Exhibit 10.7
SERVICES AGREEMENT
THIS AGREEMENT, dated as of April __, 1998 by and between WILSHIRE
FINANCIAL SERVICES GROUP INC., a Delaware corporation ("WFSG"), WILSHIRE REALTY
SERVICES CORPORATION, a Delaware corporation ("WRSC") and solely with respect to
Section 3 hereof, WILSHIRE REAL ESTATE INVESTMENT TRUST INC., a Maryland
corporation ("WREIT").
WITNESSETH:
WHEREAS, WRSC has entered into a Management Agreement dated the date hereof
(the "Management Agreement") with WREIT whereby WRSC has agreed to provide
certain management and administrative services to WREIT;
WHEREAS, WRSC desires to obtain certain assistance from WFSG, and WFSG is
willing to provide such assistance, in performing certain of such managerial and
administrative services for WREIT;
NOW THEREFORE, in consideration of the mutual agreements herein set forth,
the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used but not defined herein
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shall have the respective meanings assigned them in the Management Agreement.
SECTION 2. Duties of WFSG. WFSG shall, upon the request of WRSC, provide
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or cause to be provided to WRSC the following services, facilities, and
equipment to assist WRSC in performing its obligations under the Management
Agreement, including:
(i) Administrative Services. Advice and assistance in connection
with real estate or real estate related acquisitions, formulation of
investment criteria, revisions to Guidelines, the purchase and commitment
to purchase assets, the sale and commitment to sell assets, the maintenance
and administration of asset portfolios, the collection of revenues (other
than from servicing), and the payment of debts and obligations;
(ii) Management and Accounting. Advice and assistance in connection
with accounting and financial reporting functions, legal compliance,
banking, risk management and strategic matters, and supervisory duties with
respect to servicers and others, including assistance furnishing reports
and statistical and economic research regarding the WREIT's activities;
(iii) Human Resources Services. Provision of staff and employees and
advice and assistance in connection with employee relations and employee
benefits including record keeping;
(iv) Computer Services. Maintenance of accounting systems and other
appropriate computer systems;
(v) Secretarial Services. Advice and assistance in connection with
filing, duplicating, and mailroom services and miscellaneous secretarial
services and supplies;
(vi) Facilities. Provision of adequate facilities for business
including office space, reception area, restrooms, and parking spaces, and
adequate heating, air conditioning, and electricity during normal business
hours;
(vii) Equipment. Provision of any necessary equipment for use by
WRSC in its business and competent and sufficient technical and support
personnel to operate the equipment; and
(viii) Tax Matters. Advice and assistance in connection with the
maintenance of WREIT's status as a REIT and monitoring compliance with the
various REIT qualification tests and other rules set out in the Internal
Revenue Code and regulations thereunder.
Notwithstanding the foregoing, any employee provided by WFSG under this
Agreement will remain an employee of WFSG and it will pay all salaries, wages,
insurance, overhead costs, benefits, and taxes attributable to such employee.
SECTION 3. Right of First Refusal. The Right of First Refusal conferred
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on WREIT in this Section 3 is being conferred in consideration for WREIT's
consent to subcontracting the management services to WFSG as contemplated by
this Agreement. Nothing herein shall prevent WFSG or any of its subsidiaries
from engaging in other businesses or from rendering services of any kind to any
other person or entity, including investment in, or advisory service to others
investing in, any type of real estate investment (including investments which
constitute Primary Investments for WREIT); provided, however, that WFSG and its
subsidiaries will grant a right of first refusal with respect to the Company's
Primary Investments on the terms and conditions set forth below.
So long as the Management Agreement remains in full force and effect, WFSG
and its subsidiaries do hereby grant a right of first refusal ("Right of First
Refusal") to WREIT with respect to real estate investments which constitute
Primary Investments for WREIT; provided, however, that neither WFSG nor any
subsidiary of WFSG is required to provide such Right of First Refusal with
respect to Primary Investments that consist of mortgage-backed securities where
the mortgage loans collateralizing such mortgage-backed securities are owned by
WFSG or a subsidiary of WFSG. In addition, the foregoing Right of First
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Refusal does not apply to the acquisition of real property by WFSG or a
subsidiary in connection with foreclosure (or deed in lieu of foreclosure) on
property securing a mortgage loan owned by WFSG or a subsidiary of WFSG.
With respect to acquisitions of pools of assets consisting of both Primary
Investments and Other Real Estate Related Assets, the Right of First Refusal
will only apply to the Primary Investments contained in such pool and it is
expressly agreed that WFSG or one of its subsidiaries may acquire other Real
Estate Related Assets contained in such pool. Further, from time to time,
mortgage lenders or others offer for sale large pools of mortgage loans and real
properties pursuant to a competitive bidding process. In such a case, WFSG or
its subsidiaries may choose an unaffiliated entity with which to submit a joint
bid for the pool, as long as WFSG or its subsidiaries takes title only to assets
as to which it has not given WREIT the Right to First Refusal. The parties
acknowledge and agree that WFSG and its subsidiaries have no obligation to
reveal to WREIT or its subsidiaries any business opportunities involving Other
Real Estate Related Assets.
WFSG agrees, and will cause each of its subsidiaries to agree, that it will
not invest in any Primary Investments for its own account or that of one of its
subsidiaries unless a majority of the Independent Directors of WREIT have
decided that WREIT should not invest in such asset. WREIT agrees that it and
such Independent Directors shall use commercially reasonable efforts to make any
such decision in sufficient time to allow WFSG or one of its subsidiaries to bid
on and acquire such asset if WREIT determines not to invest in such asset.
