0 million under a revolving note to an affiliated real estate limited partnership bearing interest at the prime rate.  Amounts drawn, which are due upon demand, were $1.6 million and $1.2 million as of September 30, 2010 and 2009, respectively.

NOTE 20 – OTHER INCOME, NET

The following table details other income, net (in thousands):

	Years Ended September 30,
	2010			2009			2008
RCC dividend income	$	2,278		$	3,405		$	2,421
Interest income		434			340			547
Loss on sales of equity securities		−			(393	)		−
Other (expense) income, net		(121	)		(196	)		68
Other income, net	$	2,591		$	3,156		$	3,036

83

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 21 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Assets and liabilities are categorized into one of three levels based on the assumptions (inputs) used in valuing the asset or liability.  Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment.  The three levels are defined as follows:

Level 1 − Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. 

Level 2 − Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3 − Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and that are, consequently, not based on market activity, but upon particular valuation techniques.

As of September 30, 2010, the Company’s financial assets and liabilities, recorded at fair value on a recurring basis, were as follows (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Investment securities	$	16,135	$	−	$	6,223	$	22,358
Investment in RRE Opportunity REIT		−		204		−		204
Retained financial interest-commercial finance		−		−		273		273
Total	$	16,135	$	204	$	6,496	$	22,835

As of September 30, 2009, the fair values of the Company’s financial assets and liabilities recorded at fair value on a recurring basis were as follows (in thousands):

	Level 1		Level 2		Level 3		Total
Assets (1):
Investment securities available-for-sale		11,255		−		8,245		19,500
Total	$	11,255	$	−	$	8,245	$	19,500

(1) In fiscal 2010, receivables from managed entities are presented in the non-recurring table, and accordingly, the prior year presentation has been reclassified for comparative purposes (see the non-recurring table that follows).

The following table presents additional information about assets which were measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value during fiscal 2010 (in thousands):

	Investment securities			Retained financial interest
Balance, beginning of year	$	8,245		$	−
Purchases, sales, issuances and settlements, net		(2,985	)		299
Change in unrealized losses – included in accumulated other comprehensive loss		1,894			−
Other-than-temporary impairment loss		(480	)
Loss on sale of investment securities, net		(451	)		−
Payments received and leases returned		−			(26	)
Balance, end of year	$	6,223		$	273

84

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 21 – FAIR VALUE OF FINANCIAL INSTRUMENTS – (Continued)

The following table presents additional information about assets which the Company measured at fair value on a recurring basis using Level 3 inputs during fiscal 2009 (in thousands):

	Investment securities
Balance, beginning of year	$	10,153
Realized losses – impairment charges on investment securities included in operations		(8,466	)
Change in unrealized losses – included in accumulated other comprehensive loss		7,161
Purchases, sales, issuances, and settlements, net		(603	)
Balance, end of year	$	8,245

The following is a discussion of assets and liabilities that are recorded at fair value on a recurring and non-recurring basis as well as the valuation techniques applied to each fair value measurement:

Receivables from managed entities.  The Company recorded a discount on certain of its receivable balances due from its real estate and commercial finance managed entities due to the extended term of the repayment to the Company.  The discount was computed based on estimated inputs, including the repayment term (Level 3).

Retained interest - commercial finance.  During fiscal 2010, the Company sold leases and loans to third-parties in which portions of the proceeds were retained by the purchasers.  The purchasers have the right to return leases and loans that default within periods ranging from approximately six to forty-eight months after the date of sale and to deduct the applicable percentage from the retained proceeds.  The Company determines the fair value of these retained interests by calculating the present value of future expected cash flows using key assumptions for credit losses and discount rates based on historical experience and repayment terms (Level 3).

Investment in RRE Opportunity REIT.  During the offering period, the Company has valued its investment in the common shares of RRE Opportunity REIT at the current offering price of $10.00 per share and valued its investment in the convertible shares of RRE Opportunity REIT at the offering price of $1.00 per share, the price at which it acquired such shares (Level 2).

Investment securities. The Company uses quoted market prices (Level 1) to value its investments in RCC and TBBK common stock.  The fair value of CDO investments is based primarily on internally generated expected cash flow models that require significant management judgments and estimates due to the lack of market activity and unobservable pricing inputs.  Unobservable inputs into these models include default, recovery, discount and deferral rates, prepayment speeds and reinvestment interest spreads (Level 3).

Impaired loans and leases - commercial finance.  Leases and loans are considered impaired when they are 90 or more days past due and are placed on non-accrual status.  The Company records an allowance for the impaired loans and leases based upon historical experience (Level 3).

Senior Notes.  The proceeds from the Senior Notes were allocated to the notes and the warrants based on their relative fair values.  The Company used a Black-Scholes pricing model to calculate the fair value of the warrants at $4.9 million for the first issuance and $1.0 million for the subsequent issuance (Level 3).

Servicing liability.  During fiscal 2010, the Company sold a portfolio of leases and loans to RCC.  Although it will remain as the servicer for the portfolio, the Company will not receive any servicing fees.  Accordingly, the Company recorded a servicing liability based on the present value of 1% of the portfolio sold (Level 3).

Investments in Commercial Finance held for sale.  The fair value of the Company’s investments in commercial finance assets is determined based upon discounted cash flow models.

85

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 21 – FAIR VALUE OF FINANCIAL INSTRUMENTS – (Continued)

The Company recognized the following changes in the carrying value of those assets and liabilities measured at fair value on a non-recurring basis (in thousands):

	Level 1		Level 2		Level 3		Total
For the Year Ended September 30, 2010
Assets:
Investments in commercial finance – impaired loans and leases	$	−	$	−	$	190	$	190
Receivables from managed entities – commercial finance and real estate		−		−		9,922		9,922
Total	$	−	$	−	$	10,112	$	10,112
Liabilities:
Servicing liability	$	−	$	−	$	2,478	$	2,478
Senior notes		−		−		2,239		2,239
Total	$	−	$	−	$	4,717	$	4,717
For the Year Ended September 30, 2009
Assets:
Investments in commercial finance – held for sale	$	−	$	−	$	142,701	$	142,701
Receivables from managed entities – commercial finance and real estate		−		−		55,047		55,047
Investments in commercial finance – impaired loans and leases		−		−		1,945		1,945
Total	$	−	$	−	$	199,693	$	199,693
Liabilities:
Senior notes	$	−	$	−	$	10,629	$	10,629

For cash, receivables and payables, the carrying amounts approximate fair value because of the short-term maturity of these instruments.

The fair value of financial instruments is as follows (in thousands):

	September 30, 2010				September 30, 2009
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Receivables from managed entities (1)	$	66,416	$	60,204	$	55,047	$	55,047
Investments in commercial finance – loans held for investment		1,661		1,011		385		385
Investments in real estate loans, net		−		−		2,862		823
	$	68,077	$	61,215	$	58,294	$	56,255
Borrowings (2)
Commercial finance debt	$	20,750	$	20,750	$	136,500	$	136,500
Corporate secured revolving credit facilities		14,127		14,127		27,079		27,079
Real estate debt		12,005		11,265		13,198		11,305
Senior notes		14,317		16,884		10,629		10,629
Other debt		4,911		3,916		3,977		3,977
	$	66,110	$	66,942	$	191,383	$	189,490

(1)   Certain of the receivables from managed entities at September 30, 2010 have been valued using a present value discounted cash flow where market prices were not available.  The discount rate used in these calculations is the estimated current market rate adjusted for liquidity risk.

(2)   The carrying value of the Company’s corporate secured revolving credit facilities approximates its fair value because of its variable interest rates. The carrying value of the Company’s commercial finance debt approximates its fair value due to its recent issuance at September 30, 2010, its short-term maturity and the variable interest rate as of September 30, 2009.  The Company’s real estate debt and other debt fair value is estimated using current interest rates for similar loans.  The Company approximated the fair value of the senior notes by applying the appreciation in a high yield fund.  This disclosure excludes instruments valued on a recurring basis.

86

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 22 - COMMITMENTS AND CONTINGENCIES

Leases. The Company leases office space and equipment under leases with varying expiration dates through 2020.  Rental expense, net of subleases, was $3.2 million, $4.0 million and $3.9 million for fiscal 2010, 2009 and 2008, respectively.  The Company’s office space leases in New York and in Philadelphia contain extension clauses.  The Company has the ability to extend the New York lease for an additional five-year term, and the Philadelphia lease provides three options to extend for additional five-year terms.  At September 30, 2010, future minimum rental commitments under both operating and capital leases were as follows (in thousands):

	Operating		Capital		Total
2011	$	2,415	$	297	$	2,712
2012		2,199		64		2,263
2013		1,802		41		1,843
2014		1,074		16		1,090
2015		1,093		−		1,093
Thereafter		5,153		−		5,153
	$	13,736	$	418	$	14,154

Broker-Dealer Capital Requirement.  Chadwick serves as a dealer-manager for the sale of securities of direct participation investment programs, both public and private, sponsored by subsidiaries of the Company who also serve as general partners and/or managers of these programs.  Additionally, Chadwick serves as an introducing agent for transactions involving sales of securities of financial services companies, REITs and insurance companies for the Company and for RCC.  As a broker-dealer, Chadwick is required to maintain minimum net capital, as defined in regulations under the Securities Exchange Act of 1934, as amended, which was $116,000 and $121,000 as of September 30, 2010 an d 2009, respectively.  As of September 30, 2010 and 2009, Chadwick’s net capital was $393,000 and $1.2 million, respectively, which exceeded the minimum requirements by $277,000 and $1.1 million, respectively.

Clawback Liability.  On November 1, 2009 and January 28, 2010, the general partners of two of the Trapeza entities, which are owned equally by the Company and its co-managing partner, repurchased substantially all of the remaining limited partnership interests in the two Trapeza entities with potential clawback liabilities for $4.4 million.  The Company contributed $2.2 million (its 50% share) and, as a result of these transactions, reduced its clawback liability to $1.2 million at September 30, 2010 from $5.7 million at September 30, 2009.

Reserve for Repurchase Commitment.  In the third and fourth quarters of fiscal 2010, the Company sold a portfolio of leases and loans to RCC in which RCC has the option to return, and the Company has the obligation to repurchase, up to a maximum of approximately $5.9 million in delinquent leases and loans as specified in the sale agreement.  In conjunction with this option, the Company recorded a $3.0 million estimated liability based on historical default rates.  The Company did not make any repurchases under this agreement as of September 30, 2010.

Legal Proceedings.  In August 2009, Riverside National Bank of Florida, or Riverside, initiated a lawsuit now captioned Federal Deposit Insurance Corporation v. The McGraw-Hill Companies, Inc. et al., United States District Court, Southern District of New York, No. 10 Civ. 4421, against several investment banks, rating agencies, and collateral managers of CDOs, including Trapeza Capital Management, LLC, or TCM.  The Company owns a 50% interest in TCM, and an unaffiliated third-party owns the other 50% interest.

The complaint seeks monetary damages in an unspecified amount against TCM arising out of Riverside’s investment in certain CDOs between 2005 and 2007.  Riverside’s claims against TCM stem from its role as collateral manager for various Trapeza CDOs, which were sold by various investment banks.  The complaint alleges that the offering materials for the CDOs were prepared in part by TCM and were false and misleading.  The complaint further alleges that TCM breached fiduciary and contractual obligations by failing to properly monitor the collateral for the CDOs, failing to mitigate losses and failing to disclose known quality and performance problems with the underlying collateral.  TCM believes that none of the claims have merit and intends to vigorously defend itself in this matter.

87

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2010

NOTE 22 - COMMITMENTS AND CONTINGENCIES – (Continued)

Real Estate Commitments.  In connection with the sale of a real estate loan in March 2006, the Company agreed that in exchange for the current property owner relinquishing certain control rights, the Company would make payments to the current property owner under stipulated circumstances, including the sale or foreclosure of the property or a subsequent resale of the loan.  A payment of $2.6 million, increasing $16,234 per month to a maximum of $3.6 million, would be due upon the occurrence of specified events.  In addition, the current property owner has the right to receive collateral as security for this obligation equal to or greater than 105% of the value of the obligation upo n the occurrence of specified events or if the Company’s net worth falls below $80.0 million.  The Company’s obligation runs through December 31, 2014.  In addition, the Company agreed to partially indemnify the purchaser of the loan for a portion of the difference between ordinary income tax rates and capital gain rates on accrued interest on the note between the date of sale of the loan in March 2006 and December 31, 2011.  To date, the Company has not been required to make any payments resulting from these agreements.

The Company is also committed to invest 1% of the equity raised by RRE Opportunity REIT to a maximum amount of $2.5 million.

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.

As of September 30, 2010, except for the clawback liability recorded for the two Trapeza entities, the reserve for lease and loan repurchase commitment and executive compensation, the Company does not believe it is probable that any payments will be required under any of its commitments and contingencies and, accordingly, no liabilities for these obligations have been recorded in the consolidated financial statements.

NOTE 23 - DISCONTINUED OPERATIONS

Real Estate.  ncome (losses) from discontinued operations for fiscal 2010, 2009 and 2008 includes the reversal of previously recorded interest and penalty assessments related to the 2004 and 2005 IRS tax examinations, which were settled in fiscal 2010.  Summarized operating results of discontinued operations within the real estate operating segment are as follows (in thousands):

	Years Ended September 30,
	2010		2009			2008
Income (loss) from discontinued operations	$	626	$	(370	)	$	(1,104	)
(Provision) benefit for income taxes		−		(70	)		386
Income (loss) from discontinued operations, net of tax	$	626	$	(440	)	$	(718	)

Commercial Finance.  An operating subsidiary within the commercial finance operating segment which was in the reverse factoring business, commenced operations in fiscal 2007.  Due to economic conditions in fiscal 2008, management discontinued this subsidiary in fiscal 2008 and reflected the results of its operations as discontinued in the consolidated statements of operations as follows (in thousands):

	Years Ended September 30,
	2010		2009			2008
Loss from discontinued operations	$	−	$	(14	)	$	(856	)
Benefit for income taxes		−		5			300
Loss from discontinued operations, net of tax	$	−	$	(9	)	$	(556	)

Total.  Summarized operating results of all discontinued entities are as follows (in thousands):

	Years Ended September 30,
	2010		2009			2008
Income (loss) from discontinued operations	$	622	$	(377	)	$	(1,999	)
(Provision) benefit for income taxes		−		(67	)		700
Income (loss) from discontinued operations, net of tax	$	622	$	(444	)	$	(1,299	)

88

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2010

NOTE 24 - 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):

	Real estate			Commercial finance			Financial fund management			All other (1)			Total
Year Ended September 30, 2010
Revenues from external customers	$	31,042		$	25,573		$	27,243		$	−		$	83,858
Equity in earnings (losses) of unconsolidated entities		869			(1,896	)		5,897			−			4,870
Total revenues		31,911			23,677			33,140			−			88,728
Segment operating expenses		(20,780	)		(18,164	)		(21,028	)		−			(59,972	)
General and administrative expenses		(316	)		(428	)		(3,668	)		(8,560	)		(12,972	)
Loss on sale of leases and loans		−			(8,097	)		−			−			(8,097	)
Impairment of intangible assets		−			(2,828	)		−			−			(2,828	)
Provision for credit losses		(49	)		(5,159	)		(1	)		−			(5,209	)
Depreciation and amortization		(1,304	)		(5,693	)		(196	)		(649	)		(7,842	)
Other-than-temporary impairment losses recognized in earnings		−			−			(480	)		(329	)		(809	)
Interest expense		(1,074	)		(6,271	)		(3	)		(5,738	)		(13,086	)
Loss on sale of loans and investment securities, net		−			−			(451	)		−			(451	)
Other income (expense), net		387			1			2,429			(226	)		2,591
Pretax loss attributable to noncontrolling interests (2)		61			4,854			8			−			4,923
Income (loss) including noncontrolling interest before intercompany interest expense and taxes		8,836			(18,108	)		9,750			(15,502	)		(15,024	)
Intercompany interest (expense) income		−			(6,115	)		−			6,115			−
Income (loss) from continuing operations including noncontrolling interests before taxes	$	8,836		$	(24,223	)	$	9,750		$	(9,387	)	$	(15,024	)
Year Ended September 30, 2009
Revenues from external customers	$	26,077		$	49,900		$	30,272		$	−		$	106,249
Equity in (losses) earnings of unconsolidated entities		(660	)		(1,133	)		3,072			−			1,279
Total revenues		25,417			48,767			33,344			−			107,528
Segment operating expenses		(22,038	)		(25,179	)		(20,468	)		−			(67,685	)
General and administrative expenses		(232	)		(409	)		(3,414	)		(10,314	)		(14,369	)
Gain on sale of leases and loans		−			628			−			−			628
Provision for credit losses		(456	)		(6,410	)		(1,738	)		−			(8,604	)
Depreciation and amortization		(1,370	)		(4,293	)		(398	)		(861	)		(6,922	)
Other-than-temporary impairment losses recognized in earnings		−			−			(8,466	)		(73	)		(8,539	)
Interest expense		(966	)		(10,524	)		(5,014	)		(3,695	)		(20,199	)
Loss on sale of loans and investment securities, net		−			−			(11,588	)		−			(11,588	)
Other income (expense), net		75			79			3,440			(438	)		3,156
Pretax loss attributable to noncontrolling interests (2)		54			−			1,549			−			1,603
Income (loss) including noncontrolling interest before intercompany interest expense and taxes		484			2,659			(12,753	)		(15,381	)		(24,991	)
Intercompany interest (expense) income		−			(5,899	)		−			5,899			−
Income (loss) from continuing operations including noncontrolling interests before taxes	$	484		$	(3,240	)	$	(12,753	)	$	(9,482	)	$	(24,991	)

89

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2010

NOTE 24 - OPERATING SEGMENTS – (Continued)

	Real estate			Commercial finance			Financial fund management			All other (1)			Total
Year Ended September 30, 2008
Revenues from external customers	$	33,283		$	93,349		$	41,095		$	−		$	167,727
Equity in losses of unconsolidated entities		(1,764	)		(333	)		(13,559	)		−			(15,656	)
Total revenues		31,519			93,016			27,536			−			152,071
Segment operating expenses		(22,602	)		(42,741	)		(27,737	)		−			(93,080	)
General and administrative expenses		(217	)		(425	)		(3,874	)		(11,564	)		(16,080	)
Gain on sale of leases and loans		−			3,865			−			−			3,865
Provision for credit losses		(500	)		(7,505	)		(2,622	)		−			(10,627	)
Depreciation and amortization		(1,093	)		(2,412	)		(257	)		(898	)		(4,660	)
Other-than-temporary impairment losses recognized in earnings		−			−			(14,467	)		−			(14,467	)
Interest expense		(1,222	)		(27,466	)		(14,559	)		(4,019	)		(47,266	)
Loss on sale of loans and investment securities, net		−			−			(17,660	)		(14	)		(17,674	)
Other income (expense), net		288			352			2,441			(45	)		3,036
Pretax (income) loss attributable to noncontrolling interests (2)		(61	)		(2,178	)		6,482			−			4,243
Income (loss) including noncontrolling interest before intercompany interest expense and taxes		6,112			14,506			(44,717	)		(16,540	)		(40,639	)
Intercompany interest (expense) income		−			(5,860	)		−			5,860			−
Income (loss) from continuing operations including noncontrolling interests before taxes	$	6,112		$	8,646		$	(44,717	)	$	(10,680	)	$	(40,639	)
Segment assets
September 30, 2010	$	155,434		$	81,053		$	36,647		$	(38,881	)	$	234,253
September 30, 2009	$	148,903		$	212,336		$	34,596		$	(19,995	)	$	375,840
September 30, 2008	$	147,657		$	356,671		$	274,742		$	(20,713	)	$	758,357

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

(2) In accordance with Company policy, certain corporate overhead expenses are allocated to the operating segments based on assets under management, which may be affected by, but not limited to, various market conditions.

     Geographic information.  Revenues generated from the Company’s European operations totaled $3.3 million, $3.2 million and $5.8 million for fiscal 2010, 2009 and 2008, respectively.  The Company, through the CDO issuers it sponsored and consolidated, began to acquire European bank loans in the fourth quarter of fiscal 2006.  Included in segment assets as of September 30, 2010, 2009 and 2008 were $7.1 million, $5.6 million and $5.5 million, respectively, of European assets.

     Major customer.  In fiscal 2010, 2009 and 2008, the management, incentive, servicing and acquisition fees that the Company received from RCC were 12%, 8% and 5%, respectively, of its consolidated revenues.  These fees have been reported as revenues by each of the Company’s operating segments.

90

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

SEPTEMBER 30, 2010

NOTE 25 – UNAUDITED QUARTERLY FINANCIAL DATA

The following sets forth the Company’s operating results by quarter (in thousands, except share data):

	December 31		March 31			June 30			September 30
Quarterly results for fiscal 2010 (1)
Revenues	$	25,422	$	19,400		$	25,238		$	18,668
Operating income (loss)	$	4,420	$	(1,876	)	$	(5,134	)	$	(5,602	)
Income (loss)from continuing operations	$	588	$	(1,845	)	$	(6,589	)	$	(9,451	)
(Loss)income from discontinued operations	$	−	$	(2	)	$	(1	)	$	625
Net income (loss)	$	588	$	(1,847	)	$	(6,590	)	$	(8,826	)
Less:  Net loss attributable to noncontrolling interests	$	383	$	615		$	1,275		$	951
Net income (loss) attributable to common shareholders	$	971	$	(1,232	)	$	(5,315	)	$	(7,875	)
Basic earnings (loss) per common share:
Continuing operations	$	0.05	$	(0.06	)	$	(0.28	)	$	(0.44	)
Net income (loss)	$	0.05	$	(0.06	)	$	(0.28	)	$	(0.41	)
Diluted earnings (loss) per common share:
Continuing operations	$	0.05	$	(0.06	)	$	(0.28	)	$	(0.44	)
Net income (loss)	$	0.05	$	(0.06	)	$	(0.28	)	$	(0.41	)

Quarterly results for fiscal 2009 (2)	December 31			March 31			June 30			September 30
Revenues	$	31,960		$	27,119		$	22,558		$	25,891
Operating income (loss)	$	3,799		$	3,921		$	(73	)	$	2,929
(Loss) income from continuing operations	$	(3,678	)	$	(12,626	)	$	(113	)	$	327
Net (loss) income	$	(3,603	)	$	(12,789	)	$	(191	)	$	49
Less:  Net loss (income) attributable to noncontrolling interests	$	383		$	1,156		$	(13	)	$	77
Net (loss) income attributable to common shareholders	$	(3,220	)	$	(11,633	)	$	(204	)	$	126
Basic (loss) earnings per common share:
Continuing operations	$	(0.18	)	$	(0.62	)	$	(0.01	)	$	0.02
Net (loss) income	$	(0.18	)	$	(0.63	)	$	(0.01	)	$	0.01
Diluted (loss) earnings per common share:
Continuing operations	$	(0.18	)	$	(0.62	)	$	(0.01	)	$	0.02
Net (loss) income	$	(0.18	)	$	(0.63	)	$	(0.01	)	$	0.01

(1) Fiscal 2010 – significant events by quarter:

● June 30 – included a $7.2 million ($5.9 million net of tax) loss on the sale of leases and loans to RCC ($0.31 per share-diluted).

● September 30 – reflected a $2.8 million charge for the impairment of intangible assets ($0.16 per share-diluted) as well as a $445,000 impairment charge for other investment securities ($0.03 per share-diluted) and $2.9 million ($0.15 per share diluted) income tax expense for the write-off of an unrealizable deferred tax asset and receivable.  In addition, the Company waived $1.8 million ($0.10 per share-diluted) of commercial finance management fees from four of its investment entities.

(2) Fiscal 2009 – significant events by quarter:

● December 31 – included a $4.9 million ($2.3 million net of tax) non-cash impairment charge taken on investments in CDO securities ($0.13 per share-diluted).

● March 31 – the Company recorded a $11.6 million ($9.1 million net of tax) loss on the sale of bank loans ($0.49 per share diluted).

NOTE 26 – SUBSEQUENT EVENT

The Company has evaluated subsequent events through the filing of this Form 10-K and determined there were no events that have occurred that would require adjustments to the consolidated financial statements.

91

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
	ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. 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, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’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 achievi ng 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, our chief executive officer and chief financial officer concluded that due to a material weakness in internal control over financial reporting surrounding accounting for income taxes described below in Management’s Annual Report on Internal Control Over Financial Reporting, the Company’s disclosure controls and procedures were not effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control – Integrated Framework.  Based upon this assessment, our management concluded that, as a result of the following material weakness, our internal control over financial reporting surrounding accounting for income taxes was not effective as of September 30, 2010.

The Company’s processes, procedures and controls related to income taxes were not effective to ensure that amounts related to certain deferred tax assets and liabilities and deferred income tax expense were accurate. The Company did not maintain effective controls over the review and analysis of supporting working papers for the tax balances noted above. As a result these balances required adjustments to be recorded in accordance with generally accepted accounting principles.

Our independent registered public accounting firm, Grant Thornton LLP, audited our internal control over financial reporting as of September 30, 2010.  Their report dated December 13, 2010, which is included following this Item 9A, expressed an adverse opinion on our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

Other than the material weakness noted above, there has been no change in our internal control over financial reporting that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan for Material Weakness in Internal Control Over Financial Reporting

We developed the following plan to remediate the material weakness in income taxes identified above.  Quarterly, we will analyze and confirm the accuracy of any significant changes in the deferred tax assets and liabilities and on annual basis, we will improve the documentation and institute more formalized review of all of the items comprising the deferred tax assets and liabilities to ensure that the proper balances and valuation allowances are reported.

We anticipate the actions described above and resulting improvements in controls will strengthen our internal control over financial reporting relating to accounting for income taxes and will address the related material weakness that we identified as of September 30, 2010.

92

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

RESOURCE AMERICA, INC.

We have audited Resource America, Inc. (a Delaware Corporation) and subsidiaries (the Company) internal control over financial reporting as of September 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed 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.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with a uthorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment.

The Company did not maintain effective internal control over accounting for income taxes. Specifically, the Company’s processes, procedures and controls related to the preparation and review of the annual tax provision were not effective to ensure that amounts related to the tax provision and the related current or deferred income tax asset and liability accounts were accurate and recorded in the proper period and determined in accordance with generally accepted accounting principles.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Resource America, Inc. has not maintained effective internal control over financial reporting as of September 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Resource America, Inc. and subsidiaries as of September 30, 2010 and 2009 and the related statements of operations, changes in equity and cash flows for each of the three years in the period ended September 30, 2010.  The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2010 financial statements, and this report does not affect and our report dated December 13, 2010, which expressed an unqualified opinion on those statements.

We do not express an opinion or any form of assurance on management’s statement referring to post year-end remediation to address the material weakness.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

December 13, 2010

93

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this item will be set forth in our definitive proxy statement with respect to our 2011 annual meeting of stockholders, to be filed on or before January 28, 2011 (“2011 proxy statement”), which is incorporated herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item will be set forth in our 2011 proxy statement, which is incorporated herein by this reference.

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
	MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this item will be set forth in our 2011 proxy statement, which is incorporated herein by this reference.

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
	AND DIRECTOR INDEPENDENCE.

The information required by this item will be set forth in our 2011 proxy statement, which is incorporated herein by this reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this item will be set forth in our 2011 proxy statement, which is incorporated herein by this reference.

94

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)      The following documents are filed as part of this Annual Report on Form 10-K

1. Financial Statements

2. Financial Statement Schedules

3. Exhibits

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Resource America. (1)
3.2	Amended and Restated Bylaws of Resource America. (1)
4.1	Note Purchase Agreement (including the form of Senior Note and form of Warrant). (2)
4.2	Indenture between LEAF Funding SPE 1, LLC and U.S. Bank National Association, dated August 20, 2010.
10.1(a)	Loan and Security Agreement, dated May 24, 2007, between Resource America, Inc., Commerce Bank, N.A. and the other parties thereto. (3)
10.1(b)	First Amendment and Joinder to Loan and Security Agreement, dated July 18, 2007. (5)
10.1(c)	Second Amendment and Joinder to Loan and Security Agreement, dated November 15, 2007. (5)
10.1(d)	Third Amendment to Loan and Security Agreement, dated August 7, 2008, dated May 24, 2007, between Resource America, Inc., TD Bank, N.A. (successor by merger to Commerce Bank, N.A.) and the other parties hereto. (6)
10.1(e)	Fourth Amendment to Loan and Security Agreement, dated September 30, 2008, dated May 24, 2007, between Resource America, Inc., TD Bank, N.A. (successor by merger to Commerce Bank, N.A.) and the other parties hereto. (7)
10.1(f)	Fifth Amendment to Loan and Security Agreement, dated December 19, 2008, dated May 24, 2007, between Resource America, Inc., TD Bank, N.A. (successor by merger to Commerce Bank, N.A.) and the other parties hereto. (4)
10.1(g)	Sixth Amendment to Loan and Security Agreement, dated March 26, 2009, dated May 24, 2007, between Resource America, Inc., TD Bank, N.A. and the other parties hereto. (10)
10.1(h)	Seventh Amendment to Loan and Security Agreement, dated May 15, 2009, dated May 24, 2007, between Resource America, Inc., TD Bank, N.A. and the other parties hereto. (14)
10.1(i)	Eighth Amendment to Loan and Security Agreement, dated November 6, 2009, dated May 24, 2007, between Resource America, Inc., TD Bank, N.A. and the other parties hereto. (17)
10.2	Amended and Restated Employment Agreement between Michael S. Yecies and Resource America, Inc., dated December 29, 2008. (8)
10.3	Amended and Restated Employment Agreement between Thomas C. Elliott and Resource America, Inc., dated December 29, 2008. (8)
10.4	Amended and Restated Employment Agreement between Jeffrey F. Brotman and Resource America, Inc., dated December 29, 2008. (8)
10.5	Amended and Restated Employment Agreement between Jonathan Z. Cohen and Resource America, Inc., dated December 29, 2008. (8)
10.6	Amended and Restated Employment Agreement between Steven J. Kessler and Resource America, Inc., dated December 29, 2008. (8)
10.7(a)	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. (9)
10.7(b)	First Amendment to Receivables Loan and Security Agreement, dated as of December 21, 2006. (9)
10.7(c)	Purchase and Sale Agreement, dated as of October 31, 2006. (9)
10.7(d)	First Amendment to Purchase and Sale Agreement, dated as of December 21, 2006. (9)
10.7(e)	Fifth Amendment to Receivables Loan and Security Agreement, dated as of May 23, 2008. (6)

95

10.7(f)	Amended and Restated Fee Letter, dated May 23, 2008. (6)
10.7(g)	Sixth Amendment to Receivables Loan and Security Agreement, dated as of November 13, 2008. (8)
10.8(a)	Credit Agreement, dated July 31, 2006, by and among LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (11)
10.8(b)	Guaranty and Suretyship Agreement by registrant and Resource Leasing, Inc. in favor of National City Bank. (11)
10.8(c)	First Amendment to Credit Agreement, dated August 14, 2006, by and among LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (12)
10.8(d)	Second Amendment to Credit Agreement, dated December 22, 2006, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (9)
10.8(e)	Third Amendment to Credit Agreement, dated March 14, 2007, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (13)
10.8(f)	Seventh Amendment to Credit Agreement, dated July 31, 2009, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank.(18)
10.8(g)	Eighth Amendment to Credit Agreement, dated September 30, 2009, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (18)
10.8(h)	Ninth Amendment to Credit Agreement, dated November 30, 2009, between LEAF Financial Corporation, LEAF Funding, Inc. and PNC Bank, National Association (successor by merger to National City Bank.). (19)
10.8(i)	Tenth Amendment to Credit Agreement, dated January 29, 2010, between LEAF Financial Corporation, LEAF Funding, Inc. and PNC Bank, National Association (successor by merger to National City Bank.). (19)
10.8(j)	Eleventh Amendment to Credit Agreement, dated March 31, 2010, between LEAF Financial Corporation, LEAF Funding, Inc. and PNC Bank, National Association (successor by merger to National City Bank.). (19)
10.8(k)	Twelfth Amendment to Credit Agreement, dated May 14, 2010, between LEAF Financial Corporation, LEAF Funding, Inc. and PNC Bank, National Association (successor by merger to National City Bank.). (20)
12.1	Ratio of Earnings to Fixed Charges.
14.1	Insider Trader Policy (15)
21.1	Subsidiaries of Resource America, Inc.
23.1	Consent of Grant Thornton LLP.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

(2) Files previously as an exhibit to our Current Report on Form 8-K filed on October 1, 2009 and by this reference incorporated herein.

(3) Filed previously as an exhibit to our Current Report on Form 8-K filed on June 1, 2007 and by this reference incorporated herein.

(4) Filed previously as an exhibit to our Current Report on Form 8-K filed on December 24, 2008 and by this reference incorporated herein.

(5) Filed previously as an exhibit to our Annual Report on Form 10-K for the fiscal year ended September 30, 2007 and by this reference incorporated herein.

(6) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and by this reference incorporated herein.

(7) Filed previously as an exhibit to our Current Report on Form 8-K filed on October 6, 2008 and by this reference incorporated herein.

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

(9) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 and by this reference incorporated herein.

(10) Filed previously as an exhibit to our Current Report on Form 8-K filed on March 27, 2009 and by this reference incorporated herein.

(11) Filed previously as an exhibit to our Current Report on Form 8-K filed on August 4, 2006 and by this reference incorporated herein.

(12) Filed previously as an exhibit to our Current Report on Form 8-K filed on August 17, 2006 and by this reference incorporated herein.

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

(14) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and by this reference incorporated herein.

96

(15) Filed previously as an exhibit to our Current Report on Form 8-K filed on August 31, 2007 and by this reference incorporated herein.

(16) Filed previously as an exhibit to our Current Report on Form 8-K filed on October 1, 2009 and by this reference incorporated herein.

(17) Filed previously as an exhibit to our Current Report on Form 8-K filed on November 9, 2009 and by this reference incorporated herein.

(18) Filed previously as an exhibit to our Annual Report on Form 10-K for the fiscal year ended September 30, 2009 and by this reference incorporated herein.

(19) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and by this reference incorporated herein.

(20) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 and by this reference incorporated herein.

97

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
December 13, 2010	By:   /s/ Jonathan Z. Cohen
	JONATHAN Z. Cohen
	Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Edward E. Cohen	Chairman of the Board	December 13, 2010
EDWARD E. COHEN
/s/ Jonathan Z. Cohen	Director, President	December 13, 2010
JONATHAN Z. COHEN	and Chief Executive Officer
	(Principal Executive Officer)
/s/ Michael J. Bradley	Director	December 13, 2010
MICHAEL J. BRADLEY
/s/ Carlos C. Campbell	Director	December 13, 2010
CARLOS C. CAMPBELL
/s/ Kenneth A. Kind	Director	December 13, 2010
KENNETH A. KIND
/s/ Hersh Kozlov	Director	December 13, 2010
HERSH KOZLOV
/s/ Andrew M. Lubin	Director	December 13, 2010
ANDREW M. LUBIN
/s/ John S. White	Director	December 13, 2010
JOHN S. WHITE
/s/ Thomas C. Elliott	Senior Vice President	December 13, 2010
THOMAS C. ELLIOTT	and Chief Financial Officer
	(Principal Financial Officer)
/s/ Arthur J. Miller	Vice President,	December 13, 2010
ARTHUR J. MILLER	and Chief Accounting Officer
	(Principal Accounting Officer)

98

Resource America, Inc.

Schedule II – Valuation and Qualifying Accounts

(in thousands)

	Balance at Beginning of Year		Additions Charged to Costs and Expenses		Amounts Written-off Against the Allowance			Balance at End of Year
Allowance for investments in real estate loans:
September 30, 2010	$	1,585	$	49	$	(1,585	)	$	49
September 30, 2009	$	1,129	$	456	$	−		$	1,585
September 30, 2008	$	629	$	500	$	−		$	1,129
Allowance for investments in commercial finance assets:
September 30, 2010	$	3,210	$	3,307	$	(5,617	)	$	900
September 30, 2009	$	1,750	$	6,410	$	(4,950	) (1)	$	3,210
September 30, 2008	$	120	$	7,505	$	(5,875	)	$	1,750
Allowance for investments in loans held for investment:
September 30, 2010	$	−	$	−	$	−		$	−
September 30, 2009	$	1,595	$	1,738	$	(3,333	) (2)	$	−
September 30, 2008	$	−	$	2,622	$	(1,027	)	$	1,595
Allowance for management fees – commercial finance:
September 30, 2010	$	−	$	1,852	$	(777	)	$	1,075
September 30, 2009	$	−	$	−	$	−		$	−
September 30, 2008	$	−	$	−	$	−		$	−

(1) Includes $1.5 million reduction due to the sale of LCFF.

(2) Includes $2.6 million reduction due to the sale of Apidos CDO VI.

Resource America, Inc.

SCHEDULE III

Real Estate and Accumulated Depreciation

September 30, 2010

(dollars in thousands)

Column A	Column B		Column C		Column D		Column E		Column F		Column G		Column H	Column I
Description	Encumbrances		Initial cost to Company		Cost capitalized subsequent to acquisition		Gross Amount at which carried at close of period		Accumulated Depreciation		Date of Construction		Date Acquired	Life on which depreciation in latest income is computed
			Buildings and Land Improvements		Improvements Carrying Costs		Buildings and Land Improvements Total
Real estate owned:
Hotel      Savannah, GA	$	12,005	$	10,187	$	2,114	$	16,505	$	3,846		1853	06/30/2005	40 years
Commercial      Philadelphia, PA		−		2,874		389		3,263		143		1924	01/9/2009	37 years
Office Building       Moberly, MO		1,472		1,866		−		1,866		123		1998	11/30/2007	39 years
Assets of   Consolidated Variable    Interest Entity (a):
Commercial Retail        Elkins West, WV		−		1,600		−		1,600		528		1963	07/01/2003	40 years
	$	13,477	$	16,527	$	2,503	$	23,234	$	4,640

(a) The date acquired reflects the date the Company adopted the provisions of Financial Accounting Standards Board (or FASB) Financial Interpretation No. 46;  this pronouncement has been replaced by the FASB Accounting Standards Codification, or ASC, section 810-10);  amounts reflected are on a one-quarter lag (as of June 30, 2010) as permitted under ASC 810-10.

	Years Ended September 30,
	2010		2009		2008
Balance, beginning of year	$	25,241	$	22,132	$	19,410
Additions:
Acquired through foreclosure		−		2,874		−
Improvements, etc.		293		235		2,722
Other – basis adjustments		−		−		−
		25,534		25,241		22,132
Deductions:
Cost of real estate sold		2,300		−		−
Other − write-down		−		−		−
Balance, end of year	$	23,234	$	25,241	$	22,132

Resource America, Inc.

SCHEDULE IV

Mortgage Loans on Real Estate

September 30, 2010

(in thousands)

Column A	Column B	Column C	Column D	Column E		Column F		Column G		Column H
Description	Interest rate	Final maturity date	Periodic payment term	Prior liens		Face amount of mortgage		Carrying amount of mortgage		Principal amount of loan subject to delinquent principal or interest
Second Lien Loan
Office building - Omaha, NE	Fixed interest rate of 8%	8/31/2011	Monthly	$	−	$	73	$	49	$	−

	Years Ended September 30,
	2010		2009		2008
Balance, beginning of year	$	4,447	$	15,869	$	27,759	(a)
Additions:
Other		2,027		266		4,795	(a)
		6,474		16,135		32,554
Deductions:
Foreclosed loans		−		2,837		−
Collections of principal		4,840		8,851		16,685	(a)
Charge-offs		1,585		−		−
		6,425		11,688		16,685
Balance, end of year	$	49	$	4,447	$	15,869	(a)

(a) This balance excludes a note receivable (not a mortgage) that related to a partial sale of our interest in a real estate venture.  The note was paid-off during fiscal 2009.

EX-4.2 2 exh4_2.htm INDENTURE DATED AUGUST 20, 2010

Exhibit 4.2

EXECUTION VERSION

INDENTURE

between

LEAF FUNDING SPE 1, LLC,

as Issuer,

U.S. BANK NATIONAL ASSOCIATION,

as Trustee and Custodian

Equipment Contract Backed Notes, Series 2010-4, Class A

Equipment Contract Backed Notes, Series 2010-4, Class B-1

and

Equipment Contract Backed Notes, Series 2010-4, Class B-2

Dated as of August 20, 2010

TABLE OF CONTENTS

		PAGE
ARTICLE I DEFINITIONS		2
Section 1.01	Definitions	2
Section 1.02	Certain Rules of Construction	2
ARTICLE II NOTE FORM		2
Section 2.01	Form Generally	2
Section 2.02	Multiple Classes of Notes; Form for Each Class; Rights of Each Class	2
Section 2.03	Denomination	4
Section 2.04	Execution, Authentication, Delivery and Dating	4
Section 2.05	[Reserved]	4
Section 2.06	Registration, Registration of Transfer and Exchange	4
Section 2.07	Mutilated, Destroyed, Lost or Stolen Note	9
Section 2.08	Payment of Principal and Interest; Rights Preserved	10
Section 2.09	Persons Deemed Owner	11
Section 2.10	Cancellation	11
Section 2.11	Tax Treatment; Withholding Taxes	11
ARTICLE III Acquisitions of CONTRACTS		12
Section 3.01	Conditions to the Acquisition of Contracts	12
ARTICLE IV ISSUANCE OF NOTES; CERTAIN ISSUER AND CUSTODIAN OBLIGATIONS		14
Section 4.01	Conditions to Issuance of Notes	14
Section 4.02	Security for Notes	17
Section 4.03	Review of Contract Files	18
Section 4.04	Defective Contracts	19
Section 4.05	Reserved	20
Section 4.06	Administration of the Contract Assets	20
Section 4.07	Releases	20
ARTICLE V SATISFACTION AND DISCHARGE		21
Section 5.01	Satisfaction and Discharge of Indenture	21
ARTICLE VI DEFAULTS AND REMEDIES		22
Section 6.01	Events of Default	22
Section 6.02	Acceleration of Maturity; Rescission and Annulment	23
Section 6.03	Collection of Indebtedness and Suits for Enforcement by Trustee	24
Section 6.04	Remedies	24

i

		PAGE
Section 6.05	Optional Preservation of Collateral	25
Section 6.06	Trustee May File Proofs of Claim	25
Section 6.07	Trustee May Enforce Claims Without Possession of Notes	26
Section 6.08	Application of Money Collected	26
Section 6.09	[Reserved]	27
Section 6.10	Unconditional Right of the Noteholders to Receive Principal and Interest	27
Section 6.11	Restoration of Rights and Remedies	27
Section 6.12	Rights and Remedies Cumulative	27
Section 6.13	Delay or Omission Not Waiver	27
Section 6.14	Control by Control Party	27
Section 6.15	Waiver of Certain Events by the Control Party	28
Section 6.16	Additional Rights of Subordinate Noteholders	28
Section 6.17	Waiver of Stay or Extension Laws	29
Section 6.18	Sale of Collateral	29
Section 6.19	Action on Notes	30
ARTICLE VII THE TRUSTEE		30
Section 7.01	Certain Duties and Immunities	30
Section 7.02	Notice of Default and Other Events	32
Section 7.03	Certain Rights of Trustee	32
Section 7.04	Not Responsible for Recitals or Issuance of Notes	34
Section 7.05	May Hold Notes	34
Section 7.06	Money Held in Trust	35
Section 7.07	Compensation and Reimbursement	35
Section 7.08	Corporate Trustee Required; Eligibility	36
Section 7.09	Resignation and Removal; Appointment of Successor	36
Section 7.10	Acceptance of Appointment by Successor	37
Section 7.11	Merger, Conversion, Consolidation or Succession to Business of Trustee	38
Section 7.12	Co-Trustees and Separate Trustees	38
Section 7.13	Maintenance of Office or Agency; Initial Appointment of Payment Agent	39
Section 7.14	Appointment of Authenticating Agent	39
Section 7.15	Appointment of Paying Agent other than Trustee; Money for Note Payments to be Held in Trust	41
Section 7.16	Rights with Respect to the Servicer and Back-up Servicer	42
Section 7.17	Representations and Warranties of the Trustee	42
ARTICLE VIII THE CUSTODIAN		43
Section 8.01	Appointment of Custodian	43
Section 8.02	Removal of Custodian	43
Section 8.03	Termination by Custodian	44
Section 8.04	Limitations on the Custodian’s Responsibilities	44
Section 8.05	Limitation on Liability	45

ii

		PAGE
Section 8.06	Custodian Obligations Regarding Genuineness of Documents	46
Section 8.07	Force Majeure	46
ARTICLE IX [RESERVED]		46
ARTICLE X SUPPLEMENTAL INDENTURES		46
Section 10.01	Supplemental Indentures without Consent of the Noteholders	46
Section 10.02	Supplemental Indentures with Consent of the Noteholders	47
Section 10.03	Execution of Supplemental Indentures	48
Section 10.04	Effect of Supplemental Indentures	48
Section 10.05	Reference in Notes to Supplemental Indentures	48
Section 10.06	Back-Up Servicer Consent	49
Section 10.07	Amendments to the Lockbox Intercreditor Agreement	49
ARTICLE XI REDEMPTIONS AND PREPAYMENTS OF NOTES		49
Section 11.01	Redemptions of Notes	49
Section 11.02	Redemption Procedures	49
Section 11.03	Notice of Redemption to Noteholders	50
Section 11.04	Amounts Payable on Redemption Date	50
Section 11.05	Release of Contract Assets in Connection with Redemptions	51
ARTICLE XII REPRESENTATIONS, WARRANTIES AND COVENANTS		51
Section 12.01	Representations and Warranties	51
Section 12.02	Covenants	57
ARTICLE XIII ACCOUNTS AND ACCOUNTINGS		63
Section 13.01	Collection of Money	63
Section 13.02	Establishment of Trust Accounts	63
Section 13.03	Collection Account	65
Section 13.04	Reserve Account	67
Section 13.05	[Reserved]	67
Section 13.06	Prefunding Account	68
Section 13.07	Capitalized Interest Account	68
Section 13.08	Reports to the Noteholders	68
Section 13.09	Monthly Servicing Reports	69
ARTICLE XIV PROVISIONS OF GENERAL APPLICATION		69
Section 14.01	General Provisions	69
Section 14.02	Acts of Noteholders	69
Section 14.03	Notices	70
Section 14.04	Notices to Noteholders; Waiver	71
Section 14.05	Successors and Assigns	71

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Section 14.06	Severability; No Waiver	71
Section 14.07	Benefits of Indenture Limited to Parties and Express Third Party Beneficiaries	71
Section 14.08	Legal Holidays	71
Section 14.09	Governing Law; Waiver of Jury Trial; Consent to Jurisdiction	72
Section 14.10	Counterparts; Entire Agreement	72
Section 14.11	Notifications	72
Section 14.12	No Petition	72
Section 14.13	Assignment	73

Schedule I                           Contract Schedule

Schedule II                           Definitions Annex

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 EXHIBITS

A-1	Form of Class A Note
A-2	Form of Class B-1 Note
A-3	Form of Class B-2 Note
B-1	Form of Request for Release
B-2	Form of Return of Documents to Custodian
C	Form of Custodian and Trustee Certificate Re:  Substitutions
D	Form of Release Agreement Re:  Existing Indebtedness
E	Form of Investor Certificate
F	Form of Transfer Certificate

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This Indenture, dated as of August 20, 2010 (as amended, supplemented or modified from time to time, this “Indenture”), is entered into between LEAF FUNDING SPE 1, LLC, a Delaware limited liability company, as Issuer and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as Trustee and as Custodian.

PRELIMINARY STATEMENT

The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of its Equipment Contract Backed Notes, Series 2010-4 (the “Notes”), issuable as provided in this Indenture.  All covenants and agreements made by the Issuer herein are for the benefit and security of the Noteholders.  The Issuer and the Custodian are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.

All things necessary to make this Indenture a valid agreement of the Issuer, the Trustee and the Custodian in accordance with its terms have been done.

GRANTING CLAUSE

To secure the payment of the principal of and interest on the Notes in accordance with their terms, the payment of all sums payable under this Indenture and the other Transaction Documents and the performance of the covenants contained in this Indenture and the other Transaction Documents, the Issuer hereby Grants to the Trustee, solely in trust and as collateral security as provided in this Indenture, for the benefit of the Secured Parties, a security interest in all of the Issuer’s “accounts,” “deposit accounts,” “chattel paper,” “payment intangibles,” “commercial tort claims,” “supporting obligations,” “promissory notes,” “letter-of-credit rights,” “documents,” “goods,” “fixtures,” “general intangibles,” “instruments,” “inventory,” “equipment,” “investment property,” “proceeds” (as each of the foregoing terms is defined in the UCC), rights, interests and property (whether now owned or hereafter acquired or arising), including the Issuer’s right, title and interest (whether now owned or hereafter acquired or arising) in and to and under the following:  (a) the Contracts listed on the Contract Schedule; (b) the related Contract Assets; (c)  the Assignment Agreements; (d) any rights of the Issuer under the Purchase and Contribution Agreement; (e) any rights of the Issuer under the Servicing Agreement; (f) the Reserve Account, Collection Account, Prefunding Account and Capitalized Interest Account and all amounts from time to time on deposit therein (including any Eligible Investments, investment property and other property at any ti me and from time to time in such accounts); (g) all amounts from time to time on deposit in the Lockbox Account with respect to the Contracts and the Equipment; (h) the interest of the Issuer in the Equipment; (i) any Insurance Policy and Insurance Proceeds; and (j) all income, payments and proceeds of the foregoing (including, but not by way of limitation, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind, investment property and other forms of obligations and receivables which at any time constitute all or part or are included in the proceeds of any of the foregoing) (all of the foregoing being hereinafter referred to as the “Collateral”).  The foregoing Grant, transfer, assignment, set over and conveyance does not constitute and is not intended to result in a creation or an assumption by the Trustee or the Secured Parties of any obligation of the Issuer, the Servicer or any other Person in connection with the Collateral or under any agreement or instrument relating thereto.  In furtherance and not in limitation of the foregoing, the Issuer hereby assigns to the Trustee, for the benefit of the Secured Parties, all of its right, title and interest in and to all liens and security interests in any assets, and all UCC financing statements related thereto. Notwithstanding the foregoing, Security Deposits shall not constitute part of the Collateral.

The Trustee acknowledges its acceptance on behalf of the Secured Parties of a security interest in all of the Issuer’s right, title and interest in and to the Collateral and declares that it shall maintain the Collateral in accordance with the provisions hereof.

ARTICLE I

DEFINITIONS

Section 1.01                      Definitions.Except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms used but not otherwise defined herein have the meaning set forth in the Definitions Annex attached hereto as Schedule II.

Section 1.02                      Certain Rules of Construction.  Unless the context of this Indenture clearly requires otherwise:  (a) references to the plural include the singular and to the singular include the plural; (b) references to any gender include any other gender; (c) the words “include” and “including” are not limiting; (d) the words “hereof,” “herein,”  220;hereby,” and “hereunder,” and any other similar words, refer to this Indenture as a whole and not to any particular provision hereof; and (e) article, section, subsection, clause, exhibit, and schedule references are to this Indenture.  Article, section, and subsection headings are for convenience of reference only, shall not constitute a part of this Indenture for any other purpose, and shall not affect the construction of this Indenture.  All exhibits and schedules attached hereto are incorporated herein by this reference.  Any reference herein to this Indenture or any other agreement, document, or instrument includes all permitted alterations, amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as applicable.

ARTICLE II

NOTE FORM

Section 2.01                      Form Generally.The Notes and the related certificates of authentication shall be in substantially the form described in this Indenture, with such appropriate insertions, omissions, substitutions and other variations as are expressly required or permitted by this Indenture.  The Notes may have such letters , numbers or other marks of identification and such legends or endorsements placed thereon, as may, consistently herewith, be determined appropriate by the officers executing such Notes, as evidenced by their execution of the Notes.  The terms of each Note are intended to be incorporated into this Indenture.

Section 2.02                      Multiple Classes of Notes; Form for Each Class; Rights of Each Class.  This Indenture provides for the issuance by the Issuer of three classes of Notes, the Class A Notes, the Class B-1 Notes and the Class B-2 Notes.  Each Note shall bear upon its face the designation of the Class to which it belongs.  Each Class A Note shall be in the form of Exhibit A-1 attached hereto. Each Class B-1 Note shall be in the form of Exhibit A-2 attached hereto. Each Class B-2 Note shall be in the form of Exhibit A-3 attached hereto. All Notes in the same Class shall be in substantially identical form except for differences in registration information and denomination and such other variations as may be permitted by this Indenture.

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(a)           Notes.  The Class A Notes are being offered and sold by the Issuer to the Initial Class A Purchaser pursuant to the Note Purchase Agreement, the Class B-1 Notes are being offered and sold by the Issuer to the Initial Class B-1 Purchaser pursuant to the Note Purchase Agreement and the Class B-2 Notes are being offered and sold by the Issuer to the Initial Class B-2 Purchaser pursuant to the Note Purchase Agreement.

Notes offered and sold to QIBs in reliance on Rule 144A shall be issued initially in the form of certificated definitive, fully registered Notes (any such Notes, the “Notes”), which shall be duly executed by the Issuer and authenticated by the Trustee as hereinafter provided and delivered by the Trustee to the applicable Noteholders in accordance with the Note Purchase Agreement. The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods, all as determined by the officers executing such Notes, as evidenced by their execution of such Notes.  The aggregate principal amount of the Notes may from time to time be increased (up to the maximum authorized amou nt) or decreased by adjustments made on the records of the Trustee as hereinafter provided.  The records of the Trustee shall be controlling with regard to the outstanding principal amount of Notes hereunder absent manifest error.

Each Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.  Any endorsement of a Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee, or by the Note Registrar at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.07hereof.

(b)           Each Note issued under this Indenture shall be in all respects equally and ratably secured with each other Note by the Collateral Granted by the Issuer hereunder.  Each Note shall be entitled to the benefits hereof, without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.  Notwithstanding the foregoing, all cash amounts shall be applied by the Trustee in accordance with the express provisions hereof and

(I)           the rights of the Holders of the Class B-1 Notes (1) to receive payments of interest in respect of the Class B-1 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of Class A Notes to receive payment of interest on the Class A Notes and to certain other payments as set forth in Section 13.03 and others entitled to receive payments thereunder and (2) to receive payments of principal in respect of the Class B-1 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of the Class A Notes to receive principal paid on the Class A Notes and to certain other payments, as set forth in Section 13.03 and others entitled to receive payments thereunder; and

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(II)           the rights of the Holders of the Class B-2 Notes (1) to receive payments of interest in respect of the Class B-2 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of Class A Notes and the Class B-1 Notes to receive payment of interest on the Class A Notes and the Class B-1 Notes and to certain other payments as set forth in Section 13.03 and others entitled to receive payments thereunder and (2) to receive payments of principal in respect of the Class B-2 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of the Class A Notes to receive principal paid on the Class  A Notes and the rights of the Holders of the Class B-1 Notes to receive principal paid on the Class B-1 Notes and to certain other payments, as set forth in Section 13.03 and others entitled to receive payments thereunder.

Section 2.03                      Denomination.  The maximum aggregate stated principal amount of the Class A Notes that may be authenticated and delivered under this Indenture is $20,000,000, the maximum aggregate stated principal amount of the Class B-1 Notes that may be authenticated and delivered under this Indenture is $750,000 and the maximum aggregate stated principal amount of the Class B-2 Notes that may be authenticated and delivered un der this Indenture is $750,000, except for Notes authenticated and delivered upon registration of transfer, or in exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.08 or 10.05.  The Notes shall be issuable only as registered Notes without coupons in the denominations of at least $100,000 with respect to any Note and multiples of $1,000 for any amount in excess thereof; provided that the foregoing shall not restrict or prevent the transfer, in accordance with Sections 2.06 and 2.07, of any “stub” Note with a remaining Outstanding Note Balance of less than $100,000 with respect to any Note.

Section 2.04                      Execution, Authentication, Delivery and Dating.  The Notes shall be executed on behalf of the Issuer by the manual or facsimile signature of one of its authorized officers.  Notes bearing the manual or facsimile signatures of individuals who were at any time authorized officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices subs equent to the authentication or delivery of such Notes.

Each Note shall be dated as of the date of its authentication.  No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee upon receipt of an Issuer Order or by any Authenticating Agent by the manual signature of one of its authorized officers, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

Section 2.05                      [Reserved].

Section 2.06                      Registration, Registration of Transfer and Exchange.

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              (a)           The Issuer shall cause to be kept a register (the “Note Register”) at the office of an agent (the “Note Registrar”), in accordance with Section 7.13, and in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall, on behalf of the Issuer, provide for the registration, issuance and ownership of the Notes and the registration of transfers of the Notes.  The Trustee is hereby appointed the initial Note Registrar.
60; Each Noteholder and, if the Note Registrar is someone other than the Trustee, the Trustee shall have the right to examine the Note Register at all reasonable times and to rely conclusively upon an Officer’s Certificate of the Note Registrar as to the names and addresses of the Noteholders and the principal amounts and numbers of such Notes as held.

(b)           The Notes have not been registered under the Securities Act or the securities laws of any jurisdiction.  Consequently, the Notes are not transferable other than pursuant to Rule 144A or another exemption from registration.  Each Person who has or who acquires any Ownership Interest in a Note shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the provisions of this Section 2.06.

(c)           With respect to any Note, at the option of the Noteholder thereof, Notes may be exchanged for other Notes of any authorized denominations (together with any “stub note” reflecting the remaining principal balance of such Note(s) that is less than the minimum authorized denomination), aggregate principal amount and Stated Maturity Date, upon surrender of the Notes to be exchanged at the Corporate Trust Office.  Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee or its agents shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive.

(d)           With respect to any Note, any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed.  All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same rights, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.  No service charge shall be charged to a Noteholder for any registration of transfer or exchange of Notes, but the Issuer and the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in conn ection with any registration of transfer or exchange of Notes.

(e)           Transfer and Exchange of Notes.  When Notes are presented by a Holder to the Note Registrar with a request:

(i)           to register the transfer of Notes; or

(ii)           to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Note Registrar shall register the transfer or make the exchange as requested; provided, however, that the Notes presented or surrendered for register of transfer or exchange:

(A)           shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Note Registrar duly

executed by such Holder or by his attorney, duly authorized in writing; and

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(B)           shall be accompanied by an Investment Letter substantially in the form of Exhibit E attached hereto shall be delivered by the proposed

transferee to the Issuer and to the Trustee to the effect that such transfer is in compliance with Rule 144A.

(f)            [Reserved]

(g)           Each purchaser of a Note or an interest in a Note, other than any Initial Purchaser, will be deemed to have represented and agreed as follows:

(i)           It understands that the Notes will be offered and may be resold by the applicable Initial Purchaser only to QIBs pursuant to Rule 144A.

(ii)           It understands that the Notes have not been registered under, and were transferred to it in a transaction not involving any public offering within the meaning of, the Securities Act, and that if in the future it decides to re-offer, resell, pledge or otherwise transfer such Notes it will do so only in accordance with applicable state securities laws and pursuant to Rule 144A to a Person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, purchasing for its own account or for the account of a QIB, whom the holder has informed that such re-offer, resale, pledge or other transfer is being made in reliance on Rule 144A or to the Issuer pursuant to the terms of the Indenture.

(iii)           It acknowledges that none of the Issuer, the Initial Purchasers or any Person representing the Issuer or any such Initial Purchaser has made any representation to it with respect to the Issuer, any affiliates thereof or the offering or sale of the Notes.  It is purchasing the Notes for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment purposes only, and not with a view to, or for offer or resale in connection with, any distribution thereof in violation of the Securities Act or the applicable state securities laws, subject to any requirements of law that the disposition of its property or the property of such investor account be at all times within its or their control and sub ject to its or their ability to resell such Notes pursuant to Rule 144A.

(iv)           If it is acquiring any Note as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to such account and that it has full power to make the acknowledgments, representations and agreements contained herein on behalf of each such account.

(v)           It is a QIB purchasing for its own account or for the account of another QIB and it, and such other Person (if applicable), are aware that the sale to it is being made in reliance on Rule 144A.

(vi)           It acknowledges that transfers of the Notes shall otherwise be subject in all respects to the restrictions applicable thereto contained in this Indenture.

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(vii)           (A) It is not (and for so long as it holds any Notes or an interest therein will not be), and is not acting on behalf of (and for so long as it holds any Notes or an interest herein will not be acting on behalf of), an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, a plan described in Section 4975(e)(1) of the Code or an entity which is deemed to hold the assets of any such plan (“Plan Assets”) pursuant to 29 C.F.R. Section 2510.3-101 as modified by Section 3(42) of ERISA (the “Plan Asset Regulation”) (each a “Benefit Plan Investor”), (B) (i) its acquisition and continued holding of such Note will be covered by a statutory exemption or a prohibited transaction class exemption issued by the United States Department of Labor, (ii) at the time of acquisition the Notes are rated at least investment grade and (iii) it believes that the Notes are properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations and agrees to so treat such Notes or (C) it has provided the Trustee with an opinion of counsel, which opinion of counsel will not be at the expense of the Trustee, the Issuer, the Servicer or any Initial Purchaser, which opines that the purchase, holding and transfer of such Note o r interest therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Trustee, the Issuer, the Servicer or any Initial Purchaser to any obligation in addition to those undertaken herein.

(viii)           It acknowledges and agrees to treat the Notes as debt for all federal, state and local income tax purposes.

(ix)           [Reserved.]

(x)           It is purchasing one or more Notes in an amount of at least $100,000, and it understands that such Notes may be resold, pledged or otherwise transferred in an amount of at least $100,000 (unless the outstanding principal amount of such Note shall be less than $100,000).

(xi)           It understands that the Notes will bear a legend substantially to the following effect unless the Issuer determines otherwise consistent with applicable law:

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS.  THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES (1) THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND (A) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB AND TO WHOM NOTICE IS GIVEN THAT RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR TO THE ISSUER PURSUANT TO THE TERMS OF THE INDENTURE, OR (B) PURSUANT TO AN

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EFFECTIVE REGISTRATION STATEMENT, AND (2) THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TO BE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.  THE INDENTURE RELATING TO THIS NOTE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN IN VIOLATION OF THE FOREGOING.  EACH TRANSFEREE ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE IS DEEMED TO REPRESENT TO THE ISSUER AND THE SERVICER THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.  EACH HOLDER HEREOF IS DEEMED TO REPRESENT AND WARRANT EITHER (A) THAT IT IS NOT (AND FOR SO LONG AS IT HOLDS THIS NOTE OR AN INTEREST HEREIN WILL NO T BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THIS SECURITY OR AN INTEREST HEREIN WILL NOT BE ACTING ON BEHALF OF), AN “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) THAT IS SUBJECT TO TITLE I OF ERISA, A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY WHICH IS DEEMED TO HOLD THE ASSETS OF ANY SUCH PLAN (“PLAN ASSETS”) PURSUANT TO 29 C.F.R. SECTION 2510.3-101 AS MO DIFIED BY SECTION 3(42) OF ERISA (THE “PLAN ASSET REGULATION”) (EACH A “BENEFIT PLAN INVESTOR”), (B) (I) ITS PURCHASE AND OWNERSHIP OF THIS SECURITY WILL BE COVERED BY A PROHIBITED TRANSACTION CLASS EXEMPTION ISSUED BY THE UNITED STATES DEPARTMENT OF LABOR, (II) AT THE TIME OF ACQUISITION THE NOTES ARE RATED AT LEAST INVESTMENT GRADE AND (III) IT BELIEVES THAT THE NOTES ARE PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE PLAN ASSET REGULATIONS AND AGREES TO SO TREAT SUCH NOTES  OR (C)  IT HAS PROVIDED THE TRUSTEE WITH AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL NOT BE AT THE EXPENSE OF THE TRUSTEE, THE ISSUER, THE SERVICER OR THE APPLICABLE INITIAL PURCHASER, WHICH OPINES THAT THE PURCHASE, HOLDING AND TRANSFER OF SUCH NOTE OR INTEREST THEREIN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE TRUSTEE, THE ISSUER, THE SERVICER OR THE APPLICABLE INITIAL PURCHASER TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE INDENTURE. THE NOTES OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED ONLY IN PERMITTED DENOMINATIONS SPECIFIED IN THE INDENTURE.  ACCORDINGLY, AN INVESTOR IN THIS NOTE MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

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(xii)           It acknowledges that the Issuer, the Servicer, each Initial Purchaser and others will rely on the truth and accuracy of the foregoing acknowledgments, representations and agreements, and agrees that if any of the foregoing acknowledgments, representations and agreements deemed to have been made by it are no longer accurate, it shall promptly notify the Issuer, the Servicer and each Initial Purchaser.

(h)           Except as otherwise required under the Note Purchase Agreement, neither Initial Purchaser shall be required to deliver, and neither the Issuer nor the Trustee shall demand therefrom, any of the certifications or opinions described in this Section 2.06 in connection with the initial issuance of the applicable Notes and the delivery thereof by the Issuer.

Section 2.07                      Mutilated, Destroyed, Lost or Stolen Note.(a) If (i) any mutilated Note is surrendered to the Trustee or the Issuer, or the Trustee and the Issuer receive evidence to their reasonable satisfaction of the destruction, loss or theft of any Note, and (ii) in the case of a destroyed, lost, or stolen Note, there is deli vered to the Trustee and the Issuer such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee and the Issuer that such Note has been acquired by a bona fide purchaser and provided that the requirements of Section 8-405 of the UCC are satisfied, the Issuer shall execute and, upon a written request therefor by the Trustee and the Issuer shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of the same Class, tenor and Principal Balance, bearing a number not contemporaneously outstanding. If, after the delivery of such new Note, a bona fide purchaser of the original Note in lieu of which such new Note was issued presents such original Note for payment, the Trustee and the Issuer shall be entitled to recover such new Note from the Person to whom it was delivered or any Person taking title there from, except a bona fide purchaser, and the Trustee and the Issuer shall be e ntitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Trustee and the Issuer, in connection therewith. If any such mutilated, destroyed, lost or stolen Note shall have become or shall be about to become due and payable in full, or shall have been called for redemption in full, instead of issuing a new Note, the Issuer may pay such Note without surrender thereof, except that any mutilated Note shall be surrendered.

Upon the issuance of any new Note under this Section, the Issuer or the Note Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Subject to the above provisions of this Section 2.07, every new Note issued pursuant to this Section 2.07, in lieu of any destroyed, lost or stolen Note, shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

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The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.08                      Payment of Principal and Interest; Rights Preserved.

(a)           For each applicable Interest Accrual Period, the Notes of each Class shall accrue interest on the Outstanding Note Balance thereof at the Note Rate applicable to such Class; provided however, that with respect to each Class of Notes and on each Payment Date, interest shall be deemed not to have accrued during the previous Interest Accrual Period on an amount equal to the Impairment of such Class of Notes.  Notwithstanding the foregoing, if, on any subsequent Payment Date and with respect to each Class of Notes, no Impairment is allocated to such Class of Notes, all Deferred Interest for such Class of Notes shall be deemed to have accrued during the immedi ately preceding Interest Accrual Period and be payable on such Payment Date as Note Current Interest.  All interest and fees accrued hereunder on the Class A Notes, the Class B-1 Notes and the Class B-2 Notes shall be calculated on the basis of a three-hundred-sixty (360)-day year comprised of twelve 30-day months and shall accrue through the day preceding the Stated Maturity Date and, to the extent that the payment of such interest shall be legally enforceable (except with respect to Deferred Interest), on any overdue payment of interest at the Note Rate from the date such interest becomes due and payable (giving effect to any applicable grace periods herein) until fully paid.  All accrued interest shall be due and payable in arrears on each Payment Date and shall be paid by the Trustee to the Noteholders in accordance with Section 13.03.  In making any interest payment, if the interest calculation with respect to a Note shall result in a portion of such payment being less than $0.01, then such payment shall be decreased to the nearest whole cent, and no subsequent adjustment shall be made in respect thereof.

