Document:

Exhibit 10.6 Promissory Note - IMH Holdings 2, LLC

Exhibit 10.6

PROMISSORY NOTE 
(IMHFC REO and Loan Portfolio (Loan #2))
$4,385,000    January 23, 2014
FOR VALUE RECEIVED, the undersigned, IMH HOLDINGS 2, LLC, a Delaware limited liability company (“Borrower”) the principal place of business of which is c/o IMH Financial Corporation, 7001 Scottsdale Road, Suite 2050, Phoenix, Arizona 85253, promises to pay to the order of CALMWATER CAPITAL 3, LLC, a California limited liability company (“Lender”), having its principal office at 11755 Wilshire Blvd., Suite 1400, Los Angeles, CA 90025, or at such other place as Lender may designate to Borrower in writing from time to time, the principal amount of Four Million Three Hundred Eight-Five Thousand and No/100 Dollars ($4,385,000.00) in lawful money of the United States of America (the “Loan”), with interest thereon to be computed on the unpaid principal balance at the “Note Rate” (as defined herein), adjusted with respect to each Interest Period (as defined herein), together with all other amounts due hereunder and under the other Loan Documents (as defined in the Loan Agreement (as defined herein)), and to be paid in installments as set forth in this Note.  Capitalized terms used herein but not defined herein shall have the meaning set forth in that certain Loan Agreement (the “Loan Agreement”) between Borrower and Lender, dated as the date hereof.

		
	1.
	TERMS OF PAYMENT

(a)    %3.    Borrower shall deliver to Lender (A) on the date the proceeds of the Loan are advanced to or for the benefit of Borrower (the "Initial Funding Date"), a payment of interest only for the period from and including the Initial Funding Date through and including January 31, 2015 and (B) thereafter, commencing on March 1, 2015 (the "First Payment Date") and on each Payment Date (as hereinafter defined) thereafter throughout the term of the Loan, monthly payments of interest in arrears.  As used herein, “Payment Date” means the First Payment Date and the first day of each calendar month thereafter throughout the term of the Loan and “Monthly Payment” shall mean each payment of interest and principal (if any) due on each Payment Date throughout the term of the Loan.
(i)    On the Initial Funding Date, Borrower shall pay to Lender a loan commitment fee (the "Loan Commitment Fee") in the amount equal to one percent (1%) of the maximum amount of the Loan.  Borrower hereby authorizes Lender to disburse on the Initial Funding Date a portion of the Loan in such amount directly to Lender in payment of the Loan Commitment Fee.  The Loan Commitment Fee shall be deemed earned upon payment and shall not be subject to reduction or be refundable under any circumstances.
(b)    Unless extended pursuant to Section 1(g) hereof or accelerated pursuant to the terms of the Loan Documents, the unpaid principal amount, together with all accrued and unpaid interest thereon, and any and all accrued and unpaid sums under the Loan Documents shall be due and payable on February 1, 2017 (the “Maturity Date”).  Interest on the principal amount of this Note shall be calculated on the basis of a 360-day year and based on the actual number of days elapsed for any period in which interest is being calculated.  Solely for the purpose of making any payment hereunder, but not for the purpose of calculating the amount 

Exhibit 10.6

thereof or the application/allocation thereof to principal and interest, if the first (1st) day of a given month is not a Business Day (as defined herein), then the Payment Date for such month shall be the next succeeding Business Day.  All amounts due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever. Business Day, as used herein, shall mean a day other than (i) a Saturday or Sunday, or (ii) any other day on which commercial banks in Los Angeles, California are not permitted or required to be open for general banking business.
(c)    Payments in federal funds immediately available at the place designated for payment received by Lender prior to 2:00 p.m. local time of such place on a day on which Lender is open for business at said place of payment shall be credited prior to close of business while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds at the place designated for payment prior to 2:00 p.m. local time at said place of payment on a day on which Lender is open for business.  Each such monthly installment shall be applied first, to the payment of accrued interest, second, to any amounts hereafter advanced by Lender hereunder or under any other Loan Document, third, to any late fees, fourth, to other amounts payable to Lender, and, last, to reduction of principal.
(d)    The term "Note Rate" as used in the Loan Documents and this Note shall mean an interest rate equal to the sum of the following, rounded up to the nearest one-sixteenth percent (1/16%): (i) the greater of (A) one half of one percent (0.50%) per annum, or (B) LIBOR (as defined herein), plus (ii) eight and one half percent (8.5%) per annum.  The term "LIBOR" means the rate per annum which is equal to the London Interbank Offered Rate reported from time to time by Reuters Screen LIBOR01 Page, at which foreign branches of major United States banks offer United States dollar deposits to other banks for a one-month period in the London interbank market at approximately 11:00 a.m., London time, on the first calendar day of the applicable month, or if such day is not a Eurodollar Business Day (as defined herein), the first succeeding Eurodollar Business Day.  If such interest rate shall cease to be available from Reuters Screen LIBOR01 Page, LIBOR shall be determined from such financial reporting service as Lender shall reasonably determine and use with respect to Lender's other loan facilities on which interest is determined on LIBOR.  If two or more such rates appear on Reuters Screen LIBOR01 Page or other applicable pages, the rate in respect of such Interest Period will be the arithmetic mean of such offered rates, absent manifest error.  The term "Eurodollar Business Day" means any day other than a Saturday, Sunday or other day on which banks in New York, New York are authorized or required to close but excluding therefrom any day on which commercial banks are not open for dealings in U.S. dollar deposits in the London interbank market.  The term "Interest Period" means the period from and including the first day of each calendar month during the term of the Loan through and including the last day of the same calendar month.
(e)    For each Interest Period, Lender shall calculate the interest payable for such Interest Period at the Note Rate on the unpaid principal balance as of the first Eurodollar Business Day of the Interest Period, and no adjustments to such payment amount shall be made on account of principal payments made during the Interest Period after the first Eurodollar Business Day thereof; provided, however, that in all events, adjustments to such payment amount 

2

Exhibit 10.6

shall be made on account of disbursements from the Reserves made during the Interest Period after the first Eurodollar Business Day therefor.  Lender's determination of LIBOR as in effect from time to time, and Lender's calculations of interest payable for an Interest Period, shall be conclusive and binding absent manifest error.
(f)    Intentionally omitted.
(g)    Borrower shall have one option to extend the Maturity Date until twelve (12) months after the scheduled Maturity Date (the “Extension Term”), provided that Borrower’s right to exercise each such option shall be subject to and conditioned on Borrower’s satisfaction of all of the following terms and conditions:
(i)    Borrower shall deliver to Lender a notice (the “Extension Notice”), not earlier than ninety (90) days prior to the scheduled Maturity Date, nor later than thirty (30) days prior to the scheduled Maturity Date, of Borrower’s election to extend the scheduled Maturity Date as permitted in this Section 1(g), which election shall be irrevocable.
(ii)    No Default or Event of Default shall have occurred and shall remain uncured (as of the date of the Extension Notice or as of the date on which the Extension Term would commence).
(iii)    All of the representations and warranties of Borrower or any indemnitor or guarantor contained in the Loan Documents shall be true, accurate and complete in all material respects as of the date the Extension Notice is given and as of the date on which the Extension Term would commence (as if all such representations and warranties were remade as of the date the Extension Notice is given and as of the date on which the Extension Term would commence and Borrower’s delivery of the Extension Notice shall be deemed to be a remaking and reaffirmation of all of such representations and warranties as of such dates).
(iv)    Borrower shall deliver to Lender an endorsement or written continuation of the title insurance policy issued to Lender as of the date hereof insuring the priority of the lien of the Security Instrument.
(v)    Borrower shall deliver to Lender (and, at Lender’s request, cause to be recorded or filed, as applicable) any and all such other items as Lender may reasonably require to confirm or assure the liens and security interests of Lender in the Assets continue to be valid and enforceable first priority liens and security interests securing the indebtedness evidenced hereby, including without limitation,  UCC searches, supplemental environmental or engineering reports, consultant’s reports, modifications or extension agreements and other documentation, all at no cost to Lender.
(vi)    As of the effective date of the Extension Term, there shall be no existing law, rule, regulation or guideline applicable to Lender, this Loan transaction or the Assets prohibiting or precluding Lender’s modification or extension of 

3

Exhibit 10.6

the Loan or otherwise adversely affecting the validity and enforceability of the Loan Documents and the Loan shall be in good standing as determined by Lender, in its sole reasonable discretion.
(vii)    Borrower shall pay all of Lender’s actual out-of-pocket fees and expenses incurred in connection with the extension of the scheduled Maturity Date, including without limitation, reasonable attorneys’ fees and disbursements incurred by Lender and fees and expenses relating to the examination of title, title insurance premiums, surveys, and recording costs, documentary, transfer or other similar taxes and revenue stamps.
(viii)    Borrower shall pay to Lender concurrently with the delivery of the Extension Notice an extension fee in an amount equal to 1% of the then Outstanding Principal Balance.
(ix)    The Assets shall maintain (on a portfolio basis) a Loan-to-Value Ratio of not more than 40.0%.
(x)    Borrower shall pay all costs in connection with Lender obtaining an interest rate cap (fully covering the applicable Extension Term), to the benefit of Lender, with terms (including without limitation, a LIBOR "benchmark") acceptable to Lender in Lender's sole but reasonable discretion.
		
	2.
	PREPAYMENT

During the first partial calendar month of the term of this Loan (if any), and through and including November 1, 2015 (collectively, the “Early Prepayment Period”), Borrower may prepay the Loan in full or in part so long as (i) Borrower gives to Lender not less than thirty (30) days and not more than ninety (90) days prior  written notice to Lender specifying the date on which prepayment is to be made (the “Early Prepayment Date”), (ii) Borrower pays on the Early Prepayment Date:  (a) all accrued interest to and including the Early Prepayment Date; (b) the Yield Maintenance (as defined below); and (c) all other sums due under this Note and the other Loan Documents and (iii) if Borrower prepays only a portion of the Loan, the principal prepaid shall not be less than Five Hundred Thousand Dollars ($500,000). Thereafter, Borrower may prepay the Loan in full or in part upon not less than thirty (30) days and not more than ninety (90) days prior  written notice to Lender specifying the date on which prepayment is to be made (the “Prepayment Date”) and upon prepayment of:  (x) all accrued interest to and including the Prepayment Date; and (y) all other sums due under this Note and the other Loan Documents and (z) if Borrower prepays only a portion of the Loan, the principal prepaid shall not be less than Five Hundred Thousand Dollars ($500,000). Any notice of prepayment given by Borrower under this Section 2 may be revoked by written notice delivered to Lender at any time prior to the date that is one (1) week prior to the prepayment date specified in such notice (the “Revocation Deadline”). Any notice of prepayment given by Borrower under this Section 2 shall be irrevocable after the Revocation Deadline. No amount repaid in respect of the Loan may be reborrowed. 

4

Exhibit 10.6

For purposes of this Section 2, "Yield Maintenance" means the aggregate amount of interest that would have been due to Lender with respect to the amount of principal being prepaid or repaid for the period from and after the Early Prepayment Date through and including  November 1, 2015, less any interest payments actually made by Borrower to Lender during such period (if any).
If Borrower receives any payments of principal (or any amounts are available to Borrower to be applied to the principal balance) of any Asset Loans (i) or on before November 1, 2015, such payments shall be governed by Section 2.4(b) of the Loan Agreement, and (ii) after November 1, 2015, Borrower shall remit such amounts immediately to Lender to be applied to the Outstanding Principal Balance (the “Mandatory Prepayment”).  
		
