**Exhibit 10.1**

 

**EMPLOYMENT AGREEMENT**

 

THIS EMPLOYMENT AGREEMENTis effective as of May 1, 2006 (“Effective Date”), by and between Impac FundingCorporation, a California corporation (“Employer”), and Gretchen Verdugo, anindividual (“Employee”).

 

**R E C I T A L S**

 

WHEREAS, Employee isknowledgeable of the business of Employer;

 

WHEREAS, Employerbelieves that Employee is an integral part of its management and currently isand will become more knowledgeable of the Business;

 

WHEREAS, Employerproposes to employ Employee in the Executive Vice President, Chief FinancialOfficer (“CFO”) position;

 

WHEREAS, Employeepossesses extensive confidential information concerning the Business, includingconfidential attorney-client communications; and

 

WHEREAS, Employee is willingto be employed by Employer and provide services to Employer and any affiliatesor related entities of Employer (as more fully described in Exhibit Aattached hereto) in her role as CFO for the consolidated entities under theterms and conditions herein stated.

 

**A G R E E M E N T**

 

NOW, THEREFORE, inconsideration of the mutual covenants and agreements hereinafter contained, andfor other good and valuable consideration, it is hereby agreed by and betweenthe parties hereto as follows:

 

**1.**             Employment, Services and Duties.

 

1.1           Employerhereby employs Employee and Employee hereby accepts such employment full-time(subject to those exceptions, if any, set forth below) as Executive VicePresident, Chief Financial Officer (“CFO”) of Employer to perform the dutiesand functions set forth in Exhibit A attached hereto and to perform suchother duties or functions as are reasonably required or as may be prescribedfrom time to time or as otherwise agreed. Employee shall render her services byand subject to the instructions and under the direction of the Employer’s Boardof Directors and to such persons as the Board may designate, including thePresident and Chief Executive Officer “(CEO”) of Employer, to whom Employeeshall directly report.

 

1.2           Employeeacknowledges and agrees that Employee may be required by Employer to devote aportion of her working time to perform functions for Employer’s affiliates orrelated entities (as set forth in Exhibit A attached hereto) in her roleas CFO for the consolidated entities and that such services are to be performedpursuant to and consistent with Employee’s duties and obligations under thisAgreement.

 

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1.3           Employeewill at all times faithfully, industriously and to the best of her ability,experience and talents perform all of the duties required of and from herpursuant to the terms of this Agreement. Employee will devote her full businessenergies and abilities and all of her business time to the performance of herduties hereunder and will not, without Employer’s prior written consent, renderto others any service of any kind (whether or not for compensation) that wouldinterfere with the full performance of Employee’s duties hereunder, and in noevent will engage in any activities that compete with the Business or thatcould create a reasonably foreseeable conflict of interest or the appearance ofa reasonably foreseeable conflict of interest; provided that nothing containedin this Section 1.3 shall preclude Employee from engaging in or managingEmployee’s outside investments.

 

**2.**             Termand Termination.

 

2.1           Theterm of this Agreement shall be through April 30, 2009, unless extended by themutual written agreement of Employer and Employee.

 

2.2           Employee’semployment shall terminate prior to the expiration of the term set forth inSection 2.1 upon the happening of any of the following events:

 

(a)           Voluntarytermination by Employee other than for Good Reason (as defined below); providedthat Employee shall be required to provide Employer with at least 30 days priorwritten notice of such voluntary termination;

 

(b)           Deathof Employee;

 

(c)           Employermay terminate Employee under this Agreement for “cause” if any of the followingoccurs (any determination of “cause” as used in this Agreement shall be madeonly by an affirmative majority vote of the Board of Directors (not includingEmployee in the deliberations or vote on the same, if a director) of Employer):

 

(i)            Employeeis convicted of (or pleads nolo contendere to) (A) a crime of dishonesty orbreach of trust, including such a crime involving either the property ofEmployer or Employer’s parent corporation, Impac Mortgage Holdings, Inc. (“IMH”)(or any affiliate or related entity of Employer or IMH) or the propertyentrusted to Employer or IMH (or any affiliate or related entity of Employer orIMH) by its clients, including fraud, or embezzlement or other misappropriationof funds belonging to Employer or IMH (or any affiliate or related entity ofEmployer or IMH) or any of their respective clients, or (B) a felony leading toincarceration of more than 90 days or the payment of a penalty or fine of$100,000 or more;

 

(ii)           Employeematerially and substantially fails to perform Employee’s job duties properlyassigned to Employee after being provided 30 days prior written notification bythe Board of Directors of Employer setting forth those duties that are notbeing performed by Employee; provided that Employee shall have a reasonabletime to correct any such failures to the extent that such failures arecorrectable and Employer may not terminate Employee for “cause” on the basis onany such failure that is cured within a reasonable time.

 

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(iii)          Employeehas engaged in willful misconduct or gross negligence in connection with herservice to Employer or IMH (or any affiliate or related entity of Employer orIMH) that has caused or is causing material harm to Employer or IMH (or anyaffiliate or related entity of Employer or IMH); or

 

(iv)          Employee’smaterial breach of any of the terms of this Agreement or any other obligationthat Employee owes to Employer or IMH (or any affiliate or related entity ofEmployer or IMH), including a material breach of trust or fiduciary duty or amaterial breach of any proprietary rights and inventions or confidentialityagreement between Employer and Employee or between IMH and Employee (or betweenEmployee and any affiliate or related entity of Employer or IMH)(as suchagreements may be adopted or amended from time to time by Employer and Employee).

 

(d)           Bymutual agreement between Employer and Employee;

 

(e)           Thedate when Employee is declared legally incompetent under the laws of the Stateof California, or if Employee has a mental or physical condition that canreasonably be expected to prevent Employee from carrying out her essentialduties and obligations under this Agreement for a period of greater than sixmonths (any such condition an “Incapacitating Condition”), notwithstandingEmployer’s reasonable accommodations (to the extent required by law);

 

(f)            Employermay terminate Employee under this Agreement at will (and without cause) uponwritten notice at any time. Unless otherwise provided in such notice, suchtermination shall be effective immediately upon providing written notice toEmployee; or

 

(g)           Employeemay terminate her employment under this Agreement for Good Reason uponproviding Employer at least 30 days prior written notice of such terminationstating the basis on which Employee has determined that she has Good Reason toterminate her employment; provided that Employer shall have a reasonable timeafter receiving such notice to cure any event that would constitute Good Reasonfor Employee to terminate her employment (provided such event is curable) andEmployee may not terminate her employment for Good Reason on the basis of anysuch event that is cured within a reasonable time. “Good Reason” shall mean:

 

(i)            theassignment to Employee of duties materially inconsistent with, or a substantialreduction or alteration in, the authority, duties or responsibilities ofEmployee as set forth in this Agreement, without Employee’s prior writtenconsent;

 

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(ii)           theprincipal place of the performance of Employee’s responsibilities and duties ischanged to a location more than 65 miles from the location of such place as ofthe date of this Agreement, without Employee’s prior written consent;

 

(iii)          amaterial breach by Employer of this Agreement, including a reduction byEmployer of Employee’s Base Salary, without Employee’s prior written consent;or

 

(iv)          afailure by Employer to obtain from IMH or any acquirer of Employer, before anyAcquisition (as defined below) takes place, an agreement to assume and performthis Agreement.

 

GoodReason does not include the expiration of the term of this Agreement on May 1,2009.

 

2.3           Exceptas set forth in Section 5, in the event that Employee’s employment isterminated pursuant to Section 2.2(a), 2.2(b), 2.2(c), 2.2(d) or 2.2(e) herein,neither Employer nor Employee shall have any remaining duties or obligationsunder this Agreement, except that Employer shall pay to Employee, or her legalrepresentatives, on the date of termination of employment (the “TerminationDate”) or, with respect to any Bonus Incentive Compensation payments orreimbursement for expenses, as promptly as practical after the TerminationDate, the following:

 

(a)           Suchcompensation as is due pursuant to Sections 3.1 (a), 3.1(b), and 3.1(c)prorated through the Termination Date;

 

(b)           Anyexpense reimbursements due and owing to Employee for reasonable and necessarybusiness and entertainment expenses of Employer incurred by Employee prior tothe Termination Date; and

 

(c)           Thedollar value of all accrued and unused paid time off that Employee is entitledto through the Termination Date.

