NOTICE OF CERTIFICATION OF SETTLEMENT CLASS, PROPOSED SETTLEMENT OF CLASS ACTION, SETTLEMENT HEARING AND RIGHT TO APPEAR

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1 IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE X IN RE IMH SECURED LOAN FUND : CONSOLIDATED UNITHOLDERS LITIGATION : Civil Action No CS X NOTICE OF CERTIFICATION OF SETTLEMENT CLASS, PROPOSED SETTLEMENT OF CLASS ACTION, SETTLEMENT HEARING AND RIGHT TO APPEAR TO: ALL FORMER UNITHOLDERS OF THE IMH SECURED LOAN FUND WHO WERE RECORD HOLDERS AS OF MAY 13, 2010, AND WHOSE UNITS HAVE BEEN CONVERTED INTO SHARES OF IMH FINANCIAL CORPORATION PURSUANT TO THE CONVERSION TRANSACTION DESCRIBED BELOW (THE CLASS ). EXCLUDED FROM THE CLASS ARE THE DEFENDANTS IDENTIFIED BELOW, ANY ENTITY IN WHICH ANY DEFENDANT HAS A CONTROLLING INTEREST; THE OFFICERS, DIRECTORS, AFFILIATES, LEGAL REPRESENTATIVES, HEIRS, SUCCESSORS, SUBSIDIARIES, AND/OR ASSIGNS OF ANY SUCH INDIVIDUAL OR ENTITY; AND ANY OF THE BROKER-DEALERS (OR ANY OF THEIR AGENTS OR REPRESENTATIVES) WHICH SOLD UNITS TO CLASS PLAINTIFFS OR THE MEMBERS OF THE CLASS. PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL BE AFFECTED BY THE LEGAL PROCEEDINGS IN THIS LITIGATION. IF THE COURT APPROVES THE PROPOSED SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS, REASONABLENESS AND ADEQUACY OF THE PROPOSED SETTLEMENT AND FROM PURSUING ANY OF THE SETTLED CLAIMS (DEFINED BELOW) ON YOUR OWN, OUTSIDE OF THIS CLASS. WHY DID I GET THIS NOTICE? The purpose of this Notice is to inform you of: (1) a class-action lawsuit, In re IMH Secured Loan Fund Unitholders Litigation, Civ. Action No CS (Del. Ch.) (the Action ) pending in the Delaware Court of Chancery (the Court ) against IMH Secured Loan Fund, LLC (the Fund ), Investment Mortgage Holdings, Inc. (the Manager of the Fund prior to its conversion), IMH Holdings, LLC ( Holdings ), another related entity which provided the Fund and affiliates of the Manager with human resources and administrative services), IMH Financial Corporation ( IMH or the Company ), and Individual Defendants Shane Albers ( Albers ), William Meris ( Meris ) and Steven Darak ( Darak ) (collectively Defendants ), (2) the proposed settlement of the class claims asserted in this lawsuit (the Settlement ), and (3) your right to object to the proposed Settlement and/or Class Plaintiffs counsel s request for an award of attorneys fees and expenses or award to some or all of the Class Plaintiffs. IMH s records reflect that you are a member of the Class and this Notice explains the rights of Class members and what steps you may, but are not required to, take in relation to the proposed Settlement. If the Court approves the proposed Settlement, the parties will ask the Court to enter a Final Order and Judgment dismissing the class claims asserted in the lawsuit with prejudice, which would preclude any more litigation by Class members concerning the facts, events, claims asserted in, claims that could have been asserted in, or subject matter of, this lawsuit against the Defendants and various related parties, but not against any broker which sold Units in the Fund to Class members, as described in detail below in the section entitled WHAT ARE THE SETTLED CLAIMS. THE FOLLOWING DISCUSSION DOES NOT CONSTITUTE FINDINGS OF THE COURT. IT IS BASED ON STATEMENTS OF THE PARTIES AND SHOULD NOT BE CONSTRUED AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS (OR LACK THEREOF) OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES. 1

2 WHAT IS THIS LAWSUIT ABOUT? The claims of Plaintiffs IRA FBO Dennis Miceli, Charlotte Wood, Howard Weitz IRA (collectively, Class Plaintiffs ) in the Action are stated in the Verified and Supplemental Consolidated Class Action Complaint (the Complaint ), filed with the Court on July 15, This Action concerns an allegedly unfair transaction (referred to as the Conversion Transaction) proposed and coordinated by the Individual Defendants controlling shareholders of the Manager and Holdings to convert the Fund, which was owned by Unitholders, into IMH and have IMH purchase the Individual Defendants ownership interests in the Manager and Holdings for allegedly excessive consideration. These transactions were implemented pursuant to an affirmative vote from Fund Unitholders obtained through a Consent Solicitation/Prospectus dated May 14, 2010 (the Consent Solicitation/Prospectus ). Before the completion of the Conversion Transaction, the Fund was managed and operated by the Manager, which was wholly owned by the Individual Defendants. As a part of the Conversion Transaction, the newly formed IMH purchased the Individual Defendants controlling interest in the Manager and Holdings, paying for that interest with IMH stock. The Class Plaintiffs assert that the Individual Defendants thereby received significant economic benefits to which they would not have otherwise been entitled, and did so to the alleged detriment of Unitholders of the Fund as of May 13, On May 14, 2010 the Individual Defendants, through their control of the Manager, commenced seeking Unitholder approval of the Conversion Transaction. On June 9, 2010, IMH announced it had secured enough votes from Unitholders to approve the Conversion Transaction, which was thereafter consummated on June 18, The Complaint alleges that the Individual Defendants breached their fiduciary duties to the Unitholders because the Conversion Transaction was neither substantively nor procedurally fair to the Unitholders for the following reasons: The Conversion Transaction Was Allegedly Procedurally Unfair: The Complaint alleges that the Individual Defendants stood to benefit personally from the approval of the Conversion Transaction, and therefore had a conflict of interest. In addition, the Complaint alleges that no independent entity or person, whether an attorney or investment advisor, represented the Unitholders interests in the negotiation of the terms of the Conversion Transaction, in determining whether the Conversion Transaction was an appropriate strategy for the Unitholders, or in determining the consideration to be paid in IMH s acquisition of the Manager and Holdings. It is also alleged that Individual Defendants thwarted a full and fair vote by: (1) soliciting votes by means of a misleading Consent Solicitation/Prospectus; (2) soliciting votes before the Securities and Exchange Commission (the SEC ) declared the Consent Solicitation/Prospectus effective; (3) impeding Unitholder consideration of the views of opponents of the Conversion Transaction including Unitholder David Kurtz and the Committee to Protect IMH Secured Loan Fund (the Committee ); and (4) posting a video on the IMH website (a transcript of which was also filed with the SEC on Form 425) of both Albers and Meris in which they made several statements which, allegedly, materially differed from statements contained in the Consent Solicitation/Prospectus. The Conversion Transaction Was Allegedly Substantively Unfair: The Complaint alleges that the Conversion Transaction was a self-dealing transaction proposed by the Individual Defendants which allowed them to: (a) exchange their interests in the Manager and Holdings, each of which had lost significant value, for a disproportionate ownership interest in IMH; (b) transfer all liabilities and ongoing expenses of the Manager and Holdings to IMH; (c) withdraw remaining cash of approximately $4 million from the Manager and Holdings; and (d) become executive officers of IMH with significant salaries and eligibility to receive bonuses as well as stock options pursuant to the 2010 Stock Incentive Plan, which allocated 1.2 million shares initially, with the potential for 600,000 additional shares upon achieving an Initial Public Offering, for a total of 1.8 million shares. Although these shares were deemed to be for use by the Company, a significant portion of these shares would be made available to the Individual Defendants (and others) by their eligibility to participate in that Stock Incentive Plan. Additionally, as a result of newly issued shares used as consideration for the purchase of the Manager and Holdings, Unitholders sustained dilution of their voting rights and ownership rights in IMH. The Complaint further alleges that the Fund and Manager breached the Restated Operating Agreement (the Operating Agreement ) dated March 30, 2006, which governed Unitholder rights regarding their investments in the Fund, by failing to provide contractual roll-up rights to those Unitholders who voted against the Conversion Transaction. The Operating Agreement provided that each Unitholder was entitled to certain rights in the event of a roll-up transaction, defined in the Operating Agreement as a transaction that would result in a significant adverse change in any one of the following: (a) Unitholders voting rights; (b) the term of existence of the Company; (c) Manager compensation; or (d) the Company s investment objectives. The Complaint alleges that the Conversion Transaction effected a signifi- 2

