Document:

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                                                                   Exhibit 10.11

                                                                [EXECUTION COPY]

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, dated as of September 4, 1999 (the "Original
Agreement Date"), and amended and restated as of October 1, 2000, and
subsequently amended and restated as of December 31, 2001, by and between Fog
Cutter Capital Group Inc. f/k/a Wilshire Real Estate Investment Inc. and Fog Cap
L.P. f/k/a Wilshire Real Estate Partnership L.P. (collectively and individually,
the "Company"), with its principal office at 1410 S.W. Jefferson Street,
Portland, Oregon 97201 and Lawrence A. Mendelsohn, residing at 02393 SW Military
Road, Portland, Oregon 97219 (the "Executive").

                              W I T N E S S E T H:
                              - - - - - - - - - -

               WHEREAS, Executive is currently employed as the President of the
Company and is also a director of the Company; and

               WHEREAS, the Company and Executive desire to enter into this
agreement (the "Agreement") to set forth terms of Executive's employment by the
Company, as such terms are amended as of December 31, 2001.

               NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:

               1.   TERM OF EMPLOYMENT. Executive's employment under this
Agreement (prior to its amendment and restatement) commenced on September 4,
1999. Except for earlier termination as provided in Section 7 hereof,
Executive's employment under this Agreement (as amended and restated) shall be
for a three (3) year term (the "Employment Term") commencing on October 1, 2000
(the "Commencement Date"). Subject to Section 7 hereof, the Employment Term
shall be automatically extended for additional terms of successive two (2) year
periods unless the Company or Executive gives written notice of the termination
of Executive's employment hereunder at least ninety (90) days prior to the
expiration of the then current Employment Term.

               2.   POSITIONS. (a) Executive shall serve as President of the
Company. Executive shall also serve on the Board of Directors of the Company
(the "Board") without additional compensation. During the term of this
Agreement, the Company shall recommend the Executive for election as a director.

               (b)  Executive shall report directly to the Chief Executive
Officer of the Company and shall have such duties and authority, consistent with
his position as President of the Company, as shall be determined from time to
time by the Chief Executive Officer, provided

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that Executive shall have authority comparable to that of presidents of United
States public companies that are similar in size and business to the Company.

               (c)  During the Employment Term, Executive shall devote
substantially all of his business time, energy, skill and efforts to the
performance of his duties and responsibilities hereunder; provided, however,
that Executive shall be allowed to (i) serve as a director, employee or
consultant of companies solely owned by Executive or Executive's family; (ii)
serve as a director of other companies; (iii) engage in charitable activities;
and (iv) manage his personal financial and legal affairs.

               3.   BASE SALARY. During the Employment Term on and prior to
December 31, 2001, the Company shall pay Executive a base salary at the annual
rate of not less than $500,000 and during the Employment Term after December 31,
2001, the Company shall pay Executive a base salary at the annual rate of not
less than $250,000. Base salary shall be payable in accordance with the usual
payroll practices of the Company (including withholding). Executive's base
salary shall be subject to annual review by the Board in October of each year
and may be increased, but not decreased, from time to time upon recommendation
of the Compensation Committee of the Board (the "Committee"). The base salary
determined as aforesaid from time to time shall constitute "Base Salary" for
purposes of this Agreement.

               4.   INCENTIVE COMPENSATION. (a) BONUS. As consideration for
Executive agreeing to amend and restate this Agreement and for past services,
the Company agrees to pay a bonus to Executive of $500,000 (the "Bonus") on
February 22, 2002. The Company will apply the Bonus to repay any outstanding
Excess Advance (as defined below) prior to making any payment to Executive. For
purposes of this Agreement, "Excess Advance" shall mean (i) any advance on the
Bonus paid by the Company to the Executive during the 12-month period commencing
on October 1, 2000 and ending on September 30, 2001, which the parties agree was
$491,000 and which will be netted against the Bonus and (ii) any other amounts
owing by the Executive to the Company which the parties hereto agree is
$9,000.00. Further, Executive acknowledges that the Bonus is in consideration of
Executive's agreement to provide the Waiver and General Release of Claims in the
form attached hereto as Exhibit 1 on the date hereof.

               (b)  OPTIONS. As of the Original Agreement Date, the Company
granted to Executive stock options (the "Initial Options") on 350,000 shares of
the Company's common stock (the "Common Stock") under the Company's Incentive
Stock Plan (the "Incentive Stock Plan"). The Initial Options have an exercise
price equal to the Company's book value per outstanding share as of September
30, 1999, which exercise price is in excess of the market value per share based
on the share price of the Common Stock as of such date. The Initial Options will
be fully exercisable at the time of vesting and 25% of the Initial Options shall
vest on each anniversary of the Original Agreement Date (which will result in
the Initial Options being fully vested on the fourth anniversary of the Original
Agreement Date). In addition, the Executive shall be entitled to participate in
the Company's Incentive Stock Plan and receive nonqualified, incentive or other
options ("Options") to purchase shares of the Company's Common Stock under the
Incentive Stock Plan as determined by the Committee from time to time provided
that the

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Incentive Stock Plan is approved by the shareholders of the Company to the
extent required by Section 162(m) of the Code. Notwithstanding the foregoing,
the Company may recommend to the Committee that Executive be granted Options
under a plan other than the Incentive Stock Plan provided that such other plan
contains terms and conditions which are substantially similar to the terms and
conditions of the Incentive Stock Plan, and further provided, that such other
plan is approved by the shareholders of the Company to the extent required by
Section 162(m) of the Code. To the extent permitted under applicable law, any
Options granted to Executive hereunder (including the Initial Options) may be
assigned and transferred by Executive to entities created for or on behalf of
Executive's immediate family for tax planning or other purposes.

               (c)  OTHER COMPENSATION. The Company may, upon recommendation of
the Committee, award to Executive such other bonuses and compensation as it
deems appropriate and reasonable.

               5.   EMPLOYEE BENEFITS AND VACATION. (a) During the Employment
Term, Executive shall be entitled to participate in all pension, retirement,
savings, health, insurance, welfare and other employee benefit plans and
arrangements, including, without limitation, any nonqualified deferred
compensation plans, maintained by the Company from time to time for the benefit
of the senior executives of the Company in accordance with their respective
terms as in effect from time to time. To the extent permitted under applicable
law, the Company shall not treat as compensation to Executive fringes and
perquisites provided to Executive or the items under Section 6 below.

               (b)  As of the Original Agreement Date, the Company agreed to
loan to Executive $50,000 during each year of the Employment Term to purchase
shares of Common Stock of the Company up to a maximum of $250,000. As of
December 31, 2001, the Company has no further obligation to make any further
stock purchase loans and any outstanding stock purchase loans shall be repaid in
accordance with their terms.

               (c) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than five (5) weeks paid vacation per calendar
year. Executive shall also be entitled to such periods of sick leave as is
customarily provided by the Company for its senior executive employees.

               6.   BUSINESS EXPENSES. The Company shall also promptly reimburse
Executive for the travel, entertainment and other business
expenses incurred by Executive in the performance of his duties hereunder, in
accordance with the Company's policies as in effect from time to time.

               7.   TERMINATION. (a) The employment of Executive under this
Agreement shall terminate upon the occurrence of any of the
following events:

                       (i) the death of Executive;

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                       (ii) the termination of Executive's employment by the
               Company due to Executive's Disability pursuant to Section 7(b)
               hereof;

                      (iii) the termination of Executive's employment by
               Executive for Good Reason pursuant to Section 7(c) hereof or
               non-renewal or expiration of the Employment Term;

                      (iv) the termination of Executive's employment by the
               Company without Cause;

                      (v) the termination of employment by Executive without
               Good Reason upon sixty (60) days prior written notice;

                     (vi) the termination of employment by Executive for any
               reason during the period commencing on the date of a Change in
               Control (as such term is hereinafter defined) and ending on the
               day immediately prior to the second anniversary of the Change in
               Control (such period being referred to herein as the "Change in
               Control Protection Period");

                43e    (vii) the termination of Executive's employment by the
               Company for Cause pursuant to Section 7(e); or

                       (viii) the retirement of Executive by the Company at or
               after his sixty-fifth birthday to the extent such termination is
               specifically permitted as a stated exception from applicable
               federal and state age discrimination laws based on position and
               retirement benefits.

For purposes of this Agreement, the term "Change in Control" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), other than Andrew A. Wiederhorn
(or his affiliates), the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of common stock of the Company), becoming
the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 25 percent or more of the
combined voting power of the Company's then-outstanding securities, (ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in any of clauses (i), (iii) or (iv) of this
sentence or a director whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in Rule
14a-11 promulgated under the Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than a member of the
Board) whose election by the Board or nomination for election by the Company's
shareholders was

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approved by Andrew A. Wiederhorn or a vote of at least 2/3rds of the directors
then still in office who were either directors at the beginning of such two year
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board, (iii) the
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50 percent of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation (provided that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person (other than those covered in the
exceptions in clause (i) of this sentence) acquires more than 25 percent of the
combined voting power of the Company's then-outstanding securities shall not
constitute a Change in Control) or (iv) approval by the shareholders of the
Company of a plan of complete liquidation of the Company or the closing of the
sale or disposition by the Company of all or substantially all of the Company's
assets other than the sale of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or indirectly, at
least 50 percent or more of the combined voting power of the outstanding voting
securities of the Company at the time of such sale.

               (b)  DISABILITY. If, by reason of the same or related physical or
mental reasons, Executive is unable to carry out Executive's material duties
pursuant to this Agreement for more than six (6) months in any twelve (12)
consecutive month period (a "Disability") as determined and certified in writing
by two (2) licensed physicians, one of which is Executive's regular attending
physician, the Company may terminate Executive's employment for Disability upon
thirty (30) days prior written notice, by a notice of Disability termination, at
any time thereafter during such twelve (12) month period in which Executive is
unable to carry out his duties as a result of the same or related physical or
mental illness. Such termination shall not be effective if Executive returns to
the full time performance of his material duties within such thirty (30) day
notice period.