	3.
	EXCULPATION

(a)    Notwithstanding anything in the Loan Documents to the contrary, but subject to the qualifications hereinbelow set forth, Lender agrees that:
(i)    Borrower shall be liable upon the indebtedness evidenced hereby and for the other obligations arising under the Loan Documents to the full extent (but only to the extent) of the security therefor, the same being the Assets.
(ii)    Judicial or other proceedings brought by Lender against Borrower upon an Event of Default shall be limited to the preservation, enforcement and foreclosure, or any thereof, of the liens, security titles, estates, assignments, rights and security interests now or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, and, except with respect to the liability described below in this Section 3, no attachment, execution or other writ of process shall be sought, issued or levied upon any assets, properties or funds of Borrower other than the Assets.
In the event of a foreclosure of such liens, security titles, estates, assignments, rights or security interests securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, no judgment for any deficiency upon the indebtedness evidenced hereby shall be sought or obtained by Lender against Borrower, except with respect to the liability described below in this Section 3; PROVIDED, HOWEVER, THAT, NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 3, BORROWER SHALL BE FULLY AND PERSONALLY LIABLE (AND SUBJECT TO LEGAL ACTION) FOR PAYMENT AND PERFORMANCE OF EACH OF THE FOLLOWING: 
(A)    for all obligations set forth in the Loan Documents, including without limitation the payment of all principal, interest, and other amounts due under this Note, upon any fraud or intentional misrepresentation or intentional failure to disclose a material fact by Borrower or any of Borrower’s principals, officers, general partners, managing members or managers, any guarantor, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements, representations or disclosures on behalf 

5

Exhibit 10.6

of Borrower, any principal, officer, general partner or member of Borrower, any guarantor or any indemnitor;
(B)    for any and all Losses (as defined herein) incurred or suffered by Lender and arising out of or in connection with any misapplication or misappropriation of any proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Assets which, under the terms of the Loan Documents, should have been delivered to Lender;
(C)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with any misapplication or misappropriation of any proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Assets, or any of them which, under the terms of the Loan Documents, should have been delivered to Lender;
(D)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with any misapplication or misappropriation of any tenant security deposits or other refundable deposits paid to or held by Borrower or any other person or entity in connection with Leases of all or any portion of any Property which are not applied in accordance with the terms of the applicable Lease or other agreement;
(E)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with any misapplication or misappropriation (including failure to turn over to Lender on demand following an Event of Default) of:  (i) any tenant security deposits and Rents and Profits collected in advance, (ii) any funds disbursed to Borrower from any Reserve, (iii) any funds held by Borrower for the benefit of another party, or (iv) any other funds due Lender under the Loan Documents.
(F)    for all obligations and indemnities of Borrower under the Loan Documents (including, without limitation, the Hazardous Substances Indemnity Agreement dated of even date herewith) relating to hazardous or toxic substances or compliance with environmental laws and regulations to the full extent of any losses or damages (including, but not limited to, those resulting from diminution in value of any Asset) incurred by Lender as a result of the existence of such hazardous or toxic substances or failure to comply with environmental laws or regulations;
(G)    for any and all Losses incurred or suffered by Lender as a result of the failure of Borrower to apply all Rents and Profits, issues, products and income of the Assets received or collected by or on behalf of Borrower after an Event of Default (or any event which, with notice and the passage of time, or both, would constitute an Event of Default) and not applied to payment of principal, interest and other amounts due under this Note and the other Loan Documents, and to the payment of Permitted Operating Expenses, as they become due or payable (except to the extent that such application of such funds is prevented by bankruptcy, receivership, or similar judicial proceeding in which Borrower is legally prevented from directing the disbursement of such sums);

6

Exhibit 10.6

(H)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with physical waste committed with respect to any Assets by, or damage to any Assets as a result of the intentional misconduct or gross negligence of Borrower or any of Borrower’s principals, officers, partners, managing members, or managers, any guarantor, any indemnitor, or any agent or employee of any such persons, or any removal of any of the Assets in violation of the terms of the Loan Documents;
(I)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with failure to pay any valid taxes, assessments, mechanic’s liens, materialmen’s liens or other liens which could create liens on any portion of the Assets which would be superior to the lien or security title of the Security Instrument or the other Loan Documents, to the full extent of the amount claimed by any such lien claimant except, with respect to any such taxes or assessments, to the extent that (i) the Rents and Profits, issues, products and income of the applicable Assets are insufficient to pay such amounts, and (ii) funds have been deposited with Lender pursuant to the terms of the Loan Agreement specifically for the applicable taxes or assessments and not applied by Lender to pay such taxes and assessments, and as to any other lienable event, to the extent adequate security therefor has been posted by Borrower;
(J)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with any violation of any provision of Section 9.10 of the Loan Agreement [Single Purpose Entity];
(K)    for all obligations set forth in the Loan Documents, including without limitation the payment of all principal, interest, and other amounts under the Note, in the event of any transfer of or further encumbrance placed on any Assets in violation of Section 9.9 of the Loan Agreement [Transfer];
(L)    for all obligations set forth in the Loan Documents, including without limitation the payment of all principal, interest, and other amounts under this Note, if Borrower shall voluntarily file a petition under Title 11 of the U.S. Code (the “Act”), as such Act may from time to time be amended, or under any similar or successor Federal statute relating to bankruptcy, insolvency, arrangements or reorganizations, or under any state bankruptcy or insolvency act, or file an answer in any involuntary proceeding admitting insolvency or inability to pay debts, or if Borrower shall fail to seek dismissal within ninety (90) days of the filing of any such involuntary proceeding, or fail to obtain a vacation of any such involuntary proceeding within one hundred twenty (120) days of the filing of such involuntary proceeding, or if any affiliate of Borrower initiates or joins in any such involuntary proceeding against Borrower, or if Borrower shall be adjudged a bankrupt, or if a trustee or receiver shall be appointed for Borrower or Borrower’s property, or if any Asset shall become subject to the jurisdiction of a Federal bankruptcy court or similar state court (it being understood, however, that the bankruptcy of an Asset Borrower shall not be recourse to Borrower if Borrower contests any such bankruptcy of an Asset Borrower and causes such bankruptcy to be dismissed or the Asset released from the automatic stay within one hundred twenty (120) days of the filing of the same, but if Borrower shall fail to obtain a dismissal or release of the same within such one 

7

Exhibit 10.6

hundred twenty (120) day period, then Borrower shall be liable to Lender for any and all Losses incurred or suffered by Lender and arising out of or in connection with such Asset Borrower’s bankruptcy), or if Borrower shall make an assignment for the benefit of Borrower’s creditors, or if there is an attachment, execution or other judicial seizure of any portion of Borrower’s assets and such seizure is not discharged within ten (10) days;
(M)    for all obligations set forth in the Loan Documents, including without limitation the payment of all principal, interest, and other amounts under this Note, upon any action by Borrower or any guarantor or indemnitor under any indemnity or guaranty executed in connection with the Loan which prevents Lender from lawfully taking possession of the Assets after an Event of Default unless Borrower is the prevailing party in an action contesting the existence of such Event of Default; 
(N)    for all obligations set forth in the Loan Documents, including without limitation the payment of all principal, interest, and other amounts under this Note if Borrower (i) moves, changes or relocates the Account (as defined in that certain Lockbox and Security Agreement of even date herewith (the “Lockbox Agreement”)  executed by Borrower in favor of Lender) to a financial institution other than the Depository (as defined in the Lockbox Agreement) without Lender’s prior written approval, and (ii) for any and all Losses incurred or suffered by Lender and arising out of or in connection with Borrower’s failure to deposit all funds received from the operation of the Assets or otherwise derived from the Borrower’s ownership of the Assets into the Account; 
(O)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with a violation of Section 9.8 of the Loan Agreement [Title to Loan Assets];
(P)    for all Mandatory Prepayments not paid to Lender;
(Q)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with a violation of Section 4.2 and Section 4.4  of the Loan Agreement [Special Covenant Relating to the Collateral];
(R)    for any and all Losses incurred or suffered by Lender and arising out of or in connection with Borrower failing to complete, or failing to cause to be completed, the Required Work in accordance with the terms of the Loan Agreement.
As used in this Section 3, “Losses” shall mean and include any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgment, awards, amounts paid in settlement, punitive damages, foreseeable and unforeseeable consequential damage, of whatever kind or nature (including but not limited to reasonable attorneys’ fees (which attorneys’ fees shall include but not be limited to appellate fees and reasonable fees for all paralegals, legal assistants and other paraprofessionals)) and other costs of defense).  Notwithstanding the foregoing, Borrower shall not be liable for any Losses that are attributable to the gross negligence or willful misconduct of Lender.

8

Exhibit 10.6

References herein to particular sections of the Loan Documents shall be deemed references to such sections as affected by other provisions of the Loan Documents relating thereto.  Nothing contained in this Section 3 shall (x) be deemed to be a release or impairment of the indebtedness evidenced by this Note or the other obligations of Borrower under the Loan Documents or the lien of the Loan Documents upon the Assets, or (y) preclude Lender from foreclosing the Loan Documents in case of any default or from enforcing any of the other rights of Lender except as stated in this Section 3, or (z) release, relieve, reduce, waive, limit or impair in any way whatsoever any obligation of any party to the Indemnity and Guaranty Agreement and Hazardous Substances Indemnity Agreement each of even date herewith executed and delivered in connection with the indebtedness evidenced by this Note.
(b)    Notwithstanding anything to the contrary in this Note, the Security Instrument or any of the other Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness evidenced hereby or secured by the Security Instrument or any of the other Loan Documents or to require that all collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this Note, the Security Instrument and the other Loan Documents.
		
	4.
	DEFAULT

(a)    It is hereby expressly agreed that should any default occur in the payment of principal or interest as stipulated above and such payment is not made within five (5) days after the date such payment is due (except that no grace or notice period is provided for the payment of principal and interest due on the Maturity Date), or should any other “Event of Default” or any default not cured within any applicable grace or notice period occur under any other Loan Document, then an event of default (an “Event of Default”) shall exist hereunder, and in such event the indebtedness evidenced hereby, including all sums advanced or accrued hereunder or under any other Loan Document, and all unpaid interest accrued thereon, shall, at the option of Lender and with notice to Borrower, at once become due and payable and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated date of maturity.
(b)    In the event that any payment is not received by Lender on the date when due (subject to the applicable grace period), then in addition to any default interest payments due hereunder and any other amounts due under the Loan Documents, Borrower shall also pay to Lender a late charge in an amount equal to five percent (5.0%) of the amount of such overdue payment.  So long as any Event of Default exists, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, and at all times after maturity of the indebtedness evidenced hereby (whether by acceleration or otherwise), interest shall accrue on the outstanding principal balance of this Note from (i) the date of the occurrence of any such Event of Default or, in the case of any monetary Event of Default, the due date of the payment giving rise to such Event 

9

Exhibit 10.6

of Default, through and including (ii) the date such Event of Default is cured or, in the case of any monetary Event of Default, the full amount of the payment due is credited or the outstanding principal amount evidenced hereby, together with all interest accrued and unpaid thereon and all other amounts payable under and with respect to the Loan Documents is paid and credited, at a rate per annum equal to the lesser of (a) five percent (5.0%) in excess of the Note Rate, or (b) the maximum rate of interest, if any, which may be charged or collected from Borrower under applicable law (the “Default Interest Rate”), and such default interest shall be immediately due and payable.  Borrower acknowledges that it would be extremely difficult or impracticable to determine Lender’s actual damages resulting from any late payment or default, and such late charges and default interest are reasonable estimates of those damages and do not constitute a penalty.
(c)    The remedies of Lender in this Note or in the Loan Documents, or at law or in equity, shall be cumulative and concurrent, and may be pursued singly, successively or together in Lender’s discretion.  In the event this Note, or any part hereof, is collected by or through an attorney-at-law, Borrower agrees to pay all costs of collection including, without limitation, reasonable attorneys’ fees (including but not limited to appellate fees and fees for all paralegals, legal assistants and other paraprofessionals) and disbursements.  In addition, in connection with any other action arising from or in connection with this Note, the Lender shall be entitled to an award of its costs and expenses, including without limitation reasonable attorneys’ fees (including but not limited to appellate fees and fees for all paralegals, legal assistants and other paraprofessionals) and disbursements, incurred or paid before and at trial or any other proceeding which may be instituted, at any tribunal level, and whether or not suit or any other proceeding is instituted.
(d)    The indebtedness evidenced by this Note and the obligations created hereby are secured by, among other things, the Security Instrument.  All of the terms and provisions of the Loan Documents are incorporated herein by reference.  Some of the Loan Documents are to be filed for record on or about the date hereof in the appropriate public records.
(e)    Time is of the essence with respect to this Note and the provisions herein contained.
		