3 cant adverse change in each of these factors with the exception of the term of existence of the Company. If the roll-up rights specified in the Operating Agreement were applied to the Conversion Transaction, Unitholders who voted against the Conversion Transaction would have been afforded the option of receiving cash (rather than shares in IMH) in an amount equal to the Unitholder s pro rata share of the Net Asset Value of the Fund as of December 31, 2009 as determined by an independent appraiser, assuming an orderly liquidation of the Fund s assets in The Complaint also asserts breach of contract and breach of fiduciary duty claims with regard to a discrepancy of ten (10) shares in the exchange ratio described in the Consent Solicitation/Prospectus and the Conversion Plan. The foregoing claims asserted in the Action are referred to herein as the Class Claims. WHAT HAS HAPPENED IN THE LAWSUIT? This lawsuit originated as three separately filed class actions and one individual action against the Defendants. On May 25, 2010, Miceli v. Investors Mortgage Holdings Inc., et al., C.A VCS (the Miceli Action ) was commenced as a class action on behalf of all Unitholders. The complaint alleged breach of fiduciary duty claims in connection with the proposed Conversion Transaction. Other Unitholders filed three subsequent actions alleging other infirmities in association with the Conversion Transaction: (1) on June 14, 2010, Ronald Tucek, Cliff Ratfliff, and LGM Capital Partners, LLC ( LGM ) filed an individual action seeking injunctive relief and reimbursement of LGM s expenses in connection with its failed proxy solicitation to become the new manager of the Fund (Ronald Tucek, Cliff Ratfliff, and LGM Capital Partners LLC v. IMH Secured Loan Fund LLC, et al., C.A VCS (the LGM Action )); (2) on June 15, 2010, Charlotte Wood commenced a class action on behalf of all Unitholders alleging solely breaches of fiduciary duty (Charlotte Wood v. IMH Secured Loan Fund LLC, et al., C.A VCS (the Wood Action )); and (3) on June 17, 2010, Howard Weitz, IRA filed a class action on behalf of a limited class of Unitholders (those who voted against the Conversion Transaction) for failing to provide roll-up rights to these class members (Weitz v. Investors Mortgage Holdings Inc., et al., C.A VCS (the Weitz Action )). On October 25, 2010, the judge presiding over the four separate actions, Chancellor Leo E. Strine, Jr., ordered that they be consolidated into one action and be subject to a single complaint. At that time, the Court appointed the law firms of Klafter Olsen & Lesser LLP and Zwerling Schachter & Zwerling, LLP to serve as Co-Lead Counsel for the Action. Plaintiffs filed their Consolidated Amended Complaint on December 17, 2010, which included the Class claims described above and the individual claims asserted by LGM and its co-plaintiffs (the LGM Proxy Claim ). Co-Lead Counsel, together with additional counsel for the Class Plaintiffs are referred to herein as Class Counsel. On February 1, 2011, Defendants filed a Motion to Dismiss Class Plaintiffs misrepresentation claims and the claims related to the 10 share discrepancy, and LGM s Proxy Claim. Defendants answered the other claims but strongly disputed that they were liable for any breach of contract or breach of fiduciary duty. On March 4, 2011, Class Plaintiffs addressed document requests to Defendants directed to those Class Claims that Defendants answered. Defendants responded to those requests on March 24, 2011 and the parties thereafter began to negotiate the contours of the documents Defendants would produce. On March 11, 2011, Class Plaintiffs responded to Defendants Motion to Dismiss certain of the Class claims and on April 1, 2011, Defendants filed their reply brief. On June 13, 2011, the Court heard oral arguments regarding the Defendants motion to dismiss. At the conclusion of the hearing, the Court directed the preparation of a revised consolidated complaint, stayed discovery, and suggested that the parties discuss settlement. The Court did not rule on Defendants Motion to Dismiss. Plaintiffs then filed the Complaint on July 15, 2011, which contained substantially the same Class Claims but, at the Court s direction, substantially limited the LGM Proxy Claim. On August 29, 2011, Defendants again moved to dismiss the same Class Claims and the LGM Proxy Claim, and answered the same Class claims as they answered in responding to the original Consolidated Amended Complaint. On September 28, 2011, Class Plaintiffs filed their opposition to Defendants motion to dismiss. On November 2, 2011, Defendants filed a reply brief in support of their motion to dismiss. Along with the Defendants reply, however, they also filed an amended motion to dismiss by which they sought dismissal of all of Class Plaintiffs claims except for the roll-up contract claim, on the grounds that if the Court granted their motion to dismiss the misrepresentation claims, the Conversion Transaction would have then been approved by a fully informed electorate. 3