               (c)  TERMINATION FOR GOOD REASON. A Termination for Good Reason
means a termination by Executive by written notice given within sixty (60) days
after the occurrence of the Good Reason event. For purposes of this Agreement,
"Good Reason" shall mean the occurrence or failure to cause the occurrence, as
the case may be, without Executive's express written consent, of any of the
following circumstances, unless such circumstances are fully corrected prior to
the date of termination specified in the Notice of Termination for Good Reason
(as defined in Section 7(d) hereof): (i) any material diminution of Executive's
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of Executive's employment for Cause or
Disability or as a result of Executive's death, or temporarily as a result of
Executive's illness or other absence), or the assignment to Executive of duties
or responsibilities that are inconsistent with Executive's position as
President; (ii) removal of Executive from, or the non reelection of Executive
to, the positions with the Company specified herein; (iii) a relocation of the
Company's principal United States executive offices to a location more than
fifty (50) miles from Portland, Oregon, or a relocation of Executive away from
such

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principal United States executive office; (iv) a failure by the Company (A) to
continue any bonus plan, program or arrangement in which Executive is entitled
to participate (the "Bonus Plans") as of December 31, 2001, provided that any
such Bonus Plans may be modified at the Company's discretion from time to time
but shall be deemed terminated if (x) any such plan does not remain
substantially in the form in effect prior to such modification and (y) if plans
providing Executive with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue Executive as a participant in
the Bonus Plans and Substitute Plans on at least the same basis (as of December
31, 2001) as to potential amount of the bonus and substantially the same level
of criteria for achievability thereof as Executive participated in immediately
prior to any change in such plans or awards, in accordance with the Bonus Plans
and the Substitute Plans; (v) any material breach by the Company of any material
provision of this Agreement; (vi) executive's removal from or failure to be
reelected to the Board; (vii) a failure of any successor to the Company to
assume in a writing delivered to Executive upon the assignee becoming such the
obligations of the Company hereunder; or (viii) a failure of the Committee to
grant Executive an award of Options in accordance with Section 4 hereof, unless
the applicable circumstances under (i) through (viii) are fully corrected prior
to the date of termination specified in the notice of termination for Good
Reason.

               (d)  NOTICE OF TERMINATION FOR GOOD REASON. A notice of
termination for Good Reason shall mean a notice that shall indicate the specific
termination provision in Section 7(c) relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination for Good Reason. The failure by Executive to set forth in the notice
of termination for Good Reason any facts or circumstances which contribute to
the showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder. The notice of termination for Good Reason shall provide for a
date of termination not less than fifteen (15) nor more than sixty (60) days
after the date such notice of termination for Good Reason is given.

               (e)  CAUSE. Subject to the notification provisions of
Section 7(f) below, Executive's employment hereunder may be terminated by the
Company for Cause. For purposes of this Agreement, the term "Cause" shall be
limited to (i) willful misconduct by Executive with regard to the Company or its
business which has a material adverse effect on the Company; (ii) the refusal of
Executive to follow the proper written direction of the Chief Executive Officer
of the Company (delivered by the Chief Executive Officer with the consent of the
Board), provided that the foregoing refusal shall not be "Cause" if Executive in
good faith believes that such direction is illegal, unethical, immoral or
detrimental to interests of the Company or could otherwise result in a breach by
Executive of Executive's fiduciary duty and promptly so notifies the Chief
Executive Officer; (iii) Executive being convicted of a felony (other than a
felony involving a traffic offense); (iv) the breach by Executive of any
fiduciary duty owed by Executive to the Company which has a material adverse
effect on the Company; (v) Executive's material fraud with regard to the
Company; or (vi) material breach of Section 11 hereof.

               (f)  NOTICE OF TERMINATION FOR CAUSE. A notice of termination for
Cause shall mean a notice that shall indicate the specific termination provision
in Section 7(e) relied upon

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and shall set forth in reasonable detail the facts and circumstances which
provide a basis for termination for Cause. Further, a notice of termination for
Cause shall be required to include a copy of a resolution duly adopted by at
least a majority of the Board at a meeting of the Board which was called for the
purpose of considering such termination and at which Executive had the right to
attend and address the Board, finding that, in the good-faith opinion of the
Board, Executive engaged in conduct set forth in the definition of "Cause"
herein and specifying the particulars thereof in reasonable detail. The date of
termination for a termination for Cause shall be the date indicated in the
notice of termination but shall be no less than 15 days after the date such
notice is given. Any purported termination for Cause which is held by a court or
arbitrator not to have been based on the grounds set forth in this Agreement or
not to have followed the procedures set forth in this Agreement shall be deemed
a termination by the Company without Cause.

               8.   CONSEQUENCES OF TERMINATION OF EMPLOYMENT. (a) DEATH. If
Executive's employment is terminated during the Employment Term by reason of
Executive's death, the employment period under this Agreement shall terminate
without further obligations to Executive's legal representatives under this
Agreement except for: (i) any compensation earned but not yet paid, including
without limitation, any unpaid Bonus due, any amount of Base Salary or deferred
compensation accrued or earned but unpaid, any accrued vacation payable pursuant
to the Company's policies and any unreimbursed business expenses payable
pursuant to Section 6 which amounts shall be promptly paid in a lump sum to
Executive's estate; (ii) full accelerated vesting under all outstanding
equity-based and long-term incentive plans (with options remaining outstanding
as provided under the applicable stock option plan and a pro rata payment under
any long term incentive plans based on actual coverage under such plans at the
time payments normally would be made under such plans); (iii) subject to Section
10 hereof, any other amounts or benefits owing to Executive under the then
applicable employee benefit plans or policies of the Company, which shall be
paid in accordance with such plans or policies; (iv) payment on a monthly basis
of six months of Executive's Base Salary on the date of death, which shall be
paid to Executive's spouse or, if she shall predecease him, then to Executive's
children (or their guardian if one is appointed) in equal shares; (v) any
outstanding stock purchase loan shall become due and payable six months after
the date of termination; and (vi) payment of COBRA coverage premiums for
Executive's spouse and dependents to the extent, and so long as, they remain
eligible for COBRA coverage, but in no event more than one year. Section 12
hereof shall also continue to apply.

               (b)  DISABILITY. If Executive's employment is terminated by
reason of Executive's Disability, Executive shall be entitled to receive (i) the
payments and benefits to which his representatives would be entitled in the
event of a termination of employment by reason of his death and (ii) all
disability benefits provided for under the Company's employee benefits plans.
Section 12 hereof shall also continue to apply.

               (c)  TERMINATION BY EXECUTIVE FOR GOOD REASON OR FOR ANY REASON
DURING THE CHANGE IN CONTROL PROTECTION PERIOD OR TERMINATION BY THE COMPANY
WITHOUT CAUSE OR NONEXTENSION. If (i) Executive terminates his employment
hereunder for Good Reason during

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the Employment Term, (ii) a Change in Control occurs and during the Change in
Control Protection Period Executive terminates his employment for any reason,
(iii) Executive's employment with the Company is terminated by the Company
without Cause or (iv) Executive's employment with the Company terminates as a
result of the Company giving notice of nonextension of the Employment Term
pursuant to Section 1 hereof, Executive shall be entitled to receive (1) in a
lump sum within ten (10) business days after such termination, (A) any
unreimbursed business expenses payable pursuant to Section 6, (B) any Base
Salary, bonus, vacation pay or other deferred compensation accrued or earned
under law or in accordance with the Company's policies but not yet paid at the
date of termination and (C)in consideration of Executive's agreement to provide
the Waiver and General Release of Claims in the form attached hereto as Exhibit
1 on the date of termination (subject to any claims or waivers arising between
the date hereof and the date of termination), an amount equal to 3 months Base
Salary in effect on the date of termination; (2) accelerated full vesting under
all outstanding equity-based and long-term incentive plans with Options
remaining outstanding as provided under the applicable stock option plan and a
pro rata payment under any long term incentive plans based on actual coverage
under such plans, payment being made at the time payments would normally be made
under such plans; (3) subject to Section 10 hereof, any other amounts or
benefits due Executive under the then applicable employee benefit plans of the
Company as shall be determined and paid in accordance with such plans, policies
and practices; (4) one (1) year of additional service and compensation credit
(at his then compensation level) for pension purposes under any defined benefit
type qualified or nonqualified pension plan or arrangement of the Company,
measured from the date of termination of employment and not credited to the
extent that Executive is otherwise entitled to such credit during such one (1)
year period, which payments shall be made through and in accordance with the
terms of the nonqualified defined benefit pension arrangement if any then
exists, or, if not, in an actuarially equivalent lump sum (using the actuarial
factors then applying in the Company's defined benefit plan covering Executive);
(5) one (1) year of the maximum Company contribution (assuming Executive
deferred the maximum amount and continued to earn his then current salary)
measured from the date of termination under any type of qualified or
nonqualified 401(k) plan (payable at the end of each such year); (6) any
outstanding stock purchase loan shall become due and payable six months
following the date of termination; and (7) payment by the Company of the
premiums for Executive's (except in the case of death) and his spouse's and
dependents' health coverage for one year under the Company's health plans which
cover the senior executives of the Company or materially similar benefits.
Payments under clause (7) of this Section 8(c) may, at the discretion of the
Company, be made by continuing participation of Executive in the plan as
terminee, by paying the applicable COBRA premium for Executive and his spouse
and dependents, or by covering Executive and his spouse and dependents under
substitute arrangements; provided, however, that, to the extent Executive incurs
tax that he would not have incurred as an active employee as a result of such
coverage or the benefits provided thereunder, Executive shall promptly receive
from the Company an additional payment in the amount necessary so that Executive
will have no additional cost for receiving such items, coverage or benefits. In
the circumstances described in each of (i) through (iv) above, Section 12 hereof
shall also continue to apply.

               (d)  TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION WITHOUT GOOD
REASON OR

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               RETIREMENT. If Executive's employment hereunder is terminated:
               (i) by the Company for Cause, (ii) by Executive without Good
               Reason, or (iii) by the Company pursuant to Section 7(a)(vii)
               hereof, Executive shall be entitled to receive only his Base
               Salary through the date of termination and any unreimbursed
               business expenses payable pursuant to Section 6. In addition, any
               outstanding stock purchase loan shall become due and payable six
               months following the date of termination. All other benefits
               (including, without limitation, Options) due Executive following
               such termination of employment shall be determined in accordance
               with the plans, policies and practices of the Company. In the
               circumstances described in this Section 8(d), Section 12 hereof
               shall continue to apply.

