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IMH FINANCIAL CORP FILES (8-K) Disclosing Entry into a Material Definitive Agreement, Termination of a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Unregistered Sale of Equity Securities, Changes in Control or Registrant, Change in Directors or Principal Officers, Amendments to Articles of Inc. or Bylaws; Change in Fiscal Year, Regulation FD Disclosure, Other Events, Financial Statements and Exhi

July 29, 2014

Item 1.01 Entry into a Material Definitive Agreement.

On July 24, 2014, IMH Financial Corporation ("IMH" or the "Company") entered into a series of agreements and transactions in connection with the refinancing of the $50 million senior secured convertible loan (the "Original Loan") originally extended to the Company by NWRA Ventures I, LLC ("NW Capital") on June 11, 2011. The Company has made and will continue to make certain prepayments of the Original Loan on terms, and pursuant to the transactions, which the Company believes will save the Company a significant amount of future interest expense, consulting fees and other related costs in relation to the Original Loan and other related agreements, and will allow the Company to borrow funds and obtain future financing on more favorable terms.

As previously reported in a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on April 9, 2014, the Company entered into an agreement with NW Capital setting forth the terms for the Company's prepayment of the Original Loan (which agreement as it has been subsequently amended, is referred to herein as the "Payoff Agreement"). In connection with carrying out the terms of the Payoff Agreement, the Company satisfies its obligations under the Original Loan by entering into the following agreements and transactions and such other transactions as more fully described below in this Current Report:

(i) the Company and NW Capital entered into the Fourth Amendment to Loan Agreement, dated July 24, 2014 (the "Fourth Amendment") and First Amendment to Promissory Note, dated July 24, 2014 (the "Note Amendment", and collectively with the Fourth Amendment, the "Loan Modification Documents") modifying the terms of the Original Loan (as modified, the "Modified Loan"), the principal terms of which are as follows: (A) the maturity date (the "Maturity Date") will be July 22, 2015; and (B) the conversion rights currently held by NW Capital to convert into the Series A Preferred will terminate. Pursuant to the Payoff Agreement, and on the condition that the Company timely complies with the terms and conditions of the Payoff Agreement, (1) the payoff amount of the Modified Loan will be $45,000,000; (2) interest will accrue on the Modified Loan at 17% per annum, all of which will be paid by the Company on a quarterly basis; and (3) beginning 90 days following the Closing Date (as defined below) and continuing at the end of each 90 day period thereafter until the Maturity Date, the Company will make payments equal to the sum of: (x) $5,000,000, which will be applied toward the then-outstanding principal and interest due on the Modified Loan; and (y) a fee of one percent (1%) of the then-outstanding principal balance of the Modified Loan (such outstanding . . .



Item 1.02 Termination of a Material Definitive Agreement.

Termination of Consulting Services Agreements:

a. ITH Agreement:

On July 24, 2014, the Company and ITH Partners, LLC agreed to terminate the Amended and Restated Consulting Agreement between the parties dated April 20, 2011 (the "ITH Agreement"). In connection with the termination of the ITH Agreement, the Company agreed to issue to ITH Partners, LLC a warrant to purchase 1,000,000 shares of the Company's common stock (the "ITH Warrant"). The ITH Warrant is exercisable for a ten (10) year term and the exercise price of is equal to fair market value of the Common Stock as of July 24, 2014 as determinable by the Company as of such date. The ITH Warrant is exercisable in cash, and subject to certain conditions, may also be exercised on a cashless basis. The ITH Warrant contains standard anti-dilution provisions. Except for the issuance of the ITH Warrant, no termination fees or other remuneration were paid in connection with the termination of the ITH Agreement.

b. Juniper Agreement:

On July 24, 2014, the Company and Juniper Capital Partners, LLC ("Juniper") agreed to terminate the Consulting Agreement between the parties dated June 7, 2011 (the "Juniper Consulting Agreement"). No termination fees or other remuneration were paid in connection with the termination of the Juniper Consulting Agreement.

Termination of William Meris Employment Agreement

Effective July 24, 2014, the Company and William Meris, the Company's former Chief Executive Officer and President, entered into an Employment Separation and General Release Agreement (the "Meris Separation Agreement"). In connection therewith, the Company and Mr. Meris terminated that certain

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Employment Agreement dated April 20, 2011 between the Company and Mr. Meris, as amended (the "Meris Employment Agreement").