 

2.4           Exceptas set forth in Section 5, in the event that Employee’s employment isterminated pursuant to Section 2.2(f) or 2.2(g), neither Employer nor Employeeshall have any remaining duties or obligations under this Agreement, exceptthat Employer shall pay to Employee, or her representatives, the amounts setforth in Section 2.3 at the times set forth in Section 2.3 and the following(provided that payments for health insurance coverage shall be made to an insuranceprovider):

 

(a)           Anadditional 18 month’s worth of Base Salary to be paid proportionally over the18 month period of time after Employee signs and delivers to Employer theWaiver and Release Agreement required pursuant to Section 2.5; and

 

(b)           Premiumsfor continuation of Employee’s health insurance benefit; under Employer’s grouphealth insurance plan, for the 18 month period succeeding the Termination Date(with such health insurance coverage to be at a level and quality equivalent tothe health insurance coverage provided by Employer to Employee immediatelyprior to the Termination Date, “Equivalent Coverage”).  Employer agrees to

 

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transmit following theTermination Date a request (and to join in such request) from Employee toEmployer’s then group health insurance carrier seeking approval to maintainEmployee’s coverage for such period under Employer’s group plan as thoughEmployee were still employed and without reference to COBRA; provided that i) Employermakes no representation concerning any future health insurance carrier’swillingness to consent to such additional coverage; ii) Employer undertakes noobligation to secure such consent.  Inthe event that such consent is not forthcoming, then Employee’s continuationcoverage shall be subject to COBRA. Employer shall pay such premiums only so long as (during said 18 monthperiod) Employee remains eligible for such Equivalent Coverage;

 

(c)           StockGrants to be determined and paid as follows:

 

For a period of 18 monthsafter the month in which the Termination Date occurs, Employee shall remain asemployee and will continue to vest in her stock option, restricted stock grantsor any other form of equity compensations that was previously granted but not vestedat the Termination Date but will not be eligible to receive any new grants oroptions after the Termination Date. However, upon Employee notifying theCompany of her election to compete or the Company notifying the Employee of herviolation of section 5.1 of this agreement, then Employee shall no longer be anEmployee of the Company and will no longer continue to vest in the stockoptions or other forms of stock grants.

 

(d)           Fora period of 18 months after the Termination Date occurs, Employee shall be paida monthly amount equal to the average Bonus Incentive Compensation underSections 3.1(b) of this Agreement or similar Bonus Incentive Compensation underprior Employment Agreements that Employee received during the 18 month periodthat preceded the Termination Date.

 

(e)           Thepayments set forth in Sections 2.4(a), (b) (c) and (d) above are referred toherein collectively as the “Severance Payments” and each as a “SeverancePayment.”

 

2.5           Asa condition precedent of Employee or her estate receiving any Severance Paymentfrom Employer, whether in a lump sum payment or a string of payments or in theform of payment of benefits, Employee or her estate shall, in consideration forpayment of such amount or benefit, sign and deliver to Employer (against the executionand delivery of the same by the other parties thereto) the form of Waiver andRelease Agreement attached hereto as Exhibit B. Such Waiver and ReleaseAgreement will not be construed to include any release of any indemnificationrights Employee may have against Employer pursuant to Employer’s Articles ofIncorporation or bylaws, any indemnification agreement or California Labor CodeSection 2800.

 

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2.6           ThisAgreement shall not be terminated by Employer merging with or otherwise beingacquired by another entity, whether or not Employer is the surviving entity, orby Employer transferring of all or substantially all of its assets (any suchevent, an “Acquisition”).

 

2.7           Inthe event of any Acquisition, the surviving entity or transferee, as the casemay be, shall be bound by and shall have the benefits of this Agreement, andEmployer shall not enter into any Acquisition unless the surviving entity ortransferee, as the case may be, agrees to be bound by the provisions of thisAgreement.

 

**3.**             Compensation.

 

3.1           Asthe total consideration for Employee’s services rendered hereunder, Employeeshall be entitled to the following during the period that Employee is employedhereunder:

 

(a)           Abase salary of $450,000 per year (“Base Salary”), payable in equal installmentsbi-weekly on those days when Employer normally pays its employees;

 

(b)           BonusIncentive Compensation consisting of a discretionary bonus up to 75% ofEmployee’s base salary paid during the fiscal year in accordance with thisagreement. The Bonus Incentive Compensation will be based upon annualIndividual Management Objectives which shall be established at the beginning ofeach year by the Company.  Bonus IncentiveCompensation) shall be determined each fiscal year by the Company in its solediscretion by multiplying (i) $337,500 (the maximum attainable Bonus IncentiveCompensation x (ii) the Bonus Factor based on percentage completion ofIndividual Management Objectives as follows:

 
| **%  Completion of Individual  Management Objectives** | ** ** | **Bonus Factor** | ** ** |
|--------------------------------------------------------|------------|------------------|------------|
| Less than 50%                                          |       | 0                | %          |
| 50 to 75%                                              |       | 50               | %          |
| 75.01% to 99.99%                                       |       | 75               | %          |
| 100% or more                                           |       | 100              | %          |

 

Payment of the BonusIncentive Compensation shall be made to Employee within 30 days following theend of the fiscal year for which such Bonus is paid;

 

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(c)           AnAnnual Restricted Stock Grant will be awarded to Employee in the amount of$300,000 worth of IMH common stock.  Theissuance price of the restricted stock grant will be determined as of theclosing stock price of IMH common stock, as reported on the NYSE, on the dateof such grant. The number of shares granted will be calculated by dividing$300,000 by the closing stock price for the date of the grant. For example, ifthe closing stock price on the date of grant is $10.00, the Employee wouldreceive 30,000 shares of restricted IMH common stock. Each such restrictedstock grant will vest equally over a three year period. However, during thevesting period, Employee will be entitled to any and all dividends paid on thevested and unvested restricted stock grants. The Annual Restricted Stock Grantwill be done each year at the same time that others in the organization areawarded stock options or restricted stock. Currently, stock awards are doneeach year in July. However, in no event shall the first such award per thisagreement be later than December 31, 2006.

 

(d)           Employeeshall accrue vacation time during the period she is employed hereunder at therate of four weeks per calendar year, subject to any vacation benefit accrualcap established by Employer (i.e., once the cap has been reached, furtheraccrual shall cease until Employee uses some or all of her accrued time to fallbelow the accrual cap). The timing of Employee’s vacation shall be governed byEmployer’s usual policies applicable to all employees;

 

(e)           Employeeis entitled to participate in any policies or plans regarding benefits ofemployment, including pension, profit sharing, group health, disabilityinsurance and other employee welfare benefit plans now existing or hereafterestablished to the extent that Employee is eligible under the terms of suchplans. Despite the foregoing, Employee is entitled to participate in any suchplan or program only if the executive officers of Employer generally areeligible to participate in such plan or program. Employer may, in its solediscretion and from time to time, establish additional senior managementbenefit programs as it deems them appropriate. Employee understands that anysuch plans may be modified or eliminated in Employer’s sole discretion inaccordance with applicable law; and

 

(f)            Suchother benefits as the Board of Directors of Employer, in its sole discretion,may from time to time provide.

 

(g)           Employeewill receive an automobile allowance of $500.00 per month.

 

(h)           Itis not intended that the Employee will be eligible to participate in othertypes of stock option grants of the Employers stock option plan as the Employeeis contractually being awarded Restricted Stock Grants as per this EmploymentAgreement.

 

3.2           Duringthe period that Employee is employed hereunder, Employer shall reimburseEmployee for reasonable and necessary business and entertainment expensesincurred by Employee on behalf of Employer in connection with the performanceof Employee’s duties hereunder.

 

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3.3           Employeemay elect to defer any portion of her Base Salary or Bonus IncentiveCompensation into an approved, Employer sponsored deferred compensation plan ifavailable; provided that Employer has no obligation to provide such a deferredcompensation plan. All Base Salary and Bonus Incentive Compensation, whether ornot deferred, shall be deemed to be earned and immediately vested upon distributionto Employee or deferral into a deferred compensation plan.

 

3.4           Thereshall be no inflation or any other automatic adjustments to any of thecompensation paid to Employee under this Agreement.

 

3.5           Employershall have the right to deduct from the compensation due to Employee hereunderany and all sums required for social security and withholding taxes and for anyother federal, state, or local tax or charge which may be in effect orhereafter enacted or required as a charge on the compensation of Employee.

 

3.6           Employershall maintain Directors and Officers insurance, and such coverage shall besubstantially similar to coverage provided by Employer’s affiliates and relatedentities.

 

**4.**             ContinuingEducation.

 

Employee is eligible fortuition reimbursement for up to $67,000 for the costs associated with obtainingher MBA degree. The reimbursement will be made after completion of eachsemester and is contingent upon Employee obtaining a grade of “B” or better. IfEmployee is terminated pursuant to Section 2.2(a), 2.2(c), Employee mustreimburse all amounts paid by the Company on her behalf for Tuition obtainingher MBA degree. Upon completing and obtaining her degree and if Employee isstill employed by the Company or upon termination based upon 2.2 (f) and (g),Employee will have no obligation to pay back any monies paid by the Company onbehalf of her obtaining her MBA degree.