               (e)  ACCESS TO BOOKS AND RECORDS. Following termination of
employment of the Executive, the Company shall permit such Executive reasonable
access to retrieve personally (or by his designated representatives) any and all
personal files, personal copies of Company files, and property that are stored
at the Company. Additionally, subject to reimbursement of any out-of-pocket
costs and expenses, the Company shall permit such Executive and his designated
representatives and agents reasonable access to all of the Company's files,
books and records, independent accountants and attorneys, as requested by him,
subject to any confidentiality agreements in effect between the Executive and
the Company.

               9.   LITIGATION COOPERATION; CONSULTATION. (a) Executive agrees
that for the Employment Term and thereafter, he will reasonably cooperate with
the Company and exercise good faith efforts in the defense of any claim or
investigation, civil or governmental, brought against Company or any of its
current, former or future directors or officers of which Executive has any
personal knowledge, and Company agrees it will reimburse Executive's reasonable
out-of-pocket expenses (including attorney's fees and disbursements and costs)
in providing such assistance. In addition, Executive agrees to reasonably
provide specific operations information to the Company as reasonably requested
in a reasonable and timely manner to assist the Company in continuing and
completing job tasks, activities, assignments, and in continuing effective
relationships with business partners by responding to reasonable inquiries as
needed by telephone at no additional cost to the Company beyond what is provided
by this Agreement, including reimbursement of Executive's reasonable
out-of-pocket expenses in providing such information and other assistance.

               (b)  The Company agrees that, in addition to and without limiting
the Company's obligations hereunder and otherwise, for the Employment Term and
thereafter, the Company will reasonably cooperate with Executive and exercise
good faith efforts in the defense of any claim or investigation, civil or
governmental, brought against Executive of which the Company or its employees,
officers or directors have any knowledge.

               10.  NO MITIGATION; NO SET-OFF. In the event of any termination
of employment under Section 8, Executive shall be under no obligation to seek
other employment and, except as explicitly set forth herein, there shall be no
offset against any amounts due

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Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that Executive may obtain. Any amounts due under
Section 8 are in the nature of severance payments, or liquidated damages, or
both, and are not in the nature of a penalty. Such amounts are in lieu of any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset from the amount due hereunder.

               11.  DETRIMENTAL ACTIVITY. (a) Executive agrees that he will not
engage in Detrimental Activity (other than as required or compelled by statute
or other law or by court order or subpoena or in connection with court testimony
or deposition) during the Employment Term and following the date of Executive's
termination. For purposes of this Agreement, "Detrimental Activity" shall mean:
(i) the disclosure to anyone outside the Company, or the use in any manner other
than in the furtherance of the Company's business, without written authorization
from the Company, of any confidential information or proprietary information of
the Company (Executive acknowledges and agrees that (i) this is in addition to
his obligations under the confidentiality agreement between Executive and the
Company dated December 15, 1999 and (ii) such agreement remains in full force
and effect); (ii) any attempt, directly or indirectly by Executive of
Solicitation (as defined below) within 6 months of the end of the Employment
Term; (iii) any conduct by Executive which is Self-Dealing and which would
conflict with the Company's interests; (iv) Executive's Disparagement (as
defined herein), or inducement of others to do so, of the Company or its past
and present officers, directors, employees or products; or (v) without written
authorization from the Company, during the period ending 3 months after the end
of the Employment Term, the rendering of services for any organization, or
engaging, directly or indirectly, in any business, which is competitive with the
Company; provided, however, that (i) in the event that Executive decides to
forego the payment of 3 months Base Salary contemplated by Section 8(c) and not
to provide on the date of termination the Mutual Waiver and General Release of
Claims, then the 3 month non-compete contemplated by clause (v) of the
definition of "Detrimental Activity" shall not apply and (ii) owning a less than
5% interest in a publicly traded company shall not be viewed as breaching clause
(v) of the definition of "Detrimental Activity". For purposes of this Agreement,
"Disparagement" means making comments or statements to the press, the Company's
employees, consultants or any individual or entity with whom the Company has a
business relationship or otherwise taking any similar action which could
reasonably be expected to adversely affect in any manner: the conduct of the
business of the Company (including, without limitation, any products or business
plans or prospects); or the business reputation of the Company, or any of its
products, or its past or present officers, directors or employees. For purposes
of this Agreement, "Solicitation" shall mean recruiting, soliciting or inducing
of any nonclerical employee or employees of the Company to terminate his or her
employment with, or otherwise cease his or her relationship with, the Company or
hiring or assisting another person or entity to hire (including, but not limited
to identifying a nonclerical employee to another employer for employment) any
nonclerical employee of the Company or any person who within six (6) months
before had been a nonclerical employee of the Company; or, soliciting or
inducing any customer of the Company to cease his or her relationship with the
Company. For purposes of this

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Agreement, "Self Dealing" means, whether during or after the Employment Term,
the use of assets, liabilities or resources of the Company (including assets or
liabilities contemplated to be acquired or incurred by the Company at the time
of termination) or confidential or proprietary information of the Company by
Executive for Executive's personal benefit, including any such use in the direct
or indirect purchase or sale of, or loan or investment of any type in, any
assets of the Company by Executive or for Executive's benefit or between
Executive and a third party which is unrelated to the Company, without the
company's prior written authorization.

               (b)  The Company agrees that it shall not, and that it shall
cause its employees, officers and directors to not, make comments or statements,
or induce others to make comments or statements, to the press or any individual
or entity which could reasonably be expected to adversely affect in any manner
the business or personal reputation of Executive. The Company agrees that it
shall not issue any press release in connection with the termination of
Executive's employment with the Company without Executive's prior written
approval of such press release (other than as required by law or regulation).

               12.  INDEMNIFICATION. (a) The Company agrees that if Executive is
made a party to or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer, member, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust, other enterprise or non-profit organization,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a director, officer, member, employee, fiduciary or agent while
serving as a director, officer, member, employee, fiduciary or agent, he shall
be indemnified and held harmless by the Company to the fullest extent authorized
by Maryland or Delaware law, as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by Executive in connection therewith,
and such indemnification shall continue as to Executive even if Executive has
ceased to be an officer, director, member, fiduciary or agent, or is no longer
employed by the company, and shall inure to the benefit of his heirs, executors
and administrators.

               (b)  As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.

               (c)  Expenses incurred by Executive in connection with any
Proceeding shall be paid by the Company in advance upon request of Executive and
the giving by Executive of any undertakings required by applicable law.

               (d)  Executive shall give the Company notice of any claim made
against him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall

<Page>

give the Company such information and cooperation as it may reasonably require
and as shall be within Executive's power and at such times and places as are
reasonably convenient for Executive.

               (e)  With respect to any Proceeding as to which Executive
notifies the Company of the commencement thereof:

                       (i)  The Company will be entitled to participate therein
               at its own expense; and

                      (ii)  Except as otherwise provided below, to the extent
               that it may wish, the Company jointly with any other indemnifying
               party similarly notified will be entitled to assume the defense
               thereof, with counsel reasonably satisfactory to Executive.
               Executive also shall have the right to employ his own counsel in
               such action, suit or proceeding and the fees and expenses of such
               counsel shall be at the expense of the Company.

               (f)  The Company shall not be liable to indemnify Executive under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner which would impose any penalty or limitation on Executive,
or which would adversely affect Executive's reputation or standing in the
business community, without Executive's written consent. Neither the Company nor
Executive will unreasonably withhold or delay their consent to any proposed
settlement.

               (g)  The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 12 shall not be exclusive of any other right which Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.

               (h)  The Company hereunder agrees to obtain officer and director
liability insurance policies covering Executive and shall maintain at all times
following the Commencement Date and during the Employment Term coverage under
such policies in the aggregate with regard to all officers and directors,
including Executive, of an amount not less than $10 million.

               13.  SPECIAL TAX PROVISION. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to Executive by the Company (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a change of ownership or effective control
covered by Code Section 280G(b)(2) or any person affiliated with the Company or
such person) as a result of a change in ownership or effective control of the
Company or a direct or indirect parent thereof (or the assets of any of the
foregoing) covered by Code Section 280G(b)(2)

<Page>

(collectively, the "Covered Payments") is or becomes subject to the excise tax
imposed by or under Section 4999 of the Code (or any similar federal or state
tax that may hereafter be imposed), and/or any interest, penalties or additions
to tax, with respect to such excise tax (such excise tax, together with such
interest penalties and additions to tax, is hereinafter collectively referred to
as the "Excise Tax"), the Company shall pay to Executive an additional amount
(the "Tax Reimbursement Payment") such that after payment by Executive of all
taxes (including, without limitation, any interest or penalties and any Excise
Tax imposed on or attributable to the Tax Reimbursement Payment itself),
Executive retains an amount of the Tax Reimbursement Payment equal to the sum of
(i) the amount of the Excise Tax imposed upon the Covered Payments, and (ii)
without duplication, an amount equal to the product of (A) any deductions
disallowed for federal, state or local income tax purposes because of the
inclusion of the Tax Reimbursement Payment in Executive's adjusted gross income,
and (B) the highest applicable marginal rate of federal, state or local income
taxation, respectively, for the calendar year in which the Tax Reimbursement
Payment is made or is to be made. The intent of this Section 13 is that (a)
Executive, after paying his federal, state and local income tax and payroll
taxes, will be in the same position as if he was not subject to the Excise Tax
under Section 4999 of the Code (or any similar federal or state tax that may be
imposed) and did not receive the extra payments pursuant to this Section 13 and
this Section 13 shall be interpreted accordingly.

               (b)  Except as otherwise provided in Section 13(a), for purposes
of determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to Executive) appointed by such public accountants (or,
if the public accountants decline such appointment and decline appointing such
legal counsel, such independent certified public accountants as promptly
mutually agreed on in good faith by the Company and Executive) (the
"Accountant"), deliver a written opinion to Executive, reasonably satisfactory
to Executive's legal counsel, that Executive has a reasonable basis to claim
that the Covered Payments (in whole or in part) (A) do not constitute "parachute
payments", (B) represent reasonable compensation for services actually rendered
(within the meaning of Section 280G(b)(4) of the Code) in excess of the "base
amount" allocable to such reasonable compensation, or (C) such "parachute
payments" are otherwise not subject to such Excise Tax (with appropriate legal
authority, detailed analysis and explanation provided therein by the
Accountants); and (ii) the value of any Covered Payments which are non-cash
benefits or deferred payments or benefits shall be determined by the Accountant
in accordance with the principles of Section 280G of the Code.

