Document:

Unassociated Document

Execution Version

PROMISSORY NOTE

 

	
$50,000,000.00

	
New York, New York

	  	
As of June 7, 2011

FOR VALUE RECEIVED, IMH Financial Corporation, a Delaware corporation, having an office at 4900 North Scottsdale Road, Suite 5000, Scottsdale, AZ 85251 (“Maker”), promises to pay to NWRA Ventures I, LLC, a Delaware limited liability company, having an address c/o NWRA Capital Partners, LLC, 10 Cutter Mill Road, Suite 402, Great Neck, NY 11021 (“Payee”), at said office, or at such place in the United States of America as may be designated from time to time in writing by Payee, the principal sum of Fifty Million and 00/100 Dollars ($50,000,000.00) in lawful money of the United States of America (the “Principal Balance”), which is being advanced in accordance with a certain Loan Agreement dated as of the date hereof entered into between Maker, as borrower, and Payee, as lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Loan Agreement”), with interest thereon at the Base Interest Rate (as hereinafter defined in Section 2 of this Note) from and including the date of this Note to, but not including, the date this Note is paid in full calculated in the manner hereinafter set forth, as follows:

 

(i)         interest on the Principal Balance at the Base Interest Rate shall be due and payable, in arrears, in immediately available funds on January 1, 2012, and on the first Business Day of each April, July, October and January thereafter during the term of this Note (each such date, a “Quarterly Payment Date”); and

 

(ii)        the entire Principal Balance, together with all interest accrued and unpaid thereon at the Base Interest Rate, the Current Pay Interest Rate (as hereinafter defined in this Section 2), if any, and all Deferred Capitalized Interest (as defined and described in Section 3 of this Note), the Exit Fee (as defined and described in Section 4 of this Note) and all other sums due under this Note, shall be due and payable in immediately available funds on June 6, 2016 (the “Stated Maturity Date”).

  

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1.           Unless otherwise defined herein, all capitalized terms as used herein shall have the meanings given to such terms in the Loan Agreement.

 

2.           All interest on the Principal Balance shall be calculated in the manner hereinafter set forth from and including the date of this Note to, but not including, the date this Note is paid in full.  The entire Principal Balance shall bear interest at the Base Interest Rate.  The term “Base Interest Rate” shall mean a rate per annum equal to seventeen percent (17%).  The Base Interest Rate shall be calculated on the basis of the actual number of days elapsed over a 360 day calendar year.  Interest which accrues on the Principal Balance at the Base Interest Rate is herein referred to as “Base Interest”. Notwithstanding anything to the contrary contained in this Note, Payee shall have the right in accordance with the provisions of this Section 2 hereinafter set forth to make an annual election (an “Interest Rate Election”) to receive payment on a current basis of a portion of the Base Interest which accrues on the Principal Balance during calendar year 2012 or during any other calendar year or any partial calendar year during the remaining term of this Note at the Current Pay Interest Rate and to defer the payment of the remaining balance of Base Interest accrued on the Principal Balance.  In addition, and notwithstanding anything to the contrary contained in this Note, Maker acknowledges and agrees that Payee has elected, effective as of the date of this Note, to (i) defer the payment of 100% of the Base Interest which accrues on the Principal Balance during the period commencing on the date of this Note and ending December 7, 2011, (ii) receive payment on January 1, 2012, of a portion of the Base Interest which accrues on the Principal Balance during the remaining portion of calendar year 2011 (i.e., December 8, 2011 through and including December 31, 2011) at the Current Pay Interest Rate, and (iii) defer the payment of the remaining balance of Base Interest which accrues on the Principal Balance during such remaining portion of calendar year 2011 (i.e., five (5%) per annum, which equals the difference between the Base Interest Rate less the Current Pay Interest Rate).  The term “Current Pay Interest Rate” shall mean a rate per annum equal to twelve percent (12%).  The portion of Base Interest which accrues at the Current Pay Interest Rate is herein referred to as “Current Pay Interest”.  The Current Pay Interest Rate shall be calculated on the basis of the actual number of days elapsed over a 360 day calendar year.  Payee shall have the right to make an Interest Rate Election with respect to calendar year 2012 and with respect to each other calendar year or partial calendar year occurring during the remaining term of this Note by delivery to Maker of an election notice in the form of Exhibit A attached to this Note (an “Interest Rate Election Notice”), which notice must be delivered by Payee to Maker not more than thirty (30) days nor less than ten (10) days prior to the beginning of a particular calendar year or partial calendar year.  If Payee timely delivers to Maker an Interest Rate Election Notice with respect to a particular calendar year or partial calendar year, then (a) the portion of the Base Interest which accrues on the Principal Balance at the Current Pay Interest Rate shall be due and payable, in arrears, in immediately available funds on each Quarterly Payment Date following the last day of each calendar quarter during the calendar year or partial calendar year in question, and (b) payment of the remaining balance of Base Interest (i.e., five (5%) per annum, which equals the difference between the Base Interest Rate less the Current Pay Interest Rate), which accrues during the calendar year or partial calendar year in question shall be deferred in accordance with the provisions of Section 3 of this Note.  If Payee shall fail to timely deliver an Interest Rate Election Notice pursuant to this Section 2 with respect to calendar year 2012 or with respect to any other calendar year or partial calendar year during the remaining term of this Note, Payee shall be deemed to have elected to receive Base Interest on the Principal Balance at the Base Interest Rate in arrears on a current pay basis on each Quarterly Payment Date pertaining to any such calendar year or partial calendar year with respect to which Payee has not made such timely election.  All Base Interest with respect to which payment has been deferred in accordance with the provisions of this Section 2 and in accordance with the provisions of Section 3 of this Note is herein collectively referred to as “Deferred Interest”.  Deferred Interest shall be capitalized in accordance with the provisions of Section 3 of this Note.

  

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3.           The outstanding balance of Deferred Interest, as capitalized from time to time in accordance with the provisions of this Section 3 hereinafter set forth shall in turn bear interest at the Base Rate, it being agreed that (i) a portion of interest accrued at the Base Rate on the outstanding balance of Deferred Interest from time to time equal to the Current Pay Interest Rate shall be due and payable, in arrears, on January 1, 2012, and on each Quarterly Payment Date thereafter until the date this Note is paid in full, and (ii) the remaining balance of interest which accrues at the Base Rate on the outstanding balance of Deferred Interest from time to time (i.e., five (5%) per annum, which equals the difference between the Base Interest Rate less the Current Pay Interest Rate) shall in turn be capitalized on January 1, 2012, and on each Quarterly Payment Date thereafter until the date this Note is paid and as so capitalized shall thereafter constitute Deferred Interest bearing and accruing interest at the Base Rate, until the date this Note is paid in full (Deferred Interest, as so capitalized on a quarterly basis in accordance with the provisions of Section 2 and Section 3 of this Note being herein collectively referred to as “Deferred Capitalized Interest”).  Maker acknowledges and agrees that (i) the provisions of this Section 3 are and will remain in full force and effect through and including the Deferred Capitalized Interest Payment Date (as hereinafter defined in this Section 3) on which all Deferred Capitalized Interest shall be due and payable in full, and (ii) Deferred Capitalized Interest may not be prepaid in whole or in part, except in accordance with the provisions of this Note hereinafter set forth.  Payment of all Deferred Interest, as capitalized quarterly in accordance with the provisions of this Section 3 hereinabove set forth, shall be deferred until the earliest to occur of (i) the date of a prepayment of the Principal Balance in accordance with the provisions of this Note hereinafter set forth, (ii) upon the occurrence of an Event of Default, and (iii) the Stated Maturity Date (the, earliest to occur of such dates, the “Deferred Capitalized Interest Payment Date”).

 

4.           On the Stated Maturity Date, in addition to the Principal Balance, all unpaid Base Interest, Deferred Capitalized Interest and any and all other amounts of any nature which may or shall then be due and payable by Maker to Payee pursuant to the provisions of this Note, the Loan Agreement and/or the other Loan Documents, Maker shall pay to Payee an exit fee (the “Exit Fee”) equal to fifteen percent (15%) of the outstanding amount of the Debt on the Stated Maturity Date (i.e., the Principal Balance, interest accrued and unpaid at the Current Pay Interest Rate, Deferred Capitalized Interest and all other sums then due and payable under this Note and/or the other Loan Documents).  Maker acknowledges and agrees that the Exit Fee (i) is being paid in consideration of the making of the Loan by Payee to Maker, and (ii) has been earned in full by Payee.  The Exit Fee may not be prepaid in whole or in part, except in accordance with the terms and provisions of this Note hereinafter set forth.

  

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5.           This Note may not be prepaid in whole or in part, except in accordance with the terms and provisions of Section 6 of this Note.

 