	5.
	LIMIT OF VALIDITY

Lender and Borrower intend to comply at all times with applicable usury laws.  The provisions of this Note and of all agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid to Lender for the use, forbearance or detention of the money loaned under this Note (“Interest”) exceed the maximum amount permissible under applicable law.  If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Borrower and Lender shall, at the time performance or fulfillment of such provision shall be due, exceed the 

10

Exhibit 10.6

limit for Interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Lender shall ever receive anything of value deemed Interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive Interest shall be applied to the reduction of the principal balance owing under this Note in the inverse order of its maturity (whether or not then due) or, at the option of Lender, be paid over to Borrower, and not to the payment of Interest.  All Interest (including without limitation any amounts or payments deemed to be Interest) paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal balance of this Note so that the Interest thereof for such full period will not exceed the maximum amount permitted by applicable law.  Borrower agrees to an effective rate of interest that is the rate stated herein plus any additional rate of interest resulting from any other charges in the nature of interest paid or to be paid by or on behalf of Borrower, or any benefit received or to be received by Lender, in connection with this Note.  This Section 5 will control all agreements between Borrower and Lender.
		
	6.
	NO WAIVER: AMENDMENT

No failure to accelerate the indebtedness evidenced hereby by reason of default hereunder, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (a) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (b) to prevent the exercise of such right of acceleration or any other right granted hereunder or by any applicable laws; and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.  No extension of the time for the payment of this Note or any installment due hereunder made by agreement with any person or any guarantor now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part, unless Lender agrees otherwise in writing.  This Note may not be waived, changed, modified or discharged orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
		
	7.
	WAIVERS

Presentment for payment, demand, protest and notice of demand, intent to accelerate, acceleration, protest and nonpayment and all other notices are hereby waived by Borrower.  Borrower hereby, for itself and any other person or entity claiming by, through, under or on behalf of Borrower, further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, both as to 

11

Exhibit 10.6

itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note or the other Loan Documents.
		
	8.
	USE OF FUNDS

Borrower hereby warrants, represents and covenants that no funds disbursed hereunder shall be used for personal, family or household purposes, but only for commercial and business uses and purposes as represented, disclosed and certified to Lender by Borrower prior to the date hereof.
		
	9.
	ENFORCEABILITY

This Note shall be interpreted, construed and enforced according to the laws of the State of Arizona (without reference to the conflicts of law rules of the State of Arizona).  The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, which shall include, without limitation, a transferee pursuant to Section 12.13 of the Loan Agreement, whether by voluntary action of the parties or by operation of law (without implying Lender’s consent to any transfer or further encumbering of the Assets in violation of Section 9.9 of the Loan Agreement).  As used herein, the terms “Borrower” and “Lender” shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law.  If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note.  All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa.  Titles of articles, sections, clauses and paragraphs are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof.  This Note shall not be construed more strictly against one party than against the other merely by virtue of the fact that this Note may have been physically prepared by one of the parties, or such party’s counsel, it being agreed that all parties and their respective counsel have mutually participated in the negotiation and preparation of this Note.  This Note and the other Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof, and all prior agreements relative hereto and thereto which are not contained herein or therein are terminated.  Lender may sell, transfer and deliver the Loan Documents to one or more investors in the secondary mortgage market.  In connection with such sale, Lender may retain or assign responsibility for servicing the Loan or may delegate some or all of such responsibility and/or obligations to a servicer, including, but not limited to, any subservicer or master servicer, on behalf of the investors.  All references to Lender herein shall refer to and include, without limitation, any such servicer, to the extent applicable.
		
	10.
	UNCONDITIONAL PAYMENT

Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff.  In the event that at any time any payment received by 

12

Exhibit 10.6

Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand.
		
	11.
	TAXES

Borrower shall pay the cost of all revenue, tax or other stamps now or hereafter required by law at any time to be affixed to this Note, to the Security Instrument and/or to any other Loan Document; and if any tax is now or hereafter imposed with respect to notes of the nature of this Note or debts of the nature of the debt evidenced by this Note, Borrower agrees to pay to Lender upon demand the amount of such tax, and hereby waives any contrary provision of any law or rule of court now or hereafter in effect.
		
	12.
	SEVERABILITY

In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.  Furthermore, in the event that the application of any provision of this Note to any person or circumstance shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, then, and in any event, such invalidity, illegality or unenforceability shall not be deemed to affect the application of such provision to any person or entity or circumstance against whom or which such application is legal, valid and enforceable.
		
	13.
	WAIVER

TO THE EXTENT THE YIELD MAINTENANCE IS DEEMED IN WHOLE OR IN PART TO CONSTITUTE A CHARGE, FEE OR PENALTY FOR PREPAYMENT OF THE LOAN (ALTHOUGH NOT INTENDED AS SUCH), BORROWER HEREBY EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND (B) AGREES THAT, IF, FOR ANY REASON, A PREPAYMENT OF ANY OR ALL OF THIS NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWER UNDER THIS NOTE, THE SECURITY INSTRUMENT, OR ANY OTHER DOCUMENT SECURING THIS NOTE, INCLUDING, BUT NOT LIMITED TO, ANY TRANSFER, DISPOSITION OR FURTHER ENCUMBRANCE AS PROHIBITED OR RESTRICTED HEREIN AND BY THE SECURITY INSTRUMENT, THEN BORROWER SHALL BE OBLIGATED TO PAY, CONCURRENTLY THEREWITH, THE YIELD MAINTENANCE THAT WOULD THEN BE DUE.  BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER 

13

Exhibit 10.6

HEREBY DECLARES THAT LENDER’S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER, FOR THIS WAIVER AND AGREEMENT.
   _______   
		
	14.
	SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL

(a)    BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE LAND (AS DEFINED IN THE SECURITY INSTRUMENT) IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS NOTE OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN SOUTHERN CALIFORNIA, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT BORROWER WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM WITH RESPECT TO THIS NOTE (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).  BORROWER FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 12.4 OF THE LOAN AGREEMENT, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(b)    EACH OF BORROWER AND LENDER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY.  THE PARTIES HERETO HEREBY AGREE THAT THE PROVISIONS CONTAINED HEREIN HAVE BEEN FAIRLY NEGOTIATED ON AN ARMS-LENGTH BASIS, WITH 

14

Exhibit 10.6

BOTH SIDES AGREEING TO THE SAME KNOWINGLY AND BEING AFFORDED THE OPPORTUNITY TO HAVE THEIR RESPECTIVE LEGAL COUNSEL CONSENT TO THE MATTERS CONTAINED HEREIN.  ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY AND THE AGREEMENTS CONTAINED HEREIN REGARDING THE APPLICATION OF JUDICIAL REFERENCE IN THE EVENT OF THE INVALIDITY OF SUCH JURY TRIAL WAIVER.
		
	15.
	INCREASED COSTS

(a)    All payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions, reserves or withholdings imposed, levied, collected, withheld or assessed by any governmental authority, which are imposed, enacted or become effective after the date hereof (such non-excluded taxes being referred to collectively as “Foreign Taxes”), excluding income and franchise taxes of the United States of America imposed by the jurisdiction under the laws of which Lender is organized or any political subdivision or taxing authority thereof or therein or imposed by the jurisdiction of Lender’s applicable lending office where Lender is resident or engaged in business or any political subdivision or taking authority thereof or therein.  If any Foreign Taxes are required to be withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all Foreign Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder.  Whenever any Foreign Tax is payable pursuant to applicable law by Borrower, as promptly as possible thereafter, Borrower shall send to Lender an original official receipt, if available, or certified copy thereof showing payment of such Foreign Tax.  Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such Foreign Tax when due to the appropriate taxing authority or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence.
(b)    In the event that any change in any requirement of law or in the interpretation or application thereof, or compliance by Lender with any request or directive (whether or not having the force of law) hereafter issued from any central bank or other governmental authority:
(A)    shall hereafter impose, modify or hold applicable any reserve, capital adequacy, tax, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of LIBOR hereunder;
(B)    shall hereafter have the effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance 

15

Exhibit 10.6

(taking into consideration Lender’s policies with respect to capital adequacy) by any amount deemed by Lender to be material; or
(C)    shall hereafter impose on Lender any other condition and the result of any of the foregoing is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender within ten (10) days of written demand, any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable as determined by Lender in its reasonable discretion.  If Lender becomes entitled to claim any additional amounts pursuant to this subsection, Lender shall provide Borrower with not less than thirty (30) days’ notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount.  A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive in the absence of manifest error.  This provision shall survive payment of this Note and the satisfaction of all other obligations of Borrower under the Loan Agreement and the Loan Documents.
Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or expense which Lender sustains or incurs as a consequence of (A) any default by Borrower in payment of the principal of or interest on a LIBOR loan, including, without limitation, any such actual out-of-pocket loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR loan hereunder), and (B) any prepayment (whether voluntary or mandatory) of the LIBOR loan on a day that is not the last day of an Interest Period, including, without limitation, such actual out-of-pocket loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the LIBOR loan hereunder; provided, however, Borrower shall not indemnify Lender from any loss or expense arising from Lender’s willful misconduct or gross negligence.  This provision shall survive payment of this Note in full and the satisfaction of all other obligations of Borrower under the Loan Agreement and the other Loan Documents.

[END OF TEXT; SIGNATURE FOLLOWS ON NEXT PAGE]

16

Exhibit 10.6

IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the date first above written.
“BORROWER”
 

[SIGNATURE PAGE TO PROMISSORY NOTE]

    

SCHEDULE 1(a)(ii) 
2
49530886.4Exhibit 10.7 Indemnity and Guaranty Agreement - Sedona Loan

Exhibit 10.7

INDEMNITY AND GUARANTY AGREEMENT 
(IMHFC Sedona)
THIS INDEMNITY AND GUARANTY AGREEMENT (this “Agreement”), made as of January 23, 2015, by IMH Financial Corporation, a Delaware corporation (“Indemnitor”), whose address is c/o IMH Financial Corporation, 7001 N. Scottsdale Road, Scottsdale, Arizona 85253, in favor of CALMWATER CAPITAL 3, LLC,  a California limited liability company (“Lender”), whose address is 11755 Wilshire Blvd., Suite 1400, Los Angeles, California 90025.
W I T N E S S E T H :
WHEREAS, Lender has extended to L’AUBERGE NEWCO, LLC, a Delaware limited liability company (“L’Auberge”) and ORCHARDS NEWCO, LLC, a Delaware limited liability company (“Orchards” and together with L’Auberge, individually, collectively, jointly and severally "Borrower") a loan in the principal amount of $50,000,000.00 (the “Loan”) pursuant to that certain Loan Agreement (the “Loan Agreement”) between Borrower and Lender, dated as the date hereof; and
WHEREAS, the Loan is evidenced by a Promissory Note dated of even date herewith (the “Note”), executed by Borrower and payable to the order of Lender in the stated principal amount of $50,000,000.00 and is secured by a Deed of Trust, Security Agreement and Financing Statement dated of even date herewith (the “Security Instrument”), from Borrower, as trustor, for the benefit of Lender, as beneficiary, encumbering that certain real property situated at 301 L’Auberge Lane, on which the L’Auberge de Sedona hotel is located, and 254 North Highway 89A, on which the Orchards Inn hotel is located, as is more particularly described on Exhibits A‐1,  A-2 and A-3 attached hereto and incorporated herein by this reference, together with the buildings, structures and other improvements now or hereafter located thereon (said real property, buildings, structures and other improvements being hereinafter individually and collectively referred to (as the context may require) as the “Property”) and by other documents and instruments (the Loan Agreement, the Note, the Security Instrument, and such other documents and instruments, as the same may from time to time be amended, consolidated, renewed or replaced, being collectively referred to herein as the “Loan Documents”); and
WHEREAS, as a condition to making the Loan to Borrower, Lender has required that Indemnitor indemnify Lender from and against and guarantee payment to Lender of the items described herein; and
WHEREAS, the extension of the Loan to Borrower is of substantial benefit to Indemnitor and, therefore, Indemnitor desires to indemnify Lender from and against and guarantee payment to Lender of the items described herein;
NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:

1

Exhibit 10.7

1.Indemnity and Guaranty.  Indemnitor hereby assumes liability for, hereby guarantees payment to Lender of, hereby agrees to pay, protect, defend and save Lender harmless from and against, and hereby indemnifies Lender from and against any and all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, attorneys’ fees (which attorneys’ fees shall include but not be limited to appellate fees and fees for all paralegals, legal assistants and other paraprofessionals)), causes of action, suits, claims, demands and judgments of any nature or description whatsoever (collectively, “Costs”) which may at any time be imposed upon, incurred by or awarded against Lender as a result of any of the Guaranteed Recourse Obligations of Borrower (hereinafter defined).  As used herein, the term “Guaranteed Recourse Obligations of Borrower” shall mean all obligations and liabilities of Borrower for which Borrower shall be personally liable pursuant to Section 3 of the Note, together with all costs and expenses, including reasonable fees and out of pocket expenses of attorneys (including but not limited to appellate fees and fees for all paralegals, legal assistants and other paraprofessionals) and expert witnesses, incurred by Lender in enforcing its rights under this Agreement.
This is a guaranty of payment and performance and not of collection.  The liability of Indemnitor under this Agreement shall be direct and immediate and not conditional or contingent upon the genuineness, validity or enforceability of the Note, the Security Instrument, or any other Loan Document, or the pursuit of any remedies against Borrower or any other person (including, without limitation, other guarantors, if any), nor against the collateral for the Loan.  Indemnitor waives any right to require that an action be brought against Borrower or any other person or to require that resort be had to any collateral for the Loan or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person.  In the event, on account of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, Borrower shall be relieved of or fail to incur any debt, obligation or liability as provided in the Loan Documents, Indemnitor shall nevertheless be fully liable therefor.  In the event of a default under the Loan Documents which is not cured within any applicable grace or cure period, Lender shall have the right to enforce its rights, powers and remedies (including, without limitation, foreclosure of all or any portion of the collateral for the Loan) thereunder or hereunder, in any order, and all rights, powers and remedies available to Lender in such event shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity.  If the indebtedness and obligations guaranteed hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Agreement shall nevertheless remain in full force and effect, and Indemnitor shall remain liable for all remaining indebtedness and obligations guaranteed hereby, even though any rights which Indemnitor may have against Borrower may be destroyed or diminished by the exercise of any such remedy.
2.    Indemnification Procedures.
(a)    If any action shall be brought against Lender based upon any of the matters for which Lender is indemnified hereunder, Lender shall notify Indemnitor in writing thereof and Indemnitor shall promptly assume the defense thereof, including, without limitation, 

2

Exhibit 10.7

the employment of counsel reasonably acceptable to Lender and the negotiation of any settlement; provided, however, that any failure of Lender to notify Indemnitor of such matter shall not impair or reduce the obligations of Indemnitor hereunder unless the same would prejudice Indemnitor’s defense.  Lender shall have the right, at the expense of Indemnitor (which shall include reasonable attorneys’ fees and expenses and shall be included in Costs), to employ separate counsel in any such action and to participate in the defense thereof.  In the event Indemnitor shall fail to discharge or undertake to defend Lender against any claim, loss or liability for which Lender is indemnified hereunder, Lender may, at its sole option and election, defend or settle such claim, loss or liability.  The liability of Indemnitor to Lender hereunder shall be conclusively established by such settlement, provided such settlement is made in good faith, the amount of such liability to include both the settlement consideration and the costs and expenses, including, without limitation, reasonable attorneys’ fees (including but not limited to appellate fees and fees for all paralegals, legal assistants and other paraprofessionals) and disbursements, incurred by Lender in effecting such settlement.  In such event, such settlement consideration, costs and expenses shall be included in Costs and Indemnitor shall pay the same as hereinafter provided.  Lender’s good faith in any such settlement shall be conclusively established if the settlement is made on the advice of outside independent legal counsel for Lender.
(b)    No Indemnitor shall, without the prior written consent of Lender: (i) settle or compromise any action, suit, proceeding or claim relating to an indemnified obligation or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to Lender of a full and complete written release of Lender (in form, scope and substance satisfactory to Lender in its sole discretion) from all liability in respect of such action, suit, proceeding or claim and a dismissal with prejudice of such action, suit, proceeding or claim; or (ii) settle or compromise any action, suit, proceeding or claim relating to an indemnified obligation in any manner that may adversely affect Lender or obligate Lender to pay any sum or perform any obligation as determined by Lender in its sole discretion.
(c)    All Costs shall be immediately reimbursable to Lender when and as incurred and, in the event of any litigation, claim or other proceeding, without any requirement of waiting for the ultimate outcome of such litigation, claim or other proceeding, and Indemnitor shall pay to Lender any and all Costs within ten (10) days after written notice from Lender itemizing the amounts thereof incurred to the date of such notice.  In addition to any other remedy available for the failure of Indemnitor to periodically pay such Costs, such Costs, if not paid within said ten (10) day period, shall bear interest at the Default Interest Rate (as defined in the Note).

3

Exhibit 10.7

3.    Reinstatement of Obligations.  If at any time all or any part of any payment made by Indemnitor or received by Lender from Indemnitor under or with respect to this Agreement is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then the obligations of Indemnitor hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence, notwithstanding such previous payment made by Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Indemnitor had never been made.
4.    Waivers by Indemnitor.  To the extent permitted by law, Indemnitor hereby waives and agrees not to assert or take advantage of:
(a)    Any right to require Lender to proceed against any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power or under any other agreement before proceeding against Indemnitor hereunder;
(b)    The defense of the statute of limitations in any action hereunder;
(c)    Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons;
(d)    Demand, presentment for payment, notice of nonpayment, intent to accelerate, acceleration, protest, notice of protest and all other notices of any kind, or the lack of any thereof, including, without limiting the generality of the foregoing, notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lender;
(e)    (i) any defense based upon an election of remedies by Lender, even though such election (e.g., nonjudicial foreclosure with respect to any collateral held by Lender to secure repayment of the indebtedness evidenced by the Note) destroys or otherwise impairs the subrogation rights of Indemnitor or the right of Indemnitor (after payment of the obligations guaranteed by Indemnitor under this Agreement) to proceed against Borrower for reimbursement, or both, and (ii) any and all rights or defenses Indemnitor may have by reason of protection afforded to Borrower with respect to any of the obligations of Indemnitor under this Agreement pursuant to the antideficiency or other laws of the State of Arizona limiting or discharging Borrower’s indebtedness; evidenced by the Note and secured, in part, by the Security Instrument;
(f)    Any right or claim of right to cause a marshaling of the assets of Indemnitor;

4

Exhibit 10.7

(g)    Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement;
(h)    Any duty on the part of Lender to disclose to Indemnitor any facts Lender may now or hereafter know about Borrower or the Property, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitor or has a reasonable opportunity to communicate such facts to Indemnitor, it being understood and agreed that Indemnitor is fully responsible for being and keeping informed of the financial condition of Borrower, of the condition of the Property and of any and all circumstances bearing on the risk that liability may be incurred by Indemnitor hereunder;
(i)    Any lack of notice of disposition or of manner of disposition of any collateral for the Loan;
(j)    Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents;
(k)    Any deficiencies in the collateral for the Loan or any deficiency in the ability of Lender to collect or to obtain performance from any persons or entities now or hereafter liable for the payment and performance of any obligation hereby guaranteed;
(l)    Any assertion or claim that the automatic stay provided by 11 U.S.C. §362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now or hereafter required, which Lender may have against Indemnitor or the collateral for the Loan;
(m)    Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise;
(n)    Any action, occurrence, event or matter consented to by Indemnitor under Section 5(h) hereof, under any other provision hereof, or otherwise;
(o)    Any and all benefits and defenses under any applicable law which would limit Indemnitor’s liability if Borrower had no liability at the time of execution of the Note, the Security Instrument or any other Loan Document, or thereafter ceases to be liable;
(p)    Any and all benefits and defenses under any applicable law which, if Indemnitor had not given this waiver would otherwise prohibit Indemnitor’s liability from being larger in amount and more burdensome than that of Borrower;

5

Exhibit 10.7

(q)    Principles or provisions of law, statutory or otherwise, which might otherwise constitute a legal or equitable discharge of a surety or a guarantor; and
(r)    Any right of discharge under any and all statutes or other laws relating to guarantors or sureties and any other rights of sureties and guarantors thereunder.
Indemnitor understands that the exercise by Lender of certain rights and remedies contained in the Security Instrument (such as a nonjudicial foreclosure sale) may affect or eliminate Indemnitor’s right of subrogation against Borrower and that Indemnitor may therefore incur a partially or totally nonreimbursable liability under this Agreement.  Nevertheless, Indemnitor hereby authorizes and empowers Lender to exercise, in its sole and absolute discretion, any right or remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Indemnitor that the obligations under this Agreement shall be absolute, independent and unconditional under any and all circumstances.  Indemnitor expressly waives, to the maximum extent permitted by law, any defense (which defense, if Indemnitor had not given this waiver, Indemnitor might otherwise have) to a judgment against Indemnitor by reason of a nonjudicial foreclosure.  Without limiting the generality of the foregoing, Indemnitor hereby expressly waives any and all benefits under (i) any applicable law which would otherwise limit Indemnitor’s liability after a nonjudicial foreclosure sale to the difference between the obligations of Indemnitor under this Agreement and the fair market value of the property or interests sold at such nonjudicial foreclosure sale, (ii) any applicable law which, if Indemnitor had not given this waiver, would otherwise limit Lender’s right to recover a deficiency judgment with respect to purchase money obligations and after a nonjudicial foreclosure sale, respectively, and (iii) any applicable law which, if Indemnitor had not given this waiver, among other things, would otherwise require Lender to exhaust all of its security before a personal judgment could be obtained for a deficiency.  Notwithstanding any foreclosure of the lien of the Security Instrument, whether by the exercise of the power of sale contained in the Security Instrument, by an action for judicial foreclosure or by Lender’s acceptance of a deed in lieu of foreclosure, Indemnitor shall remain bound under this Agreement.  Indemnitor waives all rights and defenses that Indemnitor may have because Borrower’s obligations are secured by real property.  This means, among other things:
(s)    To the full extent permitted under applicable laws, any benefits of any statutory provision or rule of civil procedure limiting the liability of a surety, including, without limitation, ARS § 12-1641 et seq. or the benefits of ARS § 33-814.
(t)    Lender may collect from Indemnitor without first foreclosing on any real or personal property collateral pledged by Borrower or others; and
(u)    If Lender forecloses on any real property collateral pledged by Borrower or others: (a) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (b) Lender may collect from Indemnitor even if Lender, by foreclosing on the real property collateral, has destroyed any right Indemnitor may have to collect from Borrower.