(b)           The principal of each Note shall be payable on each Payment Date beginning on the Initial Payment Date unless such Note becomes due and payable at an earlier date by call for redemption in accordance with Article XI.  The installment of principal due on the Class A Notes on any Payment Date shall, to the extent of cash flow available therefor in accordance with Section 13.03 on such Payment Date, be paid as set forth in Section 13.03(c)(viii).  The installment of principal due on the Class B-1 Notes on any Payment Date shall, to the extent of cash flow available therefor in accordance with Section 13.03 on such Payment Date, be paid as set forth in Section 13.03(c)(ix).  The installment of principal due on the Class B-2 Notes on any Paym ent Date shall, to the extent of cash flow available therefor in accordance with Section 13.03 on such Payment Date, be paid as set forth in Section 13.03(c)(x).  All unpaid principal on any Note (together with interest thereon and all other amounts due and payable hereunder or in respect of the Notes) shall be due and payable in full on the Stated Maturity Date for such Note.  All reductions in the principal amount of a Note effected by payment of such installments of principal shall be binding upon all future Noteholders of such Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note.  Principal shall be payable to Noteholders in the same Class on a pro rata basis based upon the relative Outstanding Note Balance of the Notes in such Class as of the related date of determination; providedthat, if as a result of such proration a portion of such principal would be less than $0.01, then such payment shall be decreased to the nearest whole cent, and such portion shall be applied to the next succeeding principal payment.

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(c)           The principal (other than principal to be deposited into the Prefunding Account in accordance with Sections 13.03(c)(viii), 13.03(c)(ix) and 13.03(c)(x)) of and interest on the Notes, and other amounts payable to the Noteholders under Section 13.03, are payable, through the Paying Agent on behalf of the Issuer, by check mailed by first-class mail to the Person whose name appears as the Registered Holder of such Note on the Note Register at the address of such Person as it appears on the Note Register or, at the option of any Noteholder, by wire transfer in immediately available funds to the account specified in writing to the Trustee by such Registered Holder at least five (5) Business Days prior to the Record Date for the Payment Date on which wire transfe rs will commence, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.  All payments on the Notes shall be paid without any requirement of presentment.  The Issuer shall notify the Person in whose name a Note is registered at the close of business on the Record Date immediately preceding the Payment Date on which the Issuer expects that the final installment of principal of such Note will be paid.  Such notice shall be mailed no later than the tenth (10th) day prior to such Payment Date and shall specify the place where such Note may be surrendered.  Funds representing any such checks returned undeliverable shall be held in accordance with Section 7.15.  Each Noteholder shall promptly surrender its Note to the Trustee at the Corporate Trust Office or in the case of mutilated, destro yed, lost or stolen Notes, as provided in Section 2.07, upon payment of the final installment of principal of such Note.

Section 2.09                      Persons Deemed Owner.  Prior to due presentment for registration of transfer of any Note, the Issuer, the Trustee, the Note Registrar, the Paying Agent and any agent of any of the foregoing shall treat the Person in whose name any Note is registered in the Note Register as the owner of such Note for the purpose of receiving payments of principal and interest on such Note and for all other purposes whatsoever, whe ther or not such Note be overdue, and none of the Issuer, the Trustee, the Note Registrar, the Paying Agent or any agent of the foregoing shall be affected by notice to the contrary.

Section 2.10                      Cancellation.  All Notes surrendered to the Trustee for payment, registration of transfer or exchange (including Notes surrendered to any Person other than the Trustee which shall be delivered to the Trustee) shall be promptly canceled by the Trustee.  No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.11, except as expressly permitted by this Indenture.  All canceled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its standard practice.

Section 2.11                      Tax Treatment; Withholding Taxes.

(a)           The Issuer has structured the transaction contemplated by this Indenture and the Notes with the intention that the Notes will qualify under applicable tax law as indebtedness of the Issuer.  The Issuer, the Trustee, the Servicer, the Back-up Servicer, each Noteholder and each beneficial owner of a Note by acceptance of its Note or a beneficial interest therein, each agree to treat the Notes as indebtedness of the Issuer for all tax purposes and further agrees not to take any action inconsistent with such treatment, unless and to the extent otherwise required by any taxing authority under applicable law.

Notwithstanding anything in any Transaction Document to the contrary, effective from the date of commencement of discussions with respect to the transactions contemplated by such documents, all parties hereto and the Noteholders may disclose to any and all Persons, without limitation of any kind, the U.S. Federal income tax treatment and tax structure of the Notes and the transactions contemplated hereby and all materials of any kind, including tax opinions or other tax analyses, if any, that are provided to such Persons regarding such tax treatment.

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(b)           Notwithstanding any other provision in this Indenture to the contrary or the other Transaction Documents, the Trustee, as Paying Agent for and on behalf of, and at the direction of the Servicer, shall comply with any and all federal withholding requirements under applicable law, as modified by the practice of any relevant taxing authority then in effect.  If any withholding tax is imposed on any payment by the Issuer (or allocation of income) under the Notes, such tax shall reduce the amount otherwise payable to such Noteholder.  Any amounts so withheld shall be treated as having been paid to the related Noteholder for all purposes of this Indenture.  Failure of a Noteholder or a beneficial owner of a Note to provide the Trustee or other paying agent with appropriate tax certificates may result in amounts being withheld from the payment to such Noteholder or beneficial owner.  In no event shall the consent of Noteholders be required for any withholding.

ARTICLE III

ACQUISITIONS OF CONTRACTS

Section 3.01                      Conditions to the Acquisition of Contracts.  Each acquisition by the Issuer of a Contract from the Originator on any Acquisition Date is subject to the conditions specified in Section 3.04 of the Servicing Agreement, in the case of Substitute Contracts, and Section 13.06 hereof, in case of Purchased Contracts, including, in each case, satisfaction of the following conditions on the relevant date specified below:< /font>

(a)           By 10:00 am (New York time) on the Business Day prior to any proposed Acquisition Date, the Originator shall have delivered to each Initial Purchaser, the Issuer, the Trustee,the Custodian and the Back-up Servicer (A) a draft Transfer Certificate substantially in the form set forth on Exhibit F attached hereto (the “Transfer Certificate”), (B) a draft Amendment to Contract Schedule containing the information required to be pro vided with respect to the Substitute Contracts and/or Purchased Contracts and related Contract Assets to be acquired by the Issuer on such Acquisition Date, as specified in the definition of Contract Schedule, (C) if applicable, a draft of the Release Agreement relating to any Existing Indebtedness, and (D) a draft Assignment Agreement and draft Exception Report with respect to each Substitute Contract and Purchased Contract to be acquired by the Issuer on such Acquisition Date.

(b)           Not later than the Acquisition Date, the Issuer shall have delivered or shall have caused to be delivered to the Custodian, the Contract Files relating to the Contracts to be purchased or substituted in accordance with Section 4.03(a).

(c)           Not later than the third Business Day after the related Acquisition Date, the Custodian shall deliver to each Initial Purchaser, the Issuer and the Trustee an executed Custodian Certificate and Exception Report resulting from the Custodian’s review of the related Substitute Contracts and Purchased Contracts and the Contract Files related thereto pursuant to Section 4.03(b). In accordance with Section 4.04(a), each Contract identified as having exceptions in such Exception Report shall be subject to a Warranty Event.

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(d)           By 11:00 am (New York time) on the proposed Acquisition Date, the Originator shall cause to be delivered the final executed Assignment Agreement, Amendment to Contract Schedule, and Release Agreement (if applicable) along with a final executed Transfer Certificate, in each case, such document or certificate containing changes from the draft document delivered pursuant to Section 3.01(a) above, if any.  The Transfer Certificate shall confirm that (A) each Substitute Contract or Purchased Contract, as applicable, is a Contract that satisfies each of the representations and warranties set forth in Clause (C) or (D) of the related Assignment Agreement, (B) all applicable filings required under Sections 4.01(a)(v) and 4.02 have been made or are in effect, (C) no Event of Default shall exist prior to or after giving effect to the acquisition of such Substitute Contracts and/or Purchased Contracts and (D) all other conditions to the acquisition of Substitute Contracts or Purchased Contracts, as applicable, have been satisfied except for the conditions set forth in Section 3.01(b) and Section 3.01(c).

A document or certificate described in clause (a), (b), (c) or (d) above shall be regarded as timely delivered if it is delivered by telecopy (with written confirmation of transmission) as of the applicable time described above; provided that, the originally executed copy shall be delivered by the applicable party promptly thereafter.

(e)           With respect to any Contract substituted for an Early Termination Contract, the Issuer shall be allowed to use the Collections received in respect thereof to purchase a new Substitute Contract in lieu of distributing such Collections in accordance with Section 13.03, provided that, such purchase of a Substitute Contract shall occur simultaneously with the Issuer’s receipt of such Collections or such Collections shall be held not later than the Payment Date (or the then current Collection Period) on deposit in the Collection Account until such Substitu te Contract is so purchased; provided, further, that if such Substitute Contract is not purchased on or before the immediately following Payment Date such Collections shall be disbursed in accordance with Section 13.03.  Notwithstanding the foregoing, any Substitute Contract so substituted for such Early Termination Contract, and related Contract Assets, must meet the same requirements as those specified in the form of Assignment Agreement attached to the Purchase and Contribution Agreement.

(f)           If a Contract is to be removed and replaced with another lease or equipment finance contract transferred to the Issuer by the Servicer pursuant to the Servicing Agreement, such “substitute” lease or equipment finance contract shall become a Contract for all purposes of the Transaction Documents and may be referred to as a Substitute Contract.  Acquisition of any Substitute Contract shall be subject to the satisfaction of the conditions described in this Article III.

(g)           Upon satisfaction of the conditions specified in the Transaction Documents, including this Section 3.01, and any conditions to the repurchase of Contracts under the Purchase and Contribution Agreement or substitution or purchase of Contracts under the Servicing Agreement (as the case may be), the Trustee shall, upon receipt of the Contract Repurchase Price and/or the Substitute Contract, and the Request for Release, release the Contract and related Contract Assets being purchased or substituted for by the Servicer, or repurchased by the Originator, from the Lien of this Indenture.

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(h)           In addition to the conditions specified above, at no time may the sum of (1) the aggregate Discounted Contract Balance of Substitute Contracts (as measured on their respective Acquisition Dates), (2) the aggregate Discounted Contract Balance of Contracts (as measured on their respective dates of repurchase), in each case either substituted for or repurchased by LEAF Financial Corporation (as initial Servicer) or repurchased by the Originator, but excluding Contracts repurchased pursuant to Warranty Events and (3) the aggregate amount of payments made by LEAF Financial Corporation under the Limited Guaranty (in no case, to exceed $2,000,000), exceed 10.00% of the aggregate Discounted Contract Balance of all Purchased Contracts (as measured on their respective Acquisit ion Dates). The Trustee and Custodian shall have no duty to monitor the limit set forth in this Section 3.01(h).

(i)           In addition to the conditions specified above, on such proposed Acquisition Date other than any date of repurchase of Contracts under the Purchase and Contribution Agreement or any substitution or purchase of Contracts under the Servicing Agreement (as the case may be), the aggregate Discounted Contract Balance of the Contracts already under review of the Custodian in accordance with Section 4.03 shall not exceed $2,000,000. Under no circumstances shall the Trustee or Custodian be obligated to determine or liable for any incorrect determinations of such amount.

(j)           In addition to the conditions specified above, on such proposed Acquisition Date other than any date of repurchase of Contracts under the Purchase and Contribution Agreement or any substitution or purchase of Contracts under the Servicing Agreement (as the case may be), the aggregate Discounted Contract Balance of the Contracts to be acquired on such date shall be equal to or greater than $1,000,000.  Under no circumstances shall the Trustee or Custodian be obligated to determine or liable for any incorrect determinations of such amount.

ARTICLE IV

ISSUANCE OF NOTES; CERTAIN ISSUER AND CUSTODIAN OBLIGATIONS

Section 4.01                      Conditions to Issuance of Notes.  All Notes shall be executed by the Issuer and delivered to the Trustee for authentication.  The Notes issued on the Closing Date shall be authenticated and delivered by the Trustee upon Issuer Order and upon satisfaction of the following conditions precedent:

(a)           receipt by the Trustee, or itsagents, of the following, in form and substance satisfactory to the Initial Purchasers, which satisfaction shall be evidenced to the Trustee by receipt of item 4.01(a)(xv) below from the Initial Purchasers:

(i)           a copy of an officially certified document, dated not more than ten (10) days prior to the Closing Date, evidencing the due organization and good standing of each of the Issuer, the Servicer and the Originator;

(ii)           certified copies of the organizational documents (together with all amendments thereto) of the Issuer, the Servicer and the Originator, along with certified resolutions or certified executed consents of each of the Issuer, the Servicer and the Originator, authorizing the execution, delivery and performance of the Transaction Documents and the transactions contemplated by the Transaction Documents by such entities and certificates evidencing the incumbency of the officers executing such Transaction Documents;

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(iii)           certified copies of requests for information or copies (or a similar search report certified by a party acceptable to the Initial Purchasers), dated a date reasonably near to the Closing Date (no earlier than ten (10) days prior to the Closing Date), listing all effective tax and judgment liens and financing statements which name the Originator as debtor and which are filed in the jurisdictions in which the statements referred to in clause (v)(1) below were or are to be filed, together with copies of such tax and judgment liens and financing statements (none of which, other than financing statements naming the party under the Transaction Documents to which transfers (including grants of security interests) thereunder purport to have been made, shall cove r any of the property purported to be conveyed thereunder);

(iv)           certified copies of requests for information or copies (or a similar search report certified by a party acceptable to the Initial Purchasers’ counsel), dated a date reasonably near to the Closing Date (no earlier than ten (10) days prior to the Closing Date), listing all effective tax and judgment liens and financing statements which name Issuer (under its present name and any previous name) as debtor and which are filed in the jurisdictions in which the statements referred to in clause (v)(2) below were or are to be filed, together with copies of such tax and judgment liens and financing statements (none of which, other than financing statements naming the party under the Transaction Documents to which transfers (including grants of security intere sts) thereunder purport to have been made, shall cover any of the property purported to be conveyed thereunder);

(v)           except as otherwise provided below, evidence of filing (or evidence of delivery for filing to the appropriate filing offices) of, and each of the following, together with evidence of all filing fees, taxes or other amounts required to be paid in connection with the following have been paid:

(1)           UCC-1 financing statements, for filing with the Secretary of State of the State of Delaware, naming the Originator, as debtor, the Issuer, as assignor secured party, and the Trustee, for the benefit of the Secured Parties, as the total assignee secured party;

(2)           UCC-1 financing statements, for filing with the Secretary of State of the State of Delaware, naming the Issuer, as debtor, and the Trustee, for the benefit of the Secured Parties, as Secured Party;

(3)           such other, similar instruments or documents, as may be necessary or, in the opinion of any Noteholder, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the transfers (including grants of security interests) under the Transaction Documents;

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               (vi)           a fully executed original counterpart of the Purchase and Contribution Agreement, this Indenture, the Servicing Agreement, the Securities Account Control Agreement, the Limited Guaranty and the Note Purchase Agreement shall have been received by the Initial Purchasers or its agents;

(vii)           a copy of the fully executed Lockbox Intercreditor Agreement and the Joinder to Lockbox Intercreditor Agreement shall have been received by the Initial Purchasers or its agents;

(viii)           written evidence of establishment of the Reserve Account, the Collection Account, the Prefunding Account, the Capitalized Interest Account and continued existence of the Lockbox Account;

(ix)           a certificate listing the Servicing Officers of the Servicer as of the Closing Date;

(x)           [Reserved]

(xi)           executed favorable legal opinions of counsel to the Servicer, the Guarantor, the Originator, the Seller, the Issuer, the Custodian, the Trustee and the Back-up Servicer, addressed to the Trustee, the Back-up Servicer and each Initial Purchaser (as applicable), dated the Closing Date and covering general corporate matters, the due execution and delivery of, and the enforceability of, each of the Transaction Documents to which the Servicer, the Guarantor, the Originator, the Seller, the Issuer, the Back-up Servicer, the Custodian and the Trustee (individually or in any other capacity) is party, true sale and non-consolidation, security interest and such other matters as the Initial Purchasers may request;

(xii)           certificates of the Secretary or Assistant Secretary of each of the Servicer, the Issuer and the Originator, dated as of the Closing Date, and certifying (A) that attached thereto is a true, complete and correct copy of (a) the organizational documents of the Servicer, the Originator and the Issuer (as applicable), and (b) resolutions duly adopted by the Servicer, the Issuer and the Originator authorizing the execution, delivery and performance of the Transaction Documents to which it is a party and the transactions contemplated thereunder, and that such resolutions have not been amended, modified, revoked or rescinded, and (B) as to the incumbency and specimen signature of each officer executing any Transaction Documents on behalf of the Servi cer, the Issuer and the Originator (as the case may be);

(xiii)           copies of all waivers, licenses, approvals or consents, if any, required or advisable, in the opinion of the Initial Purchasers, in connection with the execution, delivery and performance by the Servicer, the Issuer and the Originator (as the case may be) of the Transaction Documents (and the validity and enforceability thereof), which waivers, licenses, approvals or consents shall be in full force and effect;

(xiv)           written confirmation of the payment (or deposit for payment with the Trustee) of all fees and expenses of the Trustee, the Custodian, the Back-up Servicer, each Initial Purchaser (including the fees and charges of their respective agents, auditors and counsel) accrued as of the Closing Date;

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(xv)           [Reserved];

(xvi)           [Reserved].

(xvii)           such additional documents, instruments, certificates, opinions, ratings letters or other confirmations as the Initial Purchasers may reasonably request.

(b)           all Collateral in which a security interest has been granted to the Trustee under the Indenture shall be subject to no other Liens other than Permitted Liens.

Section 4.02                      Security for Notes.

(a)           The Servicer shall at its own expense, in consideration of the Servicer Fee, cause to be filed the financing statements and assignments described in Sections 4.01(a)(v) and 4.02(b) in accordance with such Sections.  In addition, from time to time, the Servicer shall take or cause to be taken at its own expense, in consideration of the Servicer Fee, any other such actions and execute such documents as are necessary to perfect and protect the Issuer’s precautionary security interest against the Originator in respect of the Contract Assets and the assignment to the Trustee thereof, and the Trustee’s security interests in and liens on the Collateral against all other Persons, including the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title; provided that, none of the Servicer, the Originator nor the Issuer shall be required to file UCC-1 financing statements against Obligors with respect to a Contract related to Equipment that had an original equipment cost at origination of less than (A) if such Contract is a secured loan or finance lease that provides for a $1 purchase option, $25,000, or (B) if such Contract provides for a “fair market value” purchase option, $50,000 or to file or record assignments of any UCC-1 financing statements or other lien recordings or notations made against any Obligor.  Notwithstanding anything to the contrary contained herein , if the Servicer is not LEAF Financial Corporation or one of its Affiliates, the successor Servicer shall not be responsible for the initial filings of any UCC financing statements, or any continuation statements filed by any predecessor Servicer, or the information contained therein (including the exhibits thereto), the perfection of any such security interests during the term of such predecessor Servicer, or the accuracy or sufficiency of any description of collateral in such filings, and the successor Servicer shall be fully protected in relying on such initial filings and any continuation statements or modifications thereto made by a predecessor Servicer pursuant to this Section 4.02 but shall continue to be responsible for requirements expressed above during the period it acts as Servicer.

(b)           If any change in the Servicer’s or the Issuer’s name, identity, structure or the location of its principal place of business, chief executive office or State of organization occurs, then such party shall deliver thirty (30) days’ prior written notice of such change or relocation to the Servicer, the Trustee and the Back-up Servicer, and, no later than the effective date of such change or relocation, the Servicer shall file or cause to be filed such amendments or statements as may be required to preserve and protect the Issuer’s precautionary security interest against the Originator in respect of t he Contract Assets and the assignment to the Trustee thereof, and the Trustee’s security interest in and liens on the Collateral.

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(c)           During the term of this Indenture, the Issuer will maintain its sole state of organization in the State of Delaware, and the Servicer will maintain its sole state of incorporation in a State of the United States.

Section 4.03                      Review of Contract Files.

(a)           Not later than each Acquisition Date, the Issuer shall cause to be delivered to the Custodian the documents comprising the Contract Files for the Contracts to be acquired on such Acquisition Date.  Each Contract and the folder containing other Contract Files documents for such Contract shall be clearly marked with a LEAF Contract Number, which LEAF Contract Number shall be used by the Issuer, the Trustee and the Custodian to identify such Contract on the Contract Schedule.

(b)           Not later than the third Business Day after each Acquisition Date, for each Purchased Contract and Substitute Contract, the Custodian will review the Contract Files related to each proposed Purchased Contract and Substitute Contract and shall perform such reviews as are sufficient to enable it to confirm the items required to be certified by it in the Custodian Certificate in the form attached hereto as Exhibit C.  By execution and delivery of any such Custodian Certificates, the Custodian shall evidence completion of such review and confirmation.  Other than the exceptions permitted in Section 4.04(a), the Custodian shall include in any Exception Report any failure of a document to correspond to the information on the Amendment to Contract Schedule or the absence of any one or more of the documents comprising the Contract Files for such Contract and shall deliver such Exception Report to the Servicer, the Trustee and the Issuer.

(c)           If any Contracts or Contract Assets to be pledged to the Trustee are Contracts or Contract Assets that at any time were subject to a Lien in favor of a Person that has held a Lien thereon, concurrently with the delivery of an Officer’s Certificate, the Issuer shall have delivered to (x) the Custodian (with a copy to the Trustee) a facsimile copy or an original executed Release Agreement from each Person that has held a Lien on the applicable Contract and/or Contract Assets, together with the certification in the Officer’s Certificate that each such Release Agreement constitutes a release of such Person’s security interest in each such Contract and/or Contract Asset (and the other Collateral related thereto), and (y) the Custodian (with a copy t o the Trustee) the original UCC partial or full release relating to the Release Agreement described in clause (x) above.

(d)           The Custodian shall use reasonable care in the performance of its duties under the Transaction Documents, shall identify and segregate all items constituting the Contract Files and shall maintain continuous custody of all items constituting the Contract Files in secure, fire resistant facilities in accordance with customary standards for such custody.  The Custodian makes no representations as to and shall not be responsible to verify (i) the validity, legality, enforceability, sufficiency, due authorization or genuineness of any document constituting Contract Files or of any of the Contracts or (ii) the collectibility, insurability, effectiveness or suitability of any Contract.

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(e)           The Custodian shall hold all Contracts and all other Collateral delivered to it pursuant to the Transaction Documents as Custodian for the benefit of the Trustee (for the benefit of the Secured Parties).  With respect to each item of Contract Files delivered to the Custodian, the Custodian shall (i) hold all documents constituting such Contract Files received by it for the exclusive use and benefit of the Trustee (for the benefit of the Secured Parties) and (ii) make disposition thereof only in accordance with the terms of this Indenture and the Servicing Agreement.

(f)           In the event that (i) the Trustee, the Servicer, the Issuer or the Custodian shall be served by a third party with any type of levy, attachment, writ or court order with respect to any Contract Files or (ii) a third party shall institute any court proceeding by which any Contract Files shall be required to be delivered otherwise than in accordance with the provisions of this Indenture, the party or parties receiving such service shall promptly deliver or cause to be delivered to the other parties to this Indenture copies of all court papers, orders, documents and other materials concerning such proceedings.  The Custodian shall continue to hold and maintain all the Contract Files that is the subject of such proceedings pending a final order of a c ourt of competent jurisdiction permitting or directing disposition thereof.  Upon final determination of such court, the Custodian shall deliver such Contract Files as directed by such determination or, if no such determination is made, in accordance with the provisions of this Indenture.  Expenses of the Custodian incurred as a result of such proceedings shall be borne by the Issuer.

(g)           At its own expense, the Custodian shall maintain at all times prior to the satisfaction and discharge of this Indenture and keep in full force and effect fidelity insurance, theft of documents insurance, forgery insurance and errors and omissions insurance.  All such insurance shall be in amounts, with standard coverage and subject to deductibles, all as is customary for insurance typically maintained by banks which act as custodian of collateral substantially similar to the Collateral.  Upon at least ten (10) days’ prior written request, the Issuer and/orthe Servicer shall be entitled to receive a certificate of the Custodian 217;s respective insurer that such insurance is in full force and effect.

Section 4.04                      Defective Contracts.

(a)           Check-in Procedures. If, upon its examination of any Contract File in accordance with Section 4.03 hereof, the Custodian determines that such Contract File does not satisfy the requirements described in Section 4.03(b), or is unable to confirm that such requirements have been met, the Custodian shall promptly notify the Servicer and the Originator by telephone or telecopy.  If the Originator or Servicer does not satisfy the Custodian in accordance with the foregoing sentence prior to the third Business Day after the applicable Acquisition Date, the Custodian shall return the applicable Contract and related files to the Originator, or as otherwise directed by the Originator. Any such returned Contracts and related files shall be subject to a Warranty Event unless the Majority Holders approve the exceptions with respect to such Contract and allow the inclusion of such Contract that the Custodian has identified as defective in its review under Section 4.03(b), all parties agreeing that such approval shall be valid with respect to such included Contract, but shall not constitute a course of dealing, and the allowance of such included Contract shall not operate as a waiver of any rights of the Trustee or any Secured Party hereunder, under the Purchase and Contribution Agreement, the Assignment Agreements or any other Transaction Documents with respect to any adverse consequence caused by such defect.

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(b)           Warranty Repurchases. If a Responsible Officer of the Trustee, or if another party to any of the Transaction Documents, notifies the Servicer, the Originator, the Back-up Servicer or the Issuer of the existence of any Warranty Event, the Servicer (pursuant to the Servicing Agreement) or the Originator (pursuant to the Purchase and Contribution Agreement) shall (i) cure the breach(es) which caused the Warranty Event or (ii) repurchase or substitute (if the Servicer), as applicable, such Contract and related Contract Assets at the Contract Repurchase Price or for a Substitute Contract, respectively, as required in accordance with Sect ion 6.1(a) of the Purchase and Contribution Agreement or Section 3.09 of the Servicing Agreement.  If any such Contract is substituted or repurchased by the Servicer in accordance with the provisions of the Servicing Agreement, or repurchased by the Originator pursuant to the Purchase and Contribution Agreement, and the Trustee has received a written request in the form attached hereto as Exhibit B-1 relating thereto, the Trustee shall (or cause the Custodian to), upon receipt of the applicable Contract Repurchase Price, but subject to Section 4.07 hereof, return the affected Contract and related files to the Issuer (or, if the Issuer so requests, directly to the Servicer or the Originator, as the case may be), release its interest therein and in the related Contract Assets, and such items shall no longer constitute a Contract or Contract Asset hereunder and shall be releas ed from the Lien of this Indenture.

Section 4.05                      Reserved.

Section 4.06                      Administration of the Contract Assets.  The Contract Assets shall be serviced by the Servicer in accordance with the terms of the Servicing Agreement.  The Servicer, as agent of the Issuer prior to the occurrence of an Event of Default, shall have the right to provide any notices and instructions to Obligors in connection with the Contract Assets.  In the event that the Issuer or the Trustee r eceives any notices, requests for information or other communication from an Obligor, it shall immediately forward such communication to the Servicer.  The Trustee shall deposit any Collections received by it in the Collection Account, in accordance with Section 13.02 and it shall deliver written or electronic statements regarding such collections and deposits to the Servicer at least monthly.  The Trustee shall have no obligation to advance its own funds to the Collection Account.  In the absence of an Event of Default, the Trustee shall not contact any Obligor or take any action with respect to the enforcement, modification or release of any Contract against an Obligor without the express written authorization of the Servicer or the Issuer.

Section 4.07                      Releases.

(a)           The Issuer shall be entitled to obtain a release from the Lien of this Indenture for any individual Contract and the related Contract Assets at any time after all of the conditions for such release set forth in the Transaction Documents have been satisfied and (i) after a payment by the Originator or the Servicer, as applicable, under the provisions of the relevant Transaction Documents, of the related Contract Repurchase Price therefor or (ii) after a Substitute Contract and the related Contract Assets are substituted for such Contract and the related Contract Assets in accordance with the Transaction Documents.  In order to effect any such release, the Servicer, on behalf of the Issuer, shall deliver to each Initial Purchaser, the Trustee and the Custodian in accordance with the Transaction Documents a Request for Release, in the form attached hereto Exhibit B-1, (1) identifying the Contracts and

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the related Equipment to be released, (2) requesting the release thereof, (3) setting forth the amount deposited in the Collection Account with respect thereto, and identifying the Substitute Contract substituted therefor in the event that the subject Contracts and the related Equipment are being released from the Lien of this Indenture pursuant to clause (ii) above, (4) certifying that the amount deposited in the Collection Account equals the Contract Repurchase Price relating to such Contracts and the related Equipment in the event that the subject Contracts and the related Equipment are being released from the Lien of this Indenture pursuant to clause (i) above and (5) certifying that all other conditions precedent set forth in the Transaction Documents relating to such release have been satisfied.  The Trustee, upon receipt of a written request in the form attached hereto as Exhibit B-1, and the Trustee’s confirmation that the related (i) Contract Repurchase Price has been deposited into the Collection Account or (ii) Substitute Contract has been substituted for the Contract, shall execute instruments to release a Contract from the lien of this Indenture, or convey the Trustee’s interest in the same.

(b)           Upon receipt of the Request for Release from the Servicer in the form attached hereto as Exhibit B-1, including a certification that all of the conditions specified in clause (a) of this Section 4.07 have been satisfied, and provided that if Item 7 of the Request for Release has been checked, all other certifications and documents required under the terms of this Indenture have been received by the Trustee, the Trustee shall release from the Lien of this Indenture and the Custodian shall deliver to the Issuer or upon Issuer Order the Contracts and all related Contract Assets described in the Issuer’s Request for Release.

(c)           The Custodian may, if requested by the Servicer, in the form attached hereto as Exhibit B-1, for purposes of servicing a Contract, temporarily deliver to the Servicer the original Contract.  Any Contract temporarily delivered from the custody of the Custodian to the Servicer or its agents shall have affixed to such Contract a copy of such written request in the Form of Exhibit B-1, which shall contain a legend to the effect that the Contract is the property of the Issuer and has been pledged to U.S. Bank National Association, a s Trustee for the benefit of the Secured Parties.  The Servicer shall promptly return the Contract to the Custodian, along with a letter attached hereto as Exhibit B-2, upon the need therefor no longer existing; provided that if an Event of Default has occurred, the Servicer shall forthwith return to the Custodian each Contract temporarily delivered pursuant to this Section 4.07.

ARTICLE V

SATISFACTION AND DISCHARGE

Section 5.01                      Satisfaction and Discharge of Indenture.

(a)           Following (i) payment in full of (A) all of the Notes, (B) the fees and charges and reimbursements of the Trustee, the Back-up Servicer, the Originator, the Custodian and the Noteholders and (C) all other obligations of the Issuer under this Indenture and the other Transaction Documents and (ii) a written request by the Issuer to the Trustee to terminate this Indenture and release the Collateral, this Indenture shall be discharged and terminated and the lien of this Indenture on the Collateral thereupon shall be released.  All Contract Files shall then include an Officer’s Certificate from the Issuer, stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture with respect to the Notes have been complied with.

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(b)           Upon the discharge and termination of this Indenture, the Trustee shall release from the lien of this Indenture and deliver to the Issuer all remaining Collateral, and the Trustee shall file, or cause to be filed, at the Servicer’s expense, UCC termination statements evidencing such discharge and release; provided, if the Back-up Servicer has become the Servicer, the Servicer shall be entitled to reimbursement of all expenses incurred under this Section 5.01(b) by the Issuer payable solely from amounts that are available to the Servicer therefore under Section 13.03 of the Indenture.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.01                      Events of Default.

“Event of Default” wherever used herein means the occurrence of any one of the following events, unless any such particular occurrence is waived as an “Event of Default” in writing in accordance with the provisions of this Indenture; provided that, unless and until any such waiver is given, an “Event of Default” shall be deemed to exist for all purposes under the Transaction Documents, even if the event giving rise to such Event of Default is no longer continuing or has been cured:

(a)           the Issuer shall fail to make when due any payment with respect to interest on any Notes then outstanding, or the Servicer shall fail to make when due any deposit required under the Transaction Documents (other than as described in clause (e) below), in any case on or before the date occurring five (5) Business Days after the date such payment or deposit shall become due;

(b)           the Issuer, Servicer or the Originator shall fail to perform or observe any covenant with respect to it set forth in any Transaction Document, and in each case such failure shall remain unremedied for thirty (30) Business Days after the earlier of (x) actual knowledge thereof by such Person or (y) receipt by such Person of written notice thereof;

(c)           any representation or warranty made by the Issuer, Originator or Servicer in any Transaction Document or in any other document delivered pursuant thereto (other than a representation or warranty made with respect to the Contracts) shall prove to have been incorrect in any material respect when made or deemed made and continues to be incorrect in any material respect for a period of thirty (30) Business Days after the earlier to occur of (x) the actual knowledge thereof by such Person or (y) the receipt by such Person of written notice thereof;

(d)           an Insolvency Event shall occur with respect to the Issuer or the Guarantor;

(e)           the Outstanding Note Balance of any Class of Notes is not reduced to zero and all interest due on any Class is not paid by the Stated Maturity Date;

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(f)           the Outstanding Note Balance of the Class A Notes fails to be less than or equal to the Discounted Pool Balance on a proposed Acquisition Date and such failure has not been cured within five (5) Business Days of such date; or

(g)           the Issuer is required to register as an “investment company” under the Investment Company Act of 1940, as amended.

Section 6.02                      Acceleration of Maturity; Rescission and Annulment.If an Event of Default exists, then, unless waived pursuant to Section 6.15 hereof, and in every such case, the Control Party may, and the Trustee shall, at the written direction of the Control Party, declare the principal of all the Notes to be immediately du e and payable, by notice given in writing to the Issuer and upon any such declaration, such principal and all accrued interest under the Notes shall become immediately due and payable without any presentment, demand, protest or other notice of any kind (except such notices as shall be expressly required by the provisions of this Indenture), all of which are hereby expressly waived by the Issuer; provided, that if such Event of Default consists of an Insolvency Event with respect to the Issuer, then all such principal and accrued interest shall be automatically due and payable without the need for any such notice or further action by any Person.

At any time after such a declaration of acceleration has been made, but before any Sale of the Collateral has been made or a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Control Party, by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if (notwithstanding Section 6.15 hereof) (a) and (b) below are satisfied:

(a)           the Issuer has paid or deposited with the Trustee a sum sufficient to pay:

(1)           all overdue installments of interest on all Notes and interest thereon at the overdue interest rate from the time such overdue interest first became due until the date when paid;

(2)           the principal of any Notes which has become due otherwise than by such declaration of acceleration and interest thereon at the overdue interest rate from the time such principal first became due until the date when paid;  and

(3)           all sums paid or advanced, together with interest thereon, by the Trustee, the Originator and any Secured Party, and the reasonable compensation, expenses, disbursements and advances of the Trustee and any Secured Party, their agents and counsel incurred in connection with the enforcement of this Indenture to the date of such payment or deposit.

(b)           all Events of Default, other than the nonpayment of the principal on any of the Notes which has become due solely by such declaration of acceleration, have been cured or waived by the Control Party unless (i) an Event of Default in the payment of interest on any Note when due or principal not paid at the Stated Maturity Date or (ii) in respect of a covenant or provision hereof which by its terms cannot be modified or amended without the consent of the Noteholders of each Outstanding Note affected thereby, in which case a waiver by the Noteholders of each Outstanding Notes is required.

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No such rescission shall affect any subsequent default or impair any right consequent thereon.

Section 6.03                      Collection of Indebtedness and Suits for Enforcement by Trustee.

(a)           The Issuer covenants that, if an Event of Default shall occur and the Notes have been declared due and payable and such declaration has not been rescinded and annulled, the Issuer will pay to the Trustee, for the benefit of the Noteholders, the whole amount then due and payable on the Notes for principal and interest (with interest upon the overdue principal and overdue interest at the rate provided herein), any and all amounts due and payable to the Noteholders, the Originator, the Back-up Servicer, the Custodian, the Paying Agent and the Trustee and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of each of the Trustee, the Pay ing Agent and the Noteholders and their respective agents and counsel.

(b)           If the Issuer fails to pay such amount forthwith upon such demand, the Trustee, in its own name and as Trustee of an express trust, may, with the prior written consent of the Control Party, and shall, at the written direction of the Control Party, institute Proceedings for the collection of the sums so due and unpaid, and prosecute such Proceedings to judgment or final decree, and enforce the same against the Issuer and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of the Issuer, wherever situated.

(c)           If an Event of Default exists, the Trustee shall, at the written direction of the Control Party, proceed to protect and enforce the rights of the Noteholders and the Paying Agent by such appropriate Proceedings as the Trustee, at the written direction of the Control Party, shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 6.04                      Remedies.  If an Event of Default exists, the Trustee may, with the prior written consent of the Control Party, and shall, at the written direction of the Control Party, do one or more of the following:

(a)           institute Proceedings for the collection of all amounts remaining unpaid on the Notes or under this Indenture or the other Transaction Documents whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and the Collateral the monies adjudged due;

(b)           take possession of and sell the Collateral or any portion thereof or rights or interest therein, at one or more private or public Sales called and conducted in any manner permitted by law;

(c)           institute any Proceedings from time to time for the complete or partial foreclosure of the lien created by this Indenture with respect to the Collateral;

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(d)           redirect Obligor payments to such account or accounts as the Control Party determines necessary in its sole discretion, or at the direction of the Control Party;

(e)           during the continuance of a default under a Contract, exercise any of the rights of the lessor or lender (as applicable) under such Contract;

(f)           exercise any remedies of a secured party under the Uniform Commercial Code (irrespective of whether the Uniform Commercial Code applies) or any applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Trustee or the Noteholders hereunder or under the other Transaction Documents; and

(g)           exercise any and all rights, powers and privileges available to the Trustee or the Noteholders (whether at law, in equity or by contract).

Section 6.05                      Optional Preservation of Collateral

.  If an Event of Default exists, the Trustee shall, upon written request from the Control Party, elect, by giving written notice of such election to the Issuer, to take possession of and retain the Collateral intact, collect or cause the collection of all income, payments and proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of such Notes in accordance with the provisions of Article XIII.  If the Trustee is unable to or is stayed from giving such notice to the Issuer for any reason whatsoever, such election shall be effective as of the time of such request from the Control Party, as the case may be, notwithstanding any failure to give such notice, and the Trustee shall give such notice upon the removal or cure of such inability or stay (but shall have no obligation t o effect such removal or cure).  Any such election may be rescinded with respect to any portion of the Collateral remaining at the time of such rescission by written notice to the Trustee and the Issuer from the Control Party.

Section 6.06                      Trustee May File Proofs of Claim

.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial Proceeding relating to the Issuer or the property of the Issuer or its creditors, the Trustee (irrespective of whether the principal of any of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuer for the payment of overdue principal or interest) shall be entitled and empowered and shall, at the prior written direction of the Control Party, intervene in such proceeding or otherwise:

(a)           to file and prove a claim for all amounts of principal and interest owing and unpaid in respect of the Notes issued hereunder and to file such other papers or documents and take such other actions, including participating as a member, voting or otherwise, in any committee of creditors appointed in the matter as may be necessary or advisable in order to have the claims of the Trustee, the Noteholders, the Paying Agent, the Custodian (including any claim for the reasonable compensation, expenses, disbursements and advances of each such Person and their respective agents and counsel and any other amounts due the Trustee under Section 7.07) and of the Noteholders allowed in such judicial Proceeding;

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(b)           unless prohibited by applicable law and regulations, to vote at the direction of the Control Party on behalf of the Noteholders in any election of a trustee, a standby trustee or person performing similar functions in any such proceedings;

(c)           to petition for lifting of the automatic stay and thereupon to foreclose upon the Collateral as elsewhere provided herein; and

(d)           to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator, or sequestrator (or other similar official) in any such judicial Proceeding is hereby authorized by the Noteholders andthe Paying Agent to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to each such Person, to pay to the Trustee or such Person any amount due to it for the reasonable compensation, expenses, disbursements and advances of each of the Trustee and such other Person, their agents and counsel, and any other amounts due the Trustee under Section 7.07.

Nothing contained in this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Secured Party any plan of reorganization, arrangement, adjustment or composition affecting any of the Notes or the rights of any Secured Party, or to authorize the Trustee to vote in respect of the claim of any Secured Party in any such Proceeding; provided, however, that the Control Party shall be authorized to vote on all of the foregoing matters described above on behalf of the Noteholders and to consent to certain amendments as described under Section 10.02 hereof.

Section 6.07                      Trustee May Enforce Claims Without Possession of Notes.

(a)           In all Proceedings brought by the Trustee in accordance with this Indenture (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all of the Noteholders and it shall not be necessary to make any Noteholder a party to any such Proceedings.

(b)           All rights of actions and claims under this Indenture or any of the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any Proceeding relating thereto, and any such Proceedings instituted by the Trustee shall be brought with the prior written consent of the Control Party and in the Trustee’s own name as trustee of an express trust, and any recovery, whether by judgment, settlement or otherwise shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel, be for the benefit of the Noteholders, as the case may be.

Section 6.08                      Application of Money Collected.  If the Notes have been declared due and payable following an Event of Default and such declaration has not been rescinded or annulled, any money collected by the Trustee with respect to the Notes and the other Transaction Documents pursuant to this Article VI or otherwise and any other money that may be held thereafter by the Trustee as security for the Notes and the other Transac tion Documents shall be applied in the order set forth in Section 13.03 on the earlier of the next Payment Date and such dates as the Trustee may designate for the release of such funds, to the same extent as if such date were a Payment Date.

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Section 6.09                      [Reserved]

Section 6.10                      Unconditional Right of the Noteholders to Receive Principal and Interest.  Notwithstanding any other provision in this Indenture, each Noteholder shall have the right, which is absolute and unconditional, to receive payment of the principal and interest on such Note on the dates on which such principal and interest becomes due and payable and to institute any Proceeding for the enforcement of any such payment, an d such right shall not be impaired without the consent of such Noteholder.

Section 6.11                      Restoration of Rights and Remedies.  If the Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Noteholder, then, and in every case, the Issuer, the Trustee and the Noteholders shall, subject to any determination in such Proceedin g, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Noteholders shall continue as though no such Proceeding had been instituted.

Section 6.12                      Rights and Remedies Cumulative.Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 2.08, no right or remedy herein conferred upon or reserved to the Trustee or to the Noteholders is intended to be exclusive of an y other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 6.13                      Delay or Omission Not Waiver.  No delay or omission of the Trustee or of any Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein.  Every right and remedy given by this Article VI or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or the Noteholders, as the case may be.

Section 6.14                      Control by Control Party.  The Control Party shall have the right to direct in writing the time, method and place of conducting any Proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that:

(a)           such direction shall not be in conflict with any rule of law or with this Indenture including any provision hereof which expressly provides for approval by a percentage of Outstanding Note Balance of all Notes or of all Notes within a Class;

(b)           if the Trustee has reasonable grounds for believing that repayment of any funds expended or risked by it is not assured to it without an indemnity reasonably satisfactory to it against such risk or liability, such indemnity shall have been provided.

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Section 6.15                      Waiver of Certain Events by the Control Party.

     The Control Party may waive on behalf of all Noteholders any Event of Servicing Termination, Default or Event of Default and its consequences in each case except:

(i)           an Event of Default in the payment of interest on any Note when due or principal not paid at the Stated Maturity Date;

(ii)           in respect of a covenant or provision hereof which by its terms cannot be modified or amended without the consent of the Noteholder of each Outstanding Note affected thereby; or

(iii)           in the circumstances provided in Section 6.02 hereof.

Upon any such waiver, such Event of Servicing Termination, Default or Event of Default shall cease to exist, and any Event of Default shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Servicing Termination, Default or Event of Default or impair any right consequent thereon.

Section 6.16                      Additional Rights of Subordinate Noteholders.  At any time during the period from the first to occur of (i) the commencement of an Insolvency Event or any other insolvency proceeding with respect to the Issuer, (ii) the acceleration of the Class A Notes pursuant to Section 6.02 or (iii) the commencement of the foreclosure of any Collateral under this Article VI following the occurrence of an Event of Default, and without prejudice to any other rights of the Holders of the Class B-1 Notes under the Transaction Documents, any one or more Holders of the Class B-1 Notes shall initially have the sole right to deliver written notice, which notice shall be sent to the Trustee (the “Class A Buyout Notice”) electing to purchase (without recourse, warranty or representation (other than that the Holders of such Class A Notes own such Class A Notes free and clear of any Liens created or granted by the Holder of such Class A Notes)) the entire (but not less than the entire) aggregate amount of Outstanding Class A Notes (and all associated rights, titles, claims and privileges associated therewith) for an amount (the “Class A Buyout Price”) equal to the Outstanding Note Balance of, and a ccrued but unpaid interest on, the Class A Notes (excluding therefrom any premium or penalty otherwise payable). The Trustee agrees that it shall give to the Holders of the Class B-1 Notes and the Class B-2 Notes written notice of the events described in clauses (i), (ii), and (iii) of this Section 6.16 promptly upon its receiving notice of such event or a Responsible Officer of the Trustee having actual knowledge thereof (such date of notice, the “Default Notice Date”).

If no Holder of the Class B-1 Notes exercises its rights to purchase the Class A Notes within ten (10) Business Days of the Default Notice Date, then, without prejudice to any other rights of the Holders of the Class B-2 Notes under the Transaction Documents, any one or more Holders of the Class B-2 Notes shall then have the sole right to deliver the Class A Buyout Notice, which notice shall be sent to the Trustee electing to purchase (without recourse, warranty or representation (other than that the Holders of such Class A Notes own such Class A Notes free and clear of any Liens created or granted by the Holder of such Class A Notes)) the entire (but not less than the entire) aggregate amount of Outstanding Class A Notes (and all associated rights, titles, claims and privileges associated therewith) for the Class A Buyout Price.

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The purchase of the Class A Notes pursuant to this Section shall close no later than the date specified in the operative Class A Buyout Notice. The Class A Buyout Price shall be remitted by wire transfer in immediately available federal funds to the Trustee.  Interest shall be calculated to but excluding the Business Day on which such purchase shall occur if the Class A Buyout Price is wired to the Trustee prior to 11:00 am New York time and interest shall be calculated to and including such Business Day if the Class A Buyout Price is wired to the Trustee, later than 11:00 am New York time.

Section 6.17                      Waiver of Stay or Extension Laws.  The Issuer covenants (to the extent that it may lawfully do so) that it will not, at any time, insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it ma y lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.18                      Sale of Collateral.

(a)           The power to effect any sale (a “Sale”) of any portion of the Collateral pursuant to Section 6.04 shall not be exhausted by any one or more Sales as to any portion of the Collateral remaining unsold, but shall continue unimpaired until the entire Collateral securing the Notes shall have been sold or all amounts payable on the Notes and under this Indenture and the other Transaction Documents shall have been paid.  The Trustee may from time to time postpone any Sale by public announcement made at the time and place of such Sale.

(b)           To the extent permitted by applicable law, the Trustee shall not, in any private Sale, sell to one or more third parties, or otherwise liquidate, all or any portion of the Collateral, unless:

(i)           the Control Party consents to such Sale or liquidation; or

(ii)           the proceeds of such Sale or liquidation available to be distributed to the Noteholders are sufficient to pay in full all amounts then due with respect to the Notes and, without duplication, all amounts owed to the Servicer, Originator, Trustee, Custodian, and Back-up Servicer.

(c)           Any Noteholder may bid for and acquire any portion of the Collateral in connection with a Sale thereof.  After the Trustee has received each offer to purchase all or any portion of the Collateral, the Trustee shall notify each Class B-1 Noteholder and Class B-2 Noteholder of the highest offer (the date of such notification, the “Collateral Purchase Notice Date”) and any one or more Class B-1 Noteholders will initially have the sole right to purchase (not later than five Business Days after delivery of written notice to the Trustee of exercise of each right to purchase) the Collateral at the highest price there offered. If no Holder of the Clas s B-1 Notes exercises its rights to purchase the Collateral within ten (10) Business Days of the Collateral Purchase Notice Date, the Trustee shall notify each Class B-2 Noteholder of the highest offer and any one or more Class B-2 Noteholders will then have the sole

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right to purchase (not later than five Business Days after delivery of written notice to the Trustee of exercise of each right to purchase) the Collateral at the highest price there offered. If a Noteholder submits the highest bid, in lieu of paying cash therefor, such bidder may make settlement for the purchase price by crediting against the purchase price that portion of the net proceeds of such Sale to which such bidder would be entitled, after deducting the reasonable costs, charges and expenses (including reasonable attorneys’ fees and expenses) incurred by such Noteholder in connection with such Sale. The Notes need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against the Notes.  The Noteholders may hold, lease, operate, manage or otherwise deal with any property so acqui red in any manner permitted by law.

(d)           The Trustee shall execute and deliver an appropriate instrument of conveyance provided to it by the Servicer transferring its interest in any portion of the Collateral in connection with a Sale thereof.  In addition, the Trustee is hereby irrevocably appointed the agent and attorney-in-fact with full irrevocable power and authority in the place and stead of the Issuer and in the name of the Issuer or in its own name, from time to time, from and after the occurrence of an Event of Default for the purpose of exercising the rights and remedies of the Trustee hereunder and, to take any and all action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the foregoing, including without limitation, to transfer and convey its interest in any portion of the Collateral in connection with a Sale thereof, and to take all action necessary to effect such Sale.  No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any monies.

(e)           The method, manner, time, place and terms of any Sale of all or any portion of the Collateral shall be commercially reasonable.  The Trustee shall incur no liability for any Sale conducted in accordance with this Section.

Section 6.19                      Action on Notes.  The Trustee’s right to seek and recover judgment on the Notes or under this Indenture or the other Transaction Documents shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture or the other Transaction Documents.  Neither the lien of this Indenture nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer.

ARTICLE VII

THE TRUSTEE

Section 7.01                      Certain Duties and Immunities.

(a)           Except during the existence of an Event of Default known to the Trustee as provided in subsection (e) below:

(i)           the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

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(ii)           in the absence of bad faith or negligence on its part, the Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions, which by any provision hereof are specifically required to be furnished to the Trustee, such certificate or opinion shall cite the applicable provision and the Trustee shall be under a duty to examine the same and to determine whether or not they conform to the requirements of this Indenture.

(b)           So long as any Event of Default or Event of Servicing Termination exists, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs, and nothing contained herein shall relieve the Trustee of such obligations.

(c)           No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith (as determined by a court of competent jurisdiction), except that:

(i)           this subsection (c) shall not be construed to limit the effect of subsection (a) of this Section;

(ii)           neither the Trustee nor any of its officers, directors, employees or agents shall be liable with respect to any action taken or omitted to be taken by the Trustee in good faith in accordance with the written direction (A) given pursuant to this Indenture or (B) by the Control Party in accordance with Section 6.14 relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(iii)           no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability (financial or otherwise) in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds is not assured to it without an indemnity reasonably satisfactory to it against such risk or liability; and

(iv)           the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be conclusively proven by a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts.

(d)           Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01.

(e)           For all purposes under this Indenture, the Trustee shall not be deemed to have notice of any Default, Event of Default (except as described in Section 6.01(a) or (b)) or Event of Servicing Termination unless a Responsible Officer assigned to and working in the Trustee’s Corporate Trust Office has actual knowledge or has received written notice (at the address and in the manner specified in Section 14.03) of any such event, and such notice references (i) the Notes generally, the Issuer or this Indenture or (ii) the applicable Default, Event of Default or Event of Servicing Termination.

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(f)           Subject to Section 7.03(e), the Trustee shall be under no obligation to institute any suit, or to take any remedial proceeding under this Indenture, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder if it has reasonable grounds for believing that repayment of any funds expended or risked by it is not assured to it without an indemnity reasonably satisfactory to it against such risk or liability, until such indemnity shall have been provided.

(g)           Notwithstanding any extinguishment of all right, title and interest of the Issuer in and to the Collateral following an Event of Default and a consequent declaration of acceleration of the maturity of the Notes, whether such extinguishment occurs through a Sale of the Collateral to another person or the acquisition of the Collateral by the Noteholders, the rights of the Noteholders shall continue to be governed by the terms of this Indenture.

(h)           Notwithstanding anything to the contrary contained herein, the provisions of subsections (e) through (g), inclusive, of this Section 7.01 shall be subject to the provisions of subsections (a) through (c), inclusive, of this Section 7.01.

(i)           At all times during the term of this Indenture, the Trustee and the Custodian shall keep at their Corporate Trust Office for inspection by the Noteholders, the Contract Schedule and all amendments thereto delivered to it.

(j)           The Trustee shall have no obligation to ascertain whether any payment of interest on an overdue installment of interest is legally enforceable.

Section 7.02                      Notice of Default and Other Events.  Promptly upon the existence of any Default or Event of Default or Event of Servicing Termination known to the Trustee (within the meaning of Section 7.01(e)), the Trustee shall transmit by telephonic or telecopy communication confirmed by mail to all Noteholders, as their names and address es appear in the Note Register, notice of such event hereunder known to the Trustee.

Section 7.03                      Certain Rights of Trustee.  Except as otherwise provided in Section 7.01:

(a)           the Trustee may in good faith conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other obligation, paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)           any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request, an Issuer Order, or any writing executed by a duly authorized officer of the Issuer;

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(c)           whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith, negligence or willful misconduct on its part, reasonably request and conclusively rely upon an Officer’s Certificate of the Servicer or the Issuer;

(d)           the Trustee may consult with counsel selected by it with due care and familiar with such matters and the written advice or opinion of such counsel or any Opinion of Counsel (in form and substance satisfactory to the Trustee and addressed to the Trustee) shall be full and complete authorization and protection and the Trustee shall not be liable in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(e)           the Trustee may, at any time during the administration of this Indenture, request and receive a written direction from the Control Party in connection with actions to be taken in its capacity as Trustee and shall not be liable for any action taken or omitted in good faith reliance thereon;

(f)           the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture which are exercisable at the request or direction of any of the Noteholders or the Control Party pursuant to this Indenture, if it has reasonable grounds for believing that repayment of the costs, expenses (including legal fees and expenses) and liabilities which might be incurred by it in compliance with such request or direction is not assured to it without an indemnity reasonably satisfactory to it against such cost, expense or liability;

(g)           the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, entitlement, bond, note or other paper or document, unless requested in writing to do so by the Control Party; provided, however, that the Trustee shall be under no obligation to make such investigation if it has reasonable grounds for believing that repayment of any cost, expense or liability likely to be incurred in making such investigation is not assured to it without an indemnity reasonably satisfactory to it against such cost, expense or liability , but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, upon reasonable notice and at reasonable times personally or by agent or attorney;

(h)           the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder, either directly or by or through agents, custodians, nominees or attorneys provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care; and

(i)           except as otherwise agreed in writing, the Trustee shall not be responsible for the payment of any interest on amounts deposited with it hereunder.

Notwithstanding the foregoing, nothing in this Indenture or the Servicing Agreement or any other Transaction Document regarding the Trustee shall limit the Back-up Servicer’s obligations under this Indenture or the Servicing Agreement or any other Transaction Document, which shall be governed by the respective agreement.

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Section 7.04                      Not Responsible for Recitals or Issuance of Notes.

(a)           The recitals contained herein and in the Notes, except the certificates of authentication on the Notes, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness or validity.  Other than pursuant to Section 7.17 hereof, the Trustee makes no representations as to the validity, adequacy or condition of the Collateral or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with the Trustee hereunder or as to the validity or sufficiency of this Indenture or of the Notes.  The Trustee shall not be accountable for the use or application by the Issuer of Notes or the proceeds thereof or of any money paid to the Issuer or upon Issuer Order or for the use or application by the Servicer of any amounts paid to the Servicer under any provisions hereof.

(b)           Except as otherwise expressly provided herein or in the other Transaction Documents, and without limiting the generality of the foregoing, the Trustee shall have no responsibility or liability for or with respect to the existence or validity of any Contract, the perfection of any security interest (whether as of the date hereof or at any future time), the filing of any financing statements, amendments thereto, or continuation statements, the maintenance of or the taking of any action to maintain such perfection, the validity of the assignment of any portion of the Collateral to the Trustee or of any intervening assignment, the review of any Contract (it being understood that the Trustee (in its capacity as Trustee) has not reviewed and does not intend to review the s ubstance or form of any such Contract), the performance or enforcement of any Contract, the compliance by the Issuer, the Servicer, the Originator or any Obligor with any covenant or the breach by the Issuer, the Servicer, the Originator or any Obligor of any warranty or representation made hereunder or in any related document or the accuracy of any such warranty or representation, any investment of monies in the Collection Account, or any loss resulting therefrom (other than losses from nonpayment of investments in obligations of U.S. Bank National Association issued in its capacity other than as Trustee or investments made in violation of the provisions hereof), the acts or omissions of the Issuer, the Servicer, the Originator or any Obligor or any action of the Issuer, the Originator or the Servicer taken in the name of the Trustee or the validity of the Servicing Agreement.

(c)           The Trustee shall not have any obligation or liability under any Contract by reason of or arising out of this Indenture or the granting of a security interest in such Contract hereunder or the receipt by the Trustee of any payment relating to any Contract pursuant hereto, nor shall the Trustee be required or obligated in any manner to perform or fulfill any of the obligations of the Issuer under or pursuant to any Contract, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it, or the sufficiency of any performance by any party, under any Contract.

Section 7.05                      May Hold Notes.  The Trustee, any Paying Agent, Note Registrar, or Authenticating Agent may, in its individual capacity, become the owner or pledgee of Notes.

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    Section 7.06                      Money Held in Trust.  Money and investments held in trust by the Trustee or any Paying Agent hereunder shall be held in one or more segregated, trust accounts (which shall be Eligible Accounts), in the name of th e Trustee on behalf of the Secured Parties at the Corporate Trust Office, which accounts shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.  The Trustee or any Paying Agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Issuer or otherwise specifically provided herein (in such case subject to the provisions of Section 13.03).

Section 7.07                      Compensation and Reimbursement.  The Issuer agrees:

(a)           Solely from amounts distributed from the Collection Account pursuant to Section 13.03, to:  (i) pay the Trustee monthly its fee for all services rendered by it hereunder as Trustee, in the amount of the Trustee Fee (which compensation shall not otherwise be limited by any provision of law in regard to the compensation of a trustee of an express trust), (ii) pay the Custodian monthly its fee for all services rendered by it hereunder as Custodian, in the amount of the Custodian Fee and (iii) pay to the Back-up Servicer its fee for all services rendered by it hereunder and under the Servicing Agreement as Back-up Servicer, in the amount of the Back-up Servicer Fee, in each case in accordance with the priorities set forth in Section 13. 03;

(b)           except as otherwise expressly provided herein and solely from amounts distributed pursuant to Section 13.03, to reimburse the Trustee, the Custodian or the Back-up Servicer upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee, the Custodian or the Back-up Servicer, respectively, in accordance with any provision of this Indenture or the Servicing Agreement or any other Transaction Document relating thereto (including the reasonable compensation and the expenses and disbursements of the Trustee’s, the Custodian’s and Back-up Servicer’s agents and counsel), except any such expense, disbursement or advance as may be attributable to its willful misconduct, negligence or bad faith; and

(c)           to indemnify and hold harmless the Trustee, the Custodian, the Securities Intermediary, the Back-up Servicer and their respective officers, directors, employees, representatives and agents from and against, and reimburse for, any loss, claim, obligation, action, suit liability, expense, penalty, stamp or other similar tax, reasonable costs and expenses (including reasonable attorneys’ and agents’ fees and expenses) damage or injury (to person, property or natural resources) of any kind and nature sustained or suffered by the Trustee, the Custodian, the Securities Intermediary and the Back-up Servicer by reason of any acts or omissions (or alleged acts or omissions) of the Trustee, the Custodian, the Securities Intermediary or the Back-up Servicer under th e Transaction Documents or arising directly or indirectly out of the activities of the Issuer or any of the transactions contemplated hereby (including any violation of any applicable laws by the Issuer as a result of the transactions contemplated by this Indenture) or the participation by the Trustee, the Custodian, the Securities Intermediary and the Back-up Servicer in the transactions contemplated by the Transaction Documents, including any judgment, award, settlement, reasonable attorneys’ fees and other expenses incurred in connection with the defense of any actual or threatened action,

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proceeding or claim; provided that, the Issuer shall not indemnify the Trustee, the Custodian, the Securities Intermediary or the Back-up Servicer if such loss, liability, expense, damage or injury is due to the Trustee’s, theCustodian’s, the Securities Intermediary’s or the Back-up Servicer’s negligence or willful misconduct, willful misfeasance or bad faith in the performance of duties; provided, further, that all amounts payable in respect of such indemnity shall be payable by the Issuer solely from the amounts distributed pursuant to Section 13.03 or released from the Lien of this Indenture.  The provisions of this indemnity shall run directly to and be enforceable by an injured person subject to the limitations hereof and the provisions of this Section 7.07 shall survive the termination of this Indenture or the earlier resignation or removal of the Trustee, the Custodian, the Securities Intermediary or the Back-up Servicer.

(d)           The Trustee hereby acknowledges and agrees that if the Servicer and/or the Issuer fails to pay the amounts set forth in this Section 7.07, the Trustee will continue to perform its obligations under this Indenture, regardless of the Servicer and/or the Issuer’s failure to pay such amounts, until the appointment of a successor Trustee in accordance with Section 7.09 of this Indenture; provided, however, that in such event, the Trustee shall continue to be entitled to be paid all accrued amounts due it pursuant to this Section 7.07 from amounts payable pursuant to Section 13.03.

Section 7.08                      Corporate Trustee Required; Eligibility.  There shall at all times be a trustee hereunder, who shall be the Trustee, which shall:  (a) be a banking corporation or association organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000 and sub ject to supervision or examination by federal or state authority and having an office within the United States of America; and (b) have a commercial paper or other short-term rating of at least A-1/P-1 from each of Moody’s and S & P.  If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

Section 7.09                      Resignation and Removal; Appointment of Successor.

(a)           No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee.

(b)           The Trustee may resign at any time by giving thirty (30) days’ prior written notice thereof to the Issuer and the Noteholders.  If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, whose acceptance will not be unreasonably withheld or delayed.  Such court may thereupon, after such notice, if any, as it may deem proper and may prescribe, appoint a successor Trustee.

(c)           The Trustee may be removed by the Control Party at any time if one of the following events has occurred:

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                (i)           the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Issuer or the Control Party;

(ii)           the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

(iii)           the Trustee has failed to perform its duties in accordance with this Indenture or has breached any representation of warranty made in this Indenture; or

(iv)           upon thirty (30) days’ prior written notice of termination by the Control Party.

(d)           If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause with respect to any of the Notes, the Issuer shall promptly appoint a successor Trustee.  If no successor Trustee shall have been so appointed by the Issuer within thirty (30) days of notice of removal or resignation and shall have accepted appointment in the manner hereinafter provided, then the Control Party may appoint a successor Trustee.  No removal or resignation of the Trustee shall become effective until the acceptance of the appointment of a successor Trustee that is eligible to act as Trustee under Section 7.08.

(e)           The Issuer shall give notice in the manner provided in Section 14.03 of each resignation and each removal of the Trustee and each appointment and acceptance of appointment of a successor Trustee with respect to the Notes.  Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

(f)           All amounts owing to the resigning or removed Trustee shall be payable solely on the next scheduled date for distributions and solely in accordance with the priorities set forth in Section 13.03.

Section 7.10                      Acceptance of Appointment by Successor.Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer, the Secured Parties and the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee but, on request of the Issuer, the Control Party or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.  Upon request of any such successor Trustee or the Control Party, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article.

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Section 7.11                      Merger, Conversion, Consolidation or Succession to Business of Trustee.  Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder (provided that such successor shall at all times be required to be eligible under Section 7.08), without the execution or filing of any paper or any further act on the part of any of the parties hereto.  In case any Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes.

Section 7.12                      Co-Trustees and Separate Trustees.

(a)           At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Collateral may at the time be located, the Issuer and the Trustee shall have power to appoint, and, upon the written request of the Trustee, the Issuer shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee and meeting the eligibility standards for the Trustee specified in Section 7.08, either to act as Co-Trustee, jointly with the Trustee of all or any part of such Collateral, or to act as separate Trustee of any such property (a “Co-Trustee”), in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section.  If the Issuer does not join in such appointment within fifteen (15) days after the receipt by it of a request so to do, or, in case an Event of Default exists, the Trustee alone shall have power to make such appointment.

(b)           Should any written instrument from the Issuer be reasonably required by any Co-Trustee or separate Trustee so appointed for more fully confirming to such Co-Trustee or separate Trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Issuer.

(c)           Every Co-Trustee or separate Trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms:

(i)           the Notes shall be authenticated and delivered by, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(ii)           the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-Trustee or separate Trustee jointly, as shall be provided in the instrument appointing such Co-Trustee or separate Trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised an d performed by such Co-Trustee or separate Trustee at the direction or with the consent of the Trustee;

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(iii)           the Trustee at any time, by an instrument in writing executed by it and, prior to the occurrence of an Event of Default, the Issuer, may accept the resignation of or remove any Co-Trustee or separate Trustee, appointed under this Section, and, in case an Event of Default exists, the Trustee shall have power to accept the resignation of, or remove, any such Co-Trustee or separate Trustee without the concurrence of the Issuer.  Upon the written request of the Trustee, the Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal.  A successor to any Co-Trustee or separate Trustee that has so resigned or been removed may be appointed in the manner provided in this Section;

(iv)           no Co-Trustee or separate Trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other such Trustee hereunder nor shall the Trustee be liable by reason of any act or omission of any Co-Trustee or separate Trustee selected by the Trustee with due care or appointed in accordance with directions to the Trustee pursuant to Section 6.14 provided, that the appointment of any Co-Trustee or separate Trustee shall not relieve the Trustee from any of its express duties and obligations under this Indenture; and

(v)           any Act of Noteholders delivered to the Trustee shall be deemed to have been delivered to each such Co-Trustee and separate Trustee.

Section 7.13                      Maintenance of Office or Agency; Initial Appointment of Payment Agent.  The Note Registrar will maintain an office within the State of New York or the State of Minnesota where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demand to or upon the Issuer in respect of the Notes and this Indenture may be served. 0; The Issuer hereby appoints the Trustee as the Paying Agent and its Corporate Trust Office as the office for each of said purposes.

Section 7.14                      Appointment of Authenticating Agent.  The Trustee may at its expense appoint an Authenticating Agent or Authenticating Agents with respect to the Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes issued upon original issue or upon exchange, registration of transfer or pursuant to Section 2.08, and Notes so authenticated shall be entitled to the benefits of this Indenture a nd shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder.  Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee certificate of authentication or the delivery of Notes to the Trustee for authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent and delivery of the Notes to the Authenticating Agent on behalf of the Trustee.  Each Authenticating Agent shall be acceptable to the Issuer (whose acceptance shall not be unreasonably withheld or delayed) and shall at all times be a corporation having a combined capital and surplus of not less than the equivalent of $50,000,000 and subject to supervision or examination by federal or state a uthority or the equivalent

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foreign authority, in the case of an Authenticating Agent who is not organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia.  If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent, provided that such corporation shall be otherwise eligible under this Section.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Issuer.  The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent, the Noteholders and to the Issuer.  Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and, after the occurrence of an Event of Default, the Control Party, and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Noteholders, if any, with respect to which such Authenticating Agent will se rve, as their names and addresses appear in the Note Register.  Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.  No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Trustee certificate of authentication, an alternate certificate of authentication in the following form:

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This is one of the Notes described in the within-mentioned Indenture.

U.S. Bank National Association, as Trustee
By:
	As Authenticating Agent

By:
	As Authenticating Agent

Section 7.15                      Appointment of Paying Agent other than Trustee; Money for Note Payments to be Held in Trust.

