Tentative Settlement Reached in IMH Class Action

The following is a copy of an SEC filing recently submitted by IMH Financial Corporation (formerly IMH Secured Loan Fund) in connection with a proposed class action settlement:

On January 31, 2012, IMH Financial Corporation (“IMH”) reached a tentative settlement in principle to resolve all claims asserted by the plaintiffs in the putative class action lawsuit captioned In re IMH Secured Loan Fund Unitholders Litigation (“Litigation”), pending in the Court of Chancery in the State of Delaware against IMH, certain affiliated and predecessor entities, and certain former and current officers and directors of IMH, other than the claims of one plaintiff. The tentative settlement in principle, memorialized in a Memorandum of Understanding (“MOU”), is subject to certain class certification conditions, confirmatory discovery and final court approval (including a fairness hearing). The MOU contemplates a full release and settlement of all claims, other than the claims of the one non-settling plaintiff, against IMH and the other defendants in connection with the claims made in the Litigation.

The following are some of the key elements of the tentative settlement; however, please see the Form 8-K and corresponding exhibits for full details:

·IMH will offer $20.0 million of 4% five-year subordinated notes to members of the Class in exchange for 2,493,765 shares of IMH common stock at an exchange rate of $8.02 per share [See related blog post: IMH Financial Corporation’s CEO Shane Albers unloads stock at a premium of $8.02 per share]

·IMH will offer to Class members that are accredited investors $10.0 million of convertible notes with the same economic terms as the convertible notes previously issued to NWRA Ventures I, LLC
·IMH will deposit $1.645 million in cash into a settlement escrow account (less $300,000 to be held in a reserve escrow account that is available for use by IMH to fund its defense costs for other unresolved litigation) which will be distributed (after payment of notice and administration costs and any amounts awarded by the Court for attorneys’ fees and expense) to Class members in proportion to the number of IMH shares held by them as of June 23, 2010
·IMH will enact certain agreed upon corporate governance enhancements, including the appointment of two independent directors to the IMH board of directors upon satisfaction of certain conditions (but in no event prior to December 31, 2012) and the establishment of a five-person investor advisory committee (which may not be dissolved until such time as IMH has established a seven-member board of directors with at least a majority of independent directors)

·Provides additional restrictions on the future sale or redemption of IMH common stock held by certain IMH executive officers
IMH has vigorously denied, and continues to vigorously deny, that it has committed any violation of law or engaged in any of the wrongful acts that were alleged in the Litigation, but believes it is in the best interests of IMH and its stockholders to eliminate the burden and expense of further litigation and to put the claims that were or could have been asserted to rest.

There can be no assurance that the court will approve the tentative settlement in principle. Further, the judicial process to ultimately settle this action is estimated to take a minimum of six to nine months or longer. If not approved, the tentative settlement as outlined in the MOU may be terminated and IMH will continue to vigorously defend this action. The foregoing description of the tentative settlement in principle and MOU are qualified in their entirety by reference to the MOU which is available on the SEC’s website, attached as Exhibit 99.1 to the Form 8-K furnished on February 6, 2012.

Click here to view copy of the Memorandum of Understanding (“MOU”) filed with the SEC.

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