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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>SECURITIES AND EXCHANGE
COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>WASHINGTON, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>FORM 8-K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>CURRENT REPORT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>Pursuant to Section&nbsp;13 or 15(d) of the
Securities Exchange Act of 1934</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top; text-autospace: none; font-weight: bold; text-align: center; width: 49%">Date of report (Date of earliest event reported):</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: none; font-weight: bold; width: 2%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-autospace: none; font-weight: bold; text-align: center; width: 49%">January 31, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>IMH Financial Corporation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">__________________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">(Exact name of registrant
as specified in charter)</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 30%; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 30%; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 30%; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-autospace: none; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Delaware</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">000-52611</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">81-0624254</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">(State or other jurisdiction</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">of incorporation)</P></TD>
    <TD>&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Commission</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">File Number)</P></TD>
    <TD>&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(I.R.S. Employer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Identification No.)</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="text-align: center; vertical-align: bottom">
    <TD STYLE="text-autospace: none; font-weight: bold; border-bottom: Black 1pt solid">4900 N. Scottsdale Rd., Suite # 5000<BR> Scottsdale, Arizona&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; font-weight: bold; border-bottom: Black 1pt solid">&nbsp;<B>85251</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Address of Principal Executive Offices)</P></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-autospace: none; text-align: center">(Zip Code)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-autospace: none; text-align: center">Registrant&rsquo;s telephone number, including area code:</TD>
    <TD STYLE="width: 50%; text-autospace: none; font-weight: bold; text-align: center">(480) 840-8400</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>N/A</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">______________________________________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">Former name or former address,
if changed since last report</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 15pt; text-align: left"><FONT STYLE="font-family: Wingdings">o</FONT></TD><TD STYLE="width: 5pt"></TD><TD STYLE="text-align: justify">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 15pt; text-align: left"><FONT STYLE="font-family: Wingdings">o</FONT></TD><TD STYLE="width: 5pt"></TD><TD STYLE="text-align: justify">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 15pt; text-align: left"><FONT STYLE="font-family: Wingdings">o</FONT></TD><TD STYLE="width: 5pt"></TD><TD STYLE="text-align: justify">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 15pt; text-align: left"><FONT STYLE="font-family: Wingdings">o</FONT></TD><TD STYLE="width: 5pt"></TD><TD STYLE="text-align: justify">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 5pt 0 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 5pt 0"><B>Item 8.01</B>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Other Events</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On January 31, 2012, IMH Financial Corporation (&quot;IMH&quot;)
reached a tentative settlement in principle to resolve all claims asserted by the plaintiffs&nbsp;in the putative class action
lawsuit captioned <I>In re IMH Secured Loan Fund Unitholders Litigation</I> (&ldquo;Litigation&rdquo;), pending in the Court of
Chancery in the State of Delaware against IMH, certain affiliated and predecessor entities, and certain former and current officers
and directors of IMH, other than the claims of one plaintiff. The tentative settlement in principle, memorialized in a Memorandum
of Understanding (&ldquo;MOU&rdquo;), is subject to certain class certification conditions, confirmatory discovery and final court
approval (including a fairness hearing). The MOU contemplates a&nbsp;full&nbsp;release and settlement&nbsp;of all claims, other
than the claims of the one non-settling plaintiff, against IMH and&nbsp;the other defendants in connection with the claims made
in the Litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following are some of the key elements of the tentative settlement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>IMH will offer $20.0 million of 4% five-year subordinated notes to members of the Class in exchange&nbsp;for 2,493,765 shares
of IMH common stock at an exchange rate of $8.02 per share&nbsp;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>IMH will offer to Class members that are accredited investors&nbsp;$10.0 million&nbsp; of convertible notes with the same economic
terms as the convertible notes previously&nbsp;issued to NWRA Ventures I, LLC</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>IMH will&nbsp;deposit&nbsp;$1.645 million in cash&nbsp;into a settlement escrow account&nbsp;(less $300,000&nbsp;to&nbsp;be
held in a reserve escrow account that is available for use by IMH to fund its defense costs for other unresolved litigation)&nbsp;which&nbsp;will
be distributed (after payment of notice and administration costs and any amounts awarded by the Court for attorneys' fees and expense)
to Class members in proportion to the number of IMH shares held by them as of June 23, 2010</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>IMH will enact certain agreed upon corporate governance enhancements, including the appointment of two independent directors
to the IMH board of directors&nbsp;upon&nbsp;satisfaction of certain conditions (but in no event prior to December 31,&nbsp;2012)
and the establishment of a five-person investor advisory committee (which may not be dissolved until such time as&nbsp;IMH has
established a seven-member board of directors with at least a majority of independent directors)</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>provides additional restrictions on the future sale or redemption of IMH common stock held by certain IMH executive officers</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">IMH has vigorously denied, and continues to vigorously deny, that
it has committed any violation of law or engaged in any of the wrongful acts that were alleged in the Litigation, but believes
it is in the best interests of IMH and its stockholders to eliminate the burden and expense of further litigation and to put the