If, at the request of the Trustee, a party other than the Trustee is ever appointed as a Paying Agent, the Issuer will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee that, subject to the provisions of this Section, such Paying Agent will:

(a)           hold all sums held by it for the payment of principal or interest on Notes in trust in an Eligible Account in the name of the Trustee on behalf of the Issuer at the Corporate Trust Office, which account shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties, until such sums shall be paid to such Persons or otherwise disposed of as provided in Section 13.03;

(b)           give the Trustee and the Noteholders notice of any Default by the Issuer (or any other obligor upon the Notes) in the making of any payment of principal or interest; and

(c)           at any time, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Subject to Section 11.04, any money deposited with the Trustee or any Paying Agent in trust for the payment of the principal or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer on Issuer Request, and the Noteholder of such Note shall thereafter, as an unsecured general creditor, and subject to any applicable statute of limitations, look only to the Issuer for payment thereof, and all liability of the Trustee and such Paying Agent with respect to such trust money or the related Note, shall thereupon cease; provided that the Trustee or such Paying Agent, before

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being required to make any such repayment, may (upon delivery of an Issuer Order), cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the city in which the Corporate Trust Office is located, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer.  The Trustee may also adopt and employ any other reasonable means of notification of such repayment (including mailing notice of such repayment to the Noteholders whose right to or interest in monies due and payable but not claimed is determinable from the records of any Paying Agent, at the last address as shown on the Note Register for each such Noteholder).  No additional in terest shall accrue on the related Note subsequent to the date on which such funds were available for distribution to such Noteholder.

Section 7.16                      Rights with Respect to the Servicer and Back-up Servicer.  The Trustee’s rights and obligations with respect to the Servicer and the Back-up Servicer shall be governed by this Indenture, the Servicing Agreement and the other Transaction Documents.

Section 7.17                      Representations and Warranties of the Trustee.  The Trustee hereby represents and warrants for the benefit of the parties hereto and the Secured Parties that:

(a)           Organization and Good Standing.  The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States, and has the power to own its assets and to transact the business in which it is presently engaged;

(b)           Authorization.  The Trustee has the power, authority and legal right to execute, deliver and perform this Indenture and each other Transaction Document to which it is a party and to authenticate the Notes, and the execution, delivery and performance of this Indenture and each other Transaction Document and the authentication of the Notes has been duly authorized by the Trustee by all necessary corporate action;

(c)           Binding Obligations.  This Indenture and each other Transaction Document to which the Trustee is a party, assuming due authorization, execution and delivery by the other parties hereto and thereto, constitute the legal, valid and binding obligations of the Trustee, enforceable against the Trustee in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors’ rights generally and the rights of trust companies in particular and (ii)
60;the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought, whether in a proceeding at law or in equity;

(d)           No Violation.  The performance by the Trustee  of its obligations under this Indenture and each other Transaction Document to which the Trustee is a party will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice, lapse of time or both) a default under, the charter documents or bylaws of the Trustee;

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(e)           No Proceedings.  To the best of its knowledge, there are no proceedings or investigations to which the Trustee is a party pending, or, to the knowledge of the Trustee, threatened, before any court, regulatory body, administrative agency or other tribunal or Governmental Authority (A) asserting the invalidity of this Indenture or any other Transaction Documents, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Indenture or any other Transaction Document or (C) seeking any determination or ruling that would materially and adversely affect the perfo rmance by the Trustee of its obligations under, or the validity or enforceability of, this Indenture, the Notes or any other Transaction Documents;

(f)           Approvals.  Neither the execution or delivery by the Trustee of this Indenture or any other Transaction Document to which it is a party nor the consummation of the transactions by the Trustee contemplated hereby or by any other Transaction Document to which it is a party requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any Governmental Authority under any existing federal or state law governing the banking or trust powers of the Trustee; and

(g)           Eligibility.  The Trustee meets the eligibility requirements set forth in Section 7.08 hereof.

ARTICLE VIII

THE CUSTODIAN

Section 8.01                      Appointment of Custodian.  Subject to the terms and conditions hereof, the Issuer hereby revocably appoints the Custodian, and the Custodian hereby accepts such appointment and agrees to act as Custodian on behalf of the Secured Parties to maintain exclusive custody of the Contract Files in order to perfect the ownership interest of the Issuer in the Contracts and the security interest of the Secured Parties in the Contracts and the other items in the Contract Files and any and all proceeds of the foregoing; provided that from and after the release or discharge of the Secured Parties’ lien in and to the Contracts and the other items in the Contract Files and any and all proceeds of the foregoing, the Custodian shall serve as exclusive agent and custodian of the Issuer with respect to the Contract Files.

Section 8.02                      Removal of Custodian.With or without cause, with sixty (60) days’ notice, (a) prior to the occurrence of an Event of Default the Issuer may, with the prior written consent of the Control Party, or (b) following the occurrence of an Event of Default, the Control Party may, remove and discharge t he Custodian from the performance of its duties under this Indenture with respect to any or all of the Contracts and related Contract Files by written notice from the Issuer or the Control Party, as the case may be, to the Custodian, with a copy to the Trustee and the Servicer.  Having given notice of such removal, the Issuer (prior to the occurrence of an Event of Default) or the Control Party (following the occurrence of an Event of Default) shall, by written instrument and with the consent of the Control Party (if the notice of removal came from the Issuer), promptly appoint a successor custodian to act on behalf of the Issuer in replacement of the Custodian under this Indenture, which successor Custodian shall be satisfactory to the Control Party in its sole discretion.  In the event of any such removal, the Custodian shall promptly transfer to the successor custodian, as directed, all affected Contracts and related Contract Files.  In the event of removal of the Custodian f or cause and the appointment of a successor custodian under this

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 Indenture, the expenses of transferring the Contracts and related Contract Files to the successor custodian shall be at the expense of the Custodian.  In the event of removal of the Custodian without cause by the Issuer (prior to the occurrence of an Event of Default) or the Control Party, as the case may be, and the appointment of a successor custodian under this Indenture, the Issuer shall be responsible for the expenses of transferring the Contracts and related Contract Files to the successor custodian.  Notwithstanding the foregoing, this Indenture shall remain in full force and effect with respect to any Contracts and related Contract Files for which this Indenture is not terminated hereunder.  The Custodian may petition a court of competent jurisdiction to appoint a successor hereunder if no su ccessor is appointed within such 60-day notice period.

Section 8.03                      Termination by Custodian.The Custodian may terminate its obligations under this Indenture upon at least sixty (60) days’ notice to the Servicer, the Issuer and the Noteholders; provided, no termination shal l be effective until appointment of a successor acceptable to the Issuer or, if an Event of Default has occurred, the Control Party.  In the event of such termination, the Issuer shall promptly appoint a successor custodian; provided that after the occurrence of an Event of Default, solely the Control Party may appoint a successor custodian.  The payment of such successor custodian’s fees and expenses with respect to each Contract and related Contract Files shall be solely the responsibility of the Issuer.  Upon such appointment, the Custodian shall promptly transfer to the successor custodian, as directed, all Contracts and related Contract Files being held under this Indenture.  The Custodian may petition a court of competent jurisdiction to appoint a successor hereunder if no successor is appointed within such sixty (60) day notice period.

Section 8.04                      Limitations on the Custodian’s Responsibilities.

(a)           Except as provided herein, the Custodian shall be under no duty or obligation to inspect, review or examine the Contracts or related Contract Files to determine that the contents thereof are appropriate for the represented purpose or that they have been actually recorded or that they are other than what they purport to be on their face.

(b)           The Custodian shall not be responsible for preparing or filing any reports or returns relating to federal, state or local income taxes with respect to this Indenture, other than for the Custodian’s compensation or for reimbursement of expenses.

(c)           The Custodian shall not be responsible or liable for, and makes no representation or warranty with respect to, the validity, adequacy or perfection of any lien upon or security interest in any Contract; provided that, the foregoing shall not reduce or eliminate the Custodian’s obligations under Section 4.03 hereof.

(d)           Any other provision of this Indenture to the contrary notwithstanding, the Custodian shall have no notice, and shall not be bound by any of the terms and conditions of any document executed or delivered in connection with, or intended to control any part of, the transactions anticipated by or referred to in this Indenture unless the Custodian is a signatory party to that document or such document is the Indenture, the Servicing Agreement or the Lockbox Intercreditor Agreement.  Notwithstanding the foregoing sentence, the Custodian shall be deemed to have notice of the terms and conditions (including, without limitation, definitions not otherwise set

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forth in full in this Indenture) of documents executed or delivered in connection with, or intended to control any part of, the transactions anticipated by or referred to in this Indenture, to the extent such terms and provisions are referenced, or are incorporated by reference, into this Indenture only as long as the Custodian shall have been provided a copy of any such document or Indenture.  Each of the Trustee, the Back-up Servicer and the Custodian acknowledges receipt of a copy of the Transaction Documents to which it is a party on the Closing Date.

(e)           The duties and obligations of the Custodian shall only be such as are expressly set forth in this Indenture or as set forth in a written amendment to this Indenture executed by the parties hereto or their successors and assigns.  In the event that any provision of this Indenture implies or requires that action or forbearance be taken by a party, but is silent as to which party has the duty to act or refrain from acting, the parties agree that the Custodian shall not be the party required to take the action or refrain from acting.  In no event shall the Custodian have any responsibility to ascertain or take action except as expressly provided herein.

(f)           Nothing in this Indenture shall be deemed to impose on the Custodian any duty to qualify to do business in any jurisdiction, other than (i) any jurisdiction where any Contract and related Contract Files is or may be held by the Custodian from time to time hereunder, and (ii) any jurisdiction where its ownership of property or conduct of business requires such qualification and where failure to qualify could have a material adverse effect on the Custodian or its property or business or on the ability of the Custodian, the Issuer or the Servicer to perform its duties hereunder or under the other Transaction Documents.

(g)           The Custodian may consult with counsel selected by it with due care and familiar with such matters and the written advice or opinion of such counsel or any Opinion of Counsel (in form and substance satisfactory to the Custodian and addressed to the Custodian) shall be full and complete authorization and protection and the Custodian shall not be liable in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon..

(h)           The Custodian may, at any time during the administration of this Indenture, request and receive a written direction from the Control Party in connection with actions to be taken under this Indenture and shall not be liable for any action taken or omitted in good faith reliance thereon;

(i)           No provision of this Indenture shall require the Custodian to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights and powers, if, in its reasonable judgment, it shall believe that repayment of such funds is not reasonably assured to it without an indemnity against such risk or liability.

(j)           The Custodian shall have no duty to ascertain whether or not each amount or payment has been received by the Trustee or any third person.

Section 8.05                      Limitation on Liability.Neither the Custodian nor any of its directors, officers, agents or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith in good faith and believed (which belief may be based upon the opinion or advice of counsel selected by it in the exercise of reasonable care) by it or them to be within the purview of this Indenture, except for its

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or their own negligence, lack of good faith or willful misconduct.  The Custodian and any director, officer, employee or agent of the Custodian may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder.  In no event shall the Custodian or its directors, officers, agents and employees be held liable for any special, indirect or consequential damages resulting from any action taken or omitted to be taken by it or them hereunder or in connection herewith even if advised of the possibility of such damages.  The provisions of this Section 8.05 shall survive the termination of this Indenture.

Section 8.06                      Custodian Obligations Regarding Genuineness of Documents.In the absence of bad faith or negligence on the part of the Custodian, the Custodian may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any request, instructions, certificate, opinion or other document furnished to the Custodian, reasonably believed by the Custodian to be genuine and to have been signed or presented by the proper party or parties and conforming to the requirements of this Indenture; provided that the provisions of this Section shall not in any manner limit or reduce the responsibilities of the Custodian under this Indenture.

Section 8.07                      Force Majeure.The Custodian shall not be responsible for delays or failures in performance resulting from acts of God, strikes, lockouts, riots, acts of war or terrorism, epidemics, nationalization, expropriation, currency restrictions, government regulations adopted after the date of this Indenture, fire, communic ation line failures, computer viruses, power failures, earthquakes or other disasters of a similar nature which are beyond its control.

ARTICLE IX

[RESERVED]

ARTICLE X

SUPPLEMENTAL INDENTURES

Section 10.01                                Supplemental Indentures without Consent of the Noteholders.

(a)           The Issuer, the Trustee and the Custodian, without the consent of the Holders of any Notes may, at any time and from time to time, enter into one or more amendments to this Indenture or indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes, provided that (x) any such amendment or supplemental indenture, as evidenced by an opinion of counsel, will not have an adverse effect on the rights or interests of the Holders and (y) any such amendment does not modify this Indenture in a manner requiring the consent of all affected Noteholders as described in Section 10.02 hereof:

(i)           to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the Lien of this Indenture additional property; or

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(ii)           to correct or supplement any provision in the Indenture which may be inconsistent with any other provisions therein or with the provisions of any other Transaction Document; or

(iii)           to evidence the succession of another Person to the Issuer, and the assumption by such successor of the covenants of the Issuer in this Indenture and in the Notes; or

(iv)           to add to the covenants of, and the conditions, limitations and restrictions to be observed by, the Issuer, for the benefit of the Secured Parties or to surrender any right or power conferred upon the Issuer in this Indenture; or

(v)           to convey, transfer, assign, mortgage or pledge any property to or with the Trustee; or

(vi)           to evidence the succession of the Trustee pursuant to the terms of this Indenture.

(b)           The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustee’s own rights, duties, indemnities, liabilities or immunities under this Indenture or otherwise.

(c)           Promptly after the execution by the Issuer, the Custodian and the Trustee of any supplemental indenture pursuant to this Section, the Issuer shall mail to each Noteholder a copy of such supplemental indenture.

Section 10.02                                Supplemental Indentures with Consent of the Noteholders.With the prior written consent of the Majority Holders and the Servicer, the Issuer, the Trustee and the Custodian may enter into an amendment or modification to this indenture or into indentures sup plemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture (other than as provided in Section 10.01 hereof); provided, however, that no such amendment or supplemental indenture shall become effective without the consent of each of the Holders of the Notes adversely affected thereby if such amendment or supplemental indenture shall:

(a)           change the Stated Maturity Date of any Note or the due date of any installment of principal of, or method of computing principal of, or any installment of interest on, any Note, or change the principal amount thereof or the applicable Note Rate thereof or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment; or

(b)           reduce the percentage of the principal amount of Outstanding Notes, the consent of the Holders of which is required for any such amendment or supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or Events of Default or their consequences; or

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(c)           impair or adversely affect the priority of any payments payable by the Trustee from the Collection Account on each Payment Date under this Indenture; or

(d)           permit the creation of any Lien ranking prior to, on a parity with, or subordinate to the Lien of the Trustee with respect to any part of the Collateral or, except as expressly provided in this Indenture, terminate or release the Lien of the Trustee on any material portion of the Collateral at any time subject to the Indenture or deprive any Secured Party of the security afforded by the Lien of this Indenture; or

(e)           modify or alter any of the provisions of this Section 10.02 or any defined term used in Sections 10.01 or 10.02 of this Indenture (or any defined term used therein), except to increase the percentage of Holders required for any modification or waiver or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of each Noteholder affected thereby; or

(f)           modify Sections 6.01(a), 6.01(b), or Section 13.03 or any defined term used therein.

The Trustee is hereby authorized to join in the execution of any such amendment or supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such amendment or supplemental indenture that affects in any adverse respect the Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise.

Promptly after the execution by the Issuer, the Servicer,andthe Trustee (and all Noteholders if required to approve such amendment or supplement) of any supplemental indenture pursuant to this Section, the Issuer shall mail to the the Back-up Servicer and each Noteholder a copy of such supplemental indenture.

Section 10.03                                Execution of Supplemental Indentures.  In executing any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture and the Trustee receive, and (solely with respect to the Trustee, subject to Section 7.01) shall be not be liable for and shall be fully authorized to conclusively rely in good faith upon, an Opinion of Counsel reasonably acceptable to the Trustee stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and all conditions precedent to such execution have been satisfied.

Section 10.04                                Effect of Supplemental Indentures.  Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Noteholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereb y.

Section 10.05                                Reference in Notes to Supplemental Indentures.  Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and if required by the

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Issuer shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

Section 10.06                                Back-Up Servicer Consent. Notwithstanding any other provision to the contrary, for so long as there is a Back-Up Servicer, the Issuer, the Indenture Trustee and the Custodian shall not, without the consent of the Back-Up Servicer (such consent not to be unreasonably withheld), make, execute, acknowledge or deliver amendments to this Indenture or enter into any su pplemental indentures hereto or thereto or otherwise waive or amend any provision of this Indenture if such action shall have, or it is expected may have, a material adverse effect on the Back-Up Servicer or any successor Servicer.

Section 10.07                                Amendments to the Lockbox Intercreditor Agreement.  The Trustee shall not enter into any material amendment, modification, supplement, consent or waiver of the Lockbox Intercreditor Agreement without the consent of all Noteholders.

ARTICLE XI

REDEMPTIONS AND PREPAYMENTS OF NOTES

Section 11.01                                Redemptions of Notes.

(a)           Optional Redemption.   The Issuer (as directed by the Guarantor) shall have the right, subject to the terms hereof, to redeem, in whole but not in part, all outstanding Notes on any Business Day, upon not less than 15 days prior written notice to the Trustee and the Holders of the Notes (an “Optional Redemption”).

(b)           Mandatory Redemption.   On a Business Day within five (5) Business Days after the occurrence of a Mandatory Redemption Event, the Issuer shall redeem, in whole but not in part, all outstanding Notes (a “Mandatory Redemption”).

(c)           Installments of interest and principal due on or prior to the Redemption Date shall continue to be payable to the Holders of the Notes according to their terms and the provisions of Section 2.09 hereof.

Section 11.02                                Redemption Procedures.  In connection with any redemption pursuant to Section 11.01 hereof:

(a) in the case of an Optional Redemption, the Issuer (as directed by the Guarantor) shall, at least 15 days prior to the Redemption Date, notify the Trustee and the Holders of the Notes in writing of the Optional Redemption and, in the case of a Mandatory Redemption, the Issuer shall, as soon as reasonably practical after the Mandatory Redemption Event, notify the Trustee and the Holders of the Notes in writing of the Mandatory Redemption;

(b) in the case of an Optional Redemption, the Issuer (as directed by the Guarantor) or, in the case of a Mandatory Redemption, the Issuer shall deposit in the Collection Account on or prior to the Redemption Date at least the amounts described in Section 11.02(c);

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(c) in the case of an Optional Redemption, the Issuer (as directed by the Guarantor) shall deliver an Issuer Order directing the Trustee to and the Trustee shall, and, in the case of a Mandatory Redemption, the Trustee shall (without any Issuer Order),make payment on the Redemption Date of the sum of (A) the Redemption Price plus, (B) fees, expenses and other reimbursable amounts owing to the Noteholders, the Originator, the Trustee, the Securities Intermediary, the Custodian, the Back-up Servicer andthe Servicer under the Transaction Documents; and

(d) upon delivery to the Trustee, the Noteholders, the Custodian, the Paying Agent,andthe Back-up Servicer of such documents and an Officer’s Certificate from the Servicer certifying that (1) the amounts required to be deposited into the Collection Account shall have been deposited and (2) the requirements of this Article XI have been satisfied, the Trustee shall release its interest in the entire Collateral as provided in Section 11.05.

Section 11.03                                Notice of Redemption to Noteholders.  In the case of an Optional Redemption or a Mandatory Redemption, upon receipt of the notice set forth in Section 11.02(a), the Trustee shall provide notice thereof with a copy of such notice of redemption pursuant to Section 11.01 by first class mail or courier delivery, dispatched no later than five (5) B usiness Days following the date on which such notice was provided, to each Noteholder (at its address in the Note Register).

All notices of redemption shall state:

(a)           the Redemption Date;

(b)           the amount that will be deposited in the Collection Account, which shall be at least the sum of (A) the Redemption Price plus (B) all other amounts that are payable to the Noteholders, the Trustee, the Originator, the Custodian, the Back-up Servicer, and the Servicer under the Transaction Documents on the Redemption Date;

(c)           that on the Redemption Date, the Redemption Price will become due and payable with respect to the Notes, and that interest on all Outstanding Notes shall cease to accrue on such date;

(d)           all conditions precedent in connection with such redemption have been satisfied;

(e)           the address at which such redeemed Notes shall be delivered; and

(f)           the record date for such Redemption Date, which shall be one Business Day before the Redemption Date.

Notice of redemption of Notes shall be given by the Trustee in the name and at the expense of the Issuer.

Section 11.04                                Amounts Payable on Redemption Date.  Notice of redemption having been given to Noteholders as provided in Section 11.03, such Notes shall, on the Redemption Date, become due and payable at the Redemption Price, and on such Redemption Date (unless the Issuer shall default in the payment of such Redemption Price), all of the Outstanding Notes shall cease to bear inte rest.  On the Redemption Date:  (A) each Noteholder shall be paid such Noteholder’s applicable share of the Redemption Price by the Paying Agent on behalf of the Issuer upon presentation and surrender of their respective Notes at the office or agency specified in

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Section 7.13; and (B) each other Person to whom monies are owed under Section 11.03(b) shall be paid all amounts owing to such Person from the amounts deposited in the Collection Account in accordance with Section 11.02(b); provided, that no redemption may be effectuated unless, concurrently with the redemption occurring under this Article XI, all amounts due under this clause (B) shall be paid in full from funds on deposit in the Collection Account.  If the Holder of any Note called for redemption shall not be so paid, then the principal shall, until paid, bear interest from the Redemption Date at the applicable Note Rate and the redemption of such Note(s) shall be canceled, the Paying Agent shall return the related portion of the Redemption Price to the Issuer or other Person providing the fund s for payment, and such Notes shall be payable on the Stated Maturity Date or earlier to the extent otherwise provided herein.  All amounts payable on the Redemption Date shall be paid in accordance with this Section 11.04, without regard to the priority of distribution provisions contained in Section 13.03.

Section 11.05                                Release of Contract Assets in Connection with Redemptions.

(a)           In connection with the redemptions permitted under this Article XI, the Trustee shall release its Lien on the Contracts, upon (I) the deposit of the amounts set forth in Section 11.02(c) into the Collection Account and (II) the Issuer’s delivery to the Trustee and the Custodian of an Officer’s Certificate, (1) identifying the Contracts and the related Equipment to be released, (2) requesting the release thereof, (3) setting forth the amount deposited in the Collection Account with respect thereto, (4) certifying that the amount deposited in the Collection Account is at least equal to the Redemption Price and all other amounts required to be paid in connection with a redemption under this Article XI, and (5) certifying th at all other conditions precedent set forth in the Transaction Documents relating to such release have been satisfied.

(b)           Upon release of the Trustee’s Lien on the Contracts in accordance with Section 11.05(a), the Custodian shall deliver to the Issuer the Contracts and all related Contract Assets described in the Issuer’s Officer’s Certificate.

ARTICLE XII

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 12.01                                Representations and Warranties.

The Issuer hereby makes the following representations and warranties for the benefit of the Trustee, the Custodian and the Secured Parties on which the Trustee relies in accepting the Collateral in trust and in authenticating the Notes.  Except as specifically provided otherwise, such representations and warranties are made as of the Closing Date and each Acquisition Date and shall survive the transfer, grant and assignment of the Collateral to the Trustee.

(a)           Organization and Good Standing.  The Issuer is a Delaware limited liability company duly organized, validly existing and is not organized under the laws of any other jurisdiction.  The Issuer is in good standing under the law of the State of Delaware and each other State where the nature of its activities requires it to “qualify to do business”, except to the extent that the failure to so qualify would not individually or in the aggregate materially adversely affect the ability of the Issuer to perform its obligations under the Transaction Documents.

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(b)           Authorization.  The Issuer has the power, authority and legal right to execute, deliver and perform under the Transaction Documents and the execution, delivery and performance of the Transaction Documents have been duly authorized by the Issuer by all necessary limited liability company action.

(c)           Binding Obligation.  Each of the Transaction Documents to which the Issuer is a party, assuming due authorization, execution and delivery by the parties thereto other than the Issuer, constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, rehabilitation, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors’ rights generally and (ii) the remedy of specific performance and injunctiv e and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, whether a proceeding at law or in equity.

(d)           No Violation.  The consummation of the transactions contemplated by the fulfillment of the terms of the Transaction Documents will not:  (i) conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice, lapse of time or both) a default under the organizational documents of the Issuer, any indenture, agreement, mortgage, deed of trust or other instrument to which the Issuer is a party or by which it is bound; (ii) result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of such indenture, agreement, mortgage, deed of trust or other such instrument, other than any Lien created or imposed pursuant to the terms of the Transaction Documents, or (iii) violate any law or, to the best of the Issuer’s knowledge, any material order, rule or regulation applicable to the Issuer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Issuer or any of its properties.

(e)           No Proceedings.  There are no proceedings or investigations to which the Issuer, or any of the Issuer’s Affiliates, is a party pending, or, to the knowledge of the Issuer, threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (A) asserting the invalidity of the Transaction Documents or any Receivable or any Contract, (B) seeking to prevent the issuance of any of the Notes or the consummation of any of the transactions contemplated by the Transaction Documents, or (C) seeking any determination or ruling that would adversely affect the performan ce by the Issuer of its obligations under, or the validity or enforceability of, the Transaction Documents or any Receivable or any Contract.

(f)           Approvals.  All approvals, authorizations, consents, orders or other actions of any Person, or of any court, governmental agency or body or official, required in connection with the execution and delivery of the Transaction Documents and with the valid and proper authorization, issuance and sale of the Notes pursuant to this Indenture (except that no such representation is made with respect to any necessary approvals of State securities officials under the Blue Sky Laws), have been or will be taken or obtained on or prior to the Closing Date.

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(g)           Principal Office.  The Issuer’s principal place of business and chief executive office is located at the Issuer Address.

(h)           Transfer and Assignment.  Upon the delivery by or on behalf of the Issuer to the Trustee of the Contracts and the filing of the financing statements described in Sections 4.01(a)(v) and 4.02(b), the Trustee, for the benefit of the Secured Parties, shall have a first priority perfected security interest in the Issuer’s interest in the Contracts and Receivables and the proceeds thereof and that portion of the Collateral in which a security interest may be perfected by possession or the filing of a financing statement, in each case, under the UCC, limited to the extent set forth in Section 9-315 of the UCC as in effect in the applicable jurisdiction; provided that none of the Servicer, the Originator and the Issuer shall be required to file or record assignments of any UCC-1 financing statements or other lien recordings made against an Obligor.  All filings (including UCC filings) as are necessary in any jurisdiction to perfect the security interest of the Trustee in the Collateral, including the transfer of the Contracts and any other payments to become due thereunder, have been made.

(i)           Owners of the Issuer.  The Originator owns one hundred percent (100%) of the Equity Interest in the Issuer, and such Equity Interest is duly authorized, validly issued, fully paid for and non-assessable by the Issuer.

(j)           Bulk Transfer Laws.  The transfer, assignment and conveyance of the Contract Assets by the Issuer pursuant to this Indenture are not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction.

(k)           The Contract Assets.  The rights of the Issuer with respect to the representations and warranties that are made by the Originator in the Purchase and Contribution Agreement and each Assignment Agreement as of each Acquisition Date have been assigned by the Issuer to the Trustee pursuant to the terms hereof, and the Issuer is not aware of any inaccuracy in any such representations and warranties except for such inaccuracies as have been provided in writing to the Trustee.

(l)           Solvency.  The Issuer, both prior to and after giving effect to the transactions contemplated hereby, (i) is not “insolvent” (as such term is defined in §101(32)(A) of the Bankruptcy Code); (ii) is able to pay its debts as they become due; and (iii) does not have unreasonably small capital for the activities that it conducts or for any transaction(s) in which it is about to engage.

(m)           Investment Company.  The Issuer is not an “investment company” or a company controlled by an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, or otherwise subject to any other federal or state statute or regulation limiting its ability to incur indebtedness.  The Issuer, at all times, within the meaning of 17 C.F.R. 270.3a-7, (1) will have issued only the Notes and the membership interest s issued to its managing member at its formation, and any other securities issued by the Issuer are “fixed income securities or other securities ... that depend primarily on the cash flow from eligible assets” and for

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which a trustee is appointed in compliance with 17 C.F.R. 270.3a-7(a)(4), (2) will sell its securities only to its affiliates, “qualified institutional buyers”, or institutional accredited investors or will sell securities “rated, at the time of initial sale, in one of the four highest categories assigned long-term debt” by one of DBRS, Moody’s, S & P or Fitch, (3) will either acquire or dispose of the Contracts only in accordance with and as permitted by the Purchase and Contribution Agreement, the Assignment Agreements, the Servicing Agreement, its limited liability company operating agreement and the Indenture or (y) any other “eligible assets” only (a) in accordance with the agreements under which its securities are issued, (b) if a rating downgrade of any of its outstanding “fixed-income securities” does not result and (c) if such acquisition or disposition is not & #8220;for the primary purpose of recognizing gains or decreasing losses resulting from market value changes”.  The Issuer will not engage in any business other than that expressly permitted by the Transaction Documents and its limited liability company operating agreement.

(n)           Limited Activities.  Since its formation, the Issuer has conducted no activities other than the execution, delivery and performance of the Transaction Documents contemplated hereby, and such other activities as are incidental to the foregoing and otherwise permitted under Section 12.02(i).  The Issuer has incurred no indebtedness nor engaged in any activities or transactions nor acquired any assets except as expressly contemplated hereunder and under the other Transaction Documents.

(o)           Taxes.  The Issuer has filed or caused to be filed all Federal, state and local tax returns which are required to be filed by it, and has paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, other than any taxes or assessments, the validity of which are being contested in good faith by appropriate proceedings and with respect to which the Issuer or the Servicer on its behalf has set aside adequate reserves on its books in accordance with GAAP and which proceedings have not given rise to any Lien.

(p)           Lockbox Accounts.  The Issuer has no lockbox accounts or other bank accounts for the collection of the Contract Assets other than the Lockbox Account.

(q)           Accuracy of Information.  All certificates, reports, financial statements and similar writings furnished by or on behalf of the Issuer to the Trustee or any Noteholder, at any time pursuant to any requirement of, or in response to any written request of any such party under, this Indenture or any other Transaction Document, have been, and all such certificates, reports, financial statements and similar writings hereafter furnished by the Issuer to such parties will be, true and accurate in every respect material to the transactions contemplated hereby on the date as of which any such certificate, report, financial statement or similar writing was or will be delivered, and shall not omit to state any material facts or any facts necessary to make the statements contained therein not materially misleading.

(r)           Perfection Requirements as to Collateral.

(1)           This Indenture creates a valid and continuing security interest (as defined in the UCC) in the Collateral in favor of the Trustee, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer.  The Issuer has good and marketable title to the Collateral (including the Collection Account, the Reserve Account, the Prefunding Account, the Capitalized Interest Account and all amounts from time to time on deposit in the Lockbox Account with respect to the Contracts), free and clear of any Liens (except as otherwise provided in the Lockbox Intercredit or Agreement and the rights of Obligors to Security Deposits retained by the Issuer).

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(2)           All of the Contracts included in the Collateral constitute “tangible chattel paper” within the meaning of the UCC.  The Issuer has transferred to the Trustee the original copies of such tangible chattel paper, and, other than the stamp, if any, in favor of a prior lender that signed a Release Agreement related to a Contract, none of such tangible chattel paper has any marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than in favor of the Issuer or the Trustee.  The Equipment related to each Contract constitutes either “equipment 221; for purposes of section 9-102(33) of the UCC or “inventory” for purposes of section 9-102(48) of the UCC; provided however, that not more than 5.0% of the Contracts may relate to Equipment that does not constitute “equipment” for purposes of section 9-102(33) of the UCC or “inventory” for purposes of section 9-102(48) of the UCC.

(3)           The Issuer has caused (and will instruct the Servicer to cause), the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest granted in the Collateral to the Trustee hereunder.  Each such financing statement will contain a statement that a “purchase of, or security interest in, any collateral described in this financing statement will violate the rights of the Trustee.”

(4)           Each of the Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account constitutes a “securities account” within the meaning of the applicable UCC.  As provided in Section 13.02(e), the securities intermediary for the Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account has agreed to treat all assets credited thereto as “financial assets” within the meaning of the UCC and the Issuer has taken all steps necessary to cause the securities intermediary to identify in its records the Trustee as the pers on having a security entitlement against the securities intermediary in theCollection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account.  None of the Collection Account, the Reserve Account, the Prefunding Account or the Capitalized Interest Account is in the name of any person other than the Trustee for the benefit of the Secured Parties.  The Issuer has not permitted the securities intermediary of the Collection Account, the Reserve Account, the Prefunding Account or the Capitalized Interest Account to comply with entitlement orders of any person other than the Trustee.  The Issuer has received all consents and approvals required in connection with the Grant to the Trustee of its interest and rights in the Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account.

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(5)           The LockboxAccount constitutes a “deposit account” within the meaning of the applicable UCC.  The Issuer has delivered, or has caused the Servicer to deliver, to the Trustee, a fully executed Lockbox Intercreditor Agreement relating to the Lockbox Account, pursuant to which the Lockbox Bank has agreed to comply with all instructions by the Trustee, as securities intermediary thereunder, directing the disposition of funds in the Lockbox Account without further consent by the Issuer or the Servicer .  The Issuer has not permitted any Lockbox Bank to comply with any instructions of any other Person regarding withdrawal of funds other than the Trustee and, to the extent permitted under the Transaction Documents, the Servicer.  The Lockbox Account is not in the name of any person other than the Issuer, the Trustee or the Lockbox Bank, as securities intermediary under the Lockbox Intercreditor Agreement.

(6)           Other than the security interest granted to the Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Collateral.  The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer or the Originator that include a description of collateral that includes the Collateral other than any financing statement that have  been terminated or released.  The Issuer is not aware of any judgment, ERISA or tax lien filings against the Issuer or the Originator.

(7)           Notwithstanding any other provision of this Indenture or any other Transaction Document, the representations contained in this Section 12.01(r) shall be continuing and remain in full force and effect, without waiver, until the date on which the Notes have been paid in full.

(8)           In the event that the sale of a Contract by the Originator to the Issuer under the Purchase and Contribution Agreement and the pledge of such Contract by the Issuer to the Trustee, for the benefit of the Secured Parties, hereunder are insufficient, without a notation on a related Motorized Titled Equipment’s certificate of title, or without fulfilling any additional administrative requirements under the laws of the state in which such Motorized Titled Equipment is located, to assign the ownership of such Motorized Titled Equipment to th e Issuer or to perfect a security interest in such Motorized Titled Equipment (and the proceeds thereof) in favor of the Trustee, for the benefit of the Secured Parties, the parties hereto agree that (i) the designation of the Servicer (or its nominee) or the Originator (or its nominee) under a Lienholder Nominee Agreement, to be executed within 180 days following the first day of inclusion of such Contract secured by such Motorized Titled Equipment in the calculation of the Discounted Pool Balance, as the lienholder on the certificate of title with respect to such Motorized Titled Equipment, is in its capacity as agent of the Issuer and the Trustee, for the benefit of the Secured Parties, as their interests may appear, and (ii) such designation shall be sufficient until such notations are made or additional administrative requirements are fulfilled.

(9)           Any Contract for which the Servicer shall not have within 180 days of the first day of inclusion of such Contract secured by such Motorized Titled Equipment in the calculation of the Discounted Pool Balance, (i) received a Lien Certificate showing the Issuer or the Servicer (or its nominee) or the Originator (or its nominee) under a Lienholder Nominee Agreement as secured party with respect to the related Motorized Titled Equipment from the applicable Registrar of Titles and (ii) delivered such Lien Certificate or such evidence to the Custodi an, shall no longer be included in the calculation of the Discounted Pool Balance.  In the case of any Contract excluded from the calculation of the Discounted Pool Balance pursuant to the previous sentence, the Contract so excluded from the calculation of the Discounted Pool Balance may at a later time be included in the calculation of the Discounted Pool Balance, provided, that the Custodian shall have received a Lien Certificate showing the Issuer or the Servicer (or its nominee) or the Originator (or its nominee) under a Lienholder Nominee Agreement as secured party with respect to the related Motorized Titled Equipment from the applicable Registrar of Titles.

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(10)           At all times, all Collateral will consist of property in which a security interest may be created and attach under the UCC.

Section 12.02                                Covenants.  The Issuer hereby makes the following covenants for the benefit of the Secured Parties and on which the Trustee relies in accepting the Collateral in trust and in authenticating the Notes.

(a)           No Liens.  Except for the conveyances and grant of security interests hereunder, the Issuer will not sell, pledge, assign, convey, dispose of or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any Collateral now existing or hereafter created, or any interest therein prior to the termination of this Indenture pursuant to Section 5.01; the Issuer will notify the Trustee in writing of the existence of any Lien on any of the Collateral immediately upon discovery thereof; the Issuer shall promptly discharge (or cause to be discharged) any Lien (other than Permitted Liens) on the Coll ateral; and the Issuer shall defend the right, title and interest of the Trustee in, to and under the Collateral now existing or hereafter created, against all claims of third parties claiming through or under the Issuer; provided that nothing in this Section 12.02(a) shall prevent or be deemed to prohibit the Issuer from suffering to exist upon any of the Equipment any Liens for municipal or other local taxes and other governmental charges due from the Issuer if such taxes or governmental charges shall not at the time be due and payable or, if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings, nonpayment of such taxes or charges shall not pose any risk of forfeiture of such Equipment, and the aggregate amount at dispute shall not be greater than $50,000.00, unless the Control Party otherwise approves.

(b)           Obligations with Respect to the Contract Assets.  The Issuer will do nothing to impair the rights of the Trustee (for the benefit of the Secured Parties) in the Collateral.  In addition, to the extent the Issuer actually receives any Collections, it shall deposit or cause to be deposited in the Collection Account within two (2) Business Days of receipt thereof the amount of such Collections in accordance with Section 13.03 and will hold such monies in trust for the Trustee until so deposited.  The Issuer agrees to take all such lawful acti on as the Trustee or the Control Party may request to compel or secure the performance and observance by the Originator and the Servicer, as applicable, of each of their obligations to the Issuer under or in connection with the Purchase and Contribution Agreement, the Assignment Agreements and the Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such Transaction Documents to the extent and in the manner directed by the Trustee or the Control Party, as applicable, including the transmission of notices of default thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Originator or the Servicer of each of their obligations thereunder.

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(c)           Notice of Default, Etc.  The Issuer will deliver to the Trustee and each Holder of Outstanding Notes immediately upon becoming aware of the existence of any condition or event that constitutes a Default, an Event of Default or an Event of Servicing Termination, a written notice describing its nature and period of existence and what action is being taken or proposed to be taken with respect thereto.

(d)           Compliance with Law.  The Issuer will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any Governmental Authority applicable to it or the Collateral or any part thereof or necessary for it to perform its responsibilities hereunder and under the other Transaction Documents; provided that the Issuer may contest any act, regulation, order, decree or direction in good faith and in any reasonable manner which shall not adversely affect the rights of the Trustee (for the benefit of the Secured Parties) in the Collateral.

(e)           Preservation of Security Interest.  The Issuer shall execute and file such documents requested of it which may be required by law to fully preserve and protect the first priority security interest of the Trustee (for the benefit of the Secured Parties) in the Collateral.

(f)           Maintenance of Office, Etc.  The Issuer will not, without providing thirty (30) days’ prior written notice to the Trustee and without filing such amendments to any previously filed financing statements as the Trustee may require or as may be required in order to maintain the Trustee’s perfected security interest in the Collateral (for the benefit of the Secured Parties), (a) change its jurisdiction of organization or the location of its principal place of business, or (b) change its name, identity or corporate structure in any manner that would make any financing statement or continuation statement fi led by the Issuer in accordance with this Indenture seriously misleading within the meaning of Section 9-506 of any applicable enactment of the UCC.

(g)           Further Assurances.  The Issuer will make, execute or endorse, acknowledge, and file or deliver to the Trustee and the Control Party from time to time such schedules, confirmatory assignments, conveyances, transfer endorsements, powers of attorney, certificates, reports, UCC financing statements, and other assurances or instruments and take such further steps relating to the Collateral, as the Trustee may reasonably request and reasonably require in connection with the transactions the subject of the Transaction Documents, except that UCC financing statements are not required to have been filed against the related Obligor for a ny Equipment related to any Contract that had an original equipment cost at origination of less than (A) if such Contract is a secured loan or finance lease that provides for a $1 purchase option, $25,000, or (B) if such Contract provides for a “fair market value” purchase option, $50,000.

(h)           Notice of Liens.  The Issuer shall notify the Trustee in writing immediately after becoming aware of any Lien on any portion of the Collateral, except for any Liens on Equipment for municipal or other local taxes due from the Issuer if such taxes shall not at the time be due or payable without penalty or, provided the same are Permitted Liens, if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings, such nonpayment shall not pose any ris k of forfeiture of such Collateral and the Issuer shall have set aside on its books adequate reserves with respect thereto.

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(i)           Separateness Covenants.  The Issuer (i) shall not engage in any other business than (A) the acquisition, ownership, selling and pledging of the property acquired by it pursuant to the Purchase and Contribution Agreement, any Assignment Agreement, the Servicing Agreement and this Indenture and causing the issuance of, receiving and selling the Notes issued pursuant to this Indenture, (B) the exercise of any powers permitted to limited liability companies under Delaware law which are incidental to the foregoing or necessary to accomplish the foregoing and are not prohibited by the terms of its certificate of format ion, its limited liability company agreement or the other Transaction Documents; (ii) will hold such appropriate meetings of its board of managers or distribute appropriate unanimous consents in lieu of a meeting as are necessary to authorize all of the Issuer’s actions that are required by law to be authorized by the board of managers, keep minutes of its meetings and otherwise observe all other customary corporate formalities; (iii) will (A) maintain its books and records separate from the books and records of any other entity, (B) maintain separate bank accounts and no funds of the Issuer shall be commingled with funds of any other entity except as otherwise permitted in the Lockbox Intercreditor Agreement, (C) keep in full effect its existence, rights, privileges, licenses and franchises as a limited liability company under the laws of its applicable state of organization, and will obtain and preserve its “qualification to do business” as a foreign limited liability company in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, (D) cause its managers and officers to act independently and in its interests, (E) cause its board of managers to duly authorize all of its corporate actions and (F) observe all company procedures required by its organizational documents and applicable laws; and (iv) will not (A) dissolve or liquidate in whole or in part, (B) own any subsidiary or lend or advance any moneys to, or make an investment in, any Person, (C) incur any debt in connection with or make any capital expenditures, (D)(1) commence any case, proceeding or other action under any existing or future bankruptcy, insolvency or similar law seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, wind-up, liquidation, dissolution, composition or other relief with respect to it or its debts, (2) seek ap pointment of a receiver, trustee, custodian or other similar official for it or any part of its assets, (3) make a general assignment for the benefit of creditors, or (4) take any action in furtherance of, or consenting or acquiescing in, any of the foregoing, (E) make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or its capability of doing so, or otherwise), endorse or otherwise become contingently liable (directly or indirectly) for the obligations of, or own or purchase any stock, obligations or securities of or any other interest in, or make any capital contribution to, any other Person other than as specifically provided for in the Transaction Documents, (F) merge or consolidate with any other Person, (G) engage in any other action that detracts from whether the separate legal identity of the Issuer will be respected, including (1) holding itse lf out as or permitting itself to be held out as being liable for the debts of any other Person or (2) acting other than in its name and through its

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duly authorized officers or agents, (H) create, incur, assume, or in any manner become liable in respect of any indebtedness other than the Notes, expenses associated with the Closing Date, trade payables and expense accruals incurred in the ordinary course of business in an amount less than $12,300 at any one time outstanding and which are incidental to its permitted activities, and as provided in or under the Transaction Documents, (I) sponsor or contribute, or contract to or incur any other obligation to contribute to any Pension Plans, or (J) enter into or become party to any agreements or instruments other than the Transaction Documents or any documents or instruments executed pursuant thereto and in connection therewith.  So long as any Notes remain Outsta nding or any other amounts are owed under the Transaction Documents, the Issuer shall not amend its organizational documents without the prior written consent of the Control Party and prior written notice to the Trustee.  The Issuer shall not make any investment in any Person through the direct or indirect holding of securities or otherwise other than in Eligible Investments.  The Issuer shall not declare or pay any dividends, except out of funds released to it under Section 13.03.  The Issuer will not have any of its indebtedness guaranteed by the Originator or any Affiliate of the Originator.  Furthermore, the Issuer 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 the Originator and the Issuer will not engage in any transactions with the Originator, except as expressly contemplated by the Transaction Documents and on an arm’s-length basis.  The Issuer will not hold the Origina tor out to third parties as other than an entity with assets and liabilities distinct from the Issuer.  The Issuer will cause any financial statements consolidated with those of the Originator to state that the Issuer is a separate corporate entity with its own separate creditors who, in any liquidation of the Issuer, will be entitled to be satisfied out of the Issuer’s assets prior to any value in the Issuer becoming available to the Issuer’s equity holders.  The Issuer will not act in any other matter that could foreseeably mislead others with respect to the Issuer’s separate identity.  Without the prior written consent of the Control Party, the Issuer will not, nor will it permit or allow others to, amend, modify, terminate or waive any provision of any Contract Assets, except to the extent otherwise expressly permissible under the Transaction Documents.  Notwithstanding the foregoing, the Servicer may, without the prior written consent of the Cont rol Party, waive any assumption fees, late payment charges, charges for checks returned for insufficient funds, or other fees which may be collected in the ordinary course of servicing the Contracts.  The Issuer shall take such actions as the Trustee (at the direction of the Control Party) shall request to enforce the Issuer’s rights under the Contracts, and, at any time during which a Default shall have occurred and be continuing, shall take such actions as are necessary to enable the Trustee (at the direction of the Control Party) to exercise such rights in the Trustee’s own name.  On or before June 15 of each year, so long as any of the Notes are Outstanding, the Issuer shall furnish to the Trustee and each Noteholder, an Officer’s Certificate confirming that the Issuer is in compliance with its obligations under this Section 12.02(i).

(j)           Directors.  The Issuer agrees that at all times, at least one (1) of the directors of the Issuer will be professional directors that are not, and have not been, a director, shareholder, officer or employee of any direct or ultimate parent or Affiliate of the Originator; provided that an independent director or independent officer may serve in similar capacities for other “special purpose entities” formed by the Originator and its Affiliates.

(k)           Treatment for Tax Purposes.  The Issuer shall treat the Notes as indebtedness of the Issuer and the Collateral as assets owned by the Issuer for purposes of all federal, state and local income taxes, unless and until otherwise required by an applicable taxing authority.

(l)           Information Regarding the Issuer.  The Issuer shall, on the written request of the Trustee or the Control Party, on reasonable notice, furnish to the Trustee and the Noteholders the books and records of the Issuer maintained pursuant to its limited liability company agreement and any and all other information maintained or held by the Issuer regarding the Issuer or the Collateral.

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(m)           Preservation of the Contract Assets.  The Issuer shall not assign, sell, pledge, or exchange, or in any way encumber or permit the encumbrance of, or otherwise dispose of, the Contract Assets except as expressly permitted under the Transaction Documents to which it is a party.

(n)           Enforcement of Transaction Documents.  Upon request, the Issuer will cooperate with the taking of all actions necessary, and the diligent pursuit of all remedies available to it, in all cases to the extent commercially reasonable, to allow the Control Party and the Trustee in the name of the Issuer to enforce all obligations of the Originator and the Servicer owing to the Issuer under the Transaction Documents to which such Persons are a party and to secure its rights thereunder.

(o)           Issuer May Not Merge, etc.  The Issuer shall not merge with or into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person.

(p)           [Reserved.]

(q)           Use of Proceeds.  The proceeds from the sale of the Notes may be used by the Issuer solely to pay to or on behalf of the applicable assignor, the Purchase Price owed to it in accordance with the Assignment Agreement for the purchase of Contract Assets, and to pay expenses owed to the Noteholders, the Trustee, the Custodian, the Servicer and the Back-up Servicer related thereto or otherwise associated with the issuance of the Notes.  None of the transactions contemplated in this Indenture (including the use of the proceeds from the sale of the Notes) will result in a violation of Section 7 of the Securities and Ex change Act of 1934, as amended, or any regulations issued pursuant thereto, including Regulations T, U and X of the Board of Governors of the Federal Reserve System.  The Issuer does not own or intend to, and none of the proceeds from the Notes will be used to, carry or purchase any margin securities originally issued by it or any “margin stock” within the meaning of said Regulation U.

(r)           Indemnification.  The Issuer shall indemnify and hold harmless the Noteholders from and against any loss, liability, expense, damage or injury sustained or suffered by them by reason of any acts, omissions or alleged acts or omissions (i) by the Issuer in the performance of its obligations under the Transaction Documents (including any violation of any applicable laws by the Issuer as a result of the transactions contemplated by this Indenture) to which it is a party, or (ii) arising out of the activities of any of them with respect to the Collateral, includi ng enforcement of rights and remedies against the Issuer under the Transaction Documents to which it is a party and any judgment, award, settlement, reasonable attorneys’ fees and other expenses reasonably incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided that the Issuer shall not indemnify the Noteholders if such loss, liability, expense, damage or injury is due to such Person’s gross negligence, willful misconduct, willful misfeasance or bad faith in the performance of its rights or duties hereunder. Any indemnification pursuant to this Section shall only be payable, subject to the priority of payments in Section 13.03, from the assets of the Issuer released from the Collateral except as otherwise expressly provided in the Transaction Documents.  The provisions of this indemnity shall survive the termination of this Indenture.

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(s)           Taxes.  The Issuer shall pay and discharge all taxes and governmental charges upon it or against any of its properties or assets or its income prior to the date after which penalties attach for failure to pay, except (a) to the extent that the Issuer shall be contesting in good faith in appropriate proceedings its obligation to pay such taxes or charges, and adequate reserves having been set aside for the payment thereof and no Lien has been created on any of its assets in connection therewith, or (b) with respect to such taxes and charges which are not material in either nature or amount such that any failure to pay or discharge them, and any resulting penalties, either in any one instance or in the aggregate, would not materially and adversely affect the financial condition, operations, activities or prospects of the Issuer or the interests of each Noteholder under this Indenture, a Note or any other Transaction Document, and no Lien has been created on any of the Issuer’s assets in connection therewith.

(t)           No Adverse Transactions.  The Issuer shall not enter into any transaction which adversely affects the Collateral or any Secured Party’s rights under this Indenture, a Note or any other Transaction Document.

(u)           Transactions by Issuer.  None of the Noteholders shall have any obligation to authorize the Issuer to, and the Issuer shall not (without the prior written consent of the Majority Holders), enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Person (including, without limitation any Affiliate, any shareholder, director, manager, officer or employee (or any relative thereof) of the Issuer or any such Affiliate) unless such transaction is (a) expressly permitted under this Indenture or any other Transaction Document, (b) in the ordinary course of conducting the Issuer’s permitted activities and (c) upon fair and reasonable terms no less favorable to the Issuer than it would obtain in a comparable arm’s-length transaction.

(v)           Further Limitations on Actions.  The Issuer shall not do any of the following without the consent of the Control Party:  (i) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of the Issuer’s membership interests, except in connection with employment or similar agreements with officers and directors of the Issuer, or (ii) make any change in the Issuer’s capital structure (except for permitted redemptions or prepayments of the Notes hereunder), or (iii) make any material change in any of its objectives, purposes or operations.

(w)           Rule 144A Information.With respect to the Holder of any Note, the Issuer shall promptly furnish or cause to be furnished to such Holder or to a prospective purchaser of such Note designated by such Holder, as the case may be, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act (“Rule 144A Information” ) in order to permit compliance by such Holder with Rule 144A in connection with the resale of such Note by such Holder; provided, however, that the Issuer shall not be required to furnish Rule 144A Information in connection with any request made on or after the date which is three years from the later of (a) the date such Note (or any predecessor Note) was acquired from the Issuer or (b) the date such Note (or any predecessor Note) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 under the Securities Act; and

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provided, further, that the Issuer shall not be required to furnish such information at any time to a prospective purchaser located outside the United States who is not a U.S. Person.

ARTICLE XIII

ACCOUNTS AND ACCOUNTINGS

Section 13.01                                Collection of Money. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and othe r property payable to or receivable by the Trustee pursuant to this Indenture.  The Trustee shall, upon request from the Servicer, provide the Servicer with sufficient information regarding the amount of collections with respect to the Contract Assets and the other Collateral received by the Trustee in any accounts held in the name of the Trustee to permit the Servicer to perform its duties under the Servicing Agreement.  The Trustee shall hold all such money and property so received by it as part of the Collateral and shall apply it as provided in this Indenture.  If any Contract becomes a Defaulted Contract, the Trustee, upon the request of the Issuer or the Servicer, may, and upon the request of the Control Party shall, take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings.  Any such action shall be without prejudice to any right to deem a Contract a “Defaulted Contra ct” for purposes of the Transaction Documents and to claim a Default or Event of Default under this Indenture and to proceed thereafter as provided in Article VI.

Section 13.02                                Establishment of Trust Accounts.  i) Prior to the Closing Date, the Issuer established, and as of the Closing Date the Issuer maintains, with the Trustee (i) a segregated, trust account (the “Reserve Account”) for the deposit and retention of amounts required to be maintained therein and (ii) a segregated, trust account (the “Collection Account”) for the receipt and/or retention (as applicable) of (A) Collections, (B) Servicer Advances, (C) any interest or other earnings earned on all or part of the funds in any of the Collection Account or on any other Collateral and any other amounts, if any, remitted by the Issuer pursuant to Section 13.02(d), (D) amounts received in accordance with Section 11.02(b) in connection with a redemption of Outstanding Notes in accordance with Article XI, (E) amounts transferred from the Reserve Account in accordance with this Indenture and (F) amounts transferred from the Lockbox Account in accordance with the Servicing Agreement, (iii) a segregated trust account (the “Prefunding Account”) for the deposit and retention of amounts required to be maintained therein and (iv) a segregated trust account (the “Capitalized Interest Account”) for the deposit and retention of amounts required to be maintained therein. The Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account are collectively referred to as the “Trust Accounts.”

(b)           The Trust Accounts shall be in the name of the Trustee on behalf of the Noteholders at the Corporate Trust Office, which shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.  Funds in each Trust Account shall not be commingled with any other monies.  The Trustee shall ensure that the Trust Accounts are at all times Eligible Accounts.  All payments to be made from time to time by the Issuer to the Noteholders and other Persons out of funds in any Trust Account pursuant to this Indenture shall be made by the Trustee or the Pay ing Agent.  All monies deposited from time to time in the Trust Accounts

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pursuant to this Indenture shall be held by the Trustee as part of the Collateral as herein provided.

(c)           Upon direction of the Servicer, the Trustee shall invest the funds in or credited to any or all of the Trust Accounts in Eligible Investments.  The direction of the Servicer shall specify the Eligible Investments in which the Trustee shall invest, shall state that the same are Eligible Investments and shall further specify the percentage of funds to be invested in each Eligible Investment.  No such Eligible Investment shall mature later than the Business Day preceding the next following Payment Date.  In the absence of direction of the Servicer, the Trustee shall invest funds in the Trust Accounts in Eligible Investments described in clause (g) of the definition thereof.  Eligible Investments for funds in or credited to th e Trust Accounts shall be made in the name of the Trustee for the benefit of the Secured Parties.

(d)           Any proceeds, payments, income or other gain from investments in Eligible Investments made in respect of funds in or credited to the Trust Accounts, as outlined in (c) above, shall be credited to the respective Trust Account from which such funds were derived.  The Trustee shall not be liable for any loss incurred on any funds invested in Eligible Investments pursuant to the provisions of this Section (other than losses from nonpayment of investments in obligations of U.S. Bank National Association issued in its individual capacity).  In no event shall the Trustee be liable for the selection of investments or for losses incurred as a result of the liquidation of any investment prior to its Stated Maturity Date or for the failure of any approp riate Person to provide timely written investment direction.

(e)           Each party hereto agrees that each of the Trust Accounts constitutes a “securities account” within the meaning of Article 8 of the UCC and in such capacity U.S. Bank National Association shall be acting as a “securities intermediary” within the meaning of 8-102 of the UCC and that, regardless of any provision in any other agreement, for purposes of the UCC, the State of New York shall be deemed to be the “securities intermediary’s jurisdiction” under Section 8-110 of the UCC.  The Trustee shall be the “entitlement holder” within the meaning of Section 8-102(a)(7) of the UCC with respect to the Trust Accounts.  In further ance of the foregoing, U.S. Bank National Association, acting as a “securities intermediary,” shall comply with “entitlement orders” within the meaning of Section 8-102(a)(8) of the UCC originated by the Trustee with respect to the Trust Accounts, without further consent by the Issuer.  Each item of property (whether investment property, financial asset, security, instrument or cash) credited to each Trust Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.  All securities or other property underlying any financial assets credited to each Trust Account shall be registered in the name of the Trustee or indorsed to the Trustee or in blank, and in no case will any financial asset credited to any Trust Account be registered in the name of the Issuer, payable to the order of the Issuer or specially indorsed to the Issuer except to the extent the foregoing have been specially indorsed to the Trustee or in blank. Any Eligible Investment consisting of “certificated securities,” as defined in the applicable UCC will be evidenced directly or indirectly by physical certificates and each such certificated security (i) will be delivered and held in its direct physical possession by the Securities Intermediary in the State of Minnesota and (ii) (x) is registered in the name of the Securities Intermediary or (y) has been appropriately assigned thereon, or is accompanied by a bond power and/or assignment appropriately executed, in blank or to the Securities Intermediary, and is accompanied by any other documents required by the documents governing such security to effect the transfer of the registration thereof to the Securities Intermediary.  The Trust Accounts shall be under the sole dominion and control (as defined in Section 8-106 of the UCC) of the Trustee, and the Issuer shall have no right to clos e, make withdrawals from, or give

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disbursement directions with respect to, or receive distributions from, (A) the Collection Account or the Reserve Account, except in accordance with Section 13.03 and (B) with respect to the Prefunding Account and Capitalized Interest Account, except in accordance with Sections 13.06 and 13.07, respectively.

(f)           In the event that U.S. Bank National Association, as securities intermediary, has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Trust Accounts or any security entitlement credited thereto, it hereby agrees that such security interest shall be subordinate to the security interest created by this Indenture and that the Trustee’s rights to the funds on deposit therein shall be subject to Section 13.03.  The financial assets credited to, and other items deposited to the Trust Accounts will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any person other than as created pursuant to this Indenture.

Section 13.03                                Collection Account.  ii) Except as otherwise expressly provided herein, all amounts received by the Issuer other than (i) proceeds of the sale of the applicable Notes to the Initial Class A Purchaser or any Initial Class B Purchaser, (ii) the Initial Reserve Deposit deposited in the Reserve Account, (iii) amounts deposited in the Prefunding Account or Capitalized Interest Account or (iv) amounts erroneously credited to the Issuer for which the Control Party has provided its prior consent to the application thereof, shall be deposited in the Collection Account until applied, together with funds from the Reserve Account in accordance with this Section 13.03.

(b)           By no later than 1:00 p.m. (New York time) on each Payment Date, after making all transfers and deposits to the Collection Account pursuant to Section 13.03, Section 13.04(b)  and Section 13.05, the Trustee shall withdraw from the Collection Account all Available Funds with respect to the related Collection Period and shall disburse such Available Funds in accordance with the related Monthly Servicing Report; provided that, if the Trustee shall not have received the Monthly Servicing Report, (x) the Trustee shall withdraw from the Collection Account amounts verified in writing by the Servicer as needed to pay first, all accrued and unpaid f ees and properly invoiced costs and expenses of each of the Originator, Servicer, Back-up Servicer, Trustee and Custodian and second, amounts in accordance with the priorities set forth in Section 13.03(c)(v) through 13.03(c)(x), (y) the Trustee shall distribute such funds in order to make such payments to the appropriate Persons and (z) upon subsequent receipt of the Monthly Servicing Report, or such other information as may be required by the Trustee, the Trustee shall pay each such other amounts set forth below, all as set forth in the Monthly Servicing Report or in such other information delivered to the Trustee; provided further that amounts deposited in the C ollection Account in accordance with Section 11.02(b) shall be disbursed in accordance with Section 11.04 and not this Section 13.03;

(c)           On each Payment Date, whether or not an Event of Default has occurred and is continuing and the maturity of the Notes has been accelerated, the Trustee shall make the following payments from the Available Funds then on deposit in the Collection Account (after required deposits therein from the Reserve Account) in the following order of priority (to the extent funds are available therefor):

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(i)           to the Servicer, any unreimbursed Servicer Advances;

(ii)           to the Servicer, the Servicer Fee (including any accrued and unpaid amounts owing to a predecessor Servicer) then due to such person, together with any accrued and unpaid Servicer Fees owed to such person from prior Collection Periods;

(iii)           (a) to the Servicer, any Servicing Charges and (b) to the Servicer (including any accrued and unpaid amounts owing to a predecessor Servicer), any unreimbursed Collection Costs incurred by such person;

(iv)           to the Trustee, the Custodian and the Back-up Servicer, the Trustee Fees and out-of-pocket expenses, Custodian Fees and out-of-pocket expenses and Back-up Servicer Fees and out-of-pocket expenses (which includes out-of-pocket expenses due to any successor Servicer)  then due, together with any unpaid Trustee Fees and out-of-pocket expenses, Custodian Fees and out-of-pocket expenses and Back-up Servicer Fees and out-of-pocket expenses from prior Collection Periods (subject to certain limitations set forth herein), and any unpaid Transition Costs in an amount not to exceed in the aggregate $150,000;

(v)           to the Class A Noteholders, pro rata, the total amount of Note Interest due and payable to Holders of such Class of Notes;

(vi)           to the Class B-1 Noteholders, pro rata, the total amount of Note Interest due and payable to Holders of such Class of Notes;

(vii)           to the Class B-2 Noteholders, pro rata, the total amount of Note Interest due and payable to Holders of such Class of Notes;

(viii)           so long as no Event of Default has occurred and is continuing, to the Prefunding Account the amount that otherwise would have been made to Class A Noteholders in reduction of principal until the Outstanding Note Balance of the Class A Notes has been reduced to zero; otherwise, to the Class A Noteholders in reduction of principal until the Outstanding Note Balance of the Class A Notes has been reduced to zero;

(ix)           so long as no Event of Default has occurred and is continuing, to the Prefunding Account the amount that otherwise would have been made to Class B-1 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-1 Notes has been reduced to zero; otherwise, to the Class B-1 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-1 Notes has been reduced to zero;

(x)           so long as no Event of Default has occurred and is continuing, to the Prefunding Account the amount that otherwise would have been made to Class B-2 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-2 Notes has been reduced to zero; otherwise, to the Class B-2 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-2 Notes has been reduced to zero;

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(xi)           to the Trustee, Securities Intermediary, Custodian and Back-up Servicer, any indemnification payments owed by the Issuer; and

(xii)           to the Issuer, any remaining Available Funds; provided, that, if there is no principal or Note Interest outstanding on the Class A, Class B-1 or Class B-2 Notes, such funds to be held in trust by the Trustee, in a segregated, trust account in the name of the Trustee on behalf of the Issuer at the Corporate Trust Office, which account shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Issuer.

(d)           On the related Redemption Date, the Trustee shall withdraw the sum of the applicable Redemption Price from the Collection Account, and the Paying Agent shall remit the Redemption Price to the applicable Noteholders in accordance with Section 11.03.

Section 13.04                                Reserve Account.  (a) Upon each date on which the following three payments are made:  $10,000,000 by the Initial Class A Purchaser for the Class A Notes, $375,000 by the Initial Class B-1 Purchaser for the Class B-1 Notes and $375,000 b y the Initial Class B-2 Purchaser for the Class B-2 Notes, in accordance with Section 3(c) of the Note Purchase Agreement, $375,000 of the cash proceeds resulting from the issuance of the Class B-1 Notes and $375,000 of the cash proceeds resulting from the issuance of the Class B-2 Notes will be deposited into the Reserve Account.

(b)           If on any Payment Date, (i) amounts on deposit in the Collection Account are insufficient to reduce the aggregate Outstanding Note Balance to an amount lower than or equal to the Discounted Pool Balance, plus amounts then on deposit in the Prefunding Account, after applying clauses (i) through (x) of Section 13.03(c) or (ii) amounts on deposit in the Reserve Account are greater than or equal to the aggregate Outstanding Note Balance, the Trustee will withdraw, to the extent of funds on deposit in the Reserve Account, in the case of (i), the amount of such insufficiency or, in the case of (ii), all funds and deposit such amounts into the Collection Account to be used as Available Funds; provided, that all amounts so withdrawn shall be applied in reduction of principal until the Outstanding Note Balance of the Class A Notes has been reduced to zero, and then in reduction of principal until the Outstanding Note Balance of the Class B-1 Notes has been reduced to zero, and then in reduction of principal until the Outstanding Note Balance of the Class B-2 Notes has been reduced to zero.  Upon the occurrence of any Event of Default that results in acceleration of the Notes and is not waived or cured on or before the next Payment Date, all funds maintained in the Reserve Account shall be transferred to the Collection Account by the Trustee to be used as Available Funds in accordance with Section 13.03(c).  On the Stated Maturity Date, and at the option of the Issuer in connection with the redemption pursuant to Article XI, any remaining funds on deposit in the Reserve Account shall be deposited in the Collection Account to be used as Available Funds a nd distributed in accordance with Section 13.03(c).

Section 13.05                                [Reserved]

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Section 13.06                                Prefunding Account.  Upon each date on which the following three payments are made:  $10,000,000 by the Initial Class A Purchaser for the Class A Notes, $375,000 by the Initial Class B-1 Purchaser for the Class B-1 Notes and $375,000 by the Initial Class B-2 Purchaser for the Class B-2 Notes, in accordance with Section 3(c) of the Note Purchase Agreement, $4,0 45,913.38 of the cash proceeds resulting from the issuance of the Class A Notes will be deposited to the Prefunding Account. In addition, any amounts that otherwise would have been made to any Noteholders in reduction of their respective principal shall be deposited into the Prefunding Account in accordance with Sections 13.03(c)(viii), 13.03(c)(ix) and 13.03(c)(x). The Issuer is authorized to use amounts in the Prefunding Account to acquire from time to time Purchased Contracts from the Originator and the Originator’s interest in the related Equipment pursuant to the Purchase and Contribution Agreement, provided that (1) such Contracts are Eligible Contracts as of the related Acquisition Date (except as permitted pursuant to Section 4.04(a)), (2) no Event of Default has occurred and is continuing, (3) the Overconcentration Test would be satisfied immediately after the Issuer acquires the proposed Purchased Contracts on the related Acquisition Date, (4) the Outstanding Note Balance of the Class A Notes is equal to or lower than the Discounted Pool Balance and (5) the aggregate number of Contract Files to be reviewed by the Custodian relating to such proposed Contracts to be acquired at any time shall not exceed five hundred (500) without the consent of the Custodian and the Class A Noteholders. Upon the occurrence of any Event of Default that results in acceleration of the Notes and is not waived or cured on or before the next Payment Date, all amounts on deposit in the Prefunding Account will be withdrawn by the Trustee, to the extent of funds on deposit therein, and distributed, to the Class A Noteholders, the Class B-1 Noteholders and the Class B-2 Noteholders, pro rata based upon their respective Outstanding Note Balances, in reduction of principal, and without regard to the priority of payments set forth in Section 13.03(c).

Section 13.07                                Capitalized Interest Account.  Upon each date on which the following three payments are made:  $10,000,000 by the Initial Class A Purchaser for the Class A Notes, $375,000 by the Initial Class B-1 Purchaser for the Class B-1 Notes and $375,000 by the Initial Class B-2 Purchaser for the Class B-2 Notes, $193,449.82 of the cash proceeds resultin g from the issuance of the Class A Notes will be deposited to the Capitalized Interest Account.  On each Payment Date, amounts from the Capitalized Interest Account shall be deposited into the Collection Account by the Trustee in an amount equal to accrued interest at 6.75% per annum (calculated on the basis of the actual number of days elapsed in a three-hundred-sixty (360)-day year) on the amount in the Prefunding Account on the Closing Date (for the calculation of capitalized interest due on the first Payment Date) and on the immediately preceding Payment Date (for the calculation of capitalized interest due on each Payment Date other than the initial Payment Date). Upon the occurrence of any Event of Default that results in acceleration of the Notes and is not waived or cured on or before the next Payment Date, all amounts on deposit in the Capitalized Interest Account will be withdrawn by the Trustee, to the extent of funds on deposit therein, and distributed to the Class A Noteholders, the Cl ass B-1 Noteholders and the Class B-2 Noteholders, pro rata based upon their respective Outstanding Note Balances, in reduction of principal, and without regard to the priority of payments set forth in Section 13.03(c).