6.           The Principal Balance may not be prepaid, in whole or in part, at any time prior to December 7, 2014 (the “Closed Period”).  From and after the end of the Closed Period on December 7, 2014, Maker shall have the right (upon compliance with, and subject to, the following provisions of this Section 6 and subject to the provisions of Section 7 and Section 8 of this Note) to prepay the Principal Balance, in whole, but not in part, upon not less than ninety (90) days’, nor more than one hundred twenty (120) days’ prior written irrevocable notice to Payee specifying the date of prepayment, which date of prepayment shall be the last Business Day during the month of December 2014 or June 2015 (each such day, a "Permitted Prepayment Date"), which payment of the Principal Balance shall be accompanied by the payment of an amount equal to the sum of: (i) all accrued and unpaid Base Interest, (ii) all Deferred Capitalized Interest, (iii) the Modified Prepayment Exit Fee (as hereinafter defined in this Section 6), (iv) the Prepayment Premium (as defined and calculated in accordance with the provisions of this Section 6 hereinafter set forth), and (v) all other sums of any nature then payable pursuant to the provisions of this Note, the Loan Agreement and/or the other Loan Documents (items (i), (ii), (iii), (iv) and (v) are collectively referred to herein as the "Prepayment Amount").  The “Modified Prepayment Exit Fee” shall be calculated on the assumption that Payee would have elected Deferred Interest for the portion of Base Interest eligible for such election with respect to the period commencing on the applicable prepayment date and ending on the Stated Maturity Date and shall be equal to fifteen percent (15%) of the aggregate of (i) the outstanding amount of the Debt as of the applicable prepayment date, (ii) the amount of Current Pay Interest which would have been due on the Stated Maturity Date, and (iii) the amount of Deferred Capitalized Interest which would have accrued during the period commencing on the applicable prepayment date and ending on the Stated Maturity Date and which would have been due on the Stated Maturity Date.  The entire Principal Balance, together with the Prepayment Amount shall, notwithstanding anything to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, be absolutely and unconditionally due and payable (i) on the date specified in such irrevocable notice of prepayment (which date must be a Permitted Prepayment Date), and any failure by Maker to effect such prepayment on the date specified in any such irrevocable notice shall, for all purposes, constitute an Event of Default, and (ii) at any time at the sole and absolute discretion of Payee upon the occurrence of an Event of Default.  Together with, and as a condition precedent to the enforceability by Maker of, the irrevocable prepayment notice to be delivered pursuant to this Section 6, Maker shall deliver to Payee an officer’s certificate of Maker, certifying to Payee as of the date of such officer’s certificate, and, as necessary, updating, those representations and warranties contained in Schedule 1 of the Certificate of Designation (the “Prepayment Bringdown Certificate”).  On the date of prepayment, subject to Payee’s right to waive such delivery obligation in its sole and absolute discretion, Maker shall deliver to Payee the Prepayment Bringdown Certificate dated as of the date of such prepayment.  Maker shall pay to Payee contemporaneously with, and as a condition precedent to Payee being obligated to accept, any such prepayment of the Principal Balance, the Prepayment Amount.   All sums which are payable in connection with any prepayment of the Principal Balance pursuant to this Section 6 shall be paid in Federal funds or other immediately available funds.  If a prepayment is effected subsequent to 2 p.m., New York City time, such prepayment shall be deemed to have been made on the next occurring Business Day, in which case Payee shall be entitled to receive interest on the Principal Balance at the Base Rate for each day through, but not including, such next occurring Business Day.  Any payment of the Principal Balance after Payee shall have declared the Debt to be immediately due as the result of the occurrence of an Event of Default, shall be deemed to be a voluntary prepayment for all purposes of this Section 6 (irrespective of whether such payment is made or tendered during or subsequent to the Closed Period), shall be subject to compliance by Maker with all of the provisions, and all of the rights of Payee under, this Section 6, and Section 7 and Section 8 of this Note, and a Prepayment Premium calculated in accordance with the provisions of this Section 6 shall be payable with respect thereto and as a condition precedent to the obligation of Payee to accept such tender.  Payee shall in no event or under any circumstances be obligated to accept any prepayment of the Principal Balance unless it is accompanied by the Prepayment Amount.  The prepayment premium (the “Prepayment Premium”) payable in connection with any prepayment of the Principal Balance in accordance with the provisions of this Section 6 shall be calculated on the assumption that Payee would have elected Deferred Interest for the portion of Base Interest eligible for such election with respect to the period commencing on the applicable prepayment date and ending on the Stated Maturity Date, and shall be equal to an amount determined by: (A) calculating the sum of the present values of (i) the Principal Balance, (ii) the Current Pay Interest which would have accrued and become due and payable pursuant to this Note on (x) the Quarterly Payment Dates during the period commencing on the applicable prepayment date and ending on the Stated Maturity Date and (y) the Stated Maturity Date, (iii) the Deferred Capitalized Interest which would have accrued pursuant to this Note during the period commencing on the applicable prepayment date and ending on the Stated Maturity Date and which would have been due on the Stated Maturity Date, and (iv) the Modified Prepayment Exit Fee, by discounting (on a quarterly basis), as of the applicable prepayment date, such payments referred to in clauses (i), (ii), (iii) and (iv) of this sentence from their scheduled payment dates (i.e., the Quarterly Payment Dates and the Stated Maturity Date in the case of such Current Pay Interest, and the Stated Maturity Date in the case of the Principal Balance, such Deferred Capitalized Interest and the Modified Prepayment Exit Fee) back to the applicable prepayment date, utilizing the Discount Rate (as hereinafter defined in this Section 6), and (B) subtracting from the sum calculated pursuant to the provisions of Clause (A) the aggregate amount of the Principal Balance and Modified Prepayment Exit Fee being paid on the applicable prepayment date; provided, that, if Payee exercises its right pursuant to Section 7 of this Note to convert a portion of the Debt into Preferred Equity Shares and to accept payment of the balance of the Debt in cash, or if Payee elects, in its sole and absolute discretion, to accept a partial prepayment of the Principal Balance, then the result of the sum calculated above in this Section 6 shall be multiplied by a fraction, the numerator of which shall be equal to the portion of the Principal Balance which Payee has elected to accept in cash, and the denominator of which shall be equal to the aggregate Principal Balance on the date of prepayment).

  

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The “Discount Rate” shall be a rate equal to two and one-half percent (2.5%), plus a rate which when compounded quarterly, is equivalent to the Treasury Rate (as hereinafter defined); provided, however, that if the Debt is declared to be immediately due and payable by Payee as the result of the occurrence of an Event of Default, and if thereafter Maker tenders a payment of the Debt, which, as noted above shall be deemed to constitute a voluntary prepayment for all purposes of this Section 6 irrespective of whether such payment is made or tendered during or subsequent to the Closed Period, then, (i) for purposes of calculating the Prepayment Premium pursuant to this Section 6 in connection with such prepayment the Base Interest Rate shall, effective as of the date of the occurrence of such Event of Default, be deemed to have been increased to the Default Rate (as hereinafter defined in Section 13 of this Note) and to have remained in effect thereafter through and including the Stated Maturity Date, and interest so accrued at the Default Rate on the entire Principal Balance shall be deemed to have been capitalized and compounded monthly through and including the Stated Maturity Date, and (ii) the Exit Fee payable in connection with any such prepayment shall be deemed to have been increased to twenty five percent (25%) of the then outstanding amount of the Debt.  The “Treasury Rate” is the yield calculated by the linear interpolation of the yields, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S. government securities/Treasury constant maturities for the week ending prior to the date of prepayment, of U.S. Treasury constant maturities with maturity dates (one longer and one shorter) most nearly approximating the Stated Maturity Date.  If Release H.15 is no long published, Payee shall select a comparable publication to determine the Treasury Rate.  The determination of the Discount Rate and the Treasury Rate shall be made by Payee on the date which is ten (10) Business Days prior to the scheduled date of prepayment.  Payee shall deliver to Maker a statement setting forth the amount and basis of determination of the Prepayment Premium which is due in connection with a prepayment of the Principal Balance in accordance with the provisions of this paragraph, it being expressly understood that (i) Payee shall not be obligated or required to have actually reinvested the prepaid portion of the Principal Balance in any U.S. Treasury obligations as a condition precedent to Maker being obligated to pay a Prepayment Premium calculated in accordance with the provisions of this Section 6, and (ii) Maker shall not have the right to question the correctness of any such statement or the method of calculation set forth therein, which statement shall in all respects be conclusive and binding upon Maker absent manifest error.

  

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7.           If Maker delivers an irrevocable notice of prepayment to Payee in accordance with the provisions of Section 6 of this Note, Payee shall have the right to exercise the Conversion Right pursuant to the provisions of Article 10 of the Loan Agreement by delivering a Conversion Notice to Maker pursuant to Section 10.1 of the Loan Agreement on or before the close of business on the sixtieth (60th) day following the date of delivery of such irrevocable notice by Maker to Payee, provided that if such sixtieth (60th) day is not a Business Day, the Conversion Notice shall be delivered by the close of business on the first Business Day thereafter, and to elect to convert all or any portion of the Debt which is outstanding on the date designated for such prepayment in such irrevocable notice (or such earlier date as may be mutually agreed upon by Payee and Maker) to Preferred Equity Shares in accordance with the provisions of Article 10 of the Loan Agreement.  The portion of the Debt which is not so converted to Preferred Equity Shares in accordance with the provisions of this Section 7 shall be due and payable in full on the date designated for prepayment in such irrevocable notice (or on such earlier date as may be mutually agreed upon by Payee and Maker).  The Prepayment Premium which will be due in connection with any partial prepayment of the Debt in accordance with the provisions of this Section 7 shall be equal to the Prepayment Premium which would have been due on the date of prepayment if the entire Debt was being prepaid multiplied by a fraction, the numerator of which shall be the amount of the Debt which Payee has elected to permit to be prepaid and not converted to Preferred Equity Shares, and the denominator of which shall be equal to the entire amount of the Debt on the date of prepayment and conversion.

  

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8.           Contemporaneous with any prepayment of this Note by Maker pursuant to, and in accordance with, Section 6 of this Note or pursuant to the provisions of both Section 6 and Section 7 of this Note, as applicable, and as a condition precedent to the obligation of Payee to accept such prepayment, Maker shall, pursuant to Section 2.2.2 of the Loan Agreement, and except as hereinafter expressly provided to the contrary in this Section 8, purchase from Payee and the Affiliates of Payee one hundred percent (100%) of the Lender Common Stock of Maker then held by Payee and/or the Affiliates of Payee for a purchase price calculated pursuant to the provisions of Section 2.2.2 of the Loan Agreement.  If Payee elects, pursuant to the provisions of Section 7 of this Note, to accept only a partial prepayment of the Debt and to convert the balance of the Debt to Preferred Equity Shares pursuant to the provisions of Section 7 of this Note and Article 10 of the Loan Agreement, Maker shall contemporaneously with such partial prepayment, and as a condition precedent to the obligation of Payee to accept such partial prepayment, purchase from Payee and the Affiliates of Payee pursuant to the provisions of Section 2.2.2 of the Loan Agreement a pro-rata portion of the Lender Common Stock of Maker then held by Payee and/or the Affiliates of Payee for a purchase price calculated in accordance with the provisions of Section 2.2.2 of the Loan Agreement, which pro-rata portion shall be equal to the total number of shares of the Lender Common Stock then held by Payee and/or the Affiliates of Payee multiplied by a fraction, the numerator of which shall be the portion of the outstanding Debt being prepaid, and the denominator of which shall be the then total amount of the Debt.  Payee shall have the right in its sole and absolute discretion to waive the requirements of this Section 8 in whole or in part.

 

9.           Notwithstanding any term to the contrary contained in this Note, at any time prior to the Stated Maturity Date, Payee shall have the right to exercise the Conversion pursuant to, and in accordance with, the terms of Article 10 of the Loan Agreement.

  

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10.         Interest on the Principal Balance calculated in the manner set forth above in this Note shall be paid directly by Maker to Payee in funds settled through the New York City Clearing House Interbank Payment System or other funds immediately available to Payee by 2:00 p.m., New York City time, on the due date thereof, by deposit to Bank Chase Account #974 024 010 (via the following fed wire instructions: Bank Chase; ABA #021 000 021; Acct #974 024 010; Acct Name: NWRA Ventures I LLC) in the name of Payee or such other account as Payee shall designate from time to time by written notice to Maker given not less than five (5) Business Days prior to the next scheduled interest payment date.  Each other payment required to be made under this Note shall be made on the due date thereof, in the manner and at the time and place provided in the immediately preceding sentence.  Payments received after 2:00 p.m., New York City time, shall be deemed to have been received on the next Business Day.  Whenever any payments under this Note, the Loan Agreement or the other Loan Documents shall be stated to be due on a day that is not a Business Day and an alternative payment date is not otherwise provided for, such payment shall be made on the immediately preceding Business Day.

 

11.         It is hereby expressly agreed that the entire Debt shall become immediately due and payable at the option of Payee on the happening of any Event of Default.

 

12.         Subject to the provisions of this Section 12 hereinafter set forth, if any installment of Base Interest or Deferred Interest payable under this Note remains unpaid for five (5) days after the due date thereof, or if any other sum payable under this Note remains unpaid for five (5) days after the due date thereof, Maker shall pay to Payee an additional amount equal to five percent (5%) of such unpaid installment or sum as a late payment charge, which additional amount shall constitute part of the Debt and be secured by the Mortgages and the Pledge and Security Agreements.  Payment of late payment charges pursuant to this Section 12 or of interest at the Default Rate shall under no circumstance be deemed a substitute for timely payment in full of all principal, interest and other sums which may or shall become payable under this Note, the Loan Agreement, or any of the other Loan Documents hereunder or thereunder or be deemed to cure any default by Maker.  No acceptance by Payee of any payment in respect of a late payment charge or interest at the Default Rate shall in any event be deemed a waiver by Payee of any of the rights and remedies available to Payee at law, in equity and under the Loan Documents upon a Default or an Event of Default under this Note, the Loan Agreement, or any of the other Loan Documents.