4 On November 10, 2011, Class Plaintiffs moved to strike Defendants reply brief and amended motion to dismiss as improper. The Court granted the Class Plaintiffs motion; however, it did not preclude the Defendants from raising this argument later in the litigation. Over a three-month period commencing just prior to Defendants filing of their reply brief and amended motion to dismiss, counsel for the parties participated in a number of in-person meetings and telephone calls in an attempt to resolve the Class Claims. Only after extensive arms -length negotiations did the parties reach an agreement-in-principle to resolve the Class claims, as set forth in a Memorandum of Understanding ( MOU ) executed on January 31, 2012, which IMH publicly filed with the SEC on Form 8-K on February 6, The settlement described in the MOU, however, was subject to confirmatory discovery, the negotiation and execution of a settlement agreement and its exhibits, and final Court approval. The confirmatory discovery Class Plaintiffs conducted included the review of more than 17,000 pages of documents produced by IMH and a third party, principally concerning: (1) the basis for the valuation of the Manager, (2) the likely proceeds realizable from an assumed liquidation of the Fund s assets during the difficult real estate market that prevailed in 2010, and (3) IMH s ability to meet its obligations under the terms of the Convertible Notes and Shareholder Notes provided for pursuant to the proposed settlement (as described in detail below). Class Plaintiffs explored these issues, as well as the merits of the Class Claims and the fairness of the proposed Settlement through depositions of Defendants Meris and Darak, a representative of Sutter Securities (which had opined on the fairness of the consideration provided to the Individual Defendants pursuant to the Conversion Transaction), and a representative of Juniper Capital Partners, LLC (which negotiated the purchase of Defendant Albers shares as described below). Co-Lead Counsel also analyzed the testimony that each of the Individual Defendants provided in the course of the SEC s investigation of IMH. Only after exploring these issues in detail did Class Plaintiffs and their counsel determine to go forward with the proposed settlement, which is set forth in the Stipulation of Settlement, which was executed on March 19, 2013, after extensive additional negotiations over, among other documents, the Stipulation of Settlement, all of the offering documents included on the enclosed CD, and this Notice. On March 21, 2013, in furtherance of the proposed Settlement and on the consent of the parties, the Court entered a Scheduling Order by which it preliminarily certified, for settlement purposes only, a non-opt out Class pursuant to Court of Chancery Rule 23(a) and (b)(1) as follows: all former Unitholders of the Fund who were record holders as of May 13, 2010, and whose Units have been converted into shares of IMH pursuant to the Conversion Transaction. Excluded from the Settlement Class shall be the Defendants herein, any entity in which any Defendant has a controlling interest; the officers, directors, affiliates, legal representatives, heirs, successors, subsidiaries, and/or assigns of any such individual or entity; and any of the broker-dealers (or any of their agents or representatives) which sold Units to Class Plaintiffs or the members of the Class. The Court also directed that this Notice and the accompanying CD containing certain documents be disseminated to Class members and set June 20, 2013 as the date on which it will consider the fairness of the proposed Settlement and the application of Class Counsel for an award of attorneys fees and expenses and for an award to Class Plaintiffs (the Settlement Hearing ) as described below in the section entitled WHEN AND WHERE WILL THE COURT DECIDE WHETHER TO APPROVE THE PROPOSED SETTLEMENT AND CLASS COUNSELS FEE AND EXPENSE APPLICATION? WHAT BENEFITS DOES THE SETTLEMENT PROVIDE? Subject to Court approval, the proposed Settlement provides the following benefits to Class members: 1. Within 30 days after Final Approval (and subject to compliance with relevant laws and regulations) IMH will proceed with a $20 million subordinated notes offering (the Notes Offering ) by which the members of the Class shall have the option to exchange, in the aggregate, up to 2,493,765 IMH shares for notes bearing interest at 4% per annum (the Shareholder Notes ) at an exchange rate of $8.02 in Shareholder Notes per IMH share, as further described below under the heading WHAT ARE THE TERMS OF THE SHAREHOLDER NOTES? Converting IMH shares into debt provides at least the following advantages to Class members: (a) the Shareholder Notes provide a fixed interest payment over five years, while future dividends on IMH stock are uncertain in timing and amount; (b) as described below, IMH is obligated to redeem the Shareholder Notes prior to their maturity in certain circumstances; there is no obligation on 4

5 the part of IMH to repurchase any IMH stock, except Series C stock following a public offering; (c) the Subordinated Notes will be exchanged for $8.02 per IMH share while the future value of IMH stock is uncertain; and (d) in the event IMH seeks bankruptcy protection, the Shareholder Notes, while subordinate to any IMH senior indebtedness, will be senior in payment priority to common stock. 2. Within 30 days after Final Approval (and subject to compliance with relevant laws and regulations) IMH will proceed with a $10 million rights offering (the Rights Offering ) which will allow Class members, provided they are accredited investors, to purchase IMH convertible notes on the same financial terms as those purchased by NW Capital (the Convertible Notes ), as further described below under the heading WHAT ARE THE TERMS OF THE CONVERT- IBLE NOTES? As has been previously reported, IMH is obligated to pay NW Capital 17% interest on its loan to the Company and this obligation is secured by most of IMH s assets. Class members opting to take advantage of this opportunity will be entitled to receive the same return on the Convertible Notes on the same secured basis as NW Capital. 3. IMH and its insurer will pay on behalf of the Defendants at least $1,345, (and possibly up to $1,570,000.00, to the extent costs related to the defense and possible resolution of other lawsuits against IMH concerning the Conversion Transaction do not exhaust a $225, reserve fund established by IMH (the Reserve Fund )) (the Cash Consideration ), from which Class Counsel will seek Court approval to use to pay all or a portion of their attorneys fees and expenses, including the costs of the administration of this settlement by the Claims Administrator (McGladrey LLP). To the extent Class Plaintiffs do not seek or the Court does not award the full amount of the Cash Consideration, it will, if economically feasible, be distributed to Class members by the Claims Administrator in proportion to their respective ownership of IMH shares as of June 23, As discussed under the heading HOW WILL THE LAWYERS BE PAID, Class Counsel will also seek a portion of the payments to be made on the Shareholder Notes for their attorneys fees. In addition to this monetary consideration, as further described under the heading WHAT ARE THE CHANGES TO IMH S BUSINESS?, the proposed Settlement provides for various changes to how IMH will conduct its business going forward for the benefit of investors and places certain restrictions on the rights of the Individual Defendants, as follows: a. IMH shall not grant any new annual award of stock options for the fiscal years 2012 and 2013 to Defendants Meris and Darak (Defendant Albers is no longer employed by IMH). The MOU referred to 2011 and 2012 but given that 2011 has already concluded, and no new options were granted in 2012, 2012 and 2013 reflects the intent of the parties to bar Defendants Meris and Darak from receiving any additional options for two full years. b. Defendants Meris and Darak further agree to additional restrictions on the sale of their IMH stock. c. IMH shall appoint at least two (2) independent directors to the IMH Board of Directors. d. IMH shall establish a five (5) person Investor Advisory Committee comprised of various categories of IMH shareholders and a representative from each of IMH s broker-dealer and Registered Investment Advisor (RIA) networks, for the purpose of providing independent input to the IMH Board of Directors. If you want to be considered for service on this committee, see WHAT ARE MY OPTIONS? below. e. New World Realty Advisors, LLC ( NWRA ) and IMH have agreed that the NWRA consulting contract dated as of February 28, 2011 shall be terminable by the IMH Board of Directors upon repayment in full of the IMH indebtedness to NW Capital. WHY DID THE PARTIES AGREE TO THIS PROPOSED SETTLEMENT? Class Plaintiffs and Class Counsel have carefully considered the merits of the claims they asserted in this Action. While Class Plaintiffs and Class Counsel believe that the Class Claims have merit, in agreeing to the proposed settlement, Class Plaintiffs and their counsel have considered the risks of continued litigation and the uncertainty of a successful outcome of the Action for Class members. Specifically, Defendants have asserted a number of defenses to the Class Claims they contend are compelling including that: (1) the Conversion Transaction did not constitute a Roll-Up transaction (for the extensive reasons set forth in the Consent Solicitation/Prospectus); (2) the consideration paid to the Individual Defendants for their ownership interests in the Manager was determined to be reasonable by valuation specialist, Sutter Securities, which was an independent party that viewed the transaction objectively; (3) the 10 share discrepancy between the exchange rate for Units into shares of IMH was a minor clerical error that only appeared one time and was corrected; and (4) the alleged misrepresentations that Defendants made in connection with the Conversion Transaction were merely inconsistencies and were inadvertent and regardless of intent, are not actionable in light of all 5