Pursuant to the Meris Employment Agreement, Mr. Meris was entitled to receive a lump sum severance payment (the "Meris Severance Payment") equal to the entire amount of his accrued but unpaid base salary through his separation date plus an amount equal to two (2) times his "Covered Average Compensation" as that term is defined in the Meris Employment Agreement. Pursuant to the Meris Separation Agreement, the Company and Mr. Meris have agreed to modify the payment terms of the Meris Severance Payment (equal to $1,236,360, less required withholdings) from a lump sum payment to (i) one-half payable within 10 days of the effective date of his resignation and (ii) the balance payable over 12 months on a pro rata monthly basis commencing in August 2014. The Meris Severance Payment includes the entire amount of Mr. Meris' accrued but unpaid base salary through his separation date and an amount equal to two (2) times his "Covered Average . . .

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As described in Item 1.01 above, on July 24, 2014 the Company entered into the Loan Modification Documents, pursuant to which, the Company incurred a direct financial obligation of $45,000,000. The repayment terms and other restrictions and obligations imposed on the Company pursuant to the Loan Modification Documents are generally described in Item 1.01 above, which disclosure is incorporated into this Item 2.03.

Item 3.02 Unregistered Sales of Equity Securities.

In connection with the transactions and agreements generally described in this Current Report, the Company effected the following sales of equity securities that were not registered pursuant to the 1933 Act:

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On July 24, 2014, the Company issued 814,146 shares of Series A Stock to Juniper upon the conversion of the interest in the Original Loan that had been distributed to Juniper (as defined above, the "Juniper Series A Shares"). The issuance of the Juniper Series A Shares was effected pursuant to Section 4(a)(2) of the 1933 Act and Rule 506(b) promulgated thereunder as the Company (i) did not engage in any public advertising or general solicitation in connection with the offer and sale of such shares; (ii) reasonably believed that Juniper is sophisticated, had access to all information about the Company it deemed necessary, understood the risks of acquiring the shares of Series A Preferred Stock for investment purposes and is able to fend for itself; and (iii) believed that Juniper acquired the such shares for its own account. No commissions or other remuneration was paid in connection with this issuance. On July 24, 2014, the Company issued 2,424,394 shares of Series B-1 Preferred Stock to the Juniper Entities in exchange for the shares of Juniper Series A Shares. The Juniper Entities also purchased an additional 180,458 shares of Series B-1 Preferred Stock in exchange for a cash payment of $580,552. Such shares of Series B-1 Preferred Stock were issued to Juniper pursuant to the exemption from registration under Section 4(a)(2) of the 1933 Act and Rule 506(b) promulgated thereunder, as the Company (i) did not engage in any public advertising or general solicitation in connection with the offer and sale of such shares; (ii) reasonably believed that Juniper is sophisticated, had access to all information about the Company it deemed necessary, understood the risks of acquiring the shares of Series B-1 Preferred Stock for investment purposes and is able to fend for itself; and (iii) believed that Juniper acquired the such shares for its own account. No commissions or other remuneration was paid in connection with this issuance. On July 24, 2014, the Company issued the SRE Series B-2 Shares pursuant to the terms of the Subscription Agreement. The issuance of the SRE Series B-2 Shares was effected pursuant to Section 4(a)(2) of the 1933 Act and Rule 506(b) promulgated thereunder as the Company (i) relied on SRE's representations that it is an "accredited investor" as that term is defined in Rule 501 promulgated under the 1933 Act; (ii) did not engage in any public . . .



Item 5.01 Changes in Control of Registrant.

NW Capital, as the Company's senior secured lender as set forth in the Modified Loan Documents, having a security interest in substantially all of the Company's assets and the right to consent before we may take a wide variety of actions, will continue to have significant approval rights over the Company's business and operations.

Additionally, as described above, in connection with the transactions set forth above on July 24, 2014, the Company issued 2,604,852 shares of Series B-1 Preferred Stock to Juniper, and 5,595,148 shares of Series B-2 Preferred Stock to SRE. The terms of the Series B Preferred Stock generally require that the Company obtain the approval of the holders of 85% of the outstanding shares of Series B Preferred Stock prior to taking various actions, including prior to making certain personnel decisions and effecting certain defined expenditures and transactions. Additionally, as a result of the issuances of the Series B Preferred Stock, Juniper and SRE each own approximately 10.6% and 22.8%, respectively, of the Company's issued and outstanding equity securities and as a result each has significant voting power with respect to any matters submitted to our stockholders for approval.

