SUBSCRIPTION AGREEMENT
Exhibit 4.2
SUBSCRIPTION
AGREEMENT
AGREEMENT
IMH Secured Loan Fund, LLC
00000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxx
00000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxx
This Subscription Agreement (“Agreement”) for a subscription to purchase ownership interests
(the “Units”) in IMH Secured Loan Fund, LLC (the “Fund”), which Units are offered pursuant to the
Confidential Private Placement Memorandum dated March 31, 2006 (such Confidential Private Placement
Memorandum, together with any supplements delivered to the undersigned, is called the
“Memorandum”), is entered into by and among the undersigned subscribing investor (“Investor”, “he”,
“she”, or words of similar import as the context requires), and the Fund, acting through its
manager, Investors Mortgage Holdings, Inc. (“Manager”). An Investor hereunder also becomes a member
of the Fund pursuant to the Restated Operating Agreement of the Fund (the “Operating Agreement”) by
signing the Operating Agreement Signature Page attached hereto. Capitalized terms used but not
defined in this Agreement shall have the respective meanings given them in the Memorandum or the
Operating Agreement.
A. Verification of Status as “Accredited Investor” under Regulation D.
The Investor represents and warrants that he or she is an “accredited investor” within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended, (the
“Securities Act”), and has initialed the statements below which apply to the Investor.
Please Initial Applicable Statements Below:
| 1. | ____ | The Investor is a natural person whose own net worth, or joint net worth with the Investor’s spouse, exceeds $1,000,000. | ||||||
| 2. | ____ | The Investor is a natural person who had an individual income in excess of $200,000 (or joint income with the Investor’s spouse in excess of $300,000) in each of the two previous years and who reasonably expects a gross income at the same level or greater in the current year. | ||||||
| 3. | ____ | The Investor is an employee benefit plan (under Title I of ERISA) whose investment decision is made by a qualified plan fiduciary or registered investment advisor, or whose total assets exceed $5,000,000, or is a self-directed plan where all investment decisions are made solely by accredited investors. | ||||||
| 4. | ____ | The Investor is a partnership, corporation, trust or other entity where all equity owners are accredited investors. | ||||||
| 5. | ____ | The Investor is a corporation, partnership, Massachusetts business or similar trust, or 501(c)(3) organization, with assets in excess of $5,000,000, not formed for the specific purpose of investing in the Fund. | ||||||
| 6. | ____ | The Investor is a trust with assets in excess of $5,000,000, not formed for the specific purpose of investing in the Fund and whose purchase is directed by a person capable of evaluating the merits and risks of the Fund. | ||||||
| 7. | ____ | The Investor is a director, executive officer, or Manager of the Fund or a director or executive officer of the Manager. | ||||||
| 8. | ____ | The Investor is a bank, savings and loan, registered broker/dealer, insurance company, registered investment company, business development company, or small business investment company. | ||||||
If the Investor elects at any time to reinvest distributions from the Fund in additional
Units, the Investor represents and warrants that the Investor will continue to qualify as an
accredited investor at the time any such reinvestment is made, and agrees to immediately notify the
Fund if the Investor is no longer an accredited investor under the above definitions.
B. Agreement. The Investor agrees as follows:
1. Subscription for the Units.
(a) The Investor agrees to become a Member in the Fund, and subscribes for and agrees to make
a capital contribution to the Fund in the amount set forth below, on the terms and conditions
described herein and in the Memorandum.
(b) The Investor acknowledges and agrees that he is not entitled to cancel, terminate or
revoke this Agreement or the subscription hereunder, except as otherwise set forth in the
Memorandum or applicable law; that this Agreement, the subscription, and the power of attorney
granted herein shall survive (i) changes in the transaction, documents and instruments described in
the Memorandum that in the aggregate are not material or that are contemplated by the Memorandum,
and (ii) the death or disability of the Investor.