 

**5.**             Non-Competition.

 

5.1           Atall times during Employee’s employment hereunder, and, if Employee’s employmentis terminated pursuant to Section 2.2(f) or 2.2(g)  during the 18 month period of time after suchtermination (the “Post-Termination Payment Period”) and in consideration forany and all payments and benefits provided to Employee pursuant to thisAgreement, during the Post-Termination Payment Period, Employee shall not,directly or indirectly, engage or participate in, prepare or set up, assist orhave any interest in any person, partnership, corporation, limited liabilitycompany, firm, association, or other business organization, entity orenterprise (whether as an employee, officer, director, member, agent, securityholder, creditor, consultant or otherwise) that engages in any activity inthose geographic areas where Employer conducts the Business, which activity isthe same as, similar to, or competitive with any activity engaged in byEmployer (mortgage REIT, mortgage banking and wholesale lending operations forsub prime and Alt-A residential loans, commercial or multifamily lending,  or such other business as Employer may engagein). Notwithstanding the foregoing, Employee may elect at any point during thePost-Termination Payment Period to forego any future remaining payments orbenefits payable under Section 2.4, in which case the limitations set forth inthis Section 5.1 shall terminate at the time of such election.

 

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5.2           Nothingcontained in Section 5 shall be deemed to preclude Employee from purchasing orowning, directly or beneficially, as a passive investment, less than fivepercent of any class of publicly traded securities of any entity so long asEmployee does not actively participate in or control, directly or indirectly,any investment or other decisions with respect to such entity.

 

**6.**             NoCompensation from Related Entities.

 

Without prior writtenapproval from Employer’s Board of Directors, Employee shall not directly orindirectly receive compensation from any company with whom Employer or any ofits affiliates (as “affiliate” is defined in Rule 405 promulgated under theSecurities Act of 1933) has any financial, business or affiliated relationship.

 

**7.**             Confidentiality;Non-Solicitation and Proprietary Rights.

 

Concurrently with signingthis Agreement, Employee and Employer will sign a Proprietary Rights and InventionsAgreement in the form attached hereto as Exhibit C (the “ProprietaryRights and Inventions Agreement”).

 

**8.**             Copiesof Agreement.

 

Employee authorizesEmployer to send a copy of the Proprietary Rights and Inventions Agreement toany and all future employers which Employee may have, and to any and allpersons, firms, and corporations, with whom Employee may become affiliated in abusiness or commercial enterprise, and to inform any and all such employers,persons, firms or corporations that Employer intends to exercise its legalrights should Employee breach the terms of the Proprietary Rights andInventions Agreement or should another party induce a breach of that agreementon Employee’s part.

 

**9.**             SeverableProvisions.

 

The provisions of thisAgreement are severable and if any one or more provisions is determined to beillegal or otherwise unenforceable, in whole or in part, the remainingprovisions, and any partially unenforceable provisions to the extentenforceable, shall nevertheless be binding and enforceable.

 

**10.**          Arbitration.

 

To the fullest extentallowed by law, any controversy, claim or dispute between Employee and Employer(or any of its stockholders, directors, officers, employees, affiliates,agents, successors or assigns) relating to or arising out of Employee’semployment or the cessation of that employment will be submitted to final andbinding arbitration in Orange County, California for determination inaccordance with the American Arbitration Association’s (“AAA”) National Rulesfor the Resolution of Employment Disputes, as the exclusive remedy for suchcontroversy, claim or dispute. In any such arbitration, the parties may conductdiscovery

 

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to the same extentas would be permitted in a court of law. The arbitrator shall issue a writtendecision, and shall have full authority to award all remedies which would beavailable in court. The arbitrator shall be required to determine all issues inaccordance with existing case law and the statutory laws of the State ofCalifornia. Employer shall pay the arbitrator’s fees and any AAA administrativeexpenses. In the event Employee files a claim to collect unpaid payments orbenefits payable under Section 2.4, the prevailing party shall be awarded reasonableattorneys’ fees and costs. Any judgment upon the award rendered by, thearbitrator(s) may be entered in any court having jurisdiction thereof. Possibledisputes covered by the above include unpaid wages, breach of contract, torts,violation of public policy, discrimination, harassment, or any otheremployment-related claims under laws including Title VII of the Civil RightsAct of 1964, the Americans With Disabilities Act, the Age Discrimination inEmployment Act, the California Fair Employment and Housing Act, the CaliforniaLabor Code, and any other federal or state constitutional provisions, statutesor laws relating to an employee’s relationship with her employer. However,claims for workers’ compensation benefits and unemployment insurance (or anyother claims where mandatory arbitration is prohibited by law) are not coveredby this arbitration agreement, and such claims may be presented to theappropriate court or government agency. BY AGREEING TO THIS MUTUAL AND BINDINGARBITRATION PROVISION, BOTH EMPLOYEE AND EMPLOYER GIVE UP ALL RIGHTS TO TRIALBY JURY. This arbitration policy is to be construed as broadly as ispermissible under relevant law. EMPLOYER AND EMPLOYEE HAVE READ THIS SECTION 9AND IRREVOCABLY AGREE TO ARBITRATE ANY DISPUTE IDENTIFIED ABOVE.

 

 
| /s/ RJJ                  |                     | /s/ GV |
|--------------------------|--------------------------|--------|
| Employer’s Initials | Employee’s Initials |

 

**11.**          InjunctiveRelief.

 

The parties hereto agreethat any breach or threatened breach of Section 5 of this Agreement or theProprietary Rights and Inventions Agreement will cause substantial andirreparable damage to Employer in an amount and of a character difficult toascertain. Accordingly, to prevent any such breach or threatened breach, and inaddition to any other relief to which Employer may otherwise be entitled,Employer will be entitled to immediate temporary, preliminary and permanentinjunctive relief through appropriate legal proceedings in any arbitration,without proof of actual damages that have been incurred or may be incurred byEmployer with respect to such breach or threatened breach. Employee expresslyagrees that Employer will not be required to post any bond or other security asa condition to obtaining any injunctive relief pursuant to this Section 11, andEmployee expressly waives any right to the contrary. Employee agrees that thisSection 11 is without prejudice to the rights of the parties to compelarbitration pursuant to Section 10.

 

**12.**          EntireAgreement.

 

This Agreement and theExhibits attached hereto contain the entire agreement of the parties relating tothe subject matter hereof, and the parties hereto have made no agreements,representations or warranties relating to the subject matter of this Agreementthat are not set forth otherwise herein or the Exhibits attached hereto. ThisAgreement supersedes any and all prior agreements, written or oral, withEmployer relating to Employees employment with

 

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Employer and anyother subject matter of this Agreement. Any such prior agreements are herebyterminated and of no further effect and Employee, by the execution hereof,agrees that any compensation provided for under any such prior agreement isspecifically superseded and replaced by the provision of this Agreement;subject to the following (i) this Agreement is not intended to supercede,cancel or replace any stock option or dividend equivalent right payments thatEmployee may have or otherwise be entitled to receive. The parties hereto agreethat in no event shall an oral modification of this Agreement be enforceable orvalid.

 

**13.**          GoverningLaw.

 

This Agreement is andshall be governed and construed in accordance with the laws of the State ofCalifornia, regardless of any laws on choice of law or conflicts of law of anyjurisdiction.

 

**14.**          Notice.

 

All notices hereundermust be in writing and shall be sufficiently given for all purposes hereunderif properly addressed and delivered personally by documented overnight deliveryservice, by certified or registered mail, return receipt requested, or byfacsimile or other electronic transmission service at the address or facsimilenumber, as the case may be, set forth below. Any notice given personally or bydocumented overnight delivery service is effective upon receipt. Any noticegiven by registered mail is effective upon receipt, to the extent such receiptis confirmed by return receipt. Any notice given by facsimile transmission iseffective upon receipt, to the extent that receipt is confirmed, eitherverbally or in writing by the recipient. Any notice which is refused, unclaimedor undeliverable because of an act or omission of the party to be notified, ifsuch notice was correctly addressed to the party to be notified, shall bedeemed communicated as of the first date that said notice was refused,unclaimed or deemed undeliverable by the postal authorities, or overnightdelivery service.

 
| If to Employer: |   | Impac Funding Corporation                         |
|-----------------|--------|---------------------------------------------------|
|            |   | 1401 Dove Street                                  |
|            |   | Newport Beach, California 92660                   |
|            |   | Telephone: (949) 475-3600                         |
|            |   | Facsimile: (949) 475-3969                         |
|            |   | Attention: Ronald Morrison, Esq., General Counsel |
|            |   |                                              |
| With a copy to: |   | Ernest W. Klatte, III, Esq.                       |
|            |   | Rutan & Tucker, L.L.P.                        |
|            |   | 611 Anton Blvd., 14th Floor                       |
|            |   | Costa Mesa, California 92626                      |
|            |   | Telephone: (714) 641-5100                         |
|            |   | Facsimile: (714) 546-9035                         |

 

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| If to Employee: |   | Gretchen Verdugo            |
|-----------------|--------|-----------------------------|
|            |   |                        |
| With a copy to: |   | Patricio T.D. Barrera, Esq. |
|            |   | Marcin Barrera LLP          |
|            |   | 1901 Avenue of the Stars    |
|            |   | Suite 1900                  |
|            |   | Los Angeles, Ca. 90067      |
|            |   | Telephone: (310)286-1050    |
|            |   | Facsimile: (310)286-1070    |

 

**15.**          AmendmentsAnd Waivers.

 

This Agreement may not beamended, modified, superseded, canceled, or any terms waived, except by writteninstrument signed by both parties, or in the case of waiver, by the party to becharged.