As further described in Item 5.02 below, Messrs. Meris and Steve Darak, who previously served as our sole directors, have stepped down from the Board. In accordance with certain existing obligations and to give effect to certain of the agreements set forth herein, the Company has appointed seven (7) new persons to serve on the Board.

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Each of the Modified Loan Documents, the issuances of the Series B Preferred Stock described herein and the appointment of the new persons to the Board may constitute a change of control of the Company.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Resignations of Executive Officers and Directors:

Mr. Meris resigned as the Company's Chief Executive Officer, President and Chairman of the Board, effective July 24, 2014. Also, effective July 24, 2014, Steven Darak resigned from the Board. Mr. Darak will continue as our Chief Financial Officer. Neither Mr. Meris nor Mr. Darak resigned from our Board as the result of any disagreement with any Company practice or policy.

Appointment of New Executive Officer:

Lawrence D. Bain (age 64) - Effective July 24, 2014, Mr. was appointed as the Company's new Chief Executive Officer and Chairman of our Board of Directors. Since 2009, Mr. Bain has served as a strategic consultant to the Company and provided the Company with services related to asset management and disposition as well as loan underwriting. During the period of his consultancy, Mr. Bain has also served as managing partner of ITH Partners, LLC, a private equity firm. Mr. Bain brings significant operating and board experience gained in roles as a chief executive officer and chairman over the last fourteen years. From 2000 to 2009, Mr. Bain served as chief executive officer for True North Advisors, LLC (a private equity investment fund and an affiliate of the private equity firm, True North Partners, LLC). From 2004 to 2009, Mr. Bain served as chief executive officer of ProLink Solutions, LLC, which designs, manufactures, maintains and sells global positioning satellite (GPS) golf course management systems and software to golf course owners and operators worldwide. Mr. Bain spent approximately 20 years in the securities industry holding managing director positions at Stifel, Nicolaus & Company, Inc., Everen Securities, Dean Witter and EF Hutton. Mr. Bain is a graduate of the Ohio State University and attended the Securities Industry Executive Program at The Wharton School. There are no family relationships between Mr. Bain and any other officer or director of the Company. In connection with his appointment as Chief Executive Officer, Mr. Bain entered into the Bain Employment Agreement generally described in Item 1.01 above, which description is incorporated herein. In addition to his other duties, Mr. Bain will serve as the Chair of the Investment Committee.

Mr. Bain is the control person of ITH. As described above, the Company and ITH previously entered into the ITH Agreement whereby ITH provided the Company various services in exchange for cash and other consideration. Further, as described above, on July 24, 2014, the Company issued warrants to ITH in accordance with the terms of the ITH Warrant which was issued by the Company in connection with terminating the ITH Agreement, the terms of which were generally described in Item 1.02 above and which description is incorporated herein.

Appointment of New Directors:

The Company has appointed the following six (6) individuals to serve, in addition to Mr. Bain, as directors: Leigh Feuerstein, Andrew Fishleder, M.D., Michael M. Racy, Seth Singerman, Lori Wittman, and Jay Wolf. Messrs. Wolf and Singerman are being appointed to the Board, effective July 24 2014, as the Series B-1 Director and Series B-2 Director, respectively, and Lori Wittman is being appointed to the Board as the Series B Independent Director. The Company believes that this reconstituted board satisfies the

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. . .

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

Series B Preferred Stock Certificate of Designation:

In connection with the funding and closing of the Refinancing, we filed with the Secretary of State of the State of Delaware the Certificate of Designation, certain material terms of which are discussed in Item 1.01 above. Pursuant to the Certificate of Designation, the Company is authorized to issue an aggregate of 2,604,852 shares of Series B-1 Preferred Stock and 5,595,148 shares of Series B-2 Preferred Stock. The Certificate of Designation was effective on July 24, 2014.

This summary of the Certificate of Designation and the summary of the terms of the Series B Preferred Stock in Item 1.01 are qualified in their entirety by reference to the Certificate of Designation, which is attached hereto as Exhibit 3.1 and is incorporated herein by reference.

