EXHIBIT 10.12
LOAN SERVICING AGREEMENT
This Agreement is dated November 15, 1996 among Wilshire Credit
Corporation, a Nevada corporation ("WCC"), Wilshire Funding Corporation, a
Delaware corporation, ("WFC") Wilshire Financial Services Group Inc., a Delaware
corporation ("WFSG") and Wilshire Servicing Corporation, a Delaware corporation
("WSC"). WFC and WFSG are referred to as the "Company".
RECITALS
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The Company owns, and intends to acquire and make, loans, accounts,
chattel paper, real estate owned and other financial assets ("loans") during the
term of this Loan Servicing Agreement (the "Agreement"). The Company desires
that WCC service such loans. In addition, future entities that are affiliated
with the Company ("Affiliates") may acquire or make loans. The term Loan or
Loans shall mean all loans now owned by the Company or its Affiliates, acquired
or made by the Company or its Affiliates, or for which the Company or its
Affiliate acts as a master servicer, and including, without limitation, consumer
and commercial loans, secured and unsecured loans, and whether or not evidenced
by a promissory note.
The parties hereby agree as follows:
1. Exclusive Servicing of Loans. WCC shall provide loan portfolio
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management services, including billing, portfolio administration and collection
services ("Services") for all Loans unless WCC and the Company agree that
specific Loans shall not be so serviced ("Excluded Loans"). The Company shall
agree that WCC shall not be required to service loans for which WCC may not have
applicable licenses. The Company agrees that all of its Loans and the Loans of
any Affiliate, except for Excluded Loans, shall be serviced by Wilshire under
this Agreement.
2. Manner and Performance of Service. Except as specifically provided
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herein, WCC shall be entitled to exercise its sole discretion in servicing the
Loans. WCC shall devote such time and attention as shall be necessary to
provide the Company with the Services described herein. WCC may service its own
loans and render services to any other current clients for existing contracts
and amendments thereof, provided that such activities do not interfere with
WCC's performance of the Services. Without limitation, WCC's Services shall
consist of the following:
2.1 WCC's Duties in General. WCC shall administer the Loans with
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reasonable care, using that degree of skill and attention that WCC exercises
with respect to comparable Loans that it services for its own account or as a
fiduciary for others. WCC shall take all necessary actions which WCC in good
faith determines are commercially reasonable in regard to each Loan until it is
collected or WCC, in its good
faith judgment, determines that it is no longer commercially reasonable to
continue to try to collect the outstanding indebtedness of the Loan.
2.2 Compliance. WCC shall use its best efforts to comply throughout
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the term of this Agreement with all requirements of applicable federal, state
and local laws and regulations thereunder, including to the extent applicable,
any consumer and debt collection protection laws and any other consumer credit,
equal opportunity and disclosure laws.
2.3 Collection. WCC shall use its reasonable efforts, but not less
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than the same efforts it uses with respect to comparable loans that it services
for its own account or for others, to collect all payments due and to become due
under each of the Loans from the party or parties liable thereunder (a
"Borrower").
2.4 Subcontractors. WCC may subcontract services, but no such
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subcontract shall relieve or reduce WCC's obligations to perform services as
provided in this Agreement.
2.5 Indemnity. WCC shall reimburse and indemnify the Company and its
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successors and assigns for and against, and hold the Company and its successors
and assigns harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements, including without limitation reasonable fees and disbursements of
counsel, which may be imposed upon, or incurred by the Company in any way
relating to or arising out of WCC's gross negligence in its performance of its
duties hereunder. The Company shall reimburse and indemnify WCC and its
successors and assigns for and against, and hold WCC and its successors and
assigns harmless from and against, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements, including without limitation reasonable fees and disbursements of
counsel, which may be imposed upon, or incurred by WCC in any way relating to or
arising out of WCC's performance of its duties hereunder, the Loans or the
servicing thereof prior to the servicing by WCC other than arising out of WCC's
gross negligence.
2.6 Modifications, Adjustable Rate, and Payoffs. In connection with
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its collection efforts WCC may modify or change the interest rate of any Loan,
and quote to, and accept from, a Borrower a full or partial payoff amount on any
Loan as full settlement.
2.7 Monthly Accounting Reports. For each month during the term of
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this Agreement, WCC will furnish the Company with a monthly report regarding the
Loans by the twenty-fifth (25th) day of the following month. WCC shall furnish
at WCC's cost such other information regarding WCC, the Loans and this Agreement
as the Company may from time to time reasonably request, provided, that if the
information or data requested by the Company is something WCC cannot produce
internally from its then
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existing reporting systems without manual compilation or production, or
reprogramming its computer system, the Company shall reimburse
WCC for its cost for furnishing such information.