6 the information disclosed in the Consent Solicitation/Prospectus. Furthermore, Defendants contend that the Consent Solicitation/Prospectus was an iterative document that, in the interest of full and fair disclosure, incorporated multiple revisions/amendments prior to being finalized. In addition, Defendants contend that if they were successful in convincing the Court to dismiss Class Plaintiffs misrepresentation claims, the Conversion Transaction would have been approved by a fully informed electorate and that, as a result, Plaintiffs breach of fiduciary duty claims would be subject to a business judgment defense a difficult defense for Class Plaintiffs to overcome. Class Plaintiffs believe Defendants arguments and contentions are not irrefutable; however, there is no guarantee that Class Plaintiffs and their counsel would have been successful in convincing the Court to deny the Defendant s pending motion to dismiss or in ultimately proving any liability and damages whatsoever. Further, had the Action continued, the insurance paying for the Defendant s defense would have been exhausted, thereby requiring IMH to expend its own limited cash to defend the Action to the detriment of Class members, each of whom are now IMH shareholders. Accordingly, had the Action not been settled, there would have been substantial risks to achieving any recovery on behalf of the Class and substantial risks to IMH s business going forward. Settling the Class Claims will also permit the Company to focus on improving its financial condition without the distraction of this Action and eliminate one of the impediments to moving forward with an initial public offering or other event of similar economic benefit to shareholders. Given these risks, and the substantial benefits provided by the proposed Settlement, Class Plaintiffs and their counsel believe that the terms and conditions of the proposed Settlement are fair, reasonable and adequate and that it is in the best interest of Class Plaintiffs and the members of the Class to settle the Class Claims on the terms described in this Notice. Defendants have vigorously denied, and continue to deny (a) any wrongdoing or liability with respect to all claims, events and transactions complained of in the Action; (b) that they engaged in any form of wrongdoing; (c) that they committed any violation of law; (d) that they breached any fiduciary duties; (e) that they acted improperly in any way; and (f) any liability of any kind to Class Plaintiffs or the Class. Nevertheless, Defendants consider it desirable that the Class Claims be settled and dismissed on the merits and with prejudice and without costs to any party (except as set forth below) in order to: (i) avoid the ongoing distraction, burden and expense of further litigation; (ii) dispose of potentially burdensome, disruptive, protracted and costly litigation; (iii) finally put to rest and terminate litigation concerning the Conversion Transaction; and (iv) remove a major impediment to accessing capital markets and moving the Company forward in general. WHAT ARE THE TERMS OF THE SHAREHOLDER NOTES? IMH shall, within 30 days after the Final Approval of the Settlement, subject to certain conditions set forth in the Stipulation, proceed with a $20 million Notes offering by which the members of the Class shall have the option to exchange, in the aggregate, 2,493,765 shares of IMH common stock for Shareholder Notes bearing interest at 4% per year, payable quarterly and maturing in 5 years, subject to certain exceptions described below. The exchange rate is $8.02 in face-value of Shareholder Notes per IMH share, but shares will only be exchangeable in 25 share lots for $200 worth of Shareholder Notes [$8.02 x 25 = $200.50]. You will receive a check for $0.50 for each 25 share lot that is exchanged for Shareholder Notes. However, to the extent the Court awards to Class Counsel fees payable from Shareholder Notes, you will not receive the full interest or principal payments on your Shareholder Notes received. For example, if the Court awards Class Counsel the rights to ten percent of the payments on the Shareholder Notes, you will receive 4% interest per year on $180 worth of Shareholder Notes and $180 in principal payments for each 25 share lot exchanged. Class Counsel maintain that they are entitled to a share of the payments made in respect of the Shareholder Notes under well-settled legal principles that entitle counsel who create a benefit for a class to be paid a share of the benefit for their attorneys fees. The Shareholder Notes are subject to various additional terms as described in the documents included on the enclosed CD. If you would like a paper copy of these materials, they are available upon request from the Claims Administrator by writing to the IMH Secured Loan Fund Unitholders Litigation, c/o McGladrey LLP, P.O. Box 1327, Blue Bell, PA These documents are substantially complete but are subject to revision and completion, and do not constitute a present offer of Shareholder Notes. The actual offering documents will only be available at the time the offering commences but should be substantially similar to the ones on the CD. In addition to reading the form of documents on the enclosed CD, you should carefully read the Shareholder Note Offering Documents when you receive them. 6

7 The Shareholder Notes shall be issued in book entry form (meaning you will not receive any Shareholder Notes issued to you; only a statement indicating that you are the beneficial owner of whatever amount of Shareholder Notes you are entitled to receive for your IMH shares). Instead, they will be represented by a single Global Note administered by an institutional trustee (the Trustee ) and a custodian selected by IMH for the benefit of all holders of the Shareholder Notes. The Trustee s and custodian s reasonable and customary expenses shall be borne by the Company. The Shareholder Notes shall be subordinated in payment and priority to IMH s debt resulting from a loan from NW Capital dated June 7, 2011 ( NW Capital Loan ), 1 the Convertible Notes issued pursuant to the Rights Offering (as described below), and any additional senior debt obligation now existing or subsequently incurred by IMH. In addition, the Shareholder Notes shall continue to be subordinated in payment and priority to any shares of IMH preferred stock into which the NW Capital Loan and Convertible Notes are converted (collectively, together with any additional senior debt obligation now existing or subsequently incurred by IMH, the Senior Obligations ), in whole or in part, pursuant to the Agreement between NW Capital and the Trustee for the Shareholder Notes ( Exchange Offering Agreement ), substantially in the form included on the enclosed CD. The Company will make regularly scheduled payments, including quarterly interest and principal payments despite these subordination provisions so long as certain conditions are satisfied as provided in the Exchange Offering Agreement, as summarized below. Subject to the Exchange Offering Agreement, redemption of the Shareholder Notes shall be as follows: i. (a) 50% of the principal amount of each Shareholder Note shall be payable four years after issue, so long as the Company has cash or cash equivalents in the amount of at least $10 million plus two times the trailing net operating expenses for the prior 12 month period and has an operating profit defined as net earnings plus depreciation for the prior 12 months; provided, however, that the Company shall not be in default on a Senior Obligation or by virtue of making the payment shall not become in default on such a Senior Obligation; and (b) five years after issue, the remaining principal and any interest due on each Shareholder Note shall be paid, provided, however, that the Company shall not be in default on a Senior Obligation or by virtue of making the payment shall not become in default on such a Senior Obligation. In the event of such a default or default that would exist in the event of such a payment, neither the 50% principal payment nor the final payment in year five will be made so long as the default is not cured and still exists, or such payment would continue to result in a default. ii. (a) All of the outstanding Shareholder Notes shall be redeemed upon the consummation of a public offering by IMH in an amount not less than $150 million; or (b) at any time in the discretion of IMH with any remaining principal and accrued interest or interest then due. iii. In the event a continuing default that exists or would exist on any Senior Obligation prevents any payments on the Shareholder Notes, no further payments (interest or principal) would be made on the Shareholder Notes until and unless all Senior Obligations are paid in full. IMH shall not enter into any Senior Obligation that expressly provides that the redemption of the Shareholder Notes shall constitute an event of default on such Senior Obligation, but such Senior Obligation shall not be prohibited from having customary affirmative and restrictive covenants relating to, among other matters, tangible net worth, debt service coverage and liquidity. IMH shall only be authorized to issue additional debt senior to the Shareholder Notes so long as the amount of total shareholders equity after such issuance is greater than twice the amount of the then outstanding aggregate principal amount of the Shareholder Notes. The $20 million Notes offering will be divided into two separate pools of $10 million each to be divided according to how each individual Class member voted on the Conversion Transaction: One pool of $10 million principal amount of Shareholder Notes will initially be made available only to those Class members who cast a vote against the Conversion Transaction and whose votes were received by IMH by June 23, 2010 (the No Vote Pool ). Approximately 11% of the outstanding Units in the Fund (now representing 1,883,169 IMH shares) are eligible to participate in the No Vote Pool. The other pool of $10 million principal amount of Shareholder Notes will initially be made available only to all other members of the Class (now holding approximately 14 million IMH shares) 1 The NW Capital Loan Agreement, as amended, can be found on the enclosed CD or at 7