Section 13.08                                Reports to the Noteholders. (a) On each Payment Date, the Trustee will make available to each Noteholder the Monthly Servicing Report.

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    The Trustee will make the Monthly Servicing Report available to the Noteholders, via the Trustee’s Internet website, and, with the consent or at the direction of the Issuer, such other information regarding the Notes and/or the Contracts as the Trustee may have in its possession, but only with the use of a password provided by the Trustee or its agent to such Person.  The Trustee will make no representation or warranties as to the accuracy or completeness of such documents and will assume no responsibility for the contents thereof.

The Trustee’s Internet website initially shall be located at www.usbank.com/abs or at such other address as shall be specified by the Trustee from time to time in writing to the Noteholders.  In connection with providing access to the Trustee’s Internet website, the Trustee may require registration and the acceptance of a disclaimer.  The Trustee shall not be liable for errors in the dissemination of information in accordance with this Indenture.

Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles.

(b)           At least annually, or as otherwise required by law, the Servicer shall prepare or cause to be prepared, and the Trustee shall distribute to the Noteholders, any 1099 form, or other tax information or statements as are required by applicable tax law.

Section 13.09                                Monthly Servicing Reports.  No later than 12:00 p.m. (New York time) on each Reporting Date, the Servicer shall deliver the Monthly Servicing Report to each Initial Purchaser, the Trustee and the Back-up Servicer.  No later than 12:00 noon (New York time) on the following Verification Date, the Back-up Servicer shall perfor m its obligations and duties set forth in Section 4.05 of the Servicing Agreement and shall notify the Issuer andthe Trustee of any discrepancies therein or the need for any additional information to complete such verification, and the Servicer shall promptly re-issue a revised Monthly Servicing Report addressing such discrepancies and such information request which revised Monthly Servicing Report shall supersede the prior report for purposes of making the distributions described in Section 13.03. The Monthly Servicing Report shall include the information specified in the form of Monthly Servicing Report attached to the Servicing Agreement, as such form may be modified from time to time with the consent of the Servicer, the Back-up Servicer and the Control Party.

ARTICLE XIV

PROVISIONS OF GENERAL APPLICATION

Section 14.01                                General Provisions.  All of the provisions of this Article shall apply to this Indenture.

Section 14.02                                Acts of Noteholders.

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or

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instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section.

(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)           The ownership of Notes shall be proved by the Note Register.

(d)           Any request, demand, authorization, direction, notice, consent, waiver or other action by the Noteholder of any Note shall bind the Noteholder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

Section 14.03                                Notices.  Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or the Control Party or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with any party hereto shall be sufficient for every purpose hereunder if in writing and telecopied (with written confirmatio n of receipt), mailed by registered mail, overnight bonded courier or personally delivered, and addressed to the appropriate address below (or such other address as may be provided to the other parties in writing from time to time):

(a)           to the Trustee at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, Minnesota 55107, telecopier number 651-495-8090, Attention:  LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, Series 2010-4;

(b)           to the Custodian at 1133 Rankin Street, EP-MN-TMZD, St. Paul, MN 55116 telecopy number:  651-695-6102, Attention:  LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, Series 2010-4;

(c)           to the Servicer at 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman;

(d)           to the Issuer at 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman;

(e)           to the Originator at 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman; or

(f)           to the Back-up Servicer at 1310 Madrid Street, Suite 103, Marshall, MN 56258, telecopy number:  866-806-0775, Attention: Bradley Winkelman, Re:  LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, Series 2010-4;

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Section 14.04                                Notices to Noteholders; Waiver.  Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and telecopied (with written confirmation of receipt from each addressee), mailed by registered mail, overnight bonded courier or delivered personally to each Noteholder affected by such event, at i ts address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.  In any case in which notice to Noteholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice which is mailed in the manner herein provided shall conclusively be presumed to have been duly given.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Noteholders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to the Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.

Section 14.05                                Successors and Assigns.All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not.

Section 14.06                                Severability; No Waiver.  In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  No failure on the part of the Trustee, the Control Party or any Noteholder 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 14.07                                Benefits of Indenture Limited to Parties and Express Third Party Beneficiaries.Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, the Noteholders and any of their successors hereunder, a ny benefit or any legal or equitable right, remedy or claim under this Indenture or under the Notes.  Each of the Noteholders are express third party beneficiaries of this Indenture each entitled to enforce the provisions hereof as if a party hereto.

Section 14.08                                Legal Holidays.In any case in which the date of any Payment Date, or the Stated Maturity Date of any Note shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment of principal or interest need not be m ade on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of any such Stated Maturity Date or Payment Date.

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Section 14.09                                Governing Law; Waiver of Jury Trial; Consent to Jurisdiction.

(a)           This Indenture and each Note shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements made and to be performed therein, except to the extent that the perfection or effect of perfection of the security interests granted hereunder are governed by the laws of a jurisdiction other than the State of New York.  Section 5-1401 and Section 5-1402 of the New York General Obligations Law shall be applicable.

(b)           The Issuer hereby agrees to the jurisdiction of any federal court located within the State of New York, and waives personal service of any and all process upon it and consents that all such service of process be made by registered mail directed to the Issuer at the address set forth in Section 14.03 hereof and service so made shall be deemed to be completed five (5) days after the same shall have been deposited in the U.S. mails, postage prepaid.  With respect to the foregoing consent to jurisdiction, the Issuer hereby waives any objection based on forumnonconveniens, and any objection to venue of any action instituted hereunder and consents to the granting of such legal or equitable relief as is deemed appropriate by the court.

(c)           The Issuer hereby waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise among the parties hereto or otherwise arising out of, connected with, related to, or incidental to the relationship between them in connection with this Indenture.  Instead, any dispute resolved in court will be resolved in a bench trial without a jury.  Nothing in this Section 14.09 shall affect the right of the Trustee, the Control Party or any Noteholder to serve legal process in any other manner permitted by law or to bring any action or proceeding against the Issuer or its property in the cour ts of any other jurisdiction.

Section 14.10                                Counterparts; Entire Agreement.This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.  Deliv ery by telecopier of an executed counterpart of a signature page to this Indenture shall be as effective as delivery of the original executed counterpart.  This Indenture, together with the exhibits hereto and the other written Transaction Documents referenced herein, sets forth the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings.

Section 14.11                                Notifications.Notwithstanding any provision to the contrary contained in this Indenture, all reports, notices, communications and consents which are required, by the terms of this Indenture, to be delivered by the Noteholders, shall be required to be deli vered to the Trustee in writing.

Section 14.12                                No Petition.  During the term of this Indenture and for one year and one day after payment in full of all obligations of the Issuer under the Transaction Documents, none of the parties hereto or any Affiliate thereof or any Noteholder will file any involuntary petition against the Issuer or otherwise institute, or cooperate with or encourage any other P erson to file or otherwise institute, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or any other proceedings under federal or state bankruptcy or similar law against or concerning the Issuer; provided that if such proceeding shall have commenced, nothing herein shall preclude any Noteholder from filing a proof of claim in any such proceeding.

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Section 14.13                                Assignment.

Notwithstanding anything to the contrary contained herein, this Indenture may not be assigned by the Issuer.

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In Witness Whereof, the Issuer, the Trustee and the Custodian have caused this Indenture to be duly executed by their respective duly authorized officers as of the date and year first above written.

LEAF Funding SPE 1, LLC, as Issuer
By:	/s/
	Name
	Title

U.S. Bank National Assication, as Trustee
By:	/s/
	Name
	Title

U.S. Bank National Assication, as Custodian
By:	/s/
	Name
	Title

SCHEDULE I

CLOSING DATE CONTRACT SCHEDULE

[See attached.]

Sched. I-1

SCHEDULE II

DEFINITIONS ANNEX

[See attached.]

Sched. II-1

SCHEDULE II

TO INDENTURE

DEFINITIONS ANNEX

“Acquisition Date”:  With respect to a Substitute Contract or Purchased Contract, the date on which such Substitute Contract is transferred by LEAF Financial Corporation (as initial Servicer) to the Issuer or the Conveyance Date on which such Purchased Contract is transferred by the Seller to the Issuer.

“Act”:  With respect to any Noteholder, the meaning set forth in Section 14.02 of the Indenture.

“Advance Payment”: With respect to a Contract and a Collection Period, any Scheduled Payment or portion thereof made by or on behalf of an Obligor and received by the Servicer during such Collection Period, which Scheduled Payment or portion thereof does not become due until a subsequent Collection Period.  Prepayments are not “Advance Payments.”

“Affiliate”:  With respect to any specified Person, any other Person, directly or indirectly, controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control,” when used with respect to any specified Person, means the power (a) to vote ten percent (10%) or more of the securities or interests (on a fully diluted basis) having ordinary voting power for the directors, managers or managing partners (or their equivalent) of such Person or (b) 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  220;controlled” have meanings correlative to the foregoing.

“Amendment to Contract Schedule”:  The list of Contracts, including all information set forth in the definition of “Contract Schedule”, amending the Contract Schedule pursuant to any substitution, modification or other acquisition of Contracts in accordance with the terms of the Transaction Documents.

“Assignment Agreement”:  Means each Assignment Agreement delivered pursuant to the Purchase and Contribution Agreement.

 “Authenticating Agent”:  Any entity appointed by the Trustee pursuant to Section 7.14 of the Indenture.

“Available Funds”: With respect to any Payment Date, (a) any payments on the Contracts received during the related Collection Period, (b) proceeds of any Servicer Advances made with respect to such Payment Date for delinquent Scheduled Payments, no later than immediately prior to such Payment Date, (c) all Recoveries, Insurance Proceeds, Residual Receipts and other amounts received with respect to the Contracts or Equipment, (d) payments made by the Originator or the Servicer, as the case may be, to repurchase contracts affected by breaches of representations and warranties regarding the Contracts, or Delinquent Contracts or

Defaulted Contracts and (e) any amounts on deposit in the Reserve Account in accordance with the Indenture.

“Back-up Servicer”:  Means Lyon Financial Services, Inc., d/b/a U.S. Bank Portfolio Services, a Minnesota corporation, acting in the capacity of Back-up Servicer or as successor Servicer; and at such time, if any, that a successor Person shall have become the “Back-up Servicer” pursuant to the applicable provisions of the Servicing Agreement, the term “Back-up Servicer” shall also mean such successor Person.

“Back-up Servicer Default”:  An occurrence of any of the following:

(a)           Any failure on the part of the Back-up Servicer to duly observe or perform any covenants or agreements of the Back-up Servicer set forth in any Transaction Document or if any representation or warranty of the Back-up Servicer set forth in Section 7.01 of the Servicing Agreement or in any other Transaction Document shall prove to be incorrect, in any material respect, which failure or breach continues unremedied for a period of thirty (30) Business Days after the earlier of the date on which the Back-up Servicer becomes aware of such failure or breach or the date on which written notice of such failure or breach, requiring the situation giving rise to such breach or non-conformity to be remedied, shall have been given to the Back-up Servicer by th e Issuer, the Trustee, or the Control Party; or

(b)           Any negligence or willful misconduct of the Back-up Servicer related to the Transaction Documents that results in a material loss or damage to the Issuer, the Originator, the Servicer, the Trustee, any Noteholder or the Collateral; or

(c)           A conviction of the Back-up Servicer or any of its officers of a felony or of any crime involving fraud in the discharge of fiduciary duties or the servicing of assets that could reasonably be expected to have a material adverse effect on the performance of the Back-up Servicer’s duties under the Transaction Documents; or

(d)           The entry of a decree or order for relief by a court having jurisdiction in respect of the Back-up Servicer or a petition shall be filed against the Back-up Servicer in an involuntary case under any federal bankruptcy laws, as now or hereafter in effect, or any other present or future federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the Back-up Servicer or for any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Back-up Servicer and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days; or

(e)           The commencement by the Back-up Servicer of a voluntary case under any federal bankruptcy laws, as now or hereafter in effect, or any other present or future federal or state bankruptcy, insolvency, reorganization or similar law, or the consent by the Back-up Servicer to the appointment of or taking possession by a conservator, receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official in any insolvency, readjustment of debt, marshaling of assets and liabilities, bankruptcy or similar proceedings of or related to the Back-up Servicer or related to a substantial part of its property, or the making by the Back-up Servicer of an assignment for the benefit of creditors, or the failure by the Back-up Servicer

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generally to pay its debts as such debts become due or if the Back-up Servicer shall admit in writing its inability to pay its debts as they become due, or the taking of corporate action by the Back-up Servicer in furtherance of any of the foregoing.

“Back-up Servicer Fee”:  As further described in the Back-up Servicer Fee Schedule, the monthly fee payable on each Payment Date to the Back-up Servicer in consideration for its performance of its duties as Back-up Servicer in an amount equal to the greater of (i) one twelfth (1/12th) of the product of the aggregate Discounted Pool Balance as of the Payment Date occurring immediately prior to the related Collection Period (or, in the case of the Initial Payment Date, the Closing Date) and the Back-up Servicer Fee Rate, and (ii) $2,500.00. The Back-up Servicer Fee shall also include an initial acceptance fee of $7,500.00, which shall be payable on the Closing Date.

“Back-up Servicer Fee Rate”:  18 basis points.

“Back-up Servicer Fee Schedule”:  That certain “Schedule of Fees for Services Rendered as Back-up Servicer for $21,500,000 (Approximate) LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, 2010-4”, dated as of August 27, 2010.

“Bankruptcy Code”: The United States Bankruptcy Code, Title 11 of the United States Code, as amended from time to time, and any successor statute.

“Booked Residual”:  With respect to any Contract on any date of determination, the residual value of the Equipment subject to such Contract, as reflected in LEAF Financial Corporation’s servicing system on the date such Contract was booked on LEAF Financial Corporation’s servicing system.

“Business Day”:  Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in New York City, the city in which the Servicer is located or the city in which the corporate trust office of the Trustee is located are authorized or obligated by law or executive order to be closed.

“Calculation Date”:  Means, unless the context requires otherwise, the close of business on the last day of a Collection Period.

“Capitalized Interest Account”:  The trust account created and maintained pursuant to Section 13.02 of the Indenture; provided, that in no event shall the Capitalized Interest Account be other than an Eligible Account.

“Class”:  With respect to the Notes, the designation of Class A, Class B-1 or Class B-2, with the specific senior or subordinated rights related to such designation as are identified in the Indenture.

“Class A Buyout Notice”:  Has the meaning assigned in Section 6.16 of the Indenture.

“Class A Buyout Price”:  Has the meaning assigned in Section 6.16 of the Indenture.

“Class A Noteholder”:  A Holder of Class A Notes.

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“Class A Notes”:  The Equipment Contract Backed Notes, Series 2010-4, Class A issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $20,000,000.

“Class B Notes”:  Means, collectively, the Class B-1 Notes and the Class B-2 Notes.

“Class B-1 Noteholder”:  A Holder of Class B-1 Notes.

“Class B-1 Notes”:  The Equipment Contract Backed Notes, Series 2010-4, Class B-1 issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $750,000.

“Class B-2 Noteholder”:  A Holder of Class B-2 Notes.

“Class B-2 Notes”:  The Equipment Contract Backed Notes, Series 2010-4, Class B-2 issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $750,000.

“Closing Date”:  August 31, 2010; provided, however, that with respect to Section 3(c)(i) of the Note Purchase Agreement, “Closing Date” shall mean September 2, 2010.

“Code”:  The Internal Revenue Code of 1986, as amended.

“Co-Trustee”:  The meaning set forth in Section 7.12 of the Indenture.

“Collateral”:  The meaning set forth in the Granting Clause of the Indenture.

“Collateral Purchase Notice Date”:  Has the meaning set forth in Section 6.18(c) of the Indenture.

“Collection Account”:  The segregated trust accounts and any related sub-accounts created and maintained pursuant to Section 13.02 of the Indenture; provided that in no event shall the Collection Account be other than an Eligible Account.

“Collection Costs”:  With respect to any Contract and subject to the Servicer’s standard of care set forth in Section 3.02 of the Servicing Agreement, reasonable costs and expenses incurred by the Servicer (including reasonable attorney’s fees and out-of-pocket expenses) and payable to Persons other than Affiliates of the Servicer in connection with the realization, attempted realization or enforcement of rights and remedies upon such Contract and as further described in Section 3.08 of the Servicing Agreement.

“Collection Period”:  With respect to any Payment Date, the period commencing on the first day of the immediately preceding calendar month and ending on the last day of such calendar month; provided that the first Collection Period is the period from the Closing Date until August 31, 2010.

“Collections”:  As of any determination date, the sum of all amounts collected during a Collection Period under or in respect of the Contract Assets, including, without limitation, all

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amounts consisting of Scheduled Payments, Contract Repurchase Prices, Guaranty Amounts, Insurance Proceeds and other Recoveries and Residual Receipts, but excluding any amounts consisting of Security Deposits.

“Contract”:  As of any date of determination, a lease (including the master lease, if applicable), a loan, a leveraged lease loan, conditional sale or similar equipment finance contract conveyed on an Acquisition Date by the Originator to the Issuer pursuant to the Purchase and Contribution Agreement and pledged to the Trustee in accordance with the Transaction Documents and including any substitutions therefor; provided that, from and after the date that such Contract is repurchased, substituted or released from the lien of the Indenture, each in accordance with the requirements of the Transaction Documents, such Contract shall no longer constitute a “Contract”.

“Contract Assets”:  Collectively, as of any date of determination, (a) each Contract that is listed on the Contract Schedule from time to time, (b) all Receivables related thereto, (c) the interest of the Issuer in the Equipment related thereto, (d) the related Contract Files, (e) all other Related Security, and (f) any and all income and proceeds of the foregoing.

“Contract File”:  With respect to each Contract, the following documentation (unless otherwise permitted by the Majority Holders): (a) if the Equipment related to such Contract is Motorized Titled Equipment, (i) a copy of the application for certificate of title showing the Originator or Servicer (or their nominees) as lienholder or secured party or (ii) on and after the date that is 180 days after such Contract was pledged by the Issuer to the Trustee (for the benefit of the Secured Parties), the original copy of the Lien Certificate with respect to such Motorized Titled Equipment, which such Lien Certificate notes the secured party of such Motorized Titled Equipment as being the Originator (or its nominee pursuant to the Lienholder No minee Agreement) or Servicer (or its nominee pursuant to the Lienholder Nominee Agreement); provided, however, that, prior to the occurrence of an Event of Default and the request by the Trustee for the recordation of the Trustee’s lien on such Equipment’s certificate of title, the original Lien Certificate shall not be required to show the Trustee as secured party, (b) the one and only executed original counterpart of such Contract (bearing the original signature of an employee of the Originator, or if the contract was not originated by the Originator, the originator thereof, together with an original or facsimile copy of the signature of the lessee) in the Servicer’s possession, or if the LEAF Parties are not in possession of such original, a machine copy thereof certified by an officer of the Servicer or the Originator that such copy is a true and complete copy thereof; (c) copies of an Insurance Policy, if any, evidence of insuran ce, if any, and any other copies of documents evidencing or related to any Insurance Policy with respect to such Contract; (d) copies of all UCC financing statements required to be filed to perfect the security interest in the related Equipment and the Related Security related thereto (except with respect to a Contract related to Equipment that had an original equipment cost at origination of less than (A) if such Contract is a secured loan or finance lease that provides for a $1 purchase option, $25,000, or (B) if such Contract provides for a “fair market value” purchase option, $50,000); and (e) copies of any additional documents (other than Servicing Documents) that the Servicer keeps on file with respect to such Contract.

“Contract Repurchase Price”:  Means, with respect to any Contract repurchased by the Originator pursuant to the Purchase and Contribution Agreement, repurchased by the Servicer

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pursuant to the Servicing Agreement, or removed from the Collateral by the Issuer pursuant to the Indenture, the sum of (a) the Discounted Contract Balance (computed without giving effect to clauses (b) and (c) of the definition of Discounted Contract Balance and without duplication of amounts) of the related Contract on the date of determination on or immediately preceding the date when the Contract is removed or repurchased, plus (b) any Scheduled Payments with respect to the Contract due on or prior to such date of determination but not received through such date of determination, minus (c) the Discounted Contract Balance of any Contract provided in substitution therefor.

“Contract Schedule”:  The list of Contracts that are the subject of the transactions contemplated by the Transaction Documents, which list shall include (a) those Contracts listed on the Assignment Agreement delivered on the Closing Date and attached to the Indenture as Schedule I plus (b) any Contracts listed on an Amendment to Contract Schedule as a result of the addition of any Substitute Contract or Purchased Contract listed on any Assignment Agreement delivered after the Closing Date, less (c) any Contracts deleted as a result of a repurchase, substitution therefor, or release thereof pursuant to the Transaction Documents.  The Contract Schedule shall include with respect to each Contract:  (A) the LEAF Contract Number; (B) the name of the Obligor; (C) the State of the Obligor’s billing address; (D) the Discounted Contract Balance as of the related Cut-Off Date; (E) whether such Contract is a Delinquent Contract; (F) the remaining term; and (G) the original cost of the Equipment (but the Custodian need not verify such original cost).  The Contract Schedule shall also include with respect to each Substitute Contract:  (A) the LEAF Contract Number of the Contract being replaced and (B) the Discounted Contract Balance of the Contract being replaced as of the related Cut-Off Date.  The Contract Schedule kept by the Trustee at its Corporate Trust Office shall be the definitive Contract Schedule for all purposes of the Indenture, absent manifest error (in which case the Contract Schedule shall be all schedules attached to any Officer’s Certificate delivered by the Servicer or the Issuer, to the Trustee relating to the Contract Schedule).

“Control Party”:  Means (a) so long as any Class A Notes are outstanding, the Class A Noteholders representing 66-2/3% of the Outstanding Note Balance of the Class A Notes, (b) after the Class A Notes have been paid in full and for so long as any Class B-1 Notes remain outstanding, the Class B-1 Noteholders representing 66-2/3% of the Outstanding Note Balance of the Class B-1 Notes or (c) after the Class A Notes and the Class B-1 Notes have been paid in full and for so long as any Class B-2 Notes remain outstanding, the Class B-2 Noteholders representing 66-2/3% of the Outstanding Note Balance of the Class B-2 Notes.

“Conveyance Date”:Has the meaning set forth in Section 2.1(e) of the Purchase and Contribution Agreement.

“Conveyed Assets”:Has the meaning set forth in Section 2.1(a) of the Purchase and Contribution Agreement.

“Corporate Trust Office”:  The designated corporate trust office of the Trustee located, at the time of the execution of the Indenture at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, MN 55107, Attention: LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, or at such other address as the Trustee may designate from time to time by notice to the parties to the

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Transaction Documents, or the principal corporate trust office of any permitted successor Trustee under the Indenture.

“Credit and Collection Policies”:  Means the written collection and servicing policies of the Servicer, as in effect on the Closing Date, copies of which were delivered to the Back-up Servicer prior to the Closing Date, as amended with prior written consent of the Control Party (in the case of material amendments) from time to time in accordance with Section 3.01(c)(ix) of the Servicing Agreement; provided that, if LEAF Financial Corporation is not the Servicer, the term “Credit and Collection Policies” shall mean the written collection and servicing procedures of such successor Servicer as provided to the Trustee at the time such Person becomes successor Servicer.

“Cumulative Net Loss Trigger Event”:  Has the meaning set forth in Section 6.01(a)(ix) of the Servicing Agreement.

“Cumulative Net Loss Percentage”:  Means, with respect to any Collection Period, the percentage equivalent of a fraction, (i) the numerator of which is the excess of (a) the Discounted Contract Balance (immediately prior to becoming a Defaulted Contract) of all Contracts that became Defaulted Contracts during such Collection Period and all prior Collection Periods and remain Defaulted Contracts over (b) the aggregate amount of all Recoveries collected by the Servicer with respect to such Defaulted Contracts and (ii) the denominator of which is the sum of the Discounted Contract Balances of the Purchased Contracts as of their respective Cut-Off Dates.

“Custodian”:  Initially means U.S. Bank National Association, or such other party as is appointed in accordance with Article VIII of the Indenture to act as custodian to receive, inventory and maintain possession of the Contract Files in accordance with the requirements of the Indenture.

“Custodian Certificate”:  The certificate, substantially in the form of Exhibit C attached to the Indenture, delivered by the Custodian to the Trustee and the Issuer pursuant to Section 4.03 of the Indenture.

“Custodian Fee”:  Means the monthly fee payable on each Payment Date to the Custodian in an amount equal to the greater of (i) $60.00and (ii) the actual per file fees, based on the Custodian’s schedule of fees then in effect, incurred during the related Collection Period with respect to activities involving the Contract Assets during such Collection Period, as further described in the Custodian Fee Schedule.

“Custodian Fee Schedule”:  That certain “Schedule of Fees for Services Rendered as Custodian for $21,500,000 (Approximate) LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, 2010-4”, dated as of August 27, 2010.

“Cut-Off Date”:  Means, with respect to each Substitute Contract and Purchased Contract, the close of business on the last day of the calendar month immediately preceding the calendar month in which such Substitute Contract or Purchased Contract is pledged to the Trustee.

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“Default”:  Any occurrence or circumstance which with notice or the lapse of time or both would become an Event of Default, unless any such particular occurrence or circumstance is waived as a “Default” in writing in accordance with the provisions of the Indenture; provided that, unless and until any such waiver is given, a “Default” shall be deemed to exist for all purposes under the Transaction Documents, even if the occurrence or circumstance giving rise to such Default is no longer continuing or has been cured.

“Default Notice Date”:  Has the meaning set forth in Section 6.16 of the Indenture.

“Defaulted Contract”:  Any Contract:  (a) as to which an Insolvency Event has occurred with respect to the Obligor where the related lease has been rejected in the Obligor’s bankruptcy proceedings, (b) all or any portion of which has been or should have been, in accordance with the Credit and Collection Policies, written off on the Servicer's books as uncollectible, or (c) as to which more than 10% of a Scheduled Payment remains unpaid for 181 days or more from the original due date for such payment, without regard to any Servicer Advance, provided that a Contract shall no longer be a Defaulted Contract for any purpose of the Transaction Documents, upon the cure of the condition or event which caused it to be a Defaulted Contract.

“Deferred Interest”:  Has the meaning set forth in the definition of Note Current Interest.

“Delinquent Contract”:  Any Contract (a) as to which more than 10% of a Scheduled Payment was not received by the Servicer within ninety-one (91) days after the original due date for such Scheduled Payment, without regard to any Servicer Advance and (b) that is not a Defaulted Contract.

“Delinquency Ratio”: Means, with respect to any Determination Date, the quotient, expressed as a percentage, of (a) the aggregate Discounted Contract Balance of all Delinquent Contracts determined as of the end of the related Collection Period, divided by (b) the aggregate Discounted Contract Balance of all Contracts in the trust estate as of the last day of the related Collection Period.

“Determination Date”:  With respect to any Payment Date, a date which is the sixteenth day of the calendar month in which such Payment Date occurs, or if such day is not a Business Day, the immediately preceding Business Day.

“Discount Rate”:  6.25% per annum.

“Discounted Contract Balance”: Means, with respect to any Contract, on any date of determination, the lesser of (x) the original equipment cost at origination of the Equipment relating to such Contract and (y) the sum of the present value of all of the remaining payments becoming due under such Contract after the end of the prior Collection Period, discounted monthly at the Discount Rate assuming (a) Scheduled Payments are due on the last day of each Collection Period in which a Scheduled Payment is due; (b) Scheduled Payments are discounted on a monthly basis using a 30-day month and a 360-day year; and (c) Scheduled Payments are discounted to the last day of the Collection Period prior to the Determination Date; provided, however, that the Discounted Contract Balance of any (i) Defaulted Contract, (ii) Contract with respect to which a prepayment in full has been made, (iii) Disposed Contract, (iv) Contract purchased by the Originator or Servicer, as applicable, pursuant to the Purchase and Contribution

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Agreement or the Servicing Agreement or (v) Contract as to which more than 10% of a Scheduled Payment was not received by the Servicer within thirty-one (31) days after the original due date for such Scheduled Payment, without regard to any Servicer Advance, shall be equal to zero.

“Discounted Pool Balance”:  Means, as determined from time to time, the lesser of (x) the aggregate original equipment costs at origination of the Equipment relating to all Contracts and (y) the sum of (a) the Discounted Contract Balances of all Contracts and (b) the discounted Residual Receipts of all Contracts (assuming (1) such Residual Receipts are received six months from the end of the related Contract term, (2) the collection rate for Residual Receipts is equal to 30% of the Issuer’s related Booked Residual on the related residual payment date and (3) a discount rate of 6.25% per annum).

In connection with all calculations required to be made pursuant to the Transaction Documents with respect to the determination of the Discounted Pool Balance on any determination date, the discounted residual receipts for each Contract shall be calculated assuming: (a) the residual receipts are discounted on a monthly basis using a 30-day month and a 360-day year and (b) the residual receipts are discounted to the last day of the Collection Period prior to the determination date.

“Disposed Contract”:  Means, with respect to any Collection Period, a Contract (other than a Defaulted Contract) for which either (a) all Residual Receipts with respect to such Contract have been received or (b) its initial term has expired and the residual value of the related Equipment has been determined to be zero by the Servicer in accordance with the Servicer’s customary servicing procedures; provided, however, that if four successive months have elapsed without the Servicer receiving a payment towards Residual Receipts with respect to such Contract, such Contract shall be deemed to be a Disposed Contract.  Once a Contract is Disposed Contract, it shall be re leased to the Servicer.

“Due Date”:  With respect to each Contract, each date on which a Scheduled Payment is due thereunder.

“Early Termination Contract”:  Any Contract with respect to which the Servicer, in accordance with the Servicing Agreement, has allowed the Obligor to prepay or terminate early for any reason including, but not limited to, trade-in, upgrade, or declaration of obsolescence or surplus status relating to any of the related Equipment.

“Electronic Ledger”:  Means the electronic master record of the Contracts.

“Eligible Account”:  A segregated trust account or accounts maintained with the corporate trust department of a federal or state-chartered depository institution or trust company whose long-term unsecured debt obligations are rated at least AA- by S & P and at least Aa3 by Moody’s and which has a minimum capital and surplus of not less than $100,000,000.

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“Eligible Contract”:  Means, as of the applicable Acquisition Date, a Contract that satisfies the representations and warranties set forth in the Purchase and Contribution Agreement.

“Eligible Investments”:  Any and all of the following:

(a)           direct obligations of, and obligations fully guaranteed by, the United States of America or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(b)           (i) demand and time deposits in, certificates of deposit of, banker’s acceptances issued by or federal funds sold by any depository institution or trust company (including the Trustee or its agent acting in their respective commercial capacities) incorporated under the laws of the United States of America or any State thereof and subject to supervision and examination by federal and/or state authorities, provided that, at the time of such investment or contractual commitment providing for such investment, such depository institution or trust company has a short term unsecured debt rating in the highest available rating categories of each of Moody’s, S & P, and Fitch, providedfurther that each such investment has an original maturity of no more than two hundred seventy (270) days, and (ii) such demand or time deposit or deposits are fully insured by the Federal Deposit Insurance Corporation;

(c)           repurchase obligations with a term not to exceed thirty (30) days with respect to any security described in clause (a) above and entered into with a depository institution or trust company (acting as a principal) rated in the highest available short term rating category by each of Moody’s, S & P, and Fitch at the time of such investment; provided that collateral transferred pursuant to such repurchase obligation must be of the type described in clause (a) above and must (i) be valued weekly at current market price plus accrued interest, (ii) pursuant to such valuation, equal, at all times, one hundred five percent (105%) of the cash transferred by the T rustee in exchange for such collateral and (iii) be delivered to the Trustee or, if the Trustee is supplying the collateral, an agent for the Trustee, in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities;

(d)           commercial paper having an original maturity of less than two hundred seventy (270) days and issued by any corporation incorporated under the laws of the United States of America or any State thereof which is unaffiliated with any LEAF Party and has a short term unsecured debt rating in the highest available rating category of each of the Moody’s, S & P, and Fitch at the time of such investment;

(e)           a guaranteed investment contract rated in the highest available rating category by each of Moody’s, S & P, and Fitch or issued by an insurance company or other corporation having a long term unsecured debt rating in the highest available rating category of each of Moody’s, S & P, and Fitch at the time of such investment; and

(f)           money market funds having ratings in the highest available rating categories of each of Moody’s, S & P, and Fitch at the time of such investment (which shall include money market funds for which the Trustee or an Affiliate thereof is an advisor); any such money market

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funds which provide for demand withdrawals being conclusively deemed to satisfy any maturity requirement for Eligible Investments set forth in the Indenture.

The Trustee may purchase from or sell to itself or an affiliate, as principal or agent, the Eligible Investments listed above.  All Eligible Investments shall be made in the name of the Trustee for the benefit of the Secured Parties and no such Eligible Investments shall mature later than the Business Day preceding the next following Payment Date as required under Section 13.02(c) of the Indenture.

“Equipment”:  The equipment and other personal property (tangible or intangible) of the type contemplated by the Credit and Collection Policies and that is being financed under a Contract.

“Equity Interest”:  The one and only equity membership interest in the Issuer, entitling the owner thereof to one hundred percent (100%) of the capital, profits, losses and distributions in and from the Issuer, and one hundred percent (100%) of voting rights of an equity member.

“ERISA”:  The Employee Retirement Income Security Act of 1974, as amended or any successor statute thereto.

“Event of Default”:  Has the meaning set forth in Section 6.01 of the Indenture.

“Event of Servicing Termination”:  Has the meaning set forth in Section 6.01(a) of the Servicing Agreement.

“Exception Report”:  Any report by the Custodian identifying exceptions regarding Contract Assets.

“Existing Indebtedness”:  Any indebtedness identified in an Assignment Agreement that is secured in whole or in part by Contract Assets being acquired by the Issuer, and paid off or  otherwise released, as of the related Acquisition Date.

“Final Due Date”:  With respect to each Contract, the final Due Date thereunder.

“Final Order”:  Means a final order of a court exercising proper jurisdiction in an insolvency proceeding with respect to which the appeal period has expired without an appeal having been filed.

“Fiscal Quarter”:  Each quarter of each fiscal year, which shall be the three (3) months ended March 31, June 30, September 30 and December 31, unless the Servicer has otherwise notified the Trustee, the Back-up Servicer and the Control Party in writing prior to a change in its fiscal year.

“Fitch”: Means Fitch, Inc. and its successors in interest.

“GAAP”:  Generally accepted accounting principles as in effect in the United States as may be in place from time to time, applied on a consistent basis.

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“Governmental Authority”:  Means any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over any LEAF Party or any of its properties.

“Grant”:  To grant, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm.  A Grant in any collateral comprising the Collateral or of any instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim, collect, receive and receipt for payments in respect of the Contract Assets, or any other payment due thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the g ranting party or otherwise, and generally to do and receive anything which the granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Guarantor”:  Means LEAF Financial Corporation.

“Guaranty Amounts”:  Any amounts paid by a guarantor (who is an Obligor) of a particular Contract.

           “Impairment” shall mean, as of each Payment Date (as calculated immediately prior to the distributions pursuant to Section 13.03(c) of the Indenture), an amount equal to (x) the Outstanding Note Balance of all Classes of Notes minus (y) the sum of (i) the Discounted Pool Balance and (ii) amounts on deposit in the Reserve Account. Impairment with respect to each Class of Notes as of each Payment Date shall be allocated first, to the Class B-2 Notes, in an amount equal to the lesser of the Outstanding Note Balance of the Class B-2 Notes and the Impairment, second, to the C lass B-1 Notes, in an amount equal to the lesser of the Outstanding Note Balance of the Class B-1 Notes and the Impairment not yet allocated on such Payment Date and third, to the Class A Notes, in an amount equal to the lesser of the Outstanding Note Balance of the Class A Notes and the Impairment not yet allocated on such Payment Date. For the avoidance of doubt, the allocation of Impairment to a Class of Notes shall be used only for the calculation of Note Current Interest with respect to such Class of Notes and shall not reduce the Outstanding Note Balance of such Class of Notes.

“Indenture”:  The Indenture, dated as of August 20, 2010, among the Issuer, the Trustee and the Custodian, and any permitted supplements or amendments thereto.

“Independent”:  When used with respect to any specified Person means such a Person, who (a) is in fact independent of the Issuer and the Servicer, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer or the Servicer or in any Affiliate thereof, (c) is not connected with the Issuer or the Servicer as an officer, employee, promoter, underwriter, trustee, partner, director, customer, supplier or person performing similar functions, (d) is not a person controlling or under common control with any such stockholder, customer, supplier or other person, and (e) is not a member of the immediate family of any such stockholder, director, officer, employee, customer, supp lier or other person.  Whenever it is herein provided that any Independent Person’s opinion or certificate shall be furnished to the

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Trustee, such Person shall be identified by an Issuer Order, and such opinion or certificate shall state that the signer has read this definition and that the signer is Independent within the meaning hereof.

“Independent Accountants”:  Means any independent certified public accountants of recognized national standing.

“Initial Class A Purchaser”:  Means Guggenheim Partners Asset Management, LLC.

“Initial Class B Purchasers”:  Means, collectively, the Initial Class B-1 Purchaser and the Initial Class B-2 Purchaser.

“Initial Class B-1 Purchaser”:  Means Guggenheim Securities, LLC.

“Initial Class B-2 Purchaser”:  Means Guggenheim Securities, LLC.

“Initial Payment Date” and “First Payment Date”:  September 20, 2010.

“Initial Purchaser”:  Means the Initial Class A Purchaser, the Initial Class B-1 Purchaser or the Initial Class B-2 Purchaser, as applicable.

“Initial Purchasers”:  Means, collectively, Initial Class A Purchaser and the Initial Class B Purchasers.

“Initial Reserve Deposit” means the initial deposit of a portion of the proceeds of the Class B-1 and Class B-2 Notes on the Closing Date into the Reserve Account, in an aggregate amount equal to $750,000.

“Insolvency Event”:  With respect to a specified Person, shall mean either of the following events: (a) a case or proceeding shall have been commenced against such Person seeking a decree or order in respect of such Person (i) under the Bankruptcy Code, as now constituted or hereafter amended or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Person or of any substantial part of such Person’s assets, or (iii) ordering the winding-up or liquidation of the affairs of such Person, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or s uch court shall enter a decree or order granting the relief sought in such case or proceeding; or (b) the commencement by such Person of a voluntary case under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person for any substantial part of such Person’s assets, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

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“Insurance Policy”:  With respect to an item of Equipment and a Contract, any policy of insurance maintained by an Obligor pursuant to such Contract that covers physical damage to the Equipment and general liability (including policies procured by the Servicer on behalf of an Obligor).

“Insurance Proceeds”:  With respect to an item of Equipment, any amount received during the related Collection Period pursuant to an Insurance Policy issued with respect to the related Contract, net of any costs of collecting such amounts not otherwise reimbursed.

“Insurer”:  Any insurance company or other Person providing any Insurance Policy covering Equipment.

“Interest Accrual Period”:  With respect to any Payment Date, with respect to each Class of Notes, the period commencing on and including the immediately preceding Payment Date and ending on and including the day immediately preceding such current Payment Date; provided that, in the case of the first Interest Accrual Period, such Interest Accrual Period shall commence on the Closing Date, and shall end on the day immediately preceding the Initial Payment Date.

“Interim Delinquency Ratio”:  Means, with respect to the first three Determination Dates after the Closing Date, the average of the Delinquency Ratios for such Determination Date and each preceding Determination Date which occurred after the Closing Date.

“Investment Letter”:  Has the meaning set forth in Section 2.06(e)(ii)(B) of the Indenture.

“Issuer”:  LEAF Funding SPE 1, LLC, and its successors and permitted assigns under the Indenture.

“Issuer Address”:  LEAF Funding SPE 1, LLC, 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman, or such other address as is notified in writing to the Trustee, Custodian, Back-up Servicer and the Noteholders not less than thirty (30) days prior to the effectiveness of any change thereof.

“Issuer Order” and “Issuer Request”:  A written order or request signed by an authorized officer of the Issuer and delivered to the Trustee.

“Joinder to Lockbox Intercreditor Agreement”:  The joinder agreement to the Lockbox Intercreditor Agreement pursuant to which each of the Trustee and the Issuer becomes a party to the Lockbox Intercreditor Agreement.

“LEAF Contract Number”:  The number assigned to a Contract by the Servicer, which number is used to identify Contracts and the related Contract Assets for all purposes under the Transaction Documents and the Lockbox Intercreditor Agreement and for all purposes by the Servicer and its Affiliates, including on the Custodian Certificate and any Officer’s Certificate delivered by the Servicer or the Issuer, the Contract Schedule, the Monthly Servicing Report and the Contract Files.

“LEAF Party”:  Means each of the Issuer, the Originator, and the Servicer.

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“Lien”:  Any security interest, lien, charge, pledge, equity or encumbrance of any kind other than Permitted Liens.

“Lien Certificate”:  With respect to Motorized Titled Equipment, (i) if such Motorized Titled Equipment is registered in Florida, (x) to the extent the related Contract has been originated by the Originator or the Servicer, an original certificate of title or (y) to the extent the related Receivable has been originated by a Person other than the Originator or the Servicer, (A) an original certificate of title or (B) if the original certificate of title has been sent to the registered owner of such Motorized Titled Equipment, an original computer confirmation of lien, (ii) if such Motorized Titled Equipment is registered in Kansas, a true copy of the application for certificate of  title and registration, (iii) if such Motorize d Titled Equipment is registered in Kentucky, an original notice of lien, (iv) if such Motorized Titled Equipment is registered in Maryland, an original notice of security interest filing, (v) if such Motorized Titled Equipment is registered in Minnesota, an original lien card, (vi) if such Motorized Titled Equipment is registered in Missouri, an original notice of recorded lien, (vii) if such Motorized Titled Equipment is registered in Montana, a true copy of the application for certificate of title, (viii) if such Motorized Titled Equipment is registered in New York, an original notice of lien, (ix) if such Motorized Titled Equipment is registered in Oklahoma, an original, file-stamped lien entry form, (x) if such Motorized Titled Equipment is registered in Wisconsin, an original lien confirmation card or (xi) if such Motorized Titled Equipment 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 Motorized Titled Equipment (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).

“Lienholder Nominee Agreement”:  Each Vehicle Lienholder Nominee Agreement between the Originator or the Servicer, as lienholder, the Issuer and the Trustee that may be entered into from time to time, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“Limited Guaranty”:  The Limited Guaranty, dated as of August 20, 2010, made by the Guarantor in favor of the Class A Noteholders.

“Lockbox”:  The post office or other lockbox to which Obligors have been directed to remit payments.

“Lockbox Account”:  The deposit account (account number 153910088597) at the Lockbox Bank in the name of “U.S. Bank NA as Securities Intermediary for LEAF Financial and various lenders” or, if the Lockbox Intercreditor Agreement is terminated or LEAF Financial Corporation is no longer the Servicer, such other Lockbox Account as is established by the then Servicer with the consent of the Control Party.

“Lockbox Bank”:  Means U.S. Bank National Association and its successor in interest or any successor approved in accordance with the Lockbox Intercreditor Agreement.

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“Lockbox Intercreditor Agreement”:  The Amended and Restated Lockbox Intercreditor Agreement, dated as of April 18, 2005, among the Lockbox Bank, the Servicer, certain other parties thereto and subsequent parties joined pursuant to the terms thereof (including the Issuer and the Trustee), as amended, supplemented or otherwise modified from time to time.

 “Majority Holders”:  Means (i) if any Class A Notes are outstanding, the Holders holding Notes evidencing more than fifty percent (50%) of the Outstanding Note Balance of the Class A Notes, (ii) if no Class A Notes are outstanding, the Holders holding Notes evidencing more than fifty percent (50%) of the Outstanding Note Balance of the Class B-1 Notes or (iii) if no Class A Notes and Class B-1 Notes are outstanding, the Holders holding Notes evidencing more than fifty percent (50%) of the Outstanding Note Balance of the Class B-2 Notes.

“Mandatory Redemption”:  Is as defined in Section 11.01 of the Indenture.

“Mandatory Redemption Event”: Means the closing of a credit facility in an amount equal to at least $20,000,000 by LEAF Financial Corporation.

“Monthly Servicing Report”:  The report prepared by the Servicer pursuant to Section 13.09 of the Indenture and Section 4.01 of the Servicing Agreement, substantially in the form of Exhibit A to the Servicing Agreement.

“Moody’s”:  Moody’s Investors Service, Inc. and its successors in interest.

“Motorized Titled Equipment”:  Equipment consisting of motorized personal property that requires titling under State motor vehicle statutes.

“Noteholder” and “Holder”:  The Person in whose name a Note is registered in the Note Register.

“Note Current Interest”:  Means interest accrued during each Interest Accrual Period and payable to the Noteholders of a Class on the related Payment Date; provided however, that with respect to each Class of Notes and on each Payment Date, interest shall be deemed not to have accrued during the previous Interest Accrual Period on an amount equal to the Impairment of such Class of Notes (such interest that is deemed not to have accrued, “Deferred Interest”). Notwithstanding the foregoing, if, on any subsequent Payment Date and with respect to each Class of Notes, no Impairment is allocated to such Class of Notes, all Deferred Interest for such Class of Notes shall be deemed to have accrued during the immediately preceding Interest Accrual Period and be payable on such Payment Date as Note Current Interest.

“Note Interest”:  Means, with respect to a Class of Notes and any Payment Date, the sum of the Note Current Interest and any unpaid, overdue interest, if any, for such Class.

“Note Purchase Agreement”:  Means the Note Purchase Agreement, dated August 20, 2010, among the Originator, the Issuer, the Initial Class A Purchaser and the Initial Class B Note Purchasers.

“Note Rate”:  Means for the Class A Notes, 6.75% per annum, and for the Class B Notes, 10.00% per annum; provided, however, that upon the occurrence and during the continuance of

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any Event of Default, “Note Rate” shall mean 20.00% per annum with respect to both the Class A Notes and the Class B Notes.

“Note Register” and “Note Registrar”:  Have the respective meanings set forth in Section 2.06 of the Indenture.

“Notes”:  Any one or all of the Outstanding Equipment Contract Backed Notes, Series 2010-4, issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $21,500,000, of all Classes, or as the context may require, a specific Class.

“Obligor”:  The borrower or lessee under each Contract, including any guarantor of such Contract (other than any guarantor who is the vendor of the Equipment the subject of such Contract or the Person who originated such Contract), and their respective successors and assigns.

“Officer’s Certificate”:  A certificate signed by the Chairman of the Board, the President, a Vice President, the Treasurer, the Controller, an Assistant Controller, the Secretary, or any Assistant Secretary of the Person on whose behalf the certificate is delivered, and delivered to the Trustee or an Initial Purchaser, as the case may be.

“One-Time Successor Servicer Fee”:  Has the meaning set forth in Section 7.06 of the Servicing Agreement.

“Opinion of Counsel”:  A written opinion of counsel who may, except as otherwise expressly provided in the Indenture or required by the Control Party, be inside (but only with respect to internal corporate matters) or outside counsel for the Servicer, the Originator or the Issuer, as applicable, and who shall be reasonably satisfactory to the Control Party and which opinion shall be addressed to the Noteholders and/or the Trustee (as required by the applicable terms of the Transaction Documents) and be in form and substance reasonably satisfactory to the Control Party and the Trustee.

“Optional Redemption”:  Is as defined in Section 11.01 of the Indenture.

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

“Outstanding”:  With respect to Notes, as of any date of determination, all Notes theretofore authenticated and delivered under the Indenture except:

(a)           Notes previously canceled by the Note Registrar or delivered to the Note Registrar for cancellation;

(b)           Notes for whose payment money in the necessary amount has been theretofore irrevocably deposited with the Trustee or any Paying Agent (other than the Issuer) in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or any provision therefor, satisfactory to the Trustee, has been made, in accordance with Article XI of the Indenture); and

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(c)           Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture, unless proof satisfactory to the Trustee is presented that any such Notes are held by a protected purchaser; provided that, for purposes of determining whether the Noteholders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes beneficially owned, directly or indirectly, by the Issuer, any other obligor upon the Notes, the Servicer, any Affiliate of the Issuer or of the Servicer or such other obligor shall be disregarded and deemed not to b e outstanding; providedfurther that, in determining whether the Trustee will be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only such Notes as a Responsible Officer of the Trustee knows to be so owned shall be so disregarded.  For purposes of this definition, beneficial ownership shall be determined in accordance with Rule 13d-3 of the Securities and Exchange Commission, promulgated pursuant to the Securities Exchange Act of 1934, as amended.

“Outstanding Note Balance”:  With respect to any Class of Notes (including, for purposes of accruing interest thereon, any Notes called for redemption but not yet redeemed), the aggregate purchase price received by the Issuer for such Class of Notes pursuant to Section 3(c) of the Note Purchase Agreement less the sum of all amounts actually distributed in respect of principal for such Class of Notes as of such date.

 “Overconcentration Test”:  Solely in the event that the sum of Discounted Contract Balance of all Contracts (measured as of their respective Cut-Off Dates) exceeds $5,000,000, means a test that is satisfied with respect to the Purchased Contracts to be purchased by the Issuer on an Acquisition Date if each of the following statements would be true immediately after the purchase by the Issuer of such Purchased Contracts:

(1) The average Discounted Contract Balance of all Contracts (measured as of their respective Cut-Off Dates) does not exceed $25,000.

(2) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) related to any one Obligor does not exceed $500,000.

(3) The sum of the Discounted Contract Balances (measured as of their respective Cut-Off Dates) of all Contracts arising from the largest ten (10) Obligors in the aggregate does not exceed 18% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(4) The weighted average original term of all Contracts (measured as of their respective Cut-Off Dates) does not exceed fifty-seven (57) months.

(5) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the related Subject Equipment is located in New York does not exceed 20.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(6) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the related Subject Equipment is located

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in California does not exceed 9.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(7) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the related Subject Equipment is located in New Jersey does not exceed 12.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(8) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the Scheduled Payments are not due on a monthly basis does not exceed 4.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(9) The weighted average Fair Isaac’s Small Business Scoring Service credit score of the Obligor (measured as of their respective Cut-Off Dates) on all Contracts is at least 200.

       (10) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the Fair Isaac’s Small Business Scoring Service credit score of the Obligor (measured as of their respective Cut-Off Dates) is less than 176 does not exceed 2.75% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

       (11) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the Subject Equipment is copier equipment does not exceed 85.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

“Ownership Interest”:  Means, with respect to any Note, any ownership interest in such Note, including any interest in such Note as the Noteholder thereof and any other interest therein, whether direct or indirect, legal or beneficial.

“Paying Agent”:  The Trustee (or any other Person that meets the eligibility standards for the Trustee set forth in Section 7.08 of the Indenture and that is authorized pursuant to Section 7.15 of the Indenture to pay the principal of or interest on any Notes on behalf of the Issuer).

“Payment Date”:  The first Payment Date will be September20, 2010, and each subsequent Payment Date will be the 20th day of each month, or if such date is not a Business Day, the business day immediately following such 20th day.

“Permitted Liens”:  Means (i) liens created under the Indenture in favor of the Trustee for the benefit of the Secured Parties, (ii) Liens created under the Assignment Agreements in favor of the Issuer, (iii) Liens for taxes not yet due and payable and for which adequate reserves are maintained in accordance with GAAP, (iv) mechanics’ liens filed on any Equipment that attach after the applicable Cut-Off Date and are not yet due and payable and if unpaid would not materially impair the value of such Equipment, (v) mechanics’ liens, property tax liens and other liens arising on the Equipment through an Obligor to the extent the Servicer has determined in good faith in accordance with its Credit and Col lection Policies to not make an advance to

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discharge, and (vi) any Obligor’s right to quiet enjoyment and possession of any Equipment under the applicable Contract.

“Person”:  Any individual, corporation, limited liability company, partnership, association, joint-stock company, trust (including any beneficiary thereof), unincorporated organization or other entity or government or any agency or political subdivision thereof.

“Plan”:  An “employee benefit plan,” as defined in Section 3(3) of ERISA or a “plan” within the meaning of Section 4975(e)(1) of the Code.

“Prefunding Account”:  The trust account created and maintained pursuant to Section 13.02 of the Indenture; provided, that in no event shall the Prefunding Account be other than an Eligible Account.

“Prepayment”:  With respect to a Collection Period and a Contract (except a Defaulted Contract), (i) the payment by the related Obligor of all remaining Scheduled Payments due on such Contract or (ii) as defined in the Credit and Collection Policies, so long as such amount is designated by the Obligor as a prepayment and the Servicer has consented to such prepayment. Advance Payments and Residual Receipts are not "Prepayments."

“Prepayment Amount”:  In the event that an Obligor requests an upgrade or trade-in of Equipment under a Contract and the Servicer has agreed to such request, the payment by the Servicer of an amount equal to the sum, without duplication, of (i) the Discounted Contract Balance as of the date of reconveyance, (ii) one month’s interest thereon at the Discount Rate, (iii) the discounted portion of the Booked Residual for such Contract and (iv) any Scheduled Payments due and outstanding under such Contract that have not been paid by the Obligor, all in connection with the removal of such Equipment and the related Contract from the Collateral.

“Proceeding”:  Any suit in equity, action at law or other judicial or administrative proceeding.

“Purchase and Contribution Agreement”:  Means the Purchase and Contribution Agreement, dated as of August 20, 2010, between the Originator, as seller, and the Issuer, as purchaser.

“Purchase Price”:  Means, with respect to Contracts sold pursuant to any Assignment Agreement, the payment amount identified in Section 2 of such Assignment Agreement.

“Purchased Contracts”: means those Contracts purchased by the Issuer, and pledged to the Trustee, with the amounts on deposit in the Prefunding Account.

“QIB”:  Means a “qualified institutional buyer” within the meaning of Rule 144A.

“Receivable”:  As of any date of determination, all Scheduled Payments and all other income, payments and proceeds of the Contracts (including Guaranty Amounts, Servicing Charges, Insurance Proceeds and other Recoveries or Residual Receipts) that are (1) collected on or after the applicable Cut-Off Date or (2) Advance Payments collected by the Servicer before the applicable Cut-Off Date but due in Collection Periods commencing on and after the

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applicable Cut-Off Date, and any Recoveries thereon; provided that, from and after the date, if any, on which the related Contract Assets are repurchased in accordance with Section 6.1(a) or Section 6.1(b) of the Purchase and Contribution Agreement, substituted pursuant to Section 3.04 of the Servicing Agreement or repurchased pursuant to Section 3.09 of the Servicing Agreement, such Receivable shall no longer constitute a “Receivable” for purposes of the Transaction Documents.

“Record Date”:  With respect to each Payment Date, at the close of business on the Business Day immediately preceding such Payment Date.

“Recoveries”:  For any Collection Period occurring after the date on which any Contract becomes a Defaulted Contract, all amounts received in respect of a Defaulted Contract, including, without limitation, amounts received in connection with the sale or other disposition of the related Equipment, Insurance Proceeds with respect to the related Equipment, legal judgments and settlements, collection agency efforts, or any other payments made by or on behalf of the related Obligor, net of contingency expenses, in connection with such Defaulted Contract; provided, that in no event may Recoveries in respect of a Defaulted Contract be less than zero.

“Redemption Date”:  The Business Day elected by the Issuer pursuant to Section 11.01(a) of the Indenture for an Optional Redemption, the Business Day elected by the Issuer pursuant to Section 11.01(b) of the Indenture for a Mandatory Redemption, or any other Business Day mutually determined by the Issuer, the Noteholders and the Trustee.

“Redemption Price”:  With respect to any Note as of the Redemption Date, the Outstanding Note Balance of the Notes, together with interest accrued thereon to the Redemption Date.

“Registered Holder”:  The Person whose name appears on the Note Register on the applicable Record Date.

“Registrar of Titles”:  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”:  With respect to any Contract, all liens, security interests, guarantees, indemnities, warranties, letters of credit and other agreements securing or supporting payment on any Receivable or relating to any Equipment, including, with respect to any Receivables, any “supporting obligations” (as defined in 9-102 of the UCC) therefor, and all rights with respect to any vendors, dealers or manufacturers of the Equipment or other originators, including those arising under private label leases, all rights under any purchase or vendor agreements relating thereto, and all rights of the Originator and its assignees with respect to the Contracts and related Equipment under the Purchase and Contribution Agreement.

“Release Agreement”:  The notice regarding prepayment of Existing Indebtedness and release of related collateral, substantially in the form of Exhibit D attached to the Indenture.

- 21 -

“Reporting Date”:  The 16th day of each month or, if such day is not a Business Day, the next succeeding Business Day.

“Reserve Account”:  The trust account created and maintained pursuant to Section 13.02 of the Indenture; provided, that in no event shall the Reserve Account be other than an Eligible Account.

“Residual Receipts”:  Means, without duplication, (a) all proceeds of the sale of Equipment received by the Servicer at the end of the related Contract, whether to the related Obligor or to a third party, (b) any amounts collected by the Servicer as judgments against an Obligor or others related to the failure of such Obligor to pay any required amounts relating to the Booked Residual under the related Contract or to return the Equipment, (c) all proceeds from renewal payments made for the continued use of the Equipment after the original date of termination of the related Contract plus (d) any amounts not otherwise described above which are received by the Servicer and applied against the Booked Residual of such Contract in accordance with the Servicer’s servicing standards, in each case as reduced by any reasonably incurred out-of-pocket expenses incurred by the Servicer in enforcing such Contract or in liquidating such Equipment; provided, that in no event may Residual Receipts in respect of a Contract or any Equipment be less than zero.

“Responsible Officer”:  (a) When used with respect to the Trustee or the Back-up Servicer, any officer of the Trustee or the Back-up Servicer, including any Vice President, Assistant Vice President, any Secretary or Assistant Secretary, any trust officer or any other officer of the Trustee or the Back-up Servicer customarily performing functions similar to those performed by any of the above designated officers, and also, with respect to a particular matter, any other officer, to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject and, in each case, having direct responsibility for the administration of the Indenture; and (b) when used with respect to the Servicer (i f the Servicer is LEAF Financial Corporation or any of its Affiliates) or the Issuer, any of the president, chief financial officer, chief operating officer, chief accounting officer, treasurer or any Vice-President.

“Rule 144A”:  Means the rule designated as “Rule 144A” promulgated by the United States Securities and Exchange Commission under the Securities Act.

 “Rule 144A Information”:  Has the meaning set forth in Section 12.02(w) of the Indenture.

“S & P”:  Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and its successors in interest.

“Sale”:  Has the meaning set forth in Section 6.18 of the Indenture.

“Scheduled Payment”:  With respect to a Payment Date and a Contract, the periodic scheduled payment of rent or other payments on a monthly, quarterly, semi-annual or annual basis, in arrears or in advance as set forth in the Contract, and due from the Obligor in the related Collection Period, exclusive of any Servicing Charges and Residual Receipts (which Residual

- 22 -

Receipts, for the avoidance of doubt, include all payments due after the Final Due Date for a Contract).

“Secured Parties”:  Means, collectively, the Noteholders.

“Securities Account Control Agreement”:Means the Securities Account Control Agreement, dated as of August 20, 2010, by and between the Issuer and the Trustee, as both securities intermediary and trustee.

“Securities Act”: The United States Securities Act of 1933, as amended.

“Securities Intermediary”: Means U.S. Bank National Association in its capacity as Securities Intermediary pursuant to the Securities Account Control Agreement.

“Security Deposit”:  Any amount paid to the Servicer or the Originator and its assigns by an Obligor as a security deposit which has not previously been refunded to such Obligor or applied towards such Obligor’s obligations under such Contract.

“Seller”:  LEAF Funding, Inc., a Delaware corporation.

“Servicer”:  The servicer of the Contract Assets, which shall be LEAF Financial Corporation until such time, if any, as the Back-up Servicer or other successor Person shall have become the “Servicer” pursuant to the applicable provisions of the Servicing Agreement, whereupon “Servicer” shall mean such successor Person.

“Servicer Advance”:  Means, in the event that any Obligor fails to remit the full Scheduled Payment due from it with respect to a Collection Period by the Determination Date related to such Collection Period, an advance by the Servicer pursuant to Section 3.04 of the Servicing Agreement from its own funds prior to the related Payment Date of an amount equal to such unpaid Scheduled Payment.

“Servicer Fee”:  The fee payable on each Payment Date to the Servicer in consideration for the Servicer’s performance of its duties under the Servicing Agreement during the related Collection Period, in an amount equal to the product of (a) one-twelfth (1/12) of the Servicer Fee Rate and (b) the aggregate Discounted Pool Balance as of the Payment Date occurring immediately prior to the related Collection Period (or, in the case of the Initial Payment Date, the Initial Cut–Off Date). If the Back-up Servicer shall become the successor Servicer, the Servicer Fee shall be subject to a minimum of $6,000 per month.

“Servicer Fee Rate”:  2.00% per annum.

“Servicer Financial Statements”:  The financial statements described in Section 4.02(i) of the Servicing Agreement.

“Servicer Termination Notice”:  The notice described in Section 6.01 of the Servicing Agreement.

- 23 -

 “Servicing Agreement”:  The Servicing Agreement, dated as of August 20, 2010, among the Servicer, the Issuer, the Trustee and the Back-up Servicer, as amended, supplemented or otherwise modified from time to time.

“Servicing Charges”:  Means the sum of (a) any late payment charges paid by an Obligor on a Contract after application of any such charges to amounts then due under such Contract and (b) any other incidental charges, or fees received from an Obligor, including (i) tax payments, insurance premium payments or reimbursements, late charges, documentation fees, extension fees, administrative charges and maintenance premiums and other pass-through items and (ii) prepayment charges paid by an Obligor in connection with a Prepayment.

“Servicing Documents”:  Means all servicing records, servicing agreements, servicing rights, pledge agreements and any other collateral pledged or otherwise relating to the Contracts, together with all files, documents, instruments, certificates, correspondence, accounting books and records relating thereto or to the Contract Files.

“Servicing Officers”:  Those officers of the Servicer involved in, or responsible for, the administration and servicing of the Contract Assets, as identified on a certificate delivered to the Trustee in accordance with Section 4.01(a)(ix) of the Indenture, as the same may be updated from time to time.

“State”:  Any state of the United States of America and, in addition, the District of Columbia.

“Stated Maturity Date”:  If the Notes have not already been paid in full prior to such date, February 20, 2011.

“Subject Equipment”:  Means Equipment subject to a certain Contract.

“Substitute Contract”:  A Contract substituted by the Servicer in replacement of one or more Contracts of the Issuer pursuant to the terms and provisions of the Transaction Documents.

“Substitution and Repurchase Amounts”:  Means the sum of (i) the aggregate Discounted Contract Balance of Substitute Contracts (as measured on their respective Acquisition Dates) and (ii) the aggregate Discounted Contract Balance of those Contracts (as measured on their respective dates of repurchase), in each case either substituted for or repurchased by LEAF Financial Corporation (as initial Servicer) or repurchased by the Originator, but excluding Contracts repurchased pursuant to Warranty Events.

“Tax Lien”:  A lien arising under Section 6321 of the Code.

“Three-Month Rolling Average Delinquency Ratio”:  Means, with respect to any Determination Date commencing with the fourth Determination Date after the Closing Date, the average of the Delinquency Ratios for such Determination Date and the two preceding Determination Dates.

“Transaction Documents”:  The Indenture, the Lockbox Intercreditor Agreement, each Assignment Agreement, the Note Purchase Agreement, the Servicing Agreement, the Purchase

- 24 -

and Contribution Agreement, the Notes, the Joinder to Lockbox Intercreditor Agreement, any Lienholder Nominee Agreement, the Securities Account Control Agreement and each other document and/or instrument executed pursuant thereto or in connection therewith.

“Transfer Certificate”:  Has the meaning set forth in Section 3.01(a) of the Indenture.

“Transfer Taxes”:  Means any tax, fee or other governmental charge payable to any federal, state or local government in connection with the sale of the Contract Assets to the Issuer pursuant to the Assignment Agreements and the pledge of the Contract Assets by the Issuer to the Trustee pursuant to the Indenture.

“Transition Costs”:  Means any documented fees and expenses reasonably incurred by a successor Servicer, the Back-up Servicer or the Trustee in connection with a transfer of servicing under the Servicing Agreement, as provided in the Indenture and the Servicing Agreement; provided that the total amount of Transition Costs payable to all such Persons shall not exceed $150,000 in the aggregate.

“Trust Accounts”:  Has the meaning set forth in Section 13.02(a) of the Indenture.

“Trustee”:  The trustee under the Indenture which, initially, shall be U.S. Bank National Association until such time, if any, as a successor Person shall have become the Trustee pursuant to the applicable provisions of the Indenture, whereupon “Trustee” shall mean such successor Person.

“Trustee Fee”:  The monthly fees payable on each Payment Date to the Trustee in consideration for the Trustee’s performance of its duties hereunder, as set forth in the Trustee Fee Schedule.

“Trustee Fee Schedule”:  That certain “Schedule of Fees for Services Rendered as Trustee, Paying Agent and Registrar for $21,500,000 (Approximate) LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, 2010-4”, dated as of August 27, 2010.

“UCC”:  The Uniform Commercial Code as then in effect in the State of New York, or where the context otherwise requires, the jurisdiction the law of which governs the perfection or priority of any applicable security interest.

“United States”:  The United States of America and its territories.

“U.S. Person”:  Means (other than for tax purposes) (i) any natural person resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non-discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or

- 25 -

account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non-U.S. Person), or (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated, and owned, by accredited investors within the meaning of Rule 501(a) under the Securities Act who are not natural persons, estates or trusts); provided that, the term “U.S. Person” shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country, and (C) the international organizations set forth in Section 902(k)(2)(vi) of RegulationS under the Securities Act and any other similar international organizations, and their agencies, affiliates and pension plans.

“Vendor”:  Any Equipment manufacturer, distributor, dealer or supplier with whom the Servicer or Originator has a vendor program in effect pursuant to which the Servicer or Originator acquires or otherwise originates Contracts used to finance equipment manufactured and/or distributed by such vendor and leased or otherwise financed by Obligors under such Contracts.

“Verification Date”:  The third Business Day after each Reporting Date, by which time the Back-up Servicer must verify the information contained in the Monthly Servicing Report delivered on such Reporting Date.

“Warranty Event”:  With respect to any Contract, (a) any breach of Section 4.1(a) of the Purchase and Contribution Agreement or clauses (3) or (4) of any Assignment Agreement that gives rise to a repurchase obligation under Section 6.1(a) of the Purchase and Contribution Agreement, any breach of Section 2.02 of the Servicing Agreement that gives rise to a repurchase obligation under Section 3.09 of the Servicing Agreement, or (c) the circumstances described in Section 4.04(a) of the Indenture.

- 26 -

EX-12.1 3 exh12_1.htm RATIO OF EARNINGS TO FIXED CHARGES

Exhibit 12.1

Ratio of Earnings to Fixed Charges

(in thousands, except ratios)

	For the Fiscal Year Ended September 30,
	2010			2009			2008			2007			2006
Earnings:
Pretax (loss) income from continuing operations	$	(19,947	)	$	(26,594	)	$	(44,882	)	$	9,824		$	19,442
Less – noncontrolling interests		(8	)		(1,549	)		(6,482	)		1,612			1,624
Less –  equity in earnings of affiliates		(4,870	)		(1,279	)		15,656			(13,960	)		(5,896	)
Add –  cash distributions received from equity investments		5,104			6,128			15,647			16,212			12,570
		(19,721	)		(23,294	)		(20,061	)		13,688			27,740
Fixed charges		13,386			20,520			47,581			33,782			10,244
Total	$	(6,335	)	$	(2,774	)	$	27,520		$	47,470		$	37,984
Fixed Charges:
Interest expense	$	13,086		$	20,199		$	47,266		$	33,566		$	10,119
Estimated interest portion of rent expense (2)		300			321			315			216			125
Total	$	13,386		$	20,520		$	47,581		$	33,782		$	10,244
Ratio of earnings to fixed charges			(1)			(1)			(1)		1.4			3.7

(1)   Earnings for fiscal 2010, 2009 and 2008 were inadequate to cover fixed charges.  The coverage deficiencies for those periods were $19.7 million $23.2 million and $20.0 million, respectively.

