Document:

Unassociated Document

 

EMPLOYMENT SEPARATION AND GENERAL RELEASE AGREEMENT

(Shane C. Albers)

 

THIS EMPLOYMENT SEPARATION AND GENERAL RELEASE AGREEMENT (this “Separation Agreement”) is entered into this 20th day of April 2011 (the “Execution Date”), by and between (i) Shane C. Albers, an individual (“Executive”), and (ii) IMH Financial Corporation, a Delaware corporation (the “Company”).

 

THE PARTIES ENTER INTO THIS SEPARATION AGREEMENT on the basis of the following facts, understandings and intentions:

 

A.          As of the Execution Date, Executive is, and prior thereto has been employed as, the Chairman of the Board and Chief Executive Officer of the Company.

 

B.           The Company and NWRA Capital Partners, LLC (and/or its designee, the “Investor”) have entered into that certain “Term Sheet for Investment in IMH Financial Corporation” dated as of January 14, 2011 (as amended, the “Term Sheet”).

 

C.           The Company and the Investor have entered into, that certain convertible note transaction commitment letter with the Investor (the “NW Commitment Letter”) pursuant to which the parties thereto contemplate closing and funding prior to or on May 31, 2011 a convertible note transaction (the “NW Convertible Note Transaction”) pursuant to the NW Convertible Note Transaction documents (the “NW Transaction Documents”).  Executive has attended meetings of the Board of Directors of the Company (the “Board”) wherein the Convertible Note Transaction has been discussed

 

D.           Executive and Desert Pyramids LLC (“Desert”) have entered into that certain Securities Purchase Agreement (the “SPA”) that the parties thereto contemplate closing and funding prior to or on May 31, 2011.

 

E.           It is contemplated that (i) the closing of the NW Convertible Note Transaction (the “NW Convertible Note Closing”), (ii) the closing of this Separation Agreement (the “Separation Closing”) and (iii) the closing of the SPA (the “SPA Closing” and, together with the Separation Closing, the “Executive  Closings”) shall be concurrent and occur prior to or on May 31, 2011, but in no event prior to the eighth day after the Execution Date.

 

F.           The rights and obligations of the Company and Executive under this Separation Agreement (including, without limitation, Executive’s termination pursuant to this Separation Agreement) shall be subject to, and conditioned upon, the respective parties’ authorization,  execution, delivery to the other party of all documents contemplated hereunder, as applicable, and the NW Convertible Note Closing and the Executive Closings.

 

G.           Except as otherwise set forth in this Agreement, Executive and the Company have mutually agreed that Executive’s Board and employment relationship with the Company (and all of its affiliates and subsidiaries) shall terminate concurrently with the NW Convertible Loan Closing and the Executive Closings (the “Separation Date”) upon, and subject to, the terms and conditions set forth herein.

 

  

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H.           The Company and Executive shall execute this Agreement concurrently with the execution of the NW Commitment Letter by the Company and the Investor.

 

NOW THEREFORE, in consideration of the covenants undertaken and the releases,  and subject to each party’s compliance with the terms and conditions, contained in this Separation Agreement, Executive and the Company agree as follows:

 

1.           Termination of Employment.

 

1.1           Resignation Letter. Executive’s employment by the Company shall be terminated without Cause (as defined in Section 1.2) as of the Separation Date.  Executive shall resign as an officer, director, employee, member, manager and in any other capacity with the Company and each of the Company’s affiliates and subsidiaries, effective as of the Separation Date.  Concurrently with the Execution Date, Executive shall execute and deliver to the Company the resignation letter attached hereto as Exhibit 1.1 (the “Resignation Letter”).  For purposes of Section 5.4(d)(i) of the Amended and Restated Certificate of Incorporation of the Company, this Separation Agreement shall constitute an employment agreement, and termination of employment of Executive as of the Separation Date shall be deemed to be a termination of Executive’s employment without Cause.  The parties hereby agree that all payments due to Executive from the Company after the Separation Date shall be determined solely in accordance with this Separation Agreement.

 

1.2           Cause.  For purposes hereof, the term “Cause” means, as reasonably determined by the Company based on the information then known to it, that one or more of the following has occurred: (i) Executive is convicted of, pled guilty or pled nolo contendere to a felony (under the laws of the United States or any relevant state, or a similar crime or offense under the applicable laws of any relevant foreign jurisdiction); (ii) Executive has engaged in acts of fraud, dishonesty or other acts of willful misconduct in the course of Executive’s duties for the Company; (iii) Executive willfully fails to perform or uphold Executive’s duties to the Company and its affiliates and/or willfully fails to comply with reasonable directives of the Company; or (iv) a material breach by Executive of any contract Executive is a party to with the Company or any of its affiliates.

 

2.           Payments and Benefits.  Provided that Executive does not revoke this Separation Agreement pursuant to Section 5, and provided that Executive returns the Company Property (as defined below) to the Company prior to or on the Separation Date, and provided that the NW Convertible Note Closing and the Executive Closings have occurred (collectively, the “Protective Conditions”), the Company shall pay or provide to Executive the following benefits:

 

2.1           Severance Pay.  Subject to Executive’s continued compliance with Executive’s obligations under this Separation Agreement, the Company shall pay as severance pay to Executive an amount equal to Five Hundred Fifty Thousand Dollars ($550,000), less legally required withholding (the “Severance Payment”).  The Severance Payment shall be paid to Executive by the Company in a lump sum within ten (10) days after the NW Convertible Note Closing and the Executive Closings.  The Severance Payment includes the entire amount of Executive’s accrued base salary and accrued and unused vacation through the Separation Date and any unpaid bonus Executive may be entitled to receive (for 2010, 2011 or otherwise).

 

  

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2.2           Reimbursement of Expenses Payment.  Subject to Executive’s continued compliance with Executive’s obligations under this Separation Agreement, the Company shall pay to Executive an amount equal to Fifty Thousand Dollars ($50,000) (the “Reimbursement Payment”) to reimburse Executive for Executive’s legal, accounting, and other expenses incurred in connection with the preparation, negotiation and finalization of this Separation Agreement.  The Reimbursement Payment shall be paid to Executive by the Company in a lump sum within ten (10) days after the NW Convertible Note Closing and the Executive Closings.

 

2.3           COBRA Benefits.  The Company shall pay that portion (based on the employer subsidy to Executive that the Company paid for health and dental insurance coverage immediately prior to the Execution Date) of the premiums charged to continue medical and dental coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for Executive and Executive’s eligible dependents immediately prior to the Separation Date; and Executive shall continue to pay that portion of such premiums which Executive has previously paid (by payroll deduction or otherwise).   Notwithstanding the foregoing, the Company’s obligation to make any payment or reimbursement pursuant to this Section 2.3 shall commence with continuation coverage for the month following the month in which the Separation Date occurs and shall cease with continuation coverage on the twelfth (12th) month following the month in which the Separation Date occurs (or, if earlier, shall cease upon the first to occur of Executive’s death, the date Executive becomes eligible for coverage under the health plan of a future employer, or the date the Company ceases to offer group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to Executive).  Prior to or on the Separation Date, Executive shall provide the Company with the written notice required under COBRA in connection with commencing such COBRA coverage.

 

2.4           Transition Benefits.   Subject to Executive’s continued compliance with Executive’s obligations under this Separation Agreement, during the one-year period commencing on the Separation Date, the Company shall reimburse Executive for Executive’s reasonable use of a non-Company-issued (a) cell phone, (b) BlackBerry (or equivalent device) in an amount not to exceed Two Hundred Dollars $200) per month, and (c) a laptop computer.  If Terri Guske (“Guske”) agrees to provide executive assistance to Executive after the Separation Date in accordance with this Section 2.4, then the following shall apply:

 

2.4.1           Guske Conditions.  The Company’s obligations to Executive with respect to the consulting arrangements between Guske and Executive shall be subject to, and conditioned upon, the following (the “Guske Conditions”):  (a) Guske and the Company shall enter into a separation agreement upon terms and conditions satisfactory to each party thereto; (b) Guske shall provide the Company with written notice of Guske’s resignation of employment with the Company prior to or on the Separation Date; (c) Guske shall execute a waiver and release, a confidentiality agreement, and shall provide written non-disparagement undertakings in favor of the Company (and all of the Company’s affiliates, officers, directors, employees and consultants) prior to or on the Separation Date; (d) Guske and Executive shall execute a consulting agreement (the “Guske Consulting Agreement”) reflecting Guske’s obligation to render certain specified executive assistant services to Executive and transitional executive assistant services to the Company, as approved by the Company and to which Guske shall be a third-party beneficiary (the “Guske Services”), and Executive’s obligations to pay Guske consulting fees in consideration for the Guske Services; (e) the Guske Services set forth in the Guske Consulting Agreement shall include, without limitation, general executive assistant duties to Executive, and transitional executive assistant duties to the Company, as the Company may request from time to time; and (f) Guske and Executive shall acknowledge and agree in the Guske Consulting Agreement (i) that neither the Company nor any affiliate of the Company shall have any financial or other obligations to Guske after the Separation  Date, and (ii) that the Company (and its affiliates) shall be third-party beneficiaries under the Guske Consulting Agreement.

 

  

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2.4.2           Limitation.  Subject to the satisfaction of the Guske Conditions, the Company shall reimburse Executive for Executive’s payment to Guske for the Guske Services under the Guske Consulting Agreement in an annual amount equal to One Hundred Seventy Thousand Dollars ($170,000), payable one-twelfth (1/12) per month by the tenth (10th) day of each month for twelve (12) months commencing on the Effective Date.  No such reimbursement shall be due and payable (a) unless Executive and the Company are reasonably satisfied that the Guske Services under the Guske Consulting Agreement have been rendered for the applicable month, or (b) in the event of a breach of this Agreement by Executive, or (c) in the event of a breach by Guske of the Guske Consulting Agreement.

 

2.5          Return of Property.

 

2.5.1           Company Property.  Executive shall turn over to the Company prior to or on the Separation Date all of the Company property that is in Executive’s possession or control prior to or on the Separation Date (the “Company Property”) including, without limitation:  (a) all Company files, books and records (and all copies thereof), including, without limitation, all paper and electronic copies thereof; (b) all electronic devices, including, without limitation, all Company-issued Blackberry devices, cell phones and computers; and (c) all other property of the Company.

 

2.5.2           Executive Property.  The Company shall allow Executive to retain after the Separation Date copies of Executive’s personal information located in the Company’s offices and not related in any way to the business of the Company or any of its affiliates (the “Executive Property”), as more particularly identified on Exhibit 2.5.2 attached hereto.  The Executive Property may be located on Company-issued electronic devices.  Nothing herein shall modify Executive’s continuing rights to preserve all documents that may bear on any pending or threatened litigation or investigations as set forth in any litigation hold memoranda or otherwise respecting the preservation of documents.

 

3.           Release of Guarantees and Collateral.  Subject to the satisfaction of the Protective Conditions, all guarantees provided, or collateral posted, by Executive in respect of indebtedness of the Company and its affiliates, as set forth on Exhibit 3 (the “Guarantees” and the “Collateral,” respectively) shall be released by (a) the Company and its affiliates, and (b) all counter-parties thereto within ten (10) days following the Separation Date.  Until such time as all Guarantees and Collateral as set forth on Exhibit 3, are released by the Company and all counter-parties thereto, the Company shall (a) indemnify and hold harmless Executive from and against any and all Claims (defined in Section 10.1 below) based upon, arising from or with respect to the Guarantees and the Collateral in accordance with Section 9 of this Separation Agreement, and (b) be the primary obligor of all such indebtedness and other obligations.

 

  

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4.           Repayment of Excess Withholding.  Upon the earlier to occur of thirty (30) calendar days after receipt by the Company from the applicable federal or state taxing authority, the Company shall pay to Executive via wire transfer Eighty Three Thousand Dollars ($83,000), which was the amount withheld from Executive’s salary by the Company during 2009 in excess of the amount legally required to be withheld.