  

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13.         In addition to any late payment charge which may be due under this Note, if the Debt is declared immediately due and payable by Payee pursuant to the provisions of this Note, the Loan Agreement or the other Loan Documents, or if the Debt is not paid in full on the Stated Maturity Date, Maker shall thereafter pay interest on the then entire outstanding Debt (inclusive of any outstanding late payment charges due pursuant to Section 12 above) from the date of such declaration or the Stated Maturity Date, as the case may be, until the date the Debt is paid in full at the Default Rate.  In addition, if a monetary Event of Default or a material non-monetary Event of Default shall occur, the Principal Balance shall, from and including the date upon which such Event of Default or default has occurred and for so long as such Event of Default or default continues and without further act or instrument and without the necessity of any further or prior notice by Payee to Maker, bear interest at the Default Rate, irrespective of whether Payee shall have declared the Debt to be immediately due and payable as the result of the occurrence of such Event of Default or default, and which interest at the Default Rate shall from and after the date of the occurrence of such Event of Default or default shall be capitalized and compounded monthly until paid in full.  The term “Default Rate” shall mean a rate per annum equal to five percent (5%) plus the Base Interest Rate.  The Default Rate shall be calculated on the basis of the actual number of days elapsed over a 360 day calendar year.

  

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14.         Maker hereby waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note.  If any payment under this Note is not made when due, Maker agrees to pay all reasonable, documented, out-of-pocket costs of collection when incurred, including reasonable attorneys’ fees (which costs shall be added to the amount due under this Note and shall be receivable therewith).  Maker agrees to perform and comply with each of the terms, covenants and provisions contained in this Note, the Loan Agreement and the other Loan Documents on the part of Maker to be observed or performed.  No release of any security for the payment of this Note or extension of time for payment of this Note, or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Loan Agreement, or the other Loan Documents made by agreement between Payee and any other person or party shall release, discharge, modify, change or affect the liability of Maker under this Note, the Loan Agreement, or the other Loan Documents.

 

15.         This Note is subject to the express condition that at no time shall Maker be obligated or required to pay interest on the Principal Balance at a rate which could subject Payee to either civil or criminal liability as a result of being in excess of the maximum rate which Maker is permitted by law to contract or agree to pay.  If, by the terms of this Note, Maker is at any time required or obligated to pay interest on the Principal Balance at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and interest payable hereunder shall be computed at such maximum rate and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the Principal Balance.

  

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16.         If Maker consists of more than one person, party or entity, the obligations and liabilities of each such person, party or entity under this Note shall constitute their joint and several obligations.

 

17.         This Note is secured by the Mortgages, the Pledge and Security Agreements and the other Loan Documents.

 

18.         The terms of this Note shall be governed by and construed under the laws of the State of New York without regard to principles of conflict of laws.

 

19.         This Note may only be modified, amended, changed or terminated by an agreement in writing signed by Payee and Maker.  No waiver of any term, covenant or provision of this Note shall be effective unless given in writing by Payee and if so given by Payee shall only be effective for the specific instance in which given.

  

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20.         Maker acknowledges that this Note and Maker’s obligations under this Note are, and shall at all times continue to be, absolute and unconditional in all respects, and shall at all times be valid and enforceable irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to this Note and the obligations of Maker under this Note or the obligations of any other person or party relating to this Note or the obligations of Maker hereunder or otherwise with respect to the Loan, except as enforceability may be limited by anti-deficiency laws or bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).  Maker absolutely, unconditionally and irrevocably waives any and all right to assert any defense, setoff, counterclaim or crossclaim of any nature whatsoever with respect to this Note or the obligations of Maker under this Note or the obligations of any other person or party relating to this Note or the obligations of Maker hereunder or otherwise with respect to the Loan in any action, case or proceeding brought by Payee to collect the Debt, or any portion thereof, or to enforce, foreclose and realize upon the liens and security interests created by the Mortgages, the Pledge and Security Agreements and the other Loan Documents.  Maker acknowledges that no oral or other agreements, understandings, representations or warranties exist with respect to this Note or with respect to the obligations of Maker under this Note, except those specifically set forth in this Note, the Loan Agreement and the other Loan Documents, and that this Note, the Loan Agreement and other Loan Documents set forth the entire agreement and understanding of Payee and Maker.  Maker specifically acknowledges and agrees that any rights, remedies or monetary claims (including, without limitation, damage claims and indemnity claims) of any kind arising under or in any way related to the provisions of the Loan Agreement that address the Conversion Right and the exercise by Payee of the Conversion Right are (except as otherwise expressly provided to the contrary in the Loan Agreement) independent of and unrelated in any manner whatsoever to Maker’s obligation to pay the Debt and to perform its obligations under the Note, the Loan Agreement and the other Loan Documents.  Maker acknowledges that no oral or other agreements, understandings, representations or warranties exist with respect to this Note or with respect to the obligations of Maker under this Note, except those specifically set forth in this Note, the Loan Agreement and the other Loan Documents, and that this Note, the Loan Agreement and other Loan Documents set forth the entire agreement and understanding of Payee and Maker.

  

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21.         No delay on the part of Payee in exercising any right or remedy under this Note, the Loan Agreement or the other Loan Documents or failure to exercise the same shall operate as a waiver in whole or in part of any such right or remedy.  No notice to or demand on Maker shall be deemed to be a waiver of the obligation of Maker or of the right of Payee to take further action without further notice or demand as provided in this Note, the Loan Agreement and the other Loan Documents.

 

22.         If Maker does not maintain a place of business in New York City, Maker shall appoint an agent for service of process (or notice of motion or other application to any court) in New York City and will give prompt notice to Payee of the name and address of any such agent appointed by Maker.  Maker further agrees that the failure of Maker’s agent for service of process to give Maker notice of any service of process will not impair or affect the validity of such service or of any judgment based thereon.  If, despite the foregoing, there is for any reason no agent for service of process on Maker available to be served and if at that time Maker has no place of business in New York City, then Maker irrevocably consents to service of process (or notice of motion or other application to any court) at the last known address of Maker, whether such address be within or without the jurisdiction of any such court.  Maker agrees to submit to personal jurisdiction in the State of New York in any action, case or proceeding arising out of this Note, the Loan Agreement, the other Loan Documents or otherwise with respect to the Loan and, in furtherance of such agreement, Maker hereby agrees and consents that without limiting other methods of obtaining jurisdiction, personal jurisdiction over Maker in any such action, case or proceeding may be obtained within or without the jurisdiction of any court located in New York by service of process in the manner described above.  Maker also agrees that the venue of any litigation arising in connection with the Debt or in respect of any of the obligations of Maker under the Note, the Loan Agreement, the other Loan Documents or otherwise with respect to the Loan shall, to the extent permitted by law, be in New York County.

  

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23.         Maker (and the undersigned representative(s) of Maker, if any) represent that Maker has full power, authority and legal right to execute and deliver this Note and that this Note constitutes the valid and binding obligations of Maker, except as enforceability may be limited by anti-deficiency laws or bankruptcy, receivership, conservatorship, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

 

24.         MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND PAYEE BY ITS ACCEPTANCE OF THIS NOTE IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, CASE, PROCEEDING, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THE CREDIT FACILITY, THIS NOTE, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 

25.         Whenever used, the singular number shall include the plural, the plural the singular, and the words “Payee” and “Maker” shall include their respective successors and assigns, provided, however, that Maker shall in no event or under any circumstance have the right without obtaining the prior written consent of Payee in its discretion to assign or transfer Maker’s obligations under this Note, the Loan Agreement or the other Loan Documents, in whole or in part, to any other person, party or entity.

  

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26.         Wherever pursuant to this Note Payee exercises any right given to Payee to consent or not consent, or to approve or disapprove, or any arrangement or term is to be satisfactory to Payee, the decision of Payee to consent or not consent, or to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory, shall be in the sole and absolute discretion of Payee and shall be final and conclusive absent manifest error.

 

27.         For example purposes only, attached as Exhibit B is an example of the computation methodology to be utilized in connection with payments under this Note.

 

[SIGNATURE PAGE FOLLOWS]

 

  

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IN WITNESS WHEREOF, Maker has duly executed this Note as of the day and year first above written.

 

	  	
IMH FINANCIAL CORPORATION

	  	  	  
	  	
By:

	
/s/ William G. Meris

	  	  	
Name:

	
William G. Meris

	  	  	
Title:

	
President

  

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Exhibit A

 

Form of Election Notice

 

[INSERT PAYEE LETTERHEAD]

[INSERT DATE]

IMH Financial Corporation

4900 North Scottsdale Road

Suite 5000 Scottsdale, AZ 85251

Attention: Mr. Will Meris

Re: That certain Promissory Note, dated as of June 7, 2011 (the “Promissory Note”), made by IMH Financial Corporation, a Delaware corporation (“Maker”), to NWRA Ventures I, LLC, a New York limited liability company (“Payee”)

Dear Sirs:

The terms of the Promissory Note are incorporated herein.  All capitalized terms used herein, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Promissory Note.

Payee hereby notifies Maker that Payee, pursuant to the provisions of Section 2 of the Promissory Note, elects to receive the Base Interest for the calendar year [____] or partial calendar year [____] as follows: (a) a portion of the Base Interest accruing on the Principal Balance at the Current Pay Interest Rate shall be due and payable, in arrears, in immediately available funds on each Quarterly Payment Date following the last day of each calendar quarter during the calendar year or partial calendar year in question, (b) payment of the remaining balance of Base Interest, which accrues during such calendar year or partial calendar year (i.e., five (5%) per annum, which equals the difference between the Base Interest Rate less the Current Pay Interest Rate) shall be deferred and capitalized in accordance with the provisions of Section 3 of the Promissory Note, and (c) a portion of the Base Interest which accrues on the outstanding balance of Deferred Interest from time to time in accordance with the provisions of Section 3 of the Promissory Note at the Current Pay Interest Rate shall be due and payable, in arrears, in immediately available funds on each Quarterly Payment Date until the date the Promissory Note is paid in full, and the remaining balance of interest which accrues thereon at the Base Rate (i.e., five (5%) per annum, which equals the difference between the Base Interest Rate less the Current Pay Interest Rate) shall in turn be deferred and capitalized in accordance with the provisions of Section 3 of the Promissory Note, and as so deferred and capitalized shall thereafter constituted Deferred Capitalized Interest, which Deferred Capitalized Interest shall be due and payable on the Deferred Capitalized Interest Payment Date.

 

  

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Sincerely,

	
NWRA Ventures I, LLC

	  
	  	  	  
	
By:

	  	  
	  	
Name:

	  
	  	
Title:

	  

  

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Exhibit B

 

Convertible Debt Prepayment Model

[attached hereto]

  

  

19CONSULTING SERVICES AGREEMENT

(Juniper Capital Partners, LLC)

 

THIS CONSULTING SERVICES AGREEMENT (this “Agreement”) is entered into effective as of June 7, 2011 (the “Effective Date”), by and between (A) (i) IMH Financial Corporation, a Delaware corporation (“IMH”) and (ii) Juniper Capital Partners LLC (the “Consultant”), and (B) (i) INFINET Securities, LLC (“Infinet”), and (ii) the Consultant.

 

THE PARTIES ENTER THIS AGREEMENT ON THE BASIS OF THE FOLLOWING FACTS, INTENTIONS AND UNDERSTANDINGS:

 

A.           IMH and Infinet, respectively, desire to retain the Consultant to provide advice to, and consult with, IMH and Infinet, respectively, with respect to the Consulting Services on the terms and conditions set forth in this Agreement, and the Consultant desires to accept such engagement from IMH and Infinet, respectively, and to perform the Consulting Services on the terms and conditions set forth in this Agreement.

 

B.           IMH and Infinet, respectively, acknowledges and agrees that (i) the Consultant’s responsibilities under this Agreement are advisory only and that the Consultant has no responsibility or right to assist IMH or Infinet, respectively, in implementing or effecting any transaction, and (ii) in the event that IMH or Infinet, respectively, elects to implement or effect any transaction pertaining to the Consulting Services or otherwise, IMH or Infinet, respectively, shall do so independent of the Consultant and through other consultants selected by IMH or Infinet, respectively, including, without limitation, legal counsel, auditors, financial advisors and underwriters, among other qualified experts.