(2)   Estimated to be 8% of rent expense.

EX-21.1 4 exh21_1.htm SUBSIDIARIES OF RESOURCE AMERICA, INC.

EXHIBIT 21.1

RESOURCE AMERICA, INC.

LIST OF SUBSIDIARIES

NAME OF SUBSIDIARIES	STATE OF INCORPORATION
Resource Financial Fund Management, Inc.	Delaware
Trapeza Capital Management, LLC	Delaware
Trapeza Manager, Inc.	Delaware
Trapeza Funding, LLC	Delaware
Trapeza Funding II, LLC	Delaware
Trapeza Funding III, LLC	Delaware
Trapeza Funding IV, LLC	Delaware
Trapeza Funding V, LLC	Delaware
Trapeza TPS, LLC	Delaware
Trapeza Management Group, LLC	Delaware
Structured Finance Fund GP, LLC	Delaware
Structured Finance Management, LLC	Delaware
Ischus Capital Management, LLC	Delaware
Apidos Capital Management, LLC	Delaware
Apidos Select Corporate Credit Fund GP, LLC	Delaware
Resource Financial Institutions Group, Inc.	Delaware
Resource Credit Partners GP, Inc.	Delaware
Resource Credit Management, LLC	Delaware
Resource Capital Manager, Inc.	Delaware
RAI Ventures, Inc.	Delaware
Chadwick Securities, Inc.	Delaware
Resource Europe Management Limited	UK
Resource Capital Markets, Inc.	Delaware
Resource Capital Investor, Inc.	Delaware
Resource Leasing, Inc.	Delaware
FLI Holdings, Inc.	Delaware
LEAF Financial Corporation	Delaware
Commerce Square Insurance Services, LLC	Delaware
Commerce Square Equipment Insurance Co.	Delaware
LEAF Ventures, LLC	Delaware
Merit Capital Manager, LLC	Delaware
Merit Capital Advance, LLC	Delaware
Merit Processing, LLC	Delaware
LEAF Ventures II, LLC	Delaware
Prompt Payment, LLC	Delaware
LEAF Capital Management, Inc.	Delaware
Lease Equity Appreciation Fund I, L.P.	Delaware
LEAF Fund I, LLC	Delaware
Lease Equity Appreciation Fund II, L.P.	Delaware
LEAF Fund II, LLC	Delaware
LEAF II B SPE, LLC	Delaware
LEAF II Receivables Funding, LLC	Delaware
LEAF Funding, Inc.	Delaware
LEAF Commercial Finance Fund, LLC	Delaware
Resource Capital Funding II, LLC	Delaware
Resource Asset Management, LLC	Delaware
LEAF Asset Management, LLC	Delaware
LEAF Equipment Leasing Income Fund III, L.P.	Delaware
LEAF Funding, LLC	Delaware
LEAF Capital Funding III, LLC	Delaware
LEAF Fund III, LLC	Delaware

LEAF III B SPE, LLC	Delaware
LEAF III C SPE, LLC	Delaware
LEAF Equipment Finance Fund 4, L.P.	Delaware
LEAF Funds Joint Venture 2, LLC	Delaware
LEAF Fund 4A SPE, LLC	Delaware
Resource Capital Funding, LLC	Delaware
Resource Real Estate Holdings, Inc.	Delaware
Resource Real Estate, Inc.	Delaware
Resource Capital Partners, Inc.	Delaware
Resource Real Estate Management, LLC	Delaware
Resource Capital Partners II, LLC	Delaware
RRE Investor, LLC	Delaware
Resource Real Estate Funding, Inc.	Delaware
RRE Leasco, LLC	Delaware
RRE Oak Park Leaseco, LLC	Delaware
Resource Real Estate Management, Inc.	Delaware
RRE D2R2 2007-1, LLC	Delaware
RRE HUD MF 2007, LLC	Delaware
RRE Sky Harbor, LLC	Delaware
RRE River Oaks, LLC	Delaware
RRE Shoreline, LLC	Delaware
RRE Twyckenham, LLC	Delaware
RRE Windsor Square, LLC	Delaware
RRE Wyandotte, LLC	Delaware
RRE West Tech, LLC	Delaware
RRE VIP Borrower, LLC	Delaware
RRE VIP International Village, LLC	Delaware
RRE VIP Regency Park, LLC	Delaware
RRE VIP Waterford Nevillewood, LLC	Delaware
Resource Real Estate Opportunity Advisor, LLC	Delaware
Resource Real Estate Opportunity REIT, Inc.	Delaware
RRE Opportunity Holdings, LLC	Delaware
Resource Real Estate Opportunity Manager, LLC	Delaware
RRE VIP Participant, LLC	Delaware
RCP Westchase Wyndham Manager, LLC	Delaware
RCP Pear Tree Manager, LLC	Delaware
RCP Wind Tree Manager, LLC	Delaware
RCP Falls at Duraleigh Manager, LLC	Delaware
RCP Sage Canyon Manager, LLC	Delaware
RCP Cuestas Manager, Inc.	Delaware
RCP Chenal Brightwaters Manager, LLC	Delaware
RCP Holdco I Manager, Inc.	Delaware
RCP Reserves Manager, Inc.	Delaware
RCP Foxglove Manager, Inc.	Delaware
RCP Santa Fe Manager, Inc.	Delaware
RCP Regents Center Manager, Inc.	Delaware
RCP Highland Lodge Manager, Inc.	Delaware
RCP Grove Manager, LLC	Delaware
RCP Avalon Manager, Inc.	Delaware
RCP Howell Bridge Manager, Inc.	Delaware
RCP Heritage Lake Manager, LLC	Delaware
RCP Magnolia Manager, LLC	Delaware
RCP West Wind Manager, LLC	Delaware
RCP Ryan’s Crossing Manager, LLC	Delaware
RCP Memorial Tower Manager, LLC	Delaware
RCP Cypress Landing Manager, LLC	Delaware

Cypress Landing Partners, LLC	Delaware
RCP Island Tree Manager, LLC	Delaware
Island Tree Partners, LLC	Delaware
RCP Villas Manager, LLC	Delaware
RCP Coach Lantern Manager, LLC	Delaware
RCP Foxcroft Manager, LLC	Delaware
RCP Tamarlane Manager, LLC	Delaware
RCP Park Hill Manager, LLC	Delaware
RCP Woodland Hills Manager, LLC	Delaware
RCP Brent Oaks Manager, LLC	Delaware
RCP Cape Cod Manager, LLC	Delaware
RCP Woodhollow Manager, LLC	Delaware
SR Fountains Holdings, LLC	Delaware
AR Real Estate Investors, LLC	Delaware
AR Real Estate, GP LLC	Delaware
RCP Nittany Pointe Manager, Inc.	Delaware
RCP Chinoe Creek Manager, Inc.	Delaware
RCP Portland Courtyard Manager, Inc.	Delaware
RCP Albuquerque Manager, Inc.	Delaware
RCP Fountains GP, Inc.	Delaware
RCP Mill Creek Manager, LLC	Delaware
RCP Windridge Manager, LLC	Delaware
RRE Howell Bridge Holdings, LLC	Delaware
RRE Bentley Place Holdings, LLC	Delaware
RRE Reserves Holdings, LLC	Delaware
RRE Reserves Holdco I, LLC	Delaware
RRE Regents Center Holdings, LLC	Delaware
RRE 1 Duraleigh Member, LLC	Delaware
RRE 2 Duraleigh Member, LLC	Delaware
RRE Avalon Member, LLC	Delaware
RRE Avalon Holdings, LLC	Delaware
RRE Funding I, LLC	Delaware
RRE Magnolia Holdings, LLC	Delaware
RRE West Wind Holdings, LLC	Delaware
RRE Ryan’s Crossing Holdings, LLC	Delaware
RRE Falls at Duraleigh Holdings, LLC	Delaware
RRE Sage Canyon Holdings, LLC	Delaware
RRE Cuestas Holdings, LLC	Delaware
RRE Heritage Lake Holdings, LLC	Delaware
RRE Heritage Lake TIC, LLC	Delaware
RRE Pear Tree Holdings, LLC	Delaware
RRE Wind Tree Holdings, LLC	Delaware
RRE West Chase Wyndham Holdings, LLC	Delaware
RRE Funding II, LLC	Delaware
RRE Villas Holdings, LLC	Delaware
RRE Memorial Towers Holdings, LLC	Delaware
RRE Coach Lantern Holdings, LLC	Delaware
RRE Foxcroft Holdings, LLC	Delaware
Foxcroft South Owners Association	Maryland
Foxcroft North Owners Association	Maryland
RRE Tamarlane Holdings, LLC	Delaware
RRE Park Hill Holdings, LLC	Delaware
RRE Bentley Place Holdco I, LLC	Delaware
RRE West Chase Wyndham TIC, LLC	Delaware
RRE Chenal Brightwaters TIC, LLC	Delaware
RRE Chenal Brightwaters Holdings, LLC	Delaware
RRE Highland Lodge TIC, LLC	Delaware
RRE Regents Center TIC, LLC	Delaware

RRE Heritage Lake TIC, LLC	Delaware
RRE Bentley Place TIC, LLC	Delaware
RRE Reserves TIC, LLC	Delaware
RRE Highland Lodge Holdings, LLC	Delaware
RRE Bent Oaks Holdings, LLC	Delaware
RRE Cape Code Holdings, LLC	Delaware
RRE Woodhollow Holdings, LLC	Delaware
RRE Woodland Hills Holdings, LLC	Delaware
RRE Mill Creek Holdings, LLC	Delaware
RRE Wyndridge Holdings, LLC	Delaware
Resource RSI Phase I, LLC	Delaware
Resource RSI Phase II, LLC	Delaware
Press Building, LLC	Delaware
Resource Programs, Inc.	Delaware
RCP Financial, LLC	Pennsylvania
Resource Properties VIII, Inc.	Delaware
Resource Properties XIV, Inc.	Delaware
Resource Properties XVII, Inc.	Delaware
Resource Properties XXIV, Inc.	Delaware
Resource Properties XXV, Inc.	Delaware
Resource Properties XXVI, Inc.	Delaware
Resource Properties XXX, Inc.	Delaware
Resource Properties XXXI, Inc.	Delaware
Resource Properties XXXIII, Inc.	Delaware
Resource Properties XL, Inc.	Delaware
Resource Properties XLI, Inc.	Delaware
Resource Properties XLVII, Inc.	Delaware
Resource Properties XLIX, Inc.	Delaware
Resource Properties 54, Inc.	Delaware
Chesterfield Mortgage Investors, Inc.	Delaware
Resource Commercial Mortgages, Inc.	Delaware
Resource Housing Investors I, Inc.	Delaware
Resource Housing Investors II, Inc.	Delaware
Resource Housing Investors III, Inc.	Delaware
Resource Housing Investors IV, Inc.	Delaware
Resource Rittenhouse, Inc.	Delaware

EX-23.1 5 exh23_1.htm CONSENT OF GRANT THORNTON LLP

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated December 13, 2010, with respect to the consolidated financial statements, schedules and internal control over financial reporting included in the Annual Report of Resource America, Inc. and subsidiaries on Form 10-K for the year ended September 30, 2010.  We hereby consent to the incorporation by reference of said reports in the Registration Statements of Resource America, Inc. on Forms S-8 (File No. 333-158557, effective April 13, 2009; File No. 333-126344, effective July 1, 2005, File No. 333-105615, effective May 28, 2003; File Nos. 333-98505 and 333-98507, effective August 22, 2002; File No. 333-81420, effective January 25, 2002 and File No. 333-37416, effective May 19, 2000).

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

December 13, 2010

EX-31.1 6 exh31_1.htm EXHIBIT 31.1

EXHIBIT 31.1

CERTIFICATION

I, Jonathan Z. Cohen, certify that:

1)   I have reviewed this report on Form 10-K for the fiscal year ended September 30, 2010 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:  December 13, 2010	Jonathan Z. Cohen
	Chief Executive Officer

EX-31.2 7 exh31_2.htm EXHIBIT 31.2

EXHIBIT 31.2

CERTIFICATION

I, Thomas C. Elliott, certify that:

1)   I have reviewed this report on Form 10-K for the fiscal year ended September 30, 2010 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/ Thomas C. Elliott
Date:  December 13, 2010	Thomas C. Elliott
	Senior Vice President and Chief Financial Officer

EX-32.1 8 exh32_1.htm EXHIBIT 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 Annual Report of Resource America, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2010 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:  December 13, 2010	Jonathan Z. Cohen
	Chief Executive Officer

EX-32.2 9 exh32_2.htm EXHIBIT 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 Annual Report of Resource America, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas C. Elliott, Senior 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/ Thomas C. Elliott
Date:  December 13, 2010	Thomas C. Elliott
	Senior Vice President and Chief Financial Officer

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EX-4.2

Exhibit 4.2

EXECUTION VERSION

INDENTURE

between

LEAF FUNDING SPE 1, LLC,

as Issuer,

U.S. BANK NATIONAL ASSOCIATION,

as Trustee and Custodian

Equipment Contract Backed Notes, Series 2010-4, Class A

Equipment Contract Backed Notes, Series 2010-4, Class B-1

and

Equipment Contract Backed Notes, Series 2010-4, Class B-2

Dated as of August 20, 2010

TABLE OF CONTENTS

		PAGE
ARTICLE I DEFINITIONS		2
Section 1.01	Definitions	2
Section 1.02	Certain Rules of Construction	2
ARTICLE II NOTE FORM		2
Section 2.01	Form Generally	2
Section 2.02	Multiple Classes of Notes; Form for Each Class; Rights of Each Class	2
Section 2.03	Denomination	4
Section 2.04	Execution, Authentication, Delivery and Dating	4
Section 2.05	[Reserved]	4
Section 2.06	Registration, Registration of Transfer and Exchange	4
Section 2.07	Mutilated, Destroyed, Lost or Stolen Note	9
Section 2.08	Payment of Principal and Interest; Rights Preserved	10
Section 2.09	Persons Deemed Owner	11
Section 2.10	Cancellation	11
Section 2.11	Tax Treatment; Withholding Taxes	11
ARTICLE III Acquisitions of CONTRACTS		12
Section 3.01	Conditions to the Acquisition of Contracts	12
ARTICLE IV ISSUANCE OF NOTES; CERTAIN ISSUER AND CUSTODIAN OBLIGATIONS		14
Section 4.01	Conditions to Issuance of Notes	14
Section 4.02	Security for Notes	17
Section 4.03	Review of Contract Files	18
Section 4.04	Defective Contracts	19
Section 4.05	Reserved	20
Section 4.06	Administration of the Contract Assets	20
Section 4.07	Releases	20
ARTICLE V SATISFACTION AND DISCHARGE		21
Section 5.01	Satisfaction and Discharge of Indenture	21
ARTICLE VI DEFAULTS AND REMEDIES		22
Section 6.01	Events of Default	22
Section 6.02	Acceleration of Maturity; Rescission and Annulment	23
Section 6.03	Collection of Indebtedness and Suits for Enforcement by Trustee	24
Section 6.04	Remedies	24

i

		PAGE
Section 6.05	Optional Preservation of Collateral	25
Section 6.06	Trustee May File Proofs of Claim	25
Section 6.07	Trustee May Enforce Claims Without Possession of Notes	26
Section 6.08	Application of Money Collected	26
Section 6.09	[Reserved]	27
Section 6.10	Unconditional Right of the Noteholders to Receive Principal and Interest	27
Section 6.11	Restoration of Rights and Remedies	27
Section 6.12	Rights and Remedies Cumulative	27
Section 6.13	Delay or Omission Not Waiver	27
Section 6.14	Control by Control Party	27
Section 6.15	Waiver of Certain Events by the Control Party	28
Section 6.16	Additional Rights of Subordinate Noteholders	28
Section 6.17	Waiver of Stay or Extension Laws	29
Section 6.18	Sale of Collateral	29
Section 6.19	Action on Notes	30
ARTICLE VII THE TRUSTEE		30
Section 7.01	Certain Duties and Immunities	30
Section 7.02	Notice of Default and Other Events	32
Section 7.03	Certain Rights of Trustee	32
Section 7.04	Not Responsible for Recitals or Issuance of Notes	34
Section 7.05	May Hold Notes	34
Section 7.06	Money Held in Trust	35
Section 7.07	Compensation and Reimbursement	35
Section 7.08	Corporate Trustee Required; Eligibility	36
Section 7.09	Resignation and Removal; Appointment of Successor	36
Section 7.10	Acceptance of Appointment by Successor	37
Section 7.11	Merger, Conversion, Consolidation or Succession to Business of Trustee	38
Section 7.12	Co-Trustees and Separate Trustees	38
Section 7.13	Maintenance of Office or Agency; Initial Appointment of Payment Agent	39
Section 7.14	Appointment of Authenticating Agent	39
Section 7.15	Appointment of Paying Agent other than Trustee; Money for Note Payments to be Held in Trust	41
Section 7.16	Rights with Respect to the Servicer and Back-up Servicer	42
Section 7.17	Representations and Warranties of the Trustee	42
ARTICLE VIII THE CUSTODIAN		43
Section 8.01	Appointment of Custodian	43
Section 8.02	Removal of Custodian	43
Section 8.03	Termination by Custodian	44
Section 8.04	Limitations on the Custodian’s Responsibilities	44
Section 8.05	Limitation on Liability	45

ii

		PAGE
Section 8.06	Custodian Obligations Regarding Genuineness of Documents	46
Section 8.07	Force Majeure	46
ARTICLE IX [RESERVED]		46
ARTICLE X SUPPLEMENTAL INDENTURES		46
Section 10.01	Supplemental Indentures without Consent of the Noteholders	46
Section 10.02	Supplemental Indentures with Consent of the Noteholders	47
Section 10.03	Execution of Supplemental Indentures	48
Section 10.04	Effect of Supplemental Indentures	48
Section 10.05	Reference in Notes to Supplemental Indentures	48
Section 10.06	Back-Up Servicer Consent	49
Section 10.07	Amendments to the Lockbox Intercreditor Agreement	49
ARTICLE XI REDEMPTIONS AND PREPAYMENTS OF NOTES		49
Section 11.01	Redemptions of Notes	49
Section 11.02	Redemption Procedures	49
Section 11.03	Notice of Redemption to Noteholders	50
Section 11.04	Amounts Payable on Redemption Date	50
Section 11.05	Release of Contract Assets in Connection with Redemptions	51
ARTICLE XII REPRESENTATIONS, WARRANTIES AND COVENANTS		51
Section 12.01	Representations and Warranties	51
Section 12.02	Covenants	57
ARTICLE XIII ACCOUNTS AND ACCOUNTINGS		63
Section 13.01	Collection of Money	63
Section 13.02	Establishment of Trust Accounts	63
Section 13.03	Collection Account	65
Section 13.04	Reserve Account	67
Section 13.05	[Reserved]	67
Section 13.06	Prefunding Account	68
Section 13.07	Capitalized Interest Account	68
Section 13.08	Reports to the Noteholders	68
Section 13.09	Monthly Servicing Reports	69
ARTICLE XIV PROVISIONS OF GENERAL APPLICATION		69
Section 14.01	General Provisions	69
Section 14.02	Acts of Noteholders	69
Section 14.03	Notices	70
Section 14.04	Notices to Noteholders; Waiver	71
Section 14.05	Successors and Assigns	71

iii

		PAGE
Section 14.06	Severability; No Waiver	71
Section 14.07	Benefits of Indenture Limited to Parties and Express Third Party Beneficiaries	71
Section 14.08	Legal Holidays	71
Section 14.09	Governing Law; Waiver of Jury Trial; Consent to Jurisdiction	72
Section 14.10	Counterparts; Entire Agreement	72
Section 14.11	Notifications	72
Section 14.12	No Petition	72
Section 14.13	Assignment	73

Schedule I                           Contract Schedule

Schedule II                           Definitions Annex

iv

 EXHIBITS

A-1	Form of Class A Note
A-2	Form of Class B-1 Note
A-3	Form of Class B-2 Note
B-1	Form of Request for Release
B-2	Form of Return of Documents to Custodian
C	Form of Custodian and Trustee Certificate Re:  Substitutions
D	Form of Release Agreement Re:  Existing Indebtedness
E	Form of Investor Certificate
F	Form of Transfer Certificate

v

This Indenture, dated as of August 20, 2010 (as amended, supplemented or modified from time to time, this “Indenture”), is entered into between LEAF FUNDING SPE 1, LLC, a Delaware limited liability company, as Issuer and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as Trustee and as Custodian.

PRELIMINARY STATEMENT

The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of its Equipment Contract Backed Notes, Series 2010-4 (the “Notes”), issuable as provided in this Indenture.  All covenants and agreements made by the Issuer herein are for the benefit and security of the Noteholders.  The Issuer and the Custodian are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.

All things necessary to make this Indenture a valid agreement of the Issuer, the Trustee and the Custodian in accordance with its terms have been done.

GRANTING CLAUSE

To secure the payment of the principal of and interest on the Notes in accordance with their terms, the payment of all sums payable under this Indenture and the other Transaction Documents and the performance of the covenants contained in this Indenture and the other Transaction Documents, the Issuer hereby Grants to the Trustee, solely in trust and as collateral security as provided in this Indenture, for the benefit of the Secured Parties, a security interest in all of the Issuer’s “accounts,” “deposit accounts,” “chattel paper,” “payment intangibles,” “commercial tort claims,” “supporting obligations,” “promissory notes,” “letter-of-credit rights,” “documents,” “goods,” “fixtures,” “general intangibles,” “instruments,” “inventory,” “equipment,” “investment property,” “proceeds” (as each of the foregoing terms is defined in the UCC), rights, interests and property (whether now owned or hereafter acquired or arising), including the Issuer’s right, title and interest (whether now owned or hereafter acquired or arising) in and to and under the following:  (a) the Contracts listed on the Contract Schedule; (b) the related Contract Assets; (c)  the Assignment Agreements; (d) any rights of the Issuer under the Purchase and Contribution Agreement; (e) any rights of the Issuer under the Servicing Agreement; (f) the Reserve Account, Collection Account, Prefunding Account and Capitalized Interest Account and all amounts from time to time on deposit therein (including any Eligible Investments, investment property and other property at any ti me and from time to time in such accounts); (g) all amounts from time to time on deposit in the Lockbox Account with respect to the Contracts and the Equipment; (h) the interest of the Issuer in the Equipment; (i) any Insurance Policy and Insurance Proceeds; and (j) all income, payments and proceeds of the foregoing (including, but not by way of limitation, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind, investment property and other forms of obligations and receivables which at any time constitute all or part or are included in the proceeds of any of the foregoing) (all of the foregoing being hereinafter referred to as the “Collateral”).  The foregoing Grant, transfer, assignment, set over and conveyance does not constitute and is not intended to result in a creation or an assumption by the Trustee or the Secured Parties of any obligation of the Issuer, the Servicer or any other Person in connection with the Collateral or under any agreement or instrument relating thereto.  In furtherance and not in limitation of the foregoing, the Issuer hereby assigns to the Trustee, for the benefit of the Secured Parties, all of its right, title and interest in and to all liens and security interests in any assets, and all UCC financing statements related thereto. Notwithstanding the foregoing, Security Deposits shall not constitute part of the Collateral.

The Trustee acknowledges its acceptance on behalf of the Secured Parties of a security interest in all of the Issuer’s right, title and interest in and to the Collateral and declares that it shall maintain the Collateral in accordance with the provisions hereof.

ARTICLE I

DEFINITIONS

Section 1.01                      Definitions.Except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms used but not otherwise defined herein have the meaning set forth in the Definitions Annex attached hereto as Schedule II.

Section 1.02                      Certain Rules of Construction.  Unless the context of this Indenture clearly requires otherwise:  (a) references to the plural include the singular and to the singular include the plural; (b) references to any gender include any other gender; (c) the words “include” and “including” are not limiting; (d) the words “hereof,” “herein,”  220;hereby,” and “hereunder,” and any other similar words, refer to this Indenture as a whole and not to any particular provision hereof; and (e) article, section, subsection, clause, exhibit, and schedule references are to this Indenture.  Article, section, and subsection headings are for convenience of reference only, shall not constitute a part of this Indenture for any other purpose, and shall not affect the construction of this Indenture.  All exhibits and schedules attached hereto are incorporated herein by this reference.  Any reference herein to this Indenture or any other agreement, document, or instrument includes all permitted alterations, amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as applicable.

ARTICLE II

NOTE FORM

Section 2.01                      Form Generally.The Notes and the related certificates of authentication shall be in substantially the form described in this Indenture, with such appropriate insertions, omissions, substitutions and other variations as are expressly required or permitted by this Indenture.  The Notes may have such letters , numbers or other marks of identification and such legends or endorsements placed thereon, as may, consistently herewith, be determined appropriate by the officers executing such Notes, as evidenced by their execution of the Notes.  The terms of each Note are intended to be incorporated into this Indenture.

Section 2.02                      Multiple Classes of Notes; Form for Each Class; Rights of Each Class.  This Indenture provides for the issuance by the Issuer of three classes of Notes, the Class A Notes, the Class B-1 Notes and the Class B-2 Notes.  Each Note shall bear upon its face the designation of the Class to which it belongs.  Each Class A Note shall be in the form of Exhibit A-1 attached hereto. Each Class B-1 Note shall be in the form of Exhibit A-2 attached hereto. Each Class B-2 Note shall be in the form of Exhibit A-3 attached hereto. All Notes in the same Class shall be in substantially identical form except for differences in registration information and denomination and such other variations as may be permitted by this Indenture.

- 2 -

(a)           Notes.  The Class A Notes are being offered and sold by the Issuer to the Initial Class A Purchaser pursuant to the Note Purchase Agreement, the Class B-1 Notes are being offered and sold by the Issuer to the Initial Class B-1 Purchaser pursuant to the Note Purchase Agreement and the Class B-2 Notes are being offered and sold by the Issuer to the Initial Class B-2 Purchaser pursuant to the Note Purchase Agreement.

Notes offered and sold to QIBs in reliance on Rule 144A shall be issued initially in the form of certificated definitive, fully registered Notes (any such Notes, the “Notes”), which shall be duly executed by the Issuer and authenticated by the Trustee as hereinafter provided and delivered by the Trustee to the applicable Noteholders in accordance with the Note Purchase Agreement. The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods, all as determined by the officers executing such Notes, as evidenced by their execution of such Notes.  The aggregate principal amount of the Notes may from time to time be increased (up to the maximum authorized amou nt) or decreased by adjustments made on the records of the Trustee as hereinafter provided.  The records of the Trustee shall be controlling with regard to the outstanding principal amount of Notes hereunder absent manifest error.

Each Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.  Any endorsement of a Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee, or by the Note Registrar at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.07hereof.

(b)           Each Note issued under this Indenture shall be in all respects equally and ratably secured with each other Note by the Collateral Granted by the Issuer hereunder.  Each Note shall be entitled to the benefits hereof, without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.  Notwithstanding the foregoing, all cash amounts shall be applied by the Trustee in accordance with the express provisions hereof and

(I)           the rights of the Holders of the Class B-1 Notes (1) to receive payments of interest in respect of the Class B-1 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of Class A Notes to receive payment of interest on the Class A Notes and to certain other payments as set forth in Section 13.03 and others entitled to receive payments thereunder and (2) to receive payments of principal in respect of the Class B-1 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of the Class A Notes to receive principal paid on the Class A Notes and to certain other payments, as set forth in Section 13.03 and others entitled to receive payments thereunder; and

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(II)           the rights of the Holders of the Class B-2 Notes (1) to receive payments of interest in respect of the Class B-2 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of Class A Notes and the Class B-1 Notes to receive payment of interest on the Class A Notes and the Class B-1 Notes and to certain other payments as set forth in Section 13.03 and others entitled to receive payments thereunder and (2) to receive payments of principal in respect of the Class B-2 Notes on any Payment Date, on the Stated Maturity Date or on the Redemption Date shall be subordinate to the rights of the Holders of the Class A Notes to receive principal paid on the Class  A Notes and the rights of the Holders of the Class B-1 Notes to receive principal paid on the Class B-1 Notes and to certain other payments, as set forth in Section 13.03 and others entitled to receive payments thereunder.

Section 2.03                      Denomination.  The maximum aggregate stated principal amount of the Class A Notes that may be authenticated and delivered under this Indenture is $20,000,000, the maximum aggregate stated principal amount of the Class B-1 Notes that may be authenticated and delivered under this Indenture is $750,000 and the maximum aggregate stated principal amount of the Class B-2 Notes that may be authenticated and delivered un der this Indenture is $750,000, except for Notes authenticated and delivered upon registration of transfer, or in exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.08 or 10.05.  The Notes shall be issuable only as registered Notes without coupons in the denominations of at least $100,000 with respect to any Note and multiples of $1,000 for any amount in excess thereof; provided that the foregoing shall not restrict or prevent the transfer, in accordance with Sections 2.06 and 2.07, of any “stub” Note with a remaining Outstanding Note Balance of less than $100,000 with respect to any Note.

Section 2.04                      Execution, Authentication, Delivery and Dating.  The Notes shall be executed on behalf of the Issuer by the manual or facsimile signature of one of its authorized officers.  Notes bearing the manual or facsimile signatures of individuals who were at any time authorized officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices subs equent to the authentication or delivery of such Notes.

Each Note shall be dated as of the date of its authentication.  No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee upon receipt of an Issuer Order or by any Authenticating Agent by the manual signature of one of its authorized officers, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

Section 2.05                      [Reserved].

Section 2.06                      Registration, Registration of Transfer and Exchange.

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              (a)           The Issuer shall cause to be kept a register (the “Note Register”) at the office of an agent (the “Note Registrar”), in accordance with Section 7.13, and in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall, on behalf of the Issuer, provide for the registration, issuance and ownership of the Notes and the registration of transfers of the Notes.  The Trustee is hereby appointed the initial Note Registrar.
60; Each Noteholder and, if the Note Registrar is someone other than the Trustee, the Trustee shall have the right to examine the Note Register at all reasonable times and to rely conclusively upon an Officer’s Certificate of the Note Registrar as to the names and addresses of the Noteholders and the principal amounts and numbers of such Notes as held.

(b)           The Notes have not been registered under the Securities Act or the securities laws of any jurisdiction.  Consequently, the Notes are not transferable other than pursuant to Rule 144A or another exemption from registration.  Each Person who has or who acquires any Ownership Interest in a Note shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the provisions of this Section 2.06.

(c)           With respect to any Note, at the option of the Noteholder thereof, Notes may be exchanged for other Notes of any authorized denominations (together with any “stub note” reflecting the remaining principal balance of such Note(s) that is less than the minimum authorized denomination), aggregate principal amount and Stated Maturity Date, upon surrender of the Notes to be exchanged at the Corporate Trust Office.  Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee or its agents shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive.

(d)           With respect to any Note, any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed.  All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same rights, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.  No service charge shall be charged to a Noteholder for any registration of transfer or exchange of Notes, but the Issuer and the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in conn ection with any registration of transfer or exchange of Notes.

(e)           Transfer and Exchange of Notes.  When Notes are presented by a Holder to the Note Registrar with a request:

(i)           to register the transfer of Notes; or

(ii)           to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Note Registrar shall register the transfer or make the exchange as requested; provided, however, that the Notes presented or surrendered for register of transfer or exchange:

(A)           shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Note Registrar duly

executed by such Holder or by his attorney, duly authorized in writing; and

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(B)           shall be accompanied by an Investment Letter substantially in the form of Exhibit E attached hereto shall be delivered by the proposed

transferee to the Issuer and to the Trustee to the effect that such transfer is in compliance with Rule 144A.

(f)            [Reserved]

(g)           Each purchaser of a Note or an interest in a Note, other than any Initial Purchaser, will be deemed to have represented and agreed as follows:

(i)           It understands that the Notes will be offered and may be resold by the applicable Initial Purchaser only to QIBs pursuant to Rule 144A.

(ii)           It understands that the Notes have not been registered under, and were transferred to it in a transaction not involving any public offering within the meaning of, the Securities Act, and that if in the future it decides to re-offer, resell, pledge or otherwise transfer such Notes it will do so only in accordance with applicable state securities laws and pursuant to Rule 144A to a Person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, purchasing for its own account or for the account of a QIB, whom the holder has informed that such re-offer, resale, pledge or other transfer is being made in reliance on Rule 144A or to the Issuer pursuant to the terms of the Indenture.

(iii)           It acknowledges that none of the Issuer, the Initial Purchasers or any Person representing the Issuer or any such Initial Purchaser has made any representation to it with respect to the Issuer, any affiliates thereof or the offering or sale of the Notes.  It is purchasing the Notes for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment purposes only, and not with a view to, or for offer or resale in connection with, any distribution thereof in violation of the Securities Act or the applicable state securities laws, subject to any requirements of law that the disposition of its property or the property of such investor account be at all times within its or their control and sub ject to its or their ability to resell such Notes pursuant to Rule 144A.

(iv)           If it is acquiring any Note as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to such account and that it has full power to make the acknowledgments, representations and agreements contained herein on behalf of each such account.

(v)           It is a QIB purchasing for its own account or for the account of another QIB and it, and such other Person (if applicable), are aware that the sale to it is being made in reliance on Rule 144A.

(vi)           It acknowledges that transfers of the Notes shall otherwise be subject in all respects to the restrictions applicable thereto contained in this Indenture.

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(vii)           (A) It is not (and for so long as it holds any Notes or an interest therein will not be), and is not acting on behalf of (and for so long as it holds any Notes or an interest herein will not be acting on behalf of), an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, a plan described in Section 4975(e)(1) of the Code or an entity which is deemed to hold the assets of any such plan (“Plan Assets”) pursuant to 29 C.F.R. Section 2510.3-101 as modified by Section 3(42) of ERISA (the “Plan Asset Regulation”) (each a “Benefit Plan Investor”), (B) (i) its acquisition and continued holding of such Note will be covered by a statutory exemption or a prohibited transaction class exemption issued by the United States Department of Labor, (ii) at the time of acquisition the Notes are rated at least investment grade and (iii) it believes that the Notes are properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations and agrees to so treat such Notes or (C) it has provided the Trustee with an opinion of counsel, which opinion of counsel will not be at the expense of the Trustee, the Issuer, the Servicer or any Initial Purchaser, which opines that the purchase, holding and transfer of such Note o r interest therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Trustee, the Issuer, the Servicer or any Initial Purchaser to any obligation in addition to those undertaken herein.

(viii)           It acknowledges and agrees to treat the Notes as debt for all federal, state and local income tax purposes.

(ix)           [Reserved.]

(x)           It is purchasing one or more Notes in an amount of at least $100,000, and it understands that such Notes may be resold, pledged or otherwise transferred in an amount of at least $100,000 (unless the outstanding principal amount of such Note shall be less than $100,000).

(xi)           It understands that the Notes will bear a legend substantially to the following effect unless the Issuer determines otherwise consistent with applicable law:

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS.  THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES (1) THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND (A) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT, OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB AND TO WHOM NOTICE IS GIVEN THAT RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR TO THE ISSUER PURSUANT TO THE TERMS OF THE INDENTURE, OR (B) PURSUANT TO AN

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EFFECTIVE REGISTRATION STATEMENT, AND (2) THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TO BE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.  THE INDENTURE RELATING TO THIS NOTE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN IN VIOLATION OF THE FOREGOING.  EACH TRANSFEREE ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE IS DEEMED TO REPRESENT TO THE ISSUER AND THE SERVICER THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.  EACH HOLDER HEREOF IS DEEMED TO REPRESENT AND WARRANT EITHER (A) THAT IT IS NOT (AND FOR SO LONG AS IT HOLDS THIS NOTE OR AN INTEREST HEREIN WILL NO T BE), AND IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THIS SECURITY OR AN INTEREST HEREIN WILL NOT BE ACTING ON BEHALF OF), AN “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”) THAT IS SUBJECT TO TITLE I OF ERISA, A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY WHICH IS DEEMED TO HOLD THE ASSETS OF ANY SUCH PLAN (“PLAN ASSETS”) PURSUANT TO 29 C.F.R. SECTION 2510.3-101 AS MO DIFIED BY SECTION 3(42) OF ERISA (THE “PLAN ASSET REGULATION”) (EACH A “BENEFIT PLAN INVESTOR”), (B) (I) ITS PURCHASE AND OWNERSHIP OF THIS SECURITY WILL BE COVERED BY A PROHIBITED TRANSACTION CLASS EXEMPTION ISSUED BY THE UNITED STATES DEPARTMENT OF LABOR, (II) AT THE TIME OF ACQUISITION THE NOTES ARE RATED AT LEAST INVESTMENT GRADE AND (III) IT BELIEVES THAT THE NOTES ARE PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE PLAN ASSET REGULATIONS AND AGREES TO SO TREAT SUCH NOTES  OR (C)  IT HAS PROVIDED THE TRUSTEE WITH AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL NOT BE AT THE EXPENSE OF THE TRUSTEE, THE ISSUER, THE SERVICER OR THE APPLICABLE INITIAL PURCHASER, WHICH OPINES THAT THE PURCHASE, HOLDING AND TRANSFER OF SUCH NOTE OR INTEREST THEREIN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE TRUSTEE, THE ISSUER, THE SERVICER OR THE APPLICABLE INITIAL PURCHASER TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE INDENTURE. THE NOTES OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED ONLY IN PERMITTED DENOMINATIONS SPECIFIED IN THE INDENTURE.  ACCORDINGLY, AN INVESTOR IN THIS NOTE MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

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(xii)           It acknowledges that the Issuer, the Servicer, each Initial Purchaser and others will rely on the truth and accuracy of the foregoing acknowledgments, representations and agreements, and agrees that if any of the foregoing acknowledgments, representations and agreements deemed to have been made by it are no longer accurate, it shall promptly notify the Issuer, the Servicer and each Initial Purchaser.

(h)           Except as otherwise required under the Note Purchase Agreement, neither Initial Purchaser shall be required to deliver, and neither the Issuer nor the Trustee shall demand therefrom, any of the certifications or opinions described in this Section 2.06 in connection with the initial issuance of the applicable Notes and the delivery thereof by the Issuer.

Section 2.07                      Mutilated, Destroyed, Lost or Stolen Note.(a) If (i) any mutilated Note is surrendered to the Trustee or the Issuer, or the Trustee and the Issuer receive evidence to their reasonable satisfaction of the destruction, loss or theft of any Note, and (ii) in the case of a destroyed, lost, or stolen Note, there is deli vered to the Trustee and the Issuer such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee and the Issuer that such Note has been acquired by a bona fide purchaser and provided that the requirements of Section 8-405 of the UCC are satisfied, the Issuer shall execute and, upon a written request therefor by the Trustee and the Issuer shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of the same Class, tenor and Principal Balance, bearing a number not contemporaneously outstanding. If, after the delivery of such new Note, a bona fide purchaser of the original Note in lieu of which such new Note was issued presents such original Note for payment, the Trustee and the Issuer shall be entitled to recover such new Note from the Person to whom it was delivered or any Person taking title there from, except a bona fide purchaser, and the Trustee and the Issuer shall be e ntitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Trustee and the Issuer, in connection therewith. If any such mutilated, destroyed, lost or stolen Note shall have become or shall be about to become due and payable in full, or shall have been called for redemption in full, instead of issuing a new Note, the Issuer may pay such Note without surrender thereof, except that any mutilated Note shall be surrendered.

Upon the issuance of any new Note under this Section, the Issuer or the Note Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Subject to the above provisions of this Section 2.07, every new Note issued pursuant to this Section 2.07, in lieu of any destroyed, lost or stolen Note, shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

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The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.08                      Payment of Principal and Interest; Rights Preserved.

(a)           For each applicable Interest Accrual Period, the Notes of each Class shall accrue interest on the Outstanding Note Balance thereof at the Note Rate applicable to such Class; provided however, that with respect to each Class of Notes and on each Payment Date, interest shall be deemed not to have accrued during the previous Interest Accrual Period on an amount equal to the Impairment of such Class of Notes.  Notwithstanding the foregoing, if, on any subsequent Payment Date and with respect to each Class of Notes, no Impairment is allocated to such Class of Notes, all Deferred Interest for such Class of Notes shall be deemed to have accrued during the immedi ately preceding Interest Accrual Period and be payable on such Payment Date as Note Current Interest.  All interest and fees accrued hereunder on the Class A Notes, the Class B-1 Notes and the Class B-2 Notes shall be calculated on the basis of a three-hundred-sixty (360)-day year comprised of twelve 30-day months and shall accrue through the day preceding the Stated Maturity Date and, to the extent that the payment of such interest shall be legally enforceable (except with respect to Deferred Interest), on any overdue payment of interest at the Note Rate from the date such interest becomes due and payable (giving effect to any applicable grace periods herein) until fully paid.  All accrued interest shall be due and payable in arrears on each Payment Date and shall be paid by the Trustee to the Noteholders in accordance with Section 13.03.  In making any interest payment, if the interest calculation with respect to a Note shall result in a portion of such payment being less than $0.01, then such payment shall be decreased to the nearest whole cent, and no subsequent adjustment shall be made in respect thereof.

(b)           The principal of each Note shall be payable on each Payment Date beginning on the Initial Payment Date unless such Note becomes due and payable at an earlier date by call for redemption in accordance with Article XI.  The installment of principal due on the Class A Notes on any Payment Date shall, to the extent of cash flow available therefor in accordance with Section 13.03 on such Payment Date, be paid as set forth in Section 13.03(c)(viii).  The installment of principal due on the Class B-1 Notes on any Payment Date shall, to the extent of cash flow available therefor in accordance with Section 13.03 on such Payment Date, be paid as set forth in Section 13.03(c)(ix).  The installment of principal due on the Class B-2 Notes on any Paym ent Date shall, to the extent of cash flow available therefor in accordance with Section 13.03 on such Payment Date, be paid as set forth in Section 13.03(c)(x).  All unpaid principal on any Note (together with interest thereon and all other amounts due and payable hereunder or in respect of the Notes) shall be due and payable in full on the Stated Maturity Date for such Note.  All reductions in the principal amount of a Note effected by payment of such installments of principal shall be binding upon all future Noteholders of such Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note.  Principal shall be payable to Noteholders in the same Class on a pro rata basis based upon the relative Outstanding Note Balance of the Notes in such Class as of the related date of determination; providedthat, if as a result of such proration a portion of such principal would be less than $0.01, then such payment shall be decreased to the nearest whole cent, and such portion shall be applied to the next succeeding principal payment.

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(c)           The principal (other than principal to be deposited into the Prefunding Account in accordance with Sections 13.03(c)(viii), 13.03(c)(ix) and 13.03(c)(x)) of and interest on the Notes, and other amounts payable to the Noteholders under Section 13.03, are payable, through the Paying Agent on behalf of the Issuer, by check mailed by first-class mail to the Person whose name appears as the Registered Holder of such Note on the Note Register at the address of such Person as it appears on the Note Register or, at the option of any Noteholder, by wire transfer in immediately available funds to the account specified in writing to the Trustee by such Registered Holder at least five (5) Business Days prior to the Record Date for the Payment Date on which wire transfe rs will commence, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.  All payments on the Notes shall be paid without any requirement of presentment.  The Issuer shall notify the Person in whose name a Note is registered at the close of business on the Record Date immediately preceding the Payment Date on which the Issuer expects that the final installment of principal of such Note will be paid.  Such notice shall be mailed no later than the tenth (10th) day prior to such Payment Date and shall specify the place where such Note may be surrendered.  Funds representing any such checks returned undeliverable shall be held in accordance with Section 7.15.  Each Noteholder shall promptly surrender its Note to the Trustee at the Corporate Trust Office or in the case of mutilated, destro yed, lost or stolen Notes, as provided in Section 2.07, upon payment of the final installment of principal of such Note.

Section 2.09                      Persons Deemed Owner.  Prior to due presentment for registration of transfer of any Note, the Issuer, the Trustee, the Note Registrar, the Paying Agent and any agent of any of the foregoing shall treat the Person in whose name any Note is registered in the Note Register as the owner of such Note for the purpose of receiving payments of principal and interest on such Note and for all other purposes whatsoever, whe ther or not such Note be overdue, and none of the Issuer, the Trustee, the Note Registrar, the Paying Agent or any agent of the foregoing shall be affected by notice to the contrary.

Section 2.10                      Cancellation.  All Notes surrendered to the Trustee for payment, registration of transfer or exchange (including Notes surrendered to any Person other than the Trustee which shall be delivered to the Trustee) shall be promptly canceled by the Trustee.  No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.11, except as expressly permitted by this Indenture.  All canceled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its standard practice.

Section 2.11                      Tax Treatment; Withholding Taxes.

(a)           The Issuer has structured the transaction contemplated by this Indenture and the Notes with the intention that the Notes will qualify under applicable tax law as indebtedness of the Issuer.  The Issuer, the Trustee, the Servicer, the Back-up Servicer, each Noteholder and each beneficial owner of a Note by acceptance of its Note or a beneficial interest therein, each agree to treat the Notes as indebtedness of the Issuer for all tax purposes and further agrees not to take any action inconsistent with such treatment, unless and to the extent otherwise required by any taxing authority under applicable law.

Notwithstanding anything in any Transaction Document to the contrary, effective from the date of commencement of discussions with respect to the transactions contemplated by such documents, all parties hereto and the Noteholders may disclose to any and all Persons, without limitation of any kind, the U.S. Federal income tax treatment and tax structure of the Notes and the transactions contemplated hereby and all materials of any kind, including tax opinions or other tax analyses, if any, that are provided to such Persons regarding such tax treatment.

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(b)           Notwithstanding any other provision in this Indenture to the contrary or the other Transaction Documents, the Trustee, as Paying Agent for and on behalf of, and at the direction of the Servicer, shall comply with any and all federal withholding requirements under applicable law, as modified by the practice of any relevant taxing authority then in effect.  If any withholding tax is imposed on any payment by the Issuer (or allocation of income) under the Notes, such tax shall reduce the amount otherwise payable to such Noteholder.  Any amounts so withheld shall be treated as having been paid to the related Noteholder for all purposes of this Indenture.  Failure of a Noteholder or a beneficial owner of a Note to provide the Trustee or other paying agent with appropriate tax certificates may result in amounts being withheld from the payment to such Noteholder or beneficial owner.  In no event shall the consent of Noteholders be required for any withholding.

ARTICLE III

ACQUISITIONS OF CONTRACTS

Section 3.01                      Conditions to the Acquisition of Contracts.  Each acquisition by the Issuer of a Contract from the Originator on any Acquisition Date is subject to the conditions specified in Section 3.04 of the Servicing Agreement, in the case of Substitute Contracts, and Section 13.06 hereof, in case of Purchased Contracts, including, in each case, satisfaction of the following conditions on the relevant date specified below:< /font>

(a)           By 10:00 am (New York time) on the Business Day prior to any proposed Acquisition Date, the Originator shall have delivered to each Initial Purchaser, the Issuer, the Trustee,the Custodian and the Back-up Servicer (A) a draft Transfer Certificate substantially in the form set forth on Exhibit F attached hereto (the “Transfer Certificate”), (B) a draft Amendment to Contract Schedule containing the information required to be pro vided with respect to the Substitute Contracts and/or Purchased Contracts and related Contract Assets to be acquired by the Issuer on such Acquisition Date, as specified in the definition of Contract Schedule, (C) if applicable, a draft of the Release Agreement relating to any Existing Indebtedness, and (D) a draft Assignment Agreement and draft Exception Report with respect to each Substitute Contract and Purchased Contract to be acquired by the Issuer on such Acquisition Date.

(b)           Not later than the Acquisition Date, the Issuer shall have delivered or shall have caused to be delivered to the Custodian, the Contract Files relating to the Contracts to be purchased or substituted in accordance with Section 4.03(a).

(c)           Not later than the third Business Day after the related Acquisition Date, the Custodian shall deliver to each Initial Purchaser, the Issuer and the Trustee an executed Custodian Certificate and Exception Report resulting from the Custodian’s review of the related Substitute Contracts and Purchased Contracts and the Contract Files related thereto pursuant to Section 4.03(b). In accordance with Section 4.04(a), each Contract identified as having exceptions in such Exception Report shall be subject to a Warranty Event.

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(d)           By 11:00 am (New York time) on the proposed Acquisition Date, the Originator shall cause to be delivered the final executed Assignment Agreement, Amendment to Contract Schedule, and Release Agreement (if applicable) along with a final executed Transfer Certificate, in each case, such document or certificate containing changes from the draft document delivered pursuant to Section 3.01(a) above, if any.  The Transfer Certificate shall confirm that (A) each Substitute Contract or Purchased Contract, as applicable, is a Contract that satisfies each of the representations and warranties set forth in Clause (C) or (D) of the related Assignment Agreement, (B) all applicable filings required under Sections 4.01(a)(v) and 4.02 have been made or are in effect, (C) no Event of Default shall exist prior to or after giving effect to the acquisition of such Substitute Contracts and/or Purchased Contracts and (D) all other conditions to the acquisition of Substitute Contracts or Purchased Contracts, as applicable, have been satisfied except for the conditions set forth in Section 3.01(b) and Section 3.01(c).

A document or certificate described in clause (a), (b), (c) or (d) above shall be regarded as timely delivered if it is delivered by telecopy (with written confirmation of transmission) as of the applicable time described above; provided that, the originally executed copy shall be delivered by the applicable party promptly thereafter.

(e)           With respect to any Contract substituted for an Early Termination Contract, the Issuer shall be allowed to use the Collections received in respect thereof to purchase a new Substitute Contract in lieu of distributing such Collections in accordance with Section 13.03, provided that, such purchase of a Substitute Contract shall occur simultaneously with the Issuer’s receipt of such Collections or such Collections shall be held not later than the Payment Date (or the then current Collection Period) on deposit in the Collection Account until such Substitu te Contract is so purchased; provided, further, that if such Substitute Contract is not purchased on or before the immediately following Payment Date such Collections shall be disbursed in accordance with Section 13.03.  Notwithstanding the foregoing, any Substitute Contract so substituted for such Early Termination Contract, and related Contract Assets, must meet the same requirements as those specified in the form of Assignment Agreement attached to the Purchase and Contribution Agreement.

(f)           If a Contract is to be removed and replaced with another lease or equipment finance contract transferred to the Issuer by the Servicer pursuant to the Servicing Agreement, such “substitute” lease or equipment finance contract shall become a Contract for all purposes of the Transaction Documents and may be referred to as a Substitute Contract.  Acquisition of any Substitute Contract shall be subject to the satisfaction of the conditions described in this Article III.

(g)           Upon satisfaction of the conditions specified in the Transaction Documents, including this Section 3.01, and any conditions to the repurchase of Contracts under the Purchase and Contribution Agreement or substitution or purchase of Contracts under the Servicing Agreement (as the case may be), the Trustee shall, upon receipt of the Contract Repurchase Price and/or the Substitute Contract, and the Request for Release, release the Contract and related Contract Assets being purchased or substituted for by the Servicer, or repurchased by the Originator, from the Lien of this Indenture.

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(h)           In addition to the conditions specified above, at no time may the sum of (1) the aggregate Discounted Contract Balance of Substitute Contracts (as measured on their respective Acquisition Dates), (2) the aggregate Discounted Contract Balance of Contracts (as measured on their respective dates of repurchase), in each case either substituted for or repurchased by LEAF Financial Corporation (as initial Servicer) or repurchased by the Originator, but excluding Contracts repurchased pursuant to Warranty Events and (3) the aggregate amount of payments made by LEAF Financial Corporation under the Limited Guaranty (in no case, to exceed $2,000,000), exceed 10.00% of the aggregate Discounted Contract Balance of all Purchased Contracts (as measured on their respective Acquisit ion Dates). The Trustee and Custodian shall have no duty to monitor the limit set forth in this Section 3.01(h).

(i)           In addition to the conditions specified above, on such proposed Acquisition Date other than any date of repurchase of Contracts under the Purchase and Contribution Agreement or any substitution or purchase of Contracts under the Servicing Agreement (as the case may be), the aggregate Discounted Contract Balance of the Contracts already under review of the Custodian in accordance with Section 4.03 shall not exceed $2,000,000. Under no circumstances shall the Trustee or Custodian be obligated to determine or liable for any incorrect determinations of such amount.

(j)           In addition to the conditions specified above, on such proposed Acquisition Date other than any date of repurchase of Contracts under the Purchase and Contribution Agreement or any substitution or purchase of Contracts under the Servicing Agreement (as the case may be), the aggregate Discounted Contract Balance of the Contracts to be acquired on such date shall be equal to or greater than $1,000,000.  Under no circumstances shall the Trustee or Custodian be obligated to determine or liable for any incorrect determinations of such amount.

ARTICLE IV

ISSUANCE OF NOTES; CERTAIN ISSUER AND CUSTODIAN OBLIGATIONS

Section 4.01                      Conditions to Issuance of Notes.  All Notes shall be executed by the Issuer and delivered to the Trustee for authentication.  The Notes issued on the Closing Date shall be authenticated and delivered by the Trustee upon Issuer Order and upon satisfaction of the following conditions precedent:

(a)           receipt by the Trustee, or itsagents, of the following, in form and substance satisfactory to the Initial Purchasers, which satisfaction shall be evidenced to the Trustee by receipt of item 4.01(a)(xv) below from the Initial Purchasers:

(i)           a copy of an officially certified document, dated not more than ten (10) days prior to the Closing Date, evidencing the due organization and good standing of each of the Issuer, the Servicer and the Originator;

(ii)           certified copies of the organizational documents (together with all amendments thereto) of the Issuer, the Servicer and the Originator, along with certified resolutions or certified executed consents of each of the Issuer, the Servicer and the Originator, authorizing the execution, delivery and performance of the Transaction Documents and the transactions contemplated by the Transaction Documents by such entities and certificates evidencing the incumbency of the officers executing such Transaction Documents;

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(iii)           certified copies of requests for information or copies (or a similar search report certified by a party acceptable to the Initial Purchasers), dated a date reasonably near to the Closing Date (no earlier than ten (10) days prior to the Closing Date), listing all effective tax and judgment liens and financing statements which name the Originator as debtor and which are filed in the jurisdictions in which the statements referred to in clause (v)(1) below were or are to be filed, together with copies of such tax and judgment liens and financing statements (none of which, other than financing statements naming the party under the Transaction Documents to which transfers (including grants of security interests) thereunder purport to have been made, shall cove r any of the property purported to be conveyed thereunder);

(iv)           certified copies of requests for information or copies (or a similar search report certified by a party acceptable to the Initial Purchasers’ counsel), dated a date reasonably near to the Closing Date (no earlier than ten (10) days prior to the Closing Date), listing all effective tax and judgment liens and financing statements which name Issuer (under its present name and any previous name) as debtor and which are filed in the jurisdictions in which the statements referred to in clause (v)(2) below were or are to be filed, together with copies of such tax and judgment liens and financing statements (none of which, other than financing statements naming the party under the Transaction Documents to which transfers (including grants of security intere sts) thereunder purport to have been made, shall cover any of the property purported to be conveyed thereunder);

(v)           except as otherwise provided below, evidence of filing (or evidence of delivery for filing to the appropriate filing offices) of, and each of the following, together with evidence of all filing fees, taxes or other amounts required to be paid in connection with the following have been paid:

(1)           UCC-1 financing statements, for filing with the Secretary of State of the State of Delaware, naming the Originator, as debtor, the Issuer, as assignor secured party, and the Trustee, for the benefit of the Secured Parties, as the total assignee secured party;

(2)           UCC-1 financing statements, for filing with the Secretary of State of the State of Delaware, naming the Issuer, as debtor, and the Trustee, for the benefit of the Secured Parties, as Secured Party;

(3)           such other, similar instruments or documents, as may be necessary or, in the opinion of any Noteholder, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the transfers (including grants of security interests) under the Transaction Documents;

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               (vi)           a fully executed original counterpart of the Purchase and Contribution Agreement, this Indenture, the Servicing Agreement, the Securities Account Control Agreement, the Limited Guaranty and the Note Purchase Agreement shall have been received by the Initial Purchasers or its agents;

(vii)           a copy of the fully executed Lockbox Intercreditor Agreement and the Joinder to Lockbox Intercreditor Agreement shall have been received by the Initial Purchasers or its agents;

(viii)           written evidence of establishment of the Reserve Account, the Collection Account, the Prefunding Account, the Capitalized Interest Account and continued existence of the Lockbox Account;

(ix)           a certificate listing the Servicing Officers of the Servicer as of the Closing Date;

(x)           [Reserved]

(xi)           executed favorable legal opinions of counsel to the Servicer, the Guarantor, the Originator, the Seller, the Issuer, the Custodian, the Trustee and the Back-up Servicer, addressed to the Trustee, the Back-up Servicer and each Initial Purchaser (as applicable), dated the Closing Date and covering general corporate matters, the due execution and delivery of, and the enforceability of, each of the Transaction Documents to which the Servicer, the Guarantor, the Originator, the Seller, the Issuer, the Back-up Servicer, the Custodian and the Trustee (individually or in any other capacity) is party, true sale and non-consolidation, security interest and such other matters as the Initial Purchasers may request;

(xii)           certificates of the Secretary or Assistant Secretary of each of the Servicer, the Issuer and the Originator, dated as of the Closing Date, and certifying (A) that attached thereto is a true, complete and correct copy of (a) the organizational documents of the Servicer, the Originator and the Issuer (as applicable), and (b) resolutions duly adopted by the Servicer, the Issuer and the Originator authorizing the execution, delivery and performance of the Transaction Documents to which it is a party and the transactions contemplated thereunder, and that such resolutions have not been amended, modified, revoked or rescinded, and (B) as to the incumbency and specimen signature of each officer executing any Transaction Documents on behalf of the Servi cer, the Issuer and the Originator (as the case may be);

(xiii)           copies of all waivers, licenses, approvals or consents, if any, required or advisable, in the opinion of the Initial Purchasers, in connection with the execution, delivery and performance by the Servicer, the Issuer and the Originator (as the case may be) of the Transaction Documents (and the validity and enforceability thereof), which waivers, licenses, approvals or consents shall be in full force and effect;

(xiv)           written confirmation of the payment (or deposit for payment with the Trustee) of all fees and expenses of the Trustee, the Custodian, the Back-up Servicer, each Initial Purchaser (including the fees and charges of their respective agents, auditors and counsel) accrued as of the Closing Date;

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(xv)           [Reserved];

(xvi)           [Reserved].

(xvii)           such additional documents, instruments, certificates, opinions, ratings letters or other confirmations as the Initial Purchasers may reasonably request.

(b)           all Collateral in which a security interest has been granted to the Trustee under the Indenture shall be subject to no other Liens other than Permitted Liens.

Section 4.02                      Security for Notes.

(a)           The Servicer shall at its own expense, in consideration of the Servicer Fee, cause to be filed the financing statements and assignments described in Sections 4.01(a)(v) and 4.02(b) in accordance with such Sections.  In addition, from time to time, the Servicer shall take or cause to be taken at its own expense, in consideration of the Servicer Fee, any other such actions and execute such documents as are necessary to perfect and protect the Issuer’s precautionary security interest against the Originator in respect of the Contract Assets and the assignment to the Trustee thereof, and the Trustee’s security interests in and liens on the Collateral against all other Persons, including the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title; provided that, none of the Servicer, the Originator nor the Issuer shall be required to file UCC-1 financing statements against Obligors with respect to a Contract related to Equipment that had an original equipment cost at origination of less than (A) if such Contract is a secured loan or finance lease that provides for a $1 purchase option, $25,000, or (B) if such Contract provides for a “fair market value” purchase option, $50,000 or to file or record assignments of any UCC-1 financing statements or other lien recordings or notations made against any Obligor.  Notwithstanding anything to the contrary contained herein , if the Servicer is not LEAF Financial Corporation or one of its Affiliates, the successor Servicer shall not be responsible for the initial filings of any UCC financing statements, or any continuation statements filed by any predecessor Servicer, or the information contained therein (including the exhibits thereto), the perfection of any such security interests during the term of such predecessor Servicer, or the accuracy or sufficiency of any description of collateral in such filings, and the successor Servicer shall be fully protected in relying on such initial filings and any continuation statements or modifications thereto made by a predecessor Servicer pursuant to this Section 4.02 but shall continue to be responsible for requirements expressed above during the period it acts as Servicer.

(b)           If any change in the Servicer’s or the Issuer’s name, identity, structure or the location of its principal place of business, chief executive office or State of organization occurs, then such party shall deliver thirty (30) days’ prior written notice of such change or relocation to the Servicer, the Trustee and the Back-up Servicer, and, no later than the effective date of such change or relocation, the Servicer shall file or cause to be filed such amendments or statements as may be required to preserve and protect the Issuer’s precautionary security interest against the Originator in respect of t he Contract Assets and the assignment to the Trustee thereof, and the Trustee’s security interest in and liens on the Collateral.

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(c)           During the term of this Indenture, the Issuer will maintain its sole state of organization in the State of Delaware, and the Servicer will maintain its sole state of incorporation in a State of the United States.

Section 4.03                      Review of Contract Files.

(a)           Not later than each Acquisition Date, the Issuer shall cause to be delivered to the Custodian the documents comprising the Contract Files for the Contracts to be acquired on such Acquisition Date.  Each Contract and the folder containing other Contract Files documents for such Contract shall be clearly marked with a LEAF Contract Number, which LEAF Contract Number shall be used by the Issuer, the Trustee and the Custodian to identify such Contract on the Contract Schedule.

(b)           Not later than the third Business Day after each Acquisition Date, for each Purchased Contract and Substitute Contract, the Custodian will review the Contract Files related to each proposed Purchased Contract and Substitute Contract and shall perform such reviews as are sufficient to enable it to confirm the items required to be certified by it in the Custodian Certificate in the form attached hereto as Exhibit C.  By execution and delivery of any such Custodian Certificates, the Custodian shall evidence completion of such review and confirmation.  Other than the exceptions permitted in Section 4.04(a), the Custodian shall include in any Exception Report any failure of a document to correspond to the information on the Amendment to Contract Schedule or the absence of any one or more of the documents comprising the Contract Files for such Contract and shall deliver such Exception Report to the Servicer, the Trustee and the Issuer.

(c)           If any Contracts or Contract Assets to be pledged to the Trustee are Contracts or Contract Assets that at any time were subject to a Lien in favor of a Person that has held a Lien thereon, concurrently with the delivery of an Officer’s Certificate, the Issuer shall have delivered to (x) the Custodian (with a copy to the Trustee) a facsimile copy or an original executed Release Agreement from each Person that has held a Lien on the applicable Contract and/or Contract Assets, together with the certification in the Officer’s Certificate that each such Release Agreement constitutes a release of such Person’s security interest in each such Contract and/or Contract Asset (and the other Collateral related thereto), and (y) the Custodian (with a copy t o the Trustee) the original UCC partial or full release relating to the Release Agreement described in clause (x) above.

(d)           The Custodian shall use reasonable care in the performance of its duties under the Transaction Documents, shall identify and segregate all items constituting the Contract Files and shall maintain continuous custody of all items constituting the Contract Files in secure, fire resistant facilities in accordance with customary standards for such custody.  The Custodian makes no representations as to and shall not be responsible to verify (i) the validity, legality, enforceability, sufficiency, due authorization or genuineness of any document constituting Contract Files or of any of the Contracts or (ii) the collectibility, insurability, effectiveness or suitability of any Contract.

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(e)           The Custodian shall hold all Contracts and all other Collateral delivered to it pursuant to the Transaction Documents as Custodian for the benefit of the Trustee (for the benefit of the Secured Parties).  With respect to each item of Contract Files delivered to the Custodian, the Custodian shall (i) hold all documents constituting such Contract Files received by it for the exclusive use and benefit of the Trustee (for the benefit of the Secured Parties) and (ii) make disposition thereof only in accordance with the terms of this Indenture and the Servicing Agreement.

(f)           In the event that (i) the Trustee, the Servicer, the Issuer or the Custodian shall be served by a third party with any type of levy, attachment, writ or court order with respect to any Contract Files or (ii) a third party shall institute any court proceeding by which any Contract Files shall be required to be delivered otherwise than in accordance with the provisions of this Indenture, the party or parties receiving such service shall promptly deliver or cause to be delivered to the other parties to this Indenture copies of all court papers, orders, documents and other materials concerning such proceedings.  The Custodian shall continue to hold and maintain all the Contract Files that is the subject of such proceedings pending a final order of a c ourt of competent jurisdiction permitting or directing disposition thereof.  Upon final determination of such court, the Custodian shall deliver such Contract Files as directed by such determination or, if no such determination is made, in accordance with the provisions of this Indenture.  Expenses of the Custodian incurred as a result of such proceedings shall be borne by the Issuer.

(g)           At its own expense, the Custodian shall maintain at all times prior to the satisfaction and discharge of this Indenture and keep in full force and effect fidelity insurance, theft of documents insurance, forgery insurance and errors and omissions insurance.  All such insurance shall be in amounts, with standard coverage and subject to deductibles, all as is customary for insurance typically maintained by banks which act as custodian of collateral substantially similar to the Collateral.  Upon at least ten (10) days’ prior written request, the Issuer and/orthe Servicer shall be entitled to receive a certificate of the Custodian 217;s respective insurer that such insurance is in full force and effect.

Section 4.04                      Defective Contracts.

(a)           Check-in Procedures. If, upon its examination of any Contract File in accordance with Section 4.03 hereof, the Custodian determines that such Contract File does not satisfy the requirements described in Section 4.03(b), or is unable to confirm that such requirements have been met, the Custodian shall promptly notify the Servicer and the Originator by telephone or telecopy.  If the Originator or Servicer does not satisfy the Custodian in accordance with the foregoing sentence prior to the third Business Day after the applicable Acquisition Date, the Custodian shall return the applicable Contract and related files to the Originator, or as otherwise directed by the Originator. Any such returned Contracts and related files shall be subject to a Warranty Event unless the Majority Holders approve the exceptions with respect to such Contract and allow the inclusion of such Contract that the Custodian has identified as defective in its review under Section 4.03(b), all parties agreeing that such approval shall be valid with respect to such included Contract, but shall not constitute a course of dealing, and the allowance of such included Contract shall not operate as a waiver of any rights of the Trustee or any Secured Party hereunder, under the Purchase and Contribution Agreement, the Assignment Agreements or any other Transaction Documents with respect to any adverse consequence caused by such defect.

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(b)           Warranty Repurchases. If a Responsible Officer of the Trustee, or if another party to any of the Transaction Documents, notifies the Servicer, the Originator, the Back-up Servicer or the Issuer of the existence of any Warranty Event, the Servicer (pursuant to the Servicing Agreement) or the Originator (pursuant to the Purchase and Contribution Agreement) shall (i) cure the breach(es) which caused the Warranty Event or (ii) repurchase or substitute (if the Servicer), as applicable, such Contract and related Contract Assets at the Contract Repurchase Price or for a Substitute Contract, respectively, as required in accordance with Sect ion 6.1(a) of the Purchase and Contribution Agreement or Section 3.09 of the Servicing Agreement.  If any such Contract is substituted or repurchased by the Servicer in accordance with the provisions of the Servicing Agreement, or repurchased by the Originator pursuant to the Purchase and Contribution Agreement, and the Trustee has received a written request in the form attached hereto as Exhibit B-1 relating thereto, the Trustee shall (or cause the Custodian to), upon receipt of the applicable Contract Repurchase Price, but subject to Section 4.07 hereof, return the affected Contract and related files to the Issuer (or, if the Issuer so requests, directly to the Servicer or the Originator, as the case may be), release its interest therein and in the related Contract Assets, and such items shall no longer constitute a Contract or Contract Asset hereunder and shall be releas ed from the Lien of this Indenture.

Section 4.05                      Reserved.