 

5.           Consulting Services.  Subject to the satisfaction of the Protective Conditions, Executive shall provide the Company with transitional consulting services (to the extent reasonably requested of Executive by the Company in writing) during the Consulting Term (as defined below) in exchange for a monthly payment to Executive by the Company of Twenty Thousand Dollars ($20,000) for each thirty (30) days of consulting services performed during the Consulting Term.  The Company shall reimburse Executive during the Consulting Term for Executive’s reasonable and actually incurred expenses in connection with Executive’s provision of the consulting services under this Section 5, including, without limitation, lodging and meals, upon Executive’s submission of receipts in accordance with the Company’s customary reimbursement policies.  The “Consulting Term” shall be a period of ninety (90) days commencing on the Separation Date and ending at the close of business on the last day of the ninetieth (90th) day following the Separation Date (the “Consulting Termination Date”); provided, however, that the Consulting Term shall be automatically extended for thirty (30) additional days on the Consulting Termination Date and at the end of each thirty (30) day period thereafter, unless either party hereto gives written notice to the other party hereto at least thirty (30) days prior to the expiration of the Consulting Term (including any renewal thereof) of such party’s election to terminate the Consulting Term (such notice to be delivered in accordance with Section 19.8).  The term “Consulting Term” shall include any extension thereof pursuant to the preceding sentence.  During the Consulting Term, Executive shall not be deemed an employee of the Company, or of any affiliate of the Company, while performing consulting services pursuant to this Separation Agreement and, subject to the other provisions of this Separation Agreement, Executive shall not be eligible to participate in any vacation, medical, retirement or other benefit plan or program of the Company or any of the Company’s affiliates and shall not make any claim of entitlement to any such benefits.  This Separation Agreement does not authorize Executive to enter into contracts or other agreements for or on behalf of the Company or any of the Company’s affiliates, or to otherwise bind or make commitments on behalf of the Company or any of the Company’s affiliates.  After the Separation Date, and during the Consulting Term, Executive shall at no time hold Executive out as having any such authority to act on behalf of the Company and, in fact, Executive shall have no such authority after the Separation Date.  Executive shall at no time after the Separation Date hold Executive out as an officer, director or employee of the Company or any of its affiliates, and Executive shall hold no office or other position (as an employee, director, or otherwise, other than as an independent contractor performing services as a consultant under this Separation Agreement) after the Separation Date.  Any federal, state, local and other applicable taxes which may become due and payable as a result of the compensation paid pursuant to this Section 5 and the services performed by Executive under this Separation Agreement as a consultant are the sole responsibility of Executive.  Executive is not entitled to worker’s compensation benefits or unemployment compensation benefits provided by the Company in respect of Executive’s consulting services during the Consulting Term pursuant to this Section 5.  Executive shall be solely responsible for any such benefits or related payments.  If, after expiration of the Consulting Term, Executive is requested by the Company or any of its affiliates, to testify or be deposed or interviewed in connection with the Litigation (as defined in Section 15.1), the Company shall reimburse Executive for Executive’s reasonable and actually incurred expenses, subject to the Company’s customary reimbursement policies.  In no event and under no circumstances shall Executive have the right to engage third parties (including, without limitation, legal counsel) at the Company’s expense without the Board’s prior written approval in each instance.

 

  

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6.           Transitional Use of Mortgage Banker’s License.  During the period beginning on the Separation Date and ending on the earlier to occur of (a) the one-year anniversary of the Separation Date, and (b) the date the Company has procured a successor mortgage banker license) (such period, the “License Period”), the Company, its affiliates and subsidiaries, as applicable, shall be entitled to utilize on a non-exclusive basis through the Company’s affiliate or subsidiary (the “Licensors”) that holds the mortgage banker license (the “License”), for which Executive is the registered responsible person (the “Responsible Person”), all transactions required by the Licensor to be executed by a mortgage banker licensed in Arizona; provided, however, that the Company shall indemnify and hold harmless Executive from any claims related thereto.  Subject to Executive’s continued compliance with Executive’s obligations under this Separation Agreement, including, without limitation, Executive’s agreement to remain as the Responsible Person with respect to the License and the Licensor during the License Period, the Company shall pay to Executive an additional amount equal to Five Hundred and Fifty Thousand Dollars ($550,000), less legally required withholding and authorized deductions (the “Mortgage License Payment”).  The Mortgage License Payment shall be paid to Executive by the Company in a lump sum within ten (10) days after the Separation Date.  For purposes of clarity, the Mortgage License Payment is in addition to and separate from the Severance Payment.  During the License Period, Executive may continue to use the License at Executive’s sole cost and expense, but shall not allow a third party (other than an entity owned, controlled or managed by Executive) use of the License, and Executive shall indemnify and hold harmless the Company (and all affiliates and subsidiaries thereof) from any claims related thereto.  For the avoidance of doubt, the Company’s obligations hereunder shall be subject to the NW Convertible Note Closing and the Executive Closings.

 

6.1           Executive’s Representations. Executive represents, warrants and covenants to the Company during the License Period that (a) Executive shall utilize the License solely in accordance with applicable laws, (b) Executive shall reasonably cooperate with the Company in maintaining the License in good standing, (c) Executive shall copy the Company on any and all correspondence Executive sends to or receives from the licensing authority with respect to the License, and (d) Executive shall promptly meet and confer with the Company in the event of any alleged violations of applicable laws with respect to the use of the License, and shall work in concert with the Company to promptly resolve any such alleged violations.

 

6.2           The Company’s Representations.  The Company represents, warrants and covenants to Executive during the License Period that (a) the Company, its affiliates and/or subsidiaries and the Licensor shall utilize the License solely in accordance with applicable laws, (b) the Company shall copy Executive on any and all correspondence the Company sends to or receives from the licensing authority with respect to the License, and (c) the Company shall promptly meet and confer with Executive in the event of any alleged violations of applicable laws with respect to the use of the License, and shall work in concert with Executive to promptly resolve any such alleged violations.

 

  

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6.3           Licensor; Compliance with Applicable Law.  Notwithstanding the foregoing to the contrary, to the extent that Executive must be an employee of the Company or any affiliate or subsidiary thereof or the Licensor in order to accommodate Licensor’s use of the License as a matter of applicable law, then, upon prior written notice to Executive, Executive shall become an employee of Licensor (or the Company, or any affiliate or subsidiary thereof) during the License Period for that sole purpose.  No additional compensation, fees or payments shall be payable to Executive under this Section 6.3 whether or not this Section 6.3 is or becomes applicable.

 

7.           Exclusive Remedy.  Subject to the terms and conditions of this Separation Agreement, the payments contemplated in this Separation Agreement shall constitute the sole and exclusive remedy for Executive in connection with the termination of Executive’s employment, and Executive and the Company covenant not to assert or pursue any other remedies, at law or equity, with respect to the termination of Executive’s employment or Executive’s performance or non-performance for or on behalf of the Company or any affiliate thereof at any time prior to the Separation Date, including, without limitation, with respect to any of the allegations made, and/or claims asserted (or that may be asserted), against Executive by any plaintiff and/or any regulatory agency, including, without limitation, the Securities and Exchange Commission.

 

8.           Company Property.  Executive represents, warrants and covenants to the Company that Executive has turned over to the Company prior to or on the Separation Date all of the Company Property and has not retained any copies thereof.

 

9.           Indemnification; Insurance.  Executive shall be entitled, following the Separation Date, to all rights provided in (a) Executive’s indemnification agreement with the Company, as in effect on the Separation Date and subject to the terms and conditions set forth therein, a copy of which is attached hereto as Exhibit 9.1 (the “Indemnification Agreement”), (b) the Amended and Restated Certification of Incorporation, of the Company (the “Company’s Articles”), a copy of which is attached hereto as Exhibit 9.2, and (c) the Company’s Bylaws, a copy of which is attached hereto as Exhibit 9.3.  In connection with any matter for which Executive is entitled to indemnification by the Company, and with respect to which it is determined by the representatives of the Board, pursuant to the Indemnification Agreement, that indemnification is appropriate for payment of Executive’s expenses to retain Executive’s own independent legal counsel, then and only then shall Executive have the right to be indemnified for any reasonable and actually incurred fees and expenses of such counsel subject to the terms of the Indemnification Agreement.  Subject to the Indemnification Agreement, Executive shall have the benefit of the Company’s then existing and future (to the extent permissible by the D&O Insurance carrier) directors and officers liability insurance after the Separation Date in accordance with its terms (the “D&O Insurance”).

 

  

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10.         Release.  The following Executive Release and the Company Release shall be effective on the Separation Date and not on the Execution Date:

 

10.1           Executive’s Release.  Executive, on Executive’s own behalf and on behalf of Executive’s descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, to be effective only on the Separation Date, acknowledges full and complete satisfaction of, and releases and discharges and covenants not to sue (i) the Company or its divisions, subsidiaries, parents, or affiliated entities, past, present and future, and each of them, as well as its and their assignees, successors, directors, officers, stockholders, partners, consultants, representatives, attorneys, agents or employees, past, present and future, or any of them or (ii) the Investor (and the constituent members thereof) (individually and collectively, the “Company Releasees”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with the Company (or any affiliate thereof) or the termination thereof,  including, without limitation, any claim for severance pay, profit sharing, bonus or similar benefit, vacation pay, paid time off, commissions, equity-based awards and/or dividend equivalents thereon, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of the Company Releasees committed or omitted prior to the date of this Separation Agreement, including, without limitation, any claim under Title VII of the Civil, Rights Act of 1964, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Equal Pay Act of 1963, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Family and Medical Leave Act, the Americans with Disabilities Act, the Worker Adjustment and Retraining Notification Act, or any other federal, state or local law, regulation, ordinance, constitution or common law (including any amendments thereto) which Executive now owns or holds, or has at any time heretofore owned or held, or may at any time own or hold by reason of any matter or thing arising from or based upon any cause whatsoever (collectively, the “Claims”); provided, however, that such release shall not apply to (a) any obligation created by or specifically provided for in this Separation Agreement for which receipt or satisfaction has not been acknowledged, including, without limitation, the Company’s obligation to indemnify Executive pursuant to the terms of this Separation Agreement, (b) any right to indemnification that Executive may have pursuant to the Indemnification Agreement, the Company’s Articles or the Company’s Bylaws with respect to any losses, damages or expenses (including, without limitation, attorneys’ fees) that Executive may in the future incur with respect to Executive’s service as an employee, officer or director of the Company or any of its subsidiaries or affiliates, (d)  with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Company policy of D&O Insurance, (e) any rights to continued medical coverage that Executive may have under COBRA, and (f) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Company that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended.  Moreover, nothing in this Separation Agreement or this release precludes Executive from filing a charge or complaint with, or participating in any investigation or proceeding before, the Equal Employment Opportunity Commission (“EEOC”); provided, however, that while Executive may file a charge and participate in any proceeding conducted by the EEOC, by signing this Separation Agreement and release, Executive waives the right to bring a lawsuit against the Company or any other of the Company Releasees and waives the right to any individual monetary recovery in any action or lawsuit initiated by the EEOC.  Executive acknowledges and agrees that Executive has received any and all leave and other benefits that Executive has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.  Executive acknowledges that Executive has received all amounts owed for Executive’s regular and usual salary (including, without limitation, any bonus, severance, vacation pay or other wages), and usual benefits through the date of this Separation Agreement.