 

**16.**          Successorand Assigns.

 

This Agreement is notassignable by Employee, nor by Employer except to an affiliated or successorentity. This Agreement is binding on the parties’ heirs, executors,administrators, other legal representatives, successors, and, to the extentassignable, their assigns.

 

**17.**          Representations.

 

The person executing thisAgreement on behalf of Employer hereby represents and warrants on behalf ofherself and Employer that she is authorized to represent and bindEmployer.  Employee specificallyrepresents and warrants to Employer that she is not now under any contractualor quasi-contractual obligations that is inconsistent or in conflict with thisAgreement or that would prevent, limit or impair Employee’s performance of herobligations under this Agreement, (b) she has had the opportunity to berepresented by legal counsel of her choosing in preparing, negotiating,executing and delivering this Agreement; and (c) fully understands the termsand provisions of this Agreement.

 

**18.**          Counterparts;Facsimile Signatures.

 

This Agreement may beexecuted in any number of counterparts, each of which shall be deemed anoriginal for all purposes. This Agreement may be executed by a party’ssignature transmitted by facsimile (“fax”), and copies of this Agreementexecuted and delivered by means of faxed signatures shall have the same forceand effect as copies hereof executed and delivered with original signatures.All parties hereto may rely upon faxed signatures as if such signatures wereoriginals. Any party executing and delivering this Agreement by fax shallpromptly thereafter deliver a counterpart signature page of this Agreementcontaining said party’s original signature. All parties hereto agree that afaxed signature page may be introduced into evidence in any proceeding arisingout of or related to this Agreement as if it were an original signature page.

 

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**19.**          Rulesof Construction.

 

This Agreement has beennegotiated by the parties and is to be interpreted according to its fairmeaning as if the parties had prepared it together and not strictly for oragainst any party. References in this Agreement to “Sections” refer to Sectionsof this Agreement, unless the context expressly indicates otherwise. Referencesto “provisions” of this Agreement refer to the terms, conditions, restrictionsand promises contained in this Agreement. References in this Agreement to lawsand regulations refer to such laws and regulations as in effect on this dateand to the corresponding provisions, if any, of any successor law orregulation. At each place in this Agreement where the context so requires, themasculine, feminine or neuter gender includes the others and the singular orplural number includes the other. Forms of the verb “including” mean “includingwithout limitation” unless the context expressly indicates otherwise. “Or” isinclusive and includes “and” unless the context expressly indicates otherwise.The introductory headings at the beginning of Sections of this Agreement aresolely for the convenience of the parties and do not affect any provision ofthis Agreement.

 

IN WITNESS WHEREOF, thisAgreement is executed as of the day and year first above written.

 

 
|   |   | “EMPLOYER”                          |
|--------|--------|-----------------------------------------------|
|   |   |                                          |
|   |   | Impac Funding Corp., a California corporation |
|   |   |                                          |
|   |   | By:                                           | /s/ Richard J. Johnson |   |
|   |   |                                          |  Name: | Richard J. Johnson |   |
|   |   |                                          |  Title: | Chief Operating Officer |   |
|   |   |                                          |
|   |   |                                          |
|   |   | “EMPLOYEE”                     |
|   |   |                                          |
|   |   | /s/ Gretchen Verdugo                          |
|   |   | GRETCHEN VERDUGO                              |
|        |        |                                               |  |  |  |  |  |

 

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**EXHIBIT A**

 

**JOB DESCRIPTION AND RELATEDENTITIES**

 

**ExecutiveVice President, Chief Financial Officer (“CFO”), Impac Funding Corporation**

 

Responsible for planning, coordinating and directingthe financial affairs of the Organization, including the accounting, treasury,financial planning, reporting, compliance, analysis, and tax functions.  For purposes of this Exhibit A, “organization”means Employer and any affiliates or related entities of Employer for whomEmployer is requested to provide services pursuant to the Employment Agreementby and between Employer and Employer dated as of May 1, 2006 (the “Agreement”).  Provide management and the Board of Directorsof Employer and all of the entities within the Organization with meaningful andtimely information regarding the Organization’s financial performance.  Monitor compliance with all applicable laws,rules, and regulations related to financial information and financialperformance of the Organization, including tax compliance, and implement andoversee programs designed to ensure such compliance and responsible formanaging and overseeing the daily operations of the Company’s internal auditdepartment and their efforts to keep the Company SOX 404 compliant.  Serve on the Asset Liability Committee ofImpac Mortgage Holdings, Inc. (“IMH”) and administer and oversee its interestrate risk management of IMH’s balance sheet. Implement and maintain programs designed to ensure proper management ofthe Organization’s liquidity position and that proper cost effective funding isavailable to meet the Organization’s objectives.  Recommend and implement asset/liability andtax strategies to improve financial performance.  Direct a financial planning process for bothnext year budgeting and strategic planning purposes.  Provide appropriate financial analysis ofinvestment, merger and acquisition alternatives and capital raising efforts andalternatives.  Act as liaison with theinternal and external auditors.  Managethe staff of exempt and non-exempt employees. Perform supervisory duties to include: hiring, corrective action,performance appraisals, salary reviews, counseling, work scheduling, training,and budgeting.

 

Employee acknowledges, understands and agrees thatEmployee will be requested by Employee to devote some or all of Employee’s timeand effort during the term of employment pursuant to the Agreement (andconsistent with the above job descriptions) to the businesses of Employer’saffiliates or related entities pursuant to certain agreements between and amongEmployer and such affiliates or related entities,  Such affiliates and related entities include,but are not limit to, the following: Impac Mortgage Holdings, Inc., ImpacCommercial Capital Corp., Impac Warehouse Lending Group, IMH Assets Corp.,Impac Lending Group, Impac Secured Assets Corp., Impac Mortgage AcceptanceCorp., and Impac Foundation.

 

Employee furtherunderstands and acknowledges that, pursuant to the Agreement, Employee may bedirected by Employer to provide services consistent with the above jobdescriptions to additional real estate investment trusts or other entitieswhich Employer establishes or with which Employer affiliates or becomes relatedand for which there exists an agreement with Employer or any of the aboveentities to provide such services.

 

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Employee understands andacknowledges that Employee’s obligations under this Agreement, includingEmployee’s duties under Section 5 thereof and the Proprietary Rights andInventions Agreement entered into pursuant to Section 7 thereof shall apply andextend to Employee’s knowledge of the business of Employer’s affiliates orrelated entities and any trade secret or other confidential or proprietaryinformation relating to same.

 

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**EXHIBIT B**

 

**WAIVER AND RELEASEAGREEMENT**

 

For full and valuableconsideration, including, but not limited to, severance payments made and to bemade by Impac Funding Corporation and any affiliate or related entity of ImpacFunding Corporation (collectively, “Employer”) to Gretchen Verdugo (“Employee”)pursuant to the Employment Agreement between Employer and Employee dated as ofMay 1, 2006 (the “Employment Agreement”), Employee, on the one part, andEmployer on the other part, hereby enter into this Waiver and Release Agreement(“Waiver”), and each agrees to waive and release the other and, as the case maybe, the other’s stockholders, directors, officers, employees, affiliates,agents, successors and assigns, if any, from all known and unknown claims, agreementsor complaints related to or arising under Employee’s employment with Employer,including, but not limited to, any claim arising out of Employee’s termination,any express or implied agreement between Employee and Employer (other than eachparty’s respective rights and obligations under Sections 2.3, 2.4 and 5.1 ofthe Employment Agreement, and the Proprietary Rights and Inventions Agreement),and any other federal or state constitutional provisions, statutes or lawsrelating to an employee’s relationship with her employer, including, but notlimited to, Title VII of the Civil Rights Act of 1964, the Employee RetirementIncome Security Act, the Age Discrimination in Employment Act, the AmericansWith Disabilities Act, the California Fair Employment and Housing Act, and theCalifornia Labor Code.