Section 4.06                      Administration of the Contract Assets.  The Contract Assets shall be serviced by the Servicer in accordance with the terms of the Servicing Agreement.  The Servicer, as agent of the Issuer prior to the occurrence of an Event of Default, shall have the right to provide any notices and instructions to Obligors in connection with the Contract Assets.  In the event that the Issuer or the Trustee r eceives any notices, requests for information or other communication from an Obligor, it shall immediately forward such communication to the Servicer.  The Trustee shall deposit any Collections received by it in the Collection Account, in accordance with Section 13.02 and it shall deliver written or electronic statements regarding such collections and deposits to the Servicer at least monthly.  The Trustee shall have no obligation to advance its own funds to the Collection Account.  In the absence of an Event of Default, the Trustee shall not contact any Obligor or take any action with respect to the enforcement, modification or release of any Contract against an Obligor without the express written authorization of the Servicer or the Issuer.

Section 4.07                      Releases.

(a)           The Issuer shall be entitled to obtain a release from the Lien of this Indenture for any individual Contract and the related Contract Assets at any time after all of the conditions for such release set forth in the Transaction Documents have been satisfied and (i) after a payment by the Originator or the Servicer, as applicable, under the provisions of the relevant Transaction Documents, of the related Contract Repurchase Price therefor or (ii) after a Substitute Contract and the related Contract Assets are substituted for such Contract and the related Contract Assets in accordance with the Transaction Documents.  In order to effect any such release, the Servicer, on behalf of the Issuer, shall deliver to each Initial Purchaser, the Trustee and the Custodian in accordance with the Transaction Documents a Request for Release, in the form attached hereto Exhibit B-1, (1) identifying the Contracts and

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the related Equipment to be released, (2) requesting the release thereof, (3) setting forth the amount deposited in the Collection Account with respect thereto, and identifying the Substitute Contract substituted therefor in the event that the subject Contracts and the related Equipment are being released from the Lien of this Indenture pursuant to clause (ii) above, (4) certifying that the amount deposited in the Collection Account equals the Contract Repurchase Price relating to such Contracts and the related Equipment in the event that the subject Contracts and the related Equipment are being released from the Lien of this Indenture pursuant to clause (i) above and (5) certifying that all other conditions precedent set forth in the Transaction Documents relating to such release have been satisfied.  The Trustee, upon receipt of a written request in the form attached hereto as Exhibit B-1, and the Trustee’s confirmation that the related (i) Contract Repurchase Price has been deposited into the Collection Account or (ii) Substitute Contract has been substituted for the Contract, shall execute instruments to release a Contract from the lien of this Indenture, or convey the Trustee’s interest in the same.

(b)           Upon receipt of the Request for Release from the Servicer in the form attached hereto as Exhibit B-1, including a certification that all of the conditions specified in clause (a) of this Section 4.07 have been satisfied, and provided that if Item 7 of the Request for Release has been checked, all other certifications and documents required under the terms of this Indenture have been received by the Trustee, the Trustee shall release from the Lien of this Indenture and the Custodian shall deliver to the Issuer or upon Issuer Order the Contracts and all related Contract Assets described in the Issuer’s Request for Release.

(c)           The Custodian may, if requested by the Servicer, in the form attached hereto as Exhibit B-1, for purposes of servicing a Contract, temporarily deliver to the Servicer the original Contract.  Any Contract temporarily delivered from the custody of the Custodian to the Servicer or its agents shall have affixed to such Contract a copy of such written request in the Form of Exhibit B-1, which shall contain a legend to the effect that the Contract is the property of the Issuer and has been pledged to U.S. Bank National Association, a s Trustee for the benefit of the Secured Parties.  The Servicer shall promptly return the Contract to the Custodian, along with a letter attached hereto as Exhibit B-2, upon the need therefor no longer existing; provided that if an Event of Default has occurred, the Servicer shall forthwith return to the Custodian each Contract temporarily delivered pursuant to this Section 4.07.

ARTICLE V

SATISFACTION AND DISCHARGE

Section 5.01                      Satisfaction and Discharge of Indenture.

(a)           Following (i) payment in full of (A) all of the Notes, (B) the fees and charges and reimbursements of the Trustee, the Back-up Servicer, the Originator, the Custodian and the Noteholders and (C) all other obligations of the Issuer under this Indenture and the other Transaction Documents and (ii) a written request by the Issuer to the Trustee to terminate this Indenture and release the Collateral, this Indenture shall be discharged and terminated and the lien of this Indenture on the Collateral thereupon shall be released.  All Contract Files shall then include an Officer’s Certificate from the Issuer, stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture with respect to the Notes have been complied with.

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(b)           Upon the discharge and termination of this Indenture, the Trustee shall release from the lien of this Indenture and deliver to the Issuer all remaining Collateral, and the Trustee shall file, or cause to be filed, at the Servicer’s expense, UCC termination statements evidencing such discharge and release; provided, if the Back-up Servicer has become the Servicer, the Servicer shall be entitled to reimbursement of all expenses incurred under this Section 5.01(b) by the Issuer payable solely from amounts that are available to the Servicer therefore under Section 13.03 of the Indenture.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.01                      Events of Default.

“Event of Default” wherever used herein means the occurrence of any one of the following events, unless any such particular occurrence is waived as an “Event of Default” in writing in accordance with the provisions of this Indenture; provided that, unless and until any such waiver is given, an “Event of Default” shall be deemed to exist for all purposes under the Transaction Documents, even if the event giving rise to such Event of Default is no longer continuing or has been cured:

(a)           the Issuer shall fail to make when due any payment with respect to interest on any Notes then outstanding, or the Servicer shall fail to make when due any deposit required under the Transaction Documents (other than as described in clause (e) below), in any case on or before the date occurring five (5) Business Days after the date such payment or deposit shall become due;

(b)           the Issuer, Servicer or the Originator shall fail to perform or observe any covenant with respect to it set forth in any Transaction Document, and in each case such failure shall remain unremedied for thirty (30) Business Days after the earlier of (x) actual knowledge thereof by such Person or (y) receipt by such Person of written notice thereof;

(c)           any representation or warranty made by the Issuer, Originator or Servicer in any Transaction Document or in any other document delivered pursuant thereto (other than a representation or warranty made with respect to the Contracts) shall prove to have been incorrect in any material respect when made or deemed made and continues to be incorrect in any material respect for a period of thirty (30) Business Days after the earlier to occur of (x) the actual knowledge thereof by such Person or (y) the receipt by such Person of written notice thereof;

(d)           an Insolvency Event shall occur with respect to the Issuer or the Guarantor;

(e)           the Outstanding Note Balance of any Class of Notes is not reduced to zero and all interest due on any Class is not paid by the Stated Maturity Date;

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(f)           the Outstanding Note Balance of the Class A Notes fails to be less than or equal to the Discounted Pool Balance on a proposed Acquisition Date and such failure has not been cured within five (5) Business Days of such date; or

(g)           the Issuer is required to register as an “investment company” under the Investment Company Act of 1940, as amended.

Section 6.02                      Acceleration of Maturity; Rescission and Annulment.If an Event of Default exists, then, unless waived pursuant to Section 6.15 hereof, and in every such case, the Control Party may, and the Trustee shall, at the written direction of the Control Party, declare the principal of all the Notes to be immediately du e and payable, by notice given in writing to the Issuer and upon any such declaration, such principal and all accrued interest under the Notes shall become immediately due and payable without any presentment, demand, protest or other notice of any kind (except such notices as shall be expressly required by the provisions of this Indenture), all of which are hereby expressly waived by the Issuer; provided, that if such Event of Default consists of an Insolvency Event with respect to the Issuer, then all such principal and accrued interest shall be automatically due and payable without the need for any such notice or further action by any Person.

At any time after such a declaration of acceleration has been made, but before any Sale of the Collateral has been made or a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Control Party, by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if (notwithstanding Section 6.15 hereof) (a) and (b) below are satisfied:

(a)           the Issuer has paid or deposited with the Trustee a sum sufficient to pay:

(1)           all overdue installments of interest on all Notes and interest thereon at the overdue interest rate from the time such overdue interest first became due until the date when paid;

(2)           the principal of any Notes which has become due otherwise than by such declaration of acceleration and interest thereon at the overdue interest rate from the time such principal first became due until the date when paid;  and

(3)           all sums paid or advanced, together with interest thereon, by the Trustee, the Originator and any Secured Party, and the reasonable compensation, expenses, disbursements and advances of the Trustee and any Secured Party, their agents and counsel incurred in connection with the enforcement of this Indenture to the date of such payment or deposit.

(b)           all Events of Default, other than the nonpayment of the principal on any of the Notes which has become due solely by such declaration of acceleration, have been cured or waived by the Control Party unless (i) an Event of Default in the payment of interest on any Note when due or principal not paid at the Stated Maturity Date or (ii) in respect of a covenant or provision hereof which by its terms cannot be modified or amended without the consent of the Noteholders of each Outstanding Note affected thereby, in which case a waiver by the Noteholders of each Outstanding Notes is required.

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No such rescission shall affect any subsequent default or impair any right consequent thereon.

Section 6.03                      Collection of Indebtedness and Suits for Enforcement by Trustee.

(a)           The Issuer covenants that, if an Event of Default shall occur and the Notes have been declared due and payable and such declaration has not been rescinded and annulled, the Issuer will pay to the Trustee, for the benefit of the Noteholders, the whole amount then due and payable on the Notes for principal and interest (with interest upon the overdue principal and overdue interest at the rate provided herein), any and all amounts due and payable to the Noteholders, the Originator, the Back-up Servicer, the Custodian, the Paying Agent and the Trustee and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of each of the Trustee, the Pay ing Agent and the Noteholders and their respective agents and counsel.

(b)           If the Issuer fails to pay such amount forthwith upon such demand, the Trustee, in its own name and as Trustee of an express trust, may, with the prior written consent of the Control Party, and shall, at the written direction of the Control Party, institute Proceedings for the collection of the sums so due and unpaid, and prosecute such Proceedings to judgment or final decree, and enforce the same against the Issuer and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of the Issuer, wherever situated.

(c)           If an Event of Default exists, the Trustee shall, at the written direction of the Control Party, proceed to protect and enforce the rights of the Noteholders and the Paying Agent by such appropriate Proceedings as the Trustee, at the written direction of the Control Party, shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 6.04                      Remedies.  If an Event of Default exists, the Trustee may, with the prior written consent of the Control Party, and shall, at the written direction of the Control Party, do one or more of the following:

(a)           institute Proceedings for the collection of all amounts remaining unpaid on the Notes or under this Indenture or the other Transaction Documents whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and the Collateral the monies adjudged due;

(b)           take possession of and sell the Collateral or any portion thereof or rights or interest therein, at one or more private or public Sales called and conducted in any manner permitted by law;

(c)           institute any Proceedings from time to time for the complete or partial foreclosure of the lien created by this Indenture with respect to the Collateral;

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(d)           redirect Obligor payments to such account or accounts as the Control Party determines necessary in its sole discretion, or at the direction of the Control Party;

(e)           during the continuance of a default under a Contract, exercise any of the rights of the lessor or lender (as applicable) under such Contract;

(f)           exercise any remedies of a secured party under the Uniform Commercial Code (irrespective of whether the Uniform Commercial Code applies) or any applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Trustee or the Noteholders hereunder or under the other Transaction Documents; and

(g)           exercise any and all rights, powers and privileges available to the Trustee or the Noteholders (whether at law, in equity or by contract).

Section 6.05                      Optional Preservation of Collateral

.  If an Event of Default exists, the Trustee shall, upon written request from the Control Party, elect, by giving written notice of such election to the Issuer, to take possession of and retain the Collateral intact, collect or cause the collection of all income, payments and proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of such Notes in accordance with the provisions of Article XIII.  If the Trustee is unable to or is stayed from giving such notice to the Issuer for any reason whatsoever, such election shall be effective as of the time of such request from the Control Party, as the case may be, notwithstanding any failure to give such notice, and the Trustee shall give such notice upon the removal or cure of such inability or stay (but shall have no obligation t o effect such removal or cure).  Any such election may be rescinded with respect to any portion of the Collateral remaining at the time of such rescission by written notice to the Trustee and the Issuer from the Control Party.

Section 6.06                      Trustee May File Proofs of Claim

.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial Proceeding relating to the Issuer or the property of the Issuer or its creditors, the Trustee (irrespective of whether the principal of any of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuer for the payment of overdue principal or interest) shall be entitled and empowered and shall, at the prior written direction of the Control Party, intervene in such proceeding or otherwise:

(a)           to file and prove a claim for all amounts of principal and interest owing and unpaid in respect of the Notes issued hereunder and to file such other papers or documents and take such other actions, including participating as a member, voting or otherwise, in any committee of creditors appointed in the matter as may be necessary or advisable in order to have the claims of the Trustee, the Noteholders, the Paying Agent, the Custodian (including any claim for the reasonable compensation, expenses, disbursements and advances of each such Person and their respective agents and counsel and any other amounts due the Trustee under Section 7.07) and of the Noteholders allowed in such judicial Proceeding;

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(b)           unless prohibited by applicable law and regulations, to vote at the direction of the Control Party on behalf of the Noteholders in any election of a trustee, a standby trustee or person performing similar functions in any such proceedings;

(c)           to petition for lifting of the automatic stay and thereupon to foreclose upon the Collateral as elsewhere provided herein; and

(d)           to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator, or sequestrator (or other similar official) in any such judicial Proceeding is hereby authorized by the Noteholders andthe Paying Agent to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to each such Person, to pay to the Trustee or such Person any amount due to it for the reasonable compensation, expenses, disbursements and advances of each of the Trustee and such other Person, their agents and counsel, and any other amounts due the Trustee under Section 7.07.

Nothing contained in this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Secured Party any plan of reorganization, arrangement, adjustment or composition affecting any of the Notes or the rights of any Secured Party, or to authorize the Trustee to vote in respect of the claim of any Secured Party in any such Proceeding; provided, however, that the Control Party shall be authorized to vote on all of the foregoing matters described above on behalf of the Noteholders and to consent to certain amendments as described under Section 10.02 hereof.

Section 6.07                      Trustee May Enforce Claims Without Possession of Notes.

(a)           In all Proceedings brought by the Trustee in accordance with this Indenture (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all of the Noteholders and it shall not be necessary to make any Noteholder a party to any such Proceedings.

(b)           All rights of actions and claims under this Indenture or any of the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any Proceeding relating thereto, and any such Proceedings instituted by the Trustee shall be brought with the prior written consent of the Control Party and in the Trustee’s own name as trustee of an express trust, and any recovery, whether by judgment, settlement or otherwise shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel, be for the benefit of the Noteholders, as the case may be.

Section 6.08                      Application of Money Collected.  If the Notes have been declared due and payable following an Event of Default and such declaration has not been rescinded or annulled, any money collected by the Trustee with respect to the Notes and the other Transaction Documents pursuant to this Article VI or otherwise and any other money that may be held thereafter by the Trustee as security for the Notes and the other Transac tion Documents shall be applied in the order set forth in Section 13.03 on the earlier of the next Payment Date and such dates as the Trustee may designate for the release of such funds, to the same extent as if such date were a Payment Date.

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Section 6.09                      [Reserved]

Section 6.10                      Unconditional Right of the Noteholders to Receive Principal and Interest.  Notwithstanding any other provision in this Indenture, each Noteholder shall have the right, which is absolute and unconditional, to receive payment of the principal and interest on such Note on the dates on which such principal and interest becomes due and payable and to institute any Proceeding for the enforcement of any such payment, an d such right shall not be impaired without the consent of such Noteholder.

Section 6.11                      Restoration of Rights and Remedies.  If the Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Noteholder, then, and in every case, the Issuer, the Trustee and the Noteholders shall, subject to any determination in such Proceedin g, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Noteholders shall continue as though no such Proceeding had been instituted.

Section 6.12                      Rights and Remedies Cumulative.Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 2.08, no right or remedy herein conferred upon or reserved to the Trustee or to the Noteholders is intended to be exclusive of an y other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 6.13                      Delay or Omission Not Waiver.  No delay or omission of the Trustee or of any Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein.  Every right and remedy given by this Article VI or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or the Noteholders, as the case may be.

Section 6.14                      Control by Control Party.  The Control Party shall have the right to direct in writing the time, method and place of conducting any Proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that:

(a)           such direction shall not be in conflict with any rule of law or with this Indenture including any provision hereof which expressly provides for approval by a percentage of Outstanding Note Balance of all Notes or of all Notes within a Class;

(b)           if the Trustee has reasonable grounds for believing that repayment of any funds expended or risked by it is not assured to it without an indemnity reasonably satisfactory to it against such risk or liability, such indemnity shall have been provided.

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Section 6.15                      Waiver of Certain Events by the Control Party.

     The Control Party may waive on behalf of all Noteholders any Event of Servicing Termination, Default or Event of Default and its consequences in each case except:

(i)           an Event of Default in the payment of interest on any Note when due or principal not paid at the Stated Maturity Date;

(ii)           in respect of a covenant or provision hereof which by its terms cannot be modified or amended without the consent of the Noteholder of each Outstanding Note affected thereby; or

(iii)           in the circumstances provided in Section 6.02 hereof.

Upon any such waiver, such Event of Servicing Termination, Default or Event of Default shall cease to exist, and any Event of Default shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Servicing Termination, Default or Event of Default or impair any right consequent thereon.

Section 6.16                      Additional Rights of Subordinate Noteholders.  At any time during the period from the first to occur of (i) the commencement of an Insolvency Event or any other insolvency proceeding with respect to the Issuer, (ii) the acceleration of the Class A Notes pursuant to Section 6.02 or (iii) the commencement of the foreclosure of any Collateral under this Article VI following the occurrence of an Event of Default, and without prejudice to any other rights of the Holders of the Class B-1 Notes under the Transaction Documents, any one or more Holders of the Class B-1 Notes shall initially have the sole right to deliver written notice, which notice shall be sent to the Trustee (the “Class A Buyout Notice”) electing to purchase (without recourse, warranty or representation (other than that the Holders of such Class A Notes own such Class A Notes free and clear of any Liens created or granted by the Holder of such Class A Notes)) the entire (but not less than the entire) aggregate amount of Outstanding Class A Notes (and all associated rights, titles, claims and privileges associated therewith) for an amount (the “Class A Buyout Price”) equal to the Outstanding Note Balance of, and a ccrued but unpaid interest on, the Class A Notes (excluding therefrom any premium or penalty otherwise payable). The Trustee agrees that it shall give to the Holders of the Class B-1 Notes and the Class B-2 Notes written notice of the events described in clauses (i), (ii), and (iii) of this Section 6.16 promptly upon its receiving notice of such event or a Responsible Officer of the Trustee having actual knowledge thereof (such date of notice, the “Default Notice Date”).

If no Holder of the Class B-1 Notes exercises its rights to purchase the Class A Notes within ten (10) Business Days of the Default Notice Date, then, without prejudice to any other rights of the Holders of the Class B-2 Notes under the Transaction Documents, any one or more Holders of the Class B-2 Notes shall then have the sole right to deliver the Class A Buyout Notice, which notice shall be sent to the Trustee electing to purchase (without recourse, warranty or representation (other than that the Holders of such Class A Notes own such Class A Notes free and clear of any Liens created or granted by the Holder of such Class A Notes)) the entire (but not less than the entire) aggregate amount of Outstanding Class A Notes (and all associated rights, titles, claims and privileges associated therewith) for the Class A Buyout Price.

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The purchase of the Class A Notes pursuant to this Section shall close no later than the date specified in the operative Class A Buyout Notice. The Class A Buyout Price shall be remitted by wire transfer in immediately available federal funds to the Trustee.  Interest shall be calculated to but excluding the Business Day on which such purchase shall occur if the Class A Buyout Price is wired to the Trustee prior to 11:00 am New York time and interest shall be calculated to and including such Business Day if the Class A Buyout Price is wired to the Trustee, later than 11:00 am New York time.

Section 6.17                      Waiver of Stay or Extension Laws.  The Issuer covenants (to the extent that it may lawfully do so) that it will not, at any time, insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it ma y lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.18                      Sale of Collateral.

(a)           The power to effect any sale (a “Sale”) of any portion of the Collateral pursuant to Section 6.04 shall not be exhausted by any one or more Sales as to any portion of the Collateral remaining unsold, but shall continue unimpaired until the entire Collateral securing the Notes shall have been sold or all amounts payable on the Notes and under this Indenture and the other Transaction Documents shall have been paid.  The Trustee may from time to time postpone any Sale by public announcement made at the time and place of such Sale.

(b)           To the extent permitted by applicable law, the Trustee shall not, in any private Sale, sell to one or more third parties, or otherwise liquidate, all or any portion of the Collateral, unless:

(i)           the Control Party consents to such Sale or liquidation; or

(ii)           the proceeds of such Sale or liquidation available to be distributed to the Noteholders are sufficient to pay in full all amounts then due with respect to the Notes and, without duplication, all amounts owed to the Servicer, Originator, Trustee, Custodian, and Back-up Servicer.

(c)           Any Noteholder may bid for and acquire any portion of the Collateral in connection with a Sale thereof.  After the Trustee has received each offer to purchase all or any portion of the Collateral, the Trustee shall notify each Class B-1 Noteholder and Class B-2 Noteholder of the highest offer (the date of such notification, the “Collateral Purchase Notice Date”) and any one or more Class B-1 Noteholders will initially have the sole right to purchase (not later than five Business Days after delivery of written notice to the Trustee of exercise of each right to purchase) the Collateral at the highest price there offered. If no Holder of the Clas s B-1 Notes exercises its rights to purchase the Collateral within ten (10) Business Days of the Collateral Purchase Notice Date, the Trustee shall notify each Class B-2 Noteholder of the highest offer and any one or more Class B-2 Noteholders will then have the sole

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right to purchase (not later than five Business Days after delivery of written notice to the Trustee of exercise of each right to purchase) the Collateral at the highest price there offered. If a Noteholder submits the highest bid, in lieu of paying cash therefor, such bidder may make settlement for the purchase price by crediting against the purchase price that portion of the net proceeds of such Sale to which such bidder would be entitled, after deducting the reasonable costs, charges and expenses (including reasonable attorneys’ fees and expenses) incurred by such Noteholder in connection with such Sale. The Notes need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against the Notes.  The Noteholders may hold, lease, operate, manage or otherwise deal with any property so acqui red in any manner permitted by law.

(d)           The Trustee shall execute and deliver an appropriate instrument of conveyance provided to it by the Servicer transferring its interest in any portion of the Collateral in connection with a Sale thereof.  In addition, the Trustee is hereby irrevocably appointed the agent and attorney-in-fact with full irrevocable power and authority in the place and stead of the Issuer and in the name of the Issuer or in its own name, from time to time, from and after the occurrence of an Event of Default for the purpose of exercising the rights and remedies of the Trustee hereunder and, to take any and all action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the foregoing, including without limitation, to transfer and convey its interest in any portion of the Collateral in connection with a Sale thereof, and to take all action necessary to effect such Sale.  No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any monies.

(e)           The method, manner, time, place and terms of any Sale of all or any portion of the Collateral shall be commercially reasonable.  The Trustee shall incur no liability for any Sale conducted in accordance with this Section.

Section 6.19                      Action on Notes.  The Trustee’s right to seek and recover judgment on the Notes or under this Indenture or the other Transaction Documents shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture or the other Transaction Documents.  Neither the lien of this Indenture nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer.

ARTICLE VII

THE TRUSTEE

Section 7.01                      Certain Duties and Immunities.

(a)           Except during the existence of an Event of Default known to the Trustee as provided in subsection (e) below:

(i)           the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

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(ii)           in the absence of bad faith or negligence on its part, the Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions, which by any provision hereof are specifically required to be furnished to the Trustee, such certificate or opinion shall cite the applicable provision and the Trustee shall be under a duty to examine the same and to determine whether or not they conform to the requirements of this Indenture.

(b)           So long as any Event of Default or Event of Servicing Termination exists, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs, and nothing contained herein shall relieve the Trustee of such obligations.

(c)           No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith (as determined by a court of competent jurisdiction), except that:

(i)           this subsection (c) shall not be construed to limit the effect of subsection (a) of this Section;

(ii)           neither the Trustee nor any of its officers, directors, employees or agents shall be liable with respect to any action taken or omitted to be taken by the Trustee in good faith in accordance with the written direction (A) given pursuant to this Indenture or (B) by the Control Party in accordance with Section 6.14 relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(iii)           no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability (financial or otherwise) in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds is not assured to it without an indemnity reasonably satisfactory to it against such risk or liability; and

(iv)           the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be conclusively proven by a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts.

(d)           Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01.

(e)           For all purposes under this Indenture, the Trustee shall not be deemed to have notice of any Default, Event of Default (except as described in Section 6.01(a) or (b)) or Event of Servicing Termination unless a Responsible Officer assigned to and working in the Trustee’s Corporate Trust Office has actual knowledge or has received written notice (at the address and in the manner specified in Section 14.03) of any such event, and such notice references (i) the Notes generally, the Issuer or this Indenture or (ii) the applicable Default, Event of Default or Event of Servicing Termination.

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(f)           Subject to Section 7.03(e), the Trustee shall be under no obligation to institute any suit, or to take any remedial proceeding under this Indenture, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder if it has reasonable grounds for believing that repayment of any funds expended or risked by it is not assured to it without an indemnity reasonably satisfactory to it against such risk or liability, until such indemnity shall have been provided.

(g)           Notwithstanding any extinguishment of all right, title and interest of the Issuer in and to the Collateral following an Event of Default and a consequent declaration of acceleration of the maturity of the Notes, whether such extinguishment occurs through a Sale of the Collateral to another person or the acquisition of the Collateral by the Noteholders, the rights of the Noteholders shall continue to be governed by the terms of this Indenture.

(h)           Notwithstanding anything to the contrary contained herein, the provisions of subsections (e) through (g), inclusive, of this Section 7.01 shall be subject to the provisions of subsections (a) through (c), inclusive, of this Section 7.01.

(i)           At all times during the term of this Indenture, the Trustee and the Custodian shall keep at their Corporate Trust Office for inspection by the Noteholders, the Contract Schedule and all amendments thereto delivered to it.

(j)           The Trustee shall have no obligation to ascertain whether any payment of interest on an overdue installment of interest is legally enforceable.

Section 7.02                      Notice of Default and Other Events.  Promptly upon the existence of any Default or Event of Default or Event of Servicing Termination known to the Trustee (within the meaning of Section 7.01(e)), the Trustee shall transmit by telephonic or telecopy communication confirmed by mail to all Noteholders, as their names and address es appear in the Note Register, notice of such event hereunder known to the Trustee.

Section 7.03                      Certain Rights of Trustee.  Except as otherwise provided in Section 7.01:

(a)           the Trustee may in good faith conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other obligation, paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)           any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request, an Issuer Order, or any writing executed by a duly authorized officer of the Issuer;

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(c)           whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith, negligence or willful misconduct on its part, reasonably request and conclusively rely upon an Officer’s Certificate of the Servicer or the Issuer;

(d)           the Trustee may consult with counsel selected by it with due care and familiar with such matters and the written advice or opinion of such counsel or any Opinion of Counsel (in form and substance satisfactory to the Trustee and addressed to the Trustee) shall be full and complete authorization and protection and the Trustee shall not be liable in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(e)           the Trustee may, at any time during the administration of this Indenture, request and receive a written direction from the Control Party in connection with actions to be taken in its capacity as Trustee and shall not be liable for any action taken or omitted in good faith reliance thereon;

(f)           the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture which are exercisable at the request or direction of any of the Noteholders or the Control Party pursuant to this Indenture, if it has reasonable grounds for believing that repayment of the costs, expenses (including legal fees and expenses) and liabilities which might be incurred by it in compliance with such request or direction is not assured to it without an indemnity reasonably satisfactory to it against such cost, expense or liability;

(g)           the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, entitlement, bond, note or other paper or document, unless requested in writing to do so by the Control Party; provided, however, that the Trustee shall be under no obligation to make such investigation if it has reasonable grounds for believing that repayment of any cost, expense or liability likely to be incurred in making such investigation is not assured to it without an indemnity reasonably satisfactory to it against such cost, expense or liability , but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, upon reasonable notice and at reasonable times personally or by agent or attorney;

(h)           the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder, either directly or by or through agents, custodians, nominees or attorneys provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care; and

(i)           except as otherwise agreed in writing, the Trustee shall not be responsible for the payment of any interest on amounts deposited with it hereunder.

Notwithstanding the foregoing, nothing in this Indenture or the Servicing Agreement or any other Transaction Document regarding the Trustee shall limit the Back-up Servicer’s obligations under this Indenture or the Servicing Agreement or any other Transaction Document, which shall be governed by the respective agreement.

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Section 7.04                      Not Responsible for Recitals or Issuance of Notes.

(a)           The recitals contained herein and in the Notes, except the certificates of authentication on the Notes, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness or validity.  Other than pursuant to Section 7.17 hereof, the Trustee makes no representations as to the validity, adequacy or condition of the Collateral or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with the Trustee hereunder or as to the validity or sufficiency of this Indenture or of the Notes.  The Trustee shall not be accountable for the use or application by the Issuer of Notes or the proceeds thereof or of any money paid to the Issuer or upon Issuer Order or for the use or application by the Servicer of any amounts paid to the Servicer under any provisions hereof.

(b)           Except as otherwise expressly provided herein or in the other Transaction Documents, and without limiting the generality of the foregoing, the Trustee shall have no responsibility or liability for or with respect to the existence or validity of any Contract, the perfection of any security interest (whether as of the date hereof or at any future time), the filing of any financing statements, amendments thereto, or continuation statements, the maintenance of or the taking of any action to maintain such perfection, the validity of the assignment of any portion of the Collateral to the Trustee or of any intervening assignment, the review of any Contract (it being understood that the Trustee (in its capacity as Trustee) has not reviewed and does not intend to review the s ubstance or form of any such Contract), the performance or enforcement of any Contract, the compliance by the Issuer, the Servicer, the Originator or any Obligor with any covenant or the breach by the Issuer, the Servicer, the Originator or any Obligor of any warranty or representation made hereunder or in any related document or the accuracy of any such warranty or representation, any investment of monies in the Collection Account, or any loss resulting therefrom (other than losses from nonpayment of investments in obligations of U.S. Bank National Association issued in its capacity other than as Trustee or investments made in violation of the provisions hereof), the acts or omissions of the Issuer, the Servicer, the Originator or any Obligor or any action of the Issuer, the Originator or the Servicer taken in the name of the Trustee or the validity of the Servicing Agreement.

(c)           The Trustee shall not have any obligation or liability under any Contract by reason of or arising out of this Indenture or the granting of a security interest in such Contract hereunder or the receipt by the Trustee of any payment relating to any Contract pursuant hereto, nor shall the Trustee be required or obligated in any manner to perform or fulfill any of the obligations of the Issuer under or pursuant to any Contract, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it, or the sufficiency of any performance by any party, under any Contract.

Section 7.05                      May Hold Notes.  The Trustee, any Paying Agent, Note Registrar, or Authenticating Agent may, in its individual capacity, become the owner or pledgee of Notes.

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    Section 7.06                      Money Held in Trust.  Money and investments held in trust by the Trustee or any Paying Agent hereunder shall be held in one or more segregated, trust accounts (which shall be Eligible Accounts), in the name of th e Trustee on behalf of the Secured Parties at the Corporate Trust Office, which accounts shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.  The Trustee or any Paying Agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Issuer or otherwise specifically provided herein (in such case subject to the provisions of Section 13.03).

Section 7.07                      Compensation and Reimbursement.  The Issuer agrees:

(a)           Solely from amounts distributed from the Collection Account pursuant to Section 13.03, to:  (i) pay the Trustee monthly its fee for all services rendered by it hereunder as Trustee, in the amount of the Trustee Fee (which compensation shall not otherwise be limited by any provision of law in regard to the compensation of a trustee of an express trust), (ii) pay the Custodian monthly its fee for all services rendered by it hereunder as Custodian, in the amount of the Custodian Fee and (iii) pay to the Back-up Servicer its fee for all services rendered by it hereunder and under the Servicing Agreement as Back-up Servicer, in the amount of the Back-up Servicer Fee, in each case in accordance with the priorities set forth in Section 13. 03;

(b)           except as otherwise expressly provided herein and solely from amounts distributed pursuant to Section 13.03, to reimburse the Trustee, the Custodian or the Back-up Servicer upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee, the Custodian or the Back-up Servicer, respectively, in accordance with any provision of this Indenture or the Servicing Agreement or any other Transaction Document relating thereto (including the reasonable compensation and the expenses and disbursements of the Trustee’s, the Custodian’s and Back-up Servicer’s agents and counsel), except any such expense, disbursement or advance as may be attributable to its willful misconduct, negligence or bad faith; and

(c)           to indemnify and hold harmless the Trustee, the Custodian, the Securities Intermediary, the Back-up Servicer and their respective officers, directors, employees, representatives and agents from and against, and reimburse for, any loss, claim, obligation, action, suit liability, expense, penalty, stamp or other similar tax, reasonable costs and expenses (including reasonable attorneys’ and agents’ fees and expenses) damage or injury (to person, property or natural resources) of any kind and nature sustained or suffered by the Trustee, the Custodian, the Securities Intermediary and the Back-up Servicer by reason of any acts or omissions (or alleged acts or omissions) of the Trustee, the Custodian, the Securities Intermediary or the Back-up Servicer under th e Transaction Documents or arising directly or indirectly out of the activities of the Issuer or any of the transactions contemplated hereby (including any violation of any applicable laws by the Issuer as a result of the transactions contemplated by this Indenture) or the participation by the Trustee, the Custodian, the Securities Intermediary and the Back-up Servicer in the transactions contemplated by the Transaction Documents, including any judgment, award, settlement, reasonable attorneys’ fees and other expenses incurred in connection with the defense of any actual or threatened action,

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proceeding or claim; provided that, the Issuer shall not indemnify the Trustee, the Custodian, the Securities Intermediary or the Back-up Servicer if such loss, liability, expense, damage or injury is due to the Trustee’s, theCustodian’s, the Securities Intermediary’s or the Back-up Servicer’s negligence or willful misconduct, willful misfeasance or bad faith in the performance of duties; provided, further, that all amounts payable in respect of such indemnity shall be payable by the Issuer solely from the amounts distributed pursuant to Section 13.03 or released from the Lien of this Indenture.  The provisions of this indemnity shall run directly to and be enforceable by an injured person subject to the limitations hereof and the provisions of this Section 7.07 shall survive the termination of this Indenture or the earlier resignation or removal of the Trustee, the Custodian, the Securities Intermediary or the Back-up Servicer.

(d)           The Trustee hereby acknowledges and agrees that if the Servicer and/or the Issuer fails to pay the amounts set forth in this Section 7.07, the Trustee will continue to perform its obligations under this Indenture, regardless of the Servicer and/or the Issuer’s failure to pay such amounts, until the appointment of a successor Trustee in accordance with Section 7.09 of this Indenture; provided, however, that in such event, the Trustee shall continue to be entitled to be paid all accrued amounts due it pursuant to this Section 7.07 from amounts payable pursuant to Section 13.03.

Section 7.08                      Corporate Trustee Required; Eligibility.  There shall at all times be a trustee hereunder, who shall be the Trustee, which shall:  (a) be a banking corporation or association organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000 and sub ject to supervision or examination by federal or state authority and having an office within the United States of America; and (b) have a commercial paper or other short-term rating of at least A-1/P-1 from each of Moody’s and S & P.  If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

Section 7.09                      Resignation and Removal; Appointment of Successor.

(a)           No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee.

(b)           The Trustee may resign at any time by giving thirty (30) days’ prior written notice thereof to the Issuer and the Noteholders.  If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, whose acceptance will not be unreasonably withheld or delayed.  Such court may thereupon, after such notice, if any, as it may deem proper and may prescribe, appoint a successor Trustee.

(c)           The Trustee may be removed by the Control Party at any time if one of the following events has occurred:

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                (i)           the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Issuer or the Control Party;

(ii)           the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

(iii)           the Trustee has failed to perform its duties in accordance with this Indenture or has breached any representation of warranty made in this Indenture; or

(iv)           upon thirty (30) days’ prior written notice of termination by the Control Party.

(d)           If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause with respect to any of the Notes, the Issuer shall promptly appoint a successor Trustee.  If no successor Trustee shall have been so appointed by the Issuer within thirty (30) days of notice of removal or resignation and shall have accepted appointment in the manner hereinafter provided, then the Control Party may appoint a successor Trustee.  No removal or resignation of the Trustee shall become effective until the acceptance of the appointment of a successor Trustee that is eligible to act as Trustee under Section 7.08.

(e)           The Issuer shall give notice in the manner provided in Section 14.03 of each resignation and each removal of the Trustee and each appointment and acceptance of appointment of a successor Trustee with respect to the Notes.  Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

(f)           All amounts owing to the resigning or removed Trustee shall be payable solely on the next scheduled date for distributions and solely in accordance with the priorities set forth in Section 13.03.

Section 7.10                      Acceptance of Appointment by Successor.Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer, the Secured Parties and the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee but, on request of the Issuer, the Control Party or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.  Upon request of any such successor Trustee or the Control Party, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article.

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Section 7.11                      Merger, Conversion, Consolidation or Succession to Business of Trustee.  Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder (provided that such successor shall at all times be required to be eligible under Section 7.08), without the execution or filing of any paper or any further act on the part of any of the parties hereto.  In case any Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes.

Section 7.12                      Co-Trustees and Separate Trustees.

(a)           At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Collateral may at the time be located, the Issuer and the Trustee shall have power to appoint, and, upon the written request of the Trustee, the Issuer shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee and meeting the eligibility standards for the Trustee specified in Section 7.08, either to act as Co-Trustee, jointly with the Trustee of all or any part of such Collateral, or to act as separate Trustee of any such property (a “Co-Trustee”), in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section.  If the Issuer does not join in such appointment within fifteen (15) days after the receipt by it of a request so to do, or, in case an Event of Default exists, the Trustee alone shall have power to make such appointment.

(b)           Should any written instrument from the Issuer be reasonably required by any Co-Trustee or separate Trustee so appointed for more fully confirming to such Co-Trustee or separate Trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Issuer.

(c)           Every Co-Trustee or separate Trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms:

(i)           the Notes shall be authenticated and delivered by, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(ii)           the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-Trustee or separate Trustee jointly, as shall be provided in the instrument appointing such Co-Trustee or separate Trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised an d performed by such Co-Trustee or separate Trustee at the direction or with the consent of the Trustee;

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(iii)           the Trustee at any time, by an instrument in writing executed by it and, prior to the occurrence of an Event of Default, the Issuer, may accept the resignation of or remove any Co-Trustee or separate Trustee, appointed under this Section, and, in case an Event of Default exists, the Trustee shall have power to accept the resignation of, or remove, any such Co-Trustee or separate Trustee without the concurrence of the Issuer.  Upon the written request of the Trustee, the Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal.  A successor to any Co-Trustee or separate Trustee that has so resigned or been removed may be appointed in the manner provided in this Section;

(iv)           no Co-Trustee or separate Trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other such Trustee hereunder nor shall the Trustee be liable by reason of any act or omission of any Co-Trustee or separate Trustee selected by the Trustee with due care or appointed in accordance with directions to the Trustee pursuant to Section 6.14 provided, that the appointment of any Co-Trustee or separate Trustee shall not relieve the Trustee from any of its express duties and obligations under this Indenture; and

(v)           any Act of Noteholders delivered to the Trustee shall be deemed to have been delivered to each such Co-Trustee and separate Trustee.

Section 7.13                      Maintenance of Office or Agency; Initial Appointment of Payment Agent.  The Note Registrar will maintain an office within the State of New York or the State of Minnesota where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demand to or upon the Issuer in respect of the Notes and this Indenture may be served. 0; The Issuer hereby appoints the Trustee as the Paying Agent and its Corporate Trust Office as the office for each of said purposes.

Section 7.14                      Appointment of Authenticating Agent.  The Trustee may at its expense appoint an Authenticating Agent or Authenticating Agents with respect to the Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes issued upon original issue or upon exchange, registration of transfer or pursuant to Section 2.08, and Notes so authenticated shall be entitled to the benefits of this Indenture a nd shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder.  Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee certificate of authentication or the delivery of Notes to the Trustee for authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent and delivery of the Notes to the Authenticating Agent on behalf of the Trustee.  Each Authenticating Agent shall be acceptable to the Issuer (whose acceptance shall not be unreasonably withheld or delayed) and shall at all times be a corporation having a combined capital and surplus of not less than the equivalent of $50,000,000 and subject to supervision or examination by federal or state a uthority or the equivalent

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foreign authority, in the case of an Authenticating Agent who is not organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia.  If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent, provided that such corporation shall be otherwise eligible under this Section.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Issuer.  The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent, the Noteholders and to the Issuer.  Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and, after the occurrence of an Event of Default, the Control Party, and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Noteholders, if any, with respect to which such Authenticating Agent will se rve, as their names and addresses appear in the Note Register.  Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent.  No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Trustee certificate of authentication, an alternate certificate of authentication in the following form:

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This is one of the Notes described in the within-mentioned Indenture.

U.S. Bank National Association, as Trustee
By:
	As Authenticating Agent

By:
	As Authenticating Agent

Section 7.15                      Appointment of Paying Agent other than Trustee; Money for Note Payments to be Held in Trust.

If, at the request of the Trustee, a party other than the Trustee is ever appointed as a Paying Agent, the Issuer will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee that, subject to the provisions of this Section, such Paying Agent will:

(a)           hold all sums held by it for the payment of principal or interest on Notes in trust in an Eligible Account in the name of the Trustee on behalf of the Issuer at the Corporate Trust Office, which account shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties, until such sums shall be paid to such Persons or otherwise disposed of as provided in Section 13.03;

(b)           give the Trustee and the Noteholders notice of any Default by the Issuer (or any other obligor upon the Notes) in the making of any payment of principal or interest; and

(c)           at any time, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Subject to Section 11.04, any money deposited with the Trustee or any Paying Agent in trust for the payment of the principal or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer on Issuer Request, and the Noteholder of such Note shall thereafter, as an unsecured general creditor, and subject to any applicable statute of limitations, look only to the Issuer for payment thereof, and all liability of the Trustee and such Paying Agent with respect to such trust money or the related Note, shall thereupon cease; provided that the Trustee or such Paying Agent, before

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being required to make any such repayment, may (upon delivery of an Issuer Order), cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the city in which the Corporate Trust Office is located, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer.  The Trustee may also adopt and employ any other reasonable means of notification of such repayment (including mailing notice of such repayment to the Noteholders whose right to or interest in monies due and payable but not claimed is determinable from the records of any Paying Agent, at the last address as shown on the Note Register for each such Noteholder).  No additional in terest shall accrue on the related Note subsequent to the date on which such funds were available for distribution to such Noteholder.

Section 7.16                      Rights with Respect to the Servicer and Back-up Servicer.  The Trustee’s rights and obligations with respect to the Servicer and the Back-up Servicer shall be governed by this Indenture, the Servicing Agreement and the other Transaction Documents.

Section 7.17                      Representations and Warranties of the Trustee.  The Trustee hereby represents and warrants for the benefit of the parties hereto and the Secured Parties that:

(a)           Organization and Good Standing.  The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States, and has the power to own its assets and to transact the business in which it is presently engaged;

(b)           Authorization.  The Trustee has the power, authority and legal right to execute, deliver and perform this Indenture and each other Transaction Document to which it is a party and to authenticate the Notes, and the execution, delivery and performance of this Indenture and each other Transaction Document and the authentication of the Notes has been duly authorized by the Trustee by all necessary corporate action;

(c)           Binding Obligations.  This Indenture and each other Transaction Document to which the Trustee is a party, assuming due authorization, execution and delivery by the other parties hereto and thereto, constitute the legal, valid and binding obligations of the Trustee, enforceable against the Trustee in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors’ rights generally and the rights of trust companies in particular and (ii)
60;the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought, whether in a proceeding at law or in equity;

(d)           No Violation.  The performance by the Trustee  of its obligations under this Indenture and each other Transaction Document to which the Trustee is a party will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice, lapse of time or both) a default under, the charter documents or bylaws of the Trustee;

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(e)           No Proceedings.  To the best of its knowledge, there are no proceedings or investigations to which the Trustee is a party pending, or, to the knowledge of the Trustee, threatened, before any court, regulatory body, administrative agency or other tribunal or Governmental Authority (A) asserting the invalidity of this Indenture or any other Transaction Documents, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Indenture or any other Transaction Document or (C) seeking any determination or ruling that would materially and adversely affect the perfo rmance by the Trustee of its obligations under, or the validity or enforceability of, this Indenture, the Notes or any other Transaction Documents;

(f)           Approvals.  Neither the execution or delivery by the Trustee of this Indenture or any other Transaction Document to which it is a party nor the consummation of the transactions by the Trustee contemplated hereby or by any other Transaction Document to which it is a party requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any Governmental Authority under any existing federal or state law governing the banking or trust powers of the Trustee; and

(g)           Eligibility.  The Trustee meets the eligibility requirements set forth in Section 7.08 hereof.

ARTICLE VIII

THE CUSTODIAN

Section 8.01                      Appointment of Custodian.  Subject to the terms and conditions hereof, the Issuer hereby revocably appoints the Custodian, and the Custodian hereby accepts such appointment and agrees to act as Custodian on behalf of the Secured Parties to maintain exclusive custody of the Contract Files in order to perfect the ownership interest of the Issuer in the Contracts and the security interest of the Secured Parties in the Contracts and the other items in the Contract Files and any and all proceeds of the foregoing; provided that from and after the release or discharge of the Secured Parties’ lien in and to the Contracts and the other items in the Contract Files and any and all proceeds of the foregoing, the Custodian shall serve as exclusive agent and custodian of the Issuer with respect to the Contract Files.

Section 8.02                      Removal of Custodian.With or without cause, with sixty (60) days’ notice, (a) prior to the occurrence of an Event of Default the Issuer may, with the prior written consent of the Control Party, or (b) following the occurrence of an Event of Default, the Control Party may, remove and discharge t he Custodian from the performance of its duties under this Indenture with respect to any or all of the Contracts and related Contract Files by written notice from the Issuer or the Control Party, as the case may be, to the Custodian, with a copy to the Trustee and the Servicer.  Having given notice of such removal, the Issuer (prior to the occurrence of an Event of Default) or the Control Party (following the occurrence of an Event of Default) shall, by written instrument and with the consent of the Control Party (if the notice of removal came from the Issuer), promptly appoint a successor custodian to act on behalf of the Issuer in replacement of the Custodian under this Indenture, which successor Custodian shall be satisfactory to the Control Party in its sole discretion.  In the event of any such removal, the Custodian shall promptly transfer to the successor custodian, as directed, all affected Contracts and related Contract Files.  In the event of removal of the Custodian f or cause and the appointment of a successor custodian under this

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 Indenture, the expenses of transferring the Contracts and related Contract Files to the successor custodian shall be at the expense of the Custodian.  In the event of removal of the Custodian without cause by the Issuer (prior to the occurrence of an Event of Default) or the Control Party, as the case may be, and the appointment of a successor custodian under this Indenture, the Issuer shall be responsible for the expenses of transferring the Contracts and related Contract Files to the successor custodian.  Notwithstanding the foregoing, this Indenture shall remain in full force and effect with respect to any Contracts and related Contract Files for which this Indenture is not terminated hereunder.  The Custodian may petition a court of competent jurisdiction to appoint a successor hereunder if no su ccessor is appointed within such 60-day notice period.

Section 8.03                      Termination by Custodian.The Custodian may terminate its obligations under this Indenture upon at least sixty (60) days’ notice to the Servicer, the Issuer and the Noteholders; provided, no termination shal l be effective until appointment of a successor acceptable to the Issuer or, if an Event of Default has occurred, the Control Party.  In the event of such termination, the Issuer shall promptly appoint a successor custodian; provided that after the occurrence of an Event of Default, solely the Control Party may appoint a successor custodian.  The payment of such successor custodian’s fees and expenses with respect to each Contract and related Contract Files shall be solely the responsibility of the Issuer.  Upon such appointment, the Custodian shall promptly transfer to the successor custodian, as directed, all Contracts and related Contract Files being held under this Indenture.  The Custodian may petition a court of competent jurisdiction to appoint a successor hereunder if no successor is appointed within such sixty (60) day notice period.

Section 8.04                      Limitations on the Custodian’s Responsibilities.

(a)           Except as provided herein, the Custodian shall be under no duty or obligation to inspect, review or examine the Contracts or related Contract Files to determine that the contents thereof are appropriate for the represented purpose or that they have been actually recorded or that they are other than what they purport to be on their face.

(b)           The Custodian shall not be responsible for preparing or filing any reports or returns relating to federal, state or local income taxes with respect to this Indenture, other than for the Custodian’s compensation or for reimbursement of expenses.

(c)           The Custodian shall not be responsible or liable for, and makes no representation or warranty with respect to, the validity, adequacy or perfection of any lien upon or security interest in any Contract; provided that, the foregoing shall not reduce or eliminate the Custodian’s obligations under Section 4.03 hereof.

(d)           Any other provision of this Indenture to the contrary notwithstanding, the Custodian shall have no notice, and shall not be bound by any of the terms and conditions of any document executed or delivered in connection with, or intended to control any part of, the transactions anticipated by or referred to in this Indenture unless the Custodian is a signatory party to that document or such document is the Indenture, the Servicing Agreement or the Lockbox Intercreditor Agreement.  Notwithstanding the foregoing sentence, the Custodian shall be deemed to have notice of the terms and conditions (including, without limitation, definitions not otherwise set

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forth in full in this Indenture) of documents executed or delivered in connection with, or intended to control any part of, the transactions anticipated by or referred to in this Indenture, to the extent such terms and provisions are referenced, or are incorporated by reference, into this Indenture only as long as the Custodian shall have been provided a copy of any such document or Indenture.  Each of the Trustee, the Back-up Servicer and the Custodian acknowledges receipt of a copy of the Transaction Documents to which it is a party on the Closing Date.

(e)           The duties and obligations of the Custodian shall only be such as are expressly set forth in this Indenture or as set forth in a written amendment to this Indenture executed by the parties hereto or their successors and assigns.  In the event that any provision of this Indenture implies or requires that action or forbearance be taken by a party, but is silent as to which party has the duty to act or refrain from acting, the parties agree that the Custodian shall not be the party required to take the action or refrain from acting.  In no event shall the Custodian have any responsibility to ascertain or take action except as expressly provided herein.

(f)           Nothing in this Indenture shall be deemed to impose on the Custodian any duty to qualify to do business in any jurisdiction, other than (i) any jurisdiction where any Contract and related Contract Files is or may be held by the Custodian from time to time hereunder, and (ii) any jurisdiction where its ownership of property or conduct of business requires such qualification and where failure to qualify could have a material adverse effect on the Custodian or its property or business or on the ability of the Custodian, the Issuer or the Servicer to perform its duties hereunder or under the other Transaction Documents.

(g)           The Custodian may consult with counsel selected by it with due care and familiar with such matters and the written advice or opinion of such counsel or any Opinion of Counsel (in form and substance satisfactory to the Custodian and addressed to the Custodian) shall be full and complete authorization and protection and the Custodian shall not be liable in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon..

(h)           The Custodian may, at any time during the administration of this Indenture, request and receive a written direction from the Control Party in connection with actions to be taken under this Indenture and shall not be liable for any action taken or omitted in good faith reliance thereon;

(i)           No provision of this Indenture shall require the Custodian to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights and powers, if, in its reasonable judgment, it shall believe that repayment of such funds is not reasonably assured to it without an indemnity against such risk or liability.

(j)           The Custodian shall have no duty to ascertain whether or not each amount or payment has been received by the Trustee or any third person.

Section 8.05                      Limitation on Liability.Neither the Custodian nor any of its directors, officers, agents or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith in good faith and believed (which belief may be based upon the opinion or advice of counsel selected by it in the exercise of reasonable care) by it or them to be within the purview of this Indenture, except for its

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or their own negligence, lack of good faith or willful misconduct.  The Custodian and any director, officer, employee or agent of the Custodian may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder.  In no event shall the Custodian or its directors, officers, agents and employees be held liable for any special, indirect or consequential damages resulting from any action taken or omitted to be taken by it or them hereunder or in connection herewith even if advised of the possibility of such damages.  The provisions of this Section 8.05 shall survive the termination of this Indenture.

Section 8.06                      Custodian Obligations Regarding Genuineness of Documents.In the absence of bad faith or negligence on the part of the Custodian, the Custodian may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any request, instructions, certificate, opinion or other document furnished to the Custodian, reasonably believed by the Custodian to be genuine and to have been signed or presented by the proper party or parties and conforming to the requirements of this Indenture; provided that the provisions of this Section shall not in any manner limit or reduce the responsibilities of the Custodian under this Indenture.

Section 8.07                      Force Majeure.The Custodian shall not be responsible for delays or failures in performance resulting from acts of God, strikes, lockouts, riots, acts of war or terrorism, epidemics, nationalization, expropriation, currency restrictions, government regulations adopted after the date of this Indenture, fire, communic ation line failures, computer viruses, power failures, earthquakes or other disasters of a similar nature which are beyond its control.

ARTICLE IX

[RESERVED]

ARTICLE X

SUPPLEMENTAL INDENTURES

Section 10.01                                Supplemental Indentures without Consent of the Noteholders.

(a)           The Issuer, the Trustee and the Custodian, without the consent of the Holders of any Notes may, at any time and from time to time, enter into one or more amendments to this Indenture or indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes, provided that (x) any such amendment or supplemental indenture, as evidenced by an opinion of counsel, will not have an adverse effect on the rights or interests of the Holders and (y) any such amendment does not modify this Indenture in a manner requiring the consent of all affected Noteholders as described in Section 10.02 hereof:

(i)           to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the Lien of this Indenture additional property; or

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(ii)           to correct or supplement any provision in the Indenture which may be inconsistent with any other provisions therein or with the provisions of any other Transaction Document; or

(iii)           to evidence the succession of another Person to the Issuer, and the assumption by such successor of the covenants of the Issuer in this Indenture and in the Notes; or

(iv)           to add to the covenants of, and the conditions, limitations and restrictions to be observed by, the Issuer, for the benefit of the Secured Parties or to surrender any right or power conferred upon the Issuer in this Indenture; or

(v)           to convey, transfer, assign, mortgage or pledge any property to or with the Trustee; or

(vi)           to evidence the succession of the Trustee pursuant to the terms of this Indenture.

(b)           The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustee’s own rights, duties, indemnities, liabilities or immunities under this Indenture or otherwise.

(c)           Promptly after the execution by the Issuer, the Custodian and the Trustee of any supplemental indenture pursuant to this Section, the Issuer shall mail to each Noteholder a copy of such supplemental indenture.

Section 10.02                                Supplemental Indentures with Consent of the Noteholders.With the prior written consent of the Majority Holders and the Servicer, the Issuer, the Trustee and the Custodian may enter into an amendment or modification to this indenture or into indentures sup plemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture (other than as provided in Section 10.01 hereof); provided, however, that no such amendment or supplemental indenture shall become effective without the consent of each of the Holders of the Notes adversely affected thereby if such amendment or supplemental indenture shall:

(a)           change the Stated Maturity Date of any Note or the due date of any installment of principal of, or method of computing principal of, or any installment of interest on, any Note, or change the principal amount thereof or the applicable Note Rate thereof or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment; or

(b)           reduce the percentage of the principal amount of Outstanding Notes, the consent of the Holders of which is required for any such amendment or supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or Events of Default or their consequences; or

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(c)           impair or adversely affect the priority of any payments payable by the Trustee from the Collection Account on each Payment Date under this Indenture; or

(d)           permit the creation of any Lien ranking prior to, on a parity with, or subordinate to the Lien of the Trustee with respect to any part of the Collateral or, except as expressly provided in this Indenture, terminate or release the Lien of the Trustee on any material portion of the Collateral at any time subject to the Indenture or deprive any Secured Party of the security afforded by the Lien of this Indenture; or

(e)           modify or alter any of the provisions of this Section 10.02 or any defined term used in Sections 10.01 or 10.02 of this Indenture (or any defined term used therein), except to increase the percentage of Holders required for any modification or waiver or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of each Noteholder affected thereby; or

(f)           modify Sections 6.01(a), 6.01(b), or Section 13.03 or any defined term used therein.

The Trustee is hereby authorized to join in the execution of any such amendment or supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such amendment or supplemental indenture that affects in any adverse respect the Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise.

Promptly after the execution by the Issuer, the Servicer,andthe Trustee (and all Noteholders if required to approve such amendment or supplement) of any supplemental indenture pursuant to this Section, the Issuer shall mail to the the Back-up Servicer and each Noteholder a copy of such supplemental indenture.

Section 10.03                                Execution of Supplemental Indentures.  In executing any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture and the Trustee receive, and (solely with respect to the Trustee, subject to Section 7.01) shall be not be liable for and shall be fully authorized to conclusively rely in good faith upon, an Opinion of Counsel reasonably acceptable to the Trustee stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and all conditions precedent to such execution have been satisfied.

Section 10.04                                Effect of Supplemental Indentures.  Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Noteholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereb y.

Section 10.05                                Reference in Notes to Supplemental Indentures.  Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and if required by the

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Issuer shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

Section 10.06                                Back-Up Servicer Consent. Notwithstanding any other provision to the contrary, for so long as there is a Back-Up Servicer, the Issuer, the Indenture Trustee and the Custodian shall not, without the consent of the Back-Up Servicer (such consent not to be unreasonably withheld), make, execute, acknowledge or deliver amendments to this Indenture or enter into any su pplemental indentures hereto or thereto or otherwise waive or amend any provision of this Indenture if such action shall have, or it is expected may have, a material adverse effect on the Back-Up Servicer or any successor Servicer.

Section 10.07                                Amendments to the Lockbox Intercreditor Agreement.  The Trustee shall not enter into any material amendment, modification, supplement, consent or waiver of the Lockbox Intercreditor Agreement without the consent of all Noteholders.

ARTICLE XI

REDEMPTIONS AND PREPAYMENTS OF NOTES

Section 11.01                                Redemptions of Notes.

(a)           Optional Redemption.   The Issuer (as directed by the Guarantor) shall have the right, subject to the terms hereof, to redeem, in whole but not in part, all outstanding Notes on any Business Day, upon not less than 15 days prior written notice to the Trustee and the Holders of the Notes (an “Optional Redemption”).

(b)           Mandatory Redemption.   On a Business Day within five (5) Business Days after the occurrence of a Mandatory Redemption Event, the Issuer shall redeem, in whole but not in part, all outstanding Notes (a “Mandatory Redemption”).

(c)           Installments of interest and principal due on or prior to the Redemption Date shall continue to be payable to the Holders of the Notes according to their terms and the provisions of Section 2.09 hereof.

Section 11.02                                Redemption Procedures.  In connection with any redemption pursuant to Section 11.01 hereof:

(a) in the case of an Optional Redemption, the Issuer (as directed by the Guarantor) shall, at least 15 days prior to the Redemption Date, notify the Trustee and the Holders of the Notes in writing of the Optional Redemption and, in the case of a Mandatory Redemption, the Issuer shall, as soon as reasonably practical after the Mandatory Redemption Event, notify the Trustee and the Holders of the Notes in writing of the Mandatory Redemption;

(b) in the case of an Optional Redemption, the Issuer (as directed by the Guarantor) or, in the case of a Mandatory Redemption, the Issuer shall deposit in the Collection Account on or prior to the Redemption Date at least the amounts described in Section 11.02(c);

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(c) in the case of an Optional Redemption, the Issuer (as directed by the Guarantor) shall deliver an Issuer Order directing the Trustee to and the Trustee shall, and, in the case of a Mandatory Redemption, the Trustee shall (without any Issuer Order),make payment on the Redemption Date of the sum of (A) the Redemption Price plus, (B) fees, expenses and other reimbursable amounts owing to the Noteholders, the Originator, the Trustee, the Securities Intermediary, the Custodian, the Back-up Servicer andthe Servicer under the Transaction Documents; and

(d) upon delivery to the Trustee, the Noteholders, the Custodian, the Paying Agent,andthe Back-up Servicer of such documents and an Officer’s Certificate from the Servicer certifying that (1) the amounts required to be deposited into the Collection Account shall have been deposited and (2) the requirements of this Article XI have been satisfied, the Trustee shall release its interest in the entire Collateral as provided in Section 11.05.

Section 11.03                                Notice of Redemption to Noteholders.  In the case of an Optional Redemption or a Mandatory Redemption, upon receipt of the notice set forth in Section 11.02(a), the Trustee shall provide notice thereof with a copy of such notice of redemption pursuant to Section 11.01 by first class mail or courier delivery, dispatched no later than five (5) B usiness Days following the date on which such notice was provided, to each Noteholder (at its address in the Note Register).

All notices of redemption shall state:

(a)           the Redemption Date;

(b)           the amount that will be deposited in the Collection Account, which shall be at least the sum of (A) the Redemption Price plus (B) all other amounts that are payable to the Noteholders, the Trustee, the Originator, the Custodian, the Back-up Servicer, and the Servicer under the Transaction Documents on the Redemption Date;

(c)           that on the Redemption Date, the Redemption Price will become due and payable with respect to the Notes, and that interest on all Outstanding Notes shall cease to accrue on such date;

(d)           all conditions precedent in connection with such redemption have been satisfied;

(e)           the address at which such redeemed Notes shall be delivered; and

(f)           the record date for such Redemption Date, which shall be one Business Day before the Redemption Date.

Notice of redemption of Notes shall be given by the Trustee in the name and at the expense of the Issuer.

Section 11.04                                Amounts Payable on Redemption Date.  Notice of redemption having been given to Noteholders as provided in Section 11.03, such Notes shall, on the Redemption Date, become due and payable at the Redemption Price, and on such Redemption Date (unless the Issuer shall default in the payment of such Redemption Price), all of the Outstanding Notes shall cease to bear inte rest.  On the Redemption Date:  (A) each Noteholder shall be paid such Noteholder’s applicable share of the Redemption Price by the Paying Agent on behalf of the Issuer upon presentation and surrender of their respective Notes at the office or agency specified in

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Section 7.13; and (B) each other Person to whom monies are owed under Section 11.03(b) shall be paid all amounts owing to such Person from the amounts deposited in the Collection Account in accordance with Section 11.02(b); provided, that no redemption may be effectuated unless, concurrently with the redemption occurring under this Article XI, all amounts due under this clause (B) shall be paid in full from funds on deposit in the Collection Account.  If the Holder of any Note called for redemption shall not be so paid, then the principal shall, until paid, bear interest from the Redemption Date at the applicable Note Rate and the redemption of such Note(s) shall be canceled, the Paying Agent shall return the related portion of the Redemption Price to the Issuer or other Person providing the fund s for payment, and such Notes shall be payable on the Stated Maturity Date or earlier to the extent otherwise provided herein.  All amounts payable on the Redemption Date shall be paid in accordance with this Section 11.04, without regard to the priority of distribution provisions contained in Section 13.03.

Section 11.05                                Release of Contract Assets in Connection with Redemptions.

(a)           In connection with the redemptions permitted under this Article XI, the Trustee shall release its Lien on the Contracts, upon (I) the deposit of the amounts set forth in Section 11.02(c) into the Collection Account and (II) the Issuer’s delivery to the Trustee and the Custodian of an Officer’s Certificate, (1) identifying the Contracts and the related Equipment to be released, (2) requesting the release thereof, (3) setting forth the amount deposited in the Collection Account with respect thereto, (4) certifying that the amount deposited in the Collection Account is at least equal to the Redemption Price and all other amounts required to be paid in connection with a redemption under this Article XI, and (5) certifying th at all other conditions precedent set forth in the Transaction Documents relating to such release have been satisfied.

(b)           Upon release of the Trustee’s Lien on the Contracts in accordance with Section 11.05(a), the Custodian shall deliver to the Issuer the Contracts and all related Contract Assets described in the Issuer’s Officer’s Certificate.

ARTICLE XII

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 12.01                                Representations and Warranties.

The Issuer hereby makes the following representations and warranties for the benefit of the Trustee, the Custodian and the Secured Parties on which the Trustee relies in accepting the Collateral in trust and in authenticating the Notes.  Except as specifically provided otherwise, such representations and warranties are made as of the Closing Date and each Acquisition Date and shall survive the transfer, grant and assignment of the Collateral to the Trustee.

(a)           Organization and Good Standing.  The Issuer is a Delaware limited liability company duly organized, validly existing and is not organized under the laws of any other jurisdiction.  The Issuer is in good standing under the law of the State of Delaware and each other State where the nature of its activities requires it to “qualify to do business”, except to the extent that the failure to so qualify would not individually or in the aggregate materially adversely affect the ability of the Issuer to perform its obligations under the Transaction Documents.

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(b)           Authorization.  The Issuer has the power, authority and legal right to execute, deliver and perform under the Transaction Documents and the execution, delivery and performance of the Transaction Documents have been duly authorized by the Issuer by all necessary limited liability company action.

(c)           Binding Obligation.  Each of the Transaction Documents to which the Issuer is a party, assuming due authorization, execution and delivery by the parties thereto other than the Issuer, constitutes a legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, rehabilitation, moratorium or other similar laws (whether statutory, regulatory or decisional) now or hereafter in effect relating to creditors’ rights generally and (ii) the remedy of specific performance and injunctiv e and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, whether a proceeding at law or in equity.

(d)           No Violation.  The consummation of the transactions contemplated by the fulfillment of the terms of the Transaction Documents will not:  (i) conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice, lapse of time or both) a default under the organizational documents of the Issuer, any indenture, agreement, mortgage, deed of trust or other instrument to which the Issuer is a party or by which it is bound; (ii) result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of such indenture, agreement, mortgage, deed of trust or other such instrument, other than any Lien created or imposed pursuant to the terms of the Transaction Documents, or (iii) violate any law or, to the best of the Issuer’s knowledge, any material order, rule or regulation applicable to the Issuer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Issuer or any of its properties.

(e)           No Proceedings.  There are no proceedings or investigations to which the Issuer, or any of the Issuer’s Affiliates, is a party pending, or, to the knowledge of the Issuer, threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (A) asserting the invalidity of the Transaction Documents or any Receivable or any Contract, (B) seeking to prevent the issuance of any of the Notes or the consummation of any of the transactions contemplated by the Transaction Documents, or (C) seeking any determination or ruling that would adversely affect the performan ce by the Issuer of its obligations under, or the validity or enforceability of, the Transaction Documents or any Receivable or any Contract.

(f)           Approvals.  All approvals, authorizations, consents, orders or other actions of any Person, or of any court, governmental agency or body or official, required in connection with the execution and delivery of the Transaction Documents and with the valid and proper authorization, issuance and sale of the Notes pursuant to this Indenture (except that no such representation is made with respect to any necessary approvals of State securities officials under the Blue Sky Laws), have been or will be taken or obtained on or prior to the Closing Date.

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(g)           Principal Office.  The Issuer’s principal place of business and chief executive office is located at the Issuer Address.

(h)           Transfer and Assignment.  Upon the delivery by or on behalf of the Issuer to the Trustee of the Contracts and the filing of the financing statements described in Sections 4.01(a)(v) and 4.02(b), the Trustee, for the benefit of the Secured Parties, shall have a first priority perfected security interest in the Issuer’s interest in the Contracts and Receivables and the proceeds thereof and that portion of the Collateral in which a security interest may be perfected by possession or the filing of a financing statement, in each case, under the UCC, limited to the extent set forth in Section 9-315 of the UCC as in effect in the applicable jurisdiction; provided that none of the Servicer, the Originator and the Issuer shall be required to file or record assignments of any UCC-1 financing statements or other lien recordings made against an Obligor.  All filings (including UCC filings) as are necessary in any jurisdiction to perfect the security interest of the Trustee in the Collateral, including the transfer of the Contracts and any other payments to become due thereunder, have been made.

(i)           Owners of the Issuer.  The Originator owns one hundred percent (100%) of the Equity Interest in the Issuer, and such Equity Interest is duly authorized, validly issued, fully paid for and non-assessable by the Issuer.

(j)           Bulk Transfer Laws.  The transfer, assignment and conveyance of the Contract Assets by the Issuer pursuant to this Indenture are not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction.

(k)           The Contract Assets.  The rights of the Issuer with respect to the representations and warranties that are made by the Originator in the Purchase and Contribution Agreement and each Assignment Agreement as of each Acquisition Date have been assigned by the Issuer to the Trustee pursuant to the terms hereof, and the Issuer is not aware of any inaccuracy in any such representations and warranties except for such inaccuracies as have been provided in writing to the Trustee.