8 who wish to exchange IMH shares (the Open Pool ). Class members will have the right to exchange shares in their respective Shareholder Notes Pool on a pro rata basis subject to the following restrictions: 1. If the Open Pool is not exhausted and the No Vote Pool is oversubscribed, then the oversubscribed exchange requests of no voters shall be satisfied by the excess in the Open Pool on a pro rata basis. 2. If the No Vote Pool is not exhausted and the Open Pool is oversubscribed, then the oversubscribed exchange requests of the Open Pool shall be satisfied by the excess in the No Vote Pool on a pro rata basis. 3. To the extent that any amount of the two Shareholder Notes Pools (i.e., $20 million) remains after all exchange requests have been satisfied, such excess Shareholder Notes shall not be issued. The allocation of the Shareholder Notes in the two pools shall be administered by an exchange agent selected by the Company. If you wish to exchange some or all of your IMH shares for Shareholder Notes, you must follow the instructions set forth in the final offering documents that will be sent to you following Final Approval. As noted above, the Shareholder Notes will be subordinated to the Senior Obligations. For a full description of the subordination terms, see the Exchange Offering Agreement included on the enclosed CD. The Global Note will be held for the benefit of NW Capital as security for the Senior Obligations payable to NW Capital and the holders of the Convertible Notes described below. Although the Shareholder Notes are subordinated to the Senior Obligations, regularly scheduled payments will be made on the Shareholder Notes as long as the following conditions, described in more detail in the Exchange Offering Agreement, are satisfied: no default or event of default has occurred and is continuing with regard to any of the Senior Obligations; no event has occurred which, with the giving of notice or the passage of time or both, would constitute an event of default on the Senior Obligations; no Trigger Event (as defined in the Exchange Offering Agreement and summarized below) has occurred; no Default Event(as defined in the Exchange Offering Agreement and summarized below) has occurred except to the extent described below; and no Deficiency Event (as defined in the Exchange Offering Agreement and summarized below) has occurred and is continuing. Default Event generally means an act or omission by any Exchange Offering Noteholder (or any Person acting together with, or on behalf of, any Exchange Offering Noteholder) (x) with an expression of intention of causing, or which could cause an Adverse Effect, and (y) in which any such Person should have reasonably known that taking or omitting to take such action could cause, an Adverse Effect. A Default Event will also occur if any bankruptcy case as to the Exchange Offering Indenture Trustee (which does not involve the Exchange Offering Trust Indenture) is commenced. Adverse Effect generally means an actual adverse effect upon the NW Capital Loan, NW Capital's interest in the Loan or any rights accruing therefrom. Trigger Event generally means (1) an act or omission by the Exchange Offering Indenture Trustee (or any Person acting together with, or authorized to act on behalf of, Exchange Offering Indenture Trustee), that either (x) is made with an expression of an intention of causing, or which could cause, an Adverse Effect, or (y) which such Person should have reasonably known that taking or omitting to take such action could cause, an Adverse Effect; (2) in connection with, or subsequent to the conversion of the NW Capital Loan into Series A Preferred Stock, any bankruptcy proceeding as to IMH or any of its subsidiaries except as approved by NW Capital; or (3) any bankruptcy proceeding in which the trust created by the Exchange Offering Trust Indenture is subject. A Trigger Event, however, shall not include a Default Event. Upon the occurrence of a Default Event, payments on the Shareholder Notes will be suspended and further payments will be subject to the following terms: For up to 180 days after the Default Event, NW Capital is entitled to determine its reasonable estimate of all costs and damages and other related fees and expenses that it and its related parties (each an Indemnified Party ) may sustain as a result of the Default Event (the Potential Default Event Costs ). 8

9 The Exchange Offering Agreement contains a procedure to determine the final estimate of the Potential Default Event Costs (the Applicable Estimate ). Until final resolution of the Potential Default Event Costs in accordance with the procedures set forth in the Exchange Offering Agreement, no further payments under the Exchange Offering Indenture Notes will be made to holders of Shareholder Notes but such funds will be held in trust for the benefit of NW Capital. Once the Applicable Estimate is determined, all future payments under the Exchange Offering Indenture Note shall be held in trust for the benefit of NW Capital until 150% of the NW Capital Estimate has been accumulated in trust (the Holdback Amount ). The Holdback Amount may be paid to NW Capital. Payments can resume on the Shareholder Notes provided all of the conditions set forth above are met (no Trigger Event or new Default Event occurs) and there is no Deficiency Event. Deficiency Event means either (i) that the Holdback Amount has been reduced to an amount equal to or less than forty percent (40%) of the originally funded Holdback Amount, and NW Capital, in its reasonable discretion, determines that no additional funds are necessary to fund the actual costs and damages that NW Capital and/or any Indemnified Party may sustain as a result of such Default Event, or (ii) the amounts remaining in trust to fund the Holdback Amount are insufficient to fund the costs and damages that NW Capital and/or any Indemnified Party actually sustain as a result of the Default Event giving rise to the Holdback Amount) If there is a Deficiency Event, amounts required to cover such deficiency, as more particularly described in the Exchange Offering Agreement, must first be accrued in trust for the benefit of NW Capital, before payments can resume on the Shareholder Notes. Upon the occurrence of a Trigger Event resulting from clause (2) of the definition of Trigger Event described above (that is, a bankruptcy proceeding as to IMH or any of its subsidiaries has occurred in connection with, or subsequent to, NW Capital s conversion of its loan into preferred stock), NW Capital is entitled to foreclose on the Global Note. Upon doing so, NW Capital has agreed to undertake commercially reasonable efforts to seek to engage an institutional trustee (a Delegate ) to pursue a claim against IMH and/or its subsidiaries for a recovery on the Global Note for the benefit of NW Capital and the Exchange Offering Noteholders. The ability of the Exchange Offering Noteholders identified in the Note Register prior to the foreclosure to receive payments in such event, however, will be completely contingent upon the payment in full of the Senior Obligations and the existence of any excess proceeds recovered under a claim by the Delegate against IMH and/or its subsidiaries for the Exchange Offering Indenture Notes after the payment in full of the Senior Obligations. Upon the occurrence of a Trigger Event resulting from clause (1) and (3) of the definition of Trigger Event described above, NW Capital is also entitled to foreclose on the Global Note. Upon doing so, NW Capital has agreed to also undertake commercially reasonable efforts to seek to engage an institutional trustee (a Delegate ) to perform the obligations of the Exchange Offering Indenture Trustee pursuant to and in accordance with the Exchange Offering Trust Indenture. Following the appointment of a Delegate, and absent a default of IMH or any of its subsidiaries on any Senior Obligation, such Delegate shall remit all amounts due and payable pursuant to the terms of the Exchange Offering Trust Indenture in the following order: (1) first, to NW Capital, in an amount equal to all costs and damages, fees and expenses that NW Capital and/or any Indemnified Party may sustain as a result of such Trigger Event, and (2) second, any remaining amounts to the Exchange Offering Noteholders as identified in the Note Register prior to the foreclosure. Upon the occurrence of any default of any Borrower Entity under the Senior Obligations and the acceleration of the Senior Obligations by NW Capital, such Delegate shall remit all amounts due and payable pursuant to the terms of the Exchange Offering Trust Indenture in the following order: (1) first, to NW Capital, in an amount sufficient to indefeasibly satisfy in full the Senior Obligations, and (2) second, any remaining amounts to the Exchange Offering Noteholders as identified in the Note Register prior to the foreclosure. The ability of the Exchange Offering Noteholders identified in the Note Register prior to the foreclosure to receive payments in such event, however, will be subject to the contingency described above in the previous paragraph. The foregoing description is qualified in its entirety by the more detailed description in the Exchange Offering Agreement included on the enclosed CD. WHAT ARE THE TERMS OF THE CONVERTIBLE NOTES? IMH shall proceed within 30 days after Final Approval of the Settlement, subject to certain conditions set forth in the Stipulation, to make a Rights Offering in the amount of $10 million to accredited investors, to purchase IMH Convertible Notes (the Convertible Notes ) with economic terms identical to those provided to NW Capital as a part of the NW Capital Loan (e.g., same coupon rate and terms, same maturity, same collateral pool), with certain exceptions. Specifically, the Convertible Notes shall be converted into Series A Preferred Stock if, and only to the extent that, NW Capital exercises its option contained in the NW Capital Loan Agreement to effect such conversion in the same propor- 9