6

Exhibit 10.7

This is an unconditional and irrevocable waiver of any rights and defenses that Indemnitor may have because Borrower’s obligations are secured by real property.
5.    General Provisions.
(a)    Fully Recourse.  All of the terms and provisions of this Agreement are recourse obligations of Indemnitor and not restricted by any limitation on personal liability set forth in any Loan Document.
(b)    Unsecured Obligations.  Indemnitor hereby acknowledges that Lender’s appraisal of the Property is such that Lender is not willing to accept the consequences of the inclusion of Indemnitor’s indemnity set forth herein among the obligations secured by the Security Instrument and the other Loan Documents and that Lender would not make the Loan but for the unsecured personal liability undertaken by Indemnitor herein.
(c)    Survival.  This Agreement shall be deemed to be continuing in nature and shall remain in full force and effect and shall survive the exercise of any remedy by Lender under the Security Instrument or any of the other Loan Documents, including, without limitation, any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the Loan is paid or satisfied in full.
(d)    No Subrogation; No Recourse Against Lender.  Notwithstanding the satisfaction by Indemnitor of any liability hereunder, until such time as the Loan has been fully and indefeasibly repaid, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of Lender’s right, title and interest in all collateral or security for the Loan, and there has expired the maximum possible period thereafter during which any payment made by Borrower or others to Lender with respect to the indebtedness evidenced by the Note could be deemed a preference under the United States Bankruptcy Code, Indemnitor shall not have any right of subrogation, contribution, reimbursement or indemnity whatsoever or any right of recourse to or with respect to the assets or property of Borrower or to any collateral for the Loan.  In connection with the foregoing, Indemnitor expressly waives, until such time as the Loan has been fully and indefeasibly repaid, all obligations owed to Lender under the Loan Documents have been fully performed, and Lender has released, transferred or disposed of all of Lender’ s right, title and interest in such collateral or security, and there has expired the maximum possible period thereafter during which any payment made by Borrower or others to Lender with respect to the indebtedness evidenced by the Note could be deemed a preference under the United States Bankruptcy Code, any and all rights of subrogation to Lender against Borrower, and Indemnitor hereby waives any rights to enforce any remedy which Lender may have against Borrower, and any right to participate in any collateral for the Loan.  In addition to and without in any way limiting the foregoing, Indemnitor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness of Borrower to Lender, and agree with Lender that Indemnitor shall not demand or accept any payment of principal or interest from Borrower, shall not claim any offset or other reduction of Indemnitor’s obligations hereunder because of any such indebtedness and shall not take any action to obtain any of the collateral from the Loan; provided, however, that so long as there does not exist a default or Event of Default, or condition of event which, with the 

7

Exhibit 10.7

passage of time or giving of notice, or both, would constitute a default or Event of Default, a distribution of profits on a return of capital made by Borrower which may ultimately be received by Indemnitor shall not be deemed to be indebtedness of, or payment of principal and interest from, Borrower.  Further, Indemnitor shall not have any right of recourse against Lender by reason of any action Lender may take or omit to take under the provisions of this Agreement or under the provisions of any of the Loan Documents.
(e)    Reservation of Rights.  Nothing contained in this Agreement shall prevent or in any way diminish or interfere with any rights or remedies, including, without limitation, the right to contribution, which Lender may have against Borrower, Indemnitor or any other party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. §9601 et seq.), as it may be amended from time to time, or any other applicable federal, state or local laws, all such rights being hereby expressly reserved.
(f)    Financial Statements; Net Worth. Indemnitor hereby agrees, as a material inducement to Lender to make the Loan to Borrower, to furnish, from time to time to Lender promptly upon demand by Lender current and dated financial statements detailing the assets and liabilities of Indemnitor certified by Indemnitor, in form and substance reasonably acceptable to Lender.  Indemnitor hereby warrants and represents unto Lender that any and all balance sheets, net worth statements and other financial data which have heretofore been given or may hereafter be given to Lender with respect to Indemnitor did or will at the time of such delivery fairly and accurately present the financial condition of Indemnitor.  Indemnitor hereby agrees, for the benefit of Lender:  (i) No Indemnitor shall, without the prior written approval of Lender which may be given or withheld in Lender’s sole and absolute discretion, enter into, effect or permit by operation of law or otherwise, any merger, reorganization, consolidation, dissolution or liquidation affecting Indemnitor, or any change in ownership of Indemnitor, or any sale of any assets of Indemnitor (a "Transfer Event"), which would result in Indemnitor failing to have, immediately after the effective date of such Transfer Event, a minimum aggregate net worth of at least Fifty Million Dollars ($50,000,000) (the "Minimum Net Worth") with not less than $4,000,000 of such Minimum Net Worth consisting of cash and cash equivalents at all times during the 2015 calendar year and $5,000,000 of such Minimum Net Worth consisting of cash and cash equivalents at all times during the 2016 calendar year (“Minimum Liquidity”); (ii)  Indemnitor shall maintain, from and after the date of execution of this Agreement and thereafter throughout the term of the Loan, a net worth equal to the Minimum Net Worth and the Minimum Liquidity in the foregoing amounts, as evidenced by financial statements certified by Indemnitor;  Indemnitor agrees that such financial statements shall be prepared for Indemnitor as required by Indemnitor’s public reporting obligations and delivered to Lender within ninety (90) days  following the end of each calendar year, together with a certificate from Indemnitor that no material adverse change in the financial statements and net worth of Indemnitor has occurred since the date of such statement; and (iii) Indemnitor shall notify Lender within ten (10) days after Indemnitor becomes aware that Indemnitor has failed to maintain the Minimum Net Worth and/or Minimum Liquidity as set forth above.  For the purposes hereof, “net worth” shall be determined based upon the (1) fair market value of all of the assets of Indemnitor (excluding intangible assets (determined in conformity with generally accepted accounting principles as of the date of the applicable financial report (“GAAP”)) and excluded intangible assets shall 

8

Exhibit 10.7

include goodwill, intellectual property, licenses, organizational costs, deferred amounts, covenants not to compete, unearned income, restricted funds, investments in subsidiaries or other Affiliates (as defined in the Loan Agreement), intercompany receivables and accumulated depreciation, less (2) all liabilities of Indemnitor (as determined in accordance with GAAP). Any breach of this Section 5(f) shall be deemed an Event of Default under the Loan Documents. 
(g)    Rights Cumulative; Payments.  Lender’s rights under this Agreement shall be in addition to all rights of Lender under the Note, the Security Instrument and the other Loan Documents.  Further, payments made by Indemnitor under this Agreement shall not reduce in any respect Borrower’s obligations and liabilities under the Note, the Security Instrument and the other Loan Documents.
(h)    No Limitation on Liability.  Indemnitor hereby consents and agrees that the liability of Indemnitor under this Agreement shall be unconditional and absolute and shall in no way be impaired or limited by any of the following events, whether occurring with or without notice to Indemnitor or with or without consideration:  (i) any extensions of time for performance required by any of the Loan Documents or extension or renewal of the Note; (ii) any sale, assignment or foreclosure of the Note, the Security Instrument or any of the other Loan Documents or any sale or transfer of the Property; (iii) any change in the composition of Borrower, including, without limitation, the withdrawal or removal of Indemnitor from any current or future position of ownership, management or control of Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release of Borrower or of any other person or entity from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, Lender’s voluntary act or otherwise; (vi) the release or substitution in whole or in part of any security for the Loan; (vii) Lender’s failure to record the Security Instrument or to file any financing statement (or Lender’s improper recording or filing thereof) or to otherwise perfect, protect, secure or insure any lien or security interest given as security for the Loan; (viii) the modification of the terms of any one or more of the Loan Documents; or (ix) the taking or failure to take any action of any type whatsoever.  No such action which Lender shall take or fail to take in connection with the Loan Documents or any collateral for the Loan, nor any course of dealing with Borrower or any other person, shall limit, impair or release Indemnitor’s obligations hereunder, affect this Agreement in any way or afford Indemnitor any recourse against Lender.  Nothing contained in this Section shall be construed to require Lender to take or refrain from taking any action referred to herein.
(i)    Entire Agreement; Amendment; Severability. This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior agreements, whether written or oral, between the parties respecting such matters.  Any amendments or modifications hereto, in order to be effective, shall be in writing and executed by the parties hereto.  A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

9

Exhibit 10.7

(j)    Binding Effect; Waiver of Acceptance.  This Agreement shall bind Indemnitor and the heirs, personal representatives, successors and assigns of Indemnitor and shall inure to the benefit of Lender and the officers, directors, shareholders, agents and employees of Lender and their respective heirs, successors and assigns.  Notwithstanding the foregoing, Indemnitor shall not assign any of their rights or obligations under this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in Lender’s sole discretion.  Indemnitor hereby waives any acceptance of this Agreement by Lender, and this Agreement shall immediately be binding upon Indemnitor.
(k)    Notices.  All notices or other communications required or permitted to be given pursuant to the provisions of this Agreement shall be in writing and shall be considered as properly given if delivered to the appropriate party at the address set forth below (subject to change from time to time by written notice to all other parties to this Agreement).  Except when otherwise required by law, any notice which a party is required or may desire to give the other shall be in writing and may be sent by e-mail (provided that a copy is simultaneously sent by one of the other permitted means of giving notice hereinafter set forth), by personal delivery or by mail (either (i) by United States registered or certified mail, return receipt requested, postage prepaid, or (ii) by Federal Express or similar generally recognized overnight carrier regularly providing proof of delivery).  Any notice so given by e-mail shall be deemed to have been given as of the date on which the sender of such communication shall confirm receipt thereof by the appropriate parties.  Any notice so given by mail shall be deemed to have been given as of the date of delivery established by U.S. Post Office return receipt or the overnight carrier’s proof of delivery, as the case may be.  Any such notice not so given shall be deemed given upon receipt of the same by the party to whom the notice is to be given; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the addresses of the parties shall be:

10

Exhibit 10.7

	
		
	Indemnitor:
	IMH Financial Corporation

	 
	7001 N. Scottsdale Road

	 
	Scottsdale, Arizona 85253

	 
	Attention:  Lawrence D. Bain

	 
	Email:  ldb@imhfc.com

	 
	 

	With a copies to:
	Polsinelli PC

	 
	One East Washington Street, Suite 1200

	 
	Phoenix, Arizona 85004

	 
	Attention:  Margaret Esler

	 
	Email:  mesler@polsinelli.com

	 
	 

	and
	c/o IMH Financial Corporation 

	 
	7001 N. Scottsdale Road

	 
	Scottsdale, Arizona 85253

	 
	Attention: Jonathan Brohard

	 
	Email: jbrohard@imhfc.com

	 
	 

	Lender:
	Calmwater Capital 3, LLC 

	 
	11755 Wilshire Blvd., Suite 1400

	 
	Los Angeles, California 90025

	 
	Attention:  Larry Grantham

	 
	Email:  larry@karlinre.com

	 
	 

	With a copy to:
	Safarian, Choi & Bolstad LLP

	 
	555 South Flower St., Suite 650

	 
	Los Angeles, California 90071

	 
	Attention:  Alex Choi

	 
	Email:  achoi@safarianchoi.com

Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of fifteen (15) days’ notice to the other party in the manner set forth hereinabove.  
(l)    No Waiver; Time of Essence; Business Day.  The failure of any party hereto to enforce any right or remedy hereunder, or to promptly enforce any such right or remedy, shall not constitute a waiver thereof nor give rise to any estoppel against such party nor excuse any of the parties hereto from their respective obligations hereunder.  Any waiver of such right or remedy must be in writing and signed by the party to be bound.  This Agreement is subject to enforcement at law or in equity, including actions for damages or specific performance.  Time is of the essence hereof.  The term “business day” as used herein shall mean 

