RELATED PARTY TRANSACTIONS AND COMMITMENTS

Contractual Agreements

Interim CEO Arrangement

During the year ended December 31, 2019, the Company entered into a Termination of Employment Agreement, Release and Additional Compensation Agreement with Mr. Bain, the Company’s former Chairman of the Board and Chief Executive Officer (the “Bain Termination Agreement”) as well as certain other agreements. The material terms of these agreements are summarized below.

On July 30, 2019, the Company entered into a Consulting Services Agreement (the “ITH Consulting Services Agreement”) with ITH Partners, LLC, a Nevada limited liability company (“ITH”), pursuant to which ITH agreed to provide certain consulting services to the Company for a ninety (90) day period commencing effective as of July 25, 2019, subject to automatic thirty (30) day renewals unless earlier terminated by the parties as provided therein. Mr. Bain is the Managing Director of ITH. Pursuant to the ITH Consulting Services Agreement, Mr. Bain was appointed to fill a vacancy on the Board of Directors of the Company (created when Mr. Bain’s employment terminated and he stepped down from the Board of Directors) and served as interim Co-Chairman and Chief Executive Officer of the Company until November 1, 2019. The ITH Consulting Services Agreement imposes certain limitations on the authority of Mr. Bain to act on behalf of the Company. In exchange for ITH’s services under this agreement, the Company agreed to pay ITH a monthly consulting fee of $30,000 commencing August 1, 2019. The Company elected to terminate this agreement effective December 15, 2019;


2)	Mr. Bain received a cash bonus of $0.6 million for his 2018 services (which was paid during year ended December 31, 2019) and $0.35 million for his 2019 services, to be paid no later than March 31, 2020 (which has been accrued in the accompanying consolidated financial statement in general and administrative expenses);


3)	Mr. Bain is entitled to receive two payments of $0.25 million each by no later than January 31, 2020 (which was paid subsequent to year end) and January 31, 2021, respectively;


4)	Mr. Bain is entitled to receive a Legacy Asset Performance Fee (“LAPF”), as calculated in accordance with his prior employment agreement, in connection with the disposition of the Company’s interests in the assets of the New Mexico Partnerships (the “New Mexico Assets”) provided that such disposition occurs prior to December 31, 2022;

On July 30, 2019, the Company and ITH also entered into a Consulting Services Agreement (the “New Mexico Asset Consulting Agreement”) pursuant to which ITH agreed to provide certain consulting services to the Company with respect to certain real property located in Sandoval County, New Mexico (the “New Mexico Asset”) for a period expiring on the earlier to occur of (a) consummation of the sale of all or substantially all of the New Mexico Asset and (b) December 31, 2022, unless such agreement is earlier terminated by the parties as provided therein. During the term of the New Mexico Asset Consulting Agreement, Mr. Bain is obligated to report to the Company’s Board of Directors and will serve as president of various corporations that serve as general partner of those entities that own the New Mexico Asset. The agreement also imposes certain limitations on the authority of Mr. Bain to act on behalf of the Company. In exchange for ITH’s services under this agreement, the Company has agreed to pay ITH a base monthly consulting fee of $5,000 commencing August 1, 2019, and an incentive bonus in the event that the Net Cash received from the sale of the New Mexico Asset exceeds certain minimum thresholds, after the payment of various reimbursements and expenses. ; and


6)	All unvested equity awards and deferred compensation benefits granted to Mr. Bain were vested.

During the year ended December 31, 2019, the Company paid Mr. Bain $0.2 million, net of certain withholdings, under the ITH Consulting Services Agreement and $20 thousand under the New Mexico Asset Consulting Agreement.

Under the terms of his employment agreement that expired on July 24, 2019, Mr. Bain is entitled to, among other things, legacy fee payments derived from the value of the disposition of certain legacy assets held by the Company as of December 31, 2010, if such assets are sold at values in excess of 110% of their carrying value as of December 31, 2010. Mr. Bain earned legacy fees of $0.1 million during each of the years ended December 31, 2019 and 2018.