10 tion as NW Capital exercises that right. The Convertible Notes are also subject to the Rights Offering Intercreditor Agreement also included on the enclosed CD. The Rights Offering Intercreditor Agreement, like the Agreement, requires payments on the Convertible Notes to be held in trust to satisfy any costs or damages suffered by NW Capital as a result of a Noteholder Event, which is similar to clause (1) of the definition of a Default Event, described above. The Rights Offering is open only to members of the Class who are accredited investors, as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended (the Securities Act ). If you would like to subscribe to the Rights Offering, you must follow the instructions set forth in the final offering documents that will be sent to you following Final Approval. However, you must establish your status as an accredited investor by filling out and returning the Accredited Investor Status Certificate attached to this Notice. If you want to participate in the Rights Offering and are an accredited investor, please complete, sign and return the Accredited Investor Status Certificate to the Claims Administrator at IMH Secured Loan Fund Unitholders Litigation, c/o McGladrey LLP, P.O. Box 1327, Blue Bell, PA not later than June 10, IMH reserves the right to verify any information or statements made in the Accredited Investor Status Certificate. If you do not fill out and return the Accredited Investor Status Certificate in accordance with this Notice, you will not be able to participate in the Rights Offering. By filling out and returning the Accredited Investor Status Certificate, you have not committed to participating in the Rights Offering, nor is any payment due from you at the time you fill out and return the Accredited Investor Status Certificate. The Convertible Notes shall be offered for purchase in minimum denominations of $ per Convertible Note, as described in the documents included on the enclosed CD. If you would like a paper copy of these materials, they are available upon request from the Claims Administrator by writing to the IMH Secured Loan Fund Unitholders Litigation, c/o McGladrey LLP, P.O. Box 1327, Blue Bell, PA These documents are subject to revision and completion, and do not constitute a present offer of Convertible Notes. The actual Convertible Notes offering documents will not be available until after Final Approval. In addition to reading the documents on the enclosed CD, you should carefully read the Convertible Notes Offering Documents when you receive them. NW Capital shall have the option to purchase any of the remaining Convertible Notes only after all members of the Class who are accredited investors and have established that status by completing the Accredited Investor Status Certificate and have had a full opportunity to participate in the Rights Offering. However, IMH may not use any of the proceeds of the Rights Offering to repay the NW Capital loan or other NW Capital indebtedness. The Rights Offering will be administered by a trustee or another agent selected by the Company with its reasonable and customary expenses paid for by IMH. Class members may, at their election, participate in the Notes Offering, the Rights Offering, or both, or neither, and may do so in whole or in part. If the proposed Settlement is approved and becomes final, you will be provided with the actual offering documents and instructions. However, as described above, you will not be able to participate in the Rights Offering unless you establish your status as an accredited investor by completing and returning the Accredited Investor Status Certificate attached to this Notice within the timeframe described above. Do not provide any payment for any Convertible Notes at this time. The Shareholder Notes and Convertible Notes may be transferred only among Class members, subject, in the case of the Shareholder Notes, to the consent of IMH, which shall not be unreasonably withheld, and in the case of the Convertible Notes, to the consent of NW Capital in its sole and reasonable discretion, and subject further to securities and other applicable laws. In addition, Class Members agree to abide by any and all current or future restrictions relating to the transfer of IMH s securities, equities or debt, which are established from time to time by the IMH Board of Directors for the purpose of preserving IMH s built-in tax losses, including but not limited to the Second Amended and Restated Bylaws of IMH Financial Corporation, which is included on the enclosed CD. WHAT ARE THE CHANGES TO IMH S BUSINESS? The Settlement Agreement calls for various changes to how IMH will conduct its business going forward for the benefit of investors and places certain restrictions on the rights of the Individual Defendants, as follows: Restrictions on the Individual Defendants: 1. Although the employment contracts currently anticipate an annual award of stock options to Individual Defendants Meris and Darak, IMH shall not award any new stock options under the 2010 Stock Incentive Plan for fis- 10

11 cal years 2012 and Moreover, IMH has not, prior to the date of the Stipulation, awarded any stock options under the 2010 Stock Incentive Plan for fiscal year 2012 to Meris and/or Darak. 2. If either Individual Defendant Meris or Darak separates from IMH without cause and seeks to have the restrictions on the sale of his Class B stock (i.e., Class B-1, B-2 and B-3 stock) lifted, then a determination must be made by independent IMH Directors or an independent third party that the separation from IMH is in fact a termination and not a resignation, and that the termination was without cause 3. Following an initial public offering of IMH stock, the restrictions on the Class B-4 stock owned by Individual Defendants Meris and Darak shall not be lifted until the expiration of the restrictions on the Class B-1, B-2 and B-3 stock. 4. IMH will not redeem any stock owned by Individual Defendants Meris and Darak while the Shareholder Notes remain outstanding. Changes to IMH s Business Operations: 1. IMH shall appoint at least two (2) independent directors to the IMH Board of Directors within 6 months of the final approval of the Settlement. 2. IMH shall establish a five (5) person Investor Advisory Committee ( IAC ) whose purpose will be to provide non-binding independent consultation and input to the IMH Board of Directors. The IAC shall be comprised of members who represent various categories of IMH shareholders, investors and broker-dealers and shall be appointed by the IMH Board of Directors with NW Capital s approval not to be unreasonably withheld. The IAC will meet with the IMH Board of Directors and/or management not less than once every four (4) months and provide input as to IMH s relevant plans and actions as they relate to Company business. The IAC may not be terminated until the appointment of a full Board of Directors (consisting of 7 members) with a majority of independent directors. The fully appointed Board of Directors may, in their discretion, seek to terminate or retain the IAC for any period of time thereafter. 3. The NWRA consulting contract dated as of February 28, 2011 shall be terminable by the IMH Board of Directors upon the full repayment of the NW Capital indebtedness, provided that the indebtedness has not been converted to preferred or common stock. Presently, the IMH Board of Directors may not terminate the NWRA consulting contract until February 28, 2015 even if the NW Capital is repaid other than for cause. WHAT ARE MY OPTIONS IF THE SETTLEMENT IS APPROVED? Pursuant to the proposed Settlement, you may elect to exchange some or all of your IMH shares (in 25 share increments) for Shareholder Notes and you may also elect to subscribe to the Rights Offering (in $100 denominations). If the Court approves the Settlement, you will be sent final versions of the Offering Documents and other documents that are on the accompanying CD. You may also request to be considered to serve on the Investor Advisory Committee described above. To do so, you should complete the attached Investor Advisory Committee Questionnaire. You may, instead, also do nothing. WHAT HAPPENS IF I DO NOTHING AT ALL? If the Court determines that the Settlement is fair, reasonable, adequate, and in the best interests of the Class, the parties will ask the Court to enter a Final Order and Judgment, which will, among other things: 1. approve the Settlement; 2. authorize and direct the performance of the Settlement and reserve jurisdiction to supervise it; 3. determine that the requirements of the Delaware Court of Chancery Rules and due process have been satisfied in connection with this Notice; 4. dismiss the Action with prejudice, bar prosecution of Settled Claims (as defined below), and grant the releases described more fully below; and 5. state the Court s decision on the application for attorneys fees and expenses to Class Counsel, including awards to Class Plaintiffs. 11