 

C.           Notwithstanding the Consultant’s dual consulting relationships described in this Agreement between (i) the Consultant and IMH, on the one hand, and (ii) the Consultant and Infinet, on the other hand, the Consultant shall not receive duplicate benefits from IMH and Infinet unless otherwise specifically set forth in this Agreement.

 

D.           A breach by the Consultant of the Consultant’s obligations under this Agreement to IMH or Infinet, as applicable, shall also give rise to an automatic cross-default in favor of Infinet or IMH, as applicable, as follows:  (i) in the event of a breach of the Consultant’s obligations to IMH under this Agreement, such breach shall also constitute a breach of the Consultant’s obligations to Infinet under this Agreement; and (ii) in the event of a breach of the Consultant’s obligations to Infinet under this Agreement, such breach shall also constitute a breach of the Consultant’s obligations to IMH under this Agreement.

 

E.            IMH shall guarantee the payment obligations of Infinet to the Consultant with respect to the Base Consulting Fee if that obligation is not paid by Infinet in a timely manner, as more particularly set forth in this Agreement.

 

  

 

  

F.            The Consultant acknowledges that (i) IMH is seeking to consummate a transaction with NWRA Ventures I, LLC (and/or its designees) (collectively, “NWRA”) (the “NWRA Convertible Note Transaction”), (ii) the consummation of the NWRA Convertible Note Transaction shall not constitute a breach of this Agreement by IMH or Infinet and shall not constitute a Change in Control or a Constructive Termination without Cause (all as defined herein) under this Agreement, and (iii) pursuant to the Convertible Note Transaction the note thereunder may be converted into preferred stock in IMH pursuant to IMH’s Certificate of Designation (the conversion thereof being the “Conversion Date”).

 

G.           IMH, Infinet and the Consultant intend (i) that this Agreement shall be a consulting agreement and not an employment agreement, and (ii) that the Consultant shall be an independent contractor and not an employee.

 

H.           The Effective Date of this Agreement shall be the date that the NWRA Convertible Note Transaction is both executed and closes.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and promises contained in this Agreement, the parties hereto agree as follows:

 

1.           Engagement.

 

1.1         Initial Term.  As of the Effective Date, IMH and Infinet, respectively, engage the Consultant, and the Consultant accepts such engagement, upon the terms and conditions hereinafter set forth, for the period (a) commencing on the Effective Date, and (b) expiring four (4) years thereafter on May __, 2015, except as otherwise permitted by the terms of this Agreement (the “Initial Term”).

 

1.2         Renewal Term.  Upon the expiration of the Initial Term, provided this Agreement has not been terminated by IMH, Infinet or the Consultant, as applicable, pursuant to the terms of this Agreement, the Initial Term shall be automatically extended for successive three (3) year terms (each, a “Renewal Term”) unless either of (a) the Board of Directors of IMH (the “IMH Board”), or the Board of Directors of Infinet (the “Infinet Board’), as applicable, on the one hand, by a seventy percent (70%) vote of the IMH Board or the Infinet Board, as applicable, or (b) the Consultant, on the other hand, gives the other a written notice of non-renewal within ninety (90) days prior to the expiration of the Initial Term or the applicable Renewal Term (the “Non-Renewal Notice”).  If any such Notice of Non-Renewal is not given, this Agreement shall immediately and automatically renew and shall terminate at the end of the then applicable Renewal Term.

 

1.3         Definition.  The Initial Term and the Renewal Term with respect to IMH or Infinet, as applicable, shall be collectively referred to in this Agreement as the “Term.”

 

2.           Title.  The Consultant’s title shall be “Strategic Consultant, Business Development” for each of IMH and Infinet.

 

  

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3.           Consulting Services.

 

3.1         Included Services.  The Consultant shall perform consulting services for the benefit of IMH and Infinet, respectively, as more particularly set forth on Schedule 2.1 attached hereto (the “Consulting Services”) and such other services as IMH and the Consultant, on the one hand, or Infinet and the Consultant, on the other hand, hereto may mutually agree upon in writing from time to time after the Effective Date; provided, however, in no event shall the Consultant provide any of the Excluded Services (as defined below) to IMH or Infinet, nor shall IMH or Infinet expect any of the Excluded Services to be a part of the Consulting Services to be rendered to IMH or Infinet, as applicable; provided, further, in the event that the Consultant becomes properly licensed in all applicable jurisdictions to render some or all of the Excluded Services, and such license is in good standing at all times during the Term, upon the written request of IMH or Infinet, as applicable, the Consultant may provide the Excluded Services to IMH or Infinet, as applicable, upon the subsequent, mutual written agreement between IMH and the Consultant, or Infinet and the Consultant, as applicable (the “Conditions to Providing the Excluded Services”).

 

3.2         Board Activities.

 

3.2.1  IMH Board.  Upon the written request of the Consultant after the Conversion Date, IMH shall seek to cause Jay Wolf (“Wolf”), a member of the Consultant, to be elected to the IMH Board, subject to customary board election practices and the following proviso.  In the event that Wolf ceases for any reason during the Term to serve on the IMH Board, Wolf shall have the right (but not the obligation) to propose a successor to Wolf, and IMH shall seek to cause such recommended successor to be elected to the IMH Board within a commercial reasonable period of time, subject to customary board election practices; provided, however, the IMH Board shall have the overriding right to review and approve, in its sole discretion, the reputation, education, experience and other qualifications of Wolf’s proposed successor.

 

3.2.2  Infinet Board.  Upon the written request of the Consultant, prior to or on the Effective Date, Infinet shall seek to cause Wolf to be elected to the Infinet Board on or about the Effective Date, subject to customary board election practices.  In the event that Wolf ceases for any reason during the Term to serve on the Infinet Board, Wolf shall have the right (but not the obligation) to recommend a successor to Wolf, and Infinet shall seek to cause such recommended successor to be elected to the Infinet Board within a commercially reasonable period of time; provided, however, the Infinet Board shall have the overriding right to review and approve, in its sole discretion, the reputation, education, experience and other qualifications of Wolf’s proposed successor.

  

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3.3         Excluded Services.

 

3.3.1  Specific.  Subject to IMH’s and Infinet’s, as applicable, written approval of the Conditions to Providing the Excluded Services, the Consulting Services to be rendered by the Consultant to IMH or Infinet, as applicable, shall not include any services pertaining to implementing or effecting any transaction, or include, without limitation, any of the following services in any securities transaction or transactions:  (i) structuring an offering or any transaction; (ii) identifying potential purchasers; (iii) taking transaction orders from customers; (iv) routing or matching orders; (v) facilitating negotiations of equity transactions; (vi) selecting a market or dealer; (vii) executing or facilitating the execution of any securities transaction; (viii) soliciting or recommending any securities transactions; (ix) handling customer funds or securities; (x) arranging for or performing clearance and settlement of executed trades; or (xi) preparing and sending any transaction confirmations.  To the extent that IMH or Infinet, as applicable, elects to implement or effect any securities transaction pertaining to the Consulting Services or otherwise, IMH and Infinet, as applicable, shall do so independent of the Consultant and through other consultants, including, without limitation, legal counsel, auditors, financial advisors and underwriters, as applicable, among other qualified experts.

 

3.3.2  Other.  IMH and Infinet, respectively, acknowledges and agrees that the Consultant shall have no responsibility (i) to render any services, or be expected to render any services, under this Agreement that require the Consultant to register as a broker-dealer or an investment advisor, or (ii) to perform, or be expected to perform, any services that are consistent with being engaged in the business of a broker-dealer or an investment advisor.

 

3.3.3  Definition.  The services described in Sections 3.3.1 and 3.3.2 shall collectively constitute the “Excluded Services”.

 

4.           Reporting; Time Commitment.

 

4.1         Reporting.  The Consultant shall report directly to (a) the IMH Board and the Chief Executive Officer of IMH with respect to matters concerning IMH, and (b) the Infinet Board and the Chief Executive Officer of Infinet with respect to matters concerning Infinet; provided, however, for the avoidance of doubt, this Agreement shall not be amended or extended (other than as contemplated under Section 1.2) without the prior written approval of the IMH Board or the Infinet Board, as applicable.

 

4.2         Time Commitment.  During the Term, the Consultant shall devote such amount of the Consultant’s business time, energy and skill to the Consulting Services as may be reasonably necessary to perform the Consulting Services, with the exact division of time between IMH and Infinet to be determined by IMH and Infinet from time to time after consultation with the Consultant (the “Sharing Ratio”), subject to the Consultant’s right to (a) continue with the Consultant’s other pre-existing, non-material consulting and other assignments with third parties (to be reviewed and approved by the IMH Board and the Infinet Board from time to time and, in the first instance, reviewed and approved by the IMH Board and the Infinet Board prior to or on the Effective Date), and (b) take on new consulting and other assignments for third parties, in the event and to the extent that such new consulting and other assignments (i) do not present current material conflicts of interest with the Consulting Services, (ii) are not reasonably likely to present future material conflicts of interest with the Consulting Services, (iii) do not materially adversely effect the Consultant’s commitment of time to IMH or Infinet and to the timely delivery of the Consulting Services to IMH and Infinet, and (iv) are approved in writing in advance in each instance by the IMH Board and the Infinet Board.

  

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5.           Representations, Warranties and Covenants.

 

5.1         The Consultant.  The Consultant represents, warrants and covenants to each of IMH and Infinet as follows:

 

5.1.1  Organization.  The Consultant is duly organized, validly existing and in good standing under the laws of its organization and has the requisite corporate power and authority to carry on its business as now being conducted.

 

5.1.2  Authority; Binding Obligation.  The Consultant has all requisite corporate power and authority to enter into this Agreement and perform the Consulting Services.  The execution and delivery of this Agreement has been duly authorized by all necessary action on the part of the Consultant.  This Agreement has been duly executed and delivered by the Consultant and, assuming due execution and delivery by the other parties hereto, constitutes the valid and binding obligation of the Consultant, enforceable against the Consultant in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

 

5.1.3  Conduct.  The Consultant (and all employees and members thereof) shall professionally, honestly and faithfully present and conduct itself (and themselves) at all times during the Term and in the performance of the Consulting Services.  The Consultant (and all employees and members thereof) shall perform the Consulting Services in a diligent, timely and competent manner.  The Consultant has not held itself out as (x) a broker-dealer, or as a person qualified to render the services of a broker-dealer, or (y) a party willing or able to execute trades or assist others in routing or completing securities transactions.  Upon the expiration or earlier termination of the Term, the Consultant shall deliver to IMH and Infinet, as applicable, all property belonging to IMH and Infinet, as applicable, then in the Consultant’s possession or otherwise previously provided to the Consultant by IMH or Infinet, as applicable.

 

5.1.4  Location.  The Consultant shall (i) primarily work remotely from the Consultant’s own office in Los Angeles, California; however, as reasonably requested by IMH and/or Infinet from time to time the Consultant shall work from IMH’s and Infinet’s office in Scottsdale, Arizona (the “Scottsdale Office”), and (ii) be expected to travel from time to time in the course of performing the Consulting Services for IMH and Infinet.

 

5.1.5  Excluded Services.  At no time shall the Consultant (or any employee or member thereof) have the right to perform any of the Excluded Services on behalf of IMH, or any affiliates thereof, or Infinet, except as otherwise permitted under Section 3.1.

