EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is effective as of November 13, 2006 (“Effective Date”), by and between Impac Mortgage Holdings, Inc., a Maryland corporation (“Employer”), and Andrew McCormick, an individual (“Employee”).

RECITALS

WHEREAS, Employee is knowledgeable of the business of Employer;

WHEREAS, Employer believes that Employee is an integral part of its management and currently is and will become more knowledgeable of the Business of employer and any affiliates or related entities of Employer;

WHEREAS, Employer proposes to employ Employee as the Executive Vice President, Chief Investment Officer (“CIO”), Impac Mortgage Holdings, Inc.;

WHEREAS, Employee may possess extensive confidential information concerning the Business, including confidential attorney-client communications; and

WHEREAS, Employee is willing to be employed by Employer and provide services to Employer and any affiliates or related entities of Employer (as more fully described in Exhibit A attached hereto) in his role as CIO for the consolidated entities under the terms and conditions herein stated.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, and for other good and valuable consideration, it is hereby agreed by and between the parties hereto as follows:

1.        Employment, Services and Duties.

1.1 Employer hereby employs Employee and Employee hereby accepts such employment full-time (subject to those exceptions, if any, set forth below) as Executive Vice President, Chief Investment Officer (“CIO”) of Employer to perform the duties and functions set forth in Exhibit A attached hereto and to perform such other duties or functions as are reasonably required or as may be prescribed from time to time or as otherwise agreed. Employee shall render his services by and subject to the instructions and under the direction of the Employer’s Board of Directors and to the President (“President”) and/or such persons as the Board may reasonably designate.

1.2 Employee acknowledges and agrees that Employee may be required by Employer to devote a portion of his working time to perform functions for Employer’s affiliates, subsidiaries or related entities and that such services are to be performed pursuant to and consistent with Employee’s duties and obligations under this Agreement.

1.3 Employee will at all times faithfully, industriously and to the best of his ability, experience and talents perform all of the duties required of him pursuant to the terms of

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this Agreement. Employee will devote his full business energies and abilities and all of his business time to the performance of his duties hereunder and will not, without Employer’s prior written consent, render to others any service of any kind (whether or not for compensation) that would interfere with the full performance of Employee’s duties hereunder, and in no event will engage in any activities that compete with the Business or that could create a reasonably foreseeable conflict of interest or the appearance of a reasonably foreseeable conflict of interest; provided that nothing contained in this Section 1.3 shall preclude Employee from engaging in or managing Employee’s outside investments.

2.        Term and Termination.

2.1 The term of this Agreement shall be through December 31, 2008, unless extended by the mutual written agreement of Employer and Employee.

2.2 Employee’s employment shall terminate prior to the expiration of the term set forth in Section 2.1 upon the happening of any of the following events:

(a) Voluntary termination by Employee other than for Good Reason (as defined below); provided that Employee shall be required to provide Employer with at least 30 days prior written notice of such voluntary termination;

(b) Death of Employee;

(c) Employer may terminate Employee under this Agreement for “Cause” if any of the following occurs (any determination of “Cause” as used in this Agreement shall be made only by an affirmative majority vote of the Board of Directors (not including Employee in the deliberations or vote on the same, if a director) of Employer), “Cause” shall mean:

(i) Employee is convicted of (or pleads nolo contendere to) (A) a crime of dishonesty or breach of trust, including such a crime involving either the property of Employer (or any affiliate or related entity of Employer) or the property entrusted to Employer (or any affiliate or related entity of Employer) by its clients, including fraud, or embezzlement or other misappropriation of funds belonging to Employer (or any affiliate or related entity of Employer) or any of their respective clients, or (B) a felony leading to incarceration of more than 90 days or the payment of a penalty or fine of $100,000 or more;

(ii) Employee materially and substantially fails to perform Employee’s job duties properly assigned to Employee after being provided 30 days prior written notification by Employer setting forth those duties that are not being performed by Employee; provided that Employee shall have a reasonable time to correct any such failures to the extent that such failures are correctable and Employer may not terminate Employee for “Cause” on the basis on any such failure that is cured within a reasonable time.

(iii) Employee has engaged in willful misconduct or gross negligence in connection with his service to Employer (or any affiliate or related

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entity of Employer) that has caused or is causing material harm to Employer (or any affiliate or related entity of Employer); or

(iv) Employee’s material breach of any of the terms of this Agreement or any other obligation that Employee owes to Employer (or any affiliate or related entity of Employer), including a material breach of trust or fiduciary duty or a material breach of any proprietary rights and inventions or confidentiality agreement between Employer and Employee (or between Employee and any affiliate or related entity of Employer)(as such agreements may be adopted or amended from time to time by Employer and Employee).