(c) The Investor hereby irrevocably constitutes and appoints the Manager (and any substitute
or successor acting in such capacity) his true and lawful attorney in his name, place and xxxxx,
(a) to receive and pay over to the Fund on behalf of the Investor, to the extent set forth in this
Agreement, all funds received hereunder, (b) to execute, complete or correct, on behalf of the
Investor, all documents to be executed by the Investor in connection with the Investor’s
subscription for Units, including, without limitation, filling in or amending amounts, dates, and
other pertinent information, and (c) to execute, acknowledge, swear to and file: (i) any
counterparts of the Operating Agreement to be entered into pursuant to this Agreement and any
amendments thereto to which the Investor is a signatory, (ii) any agreements or other documents
relating to the obligations of the Fund, as limited and defined in the Operating Agreement, (iii)
any certificates of formation required by law and all amendments thereto, (iv) all certificates and
other instruments necessary to qualify or continue the qualification of, the Fund in the states
where it may be doing business, (v) all assignments, conveyances or other instruments or documents
necessary to effect the dissolution of the Fund, and (vi) all other filings with agencies of the
federal government, of any state or local government, or of any other jurisdiction, which the
Manager considers necessary or desirable to carry out the purposes of this Agreement, the Operating
Agreement and the business of the Fund. This power of attorney shall be deemed coupled with an
interest, shall be irrevocable and shall survive the transfer of the Investor’s Unit.
2. Certain Acknowledgments and Agreements of the Investor.
The Investor understands, agrees, and acknowledges that:
(a) The subscription for the Units contained herein may be accepted or rejected, in whole or
in part, by the Fund in its sole and absolute discretion. No subscription shall be deemed accepted
until the Investor has been admitted as a Member in the Fund; such admission shall be deemed an
acceptance of this Agreement by the Fund for all purposes.
(b) Except as provided under applicable securities laws, this subscription is and shall be
irrevocable, except that the Investor shall have no obligations hereunder if this subscription is
for any reason rejected or this offering is for any reason cancelled.
(c) All documents pertaining to this investment have been made available for inspection by the
Investor, and the books and records of the Fund shall be available for inspection by Members during
reasonable business hours at the Fund’s principal place of business, upon reasonable prior notice
to the Manager as provided for in the Operating Agreement.
(d) No foreign, federal or state authority has made any finding or determination as to the
fairness of investment of the Units and no foreign, federal or state authority has recommended or
endorsed or shall recommend or endorse this offering.
3. Representations and Warranties of the Investor.
The Investor understands that the Units are being sold in reliance upon the exemptions from
registration provided for in the Securities Act and/or Regulation D promulgated thereunder, for
transactions involving limited offers and sales, and the Investor, for himself and for his heirs,
personal representatives, successors and assigns, makes the following representations, declarations
and warranties with the intent that the same may be relied upon in determining the suitability of
the undersigned as an investor in the Fund:
(a) The Investor has received, carefully read, and understands the Memorandum and all exhibits
thereto and has consulted, or had the opportunity to consult, his own attorney, accountant or
investment advisor with respect to the investment contemplated hereby and its suitability for the
Investor. Any special acknowledgment set forth below with respect to any statement contained in the
Memorandum shall not be deemed to limit the generality of this representation and warranty.
(b) During the course of this transaction, and prior to the purchase of any of the Units, the
Investor has had the opportunity to ask questions of and receive answers from the Fund or the
Manager, or any of its principals, concerning the terms and conditions of the offering described in
the Memorandum, and to obtain any additional information necessary to verify the information
contained in the Memorandum or otherwise relative to the financial data and business of the Fund,
to the extent that such parties possess such information or can acquire it without unreasonable
effort or expense, and all such questions, if asked, have been answered satisfactorily and all such
documents, if examined, have been found to be fully satisfactory.
