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Unassociated Document

    EXHIBIT
10.4

    

    CONSULTING SERVICES
AGREEMENT

     

    (ITH
Partners, LLC)

     

    THIS
CONSULTING SERVICES AGREEMENT (this “Agreement”) is entered into effective as of
November 19, 2010 (the “Effective Date”) by and between (i) IMH Financial
Corporation, a Delaware corporation (the “Company”), and (ii) ITH Partners,
LLC, a Nevada limited liability company (the “Consultant”).

    

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

    

    A.           On
December 15, 2009, ITH entered a consulting agreement with IMH Secured Loan
Fund, LLC (the “Original Consulting Agreement”) which commenced on September 1,
2009 and provided that it expired by its terms on January 31,
2009.  The Original Consulting Agreement was entered pursuant to
Section 3.1 of the Operating Agreement of IMH Secured Loan Fund, LLC (the
“Fund”) whereby Investors Mortgage Holdings Inc., a Delaware corporation (the
“Manager”) had exclusive control over the business of the Fund, subject to and
in accordance with the terms of the Operating Agreement.

    

    B.           The
Securities and Exchange Commission (the “SEC”) declared the Company’s Form S-4
effective on May 14, 2010, pursuant to which the Fund sought to obtain the
written consent of the members of the Fund to the Conversion Transactions (as
defined therein) and the 2010 Stock Incentive Plan (as defined
therein).  The requisite number of members of the Fund approved the
Conversion Transactions and the 2010 Stock Incentive Plan.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    C.           The
Company desires to retain the Consultant to provide advice to, and consult with,
the Company with respect to the Consulting Services on the terms and conditions
set forth in this Agreement, and the Consultant desires to accept such
engagement and to perform the Consulting Services on the terms and conditions
set forth in this Agreement.

    

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

    

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

    
      
         

      

      
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    1.           Engagement.  As
of the Effective Date, the Company engages the Consultant, and the Consultant
accepts such engagement, upon the terms and conditions hereinafter set forth,
for the period commencing on the Effective Date and expiring on December 31,
2011 or as otherwise permitted by the terms of this Agreement (the “Consulting
Term”).

     

    2.           Consulting
Services.

     

    2.1          Included
Services.  The Consultant shall perform consulting services for
the benefit of the Company, as more particularly set forth on Schedule 2.1 attached
hereto (the “Consulting Services”) and such other services as the parties hereto
may mutually agree upon in writing from time to time after the Effective Date;
provided, however, in no event
shall the Consultant provide any of the Excluded Services (as defined below) nor
shall the Company expect any of the Excluded Services to be a part of the
Consulting Services.

     

    2.2          Excluded
Services.

     

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

     

    
      
         

      

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

     

    (c)           Definition.  The
services described in Sections 2.2(a) and
2.2(b) shall
collectively constitute the “Excluded Services”.

     

    3.           Reporting;
Time Commitment.

     

    3.1          Reporting.  The
Consultant shall report to the Chief Executive Officer and the President of the
Company; provided, however, for the
avoidance of doubt, this Agreement shall not be amended or extended without the
prior written approval of the Chief Executive Officer.

     

    
      
         

      

      
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    3.2          Time
Commitment.  During the Consulting Term, the Consultant shall
devote substantially all of the Consultant’s business time, energy and skill to
the Consulting Services, subject to the Consultant’s right to (a) continue with
the Consultant’s other pre-existing consulting and other assignments with third
parties (to be reviewed and approved by the Company from time to time and, in
the first instance, reviewed and approved by the Company prior to or on the
Effective Date), and (b) take on new consulting and other assignments for
third parties, in the event and to the extent that such new consulting and other
assignments do not present current conflicts of interest with the Consulting
Services, or are not reasonably likely to present future conflicts of interest
with the Consulting Services.

     

    4.           Representations,
Warranties and Covenants.

     

    4.1          The
Consultant.  The Consultant represents, warrants and covenants
to the Company as follows:

     

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

     

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

     

    
      
         

      

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

     

    (d)           Location.  The
Consultant shall (i) be present and work from the Company’s headquarters office
in Scottsdale, Arizona (the “Headquarters Office”) for a substantial portion of
each business week during the Consulting Term, and (ii) be expected to
travel from time to time in the course of performing the Consulting
Services.

     

    (e)           Original
Consulting Agreement.  The Original Consulting Agreement
provided that it expired by its terms on January 31, 2009, and was not extended
by and between the Company (or any of its predecessors or affiliates) and the
Consultant.

     

    
      
         

      

      
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    (f)           Solicitation. The Consulting Services
do not include any solicitation of members of the Fund with respect to the
consents contemplated by the Form S-4 bearing on the Conversion Transactions and
the 2010 Stock Incentive Plan, and at no time did the Consultant (or any
employee or member thereof) engage in any such solicitation.

     

    (g)           Excluded
Services.  At no time (i) has the Consultant (or any
employee or member thereof) performed any Excluded Services on behalf of the
Company or the Fund, or any affiliates thereof, and (ii) shall the
Consultant (or any employee or member thereof) perform any Excluded Services on
behalf of the Company or any affiliates thereof.

     

    (h)           Managing
Member.  The managing member of the Consultant is Lawrence D.
Bain (“Bain”), and Bain shall personally perform all of the Consulting Services
for, on behalf of, and through the Consultant.

     

    (i)    
       Accredited
Investors.  The Consultant and Bain are “accredited investors”
within the meaning of Regulation D of the Securities Act of 1933, as amended,
and have the requisite capacity to protect the Consultant’s interests in
connection with the acquisition of any warrants or any shares of common stock of
the Company issuable upon the exercise of any warrants (the “Securities”)
pursuant to the terms of this Agreement. The Consultant understands that the
Securities are “restricted securities” under the federal securities laws and may
not be resold without registration under the Securities Act other than pursuant
to Rule 144 or another exemption from registration, and will bear a legend to
that effect until such Securities become transferable without
restrictions.

     

    
      
         

      

      
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    4.2          The
Company.  The Company represents, warrants and covenants to the
Consultant as follows:

     

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

     

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

     

    5.           Termination by the Company;
Expiration.

     

    5.1          Termination.  Subject
to the terms and conditions of this Agreement, the Company may terminate the
Consulting Term at any time, with or without Cause (as defined below) upon not
less than thirty (30) days prior written notice to the Consultant.

     

    
      
         

      

      
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    5.2          Termination
by the Consultant.  Subject to the terms and conditions of this
Agreement, the Consultant may terminate the Consulting Term at any time, with or
without Cause, upon not less than thirty (30) days prior written notice to the
Company.

     

    5.3          Obligations of the Company
Upon Termination; Expiration.

     

    (a)           Cause.  If
the Consulting Term is terminated by the Company for Cause, the Company shall
have no further obligations to the Consultant under this Agreement other than
the following:  (i) payment of any past due Monthly Payments (as
defined in Schedule
6.1); (ii) payment of the pro-rated Monthly Payments through the end of
the month in which the termination becomes effective; (iii) payment of any
reimbursable expenses incurred by the Consultant through the date that the
termination becomes effective; and (iv) the indemnification obligations set
forth in Section
11 as may be applicable pursuant to the terms thereof.

     

    (b)           Other than for Cause; First
Special Payment.  In the event that the Consulting Term is
terminated by the Company for any reason other than Cause, then, in addition to
the amounts set forth in Section 5.3(a), the
Company shall also pay to the Consultant the following:  (i) the
Monthly Payment for one (1) month following such termination, and (ii) the First
Special Payment in accordance with and subject to the terms, conditions and
timing set forth in Section 2 of Schedule
6.1.

     

    
      
         

      

      
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    (c)           Expiration.  In
the event that the Consulting Term expires by its terms, then, in addition to
the amounts set forth in Section 5.3(a) above
(except with respect to the Company’s obligation therein to pay the Monthly
Payment for one (1) month), the Consultant shall also be entitled to the
amounts set forth in Section 5.3(b) in
accordance with and subject to the terms, conditions and timing set forth in
Section 2 of Schedule
6.1.

     

    (d)           No
Survival.  The obligations of the Company under this Section 5 shall
not survive the expiration or earlier termination of this Agreement except as
specifically set forth in this Agreement.

     

    5.4          Sole
Remedy.  The payments contemplated by this Section 5 shall
constitute the Consultant’s sole and exclusive remedy in the event of (a) any
termination of the Consulting Term by the Company, or (b) the expiration of the
Consulting Term, as more specifically set forth above.  Subject to the
Consultant’s receipt of the applicable payments in Section 5.3, the
Consultant shall not assert or pursue any other remedies at law or in equity
against the Company with respect to any termination of this engagement or the
Agreement.