11

Exhibit 10.7

a weekday, Monday through Friday, except a legal holiday or a day on which banking institutions in Los Angeles, California are authorized by law to be closed.
(m)    Captions for Convenience.  The captions and headings of the sections and paragraphs of this Agreement are for convenience of reference only and shall not be construed in interpreting the provisions hereof.
(n)    Attorneys’ Fees.  If any dispute (whether or not any action or proceeding for any relief against the other is brought) arises between the parties relating to this Agreement, the losing party shall pay to the prevailing party a reasonable sum for attorneys’ fees (including but not limited to appellate fees and fees for all paralegals, legal assistants and other paraprofessionals) and costs incurred in bringing or defending such action or proceeding and appealing and enforcing any judgment granted therein, all of which shall be deemed to have accrued upon the commencement of such action or proceeding and shall be paid whether or not such action or proceeding is prosecuted to final judgment and, to the extent the Lender is the prevailing party, such costs, fees and expenses shall be included in Costs.
(o)    Successive Actions.  A separate right of action hereunder shall arise each time Lender acquires knowledge of any matter indemnified or guaranteed by Indemnitor under this Agreement.  Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time.  No action hereunder shall preclude any subsequent action, and Indemnitor hereby waives and covenants not to assert any defense in the nature of splitting of causes of action or merger of judgments.
(p)    Reliance.  Lender would not make the Loan to Borrower without this Agreement.  Accordingly, Indemnitor intentionally and unconditionally enters into the covenants and agreements as set forth above and understand that, in reliance upon and in consideration of such covenants and agreements, the Loan shall be made and, as part and parcel thereof, specific monetary and other obligations have been, are being and shall be entered into which would not be made or entered into but for such reliance.
(q)    SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(i)    INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, EACH HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PROPERTY IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER OF THE LOAN DOCUMENTS, (ii)  HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA EXCEPT AS SPECIFICALLY SET FORTH HEREIN, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv) AGREES THAT INDEMNITOR WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM WITH RESPECT TO THIS AGREEMENT 

12

Exhibit 10.7

(BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).  INDEMNITOR FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE AUTHORIZED AGENT FOR INDEMNITOR AT THE ADDRESS FOR NOTICES DESCRIBED ABOVE, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE UPON INDEMNITOR (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(r)    INDEMNITOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT  OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY.  THE PARTIES HERETO HEREBY AGREE THAT THE PROVISIONS CONTAINED HEREIN HAVE BEEN FAIRLY NEGOTIATED ON AN ARMS-LENGTH BASIS, WITH BOTH SIDES AGREEING TO THE SAME KNOWINGLY AND BEING AFFORDED THE OPPORTUNITY TO HAVE THEIR RESPECTIVE LEGAL COUNSEL CONSENT TO THE MATTERS CONTAINED HEREIN.  ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY AND THE AGREEMENTS CONTAINED HEREIN REGARDING THE APPLICATION OF JUDICIAL REFERENCE IN THE EVENT OF THE INVALIDITY OF SUCH JURY TRIAL WAIVER.
(s)    Waiver by Indemnitor.  Indemnitor covenants and agrees that, upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Indemnitor shall not seek or cause Borrower or any other person or entity to seek a supplemental stay or other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. § 105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law, (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Indemnitor or the collateral for the Loan by virtue of this Agreement or otherwise.

13

Exhibit 10.7

(t)    No Petition.  Indemnitor hereby covenants and agrees that they will not at any time institute against Borrower, or join in any institution against Borrower of, any bankruptcy proceedings under any United States Federal or state bankruptcy or similar law.
(u)    Secondary Market.  Lender may sell, transfer and deliver the Loan Documents to one or more investors in the secondary market.  In connection with such sale, Lender may retain or assign responsibility for servicing the Loan or may delegate some or all of such responsibility and/or obligations to a servicer, including, but not limited to, any subservicer or master servicer, on behalf of the investors.  All references to Lender herein shall refer to and include, without limitation, any such servicer, to the extent applicable.
(v)    Construction.  This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that this Agreement may have been physically prepared by one of the parties, or such party’s counsel, it being agreed that all parties and their respective counsel have mutually participated in the negotiation and preparation of this Agreement.
(w)    Joint and Several Liability.  The liability of all persons and entities obligated in any manner under this Agreement shall be joint and several.
[END OF TEXT; SIGNATURE FOLLOWS ON NEXT PAGE]

14

Exhibit 10.7

IN WITNESS WHEREOF, Indemnitor has executed this Agreement as of the day and year first above written.
“INDEMNITOR”
	
		
	 
	IMH FINANCIAL CORPORATION,

	 
	a Delaware corporation

	 
	 

	 
	 

	By:
	/s/ Lawrence D. Bain

	Name:
	Lawrence D. Bain

	Title:
	Chairman & CEO

	 
	 

	 
	 

Exhibit 10.7

EXHIBIT A-1 
 
DESCRIPTION OF L’AUBERGE PROPERTY
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF ARIZONA, COUNTY OF COCONINO, AND DESCRIBED AS FOLLOWS:
PARCEL 1

A parcel of land situated in the West Half of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Base and Meridian, Coconino County, Arizona, being more particularly described as follows: 

COMMENCING at the West Quarter corner of said Section 8 as marked by a G.L.O. brass capped pipe under drain cover in sidewalk and from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe in cairn, lies South 01°42'03" East (basis of bearings for this description) a distance of 2,621.04 feet; 

THENCE from said West Quarter corner North 12°54'17" East  (North 12°27'33" East rec.) a distance of 76.90 (76.90 rec.) feet to a point on the Southeasterly right of way line of Arizona State Highway 89-A; 

THENCE Northeasterly along said Southeasterly right of way line being a non-tangent curve concave to the Southeast having a radius of 2,150.00 (2,150.00 rec.) feet, chord bearing of North 23°04'02" East and central angle of 05°24'36" (05°24'18" rec.) an arc distance of 203.00 (203.00 rec.) feet to the position of a previously set cotton picker spindle with brass tag stamped "LS 14184"; 

THENCE continuing Northeasterly along said Southeasterly right of way line being a curve concave to the Southeast having a radius of 2,150.00 (2,150.00 rec.) feet, chord bearing of North 26°36'58" East a central angle of 01°41'17" (01°41'39" rec.) an arc distance of 63.35 (63.57 rec.) feet to the position of a previously set chiseled “+” in concrete;

THENCE departing said Southeasterly right of way line of Arizona State Highway 89-A, South 89° 51' 31" East (North 89° 42' 07" East rec.) a distance of 3.74 feet to a 1⁄2 inch re-bar with cap stamped "LS 14184" found as previously set on the Northeasterly line of that certain tract of land acquired by the City of Sedona in December 2005 and described in Instrument No. 2005-3361777 of the Coconino County Recorder's Office in Coconino County, Arizona;

THENCE along the North line of the Orchards/L'Auberge parcel,  South 89° 51' 31" East (North 89° 42' 07" East rec.) a distance of 212.10 feet to a 1⁄2 inch re-bar with cap stamped "LS 14184" (found as previously set); 

THENCE along the Northerly line of the Orchards/L'Auberge parcel,  South 40°28'17" East (South 41°45'00" East rec.) a distance of 62.25 feet to the POINT OF BEGINNING; 

Exhibit A-1

THENCE South 40°28'17" East (South 41°45'00" East rec.) a distance of 47.00 feet to a 1⁄2 inch re-bar with brass tag stamped "LS 14184" (found as previously set);

THENCE North 38°57'49" East (North 38°15'00" East rec.) a distance of 150.75 (152.00 rec.) feet to a 1⁄2 inch re-bar with brass tag stamped "LS 14184 (found as previously set);

THENCE South 50°57'03" East (South 51°45'00" East rec.) a distance of 82.00 (82.00 rec.) feet to a 1⁄2 inch re-bar with brass tag stamped "LS 14184" (found as previously set);

THENCE North 57°27'57" East (North 56°40'00" East rec.) a distance of 26.55 (26.55 rec.) feet to a 1⁄2 inch re-bar with brass tag stamped "LS 14184" (found as previously set);

THENCE South 32°32'03" East (South 33°20'00" East rec.) a distance of 523.60 (542.50 rec.) feet to a point in Oak Creek that lies on the Northwesterly boundary of the "Brewer Tract" described in Docket 510, Page 496 of the Coconino County Recorder's Office and from which a 1⁄2 inch re-bar with cap stamped "LS 14184", previously set as a witness corner, lies  North 32o 32'03” West, a distance of 100.00 feet; 

THENCE South 51°44'33" West (no rec.), a distance of 6.59 (no rec.) feet to the Westerly corner of said "Brewer Tract" being a point in Oak Creek; 

THENCE South 54°01'27" East (no rec.) a distance of 19.52 (no rec.) feet along the Southwesterly boundary of said "Brewer Tract" to a point in Oak Creek; 

THENCE South 52°31'27" West (South 51°43'30" West rec.) a distance of 11.99 (11.40 rec.) feet to a point in Oak Creek; 

THENCE along the Southerly boundary of “Parcel 1B” as shown and described on that certain ALTA/ACSM Land Title Survey map recorded as instrument number 3490268 in the Official Records of Coconino County, South 69°02'57" West a distance of 134.25 feet to the most Northerly corner of the Weckerly parcel as described in Dkt. 1525, Pgs. 007-009 of the Coconino County Recorder's Office; 

THENCE along a prolongation of the Northeasterly boundary of said Weckerly parcel, North 54°01'29" West a distance of 23.88 feet, more or less, to the centerline of Oak Creek as it may exist from time to time in the future;

THENCE along said centerline of Oak Creek, as it may exist from time to time in the future, an approximate bearing of South 65°34'01" West a distance of 111.83 feet, more or less;

THENCE continuing along said centerline of Oak Creek, as it may exist from time to time in the future, an approximate bearing of South 69°31'14" West a distance of 163.52 feet, more or less, to the intersection of said centerline of Oak Creek with the Northwesterly prolongation of the Southwesterly boundary of the Miller parcel as described in Dkt. 1478, Pgs. 378 & 378A of the Coconino County Recorder's Office; 

THENCE in a reversed direction of said Northwesterly prolongation of the Southwesterly boundary of the Miller parcel, South 38°15'58" East a distance of 98.08 feet, more or less, to said Southerly boundary of “Parcel 1B”;

Exhibit A-1

THENCE along said Southerly boundary of “Parcel 1B”, South 63°20'02" West (South 62°02'45" West rec.) a distance of 579.51 feet to a point in Oak Creek that is on the West line of said Section 8 and lies South 01"42'03" East a distance of 624.60 feet from said West Quarter corner of Section 8; 

THENCE North 01°42'03" West (North 02°30'00" West rec.) a distance of 447.60 (447.60 rec.) feet along said West line of Section 8 to a 1⁄2 inch re-bar with brass tag stamped "PE 2924" (found as previously found); 

THENCE North 38°37'57" East (North 37°50'00" East rec.) a distance of 207.55 feet to a 1⁄2 inch re-bar with cap stamped "LS 14184" (found as previously set); 

THENCE North 38°09'30" East (North 37°50'00" East rec.) a distance of 109.23 feet to a 1⁄2 inch re-bar with cap stamped "LS 14184" (found as previously set); 

THENCE North 49°44'02" East a distance of 94.50 feet; 

THENCE North 37°42'35" East a distance of 174.72 feet to the POINT OF BEGINNING.

PARCEL 2

An easement for ingress, egress and public utilities created by instrument recorded December 22, 1982, in Docket 911, Page 206, records of Coconino County, Arizona, described as follows:

A strip of land 33.00 feet wide situated in the Southeast Quarter of Section 7, Township 17 North, Range 6 East of the Gila and Salt River Meridian, Coconino County, Arizona, being more particularly defined as lying 16.50 feet on each side of the following described center line:

COMMENCING at the East Quarter corner of said Section 7 as marked by a G.L.O. brass capped pipe under drain cover in sidewalk and from which the Southeast corner of said Section 7 as marked by a B.L.M. brass capped pipe, lies South 0l°42'03" East (basis of bearings for this description) a distance of 2621.04 feet; 

THENCE South 0l°42'03" East (South 02°30'00" East rec.) a distance of 261.40 (261.4 rec.) feet along the East line of said Southeast Quarter of Section 7 to the POINT OF BEGINNING of this center line (side lines of this strip of land begin on said East line); 

THENCE South 28°37'57" West (South 27°50'00" West rec.) a distance of 500.20 (500.2 rec.) feet;

THENCE South 37°53'57" West (South 37°06'00" West rec.) a distance of 330.00 (330.00 rec.) feet to the terminus of this center line;

EXCEPTING THEREFROM all that portion thereof lying within the right-of-way of Arizona Highway 89-A.