               (c)  For purposes of determining the amount of the Tax
Reimbursement Payment, Executive shall be deemed: (i) to pay federal, state
and/or local income taxes at the highest applicable marginal rate of income
taxation for the calendar year in which the Tax Reimbursement Payment is made or
is to be made, and (ii) to have otherwise allowable

<Page>

deductions for federal, state and local income tax purposes at least equal to
those disallowed due to the inclusion of the Tax Reimbursement Payment in
Executive's adjusted gross income.

               (d)  (i) (A) In the event that prior to the time Executive has
filed any of his tax returns for the calendar year in which the change in
ownership event covered by Code Section 280G(b)(2) occurred, the Accountant
determines, for any reason whatever, the correct amount of the Tax Reimbursement
Payment to be less than the amount determined at the time the Tax Reimbursement
Payment was made, Executive shall repay to the Company, at the time that the
amount of such reduction in Tax Reimbursement Payment is determined by the
Accountant, the portion of the prior Tax Reimbursement Payment attributable to
such reduction (including the portion of the Tax Reimbursement Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the portion of the Tax Reimbursement Payment being repaid by Executive, using
the assumptions and methodology utilized to calculate the Tax Reimbursement
Payment (unless manifestly erroneous)), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.

                    (B)  In the event that the determination set forth in (A)
above is made by the Accountant after the filing by Executive of any of his tax
returns for the calendar year in which the change in ownership event covered by
Code Section 280G(b)(2) occurred but prior to one (1) year after the occurrence
of such change in ownership, Executive shall file at the request of the Company
an amended tax return in accordance with the Accountant's determination, but no
portion of the Tax Reimbursement Payment shall be required to be refunded to the
Company until actual refund or credit of such portion has been made to
Executive, and interest payable to the Company shall not exceed the interest
received or credited to Executive by such tax authority for the period it held
such portion (less any tax Executive must pay on such interest and which he is
unable to deduct as a result of payment of the refund).

                    (C)  In the event Executive receives a refund pursuant to
(B) above and repays such amount to the Company, Executive shall thereafter file
for refunds or credits by reason of the repayments to the Company. Executive and
the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if Executive's claim for
such refund or credit is denied.

                    (D)  Executive and the Company shall mutually agree upon the
course of action, if any, to be pursued (which shall be at the expense of the
Company) if Executive's claim for refund or credit is denied.

                         (ii)  In the event that the Excise Tax is later
               determined by the Accountants or the Internal Revenue Service to
               exceed the amount taken into account hereunder at the time the
               Tax Reimbursement Payment is made (including by reason of any
               payment the existence or amount of which cannot be determined at
               the time of the Tax Reimbursement Payment), the Company shall
               make an additional Tax Reimbursement Payment in respect of such
               excess (plus any interest, penalties or additions to tax payable
               with respect to such excess)

<Page>

               once the amount of such excess is finally determined.

                        (iii)  In the event of any controversy with the
               Internal Revenue Service (or other taxing authority) under this
               Section 13, subject to subpart (i)(D) above, Executive shall
               permit the Company to control issues related to this Section 13
               (at its expense), provided that such issues do not potentially
               materially adversely affect Executive, but Executive shall
               control any other issues. In the event the issues are
               interrelated, Executive and the Company shall in good faith
               cooperate so as not to jeopardize resolution of either issue, but
               if the parties cannot agree Executive shall make the final
               determination with regard to the issues. In the event of any
               conference with any taxing authority as to the Excise Tax or
               associated income taxes, Executive shall permit the
               representative of the Company to accompany him and Executive and
               his representative shall cooperate with the Company and its
               representative.

                         (iv)  With regard to any initial filing for a refund
               or any other action required pursuant to this Section 13 (other
               than by mutual agreement) or, if not required, agreed to by the
               Company and Executive, Executive shall cooperate fully with the
               Company, provided that the foregoing shall not apply to actions
               that are provided herein to be at the sole discretion of
               Executive.

               (e)  The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth day following the
determination by the Accountant, and any payment made after such fifth day shall
bear interest at the rate provided in Code Section 1274(b)(2)(B). The Company
shall use its best efforts to cause the Accountant to promptly deliver the
initial determination required hereunder and, if not delivered, within ninety
(90) days after the change in ownership event covered by Section 280G(b)(2) of
the Code, the Company shall pay Executive the Tax Reimbursement Payment set
forth in an opinion from counsel recognized as knowledgeable in the relevant
areas selected by Executive, and reasonably acceptable to the Company, within
five (5) days after delivery of such opinion. In accordance with Section 16(g),
the Company may withhold from the Tax Reimbursement Payment and deposit into
applicable taxing authorities such amounts as are required to be withheld by
applicable law. To the extent that Executive is required to pay estimated or
other taxes on amounts received by Executive beyond any withheld amounts,
Executive shall promptly make such payments. The amount of such payment shall be
subject to later adjustment in accordance with the determination of the
Accountant as provided herein.

               (f)  The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by Executive's counsel.

               (g)  The Company and Executive shall mutually agree on and
promulgate further guidelines in accordance with this Section 13 to the extent,
if any, necessary to effect the reversal of excessive or shortfall Tax
Reimbursement Payments. The foregoing shall not in any way be inconsistent with
Section 13(d)(i)(D) hereof.

<Page>

               14.  LEGAL AND OTHER FEES AND EXPENSES. In the event that a claim
for payment or benefits under this Agreement is disputed, the Company shall pay
all reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by Executive in pursuing such claim, unless the claim by
Executive is found to be frivolous by any court or arbitrator.

               15.  ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Portland in the State of Oregon under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and the statement for reasons for
the decision; and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial Arbitration Rules.
The determination of the arbitrators, which shall be based upon a DE NOVO
interpretation of this Agreement, shall be final and binding and judgment may be
entered on the arbitrators' award in any court having jurisdiction. All costs of
arbitration, including the cost of the American Arbitration Association and the
arbitrator, shall be borne by the Company.

               16.  MISCELLANEOUS.

               (a)  GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon without reference
to principles of conflicts of laws.

               (b)  ENTIRE AGREEMENT/AMENDMENTS. This Agreement and the
instruments contemplated herein, contain the entire understanding of the parties
with respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements, whether written or
otherwise, between the Company and Executive. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein and therein. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.

               (c)  NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.

               (d)  ASSIGNMENT. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable, with the consent of Executive, by
the Company only to an acquiror of all or substantially all of the assets of the
Company, provided such acquiror promptly

<Page>

assumes all of the obligations hereunder of the Company in a writing delivered
to Executive and otherwise complies with the provisions hereof with regard to
such assumption.

               (e)  SUCCESSORS; BINDING AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement shall inure to the benefit of and be binding upon parties hereto
and their personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees legatees and permitted assignees of
the parties hereto. If Executive dies while any amount would still be payable
hereunder if Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of the Agreement to
the personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, legatees and permitted assignees of the parties
hereto.

               (f)  COMMUNICATIONS. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given (i) when faxed or delivered, and
(ii) two business days after being mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the initial page of this Agreement, provided
that all notices to the Company shall be directed to the attention of Andrew A.
Wiederhorn of the Company, or to such other address as any party may have
furnished to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.

               (g)  WITHHOLDING TAXES. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.

               (h)  SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment.

               (i)  COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

               (j)  HEADINGS. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.

               IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                     FOG CUTTER CAPITAL GROUP INC., on its
                                     behalf and on behalf of FOG CAP L.P.

<Page>

                                     By:
                                          -----------------------------
                                          Name:
                                          Title:

                                      Lawrence A. Mendelsohn

<Page>

                                    EXHIBIT 1

                   MUTUAL WAIVER AND GENERAL RELEASE OF CLAIMS

To:      Fog Cutter Capital Group Inc. and
         Fog Cap L.P.
         1410 S.W. Jefferson Street
         Portland, Oregon 97201

               1.   (a) In consideration for the payment and/or other benefits
to be provided me pursuant to my Employment Agreement with the Company dated as
amended and restated as of December 31, 2001 (the "Employment Agreement"), I,
for myself and for my heirs, executors, administrators, and assigns (hereinafter
referred to collectively as "Releasors"), forever release and discharge the
Company and any and all of its subsidiaries, divisions, affiliated entities,
employee benefit and/or pension plans or funds, successors and assigns, and all
of its or their past and present officers, directors, members, shareholders,
trustees, agents and employees (hereinafter referred to as the "Entities and
Persons"), from any and all claims, demands, cause of action, fees and
liabilities of any kind whatsoever, whether known or unknown, which I ever had,
or may have, or now have, against the Entities and Persons by reason of any
actual or alleged act, omission, transaction, practice, conduct, occurrence, or
other matter up to and including the date of this Mutual Waiver and General
Release (other than (i) any and all claims for indemnity as a director and
officer in connection with matters relating to Capital Consultants Inc. and (ii)
ongoing obligations of the Company or Executive under the Employment Agreement).

               (b)  In consideration for the delivery of this Mutual Waiver and
General Release, and for other good and valuable consideration the receipt and
sufficiency of which are acknowledged and agreed, the Company, for itself and
for its successors and assigns, forever releases and discharges me and my heirs,
executors, administrators and assigns from any and all claims, demands, causes
of action, fees and liabilities of any kind whatsoever, whether known or
unknown, which the Company ever had, or may have, or now has, against me or my
heirs, executors, administrators or assigns by reason of any actual or alleged
act, omission, transaction, practice, conduct, occurrence, or other matter up to
and including the date of this Mutual Waiver and General Release and with regard
to my termination of employment.

               2.   Without limiting the generality of the foregoing, this
Mutual Waiver and General Release is intended to and shall release the Entities
and Persons from any and all claims, whether known or unknown, which Releasors
ever had, or now have or may have up to and including the date of this Mutual
Waiver and General Release against the Entities and Persons arising out of my
employment with the Company, including, but not limited to: (i) any claim under
Title VII of the Civil Rights Act, as amended; (ii) any other claim (whether
based on

<Page>

federal, state, or local law, statutory or decisional) relating to or arising
out of my employment by the Company, or the terms and conditions of such
employment; (iii) any claim under the Age Discrimination in Employment Act, as
amended; (iv) any claim under applicable state or local law against
discrimination; (v) any claim for attorneys' fees, costs, disbursements and/or
the like; or (vi) any claim under, with regard to, or in connection with my
Employment Agreement or any agreement or plan with regard to equity, incentive
or deferred compensation (other than ongoing obligations of the Company or
Executive under the Employment Agreement).