     

    
      
         

      

      
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    5.5          Definition.  For
purposes of this Agreement, “Cause” shall mean, as reasonably determined in good
faith by the Board of the Company, based on the facts then known to the Board of
the Company, that the Consultant has wilfully or negligently failed to perform
the Consulting Services (the “Breach”); provided, however, that the
Company shall provide the Consultant with prompt written notice of the Breach
(within not more than thirty (30) days after the Company’s actual notice
thereof) and the Consultant shall have not more than a thirty (30) day period
thereafter to seek to cure the Breach to the Company’s reasonable satisfaction
(the “Cure Right”); provided, further, no such
Cure Right shall be applicable for the benefit of the Consultant (a) in the
case of any repeated Breach by the Consultant (i.e., more than one
Breach by the Consultant of a similar issue), (b) any Breach involving a
violation by the Consultant (or any of its employees or members) of applicable
law, (c) any Breach by the Consultant (or any of its employees or members)
involving an act of moral turpitude, (d) the rendering of any Excluded Services
by the Consultant (or any of its employees or members), (e) a Breach by the
Consultant (or any of its employees or members) of any SEC regulation or any
injunction, censure, cease and desist or other act taken by the SEC against the
Consultant (or any of its employees or members), or given by the SEC to the
Consultant (or any of its employees or members) or (f) the withdrawal or
termination of Bain as the managing member of the Consultant.

     

    6.           Consulting
Fees and Expenses.

     

    6.1          Consulting
Fees.  During the Consulting Term, subject to the terms of this
Agreement (including, without limitation, the terms, conditions and
qualifications set forth in Schedule 6.1), as
payment and consideration for the Consultant’s performance of the Consulting
Services and other agreements herein, the Company shall pay the Consultant the
consulting fees set forth on Schedule 6.1 (the
“Consulting Fees”) (which shall include, as applicable, the Monthly Payments,
the First Special Payment, the Second Special Payment and the Consultant’s
Equity Securities, as applicable) subject to and in accordance with the terms,
conditions, qualifications and timing set forth on Schedule
6.1.

     

    
      
         

      

      
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    6.2           Expenses.  The
Consultant shall be entitled to reimbursement for all reasonable and actually
incurred business expenses that the Consultant incurs during the Consulting Term
in carrying out the Consulting Services; provided, however, that the
Consultant shall provide to the Company the customary documentation in
accordance with the Company’s expense reimbursement policies in effect from time
to time.

     

    7.           Relationship. The Consultant (and all
employees and members thereof) shall operate at all times as an independent
contractor of the Company.  Without limiting the generality of the
foregoing, nothing in this Agreement shall be construed as creating an
employer/employee relationship, partnership, joint venture, or other business
group between the Consultant, on the one hand, and the Company, on the other
hand.

     

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

     

    7.2           Office
and Services.  The Company shall
provide the Consultant with a single private office space at the Headquarters
Office, as well as internet access, telephone, facsimile, cell phone service, a
single executive assistant, and photocopy services in order to accommodate the
Consultant’s performance of the Consulting Services.

     

    
      
         

      

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

     

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

     

    
      
         

      

      
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    8.           Protective
Covenants.

     

    8.1          Confidential
Information; Inventions.

     

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

     

    
      
         

      

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

     

    
      
         

      

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

     

    
      
         

      

      
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    8.2           Enforcement.  The
Consulting Services are unique and the Consultant (and all employees and members
thereof) has access to Confidential Information and Work
Product.  Accordingly, a breach by the Consultant of any of the
covenants in this Section 8 would cause
immediate and irreparable harm to the Company that would be difficult or
impossible to measure, and any damages to the Company for any such injury would
therefore be an inadequate remedy for any such breach.  Therefore, in
the event of any breach or threatened breach of any provision of this Section 8, the
Company shall be entitled, in addition to, and without limitation upon, all
other remedies the Company may have under this Agreement, at law or otherwise,
to obtain specific performance, injunctive relief and/or other appropriate
relief (without posting any bond or deposit) in order to enforce or prevent any
violations of the provisions of this Section 8, or require
the Consultant (and all employees and members thereof) to account for and pay
over to the Company all compensation, profits, moneys, accruals, increments or
other benefits derived from or received as a result of any transactions
constituting a breach of this Section 8 if and when
final judgment of a court of competent jurisdiction is so entered against the
Consultant (or any employee or member thereof).

     

    
      
         

      

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

     

    9.           Ownership.  All software,
hardware, equipment, or records, including all copies or extracts of them which
the Consultant (or any employee or member thereof) prepares, uses or sees during
the Consulting Term in relation to the performance of the Consulting Services
shall be and remain the sole property of the Company.

     

    10.         Miscellaneous.

     

    10.1        Successors.

     

    (a)           No Assignment by the
Consultant.  This Agreement is personal to the Consultant and
shall not, without the prior written consent of the Company, be assignable by
the Consultant.

     

    
      
         

      

      
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    (b)           Consulting Fees;
Implementation Obligations.  This Agreement shall inure to the
benefit of and be binding upon the Company as specifically set forth herein and
the Company’s respective successors and assigns, and any such successor or
assignee shall be deemed automatically substituted for the Company under the
terms of this Agreement for all purposes, including, without limitation, the
Company’s obligation to pay the Consulting Fees to the Consultant and the
Company’s obligation to provide the indemnification obligations
herein.  As used herein, “successor” and “assignee” shall include any
person, firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the ownership of
the Company or to which the Company assigns this Agreement by operation of law
or otherwise.

     

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

     

    10.3        Modification.  This Agreement
may not be amended or modified other than by a written agreement executed by the
Consultant and the Company.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    10.4        Complete
Agreement.  This Agreement
contains the entire agreement and final understanding between the parties hereto
with respect to the subject matter addressed herein among the parties, and
supersedes and replaces all prior negotiations and all agreements proposed or
executed, whether written or oral, with the Consultant and/or the Company
concerning the subject matter hereof, including, without limitation, the
Original Consulting Agreement.  Any representation, promise or
agreement not specifically included in this Agreement shall not be binding upon
or enforceable against any party hereto.  This Agreement constitutes
an integrated agreement.

     

    10.5        Litigation
and Investigation Assistance.  In addition to
the Consulting Services, at the expense of the Company, the Consultant (and its
employees and members) shall cooperate in (a) the defense of the Company
against any threatened or pending litigation by any Person or in any
investigation or proceeding by any governmental agency that relates to any
events or actions which occur during the Consulting Term, and (b) the
prosecution of any claims and lawsuits brought by the Company that are currently
outstanding or that may in the future be brought relating to matters which occur
during the Consulting Term.  Except as requested by the Company or as
required by law, the Consultant (and its employees and members) shall not
publicly comment upon any (i) threatened or pending claim or litigation
(including investigations or arbitrations) involving the Company, or
(ii) threatened or pending government investigations involving the
Company.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    If to the
Consultant:

     

    ITH
Partners, LLC

    6929 N.
Hayden Road

    Suite
C4

    Scottsdale,
AZ 85250

    Attn:      Mr.
Lawrence D. Bain

     

    If to the
Company:

     

    IMH
Financial Corporation

    4900
North Scottsdale Road

    Suite
5000

    Scottsdale,
AZ  85251

    Attn:      Mr.
Shane C. Albers

    

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

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    11.    
    Indemnification.  To
the maximum extent permitted by law, the Company, and its successors and assigns
(the “Indemnitor”), shall indemnify, protect, defend and hold harmless the
Consultant (and its members) (the “Indemnitee”), from, for, and against any and
all claims, liabilities, liens, fines, demands, lawsuits, actions, losses,
damages, injuries, judgments, settlements, costs or expenses whether asserted in
law or in equity and including any claims made by regulatory agencies asserted
against the Indemnitee arising out of, in whole or in part, the actions or
commissions of the Indemnitor, this Agreement or the Consulting Services, other
than those which have arisen from the Indemnitee’s gross negligence, willful
misconduct or breach of this Agreement (hereinafter, collectively,
“Claims”).  The Indemnitor shall provide a legal defense with counsel
reasonably approved by the Indemnitee upon the first notice the Indemnitee sends
to the Indemnitor and the Indemnitor shall continue to provide such defense to
the Indemnitee until the matter is fully resolved by either final judgment,
settlement, or other release executed by the Indemnitee.  The
Indemnitor indemnifies the Indemnitee from, for and against all Claims,
including, without limitation, all legal fees, costs and expert fees and costs
that the Indemnitee may directly or indirectly sustain, suffer or incur as a
result thereof.  The Indemnitor shall and does hereby assume on behalf
of the Indemnitee, upon its demand, the amount of any costs allowed by law, and
costs identified herein, any settlement reached or any judgment that may be
entered against the Indemnitee, as a result of such Claims.  The
obligations of the Indemnitor pursuant to this Section 11 shall
survive the expiration or earlier termination of this Agreement.

     

    [Remainder of page intentionally left
blank.]