  

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5.1.6   Members of Consultant.  Each of Wolf and Alex Krys (“Krys”) is a member of the Consultant, and substantially all of the Consulting Services for, on behalf of, and through the Consultant shall be performed by a combination of Wolf and Krys; provided that, upon the reasonable request of IMH and Infinet, as applicable, that a particular portion of the Consulting Services be performed primarily by Wolf, Consultant shall use its reasonable best efforts to cause such portion to be performed primarily by Wolf.

 

5.2         The Company.  IMH and Infinet, respectively, represents, warrants and covenants to the Consultant as follows:

 

5.2.1  Organization.  IMH and Infinet, respectively, are duly organized, validly existing and in good standing under the laws of its organization and has the requisite corporate power and authority to carry on IMH’s business as now being conducted and Infinet’s business as now being contemplated to be conducted.

 

5.2.2  Authority; Binding Obligation.  IMH and Infinet, respectively, has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder.  The execution and delivery of this Agreement has been duly authorized by all necessary action on the part of IMH and Infinet, respectively.  This Agreement has been duly executed and delivered by IMH and Infinet, respectively, and, assuming due execution and delivery by the other parties hereto, constitutes the valid and binding obligation of IMH and Infinet, respectively, enforceable against IMH and Infinet, respectively, in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

 

6.           [Intentionally Omitted].

 

7.           Consulting Fees and Expenses; Benefits.

 

7.1         Consulting Fees.  During the Term, subject to the terms of this Agreement, as payment and consideration for the Consultant’s performance of the Consulting Services to IMH and Infinet, respectively, and other agreements herein, IMH and Infinet, respectively, shall pay the Consultant the consulting fees set forth in this Section 7, with no duplication of amounts intended (collectively, the “Consulting Fees”) subject to and in accordance with the terms, conditions, qualifications and timing set forth in this Section 7.

 

7.2         Base Consulting Fee.

 

7.2.1  Amount.  During the Term, for so long as the Consultant is providing the Consulting Services, the Consultant shall receive an aggregate annual base consulting fee of Three Hundred Thousand Dollars ($300,000) (the “Base Consulting Fee”).

  

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7.2.2  Adjustment.  The amount of the Base Consulting Fee shall be reviewed by the IMH Board and the Infinet Board, respectively, annually and may be adjusted upward (but not downward) at such time.

 

7.2.3  Payment Timing; Other.  From and after the Effective Date and during the Term, the Base Consulting Fee shall be payable by IMH and Infinet one-twelfth (1/12) per month in accordance with IMH’s and Infinet’s respective normal business practices, but in no event less frequently than monthly.

 

7.3         Expenses.  The Consultant shall be entitled to reimbursement by IMH and Infinet, respectively, for all reasonable and actually incurred business expenses that the Consultant incurs on behalf of IMH or Infinet, respectively, during the Term in carrying out the Consulting Services; provided, however, that the Consultant shall provide to IMH or Infinet, as applicable, the customary documentation in accordance with IMH’s and Infinet’s respective expense reimbursement policies in effect from time to time; and provided, further, that the Consultant submits to IMH or Infinet, as applicable, all receipts for all properly reimbursable expenses within ninety (90) days after the incurrence of such expenses; and provided, lastly, that IMH and Infinet, as applicable, shall reimburse the Consultant therefor within thirty (30) days after the receipt of such business receipts.

 

7.4         IMH Guarantee.  In the event that Infinet fails to meet Infinet’s payment obligations to the Consultant with respect to the Base Consulting Fee in a timely manner, then IMH shall pay the entirety of the Base Consulting Fee to the Consultant and Infinet agrees that IMH shall have full recourse against Infinet to seek reimbursement thereof (and all costs of collection, including, without limitation, all attorneys’ fees and costs incurred in connection therewith).

 

8.           Termination; Termination Fees; and Related Matters.

 

8.1         Termination.  The Consultant’s Consulting Services may be terminated at any time, with or without Cause, at the option of IMH or Infinet, respectively, subject only to any applicable termination obligations set forth in this Section 8.  Upon any termination hereunder, the Term shall automatically expire.

 

8.2         Definitions.  For purposes of this Section 8, the following terms shall have the indicated definitions:

 

(1)         Cause.  “Cause” shall mean:

 

(i)           The Consultant is convicted of, or enters a plea of nolo contendere to, an act which is defined as a felony under any federal, state or local law, which conviction or plea has or can be expected to have a material adverse impact on the business or reputation of IMH or Infinet, as applicable; provided, however, that a conviction of, or a plea of nolo contendere to, a traffic related felony (including, without limitation, driving under the influence, driving while intoxicated, or any similar crime or offense) shall not give rise to “Cause;” or

  

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(ii)          the Consultant is convicted of any one or more acts of intentional theft, larceny, embezzlement, fraud or other misappropriation;

 

(iii)         a judicial determination of the Consultant’s commission of any one or more acts of gross negligence or willful misconduct that has resulted in material harm to the business or reputation of IMH or Infinet, respectively; or

 

(iv)        the Consultant’s material breach of this Agreement that, if curable, is not cured by the Consultant within thirty (30) days after written notice form IMH or Infinet, as applicable (such written notice shall include a specific delineation of the particular acts or circumstances that are the basis for the alleged material breach).

 

Notwithstanding the foregoing, no termination of the Consulting Services by IMH or Infinet, as applicable, shall be treated as for Cause or be effective until and unless all of the steps described in clauses (A) through (C) immediately below have been complied with:

 

(A)           written notice of intention to terminate for Cause has been given by IMH or Infinet, as applicable, to the Consultant within sixty (60) days after the IMH Board or the Infinet Board, as applicable, first learns of the act, failure or event (or latest in a series of acts, failures or events) constituting “Cause;”

 

(B)           the IMH Board or the Infinet Board, as applicable, has voted (at a meeting of the IMH Board or the Infinet Board, as applicable, duly called and held as to which the termination of the Consultant from IMH or Infinet, as applicable, is an agenda item) to terminate the Consultant for Cause after the Consultant has been given written notice of the acts or circumstances which are the basis for the termination for Cause and after the Consultant has been afforded at least ten (10) days prior written notice of the meeting and an opportunity to present the Consultant’s position in writing; and

 

(C)           the IMH Board or the Infinet Board, as applicable, has given a Notice of Termination to the Consultant within ten (10) days after the last to occur of the IMH Board or the Infinet Board meeting, as applicable, and the conviction or final, judicial determination, as applicable, as required in Sections 8.2(1)(i), (ii) or (iii).

 

IMH or Infinet, as applicable, after a good faith determination by the IMH Board or the Infinet Board, as applicable, may, in the sole discretion of the IMH Board or the Infinet Board, as applicable, suspend the Consultant from performing any services for IMH or Infinet, as applicable, with continuing payment of the Base Consulting Fee at any time during the period commencing with the giving of notice to the Consultant under clause (A) immediately above until final Notice of Termination is given under clause (C) immediately above.  Upon the giving of notice as provided in clause (C) immediately above, no further payments shall be due to the Consultant under this Agreement except as provided in Section 8.3(vi).

  

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(2)         Change in Control.  A “Change in Control” as to IMH shall mean the occurrence of any one or more of the following events following the Effective Date and the consummation of the NWRA Convertible Note Transaction with respect to IMH only (and not Infinet):

 

(i)           any individual, entity or group (a “Person”) within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Act”) (other than IMH, any corporation, partnership, trust or other entity controlled by IMH (a “Subsidiary”), or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of IMH or any of its Subsidiaries or NWRA or any affiliate thereof), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such Person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act) of securities of IMH representing fifty percent (50%) or more of the combined voting power of IMH’s then outstanding securities having the right to vote generally in an election of IMH’s Board (“Voting Securities”), other than as a result of (A) an acquisition of securities directly from IMH or any Subsidiary or (B) an acquisition by any corporation pursuant to a reorganization, consolidation or merger; or

 

(ii)          approval by the shareholders of IMH of a complete liquidation or dissolution of IMH; or

 

(iii)         the sale, lease, exchange or other disposition of all or substantially all of the assets of IMH, other than to a corporation, with respect to which following such sale, lease, exchange or other disposition (A) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the outstanding Voting Securities immediately prior to such sale, lease, exchange or other disposition, (B) no Person (excluding IMH or NWRA or any affiliate thereof and any employee benefit plan (or related trust) of IMH or NWRA or any affiliate thereof, or a Subsidiary or such corporation or a subsidiary thereof and any Person beneficially owning, immediately prior to such sale, lease, exchange or other disposition, directly or indirectly, fifty percent (50%) or more of the outstanding Voting Securities), beneficially owns, directly or indirectly, fifty percent (50%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) subject to the nomination and approval of a full slate of directors to the IMH Board (including, without limitation, independent directors) in accordance with IMH’s governing documents reasonably promptly after, or in connection with, the consummation of the NWRA Convertible Note Transaction, but in no event later than December 31, 2011, at least a majority of the members of the board of directors of such corporation were members of the IMH Board at the time of the execution of the initial agreement or action of the IMH Board providing for such sale, lease, exchange or other disposition of assets of IMH.

  

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Notwithstanding the foregoing, a “Change in Control” as to IMH shall not be deemed to have occurred for purposes of this Agreement solely as the result of (a) an acquisition of securities by IMH or NWRA or any affiliate thereof in IMH which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate voting power represented by the Voting Securities beneficially owned by any Person to fifty percent (50%) or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any Person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Stock or other Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction), then a “Change in Control” as to IMH shall be deemed to have occurred for purposes of this Agreement, or (b) the nomination and approval of a full slate of directors to the IMH Board (including, without limitation, independent directors) in accordance with IMH’s governing documents reasonably promptly after, and in connection with, the NWRA Convertible Note Transaction, but in no event later than December 31, 2011.

 

(3)         Constructive Termination Without Cause. “Constructive Termination Without Cause” shall mean a termination of the Consultant initiated by the Consultant not later than six (6) months following the occurrence, without the Consultant’s prior written consent, of one or more of the following events (or the latest to occur in a series of events):

 

(i)           a material adverse change in the Consulting Services for IMH or Infinet (except in the event that IMH has requested that the Consultant become a full-time executive officer of IMH), as applicable, which would materially reduce the level, importance or scope of the Consulting Services, except in connection with the termination of the Consultant’s Consulting Services for Cause, as a result of Consultant’s death or by Consultant other than for a Constructive Termination Without Cause;

 

(ii)          any material breach by IMH or Infinet, as applicable, of this Agreement;

 

(iii)         any purported termination of the Consultant for Cause by the Company or Infinet, as applicable, which does not comply with the terms of Section 8.2(1);

 

(iv)        the failure of IMH or Infinet, as applicable, to obtain a written agreement from any successor or assign of IMH or Infinet, as applicable, to assume and agree to perform the portions of this Agreement as applicable to IMH or Infinet, as applicable, as contemplated in Section 12 of this Agreement;

 

(v)         the failure by IMH to continue in effect any benefit plan in which the Consultant participates immediately prior to a Change in Control of IMH which is material to the Consultant’s total fees from IMH, unless reasonably comparable alternative arrangements (embodied in ongoing substitute or alternative plans) have been implemented with respect to such plans, or the failure by IMH to continue the Consultant’s participation therein (or in such reasonably comparable substitute or alternative plans) on a basis not materially less favorable, in terms of the amount of benefits provided by IMH and the level of the Consultant’s participation relative to other participants, as existed during the last completed fiscal year of IMH prior to the Change in Control of IMH;

  

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(vi)        [Intentionally Omitted]; or

 

(vii)       subject to Section 3.2.1, except as may be prohibited by the Securities and Exchange Commission, the Financial Industry Regulatory Authority or other applicable laws or the insurance carrier(s), the failure of the IMH Board or the Infinet Board, as applicable, to take action as may be necessary to seek to elect the Consultant to the IMH Board or the Infinet Board, as applicable; provided, however, that it will not be a Constructive Termination Without Cause if the Consultant shall fail to be re-elected by the shareholders of IMH or the IMH Board, or by the members of the Infinet or Infinet Board, as applicable, if such failure to take action is in connection with the termination of the Consultant from IMH or Infinet, as applicable, for Cause, as a result of the Consultant’s death, or by the Consultant other than for a Constructive Termination Without Cause.