               3.   Notwithstanding the foregoing, the foregoing release shall
not cover rights of indemnification to which I was entitled immediately prior to
my termination date under the Company's Certificate of Incorporation or By-laws,
or Section 12 of the Employment Agreement or otherwise with regard to my service
as an officer of the Company.

               4.   (a) I agree that I will not, from any source or proceeding,
seek or accept any award or settlement with respect to any claim or right
covered by Section 1(a) above. In addition to the foregoing, except as otherwise
prohibited by law, I represent and warrant that I will not sue or commence any
proceeding (judicial or administrative), or participate in any action, suit or
proceeding, against any of the Entities and Persons, with respect to any act,
event, occurrence, or any alleged failure to act, released hereunder.

               (b)  The Company hereby agrees that it will not, from any source
or proceeding, seek or accept any award or settlement with respect to any claim
or right covered by Section 1(b) hereof. In addition to the foregoing, except as
otherwise prohibited by law, the Company represents and warrants that it will
not sue or commence any proceeding (judicial or administrative), or participate
in any action, suit or proceeding, against me or any of my heirs, executors,
administrators or assigns with respect to any act, event or occurrence, or any
alleged failure to act, released hereunder. 6. The interpretation of this Mutual
Waiver and General Release will be governed by the law of the State of New York
without reference to principles of conflict of laws. In the event any provision
of this Mutual Waiver and General Release shall be held invalid or unenforceable
by any court of competent jurisdiction, such holding shall not invalidate or
render unenforceable any other provision of this Mutual Waiver and General
Release.

               7.   This Mutual Waiver and General Release is not intended, and
shall not be construed, as an admission that the Entities and Persons or I have
violated any federal, state or local law (statutory or decisional), ordinance or
regulation, breached any contract or committed any wrong whatsoever.

               8.   I acknowledge that I have been advised by the Company to
consult an attorney before signing this Mutual Waiver and General Release and
that I have executed this Mutual Waiver and General Release after having had the
opportunity to consult with an attorney of my choice.

               9.   I further acknowledge that I have read this Mutual Waiver
and General

<Page>

Release in full, have had seven (7) days to consider the terms of this Mutual
Waiver and General Release, that I fully understand the terms, and that I have
knowingly and voluntarily assented to all the terms and conditions contained
herein.

               10.  I further acknowledge that after executing this Mutual
Waiver and General Release I have seven (7) days to revoke it by delivery of a
Notice of Revocation to the Company to the attention of Andrew A. Wiederhorn or
his successor prior to the eighth day after execution and delivery by me of the
Mutual Waiver and General Release. I understand that if so revoked by me, the
Company's obligations under this Mutual Waiver and General Release are null and
void.

               11.  The parties hereto understand that this Mutual Waiver and
General Release, and the Employment Agreement constitute the complete
understanding between such parties and that no other promises or agreements
shall be binding unless in writing and signed by both such parties..

Dated:                                        FOG CUTTER CAPITAL GROUP INC.

Signature:                                    By:
                                                 -----------------------

Witness:                                      FOG CAP L.P.

                                              By:
                                                 -----------------------<Page>

                                                                   Exhibit 10.12

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, dated as of October 9, 1999 (the "Original Agreement
Date"), amended as of May 19, 2000, and amended again as of July 27, 2000 and
amended and restated as of October 1, 2000, and subsequently amended and
restated as of October 1, 2001, by and between Fog Cutter Capital Group Inc.
f/k/a Wilshire Real Estate Investment Inc. and Fog Cap L.P. f/k/a Wilshire Real
Estate Partnership L.P. (collectively and individually, the "Company"), with its
principal office at 1410 S.W. Jefferson Street, Portland, Oregon 97201 and
Robert G. Rosen, residing at 3 Vetere Place, Mt. Kisco, New York 10549 (the
"Executive").

                              W I T N E S S E T H:
                              - - - - - - - - - -

               WHEREAS, Executive is currently employed as an executive of the
Company; and

               WHEREAS, the Company and Executive desire to enter into this
agreement (the "Agreement") to set forth terms of Executive's employment by the
Company, as such terms are amended as of October 1, 2001.

               NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:

               1.   TERM OF EMPLOYMENT. Executive's employment under this
Agreement (prior to its amendment and restatement) commenced on October 9, 1999.
Except for earlier termination as provided in Section 7 hereof, Executive's
employment under this Agreement (as amended and restated) shall be for a twelve
(12) month term commencing on October 1, 2001 (the "Commencement Date") and
ending on September 30, 2002 (the "Employment Term"). Subject to Section 7
hereof, the Employment Term may be extended for an additional six (6) months if
the Company or Executive gives written notice of the extension of Executive's
employment hereunder at least thirty (30) days prior to the expiration of the
Employment Term; provided, however, that the Employment Term may only be
extended if the Disposition Event (as defined in this Agreement) has not been
met.

               2.   POSITION. (a) Executive shall serve as an Executive Vice
President of the Company.

               (b)  Executive shall report directly to the Chief Executive
Officer of the Company and shall have such duties and authority, consistent with
his position as shall be determined from time to time by the Chief Executive
Officer.

               (c)  During the Employment Term, Executive shall devote
substantially all of

<Page>

his business time ("Business Time"), energy, skill and efforts to the
performance of his duties and responsibilities hereunder; provided, however,
that Executive shall be allowed to (i) engage in charitable activities and (ii)
manage his personal financial and legal affairs. Executive shall perform his
duties hereunder in the New York area; provided, however, that Executive shall
spend sufficient time, as required in writing by the Company's Chief Executive
Officer (the "CEO") in the Company's Portland Office. The Company shall provide
Executive with private office space to be used by Executive when working from
the New York area. Such office shall be provided to Executive, as is, with
existing furniture, telephone and data setup and shall remain on a lease not to
extend beyond September 30, 2002, unless otherwise extended by the Company for
up to six (6) additional months, which extension must be approved in writing by
the CEO. Notwithstanding the foregoing, Executive, with the Company's prior
written authorization (which authorization shall be at the sole and absolute
discretion of the Company), may move the New York area office to the New York
City area; provided, that, the total monthly cost for operating such office
(including, but not limited to, rent and utilities, but excluding, Bloomberg and
other similar systems to which Executive has access to in the Portland Office
and which are readily transportable) shall not exceed $4,000.

               3.   BASE SALARY. Effective as October 1, 2001, the Company shall
pay Executive a base salary at the annual rate of not less than $250,000 ("Base
Salary"). Base Salary shall be payable in accordance with the usual payroll
practices of the Company (including withholding).

               4.   INCENTIVE COMPENSATION. (a) BONUS. For the period commencing
on October 1, 2001 and ending September 30, 2002 (the "Bonus Period"), Executive
shall be eligible for a bonus (the "Bonus") based upon the following formula:
(1) if the Company acting upon the approval of its CEO or the majority of the
Board of Directors sells (the "Bear Disposition Event") the Company's interest
in the BSMSI Class B4 mortgage backed security, the Bear Stearns Structured
Products Trust 2000-3 Class B (certificate #1 and #2), and the Bear Stearns
Structured Products Inc. Pass-Through Certificates, Series 2000-5 Class B1, B2
and B3 or, if the structure is unwound, the underlying collateral (collectively,
the "Bear Bonds") for aggregate cash proceeds, net of all out of pocket expenses
including investment banking, legal, accounting, trustee, rating agency,
financial printer, and other related fees (the "Bear Net Proceeds"), received by
the Company (which shall include proceeds used to pay down the financing
associated with the Bear Bonds) of at least $20.65 million (the "Bear Target
Amount") on or before March 31, 2003, the Bonus immediately payable shall be
$350,000 plus 10% of the Bear Net Proceeds greater than the Bear Target Amount
(the "Bear Bonus Amount"), and (2) if the Company acting upon the approval of
its CEO or the majority of the Board of Directors sells (the "Cityscape
Disposition Event" and, together with the Bear Disposition Event, the
"Disposition Event") the Company's Cityscape Mortgage Backed Securities Series
1997-A Class RI Certificate, Series 1997-B Class R Certificate, Series 1997-C
Class RI Certificate and RII Certificate or, if the structure is unwound, the
underlying collateral (collectively, the "Cityscape Bonds") for aggregate cash
proceeds, net of all out of pocket expenses including investment banking, legal,
accounting, trustee, rating agency, financial printer, and other related fees
(the "Cityscape Net Proceeds"), received by the Company (which shall include
proceeds used to pay

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down the financing associated with the Cityscape Bonds, if any) of at least $1.5
million (the "Cityscape Target Amount") on or before March 31, 2003, the Bonus
immediately payable shall be 2% of the Cityscape Net Proceeds (the "Cityscape
Bonus Amount"). The Bear Target Amount or the Cityscape Target Amount, as the
case may be, shall be (i) increased by (x) the purchase price of any additional
senior or other bonds purchased to facilitate the related Disposition Event
("Additional Bonds") and (y) any interest paid while financing such Additional
Bonds as well as other financing costs and investment banking, legal,
accounting, trustee, rating agency, financial printer and other fees relating to
the purchase and sale of any such Additional Bonds and (ii) decreased by (x) any
cash flow received by the Company (which includes cashflow used to pay the
financing on the Additional Bonds) on the Additional Bonds, (y) any cashflow on
the Bear Bonds received by the Company (which shall include proceeds used to pay
down the financing associated with the Bear Bonds), and (z) any payments
received by the Company on the Cityscape Bonds. Following any such increase in
the Bear Target Amount or the Cityscape Target Amount (as the case may be),
aggregate cash proceeds, net of all out of pocket expenses including investment
banking, legal, accounting, trustee, rating agency, financial printer, and other
related fees, received by the Company (which shall include proceeds used to pay
down the financing associated with the Additional Bonds) in respect of the
Additional Bonds used to facilitate the Bear Disposition Event or Cityscape
Disposition Event, as the case may be, shall included in determining the amount
of Bear Net Proceeds or Cityscape Net Proceeds, as the case may be, received in
respect of the Bear Target Amount or the Cityscape Target Amount, as the case
may be. Notwithstanding the foregoing, if the Company chooses not to sell any
related bond position and a bona-fide bid exists for such bond (such bid must be
in writing and not subject to any undeliverable condition and meets the
conditions set forth in this section), the amount of such bid (net of estimated
out of pocket costs) shall be considered to be part of the applicable net cash
proceeds described above for purposes of determining if the targets have been
met.