CEO Employment Agreement

Effective August 30, 2019, the Company and Chadwick Parson entered into an Executive Employment Agreement (the “Parson Employment Agreement”) pursuant to which, effective November 1, 2019 (the “Commencement Date”), Mr. Parson began serving as the Company’s Chief Executive Officer and was appointed as Chairman of the Board of Directors. The initial term of the Parson Employment Agreement runs through December 31, 2024 (the “Initial Term”). The Initial Term shall automatically be extended for successive one-year periods, unless otherwise terminated (i) for cause or (ii) in the event that the Company or Mr. Parson notifies the other party in writing that the Initial Term (or any subsequent renewal term) shall not be renewed, no later than the 180 days prior to the expiration of such term.

In exchange for Mr. Parson’s services, the Company has agreed to pay Mr. Parson an annual base salary of $800,000 (subject to a 3% annual cost of living increase), which may be reduced by the Company, but in no event to an amount less than $500,000, if the Company does not secure at least $75.0 million in new capital by the 30-month anniversary of the Commencement Date. Mr. Parson is also entitled to annual incentive compensation based on objectives as may be set forth by the Board’s Compensation Committee. Mr. Parson shall also be entitled to earn a one-time cash bonus of $900,000 in the event the Company closes a restructuring or recapitalization event within 30 months of the Commencement Date, which shall be payable within 30 days following such restructuring or recapitalization event. In addition, the Company agreed to award Mr. Parson, on the Commencement Date, 400,000 restricted shares of the Company’s common stock under the terms of an award agreement entered into between the Company and Mr. Parson pursuant to the terms and provisions of the Equity Stock Incentive Plan. Those shares vest ratably over a three year period from the Commencement Date, unless such vesting is otherwise accelerated as set forth in the award agreement. Mr. Parson is entitled to a relocation allowance of up to $0.2 million.

In the event of termination without Cause or if Mr. Parson resigns with Good Reason (as both terms are defined in the Parson Employment Agreement), Mr. Parson will be entitled to any unpaid accrued amounts due, the immediate vesting of all unvested equity-based grants, a prorated amount of any incentive compensation earned during the year of termination, and severance pay equal to the amount of any base salary that would be otherwise payable throughout the Initial Term (and if terminated after the third anniversary of the Commencement Date, an additional amount equal to the one year of base pay), but in no event shall the severance amount exceed three times of his base salary.

Juniper Capital Partners, LLC and Related Entities

In July 2014, the Company and JCP Realty Advisors, LLC (“JCP Realty”) entered into a consulting services agreement (the “JCP Consulting Agreement”) pursuant to which JCP Realty agreed to perform various services for the Company, including, but not limited to, (a) advising the Company with respect to identifying, structuring, and analyzing investment opportunities, and (b) assisting the Company in managing and liquidating assets, including non-performing assets. Our director, Jay Wolf, is the Managing Member of Juniper Capital Partners, the parent company of JCP Realty. The initial term of the JCP Consulting Agreement was three years and was automatically renewable for an additional two years unless notice of termination was provided by either party. The Company and JCP Realty entered into an amendment of the JCP Consulting Agreement dated October 17, 2017 pursuant to which: (i) the term was extended for two years that ended on July 24, 2019; (ii) the annual base consulting fee was reduced from $0.6 million to $0.5 million (subject to possible upward adjustment based on an annual review by our board of directors); and (iii) JCP Realty is entitled to receive an origination fee of up to 1.25% on any loans or investments in real estate, preferred equity or mezzanine securities that are originated or identified by JCP Realty (subject to a reduced fee based on the increasing size of the loan or investment). JCP Realty is also entitled to legacy fee payments derived from the disposition of certain assets held by the Company as of December 31, 2010 to persons or opportunities arising through the efforts of JCP Realty equal to 5.5% of the positive difference derived by subtracting (i) 110% of our December 31, 2010 valuation mark of that asset from (ii) the gross sales proceeds (on a legacy asset by asset basis without any offset for losses realized on any individual asset sales).