 

  

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10.2           The Company’s Release.  The Company, on the Company’s own behalf and on behalf of the Company’s divisions, subsidiaries, parents, or affiliated entities, past, present and future, and each of them, to be effective only on the Separation Date, acknowledges full and complete satisfaction of, and releases and discharges and covenants not to sue Executive or Executive’s descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, as well as Executive’s attorneys, agents or employees, past, present and future, or any of them (individually or collectively, the “Executive  Releasees”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with the Company’s (or its affiliates’) employment of Executive or any other relationship with or interest in the Company or the termination thereof, including, without limitation, any claims against Executive with respect to Executive’s performance or alleged non-performance, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any action or omission by or on behalf of Executive or the Executive Releasees  committed or omitted prior to the date of this Separation Agreement, including, without limitation, any and all pending or future claims by any existing or future plaintiff or regulatory agency, including, without limitation, those allegations asserted by plaintiffs and regulatory agencies against Executive set forth in the pleadings or government inquiries related to the case matters summarized on Exhibit 10.2 attached hereto, and including, without limitation, any and all other Claims or claims asserted from time to time by such plaintiffs and future plaintiffs or such government agencies or future government agencies which the Company or any of its divisions, subsidiaries, parents or affiliated entities, past, present or future, and each of them, now owns or holds, or has at any time heretofore owned or held, or may at any time own or hold by reason of any matter or thing arising from or based upon any cause whatsoever prior to the Separation Date  (the “Litigation Claims”); provided, however, that such release shall not apply to any obligation created by or specifically provided for in this Separation Agreement for which receipt or satisfaction has not been acknowledged.

 

11.          ADEA Waiver.  Executive expressly acknowledges and agrees that by entering into this Separation Agreement, Executive is waiving any and all rights or claims that Executive may have arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), which have arisen on or before the Execution Date of this Separation Agreement.  Executive further expressly acknowledges and, agrees that:

 

11.1           Additional Consideration.  In return for this Separation Agreement Executive shall receive from the Company consideration beyond that which Executive was already entitled to receive from the Company before entering into this Separation Agreement.

 

  

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11.2       Consultation with Counsel.  Executive is hereby advised in writing by this Separation Agreement to consult with an attorney before signing this Separation Agreement, and Executive acknowledges and agrees that Executive has done so.

 

11.3       Acknowledgement and Waiver.  Executive was given a copy of this Separation Agreement on April 20, 2011 and informed that Executive had twenty-one (21) days within which to consider the Separation Agreement and that if Executive wishes to execute this Separation Agreement prior to the expiration of such 21-day period, Executive should execute the Acknowledgement and Waiver attached hereto as Exhibit 11.3.

 

11.4       ADEA Waiver.  Nothing in this Separation Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.

 

11.5       Revocation Right.  Executive was informed by the Company that Executive has seven (7) days following the Execution Date of this Separation Agreement in which to revoke this Separation Agreement, and this Separation Agreement shall become null and void if Executive elects revocation during that seven (7) day time period.  Any revocation must be in writing and must be received by the Company during the seven (7) day revocation period.  In the event that Executive exercises Executive’s right of revocation, neither the Company nor Executive shall have any rights or obligations under this Separation Agreement.

 

12.         Conditions.

 

12.1       Conditions for Executive’s Benefit.  The following conditions precedent to the Separation Closing under this Separation Agreement are for the sole benefit of Executive and may be waived or not waived by Executive in Executive’s sole discretion:

 

12.1.1    NW Transaction Documents.  The NW Transaction Documents shall be duly authorized, executed and delivered by the Company to the Investor, and by the Investor to the Company and the NW Convertible Note Closing shall have occurred.

 

12.1.2    SPA.  The SPA shall be duly authorized and executed by Desert and delivered to Executive and the SPA Closing shall have occurred.

 

12.1.3    Receipt of Payments.  Executive shall have received on the Separation Date all payments to be made to Executive by the Company on the Separation Date pursuant to this Separation Agreement.

 

12.1.4    Filings.  All filings required to be made by the Company with the Securities and Exchange Commission with respect to this Separation Agreement shall have been made by the Company in a timely manner.

 

12.1.5    The Company Waiver.  Executive shall have received from the Company a transfer restriction waiver in the form attached hereto as Exhibit 12.1.5 permitting the transfer of Executive’s shares in the Company to be sold to Desert under the Stock Purchase Agreement (the “Transfer Waiver”).

 

  

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12.2       Conditions for the Company’s Benefit.  The following conditions precedent to the Separation Closing under this Separation Agreement are for the sole benefit of the Company and may be waived or not waived by the Company in the Company’s sole discretion.

 

12.2.1   NW Transaction Documents.  The NW Transaction Documents shall be duly authorized, executed and delivered by the Company to the Investor, and by the Investor to the Company and the NW Convertible Note Closing shall have occurred.

 

12.2.2   SPA.  The SPA shall be duly authorized and executed by Purchaser and Executive and the SPA Closing shall have occurred.

 

12.2.3   Filings.  All filings required to be made by Executive with the Securities and Exchange Commission with respect to this Separation Agreement and the SPA shall have been made by Executive in a timely manner.

 

12.2.4   Revocation Right.  Executive has not revoked this Separation Agreement, and Executive confirms in writing to the Company that Executive has not revoked this Separation Agreement.

 

12.2.5   Acknowledgement and Waiver.  Executive has delivered to the Company a duly executed copy of the Acknowledgement and Waiver.

 

13.          No Transferred Claims.  Executive and the Company represent and warrant to the other that such party has not heretofore assigned or transferred to any person not a party to this Separation Agreement any released matter or any part or portion thereof.

 

14.          Restrictive Covenants.

 

14.1       Nonsolicitation of Employees and Consultants.  During the thirty-six (36) month period after the Separation Date, Executive shall not, directly or indirectly, through any other Person (as defined below), induce or attempt to induce any employee of the Company or any affiliate of the Company to leave the employ or service, as applicable, of the Company or such affiliate, or in any way interfere with the relationship between the Company or any such affiliate, on the one hand, and any employee thereof, on the other hand; provided, however, that Executive may (i) enter into the Guske Consulting Agreement in accordance with this Separation Agreement, (ii) solicit the employment of Guske at any time following the one-year anniversary of the Separation Date, or (iii) solicit the employment of any former employee of the Company or its affiliates at any time after the termination of such individual’s services with the Company and its affiliates.  As used herein, the term “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.

 

  

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14.2       Executive’s Non-Disparagement Obligation.  Executive shall not (a) directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, the Company or any of its affiliates, past, present and future, and each of them, as well as its and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, consultants, stockholders, representatives, assigns, and successors, past and present, and each of them, or (b) make any statement or engage in any conduct that has the purpose or effect of disrupting the business of the Company or any of its affiliates; provided that a judicial action validly brought by Executive to enforce Executive’s rights hereunder shall not be deemed to be the type of conduct contemplated by the foregoing.  Nothing in this Section 14.2 shall in any way prohibit Executive from disclosing such information as may be required by law, or by judicial or administrative process or order or the rules of any securities exchange or similar self-regulatory organization applicable to Executive in the circumstances.

 

14.3       The Company’s Non-Disparagement Obligations.  The Company shall not (a) directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, or (b) make any statement or engage in any conduct that has the purpose or effect of disrupting the business (if any) of Executive; provided that a judicial action validly brought by the Company to enforce the Company’s rights hereunder shall not be deemed to be the type of conduct contemplated by the foregoing.  Neither the Board, any senior executive officer of the Company with the authority to speak for the Company, nor any other designated officer, employee or consultant of the Company with the authority to speak on behalf of the Company shall, directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, Executive.  Nothing in this Section 14.3 shall in any way prohibit the Company, the Board, or any senior executive officer of the Company from disclosing such information as may be required by law, or by judicial or administrative process or order or the rules of any securities exchange or similar self-regulatory organization applicable to the Company, the Board, or any senior executive officer of the Company in the circumstances.

 

14.4       Special Covenants of Executive.  During the period between the Execution Date and the Separation Date, Executive shall

 

14.4.1   attend all meetings of the Board to which any Board member invites Executive;

 

14.4.2   approve all minutes of the Board that fairly reflect the applicable Board meeting that Executive has not yet approved with respect to meetings attended by Executive; and

 

14.4.3   not take any actions, directly or indirectly, designed to interfere with or delay the NW Convertible Note Transaction or the NW Convertible Note Closing.

 

  

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15.          Cooperation.

15.1         Executive Cooperation.  Following the Separation Date, at the Company’s sole expense, Executive shall reasonably cooperate with the Company and its affiliates and subsidiaries in connection with:  (a) any internal or governmental, investigation or administrative, regulatory, arbitral or judicial proceeding involving the Company and any of its affiliates with respect to matters relating to Executive’s employment with or service as a member of the Board or the board of directors of any affiliate or subsidiary (collectively, “Litigation”); or (b) any audit of the financial statements of the Company or any affiliate or subsidiary with respect to the period of time when Executive was employed by the Company or any affiliate (“Audit”).  Executive acknowledges and agrees that such cooperation may include, without limitation, Executive making himself reasonably available to the Company or any affiliate or subsidiary (or their respective attorneys or auditors) upon reasonable notice for: (i) interviews, factual investigations, and providing declarations or affidavits that provide truthful information in connection with any Litigation or Audit; (ii) appearing at the reasonable request of the Company or any affiliate or subsidiary to give testimony without requiring service of a subpoena or other legal process; (iii) volunteering to the Company or any affiliate or subsidiary pertinent information related to any Litigation or Audit; (iv) providing information and legal representations to the auditors of the Company or any affiliate or subsidiary, in a form and within a time frame reasonably requested by the Board, with respect to the Company’s or any affiliate’s or any subsidiary’s opening balance sheet valuation of intangibles and financial statements for the period in which Executive was employed by the Company or any affiliate or any subsidiary; and (v) turning over to the Company or any affiliate any documents relevant to any Litigation or Audit that are or may come into Executive’s possession.  The Company shall make the Company’s legal counsel available to represent Executive in connection with such matters as Executive and the Company may deem to be necessary or advisable.  Executive shall not have the right to retain independent legal counsel at the Company’s expense without prior approval of the Board, subject to the terms of the Indemnification Agreement.  The Company shall reimburse Executive for Executive’s reasonable expenses incurred in connection with providing the services under this Section 15.1, upon Executive’s submission of receipts and compliance with the Company’s customary reimbursement policies.

 

15.2         Company Cooperation.  Following the Separation Date, except as otherwise approved by the Board in writing, at Executive’s sole expense, the Company shall reasonably cooperate with Executive in connection with any governmental investigation or administrative, regulatory, arbitral or judicial proceeding involving Executive with respect to matters relating to Executive’s employment with or service as a member of the Board or the board of directors of any Company affiliate (collectively, “Executive Litigation”).

 

16.          Affirmative Covenants.  The Company shall (a) indemnify, defend and hold harmless Executive pursuant to the indemnification provisions of the Company’s Articles, the Company’s Bylaws and the Indemnification Agreement against all Claims and other claims, including, without limitation, any Litigation or any Litigation Claims, and (b) only modify Executive’s protection under the Company’s Articles, the Company’s Bylaws, the Indemnification Agreement or the Company’s D&O Insurance to the extent of any such modifications for the benefit of any officer or director of the Company.

 

17.          Execution Date.  The Company and Executive shall execute this Agreement on the Execution Date, which shall be the date the Company and the Investor execute the NW Commitment Letter.

 

18.          Securities Purchase Agreement.  With reference to the Securities Purchase Agreement by and between Executive, as seller, and Desert, as purchaser, all of the representations and warranties made by Executive, as seller, in Article 4 of the Stock Purchase Agreement are incorporated by reference into this Separation Agreement as representations and warranties by Executive for the benefit of the Company.

 

  

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19.          Miscellaneous.

 

19.1        Successors.

 

19.1.1   Non-Assignable.  This Separation Agreement is personal to Executive and the Company and shall not, without the prior written consent of the other party, be assignable.

 

19.1.2   Successor and Assigns.  This Separation Agreement shall inure to the benefit of and be binding upon Executive and the Company and their respective representatives, successors, heirs and permitted assigns and any such representative, successor, heir or assignee shall be deemed substituted for Executive or the Company, as the case may be, under the terms of this Separation Agreement for all purposes.  As used herein, “successor” and “assignee” of the Company 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 the Company or to which the Company assigns this Separation Agreement by operation of law or otherwise in accordance with the terms of this Separation Agreement.

 

19.2        Waiver.  No waiver of any breach of any term or provision of this Separation Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Separation Agreement.  No waiver shall be binding unless in writing and signed by the party waiving the breach.

 

19.3        Modification.  This Separation Agreement may not be amended or modified other than by a written agreement executed by Executive and an executive officer of the Company duly authorized to execute such agreement.