               (b)  OPTIONS. As of the Original Agreement Date, the Company
granted to Executive stock options (the "Initial Options") on 210,000 shares of
the Company's common stock (the "Common Stock") under the Company's Incentive
Stock Plan (the "Incentive Stock Plan"). The Initial Options have an exercise
price equal to the Company's book value per outstanding share as of September
30, 1999, which exercise price is in excess of the market value per share based
on the share price of the Common Stock as of such date. The Initial Options will
be fully exercisable at the time of vesting and 25% of the Initial Options shall
vest on each anniversary of the Original Agreement Date (which will result in
the Initial Options being fully vested on the fourth anniversary of the Original
Agreement Date). In addition, the Executive shall be entitled to participate in
the Company's Incentive Stock Plan and receive nonqualified, incentive or other
options ("Options") to purchase shares of the Company's Common Stock under the
Incentive Stock Plan as determined by the Compensation Committee of the
Company's Board of Directors (the "Committee") from time to time provided that
the Incentive Stock Plan is approved by the shareholders of the Company to the
extent required by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Notwithstanding the foregoing, the Company may recommend
to the Committee that Executive be granted Options under a plan other than the
Incentive Stock Plan provided that such other plan contains terms and conditions
which are substantially similar to the terms and conditions of the Incentive
Stock Plan, and

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further provided, that such other plan is approved by the shareholders of the
Company to the extent required by Section 162(m) of the Code. To the extent
permitted under applicable law, any Options granted to Executive hereunder
(including the Initial Options) may be assigned and transferred by Executive to
entities created for or on behalf of Executive's immediate family for tax
planning or other purposes.

               (c)  DEFERRED COMPENSATION. Executive and the Company agree that
they were unable to mutually agree upon performance goals for the period from
October 1, 2000 through December 31, 2001 for the bonus payments described in
this Agreement, prior to its amendment and restatement. Accordingly, Executive
and the Company agree that pursuant to Section 7(c)(viii) of the Agreement,
prior to its amendment and restatement, and due to the Company's nonextension of
the Agreement, a "Good Reason" termination event (as defined under the terms of
the Agreement, prior to its amendment and restatement), has occurred and by this
Agreement, in the form set forth herein, Executive and the Company agree that
the Company shall credit to a separate bookkeeping account for Executive the
amount of $1,100,000 (the "Deferred Payment"), which amount is equal to the
amount due Executive pursuant to Section 8(c) of the Agreement, prior to its
amendment and restatement, and any prior obligations of the Company to make
bonus payments to Executive (other than those described in Section 4(a) above)
shall be forever cancelled. The foregoing amount is attributable to services
rendered by Executive for the period from October 1, 2000 through December 31,
2001. Notwithstanding the foregoing, Executive agrees that payment of the
Deferred Payment shall be deferred until his termination of employment as
provided in Section 8(a) or 8(b) hereof. If, however, Executive is terminated
for Cause (as defined in Section 7(c) hereof) or voluntarily resigns, the
Deferred Payment shall be forfeited. This provision shall not require the
Company to fund any part of such Deferred Payment. The Deferred Payment shall be
paid out of the Company's general assets and, with respect to such Deferred
Payment, Executive shall be an unsecured general creditor of the Company.
Executive and the Company agree that following Executive's termination of
employment for any reason, the Company shall have no further obligations to
Executive except those specifically referenced herein.

               (d)  OTHER COMPENSATION. The Company may, upon recommendation of
the Committee, award to Executive such other bonuses and compensation as it
deems appropriate and reasonable.

               (e)  REPAYMENT OF BONUS ADVANCE. Notwithstanding anything herein
to the contrary, Executive shall immediately repay the payment made to him in
the amount of $181,250.00 as a fourth quarter 2001 bonus advance made pursuant
to Section 4(b) of this Agreement, prior to its amendment and restatement.

               5.   EMPLOYEE BENEFITS AND VACATION. (a) During the Employment
Term, Executive shall be entitled to participate in all pension, retirement,
savings, welfare and other employee benefit plans and arrangements, including,
without limitation, any nonqualified deferred compensation plans, maintained by
the Company from time to time for the benefit of the senior executives of the
Company in accordance with their respective terms as in effect from time to
time. Executive acknowledges that the aforementioned items may be included as

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compensation for income tax purposes to the extent required by applicable law.
To the extent permitted under applicable law, the Company shall not treat as
compensation to Executive fringes and perquisites provided to Executive or the
items under Section 6 below.

               (b)  On December 27, 1999, the Company loaned $47,868.75 (the
"Stock Purchase Loan") to Executive to purchase shares of Common Stock of the
Company as evidenced by a promissory note dated December 27, 1999 and secured by
the stock so purchased pursuant to a stock pledge agreement. The Company has
also lent from time to time additional amounts (aggregating $795,300 in
principal amount as of their respective issue dates), evidenced by separate
notes and stock pledge agreements (the "Additional Loans"). The Company and the
Executive have agreed to amend and restate as of the date hereof (i) the
Additional Loans to revise the maturity date and (ii) the Stock Purchase Loan to
reflect a revised rate of interest, to revise the maturity date and to provide
that interest and principal are paid on such Loan when dividends are paid. The
Company may net any amounts payable by it under this Agreement against any
amounts payable by Executive to the Company hereunder or pursuant to the Stock
Purchase Loan or the Additional Loans.

               (c)  During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than five (5) weeks paid vacation per calendar
year. Executive shall also be entitled to such periods of sick leave as is
customarily provided by the Company for its senior executive employees.

               6.   BUSINESS EXPENSES. The Company shall also reimburse
Executive for the travel, entertainment and other business expenses incurred by
Executive in the performance of his duties hereunder (including Executive's
reasonable costs associated with travel between the Portland Office and the New
York area office pursuant to Section 2(c) hereof) in accordance with the
Company's policies as in effect from time to time.

               7.   TERMINATION. (a) The employment of Executive under this
Agreement shall terminate upon the occurrence of any of the following events:

                       (i)   the death of Executive;

                      (ii)   the termination of Executive's employment by the
               Company due to Executive's Disability pursuant to Section 7(b)
               hereof;

                     (iii)   the termination of Executive's employment by the
               Company without Cause;

                      (iv)   the Executive's voluntary resignation;

                       (v)   the termination of Executive's employment by the
               Company for Cause pursuant to Section 7(c); or

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                      (vi)   the expiration of the Employment Term.

               (b)  DISABILITY. If, by reason of the same or related physical or
mental reasons, Executive is unable to carry out Executive's material duties
pursuant to this Agreement for more than six (6) months in any twelve (12)
consecutive month period (a "Disability") as determined and certified in writing
by two (2) licensed physicians, one of which is Executive's regular attending
physician, the Company may terminate Executive's employment for Disability upon
thirty (30) days prior written notice, by a notice of Disability termination, at
any time thereafter during such twelve (12) month period in which Executive is
unable to carry out his duties as a result of the same or related physical or
mental illness. Such termination shall not be effective if Executive returns to
the full time performance of his material duties within such thirty (30) day
notice period.

               (c)  CAUSE. Executive's employment hereunder may be terminated by
the Company for Cause. For purposes of this Agreement, the term "Cause" shall be
limited to (i) willful misconduct by Executive with regard to the Company or its
business which has a material adverse effect on the Company; (ii) the refusal of
Executive to follow the direction of the CEO, provided that the foregoing
refusal shall not be "Cause" if Executive in good faith believes that such
direction is illegal, unethical or immoral and promptly so notifies the CEO;
(iii) Executive being convicted of a felony (other than a felony involving a
traffic offense) in connection with the Executive's employment with the Company;
(iv) Executive's material fraud with regard to the Company; or (v) breach of
Section 11 hereof.

               8.   CONSEQUENCES OF TERMINATION OF EMPLOYMENT. (a) DEATH. If
Executive's employment is terminated during the Employment Term by reason of
Executive's death, the employment period under this Agreement shall terminate
without further obligations to Executive's legal representatives under this
Agreement except for: (i) any compensation earned but not yet paid, including
without limitation, any Vested Bonus, any amount of Base Salary or deferred
compensation accrued or earned but unpaid, any accrued vacation payable pursuant
to the Company's policies and any unreimbursed business expenses payable
pursuant to Section 6 which amounts shall be promptly paid in a lump sum to
Executive's spouse; (ii) full accelerated vesting under all outstanding
equity-based and long-term incentive plans (with options remaining outstanding
as provided under the applicable stock option plan and a pro rata payment under
any long term incentive plans based on actual coverage under such plans at the
time payments normally would be made under such plans); (iii) subject to Section
10 hereof, any other amounts or benefits owing to Executive under the then
applicable employee benefit plans or policies of the Company, which shall be
paid in accordance with such plans or policies; and (iv) if Executive's estate
executes the Waiver and General Release of Claims in the form attached hereto as
Exhibit 1, the Deferred Payment shall be promptly paid in a lump sum to the
Executive's estate. Notwithstanding the foregoing, any outstanding Stock
Purchase Loan or Additional Loans shall become due, payable and netted
immediately upon termination against the Deferred Payment payable pursuant to
subsection (iv) above. Section 13 hereof shall also continue to apply. For
purposes of this Agreement, the term "Vested Bonus" shall mean (i) (A) the Bear
Bonus Amount if the Executive has fulfilled the conditions for being paid

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such bonus and it remains unpaid and (B) the Cityscape Bonus Amount if the
Executive has fulfilled the conditions for being paid such bonus and it remains
unpaid and (ii) (A) the Bear Bonus Amount if (x) the Executive dies, becomes
disabled or is terminated without cause pursuant to Section 8(a) or 8(b) hereof,
(y) the Executive or his estate delivers to the Company a bona fide bid (such
bid must be in writing, and not subject to any undeliverable condition and meets
the other conditions set forth in Section 4(a) hereto) from Credit Suisse First
Boston or Bear Stearns & Co., Inc., within 10 business days of any such
Termination and (z) the amount of any bid relating to the Bear Target Amount,
together with any applicable net cash proceeds previously received in respect of
the Bear Target Amount, equals or exceeds the then current Bear Target Amount,
and (B) the Cityscape Bonus Amount if (x) the Executive dies, becomes disabled
or is terminated without cause pursuant to Section 8(a) or 8(b) hereof, (y) the
Executive or his estate delivers to the Company a bona fide bid (such bid must
be in writing, and not subject to any undeliverable condition and meets the
other conditions set forth in Section 4(a) hereto) from Credit Suisse First
Boston or Bear Stearns & Co., Inc., within 10 business days of any such
Termination and (z) the amount of any bid relating to the Cityscape Target
Amount, together with any applicable net cash proceeds previously received in
respect of the Cityscape Target Amount, equals or exceeds the then current
Cityscape Target Amount.