(l)           Solvency.  The Issuer, both prior to and after giving effect to the transactions contemplated hereby, (i) is not “insolvent” (as such term is defined in §101(32)(A) of the Bankruptcy Code); (ii) is able to pay its debts as they become due; and (iii) does not have unreasonably small capital for the activities that it conducts or for any transaction(s) in which it is about to engage.

(m)           Investment Company.  The Issuer is not an “investment company” or a company controlled by an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, or otherwise subject to any other federal or state statute or regulation limiting its ability to incur indebtedness.  The Issuer, at all times, within the meaning of 17 C.F.R. 270.3a-7, (1) will have issued only the Notes and the membership interest s issued to its managing member at its formation, and any other securities issued by the Issuer are “fixed income securities or other securities ... that depend primarily on the cash flow from eligible assets” and for

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which a trustee is appointed in compliance with 17 C.F.R. 270.3a-7(a)(4), (2) will sell its securities only to its affiliates, “qualified institutional buyers”, or institutional accredited investors or will sell securities “rated, at the time of initial sale, in one of the four highest categories assigned long-term debt” by one of DBRS, Moody’s, S & P or Fitch, (3) will either acquire or dispose of the Contracts only in accordance with and as permitted by the Purchase and Contribution Agreement, the Assignment Agreements, the Servicing Agreement, its limited liability company operating agreement and the Indenture or (y) any other “eligible assets” only (a) in accordance with the agreements under which its securities are issued, (b) if a rating downgrade of any of its outstanding “fixed-income securities” does not result and (c) if such acquisition or disposition is not & #8220;for the primary purpose of recognizing gains or decreasing losses resulting from market value changes”.  The Issuer will not engage in any business other than that expressly permitted by the Transaction Documents and its limited liability company operating agreement.

(n)           Limited Activities.  Since its formation, the Issuer has conducted no activities other than the execution, delivery and performance of the Transaction Documents contemplated hereby, and such other activities as are incidental to the foregoing and otherwise permitted under Section 12.02(i).  The Issuer has incurred no indebtedness nor engaged in any activities or transactions nor acquired any assets except as expressly contemplated hereunder and under the other Transaction Documents.

(o)           Taxes.  The Issuer has filed or caused to be filed all Federal, state and local tax returns which are required to be filed by it, and has paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, other than any taxes or assessments, the validity of which are being contested in good faith by appropriate proceedings and with respect to which the Issuer or the Servicer on its behalf has set aside adequate reserves on its books in accordance with GAAP and which proceedings have not given rise to any Lien.

(p)           Lockbox Accounts.  The Issuer has no lockbox accounts or other bank accounts for the collection of the Contract Assets other than the Lockbox Account.

(q)           Accuracy of Information.  All certificates, reports, financial statements and similar writings furnished by or on behalf of the Issuer to the Trustee or any Noteholder, at any time pursuant to any requirement of, or in response to any written request of any such party under, this Indenture or any other Transaction Document, have been, and all such certificates, reports, financial statements and similar writings hereafter furnished by the Issuer to such parties will be, true and accurate in every respect material to the transactions contemplated hereby on the date as of which any such certificate, report, financial statement or similar writing was or will be delivered, and shall not omit to state any material facts or any facts necessary to make the statements contained therein not materially misleading.

(r)           Perfection Requirements as to Collateral.

(1)           This Indenture creates a valid and continuing security interest (as defined in the UCC) in the Collateral in favor of the Trustee, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer.  The Issuer has good and marketable title to the Collateral (including the Collection Account, the Reserve Account, the Prefunding Account, the Capitalized Interest Account and all amounts from time to time on deposit in the Lockbox Account with respect to the Contracts), free and clear of any Liens (except as otherwise provided in the Lockbox Intercredit or Agreement and the rights of Obligors to Security Deposits retained by the Issuer).

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(2)           All of the Contracts included in the Collateral constitute “tangible chattel paper” within the meaning of the UCC.  The Issuer has transferred to the Trustee the original copies of such tangible chattel paper, and, other than the stamp, if any, in favor of a prior lender that signed a Release Agreement related to a Contract, none of such tangible chattel paper has any marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than in favor of the Issuer or the Trustee.  The Equipment related to each Contract constitutes either “equipment 221; for purposes of section 9-102(33) of the UCC or “inventory” for purposes of section 9-102(48) of the UCC; provided however, that not more than 5.0% of the Contracts may relate to Equipment that does not constitute “equipment” for purposes of section 9-102(33) of the UCC or “inventory” for purposes of section 9-102(48) of the UCC.

(3)           The Issuer has caused (and will instruct the Servicer to cause), the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest granted in the Collateral to the Trustee hereunder.  Each such financing statement will contain a statement that a “purchase of, or security interest in, any collateral described in this financing statement will violate the rights of the Trustee.”

(4)           Each of the Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account constitutes a “securities account” within the meaning of the applicable UCC.  As provided in Section 13.02(e), the securities intermediary for the Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account has agreed to treat all assets credited thereto as “financial assets” within the meaning of the UCC and the Issuer has taken all steps necessary to cause the securities intermediary to identify in its records the Trustee as the pers on having a security entitlement against the securities intermediary in theCollection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account.  None of the Collection Account, the Reserve Account, the Prefunding Account or the Capitalized Interest Account is in the name of any person other than the Trustee for the benefit of the Secured Parties.  The Issuer has not permitted the securities intermediary of the Collection Account, the Reserve Account, the Prefunding Account or the Capitalized Interest Account to comply with entitlement orders of any person other than the Trustee.  The Issuer has received all consents and approvals required in connection with the Grant to the Trustee of its interest and rights in the Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account.

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(5)           The LockboxAccount constitutes a “deposit account” within the meaning of the applicable UCC.  The Issuer has delivered, or has caused the Servicer to deliver, to the Trustee, a fully executed Lockbox Intercreditor Agreement relating to the Lockbox Account, pursuant to which the Lockbox Bank has agreed to comply with all instructions by the Trustee, as securities intermediary thereunder, directing the disposition of funds in the Lockbox Account without further consent by the Issuer or the Servicer .  The Issuer has not permitted any Lockbox Bank to comply with any instructions of any other Person regarding withdrawal of funds other than the Trustee and, to the extent permitted under the Transaction Documents, the Servicer.  The Lockbox Account is not in the name of any person other than the Issuer, the Trustee or the Lockbox Bank, as securities intermediary under the Lockbox Intercreditor Agreement.

(6)           Other than the security interest granted to the Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Collateral.  The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer or the Originator that include a description of collateral that includes the Collateral other than any financing statement that have  been terminated or released.  The Issuer is not aware of any judgment, ERISA or tax lien filings against the Issuer or the Originator.

(7)           Notwithstanding any other provision of this Indenture or any other Transaction Document, the representations contained in this Section 12.01(r) shall be continuing and remain in full force and effect, without waiver, until the date on which the Notes have been paid in full.

(8)           In the event that the sale of a Contract by the Originator to the Issuer under the Purchase and Contribution Agreement and the pledge of such Contract by the Issuer to the Trustee, for the benefit of the Secured Parties, hereunder are insufficient, without a notation on a related Motorized Titled Equipment’s certificate of title, or without fulfilling any additional administrative requirements under the laws of the state in which such Motorized Titled Equipment is located, to assign the ownership of such Motorized Titled Equipment to th e Issuer or to perfect a security interest in such Motorized Titled Equipment (and the proceeds thereof) in favor of the Trustee, for the benefit of the Secured Parties, the parties hereto agree that (i) the designation of the Servicer (or its nominee) or the Originator (or its nominee) under a Lienholder Nominee Agreement, to be executed within 180 days following the first day of inclusion of such Contract secured by such Motorized Titled Equipment in the calculation of the Discounted Pool Balance, as the lienholder on the certificate of title with respect to such Motorized Titled Equipment, is in its capacity as agent of the Issuer and the Trustee, for the benefit of the Secured Parties, as their interests may appear, and (ii) such designation shall be sufficient until such notations are made or additional administrative requirements are fulfilled.

(9)           Any Contract for which the Servicer shall not have within 180 days of the first day of inclusion of such Contract secured by such Motorized Titled Equipment in the calculation of the Discounted Pool Balance, (i) received a Lien Certificate showing the Issuer or the Servicer (or its nominee) or the Originator (or its nominee) under a Lienholder Nominee Agreement as secured party with respect to the related Motorized Titled Equipment from the applicable Registrar of Titles and (ii) delivered such Lien Certificate or such evidence to the Custodi an, shall no longer be included in the calculation of the Discounted Pool Balance.  In the case of any Contract excluded from the calculation of the Discounted Pool Balance pursuant to the previous sentence, the Contract so excluded from the calculation of the Discounted Pool Balance may at a later time be included in the calculation of the Discounted Pool Balance, provided, that the Custodian shall have received a Lien Certificate showing the Issuer or the Servicer (or its nominee) or the Originator (or its nominee) under a Lienholder Nominee Agreement as secured party with respect to the related Motorized Titled Equipment from the applicable Registrar of Titles.

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(10)           At all times, all Collateral will consist of property in which a security interest may be created and attach under the UCC.

Section 12.02                                Covenants.  The Issuer hereby makes the following covenants for the benefit of the Secured Parties and on which the Trustee relies in accepting the Collateral in trust and in authenticating the Notes.

(a)           No Liens.  Except for the conveyances and grant of security interests hereunder, the Issuer will not sell, pledge, assign, convey, dispose of or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any Collateral now existing or hereafter created, or any interest therein prior to the termination of this Indenture pursuant to Section 5.01; the Issuer will notify the Trustee in writing of the existence of any Lien on any of the Collateral immediately upon discovery thereof; the Issuer shall promptly discharge (or cause to be discharged) any Lien (other than Permitted Liens) on the Coll ateral; and the Issuer shall defend the right, title and interest of the Trustee in, to and under the Collateral now existing or hereafter created, against all claims of third parties claiming through or under the Issuer; provided that nothing in this Section 12.02(a) shall prevent or be deemed to prohibit the Issuer from suffering to exist upon any of the Equipment any Liens for municipal or other local taxes and other governmental charges due from the Issuer if such taxes or governmental charges shall not at the time be due and payable or, if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings, nonpayment of such taxes or charges shall not pose any risk of forfeiture of such Equipment, and the aggregate amount at dispute shall not be greater than $50,000.00, unless the Control Party otherwise approves.

(b)           Obligations with Respect to the Contract Assets.  The Issuer will do nothing to impair the rights of the Trustee (for the benefit of the Secured Parties) in the Collateral.  In addition, to the extent the Issuer actually receives any Collections, it shall deposit or cause to be deposited in the Collection Account within two (2) Business Days of receipt thereof the amount of such Collections in accordance with Section 13.03 and will hold such monies in trust for the Trustee until so deposited.  The Issuer agrees to take all such lawful acti on as the Trustee or the Control Party may request to compel or secure the performance and observance by the Originator and the Servicer, as applicable, of each of their obligations to the Issuer under or in connection with the Purchase and Contribution Agreement, the Assignment Agreements and the Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such Transaction Documents to the extent and in the manner directed by the Trustee or the Control Party, as applicable, including the transmission of notices of default thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Originator or the Servicer of each of their obligations thereunder.

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(c)           Notice of Default, Etc.  The Issuer will deliver to the Trustee and each Holder of Outstanding Notes immediately upon becoming aware of the existence of any condition or event that constitutes a Default, an Event of Default or an Event of Servicing Termination, a written notice describing its nature and period of existence and what action is being taken or proposed to be taken with respect thereto.

(d)           Compliance with Law.  The Issuer will comply, in all material respects, with all acts, rules, regulations, orders, decrees and directions of any Governmental Authority applicable to it or the Collateral or any part thereof or necessary for it to perform its responsibilities hereunder and under the other Transaction Documents; provided that the Issuer may contest any act, regulation, order, decree or direction in good faith and in any reasonable manner which shall not adversely affect the rights of the Trustee (for the benefit of the Secured Parties) in the Collateral.

(e)           Preservation of Security Interest.  The Issuer shall execute and file such documents requested of it which may be required by law to fully preserve and protect the first priority security interest of the Trustee (for the benefit of the Secured Parties) in the Collateral.

(f)           Maintenance of Office, Etc.  The Issuer will not, without providing thirty (30) days’ prior written notice to the Trustee and without filing such amendments to any previously filed financing statements as the Trustee may require or as may be required in order to maintain the Trustee’s perfected security interest in the Collateral (for the benefit of the Secured Parties), (a) change its jurisdiction of organization or the location of its principal place of business, or (b) change its name, identity or corporate structure in any manner that would make any financing statement or continuation statement fi led by the Issuer in accordance with this Indenture seriously misleading within the meaning of Section 9-506 of any applicable enactment of the UCC.

(g)           Further Assurances.  The Issuer will make, execute or endorse, acknowledge, and file or deliver to the Trustee and the Control Party from time to time such schedules, confirmatory assignments, conveyances, transfer endorsements, powers of attorney, certificates, reports, UCC financing statements, and other assurances or instruments and take such further steps relating to the Collateral, as the Trustee may reasonably request and reasonably require in connection with the transactions the subject of the Transaction Documents, except that UCC financing statements are not required to have been filed against the related Obligor for a ny Equipment related to any Contract that had an original equipment cost at origination of less than (A) if such Contract is a secured loan or finance lease that provides for a $1 purchase option, $25,000, or (B) if such Contract provides for a “fair market value” purchase option, $50,000.

(h)           Notice of Liens.  The Issuer shall notify the Trustee in writing immediately after becoming aware of any Lien on any portion of the Collateral, except for any Liens on Equipment for municipal or other local taxes due from the Issuer if such taxes shall not at the time be due or payable without penalty or, provided the same are Permitted Liens, if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings, such nonpayment shall not pose any ris k of forfeiture of such Collateral and the Issuer shall have set aside on its books adequate reserves with respect thereto.

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(i)           Separateness Covenants.  The Issuer (i) shall not engage in any other business than (A) the acquisition, ownership, selling and pledging of the property acquired by it pursuant to the Purchase and Contribution Agreement, any Assignment Agreement, the Servicing Agreement and this Indenture and causing the issuance of, receiving and selling the Notes issued pursuant to this Indenture, (B) the exercise of any powers permitted to limited liability companies under Delaware law which are incidental to the foregoing or necessary to accomplish the foregoing and are not prohibited by the terms of its certificate of format ion, its limited liability company agreement or the other Transaction Documents; (ii) will hold such appropriate meetings of its board of managers or distribute appropriate unanimous consents in lieu of a meeting as are necessary to authorize all of the Issuer’s actions that are required by law to be authorized by the board of managers, keep minutes of its meetings and otherwise observe all other customary corporate formalities; (iii) will (A) maintain its books and records separate from the books and records of any other entity, (B) maintain separate bank accounts and no funds of the Issuer shall be commingled with funds of any other entity except as otherwise permitted in the Lockbox Intercreditor Agreement, (C) keep in full effect its existence, rights, privileges, licenses and franchises as a limited liability company under the laws of its applicable state of organization, and will obtain and preserve its “qualification to do business” as a foreign limited liability company in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, (D) cause its managers and officers to act independently and in its interests, (E) cause its board of managers to duly authorize all of its corporate actions and (F) observe all company procedures required by its organizational documents and applicable laws; and (iv) will not (A) dissolve or liquidate in whole or in part, (B) own any subsidiary or lend or advance any moneys to, or make an investment in, any Person, (C) incur any debt in connection with or make any capital expenditures, (D)(1) commence any case, proceeding or other action under any existing or future bankruptcy, insolvency or similar law seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, wind-up, liquidation, dissolution, composition or other relief with respect to it or its debts, (2) seek ap pointment of a receiver, trustee, custodian or other similar official for it or any part of its assets, (3) make a general assignment for the benefit of creditors, or (4) take any action in furtherance of, or consenting or acquiescing in, any of the foregoing, (E) make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or its capability of doing so, or otherwise), endorse or otherwise become contingently liable (directly or indirectly) for the obligations of, or own or purchase any stock, obligations or securities of or any other interest in, or make any capital contribution to, any other Person other than as specifically provided for in the Transaction Documents, (F) merge or consolidate with any other Person, (G) engage in any other action that detracts from whether the separate legal identity of the Issuer will be respected, including (1) holding itse lf out as or permitting itself to be held out as being liable for the debts of any other Person or (2) acting other than in its name and through its

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duly authorized officers or agents, (H) create, incur, assume, or in any manner become liable in respect of any indebtedness other than the Notes, expenses associated with the Closing Date, trade payables and expense accruals incurred in the ordinary course of business in an amount less than $12,300 at any one time outstanding and which are incidental to its permitted activities, and as provided in or under the Transaction Documents, (I) sponsor or contribute, or contract to or incur any other obligation to contribute to any Pension Plans, or (J) enter into or become party to any agreements or instruments other than the Transaction Documents or any documents or instruments executed pursuant thereto and in connection therewith.  So long as any Notes remain Outsta nding or any other amounts are owed under the Transaction Documents, the Issuer shall not amend its organizational documents without the prior written consent of the Control Party and prior written notice to the Trustee.  The Issuer shall not make any investment in any Person through the direct or indirect holding of securities or otherwise other than in Eligible Investments.  The Issuer shall not declare or pay any dividends, except out of funds released to it under Section 13.03.  The Issuer will not have any of its indebtedness guaranteed by the Originator or any Affiliate of the Originator.  Furthermore, the Issuer 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 the Originator and the Issuer will not engage in any transactions with the Originator, except as expressly contemplated by the Transaction Documents and on an arm’s-length basis.  The Issuer will not hold the Origina tor out to third parties as other than an entity with assets and liabilities distinct from the Issuer.  The Issuer will cause any financial statements consolidated with those of the Originator to state that the Issuer is a separate corporate entity with its own separate creditors who, in any liquidation of the Issuer, will be entitled to be satisfied out of the Issuer’s assets prior to any value in the Issuer becoming available to the Issuer’s equity holders.  The Issuer will not act in any other matter that could foreseeably mislead others with respect to the Issuer’s separate identity.  Without the prior written consent of the Control Party, the Issuer will not, nor will it permit or allow others to, amend, modify, terminate or waive any provision of any Contract Assets, except to the extent otherwise expressly permissible under the Transaction Documents.  Notwithstanding the foregoing, the Servicer may, without the prior written consent of the Cont rol Party, waive any assumption fees, late payment charges, charges for checks returned for insufficient funds, or other fees which may be collected in the ordinary course of servicing the Contracts.  The Issuer shall take such actions as the Trustee (at the direction of the Control Party) shall request to enforce the Issuer’s rights under the Contracts, and, at any time during which a Default shall have occurred and be continuing, shall take such actions as are necessary to enable the Trustee (at the direction of the Control Party) to exercise such rights in the Trustee’s own name.  On or before June 15 of each year, so long as any of the Notes are Outstanding, the Issuer shall furnish to the Trustee and each Noteholder, an Officer’s Certificate confirming that the Issuer is in compliance with its obligations under this Section 12.02(i).

(j)           Directors.  The Issuer agrees that at all times, at least one (1) of the directors of the Issuer will be professional directors that are not, and have not been, a director, shareholder, officer or employee of any direct or ultimate parent or Affiliate of the Originator; provided that an independent director or independent officer may serve in similar capacities for other “special purpose entities” formed by the Originator and its Affiliates.

(k)           Treatment for Tax Purposes.  The Issuer shall treat the Notes as indebtedness of the Issuer and the Collateral as assets owned by the Issuer for purposes of all federal, state and local income taxes, unless and until otherwise required by an applicable taxing authority.

(l)           Information Regarding the Issuer.  The Issuer shall, on the written request of the Trustee or the Control Party, on reasonable notice, furnish to the Trustee and the Noteholders the books and records of the Issuer maintained pursuant to its limited liability company agreement and any and all other information maintained or held by the Issuer regarding the Issuer or the Collateral.

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(m)           Preservation of the Contract Assets.  The Issuer shall not assign, sell, pledge, or exchange, or in any way encumber or permit the encumbrance of, or otherwise dispose of, the Contract Assets except as expressly permitted under the Transaction Documents to which it is a party.

(n)           Enforcement of Transaction Documents.  Upon request, the Issuer will cooperate with the taking of all actions necessary, and the diligent pursuit of all remedies available to it, in all cases to the extent commercially reasonable, to allow the Control Party and the Trustee in the name of the Issuer to enforce all obligations of the Originator and the Servicer owing to the Issuer under the Transaction Documents to which such Persons are a party and to secure its rights thereunder.

(o)           Issuer May Not Merge, etc.  The Issuer shall not merge with or into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person.

(p)           [Reserved.]

(q)           Use of Proceeds.  The proceeds from the sale of the Notes may be used by the Issuer solely to pay to or on behalf of the applicable assignor, the Purchase Price owed to it in accordance with the Assignment Agreement for the purchase of Contract Assets, and to pay expenses owed to the Noteholders, the Trustee, the Custodian, the Servicer and the Back-up Servicer related thereto or otherwise associated with the issuance of the Notes.  None of the transactions contemplated in this Indenture (including the use of the proceeds from the sale of the Notes) will result in a violation of Section 7 of the Securities and Ex change Act of 1934, as amended, or any regulations issued pursuant thereto, including Regulations T, U and X of the Board of Governors of the Federal Reserve System.  The Issuer does not own or intend to, and none of the proceeds from the Notes will be used to, carry or purchase any margin securities originally issued by it or any “margin stock” within the meaning of said Regulation U.

(r)           Indemnification.  The Issuer shall indemnify and hold harmless the Noteholders from and against any loss, liability, expense, damage or injury sustained or suffered by them by reason of any acts, omissions or alleged acts or omissions (i) by the Issuer in the performance of its obligations under the Transaction Documents (including any violation of any applicable laws by the Issuer as a result of the transactions contemplated by this Indenture) to which it is a party, or (ii) arising out of the activities of any of them with respect to the Collateral, includi ng enforcement of rights and remedies against the Issuer under the Transaction Documents to which it is a party and any judgment, award, settlement, reasonable attorneys’ fees and other expenses reasonably incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided that the Issuer shall not indemnify the Noteholders if such loss, liability, expense, damage or injury is due to such Person’s gross negligence, willful misconduct, willful misfeasance or bad faith in the performance of its rights or duties hereunder. Any indemnification pursuant to this Section shall only be payable, subject to the priority of payments in Section 13.03, from the assets of the Issuer released from the Collateral except as otherwise expressly provided in the Transaction Documents.  The provisions of this indemnity shall survive the termination of this Indenture.

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(s)           Taxes.  The Issuer shall pay and discharge all taxes and governmental charges upon it or against any of its properties or assets or its income prior to the date after which penalties attach for failure to pay, except (a) to the extent that the Issuer shall be contesting in good faith in appropriate proceedings its obligation to pay such taxes or charges, and adequate reserves having been set aside for the payment thereof and no Lien has been created on any of its assets in connection therewith, or (b) with respect to such taxes and charges which are not material in either nature or amount such that any failure to pay or discharge them, and any resulting penalties, either in any one instance or in the aggregate, would not materially and adversely affect the financial condition, operations, activities or prospects of the Issuer or the interests of each Noteholder under this Indenture, a Note or any other Transaction Document, and no Lien has been created on any of the Issuer’s assets in connection therewith.

(t)           No Adverse Transactions.  The Issuer shall not enter into any transaction which adversely affects the Collateral or any Secured Party’s rights under this Indenture, a Note or any other Transaction Document.

(u)           Transactions by Issuer.  None of the Noteholders shall have any obligation to authorize the Issuer to, and the Issuer shall not (without the prior written consent of the Majority Holders), enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Person (including, without limitation any Affiliate, any shareholder, director, manager, officer or employee (or any relative thereof) of the Issuer or any such Affiliate) unless such transaction is (a) expressly permitted under this Indenture or any other Transaction Document, (b) in the ordinary course of conducting the Issuer’s permitted activities and (c) upon fair and reasonable terms no less favorable to the Issuer than it would obtain in a comparable arm’s-length transaction.

(v)           Further Limitations on Actions.  The Issuer shall not do any of the following without the consent of the Control Party:  (i) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of the Issuer’s membership interests, except in connection with employment or similar agreements with officers and directors of the Issuer, or (ii) make any change in the Issuer’s capital structure (except for permitted redemptions or prepayments of the Notes hereunder), or (iii) make any material change in any of its objectives, purposes or operations.

(w)           Rule 144A Information.With respect to the Holder of any Note, the Issuer shall promptly furnish or cause to be furnished to such Holder or to a prospective purchaser of such Note designated by such Holder, as the case may be, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act (“Rule 144A Information” ) in order to permit compliance by such Holder with Rule 144A in connection with the resale of such Note by such Holder; provided, however, that the Issuer shall not be required to furnish Rule 144A Information in connection with any request made on or after the date which is three years from the later of (a) the date such Note (or any predecessor Note) was acquired from the Issuer or (b) the date such Note (or any predecessor Note) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 under the Securities Act; and

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provided, further, that the Issuer shall not be required to furnish such information at any time to a prospective purchaser located outside the United States who is not a U.S. Person.

ARTICLE XIII

ACCOUNTS AND ACCOUNTINGS

Section 13.01                                Collection of Money. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and othe r property payable to or receivable by the Trustee pursuant to this Indenture.  The Trustee shall, upon request from the Servicer, provide the Servicer with sufficient information regarding the amount of collections with respect to the Contract Assets and the other Collateral received by the Trustee in any accounts held in the name of the Trustee to permit the Servicer to perform its duties under the Servicing Agreement.  The Trustee shall hold all such money and property so received by it as part of the Collateral and shall apply it as provided in this Indenture.  If any Contract becomes a Defaulted Contract, the Trustee, upon the request of the Issuer or the Servicer, may, and upon the request of the Control Party shall, take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings.  Any such action shall be without prejudice to any right to deem a Contract a “Defaulted Contra ct” for purposes of the Transaction Documents and to claim a Default or Event of Default under this Indenture and to proceed thereafter as provided in Article VI.

Section 13.02                                Establishment of Trust Accounts.  i) Prior to the Closing Date, the Issuer established, and as of the Closing Date the Issuer maintains, with the Trustee (i) a segregated, trust account (the “Reserve Account”) for the deposit and retention of amounts required to be maintained therein and (ii) a segregated, trust account (the “Collection Account”) for the receipt and/or retention (as applicable) of (A) Collections, (B) Servicer Advances, (C) any interest or other earnings earned on all or part of the funds in any of the Collection Account or on any other Collateral and any other amounts, if any, remitted by the Issuer pursuant to Section 13.02(d), (D) amounts received in accordance with Section 11.02(b) in connection with a redemption of Outstanding Notes in accordance with Article XI, (E) amounts transferred from the Reserve Account in accordance with this Indenture and (F) amounts transferred from the Lockbox Account in accordance with the Servicing Agreement, (iii) a segregated trust account (the “Prefunding Account”) for the deposit and retention of amounts required to be maintained therein and (iv) a segregated trust account (the “Capitalized Interest Account”) for the deposit and retention of amounts required to be maintained therein. The Collection Account, the Reserve Account, the Prefunding Account and the Capitalized Interest Account are collectively referred to as the “Trust Accounts.”

(b)           The Trust Accounts shall be in the name of the Trustee on behalf of the Noteholders at the Corporate Trust Office, which shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Secured Parties.  Funds in each Trust Account shall not be commingled with any other monies.  The Trustee shall ensure that the Trust Accounts are at all times Eligible Accounts.  All payments to be made from time to time by the Issuer to the Noteholders and other Persons out of funds in any Trust Account pursuant to this Indenture shall be made by the Trustee or the Pay ing Agent.  All monies deposited from time to time in the Trust Accounts

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pursuant to this Indenture shall be held by the Trustee as part of the Collateral as herein provided.

(c)           Upon direction of the Servicer, the Trustee shall invest the funds in or credited to any or all of the Trust Accounts in Eligible Investments.  The direction of the Servicer shall specify the Eligible Investments in which the Trustee shall invest, shall state that the same are Eligible Investments and shall further specify the percentage of funds to be invested in each Eligible Investment.  No such Eligible Investment shall mature later than the Business Day preceding the next following Payment Date.  In the absence of direction of the Servicer, the Trustee shall invest funds in the Trust Accounts in Eligible Investments described in clause (g) of the definition thereof.  Eligible Investments for funds in or credited to th e Trust Accounts shall be made in the name of the Trustee for the benefit of the Secured Parties.

(d)           Any proceeds, payments, income or other gain from investments in Eligible Investments made in respect of funds in or credited to the Trust Accounts, as outlined in (c) above, shall be credited to the respective Trust Account from which such funds were derived.  The Trustee shall not be liable for any loss incurred on any funds invested in Eligible Investments pursuant to the provisions of this Section (other than losses from nonpayment of investments in obligations of U.S. Bank National Association issued in its individual capacity).  In no event shall the Trustee be liable for the selection of investments or for losses incurred as a result of the liquidation of any investment prior to its Stated Maturity Date or for the failure of any approp riate Person to provide timely written investment direction.

(e)           Each party hereto agrees that each of the Trust Accounts constitutes a “securities account” within the meaning of Article 8 of the UCC and in such capacity U.S. Bank National Association shall be acting as a “securities intermediary” within the meaning of 8-102 of the UCC and that, regardless of any provision in any other agreement, for purposes of the UCC, the State of New York shall be deemed to be the “securities intermediary’s jurisdiction” under Section 8-110 of the UCC.  The Trustee shall be the “entitlement holder” within the meaning of Section 8-102(a)(7) of the UCC with respect to the Trust Accounts.  In further ance of the foregoing, U.S. Bank National Association, acting as a “securities intermediary,” shall comply with “entitlement orders” within the meaning of Section 8-102(a)(8) of the UCC originated by the Trustee with respect to the Trust Accounts, without further consent by the Issuer.  Each item of property (whether investment property, financial asset, security, instrument or cash) credited to each Trust Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.  All securities or other property underlying any financial assets credited to each Trust Account shall be registered in the name of the Trustee or indorsed to the Trustee or in blank, and in no case will any financial asset credited to any Trust Account be registered in the name of the Issuer, payable to the order of the Issuer or specially indorsed to the Issuer except to the extent the foregoing have been specially indorsed to the Trustee or in blank. Any Eligible Investment consisting of “certificated securities,” as defined in the applicable UCC will be evidenced directly or indirectly by physical certificates and each such certificated security (i) will be delivered and held in its direct physical possession by the Securities Intermediary in the State of Minnesota and (ii) (x) is registered in the name of the Securities Intermediary or (y) has been appropriately assigned thereon, or is accompanied by a bond power and/or assignment appropriately executed, in blank or to the Securities Intermediary, and is accompanied by any other documents required by the documents governing such security to effect the transfer of the registration thereof to the Securities Intermediary.  The Trust Accounts shall be under the sole dominion and control (as defined in Section 8-106 of the UCC) of the Trustee, and the Issuer shall have no right to clos e, make withdrawals from, or give

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disbursement directions with respect to, or receive distributions from, (A) the Collection Account or the Reserve Account, except in accordance with Section 13.03 and (B) with respect to the Prefunding Account and Capitalized Interest Account, except in accordance with Sections 13.06 and 13.07, respectively.

(f)           In the event that U.S. Bank National Association, as securities intermediary, has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Trust Accounts or any security entitlement credited thereto, it hereby agrees that such security interest shall be subordinate to the security interest created by this Indenture and that the Trustee’s rights to the funds on deposit therein shall be subject to Section 13.03.  The financial assets credited to, and other items deposited to the Trust Accounts will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any person other than as created pursuant to this Indenture.

Section 13.03                                Collection Account.  ii) Except as otherwise expressly provided herein, all amounts received by the Issuer other than (i) proceeds of the sale of the applicable Notes to the Initial Class A Purchaser or any Initial Class B Purchaser, (ii) the Initial Reserve Deposit deposited in the Reserve Account, (iii) amounts deposited in the Prefunding Account or Capitalized Interest Account or (iv) amounts erroneously credited to the Issuer for which the Control Party has provided its prior consent to the application thereof, shall be deposited in the Collection Account until applied, together with funds from the Reserve Account in accordance with this Section 13.03.

(b)           By no later than 1:00 p.m. (New York time) on each Payment Date, after making all transfers and deposits to the Collection Account pursuant to Section 13.03, Section 13.04(b)  and Section 13.05, the Trustee shall withdraw from the Collection Account all Available Funds with respect to the related Collection Period and shall disburse such Available Funds in accordance with the related Monthly Servicing Report; provided that, if the Trustee shall not have received the Monthly Servicing Report, (x) the Trustee shall withdraw from the Collection Account amounts verified in writing by the Servicer as needed to pay first, all accrued and unpaid f ees and properly invoiced costs and expenses of each of the Originator, Servicer, Back-up Servicer, Trustee and Custodian and second, amounts in accordance with the priorities set forth in Section 13.03(c)(v) through 13.03(c)(x), (y) the Trustee shall distribute such funds in order to make such payments to the appropriate Persons and (z) upon subsequent receipt of the Monthly Servicing Report, or such other information as may be required by the Trustee, the Trustee shall pay each such other amounts set forth below, all as set forth in the Monthly Servicing Report or in such other information delivered to the Trustee; provided further that amounts deposited in the C ollection Account in accordance with Section 11.02(b) shall be disbursed in accordance with Section 11.04 and not this Section 13.03;

(c)           On each Payment Date, whether or not an Event of Default has occurred and is continuing and the maturity of the Notes has been accelerated, the Trustee shall make the following payments from the Available Funds then on deposit in the Collection Account (after required deposits therein from the Reserve Account) in the following order of priority (to the extent funds are available therefor):

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(i)           to the Servicer, any unreimbursed Servicer Advances;

(ii)           to the Servicer, the Servicer Fee (including any accrued and unpaid amounts owing to a predecessor Servicer) then due to such person, together with any accrued and unpaid Servicer Fees owed to such person from prior Collection Periods;

(iii)           (a) to the Servicer, any Servicing Charges and (b) to the Servicer (including any accrued and unpaid amounts owing to a predecessor Servicer), any unreimbursed Collection Costs incurred by such person;

(iv)           to the Trustee, the Custodian and the Back-up Servicer, the Trustee Fees and out-of-pocket expenses, Custodian Fees and out-of-pocket expenses and Back-up Servicer Fees and out-of-pocket expenses (which includes out-of-pocket expenses due to any successor Servicer)  then due, together with any unpaid Trustee Fees and out-of-pocket expenses, Custodian Fees and out-of-pocket expenses and Back-up Servicer Fees and out-of-pocket expenses from prior Collection Periods (subject to certain limitations set forth herein), and any unpaid Transition Costs in an amount not to exceed in the aggregate $150,000;

(v)           to the Class A Noteholders, pro rata, the total amount of Note Interest due and payable to Holders of such Class of Notes;

(vi)           to the Class B-1 Noteholders, pro rata, the total amount of Note Interest due and payable to Holders of such Class of Notes;

(vii)           to the Class B-2 Noteholders, pro rata, the total amount of Note Interest due and payable to Holders of such Class of Notes;

(viii)           so long as no Event of Default has occurred and is continuing, to the Prefunding Account the amount that otherwise would have been made to Class A Noteholders in reduction of principal until the Outstanding Note Balance of the Class A Notes has been reduced to zero; otherwise, to the Class A Noteholders in reduction of principal until the Outstanding Note Balance of the Class A Notes has been reduced to zero;

(ix)           so long as no Event of Default has occurred and is continuing, to the Prefunding Account the amount that otherwise would have been made to Class B-1 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-1 Notes has been reduced to zero; otherwise, to the Class B-1 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-1 Notes has been reduced to zero;

(x)           so long as no Event of Default has occurred and is continuing, to the Prefunding Account the amount that otherwise would have been made to Class B-2 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-2 Notes has been reduced to zero; otherwise, to the Class B-2 Noteholders in reduction of principal until the Outstanding Note Balance of the Class B-2 Notes has been reduced to zero;

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(xi)           to the Trustee, Securities Intermediary, Custodian and Back-up Servicer, any indemnification payments owed by the Issuer; and

(xii)           to the Issuer, any remaining Available Funds; provided, that, if there is no principal or Note Interest outstanding on the Class A, Class B-1 or Class B-2 Notes, such funds to be held in trust by the Trustee, in a segregated, trust account in the name of the Trustee on behalf of the Issuer at the Corporate Trust Office, which account shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Issuer.

(d)           On the related Redemption Date, the Trustee shall withdraw the sum of the applicable Redemption Price from the Collection Account, and the Paying Agent shall remit the Redemption Price to the applicable Noteholders in accordance with Section 11.03.

Section 13.04                                Reserve Account.  (a) Upon each date on which the following three payments are made:  $10,000,000 by the Initial Class A Purchaser for the Class A Notes, $375,000 by the Initial Class B-1 Purchaser for the Class B-1 Notes and $375,000 b y the Initial Class B-2 Purchaser for the Class B-2 Notes, in accordance with Section 3(c) of the Note Purchase Agreement, $375,000 of the cash proceeds resulting from the issuance of the Class B-1 Notes and $375,000 of the cash proceeds resulting from the issuance of the Class B-2 Notes will be deposited into the Reserve Account.

(b)           If on any Payment Date, (i) amounts on deposit in the Collection Account are insufficient to reduce the aggregate Outstanding Note Balance to an amount lower than or equal to the Discounted Pool Balance, plus amounts then on deposit in the Prefunding Account, after applying clauses (i) through (x) of Section 13.03(c) or (ii) amounts on deposit in the Reserve Account are greater than or equal to the aggregate Outstanding Note Balance, the Trustee will withdraw, to the extent of funds on deposit in the Reserve Account, in the case of (i), the amount of such insufficiency or, in the case of (ii), all funds and deposit such amounts into the Collection Account to be used as Available Funds; provided, that all amounts so withdrawn shall be applied in reduction of principal until the Outstanding Note Balance of the Class A Notes has been reduced to zero, and then in reduction of principal until the Outstanding Note Balance of the Class B-1 Notes has been reduced to zero, and then in reduction of principal until the Outstanding Note Balance of the Class B-2 Notes has been reduced to zero.  Upon the occurrence of any Event of Default that results in acceleration of the Notes and is not waived or cured on or before the next Payment Date, all funds maintained in the Reserve Account shall be transferred to the Collection Account by the Trustee to be used as Available Funds in accordance with Section 13.03(c).  On the Stated Maturity Date, and at the option of the Issuer in connection with the redemption pursuant to Article XI, any remaining funds on deposit in the Reserve Account shall be deposited in the Collection Account to be used as Available Funds a nd distributed in accordance with Section 13.03(c).

Section 13.05                                [Reserved]

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Section 13.06                                Prefunding Account.  Upon each date on which the following three payments are made:  $10,000,000 by the Initial Class A Purchaser for the Class A Notes, $375,000 by the Initial Class B-1 Purchaser for the Class B-1 Notes and $375,000 by the Initial Class B-2 Purchaser for the Class B-2 Notes, in accordance with Section 3(c) of the Note Purchase Agreement, $4,0 45,913.38 of the cash proceeds resulting from the issuance of the Class A Notes will be deposited to the Prefunding Account. In addition, any amounts that otherwise would have been made to any Noteholders in reduction of their respective principal shall be deposited into the Prefunding Account in accordance with Sections 13.03(c)(viii), 13.03(c)(ix) and 13.03(c)(x). The Issuer is authorized to use amounts in the Prefunding Account to acquire from time to time Purchased Contracts from the Originator and the Originator’s interest in the related Equipment pursuant to the Purchase and Contribution Agreement, provided that (1) such Contracts are Eligible Contracts as of the related Acquisition Date (except as permitted pursuant to Section 4.04(a)), (2) no Event of Default has occurred and is continuing, (3) the Overconcentration Test would be satisfied immediately after the Issuer acquires the proposed Purchased Contracts on the related Acquisition Date, (4) the Outstanding Note Balance of the Class A Notes is equal to or lower than the Discounted Pool Balance and (5) the aggregate number of Contract Files to be reviewed by the Custodian relating to such proposed Contracts to be acquired at any time shall not exceed five hundred (500) without the consent of the Custodian and the Class A Noteholders. Upon the occurrence of any Event of Default that results in acceleration of the Notes and is not waived or cured on or before the next Payment Date, all amounts on deposit in the Prefunding Account will be withdrawn by the Trustee, to the extent of funds on deposit therein, and distributed, to the Class A Noteholders, the Class B-1 Noteholders and the Class B-2 Noteholders, pro rata based upon their respective Outstanding Note Balances, in reduction of principal, and without regard to the priority of payments set forth in Section 13.03(c).

Section 13.07                                Capitalized Interest Account.  Upon each date on which the following three payments are made:  $10,000,000 by the Initial Class A Purchaser for the Class A Notes, $375,000 by the Initial Class B-1 Purchaser for the Class B-1 Notes and $375,000 by the Initial Class B-2 Purchaser for the Class B-2 Notes, $193,449.82 of the cash proceeds resultin g from the issuance of the Class A Notes will be deposited to the Capitalized Interest Account.  On each Payment Date, amounts from the Capitalized Interest Account shall be deposited into the Collection Account by the Trustee in an amount equal to accrued interest at 6.75% per annum (calculated on the basis of the actual number of days elapsed in a three-hundred-sixty (360)-day year) on the amount in the Prefunding Account on the Closing Date (for the calculation of capitalized interest due on the first Payment Date) and on the immediately preceding Payment Date (for the calculation of capitalized interest due on each Payment Date other than the initial Payment Date). Upon the occurrence of any Event of Default that results in acceleration of the Notes and is not waived or cured on or before the next Payment Date, all amounts on deposit in the Capitalized Interest Account will be withdrawn by the Trustee, to the extent of funds on deposit therein, and distributed to the Class A Noteholders, the Cl ass B-1 Noteholders and the Class B-2 Noteholders, pro rata based upon their respective Outstanding Note Balances, in reduction of principal, and without regard to the priority of payments set forth in Section 13.03(c).

Section 13.08                                Reports to the Noteholders. (a) On each Payment Date, the Trustee will make available to each Noteholder the Monthly Servicing Report.

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    The Trustee will make the Monthly Servicing Report available to the Noteholders, via the Trustee’s Internet website, and, with the consent or at the direction of the Issuer, such other information regarding the Notes and/or the Contracts as the Trustee may have in its possession, but only with the use of a password provided by the Trustee or its agent to such Person.  The Trustee will make no representation or warranties as to the accuracy or completeness of such documents and will assume no responsibility for the contents thereof.

The Trustee’s Internet website initially shall be located at www.usbank.com/abs or at such other address as shall be specified by the Trustee from time to time in writing to the Noteholders.  In connection with providing access to the Trustee’s Internet website, the Trustee may require registration and the acceptance of a disclaimer.  The Trustee shall not be liable for errors in the dissemination of information in accordance with this Indenture.

Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles.

(b)           At least annually, or as otherwise required by law, the Servicer shall prepare or cause to be prepared, and the Trustee shall distribute to the Noteholders, any 1099 form, or other tax information or statements as are required by applicable tax law.

Section 13.09                                Monthly Servicing Reports.  No later than 12:00 p.m. (New York time) on each Reporting Date, the Servicer shall deliver the Monthly Servicing Report to each Initial Purchaser, the Trustee and the Back-up Servicer.  No later than 12:00 noon (New York time) on the following Verification Date, the Back-up Servicer shall perfor m its obligations and duties set forth in Section 4.05 of the Servicing Agreement and shall notify the Issuer andthe Trustee of any discrepancies therein or the need for any additional information to complete such verification, and the Servicer shall promptly re-issue a revised Monthly Servicing Report addressing such discrepancies and such information request which revised Monthly Servicing Report shall supersede the prior report for purposes of making the distributions described in Section 13.03. The Monthly Servicing Report shall include the information specified in the form of Monthly Servicing Report attached to the Servicing Agreement, as such form may be modified from time to time with the consent of the Servicer, the Back-up Servicer and the Control Party.

ARTICLE XIV

PROVISIONS OF GENERAL APPLICATION

Section 14.01                                General Provisions.  All of the provisions of this Article shall apply to this Indenture.

Section 14.02                                Acts of Noteholders.

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or

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instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section.

(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)           The ownership of Notes shall be proved by the Note Register.

(d)           Any request, demand, authorization, direction, notice, consent, waiver or other action by the Noteholder of any Note shall bind the Noteholder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

Section 14.03                                Notices.  Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or the Control Party or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with any party hereto shall be sufficient for every purpose hereunder if in writing and telecopied (with written confirmatio n of receipt), mailed by registered mail, overnight bonded courier or personally delivered, and addressed to the appropriate address below (or such other address as may be provided to the other parties in writing from time to time):

(a)           to the Trustee at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, Minnesota 55107, telecopier number 651-495-8090, Attention:  LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, Series 2010-4;

(b)           to the Custodian at 1133 Rankin Street, EP-MN-TMZD, St. Paul, MN 55116 telecopy number:  651-695-6102, Attention:  LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, Series 2010-4;

(c)           to the Servicer at 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman;

(d)           to the Issuer at 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman;

(e)           to the Originator at 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman; or

(f)           to the Back-up Servicer at 1310 Madrid Street, Suite 103, Marshall, MN 56258, telecopy number:  866-806-0775, Attention: Bradley Winkelman, Re:  LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, Series 2010-4;

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Section 14.04                                Notices to Noteholders; Waiver.  Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and telecopied (with written confirmation of receipt from each addressee), mailed by registered mail, overnight bonded courier or delivered personally to each Noteholder affected by such event, at i ts address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.  In any case in which notice to Noteholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice which is mailed in the manner herein provided shall conclusively be presumed to have been duly given.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Noteholders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to the Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.

Section 14.05                                Successors and Assigns.All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not.

Section 14.06                                Severability; No Waiver.  In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  No failure on the part of the Trustee, the Control Party or any Noteholder 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 14.07                                Benefits of Indenture Limited to Parties and Express Third Party Beneficiaries.Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, the Noteholders and any of their successors hereunder, a ny benefit or any legal or equitable right, remedy or claim under this Indenture or under the Notes.  Each of the Noteholders are express third party beneficiaries of this Indenture each entitled to enforce the provisions hereof as if a party hereto.

Section 14.08                                Legal Holidays.In any case in which the date of any Payment Date, or the Stated Maturity Date of any Note shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment of principal or interest need not be m ade on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of any such Stated Maturity Date or Payment Date.

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Section 14.09                                Governing Law; Waiver of Jury Trial; Consent to Jurisdiction.

(a)           This Indenture and each Note shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements made and to be performed therein, except to the extent that the perfection or effect of perfection of the security interests granted hereunder are governed by the laws of a jurisdiction other than the State of New York.  Section 5-1401 and Section 5-1402 of the New York General Obligations Law shall be applicable.

(b)           The Issuer hereby agrees to the jurisdiction of any federal court located within the State of New York, and waives personal service of any and all process upon it and consents that all such service of process be made by registered mail directed to the Issuer at the address set forth in Section 14.03 hereof and service so made shall be deemed to be completed five (5) days after the same shall have been deposited in the U.S. mails, postage prepaid.  With respect to the foregoing consent to jurisdiction, the Issuer hereby waives any objection based on forumnonconveniens, and any objection to venue of any action instituted hereunder and consents to the granting of such legal or equitable relief as is deemed appropriate by the court.

(c)           The Issuer hereby waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise among the parties hereto or otherwise arising out of, connected with, related to, or incidental to the relationship between them in connection with this Indenture.  Instead, any dispute resolved in court will be resolved in a bench trial without a jury.  Nothing in this Section 14.09 shall affect the right of the Trustee, the Control Party or any Noteholder to serve legal process in any other manner permitted by law or to bring any action or proceeding against the Issuer or its property in the cour ts of any other jurisdiction.

Section 14.10                                Counterparts; Entire Agreement.This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.  Deliv ery by telecopier of an executed counterpart of a signature page to this Indenture shall be as effective as delivery of the original executed counterpart.  This Indenture, together with the exhibits hereto and the other written Transaction Documents referenced herein, sets forth the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings.

Section 14.11                                Notifications.Notwithstanding any provision to the contrary contained in this Indenture, all reports, notices, communications and consents which are required, by the terms of this Indenture, to be delivered by the Noteholders, shall be required to be deli vered to the Trustee in writing.

Section 14.12                                No Petition.  During the term of this Indenture and for one year and one day after payment in full of all obligations of the Issuer under the Transaction Documents, none of the parties hereto or any Affiliate thereof or any Noteholder will file any involuntary petition against the Issuer or otherwise institute, or cooperate with or encourage any other P erson to file or otherwise institute, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or any other proceedings under federal or state bankruptcy or similar law against or concerning the Issuer; provided that if such proceeding shall have commenced, nothing herein shall preclude any Noteholder from filing a proof of claim in any such proceeding.

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Section 14.13                                Assignment.

Notwithstanding anything to the contrary contained herein, this Indenture may not be assigned by the Issuer.

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In Witness Whereof, the Issuer, the Trustee and the Custodian have caused this Indenture to be duly executed by their respective duly authorized officers as of the date and year first above written.

LEAF Funding SPE 1, LLC, as Issuer
By:	/s/
	Name
	Title

U.S. Bank National Assication, as Trustee
By:	/s/
	Name
	Title

U.S. Bank National Assication, as Custodian
By:	/s/
	Name
	Title

SCHEDULE I

CLOSING DATE CONTRACT SCHEDULE

[See attached.]

Sched. I-1

SCHEDULE II

DEFINITIONS ANNEX

[See attached.]

Sched. II-1

SCHEDULE II

TO INDENTURE

DEFINITIONS ANNEX

“Acquisition Date”:  With respect to a Substitute Contract or Purchased Contract, the date on which such Substitute Contract is transferred by LEAF Financial Corporation (as initial Servicer) to the Issuer or the Conveyance Date on which such Purchased Contract is transferred by the Seller to the Issuer.

“Act”:  With respect to any Noteholder, the meaning set forth in Section 14.02 of the Indenture.

“Advance Payment”: With respect to a Contract and a Collection Period, any Scheduled Payment or portion thereof made by or on behalf of an Obligor and received by the Servicer during such Collection Period, which Scheduled Payment or portion thereof does not become due until a subsequent Collection Period.  Prepayments are not “Advance Payments.”

“Affiliate”:  With respect to any specified Person, any other Person, directly or indirectly, controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control,” when used with respect to any specified Person, means the power (a) to vote ten percent (10%) or more of the securities or interests (on a fully diluted basis) having ordinary voting power for the directors, managers or managing partners (or their equivalent) of such Person or (b) 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  220;controlled” have meanings correlative to the foregoing.

“Amendment to Contract Schedule”:  The list of Contracts, including all information set forth in the definition of “Contract Schedule”, amending the Contract Schedule pursuant to any substitution, modification or other acquisition of Contracts in accordance with the terms of the Transaction Documents.

“Assignment Agreement”:  Means each Assignment Agreement delivered pursuant to the Purchase and Contribution Agreement.

 “Authenticating Agent”:  Any entity appointed by the Trustee pursuant to Section 7.14 of the Indenture.

“Available Funds”: With respect to any Payment Date, (a) any payments on the Contracts received during the related Collection Period, (b) proceeds of any Servicer Advances made with respect to such Payment Date for delinquent Scheduled Payments, no later than immediately prior to such Payment Date, (c) all Recoveries, Insurance Proceeds, Residual Receipts and other amounts received with respect to the Contracts or Equipment, (d) payments made by the Originator or the Servicer, as the case may be, to repurchase contracts affected by breaches of representations and warranties regarding the Contracts, or Delinquent Contracts or

Defaulted Contracts and (e) any amounts on deposit in the Reserve Account in accordance with the Indenture.

“Back-up Servicer”:  Means Lyon Financial Services, Inc., d/b/a U.S. Bank Portfolio Services, a Minnesota corporation, acting in the capacity of Back-up Servicer or as successor Servicer; and at such time, if any, that a successor Person shall have become the “Back-up Servicer” pursuant to the applicable provisions of the Servicing Agreement, the term “Back-up Servicer” shall also mean such successor Person.

“Back-up Servicer Default”:  An occurrence of any of the following:

(a)           Any failure on the part of the Back-up Servicer to duly observe or perform any covenants or agreements of the Back-up Servicer set forth in any Transaction Document or if any representation or warranty of the Back-up Servicer set forth in Section 7.01 of the Servicing Agreement or in any other Transaction Document shall prove to be incorrect, in any material respect, which failure or breach continues unremedied for a period of thirty (30) Business Days after the earlier of the date on which the Back-up Servicer becomes aware of such failure or breach or the date on which written notice of such failure or breach, requiring the situation giving rise to such breach or non-conformity to be remedied, shall have been given to the Back-up Servicer by th e Issuer, the Trustee, or the Control Party; or

(b)           Any negligence or willful misconduct of the Back-up Servicer related to the Transaction Documents that results in a material loss or damage to the Issuer, the Originator, the Servicer, the Trustee, any Noteholder or the Collateral; or

(c)           A conviction of the Back-up Servicer or any of its officers of a felony or of any crime involving fraud in the discharge of fiduciary duties or the servicing of assets that could reasonably be expected to have a material adverse effect on the performance of the Back-up Servicer’s duties under the Transaction Documents; or

(d)           The entry of a decree or order for relief by a court having jurisdiction in respect of the Back-up Servicer or a petition shall be filed against the Back-up Servicer in an involuntary case under any federal bankruptcy laws, as now or hereafter in effect, or any other present or future federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the Back-up Servicer or for any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Back-up Servicer and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days; or

(e)           The commencement by the Back-up Servicer of a voluntary case under any federal bankruptcy laws, as now or hereafter in effect, or any other present or future federal or state bankruptcy, insolvency, reorganization or similar law, or the consent by the Back-up Servicer to the appointment of or taking possession by a conservator, receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official in any insolvency, readjustment of debt, marshaling of assets and liabilities, bankruptcy or similar proceedings of or related to the Back-up Servicer or related to a substantial part of its property, or the making by the Back-up Servicer of an assignment for the benefit of creditors, or the failure by the Back-up Servicer

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generally to pay its debts as such debts become due or if the Back-up Servicer shall admit in writing its inability to pay its debts as they become due, or the taking of corporate action by the Back-up Servicer in furtherance of any of the foregoing.

“Back-up Servicer Fee”:  As further described in the Back-up Servicer Fee Schedule, the monthly fee payable on each Payment Date to the Back-up Servicer in consideration for its performance of its duties as Back-up Servicer in an amount equal to the greater of (i) one twelfth (1/12th) of the product of the aggregate Discounted Pool Balance as of the Payment Date occurring immediately prior to the related Collection Period (or, in the case of the Initial Payment Date, the Closing Date) and the Back-up Servicer Fee Rate, and (ii) $2,500.00. The Back-up Servicer Fee shall also include an initial acceptance fee of $7,500.00, which shall be payable on the Closing Date.

“Back-up Servicer Fee Rate”:  18 basis points.

“Back-up Servicer Fee Schedule”:  That certain “Schedule of Fees for Services Rendered as Back-up Servicer for $21,500,000 (Approximate) LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, 2010-4”, dated as of August 27, 2010.

“Bankruptcy Code”: The United States Bankruptcy Code, Title 11 of the United States Code, as amended from time to time, and any successor statute.

“Booked Residual”:  With respect to any Contract on any date of determination, the residual value of the Equipment subject to such Contract, as reflected in LEAF Financial Corporation’s servicing system on the date such Contract was booked on LEAF Financial Corporation’s servicing system.

“Business Day”:  Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in New York City, the city in which the Servicer is located or the city in which the corporate trust office of the Trustee is located are authorized or obligated by law or executive order to be closed.

“Calculation Date”:  Means, unless the context requires otherwise, the close of business on the last day of a Collection Period.

“Capitalized Interest Account”:  The trust account created and maintained pursuant to Section 13.02 of the Indenture; provided, that in no event shall the Capitalized Interest Account be other than an Eligible Account.

“Class”:  With respect to the Notes, the designation of Class A, Class B-1 or Class B-2, with the specific senior or subordinated rights related to such designation as are identified in the Indenture.

“Class A Buyout Notice”:  Has the meaning assigned in Section 6.16 of the Indenture.

“Class A Buyout Price”:  Has the meaning assigned in Section 6.16 of the Indenture.

“Class A Noteholder”:  A Holder of Class A Notes.

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“Class A Notes”:  The Equipment Contract Backed Notes, Series 2010-4, Class A issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $20,000,000.

“Class B Notes”:  Means, collectively, the Class B-1 Notes and the Class B-2 Notes.

“Class B-1 Noteholder”:  A Holder of Class B-1 Notes.

“Class B-1 Notes”:  The Equipment Contract Backed Notes, Series 2010-4, Class B-1 issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $750,000.

“Class B-2 Noteholder”:  A Holder of Class B-2 Notes.

“Class B-2 Notes”:  The Equipment Contract Backed Notes, Series 2010-4, Class B-2 issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $750,000.

“Closing Date”:  August 31, 2010; provided, however, that with respect to Section 3(c)(i) of the Note Purchase Agreement, “Closing Date” shall mean September 2, 2010.

“Code”:  The Internal Revenue Code of 1986, as amended.

“Co-Trustee”:  The meaning set forth in Section 7.12 of the Indenture.

“Collateral”:  The meaning set forth in the Granting Clause of the Indenture.

“Collateral Purchase Notice Date”:  Has the meaning set forth in Section 6.18(c) of the Indenture.

“Collection Account”:  The segregated trust accounts and any related sub-accounts created and maintained pursuant to Section 13.02 of the Indenture; provided that in no event shall the Collection Account be other than an Eligible Account.

“Collection Costs”:  With respect to any Contract and subject to the Servicer’s standard of care set forth in Section 3.02 of the Servicing Agreement, reasonable costs and expenses incurred by the Servicer (including reasonable attorney’s fees and out-of-pocket expenses) and payable to Persons other than Affiliates of the Servicer in connection with the realization, attempted realization or enforcement of rights and remedies upon such Contract and as further described in Section 3.08 of the Servicing Agreement.

“Collection Period”:  With respect to any Payment Date, the period commencing on the first day of the immediately preceding calendar month and ending on the last day of such calendar month; provided that the first Collection Period is the period from the Closing Date until August 31, 2010.

“Collections”:  As of any determination date, the sum of all amounts collected during a Collection Period under or in respect of the Contract Assets, including, without limitation, all

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amounts consisting of Scheduled Payments, Contract Repurchase Prices, Guaranty Amounts, Insurance Proceeds and other Recoveries and Residual Receipts, but excluding any amounts consisting of Security Deposits.

“Contract”:  As of any date of determination, a lease (including the master lease, if applicable), a loan, a leveraged lease loan, conditional sale or similar equipment finance contract conveyed on an Acquisition Date by the Originator to the Issuer pursuant to the Purchase and Contribution Agreement and pledged to the Trustee in accordance with the Transaction Documents and including any substitutions therefor; provided that, from and after the date that such Contract is repurchased, substituted or released from the lien of the Indenture, each in accordance with the requirements of the Transaction Documents, such Contract shall no longer constitute a “Contract”.

“Contract Assets”:  Collectively, as of any date of determination, (a) each Contract that is listed on the Contract Schedule from time to time, (b) all Receivables related thereto, (c) the interest of the Issuer in the Equipment related thereto, (d) the related Contract Files, (e) all other Related Security, and (f) any and all income and proceeds of the foregoing.

“Contract File”:  With respect to each Contract, the following documentation (unless otherwise permitted by the Majority Holders): (a) if the Equipment related to such Contract is Motorized Titled Equipment, (i) a copy of the application for certificate of title showing the Originator or Servicer (or their nominees) as lienholder or secured party or (ii) on and after the date that is 180 days after such Contract was pledged by the Issuer to the Trustee (for the benefit of the Secured Parties), the original copy of the Lien Certificate with respect to such Motorized Titled Equipment, which such Lien Certificate notes the secured party of such Motorized Titled Equipment as being the Originator (or its nominee pursuant to the Lienholder No minee Agreement) or Servicer (or its nominee pursuant to the Lienholder Nominee Agreement); provided, however, that, prior to the occurrence of an Event of Default and the request by the Trustee for the recordation of the Trustee’s lien on such Equipment’s certificate of title, the original Lien Certificate shall not be required to show the Trustee as secured party, (b) the one and only executed original counterpart of such Contract (bearing the original signature of an employee of the Originator, or if the contract was not originated by the Originator, the originator thereof, together with an original or facsimile copy of the signature of the lessee) in the Servicer’s possession, or if the LEAF Parties are not in possession of such original, a machine copy thereof certified by an officer of the Servicer or the Originator that such copy is a true and complete copy thereof; (c) copies of an Insurance Policy, if any, evidence of insuran ce, if any, and any other copies of documents evidencing or related to any Insurance Policy with respect to such Contract; (d) copies of all UCC financing statements required to be filed to perfect the security interest in the related Equipment and the Related Security related thereto (except with respect to a Contract related to Equipment that had an original equipment cost at origination of less than (A) if such Contract is a secured loan or finance lease that provides for a $1 purchase option, $25,000, or (B) if such Contract provides for a “fair market value” purchase option, $50,000); and (e) copies of any additional documents (other than Servicing Documents) that the Servicer keeps on file with respect to such Contract.

“Contract Repurchase Price”:  Means, with respect to any Contract repurchased by the Originator pursuant to the Purchase and Contribution Agreement, repurchased by the Servicer

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pursuant to the Servicing Agreement, or removed from the Collateral by the Issuer pursuant to the Indenture, the sum of (a) the Discounted Contract Balance (computed without giving effect to clauses (b) and (c) of the definition of Discounted Contract Balance and without duplication of amounts) of the related Contract on the date of determination on or immediately preceding the date when the Contract is removed or repurchased, plus (b) any Scheduled Payments with respect to the Contract due on or prior to such date of determination but not received through such date of determination, minus (c) the Discounted Contract Balance of any Contract provided in substitution therefor.

“Contract Schedule”:  The list of Contracts that are the subject of the transactions contemplated by the Transaction Documents, which list shall include (a) those Contracts listed on the Assignment Agreement delivered on the Closing Date and attached to the Indenture as Schedule I plus (b) any Contracts listed on an Amendment to Contract Schedule as a result of the addition of any Substitute Contract or Purchased Contract listed on any Assignment Agreement delivered after the Closing Date, less (c) any Contracts deleted as a result of a repurchase, substitution therefor, or release thereof pursuant to the Transaction Documents.  The Contract Schedule shall include with respect to each Contract:  (A) the LEAF Contract Number; (B) the name of the Obligor; (C) the State of the Obligor’s billing address; (D) the Discounted Contract Balance as of the related Cut-Off Date; (E) whether such Contract is a Delinquent Contract; (F) the remaining term; and (G) the original cost of the Equipment (but the Custodian need not verify such original cost).  The Contract Schedule shall also include with respect to each Substitute Contract:  (A) the LEAF Contract Number of the Contract being replaced and (B) the Discounted Contract Balance of the Contract being replaced as of the related Cut-Off Date.  The Contract Schedule kept by the Trustee at its Corporate Trust Office shall be the definitive Contract Schedule for all purposes of the Indenture, absent manifest error (in which case the Contract Schedule shall be all schedules attached to any Officer’s Certificate delivered by the Servicer or the Issuer, to the Trustee relating to the Contract Schedule).

“Control Party”:  Means (a) so long as any Class A Notes are outstanding, the Class A Noteholders representing 66-2/3% of the Outstanding Note Balance of the Class A Notes, (b) after the Class A Notes have been paid in full and for so long as any Class B-1 Notes remain outstanding, the Class B-1 Noteholders representing 66-2/3% of the Outstanding Note Balance of the Class B-1 Notes or (c) after the Class A Notes and the Class B-1 Notes have been paid in full and for so long as any Class B-2 Notes remain outstanding, the Class B-2 Noteholders representing 66-2/3% of the Outstanding Note Balance of the Class B-2 Notes.

“Conveyance Date”:Has the meaning set forth in Section 2.1(e) of the Purchase and Contribution Agreement.

“Conveyed Assets”:Has the meaning set forth in Section 2.1(a) of the Purchase and Contribution Agreement.

“Corporate Trust Office”:  The designated corporate trust office of the Trustee located, at the time of the execution of the Indenture at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, MN 55107, Attention: LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, or at such other address as the Trustee may designate from time to time by notice to the parties to the

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Transaction Documents, or the principal corporate trust office of any permitted successor Trustee under the Indenture.

“Credit and Collection Policies”:  Means the written collection and servicing policies of the Servicer, as in effect on the Closing Date, copies of which were delivered to the Back-up Servicer prior to the Closing Date, as amended with prior written consent of the Control Party (in the case of material amendments) from time to time in accordance with Section 3.01(c)(ix) of the Servicing Agreement; provided that, if LEAF Financial Corporation is not the Servicer, the term “Credit and Collection Policies” shall mean the written collection and servicing procedures of such successor Servicer as provided to the Trustee at the time such Person becomes successor Servicer.

“Cumulative Net Loss Trigger Event”:  Has the meaning set forth in Section 6.01(a)(ix) of the Servicing Agreement.

“Cumulative Net Loss Percentage”:  Means, with respect to any Collection Period, the percentage equivalent of a fraction, (i) the numerator of which is the excess of (a) the Discounted Contract Balance (immediately prior to becoming a Defaulted Contract) of all Contracts that became Defaulted Contracts during such Collection Period and all prior Collection Periods and remain Defaulted Contracts over (b) the aggregate amount of all Recoveries collected by the Servicer with respect to such Defaulted Contracts and (ii) the denominator of which is the sum of the Discounted Contract Balances of the Purchased Contracts as of their respective Cut-Off Dates.

“Custodian”:  Initially means U.S. Bank National Association, or such other party as is appointed in accordance with Article VIII of the Indenture to act as custodian to receive, inventory and maintain possession of the Contract Files in accordance with the requirements of the Indenture.

“Custodian Certificate”:  The certificate, substantially in the form of Exhibit C attached to the Indenture, delivered by the Custodian to the Trustee and the Issuer pursuant to Section 4.03 of the Indenture.

“Custodian Fee”:  Means the monthly fee payable on each Payment Date to the Custodian in an amount equal to the greater of (i) $60.00and (ii) the actual per file fees, based on the Custodian’s schedule of fees then in effect, incurred during the related Collection Period with respect to activities involving the Contract Assets during such Collection Period, as further described in the Custodian Fee Schedule.

“Custodian Fee Schedule”:  That certain “Schedule of Fees for Services Rendered as Custodian for $21,500,000 (Approximate) LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, 2010-4”, dated as of August 27, 2010.

“Cut-Off Date”:  Means, with respect to each Substitute Contract and Purchased Contract, the close of business on the last day of the calendar month immediately preceding the calendar month in which such Substitute Contract or Purchased Contract is pledged to the Trustee.

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“Default”:  Any occurrence or circumstance which with notice or the lapse of time or both would become an Event of Default, unless any such particular occurrence or circumstance is waived as a “Default” in writing in accordance with the provisions of the Indenture; provided that, unless and until any such waiver is given, a “Default” shall be deemed to exist for all purposes under the Transaction Documents, even if the occurrence or circumstance giving rise to such Default is no longer continuing or has been cured.

“Default Notice Date”:  Has the meaning set forth in Section 6.16 of the Indenture.

“Defaulted Contract”:  Any Contract:  (a) as to which an Insolvency Event has occurred with respect to the Obligor where the related lease has been rejected in the Obligor’s bankruptcy proceedings, (b) all or any portion of which has been or should have been, in accordance with the Credit and Collection Policies, written off on the Servicer's books as uncollectible, or (c) as to which more than 10% of a Scheduled Payment remains unpaid for 181 days or more from the original due date for such payment, without regard to any Servicer Advance, provided that a Contract shall no longer be a Defaulted Contract for any purpose of the Transaction Documents, upon the cure of the condition or event which caused it to be a Defaulted Contract.

“Deferred Interest”:  Has the meaning set forth in the definition of Note Current Interest.

“Delinquent Contract”:  Any Contract (a) as to which more than 10% of a Scheduled Payment was not received by the Servicer within ninety-one (91) days after the original due date for such Scheduled Payment, without regard to any Servicer Advance and (b) that is not a Defaulted Contract.