Exhibit A-1

PARCEL 3

A perpetual, non-exclusive easement for ingress and egress as set forth in that certain easement agreement recorded April 25, 2002 in instrument number 2002-3138455 and re-recorded July 18, 2005 in instrument number 2005-3332653 of Official Records, Coconino County, Arizona.

PARCEL 4

A parcel of land being a portion of the "PACINI TRACT" described as Parcel II in Docket 1711, Pages 863 and 864 of the Coconino County Recorder's Office and situated in the West half of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, said parcel being more particularly described as follows:

COMMENCING at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S 01°42'03" E (Basis of Bearings for this description) a distance of 2,621.04 feet;

THENCE from said West quarter corner, N 21°27'04" E  a distance of 342.00 feet (N 20°32' E, 342' rec.) to the position of a previously set chiseled "+" in concrete on the Southeasterly right-of-way line of Arizona Highway 89-A;

THENCE departing said Southeasterly right-of-way line of Arizona Highway 89-A,  S 89°51'31" E a distance of 215.82 feet (N 89°10' E, 217.50' rec.) to a 1⁄2" re-bar with plastic cap stamped "LS 14184" (found as previously set); 

THENCE S 40°28'17" E a distance of 109.25 feet (S 41°45' E, 110.77' rec.)  to a 1⁄2" re-bar with brass tag stamped "LS 14184" (found as previously set);

THENCE N 38°57'49" E a distance of 150.75 feet (N 38°15' E, 152.0' rec.)  to a 1⁄2" re-bar with brass tag stamped "LS 14184" found as previously set at a corner of said "PACINI TRACT";

THENCE along the boundary of said "PACINI TRACT", S 50°57'03" E a distance of 82.00 feet (same as rec.) to a 1⁄2" re-bar with brass tag stamped "LS 14184" found as previously set at a corner thereof;

THENCE continuing along the boundary of said "PACINI TRACT", N 57°27'57" E a distance of 26.55 feet (same as rec.) to a 1⁄2" re-bar with brass tag stamped "LS 14184" found as previously set at a corner thereof;

THENCE continuing along the boundary of said "PACINI TRACT" S 32°32'03" E a distance of 5.00 feet to a 1⁄2" re-bar with plastic cap stamped "LS 14184" found as previously set at the POINT OF BEGINNING; 

THENCE N 57°27'57" E a distance of 58.00 feet to a concrete nail with brass tag stamped "LS 14184" (found as previously set);

Exhibit A-1

THENCE N 89°27'57" E a distance of 35.39 feet to a 1⁄2" re-bar with cap stamped "LS 14184" (found as previously set);

THENCE S 00°32'03" E a distance of 163.25 feet to the position of a previously set nail with brass tag stamped "LS 14184";

THENCE S 32°32'03" E a distance of 215.13 feet 1⁄2" re-bar with cap stamped "LS 14184" (found as previously set);

THENCE S 31°56'49" E a distance of 146.28 feet to a point on the Northwesterly boundary of the "BREWER TRACT" as described in Docket 510, Page 496 of the Coconino County Recorder's Office, at the Southwest corner of the said "PACINI TRACT", and from which a 1⁄2" re-bar with cap stamped "LS 14184" (found as previously set as a witness corner) bears N 32°32'03" W a distance of 100.00 feet;

THENCE along the Westerly boundary of the said "PACINI TRACT", N 32°32'03" W a distance of 518.60 feet to the POINT OF BEGINNING.    
 

Exhibit A-1

Exhibit 10.7

EXHIBIT A-2 
 
DESCRIPTION OF ORCHARDS PROPERTY
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF ARIZONA, COUNTY OF COCONINO, AND DESCRIBED AS FOLLOWS:
PARCEL 5

A parcel of land situated in the West Half of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian, Coconino County, Arizona, being more particularly described as follows:

COMMENCING at the West Quarter corner of said Section 8 as marked by a G.L.O. brass capped pipe under drain cover in sidewalk and from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe in cairn, lies South 01°42'03" East (basis of bearings for this description) a distance of 2,621.04 feet;

THENCE from said West Quarter corner North 12°54'17" East (North 12°27'33" East rec.) a distance of 76.90 (76.90 rec.) feet to a point on the Southeasterly right of way line of Arizona State Highway 89-A; 

THENCE Northeasterly along said Southeasterly right of way line being a non-tangent curve concave to the Southeast having a radius of 2,150.00 (2,150.00 rec.) feet, chord bearing of North 23°04'02" East and central angle of 05°24'36" (05°24'18" rec.) an arc distance of 203.00 (203.00 rec.) feet to the position of a previously set cotton picker spindle with tag stamped "LS 14184"; 

THENCE departing said Southeasterly right of way line of Arizona State Highway 89-A,  South 65° 25' 03" East a distance of 11.73 feet to the POINT OF BEGINNING which lies on the Southeasterly line of that certain tract of land acquired by the City of Sedona in December 2005 and described in Instrument No. 2005-3361777 of the Coconino County Recorder's Office in Coconino County, Arizona; 

THENCE along said Southeasterly line, North 24o 46' 32" East a distance of 23.47 feet;

THENCE continuing along said Southeasterly line, North 21o 21' 48" East a distance of 3.63 feet;

THENCE continuing along said Southeasterly line, North 20o 52' 26" West a distance of 8.33 feet;

THENCE continuing along said Southeasterly line, North 69o 07' 34" East a distance of 1.00 foot;

THENCE continuing along said Southeasterly line, North 19o 27' 50" West a distance of 6.81 feet;

THENCE continuing along said Southeasterly line, North 26o 18' 08" East a distance of 19.54 feet;

THENCE continuing along said Southeasterly line, South 62o 51' 12" East a distance of 4.07 feet;

THENCE continuing along said Southeasterly line, North 23o 53' 25" East a distance of 6.93 feet;

Exhibit A-2

THENCE continuing along said Southeasterly line of that tract of land acquired by the City of Sedona in December 2005, North 62o 35' 35" West a distance of 0.55 feet to the North line of the Orchards/L'Auberge parcel; 

THENCE along said North line of the Orchards/L'Auberge parcel, South 89° 51' 31" East  (North 89° 42' 07" East rec.) a distance of 212.10 feet to a 1/2 inch rebar with cap stamped "LS 14184" found as previously set; 

THENCE South 40°28'17" East (South 41°45'00" East rec.) a distance of 62.25 feet;

THENCE South 37o 42' 35" West a distance of 174.72 feet;

THENCE South 49o 44' 02" West a distance of 94.50 feet to a 1/2 inch rebar with cap stamped "LS 14184" found as previously set; 

THENCE North 31°49'11" West (North 32°21'20" West rec.) a distance of 114.47 (113.94 rec.) feet to a 1/2 inch rebar with cap stamped "LS 14184" found as previously set; 

THENCE North 22°35'10" East (North 24°24'07" East rec.) a distance of 66.04 (65.00 rec.) feet to a concrete nail with brass tag stamped "LS 14184" found as previously set; 

THENCE North 65°25'03" West (North 65°34'02" West rec.) a distance of 65.96 feet to the POINT OF BEGINNING.

PARCEL 6

An easement for overhead canopies and other purposes by or pursuant to that certain Special Warranty Deed (In Lieu of Condemnation) recorded December 27, 2005, in Document No. 3361777, Official Records of Coconino County, Arizona.
 

Exhibit A-2

Exhibit 10.7

EXHIBIT A-3 
 
DESCRIPTION OF SUBLEASES
		
	A.
	ORCHARDS SUBLEASES

		
	1.
	That certain Lease of a forty (40) unit hotel property dated as of March 13, 2009, by and between Canyon Portal II, L.L.C., an Arizona limited liability company (“Canyon Portal”) and Orchards Annex, LLC, an Arizona limited liability company (“Original Orchards Annex Lessee”), as amended by that certain Amendment to Lease dated as of July 1, 2011, by and between Canyon Portal and Original Orchards Annex Lessee, as further amended by that certain Second Amendment to Lease dated as of May 14, 2013, by and between Canyon Portal and Original Orchards Annex Lessee, as assigned to Orchards pursuant to that certain Assignment and Assumption of Lease and Consent to Assignment and Assumption of Lease dated as of May 14, 2013, by and between Original Orchards Annex Lessee and Orchards, and consented to by Canyon Portal[Affects Parcels 8, 9 and 10 below];

		
	2.
	That certain Lease for Parking Spaces dated as of January 1, 2012, by and between Canyon Portal and Orchards Inn & Restaurant LLC, an Arizona limited liability company (“Original Orchards Parking Lessee”), as amended by that certain Amendment to Lease dated as of May 1, 2012, by and between Canyon Portal and Original Orchards Parking Lessee, as further amended by that certain Second Amendment to Lease dated as of May 14, 2013, by and between Canyon Portal and Original Orchards Parking Lessee, as assigned to Orchards pursuant to that certain Assignment and Assumption of Lease and Consent to Assignment and Assumption of Lease dated as of May 14, 2013, by and between Original Orchards Annex Lessee and Orchards, and consented to by Canyon Portal [Affects Parcels 12, 13, and 14 below];

		
	3.
	That certain Lease for five (5) hotel room units dated as of April 1, 2012, by and between Canyon Portal and L’Auberge Orchards LLC, an Arizona limited liability company (“Original L’Auberge Lessee”), as amended by that certain Amendment to Lease dated as of May 14, 2013, by and between Canyon Portal and Original L’Auberge Lessee, as assigned to Orchards pursuant to that certain Assignment and Assumption of Lease and Consent to Assignment and Assumption of Lease dated as of May 14, 2013, by and between Original L’Auberge Lessee and Orchards, and consented to by Canyon Portal [Affects Parcel 11 below]; and

		
	4.
	That certain Lease of 174 square feet dated as of April 1, 2010, by and between Canyon Portal and Original L’Auberge Lessee, as amended by that certain First Amendment to Lease dated as of February 1, 2011, by and between Canyon Portal and Original L’Auberge Lessee, as further amended by that certain Second Amendment to Lease dated as of May 14, 2013, by and between Canyon Portal and Original L’Auberge Lessee, as assigned to Orchards pursuant to that certain Assignment and Assumption of Lease and Consent to Assignment and Assumption of Lease dated as of May 14, 2013, by and 

Exhibit A-3

Exhibit 10.7

between Original L’Auberge Lessee and Orchards, and consented to by Canyon Portal [Affects Parcel 7 below].
Each of the leases described in 1-4 above being a sublease of certain real property in the City of Sedona, County of Coconino, State of Arizona, and more particularly described as follows:

PARCEL 7 (I.T. EQUIPMENT ROOM):
A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt
River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N74°53'13"E a distance of 103.87 feet to the POINT OF BEGINNING;
THENCE S56°33'53"E a distance of 8.00 feet;
THENCE S33°26'07"W a distance of 22.14 feet;
THENCE N89°41'47"W a distance of 9.55 feet;
THENCE N33°26'07"E a distance of 27.36 feet to the POINT OF BEGINNING.

PARCEL 8 (ORCHARDS ANNEX BUILDING “A”):
A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;

Exhibit A-3

Exhibit 10.7

THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N67°01'52"E a distance of 426.86 feet to the POINT OF BEGINNING;
THENCE S56°17'32"E a distance of 37.30 feet;
THENCE S33°42'28"W a distance of 14.70 feet;
THENCE S56°17'32"E a distance of 8.10 feet;
THENCE S33°42'28"W a distance of 62.40 feet;
THENCE N56°17'32"W a distance of 50.00 feet;
THENCE N33°42'28"E a distance of 62.30 feet;
THENCE S56°17'32"E a distance of 4.60 feet;
THENCE N33°42'28"E a distance of 14.80 feet to the POINT OF BEGINNING.