 

19.4        Complete Agreement.  This Separation Agreement (including the exhibits hereto) constitutes and contains the entire agreement and final understanding concerning Executive’s relationship with the Company and its affiliates and the other subject matters addressed herein between the parties hereto, and supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters hereof.  Any representation, promise or agreement not specifically included in this Separation Agreement shall not be binding upon or enforceable against either party.  This Separation Agreement, along with the exhibits referred to herein, constitutes an integrated agreement.

 

19.5        Severability. If any provision of this Separation Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Separation Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Separation Agreement are declared to be severable.

 

  

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19.6        Governing Law.  This Separation Agreement shall be deemed to have been executed and delivered within the State of Arizona, and the rights and obligations of the parties under this Separation Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Arizona without regard to principles of conflict of laws.

 

19.7        Legal Counsel; Mutual Drafting.  Each party to this Separation Agreement recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice.  Each party has cooperated in the drafting, negotiation and preparation of this Separation Agreement.  Hence, in any construction to be made of this Separation Agreement, the sane shall not be construed against either party on the basis of that party being the drafter of such language.  Executive acknowledges and agrees that Executive has read and understands this Separation Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Separation Agreement, has had ample opportunity to do so and has done so.

 

19.8        Notices.

 

(i)          All notices, requests, demands and other communications required or permitted under this Separation Agreement shall be in writing and shall be deemed to have been duly given and made if delivered by hand, otherwise delivered against receipt therefor, or sent by registered or certified mail, postage prepaid, return receipt requested.  Any notice shall  be duly addressed to the parties hereto as follows:

 

(a)           if to the Company:

 

IMH Financial Corporation

4900 N. Scottsdale Road #5000

Scottsdale, Arizona 85251

Attn: Mr. William Meris

 

	
  

	
(b)

	
if to Executive, at the last address of Executive on the books of the Company.

 

(ii)         Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 19.8 for the giving of notice. Any communication shall be effective when delivered by hand, when otherwise delivered against receipt therefor, or five (5) business days after being mailed in accordance with the foregoing.

 

19.9        Counterparts.  This Separation 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.

 

19.10      Venue Forum.  Executive and the Company agree that any controversy arising out of or relating to this Separation Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other controversy arising out of Executive’s employment, including, without limitation, any state or federal statutory claims, shall be brought in a Federal or Superior Court in Phoenix, Arizona, as the exclusive forum for the resolution of such dispute.

 

  

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19.11       Waiver of Jury Trial.  The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with this Separation Agreement or Executive’s employment.

 

19.12       Number and Gender.  Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

 

19.13       Headings.  The section headings contained in this Separation Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Separation Agreement.

 

19.14       Taxes.  The Company has the right to withhold from any payment hereunder or under any other agreement between the Company and Executive the amount required by law to be withheld with respect to such payment or other benefits provided to Executive.  Other than as to such withholding right, Executive shall be solely responsible for any taxes due as a result of the payments and benefits received by Executive contemplated by this Separation Agreement.

 

[Remainder of page intentionally left blank.]

  

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IN WITNESS WHEREOF, Executive and the Company have executed this Separation Agreement on the Execution Date

 

	
“Executive”

	 
	/s/ Shane C. Albers
	
Shane C. Albers

	  
	
“Company”

	  
	
IMH Financial Corporation,

	
a Delaware corporation

	  
	
By:

	
/s/ William Meris

	  	  
	
Its:

	
President

 

  

  

  

EXHIBIT 1.1

RESIGNATION LETTER

 

	
Date:

	
April 20, 2011

	  	  
	
To:

	
The Board of Directors of IMH Financial Corporation

	  	  
	
From:

	
Shane C. Albers

 

Subject to the terms of that certain Separation Agreement by and between Shane C. Albers and IMH Financial Corporation dated as of April 20, 2011 (the “Separation Agreement”), I hereby resign as an employee, officer, director, member, manager and in any other capacity with IMH Financial Corporation and each of its affiliates, effective as of the Separation Date (as such term is defined in the Separation Agreement).

 

	  	  
	  	
Shane C. Albers

 

  

Exhibit 1.1-1

  

EXHIBIT 2.5.2

 

EXECUTIVE PROPERTY

 

None

  

Exhibit 2.5.2-1

  

EXHIBIT 3

GUARANTIES AND COLLATERAL

 

Guarantee of amount of the Company’s outstanding obligation to eFunds Corporation  (as of 4/1/11,  $252,206.66)

 

Four Certificates of Deposit pledged to secure Company’s debt to the Biltmore Bank in the amount of $1,625,000.00 (as of 4/5/11 the value of the Certificates of Deposit as applicable to Executive totaled $1,377,807.50)

 

  

Exhibit 3-1

  

EXHIBIT 9.1

INDEMNIFICATION AGREEMENT

  

Exhibit 9.1-1

  

EXHIBIT 9.2

COMPANY’S ARTICLES

  

Exhibit 9.2-1

  

EXHIBIT 9.3

COMPANY’S BYLAWS

  

Exhibit 9.3-1

  

EXHIBIT 10.2

LITIGATION CLAIMS

 

[attached hereto]

 

  

Exhibit 10.2-1

  

EXHIBIT 11.3

ACKNOWLEDGEMENT AND WAIVER

 

I, Shane C. Albers, hereby acknowledge that I was given 21 days to consider the  foregoing Employment Separation, and General Release Agreement and voluntarily chose to sign the Employment Separation and General Release Agreement prior to the expiration of the 21-day period.

 

I declare under penalty of perjury under the laws of the State of Arizona, that the foregoing is true and correct.

 

EXECUTED this 20th day of April 2011, at Scottsdale, Arizona.

 

	  	 
	  	
Shane C. Albers

 

  

Exhibit 11.3-1

  

EXHIBIT 12.1.5

TRANSFER WAIVER

  

Exhibit 12.1.5-1Unassociated Document

EMPLOYMENT AGREEMENT

(William Meris)

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 20th day of April, 2011 (the “Effective Date”) by and between (A) (i) William Meris (“Executive”) and (ii) IMH Financial Corporation, a Delaware corporation (“IMH”), and (B) (i) Executive, and (ii) INFINET Securities, LLC, a Delaware limited liability company (“Infinet”).

 

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

 

A.           IMH desires to obtain the services of Executive upon and following the Effective Date.  This Agreement shall, among other things, govern the employment relationship between Executive and IMH from and after the Effective Date, and, as of the Effective Date, shall supersede and negate all previous agreements with respect to such relationship.

 

B.           Executive desires to be employed by IMH on the terms and conditions set forth in this Agreement applicable to Executive and IMH.

 

C.           At the request of IMH, Infinet desires to obtain the services of Executive upon and following the Effective Date.  This Agreement shall, among other things, govern the employment relationship between Executive and Infinet from and after the Effective Date, and, as of the Effective Date, shall supersede and negate all previous agreements with respect to such relationship.

 

D.           At the request of IMH, Executive desires to be employed by Infinet on the terms and conditions set forth in this Agreement applicable to Executive and Infinet.

 

E.           On the Effective Date, IMH owns one hundred percent (100%) of the issued and outstanding membership units of Infinet.

 

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

 

G.           In the event that IMH requests that Executive resign as the Chief Executive Officer of Infinet and become a full-time executive officer of IMH, Executive shall promptly do so.

 

H.           A breach by Executive of Executive’s obligations under this Agreement to IMH or Infinet 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 Executive’s obligations to IMH under this Agreement, such breach shall also constitute a breach of Executive’s obligations to Infinet under this Agreement; and (ii) in the event of a breach of Executive’s obligations to Infinet under this Agreement, such breach shall also constitute a breach of Executive’s obligations to IMH under this Agreement.

  

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I.            The obligations of IMH and Infinet, respectively, to Executive are independent and neither IMH nor Infinet is guaranteeing the obligations of the other to Executive.

 

J.            Executive acknowledges that (i) IMH is seeking to consummate a transaction with NWRA Capital Partners, LLC (and/or its designees) (collectively, “Lender”) (the “Convertible Note Transaction”) and (ii) that the consummation of the 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).

 

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

 

L.           The obligations of IMH and Infinet, respectively, to Executive are independent, however, IMH shall guarantee the payment obligations of Infinet to Executive with respect to the Infinet Base Salary if that obligation is not paid by Infinet in a timely manner, as more particularly set forth in this Agreement.

 

NOW, THEREFORE, the parties hereto do hereby agree as follows.

 

1.           Term.

 

1.1         Original Term; Renewal Term.  IMH and Infinet, respectively, hereby agree to employ Executive, and Executive hereby agrees to be employed by IMH and Infinet, respectively, subject to the terms and conditions set forth in this Agreement, for the period commencing on the Effective Date and terminating on the third anniversary of the Effective Date (the “Original Term”), unless earlier terminated as provided in Section 7.  Upon the expiration of the Original Term, unless any of IMH or Infinet, as applicable, or Executive provide a Non-Renewal Notice (as defined below) to the other party, as applicable, pursuant to Section 1.2, this Agreement shall be automatically renewed for a new one (1) year term from that day forward (a “Renewal Term”).

 

1.2         Non-Renewal.  Notwithstanding the foregoing, (a) IMH or Infinet, respectively, on the one hand, and (b) Executive, on the other hand, may notify the other in writing, at any time upon not less than ninety (90) days prior written notice, that there shall be no renewal of this Agreement (a “Non-Renewal Notice”).  If any such Non-Renewal Notice is given, this Agreement shall immediately cease to renew and shall terminate at the end of the then applicable term.

 

1.3         Employment Period.  The period of Executive’s employment hereunder by IMH or Infinet, as applicable, within the Original Term and any Renewal Term is herein referred to as the “Employment Period.”

 

2.           Employment Duties.

 

2.1         Title.

 

2.1.1           IMH.  During the Employment Period, Executive shall serve as the President of IMH.  In this capacity, Executive shall have such duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly-sized companies, and such other duties and responsibilities as the Board of Directors of IMH (the “IMH Board”) shall reasonably designate that are consistent with Executive’s position as President of IMH.  Executive shall report exclusively to the Chairman and Chief Executive Officer of IMH.  In addition to serving as the President of IMH, Executive currently is and shall continue to be a member of the IMH Board from and after the Effective Date, subject to customary board election practices.

  

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2.1.2           Infinet.  During the Employment Period, Executive shall serve as the Chief Executive Officer of Infinet.  In this capacity, Executive shall have such duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly-sized companies, and such other duties, authorities and responsibilities as the Board of Directors of Infinet (the “Infinet Board”) shall reasonably designate that are consistent with Executive’s position as the Chief Executive Officer of Infinet.  Executive shall report exclusively to the Chairman of the Infinet Board.  In addition to serving as the Chief Executive Officer of Infinet, Executive shall become a member of the Infinet Board from and after the Effective Date, subject to customary board election practices.  In the event that IMH requests that Executive resign as the Chief Executive Officer of Infinet and become a full-time executive officer of IMH, Executive shall promptly do so.

 

2.2         Time.  Executive shall devote substantially all of Executive’s working time and efforts to the performance of Executive’s duties under this Agreement in an allocable manner to each of IMH and Infinet; provided, however, that nothing in this Section 2.2 shall be interpreted to preclude Executive from (i) participating with the prior written consent of the IMH Board and the Infinet Board as a director of, or advisor to, any other entity or organization that is not a customer or material service provider to IMH or Infinet or a Competing Enterprise, as defined in Section 8, so long as such participation does not interfere with the performance of Executive’s duties hereunder, whether or not such entity or organization is engaged in religious, charitable or other community or non-profit activities, (ii) investing in any entity or organization which is not a customer or material service provider to IMH or Infinet or a Competing Enterprise, so long as such investment does not interfere with the performance of Executive’s duties hereunder, or (iii) delivering lectures or fulfilling speaking engagements so long as such lectures or engagements do not interfere with the performance of Executive’s duties hereunder; and provided, further, nothing herein shall modify IMH’s rights as set forth in the last sentence of Section 2.1.2.  IMH and Infinet, respectively, consent to Executive’s performance of services for, relationships with and investments in the entities listed on Schedule 2.2, and such services, relationships and investments shall not be deemed to be a breach of this Agreement and such entities shall not be deemed to be Competing Enterprises for purposes of Section 8.1 or any other provision of this Agreement.