 

Notwithstanding the foregoing, a Constructive Termination Without Cause shall not be treated as having occurred unless the Consultant provides IMH or Infinet, as applicable, with written notice of the particular action or omission described in clauses (i) through (vii) immediately above giving rise to the claimed Constructive Termination Without Cause within thirty (30) days after the Consultant’s knowledge of the initial existence of such action or omission and, within thirty (30) days after the Consultant provides IMH or Infinet, as applicable, with such written notice, IMH or Infinet, as applicable, fails to substantially correct (or reverse) such action or omission.  In addition, a Constructive Termination Without Cause shall not be treated as having occurred unless the Consultant has been given a final Notice of Termination delivered after expiration of IMH’s or Infinet’s, as applicable, thirty (30) day cure period.  The Consultant shall be deemed to have waived the Consultant’s right to declare a Constructive Termination Without Cause with respect to any such action or omission if Consultant does not notify IMH or Infinet, as applicable, in writing of such action or omission within thirty (30) days of the Consultant’s initial knowledge of the event that gives rise to such action or omission.

 

(4)         Covered Average Fees. “Covered Average Fees” shall mean the sum of the Consultant’s Covered Fees (defined below) as calculated for the calendar year in which the Date of Termination occurs and for each of the two (2) preceding calendar years (if applicable), divided by three (3); provided that if such sum is comprised of less than three (3) full calendar years of Covered Fees, such sum shall instead be divided by the portion of three (3) full calendar years represented by such Covered Fees (it being understood that Covered Average Fees is intended to express with respect to any period the Covered Fees for such period on an annualized basis).  (For example, if such sum represents only 18 months of Covered Fees because only 18 months have elapsed since the Effective Date, then such sum would be divided by 1.5 instead of three (3).)

  

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(5)         Covered Fees.  “Covered Fees,” for any calendar year (or portion thereof), shall mean an amount equal to the sum of the Consultant’s Base Consulting Fee for such calendar year (or portion thereof).

 

8.3         Rights Upon Termination.

 

(i)           Payment of Benefits Earned Through Date of Termination.  Upon any termination of the Consultant during the Term applicable to IMH or Infinet, as applicable, the Consultant, or the Consultant’s estate, shall in all events be paid all accrued but unpaid Base Consulting Fees.  Any and all amounts due pursuant to this Section 8.3(i) shall be paid no later than thirty (30) calendar days following the Consultant’s termination from IMH or Infinet, as applicable.  The Consultant shall also retain all rights (if any) with respect to vested equity-based awards as may be provided to the Consultant under the circumstances under any applicable grant or award agreement, and shall be entitled to all other benefits in which the Consultant is specifically eligible to participate and specifically applicable to the Consultant under this Agreement.

 

(ii)          Death.  In the event of the Consultant’s death during the Term, IMH and Infinet shall, in addition to paying the amounts set forth in Section 8.3(i), take whatever action is reasonably necessary to cause all of the Consultant’s unvested equity-based awards that have been granted by IMH or Infinet, as applicable, if any, to become fully vested as of the date of death and, in the case of equity-based awards which have an exercise schedule, if any, to become fully exercisable and continue to be exercisable for a period of (a) one (1) year following death (or such greater exercise period as may be provided in the applicable award agreement for awards that are vested and exercisable at the time of death) or (b) if less, the end of the original term of the options.

 

(iii)         Non-Renewal.  In the event IMH or Infinet, as applicable, gives the Consultant a Non-Renewal Notice pursuant to Section 1, IMH or Infinet, as applicable, shall, in addition to paying the amounts set forth in Section 8.3(i), provide the Consultant with the following payments and benefits, if the Consultant executes (and does not revoke) a Separation Agreement within the time periods described in Section 8.3(vii):

 

(A)           pay to the Consultant in one lump sum at the time specified in Section 8.3(iv) an amount equal to the Consultant’s Covered Average Fees applicable to IMH or Infinet, as applicable (with no duplication of benefits);

 

(B)           Intentionally Omitted];

 

(C)           take whatever action is reasonably necessary to cause the Consultant to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards that may have been granted by IMH or Infinet, as applicable, if any, to the Consultant and be entitled to exercise and continue to exercise all such stock options and all other equity-based awards, if any, having an exercise schedule in accordance with their terms and to retain such grants and awards to the same extent as if they were vested upon termination of the Consultant in accordance with their terms.

  

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(iv)        Termination Without Cause; Constructive Termination Without Cause.  During the Term, in the event IMH or Infinet, as applicable, or any successor to IMH or Infinet, as applicable, terminates the Consultant without Cause, or if the Consultant terminates the Consultant in a Constructive Termination without Cause, IMH or Infinet, as applicable, shall, in addition to paying the amounts provided under Section 8.3(i), pay to the Consultant, in one lump sum, an amount equal to the greater of (x) two (2) times the Consultant’s Covered Average Fees, or (y) the remaining Base Consulting Fees that otherwise would be payable to the Consultant for the remainder of the Term in the absence of such termination.  In order to receive this payment, the Consultant must execute (and not revoke) a Separation Agreement (as defined below) within the time periods described in Section 8.3(vii).  The lump sum payment called for by this Section 8.3(iv) shall be paid at the time specified in Section 8.3(vii).  If the Consultant executes (and does not revoke) the Separation Agreement within the time periods described in Section 8.3(vii), IMH or Infinet, as applicable, shall also:

 

(A)           [Intentionally Omitted]; and

 

(B)           take whatever action is reasonably necessary to cause the Consultant to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards that may have been granted by IMH or Infinet, as applicable, if any, to the Consultant and be entitled to exercise and continue to exercise all such stock options and all other equity-based awards, if any, having an exercise schedule in accordance with their terms and to retain such grants and awards to the same extent as if they were vested upon termination of employment in accordance with their terms.

 

(v)         Termination for Cause; Voluntary Resignation.  In the event Consultant is terminated during the Term, other than in connection with a termination meeting the conditions of clauses (ii), (iii) or (iv) of this Section 8.3, the Consultant shall receive the amounts set forth in Section 8.3(i) in full satisfaction of all of the Consultant’s entitlements from IMH or Infinet, as applicable.  All equity-based awards not vested as of the Date of Termination, if any, shall terminate (unless otherwise provided in the applicable award agreement) and the Consultant shall have no further entitlements with respect thereto.

 

(vi)        Clarification Regarding Treatment of Options and Restricted Stock or Units.  The stock option and restricted stock or unit agreements (the “Equity Award Agreements”) that the Consultant may receive from IMH or Infinet, as applicable, if any, may contain language regarding the effect of a termination of the Consultant under certain circumstances.

  

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(A)           Notwithstanding such language in the Equity Award Agreements, if any, for so long as this Agreement is in effect, IMH or Infinet, as applicable, shall be obligated, if the terms of this Agreement are more favorable in this regard than the terms of the Equity Award Agreements, if any, to take the actions required under Sections 8.3(ii), 8.3(iii)(C) and 8.3(iv)(B) hereof upon the happening of the circumstances described therein.  Those sections provide that in certain situations IMH or Infinet, as applicable, shall cause the Consultant to become vested as of the Date of Termination in all or certain equity-based awards that may be granted by IMH or Infinet, as applicable, if any, and that such equity-based awards, if any, will thereafter be subject to the provisions of the applicable Equity Award Agreement, if any, as it applies to vested awards, if any, upon a termination.  For purposes of clarification, although an option grant may vest in accordance with these above-referenced Sections, such option shall thereafter be exercisable only for so long as the related option agreement provides, except that the compensation committee of the IMH Board or the Infinet Board, as applicable, may, in its respective sole discretion, elect to extend the expiration date of such option (but not beyond the option’s original expiration date).

 

(B)           Notwithstanding the definition of “Cause” which may appear in the Equity Award Agreements, for so long as this Agreement is in effect (X) any “for Cause” termination must be in compliance with the terms of this Agreement, including the definition of “Cause” set forth herein, and (Y) only in the event of a “for Cause” termination that meets both the definition in this Agreement and the definition in the Equity Award Agreement, if any, will the disposition of options and restricted stock or units under such Equity Award Agreement, if any, be treated in the manner described in such Equity Award Agreement, if any, in the case of a termination “for Cause.”

 

(C)           During the Term, any stock options issued to the Consultant, if any, shall provide that if the Consultant is terminated in any manner which gives rise to an obligation under this Agreement to cause the acceleration of vesting of stock options, if any, then in such event such stock options, if any, may be exercised by the Consultant by having the applicable exercise price (but not any tax withholding obligations) satisfied in a cashless manner.

 

(vii)       Separation Agreement Required; Time of Payment.  As set forth above, in order to receive any payments or benefits pursuant to Section 8.3(iii) or (iv), the Consultant must execute (and not revoke) a separation agreement (the “Separation Agreement”), which Separation Agreement shall include a mutual general release of any and all claims that the Consultant had, has or may have in connection with the Consultant’s Consulting Services with IMH or Infinet, as applicable, as well as a release of any claims that IMH or Infinet (and their respective affiliates), as applicable, had, has or may have against the Consultant.  The Separation Agreement shall be in a commercially reasonable form and be provided to the Consultant within five (5) days following the Consultant’s Separation from Service (defined below).  The Separation Agreement must be executed and returned to IMH or Infinet, as applicable, within the thirty (30) day period thereafter that will be described in the Separation Agreement and it must not be revoked by the Consultant within any applicable revocation period that will be described in the Separation Agreement.  The Separation Agreement may not be executed prior to the Consultant’s last day of rendering any Consulting Services.  The lump sum payments called for by Section 8.3(iii) and (iv) shall be paid within five (5) days following the last day on which the Consultant could revoke the Separation Agreement.  Notwithstanding anything in this Section to the contrary, if the period of time during which the Consultant has to consider the execution of the Separation Agreement, plus any revocation period set forth therein, spans two (2) calendar years, the lump sum cash payments called for by Section 8.3(iii) and (iv) shall be paid in the second calendar year.

  

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8.4         Notice of Termination.  The Non-Renewal Notice pursuant to Section 1 or of any termination of the Consultant (other than by reason of death) shall be communicated by written notice (a “Notice of Termination”) from one party hereto to the other party hereto in accordance with this Section 8 and Section 12.11.

 

8.5         Date of Termination.  “Date of Termination,” with respect to any termination of the Consultant’s engagement during the Term, shall mean (i) if the Consultant’s engagement with IMH or Infinet, as applicable, is terminated for Cause, the date on which a Notice of Termination is given which complies with the requirements of Section 8.2(1), and (ii) if the Consultant is terminated with IMH or Infinet, as applicable, for any reason, the date specified in the Notice of Termination.  Upon any termination of the Consultant’s engagement with IMH or Infinet, respectively, the Consultant shall concurrently give up the Consultant’s membership on the IMH Board (if applicable) and on the Infinet Board, respectively.