3. Term. This Agreement shall be effective as of its original date and
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will continue in full force and effect until five (5) years after the Servicing
Transfer as provided in Section 11 and thereafter for one year renewal periods
unless at least sixty (60) days prior to the beginning of the renewal period
either party notifies the other that the next one-year period will not be
renewed.
4. Fees and Costs. The Company shall pay WCC and WCC may retain or
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disburse from any Loan proceeds the following amounts:
4.1 Reimbursement of Costs. All bona fide amounts paid by WCC to
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third parties in connection with this Agreement, including without limitation,
stationery suppliers, related printing costs, fees for recordings and filings,
mailgrams, repossession agency fees, legal fees, travel, insurance costs, and
payments arising out of acts or omissions of third parties (including persons
from which the Loans are acquired), and WCC's standard photocopy charges.
4.2 Service Fee. WCC shall be entitled to a fee ("WCC's Service
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Fee") for servicing Loans equal to (a) all interest and other earnings paid or
accrued on amounts from time to time on deposit in any accounts in which
proceeds of Loans are deposited plus (b) a monthly fee equal to an amount
negotiated by the parties for each particular Loan portfolio, which monthly fee
shall be comparable to fees charged by other industry participants for servicing
comparable loan portfolios.
4.3 Payment. WCC may withdraw from all Loan proceeds all escrow
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payments, costs, and WCC's Service Fee. Within twenty-five (25) days after the
last day of each calendar month WCC shall pay to the Company or the Affiliate
owning the Loan the Net Proceeds received in that calendar month less WCC's
Service Fee. The Company or the applicable Affiliate shall pay WCC within
fifteen (15) days after billing for any excess fees and costs. WCC shall
receive any ancillary income, other than late charges, and any float revenue.
5. Independent Contractor. WCC shall provide the Services in the
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capacity of an independent contractor. Nothing in this Agreement shall be
construed as establishing an employment, partnership or joint venture between
the Company and WCC.
6. Representations of the Company. The Company represents and warrants
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as follows:
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6.1 The Company has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization, with
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently conducted.
6.2 The Company has the power and authority to execute and deliver
this Agreement and to carry out its terms; and the execution, delivery, and
performance of this Agreement have been duly authorized by the Company by all
necessary corporate action on the part of the Company.
6.3 This Agreement constitutes a legal, valid and binding obligation
of the Company enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting
enforcement of creditor rights generally.
7. Representations of WCC. WCC represents and warrants as follows:
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7.1 WCC has been duly organized and is validly existing and in good
standing under the laws of the jurisdiction of its organization, with power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted and has corporate
power, authority and legal right to service the Loans as provided in this
Agreement.
7.2 WCC has the power and authority to execute and deliver this
Agreement and to carry out its terms; and the execution, delivery, and
performance of this Agreement have been duly authorized by WCC by all necessary
corporate action on the part of WCC.
7.3 This Agreement constitutes a legal, valid and binding
obligation of WCC enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting enforcement of creditor rights generally.
8. Audits and Examinations.
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8.1 WCC shall use reasonable efforts to maintain in good order and
condition throughout the term of this Agreement all Loan files and relevant
materials that WCC has received regarding the Loans.
8.2 WCC shall maintain a copy of each Loan file at its office or
elsewhere within its control, provided, that at the Company's request, WCC will
deliver copies of such Loans to the Company or a designee of the Company. WCC
shall make available to the Company or its duly authorized representatives,
attorneys or auditors the
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Loan files and the related accounts, records and computer systems maintained by
WCC at such times as the the Company shall reasonably request.
8.3 WCC shall permit the the Company, and its agents to audit the
books and records of WCC applicable to the Loans at WCC's business premises
during WCC's normal business hours upon reasonable prior notice to WCC. The
Company shall have direct access to WCC's management information system for the
Loans or, if applicable, to any service bureau used by WCC for the Loans.
9. Substitute Servicer; Limited Arbitration.
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9.1 If at any time during the term of this Agreement WCC shall
breach, or default in the performance of a material obligation of WCC undertaken
in this Agreement, the Company and WCC shall consult for such period of time as
the Company may determine is reasonable under the circumstances to determine a
mutually acceptable resolution. In the event the Company and WCC fail to agree
thereon within such period as the Company may specify, then the Company may, by
written notice to WCC and without limitation of any other right or remedy of the
Company, require that WCC transfer the Loans, and all of WCC's servicing and
related rights and obligations in and with respect to the Loans, to a substitute
servicer to be designated by the Company. Such substitute servicer shall
thereupon perform, pursuant to a servicing contract acceptable to the Company,
all of WCC's duties and obligations under this Agreement. Upon the Company's
designation of such a substitute servicer, WCC shall within a reasonable time
and to the extent it holds possession thereof, deliver to such substitute
servicer all written evidence and documentation of the Loans and WCC thereafter
shall cooperate and follow all instructions of the Company in all reasonable
respects to facilitate such substitute servicer's performance of WCC's duties
and obligations under this Agreement. The fees and expenses of the substitute
servicer shall be paid by the Company. WCC, however, shall continue to be
entitled to WCC's Service Fee with regard to any Loan being serviced under this
section, net of all servicing fees paid by the Company to the substitute
servicer for such Loan.