 

2.3         Allocation of Time.  Subject to IMH’s rights set forth in the last sentence of Section 2.1.2, IMH and Infinet, on the one hand, and Executive, on the other hand, agree to an allocation of Executive’s time of approximately fifty percent (50%) to IMH and fifty percent (50%) to Infinet.

  

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2.4         Travel.  In performing Executive’s duties hereunder, Executive shall be available for reasonable travel as the needs of the business of IMH or Infinet, respectively, require.

 

2.5         Office Location.  Executive shall work primarily from IMH’s and Infinet’s office in Scottsdale, Arizona.

 

3.           Compensation/Benefits.  In consideration of Executive’s services hereunder, IMH and Infinet, as applicable, shall provide Executive the following:

 

3.1         Base Salary.  During the Employment Period, for so long as the Executive remains employed by both IMH and Infinet or becomes a full-time executive officer of IMH pursuant to Section 2.1.2, the Executive shall receive an annual rate of base salary (the “Base Salary”) in the aggregate amount of (a) and (b) following: (a) Three Hundred Thousand Dollars ($300,000) of the Base Salary shall be paid by IMH (the “IMH Base Salary”) and (b) Three Hundred Thousand Dollars ($300,000) of the Base Salary shall be paid by Infinet (the “Infinet Base Salary”).  Executive’s IMH Base Salary and Infinet Base Salary shall be reviewed by IMH and Infinet, respectively, annually and may be adjusted upward (but not downward) at such time and shall include a reasonable cost of living review and increase.  The IMH Base Salary and Infinet Base Salary shall be payable in accordance with IMH’s and Infinet’s respective normal business practices, but in no event less frequently than monthly.  In the event that Executive becomes a full-time executive officer of IMH, IMH shall pay Executive the entirety of the Base Salary (and any references to the IMH Base Salary thereafter  shall refer to the entirety of the Base Salary) and Infinet shall have no obligations to pay any portion thereof, including, without limitation, the Infinet Base Salary.

 

3.2         Bonuses; Equity Compensation.

 

3.2.1           IMH.  During each calendar year that occurs during the Employment Period, IMH shall establish an annual incentive compensation plan pursuant to which Executive shall be eligible to receive additional compensation (the “IMH Cash Bonus”) in an amount up to one hundred percent (100%) of Executive’s IMH Base Salary.  The IMH Cash Bonus for each calendar year shall become payable to Executive by IMH based upon the attainment of certain specified goals and objectives as determined by the Compensation Committee of the IMH Board, from time to time, in its sole discretion.  The goals and objectives for each calendar year shall be determined by the Compensation Committee of the IMH Board within ninety (90) days after the start of each calendar year (or for calendar 2011, within ninety (90) days after the Effective Date).  The Executive’s IMH Cash Bonus for 2011 shall be prorated.  Except as provided in Section 7, the Executive must be employed by IMH on the last date of the applicable calendar year in order to be eligible for the IMH Cash Bonus with respect to that calendar year.

 

  

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IMH also has adopted the 2010 IMH Financial Corporation Stock Incentive Plan (the “IMH Equity Plan”).  Subject to the terms of this Section 3.2.1, promptly after the Effective Date, it will be recommended to the Compensation Committee of the IMH Board that Executive be granted a stock option (the “Option”) under the IMH Equity Plan to purchase 150,000 shares of IMH’s common stock.  The Option shall be granted with an exercise price per share equal to the Fair Market Value (as defined in the IMH Equity Plan) of a share of IMH’s common stock on the grant date, which Fair Market Value will be determined based on the conversion price of the Convertible Loan.  Subject to the Executive’s continued employment on each vesting date, the Option shall vest and become exercisable in thirty six (36) substantially equal monthly installments, with the first installment vesting on the last day of the month following the month in which the grant date occurs and an additional installment vesting on the last day of each of the thirty five (35) months thereafter.  The Option may also become vested as provided in Section 7.  The Option shall have an ordinary term of ten (10) years.  The Option shall be granted under and  subject to the terms and conditions of the IMH Equity Plan and IMH’s form option agreement approved for use under the IMH Equity Plan.  During the Employment Period, the Executive shall also be eligible to receive additional equity awards under the IMH Equity Plan    in the sole discretion of the Compensation Committee of the IMH Board.

 

3.2.2           During each calendar year that occurs during the Employment Period, Infinet shall establish an annual incentive compensation plan pursuant to which Executive shall be eligible to receive additional compensation (the “Infinet Cash Bonus”) in an amount up to one hundred percent (100%) of Executive’s Infinet Base Salary.  The Infinet Cash Bonus for each calendar year shall become payable to Executive by Infinet based upon the attainment of certain specified goals and objectives as determined by the Infinet Board in the Infinet’s Board’s sole discretion.  The goals and objectives for each calendar year shall be determined by the Infinet Board after discussions with Executive within ninety (90) days after the start of each calendar year (or for calendar 2011, within ninety (90) days after the Effective Date).  The Executive’s Infinet Cash Bonus for 2011 shall be prorated.  Except as provided in Section 7, the Executive must be employed by Infinet on the last date of the applicable calendar year in order to be eligible for the Infinet Cash Bonus with respect to that calendar year. In the event that Executive becomes a full-time executive officer of IMH, Infinet shall have no further obligations to Executive for the Infinet Cash Bonus.

 

Infinet contemplates adopting the 2011 Infinet Securities, LLC Incentive Plan (the “Infinet Equity Plan”).  Promptly after the Effective Date, the Infinet Board shall grant to Executive  the award more particularly described on Exhibit 3.2.2 (the “Infinet 2011 Award”). During the Employment Period, the Executive shall also be eligible to receive additional equity awards under the Infinet Equity Plan in the sole discretion of the Infinet Board.

 

3.3         Medical and Disability Insurance; Physical.  During the Employment Period, Executive shall be entitled to participate in any medical, dental, vision or disability insurance programs made available from time to time by IMH or Infinet, as applicable, to its employees.  The terms and conditions of Executive’s participation in such plans shall be set forth in the relevant plan documents and Executive shall be eligible to participate in such plans on terms and conditions that are at least as favorable as those available to any other employee of IMH or Infinet, as applicable.  In addition to the standard disability insurance program available to other employees of IMH or Infinet, as applicable (the “Base Disability Policy”), during the Employment Period, Executive shall be entitled to the benefits offered by a supplemental disability policy (the “Supplemental Policy”) providing for coverage mutually reasonably acceptable to IMH and Infinet, on the one hand, and Executive, on the other hand.  During the Employment Period, Executive also shall be entitled to a comprehensive annual physical performed, at the joint expense of IMH and Infinet (but not including any related travel expense), by the physician or medical group of Executive’s choosing.  In the event that Executive becomes a full-time executive officer of IMH, Infinet shall have no further obligations for any of Executive’s medical and disability insurance (including, without limitation, with respect to the Base Disability Policy or  Supplemental Policy) or physical expenses.

  

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3.4           Vacations.  Executive shall be entitled to reasonable paid vacations during the Employment Period in accordance with the then regular procedures of IMH’s and Infinet’s governing officers, respectively; provided, however, at no time during the Employment Period shall such vacation period be less than six (6) weeks per calendar year in the aggregate.  During any period that Executive remains employed by both IMH and Infinet, Executive shall take Executive’s vacation from both companies at the same time.  IMH and Infinet shall each bear one-half (1/2) of this obligation.  In the event that Executive becomes a full-time executive officer of IMH, Infinet shall have no further obligations for any of Executive’s vacation benefits.

 

3.5           Office; Secretary, etc.  During the Employment Period, IMH and Infinet shall jointly provide to Executive a personal executive assistant and a private office commensurate with Executive’s title and duties.  IMH and Infinet shall each bear one-half (1/2) of this obligation.  In the event that Executive becomes a full-time executive officer of IMH, Infinet shall bear no portion of this obligation.

 

3.6           Automobile.  IMH and Infinet shall jointly provide Executive with a One Thousand Two Hundred Fifty Dollar ($1,250) monthly car allowance during the Employment Period in accordance with IMH’s and Infinet’s current practices, as applicable.  IMH and Infinet shall each bear one-half (1/2) of this obligation.  In the event that Executive becomes a full-time executive officer of IMH, Infinet shall bear no portion of this obligation.

 

3.7           Other Benefits.  During the Employment Period, Executive also shall be entitled to participate in any other retirement, savings, life insurance, or other benefit programs offered from time to time by IMH or Infinet, respectively, to its employees on terms and conditions which are at least as favorable as the terms and conditions generally available to employees of IMH or Infinet, respectively.  For purposes of any benefit plans offered by IMH, Executive shall be given credit for purposes of eligibility and vesting of employee benefits and benefit accrual for service prior to the Effective Date with Investors Mortgage Holdings Inc. and its affiliates (the “Former Manager”) under each benefit plan of IMH to the extent such service had been credited under employee benefit plans of the Former Manager, provided that no such crediting of service results in duplication of benefits.  Moreover, there shall be no duplication of benefits provided to Executive by IMH and Infinet.  In the event that Executive becomes a full-time executive officer of IMH, Infinet shall bear no portion of any of these obligations.

 

3.8           D&O Insurance.  IMH and Infinet, respectively, shall provide directors and officers insurance to Executive during the Employment Period on terms and conditions reasonably satisfactory to the IMH Board and the Infinet Board, respectively, and as may be reasonably, commercially available to IMH and Infinet, respectively.

 

3.9           IMH Guarantee.  The obligations of IMH and Infinet, respectively, to Executive are independent, however, in the sole case that Infinet fails to meet Infinet’s payment obligations to Executive with respect to the Infinet Base Salary (as set forth herein) in a timely manner, then IMH shall pay the Infinet Base Salary obligation to Executive 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).

  

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4.           Expenses; Indemnification.

 

4.1           Reimbursement.  During the Employment Period, IMH or Infinet, respectively, shall reimburse Executive for the reasonable business expenses incurred by Executive in the course of performing Executive’s duties for IMH or Infinet, respectively, hereunder, upon submission of invoices, vouchers or other appropriate documentation, as may be required in accordance with the policies in effect from time to time for executive employees of IMH or Infinet, respectively.  In all events, Executive shall submit to IMH or Infinet, as applicable, appropriate invoices for reimbursable business expenses incurred within ninety (90) days of incurring the expense, and IMH or Infinet, as applicable, shall reimburse Executive within thirty (30) days thereafter for all such appropriate reimbursable expenses.

 

4.2           Indemnification.  Executive, on the one hand, and Infinet and IMH, on the other hand, shall each enter into a separate indemnification agreement pursuant to which IMH and Infinet, respectively, shall indemnify Executive to the same extent as Executive is indemnified under the Indemnification Agreement dated as of November 19, 2010, between IMH and William Meris, a copy of which is attached hereto as Exhibit 4.2; provided, however, in the event that any officer or director of IMH or Infinet, respectively, receives indemnification protection more favorable than that which is set forth in the Indemnification Agreement, Executive shall automatically receive the same benefits thereof.

 

5.           Employer’s Authority; Policies.

 

5.1           General.  Executive shall observe and comply with the rules and regulations of IMH and Infinet, respectively, as adopted by the IMH Board and the Infinet Board, respectively, and communicated in writing to Executive respecting the performance of Executive’s duties and shall carry out and perform reasonable orders, directions and policies communicated in writing to Executive from time to time by the IMH Board and the Infinet Board, respectively.

 

5.2           Ethics Policies.  Executive shall comply with and be bound by any Ethics Policies adopted by IMH and Infinet, respectively, from time to time, that are communicated to Executive in writing.  Executive also shall comply with and be bound by IMH's and Infinet’s insider trading policies and procedures, respectively, that are generally applicable to employees and/or senior officers and are communicated in writing to Executive.