(c) The Investor understands and acknowledges that (i) that the Investor must bear the
economic risk of his investment in the Units until the termination of the Fund or until the
Investor withdraws from the Fund, (ii) the Units have not been registered under the Securities Act
or any state securities laws and are being offered and sold in reliance upon exemptions provided in
the Securities Act and state securities laws for transactions not involving any public offering
and, therefore, cannot be resold or transferred unless they are subsequently registered under the
Securities Act and applicable state laws or unless an exemption from such registration is
available, (iii) the Investor is purchasing the Units for investment purposes only for the account
of the Investor and not with any view toward a distribution thereof, (iv) the Investor is investing
in the Fund as a common investment vehicle rather than as a means to facilitate the individual or
separate investment decisions of holders of interests in the Investor, (v) the Investor has no
contract, undertaking, agreement or arrangement with any person to sell, transfer or pledge to such
person or anyone else any of the Units that the Investor hereby subscribes to purchase or any part
thereof, and the Investor has no present plans to enter into any such contract, undertaking,
agreement or arrangement, (vi) the Investor understands that the Units cannot be sold or
transferred without the prior written consent of the Manager, which may be withheld in its sole
discretion and shall
be withheld if such transfer could cause the Fund to become subject to regulation under
federal law as an investment company or would subject the Fund to adverse tax consequences, (vii)
there shall be no public market for the Units, (viii) any disposition of the Units may result in
unfavorable tax consequences to the Investor, (ix) the Fund does not have any obligation or
intention to register the Units or the offering thereof under the Securities Act or any state
securities laws, or of supplying the information that may be necessary to enable the Investor to
sell Units, and (x) Investors have no right to require the registration of the Units under the
Securities Act or state securities laws or other applicable securities regulations.
(d) The Investor is aware and acknowledges that (i) the Units involve a substantial degree of
risk and there is no assurance of any income from such investment, (ii) any federal and/or state
income tax benefits that may be available to the Investor may be lost through the adoption of new
laws or regulations or changes to existing laws and regulations or changes in the interpretation of
existing laws and regulations, (iii) the Investor, in making his investment, is relying, if at all,
solely upon the advice of his personal tax advisor with respect to the tax aspects of an investment
in the Fund, and (iv) because there are substantial restrictions on the transferability of the
Units, it may not be possible for the undersigned to liquidate his investment readily in case of an
emergency, or at all.
(e) All information provided to the Manager as to net worth and annual income or assets of the
Investor and the other information about the Investor are true, correct and complete in all
material respects. In connection with any reinvestments, investor agrees to advise the Fund if
his/her accredited status changes. Further, at the time of reinvestment, Investor reaffirms and
agrees to all of the terms of this subscription agreement and reaffirms all warranties contained
herein, as evidenced by such reinvestment.
(f) The Investor is at least 21 years of age and the Investor has adequate means of providing
for all his current and foreseeable needs and personal contingencies and has no need for liquidity
in this investment, and if the Investor is an unincorporated association, all of its members who
are U.S. Persons are at least 21 years of age.
(g) The Investor has evaluated the risks of investing in the Units, and has determined that
the Units are a suitable investment for the Investor. The Investor can bear the economic risk of
this investment and can afford a complete loss of his investment. In evaluating the suitability of
an investment in the Units, the Investor has not relied upon any representations or other
information (whether oral or written) other than as set forth in the Memorandum and Exhibits
thereto, and independent investigations made by the Investor or representative(s) of the Investor.
(h) The Investor is knowledgeable and experienced in evaluating investments and experienced in
financial and business matters and is capable of evaluating the merits and risks of investing in
the Units. The aggregate amount of the investments of the Investor in, and his commitments to, all
similar investments that are illiquid is reasonable in relation to his net worth.
(i) The Investor maintains his domicile, and is not merely a transient or temporary resident,
at the residence address shown on the signature page of this Agreement.
(j) Any information that the Investor has heretofore furnished to the Fund or the Manager with
respect to the Investor is correct and complete as of the date of this Agreement and if there
should be any material change in such information prior to the purchase of Units the Investor shall
immediately furnish such revised or corrected information to the Fund.
(k) The representations, warranties, agreements, undertakings and acknowledgments made by the
Investor in this Agreement are made with the intent that they be relied upon by the Fund and the
Manager in determining the Investor’s suitability as a purchaser of the Units, and shall survive
the
purchase. In addition, the Investor undertakes to notify the Fund immediately of any change in
any representation, warranty or other information relating to the Investor set forth herein.