(d) By mutual agreement between Employer and Employee;

(e) The date when Employee is declared legally incompetent under the laws of the State of California, or if Employee has a mental or physical condition that can reasonably be expected to prevent Employee from carrying out his essential duties and obligations under this Agreement for a period of greater than six months (any such condition an “Incapacitating Condition”), notwithstanding Employer’s reasonable accommodations (to the extent required by law);

(f) Employer may terminate Employee under this Agreement at will (and without Cause) upon written notice at any time. Unless otherwise provided in such notice, such termination shall be effective immediately upon providing written notice to Employee; or

(g) Employee may terminate his employment under this Agreement for Good Reason upon providing Employer at least 30 days prior written notice of such termination stating the basis on which Employee has determined that he has Good Reason to terminate his employment; provided that Employer shall have a reasonable time after receiving such notice to cure any event that would constitute Good Reason for Employee to terminate his employment (provided such event is curable) and Employee may not terminate his employment for Good Reason on the basis of any such event that is cured within a reasonable time. “Good Reason” shall mean:

(i) the assignment to Employee of duties materially inconsistent with, or a substantial reduction or alteration in, the authority, duties or responsibilities of Employee as set forth in this Agreement or Exhibit A, without Employee’s prior written consent;

(ii) the principal place of the performance of Employee’s responsibilities and duties is changed to a location outside of the Washington D.C. metropolitan area, without Employee’s prior written consent

(iii) a material breach by Employer of this Agreement, including a reduction by Employer of Employee’s Base Salary, without Employee’s prior written consent;

Good Reason does not include the expiration of the term of this Agreement on December 31, 2008.

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2.3 Except as set forth in Section 4, in the event that Employee’s employment is terminated pursuant to Section 2.2(a), 2.2(b), 2.2(c), 2.2(d) or 2.2(e) herein, neither Employer nor Employee shall have any remaining duties or obligations under this Agreement, except that Employer shall pay to Employee, or his legal representatives, on the date of termination of employment (the “Termination Date”) or, with respect to reimbursement for expenses, as promptly as practical after the Termination Date, the following:

(a) Such compensation as is due pursuant to Section 3.1 (a) prorated through the Termination Date;

(b) Any expense reimbursements due and owing to Employee for reasonable and necessary business and entertainment expenses of Employer incurred by Employee prior to the Termination Date; and

(c) The dollar value of all accrued and unused paid time off, including vacation time, that Employee is entitled to through the Termination Date

2.4 Except as set forth in Section 4, in the event that Employee’s employment is terminated pursuant to Section 2.2(f) or 2.2(g), neither Employer nor Employee shall have any remaining duties or obligations under this Agreement, except that Employer shall pay to Employee, or his representatives, (i) the amounts set forth in Section 2.3 at the times set forth in Section 2.3 and (ii) the following (provided that payments for health insurance coverage shall be made to an insurance provider), subject to Employee signing and delivering to Employer the Waiver and Release Agreement required pursuant to Section 2.6:

(a) An additional 12 month’s worth of Base Salary to be paid proportionally over the 12 month period of time after Employee signs and delivers to Employer the Waiver and Release Agreement required pursuant to Section 2.6; and

(b) If Employee is terminated pursuant to Section 2.2(f) or 2.2(g) prior to December 31, 2007, fifty percent (50%) of the Annual Incentive Bonus or $500,000 will be paid to the Employee as follows: One/twelfth (1/12 of $500,000, or $41,666.66) will accrue to Employee each month beginning in January, 2007, and all accrued amounts for any month or partial month before the Termination Date will be paid to Employee in a lump sum on the Termination Date. The balance of the monthly payments will be paid to Employee in monthly installments over the remaining months after Employee signs and delivers to Employer the Waiver and Release Agreement required pursuant to Section 2.6. As an illustration: If Employee is terminated pursuant to Section 2.2(f) or 2.2(g) on August 10, 2007, he will be paid $333,333.28 (8/12 of $500,000) on the Termination Date. The remaining balance of the $500,000 (or $166,666,72) will be paid as it accrues (i.e., assuming he has signed and delivered the Waiver and Release Agreement, $41,666.68 in September, 2007, $41,666.68 in October, 2007, $41,666.68 in November, 2007 and $41,666.68 in December, 2007.)