 

5.3           SEC and FINRA Certifications.  Executive’s duties shall include taking such actions as are necessary so that Executive is in a position to give, and does give, all certifications that an executive holding Executive’s position, under federal and state law or regulations, is required to give with the submission by IMH or Infinet, as applicable, of reports or other filings to the Securities and Exchange Commission (“SEC Filings”), and FINRA (“FINRA Filings”).

  

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5.4         Licenses.  From and after the Effective Date and throughout the Employment Period, Executive shall (a) hold and maintain in good standing all licenses necessary or advisable to conduct the business of IMH and Infinet, respectively, (b) insure that all employees of IMH and Infinet, respectively, who are required to hold and maintain licenses in order to conduct the business of IMH and Infinet, respectively, are holding and maintaining such licenses in good standing, (c) advise IMH and Infinet of any cancellation, revocation or suspension of any such licenses, and (d) advise IMH and Infinet in writing of (i) any claims asserted by any regulatory authority or private plaintiff with respect to any such licenses, and (ii) any complaints with respect to any such licenses.

 

6.           Records; Nondisclosure; Company Policies.

 

6.1         General.  All records, manuals, financial statements and similar documents obtained, reviewed or compiled by Executive in the course of the performance by Executive of services for IMH or Infinet, respectively, whether or not confidential information or trade secrets, shall be the exclusive property of IMH or Infinet, respectively.  Executive shall have no rights in or to such documents upon any termination of this Agreement.

 

6.2         Nondisclosure Agreement.  Without limitation of IMH’s and Infinet’s rights, respectively, under Section 6.1, Executive shall abide by and be bound by the Nondisclosure Agreements executed by Executive and IMH, on the one hand, and Executive and Infinet, on the other hand.

 

7.           Termination; Severance; and Related Matters.

 

7.1         At-Will Employment.  Executive’s employment with IMH and Infinet, respectively, hereunder is “at will” and, therefore, may be terminated at any time, with or without Cause, at the option of IMH or Infinet, as applicable, subject only to any applicable severance obligations set forth in this Section 7.  Upon any termination hereunder, the Employment Period with respect to IMH or Infinet, as applicable, shall expire.

 

7.2         Definitions.  For purposes of this Section 7, the following terms shall have the indicated definitions:

 

(1)          Cause.  “Cause” shall mean:

 

(i)           Executive 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

 

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

 

  

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(iii)         a judicial determination of Executive’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)         Executive’s material breach of this Agreement that, if curable, is not cured by Executive within thirty (30) days after written notice from 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 Executive’s employment 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 Executive within thirty (30) 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 Infinet Board, as applicable, duly called and held as to which termination of Executive from IMH or Infinet, as applicable, is an agenda item) to terminate Executive for Cause after Executive has been given written notice of the acts or circumstances which are the basis for the termination for Cause and after Executive has been afforded at least five (5) days prior written notice of the meeting and an opportunity to present Executive’s position in writing; and

 

(C)           the IMH Board or the Infinet Board, as applicable, has given a Notice of Termination to Executive within thirty (30) days after the last to occur of the IMH Board or Infinet Board meeting, as applicable, and the conviction or final, judicial determination, as applicable, as required in Sections 7.2(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 Executive from IMH or Infinet, as applicable, with pay at any time during the period commencing with the giving of notice to Executive 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 Executive except as provided in Section 7.3(vi).

 

(2)          Change in Control.  A “Change in Control” as to IMH or Infinet, respectively, shall mean the occurrence of any one or more of the following events following the Effective Date 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 Lender 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

  

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(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 Lender or any affiliate thereof and any employee benefit plan (or related trust) of IMH or Lender 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) 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.

 

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 an acquisition of securities by IMH or Lender or any affiliate or related party thereof 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.

 

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

  

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(i)           a material adverse change in the functions, duties or responsibilities of Executive’s position with IMH or Infinet (except in the event that IMH has requested that Executive become a full-time executive officer of IMH), as applicable, which would reduce the level, importance or scope of such position, except in connection with the termination of Executive’s employment with IMH or Infinet (except in the event that IMH has requested that Executive become a full-time executive officer of IMH), as applicable, for Disability, Cause, as a result of Executive’s death or by Executive 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 Executive’s employment for Cause by the Company or Infinet, as applicable, which does not comply with the terms of Section 7.2(1) of this Agreement;

 

(iv)         the failure of the Company 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 10 of this Agreement;

 

(v)          the failure by IMH to continue in effect any compensation plan in which Executive participates immediately prior to a Change in Control of IMH which is material to Executive’s total compensation 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 Executive’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 Executive’s participation relative to other participants, as existed during the last completed fiscal year of IMH prior to the Change in Control of IMH;

 

(vi)         the relocation of IMH’s or Infinet’s Scottsdale, Arizona office, as applicable, to a new location more than thirty (30) miles away from the current location; or

 

(vii)        except as may be prohibited by the SEC, FINRA 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 re-elect Executive to the IMH Board or the Infinet Board, as applicable; provided, however, that it will not be a Constructive Termination Without Cause if Executive shall fail to be re-elected by the stockholders of IMH or members of Infinet, as applicable, or the IMH’s Board or Infinet’s Board, as applicable, failure to take action is in connection with the termination of Executive’s employment from IMH or Infinet, as applicable, for Disability, Cause, as a result of Executive’s death or by Executive other than for a Constructive Termination Without Cause.

  

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Notwithstanding the foregoing, a Constructive Termination Without Cause shall not be treated as having occurred unless Executive 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 of the initial existence of such action or omission and, within thirty (30) days after Executive 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 Executive has given a final Notice of Termination delivered after expiration of IMH’s or Infinet’s, as applicable, thirty (30) day cure period.  Executive shall be deemed to have waived Executive’s right to declare a Constructive Termination Without Cause with respect to any such action or omission if Executive does not notify IMH or Infinet, as applicable, in writing of such action or omission within thirty (30) days of Executive’s initial knowledge of the event that gives rise to such action or omission.

 

(4)           Covered Average Compensation. “Covered Average Compensation” shall mean the sum of Executive’s Covered Compensation as calculated for the calendar year in which the Date of Termination occurs and for each of the two (2) preceding calendar years, divided by three (3).

 

(5)           Covered Compensation.  “Covered Compensation,” for any calendar year, shall mean an amount equal to the sum of (i) Executive’s Base Salary (that is, in the case of IMH, the IMH Base Salary and in the case of Infinet, the Infinet Base Salary, as applicable) for the calendar year, and (ii) the IMH Cash Bonus or the Infinet Cash Bonus, as applicable, actually earned by Executive with respect to such calendar year from IMH or Infinet, as applicable.  Covered Compensation shall be calculated according to the following rules:

 

(A)           In determining the IMH Cash Bonus or the Infinet Cash Bonus, as applicable, actually paid with respect to a calendar year, if no IMH Cash Bonus or Infinet Cash Bonus, as applicable, has been paid with respect to the calendar year in which the Date of Termination occurs, the IMH Cash Bonus or Infinet Cash Bonus, as applicable, paid with respect to the immediately preceding calendar year shall be assumed to have been paid in each of the current and immediately preceding calendar years, and if no IMH Cash Bonus or Infinet Cash Bonus, as applicable, has been paid by the Date of Termination with respect to the immediately preceding calendar year, the IMH Cash Bonus or Infinet Cash Bonus, as applicable, paid with respect to the second preceding calendar year shall be assumed to have been paid in all three of the calendar years taken into account in determining Covered Average Compensation.

 

(B)           If (i) any IMH Cash Bonus or Infinet Cash Bonus, as applicable, paid with respect to the current or immediately preceding calendar year was paid within three (3) months of Executive’s Date of Termination, (ii) such IMH Cash Bonus or Infinet Cash Bonus, as applicable, is lower than the last IMH Cash Bonus or Infinet Cash Bonus, as applicable, paid more than three (3) months from the Date of Termination, and (iii) it is determined that the IMH Board or the Infinet Board, as applicable, acted in bad faith in setting such IMH Cash Bonus or Infinet Cash Bonus, as applicable (which determination of bad faith shall specifically be made with reference to the target cash bonuses set for other officers of IMH or Infinet, respectively, and the actual cash bonuses paid to other officers of IMH or Infinet, respectively), then in such event any such IMH Cash Bonus or Infinet Cash Bonus, as applicable, paid within three (3) months of the Date of Termination shall be disregarded and the last IMH Cash Bonus or Infinet Cash Bonus, as applicable, paid more than three (3) months from the Date of Termination shall be substituted for each IMH Cash Bonus or Infinet Cash Bonus, as applicable, so disregarded.

  

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(6)           Disability.  “Disability” shall mean Executive has been determined by a competent, licensed medical doctor to be disabled and to qualify for long-term disability benefits under the long-term disability insurance policy obtained pursuant to Section 3.3 of this Agreement.

 

7.3         Rights Upon Termination.

 

(i)           Payment of Benefits Earned Through Date of Termination.  Upon any termination of Executive’s employment during the Employment Period applicable to IMH or Infinet, as applicable, Executive, or Executive’s estate, shall in all events be paid (I) all accrued but unpaid IMH Base Salary or Infinet Base Salary, as applicable, and (II) (except in the case of a termination by IMH or Infinet, as applicable, for Cause or a voluntary termination by Executive which is not due to a Constructive Termination Without Cause, in either of which cases this clause (II) shall not apply) a pro rata portion of the Executive’s IMH Cash Bonus or Infinet Cash Bonus, as applicable.  For purposes of fulfilling the requirements of clause (II) of the prior sentence, the following shall apply:

 

(b)          IMH and Infinet, on the one hand, and Executive, on the other hand, shall work in good faith to determine an appropriate IMH Cash Bonus and/or an Infinet Cash Bonus , as applicable, for the year in which the Date of Termination occurs.  Such determination shall be based in good faith on an evaluation of Executive’s, on the one hand, and IMH’s or Infinet’s performance, as applicable.  If IMH and Infinet, on the one hand, as applicable, and Executive, on the other hand, cannot agree on appropriate amounts, then:

 

(A)           IMH or Infinet, as applicable, may defer the determination of the IMH Cash Bonus or the Infinet Cash Bonus, as applicable, until such bonuses in respect of such year are determined for other officers of IMH and Infinet, as applicable, and at such time the amounts to be used for determining Executive’s pro rata bonuses shall be a percentage of Executive’s target IMH Cash Bonus and Infinet Cash Bonus, as applicable, with such percentages being equal to the average of the percentages that apply to the IMH Cash Bonus or Infinet Cash Bonus, as applicable, respectively, of other officers ranked Senior Vice President or higher based on the attainment of the applicable performance goals and objectives; and

 

(c)          Once the determination in the preceding paragraph is made, the pro rata portion of such amounts shall equal such amounts multiplied by a fraction, the numerator of which is the number of days from January 1 to the Date of Termination in the year of termination and the denominator of which is 365.

 

(d)          Any and all amounts due pursuant to this Section 7.3(i) shall be paid no later than March 15 of the calendar year following the calendar year in which Executive’s termination of employment occurs.

  

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Executive shall also retain all such rights with respect to vested equity-based awards as are provided under the circumstances under the applicable grant or award agreement, and shall be entitled to all other benefits which are provided under the circumstances in accordance with the provisions of IMH’s or Infinet’s generally applicable employee benefit plans, practices and policies, other than severance plans.  Nothing in this Agreement shall have any impact on any shares of stock, held by Executive in IMH, or units held by Executive in Infinet, prior to the execution of this Agreement or any shares of stock or units, as applicable, held by Executive at the time of termination of this Agreement which are then fully vested and not subject to any restrictions.

