SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 17, 2000.
Wilshire Real Estate Investment Inc.
(Exact Name of Registrant as Specified in Charter)
Maryland 0-23911 52-2081138
(State or Other (Commission (IRS Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
1631 SW Columbia Street, Portland, OR 97201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 721-6500
<PAGE>
Item 5. Other Events.
On August 28, 2000, Wilshire Real Estate Investment Inc. (the "Company")
announced that the Company, on behalf of itself and all of its subsidiaries and
affiliates, Andrew A. Wiederhorn and Lawrence A. Mendelsohn entered into
settlement agreements, dated as of August 17, 2000, with Wilshire Financial
Services Group ("WFSG"), on behalf of all of its subsidiaries and affiliates
other than First Bank of Beverly Hills, F.S.B, (the "Agreement") pursuant to
which all disputes among the parties have been settled, including those related
to WFSG's termination of Andrew A. Wiederhorn and Lawrence A. Mendelsohn (the
"Settlement"). The settlement agreements contain provisions, which provide that,
except as required for compliance with laws or government requests, the terms of
the Settlement shall remain confidential.
As of June 30, 2000, the Company had a reserve for disputes with WFSG of
$2.5 million (which was originally established in September 1999). Based upon
the terms of the Settlement, the Company believes that this reserve will be
sufficient and that the Settlement will not have a negative impact on the
Company's earnings for the third quarter of 2000.
The Company had been engaged in an ongoing dispute with WFSG relating to
the termination of the extensive contractual and other relationships, which
formerly existed between the companies. On August 20, 1999, the Company filed a
lawsuit (the "Lawsuit") against WFSG in the Circuit Court of the State of Oregon
for Multnomah County and on August 23, 1999, the Company filed an amended
complaint in the lawsuit adding as additional defendants Wilshire Realty
Services Corporation ("WRSC"), a wholly-owned subsidiary of WFSG, Wilshire
Credit Corporation ("WCC"), a 50.01% subsidiary of WFSG, and Wilshire Management
Leasing Corporation ("WML"), a wholly-owned subsidiary of WFSG alleging: (1)
WFSG's termination of Messrs. Wiederhorn and Mendelsohn made WFSG and WRSC
unable and/or unwilling to provide management to the Company as required under
the management agreement between the Company and WRSC (the "Management
Agreement"); (2) the inability of WFSG and WRSC to manage the Company's business
affairs triggered application of a facilities sharing agreement dated February
19, 1999 among the Company, WFSG, WRSC, WCC, and WML (the "Facilities Sharing
Agreement"); and (3) WFSG's refusal to allow Messrs. Wiederhorn and Mendelsohn
access to WFSG's facilities, personnel, and equipment for the Company's business
violated the terms of the Facilities Sharing Agreement.
On September 22, 1999, WFSG and WRSC filed papers in the above litigation
alleging various affirmative defenses and counterclaims, including allegations
that the Facilities Sharing Agreement was not in effect and was unenforceable,
and that the Company breached the Management Agreement, obligating the Company
to pay a termination fee.
The Company, on behalf of itself and all of its subsidiaries and
affiliates, Andrew A. Wiederhorn, and Lawrence A. Mendelsohn entered into a
partial settlement agreement dated as of December 10, 1999 with WFSG, on behalf
of all of its subsidiaries and affiliates other than First Bank of Beverly
Hills, F.S.B., (the "Partial Settlement Agreement"). Under the terms of the
Partial Settlement Agreement, the Company repurchased 992,687 shares of its
common stock (the "Shares"), representing approximately 8.7% of shares
outstanding, in a non-cash transaction from WFSG. The Shares, as well as
1,112,500 of options and cumulative dividends payable on the Shares, were
received in exchange for a reduction in the amount of a pay-in-kind ("PIK") note
owed by WFSG to the Company. The Shares and options represented WFSG's entire
ownership interest in the Company.
On February 18, 2000, after the Company received permission from the court
to do so, the Company filed a second amended complaint which added claims
against WFSG and its affiliated companies as follows: claims for declaratory
relief that WFSG is entitled to no termination fee under the Management
Agreement; seeking an accounting from WCC regarding the use of funds from
lockbox accounts used to service assets which the Company owns or in which the
Company has a beneficial interest; declaring the Company's entitlement to use
prepaid service fees for the servicing of assets serviced under pooling and
servicing agreements; and declaring WFSG to be in default of its
Debtor-in-Possession ("DIP") loan agreement with the
<PAGE>
Company and declaring that the balance of $5.0 million is immediately due and
payable.
On March 2, 2000, WFSG filed an answer disputing each of the counterclaims
added by the second amended complaint and realleging the counterclaims included
in WFSG's original answer and counterclaim.
As part of the Settlement, the Company and WFSG agreed to dismiss with
prejudice, and without costs or attorney fees to any party, their claims,
including counterclaims, in the Lawsuit and WFSG agreed that the termination of
Messrs. Wiederhorn and Mendelsohn was without cause.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
The following exhibits are filed as part of this report:
99.1 Press Release, dated as of August 28, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Wilshire Real Estate Investment Inc. has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Date: August 31, 2000
WILSHIRE REAL ESTATE
INVESTMENT INC.
By: /s/ Lawrence A. Mendelsohn
--------------------------
Lawrence A. Mendelsohn
President
By: /s/ Chris Tassos
----------------
Chris Tassos
Executive Vice President and Chief
Financial Officer
<PAGE>
Exhibit 99.1
Press Release
Portland, Oregon--August 28, 2000--Wilshire Financial Services Group Inc. and
its founders and former officers Andrew Wiederhorn and Larry Mendelsohn today
announced settlement of all disputes between them, including those related to
the company's termination of the former executives last year. As part of the
settlement, Wilshire Financial agreed that the termination of Wiederhorn and
Mendelsohn was without cause.
On September 3, 1999, Wilshire Financial terminated Wiederhorn and Mendelsohn,
who then sued Wilshire and its outside directors. This settlement resolves all
disputes between the parties.
Wilshire Real Estate Investment Inc. and Wilshire Financial also announced
settlement of all disputes and pending litigation between them relating to the
termination of various agreements and other business relationships between the
companies.
Contact:
Stoll Stoll Berne Lokting & Shlachter
Robert A. Schlacter, Esq., 503/227-1600
for Messrs. Wiederhorn and Mendelsohn
or
Irell & Manella
Ken Heitz, Esq., 310/203-7980
for Wilshire Financial Services Group Inc.
or
Ater Wynne
Dan Skerritt, Esq., 503/226-8421
for Wilshire Real Estate Investment Inc.
<PAGE>