Third Amended and Restated Bylaws:

In connection with the funding and closing of the Refinancing, the Board adopted the Third Amended and Restated Bylaws of the Company (the "New Bylaws"), effective as of July 23, 2014.. In adopting the New Bylaws, the Board amended the Second Amended and Restated Bylaws of the Company (the "Prior Bylaws") primarily to conform the Prior Bylaws to the Certificate of Incorporation of the Company, as amended by the Certificate of Designation (the "Certificate of Incorporation"). In summary, the Prior Bylaws were amended to:

remove references in Sections 2.01, 2.02 and 6.12 to the rights of holders of any series of preferred stock and replace such references with references to the terms of the Certificate of Incorporation; add a provision to Section 2.01 stating that the directors of the Company will have such qualifications, if any, as are set forth in the Certificate of Incorporation; provide in Section 2.02(c) that, in addition to removal without cause, any director may also be removed with cause by certain classes or series of stockholders; add a qualifier to Section 2.02(c) such that the right of stockholders to remove directors with or without cause is subject to the terms of the Certificate of Incorporation; 21



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remove the provision in Section 2.02(d) which provided that a plurality of the holders of any class or series of stock that is entitled to elect one or more directors is required to fill a vacancy in such director positions; add qualifiers to Section 2.10 such that the ability of the Board to designate committees and the ability of Board committee members to appoint persons to act in place of absent or disqualified committee members are subject to the terms of the Certificate of Incorporation; and revise the legend to be placed on the security certificates of the Company pursuant to Section 5.05 to remove the statement that the Company will furnish a copy of the Certificate of Incorporation to security holders upon written request.



The foregoing summary of the Bylaws is qualified in its entirety by reference to the Bylaws, which are attached hereto as Exhibit 3.2 and are incorporated herein by reference.

Series A Preferred Stock Certificate of Elimination

In connection with the funding and closing of the Refinancing, we filed with the . . .

Item 7.01 Regulation FD Disclosure

The Company presently intends to either pay off from its own liquidity (depending on availability) or enter into a new senior secured credit facility to refinance the remaining $45.0 million note obligation to NW Capital as soon as is practicable following the closing of the Refinancing. The Company has received letters of interest on such a refinancing at terms more favorable to the Company. However, there is no assurance that the Company will have adequate liquidity to repay or refinance this obligation at more favorable terms or at all.

Item 8.01 Other Events. 22



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On July 29, 2014, the Company issued a news release announcing the refinancing of the Original Loan and the certain of the agreements and arrangements entered into concurrently therewith, along with the changes to the composition of the Board and management. Such news release is filed herewith as Exhibit 99.1.

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Item 9.01 Financial Statements and Exhibits.

Exhibits Exhibit Description

3.1 Certificate of Designation for of Series B-1 Cumulative Convertible Preferred Stock and Series B-2 Cumulative Convertible Preferred Stock. 3.2 Third Amended and Restated Bylaws of IMH Financial Corporation. 4.1 Investors' Rights Agreement by and among IMH Financial Corporation, JCP Realty Partners, LLC, Juniper NVM, LLC and SRE Monarch, LLC, dated July 24, 2014. 10.1 Fourth Amendment to Loan Agreement between IMH Financial Corporation and NWRA Ventures I, LLC, dated July 24, 2014. 10.2 First Amendment to Promissory Note between IMH Financial Corporation and NWRA Ventures I, LLC, dated July 24, 2014. 10.3 Redemption Agreement between IMH Financial Corporation and Desert Stock Acquisition I, LLC, dated July 24, 2014. 10.4 Series B-2 Cumulative Convertible Preferred Stock Subscription Agreement between IMH Financial Corporation and SRE Monarch, LLC, dated July 24, 2014. 10.5 Series B-1 Cumulative Convertible Preferred Stock Exchange and Subscription Agreement between IMH Financial Corporation, Juniper NVM, LLC and JCP Realty Partners, LLC, dated July 24, 2014. 10.6 SRE Fee Agreement between IMH Financial Corporation and SRE Monarch, LLC, dated July 24, 2014. 10.7 Consulting Agreement between IMH Financial Corporation and JCP RealtyAdvisors, LLC, dated July 24, 2014. 10.8 Executive Employment Agreement between IMH Financial Corporation and Lawrence D. Bain dated July 24, 2014. 10.9 Restricted Stock Award Agreement between IMH Financial Corporation and Steve Darak, dated July 28, 2014. 10.10 Form of IMH Financial Corporation Indemnification Agreement. 10.11 Form of IMH Financial Corporation Indemnification Agreement by and between IMH Financial Corporation and Seth Singerman, dated July 24, 2014. 10.12 Employment Separation and General Release Agreement between IMH Financial Corporation and William Meris, dated July 24, 2014. 99.1 News Release 24



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