 

(ii)          Death.  In the event of Executive’s death during the Employment Period, IMH and Infinet shall, in addition to paying the amounts set forth in Section 7.3(i), take whatever action is reasonably necessary to cause all of Executive’s unvested equity-based awards that have been granted by IMH or Infinet, as applicable, to become fully vested as of the date of death and, in the case of equity-based awards which have an exercise schedule, 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)         Disability.  If Executive becomes Disabled and terminates employment during the Employment Period from IMH and Infinet, as applicable, IMH and Infinet, as applicable, shall, in addition to paying the amounts set forth in Section 7.3(i), pay to Executive, in one lump sum, an amount equal to two (2) times the Executive’s Covered Average Compensation applicable to IMH or Infinet (with no duplication of benefits).  In order to receive this payment, Executive must execute (and not revoke) a Separation Agreement within the time periods described in Section 7.3(viii).  The lump sum payment called for by this Section 7.3(iii) shall be paid at the time specified in Section 7.3(viii).  If Executive executes (and does not revoke) the Separation Agreement within the time periods described in Section 7.3(viii), IMH and Infinet, as applicable, shall also:

 

(A)           continue, without cost to Executive, benefits comparable to the medical benefits provided to Executive immediately prior to the Date of Termination under Section 3.3 for a period permitted under COBRA, but in no event more than eighteen (18) months following the Date of Termination, or until such earlier date as Executive obtains comparable benefits through other employment (as applicable, the “Benefit Period”);

 

(B)           take whatever action is reasonably necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards that have been granted by IMH or Infinet, as applicable, and be entitled to exercise and continue to exercise all such stock options and all other equity-based awards 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; and

  

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(C)           If Executive obtains a disability policy on commercially reasonable terms with the same or similar coverage as provided by IMH and Infinet, as applicable, in the Base Disability Policy and the Supplemental Policy prior to the Date of Termination then, until the expiration of the Benefit Period in clause (A) immediately above, following the Date of Termination (or, if earlier, until Executive obtains comparable benefits through other employment), reimburse Executive on a monthly basis for an amount equal to the difference between (i) the monthly premiums for such disability policy, less (ii) such amount as may be paid, prior to the Date of Termination, by Executive in respect of a portion of the premiums on the Base Disability Policy provided by Company prior to the Date of Termination if such disability policy is actually obtained by Executive.  Neither of IMH or Infinet shall have any obligations under the foregoing provisions if Executive is terminated for Cause.

 

(iv)         Non-Renewal.  In the event IMH or Infinet, as applicable, gives Executive a Non-Renewal Notice pursuant to Section 1 above, IMH or Infinet, as applicable, shall, in addition to paying the amounts set forth in Section 7.3(i), provide Executive with the following payments and benefits, if the Executive executes (and does not revoke) a Separation Agreement within the time periods described in Section 7.3(viii):

 

(A)           Pay to Executive in one lump sum at the time specified in Section 7.3(v)(iii) an amount equal to the Executive’s Covered Average Compensation applicable to IMH or Infinet, as applicable, (with no duplication of benefits);

 

(B)           continue, without cost to Executive, benefits comparable to the medical benefits provided to Executive from IMH or Infinet, as applicable, immediately prior to the Date of Termination under Section 3.3 for a period of twelve (12) months following the Date of Termination from IMH or Infinet, as applicable, or until such earlier date as Executive obtains comparable benefits through other employment;

 

(C)           take whatever action is reasonably necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards that have been granted by IMH or Infinet, as applicable, and be entitled to exercise and continue to exercise all such stock options and all other equity-based awards 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; and

 

(D)           if Executive obtains a disability policy on commercially reasonable terms with the same or similar coverage as provided by IMH or Infinet, as applicable, in the Base Disability Policy and the Supplemental Policy prior to the Date of Termination then, until that date that is the end of the applicable Benefit Period following the Date of Termination (or, if earlier, until Executive obtains comparable benefits through other employment), reimburse Executive on a monthly basis for an amount equal to the difference between (i) the monthly premiums for such disability policy, less (ii) such amount as may be paid, prior to the Date of Termination, by Executive in respect of a portion of the premiums on the Base Disability Policy provided by IMH or Infinet, as applicable, prior to the Date of Termination.

  

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(v)          Termination Without Cause; Constructive Termination Without Cause.  During the Employment Period, in the event IMH or Infinet, as applicable, or any successor to IMH or Infinet, as applicable, terminates Executive’s employment without Cause, or if Executive terminates Executive’s employment in a Constructive Termination without Cause, IMH or Infinet, as applicable, shall, in addition to paying the amounts provided under Section 7.3(i), pay to Executive, in one lump sum, an amount equal to two (2) times Executive’s Covered Average Compensation applicable to IMH or Infinet (with no duplication of benefits).  In order to receive this payment, Executive must execute (and not revoke) a Separation Agreement within the time periods described in Section 7.3(viii).  The lump sum payment called for by this Section 7.3(v) shall be paid at the time specified in Section 7.3(viii).  If Executive executes (and does not revoke) the Separation Agreement within the time periods described in Section 7.3(viii), IMH or Infinet, as applicable, shall also:

 

(A)           continue, without cost to Executive, benefits comparable to the medical benefits provided to Executive immediately prior to the Date of Termination under Section 3.3 for the Benefit Period following the Date of Termination or until such earlier date as Executive obtains comparable benefits through other employment;

 

(B)           take whatever action is reasonably necessary to cause Executive to become vested as of the Date of Termination in all stock options, restricted stock grants, and all other equity-based awards that have been granted by IMH or Infinet, as applicable, and be entitled to exercise and continue to exercise all such stock options and all other equity-based awards 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; and

 

(C)           If Executive obtains a disability policy on commercially reasonable terms with the same or similar coverage as provided by IMH or Infinet, as applicable, in the Base Disability Policy and the Supplemental Policy prior to the Date of Termination then, until that date that is the end of the applicable Benefit Period following the Date of Termination (or, if earlier, until Executive obtains comparable benefits through other employment), reimburse Executive on a monthly basis for an amount equal to the difference between (i) the premium for such disability policy, less (ii) such amount as may be paid, prior to the Date of Termination, by Executive in respect of a portion of the premiums on the Base Disability Policy provided by IMH or Infinet, as applicable, prior to the Date of Termination.

 

(vi)         Termination for Cause; Voluntary Resignation.  In the event Executive’s employment terminates during the Employment Period other than in connection with a termination meeting the conditions of clauses (ii), (iii), (iv) or (v) of this Section 7.3, Executive shall receive the amounts set forth in Section 7.3(i) in full satisfaction of all of Executive’s entitlements from IMH or Infinet, as applicable.  All equity-based awards not vested as of the Date of Termination shall terminate (unless otherwise provided in the applicable award agreement) and Executive shall have no further entitlements with respect thereto.

 

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

  

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(A)           Notwithstanding such language in the Equity Award Agreements, 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, to take the actions required under Sections 7.3(ii), 7.3(iii)(B), 7.3(iv)(C) and 7.3(v)(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 Executive to become vested as of the Date of Termination in all or certain equity-based awards granted by IMH or Infinet, as applicable, and that such equity-based awards will thereafter be subject to the provisions of the applicable Equity Award Agreement as it applies to vested awards 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 will the disposition of options and restricted stock or units under such Equity Award Agreement be treated in the manner described in such Equity Award Agreement in the case of a termination “for Cause.”

 

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

 

(viii)       Separation Agreement Required; Time of Payment.  As noted above, in order to receive any payments or benefits pursuant to Section 7.3(iii), (iv) or (v), Executive must execute (and not revoke) a Separation Agreement, which Agreement shall include a mutual general release of any and all claims that Executive had, has or may have in connection with Executive’s employment with IMH or Infinet, as applicable, as well as a release of any claims that IMH or Infinet (including in each case their affiliated and related entities, owners, directors, officers, consultants, agents and representatives) as applicable, had, has or may have against the Executive.  The Separation Agreement shall be provided to Executive within five (5) days following Executive’s Separation from Service.  The Separation Agreement must be executed and returned to IMH or Infinet, as applicable, within the twenty-one (21) or forty-five (45) day (as applicable) period that will be described in the Separation Agreement and it must not be revoked by Executive within the seven (7) day revocation period that will be described in the Separation Agreement.  The Separation Agreement may not be executed prior to Executive’s last day of employment.  The lump sum payments called for by Section 7.3(iii), (iv) and (v) shall be paid within five (5)  days following the last day on which Executive could revoke the Separation Agreement.    Notwithstanding anything in this Section to the contrary, if the period of time during which Executive has to consider the execution of the Separation Agreement, plus the seven (7) day revocation period, spans two (2) calendar years, the lump sum cash payments called for by Section 7.3(iii), (iv) and (v) shall be paid in the second calendar year

  

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7.4         Intentionally Deleted.

 

7.5         Notice of Termination.  The Non-Renewal Notice pursuant to Section 1 hereof or of any termination of Executive’s employment (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 7 and Section 9.

 

7.6         Date of Termination.  “Date of Termination,” with respect to any termination of Executive’s employment during the Employment Period, shall mean:

 

if Executive’s employment with IMH or Infinet, as applicable, is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of Executive’s duties with IMH or Infinet, as applicable, during such thirty (30) day period), (ii) if Executive’s employment 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 7.2(1), and (iii) if Executive’s employment is terminated with IMH or Infinet, as applicable, for any other reason, the date specified in the Notice of Termination.    Upon any termination of Executive’s employment with IMH or Infinet, as applicable, Executive shall concurrently resign Executive’s membership as a director and/or officer of IMH or Infinet, as applicable, and all subsidiaries of IMH or Infinet, as applicable.

 

7.7         No Mitigation.  If Executive’s employment by IMH or Infinet, as applicable, is terminated during the Employment Period, Executive is not required to seek other employment, or to attempt in any way to reduce any amounts payable to Executive by IMH or Infinet, as applicable.  Further, except as specifically set forth in this Agreement, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned by Executive as the result of employment by another employer, by retirement benefits, or, by offset against any amount claimed to be owed by Executive to IMH or Infinet, as applicable, or otherwise.

 

7.8         Nature of Payments.  The amounts due under this Section 7 are in the nature of severance payments considered to be reasonable by IMH or Infinet, as applicable, and are not in the nature of a penalty.  Such amounts are in full satisfaction of all claims Executive may have in respect of Executive’s employment by IMH or Infinet, as applicable, or their respective affiliates and are provided as the sole and exclusive benefits to be provided to Executive, Executive’s estate, or Executive’s beneficiaries in respect of Executive’s termination of employment from IMH or Infinet, as applicable.

 

7.9         Interpretation.    In the event that Executive terminates employment with Infinet to become a full-time executive officer of IMH pursuant to Section 2.1.2, Executive shall not be entitled to any severance or other benefits pursuant to this Section 7 as a result of Executive’s termination of employment with Infinet.  In addition, this Section 7 expressly contemplates that Executive may terminate employment with either IMH or Infinet, and continue employment pursuant to this Agreement with the other company.

  

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7.10       Section 409A.

 

(i)           If the Executive 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 Executive’s Separation from Service, the Executive shall not be entitled to any payment or benefit pursuant to Section 7 (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 Executive’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 Executive upon or in the six (6) month period following the Executive’s Separation from Service that are not so paid by reason of this Section 7.10(i) 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 Executive’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Executive’s death).

 

(ii)          To the extent that any reimbursements pursuant to Section 3.3, 3.6, 3.7, or Section 4 are taxable to the Executive, any reimbursement payment due to the Executive pursuant to any such provision shall be paid to the Executive on or before the last day of the Executive’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 Executive receives in one taxable year shall not affect the amount of such benefits or reimbursements that the Executive receives in any other taxable year.

 

(iii)         Separation from Service.  For purposes of this Agreement, the term “Separation from Service” means either (1) termination of Executive’s employment with IMH or Infinet, as applicable, or (2) a permanent reduction in the level of bona fide services Executive provides to IMH or Infinet, as applicable, to an amount that is 20% or less of the average level of bona fide services the Executive provided to IMH or Infinet, as applicable, in the immediately preceding thirty-six (36) months, with the level of bona fide service calculated in accordance with Treas. Reg. § 1.409A-1(h)(1)(ii).

 

For purposes of determining whether a Separation from Service has occurred (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; 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.