 

This Waiver shall notinclude a waiver of any of the following: (i) any right to defense and/orindemnification that Employee may have under California Labor Code section2802, or under any defense and indemnification policy or agreement; (ii) anyclaim for breach of any pension, 401k, deferred compensation or stock optionplan of Employer; or (iii) any claim that Employee may have against anyofficer, director, employee, or agent of Employer or Guarantor for defamationor intentional interference with prospective employment or business advantage.

 

This Waiver includes awaiver of any rights the parties may have under Section 1542 of the CaliforniaCivil Code, which states:

 

“A general releasedoes not extend to claims which the creditor does not know or suspect to existin her favor at the time of executing the release, which if known by her musthave materially affected her settlement with the debtor.”

 

Employee’s Waiver isconditioned upon Employer and Guarantor’s performance of all of their severanceobligations pursuant to Sections 2.3 and 2.4 of the Employment Agreement. Inthe event that Employer materially breaches its severance obligations under theEmployment Agreement, then Employee shall be entitled to pursue any claims asthough this Waiver did not exist, and the statute of limitations for any suchclaims shall be deemed to have been tolled during the period from the date ofEmployee’s termination through the date Employer breached it obligations.

 

Employer’s Waiver isconditioned upon Employee’s performance of all of her obligations pursuant toSection 5.1 of the Employment Agreement. In the event that Employee materiallybreaches her non-compete obligations under the Employment Agreement, then Employershall

 

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be entitled topursue any claims as though this Waiver did not exist, and the statute oflimitations for any such claims shall be deemed to have been tolled during theperiod from the date of Employee’s termination through the date Employeebreached her obligations unless Employer had previously agreed in writing towaive the provisions of Section 5.1. The parties to this Waiver eachacknowledge that each may hereafter discover facts different from or inaddition to those now known or believed to be true with respect to the claims,suits, rights, actions, complaints, agreements, contracts, causes of action,and liabilities of any nature whatsoever that are the subject of the aboverelease, and the parties expressly agree that this Waiver shall be and remaineffective in all respects regardless of such additional or different facts.

 

Employee is advised asfollows: (i) Employee should consult an attorney regarding this Waiver beforeexecuting it; (ii) Employee has 21 days in which to consider this Waiver andwhether Employee will enter into it; (iii) this Waiver does not waive rights orclaims that may arise after it is executed; and (iv) at anytime within sevendays after executing this Waiver, Employee may revoke this Waiver. This Waivershall not become effective or enforceable until the seven day revocation periodset forth herein has passed.

 

Capitalized terms nototherwise defined herein shall have the meanings set forth in the EmploymentAgreement.

 
| Dated: |   |                      |   |
|--------|--------|---------------------------|--------|
|   |   |                      |
|   |   | GRETCHEN VERDUGO          |
|   |   |                      |
|   |   |                      |   |
|   |   |                      |
|   |   |                      |
|   |   | IMPAC FUNDING CORPORATION |
|   |   |                      |
|   |   | By:                       |   |   |
|   |   | Print Name:               |   |   |
|   |   | Title:                    |   |   |
|        |        |                           |        |  |  |  |  |

 

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**EXHIBIT C**

 

**PROPRIETARY RIGHTS ANDINVENTIONS AGREEMENT**

 

In consideration of myemployment by Impac Funding Corporation, a California corporation (the “Company”),and the compensation I receive from the Company, I agree to certainrestrictions placed by the Company on my use and development of information andtechnology, as more fully set out below.

 

1.             ProprietaryInformation. I understand that the Company possesses and will possessProprietary Information which is important to its business. For purposes ofthis Agreement, “Proprietary Information” is information that was or will bedeveloped, created, or discovered by or on behalf of the Company or any of itsaffiliates or related entities, or which became or will become known by, or wasor is conveyed to the Company, which has commercial value in the Company’sbusiness or the business of any of the Company’s affiliates or relatedentities, unless (i) the information is or becomes publicly known throughlawful means; (ii) the information was rightfully in my possession or part ofmy general knowledge prior to my employment by the Company as specificallyidentified and disclosed by me in Exhibit A attached hereto; or (iii) theinformation is disclosed to me without confidential or proprietary restrictionby a third party who rightfully possesses the information (without confidentialor proprietary restriction) and who did not learn of it directly from theCompany or any of its affiliates or related entities.

 

Proprietary Informationincludes information (whether conveyed orally or in writing) relating to (i)client/customer lists, vendor lists or other lists or compilations containingclient, customer or vendor information; (ii) information about investmenttechniques or strategies, investment research or analysis, business techniquesor strategies, processes, costs, profits, markets, marketing plans, forecasts,sales or commissions; (iii) plans for new investment techniques and strategies;(iv) the compensation, performance and terms of employment of other employees;(v) all other information that has been or will be given to me in confidence bythe Company (or any affiliate or related entity of the Company); (vi) softwarein various stages of development, and any designs, drawings, schematics,specifications, techniques, models, data, source code, algorithms, object code,documentation, diagrams, flow charts, research development, processes andprocedures relating to any software; (vii) any documents, books, papers,drawings, schematics, models, sketches, computer programs, databases or otherdata, including electronic data recorded or retrieved by any means, thatcontain any Proprietary Information; and (viii) any information described abovewhich the Company or any of its affiliates or related entities obtains fromanother party and which the Company or any of its affiliates or relatedentities treats as proprietary or designates as Proprietary Information.

 

2.             CompanyMaterials. I understand that the Company and its affiliates and relatedentities possess or will possess “Company Materials” which are important totheir respective businesses. For purposes of this Agreement, “Company Materials”are documents or other media or tangible items that contain or embodyProprietary Information or any other information concerning the business,operations or plans of the Company or any of its affiliates or relatedentities, whether such documents have been prepared by me or by others. “CompanyMaterials” include charts, graphs, notebooks, customer lists, computersoftware, media or printouts, sound recordings and other printed, typewrittenor handwritten documents, as well as financial models and the like.

 

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3.             IntellectualProperty.

 

3.1           AllProprietary Information and all right, title and interest in and to anypatents, patent rights, copyrights, trademark rights, mask work rights, tradesecret rights, and all other intellectual and industrial property andproprietary rights that currently exist or may exist in the future anywhere inthe world (collectively “Rights”) in connection therewith shall be the soleproperty of the Company or its affiliates or related entities, as the case maybe. I hereby assign to the Company any Rights I may have or acquire in suchProprietary Information. At all times, both during my employment with theCompany and after its termination, I will keep in confidence and trust and willnot use or disclose any Proprietary Information or anything relating to itwithout the prior written consent of an officer of the Company except as may benecessary and appropriate in the ordinary course of performing my duties to theCompany. The disclosure restrictions of this Agreement shall not apply to anyinformation that I can document is generally known to the public through nofault of mine. Nothing contained herein will prohibit me from disclosing toanyone the amount my wages.

 

3.2           AllCompany Materials shall be the sole property of the Company. I agree thatduring my employment with the Company, I will not remove any Company Materialsfrom the business premises of the Company or deliver any Company Materials toany person or entity outside the Company, except as I am required to do inconnection with performing the duties of my employment. I further agree that,immediately upon the termination of my employment by me or by the Company forany reason, or for no reason, or during my employment if so requested by theCompany, I will return all Company Materials, apparatus, equipment and otherphysical property, and any reproduction of such property, excepting only (i) mypersonal copies of records relating to my compensation and (ii) my copy of thisAgreement.

 

3.3           Iagree that all “Inventions” (which term includes patentable or nonpatentableinventions, original works of authorship, derivative works, trade secrets,trademarks, copyrights, service marks, discoveries, patents, technology,algorithms, computer software, application programming interfaces, protocols,formulas, compositions, ideas, designs, processes, techniques, know-how, dataand all improvements, rights and claims related to the foregoing), which Imake, conceive, reduce to practice or develop (in whole or in part, eitheralone or jointly with others) during my employment, shall be the sole propertyof the Company to the maximum extent permitted by Section 2870 of the CaliforniaLabor Code. I hereby assign, without further consideration, all such Inventionsto the Company (free and clear of all liens and encumbrances), and the Companyshall be the sole owner of all Rights in connection therewith. No assignment inthis Agreement shall extend to Inventions, the assignment of which isprohibited by Labor Code Section 2870, which states:

 

Any provision inan employment agreement which provides that an employee shall assign, or offerto assign, any of his or her rights in an invention to his or her employershall not apply to an invention that the employee developed entirely on his orher own time without using the employer’s equipment, supplies, facilities, ortrade secret information except for those inventions that either:

 

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1.             Relateat the time of conception or reduction to practice of the invention to theemployer’s business, or actual or demonstrably anticipated research ordevelopment of the employer.