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    
      EXHIBIT
10.4

    

    
       

    

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

     

    
      
        
          	 
      	
                  “Company”

                
	 
      	 
      
	 
      	
                  IMH
      Financial Corporation

                
	 
      	 
      
	 
      	
                  By

                	/s/  
      Shane
      C. Albers
	 
      	 
      	
                  Shane
      C. Albers

                
	 
      	 
      	
                  Its:  Chief
      Executive Officer

                
	 
      	 
      
	 
      	
                  By

                	/s/   William
      A. Meris
	 
      	 
      	
                  William
      A. Meris

                
	 
      	 
      	
                  Its:  President

                
	 
      	
                  Address
      for the Purpose of Notice:

                
	 
      	
                  4900
      N. Scottsdale Rd #5000

                
	 
      	
                  Scottsdale,
      AZ 85251

                
	 
      	 
      
	 
      	
                  “Consultant”

                
	 
      	 
      
	 
      	
                  ITH
      Partners, LLC

                
	 
      	 
      
	 
      	
                  By:

                	/s/  
      Lawrence
      D. Bain
	 
      	 
      	
                  Lawrence
      D. Bain

                
	 
      	 
      	
                  Its:  Managing
      Member

                
	 
      	 
      	 
      
	 
      	 
      	
                  Address
      for the Purpose of Notice:

                
	 
      	 
      	
                  6929
      N. Hayden Road, Suite C4

                
	 
      	 
      	
                  Scottsdale,
      AZ 85250

                

        

      

    

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    SCHEDULE
2.1

     

    CONSULTING
SERVICES

     

    The
Consultant has or shall provide the following Consulting Services to the Company
to the extent requested by the Company:

     

    1.           diligence
on, and analytical work with respect to, the Company’s loan portfolio and
prospective loan purchases and sales;

     

    2.           advice
to the Company with respect to unrealized gains and losses in the Company’s loan
portfolio;

     

    3.           advice
to the Company with respect to the work of the Company’s valuation consultants
and related issues;

     

    4.           advice
to the Company with respect to certain accounting oriented issues, and interface
with various parties, including, without limitation, the Company and the
Company’s auditor;

     

    5.           advice
to the Company with respect to certain matters under consideration from time to
time by legal counsel respecting the Form S-11 and the Company’s contemplated
initial public offering (the “IPO”), interface on those issue with the Company
and the Company’s legal counsel, among others, and establishment and management
of timelines for the filing of the Form S-11;

     

    
      
         

      

      
        Schedule
2.1-1

        
          

        

      

      
         

      

    

    6.           advice
to the Company with respect to the implementation and management of certain
matters in the final Form S-4, including, without limitation, all issues with
the Company’s transfer agent, including the lock-up of the shares;

     

    7.           advice
to the Company with respect to the structuring of the Company’s contemplated IPO
and interface with management of the Company, the underwriters, legal counsel
and auditors with respect thereto;

     

    8.           advice
to the Company with respect to liquidity strategies in addition to the Company’s
contemplated IPO, including, without limitation, potential debt offerings and
assistance in the arrangement of commercial banking facilities;

     

    9.           advice
to the Company regarding the selection of an independent Board of Directors and
committees thereof, including, without limitation, candidates and proposed
compensation terms, among other issues;

     

    10.         advice
to the Company with respect to SEC filings to be made by the Company in
connection with the Company’s contemplated IPO, and interface with management,
legal counsel and the Company’s auditors with respect thereto;

     

    11.         advice
to the Company with respect to liability insurance and directors and officers
insurance; and

     

    12.         other
advice to the Company from time to time as requested by the
Company.

     

    
      
         

      

      
        Schedule
2.1-2

        
          

        

      

      
         

      

    

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

     

    
      
         

      

      
        Schedule
2.1-3

        
          

        

      

      
         

      

    

    SCHEDULE
6.1

     

    CONSULTING
FEES

     

    1.  Monthly
Fee.  Commencing on the Effective Date and ending thirty (30)
days after the Company’s written notice of termination of this Agreement to the
Consultant, in consideration for the Consultant’s Consulting Services rendered
to the Company through the date thereof, the Company shall pay the Consultant
during the Consulting Term a monthly fee of $32,500 per month (the “Monthly
Fee”), payable monthly in advance.  Partial months shall be prorated
on the basis of a 30-day month.

     

    
      
         

      

      
        Schedule
6.1-1

        
          

        

      

      
         

      

    

    2.  First Special
Payment.  In consideration for the Consultant’s Consulting
Services rendered to the Company, the Company shall also pay the Consultant a
one time fee of $1,500,000, payable only in the event that one or more of the
following occurs during the Consulting Term: (a) the Company raises $50 million
or more in the aggregate of debt or equity capital; or (b) the Company, in the
Company’s sole discretion, lists the Company’s securities on a national
securities exchange; provided, however, as a
condition thereof, the Company shall have the sole right to determine whether
the Company has sufficient liquidity at that time of the occurrence of the event
in item (b) above to make the First Special Payment in the context of the
Company’s other financial obligations.  As an overriding condition,
however, if the Company determines, in the Company’s sole discretion, that the
Company does not have sufficient liquidity at that time of the occurrence of the
event in item (b) above to make the First Special Payment in the context of the
Company’s other financial obligations, then the Company shall pay the First
Special Payment to the Consultant, subject to the Company’s right to elect to
delay the payment thereof, in the Company’s sole discretion, in 15 equal monthly
installments commencing five business days after the consummation of the event
in item (b) above (the “Deferral Option”).  If the Consultant is
terminated or the Consulting Agreement expires before either of the events in
items (a) or (b) above occurs, then the Company shall only be obligated to pay
the Consultant the First Special Payment if either of the events in (a) or (b)
above occurs within 24 months after the expiration or earlier termination of the
Consulting Agreement (the “Tail Period”); provided, however, no Tail
Period or First Special Payment shall be applicable if the Consultant resigns or
is terminated for Cause during the Consulting Term; provided, further, in the event
that neither of the events in items (a) or (b) above occurs during the
Consulting Term and either of the Chief Executive Officer or the President then
sitting as of the Effective Date are terminated by the Company during the
Consulting Term (the “Executive Termination Event”), or the Tail Period (if
applicable), then the Company shall pay the Consultant the aforesaid $1,500,000
within five days after the Executive Termination Event or the Tail Period, as
applicable, even if the Consultant or this Agreement is terminated after the
Executive Termination Event and prior to the expiration of the Consulting Term,
except in the event that the Consultant has been terminated for
Cause.

     

    
      
         

      

      
        Schedule
6.1-2

        
          

        

      

      
         

      

    

    3.  Second Special
Payment.  In consideration for the Consultant’s Consulting
Services rendered to the Company during the Consulting Term (a) if the
Company raises equity securities capital raises exceeding $100 million (in one
or a series of transactions) during the Consulting Term, the Company shall pay
the Consultant a one time fee of $750,000, and (b) if the Company raises debt
securities capital exceeding $100 million (in one or a series of transactions)
during the Consulting Term, the Company shall pay the Consultant a one time fee
of $500,000.  The Company shall pay the Consultant within five
business days after the consummation of a qualifying securities offering,
subject to the Company’s right to elect, in the Company’s sole discretion, to
pay the Second Special Payment(s) (if any) to the Consultant over a two month
period after the consummation of any qualifying equity securities offering or
qualifying debt securities offering, as applicable.

     

    
      
         

      

      
        Schedule
6.1-3

        
          

        

      

      
         

      

    

    4.  Equity
Securities.  In consideration for the Consultant’s Consulting
Services rendered to the Company during the Consulting Term, if either (1) (a)
the Company raises $50 million or more of debt or equity capital during the
Consulting Term, or (b) the Company, in the Company’s sole discretion, lists the
Company’s securities on a national securities exchange during the Consulting
Term, then the Company shall make a one-time issuance to the Consultant of
50,000 shares of the Company’s common stock, and if (2)(a) the Company
consummates the Company’s contemplated initial public offering during the
Consulting Term, and (b) the Company, in the Company’s sole discretion, lists
the Company’s securities on a national securities exchange during the Consulting
Term, and the Company receives equity capital from the Company’s contemplated
initial public offering during the Consulting Term, then the Company shall make
a one-time issuance of warrants to the Consultant to purchase 150,000 shares of
the Company’s equity securities (in such event, these warrants shall be fully
vested at issuance, have a ten year term, and have an exercise price equal to
the lesser of (i) the Company’s initial public offering price of the Company’s
common stock at the time of the Company’s initial public offering, if any, of
$50 million or more, or (ii) the exercise price of any warrants issued to the
Company’s management team at or about the time of any such equity securities
capital raise from the Company’s initial public offering (i.e., within three
months thereof) if any, of $50 million or more).  An exemplar of the
Company’s Common Stock Purchase Warrant is attached hereto.  For the
avoidance of doubt, for purposes of this Schedule 6.1, debt
capital shall include (a) any senior debt received from any bank lender
(excepting only from First Credit Bank) secured by any assets of the Company (or
any corporate affiliate thereof), and (b) cash actually received by the Company
from any loan sales to any third parties unaffiliated with the
Company.

     

    
      
         

      

      
        Schedule
6.1-4

        
          

        

      

      
         

      

    

    Warrant
No.:  _______________

     

    Issue
Date:  ___________________

     

    NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

     

    IMH FINANCIAL
CORPORATION

     

    COMMON STOCK PURCHASE
WARRANT

     

    To Purchase [_______] Shares of Common
Stock of IMH Financial Corporation

     

    THIS COMMON STOCK PURCHASE WARRANT (the
“Warrant”) certifies that, for value received,
ITH Partners, LLC (the “Holder”), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to
the close of business on the ten-year anniversary of the Initial Exercise Date
(the “Termination
Date”) but not thereafter,
to subscribe for and purchase from IMH Financial Corporation, a Delaware
corporation (the “Company”), up to [_______] shares (the
“Warrant
Shares”) of Common Stock,
par value $0.01 per share, of the Company (the “Common
Stock”). The purchase price
of one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).