 

8.6         Nature of Payments.  The amounts due under this Section 8 are in full satisfaction of all claims the Consultant may have in respect of the Consultant’s engagement by IMH or Infinet, as applicable, and are provided as the sole and exclusive benefits to be provided to the Consultant, or the Consultant’s estate, or the Consultant’s beneficiaries in respect of the Consultant’s termination of this engagement from IMH or Infinet, as applicable.

 

8.7         Interpretation.  If this engagement is terminated in order that Wolf may become a full-time executive officer of IMH, the Consultant shall not be entitled to any termination or other benefits pursuant to this Agreement as a result thereof.  In addition, this Section 8 expressly contemplates that the Consultant may terminate this engagement with either IMH or Infinet, and continue the engagement pursuant to this Agreement with the other company.

 

9.           Relationship. IMH, Infinet and the Consultant intend (a) that this Agreement shall be a consulting agreement and not an employment agreement, and (b) that the Consultant shall be an independent contractor and not an employee.  The Consultant (and all employees and members thereof) shall operate at all times as an independent contractor of IMH and Infinet.  Without limiting the generality of the foregoing, nothing in this Agreement shall be construed as creating an employer/employee relationship, partnership, joint venture, or other business group between the Consultant and IMH, on the one hand, and the Consultant and Infinet, on the other hand.

  

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9.1         No Authority to Supervise.  While IMH’s and Infinet’s personnel, respectively, may from time to time assist the Consultant in rendering the Consulting Services (if and when IMH or Infinet, respectively, may reasonably direct), the Consultant shall have no authority to supervise, direct, hire, fire or make other management decisions regarding such personnel.

 

9.2         Office and Services.  IMH and Infinet, respectively, shall provide the Consultant with private office space at the Scottsdale Office, as well as internet access, a computer, a telephone, facsimile services, cell phone service, access to an executive assistant, a garage parking space, an access pass to the Scottsdale Office building and facilities, and photocopy services in order to accommodate the Consultant’s performance of the Consulting Services.  The allocation of costs between IMH and Infinet shall be consistent with the Sharing Ratio.

 

9.3         Taxes.  The Consultant, on the one hand, and IMH and Infinet, on the other hand, agree that the Consultant (and all of the Consultant’s employees and members) is not an employee of IMH or Infinet for state or federal tax purposes.  The Consultant (and all of the Consultant’s employees and members) shall be solely responsible for any and all income, unemployment, social security, worker’s compensation, FICA or any other taxes or amounts payable with respect to the Consulting Fee and any and all other compensation paid or provided to the Consultant pursuant to this Agreement.  The Consultant shall indemnify, defend and hold harmless IMH and Infinet from and against any tax or other liability that any of them may have with respect to any such payment and against any and all losses or liabilities, including, without limitation, defense costs, arising out of the Consultant’s failure to pay any taxes due from the Consultant with respect to any such payment.

 

9.4         Workers’ Compensation and Unemployment Insurance.  The Consultant (and the Consultant’s employees and members) is not entitled to worker’s compensation benefits or unemployment compensation benefits provided by IMH or Infinet.  The Consultant shall be solely responsible for the payment of the Consultant’s (and the Consultant’s employees and members) worker’s compensation, unemployment compensation, and other such payments for the Consultant (and the Consultant’s employees and members).  IMH and Infinet shall not be obligated to pay for worker’s compensation for the Consultant (or the Consultant’s employees or members), contribute to a state unemployment fund for the Consultant, or pay the federal unemployment tax for the Consultant or pay for any health insurance benefits for the Consultant (or the Consultant’s employees or members).

  

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10.         Protective Covenants.

 

10.1       Confidential Information; Inventions.

 

10.1.1  Process.  The Consultant (and the Consultant’s employees and members) shall not use (except to the extent that such use is directly related to and required by the Consultant’s performance of the Consulting Services) or disclose at any time, either during the Term or thereafter, any Confidential Information (as defined below) of IMH or Infinet of which the Consultant (or any employee or member thereof) is or becomes aware, whether or not such information is developed by the Consultant(or any employee or member thereof).  The Consultant shall take (and shall cause the Consultant’s employees and members to take) all reasonable steps to safeguard Confidential Information of IMH and Infinet in the Consultant’s (or the Consultant’s employees and members) possession and to protect IMH and Infinet against disclosure, misuse, espionage, loss and theft.  The Consultant (and the Consultant’s employees and members) shall deliver to IMH and Infinet, as applicable, at the end of the Term with respect to IMH and Infinet, as applicable, or at any other time IMH or Infinet, respectively, may request the same from the Consultant (and the Consultant’s employees and members), all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information of IMH or Infinet or the Work Product (defined below) of IMH or Infinet which the Consultant (or the Consultant’s employees and members) may then possess or have under the Consultant’s (or the Consultant’s employees and members) control.  Notwithstanding the foregoing, the Consultant (and the Consultant’s employees and members) may truthfully respond to a lawful and valid subpoena or other legal process, but shall give IMH and Infinet, as applicable, prior written notice thereof as soon as reasonably possible and shall, as much in advance of the return date as possible, make available to IMH’s and Infinet’s counsel, as applicable, the documents and other information sought, and shall reasonably assist IMH’s and Infinet’s counsel, as applicable, in resisting or otherwise responding to such process.

 

10.1.2  Scope.  As used in this Agreement, the term “Confidential Information” means information that is not generally known to the public and that is used, developed or obtained by IMH and Infinet (together with their affiliates), respectively, in connection with its business, including, without limitation, information, observations and data obtained by the Consultant (or the Consultant’s employees and members) while providing the Consulting Services to IMH and Infinet and their affiliates, respectively (including any such information obtained prior to the Effective Date) concerning (i) the business or affairs of IMH and Infinet, respectively, (ii) products or services, (iii) fees, costs and pricing structures, (iv) data and intellectual property, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including operating systems, applications and listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, new developments, methods and processes, whether patented, patentable or unpatentable and whether or not reduced to practice, (xii) customers and clients and customer or client lists, (xiii) other copyrightable works, (xiv) all production methods, processes, technology and trade secrets, and (xv) all similar and related information in whatever form.  Confidential Information shall not include any information that has been published (other than a disclosure by the Consultant [or any employee or member thereof] in breach of this Agreement) in a form generally available to the public prior to the date the Consultant proposes to disclose or use such information.  Confidential Information shall not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.

  

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10.1.3  Definitions.  As used in this Agreement, the term (i) “Person” shall be construed broadly and shall include, without limitation, an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof, (ii) “Work Product” shall mean all inventions, innovations, improvements, technical information, systems, scientific developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patented, patentable or unpatentable, copyrightable, registrable as a trademark, reduced to writing, or otherwise) which relate to IMH’s or Infinet’s (together with their affiliates), as applicable, actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by the Consultant, or any employee or member thereof, (whether or not during usual business hours, whether or not by the use of the facilities of IMH or Infinet, as applicable, and whether or not alone or in conjunction with any other Person) while performing any Consulting Services during the Term (including those conceived, developed or made prior to the Effective Date), together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing.  All Work Product that the Consultant may discover, invent or originate with respect to IMH or Infinet and their respective businesses during the Term or at any time in the period of twelve (12) months after the end of the Term, shall be the exclusive property of IMH and Infinet, as applicable, and the Consultant(and all employees and members thereof) hereby assigns all of the Consultant’s (and all employees and members thereof) right, title and interest in and to such Work Product to IMH and Infinet, as applicable, including, without limitation, all intellectual property rights therein.  The Consultant (and all employees and members thereof) shall promptly disclose all Work Product to IMH and Infinet, as applicable, shall execute at the request of IMH and Infinet, as applicable, any reasonable assignments or other documents IMH and Infinet, as applicable, may deem necessary to protect or perfect IMH’s and Infinet’s rights therein, and shall assist IMH and Infinet, as applicable, in obtaining, defending and enforcing the Company’s rights therein.

 

10.2       Enforcement.  The Consulting Services are unique and the Consultant (and all employees and members thereof) has access to Confidential Information and Work Product.  Accordingly, a breach by the Consultant of any of the covenants in this Section 10 would cause immediate and irreparable harm to IMH and Infinet, as applicable, that would be difficult or impossible to measure, and any damages to IMH and Infinet, as applicable, for any such injury would therefore be an inadequate remedy for any such breach.  Therefore, in the event of any breach or threatened breach of any provision of this Section 10, IMH and Infinet, as applicable, shall be entitled, in addition to, and without limitation upon, all other remedies IMH and Infinet, as applicable, may have under this Agreement, at law or otherwise, to obtain specific performance, injunctive relief and/or other appropriate relief (without posting any bond or deposit) in order to enforce or prevent any violations of the provisions of this Section 10, or require the Consultant (and all employees and members thereof) to account for and pay over to IMH and Infinet, as applicable, all compensation, profits, moneys, accruals, increments or other benefits derived from or received as a result of any transactions constituting a breach of this Section 10 if and when final judgment of a court of competent jurisdiction is so entered against the Consultant (or any employee or member thereof).

  

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10.3       Underwriter Lock-Up.  If, and to the extent, requested by the managing underwriter or underwriters in any underwritten public offering of securities of IMH or Infinet, respectively, if applicable, the Consultant hereby agrees to enter into a lock-up agreement restricting the disposition of the Securities following the completion of any such public offering.  The Consultant agrees that the period of time from which such lock-up will commence and terminate and the other terms of the lock-up shall be substantially identical to the terms and conditions that apply to the lock-up agreements entered into by the directors and executive officers of IMH or Infinet, respectively; provided, however, in no event shall the term of the lock-up exceed an aggregate period of twelve (12) months.

 

11.         Ownership.  All software, hardware, equipment or records, including all copies or extracts of them which the Consultant (or any employee or member thereof) prepares, uses or sees during the Term in relation to the performance of the Consulting Services shall be and remain the sole property of IMH or Infinet, as applicable, to the extent that such software, hardware, equipment or records were provided by IMH or Infinet, to the Consultant, or made available to the Consultant by IMH or Infinet.

 

12.         Miscellaneous.

 

12.1       Successors; No Assignment by the Consultant.  This Agreement is personal to the Consultant and shall not, without the prior written consent of IMH or Infinet, as applicable, be assignable by the Consultant.  This Agreement may be assigned by IMH or Infinet, as applicable, to any successor to al or substantially all of the business or assets of IMH or Infinet, as applicable, and shall be binding upon, and inure to the benefit of, IMH’s or Infinet’s, as applicable, and such successors.  IMH or Infinet, as applicable, shall require any successor to all or substantially all of the business or assets of IMH or Infinet, as applicable, to assume expressly and agree to perform this Agreement in the same manner and to the same extent that IMH or Infinet, as applicable, would be required to perform it if no such succession had taken place.  As used herein, “successor” or “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the ownership of IMH and Infinet, respectively, or to which IMH or Infinet, respectively, assigns this Agreement by operation of law of otherwise.

 

12.2       Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be binding unless in writing and signed by the party asserted to have granted such waiver.

  

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12.3       Modification.  This Agreement may not be amended or modified other than by a written agreement (a) executed by IMH and the Consultant, on the one hand, and Infinet and the Consultant, on the other hand, and (b) approved by the IMH Board and the Infinet Board, as applicable.

 

12.4       Complete Agreement.  This Agreement (including, without limitation, the Schedules attached hereto), together with any Equity Award Agreements, now or hereafter in effect, contains the entire agreement and final understanding between the parties hereto with respect to the subject matter addressed herein among the parties, and supersedes and replaces all prior negotiations and all agreements proposed or executed, whether written or oral, with the Consultant and IMH, on the one hand, and/or Infinet and the Consultant, on the other hand, concerning the subject matter hereof.  Any representation, promise or agreement not specifically included in this Agreement shall not be binding upon or enforceable against any party hereto.  This Agreement constitutes an integrated agreement.

