EXHIBIT 10.3
EXECUTION COPY
[RESOURCE CAPITAL FUNDING II, LLC]
FORBEARANCE AND RESERVATION OF RIGHTS
     This FORBEARANCE AND RESERVATION OF RIGHTS (this “Forbearance”), dated as
of May 14, 2009, is entered into by and among RESOURCE CAPITAL FUNDING II, LLC
(the “Borrower”), LEAF FINANCIAL CORPORATION (the “Servicer”), MORGAN STANLEY
BANK, N.A. (f/k/a Morgan Stanley Bank) (“Morgan Stanley”), as a Lender and
Collateral Agent and MORGAN STANLEY CAPITAL SERVICES INC. (the “Qualifying Swap
Counterparty”).
BACKGROUND
     1. The Borrower, the Servicer, Morgan Stanley, the Backup Servicer and U.S.
Bank National Association, as the Custodian are parties to the Receivables Loan
and Security Agreement, dated as of October 31, 2006 (as amended, supplemented
or otherwise modified through the date hereof, the “RLSA”). Capitalized terms
used herein but not defined herein shall have the meanings set forth in the
RLSA.
     2. The Borrower and the Qualifying Swap Counterparty are parties to a
Qualifying Interest Rate Swap dated as of December 22, 2006 (as amended,
supplemented or otherwise modified through the date hereof, and including all
swap transactions entered into pursuant thereto, the “Swap Agreement”).
     3. The Borrower and the Servicer have requested that the Lender and the
Collateral Agent (collectively, the “Forbearing Parties”) forbear for a period
of time from exercising certain of their rights under the RLSA as set forth in
Section 1(a) below. Such Persons are willing to agree to such forbearance,
subject to the terms and conditions hereof.
     4. The Borrower has also requested that the Qualifying Swap Counterparty
forbear for a period of time from exercising certain of its rights under the
Swap Agreement as set forth in Section 1(b) below. The Qualifying Swap
Counterparty is willing to agree to such forbearance, subject to the terms and
conditions hereof.
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
     SECTION 1. Forbearance.
     (a) The Servicer and the Borrower hereby notify the Forbearing Parties that
the financial statements of Resource America for the quarter ending March 31,
2009, to be delivered by Borrower on May 15, 2009, will show that the Tangible
Net Worth of Resource America is less than its Minimum Tangible Net Worth (such
condition, the “Breach”). The occurrence of the Breach constitutes each of the
events set forth on Schedule A attached hereto (the “Covenant Failures”), and
entitles the Forbearing Parties to exercise remedies pursuant thereto absent the
forbearance provided for hereunder. For the period commencing on the date hereof
and ending on the close of business on May

 

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28, 2009 (the “Forbearance Period”), the Forbearing Parties will forbear from
exercising their rights and remedies resulting solely from the Covenant
Failures. The forbearance provided herein shall not extend to any Event of
Default, Program Termination Event or Servicer Default other than the Covenant
Failures and all of the Forbearing Parties’ rights and remedies with respect
thereto are hereby reserved. Further, the forbearance provided herein shall not
derogate from the Forbearing Parties’ rights to collect, reserve and/or apply
proceeds of Pledged Assets to payment of outstanding liabilities as may be
specifically provided for in the RLSA and the other Transaction Documents. If
the foregoing forbearance is not extended by the Forbearing Parties by the end
of the Forbearance Period, the Borrower and the Servicer hereby acknowledge that
the Covenant Failures shall exist and that each Forbearing Party shall be fully
entitled to declare a Program Termination Date and to exercise all other rights
and remedies with respect thereto under the RLSA and the other Transaction
Documents.
     (b) The Borrower hereby notifies the Qualifying Swap Counterparty that one
or more of the Covenant Failures constitutes the “Event of Default” (as defined
in the Swap Agreement) set forth in clause (1) of Section 5(a)(vi) of the Swap
Agreement and entitles the Qualifying Swap Counterparty to exercise remedies
pursuant thereto absent the forbearance provided for hereunder. The Qualifying
Swap Counterparty hereby agrees to forbear from exercising its rights and
remedies resulting solely from such “Event of Default” or the Breach and each of
the Qualifying Swap Counterparty and the Borrower hereby agrees that the “Early
Termination Date” under (and as defined in) the Swap Agreement shall not be
declared as a result of such “Event of Default” during the Forbearance Period.
If the foregoing forbearance is not extended by the Qualifying Swap Counterparty
by the end of the Forbearance Period, the Borrower hereby acknowledges that such
“Event of Default” shall exist under the Swap Agreement and that the Qualifying
Swap Counterparty shall be fully entitled to exercise all rights and remedies
with respect thereto under the Swap Agreement.
     SECTION 2. Termination of Funding. The Borrower and the Lender hereby agree
that, notwithstanding this Forbearance or anything to the contrary set forth in
the RLSA or any other Transaction Document, under no circumstances shall the
Lender be obligated to make, nor shall the Borrower request, any additional Loan
under the RLSA. For the avoidance of doubt, such termination of funding shall
continue in effect notwithstanding any subsequent extension of the forbearance
granted in Section 1(a).
     SECTION 3. Representations and Warranties. Each of the Borrower and
Servicer represents and warrants that:
     (a) except as expressly described in Section 1 above, no event or condition
has occurred and is continuing which would constitute an Event of Default, a
Program Termination Event, a Servicer Default, a Pool A Termination Event, a
Pool B Termination Event, a “Termination Event” under the Swap Agreement, an
“Event of Default” under the Swap Agreement, or any event that, if it continued
uncured, with the lapse of time or notice, or both, would constitute any of the
foregoing events; and
     (b) except as expressly described in Section 1 above, its representations
and warranties set forth in the RLSA, the Swap Agreement and the other
Transaction