“Delinquency Ratio”: Means, with respect to any Determination Date, the quotient, expressed as a percentage, of (a) the aggregate Discounted Contract Balance of all Delinquent Contracts determined as of the end of the related Collection Period, divided by (b) the aggregate Discounted Contract Balance of all Contracts in the trust estate as of the last day of the related Collection Period.

“Determination Date”:  With respect to any Payment Date, a date which is the sixteenth day of the calendar month in which such Payment Date occurs, or if such day is not a Business Day, the immediately preceding Business Day.

“Discount Rate”:  6.25% per annum.

“Discounted Contract Balance”: Means, with respect to any Contract, on any date of determination, the lesser of (x) the original equipment cost at origination of the Equipment relating to such Contract and (y) the sum of the present value of all of the remaining payments becoming due under such Contract after the end of the prior Collection Period, discounted monthly at the Discount Rate assuming (a) Scheduled Payments are due on the last day of each Collection Period in which a Scheduled Payment is due; (b) Scheduled Payments are discounted on a monthly basis using a 30-day month and a 360-day year; and (c) Scheduled Payments are discounted to the last day of the Collection Period prior to the Determination Date; provided, however, that the Discounted Contract Balance of any (i) Defaulted Contract, (ii) Contract with respect to which a prepayment in full has been made, (iii) Disposed Contract, (iv) Contract purchased by the Originator or Servicer, as applicable, pursuant to the Purchase and Contribution

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Agreement or the Servicing Agreement or (v) Contract as to which more than 10% of a Scheduled Payment was not received by the Servicer within thirty-one (31) days after the original due date for such Scheduled Payment, without regard to any Servicer Advance, shall be equal to zero.

“Discounted Pool Balance”:  Means, as determined from time to time, the lesser of (x) the aggregate original equipment costs at origination of the Equipment relating to all Contracts and (y) the sum of (a) the Discounted Contract Balances of all Contracts and (b) the discounted Residual Receipts of all Contracts (assuming (1) such Residual Receipts are received six months from the end of the related Contract term, (2) the collection rate for Residual Receipts is equal to 30% of the Issuer’s related Booked Residual on the related residual payment date and (3) a discount rate of 6.25% per annum).

In connection with all calculations required to be made pursuant to the Transaction Documents with respect to the determination of the Discounted Pool Balance on any determination date, the discounted residual receipts for each Contract shall be calculated assuming: (a) the residual receipts are discounted on a monthly basis using a 30-day month and a 360-day year and (b) the residual receipts are discounted to the last day of the Collection Period prior to the determination date.

“Disposed Contract”:  Means, with respect to any Collection Period, a Contract (other than a Defaulted Contract) for which either (a) all Residual Receipts with respect to such Contract have been received or (b) its initial term has expired and the residual value of the related Equipment has been determined to be zero by the Servicer in accordance with the Servicer’s customary servicing procedures; provided, however, that if four successive months have elapsed without the Servicer receiving a payment towards Residual Receipts with respect to such Contract, such Contract shall be deemed to be a Disposed Contract.  Once a Contract is Disposed Contract, it shall be re leased to the Servicer.

“Due Date”:  With respect to each Contract, each date on which a Scheduled Payment is due thereunder.

“Early Termination Contract”:  Any Contract with respect to which the Servicer, in accordance with the Servicing Agreement, has allowed the Obligor to prepay or terminate early for any reason including, but not limited to, trade-in, upgrade, or declaration of obsolescence or surplus status relating to any of the related Equipment.

“Electronic Ledger”:  Means the electronic master record of the Contracts.

“Eligible Account”:  A segregated trust account or accounts maintained with the corporate trust department of a federal or state-chartered depository institution or trust company whose long-term unsecured debt obligations are rated at least AA- by S & P and at least Aa3 by Moody’s and which has a minimum capital and surplus of not less than $100,000,000.

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“Eligible Contract”:  Means, as of the applicable Acquisition Date, a Contract that satisfies the representations and warranties set forth in the Purchase and Contribution Agreement.

“Eligible Investments”:  Any and all of the following:

(a)           direct obligations of, and obligations fully guaranteed by, the United States of America or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(b)           (i) demand and time deposits in, certificates of deposit of, banker’s acceptances issued by or federal funds sold by any depository institution or trust company (including the Trustee or its agent acting in their respective commercial capacities) incorporated under the laws of the United States of America or any State thereof and subject to supervision and examination by federal and/or state authorities, provided that, at the time of such investment or contractual commitment providing for such investment, such depository institution or trust company has a short term unsecured debt rating in the highest available rating categories of each of Moody’s, S & P, and Fitch, providedfurther that each such investment has an original maturity of no more than two hundred seventy (270) days, and (ii) such demand or time deposit or deposits are fully insured by the Federal Deposit Insurance Corporation;

(c)           repurchase obligations with a term not to exceed thirty (30) days with respect to any security described in clause (a) above and entered into with a depository institution or trust company (acting as a principal) rated in the highest available short term rating category by each of Moody’s, S & P, and Fitch at the time of such investment; provided that collateral transferred pursuant to such repurchase obligation must be of the type described in clause (a) above and must (i) be valued weekly at current market price plus accrued interest, (ii) pursuant to such valuation, equal, at all times, one hundred five percent (105%) of the cash transferred by the T rustee in exchange for such collateral and (iii) be delivered to the Trustee or, if the Trustee is supplying the collateral, an agent for the Trustee, in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities;

(d)           commercial paper having an original maturity of less than two hundred seventy (270) days and issued by any corporation incorporated under the laws of the United States of America or any State thereof which is unaffiliated with any LEAF Party and has a short term unsecured debt rating in the highest available rating category of each of the Moody’s, S & P, and Fitch at the time of such investment;

(e)           a guaranteed investment contract rated in the highest available rating category by each of Moody’s, S & P, and Fitch or issued by an insurance company or other corporation having a long term unsecured debt rating in the highest available rating category of each of Moody’s, S & P, and Fitch at the time of such investment; and

(f)           money market funds having ratings in the highest available rating categories of each of Moody’s, S & P, and Fitch at the time of such investment (which shall include money market funds for which the Trustee or an Affiliate thereof is an advisor); any such money market

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funds which provide for demand withdrawals being conclusively deemed to satisfy any maturity requirement for Eligible Investments set forth in the Indenture.

The Trustee may purchase from or sell to itself or an affiliate, as principal or agent, the Eligible Investments listed above.  All Eligible Investments shall be made in the name of the Trustee for the benefit of the Secured Parties and no such Eligible Investments shall mature later than the Business Day preceding the next following Payment Date as required under Section 13.02(c) of the Indenture.

“Equipment”:  The equipment and other personal property (tangible or intangible) of the type contemplated by the Credit and Collection Policies and that is being financed under a Contract.

“Equity Interest”:  The one and only equity membership interest in the Issuer, entitling the owner thereof to one hundred percent (100%) of the capital, profits, losses and distributions in and from the Issuer, and one hundred percent (100%) of voting rights of an equity member.

“ERISA”:  The Employee Retirement Income Security Act of 1974, as amended or any successor statute thereto.

“Event of Default”:  Has the meaning set forth in Section 6.01 of the Indenture.

“Event of Servicing Termination”:  Has the meaning set forth in Section 6.01(a) of the Servicing Agreement.

“Exception Report”:  Any report by the Custodian identifying exceptions regarding Contract Assets.

“Existing Indebtedness”:  Any indebtedness identified in an Assignment Agreement that is secured in whole or in part by Contract Assets being acquired by the Issuer, and paid off or  otherwise released, as of the related Acquisition Date.

“Final Due Date”:  With respect to each Contract, the final Due Date thereunder.

“Final Order”:  Means a final order of a court exercising proper jurisdiction in an insolvency proceeding with respect to which the appeal period has expired without an appeal having been filed.

“Fiscal Quarter”:  Each quarter of each fiscal year, which shall be the three (3) months ended March 31, June 30, September 30 and December 31, unless the Servicer has otherwise notified the Trustee, the Back-up Servicer and the Control Party in writing prior to a change in its fiscal year.

“Fitch”: Means Fitch, Inc. and its successors in interest.

“GAAP”:  Generally accepted accounting principles as in effect in the United States as may be in place from time to time, applied on a consistent basis.

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“Governmental Authority”:  Means any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over any LEAF Party or any of its properties.

“Grant”:  To grant, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm.  A Grant in any collateral comprising the Collateral or of any instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim, collect, receive and receipt for payments in respect of the Contract Assets, or any other payment due thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the g ranting party or otherwise, and generally to do and receive anything which the granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Guarantor”:  Means LEAF Financial Corporation.

“Guaranty Amounts”:  Any amounts paid by a guarantor (who is an Obligor) of a particular Contract.

           “Impairment” shall mean, as of each Payment Date (as calculated immediately prior to the distributions pursuant to Section 13.03(c) of the Indenture), an amount equal to (x) the Outstanding Note Balance of all Classes of Notes minus (y) the sum of (i) the Discounted Pool Balance and (ii) amounts on deposit in the Reserve Account. Impairment with respect to each Class of Notes as of each Payment Date shall be allocated first, to the Class B-2 Notes, in an amount equal to the lesser of the Outstanding Note Balance of the Class B-2 Notes and the Impairment, second, to the C lass B-1 Notes, in an amount equal to the lesser of the Outstanding Note Balance of the Class B-1 Notes and the Impairment not yet allocated on such Payment Date and third, to the Class A Notes, in an amount equal to the lesser of the Outstanding Note Balance of the Class A Notes and the Impairment not yet allocated on such Payment Date. For the avoidance of doubt, the allocation of Impairment to a Class of Notes shall be used only for the calculation of Note Current Interest with respect to such Class of Notes and shall not reduce the Outstanding Note Balance of such Class of Notes.

“Indenture”:  The Indenture, dated as of August 20, 2010, among the Issuer, the Trustee and the Custodian, and any permitted supplements or amendments thereto.

“Independent”:  When used with respect to any specified Person means such a Person, who (a) is in fact independent of the Issuer and the Servicer, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer or the Servicer or in any Affiliate thereof, (c) is not connected with the Issuer or the Servicer as an officer, employee, promoter, underwriter, trustee, partner, director, customer, supplier or person performing similar functions, (d) is not a person controlling or under common control with any such stockholder, customer, supplier or other person, and (e) is not a member of the immediate family of any such stockholder, director, officer, employee, customer, supp lier or other person.  Whenever it is herein provided that any Independent Person’s opinion or certificate shall be furnished to the

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Trustee, such Person shall be identified by an Issuer Order, and such opinion or certificate shall state that the signer has read this definition and that the signer is Independent within the meaning hereof.

“Independent Accountants”:  Means any independent certified public accountants of recognized national standing.

“Initial Class A Purchaser”:  Means Guggenheim Partners Asset Management, LLC.

“Initial Class B Purchasers”:  Means, collectively, the Initial Class B-1 Purchaser and the Initial Class B-2 Purchaser.

“Initial Class B-1 Purchaser”:  Means Guggenheim Securities, LLC.

“Initial Class B-2 Purchaser”:  Means Guggenheim Securities, LLC.

“Initial Payment Date” and “First Payment Date”:  September 20, 2010.

“Initial Purchaser”:  Means the Initial Class A Purchaser, the Initial Class B-1 Purchaser or the Initial Class B-2 Purchaser, as applicable.

“Initial Purchasers”:  Means, collectively, Initial Class A Purchaser and the Initial Class B Purchasers.

“Initial Reserve Deposit” means the initial deposit of a portion of the proceeds of the Class B-1 and Class B-2 Notes on the Closing Date into the Reserve Account, in an aggregate amount equal to $750,000.

“Insolvency Event”:  With respect to a specified Person, shall mean either of the following events: (a) a case or proceeding shall have been commenced against such Person seeking a decree or order in respect of such Person (i) under the Bankruptcy Code, as now constituted or hereafter amended or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Person or of any substantial part of such Person’s assets, or (iii) ordering the winding-up or liquidation of the affairs of such Person, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or s uch court shall enter a decree or order granting the relief sought in such case or proceeding; or (b) the commencement by such Person of a voluntary case under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person for any substantial part of such Person’s assets, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

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“Insurance Policy”:  With respect to an item of Equipment and a Contract, any policy of insurance maintained by an Obligor pursuant to such Contract that covers physical damage to the Equipment and general liability (including policies procured by the Servicer on behalf of an Obligor).

“Insurance Proceeds”:  With respect to an item of Equipment, any amount received during the related Collection Period pursuant to an Insurance Policy issued with respect to the related Contract, net of any costs of collecting such amounts not otherwise reimbursed.

“Insurer”:  Any insurance company or other Person providing any Insurance Policy covering Equipment.

“Interest Accrual Period”:  With respect to any Payment Date, with respect to each Class of Notes, the period commencing on and including the immediately preceding Payment Date and ending on and including the day immediately preceding such current Payment Date; provided that, in the case of the first Interest Accrual Period, such Interest Accrual Period shall commence on the Closing Date, and shall end on the day immediately preceding the Initial Payment Date.

“Interim Delinquency Ratio”:  Means, with respect to the first three Determination Dates after the Closing Date, the average of the Delinquency Ratios for such Determination Date and each preceding Determination Date which occurred after the Closing Date.

“Investment Letter”:  Has the meaning set forth in Section 2.06(e)(ii)(B) of the Indenture.

“Issuer”:  LEAF Funding SPE 1, LLC, and its successors and permitted assigns under the Indenture.

“Issuer Address”:  LEAF Funding SPE 1, LLC, 2005 Market Street, 15th Floor, Philadelphia, PA 19103, telecopy number:  215-640-6363, Attention:  Miles Herman, or such other address as is notified in writing to the Trustee, Custodian, Back-up Servicer and the Noteholders not less than thirty (30) days prior to the effectiveness of any change thereof.

“Issuer Order” and “Issuer Request”:  A written order or request signed by an authorized officer of the Issuer and delivered to the Trustee.

“Joinder to Lockbox Intercreditor Agreement”:  The joinder agreement to the Lockbox Intercreditor Agreement pursuant to which each of the Trustee and the Issuer becomes a party to the Lockbox Intercreditor Agreement.

“LEAF Contract Number”:  The number assigned to a Contract by the Servicer, which number is used to identify Contracts and the related Contract Assets for all purposes under the Transaction Documents and the Lockbox Intercreditor Agreement and for all purposes by the Servicer and its Affiliates, including on the Custodian Certificate and any Officer’s Certificate delivered by the Servicer or the Issuer, the Contract Schedule, the Monthly Servicing Report and the Contract Files.

“LEAF Party”:  Means each of the Issuer, the Originator, and the Servicer.

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“Lien”:  Any security interest, lien, charge, pledge, equity or encumbrance of any kind other than Permitted Liens.

“Lien Certificate”:  With respect to Motorized Titled Equipment, (i) if such Motorized Titled Equipment is registered in Florida, (x) to the extent the related Contract has been originated by the Originator or the Servicer, an original certificate of title or (y) to the extent the related Receivable has been originated by a Person other than the Originator or the Servicer, (A) an original certificate of title or (B) if the original certificate of title has been sent to the registered owner of such Motorized Titled Equipment, an original computer confirmation of lien, (ii) if such Motorized Titled Equipment is registered in Kansas, a true copy of the application for certificate of  title and registration, (iii) if such Motorize d Titled Equipment is registered in Kentucky, an original notice of lien, (iv) if such Motorized Titled Equipment is registered in Maryland, an original notice of security interest filing, (v) if such Motorized Titled Equipment is registered in Minnesota, an original lien card, (vi) if such Motorized Titled Equipment is registered in Missouri, an original notice of recorded lien, (vii) if such Motorized Titled Equipment is registered in Montana, a true copy of the application for certificate of title, (viii) if such Motorized Titled Equipment is registered in New York, an original notice of lien, (ix) if such Motorized Titled Equipment is registered in Oklahoma, an original, file-stamped lien entry form, (x) if such Motorized Titled Equipment is registered in Wisconsin, an original lien confirmation card or (xi) if such Motorized Titled Equipment 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 Motorized Titled Equipment (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).

“Lienholder Nominee Agreement”:  Each Vehicle Lienholder Nominee Agreement between the Originator or the Servicer, as lienholder, the Issuer and the Trustee that may be entered into from time to time, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.

“Limited Guaranty”:  The Limited Guaranty, dated as of August 20, 2010, made by the Guarantor in favor of the Class A Noteholders.

“Lockbox”:  The post office or other lockbox to which Obligors have been directed to remit payments.

“Lockbox Account”:  The deposit account (account number 153910088597) at the Lockbox Bank in the name of “U.S. Bank NA as Securities Intermediary for LEAF Financial and various lenders” or, if the Lockbox Intercreditor Agreement is terminated or LEAF Financial Corporation is no longer the Servicer, such other Lockbox Account as is established by the then Servicer with the consent of the Control Party.

“Lockbox Bank”:  Means U.S. Bank National Association and its successor in interest or any successor approved in accordance with the Lockbox Intercreditor Agreement.

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“Lockbox Intercreditor Agreement”:  The Amended and Restated Lockbox Intercreditor Agreement, dated as of April 18, 2005, among the Lockbox Bank, the Servicer, certain other parties thereto and subsequent parties joined pursuant to the terms thereof (including the Issuer and the Trustee), as amended, supplemented or otherwise modified from time to time.

 “Majority Holders”:  Means (i) if any Class A Notes are outstanding, the Holders holding Notes evidencing more than fifty percent (50%) of the Outstanding Note Balance of the Class A Notes, (ii) if no Class A Notes are outstanding, the Holders holding Notes evidencing more than fifty percent (50%) of the Outstanding Note Balance of the Class B-1 Notes or (iii) if no Class A Notes and Class B-1 Notes are outstanding, the Holders holding Notes evidencing more than fifty percent (50%) of the Outstanding Note Balance of the Class B-2 Notes.

“Mandatory Redemption”:  Is as defined in Section 11.01 of the Indenture.

“Mandatory Redemption Event”: Means the closing of a credit facility in an amount equal to at least $20,000,000 by LEAF Financial Corporation.

“Monthly Servicing Report”:  The report prepared by the Servicer pursuant to Section 13.09 of the Indenture and Section 4.01 of the Servicing Agreement, substantially in the form of Exhibit A to the Servicing Agreement.

“Moody’s”:  Moody’s Investors Service, Inc. and its successors in interest.

“Motorized Titled Equipment”:  Equipment consisting of motorized personal property that requires titling under State motor vehicle statutes.

“Noteholder” and “Holder”:  The Person in whose name a Note is registered in the Note Register.

“Note Current Interest”:  Means interest accrued during each Interest Accrual Period and payable to the Noteholders of a Class on the related Payment Date; provided however, that with respect to each Class of Notes and on each Payment Date, interest shall be deemed not to have accrued during the previous Interest Accrual Period on an amount equal to the Impairment of such Class of Notes (such interest that is deemed not to have accrued, “Deferred Interest”). Notwithstanding the foregoing, if, on any subsequent Payment Date and with respect to each Class of Notes, no Impairment is allocated to such Class of Notes, all Deferred Interest for such Class of Notes shall be deemed to have accrued during the immediately preceding Interest Accrual Period and be payable on such Payment Date as Note Current Interest.

“Note Interest”:  Means, with respect to a Class of Notes and any Payment Date, the sum of the Note Current Interest and any unpaid, overdue interest, if any, for such Class.

“Note Purchase Agreement”:  Means the Note Purchase Agreement, dated August 20, 2010, among the Originator, the Issuer, the Initial Class A Purchaser and the Initial Class B Note Purchasers.

“Note Rate”:  Means for the Class A Notes, 6.75% per annum, and for the Class B Notes, 10.00% per annum; provided, however, that upon the occurrence and during the continuance of

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any Event of Default, “Note Rate” shall mean 20.00% per annum with respect to both the Class A Notes and the Class B Notes.

“Note Register” and “Note Registrar”:  Have the respective meanings set forth in Section 2.06 of the Indenture.

“Notes”:  Any one or all of the Outstanding Equipment Contract Backed Notes, Series 2010-4, issued by LEAF Funding SPE 1, LLC pursuant to the Indenture, in the aggregate maximum principal amount of $21,500,000, of all Classes, or as the context may require, a specific Class.

“Obligor”:  The borrower or lessee under each Contract, including any guarantor of such Contract (other than any guarantor who is the vendor of the Equipment the subject of such Contract or the Person who originated such Contract), and their respective successors and assigns.

“Officer’s Certificate”:  A certificate signed by the Chairman of the Board, the President, a Vice President, the Treasurer, the Controller, an Assistant Controller, the Secretary, or any Assistant Secretary of the Person on whose behalf the certificate is delivered, and delivered to the Trustee or an Initial Purchaser, as the case may be.

“One-Time Successor Servicer Fee”:  Has the meaning set forth in Section 7.06 of the Servicing Agreement.

“Opinion of Counsel”:  A written opinion of counsel who may, except as otherwise expressly provided in the Indenture or required by the Control Party, be inside (but only with respect to internal corporate matters) or outside counsel for the Servicer, the Originator or the Issuer, as applicable, and who shall be reasonably satisfactory to the Control Party and which opinion shall be addressed to the Noteholders and/or the Trustee (as required by the applicable terms of the Transaction Documents) and be in form and substance reasonably satisfactory to the Control Party and the Trustee.

“Optional Redemption”:  Is as defined in Section 11.01 of the Indenture.

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

“Outstanding”:  With respect to Notes, as of any date of determination, all Notes theretofore authenticated and delivered under the Indenture except:

(a)           Notes previously canceled by the Note Registrar or delivered to the Note Registrar for cancellation;

(b)           Notes for whose payment money in the necessary amount has been theretofore irrevocably deposited with the Trustee or any Paying Agent (other than the Issuer) in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or any provision therefor, satisfactory to the Trustee, has been made, in accordance with Article XI of the Indenture); and

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(c)           Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture, unless proof satisfactory to the Trustee is presented that any such Notes are held by a protected purchaser; provided that, for purposes of determining whether the Noteholders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes beneficially owned, directly or indirectly, by the Issuer, any other obligor upon the Notes, the Servicer, any Affiliate of the Issuer or of the Servicer or such other obligor shall be disregarded and deemed not to b e outstanding; providedfurther that, in determining whether the Trustee will be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only such Notes as a Responsible Officer of the Trustee knows to be so owned shall be so disregarded.  For purposes of this definition, beneficial ownership shall be determined in accordance with Rule 13d-3 of the Securities and Exchange Commission, promulgated pursuant to the Securities Exchange Act of 1934, as amended.

“Outstanding Note Balance”:  With respect to any Class of Notes (including, for purposes of accruing interest thereon, any Notes called for redemption but not yet redeemed), the aggregate purchase price received by the Issuer for such Class of Notes pursuant to Section 3(c) of the Note Purchase Agreement less the sum of all amounts actually distributed in respect of principal for such Class of Notes as of such date.

 “Overconcentration Test”:  Solely in the event that the sum of Discounted Contract Balance of all Contracts (measured as of their respective Cut-Off Dates) exceeds $5,000,000, means a test that is satisfied with respect to the Purchased Contracts to be purchased by the Issuer on an Acquisition Date if each of the following statements would be true immediately after the purchase by the Issuer of such Purchased Contracts:

(1) The average Discounted Contract Balance of all Contracts (measured as of their respective Cut-Off Dates) does not exceed $25,000.

(2) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) related to any one Obligor does not exceed $500,000.

(3) The sum of the Discounted Contract Balances (measured as of their respective Cut-Off Dates) of all Contracts arising from the largest ten (10) Obligors in the aggregate does not exceed 18% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(4) The weighted average original term of all Contracts (measured as of their respective Cut-Off Dates) does not exceed fifty-seven (57) months.

(5) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the related Subject Equipment is located in New York does not exceed 20.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(6) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the related Subject Equipment is located

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in California does not exceed 9.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(7) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the related Subject Equipment is located in New Jersey does not exceed 12.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(8) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the Scheduled Payments are not due on a monthly basis does not exceed 4.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

(9) The weighted average Fair Isaac’s Small Business Scoring Service credit score of the Obligor (measured as of their respective Cut-Off Dates) on all Contracts is at least 200.

       (10) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the Fair Isaac’s Small Business Scoring Service credit score of the Obligor (measured as of their respective Cut-Off Dates) is less than 176 does not exceed 2.75% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

       (11) The sum of the Discounted Contract Balances of all Contracts (measured as of their respective Cut-Off Dates) with respect to which the Subject Equipment is copier equipment does not exceed 85.00% of the aggregate Discounted Contract Balances (measured as of the Cut-Off Date for each Contract).

“Ownership Interest”:  Means, with respect to any Note, any ownership interest in such Note, including any interest in such Note as the Noteholder thereof and any other interest therein, whether direct or indirect, legal or beneficial.

“Paying Agent”:  The Trustee (or any other Person that meets the eligibility standards for the Trustee set forth in Section 7.08 of the Indenture and that is authorized pursuant to Section 7.15 of the Indenture to pay the principal of or interest on any Notes on behalf of the Issuer).

“Payment Date”:  The first Payment Date will be September20, 2010, and each subsequent Payment Date will be the 20th day of each month, or if such date is not a Business Day, the business day immediately following such 20th day.

“Permitted Liens”:  Means (i) liens created under the Indenture in favor of the Trustee for the benefit of the Secured Parties, (ii) Liens created under the Assignment Agreements in favor of the Issuer, (iii) Liens for taxes not yet due and payable and for which adequate reserves are maintained in accordance with GAAP, (iv) mechanics’ liens filed on any Equipment that attach after the applicable Cut-Off Date and are not yet due and payable and if unpaid would not materially impair the value of such Equipment, (v) mechanics’ liens, property tax liens and other liens arising on the Equipment through an Obligor to the extent the Servicer has determined in good faith in accordance with its Credit and Col lection Policies to not make an advance to

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discharge, and (vi) any Obligor’s right to quiet enjoyment and possession of any Equipment under the applicable Contract.

“Person”:  Any individual, corporation, limited liability company, partnership, association, joint-stock company, trust (including any beneficiary thereof), unincorporated organization or other entity or government or any agency or political subdivision thereof.

“Plan”:  An “employee benefit plan,” as defined in Section 3(3) of ERISA or a “plan” within the meaning of Section 4975(e)(1) of the Code.

“Prefunding Account”:  The trust account created and maintained pursuant to Section 13.02 of the Indenture; provided, that in no event shall the Prefunding Account be other than an Eligible Account.

“Prepayment”:  With respect to a Collection Period and a Contract (except a Defaulted Contract), (i) the payment by the related Obligor of all remaining Scheduled Payments due on such Contract or (ii) as defined in the Credit and Collection Policies, so long as such amount is designated by the Obligor as a prepayment and the Servicer has consented to such prepayment. Advance Payments and Residual Receipts are not "Prepayments."

“Prepayment Amount”:  In the event that an Obligor requests an upgrade or trade-in of Equipment under a Contract and the Servicer has agreed to such request, the payment by the Servicer of an amount equal to the sum, without duplication, of (i) the Discounted Contract Balance as of the date of reconveyance, (ii) one month’s interest thereon at the Discount Rate, (iii) the discounted portion of the Booked Residual for such Contract and (iv) any Scheduled Payments due and outstanding under such Contract that have not been paid by the Obligor, all in connection with the removal of such Equipment and the related Contract from the Collateral.

“Proceeding”:  Any suit in equity, action at law or other judicial or administrative proceeding.

“Purchase and Contribution Agreement”:  Means the Purchase and Contribution Agreement, dated as of August 20, 2010, between the Originator, as seller, and the Issuer, as purchaser.

“Purchase Price”:  Means, with respect to Contracts sold pursuant to any Assignment Agreement, the payment amount identified in Section 2 of such Assignment Agreement.

“Purchased Contracts”: means those Contracts purchased by the Issuer, and pledged to the Trustee, with the amounts on deposit in the Prefunding Account.

“QIB”:  Means a “qualified institutional buyer” within the meaning of Rule 144A.

“Receivable”:  As of any date of determination, all Scheduled Payments and all other income, payments and proceeds of the Contracts (including Guaranty Amounts, Servicing Charges, Insurance Proceeds and other Recoveries or Residual Receipts) that are (1) collected on or after the applicable Cut-Off Date or (2) Advance Payments collected by the Servicer before the applicable Cut-Off Date but due in Collection Periods commencing on and after the

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applicable Cut-Off Date, and any Recoveries thereon; provided that, from and after the date, if any, on which the related Contract Assets are repurchased in accordance with Section 6.1(a) or Section 6.1(b) of the Purchase and Contribution Agreement, substituted pursuant to Section 3.04 of the Servicing Agreement or repurchased pursuant to Section 3.09 of the Servicing Agreement, such Receivable shall no longer constitute a “Receivable” for purposes of the Transaction Documents.

“Record Date”:  With respect to each Payment Date, at the close of business on the Business Day immediately preceding such Payment Date.

“Recoveries”:  For any Collection Period occurring after the date on which any Contract becomes a Defaulted Contract, all amounts received in respect of a Defaulted Contract, including, without limitation, amounts received in connection with the sale or other disposition of the related Equipment, Insurance Proceeds with respect to the related Equipment, legal judgments and settlements, collection agency efforts, or any other payments made by or on behalf of the related Obligor, net of contingency expenses, in connection with such Defaulted Contract; provided, that in no event may Recoveries in respect of a Defaulted Contract be less than zero.

“Redemption Date”:  The Business Day elected by the Issuer pursuant to Section 11.01(a) of the Indenture for an Optional Redemption, the Business Day elected by the Issuer pursuant to Section 11.01(b) of the Indenture for a Mandatory Redemption, or any other Business Day mutually determined by the Issuer, the Noteholders and the Trustee.

“Redemption Price”:  With respect to any Note as of the Redemption Date, the Outstanding Note Balance of the Notes, together with interest accrued thereon to the Redemption Date.

“Registered Holder”:  The Person whose name appears on the Note Register on the applicable Record Date.

“Registrar of Titles”:  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”:  With respect to any Contract, all liens, security interests, guarantees, indemnities, warranties, letters of credit and other agreements securing or supporting payment on any Receivable or relating to any Equipment, including, with respect to any Receivables, any “supporting obligations” (as defined in 9-102 of the UCC) therefor, and all rights with respect to any vendors, dealers or manufacturers of the Equipment or other originators, including those arising under private label leases, all rights under any purchase or vendor agreements relating thereto, and all rights of the Originator and its assignees with respect to the Contracts and related Equipment under the Purchase and Contribution Agreement.

“Release Agreement”:  The notice regarding prepayment of Existing Indebtedness and release of related collateral, substantially in the form of Exhibit D attached to the Indenture.

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“Reporting Date”:  The 16th day of each month or, if such day is not a Business Day, the next succeeding Business Day.

“Reserve Account”:  The trust account created and maintained pursuant to Section 13.02 of the Indenture; provided, that in no event shall the Reserve Account be other than an Eligible Account.

“Residual Receipts”:  Means, without duplication, (a) all proceeds of the sale of Equipment received by the Servicer at the end of the related Contract, whether to the related Obligor or to a third party, (b) any amounts collected by the Servicer as judgments against an Obligor or others related to the failure of such Obligor to pay any required amounts relating to the Booked Residual under the related Contract or to return the Equipment, (c) all proceeds from renewal payments made for the continued use of the Equipment after the original date of termination of the related Contract plus (d) any amounts not otherwise described above which are received by the Servicer and applied against the Booked Residual of such Contract in accordance with the Servicer’s servicing standards, in each case as reduced by any reasonably incurred out-of-pocket expenses incurred by the Servicer in enforcing such Contract or in liquidating such Equipment; provided, that in no event may Residual Receipts in respect of a Contract or any Equipment be less than zero.

“Responsible Officer”:  (a) When used with respect to the Trustee or the Back-up Servicer, any officer of the Trustee or the Back-up Servicer, including any Vice President, Assistant Vice President, any Secretary or Assistant Secretary, any trust officer or any other officer of the Trustee or the Back-up Servicer customarily performing functions similar to those performed by any of the above designated officers, and also, with respect to a particular matter, any other officer, to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject and, in each case, having direct responsibility for the administration of the Indenture; and (b) when used with respect to the Servicer (i f the Servicer is LEAF Financial Corporation or any of its Affiliates) or the Issuer, any of the president, chief financial officer, chief operating officer, chief accounting officer, treasurer or any Vice-President.

“Rule 144A”:  Means the rule designated as “Rule 144A” promulgated by the United States Securities and Exchange Commission under the Securities Act.

 “Rule 144A Information”:  Has the meaning set forth in Section 12.02(w) of the Indenture.

“S & P”:  Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and its successors in interest.

“Sale”:  Has the meaning set forth in Section 6.18 of the Indenture.

“Scheduled Payment”:  With respect to a Payment Date and a Contract, the periodic scheduled payment of rent or other payments on a monthly, quarterly, semi-annual or annual basis, in arrears or in advance as set forth in the Contract, and due from the Obligor in the related Collection Period, exclusive of any Servicing Charges and Residual Receipts (which Residual

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Receipts, for the avoidance of doubt, include all payments due after the Final Due Date for a Contract).

“Secured Parties”:  Means, collectively, the Noteholders.

“Securities Account Control Agreement”:Means the Securities Account Control Agreement, dated as of August 20, 2010, by and between the Issuer and the Trustee, as both securities intermediary and trustee.

“Securities Act”: The United States Securities Act of 1933, as amended.

“Securities Intermediary”: Means U.S. Bank National Association in its capacity as Securities Intermediary pursuant to the Securities Account Control Agreement.

“Security Deposit”:  Any amount paid to the Servicer or the Originator and its assigns by an Obligor as a security deposit which has not previously been refunded to such Obligor or applied towards such Obligor’s obligations under such Contract.

“Seller”:  LEAF Funding, Inc., a Delaware corporation.

“Servicer”:  The servicer of the Contract Assets, which shall be LEAF Financial Corporation until such time, if any, as the Back-up Servicer or other successor Person shall have become the “Servicer” pursuant to the applicable provisions of the Servicing Agreement, whereupon “Servicer” shall mean such successor Person.

“Servicer Advance”:  Means, in the event that any Obligor fails to remit the full Scheduled Payment due from it with respect to a Collection Period by the Determination Date related to such Collection Period, an advance by the Servicer pursuant to Section 3.04 of the Servicing Agreement from its own funds prior to the related Payment Date of an amount equal to such unpaid Scheduled Payment.

“Servicer Fee”:  The fee payable on each Payment Date to the Servicer in consideration for the Servicer’s performance of its duties under the Servicing Agreement during the related Collection Period, in an amount equal to the product of (a) one-twelfth (1/12) of the Servicer Fee Rate and (b) the aggregate Discounted Pool Balance as of the Payment Date occurring immediately prior to the related Collection Period (or, in the case of the Initial Payment Date, the Initial Cut–Off Date). If the Back-up Servicer shall become the successor Servicer, the Servicer Fee shall be subject to a minimum of $6,000 per month.

“Servicer Fee Rate”:  2.00% per annum.

“Servicer Financial Statements”:  The financial statements described in Section 4.02(i) of the Servicing Agreement.

“Servicer Termination Notice”:  The notice described in Section 6.01 of the Servicing Agreement.

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 “Servicing Agreement”:  The Servicing Agreement, dated as of August 20, 2010, among the Servicer, the Issuer, the Trustee and the Back-up Servicer, as amended, supplemented or otherwise modified from time to time.

“Servicing Charges”:  Means the sum of (a) any late payment charges paid by an Obligor on a Contract after application of any such charges to amounts then due under such Contract and (b) any other incidental charges, or fees received from an Obligor, including (i) tax payments, insurance premium payments or reimbursements, late charges, documentation fees, extension fees, administrative charges and maintenance premiums and other pass-through items and (ii) prepayment charges paid by an Obligor in connection with a Prepayment.

“Servicing Documents”:  Means all servicing records, servicing agreements, servicing rights, pledge agreements and any other collateral pledged or otherwise relating to the Contracts, together with all files, documents, instruments, certificates, correspondence, accounting books and records relating thereto or to the Contract Files.

“Servicing Officers”:  Those officers of the Servicer involved in, or responsible for, the administration and servicing of the Contract Assets, as identified on a certificate delivered to the Trustee in accordance with Section 4.01(a)(ix) of the Indenture, as the same may be updated from time to time.

“State”:  Any state of the United States of America and, in addition, the District of Columbia.

“Stated Maturity Date”:  If the Notes have not already been paid in full prior to such date, February 20, 2011.

“Subject Equipment”:  Means Equipment subject to a certain Contract.

“Substitute Contract”:  A Contract substituted by the Servicer in replacement of one or more Contracts of the Issuer pursuant to the terms and provisions of the Transaction Documents.

“Substitution and Repurchase Amounts”:  Means the sum of (i) the aggregate Discounted Contract Balance of Substitute Contracts (as measured on their respective Acquisition Dates) and (ii) the aggregate Discounted Contract Balance of those Contracts (as measured on their respective dates of repurchase), in each case either substituted for or repurchased by LEAF Financial Corporation (as initial Servicer) or repurchased by the Originator, but excluding Contracts repurchased pursuant to Warranty Events.

“Tax Lien”:  A lien arising under Section 6321 of the Code.

“Three-Month Rolling Average Delinquency Ratio”:  Means, with respect to any Determination Date commencing with the fourth Determination Date after the Closing Date, the average of the Delinquency Ratios for such Determination Date and the two preceding Determination Dates.

“Transaction Documents”:  The Indenture, the Lockbox Intercreditor Agreement, each Assignment Agreement, the Note Purchase Agreement, the Servicing Agreement, the Purchase

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and Contribution Agreement, the Notes, the Joinder to Lockbox Intercreditor Agreement, any Lienholder Nominee Agreement, the Securities Account Control Agreement and each other document and/or instrument executed pursuant thereto or in connection therewith.

“Transfer Certificate”:  Has the meaning set forth in Section 3.01(a) of the Indenture.

“Transfer Taxes”:  Means any tax, fee or other governmental charge payable to any federal, state or local government in connection with the sale of the Contract Assets to the Issuer pursuant to the Assignment Agreements and the pledge of the Contract Assets by the Issuer to the Trustee pursuant to the Indenture.

“Transition Costs”:  Means any documented fees and expenses reasonably incurred by a successor Servicer, the Back-up Servicer or the Trustee in connection with a transfer of servicing under the Servicing Agreement, as provided in the Indenture and the Servicing Agreement; provided that the total amount of Transition Costs payable to all such Persons shall not exceed $150,000 in the aggregate.

“Trust Accounts”:  Has the meaning set forth in Section 13.02(a) of the Indenture.

“Trustee”:  The trustee under the Indenture which, initially, shall be U.S. Bank National Association until such time, if any, as a successor Person shall have become the Trustee pursuant to the applicable provisions of the Indenture, whereupon “Trustee” shall mean such successor Person.

“Trustee Fee”:  The monthly fees payable on each Payment Date to the Trustee in consideration for the Trustee’s performance of its duties hereunder, as set forth in the Trustee Fee Schedule.

“Trustee Fee Schedule”:  That certain “Schedule of Fees for Services Rendered as Trustee, Paying Agent and Registrar for $21,500,000 (Approximate) LEAF Funding SPE 1, LLC, Equipment Contract Backed Notes, 2010-4”, dated as of August 27, 2010.

“UCC”:  The Uniform Commercial Code as then in effect in the State of New York, or where the context otherwise requires, the jurisdiction the law of which governs the perfection or priority of any applicable security interest.

“United States”:  The United States of America and its territories.

“U.S. Person”:  Means (other than for tax purposes) (i) any natural person resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non-discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or

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account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non-U.S. Person), or (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated, and owned, by accredited investors within the meaning of Rule 501(a) under the Securities Act who are not natural persons, estates or trusts); provided that, the term “U.S. Person” shall not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country, and (C) the international organizations set forth in Section 902(k)(2)(vi) of RegulationS under the Securities Act and any other similar international organizations, and their agencies, affiliates and pension plans.

“Vendor”:  Any Equipment manufacturer, distributor, dealer or supplier with whom the Servicer or Originator has a vendor program in effect pursuant to which the Servicer or Originator acquires or otherwise originates Contracts used to finance equipment manufactured and/or distributed by such vendor and leased or otherwise financed by Obligors under such Contracts.

“Verification Date”:  The third Business Day after each Reporting Date, by which time the Back-up Servicer must verify the information contained in the Monthly Servicing Report delivered on such Reporting Date.

“Warranty Event”:  With respect to any Contract, (a) any breach of Section 4.1(a) of the Purchase and Contribution Agreement or clauses (3) or (4) of any Assignment Agreement that gives rise to a repurchase obligation under Section 6.1(a) of the Purchase and Contribution Agreement, any breach of Section 2.02 of the Servicing Agreement that gives rise to a repurchase obligation under Section 3.09 of the Servicing Agreement, or (c) the circumstances described in Section 4.04(a) of the Indenture.

- 26 -

EX-12.1 3 exh12_1.htm RATIO OF EARNINGS TO FIXED CHARGES

Exhibit 12.1

Ratio of Earnings to Fixed Charges

(in thousands, except ratios)

	For the Fiscal Year Ended September 30,
	2010			2009			2008			2007			2006
Earnings:
Pretax (loss) income from continuing operations	$	(19,947	)	$	(26,594	)	$	(44,882	)	$	9,824		$	19,442
Less – noncontrolling interests		(8	)		(1,549	)		(6,482	)		1,612			1,624
Less –  equity in earnings of affiliates		(4,870	)		(1,279	)		15,656			(13,960	)		(5,896	)
Add –  cash distributions received from equity investments		5,104			6,128			15,647			16,212			12,570
		(19,721	)		(23,294	)		(20,061	)		13,688			27,740
Fixed charges		13,386			20,520			47,581			33,782			10,244
Total	$	(6,335	)	$	(2,774	)	$	27,520		$	47,470		$	37,984
Fixed Charges:
Interest expense	$	13,086		$	20,199		$	47,266		$	33,566		$	10,119
Estimated interest portion of rent expense (2)		300			321			315			216			125
Total	$	13,386		$	20,520		$	47,581		$	33,782		$	10,244
Ratio of earnings to fixed charges			(1)			(1)			(1)		1.4			3.7

(1)   Earnings for fiscal 2010, 2009 and 2008 were inadequate to cover fixed charges.  The coverage deficiencies for those periods were $19.7 million $23.2 million and $20.0 million, respectively.

(2)   Estimated to be 8% of rent expense.

EX-21.1 4 exh21_1.htm SUBSIDIARIES OF RESOURCE AMERICA, INC.

EXHIBIT 21.1

RESOURCE AMERICA, INC.

LIST OF SUBSIDIARIES

NAME OF SUBSIDIARIES	STATE OF INCORPORATION
Resource Financial Fund Management, Inc.	Delaware
Trapeza Capital Management, LLC	Delaware
Trapeza Manager, Inc.	Delaware
Trapeza Funding, LLC	Delaware
Trapeza Funding II, LLC	Delaware
Trapeza Funding III, LLC	Delaware
Trapeza Funding IV, LLC	Delaware
Trapeza Funding V, LLC	Delaware
Trapeza TPS, LLC	Delaware
Trapeza Management Group, LLC	Delaware
Structured Finance Fund GP, LLC	Delaware
Structured Finance Management, LLC	Delaware
Ischus Capital Management, LLC	Delaware
Apidos Capital Management, LLC	Delaware
Apidos Select Corporate Credit Fund GP, LLC	Delaware
Resource Financial Institutions Group, Inc.	Delaware
Resource Credit Partners GP, Inc.	Delaware
Resource Credit Management, LLC	Delaware
Resource Capital Manager, Inc.	Delaware
RAI Ventures, Inc.	Delaware
Chadwick Securities, Inc.	Delaware
Resource Europe Management Limited	UK
Resource Capital Markets, Inc.	Delaware
Resource Capital Investor, Inc.	Delaware
Resource Leasing, Inc.	Delaware
FLI Holdings, Inc.	Delaware
LEAF Financial Corporation	Delaware
Commerce Square Insurance Services, LLC	Delaware
Commerce Square Equipment Insurance Co.	Delaware
LEAF Ventures, LLC	Delaware
Merit Capital Manager, LLC	Delaware
Merit Capital Advance, LLC	Delaware
Merit Processing, LLC	Delaware
LEAF Ventures II, LLC	Delaware
Prompt Payment, LLC	Delaware
LEAF Capital Management, Inc.	Delaware
Lease Equity Appreciation Fund I, L.P.	Delaware
LEAF Fund I, LLC	Delaware
Lease Equity Appreciation Fund II, L.P.	Delaware
LEAF Fund II, LLC	Delaware
LEAF II B SPE, LLC	Delaware
LEAF II Receivables Funding, LLC	Delaware
LEAF Funding, Inc.	Delaware
LEAF Commercial Finance Fund, LLC	Delaware
Resource Capital Funding II, LLC	Delaware
Resource Asset Management, LLC	Delaware
LEAF Asset Management, LLC	Delaware
LEAF Equipment Leasing Income Fund III, L.P.	Delaware
LEAF Funding, LLC	Delaware
LEAF Capital Funding III, LLC	Delaware
LEAF Fund III, LLC	Delaware

LEAF III B SPE, LLC	Delaware
LEAF III C SPE, LLC	Delaware
LEAF Equipment Finance Fund 4, L.P.	Delaware
LEAF Funds Joint Venture 2, LLC	Delaware
LEAF Fund 4A SPE, LLC	Delaware
Resource Capital Funding, LLC	Delaware
Resource Real Estate Holdings, Inc.	Delaware
Resource Real Estate, Inc.	Delaware
Resource Capital Partners, Inc.	Delaware
Resource Real Estate Management, LLC	Delaware
Resource Capital Partners II, LLC	Delaware
RRE Investor, LLC	Delaware
Resource Real Estate Funding, Inc.	Delaware
RRE Leasco, LLC	Delaware
RRE Oak Park Leaseco, LLC	Delaware
Resource Real Estate Management, Inc.	Delaware
RRE D2R2 2007-1, LLC	Delaware
RRE HUD MF 2007, LLC	Delaware
RRE Sky Harbor, LLC	Delaware
RRE River Oaks, LLC	Delaware
RRE Shoreline, LLC	Delaware
RRE Twyckenham, LLC	Delaware
RRE Windsor Square, LLC	Delaware
RRE Wyandotte, LLC	Delaware
RRE West Tech, LLC	Delaware
RRE VIP Borrower, LLC	Delaware
RRE VIP International Village, LLC	Delaware
RRE VIP Regency Park, LLC	Delaware
RRE VIP Waterford Nevillewood, LLC	Delaware
Resource Real Estate Opportunity Advisor, LLC	Delaware
Resource Real Estate Opportunity REIT, Inc.	Delaware
RRE Opportunity Holdings, LLC	Delaware
Resource Real Estate Opportunity Manager, LLC	Delaware
RRE VIP Participant, LLC	Delaware
RCP Westchase Wyndham Manager, LLC	Delaware
RCP Pear Tree Manager, LLC	Delaware
RCP Wind Tree Manager, LLC	Delaware
RCP Falls at Duraleigh Manager, LLC	Delaware
RCP Sage Canyon Manager, LLC	Delaware
RCP Cuestas Manager, Inc.	Delaware
RCP Chenal Brightwaters Manager, LLC	Delaware
RCP Holdco I Manager, Inc.	Delaware
RCP Reserves Manager, Inc.	Delaware
RCP Foxglove Manager, Inc.	Delaware
RCP Santa Fe Manager, Inc.	Delaware
RCP Regents Center Manager, Inc.	Delaware
RCP Highland Lodge Manager, Inc.	Delaware
RCP Grove Manager, LLC	Delaware
RCP Avalon Manager, Inc.	Delaware
RCP Howell Bridge Manager, Inc.	Delaware
RCP Heritage Lake Manager, LLC	Delaware
RCP Magnolia Manager, LLC	Delaware
RCP West Wind Manager, LLC	Delaware
RCP Ryan’s Crossing Manager, LLC	Delaware
RCP Memorial Tower Manager, LLC	Delaware
RCP Cypress Landing Manager, LLC	Delaware

Cypress Landing Partners, LLC	Delaware
RCP Island Tree Manager, LLC	Delaware
Island Tree Partners, LLC	Delaware
RCP Villas Manager, LLC	Delaware
RCP Coach Lantern Manager, LLC	Delaware
RCP Foxcroft Manager, LLC	Delaware
RCP Tamarlane Manager, LLC	Delaware
RCP Park Hill Manager, LLC	Delaware
RCP Woodland Hills Manager, LLC	Delaware
RCP Brent Oaks Manager, LLC	Delaware
RCP Cape Cod Manager, LLC	Delaware
RCP Woodhollow Manager, LLC	Delaware
SR Fountains Holdings, LLC	Delaware
AR Real Estate Investors, LLC	Delaware
AR Real Estate, GP LLC	Delaware
RCP Nittany Pointe Manager, Inc.	Delaware
RCP Chinoe Creek Manager, Inc.	Delaware
RCP Portland Courtyard Manager, Inc.	Delaware
RCP Albuquerque Manager, Inc.	Delaware
RCP Fountains GP, Inc.	Delaware
RCP Mill Creek Manager, LLC	Delaware
RCP Windridge Manager, LLC	Delaware
RRE Howell Bridge Holdings, LLC	Delaware
RRE Bentley Place Holdings, LLC	Delaware
RRE Reserves Holdings, LLC	Delaware
RRE Reserves Holdco I, LLC	Delaware
RRE Regents Center Holdings, LLC	Delaware
RRE 1 Duraleigh Member, LLC	Delaware
RRE 2 Duraleigh Member, LLC	Delaware
RRE Avalon Member, LLC	Delaware
RRE Avalon Holdings, LLC	Delaware
RRE Funding I, LLC	Delaware
RRE Magnolia Holdings, LLC	Delaware
RRE West Wind Holdings, LLC	Delaware
RRE Ryan’s Crossing Holdings, LLC	Delaware
RRE Falls at Duraleigh Holdings, LLC	Delaware
RRE Sage Canyon Holdings, LLC	Delaware
RRE Cuestas Holdings, LLC	Delaware
RRE Heritage Lake Holdings, LLC	Delaware
RRE Heritage Lake TIC, LLC	Delaware
RRE Pear Tree Holdings, LLC	Delaware
RRE Wind Tree Holdings, LLC	Delaware
RRE West Chase Wyndham Holdings, LLC	Delaware
RRE Funding II, LLC	Delaware
RRE Villas Holdings, LLC	Delaware
RRE Memorial Towers Holdings, LLC	Delaware
RRE Coach Lantern Holdings, LLC	Delaware
RRE Foxcroft Holdings, LLC	Delaware
Foxcroft South Owners Association	Maryland
Foxcroft North Owners Association	Maryland
RRE Tamarlane Holdings, LLC	Delaware
RRE Park Hill Holdings, LLC	Delaware
RRE Bentley Place Holdco I, LLC	Delaware
RRE West Chase Wyndham TIC, LLC	Delaware
RRE Chenal Brightwaters TIC, LLC	Delaware
RRE Chenal Brightwaters Holdings, LLC	Delaware
RRE Highland Lodge TIC, LLC	Delaware
RRE Regents Center TIC, LLC	Delaware

RRE Heritage Lake TIC, LLC	Delaware
RRE Bentley Place TIC, LLC	Delaware
RRE Reserves TIC, LLC	Delaware
RRE Highland Lodge Holdings, LLC	Delaware
RRE Bent Oaks Holdings, LLC	Delaware
RRE Cape Code Holdings, LLC	Delaware
RRE Woodhollow Holdings, LLC	Delaware
RRE Woodland Hills Holdings, LLC	Delaware
RRE Mill Creek Holdings, LLC	Delaware
RRE Wyndridge Holdings, LLC	Delaware
Resource RSI Phase I, LLC	Delaware
Resource RSI Phase II, LLC	Delaware
Press Building, LLC	Delaware
Resource Programs, Inc.	Delaware
RCP Financial, LLC	Pennsylvania
Resource Properties VIII, Inc.	Delaware
Resource Properties XIV, Inc.	Delaware
Resource Properties XVII, Inc.	Delaware
Resource Properties XXIV, Inc.	Delaware
Resource Properties XXV, Inc.	Delaware
Resource Properties XXVI, Inc.	Delaware
Resource Properties XXX, Inc.	Delaware
Resource Properties XXXI, Inc.	Delaware
Resource Properties XXXIII, Inc.	Delaware
Resource Properties XL, Inc.	Delaware
Resource Properties XLI, Inc.	Delaware
Resource Properties XLVII, Inc.	Delaware
Resource Properties XLIX, Inc.	Delaware
Resource Properties 54, Inc.	Delaware
Chesterfield Mortgage Investors, Inc.	Delaware
Resource Commercial Mortgages, Inc.	Delaware
Resource Housing Investors I, Inc.	Delaware
Resource Housing Investors II, Inc.	Delaware
Resource Housing Investors III, Inc.	Delaware
Resource Housing Investors IV, Inc.	Delaware
Resource Rittenhouse, Inc.	Delaware

EX-23.1 5 exh23_1.htm CONSENT OF GRANT THORNTON LLP

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated December 13, 2010, with respect to the consolidated financial statements, schedules and internal control over financial reporting included in the Annual Report of Resource America, Inc. and subsidiaries on Form 10-K for the year ended September 30, 2010.  We hereby consent to the incorporation by reference of said reports in the Registration Statements of Resource America, Inc. on Forms S-8 (File No. 333-158557, effective April 13, 2009; File No. 333-126344, effective July 1, 2005, File No. 333-105615, effective May 28, 2003; File Nos. 333-98505 and 333-98507, effective August 22, 2002; File No. 333-81420, effective January 25, 2002 and File No. 333-37416, effective May 19, 2000).

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

December 13, 2010

EX-31.1 6 exh31_1.htm EXHIBIT 31.1

EXHIBIT 31.1

CERTIFICATION

I, Jonathan Z. Cohen, certify that:

1)   I have reviewed this report on Form 10-K for the fiscal year ended September 30, 2010 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:  December 13, 2010	Jonathan Z. Cohen
	Chief Executive Officer

EX-31.2 7 exh31_2.htm EXHIBIT 31.2

EXHIBIT 31.2

CERTIFICATION

I, Thomas C. Elliott, certify that:

1)   I have reviewed this report on Form 10-K for the fiscal year ended September 30, 2010 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/ Thomas C. Elliott
Date:  December 13, 2010	Thomas C. Elliott
	Senior Vice President and Chief Financial Officer

EX-32.1 8 exh32_1.htm EXHIBIT 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 Annual Report of Resource America, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2010 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:  December 13, 2010	Jonathan Z. Cohen
	Chief Executive Officer

EX-32.2 9 exh32_2.htm EXHIBIT 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 Annual Report of Resource America, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas C. Elliott, Senior 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/ Thomas C. Elliott
Date:  December 13, 2010	Thomas C. Elliott
	Senior Vice President and Chief Financial Officer

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EX-12.1

Exhibit 12.1

Ratio of Earnings to Fixed Charges

(in thousands, except ratios)

	For the Fiscal Year Ended September 30,
	2010			2009			2008			2007			2006
Earnings:
Pretax (loss) income from continuing operations	$	(19,947	)	$	(26,594	)	$	(44,882	)	$	9,824		$	19,442
Less – noncontrolling interests		(8	)		(1,549	)		(6,482	)		1,612			1,624
Less –  equity in earnings of affiliates		(4,870	)		(1,279	)		15,656			(13,960	)		(5,896	)
Add –  cash distributions received from equity investments		5,104			6,128			15,647			16,212			12,570
		(19,721	)		(23,294	)		(20,061	)		13,688			27,740
Fixed charges		13,386			20,520			47,581			33,782			10,244
Total	$	(6,335	)	$	(2,774	)	$	27,520		$	47,470		$	37,984
Fixed Charges:
Interest expense	$	13,086		$	20,199		$	47,266		$	33,566		$	10,119
Estimated interest portion of rent expense (2)		300			321			315			216			125
Total	$	13,386		$	20,520		$	47,581		$	33,782		$	10,244
Ratio of earnings to fixed charges			(1)			(1)			(1)		1.4			3.7

(1)   Earnings for fiscal 2010, 2009 and 2008 were inadequate to cover fixed charges.  The coverage deficiencies for those periods were $19.7 million $23.2 million and $20.0 million, respectively.

(2)   Estimated to be 8% of rent expense.

EX-21.1

EXHIBIT 21.1

RESOURCE AMERICA, INC.

LIST OF SUBSIDIARIES

NAME OF SUBSIDIARIES	STATE OF INCORPORATION
Resource Financial Fund Management, Inc.	Delaware
Trapeza Capital Management, LLC	Delaware
Trapeza Manager, Inc.	Delaware
Trapeza Funding, LLC	Delaware
Trapeza Funding II, LLC	Delaware
Trapeza Funding III, LLC	Delaware
Trapeza Funding IV, LLC	Delaware
Trapeza Funding V, LLC	Delaware
Trapeza TPS, LLC	Delaware
Trapeza Management Group, LLC	Delaware
Structured Finance Fund GP, LLC	Delaware
Structured Finance Management, LLC	Delaware
Ischus Capital Management, LLC	Delaware
Apidos Capital Management, LLC	Delaware
Apidos Select Corporate Credit Fund GP, LLC	Delaware
Resource Financial Institutions Group, Inc.	Delaware
Resource Credit Partners GP, Inc.	Delaware
Resource Credit Management, LLC	Delaware
Resource Capital Manager, Inc.	Delaware
RAI Ventures, Inc.	Delaware
Chadwick Securities, Inc.	Delaware
Resource Europe Management Limited	UK
Resource Capital Markets, Inc.	Delaware
Resource Capital Investor, Inc.	Delaware
Resource Leasing, Inc.	Delaware
FLI Holdings, Inc.	Delaware
LEAF Financial Corporation	Delaware
Commerce Square Insurance Services, LLC	Delaware
Commerce Square Equipment Insurance Co.	Delaware
LEAF Ventures, LLC	Delaware
Merit Capital Manager, LLC	Delaware
Merit Capital Advance, LLC	Delaware
Merit Processing, LLC	Delaware
LEAF Ventures II, LLC	Delaware
Prompt Payment, LLC	Delaware
LEAF Capital Management, Inc.	Delaware
Lease Equity Appreciation Fund I, L.P.	Delaware
LEAF Fund I, LLC	Delaware
Lease Equity Appreciation Fund II, L.P.	Delaware
LEAF Fund II, LLC	Delaware
LEAF II B SPE, LLC	Delaware
LEAF II Receivables Funding, LLC	Delaware
LEAF Funding, Inc.	Delaware
LEAF Commercial Finance Fund, LLC	Delaware
Resource Capital Funding II, LLC	Delaware
Resource Asset Management, LLC	Delaware
LEAF Asset Management, LLC	Delaware
LEAF Equipment Leasing Income Fund III, L.P.	Delaware
LEAF Funding, LLC	Delaware
LEAF Capital Funding III, LLC	Delaware
LEAF Fund III, LLC	Delaware

LEAF III B SPE, LLC	Delaware
LEAF III C SPE, LLC	Delaware
LEAF Equipment Finance Fund 4, L.P.	Delaware
LEAF Funds Joint Venture 2, LLC	Delaware
LEAF Fund 4A SPE, LLC	Delaware
Resource Capital Funding, LLC	Delaware
Resource Real Estate Holdings, Inc.	Delaware
Resource Real Estate, Inc.	Delaware
Resource Capital Partners, Inc.	Delaware
Resource Real Estate Management, LLC	Delaware
Resource Capital Partners II, LLC	Delaware
RRE Investor, LLC	Delaware
Resource Real Estate Funding, Inc.	Delaware
RRE Leasco, LLC	Delaware
RRE Oak Park Leaseco, LLC	Delaware
Resource Real Estate Management, Inc.	Delaware
RRE D2R2 2007-1, LLC	Delaware
RRE HUD MF 2007, LLC	Delaware
RRE Sky Harbor, LLC	Delaware
RRE River Oaks, LLC	Delaware
RRE Shoreline, LLC	Delaware
RRE Twyckenham, LLC	Delaware
RRE Windsor Square, LLC	Delaware
RRE Wyandotte, LLC	Delaware
RRE West Tech, LLC	Delaware
RRE VIP Borrower, LLC	Delaware
RRE VIP International Village, LLC	Delaware
RRE VIP Regency Park, LLC	Delaware
RRE VIP Waterford Nevillewood, LLC	Delaware
Resource Real Estate Opportunity Advisor, LLC	Delaware
Resource Real Estate Opportunity REIT, Inc.	Delaware
RRE Opportunity Holdings, LLC	Delaware
Resource Real Estate Opportunity Manager, LLC	Delaware
RRE VIP Participant, LLC	Delaware
RCP Westchase Wyndham Manager, LLC	Delaware
RCP Pear Tree Manager, LLC	Delaware
RCP Wind Tree Manager, LLC	Delaware
RCP Falls at Duraleigh Manager, LLC	Delaware
RCP Sage Canyon Manager, LLC	Delaware
RCP Cuestas Manager, Inc.	Delaware
RCP Chenal Brightwaters Manager, LLC	Delaware
RCP Holdco I Manager, Inc.	Delaware
RCP Reserves Manager, Inc.	Delaware
RCP Foxglove Manager, Inc.	Delaware
RCP Santa Fe Manager, Inc.	Delaware
RCP Regents Center Manager, Inc.	Delaware
RCP Highland Lodge Manager, Inc.	Delaware
RCP Grove Manager, LLC	Delaware
RCP Avalon Manager, Inc.	Delaware
RCP Howell Bridge Manager, Inc.	Delaware
RCP Heritage Lake Manager, LLC	Delaware
RCP Magnolia Manager, LLC	Delaware
RCP West Wind Manager, LLC	Delaware
RCP Ryan’s Crossing Manager, LLC	Delaware
RCP Memorial Tower Manager, LLC	Delaware
RCP Cypress Landing Manager, LLC	Delaware

Cypress Landing Partners, LLC	Delaware
RCP Island Tree Manager, LLC	Delaware
Island Tree Partners, LLC	Delaware
RCP Villas Manager, LLC	Delaware
RCP Coach Lantern Manager, LLC	Delaware
RCP Foxcroft Manager, LLC	Delaware
RCP Tamarlane Manager, LLC	Delaware
RCP Park Hill Manager, LLC	Delaware
RCP Woodland Hills Manager, LLC	Delaware
RCP Brent Oaks Manager, LLC	Delaware
RCP Cape Cod Manager, LLC	Delaware
RCP Woodhollow Manager, LLC	Delaware
SR Fountains Holdings, LLC	Delaware
AR Real Estate Investors, LLC	Delaware
AR Real Estate, GP LLC	Delaware
RCP Nittany Pointe Manager, Inc.	Delaware
RCP Chinoe Creek Manager, Inc.	Delaware
RCP Portland Courtyard Manager, Inc.	Delaware
RCP Albuquerque Manager, Inc.	Delaware
RCP Fountains GP, Inc.	Delaware
RCP Mill Creek Manager, LLC	Delaware
RCP Windridge Manager, LLC	Delaware
RRE Howell Bridge Holdings, LLC	Delaware
RRE Bentley Place Holdings, LLC	Delaware
RRE Reserves Holdings, LLC	Delaware
RRE Reserves Holdco I, LLC	Delaware
RRE Regents Center Holdings, LLC	Delaware
RRE 1 Duraleigh Member, LLC	Delaware
RRE 2 Duraleigh Member, LLC	Delaware
RRE Avalon Member, LLC	Delaware
RRE Avalon Holdings, LLC	Delaware
RRE Funding I, LLC	Delaware
RRE Magnolia Holdings, LLC	Delaware
RRE West Wind Holdings, LLC	Delaware
RRE Ryan’s Crossing Holdings, LLC	Delaware
RRE Falls at Duraleigh Holdings, LLC	Delaware
RRE Sage Canyon Holdings, LLC	Delaware
RRE Cuestas Holdings, LLC	Delaware
RRE Heritage Lake Holdings, LLC	Delaware
RRE Heritage Lake TIC, LLC	Delaware
RRE Pear Tree Holdings, LLC	Delaware
RRE Wind Tree Holdings, LLC	Delaware
RRE West Chase Wyndham Holdings, LLC	Delaware
RRE Funding II, LLC	Delaware
RRE Villas Holdings, LLC	Delaware
RRE Memorial Towers Holdings, LLC	Delaware
RRE Coach Lantern Holdings, LLC	Delaware
RRE Foxcroft Holdings, LLC	Delaware
Foxcroft South Owners Association	Maryland
Foxcroft North Owners Association	Maryland
RRE Tamarlane Holdings, LLC	Delaware
RRE Park Hill Holdings, LLC	Delaware
RRE Bentley Place Holdco I, LLC	Delaware
RRE West Chase Wyndham TIC, LLC	Delaware
RRE Chenal Brightwaters TIC, LLC	Delaware
RRE Chenal Brightwaters Holdings, LLC	Delaware
RRE Highland Lodge TIC, LLC	Delaware
RRE Regents Center TIC, LLC	Delaware

RRE Heritage Lake TIC, LLC	Delaware
RRE Bentley Place TIC, LLC	Delaware
RRE Reserves TIC, LLC	Delaware
RRE Highland Lodge Holdings, LLC	Delaware
RRE Bent Oaks Holdings, LLC	Delaware
RRE Cape Code Holdings, LLC	Delaware
RRE Woodhollow Holdings, LLC	Delaware
RRE Woodland Hills Holdings, LLC	Delaware
RRE Mill Creek Holdings, LLC	Delaware
RRE Wyndridge Holdings, LLC	Delaware
Resource RSI Phase I, LLC	Delaware
Resource RSI Phase II, LLC	Delaware
Press Building, LLC	Delaware
Resource Programs, Inc.	Delaware
RCP Financial, LLC	Pennsylvania
Resource Properties VIII, Inc.	Delaware
Resource Properties XIV, Inc.	Delaware
Resource Properties XVII, Inc.	Delaware
Resource Properties XXIV, Inc.	Delaware
Resource Properties XXV, Inc.	Delaware
Resource Properties XXVI, Inc.	Delaware
Resource Properties XXX, Inc.	Delaware
Resource Properties XXXI, Inc.	Delaware
Resource Properties XXXIII, Inc.	Delaware
Resource Properties XL, Inc.	Delaware
Resource Properties XLI, Inc.	Delaware
Resource Properties XLVII, Inc.	Delaware
Resource Properties XLIX, Inc.	Delaware
Resource Properties 54, Inc.	Delaware
Chesterfield Mortgage Investors, Inc.	Delaware
Resource Commercial Mortgages, Inc.	Delaware
Resource Housing Investors I, Inc.	Delaware
Resource Housing Investors II, Inc.	Delaware
Resource Housing Investors III, Inc.	Delaware
Resource Housing Investors IV, Inc.	Delaware
Resource Rittenhouse, Inc.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated December 13, 2010, with respect to the consolidated financial statements, schedules and internal control over financial reporting included in the Annual Report of Resource America, Inc. and subsidiaries on Form 10-K for the year ended September 30, 2010.  We hereby consent to the incorporation by reference of said reports in the Registration Statements of Resource America, Inc. on Forms S-8 (File No. 333-158557, effective April 13, 2009; File No. 333-126344, effective July 1, 2005, File No. 333-105615, effective May 28, 2003; File Nos. 333-98505 and 333-98507, effective August 22, 2002; File No. 333-81420, effective January 25, 2002 and File No. 333-37416, effective May 19, 2000).

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

December 13, 2010

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Jonathan Z. Cohen, certify that:

1)   I have reviewed this report on Form 10-K for the fiscal year ended September 30, 2010 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:  December 13, 2010	Jonathan Z. Cohen
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Thomas C. Elliott, certify that:

1)   I have reviewed this report on Form 10-K for the fiscal year ended September 30, 2010 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/ Thomas C. Elliott
Date:  December 13, 2010	Thomas C. Elliott
	Senior 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 Annual Report of Resource America, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2010 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:  December 13, 2010	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 Annual Report of Resource America, Inc. (the "Company") on Form 10-K for the fiscal year ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas C. Elliott, Senior 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/ Thomas C. Elliott
Date:  December 13, 2010	Thomas C. Elliott
	Senior Vice President and Chief Financial Officer