     

    SECTION
1.    DEFINITIONS.

     

    (a)           “Bloomberg” means Bloomberg
Financial Markets.

     

    (b)           “Business Day” means any day
other than a Saturday, Sunday or day on which commercial banks in the City of
New York are authorized or required by law to remain closed.

     

    (c)           “Market Price” means, for any
security as of any date, the last closing trade price for such security on the
Trading Market, as reported by Bloomberg, or, if the Principal Market begins to
operate on an extended hours basis and does not designate the closing trade
price, as the case may be, then the last trade price of such security prior to
4:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market
is not the principal securities exchange or trading market for such security,
the last trade price, respectively, of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the last trade price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no last trade price is reported
for such security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as reported in the
"pink sheets" by Pink Sheets LLC.  If the Market Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Market
Price, of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder.  All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

     

    (d)           “Trading Day” means any day on
which the Common Stock are traded on the Trading Market, or, if the Trading
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock are
then traded; provided
that “Trading Day” shall not include any day on which the Common Stock are
scheduled to trade on such exchange or market for less than 4.5 hours or any day
that the Common Stock are suspended from trading during the final hour of
trading on such exchange or market (or if such exchange or market does not
designate in advance the closing time of trading on such exchange or market,
then during the hour ending at 4:00 p.m., New York time).

     

    
      
         

      

      
        Schedule
2.1-5

        
          

        

      

      
         

      

    

    (e)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (f)           “Trading Market” means the New
York Stock Exchange or if the Company is not listed on the new York Stock
Exchange, the principal market on which the Common stock is then
traded.

     

    SECTION
2.    EXERCISE.

     

    (a)           EXERCISE
OF WARRANT. Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the Initial Exercise
Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in writing
to the registered Holder at the address of such Holder appearing on the books of
the Company); and, within five (5) Trading Days of the date said Notice of
Exercise is delivered to the Company, the Company shall have received payment of
the aggregate Exercise Price of the shares thereby purchased by wire transfer or
cashier’s check drawn on a United States bank. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within
five (5) Trading Days of the date the final Notice of Exercise is delivered to
the Company. Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder shall have the
effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased. The Holder and the Company shall maintain records showing the number
of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within three (3) Business
Days of receipt of such notice. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of this
paragraph, following the purchase of a portion of the Warrant Shares hereunder,
the number of Warrant Shares available for purchase hereunder at any given time
may be less than the amount stated on the face hereof.

     

    (b)           EXERCISE
PRICE. The exercise price per share of the Common Stock under this Warrant shall
be [__________], subject to adjustment hereunder (the “Exercise Price”).

     

    (c)           CASHLESS
EXERCISE. If at any time during the term of this Warrant, either there is no
effective registration statement registered, or no current prospectus is
available for the resale of the Warrant Shares by the Holder, then this Warrant
may be exercised at such time by means of a “cashless exercise” in which the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares equal to the quotient obtained by dividing (A–B) (X) by (A),
where:

     

    
      
        	  	
                (A) =

              	
                the
      Market Price on the Trading Day immediately preceding the date of such
      election;

              

      

    

     

    
      
        	  	
                (B) =

              	
                the
      Exercise Price of this Warrant, as adjusted;
    and

              

      

    

     

    
      
        	  	
                (X) =

              	
                the
      number of Warrant Shares issuable upon exercise of this Warrant in
      accordance with the terms of this Warrant by means of a cash exercise
      rather than a cashless
exercise.

              

      

    

     

    (d)           EXERCISE
LIMITATIONS.  The Company may not issue upon exercise of this Warrant
a number of shares of Common Stock which would exceed the number of shares of
Common Stock outstanding at the time of issuance (“Issuable Maximum”). If on any
attempted exercise of this Warrant, the issuance of Warrant Shares would exceed
the Issuable Maximum then the Company shall issue to the Holder such number of
Warrant Shares as may be issued below the Issuable Maximum and the exercise with
respect to the remainder of the aggregate number of Warrant Shares shall be
rescinded and this Warrant shall not be exercisable until and unless the
Issuable Maximum is subsequently increased to permit such issuance.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (e)           MECHANICS
OF EXERCISE.

     

    (i)            AUTHORIZATION
OF WARRANT SHARES. The Company covenants that all Warrant Shares which may be
issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).

     

    (ii)           DELIVERY
OF CERTIFICATES UPON EXERCISE. Certificates for shares purchased hereunder shall
be transmitted by the transfer agent of the Company to the Holder by crediting
the account of the Holder’s prime broker with the Depository Trust Company
through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company
is a participant in such system, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise within five (5)
Trading Days from the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the aggregate Exercise
Price as set forth above (“Warrant Share Delivery Date”).
This Warrant shall be deemed to have been exercised on the date the Exercise
Price is received by the Company. The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vi)
prior to the issuance of such shares, have been paid.  If the Warrant
Shares are subject to restrictions under the Securities Act, the certificates
for the Warrant Shares shall bear such legends as in the opinion of counsel to
the Company are deemed necessary or advisable.

     

    (iii)          DELIVERY
OF NEW WARRANTS UPON EXERCISE. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

     

    (iv)          RESCISSION
RIGHTS. If the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant to
this Section 2(e) by the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise.

     

    (v)           NO
FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

     

    (vi)        
 CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

     

    (vii)      
  CLOSING OF BOOKS. The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    SECTION
3.    CERTAIN ADJUSTMENTS.

     

    (a)          STOCK
DIVIDENDS, SPLITS, SUBDIVISIONS, COMBINATIONS AND RECLASSIFICATIONS. If the
Company, at any time while this Warrant is outstanding: (A) pays a dividend in
Common Stock or otherwise makes a distribution or distributions of Common Stock
to all holders of Common Stock (and not to the Holder), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event and the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted. Any adjustment made pursuant to this Section 3(a)
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

     

    (b)           PRO
RATA DISTRIBUTIONS. If the Company, at any time prior to the Termination Date,
shall distribute to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants or any security (other than Common Stock because a
distribution of Common Stock is already subject to Section 3(a) above), upon any
subsequent exercise of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution, the same evidence of its indebtedness or
assets (including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security other than the Common Stock.  At the time
of any such distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Section 3(b).

     

    (c)           FUNDAMENTAL
TRANSACTION. If, at any time while this Warrant is outstanding, (A) the Company
effects any merger or consolidation of the Company with or into another Person,
(B) the Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (C) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange in each
such case (A) through (D) pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in any such
case, a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, upon exercise of this
Warrant, the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate Consideration”)
receivable upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
event. For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(d) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental
Transaction.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (d)           CALCULATIONS.
All calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

     

    (e)           VOLUNTARY
ADJUSTMENT BY COMPANY. The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the
Company.

     

    (f)          
 NOTICE TO
HOLDERS.

     

    (i)          
 ADJUSTMENT TO EXERCISE PRICE. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to each Holder a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.

     

    (ii)           NOTICE TO ALLOW EXERCISE BY HOLDER. If
(A) the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case, the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least five (5) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.

     

    The Holder is entitled to exercise this
Warrant during the five (5) day period commencing on the date of such notice to
the effective date of the event triggering such notice.

     

    SECTION
4.    TRANSFER OF WARRANT.

     

    (a)           TRANSFERABILITY.
Subject to compliance with any applicable securities laws and the conditions set
forth in Section 4(d) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.

     

    (b)           NEW
WARRANTS. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c)           WARRANT
REGISTER. The Company shall register this Warrant, upon records to be maintained
by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.

     

    (d)           TRANSFER RESTRICTIONS. If, at the time
of the surrender of this Warrant in connection with any transfer of this
Warrant, the transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such transfer (i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities
Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act.

     

    SECTION
5.    MISCELLANEOUS.

     

    (a)           NO
RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not entitle the Holder
to any voting rights or other rights as a shareholder of the Company prior to
the exercise hereof as set forth in Section 2(e)(ii).

     

    (b)           LOSS,
THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock
certificate.

     

    (c)           SATURDAYS,
SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.

     

    (d)           AUTHORIZED
SHARES.  The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.

     

    Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Before taking any action which would
result in an adjustment in the number of Warrant Shares for which this Warrant
is exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction
thereof.

     

    (e)           JURISDICTION.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provisions or rule that would cause the application of the laws
of any jurisdiction other than New York.

     

    (f)           
RESTRICTIONS. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.

     

    (g)           NONWAIVER
AND EXPENSES. No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the
fact that all rights hereunder terminate on the Termination Date. If the Company
willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

     

    (h)           NOTICES.
Any notice, request or other document required or permitted to be given or
delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.

     

    (i)  
         LIMITATION OF LIABILITY.
No provision hereof, in the absence of any affirmative action by Holder to
exercise this Warrant to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of Holder, shall give rise to any liability of Holder
for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.

     

    (j)          
 REMEDIES. Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive and not to assert the defense in any action for specific performance that
a remedy at law would be adequate.