4. Indemnification. The Investor recognizes that the offer of the Units to him was
made in reliance upon his representations and warranties set forth in Paragraph 3 and the
acknowledgments and agreements set forth in Paragraph 2 above. The Investor agrees to provide, if
requested, any additional information that may reasonably be required to determine the eligibility
of the Investor to purchase the Units. The Investor hereby agrees to indemnify the Fund, the
Manager, and any of their affiliates and to hold each of them harmless from and against any loss,
damage or liability due to or arising out of a breach of any representation, warranty or agreement
of the Investor contained in this Agreement or in any other document provided by the Investor to
the Fund or the Manager in connection with the Investor’s investment in the Units. The Investor
hereby agrees to indemnify the Fund, the Manager, and any of their affiliates against, and to hold
them harmless from, all liabilities, lawsuits, costs or expenses (including reasonable attorneys’
fees) arising as a result of the sale or distribution of the interests by the Investor in violation
of the Securities Act or other applicable law, or any misrepresentation or breach by the Investor
with respect to the matters set forth herein. In addition, the Investor agrees to indemnify the
Fund and any affiliates against, and to hold such persons and firms harmless from, any and all
loss, damage, liability or expense, including costs and reasonable attorneys’ fees, to which they
may be put or that they may incur or sustain by reason of or in connection with any
misrepresentation made by the Investor with respect to the matters about which representations and
warranties are required by the terms of this Agreement, or any breach of any such warranties or any
failure to fulfill any covenants or agreements set forth herein or included in and as defined in
the Memorandum.
5. Arbitration. Any claim, controversy, dispute or deadlock arising under this
Agreement (collectively, a “Dispute”) shall be settled by arbitration in Maricopa County, Arizona
administered under the rules of the American Arbitration Association (“AAA”). Any arbitration and
award of the arbitrators, or a majority of them, shall be final and the judgment upon the award
rendered may be entered in any state or federal court having jurisdiction. No punitive damages
are to be awarded.
Any Dispute shall be heard by three arbitrators of which each party shall select one within 10
days of the demand for arbitration. The two party-appointed arbitrators shall select a third
arbitrator to serve as chair of the tribunal within 10 days of the selection of the second
arbitrator. If any arbitrator has not been appointed within the time limits specified herein, such
appointment shall be made by the AAA upon the written request of either party within 10 days of the
request.
| Accepted and agreed: | ||||
| Signature of Investor |
Investors need not sign this arbitration agreement to invest in the fund.
6. General. This Agreement (i) shall be binding upon the Investor and the heirs,
personal representatives, successors and assigns of the Investor, (ii) shall be governed, construed
and enforced in accordance with the laws of the State of Delaware, without reference to any
principles of conflicts of law (except insofar as affected by the state securities or “blue sky”
laws of the jurisdiction in which the offering described herein has been made to the Investor),
(iii) shall survive the admission of the Investor to the Fund, and (iv) shall, if the Investor
consists of more than one person, be the joint and several obligation of all such persons.
7. Assignment. The Investor agrees that neither this Agreement nor any rights that may
accrue to him hereunder may be transferred or assigned.
8. Investor Name and Subscription Amount. The name and other identifying information
of the Investor, and the amount of the Investor’s subscription is:
| Subscriber Name (Please print as you wish it to appear on your official records) | ||||
| Residence or Office Address | ||||
| City, State, Zip Code | ||||
| Social Security or Taxpayer I.D. No.: | ||||
| Business Telephone: | ||||
| Facsimile (Home/Business): | ||||
| Internet Email Address: | ||||
| Total capital contribution: $ Paid by ___ check or ___wire (please check one) | ||||
Please make all checks payable to: IMH Secured Loan Fund, LLC
Please initial the appropriate statement below:
| ___ | Dividends to be reinvested in the Fund. | ||
| ___ | Dividends to be paid in cash to the Investor (or Custodian of Record for XXX accounts) |
SIGNATURES
| Signature of Investor | Date | |||
| Printed Name of Signer | ||||
| Title or Capacity | ||||
| Additional Signature of Investor | ||||
| (If Applicable) | ||||
| Printed Name of Signer | ||||
| Title or Capacity | ||||
| Additional Signature of Investor | ||||
| (If Applicable) | ||||
| Printed Name of Signer | ||||
| Title or Capacity | ||||
The above and foregoing subscription is accepted this day of , 2007.
| IMH Secured Loan Fund, LLC | ||||
By: |
||||
| Investors Mortgage Holdings, Inc. | ||||
Operating Agreement — Signature Page
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date set forth
below.
| MANAGER: | MEMBER: | |||||||||
INVESTORS
|
MORTGAGE HOLDINGS, INC. | |||||||||
By: |
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| Xxxxxxx Xxxxx, President | Print Name of Member(s) | |||||||||
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