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Documents are true and correct as of the date hereof, as though made on and as
of such date (except to the extent such representations and warranties relate
solely to an earlier date and then as of such earlier date), and such
representations and warranties shall continue to be true and correct (to such
extent) after giving effect to the transactions contemplated hereby.
     SECTION 4. Effect of Forbearance; Ratification. Except as expressly set
forth herein, the RLSA, the Swap Agreement and each of the other Transaction
Documents remain in full force and effect and are hereby ratified. This
Forbearance shall not be deemed to expressly or impliedly waive, amend, or
supplement any provision of the RLSA or the Swap Agreement other than as
specifically set forth herein.
     SECTION 5. Expenses. The Borrower agrees to pay on demand all reasonable
costs and expenses of the Forbearing Parties and the Qualifying Swap
Counterparty (including costs and expenses of counsel for the Forbearing Parties
and the Qualifying Swap Counterparty) incurred in connection with the
preparation, execution and delivery of this Forbearance.
     SECTION 6. Counterparts. This Forbearance may be executed in any number of
counterparts and by different parties on separate counterparts, and each
counterpart shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
     SECTION 7. Governing Law. This Forbearance shall be governed by, and
construed in accordance with, the internal laws of the State of New York without
regard to the conflicts of law principles thereof (other than Section 5-1401 of
the New York General Obligations Law).
     SECTION 8. Section Headings. The various headings of this Forbearance are
inserted for convenience only and shall not affect the meaning or interpretation
of this Forbearance or any provision hereof.
     SECTION 9. Entire Agreement. This Forbearance is intended by the parties
hereto to be the final expression of their agreement with respect to the subject
matter hereof, and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made.
[SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the parties have executed this Forbearance as of the
date first written above.

              RESOURCE CAPITAL FUNDING II, LLC, as
Borrower
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    
 
            LEAF FINANCIAL CORPORATION, as
Servicer
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    

Forbearance and Reservation of Rights
(Resource Capital
Funding II, LLC)

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              MORGAN STANLEY BANK, N.A., as Lender
and Collateral Agent
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    

Forbearance and Reservation of Rights
(Resource Capital
Funding II, LLC)

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              MORGAN STANLEY CAPITAL SERVICES
INC., as Qualifying Swap Counterparty
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    

Forbearance and Reservation of Rights
(Resource Capital
Funding II, LLC)

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SCHEDULE A
“Covenant Failures” means the occurrence of any of the following events:
     (i) the Event of Default set forth in Section 7.01(k) of the RLSA,
     (ii) the Event of Default set forth in Section 7.01(n) of the RLSA,
     (iii) the Event of Default set forth in Section 7.01(o) of the RLSA,
     (iv) the Event of Default set forth in Section 7.01(q) of the RLSA,
     (v) the Event of Default set forth in Section 7.01(r) of the RLSA,
     (vi) the Program Termination Event set forth in clause (ii) of the
definition thereof in the RLSA,
     (vii) the Program Termination Event set forth in clause (x) of the
definition thereof in the RLSA,
     (viii) the Program Termination Event set forth in clause (xi)(2) of the
definition thereof in the RLSA and
     (ix) the Servicer Default set forth in clause (iv) of the definition
thereof in the RLSA.

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