 

12.5       Litigation and Investigation Assistance.  In addition to the Consulting Services, at the expense of IMH or Infinet, as applicable, the Consultant (and the Consultant’s employees and members) shall use the Consultant’s reasonable best efforts to cooperate in (a) the defense of IMH or Infinet, as applicable, against any threatened or pending litigation by any Person or in any investigation or proceeding by any governmental agency that relates to any events or actions which occur during the Term, and (b) the prosecution of any claims and lawsuits brought by IMH or Infinet, respectively, against third parties that are currently outstanding or that may in the future be brought relating to matters which occur during the Term.  Except as requested by IMH or Infinet, as applicable, or as required by law or legal process, the Consultant (and the Consultant’s employees and members) shall not publicly comment upon any (i) threatened or pending claim or litigation (including investigations or arbitrations) involving IMH or Infinet (or any officer, director or employee of either), as applicable, or (ii) threatened or pending government investigations involving IMH or Infinet, as applicable.

 

12.6       Severability.  It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction or an arbitrator, as the case may be, to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any party under this Agreement shall not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction, and to this end the provisions of this Agreement are declared to be severable.  Furthermore, in lieu of such invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

  

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12.7       Governing Law.  This Agreement shall, without regard to principles of conflict of laws, be governed by the laws of the State of Arizona as to all matters, including, without limitation, matters of validity, construction, effect and performance.

 

12.8       Counterparts.  This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original.  Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

 

12.9       Attorneys’ Fees.  In the event of a legal dispute between the parties hereto, the prevailing party shall be entitled to receipt from the losing party of all attorneys’ fees and costs related thereto.

 

12.10     Jurisdiction; Waiver of Jury Trial.  Any judicial proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought only in the state or federal courts of the State of Arizona, and by the execution and delivery of this Agreement, each of the parties hereto accepts for themselves the exclusive jurisdiction of the aforesaid courts and irrevocably consents to the jurisdiction of such courts (and the appropriate appellate courts) in any such proceedings, waives any objection to venue laid therein and agrees to be bound by the judgment rendered thereby in connection with this Agreement or any agreement identified herein.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF THIS AGREEMENT.

 

12.11     Notices.  Any notice to be given hereunder by any party to the other may be effected by personal delivery, in writing, or by mail, registered or certified, postage prepaid with return receipt requested.  Mailed notices shall be addressed to the parties at the addresses set forth below, but each party may change its address by written notice in accordance with this Section 12.11.  Notices shall be deemed communicated as of the actual receipt or refusal of receipt.

 

If to the Consultant:

 

Juniper Capital Partners, LLC

981 Linda Flora Drive

Los Angeles, CA  90049

Attn:   Mr. Jay Wolf

  

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If to IMH or Infinet:

 

IMH Financial Corporation

4900 North Scottsdale Road

Suite 5000

Scottsdale, AZ  85251

Attn:   Mr. William Meris

12.12     Headings; Construction.  The section and paragraph headings and titles contained in this Agreement are inserted for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation of this Agreement.  Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.  Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.

 

13.         Indemnification.  To the maximum extent permitted by law, IMH and Infinet, as applicable, and its respective successors and assigns (the “Indemnitor”), shall indemnify, protect, defend and hold harmless the Consultant (and its members and employees) (the “Indemnitee”), from, for, and against any and all claims, liabilities, liens, fines, demands, lawsuits, actions, losses, damages, injuries, judgments, settlements, costs or expenses whether asserted in law or in equity and including any claims made by regulatory agencies asserted against the Indemnitee arising out of, in whole or in part, the actions or commissions of the Indemnitor, this Agreement or the Consulting Services, other than those which have arisen from the Indemnitee’s gross negligence, willful misconduct or breach of this Agreement (hereinafter, collectively, “Claims”).  The Indemnitor shall provide a legal defense with counsel reasonably approved by the Indemnitee upon the first notice the Indemnitee sends to the Indemnitor and the Indemnitor shall continue to provide such defense to the Indemnitee until the matter is fully resolved by either final judgment, settlement, or other release executed by the Indemnitee.  The Indemnitor shall indemnify the Indemnitee from, for and against all Claims, including, without limitation, all legal fees, costs and expert fees and costs that the Indemnitee may directly or indirectly sustain, suffer or incur as a result thereof.  The Indemnitor shall and does hereby assume on behalf of the Indemnitee, upon the Indemnitee’s written demand, the amount of any costs allowed by law, and costs identified herein, any settlement reached or any judgment that may be entered against the Indemnitee, as a result of such Claims.  The obligations of the Indemnitor pursuant to this Section 13 shall survive the expiration or earlier termination of this Agreement.

 

14.         Board Approval.  The IMH Board and the Infinet Board, respectively, have approved this Agreement on behalf of IMH and Infinet, respectively.

 

15.         Cross-Default.  A breach by the Consultant of the Consultant’s obligations under this Agreement to (a) IMH shall give rise to an automatic cross-default in favor of Infinet with respect to Infinet’s obligations to the Consultant under this Agreement, and the Consultant’s rights against Infinet under this Agreement, and (b) Infinet shall give rise to an automatic cross-default in favor of IMH with respect to IMH’s obligations to the Consultant under this Agreement and the Consultant’s rights against IMH under this Agreement.

  

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16.         New Consulting Agreement.  If requested by IMH, the Consultant shall enter into separate consulting agreements consistent with the material terms of this Agreement to evidence the terms of the Consultant’s engagement by each of IMH and Infinet, as applicable.

 

17.         NWRA Capital Partners, LLC.  IMH contemplates executing various agreements with NWRA in connection with the NWRA Convertible Loan Transaction between NWRA and IMH and/or IMH’s affiliates.  The Consultant acknowledges and agrees that the execution of the NWRA Convertible Loan Transaction shall not constitute a breach of this Agreement by IMH or Infinet, a Change in Control, or a Constructive Termination without Cause.

 

18.         Section 409A.

 

18.1       Specified Employee.  If the Consultant is a “specified employee” of IMH or Infinet, as applicable, within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Consultant’s Separation from Service, the Consultant shall not be entitled to any payment or benefit pursuant to Section 8 (other than any payment that does not provide for deferred compensation within the meaning of Section 409A, or that is made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals)) until the earlier of (i) the date which is six (6) months after his Separation from Service for any reason other than death, or (ii) the date of the Consultant’s death.  The provisions of this paragraph shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code.  Any amounts otherwise payable to the Consultant upon or in the six (6) month period following the Consultant’s Separation from Service that are not so paid by reason of this Section 18.1 shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Consultant’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Consultant’s death).

 

18.2       Reimbursements.  To the extent that any reimbursements pursuant to Section 7.4 or Section 9.2 are taxable to the Consultant, any reimbursement payment due to the Consultant pursuant to any such provision shall be paid to the Consultant on or before the last day of the Consultant’s taxable year following the taxable year in which the related expense was incurred.  Such reimbursements are not subject to liquidation or exchange for another benefit and the amount of such benefits and reimbursements that the Consultant receives in one taxable year shall not affect the amount of such benefits or reimbursements that the Consultant receives in any other taxable year.

  

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18.3       Separation from Service.  For purposes of this Agreement, the term “Separation from Service” means a termination of the Consultant’s engagement with IMH or Infinet, as applicable, pursuant to this Agreement, determined in accordance with Treas. Reg. § 1.409A-1(h). For purposes of determining the definition of service recipient for purposes of Section 409A of the Code, (1) for purposes of determining an entity that would be a member of a “controlled group of corporations” (within the meaning of Section 414(b) of the Code as modified by Section 415(h) of the Code) that includes IMH or Infinet, as applicable, for purposes of applying Section 1563(a)(1), (2) or (3) of the Code for determining the members of a controlled group of corporations under Section 414(b) of the Code, the language “at least 80 percent” shall be used; and (2) for purposes of determining a group of trades or businesses under common control (within the meaning of Section 414(c) of the Code as modified by Section 415(h) of the Code) that includes IMH or Infinet, as applicable, for purposes of applying Treas. Reg. § 1.414(c) 2 for purposes of determining the members of a group of trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, the language “at least 80 percent” shall be used each place it appears in Treas. Reg. § 1.414(c) 2.  To the extent required to ensure compliance with the requirements of Section 409A, any reference in this Agreement to “Date of Termination” shall be deemed to be a reference to “Separation from Service,” as defined above.

 

18.4       No Elections.  The Consultant does not have any right to make any election regarding the time or form of any payment due under this Agreement.

 

18.5       Ban on Acceleration and Deferrals.  Under no circumstances may the time or schedule of any payment made or benefit provided pursuant to this Agreement be accelerated or subject to a further deferral except as otherwise permitted or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code.

 

18.6       Compliant Operation.  This Agreement shall be operated in compliance with Section 409A or an exception thereto and each provision of this Agreement shall be interpreted, to the extent possible, to comply with Section 409A or to qualify for an exception thereto.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on its behalf by its respective officer or managing member thereunto duly authorized as of the Effective Date.

 

	  	
“IMH”

	 	 
	  	
IMH Financial Corporation,

	  	
a Delaware corporation

	  	  
	  	
By

	
/s/ Steven Darak

	  	  	
  Steven Darak

	  	  	
  Its:  Chief Financial Officer

	  	  
	  	
Address for the Purpose of Notice:

	  	  
	  	
4900 N. Scottsdale Rd #5000

	  	
Scottsdale, AZ 85251

	  	  
	  	
“CONSULTANT”

	 	 
	  	
Juniper Capital Partners, LLC

	  	  
	  	
By

	
/s/ Jay Wolf

	  	  	
  Jay Wolf

	  	  	
  Its:  Managing Member

	  	  
	  	
Address for the Purpose of Notice:

	  	  
	  	
981 Linda Flora Drive

	  	
Los Angeles, CA  90049

	  	  
	  	
“INFINET”

	 	 
	  	
INFINET Securities, LLC,

	  	
a Delaware limited liability company

	  	  
	  	
By:

	
Infinet Financial Group, LLC,

	  	  	
a Delaware limited liability company

	  	  	  
	  	  	
By:

	
IMH Financial Corporation,

	  	  	  	
a Delaware corporation

	  	  	  	  
	  	  	  	
By:

	
/s/ Steven Darak

	  	  	  	Steven Darak
	  	  	  	Its: Chief Financial Officer

 

  

  

  

SCHEDULE 2.1

 

CONSULTING SERVICES

 

1.           IMH.  The Consultant has or shall provide the following Consulting Services to IMH to the extent requested by IMH:

 

1.1           advice to IMH of a strategic and business development nature.

 

2.           Infinet.  The Consultant has or shall provide the following Consulting Services to Infinet to the extent requested by Infinet:

 

2.1           advice to Infinet of a strategic and business development nature;

 

2.2           advice to Infinet with respect to the formation, structuring, business planning and capitalization thereof; and

 

2.3           advice to Infinet with respect to the leveraging of IMH’s relationship and strategic partnering with IMH.

 

CAVEAT:

 

All decisions shall be made by IMH and not by the Consultant.  All advice of a tax, accounting or legal nature shall be made by qualified experts and not by the Consultant.  All services requiring a registered broker-dealer, investment adviser or underwriter shall be provided by such licensed persons and not by the Consultant.

 

CAVEAT:

 

No Consulting Services set forth in this Agreement (including, without limitation, this Schedule 2.1) shall be provided to IMH or Infinet to the extent such Consulting Services constitute Excluded Services, except to the extent the Conditions to Providing the Excluded Services have been satisfied in the sole discretion of IMH or Infinet, as applicable.

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