KOL Reaches Proposed Settlement on Behalf of Former Unitholders of the IMH Secured Loan Fund

The proposed Settlement provides for the exchange of up to approximately 2.5 million shares of IMH Financial Corp for $20 million face amount of 5-year notes yielding 4% per year, the issuance of up to $10 million in senior secured convertible notes maturing in June 2016 yielding 17% per annum and paying 115% of face amount at maturity, and certain corporate governance measures.

On January 31, 2012, Class Plaintiffs reached a proposed settlement of the class action challenging the terms of the conversion of the IMH Secured Loan Fund to IMH Financial, Inc.. The proposed settlement was the subject of extensive confirmatory discovery and the product of challenging negotiations over the Stipulation of Settlement and all of the documents necessary to facilitate the two securities offerings provided for by the Settlement. The Stipulation of Settlement was executed on March 19, 2013 and a Notice describing the Settlement was mailed to class members on April 17, 2013 along with an Accredited Investor Status Certificate and Investor Advisory Committee Questionnaire. The Settlement Hearing was initially scheduled for June 20, 2013 but was held on July 18, 2013.  Three IMH shareholders, who objected to the Settlement, were heard by the Chancery Court, after which the Court denied the objections of two of the objectors and requested a modification of the release set forth in the proposed Final Judgment to address the claims of the third objector who has a pending individual action in Arizona.  The parties so modified the release and the Chancery Court entered the revised Final Judgment on July 26, 2013.

On August 23, 2013, the objector who has a pending action in Arizona filed a notice of appeal of the Court’s approval of the settlement with the Delaware Supreme Court.  On August 27, 2013, one of the other objectors also filed a notice of appeal.

An opening brief by one of the objectors/appellants was filed on October 11, 2013 but the other objectors/appellants withdrew their appeal.  Plaintiffs and Defendants filed their respective briefs in response to the remaining objectors’ arguments on November 12, 2013.  The remaining Objectors’ reply brief must be filed by November 27, 2013.

The Delaware Supreme Court has scheduled oral argument on the appeal for January 29, 2014.  The offerings and other measures provided for in the Settlement cannot take effect until this remaining appeal is favorably resolved by the Delaware Supreme Court by affirming the Chancery Court’s entry of the Amended Final Judgment approving the Settlement.