 

2.             Resultfrom any work performed by the employee for the employer.

 

I acknowledge that alloriginal works of authorship which are made by me (in whole or in part, eitheralone or jointly with others) within the scope of my employment and which areprotectable by copyright are “works made for hire,” as defined in the UnitedStates Copyright Act (17 USCA, Section 101). 1 will not disclose Inventionscovered by this Section 3.3 to any person outside the Company, unless I amrequested to do so by management personnel of the Company.

 

3.4           Iagree to disclose promptly to the Company all Inventions and relevant records,which records will remain the sole property of the Company. I further agreethat all information and records pertaining to any idea, process, trademark,service mark, invention, technology, computer program, original work orauthorship, design, formula, discovery, patent, or copyright that I do notbelieve to be an Invention, but is conceived, developed, or reduced to practiceby me (in whole or in part, either alone or jointly with others) during myemployment, shall be promptly disclosed to the Company (such disclosure to bereceived in confidence). I will also disclose to the Company all Inventionsconceived, reduced to practice, used, sold, exploited or developed by me (inwhole or in part, either alone or jointly with others) within one (1) year ofthe termination of my employment with the Company (“Presumed Inventions”); suchdisclosures shall be received by the Company in confidence, to the extent theyare not assigned to the Company in Section 3.3, and do not extend suchassignment. Because of the difficulty of establishing when any PresumedInvention is first conceived or developed by me, or whether it results fromaccess to Proprietary Information or the Company’s equipment, facilities, anddata, I agree that all Presumed Inventions and all Rights associated therewithshall be presumed to be Inventions subject to assignment under Section 3.3. Ican rebut this presumption if I prove that a Presumed Invention is not anInvention subject to assignment under Section 3.3.

 

3.5           Iagree to perform, during and after my employment, all acts deemed necessary ordesirable by the Company to permit and assist it, at the Company’s expense, inevidencing, perfecting, obtaining, maintaining, defending and enforcing Rightsor my assignment with respect to such Inventions in any and all countries.Should the Company be unable to secure my signature on any document necessaryto apply for, prosecute, obtain, enforce or defend any Rights relating to anyassigned Invention, whether due to my mental or physical incapacity or anyother cause, I hereby irrevocably designate and appoint the Company and itsduly authorized officers and agents, as my agents and attorneys-in-fact, withfull power of substitution, to act for and in my behalf and instead of me, toexecute and file any documents and to do all other lawfully permitted acts tofurther the above purposes with the same legal force and effect as if executedby me.

 

3.6           Anyassignment of copyright hereunder (and any ownership of a copyright as a workmade for hire) includes all rights of paternity, integrity, disclosure andwithdrawal and any other rights that may be known as or referred to as “moralrights” (collectively “Moral Rights”). To the extent such Moral Rights cannotbe assigned under applicable law and to the

 

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extentthe following is allowed by the laws in the various countries where MoralRights exist, I hereby waive such Moral Rights and consent to any action of theCompany that would violate such Moral Rights in the absence of such waiver andconsent. I will confirm any such waivers and consents from time to time asrequested by the Company.

 

3.7           Attachedhereto as Exhibit 1 is a complete list of all existing Inventions to which Iclaim personal ownership of as of the date of this Agreement and that I desireto specifically clarify are not subject to this Agreement, and I acknowledgeand agree that such list is complete. If no such list is attached to thisAgreement, I represent that I have no such Inventions at the time of signingthis Agreement.

 

3.8           Iunderstand that nothing in this Agreement is intended to expand the scope ofprotection provided me by Sections 2870 through 2872 of the California LaborCode.

 

4.             PriorActions and Knowledge. I represent and warrant that from the time of myfirst contact or communication with the Company, I have held in strictconfidence all Proprietary Information and have not (i) disclosed any ProprietaryInformation or delivered any Company Materials to anyone outside of the Companyor any affiliate or related entity of the Company, or (ii) used, copied,published, or summarized any Proprietary Information or removed any CompanyMaterials from the business premises of the Company, except to the extentnecessary to carry out my responsibilities as an employee of the Company.

 

5.             Non-Solicitationof Employees. I agree that for a period of eighteen months following thetermination of my employment with the Company, I will not, on behalf of myselfor any other person or entity, solicit the services of any person who wasemployed by the Company or any affiliate or related entity of the Company onthe date of my termination of employment or at any time during the six monthperiod prior to the termination of my employment.

 

6.             NoConflict with Obligations to Third Parties. I represent that my performanceof all the terms of this Agreement will not breach any agreement to keep inconfidence proprietary or confidential information acquired by me in confidenceor in trust prior to my employment with the Company. I have not entered into,and I agree I will not enter into, any agreement either written or oral inconflict herewith or in conflict with my employment with the Company.

 

7.             Remedies.I recognize that nothing in this Agreement is intended to limit any remedy ofthe Company under the California Uniform Trade Secrets Act. I recognize that myviolation of this Agreement could cause the Company irreparable harm, theamount of which may be extremely difficult to estimate, making any remedy atlaw or in damages inadequate. Therefore, I agree that the Company shall havethe right to apply to any court of competent jurisdiction for an orderrestraining any breach or threatened breach of this Agreement and for any otherrelief the Company deems appropriate. This right shall be in addition to anyother remedy available to the Company.

 

8.             Survival.I agree that my obligations under Sections 3.1 through 3.6, 5 and 6 shallcontinue in effect after termination of my employment, regardless of the reasonor reasons for termination, and whether such termination is voluntary orinvoluntary on my part, and that the Company is entitled to communicate myobligations under this Agreement to any future employer or potential employerof mine.

 

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9.             ControllingLaw. This Agreement is and shall be governed and construed in accordancewith the laws of the State of California, regardless of any laws on choice oflaw or conflicts of law of any jurisdiction.

 

10.           SeverableProvisions. The provisions of this Agreement are severable and if any oneor more provisions is determined to be illegal or otherwise unenforceable, inwhole or in part, the remaining provisions, and any partially unenforceableprovisions to the extent enforceable, shall nevertheless be binding andenforceable.

 

11.           Successorsand Assigns. This Agreement shall be effective as of the date I executethis Agreement and shall be binding upon me, my heirs, executors, assigns, andadministrators and shall inure to the benefit of the Company, its subsidiaries,successors and assigns.

 

12.           Counterparts;Facsimile Signatures. This Agreement may be executed in any number of counterparts,each of which shall be deemed an original for all purposes. This Agreement maybe executed by a party’s signature transmitted by facsimile (“fax”), and copiesof this Agreement executed and delivered by means of faxed signatures shallhave the same force and effect as copies hereof executed and delivered withoriginal signatures. All parties hereto may rely upon faxed signatures as ifsuch signatures were originals. Any party executing and delivering thisAgreement by fax shall promptly thereafter deliver a counterpart signature pageof this Agreement containing said party’s original signature. All partieshereto agree that a faxed signature page may be introduced into evidence in anyproceeding arising out of or related to this Agreement as if it were anoriginal signature page.

 

13.           Rulesof Construction. This Agreement has been negotiated by the parties and isto be interpreted according to its fair meaning as if the parties had preparedit together and not strictly for or against any party. References in thisAgreement to “Sections” refer to Sections of this Agreement, unless the contextexpressly indicates otherwise. References to “provisions” of this Agreementrefer to the terms, conditions, restrictions and promises contained in thisAgreement. References in this Agreement to laws and regulations refer to suchlaws and regulations as in effect on this date and to the correspondingprovisions, if any, of any successor law or regulation. At each place in thisAgreement where the context so requires, the masculine, feminine or neutergender includes the others and the singular or plural number includes theother. Forms of the verb “including” mean “including without limitation” unlessthe context expressly indicates otherwise. “Or” is inclusive and includes “and”unless the context expressly indicates otherwise. The introductory headings atthe beginning of Sections of this Agreement are solely for the convenience ofthe parties and do not affect any provision of this Agreement.

 

14.           Amendmentsand Waivers. This Agreement may not be amended, modified, superseded,canceled, or any terms waived, except by written instrument signed by bothparties, or in the case of waiver, by the party to be charged.