               (b)  DISABILITY, TERMINATION WITHOUT CAUSE OR EXPIRATION OF
EMPLOYMENT TERM. If Executive's employment is terminated by reason of
Executive's Disability or by the Company without Cause (as defined in Section
7(c)) or due to the expiration of the Employment Term, Executive shall be
entitled to receive the following payments and benefits: (i) any compensation
earned but not yet paid, including without limitation, any Vested Bonus, any
amount of Base Salary or deferred compensation accrued or earned but unpaid, any
accrued vacation payable pursuant to the Company's policies and any unreimbursed
business expenses payable pursuant to Section 6 which amounts shall be promptly
paid in a lump sum to Executive; (ii) if Executive executes the Waiver and
General Release of Claims in the form attached hereto as Exhibit 1, full
accelerated vesting under all outstanding equity-based and long-term incentive
plans (with options remaining outstanding as provided under the applicable stock
option plan and a pro rata payment under any long term incentive plans based on
actual coverage under such plans at the time payments normally would be made
under such plans); (iii) subject to Section 10 hereof, any other amounts or
benefits owing to Executive under the then applicable employee benefit plans or
policies of the Company, which shall be paid in accordance with such plans or
policies; and (iv) if Executive executes the Waiver and General Release of
Claims in the form attached hereto as Exhibit 1, the Deferred Payment shall be
promptly paid in a lump sum to the Executive. Notwithstanding the foregoing, any
outstanding Stock Purchase Loan or Additional Loans shall become due, payable
and netted immediately upon termination against the Deferred Payment payable
pursuant to subsection (iv) above. Section 13 hereof shall also continue to
apply.

               (c)  TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION. If
Executive's employment hereunder is terminated: (i) by the Company for Cause, or
(ii) by Executive

<Page>

voluntarily, Executive shall be entitled to receive only his Base Salary through
the date of termination, and any unreimbursed business expenses payable pursuant
to Section 6, and he shall not be entitled to receive the Deferred Payment. Any
outstanding Stock Purchase Loan or Additional Loans shall become due and payable
immediately upon termination. All other benefits (including, without limitation,
Options) due Executive following such termination of employment shall be
determined in accordance with the plans, policies and practices of the Company.

               (d)  RETURN OF FILES AND EQUIPMENT. Executive agrees that
immediately following his termination of employment for any reason as provided
in this Section 8, he shall return to the Company all files, electronic or
otherwise, equipment and any other property which is owned by the Company or to
which the Company is legally entitled. Executive also agrees to assist Company
with the closing of the New York area office as directed by the CEO or any other
Senior Executive of the Company.

               9.   SOLICITATION. Executive acknowledges that the retention of
nonclerical employees employed by the Company in which the Company has invested
training and depends on for the operation of its business is important to the
business of the Company, that Executive has obtained unique information as to
such employees as an executive of the Company and has developed a unique
relationship with such persons as a result of being an executive of the Company
and, therefore, it is necessary for the Company to be protected from
Solicitation of such employees. Executive acknowledges that, by virtue of his
employment with the Company, Executive has gained or will gain knowledge of the
identity, characteristics and preferences of its customers, and such information
may be confidential and Executive would inevitably have to draw on such
confidential information if Executive were to solicit or service the Company's
customers or referral sources on behalf of a competing business enterprise.
Accordingly, Executive agrees that he will not engage in Solicitation for the
fifteen (15) month period following the date of Executive's termination. For
purposes of this Agreement, Solicitation shall mean: recruiting, soliciting or
inducing of any nonclerical employee or employees of the Company to terminate
his or her employment with, or otherwise cease his or her relationship with, the
Company or hiring or assisting another person or entity to hire (including, but
not limited to identifying a nonclerical employee to another employer for
employment) any nonclerical employee of the Company or any person who within six
(6) months before had been a nonclerical employee of the Company; or, soliciting
or inducing any customer of the Company to cease his or her relationship with
the Company.

               10.  NO MITIGATION; NO SET-OFF. In the event of any termination
of employment under Section 8, Executive shall be under no obligation to seek
other employment and, except as explicitly set forth herein, there shall be no
offset against any amounts due Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that Executive may
obtain. Any amounts due under Section 8 are in the nature of severance payments,
or liquidated damages, or both, and are not in the nature of a penalty. Such
amounts are in lieu of any amounts payable under any other salary continuation
or cash severance arrangement of the Company and to the extent paid or provided
under any other such arrangement shall be offset from the amount due hereunder.

<Page>

               11.  DETRIMENTAL ACTIVITY. Without limitation of Section 9
hereof, Executive agrees that he will not engage in Detrimental Activity during
the Employment Term and following the date of Executive's termination. For
purposes of this Agreement, Detrimental Activity shall mean: (i) the disclosure
to anyone outside the Company, or the use in any manner other than in the
furtherance of the Company's business, without written authorization from the
Company, of any confidential information or proprietary information, relating to
the business of the Company; (ii) any attempt, directly or indirectly by
Executive of Solicitation (as defined in Section 9 above); (iii) any conduct by
Executive which would be considered to be self-dealing or which would conflict
with the Company's interests, including the direct or indirect purchase or sale
of, or loan or investment of any type in, any assets of the Company by Executive
or for Executive's benefit or between Executive and a third party which is
unrelated to the Company, without the company's prior written authorization;
(iv) Executive's Disparagement (as defined herein), or inducement of others to
do so, of the Company or its past and present officers, directors, employees or
products; or (v) without written authorization from the Company, the rendering
of services for any organization, or engaging, directly or indirectly, in any
business, which is competitive with the Company, or the rendering of services to
such organization or business if such organization or business is otherwise
prejudicial to or in conflict with the interests of the Company. For purposes of
this Agreement, Disparagement means making comments or statements to the press,
the Company's employees, consultants or any individual or entity with whom the
Company has a business relationship or otherwise taking any action which could
reasonably be expected to adversely affect in any manner: the conduct of the
business of the Company (including, without limitation, any products or business
plans or prospects); or the business reputation of the Company, or any of its
products, or its past or present officers, directors or employees.

               12.  LITIGATION COOPERATION; CONSULTATION. Executive agrees that
for the Employment Term and thereafter, he will reasonably cooperate with the
Company to the best of his ability in the defense of any claim or investigation,
civil or governmental, brought against Company or any of its current, former or
future directors or officers of which Executive has any personal knowledge, and
Company agrees it will reimburse Executive's reasonable out-of-pocket expenses
in providing such assistance. In addition, Executive agrees to reasonably
provide specific operations information to the Company as requested in a
reasonable, timely and clear manner to allow the Company to continue and/or
complete job tasks, activities, assignments, to continue effective relationships
with business partners by responding to reasonable inquiries as needed by
telephone at no additional cost to the Company beyond what is provided by this
Agreement.

               13.  INDEMNIFICATION. (a) The Company agrees that if Executive is
made a party to or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was an officer of the
Company, or is or was serving at the request of the Company as an officer,
member, employee, fiduciary or agent of another corporation or of a partnership,
joint venture, trust, other enterprise or non-profit organization, including,
without limitation, service with respect to employee benefit plans, whether or
not the basis of such Proceeding is alleged action

<Page>

in an official capacity as an officer, member, employee, fiduciary or agent
while serving as an officer, member, employee, fiduciary or agent, he shall be
indemnified and held harmless by the Company to the fullest extent authorized by
applicable law, as the same exists or may hereafter be amended, against all
Expenses incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if Executive has ceased to
be an officer, member, fiduciary or agent, or is no longer employed by the
Company, and shall inure to the benefit of his heirs, executors and
administrators.

               (b)  As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.

               (c)  Expenses incurred by Executive in connection with any
Proceeding shall be paid by the Company in advance upon request of Executive and
the giving by Executive of any undertakings required by applicable law.

               (d)  Executive shall give the Company notice of any claim made
against him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.

               (e)  With respect to any Proceeding as to which Executive
notifies the Company of the commencement thereof:

                           (i)  The Company will be entitled to participate
               therein at its own expense; and

                          (ii)  Except as otherwise provided below, to the
               extent that it may wish, the Company jointly with any other
               indemnifying party similarly notified will be entitled to assume
               the defense thereof, with counsel reasonably satisfactory to
               Executive. Executive also shall have the right to employ his own
               counsel in such action, suit or proceeding and the fees and
               expenses of such counsel shall be at the expense of the Company.

               (f)  The Company shall not be liable to indemnify Executive under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner which would impose any penalty or limitation on Executive
without Executive's written consent. Neither the Company nor Executive will
unreasonably withhold or delay their consent to any proposed settlement.

<Page>

               (g)  The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 13 shall not be exclusive of any other right which Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.

               (h)  The Company hereunder agrees to obtain officer liability
insurance policies covering Executive and shall maintain at all times following
the Commencement Date and during the Employment Term coverage under such
policies in the aggregate with regard to all officers and directors, including
Executive, of an amount not less than $10 million.

               14.  ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Portland in the State of Oregon under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and the statement for reasons for
the decision; and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial Arbitration Rules.
The determination of the arbitrators, which shall be based upon a DE NOVO
interpretation of this Agreement, shall be final and binding and judgment may be
entered on the arbitrators' award in any court having jurisdiction. All costs of
arbitration, including the cost of the American Arbitration Association and the
arbitrator, shall be borne by the Company.