claims that were or could have been asserted to rest.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">There can be no assurance that the court will approve the tentative
settlement in principle. Further, the judicial process to ultimately settle this action is estimated to take a minimum of six to
nine months or longer. If not approved, the tentative settlement as outlined in the MOU may be terminated&nbsp;and IMH will continue
to vigorously defend this action. The foregoing description of the tentative settlement in principle and MOU are qualified in their
entirety by reference to the MOU which is attached as Exhibit 99.1 and incorporated by reference in this Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Item&nbsp;9.01. Financial Statements and Exhibits.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 24.5pt">(d)&nbsp;Exhibits</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; text-autospace: none; font-weight: bold; width: 20%">Exhibit No.</TD>
    <TD STYLE="text-autospace: none; width: 2%">&nbsp;</TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; text-autospace: none; font-weight: bold; width: 78%">Description</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-autospace: none">99.1</TD>
    <TD STYLE="vertical-align: bottom; text-autospace: none">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-autospace: none">Memorandum of Understanding</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 24.5pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; padding: 0; text-autospace: none">February 6, 2012</TD>
    <TD STYLE="width: 3%; padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 37%; padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="width: 10%; padding: 0; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="padding: 0; text-autospace: none; font-weight: bold">IMH FINANCIAL CORPORATION</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-autospace: none; font-style: italic">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">By:</TD>
    <TD STYLE="padding: 0; text-autospace: none; font-style: italic; border-bottom: Black 1pt solid">/s/ William Meris</TD>
    <TD STYLE="padding: 0; text-autospace: none; font-style: italic">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">William Meris</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD>
    <TD STYLE="padding: 0; text-autospace: none">President</TD>
    <TD STYLE="padding: 0; text-autospace: none">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>



<P STYLE="margin: 0"></P>

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[{"type": "8-K", "sequence": "1", "filename": "v301296_8k.htm", "description": "FORM 8-K", "secsgml_size_bytes": 20648}]
{"company-data": {"conformed-name": "IMH Financial Corp", "cik": "0001397403", "assigned-sic": "6500", "irs-number": "810624254", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-52611", "film-number": "12573099"}, "business-address": {"street1": "4900 NORTH SCOTTSDALE ROAD, SUITE 5000", "city": "SCOTTSDALE", "state": "AZ", "zip": "85251", "phone": "480-840-8400"}, "mail-address": {"street1": "4900 NORTH SCOTTSDALE ROAD, SUITE 5000", "city": "SCOTTSDALE", "state": "AZ", "zip": "85251"}, "former-company": {"former-conformed-name": "IMH Secured Loan Fund, LLC", "date-changed": "20070424"}}
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
January 31, 2012
IMH Financial Corporation
__________________________________________
(Exact name of registrant
as specified in charter)
Delaware
000-52611
81-0624254
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
4900 N. Scottsdale Rd., Suite # 5000
Scottsdale, Arizona
85251
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code:
(480) 840-8400
N/A
______________________________________________
Former name or former address,
if changed since last report
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Item 8.01
.
Other Events
On January 31, 2012, IMH Financial Corporation ("IMH")
reached a tentative settlement in principle to resolve all claims asserted by the plaintiffs in the putative class action
lawsuit captioned
In re IMH Secured Loan Fund Unitholders Litigation
("Litigation"), pending in the Court of
Chancery in the State of Delaware against IMH, certain affiliated and predecessor entities, and certain former and current officers
and directors of IMH, other than the claims of one plaintiff. The tentative settlement in principle, memorialized in a Memorandum
of Understanding ("MOU"), is subject to certain class certification conditions, confirmatory discovery and final court
approval (including a fairness hearing). The MOU contemplates a full release and settlement of all claims, other
than the claims of the one non-settling plaintiff, against IMH and the other defendants in connection with the claims made
in the Litigation.
The following are some of the key elements of the tentative settlement:
·
IMH will offer $20.0 million of 4% five-year subordinated notes to members of the Class in exchange for 2,493,765 shares
of IMH common stock at an exchange rate of $8.02 per share
·
IMH will offer to Class members that are accredited investors $10.0 million  of convertible notes with the same economic
terms as the convertible notes previously issued to NWRA Ventures I, LLC
·
IMH will deposit $1.645 million in cash into a settlement escrow account (less $300,000 to be
held in a reserve escrow account that is available for use by IMH to fund its defense costs for other unresolved litigation) which will
be distributed (after payment of notice and administration costs and any amounts awarded by the Court for attorneys' fees and expense)
to Class members in proportion to the number of IMH shares held by them as of June 23, 2010
·
IMH will enact certain agreed upon corporate governance enhancements, including the appointment of two independent directors
to the IMH board of directors upon satisfaction of certain conditions (but in no event prior to December 31, 2012)
and the establishment of a five-person investor advisory committee (which may not be dissolved until such time as IMH has
established a seven-member board of directors with at least a majority of independent directors)
·
provides additional restrictions on the future sale or redemption of IMH common stock held by certain IMH executive officers
IMH has vigorously denied, and continues to vigorously deny, that
it has committed any violation of law or engaged in any of the wrongful acts that were alleged in the Litigation, but believes
it is in the best interests of IMH and its stockholders to eliminate the burden and expense of further litigation and to put the
claims that were or could have been asserted to rest.
There can be no assurance that the court will approve the tentative
settlement in principle. Further, the judicial process to ultimately settle this action is estimated to take a minimum of six to
nine months or longer. If not approved, the tentative settlement as outlined in the MOU may be terminated and IMH will continue
to vigorously defend this action. The foregoing description of the tentative settlement in principle and MOU are qualified in their
entirety by reference to the MOU which is attached as Exhibit 99.1 and incorporated by reference in this Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
Description
99.1
Memorandum of Understanding
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
February 6, 2012
IMH FINANCIAL CORPORATION
By:
/s/ William Meris
William Meris
President