9.2 If WCC wishes to contest or dispute the Company's appointment
of a substitute servicer, WCC shall so notify the Company in writing within
thirty (30) days after such appointment, specifying in the notice WCC's reasons
for doing so. Such controversy or dispute regarding the Company's appointment
of a substitute servicer shall be settled by arbitration, by one arbitrator in
Portland, Oregon in accordance with the Rules of the American Arbitration
Association ("AAA"), subject to the provisions of Section 9.3 and any other
applicable provisions of this Agreement. The arbitrator, whether appointed by
the parties or pursuant to the Rules of the AAA, shall be impartial and neutral
and shall have experience in the management of operations of an institution
which performs financing and collection services similar to those to be
performed by WCC under this Agreement. The decision of the arbitrator shall be
final, binding and
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conclusive upon the parties. The arbitrator shall comply with the privacy
restrictions provided in Section 9.7 regarding publication of any award.
9.3 In no event shall the arbitrator have power or authority to add
to or detract from the agreements of the parties nor to award punitive or
consequential damages. The arbitrator shall be authorized only to render an
award regarding a dispute or controversy concerning the Company's appointment of
a substitute servicer pursuant to Section 9.1 hereof, including an award of
costs and expenses as herein provided, and the arbitrator shall not purport to
determine, or issue an award regarding, any other legal or equitable rights or
remedies of the parties.
9.4 The arbitration hearing will conclude and the arbitrator's award
shall be rendered in writing within 30 days after it commences. The arbitrator
will make every effort to enforce this requirement strictly, but may extend the
time for the hearing upon a showing that exceptional circumstances require
extension to prevent manifest injustice.
9.5 The parties will share equally the expense of deposits and
advances required by the AAA but either party may advance such amounts, subject
to recovery thereof as an addition or offset to any award. The arbitrator shall
award to the prevailing party, as determined by the arbitrator, all costs, fees
and expenses related to the arbitration, including reasonable fees and expenses
of attorneys, experts and other professionals incurred by the prevailing party.
9.6 In the event of any legal action relating to the arbitration,
including any action to stay the arbitration, to vacate, modify or correct any
award or otherwise, the prevailing party in such action as determined by the
court shall be entitled to recover from the other party its court costs and
reasonable fees and expenses of attorneys, experts and other professionals
incurred in connection with the action, including such costs, fees and expenses
upon appeal. The institution and maintenance of an action for judicial relief,
or the pursuit of any provisional, ancillary, or judicial remedy by any party,
shall not constitute a waiver of the right of any party, including the plaintiff
in such judicial action, to submit the controversy or claim to arbitration
pursuant to Section 9.2 hereof.
9.7 WCC and the Company acknowledge that the existence, progress and
results of any arbitration held under this Agreement, and any arbitral award,
are to remain private. Each party agrees not to publish or disclose any
information regarding the arbitration or any such award by any means, except as
may be required for enforcement of any arbitral award and further agrees to take
reasonable care, but in no event less care than it takes to protect its own
confidential business information generally, to prevent disclosure and
dissemination of such information.
9.8 The award rendered in any arbitration may be enforced in any
court of competent jurisdiction.
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10. Non-Compete. During the term of this Agreement and for a period of
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one year after the termination of this Agreement, WCC will not, without the
prior approval of the Company, compete with the business currently conducted by
the Company, including the purchase of any Loans that the Company or an
Affiliate are able to purchase under applicable law and including the servicing
of loan portfolios (other than its own loan portfolios and servicing for other
current clients for existing contracts and amendments thereof).
11. Servicing Transfer. If WSC has substantially all of the licenses
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required of it to service, WSC may request and, following the second anniversary
of the closing date of the Company's initial public offering, it may demand that
WCC transfer to WSC , within thirty days of such demand, all obligations for
servicing the Loans, loans owned by WCC, and any other loans being serviced by
WCC for which WCC may under its agreement for such servicing, transfer such
servicing ("Servicing Transfer"). If the Servicing Transfer has not occurred by
the third anniversary of the closing date of the Company's initial public
offering, WCC and WSC shall effect the Servicing Transfer at such date. If WCC
is required to obtain consent from other owners of loans to transfer such
servicing, WCC shall make a good faith attempt to obtain such consent. Upon such
servicing transfer WCC shall assume the obligations of WCC under the servicing
contracts transferred.