12 Note, however, that in order to be able to participate in the Rights Offering, which IMH intends to commence following Final Approval of the Settlement, you must establish your status as an accredited investor at this time by completing and returning the Accredited Investor Status Certificate attached to this Notice to McGladrey LLP at IMH Secured Loan Fund Unitholders Litigation, c/o McGladrey LLP, P.O. Box 1327, Blue Bell, PA not later than June 10, If you do not fill out and return the Accredited Investor Status Certificate in accordance with this Notice, you will not be able to participate in the Rights Offering. WHAT ARE THE RELEASED CLAIMS? If the proposed Settlement is approved by the Court and becomes final, you and your agents, officers, directors, employees, shareholders, parents, subsidiaries, affiliates, predecessors, inside and outside attorneys, executors, successors, heirs, assigns, administrators, agents and representatives, shall be deemed to have released, waived and forever discharged Defendants, Defendants agents, officers, directors, employees, shareholders (other than Class members), parents, subsidiaries, affiliates, predecessors, inside and outside attorneys, executors, successors, heirs, assigns, administrators, insurers, consultants and representatives (including, but not limited to, the Interested Non-Parties and/or any of their affiliates), but not any broker-dealers (or any of their agents or representatives) that sold Units in the Fund (collectively, the Released Parties ) from any and all claims, rights, demands in law or equity, charges, complaints, actions, causes of action, arbitrations or suits of any kind or nature, known or unknown, that have accrued or may hereafter accrue (including but not limited to those seeking damages and/or injunctive, declaratory, and/or other non-monetary relief, however described), that are based upon, arise out of, relate in any way to, or involve, directly or indirectly, any of the actions, transactions, occurrences, statements, representations, misrepresentations, omissions, allegations, facts, practices, events, claims or any other matters, things or causes whatsoever, or any series thereof, that have occurred on or before January 31, 2012 and were, could have been, or in the future can or might be alleged, asserted, set forth, claimed, embraced, involved, or referred to in, or related to, directly or indirectly, the Action or the subject matter of the Action in any court, tribunal, forum or proceeding, including, without limitation, any and all claims which are based upon, arise out of, relate in any way to, or involve, directly or indirectly: (i) any deliberations or negotiations in connection with the Conversion Transactions, including the process of deliberation or negotiation of any of the managers, officers, directors or advisors; (ii) the Conversion Transactions or the conversion of any Units in connection therewith; (iii) the consideration received by Class members in connection with the Conversion Transactions; (iv) the Form S-4, the Final Proxy and Consent Solicitation Prospectus, the Supplemental Disclosures or any other disclosures, SEC filings, public filings, periodic reports, press releases, proxy statements or other statements issued, made available or filed relating, directly or indirectly, to the Conversion Transactions, including without limitation, claims under any and all federal securities laws (including those within the exclusive jurisdiction of the federal courts) or state disclosure law; (v) any fiduciary obligations of the Released Parties in connection with the Conversion Transactions; (vi) the fees, expenses or costs incurred in prosecuting, defending, or settling the Action; (vii) any of the allegations in any complaint or amendment(s) thereto filed in the Action; (viii) the Employment Separation and General Release Agreement (Shane Albers), dated April 20, 2011, including all exhibits attached thereto; (ix) the NW Capital loan or the NWRA advisory agreement between IMH and NW Capital and/or NWRA and/or any of their affiliates; or (x) any deliberations, negotiations, representations, omissions or other conduct leading to the execution of the MOU, the Stipulation and/or the Settlement (collectively, the Released Claims ). The Released Claims do not include: (i) any separate claims for defamation by individual Class members that are the subject of litigation pending as of 12/1/2011; 12

13 (ii) any claims by Class members against any broker-dealers (or any of their agents or representatives) who sold Units in the Fund (but this exception does not apply to or preserve any Released Claims against Released Parties); (iii) the Proxy Claim which is subject to a separate settlement agreement and which has been dismissed with prejudice; and (iv) enforcement of the Stipulation of Settlement or any orders by the Court in furtherance thereof. Upon entry of a final order and judgment, Defendants shall be deemed to have released any claims against any of the Class Plaintiffs, or their counsel, or members of the Class, known or unknown, arising out of or relating to the prosecution or resolution of this Action, or that would have been compulsory counterclaims. The Released Claims extend to Unknown Claims. Unknown Claims means any claim that Settling Plaintiffs or any Class member do not know or suspect exists in his, her or its favor at the time of the release of the Released Claims as against the Released Parties, including without limitation those which, if known, might have affected the decision to enter into the Stipulation. With respect to any of the Released Claims, the Settling Parties stipulate and agree that upon Final Approval, Settling Plaintiffs and each Class member shall be deemed to have and by operation of the Final Judgment shall have expressly waived, relinquished and released any and all provisions, rights and benefits conferred by or under Cal. Civ. Code 1542 or any law of the United States or any state of the United States or territory of the United States, or principle of common law, which is similar, comparable or equivalent to Cal. Civ. Code 1542, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. Settling Plaintiffs acknowledge, and the members of the Class by operation of law shall be deemed to have acknowledged, that they may discover facts in addition to or different from those now known or believed to be true with respect to the Released Claims, but that it is the intention of Settling Plaintiffs, and by operation of law the members of the Class, to completely, fully, finally and forever extinguish any and all Released Claims, known or unknown, suspected or unsuspected, which now exist, or heretofore existed, or may hereafter exist, and without regard to the subsequent discovery of additional or different facts. Settling Plaintiffs acknowledge, and the members of the Class by operation of law shall be deemed to have acknowledged, that the inclusion of Unknown Claims in the definition of Released Claims was separately bargained for and was a material element of the Stipulation and was relied upon by each and all of Defendants in entering into the Stipulation. DO I HAVE A LAWYER IN THIS CASE? The law firms of Klafter Olsen & Lesser LLP and Zwerling Schachter & Zwerling, LLP were appointed by the Court to represent Class members. These lawyers are called Co-Lead Counsel. You will not be separately charged for these lawyers, except as stated below in HOW WILL THE LAWYERS BE PAID? The Court will determine the amount of attorneys fees and reimbursement of expenses to be awarded to Co-Lead Counsel and the other lawyers for the Class Plaintiffs ( Class Counsel ). If you want to be represented by your own lawyer, you may hire one at your own expense. HOW WILL THE LAWYERS BE PAID? Neither Class Counsel nor the other attorneys representing the Class Plaintiffs have received any payment for their services in prosecuting this litigation since May 2010 when the first of the actions comprising this Action was filed with the Court. Nor have they been reimbursed for their litigation expenses. At the Settlement Hearing, or at such other time as the Court may direct, Class Counsel will ask the Court to award them all or a portion of the Cash Consideration remaining after the costs of administering this settlement by the Claims Administrator (i.e., printing and disseminating this Notice and its exhibits as well as processing Investor Advisory Committee Questionnaires and Accredited Investor Status Certificates, and any potential distribution of attorneys fees), and up to a twelve and one-half (12.5) percent share of the interest and principal payments to be made on all Shareholder Notes issued (up to $2,500, in principal payments and the interest paid on such amount if all of the Shareholder Notes are issued, for a total award of no more than $3,845, for their attorneys fees and expenses. If Class Counsel seek the maximum award described herein and it is awarded by the Court, it would represent, according to Class Counsel, approximately 25 percent of the total value of the settlement. 13