During the years ended December 31, 2019 and 2018, we incurred base consulting fees to JCP Realty of $0.2 million and $0.5 million, respectively. JCP Realty earned legacy fees of $0.1 million and $0.2 million during the years ended December 31, 2019 and 2018, respectively.

The JCP Consulting Agreement terminated on July 24, 2019.

JIA Asset Management Agreement

On August 14, 2019, the Company entered into a non-discretionary investment advisory agreement (the “JIA Advisory Agreement”) with Juniper Investment Advisors, LLC, a Delaware limited liability company (“JIA”), with an effective commencement date of August 1, 2019, pursuant to which JIA agreed to manage certain assets of the Company, including the Company’s loan portfolio and certain of its legacy real-estate owned properties. Under the terms of the JIA Advisory Agreement, the Company will pay JIA management fees ranging from 1.0% to 1.5% of the net asset value of certain assets under management, as well as a performance fee equal to 20% of the net profits from those assets upon disposition after the Company has received an annualized 7% return on its investment from those assets and recovery of the Company’s basis in such assets. In connection with the JIA Advisory Agreement, certain employees of the Company have transitioned to become employees of JIA, and JIA has also sublet a portion of the Company’s office space. During the year ended December 31, 2019, we incurred base consulting fees to JIA of $0.1 million and recorded expense reimbursements from JIA for the sublease of office space and certain overhead charges of $0.1 million.

Jay Wolf, a director of the Company, is one of the managing partners of JIA.

Notes from Certain Investors in Lakeside JV

During the year ended December 31, 2017, certain of the investors in the Lakeside JV executed promissory notes in favor of a subsidiary of the Company totaling $0.7 million. During the year ended December 31, 2018, Lakeside JV sold its real estate assets and the notes were repaid along with accrued interest of $56 thousand. Under applicable accounting guidance, the notes receivable were netted against the non-controlling interest balance in the accompanying consolidated balance sheet.

Notes Receivable from Certain Partnerships

During 2016, a subsidiary of the Company executed promissory notes with certain partnerships to loan up to $0.7 million for the funding of various costs of such partnerships. During the year ended December 31, 2018, the notes were amended to increase the collective lending facility to a maximum of $5.0 million to cover the partnerships’ anticipated operating and capital expenditures. As of December 31, 2019, the total principal advanced under these notes was $5.5 million, including $0.5 million of protective advances in excess of the facility’s maximum face amount. The promissory notes earn interest at rates ranging from the JP Morgan Chase Prime rate plus 2.0% (6.75% at December 31, 2019) to 8.0% and have maturity dates which are the earliest to occur of: (1) the date of transfer of the partnership’s real estate assets; (2) the date on which the current general partner resigns, withdraws or is removed as general partner; or (3) July 31, 2018. As such, the promissory notes are presently in default and the Company is exploring its enforcement options. The promissory notes are cross collateralized and secured by real estate and other assets owned by such partnerships. These promissory notes and the related accrued interest receivable have been eliminated in consolidation.

Investment in Unconsolidated Entities

As described in Note 6, during the year ended December 31, 2019, the Company entered into a joint venture agreement with Juniper New Mexico, LLC and Juniper Bishops Manager, LLC (both related parties of Jay Wolf, a director of the Company) to participate in a $10.0 million mezzanine loan to be used to finance the renovation of a luxury resort located in Santa Fe, New Mexico. The mezzanine loan is secondary to a senior mortgage loan funded by an unrelated party. The JV is sponsored and managed by Juniper Bishops Manager, LLC, which manages and controls the joint venture. IMH BL Mezz Lender’s maximum commitment under this investment is $3.9 million (or 39% of the $10.0 million loan), of which $3.8 million was funded as of December 31, 2019 and is reflected in investment in unconsolidated entities in the accompanying consolidated balance sheets. The Company funded $0.1 million of its remaining obligation subsequent to December 31, 2019.