 

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I HAVE READ THISAGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH ITIMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEENMADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT OTHER THAN THE PROMISES ANDREPRESENTATIONS EXPRESSLY STATED IN THIS AGREEMENT AND IN THE EMPLOYMENTAGREEMENT ENTERED INTO BETWEEN ME AND THE COMPANY CONCURRENTLY HEREWITH. I HAVECOMPLETELY NOTED ON EXHIBIT 1 TO THIS AGREEMENT ANY PROPRIETARY INFORMATION ANDINVENTIONS THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT.

 
| Dated as of: May 1, 2006                             |   |             |
|------------------------------------------------------|--------|------------------|
|                                                 |   | GRETCHEN VERDUGO |
|                                                 |   |             |
| Accepted and Agreed to:                              |   |             |
|                                                 |   |             |
| IMPAC FUNDING CORPORATION, a  California corporation |   |             |
|                                                 |   |             |
| By:                                                  |   |             |   |
|                                                 |   |             |
| Name:                                                |   |             |   |
|                                                 |   |             |
| Title:                                               |   |             |   |
|                                                      |        |                  |  |  |  |

 

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**EXHIBIT 1**

 

**EMPLOYEE’S DISCLOSURE**

 

Gentlemen:

 

1.             Exceptfor the information and ideas listed below that rightfully became part of mygeneral knowledge prior to my first contact or communication with the Companyor any of its affiliates or related entities, I represent that I am not in thepossession of and have no knowledge of any information that can be consideredthe Proprietary Information of Impac Funding Corporation, a Californiacorporation (the “Company”), other than information disclosed by Company or anyof its affiliates or related entities during my employment negotiations or myprior employment with the Company or any of its affiliates or related entities,which I understand and agree is the Proprietary Information of Company or itsaffiliates or related entities, as the case may be.

 

 

 

2.             Exceptfor the complete list of Inventions set forth below, I represent that I (inwhole or in part, either alone or jointly with others) have not made,conceived, developed or first reduced to practice any Inventions relevant tothe subject matter of my employment with the Company prior to my employmentwith the Company or any of its affiliates or related entities.

 
|   | No Inventions              |             |
|--------|----------------------------|------------------|
|   |                       |             |
|   | See below:                 |             |
|   |                       |             |
|   |                       |             |
|   |                       |             |
|   |                       |             |
|   | Additional sheets attached |             |
|   |                       |             |
|   |                       |             |
|   |                       |             |
|   |                       | GRETCHEN VERDUGO |
|        |                            |                  |  |

 

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EXHIBIT D

 

**IMPACMORTGAGE HOLDINGS, INC.**

** **

**GUARANTY**

** **

This Guaranty, dated as of May 1, 2006, is executed byImpac Mortgage Holdings, Inc., a Maryland corporation (“Guarantor”), infavor of Gretchen Verdugo (“Executive”).

 

A.             ImpacFunding Corporation, a California corporation (“Obligor”), concurrentlyherewith has entered into an Employment Agreement with Obligor dated even dateherewith (the “Contract”). Guarantor is the parent corporation of Obligor andwill receive direct and indirect benefits from the performance of the Contract.

 

B.              Executive’swillingness to enter into the Contract is subject to receipt by it of thisGuaranty duly executed by Guarantor.

 

For good and valuable consideration, the receipt andadequacy of which are hereby acknowledged, and intending to be legally bound,Guarantor hereby agrees with Executive as follows:

 

1.              Guaranty.

 

(a)             Guarantorunconditionally guarantees and promises to pay to Executive, or order, at Executive’saddress set forth in Section 4(a) hereof, on demand after the default byObligor, in lawful money of the United States, any and all Obligations (ashereinafter defined) consisting of payments due to Executive. For purposes ofthis Guaranty the term “Obligations” shall mean and include all paymentsowed by Obligor to Executive of every kind and description, direct or indirect,absolute or contingent, due or to become due, now existing or hereafter arisingpursuant to the terms of Section 2.3, 2.4, 3.1(a), 3.1(b), 3.1(c), or 3.2 ofthe Contract (as such Obligations may become due subject to the provisions ofthe Contract, including all notice requirements and cure provisions), includingall interest, late fees, charges, expenses, attorneys’ fees and otherprofessionals’ fees chargeable to Obligor or payable by Obligor there under andany costs of collection hereunder, including attorneys’ and other professionals’fees.

 

(b)             ThisGuaranty is absolute, unconditional, continuing and irrevocable and constitutesan independent guaranty of payment and not of collect ability (provided that itis subject to Obligor defaulting on any of the Obligations), and is in no wayconditioned on or contingent upon any attempt to enforce in whole or in partany of Obligor’s Obligations to Executive, the existence or continuance ofObligor as a legal entity, the consolidation or merger of Obligor with or intoany other entity, the sale, lease or disposition by Obligor of all orsubstantially all of its assets to any other entity, or the bankruptcy orinsolvency of Obligor, the admission by Obligor of its inability to pay itsdebts as they mature, or the making by Obligor of

 

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a generalassignment for the benefit of, or entering into a composition or arrangementwith, creditors. If Obligor or any permitted assignee or successor of Obligorshall fail to pay or perform any Obligations to Executive which are subject tothis Guaranty as and when they are due, Guarantor shall forthwith pay toExecutive all such liabilities or obligations in immediately available funds.Each failure by Obligor to pay or perform any such liabilities or obligationsshall give rise to a separate cause of action, and separate suits may bebrought hereunder as each cause of action arises.

 

(c)           Executive,may (subject to the provisions of the Contract) at any time and from time totime, without the consent of or notice to Guarantor, except such notice as maybe required by applicable statute which cannot be waived, without incurringresponsibility to Guarantor, and without impairing or releasing the obligationsof Guarantor hereunder, (i) change the manner, place and terms of payment orchange or extend the time of payment of, renew, or alter any Obligation herebyguaranteed, or in any manner modify, amend or supplement the terms of theContract or any documents, instruments or agreements executed in connectiontherewith, (ii) exercise or refrain from exercising any rights against Obligoror others (including Guarantor) or otherwise act or refrain from acting, (iii)settle or compromise any Obligations hereby guaranteed and/or any obligationsand liabilities (including any of those hereunder) incurred directly orindirectly in respect thereof or hereof, and may subordinate the payment of allor any part thereof to the payment of any obligations and liabilities which maybe due to Executive or others, (iv) sell, exchange, release, surrender, realizeupon or otherwise deal with in any manner or in any order any property pledgedor mortgaged by anyone to secure or in any manner securing the Obligationshereby guaranteed, (v) take and hold security or additional security for any orall of the obligations or liabilities covered by this Guaranty, and (vi) assignits rights and interests under this Guaranty, in whole or in part.

 

(d)             This isa continuing Guaranty for which Guarantor receives continuing consideration andall obligations to which it applies or may apply under the terms hereof shallbe conclusively presumed to have been created in reliance hereon and thisGuaranty is therefore irrevocable without the prior written consent ofExecutive.

 

(e) Guarantor may bring action to enforce Executive’sobligations under the Contract if (i) any proceeding is brought againstGuarantor to seek enforcement of this Guaranty or (ii) Guarantor makes anypayment to Executive pursuant to this Guaranty.

 

2.             Representationsand Warranties. Guarantor represents and warrants to Executive that

 

(a) Guarantor is acorporation duly organized, validly, existing and in good standing under thelaws of its jurisdiction of incorporation or formation; (b) the execution,delivery and performance by Guarantor of this Guaranty are within the power ofGuarantor and have been duly authorized by all necessary actions on the part ofGuarantor; (c) this Guaranty has been duly executed and delivered by Guarantorand constitutes a legal, valid and binding obligation of Guarantor, enforceableagainst it in accordance with its terms, except as limited by bankruptcy,insolvency or other laws of general application relating to or affecting theenforcement of creditors’ rights generally.

 

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3.             Waivers.

 

(a)             Guarantor,to the extent permitted under applicable law, hereby waives any right torequire Executive to (i) proceed against Obligor or any other guarantor ofObligor’s obligations under the Contract, (ii) proceed against or exhaust anysecurity received from Obligor or any other guarantor of Obligor’s Obligationsunder the Contract, or (iii) pursue any other right or remedy in the Executive’spower whatsoever.

 

(b) Guarantor further waives, to the extent permittedby applicable law, (i) any defense resulting from the absence, impairment orloss of any right of reimbursement, subrogation, contribution or other right orremedy of Guarantor against Obligor, any other guarantor of the Obligations orany security; (ii) any defense which results from any disability of Obligor orthe lack of validity or enforceability of the Contract; (iii) any right toexoneration of sureties which would otherwise be applicable; (iv) any right ofsubrogation or reimbursement and, if there are any other guarantors of theObligations, any right of contribution, and right to enforce any remedy whichExecutive now has or may hereafter have against Obligor, and any benefit of,and any right to participate in, any security now or hereafter received byExecutive; (v) all presentments, demands for performance, notices ofnon-performance, notices delivered under the Contract, protests, notice ofdishonor, and notices of acceptance of this Guaranty and of the existence,creation or incurring of new or additional Obligations and notices of anypublic or private foreclosure sale; (vi) any appraisement, valuation, stay,extension, moratorium redemption or similar law or similar rights formarshalling; and (vii) any right to be informed by Executive of the financialcondition of Obligor or any other guarantor of the Obligations or any changetherein or any other circumstances bearing upon the risk of nonpayment ornonperformance of the Obligations. Guarantor has the ability to and assumes theresponsibility for keeping informed of the financial condition of Obligor andany other guarantors of the Obligations and of other circumstances affecting suchnonpayment and nonperformance risks.