     

    (k)           SUCCESSORS
AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights
and obligations evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and permitted assigns of
Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by any such
Holder or holder of Warrant Shares.

     

    (l)         
  AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Holder.

     

    (m)           SEVERABILITY.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (n)           HEADINGS.
The headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, the Company has
caused this Warrant to be executed by its officer thereunto duly
authorized.

     

    Dated: [date]

     

    Dated:  _________________

    
      
        	 
      	
                IMH FINANCIAL
      CORPORATION

              	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	 
      	 
      
	 
      	
                Name:

              	 
      	 
      
	 
      	
                Title:

              	 
      	 
      

      

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    NOTICE OF EXERCISE

     

    TO:  IMH Financial
Corporation

     

    (1)          The undersigned hereby elects to
purchase [number] Warrant Shares of the Company pursuant to the terms of the
attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if
any.

     

    (2)          Payment shall take the form of (check
applicable box):

     

    ___________________________________ in lawful money of the
United States; or

     

    ___________________________________ if permitted the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

     

    (3)          Please issue a certificate or
certificates representing said Warrant Shares in the name of the undersigned or
in such other name as is specified below:

     

    [name]

     

    The Warrant Shares shall be delivered by
physical delivery of a certificate to:

     

    ___________________________________

    ___________________________________

     

    (4)          ACCREDITED INVESTOR. The undersigned is
an “accredited investor” as defined in Regulation
D promulgated under the
Securities Act of 1933, as amended.

     

    SIGNATURE OF HOLDER
________________________________________________________

    Name of Investing Entity:
__________________________________________________________

    Signature of Authorized Signatory of
Investing Entity: ___________________________________

    Name of Authorized Signatory:
_____________________________________________________

    Title of Authorized Signatory:
______________________________________________________

    Date:
__________________________________________________________________________

     

    
      
         

      

      
        142010
INCENTIVE PLAN

    OF

    POINT.360

     

    
      	
              1.

            	
              PURPOSES OF THE
      PLAN

            

    

     

    The
purposes of the 2010 Incentive Plan (the “Plan”) of Point.360, a California
corporation (the “Company”), are to:

     

    1.1           Encourage
selected employees, directors, consultants and advisers to improve operations
and increase the profitability of the Company;

     

    1.2           Encourage
selected employees, directors, consultants and advisers to accept or continue
employment or association with the Company or its Affiliates; and

     

    1.3           Increase
the interest of selected employees, directors, consultants and advisers in the
Company’s welfare through participation in the growth in value of the common
stock of the Company (the “Common Stock”).  All references herein to stock
or shares, unless otherwise specified, shall mean Common Stock.

     

    
      	
              2.

            	
              TYPES OF AWARDS;
      ELIGIBLE PERSONS

            

    

     

    2.1           The
Administrator (as defined below) may, from time to time, take the following
action, separately or in combination, under the Plan: (i) grant “incentive stock
options” (“ISOs”) intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
“Code”); (ii) grant “non-qualified options” (“NQOs,” and together with ISOs,
“Options”); (iii) grant or sell Common Stock subject to restrictions
(“restricted stock”) or without restrictions and (iv) grant stock appreciation
rights (any such right would permit the holder to receive the excess of the fair
market value of Common Stock on the exercise date over its fair market value (or
a greater base value) on the grant date (“SARs”)), either in tandem with Options
or as separate and independent grants; and performance compensation awards in
either Common Stock or cash or in combinations of Common Stock and cash.. 
Any such awards may be made to employees, including employees who are officers
or directors, and to individuals described in Section 1 of the Plan who the
Administrator believes have made or will make a contribution to the Company or
any Affiliate (as defined below); provided, however, that only a
person who is an employee of the Company or any Affiliate at the date of the
grant of an Option is eligible to receive ISOs under the Plan or performance
compensation awards.  The term “Affiliate” as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code.  The term
“employee” includes an officer or director who is an employee of the
Company.  The term “consultant” includes persons employed by, or otherwise
affiliated with, a consultant.  The term “adviser” includes persons
employed by, or otherwise affiliated with, an adviser.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.2           Except
as otherwise expressly set forth in the Plan, no right or benefit under the Plan
shall be subject in any manner to anticipation, alienation, hypothecation, or
charge, and any such attempted action shall be void.  No right or benefit
under the Plan shall in any manner be liable for or subject to debts, contracts,
liabilities, or torts of any option holder or any other person except as
otherwise may be expressly required by applicable law.

     

    
      	
              3.

            	
              STOCK SUBJECT TO THE
      PLAN; MAXIMUM NUMBER OF
GRANTS

            

    

     

    Subject
to the provisions of Sections 6.1.1 and 8.2 of the Plan, the total number of
shares of Common Stock under the Plan which may be offered, or issued as
restricted stock or unrestricted stock on the exercise of Options or SARs or
otherwise under the Plan shall not exceed four million (4,000,000) shares of
Common Stock.  The shares subject to an Option or SAR granted under the
Plan that expire, terminate or are cancelled unexercised shall become available
again for grants under the Plan.  If shares of restricted stock awarded
under the Plan are forfeited to the Company or repurchased by the Company, the
number of shares forfeited or repurchased shall again be available under the
Plan.  Where the exercise price of an Option is paid by means of the
optionee’s surrender of previously owned shares of Common Stock or the Company’s
withholding of shares otherwise issuable upon exercise of the Option as may be
permitted herein, only the net number of shares issued and which remain
outstanding in connection with such exercise shall be deemed “issued” and no
longer available for issuance under the Plan.  No eligible person shall be
granted Options or other awards during any twelve-month period covering more
than one million (1,000,000) shares.

     

    
      	
              4.

            	
              ADMINISTRATION

            

    

     

    4.1           The
Plan shall be administered by the Board of Directors of the Company (the
“Board”) or by a committee (the “Adminstrator”) selected by the Board to
administer the Plan, or of part thereof (in either case, the
“Administrator”).  The Board shall appoint and remove members of the
Adminstrator in its discretion in accordance with applicable laws.  At the
Board’s discretion, the Adminstrator may be comprised solely of “non-employee
directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or  “outside directors” within
the meaning of Section 162(m) of the Code.  The Administrator may delegate
non-discretionary administrative duties to such employees of the Company as the
Administrator deems proper and the Board, in its absolute discretion, may at any
time and from time to time exercise any and all rights and duties of the
Administrator under the Plan.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    4.2           Subject
to the other provisions of the Plan, the Administrator shall have the authority,
in its discretion: (i) to grant Options and SARs and grant or sell restricted
stock or unrestricted stock; (ii) to determine the fair market value of the
Common Stock subject to Options or other awards; (iii) to determine the exercise
price of Options granted, which shall be no less than the fair market value of
the Common Stock on the date of grant, the economic terms of SARs granted, which
shall provide for a benefit of the appreciation on Common Stock over not less
than the value of the Common Stock on the date of grant, or the offering price
of restricted stock; (iv) to determine the persons to whom, and the time or
times at which, Options or SARs shall be granted or restricted stock or
unrestricted stock granted or sold, and the number of shares subject to each
Option or SAR or the number of shares of restricted stock granted or sold; (v)
to grant performance compensation awards under the criteria set forth in the
Plan; and (vi) to construe and interpret the terms and provisions of the Plan,
of any applicable agreement and all Options and SARs granted under the Plan, and
of any restricted  or unrestricted stock award under the Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to the Plan; (vii)
to determine the terms and provisions of each Option and SAR granted and award
of restricted stock or unrestricted stock (which need not be identical),
including but not limited to, the time or times at which Options and SARs shall
be exercisable or the time at which the restrictions on restricted stock shall
lapse; (viii) with the consent of the grantee, to rescind any award or exercise
of an Option or SAR and to modify or amend the terms of any Option, SAR or
restricted stock; (ix) to reduce the purchase price of restricted stock or
unrestricted stock; (x) to accelerate or defer (with the consent of the grantee)
the exercise date of any Option or SAR or the date on which the restrictions on
restricted stock lapse; (xi) to issue shares of restricted stock to an optionee
in connection with the accelerated exercise of an Option by such optionee; (xii)
to authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option. SAR or award of restricted stock or
unrestricted stock and a performance compensation award; (xiii) to determine the
duration and purposes of leaves of absence which may be granted to participants
without constituting a termination of their employment for the purposes of the
Plan; and (xiv) to make all other determinations deemed necessary or advisable
for the administration of the Plan, any applicable agreement, Option, SAR or
award of restricted stock or unrestricted stock.

     

    4.3           All
questions of interpretation, implementation, and application of the Plan or any
agreement or Option, SAR or award of restricted stock shall be determined by the
Administrator, which determination shall be final and binding on all
persons.

     

    
      	
              5.

            	
              GRANTING OF OPTIONS
      AND SARS; AGREEMENTS

            

    

     

    5.1           No
Options or SARs shall be granted under the Plan after ten (10) years from the
date of adoption of the Plan by the Board.