11.1 Upon the Servicing Transfer, WSC may purchase, and WCC shall sell
and transfer to WSC, all WCC assets that WSC may desire for the servicing
business, including without limitation, all equipment, books, records, forms,
computer systems and software, real and personal property leases, and contracts
(to the extent they are assignable). As consideration for such assets, WSC
shall pay to WCC such consideration as shall be mutually agreed and assume all
liabilities (including liabilities associated with employees and employee
benefits) related thereto arising after the Servicing Transfer. In the event
that WSC is unable to assume the servicing rights and obligations for any loans,
then WSC shall cooperate with WCC to allow WCC reasonable access and use of the
transferred assets to permit WCC to continue servicing those loans not
transferred to the Company.
11.2 Upon the Servicing Transfer, WSC shall service all loans owned by
WCC and its affiliates (other than the Company and its subsidiaries) on the same
terms and conditions on which WCC is servicing WSC Loans under this Agreement
except that the fees and costs to be paid by WCC for the servicing of its loans,
and the loans of its affiliates shall be WSC's average cost for servicing
comparable loans as the parties shall mutually agree from time to time.
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11.3 Notwithstanding the assignment to WSC of servicing rights
arising from WCC contracts with third persons, any proceeds of such contracts in
excess of the fees and costs to be paid by WCC to WSC hereunder for comparable
loans shall be paid to WCC by WSC unless the parties otherwise agree.
12. General Provisions.
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12.1 Written Notices. Notices under this Agreement must be in
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writing and mailed, U.S. Mail with first class postage prepaid or overnight
mail, or telecopied, to the appropriate address shown above unless the address
has been changed by notice given as provided herein at least three (3) business
days in advance of the effective date of such change. Notice will be effective
three (3) business days after mailing or one business day after telecopy.
Wilshire Credit Corporation
XX Xxx 0000
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Wilshire Financial Services Group Inc.
XX Xxx 0000
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (503) 223-8399
Wilshire Funding Corporation
XX Xxx 0000
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Wilshire Servicing Corporation
XX Xxx 0000
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
12.2 Attorneys' Fees. If any judicial proceeding is initiated by
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either of the parties arising out of the subject matter of this Agreement,
including without limitation any suit or action arising under state or federal
securities laws, trial, appeal, or bankruptcy, the prevailing party in such
proceeding will be entitled to recover, in addition to any judgment obtained in
such proceeding, reasonable attorneys' fees and court costs incurred.
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12.3 Events Beyond the Control of the Parties. Performance by either
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party hereunder will not be deemed to be in default where the delay or default
is due to events beyond its reasonable control, including without limitation
war, insurrection, strike, lock-outs, riots, floods, earthquakes, fires,
casualties, acts of God, epidemics, quarantine restrictions, governmental
restrictions, inability to secure necessary labor or materials, acts of the
other party or failure to act of any public or governmental agency or entity.
12.4 Further Assurances. Following the execution of this Agreement,
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WCC and the Company, respectively, shall, from time to time at the request of
the other, execute and deliver such other documents and instruments, and shall
take such other actions, as may be reasonably necessary or appropriate to carry
out and perform more effectively the terms and purposes of this Agreement.
12.5 Governing Law. This Agreement will be governed by the laws of
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the state of Oregon. Any dispute arising from or in connection with this
Agreement, other than as provided in Section 9, shall be resolved in the
applicable state or federal court in Portland, Oregon.
12.6 Severability. If any provision herein is deemed unenforceable
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in whole or in part, such provision shall be deemed severable solely to the
extent of such enforceability without impacting the remainder of this Agreement.
12.7 Counterparts. This Agreement may be executed in one or more
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counterparts. Each signed counterpart shall be deemed an original, but all of
them together constitute one and the same instrument.
12.8 Entire Agreement. This Agreement constitutes the entire
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agreement between the parties as to its subject matter and supersedes all
proposals, oral or written,
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and all negotiations, conversations or discussions heretofore had between the
parties related to the subject matter of this Agreement. Any amendment to this
Agreement must be in writing signed by the party to be charged.
Wilshire Financial Services Group Inc. Wilshire Credit Corporation
By: By:
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Its: Its:
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Wilshire Funding Corporation
By:
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Its:
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Wilshire Servicing Corporation
By:
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Its:
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