               15.  RELEASE OF CLAIMS. (a) In consideration for the
renegotiation and amendment and restatement of the Agreement as of October 1,
2001, Executive, for himself and for his heirs, executors, administrators, and
assigns (hereinafter referred to collectively as "Releasors"), forever releases
and discharges the Company and any and all of its subsidiaries, divisions,
affiliated entities, employee benefit and/or pension plans or funds, successors
and assigns, and all of its or their past and present officers, directors,
members, shareholders, trustees, agents and employees (hereinafter referred to
as the "Entities and Persons"), from any and all claims, demands, cause of
action, fees and liabilities of any kind whatsoever, whether known or unknown,
which Executive ever had, now has, or may have against the Entities and Persons
by reason of any actual or alleged act, omission, transaction, practice,
conduct, occurrence, or other matter up to and including the date of this
Agreement and with regard to his employment with the Company, including the
terms of any prior version of this Agreement.

               (b)  Without limiting the generality of the foregoing, the
provisions of this Section 15 are intended to and shall release the Entities and
Persons from any and all claims, whether known or unknown, which Releasors ever
had, now have, or may have against the Entities and Persons arising out of
Executive's employment with the Company, including, but not limited to: (i) any
claim under Title VII of the Civil Rights Act, as amended; (ii) any other claim
(whether based on federal, state, or local law, statutory or decisional)
relating to or arising out of Executive's employment by the Company and the
terms and conditions of such employment; (iii) any claim under the Age
Discrimination in Employment Act, as amended;(iv)

<Page>

any claim under applicable state or local law against discrimination; (v) any
claim for attorneys' fees, costs, disbursements and/or the like; or (vi) any
claim under, with regard to, or in connection with this Agreement (prior to or
after its amendment and restatement) or any agreement or plan with regard to
equity, incentive or deferred compensation.

               (c)  Notwithstanding the foregoing, the foregoing release shall
not cover rights of indemnification to which Executive is entitled under the
Company's Certificate of Incorporation, By-laws, or Section 13 hereof or
otherwise with regard to his service as an officer of the Company.

               (d)  Executive agrees that he will not, from any source or
proceeding, seek or accept any award or settlement with respect to any claim or
right covered by Section 15(a) above. In addition to the foregoing, except as
otherwise prohibited by law, Executive represents and warrants that he will not
sue or commence any proceeding (judicial or administrative), or participate in
any action, suit or proceeding, against any of the Entities and Persons, with
respect to any act, event, occurrence, or any alleged failure to act, released
hereunder.

               (e)  In the event any portion of this Section 15 shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision of this Section
15.

               (f)  The provisions of this Section 15 are not intended, and
shall not be construed, as an admission that the Entities and Persons have
violated any federal, state or local law (statutory or decisional), ordinance or
regulation, breached any contract or committed any wrong whatsoever against
Executive.

               (g)  Executive acknowledges that he has been advised by the
Company to consult an attorney before signing this Agreement and that he has
executed this Agreement after having had the opportunity to consult with an
attorney of his choice and has had an opportunity to consider this Agreement for
a period of at least fourteen (14) days.

               16.  MISCELLANEOUS.

               (a)  GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to principles of conflicts of laws.

               (b)  ENTIRE AGREEMENT/AMENDMENTS. This Agreement and the
instruments contemplated herein, contain the entire understanding of the parties
with respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements, whether written or
otherwise, between the Company and Executive. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein and therein. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.

<Page>

               (c)  NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.

               (d)  ASSIGNMENT. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable, with the consent of Executive, by
the Company only to an acquiror of all or substantially all of the assets of the
Company, provided such acquiror promptly assumes all of the obligations
hereunder of the Company in a writing delivered to Executive and otherwise
complies with the provisions hereof with regard to such assumption.

               (e)  SUCCESSORS; BINDING AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement shall inure to the benefit of and be binding upon parties hereto
and their personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees legatees and permitted assignees of
the parties hereto. If Executive dies while any amount would still be payable
hereunder if Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of the Agreement to
the personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, legatees and permitted assignees of the parties
hereto.

               (f)  COMMUNICATIONS. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given (i) when faxed or delivered, and
(ii) two business days after being mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the initial page of this Agreement, provided
that all notices to the Company shall be directed to the attention of Andrew A.
Wiederhorn of the Company, or to such other address as any party may have
furnished to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.

               (g)  WITHHOLDING TAXES. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.

               (h)  SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment.

               (i)  COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

               (j)  HEADINGS. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of

<Page>

any provision of this Agreement.

<Page>

               IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                     FOG CUTTER CAPITAL GROUP INC., on its
                                     behalf and on behalf of FOG CAP L.P.

                                     By:
                                          ------------------------------
                                          Name:
                                          Title:

                                      ----------------------------------
                                      Robert G. Rosen

<Page>

                                    EXHIBIT 1

                      WAIVER AND GENERAL RELEASE OF CLAIMS

To:      Fog Cutter Capital Group Inc. and
         Fog Cap L.P.
         1410 S.W. Jefferson Street
         Portland, Oregon 97201

               1.  I, Robert G. Rosen, hereby agree that my employment with Fog
Cutter Capital Group Inc. f/k/a Wilshire Real Estate Investment Inc. and Fog Cap
L.P. f/k/a Wilshire Real Estate Partnership L.P. (the "Company") and its
affiliates will end on ____,_____ and will not be continued thereafter or
resumed again at any time unless mutually agreed in writing by the Company and
me. The Company and its affiliates will have no obligation to rehire or consider
me for re-employment in the future.

               2. (a) In consideration for the payment and/or other benefits to
be provided me pursuant to Section 8(b) of my Employment Agreement with the
Company dated as of October 9, 1999, amended as of May 19, 2000 and again as of
July 27, 2000 and amended and restated as of October 1, 2000, and subsequently
amended and restated as of October 1, 2001 (the "Employment Agreement"), I, for
myself and for my heirs, executors, administrators, and assigns (hereinafter
referred to collectively as "Releasors"), forever release and discharge the
Company and any and all of their subsidiaries, divisions, affiliated entities,
employee benefit and/or pension plans or funds, successors and assigns, and all
of its or their past and present officers, directors, members, shareholders,
trustees, agents and employees (hereinafter referred to as the "Entities and
Persons"), from any and all claims, demands, cause of action, fees and
liabilities of any kind whatsoever, whether known or unknown, which I ever had,
now have, or may have against the Entities and Persons by reason of any actual
or alleged act, omission, transaction, practice, conduct, occurrence, or other
matter up to and including the date of this Waiver and General Release and with
regard to my termination of employment.

               (b)  In consideration for the delivery of this Waiver and General
Release, the Company for itself and for its successors and assigns, forever
releases and discharges me and my heirs, executors, administrators and assigns,
from any and all claims, demands, cause of action, fees and liabilities of any
kind whatsoever, whether known or unknown, which the Company ever had, now have,
or may have against me or my heirs, executors, administrators or assigns by
reason of any actual or alleged act, omission, transaction, practice, conduct,
occurrence, or other matter up to and including the date of this Waiver and
General Release and with regard to my

<Page>

termination of employment.

               3.  Without limiting the generality of the foregoing, this Waiver
and General Release is intended to and shall release the Entities and Persons
from any and all claims, whether known or unknown, which Releasors ever had, now
have, or may have against the Entities and Persons arising out of my employment
with the Company, and/or the termination of that employment, including, but not
limited to: (i) any claim under Title VII of the Civil Rights Act, as amended;
(ii) any other claim (whether based on federal, state, or local law, statutory
or decisional) relating to or arising out of my employment by the Company, the
terms and conditions of such employment, the termination of such employment,
and/or any of the events relating directly or indirectly to or surrounding the
termination of that employment; (iii) any claim under the Age Discrimination in
Employment Act, as amended; (iv) any claim under applicable state or local law
against discrimination; (v) any claim for attorneys' fees, costs, disbursements
and/or the like; or (vi) any claim under, with regard to, or in connection with
my Employment Agreement or any agreement or plan with regard to equity,
incentive or deferred compensation.

               4.  Notwithstanding the foregoing, the foregoing release shall
not cover rights of indemnification to which I was entitled immediately prior to
my termination date under the Company's Certificate of Incorporation, By-laws,
or Section 13 of the Employment Agreement or otherwise with regard to my service
as an officer of the Company.

               5.  I agree that I will not, from any source or proceeding, seek
or accept any award or settlement with respect to any claim or right covered by
Section 2 above. In addition to the foregoing, except as otherwise prohibited by
law, I represent and warrant that I will not sue or commence any proceeding
(judicial or administrative), or participate in any action, suit or proceeding,
against any of the Entities and Persons, with respect to any act, event,
occurrence, or any alleged failure to act, released hereunder. If,
notwithstanding the foregoing promises, I or any Releasors sue or commence a
proceeding with regard to anything released hereunder, I shall be required and I
agree to first repay all monies and property paid to me by the Company and the
Entities and Persons pursuant to Section 8(b) of the Employment Agreement before
taking such action.

               6.  The interpretation of this Waiver and General Release will be
governed by the law of the State of New York without reference to principles of
conflict of laws. In the event any provision of this Waiver and General Release
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision of
this Waiver and General Release.

               7.  This Waiver and General Release is not intended, and shall
not be construed, as an admission that the Entities and Persons have violated
any federal, state or local law (statutory or decisional), ordinance or
regulation, breached any contract or committed any wrong whatsoever against me.

               8.  I acknowledge that I have been advised by the Company to
consult an

<Page>

attorney before signing this Mutual Waiver and General Release and that I have
executed this Mutual Waiver and General Release after having had the opportunity
to consult with an attorney of my choice.

                  9. I further acknowledge that I have read this Mutual Waiver
and General Release in full, have had seven (7) days to consider the terms of
this Mutual Waiver and General Release, that I fully understand the terms, and
that I have knowingly and voluntarily assented to all the terms and conditions
contained herein.

                  10. I further acknowledge that after executing this Mutual
Waiver and General Release I have seven (7) days to revoke it by delivery of a
Notice of Revocation to the Company to the attention of Andrew A. Wiederhorn or
his successor prior to the eighth day after execution and delivery by me of the
Mutual Waiver and General Release. I understand that if so revoked by me, the
Company's obligations under this Mutual Waiver and General Release are null and
void.

                  11. The parties hereto understand that this Mutual Waiver and
General Release, and the Employment Agreement constitute the complete
understanding between such parties and that no other promises or agreements
shall be binding unless in writing and signed by both such parties..

Dated:                               FOG CUTTER CAPITAL GROUP INC.

                                     By:
Signature:                               --------------------------

Witness:                               FOG CAP L.P.

                                     By:
                                        --------------------------

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