 

4.              Miscellaneous.

 

(a)             Notices.All notices hereunder must be in writing and shall be sufficiently given forall purposes hereunder if properly addressed and delivered personally bydocumented overnight delivery service, by certified or registered mail, returnreceipt requested, or by facsimile or other electronic transmission service atthe address or facsimile number, as the case may be, set forth below. Anynotice given personally or by documented overnight delivery service iseffective upon receipt. Any notice given by registered mail is effective uponreceipt, to the extent such receipt is confirmed by return receipt. Any noticegiven by facsimile transmission is effective upon receipt, to the extent thatreceipt is confirmed, either verbally or in writing by the recipient. Anynotice which is refused, unclaimed or undeliverable because of an act oromission of the party to be notified, if such notice was correctly addressed tothe party to be notified, shall be deemed communicated as of the first datethat said notice was refused, unclaimed or deemed undeliverable by the postalauthorities, or overnight delivery service.

 

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| Executive:      | Guarantor:       |
|-----------------|------------------|
|            |             |   |
|            | Gretchen Verdugo |   | Impac Mortgage  Holdings, Inc. |
|            |             |   | 1401 Dove Street |
|            |             |   | Newport Beach,  California 92660 |
|            |             | Telephone: (949)  475-3600 |
|            |             | Facsimile: (949)  475-3969 |
|            |             | Attention:  Ronald Morrison, Esq., General |
|            |             | Counsel |
|            |             |   |
| With a copy to: | With a copy to:  |
|            |             |   |
|            |             | Ernest W.  Klatte, III, Esq. |
|            |             | Rutan &  Tucker, LLP |
|            |             | 611 Anton Blvd.,  14th Floor |
|            |             | Costa Mesa,  California 92626 |
|            |             | Telephone: (714)  641-5100 |
|            |             | Facsimile: (714)  546-9035 |
|            |             |   |
|            |             | And |
|            |             |   |
|            |             | Patricio T.D. Barrera, ESQ. |
|            |             | Marcin Barrera LLP |
|            |             | 1901 Avenue of the Stars |
|            |             | Suite 1900 |
|            |             | Los Angeles, CA   90067 |
|            |             | Telephone: (310) 286-1050 |
|            |             | Facsimile: (310) 286-1070 |

 

(b) Nonwaiver. No failure or delay on Executive’spart in exercising any right hereunder shall operate as a waiver thereof or ofany other right nor shall any single or partial exercise of any such rightpreclude any other further exercise thereof or of any other right.

 

(c)             Amendmentsand Waivers. This Guaranty may not be amended, modified, superseded,canceled, or any terms waived, except by written instrument signed by bothparties, or in the case of waiver, by the party to be charged.

 

(d)             Assignments.This Guaranty shall be binding upon and inure to the benefit of Executive andGuarantor and their respective successors and assigns; provided,however,that without the prior written consent of Executive, Guarantor may not assignits rights and obligations hereunder.

 

----

 

(e)             CumulativeRights, etc. The rights, powers and remedies of Executive under thisGuaranty shall be in addition to all rights, powers and remedies given toExecutive by virtue of any applicable law, rule or regulation, the Contract orany other agreement, all of which rights, powers, and remedies shall becumulative and may be exercised successively or concurrently without impairingExecutive’s rights hereunder.

 

(f)              PartialInvalidity. The provisions of this Guaranty are severable and if any one ormore provisions is determined to be illegal or otherwise unenforceable, inwhole or in part, the remaining provisions, and any partially unenforceableprovisions to the extent enforceable, shall nevertheless be binding andenforceable.

 

(g)             GoverningLaw. This Guaranty is and shall be governed and construed in accordancewith the laws of the State of California, regardless of any laws on choice oflaw or conflicts of law of any jurisdiction.

 

(h)             Arbitration.To the fullest extent allowed by law, any controversy, claim or dispute betweenExecutive and Guarantor (or any of its stockholders, directors, officers,employees, affiliates, agents, successors or assigns) relating to or arisingout of this Guaranty will be submitted to final and binding arbitration inOrange County, California for determination in accordance with the AmericanArbitration Association’s (“AAA”) National Rules for the Resolution ofEmployment Disputes, as the exclusive remedy for such controversy, claim ordispute. In any such arbitration, the parties may conduct discovery to the sameextent as would be permitted in a court of law. The arbitrator shall issue awritten decision, and shall have full authority to award all remedies whichwould be available in court. The arbitrator shall be required to determine allissues in accordance with existing case law and the statutory laws of the Stateof California. Guarantor shall pay the arbitrator’s fees and any AAAadministrative expenses. In the event Executive files a claim to collect unpaidpayments or benefits payable under Section 2.4 of the Contract, the prevailingparty shall be awarded reasonable attorneys fees and costs. Any judgment uponthe award rendered by the arbitrator(s) may be entered in any court havingjurisdiction thereof. BY AGREEING TO THIS MUTUAL AND BINDING ARBITRATIONPROVISION, BOTH EXECUTIVE AND GUARANTOR GIVE UP ALL RIGHTS TO TRIAL BY JURY.This arbitration policy is to be construed as broadly as is permissible underrelevant law. EXECUTIVE AND GUARANTOR HAVE READ THIS SECTION 4(h) ANDIRREVOCABLY AGREE TO ARBITRATE ANY DISPUTE IDENTIFIED ABOVE.

 
|   | Executive’s  Initials |   |  Guarantor’s  Initials |   |   |
|--------|----------------------------|--------|----------------------------------|--------|--------|

 

(i)              EntireAgreement. This Guaranty contains the entire agreement of the partiesrelating to the subject matter hereof, and the parties hereto have made noagreements, representations or warranties relating to the subject matter ofthis Guaranty that are not set forth otherwise herein. This Guaranty supersedesany and all prior agreements, written or oral, with Guarantor relating toguaranteeing obligations under the Contract and any other subject matter ofthis Guaranty. Any such prior agreements are hereby terminated and of nofurther effect. The parties hereto agree that in no event shall an oralmodification of this Agreement be enforceable or valid.

 

----

 

(j)              Counterparts,Facsimile Signatures. This Guaranty may be executed in any number ofcounterparts, each of which shall be deemed an original for all purposes. ThisGuaranty may be executed by a party’s signature transmitted by facsimile (“fax”),and copies of this Guaranty executed and delivered by means of faxed signaturesshall have the same force and effect as copies hereof executed and deliveredwith original signatures. All parties hereto may rely upon faxed signatures asif such signatures were originals. Any party executing and delivering thisGuaranty by fax shall promptly thereafter deliver a counterpart signature pageof this Guaranty containing said party’s original signature. All parties heretoagree that a faxed signature page may be introduced into evidence in anyproceeding arising out of or related to this Guaranty as if it were an originalsignature page.

 

(k)             Rulesof Construction. This Guaranty has been negotiated by the parties and is tobe interpreted according to its fair meaning as if the parties had prepared ittogether and not strictly for or against any party. References in this Guarantyto “Sections” refer to Sections of this Guaranty, unless the context expresslyindicates otherwise. References to “provisions” of this Guaranty refer to theterms, conditions, restrictions and promises contained in this Guaranty.References in this Guaranty to laws and regulations refer to such laws andregulations as in effect on this date and to the corresponding provisions, ifany, of any successor law or regulation. At each place in this Guaranty wherethe context so requires, the masculine, feminine or neuter gender includes theothers and the singular or plural number includes the other. Forms of the verb “including”mean “including without limitation” unless the context expressly indicatesotherwise. “Or” is inclusive and includes “and” unless the context expresslyindicates otherwise. The introductory headings at the beginning of Sections ofthis Guaranty are solely for the convenience of the parties and do not affectany provision of this Guaranty.

 

(1)             NoEmployment With Guarantor. Executive understands and agrees that he is anemployee of Obligor pursuant to the Contract. Executive further understands andagrees that neither this Guaranty nor any obligations performed hereunder shallchange any employee status that Executive may have with Guarantor.

 

IN WITNESSWHEREOF, Executive and Guarantor have executed this Guaranty as of the day andyear first above written.

 

 
| ** ** | **GUARANTOR**                  |
|------------|--------------------------------|
| ** ** | ** **                     |
|       | Impac Mortgage  Holdings, Inc. |
|       |                           |
|       |                           |
|       | By:                            |   |   |
|       | Name:                          |   |   |
|       | Title:                         |   |   |
|       |                           |
| ** ** | **EXECUTIVE**                  |
| ** ** | ** **                     |
| ** ** | ** **                     |
|       | By:                            |   |   |
|       | Gretchen Verdugo               |   |
|            |                                |  |  |  |  |

 

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