  

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Executive’s employment relationship with IMH or Infinet, as applicable, is treated as continuing while Executive is on sick leave or other bona fide leave of absence (if the period of such leave does not exceed three (3) months, or if longer, so long as Executive’s right to reemployment with IMH or Infinet, as applicable, is provided either by statute or contract).  If Executive’s period of leave exceeds three (3) months and Executive’s right to reemployment with IMH or Infinet, as applicable, is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such three (3) month period.  Whether a termination of employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Section 409A of the Code.

 

To the extent required to ensure compliance with the requirements of Section 409A, any reference in this Agreement to “termination of employment” or “Date of Termination” shall be deemed to be a reference to “Separation from Service,” as defined above.

 

(iv)         No Elections.  Executive may not elect to receive cash or any other allowance in lieu of any benefits provided by this Agreement.  Executive does not have any right to make any election regarding the time or form of any payment due under this Agreement.

 

(v)          Intentionally Deleted.

 

(vi)         Disputes.  If a payment is not made, in whole or in part, due to a dispute between Executive, on the one hand, and IMH or Infinet, as applicable, on the other hand, the payment shall be made in accordance with Treas. Reg. § 1.409A-3(g), as applicable.

 

(vii)        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.

 

(viii)       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.

 

8.           Non-Competition; Non-Solicitation; Specific Enforcement.

 

8.1         Non-Competition.  Because Executive’s services to IMH and Infinet, as applicable, are special and because Executive has access to IMH’s or Infinet’s, as applicable, confidential information, Executive covenants and agrees that, during the Employment Period and, for a period of three (3) years following the Date of Termination by IMH or Infinet, as applicable, for Disability, or a termination by Executive (other than a Constructive Termination Without Cause) by IMH or Infinet, as applicable, prior to a Change in Control, Executive shall not, without the prior written consent of the IMH Board or the Infinet Board, as applicable, become associated with, or engage in any “Restricted Activities” with respect to any “Competing Enterprise,” as such terms are hereinafter defined, whether as an officer, employee, principal, partner, agent, consultant, independent contractor or shareholder.  “Competing Enterprise,” for purposes of this Agreement, shall mean any person, corporation, partnership, venture or other entity which is engaged in (a) IMH’s intended or actual business or Infinet’s business, as applicable.  “Restricted Activities,” for purposes of this Agreement, shall mean executive, managerial, directorial, administrative, strategic, business development or supervisory responsibilities and activities relating to all aspects of IMH’s or Infinet’s business, as applicable.  If the provisions of this Section 8.1 become applicable because Executive has chosen to terminate Executive’s employment with IMH or Infinet, as applicable, for reasons other than a Constructive Termination Without Cause prior to a Change in Control, IMH or Infinet, as applicable, will be required to pay Executive in a single lump sum payment within thirty (30) days following Executive’s termination of employment with IMH or Infinet, as applicable, an amount equal to one times the annual IMH Base Salary or Infinet Base Salary, as applicable, then in effect pursuant to Section 3.1.  If IMH or Infinet, as applicable, fails to make this payment in a timely manner, the provisions of this Section 8.1 and Section 8.2 shall be null and void.

  

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8.2         Non-Solicitation.  During the Employment Period, and for a period of (a) one (1) year following the Date of Termination in the event of a Non-Renewal Notice, (b) three (3) years in the event IMH or Infinet, as applicable, terminates Executive without cause, or (c) three (3) years in the event that Executive terminates Executive’s employment in a Constructive Termination without Cause, Executive shall not, without the prior written consent of IMH or Infinet, as applicable, except in the course of carrying out Executive’s duties hereunder, solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, limited liability company, venture or other business entity, any employee of IMH or Infinet, as applicable, or any person who was formerly employed by IMH or Infinet, as applicable, within the preceding six (6) months.

 

8.3         Confidential Information.  During the Employment Period, in exchange for Executive’s promise to use such information solely for the benefit of IMH, Infinet, and their related and affiliated companies (collectively, the “Group”), the Group shall provide Executive with Confidential Information concerning, among other things, its business, operations, clients, investors and business partners.  For purposes of this Agreement, “Confidential Information” shall mean information not generally known by others in the form in which it is used by the Group, and which the Group believes gives the Group a competitive advantage over other companies which do not have access to this information, including secret, confidential, or proprietary information or trade secrets of the Group, conveyed orally or reduced to a tangible form in any medium, including information concerning the operations, future plans, customers, business models, strategies and methods of the Group and its subsidiaries and affiliates, as well as information about the Group’s active and prospective investors, clients and business partners and their respective investment preferences, risk tolerances, cash flow requirements, contact information, active and prospective investments, and other information about how to best serve their needs and preferences.  Notwithstanding anything in this Agreement to the contrary, “Confidential Information” shall not include information that (i) Executive knew prior to Executive’s employment with IMH or Infinet, (ii) subsequently came into Executive’s possession other than through Executive’s work for IMH or Infinet and not as a result of a breach of any duty owed to either company by Executive, or (iii) is generally known within the relevant industry.

  

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8.4         Non-Disparagement.  Executive recognizes that Executive is being placed in a position of trust and confidence and as such shall not during the Employment Period or thereafter defame, disparage, libel or slander IMH or Infinet or the Group in any way and will not during the Employment Period or thereafter contact, respond to any request from or in any way discuss, criticize, defame, disparage, libel or slander IMH or Infinet or the Group to an agent of the media (print, television, or otherwise, whether on or off the record); provided, however, the foregoing shall not be applicable in the context of any judicial process involving Executive and IMH or Infinet.

 

8.5         Specific Enforcement.  Executive and IMH, on the one hand, and Executive and Infinet, on the other hand, agree that the restrictions, prohibitions and other provisions of this Section 8 are reasonable, fair and equitable in scope, terms, and duration, are necessary to protect the legitimate business interests of IMH and Infinet, as applicable, and are a material inducement to IMH and Infinet, as applicable, to enter into this Agreement.  Should a decision be made by a court of competent jurisdiction that the character, duration or geographical scope of the provisions of this Section 8 is unreasonable, the parties intend and agree that this Agreement shall be construed by the court in such a manner as to impose all of those restrictions on Executive’s conduct that are reasonable in light of the circumstances and as are necessary to assure to IMH and Infinet, as applicable, the benefits of this Agreement.  IMH and Infinet, as applicable, on the one hand, and Executive, on the other hand, further agree that the services to be rendered under this Agreement by Executive are special, unique and of extraordinary character, and that in the event of the breach by Executive of the terms and conditions of this Agreement or if Executive, without the prior consent of the IMH Board, or the Infinet Board, as applicable, shall take any action in violation of this Section 8, IMH or Infinet, as applicable, shall suffer irreparable harm for which there is no adequate remedy at law.  Accordingly, Executive hereby consents to the entry of a temporary restraining order or ex parte injunction, in addition to any other remedies available at law or in equity, to enforce the provisions hereof.  Any proceeding or action seeking equitable relief for violation of this Section 8 must be commenced in the federal or state courts, in either case in the State of Arizona.  Executive, on the one hand, and IMH and Infinet, as applicable, on the other hand, irrevocably and unconditionally submit to the jurisdiction of such courts and agree to take any and all future action necessary to submit to the jurisdiction of and venue in such courts.

 

9.           Notice.  Any notice required or permitted hereunder shall be in writing and shall be deemed sufficient when given by hand or by nationally recognized overnight courier or by Express, registered or certified mail, postage prepaid, return receipt requested, and addressed, if (a) to IMH at 4900 Scottsdale Road, Suite 5000, Scottsdale, Arizona 85251, Attention: IMH Board, (b) to Infinet, at the same address as aforesaid, Attention:  Infinet Board, and (c) to Executive at the address set forth in IMH’s or Infinet’s records (or to such other address as may be provided by notice), as applicable.

  

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10.         Miscellaneous.  This Agreement, together with any Equity Award Agreements now or hereafter in effect, constitutes the entire agreement between the parties concerning the subjects hereof and supersedes any and all prior agreements or understandings, including, without limitation, any plan or agreement providing benefits in the nature of severance, but excluding benefits provided under IMH or Infinet, as applicable, plans or agreements, except to the extent this Agreement provides greater rights than are provided under such other plans or agreements.  This Agreement may not be assigned by Executive without the prior written consent of IMH or Infinet, as applicable, and may be assigned by IMH or Infinet, as applicable, and shall be binding upon, and inure to the benefit of, IMH’s or Infinet’s, as applicable, successors and assigns.  IMH or Infinet, as applicable, shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/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 in this Agreement, “IMH” or “Infinet,” respectively, shall mean IMH or Infinet, respectively, as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.  Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof.

 

11.         Amendment.  This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective.  No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time.  Any waiver must be in writing and signed by Executive, on the one hand, or an authorized officer of IMH or Infinet, as applicable, on the other hand.

 

12.         Severability.  The provisions of this Agreement are severable.  The invalidity of any provision shall not affect the validity of any other provision, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

13.         Attorneys Fees.  Except as otherwise provided in this paragraph, each party shall pay the cost of such party’s own legal fees and expenses incurred in connection with any dispute regarding this Agreement.  The prevailing party in such proceeding shall be promptly reimbursed by the non-prevailing party within thirty (30) days of the entry of the award and the non-prevailing party’s receipt of all applicable invoices.

 

14.         Survivorship.  The provisions of Sections 4.2, 6, 8.1 (to the extent described below), 8.2 and 13 of this Agreement shall survive Executive’s termination of employment by IMH or Infinet, as applicable.  Other provisions of this Agreement shall survive any termination of Executive’s employment with IMH or Infinet, as applicable, to the extent necessary to the intended preservation of each party’s respective rights and obligations.

 

15.         Board Action.  Where an action called for under this Agreement is required to be taken by the IMH Board or the Infinet Board, as applicable, such action shall be taken by the vote of not less than a majority of the members of the IMH Board or the Infinet Board, as applicable, other than Executive then on the IMH Board or the Infinet Board, as applicable, and authorized to vote on the matter.

 

16.         Withholding.  All amounts required to be paid by IMH or Infinet, as applicable, shall be subject to reduction in order to comply with applicable federal, state and local tax withholding requirements.

  

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17.         Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.  The execution of this Agreement may be by actual or facsimile signature.

 

18.         Governing Law.  This Agreement shall be construed and regulated in all respects under the laws of the State of Arizona.

 

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

 

20.         Cross-Default.  A breach by Executive of Executive’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 Executive under this Agreement and Executive’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 Executive under this Agreement and Executive’s rights against IMH under this Agreement.

 

21.         New Employment Agreement.  If requested by IMH, Executive shall agree to enter into separate employment agreements to evidence the terms of Executive’s employment by each of IMH and Infinet, as applicable.

 

22.         NWRA Capital Partners, LLC.  IMH contemplates executing various agreements with Lender in connection with the Convertible Loan Transaction between Lender and IMH and/or IMH’s affiliates.  Executive acknowledges and agrees that the execution of the 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.

 

[The remainder of this page has intentionally been left blank]

  

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IN WITNESS WHEREOF, this Agreement is entered into as of the Effective Date.

 

	  	
“IMH”

	  	  
	  	
IMH Financial Corporation,

	  	
a Delaware corporation

	  	  	  
	  	
By:

	/s/ Steven T. Darak, CFO
	  	
Name:

	Steven T. Darak
	  	
Title:

	Chief Financial Officer
	  	  	  
	  	
“EXECUTIVE”

	  	  	  
	  	

/s/ William Meris

	  	
William Meris

	  	  	  
	  	
“INFINET”

	  	  	  
	  	
INFINET Financial Group, LLC

	 	Its: Sole Member
	  	  	  
	  	
By:

	
IMH Financial Corporation 

	  	  	
Its:

	Sole Member
	 	 	 	 
	 	 	 	 
	 	/s/ William Meris
	 	
William Meris

	 	
Its: President

	 	 	 	 
	 	 	 	 

  

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SCHEDULE 2.2

PERMITTED RELATIONSHIPS

 

[attached hereto]

 

  

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EXHIBIT 3.2.2

INFINET 2011 AWARD

  

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