     

    5.2           Each
Option and SAR shall be evidenced by a written agreement, in form satisfactory
to the Administrator, executed by the Company and the person to whom such grant
is made.  In the event of a conflict between the terms or conditions of an
agreement and the terms and conditions of the Plan, the terms and conditions of
the Plan shall govern.

     

    5.3           Each
agreement shall specify whether the Option it evidences is an NQO or an ISO,
provided, however, all Options
granted under the Plan to non-employee directors, consultants and advisers of
the Company are intended to be NQOs.

     

    5.4           Subject
to Section 6.3.3 with respect to ISOs, the Administrator may approve the grant
of Options or SARs under the Plan to persons who are expected to become
employees, directors, consultants or advisers of the Company, but are not
employees, directors, consultants or advisers at the date of
approval.

     

    
      	
              6.

            	
              TERMS AND CONDITIONS
      OF OPTIONS AND SARS

            

    

     

    Each
Option and SAR granted under the Plan shall be subject to the terms and
conditions set forth in Section 6.1.  NQOs and SARs shall also be subject
to the terms and conditions set forth in Section 6.2, but not those set forth in
Section 6.3.  ISOs shall also be subject to the terms and conditions set
forth in Section 6.3, but not those set forth in Section 6.2.  SARs shall
be subject to the terms and conditions of Section 6.4.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    6.1         Terms and Conditions to
Which All Options and SARs Are Subject.  All Options and SARs
granted under the Plan shall be subject to the following terms and
conditions:

     

    6.1.1        Changes in Capital
Structure.  Subject to Section 6.1.2, if the Common Stock of the
Company is changed by reason of a stock split, reverse stock split, stock
dividend, recapitalization, combination or reclassification, or if the Company
effects a spin-off of the Company’s subsidiary, appropriate adjustments shall be
made by the Administrator, in its sole discretion, in (a) the number and class
of shares of stock subject to the Plan and each Option and SAR outstanding under
the Plan, and (b) the exercise price of each outstanding Option; provided, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments.  Any adjustment, however, in an outstanding Option shall be
made without change in the total price applicable to the unexercised portion of
the Option but with a corresponding adjustment in the price for each share
covered by the unexercised portion of the Option.  Adjustments under this
Section 6.1.1 shall be made by the Administrator, whose determination as to the
nature of the adjustments that shall be made, and the extent thereof, shall be
final, binding, and conclusive.  If an adjustment under this Section 6.1.1
would result in a fractional share interest under an option or any installment,
the Administrator’s decision as to inclusion or exclusion of that fractional
share interest shall be final, but no fractional shares of stock shall be issued
under the Plan on account of any such adjustment.

     

    6.1.2        Corporate
Transactions.  Except as otherwise provided in the applicable
agreement, in the event of a Corporate Transaction (as defined below), the
Administrator shall notify each holder of an Option or SAR at least thirty (30)
days prior thereto or as soon as may be practicable.  To the extent not
then exercised all Options and SARs shall terminate immediately prior to the
consummation of such Corporate Transaction unless the Administrator determines
otherwise in its sole discretion; provided. however, that the
Administrator, in its sole discretion, may (i) permit exercise of any Options or
SARs prior to their termination, even if such Options or SARs would not
otherwise have been exercisable, and/or (ii) provide that all or certain of the
outstanding Options and SARs shall be assumed or an equivalent Option or SAR
substituted by an applicable successor corporation or entity or any Affiliate of
the successor corporation or entity.  A “Corporate Transaction” means (i) a
liquidation or dissolution of the Company; (ii) a merger or consolidation of the
Company with or into another corporation or entity (other than a merger with a
wholly-owned subsidiary); (iii) a sale of all or substantially all of the assets
of the Company; or (iv) a purchase or other acquisition of more than 50% of the
outstanding stock of the Company by one person, other than Haig Bagerdjian, or
by more than one person acting in concert with persons other than Haig
Bagerdjian.

     

    6.1.3        Time of Option or SAR
Exercise.  Subject to Section 5 and Section 6.3.4, an Option or SAR
granted under the Plan shall be exercisable (a) immediately as of the effective
date of the of the applicable agreement or (b) in accordance with a schedule or
performance criteria as may be set by the Administrator and specified in the
applicable agreement.  However, in no case may an Option or SAR be
exercisable until a written agreement in form and substance satisfactory to the
Company is executed by the Company and the grantee.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    6.1.4      Grant Date.  The
date of grant of an Option or SAR under the Plan shall be the date approved or
specified by the Administrator and reflected as  the effective date of
the applicable agreement.

     

    6.1.5      Non-Transferability of
Rights.  Except with the express written approval of the
Administrator, which approval the Administrator is authorized to give only with
respect to NQOs and SARs, no Option or SAR granted under the Plan shall be
assignable or otherwise transferable by the grantee except by will or by the
laws of descent and distribution.  During the life of the grantee, an
Option or SAR shall be exercisable only by the grantee or permitted
transferee.

     

    6.1.6      Payment.  Except
as provided below, payment in full, in cash, shall be made for all Common Stock
purchased at the time written notice of exercise of an Option is given to the
Company and the proceeds of any payment shall be considered general funds of the
Company.  The Administrator, in the exercise of its absolute discretion
after considering any tax, accounting and financial consequences, may authorize
any one or more of the following additional methods of payment:

     

    (a)           Subject
to the Sarbanes-Oxley Act of 2002, acceptance of the optionee’s full recourse
promissory note for all or part of the Option price, payable on such terms and
bearing such interest rate as determined by the Administrator (but in no event
less than the minimum interest rate specified under the Code at which no
additional interest or original issue discount would be imputed), which
promissory note may be either secured or unsecured in such manner as the
Administrator shall approve (including, without limitation, by a security
interest in the shares of the Company);

     

    (b)           Subject
to the discretion of the Administrator and the terms of the stock option
agreement granting the Option, delivery by the optionee of shares of Common
Stock already owned by the optionee for all or part of the Option price,
provided the fair market value (determined as set forth in Section 6.1.9) of
such shares of Common Stock is equal on the date of exercise to the Option
price, or such portion thereof as the optionee is authorized to pay by delivery
of such stock;

     

    (c)           Subject
to the discretion of the Administrator, through the surrender of shares of
Common Stock then issuable upon exercise of the Option, provided the fair market
value (determined as set forth in Section 6.1.9) of such shares of Common Stock
is equal on the date of exercise to the Option price, or such portion thereof as
the optionee is authorized to pay by surrender of such stock; and

     

    (d)           By
means of so-called cashless exercises as permitted under applicable rules and
regulations of the Securities and Exchange Commission and the Federal Reserve
Board.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    6.1.7      Withholding and Employment
Taxes.  At the time of exercise and as a condition thereto, or at
such other time as the amount of such obligation becomes determinable, the
grantee of an Option or SAR shall remit to the Company in cash all applicable
federal and state withholding and employment taxes.  Such obligation to
remit may be satisfied, if authorized by the Administrator in its sole
discretion, after considering any tax, accounting and financial consequences, by
the holder’s (i) delivery of a promissory note in the required amount on such
terms as the Administrator deems appropriate, (ii) tendering to the Company
previously owned shares of Common Stock or other securities of the Company with
a fair market value equal to the required amount, or (iii) agreeing to have
shares of Common Stock (with a fair market value equal to the required amount),
which are acquired upon exercise of the Option or SAR, withheld by the
Company.

     

    6.1.8      Other
Provisions.  Each Option and SAR granted under the Plan may contain
such other terms, provisions, and conditions not inconsistent with the Plan as
may be determined by the Administrator, and each ISO granted under the Plan
shall include such provisions and conditions as are necessary to qualify the
Option as an “incentive stock option” within the meaning of Section 422 of the
Code.

     

    6.1.9      Determination of
Value.  For purposes of the Plan, the fair market value of Common
Stock or other securities of the Company shall be determined as
follows:

     

    (a)           If
the stock of the Company is listed on a securities exchange or is regularly
quoted by a recognized securities dealer, and selling prices are reported, its
fair market value shall be the closing price of such stock on the date the value
is to be determined, but if selling prices are not reported, its fair market
value shall be the mean between the high bid and low asked prices for such stock
on the date the value is to be determined (or if there are no quoted prices for
the date of grant, then for the last preceding business day on which there were
quoted prices).

     

    (b)          In
the absence of an established market for the stock, the fair market value
thereof shall be determined in good faith by the Administrator, with reference
to the Company’s net worth, prospective earning power, dividend-paying capacity,
and other relevant factors, including the goodwill of the Company, the economic
outlook in the Company’s industry, the Company’s position in the industry, the
Company’s management, and the values of stock of other corporations in the same
or a similar line of business.

     

    6.1.10    Option and SAR
Term.  No Option or SAR shall be exercisable more than 10 years
after the date of grant, or such lesser period of time as is set forth in the
applicable agreement (the end of the maximum exercise period stated in the
agreement is referred to in the Plan as the “Expiration Date”).

     

    6.2         Terms and Conditions to
Which Only NQOs and SARs Are Subject.  Options granted under the
Plan which are designated as NQOs and SARs shall be subject to the following
terms and conditions:

     

    6.2.1      Exercise Price. 
The exercise price of an NQO and the base value of an SAR shall be the amount
determined by the Administrator as specified in the option or SAR agreement, but
shall not be less than the fair market value of the Common Stock on the date of
grant (determined under Section 6.1.9).