14 Any award of a share of the payments to be made on the Shareholder Notes to Class Counsel will reduce the payments Class members will receive under the Shareholder Notes in exchange of their IMH shares. For example, if the Court awards 10 percent of the payments on Shareholder Notes to Class Counsel, Class members will receive 10 percent less in interest and principal payments on each of the Shareholder Notes they receive in exchange for IMH shares. Class Counsel submits that this is fair and reasonable given their considerable efforts to obtain the Shareholder Notes for the benefit of the Class under well-settled legal principles that entitle counsel that created a benefit for a class to be paid a share of the benefit for their attorneys fees. Class Counsel also intend to seek Court approval to pay awards to some or all of the Class Plaintiffs for their efforts in the prosecution and resolution of this lawsuit not to exceed $30,000 in total. Such amounts, if approved by the Court, will be paid out of the cash portion of the attorney fee award described above. HOW DO I TELL THE COURT THAT I DO NOT LIKE SOMETHING ABOUT THE PROPOSED SETTLEMENT OR CLASS COUNSELS APPLICATION FOR ATTORNEYS FEES AND EXPENSES AND AWARDS TO SOME OR ALL OF THE CLASS PLAINTIFFS, OR SUPPORT THEM? If you are a member of the Class, you can object to or support: (i) the proposed Settlement, (ii) the entry of the proposed Final Order and Judgment, and/or (iii) the application for attorneys fees and expenses or awards to the Class Plaintiffs. In order to object, you must no later than June 10, 2013, (unless the Court extends this deadline for good cause shown), file with the Register in Chancery, New Castle County Courthouse, 500 N. King Street, Wilmington, Delaware 19801, and serve upon the counsel listed below a statement that: (a) identifies the case known as IMH Secured Loan Fund Unitholders Litigation, Civil Action No CS; (b) includes your name, address, telephone number, the number of Units you owned in the Fund as of May 13, 2010 or shares of IMH you currently own; (c) includes the basis for your objection or support; and (d) your signature. You may also, but need not, appear in person or by your attorney at the Settlement Hearing and present evidence or argument that may be proper and relevant. Any Class member who wishes to appear at the hearing, however, must, no later than June 10, 2013, (unless the Court extends this deadline for good cause shown), file with the Register in Chancery, New Castle County Courthouse, 500 N. King Street, Wilmington, Delaware 19801, and serve upon the counsel listed below a statement containing the information identified in the prior paragraph and: (a) a written notice of intention to appear; (b) the reasons that you desire to appear and be heard; and (c) all documents or writings you desire the Court to consider. Such filings shall be served upon the following counsel: Norman M. Monhait, Esquire Pamela S. Tikellis, Esquire ROSENTHAL, MONHAIT & GODDESS, P.A. CHIMICLES & TIKELLIS LLP 919 Market Street, Suite Delaware Avenue Citizens Bank Center Suite 1100 Wilmington, DE Wilmington, DE Co-Delaware Liaison Counsel for Class Plaintiffs and Richard D. Heins, Esquire ASHBY & GEDDES, P.A. 500 Delaware Ave, 8th Floor Wilmington, DE Delaware Counsel for Defendants Any member of the Class who does not object to the Settlement, the request for an award of attorneys fees and reimbursement of litigation expenses to Class Counsel, or awards to some or all of the Class Plaintiffs, or any other matter before the Court, need not do anything with respect to the Settlement Hearing. Unless the Court otherwise directs, no person shall be entitled to object to the approval of the proposed Settlement, any judgment entered thereon, any award of attorneys fees and expenses to Class Counsel or awards to some or all of 14

15 the Class Plaintiffs, or otherwise be heard, except by serving and filing a written objection and supporting papers and documents as described above. If you fail to object in the manner described above, you shall be deemed to have waived the right to object (including any right of appeal) and you shall be forever barred from raising such objection in this or any other action or proceeding. WHEN AND WHERE WILL THE COURT DECIDE WHETHER TO APPROVE THE PROPOSED SETTLEMENT AND CLASS COUNSELS FEE AND EXPENSE APPLICATION? The Court has scheduled a Settlement Hearing which will be held on June 20, 2013 at 10:00 a.m., in the Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware to: (a) determine whether the Court should approve the proposed Settlement as fair, reasonable, adequate and in the best interests of the Class; (b) determine whether the Class should be finally certified; (c) consider the application of Class Counsel, for an award of attorneys fees and reimbursement of litigation expenses, not to exceed $3,845,000.00, including $30,000 in awards to some or all of the Class Plaintiffs; and (d) rule on such other matters as the Court may deem appropriate. The Court has reserved the right to adjourn the Settlement Hearing, including the consideration of the application by Class Counsel for attorneys fees and expenses and for awards to some or all of the Class Plaintiffs, without further notice of any kind other than oral announcement at the Settlement Hearing or any adjournment thereof. The Court also has reserved the right to approve the proposed Settlement at or after the Settlement Hearing with such modification(s) as may be consented to by the parties to the Stipulation and without further notice to the Class. DO I HAVE TO COME TO THE SETTLEMENT HEARING? No. Co-Lead Counsel will represent the interests of the Class at the Settlement Hearing but you are welcome to come at your own expense. If you submit a valid and timely objection, you do not have to come to Court, but you may come and be heard if you follow the instructions set forth above under the heading HOW DO I TELL THE COURT THAT I DO NOT LIKE SOMETHING ABOUT THE PROPOSED SETTLEMENT OR CLASS COUNSELS APPLICATION FOR ATTORNEYS FEES AND EXPENSES AND AWARDS TO SOME OR ALL OF THE CLASS PLAINTIFFS, OR SUPPORT THEM? The Court will consider your objection, if any, whether or not you come to the Settlement Hearing. HOW DO I GET MORE INFORMATION? This Notice is not all-inclusive, does not purport to be comprehensive, and is only a summary of the pleadings in the Action, the Settlement Agreement and other papers and proceedings. For the full details of the Action, the Class Claims, which have been asserted by the Class Plaintiffs and defenses asserted by the Defendants, and the full terms and conditions of the proposed Settlement, including a complete copy of the Settlement Agreement, members of the Class are referred to the enclosed CD and court files in the Action. You or your attorney may examine the Court files during regular business hours of each business day at the office of the Register in Chancery, Court of Chancery, 500 N. King Street, Wilmington, Delaware Questions may also be directed to Co-Lead Counsel: Jeffrey Klafter, Esquire or Robin F. Zwerling, Esquire KLAFTER OLSEN & LESSER LLP Hillary Sobel, Esquire Two International Drive, Suite 350 ZWERLING SCHACHTER & ZWERLING, LLP Rye Brook, NY Madison Avenue jak@klafterolsen.com New York, NY rzwerling@zsz.com hsobel@zsz.com Co-Lead Counsel for the Class 15

16 DO NOT WRITE OR CALL THE COURT. SPECIAL NOTICE TO NOMINEES If you hold one or more shares of IMH that were converted from Units pursuant to the Conversion Transaction which closed on June 23, 2010, you must mail copies of this Notice and the accompanying Investor Advisory Committee Questionnaire and Accredited Investor Status form to the beneficial owners of those IMH shares within ten (10) days after receipt thereof. Dated: April 17, 2013 BY ORDER OF THE COURT: /s/ Karlis Johnson Register in Chancery 16