The parties agree that because the market in which WREIT expects to
purchase assets is characterized by rapid evolution of products and services,
and, thus, there may in the future be relationships between WREIT, WRSC, WFSG
and their respective affiliates in addition to those described herein, WREIT may
change its policies in connection with any of the foregoing (including the
definition of Primary Investments) with the approval of the majority of the
Independent Directors and subject to the written agreement of WFSG and WRSC.
Except for the acquisition of the Initial Investments (which have already
been approved by the Independent Directors), WFSG agrees that any Primary
Investments or Other Real Estate Related Assets to be acquired by WREIT (or one
of its subsidiaries) from WFSG (or one of its subsidiaries) shall require the
approval of a majority of the Independent Directors of WREIT.
SECTION 4. Compensation. As compensation for the services provided by it
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hereunder, WFSG shall be entitled to receive portion of the base management fee
and the incentive compensation fee payable to WRSC pursuant to Section 8(a) and
(b) of the Management Agreement. The portion to be received by WFSG shall be
determined by WFSG and WRSC on a quarterly basis and shall be based on the
amount of services rendered by WFSG during such quarterly period.
SECTION 5. Expenses. Expenses incurred by WFSG on behalf of WRSC shall be
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reimbursed quarterly by WRSC within 60 days after the end of each quarter. WFSG
shall
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prepare a statement documenting such expenses during each quarter, and shall
deliver such statement to WRSC within 45 days after the end of each quarter.
SECTION 6. Limits of Responsibility. WFSG assumes no responsibility under
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this Agreement other than to render the services called for hereunder in good
faith. WFSG, its directors, officers, stockholders, subsidiaries, affiliates
and employees will not be liable to WRSC, WREIT, any subsidiary, the Independent
Directors or WREIT's or any subsidiary's stockholders or partners for any acts
or omissions by WFSG, its directors, officers, stockholders, subsidiaries,
affiliates or employees under or in connection with this Agreement, except by
reason of acts constituting bad faith, willful misconduct, gross negligence or
reckless disregard of their duties.
SECTION 7. No Joint Venture. WFSG and WRSC are not partners or joint
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venturers with each other and nothing herein shall be construed to make them
such partners or joint venturers or impose any liability as such on either of
them.
SECTION 8. Term; Termination. This Agreement shall have a term which is
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coterminous with that of the Management Agreement.
SECTION 9. Assignments and Amendments. This Agreement shall terminate
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automatically in the event of its assignment, in whole or in part, by either
party, unless such other party has consented in writing. This Agreement may not
be modified or amended other than by an agreement in writing by WFSG and WRSC
and, in the case of Section 2, WFSG, WRSC and WREIT (provided however, that the
Independent Directors of WREIT have approved the assignment and/or amendment).
SECTION 10. Notices. Unless expressly provided otherwise herein, all
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notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
If to WFSG:
Wilshire Financial Services Group Inc.
1776 SW Madison St.
Portland, Oregon 97205
Attention: President
If to WRSC:
Wilshire Realty Services Corporation
1776 SW Madison St.
Portland, Oregon 97205
Attention: President
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If to WREIT:
Wilshire Real Estate Investment Trust Inc.
1776 SW Madison St.
Portland, Oregon 97205
Attention: President
Either party may alter the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the
provisions of this Section 10 for the giving of notice.
SECTION 11. Binding Nature of Agreement; Successors and Assigns. This
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Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns (to
the extent permitted hereunder) as provided herein.
SECTION 12. Entire Agreement. This Agreement contains the entire
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agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof.
SECTION 13. Governing Law. This Agreement and all questions relating to
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its validity, interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of New York, notwithstanding any New York or other conflict-of-law provisions to
the contrary.
SECTION 14. Indulgences, Not Waivers. Neither the failure nor any delay
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on the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
SECTION 15. Costs and Expenses. Each party hereto shall bear its own
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costs and expenses (including the fees and disbursements of counsel and
accountants) incurred in connection with the negotiations and preparation of and
the closing under this Agreement, and all matters incident thereto.
SECTION 16. Titles Not to Affect Interpretation. The titles of paragraphs
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and subparagraphs contained in this Agreement are for convenience only, and they
neither form
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a part of this Agreement nor are they to be used in the construction or
interpretation hereof.
SECTION 17. Execution in Counterparts. This Agreement may be executed in
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any number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
SECTION 18. Provisions Separable. The provisions of this Agreement are
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independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
If in any judicial proceeding a court shall refuse to enforce all the provisions
of this Agreement, the scope of any unenforceable provision shall be deemed
modified and diminished to the extent necessary to render such provision valid
and enforceable. In any event, the validity and enforceability of any such
provision shall not affect any other provision of this Agreement, and this
Agreement shall be construed and enforced as if such provision had not been
included.
SECTION 19. Attorneys' Fees. If any suit or action is filed by any party
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to enforce or interpret a provision of this Agreement or otherwise with respect
to the subject matter of this Agreement, the prevailing party shall be entitled,
in addition to other rights and remedies it may have, to reimbursement for its
expenses incurred with respect to such suit or action, including court costs and
reasonable attorneys' fees at trial, on appeal and in connection with any
petition for review.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
WILSHIRE FINANCIAL SERVICES GROUP INC.
By: ___________________________________
Its: __________________________________
WILSHIRE REALTY SERVICES CORPORATION
By: ___________________________________
Its: __________________________________
Accepted and agreed solely
with respect to Section 3 as
of the date first written above:
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
By: _____________________________
Its: ____________________________
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