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    6.2.2        Termination of
Employment.  Except as otherwise provided in the applicable
agreement, if for any reason a grantee ceases to be employed by the Company or
any of its Affiliates, Options that are NQOs and SARs held at the date of
termination (to the extent then exercisable) may be exercised in whole or in
part at any time within ninety (90) days of the date of such termination (but in
no event after the Expiration Date).  For purposes of this Section 6.2.2,
“employment” includes service as a director, consultant or adviser.  For
purposes of this Section 6.2.2, a grantee’s employment shall not be deemed to
terminate by reason of the grantee’s transfer from the Company to an Affiliate,
or vice versa, or sick leave, military leave or other leave of absence approved
by the Administrator, if the period of any such leave does not exceed ninety
(90) days or, if longer, if the grantee’s right to reemployment by the Company
or any Affiliate is guaranteed either contractually or by statute.

     

    6.3         Terms and Conditions to
Which Only ISOs Are Subject.  Options granted under the Plan which
are designated as ISOs shall be subject to the following terms and
conditions:

     

    6.3.1        Exercise Price. 
The exercise price of an ISO shall not be less than the fair market value
(determined in accordance with Section 6.1.9) of the stock covered by the Option
at the time the Option is granted.  The exercise price of an ISO granted to
any person who owns, directly or by attribution under the Code (currently
Section 424(d)), stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a “Ten Percent Stockholder”) shall in no event be less than one hundred ten
percent (110%) of the fair market value (determined in accordance with Section
6.1.9) of the stock covered by the Option at the time the Option is
granted.

     

    6.3.2        Disqualifying
Dispositions.  If stock acquired by exercise of an ISO granted
pursuant to the Plan is disposed of in a “disqualifying disposition” within the
meaning of Section 422 of the Code (a disposition within two (2) years from the
date of grant of the Option or within one year after the issuance of such stock
on exercise of the Option), the holder of the stock immediately before the
disposition shall promptly notify the Company in writing of the date and terms
of the disposition and shall provide such other information regarding the Option
as the Company may reasonably require.

     

    6.3.3        Grant Date.  If
an ISO is granted in anticipation of employment as provided in Section 5.4, the
Option shall be deemed granted, without further approval, on the date the
grantee assumes the employment relationship forming the basis for such grant,
and, in addition, satisfies all requirements of the Plan for Options granted on
that date.

     

    6.3.4        Term. 
Notwithstanding Section 6.1.10, no ISO granted to any Ten Percent Stockholder
shall be exercisable more than five (5) years after the date of
grant.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    6.3.5        Termination of
Employment.  Except as otherwise provided in the stock option
agreement, if for any reason an optionee ceases to be employed by the Company or
any of its Affiliates, Options that are ISOs held at the date of termination (to
the extent then exercisable) may be exercised in whole or in part at any time
within 90 days of the date of termination (but in no event after the Expiration
Date).  For purposes of this Section 6.3.5, an optionee’s employment shall
not be deemed to terminate by reason of the optionee’s transfer from the Company
to an Affiliate, or vice versa, or sick leave, military leave or other leave of
absence approved by the Administrator, if the period of any such leave does not
exceed ninety (90) days or, if longer, if the optionee’s right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute.

     

    6.4         Terms and Conditions
Applicable Solely to SARs.  In addition to the other terms and
conditions applicable to SARs in this Section 6, the holder shall be entitled to
receive on exercise of an SAR only Common Stock at a fair market value equal to
the benefit to be received by the exercise.

     

    
      	
              7.

            	
              MANNER OF
      EXERCISE

            

    

     

    7.1         An
optionee wishing to exercise an Option or SAR shall give written notice to the
Company at its principal executive office, to the attention of the officer of
the Company designated by the Administrator, accompanied by payment of the
exercise price and/or withholding taxes as provided in Sections 6.1.6 and
6.1.7.  The date the Company receives written notice of an exercise
hereunder accompanied by the applicable payment will be considered as the date
such Option or SAR was exercised.

     

    7.2         Promptly
after receipt of written notice of exercise and the applicable payments called
for by Section 7.1, the Company shall, without stock issue or transfer taxes to
the holder or other person entitled to exercise the Option or SAR, deliver to
the holder or such other person a certificate or certificates for the requisite
number of shares of Common Stock.  A holder or permitted transferee of an
Option or SAR shall not have any privileges as a stockholder with respect to any
shares of Common Stock to be issued until the date of issuance (as evidenced by
the appropriate entry on the books of the Company or a duly authorized transfer
agent) of such shares.

     

    
      	
              8.

            	
              STOCK

            

    

     

    8.1         Grant or Sale of
Stock.

     

    8.1.1        No
awards of Common Stock shall be granted under the Plan after ten (10) years from
the date of adoption of the Plan by the Board.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    8.1.2        The
Administrator may issue Common Stock under the Plan as a grant or for such
consideration (including services, and, subject to the Sarbanes-Oxley Act of
2002, promissory notes) as determined by the Administrator.  Common Stock
issued under the Plan shall be subject to the terms, conditions and restrictions
determined by the Administrator.  The restrictions, if any, may include
restrictions concerning transferability, repurchase by the Company and
forfeiture of the shares issued, together with such other restrictions as may be
determined by the Administrator.  If shares are subject to forfeiture or
repurchase by the Company, all dividends or other distributions paid by the
Company with respect to the shares may be retained by the Company until the
shares are no longer subject to forfeiture or repurchase, at which time all
accumulated amounts shall be paid to the recipient.  All Common Stock
issued pursuant to this Section 8 shall be subject to a written purchase
agreement, grant agreement, or performance compensation award which shall be
executed by the Company and the prospective recipient of the Common Stock prior
to the delivery of certificates representing such stock to the recipient. 
The purchase agreement, grant agreement or performance compensation award, may
contain any terms, conditions, restrictions, representations and warranties
required by the Administrator.  The certificates representing the shares
shall bear any legends required by the Administrator.  The Administrator
may require any purchaser or grantee of Common Stock to pay to the Company in
cash upon demand amounts necessary to satisfy any applicable federal, state or
local tax withholding requirements.  If the purchaser or grantee fails to
pay the amount demanded, the Administrator may withhold that amount from other
amounts payable by the Company to the purchaser or grantee, including salary,
subject to applicable law.  With the consent of the Administrator in its
sole discretion, a purchaser or grantee may deliver Common Stock to the Company
to satisfy this withholding obligation.  Upon the issuance of Common Stock,
the number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued.

     

    8.2         Changes in Capital
Structure.  In the event of a change in the Company’s capital
structure, as described in Section 6.1.1, appropriate adjustments shall be made
by the Administrator, in its sole discretion, in the number and class of
restricted stock subject to the Plan and the restricted stock outstanding under
the Plan; provided, however, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments.

     

    8.3         Corporate
Transactions.  In the event of a Corporate Transaction, as defined
in Section 6.1.2 hereof, to the extent not previously forfeited, subject to the
terms of the purchase agreement, the grant agreement or the performance
compensation award, all restricted stock shall be forfeited immediately prior to
the consummation of such Corporate Transaction unless the Administrator
determines otherwise in its sole discretion; provided, however, that the
Administrator, in its sole discretion, may remove any restrictions as to any
restricted stock.  The Administrator may, in its sole discretion, provide
that all outstanding restricted stock participate in the Corporate Transaction
with an equivalent stock substituted by an applicable successor corporation
subject to the restriction.

     

    
      	
              9.

            	
              PERFORMANCE
      COMPENSATION AWARDS

            

    

     

    9.1         General.  The
Administrator shall have the authority to designate an award as a performance
compensation award in order to qualify such award as “performance-based
compensation” under Section 162(m) of the Code.

     

    9.2         Eligibility. 
The Administrator will, in its sole discretion, designate within the first
ninety (90) days of a Performance Period (or within the maximum period allowed
under Section 162(m) of the Code) which participants will be eligible to receive
performance compensation awards in respect of such Performance Period (defined
at the end of this Section 9.2).  Designation of a participant eligible to
receive an award for a Performance Period shall not in any manner entitle the
participant to receive payment in respect of any award for such Performance
Period.  The determination as to whether or not such participant becomes
entitled to payment in respect of any performance compensation award shall be
decided solely in accordance with the provisions of this Section 9. 
Moreover, designation of a participant eligible to receive an award hereunder
for a particular Performance Period shall not require designation of such
participant eligible to receive an award hereunder in any subsequent Performance
Period and designation of one person as a participant eligible to receive an
award hereunder shall not require designation of any other person as a
participant eligible to receive an award hereunder in such period or in any
other period.  “Performance Period” shall mean one or more periods of time
of at least one (1) year in duration, as the Administrator may select, over
which the attainment of one or more performance goals will be measured for the
purpose of determining the participant’s right to, and the payment of, a
performance compensation award.  All performance compensation awards under
the Plan shall be evidenced by a written agreement.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    9.3           Discretion of Administrator
with Respect to performance compensation awards.  With regard to a
particular Performance Period, the Administrator shall have full discretion to
select the length of such Performance Period, the type of performance
compensation awards to be issued, the performance criteria that will be used to
establish the performance goals, the kinds and levels of the performance goals
that are to apply to the Company and the Performance Formula or Formulas. 
A “Performance Formula” is an objective formula to be applied against the
relevant performance goals to determine, with regard to the performance
compensation award of a participant, whether all, some portion but less than
all, or none of the performance compensation award has been earned for the
Performance Period.  Within the first ninety (90) days of a Performance
Period (or within the maximum period allowed under Section 162(m) of the Code),
the Administrator shall, with regard to the performance compensation awards to
be issued for such Performance Period, exercise its discretion with respect to
each of the matters enumerated in the immediately preceding sentence of this
Section 9.3 and record the same in writing.

