Exhibit 4.(4)
SETTLEMENT AGREEMENT
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This Settlement Agreement (this "Agreement") is made as of December 10,
1999 by and between Wilshire Real Estate Investment Inc., a Maryland
corporation, on behalf of itself and all of its subsidiaries and affiliates
("WREI"), Xxxxxx X. Xxxxxxxxxx, Xxxxxxxx X. Xxxxxxxxxx, on the one hand, and
Wilshire Financial Services Group Inc., a Delaware corporation, on behalf of
itself and all of its subsidiaries and affiliates, other than First Bank of
Xxxxxxx Hills, F.S.B. ("WFSG"), on the other hand.
RECITALS
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A. WFSG, by itself and through its subsidiaries, and WREI, by itself and
through its subsidiaries, are and/or have been parties to various agreements
(the interpretation, enforceability or validity of some of which are disputed by
one or more of the parties to this Agreement), including the following:
1. A Management Agreement (the "Management Agreement") dated as of
April 6, 1998 by and between Wilshire Realty Services Corporation
("WRSC"), a WFSG entity, and Wilshire Real Estate Partnership L.P.
("WREP"), a WREI entity (a copy of which is attached hereto as
Exhibit 1).
2. A convertible pay-in-kind note (the "Original PIK Note") (a copy of
which is attached hereto as Exhibit 2) dated June 10, 1999. The
Original PIK Note, all of the subsequently issued notes issued in
discharge of the interest obligations thereupon and all accrued but
unpaid interest on the Original PIK Note and any of such
subsequently issued notes are collectively hereinafter referred to
as the "PIK Notes."
3. An Agreement dated October 19, 1999 (a copy of which is attached
hereto as Exhibit 3), as supplemented by a letter dated November 29,
1999 (a copy of which is attached hereto as Exhibit 4), providing
for the transfer of certain mortgage backed securities from WFSG to
WREI.
4. An Agreement dated October 14, 1999 (the "October 14th Agreement")
relating to the transfer of employees, leasehold interests and
certain assets and a limited waiver of certain nonsolicitation
obligations (a copy of which is attached hereto as Exhibit 5).
B. WFSG currently holds 992,587 shares of the common stock of WREI, and
options to acquire an additional 1,112,500 shares (including options to acquire
35,000 shares held by certain current employees of WFSG) of WREI common stock.
C. In February of 1999, WREI made a payment in the amount of 34,000 British
Pounds to a WFSG entity in discharge of an obligation which had previously been
paid and satisfied by WREI (the "Overpayment").
D. WFSG has asserted certain claims for reimbursement against WREI (the "WREI
Reimbursement Claims") and against Messrs. Xxxxxx X. Xxxxxxxxxx and Xxxxxxxx X.
Xxxxxxxxxx (the "Xxxxxxxxxx and Xxxxxxxxxx Reimbursement Claims") which are set
forth
on Exhibit 6 attached hereto. The claims set forth in such exhibit have been
disputed in whole or in part.
E. WREI and WFSG intend by this Agreement to eliminate certain interests
which each of them has or may have in or against the other, as more fully set
forth below in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. WFSG hereby assigns and surrenders to WREI all of the right, title and
interest in shares of WREI common stock held as of the date hereof by any WFSG
entity, including, but not limited to, 992,587 shares of WREI common stock and
options (including those held by current WFSG employees) to acquire 1,112,500
additional shares of WREI common stock. WFSG also hereby assigns any and all
rights to any declared but unpaid dividends with respect to such shares. WFSG
herewith delivers all stock certificates and other instruments in WFSG's
possession evidencing such common stock and options to acquire WREI common stock
properly endorsed in blank, together with any instruments heretofore reasonably
requested by WREI to evidence the cancellation or to effect the surrender of any
options hereinbefore described.
2. WFSG hereby irrevocably releases WREI for any claim WFSG may have to a
management fee otherwise payable by WREI under Sections 9(a) and 9(b) of the
Management Agreement with respect to management services rendered by WFSG for
the benefit of WREI for the quarterly period ended September 30, 1999. Except
as otherwise specifically set forth in this Section 2 and Section 6(1) (to the
extent necessary to avoid duplicative recovery), this release shall not be
deemed to affect or otherwise prejudice either party's position with respect to
any other provision, including Section 14, of the Management Agreement.
3. WFSG hereby accepts and acknowledges that the consideration owing to WFSG
as a result of the previous performance of its obligations under the agreements
attached as Exhibits 3 and 4 is applied against the Original PIK Note as of the
date of this Agreement and is discharged in consideration of the performance by
WREI of all its obligations pursuant to this Agreement.
4. WREI hereby cancels all of WFSG' s obligations under the PIK Notes and the
PIK Notes are hereby and hereafter considered satisfied and paid in full. WREI
herewith surrenders to WFSG the original of all such PIK Notes, and each of
which has been marked by WREI to have been "paid in full."
5. WREI irrevocably releases WFSG from all liability and any and all further
obligations with respect to the Overpayment and the October 14th Agreement.
6. WFSG irrevocably releases (1) WREI from all liability and any and all
further obligations with respect to the WREI Reimbursement Claims and (2)
Messrs. Xxxxxx Xxxxxxxxxx and Xxxxxxxx Xxxxxxxxxx from all liability and any and
all further obligations with respect to the Wiederhorn and Xxxxxxxxxx
Reimbursement Claims. The
aforementioned releases in this Section 6 apply solely with respect to the
specific items scheduled on Exhibit 6 attached hereto.
7. WFSG herewith issues to WREI an unsecured promissory note in the principal
amount of $275,000, bearing interest at 9% per annum, the entire principal and
interest of which are due and payable on June 12, 2000 (a copy of which is
attached hereto as Exhibit 7).
8. Each of WFSG and WREI represents and warrants to the other that: (i) it has
the necessary corporate power and authority to enter into and perform its
obligations under this Agreement; (ii) this Agreement has been duly authorized
by and validly executed on behalf of such party; (iii) this Agreement is a valid
and binding obligation of such party, enforceable against the same in accordance
with its terms; and (iv) such party owns the assets or properties that it is
transferring pursuant to the terms of this Agreement free and clear of any and
all liens and encumbrances.
9. Each of WFSG and WREI agrees that upon the request of the other party, it
shall, at its own expense, do, execute and deliver such further acts and
documents as the other party shall reasonably request from time to time for the
purpose of assuring and confirming the other party of the rights hereby created
or for the performance of the terms of this Agreement.
10. This Agreement shall be governed by the laws of the State of Oregon
applicable to contracts performed entirely in that state, without giving effect
to the conflicts of law principles thereof.
11. This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all of
such counterparts shall together constitute but one and the same instrument.
12. The parties hereto recognize that this is a partial settlement and that
additional disputes and obligations exist between the parties. Only the
disputed claims expressly mentioned are settled and released by the terms of
this Agreement. The parties acknowledge that no party admits any liability for
any of such settled and released claims.
IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as
of the date first set forth above.
WILSHIRE REAL ESTATE INVESTMENT INC.
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By:
Its:
WILSHIRE FINANCIAL SERVICES GROUP INC.
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By:
Its:
XXXXXX X. XXXXXXXXXX
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XXXXXXXX X. XXXXXXXXXX
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