PARCEL 9 (ORCHARDS ANNEX BUILDING “B”):
A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N77°31'12"E a distance of 296.27 feet to the POINT OF BEGINNING;
THENCE N33°26'55"E a distance of 44.70 feet;
THENCE S56°33'05"E a distance of 12.70 feet;
THENCE N33°26'55"E a distance of 8.20 feet;
THENCE S56°33'05"E a distance of 38.10 feet;

Exhibit A-3

Exhibit 10.7

THENCE S33°26'55"W a distance of 67.10 feet;
THENCE N56°33'05"W a distance of 38.30 feet;
THENCE N33°26'55"E a distance of 14.20 feet;
THENCE N56°33'05"W a distance of 12.50 feet to the POINT OF BEGINNING.

PARCEL 10 (ORCHARDS ANNEX BUILDING “C”):
A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N80°02'28"E a distance of 274.61 feet to the POINT OF BEGINNING;
THENCE S56°52'51"E a distance of 45.40 feet;
THENCE S33°07'09"W a distance of 76.10 feet;
THENCE N56°52'51"W a distance of 38.30 feet;
THENCE N33°07'09"E a distance of 5.70 feet;
THENCE N56°52'51"W a distance of 12.70 feet;
THENCE N33°07'09"E a distance of 55.70 feet;
THENCE S56°52'51"E a distance of 5.60 feet;
THENCE N33°07'09"E a distance of 14.70 feet to the POINT OF BEGINNING.

PARCEL 11 (TEMPORARY HOUSING):

Exhibit A-3

Exhibit 10.7

A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N59°47'28"E a distance of 330.63 feet;
THENCE N56°03'17"W a distance of 25.50 feet to the POINT OF BEGINNING (Point “A” for reference hereinafter);
THENCE N56°03'17"W a distance of 34.10 feet;
THENCE N33°56'43"E a distance of 18.84 feet;
THENCE S86°25'02"E a distance of 1.59 feet;
THENCE N03°34'58"E a distance of 5.00 feet;
THENCE S86°25'02"E a distance of 3.50 feet;
THENCE N03°34'58"E a distance of 50.13 feet;
THENCE S86°25'02"E a distance of 5.10 feet;
THENCE N03°34'58"E a distance of 5.02 feet to Point “B” for reference hereinafter;
THENCE S86°25'02"E a distance of 26.10 feet;
THENCE S03°34'58"W a distance of 33.00 feet to Point “C” for reference hereinafter;
THENCE S03°34'58"W a distance of 30.49 feet;
THENCE S56°03'17"E a distance of 1.10 feet;
THENCE S33°56'43"W a distance of 34.30 feet to the POINT OF BEGINNING.
EXCEPTING THEREFROM the following described two portions thereof that are on the bottom floor of a two story building:
BEGINNING at Point “A” as referenced hereinbefore;

Exhibit A-3

Exhibit 10.7

THENCE N56°03'17"W a distance of 24.90 feet;
THENCE N33°56'43"E a distance of 23.30 feet;
THENCE N03°34'58"E a distance of 0.80 feet;
THENCE S86°25'02"E a distance of 21.00 feet;
THENCE S03°34'58"W a distance of 0.35 feet;
THENCE S56°03'17"E a distance of 7.01 feet;
THENCE S33°56'43"W a distance of 34.30 feet to the POINT OF BEGINNING (Point “A”).
Beginning at Point “C” as referenced hereinbefore;
THENCE S03°34'58"W a distance of 17.70 feet;
THENCE N86°25'02"W a distance of 5.10 feet;
THENCE N03°34'58"E a distance of 17.70 feet;
THENCE S86°25'02"E a distance of 5.10 feet to the POINT OF BEGINNING (Point “C”).
AND FURTHER EXCEPTING THEREFROM the following described portion thereof that is on the top floor of said two story building:
BEGINNING at Point “B” as referenced hereinbefore;
THENCE S86°25'02"E a distance of 26.10 feet;
THENCE S03°34'58"W a distance of 34.15 feet;
THENCE N86°25'02"W a distance of 26.10 feet;
THENCE N03°34'58"E a distance of 34.15 feet to the POINT OF BEGINNING (Point “B”).

PARCEL 12 (PARKING LEASEHOLD SITE NO. 1):
A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a 

Exhibit A-3

Exhibit 10.7

B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N65°24’08”E a distance of 429.98 feet to the POINT OF BEGINNING;
THENCE N32°17’00”E a distance of 27.00 feet;
THENCE S57°43’00”E a distance of 18.00 feet;
THENCE S32°17’00”W a distance of 27.00 feet;
THENCE N57°43’00”W a distance of 18.00 feet to the POINT OF BEGINNING.

PARCEL 13 (PARKING LEASEHOLD SITE NO. 2):
A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N62°08’42”E a distance of 198.61 feet to the POINT OF BEGINNING;
THENCE N34°11’13”E a distance of 18.00 feet;
THENCE S55°48’47”E a distance of 36.00 feet;
THENCE S34°11’13”W a distance of 18.00 feet;
THENCE N55°48’47”W a distance of 36.00 feet to the POINT OF BEGINNING.

PARCEL 14 (PARKING LEASEHOLD SITE NO. 3):

Exhibit A-3

Exhibit 10.7

A parcel of land situated in the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Meridian in Coconino County, Arizona, being more particularly described as follows:
Commencing at the West quarter corner of said Section 8, as marked by a G.L.O. brass cap under drain cover in sidewalk, from which the Southwest corner of said Section 8, as marked by a B.L.M. brass capped pipe, lies S01°42'03"E (Basis of Bearings for this description) a distance of 2,621.04 feet;
THENCE from said West quarter corner, N21°27'04"E a distance of 342.00 feet to West corner of the Canyon Portal property that lies on the Southeasterly right-of-way line of Arizona State Route 89A;
THENCE N73°08’07”E a distance of 158.27 feet to the POINT OF BEGINNING;
THENCE N33°52’16”E a distance of 18.00 feet;
THENCE S56°07’44”E a distance of 27.00 feet;
THENCE S33°52’16”W a distance of 18.00 feet;
THENCE N56°07’44”W a distance of 27.00 feet to the POINT OF BEGINNING.
 

[EXHIBIT CONTINUES ON NEXT PAGE]

Exhibit A-3

Exhibit 10.7

		
	B.
	L’AUBERGE LEASES

		
	5.
	That certain Lease For Parking Spaces dated as of January 1, 2012, by and between Sinagua Plaza II, L.L.C., an Arizona limited liability company (“Sinagua”) and L’Auberge Orchards LLC, an Arizona limited liability company (“Original L’Auberge Lessee”), as amended by that certain Amendment to Lease dated as of May 1, 2012, by and between Sinagua and Original L’Auberge Lessee, as further amended by that certain Second Amendment to Lease dated as of May 14, 2013, by and between Sinagua and Original L’Auberge Lessee, as assigned to L’Auberge pursuant to that certain Assignment and Assumption of Lease and Consent to Assignment and Assumption of Lease dated as of May 14, 2013, by and between Original L’Auberge Lessee and L’Auberge, and consented to by Sinagua; and

		
	6.
	That certain Lease for Storage Space dated as of January 1, 2012, by and between Sinagua and Original L’Auberge Lessee, as amended by that certain Amendment to Lease dated as of May 1, 2012, by and between Sinagua and Original L’Auberge Lessee, as further amended by that certain Second Amendment to Lease dated as of May 14, 2013, by and between Sinagua and Original L’Auberge Lessee, as assigned to L’Auberge pursuant to that certain Assignment and Assumption of Lease and Consent to Assignment and Assumption of Lease dated as of May 14, 2013, by and between Original L’Auberge Lessee and L’Auberge, and consented to by Sinagua.

Each of the leases described in 5 and 6 above being a lease of certain real property in the City of Sedona, County of Coconino, State of Arizona, and more particularly described as follows:

PARCEL NO. 1:

A parcel of land being a portion of the Northwest quarter of Section 8, Township 17 North, Range 6 East, of the Gila and Salt River Base and Meridian, Coconino County, Arizona, described as follows:

COMMENCING at the West quarter corner of said Section 8 as marked by a B.L.M. brass cap under a drain cover in sidewalk and from which the Southwest corner of said Section 8 as marked by a B.L.M brass capped iron pipe lies South 01°42'03" East (Basis of Bearings) a distance of 2,621.04 feet;

Thence from said West quarter corner of Section 8, North 30°07'59" East, a distance of 916.99 feet to a 1⁄2 inch rebar with plastic cap stamped "LS 14184", on the Southeasterly right-of-way line of Arizona State Highway 89A, said point being the TRUE POINT OF BEGINNING;

Thence Northeasterly along said Southeasterly right-of-way line of Arizona State Highway 89A being a non-tangent curve to the right with a radius of 2,150.00 feet, chord bearing of North 46°38’13” East a distance of 272.98 feet through a central angle of 07°16'47" an arc distance of 273.17 feet to a' inch rebar with plastic cap stamped “LS14184”;

Thence South 41°57'23" East, a distance of 29.20 feet to a concrete nail with brass tag stamped “LS14184”;
Thence continuing South 41°57'23" East, a distance of 3.86 feet to a 1⁄2 inch rebar with plastic cap stamped "LS14184";
Thence South 46°38'13" West, a distance of 42.83 feet to a 1⁄2 inch rebar with plastic cap stamped "LS14184";
Thence North 85°34'54" East, a distance of 93.69 feet to a 1⁄2 inch rebar with cap "LS 14184";

Exhibit A-3

Exhibit 10.7

Thence South 12°45'42" East, a distance of 60.56 feet to a 1 1⁄4 inch pipe, with no identification;
Thence South 13°36'15" West, a distance of 21.07 feet to a 1⁄2 inch rebar, with no identification;
Thence South 18°11'28" West, a distance of 63.83 feet to a 1 1⁄4 inch pipe, with no identification;
Thence South 39°06'47" West, a distance of 66.31 feet to a 1⁄2 inch rebar with plastic cap stamped "RLS 15888";
Thence South 19°19'46” East, a distance of 49.71 feet to a 1⁄2 inch rebar with plastic cap;
Thence North 78°11'14” West, a distance of 56.00 feet to a 1/2 inch rebar with plastic cap "LS 14184";
Thence South 81°59’22” West, a distance of 81.56 feet to 1⁄2 inch rebar with plastic cap stamped “LS 14184”;
Thence South 56°57’39” West, a distance of 91.19 feet, to a 1⁄2 inch rebar with plastic cap stamped “LS 14184”;
Thence North 33°02’21” West, a distance of 140.07 feet to a 1⁄2 concrete nail with brass tag stamped “LS 14184”;
Thence North 21°24’00” West, a distance of 152.40 feet to the Point of Beginning.

PARCEL NO. 2
An easement for ingress and egress, as granted in Instrument No. 00-3070064, over and across, the following described parcel:

That part of the Northwest quarter of Section 8, Township 17 North, Range 6 East of the Gila and Salt River Base and Meridian, Coconino County, Arizona, more particularly described as follows:

BEGINNING at a point on the Southeasterly line of Highway 89-A at a 5/8 inch iron rod marking the most Westerly corner of that parcel described in instrument recorded in Docket 188, page 467, records of Coconino County, Arizona, said point of beginning being Northerly, a distance of 994.44 feet and Easterly a distance of 672.96 feet from the West quarter corner of said Section 8;
Thence South 41°52'17" East, along the Southwesterly line of said parcel a distance of 155.05 feet to a 3⁄4 inch pipe at the Southerly most corner of said parcel;
Thence South 30°30'45" East, a distance of 22.62 feet to a 1⁄2 inch rebar being an angle point in the Northwesterly line of that parcel described in Docket 141, page 257, records of Coconino County Arizona;
Thence South 47°50'15" West, along the Northwesterly line of said parcel, a distance of 18.85 feet;

Thence North 40°52'59" West, a distance of 178.27 feet to to the Southeasterly line of Highway 89-A, said point being on a curve concave to the Southeast having a radius of 2150.00 feet and a chord bearing of North 50°41’21” East;

Thence Northeasterly along said curve, an arc distance of 20.40 feet through a central angle of 00°32’37” to the Point of Beginning. 

Exhibit A-3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00239-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00239-of-00352.parquet"}]]