     

    9.4           Performance Criteria.
The criterion or criteria that the Administrator shall select for purposes of
establishing the performance goal or goals for a Performance Period with respect
to any performance compensation award under the Plan shall be based on the
attainment of specific levels of performance of the Company (or an Affiliate,
division or operational unit of the Company) and shall be limited to the
following: return on net assets, return on stockholders’ equity, return on
assets, return on capital, revenue, average revenue per subscriber, stockholder
returns, profit margin, earnings per share of Common Stock, net earnings,
operating earnings, free cash flow, earnings before interest, taxes,
depreciation and amortization, number of subscribers, growth of subscribers,
operating expenses, capital expenses, subscriber acquisition costs, Common Stock
price, enterprise value, equity market capitalization or sales or market
share.  To the extent required under Section 162(m) of the Code, the
Administrator shall, within the first ninety (90) days of a Performance Period
(or within the maximum period allowed under Section 162(m) of the Code), define
in an objective fashion the manner of calculating the performance criteria it
selects to use for such Performance Period.

     

    9.5           Performance
Goals.  The Adminstrator is authorized at any time during the first
ninety (90) days of a Performance Period, or at any time thereafter (but only to
the extent the exercise of such authority after the first ninety (90) days of a
Performance Period would not cause the performance compensation awards granted
to any participant for the Performance Period to fail to qualify as
“performance-based compensation” under Section 162(m) of the Code), in its sole
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in
order to prevent the dilution or enlargement of the rights of participants, (a)
in the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development affecting the Company; or (b) in
recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    9.6         Grant.  The
Adminstrator shall have sole authority to determine the employees
(“participants”) who shall receive performance compensation awards, which shall
consist of a right which is (i) denominated in cash or Common Stock or a
combination thereof, (ii) the Common Stock valued, as determined by the
Administrator, in accordance with the achievement of such performance goal or
goals during the Performance Period as the Adminstrator shall establish, and
(iii) payable at such time and in such form as the Adminstrator shall
determine.

     

    9.7         Terms and
Conditions.

     

    9.7.1        Employment at End of
Performance Period.  Unless otherwise provided in the applicable
written performance compensation award, a Participant must be employed by the
Company on the last day of a Performance Period to be eligible for payment in
respect of a performance compensation award for such Performance
Period.

     

    9.7.2        Certification and Negative
Discretion. Following the completion of a Performance Period, the
Administrator shall meet to review and certify in writing whether, and to what
extent, the performance goals for the Performance Period have been achieved and,
if so, to calculate and certify in writing the amount of the performance
compensation awards earned for the period based upon the Performance Formula or
Formulas.  The Adminstrator shall then determine the actual size of each
Participant’s performance compensation award payment for the Performance Period
and, in so doing, may apply Negative Discretion, if and when it deems
appropriate.  Negative Discretion is the power of the Administrator to
reduce or eliminate the amount of the performance compensation award earned
under the Performance Formula in the Performance Period if, in its sole
judgment, such reduction or elimination is appropriate.

     

    9.7.3        Right to
Payment.  The participant shall be entitled to receive the
performance compensation earned as certified by the Administrator. 
Performance compensation payments may be paid in a lump sum or in installments
following the close of the Performance Period as set forth in the written
performance compensation award on the date of grant.

     

    9.7.4        Timing of Award
Payments.  The amounts payable for a Performance Period shall be
paid to participants as soon as administratively possible following completion
of the certifications required by this Section 9.7.2; provided that in no event
shall any such payment be made later than the fifteenth day of the third month
following the end of such Performance Period.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    9.7.5        Maximum Award
Payable.  Notwithstanding any provision contained in the Plan to the
contrary, the maximum performance compensation award payable to any one
participant under the Plan for a Performance Period is ______ shares of Common
Stock or, in the event the performance compensation award is paid in cash, the
equivalent cash value thereof on the last day of the Performance Period to which
such award relates, or if the award is payable in cash and Common Stock, the
cash paid shall be the excess of the award over the value of the Common Stock,
as so determined. Furthermore, any payment that has been deferred and is payable
in cash shall not, between the date as of which it is deferred and the payment
date, increase by a measuring factor for each fiscal year greater than a
reasonable rate of interest set by the Administrator; any such deferred payment
made with respect to Common Stock, shall not increase by an amount greater than
the appreciation of a share of Common Stock from the end of the Performance
Period to the payment date.

     

    
      	
              10.

            	
              EMPLOYMENT OR
      CONSULTING RELATIONSHIP

            

    

     

    Nothing
in the Plan or any Option, SAR or performance compensation award, or award of
Common Stock under the Plan shall interfere with or limit in any way the right
of the Company or of any of its Affiliates to terminate the employment,
consulting or advising of any recipient thereof or restricted stock holder at
any time, nor confer upon any of any recipient, optionee or restricted stock
holder any right to continue in the employ of, or consult with, or advise, the
Company or any of its Affiliates.

     

    
      	
              11.

            	
              CONDITIONS UPON
      ISSUANCE OF SHARES

            

    

     

    11.1         Securities Act. 
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option, SAR or other award under the Plan unless the exercise of such Option or
SAR or payment under other awards, the receipt of Common Stock and the issuance
and delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended (the “Securities Act”).

     

    11.2         Non-Compete
Agreement.  As a further condition to the receipt of Common Stock
pursuant to the exercise of an Option, SAR or any other award under the Plan,
the optionee or recipient may be required not to render services for any
organization, or engage directly or indirectly in any business, competitive with
the Company at any time during which  an Option or SAR is outstanding
to such Optionee and for six (6) months after any exercise of an Option or SAR
or the receipt of Common Stock pursuant to the exercise of an Option or SAR or
other award and, as to restricted stock, for six (6) months after the
restrictions on such restricted stock lapse.  Failure to comply with this
condition shall cause such Option, SAR  and the exercise or issuance
of shares thereunder and/or any other award under the Plan to be rescinded and
the benefit of such exercise, issuance or award to be repaid to the
Company.

     

    
      	
              12.

            	
              NON-EXCLUSIVITY OF THE
      PLAN

            

    

     

    The
adoption of the Plan shall not be construed as creating any limitations on the
power of the Company to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options other
than under the Plan.

     

    
      	
              13.

            	
              MARKET
      STAND-OFF

            

    

     

    Each
optionee, holder of an SAR or recipient of Common Stock under the Plan, if so
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any securities of the Company under the
Securities Act, shall not sell or otherwise transfer any shares of Common Stock
so acquired during the 180-day period following the effective date of a
registration statement of the Company filed under the Securities Act; provided, however, that such
restriction shall apply only to a registration statement of the Company which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act and the restriction period
shall not exceed 90 days after the registration statement becomes
effective.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
      	
              14.

            	
              AMENDMENTS TO
      PLAN

            

    

     

    The Board
may at any time amend, alter, suspend or discontinue the Plan.  Without the
consent of an optionee, holder of an SAR or holder of restricted stock, or
performance compensation award, no amendment, alteration, suspension or
discontinuance may adversely affect such person’s outstanding Option(s), SAR(s)
or the terms applicable to restricted stock or performance compensation award
except to conform the Plan and ISOs granted under the Plan to the requirements
of federal or other tax laws relating to ISOs.  No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes or (b) the Board otherwise concludes that
stockholder approval is advisable.

     

    
      	
              15.

            	
              EFFECTIVE DATE OF
      PLAN; TERMINATION

            

    

     

    The Plan
shall become effective upon adoption by the Board; provided, however, that no
Option or SAR, or other award under the Plan shall be exercisable unless and
until written consent of the stockholders of the Company, or approval of
stockholders of the Company voting at a validly called stockholders’ meeting, is
obtained within twelve (12) months after adoption by the Board.  If any
Options, SARs or other awards are so granted and stockholder approval shall not
have been obtained within twelve (12) months of the date of adoption of the Plan
by the Board, such Options, SARs or other awards shall terminate retroactively
as of the date they were granted.  In addition,  awards may
be made under the Plan and exercise of Options and SARs shall occur only after
there has been compliance with all applicable federal and state securities laws
and other applicable laws, rules and regulations.   The Plan (but
not Options and SARs previously granted under the Plan) shall terminate ten (10)
years from the date of its adoption by the Board.  Termination shall
not affect any outstanding Options or SARs or the terms applicable to other
previously made awards under the Plan.

    
      
         

      

      
        13

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