(c) Premiums for continuation of Employee’s health insurance benefit; under Employer’s group health insurance plan, for the 12 month period succeeding the Termination Date (with such health insurance coverage to be at a level and quality equivalent to the health insurance coverage provided by Employer to Employee

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immediately prior to the Termination Date, “Equivalent Coverage”). Employer agrees to transmit following the Termination Date a request (and to join in such request) from Employee to Employer’s then group health insurance carrier seeking approval to maintain Employee’s coverage for such period under Employer’s group plan as though Employee were still employed and without reference to COBRA; provided that i) Employer makes no representation concerning any future health insurance carrier’s willingness to consent to such additional coverage; ii) Employer undertakes no obligation to secure such consent. In the event that such consent is not forthcoming, then Employee’s continuation coverage shall be subject to COBRA. Employer shall pay such premiums only so long as (during said 12 month period) Employee remains eligible for such Equivalent Coverage;

(d) Stock Options to be determined and paid as follows:

(i)                         For a period of 12 months after the month in which the Termination Date occurs, Employee shall remain as employee and will continue to vest in his stock option, restricted stock grants or any other form of equity compensations that was previously granted but not vested at the Termination Date but will not be eligible to receive any new grants after the Termination Date. However, upon Employee notifying the Company of his election to compete or the Company notifying the Employee of his violation of section 4 of this agreement, then Employee shall no longer be an Employee of the Company and will no longer continue to vest in the stock options or other forms of stock grants.

(e) The payments set forth in Sections 2.4(a) (b) (c) and (d) above are referred to herein collectively as the “Severance Payments” and each as a “Severance Payment.”

2.5 Employee understands and agrees that he shall be exclusively liable for the payment of all taxes that are due, if any, as a result of his actual or constructive receipt of the Severance Payments provided for in this Agreement, including, but not limited to, any taxes and/or penalties resulting from a determination that any portion of the Severance Payments are taxable as deferred compensation pursuant to Internal Revenue Code §409A and implementing regulations. Employee agrees fully to indemnify and hold Company harmless for payment of Employee’s tax obligations or related penalties as may be required by any federal, state or local taxing authority, at any time, as a result of the actual or constructive receipt of the compensation provided for in this Agreement.

2.6 As a condition precedent of Employee or his estate receiving any Severance Payment from Employer, whether in a lump sum payment or a string of payments or in the form of payment of benefits, Employee or his estate shall, in consideration for payment of such amount or benefit, sign and deliver to Employer (against the execution and delivery of the same by the other parties thereto) the form of Waiver and Release Agreement attached hereto as Exhibit B . Such Waiver and Release Agreement will not be construed to include any release of

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any indemnification rights Employee may have against Employer pursuant to Employer’s Articles of Incorporation or bylaws, any indemnification agreement or California Labor Code Section 2800.

2.7 This Agreement shall not be terminated by Employer merging with or otherwise being acquired by another entity, whether or not Employer is the surviving entity, or by Employer transferring of all or substantially all of its assets (any such event, an “Acquisition”).

2.8 In the event of any Acquisition, the surviving entity or transferee, as the case may be, shall be bound by and shall have the benefits of this Agreement.

3.        Compensation.

3.1 As the total consideration for Employee’s services rendered hereunder, Employee shall be entitled to the following during the period that Employee is employed hereunder:

(a) A base salary of $350,000 per year (“Base Salary”), payable in equal installments bi-weekly on those days when Employer normally pays its employees.

(b) A Performance Incentive Bonus and Annual Incentive Bonus in an amount up to $1,350,000 to be allocated as follows: (i) up to $175,000 based upon Portfolio Earnings, Portfolio Credit Quality and Performance Goals; as more fully defined in Section 3.1(b)(i); (ii) up to $175,000 based upon Individual Management Objectives, as more fully defined in Section 3.1(b)(ii); and (iii) up to $1,000,000 as an Annual Incentive, as more fully defined in Section 3.1(b)(iii). The Performance Incentive Bonus objectives shall be mutually agreed upon by Employee and Employer and shall be paid within thirty (30) days of each calendar year for which the bonus has been earned. For the period of November 13, 2006 through December 31, 2006, the annual Performance Incentive Bonus will be prorated for the period. The Annual Incentive Bonus will be paid, if earned, within thirty (30) days of each calendar year end. No prorated payment will be earned for the period of November 13, 2006 through December 31, 2006.

(i) Portfolio Earnings, Credit Quality and Performance Bonus . Up to $175,000 of the Performance Incentive Bonus shall be based upon Portfolio Earnings, Credit Quality and Performance objectives which will be mutually agreed upon year by Employee and Employer’s Board of Directors or their designees in conjunction with the annual business plan of Employer. The Portfolio Earnings, Credit Quality and Performance bonus shall be calculated each year by multiplying (i) $175,000 (the maximum attainable Portfolio Earnings, Credit Quality and Performance Bonus times (ii) the Bonus Factor based on percentage completion of goals as follows:

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(ii) Individual Management Objectives Bonus. Up to $175,000 of the Performance Incentive Bonus shall be based upon annual Individual Management Objectives which will be mutually agreed upon by Employee and Employer’s Board of Directors or their designees in conjunction with the annual business plan of Employer. The Individual Management Objectives Bonus shall be calculated each year by multiplying (i) $175,000 (the maximum attainable Individual Management Objectives Bonus times (ii) the Bonus Factor based on percentage completion of goals as follows:

(iii) Annual Incentive Bonus. Employee is eligible for an additional $1,000,000 Annual Incentive Bonus. Employee shall earn 50% of the $1,000,000 Annual Incentive Bonus if the taxable income as reported in Employer’s annual audited financial statements exceeds an annualized rate of $1.15 for the period of January 1, 2007 through June 30, 2007 and $1.45 for the period of July 1, 2007 through December 31, 2007. The remaining 50% of the Annual Incentive Bonus will be earned by Employee if he is employed by Employer in good standing (which shall mean that he is not on written probation by Employer) as of December 31, 2007. For the year ending December 31, 2008, Employee will earn the $1,000,000 Annual Incentive Bonus if the taxable income as reported in IMH’s annual audited financial statements exceeds for the period of January 1, 2008 through June 30, 2008 $1.45 and $1.75 for the period of July 1, 2008 through December 31, 2008.

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(c) Stock Options in Employer will be granted and may be exercised in accordance with company guidelines. Currently, stock awards are done each year in July.

(d) Employee shall accrue vacation time during the period he is employed hereunder at the rate of 6.15 hours per bi-weekly pay period beginning upon completion of 90 days of employment with Employer. Vacation accrual shall be subject to any vacation benefit accrual cap established by Employer (i.e., once the cap has been reached, further accrual shall cease until Employee uses some or all of his accrued time to fall below the accrual cap). Employee shall be eligible to take paid vacation after six (6) months of employment. Thereafter, the timing of Employee’s vacation shall be governed by Employer’s usual policies applicable to all employees;

(e) Employee is entitled to participate in any policies or plans regarding benefits of employment, including pension, profit sharing, group health, disability insurance and other employee welfare benefit plans now existing or hereafter established to the extent that Employee is eligible under the terms of such plans. Despite the foregoing, Employee is entitled to participate in any such plan or program only if the executive officers of Employer generally are eligible to participate in such plan or program. Employer may, in its sole discretion and from time to time, establish additional senior management benefit programs as it deems them appropriate. Employee understands that any such plans may be modified or eliminated in Employer’s sole discretion in accordance with applicable law; and

(f) Such other benefits as the Board of Directors of Employer, in its sole discretion, may from time to time provide.

3.2 During the period that Employee is employed hereunder, Employer shall reimburse Employee for reasonable and necessary business and entertainment expenses incurred by Employee on behalf of Employer in connection with the performance of Employee’s duties hereunder. It is understood and agreed that Employee shall be eligible to travel first or business class airfare for all flights longer than four hours.

3.3 There shall be no inflation or any other automatic adjustments to any of the compensation paid to Employee under this Agreement.

3.4 Employer shall have the right to deduct from the compensation due to Employee hereunder any and all sums required for social security and withholding taxes and for any other federal, state, or local tax or charge which may be in effect or hereafter enacted or required as a charge on the compensation of Employee.

3.5 Employer shall maintain Directors and Officers insurance, and such coverage shall be substantially similar to coverage provided by Employer’s affiliates and related entities.

3.6 Employer shall reimburse Employee for up to $10,000 worth of legal fees incurred in negotiating and documenting this Agreement.

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4.        Non-Competition.

4.1 At all times during Employee’s employment hereunder, and, if Employee’s employment is terminated pursuant to Section 2.2(f) or 2.2(g) during the 12 month period of time after such termination (the “Post-Termination Payment Period”) and in consideration for any and all payments and benefits provided to Employee pursuant to this Agreement during the Post-Termination Payment Period, Employee shall not, directly or indirectly, engage or participate in, prepare or set up, assist or have any interest in any person, partnership, corporation, limited liability company, firm, association, or other business organization, entity or enterprise (whether as an employee, officer, director, member, agent, security holder, creditor, consultant or otherwise) that engages in any activity in those geographic areas where Employer conducts the Business, which activity is the same as, similar to, or directly competitive with any activity engaged in by Employer (REIT, mortgage banking and wholesale lending operations for sub prime and Alt-A residential loans or such other business as Employer may engage in). Notwithstanding the foregoing, Employee may elect at any point during the Post-Termination Payment Period to forego any future remaining payments or benefits payable under Section 2.4, in which case the limitations set forth in this Section 4.1 shall terminate at the time of such election.

4.2 Nothing contained in Section 4 shall be deemed to preclude Employee from purchasing or owning, directly or beneficially, as a passive investment, less than five percent of any class of publicly traded securities of any entity so long as Employee does not actively participate in or control, directly or indirectly, any investment or other decisions with respect to such entity.

5.        No Compensation from Related Entities.

Without prior written approval from Employer’s Board of Directors, Employee shall not directly or indirectly receive compensation from any company with whom Employer or any of its affiliates (as “affiliate” is defined in Rule 405 promulgated under the Securities Act of 1933) has any financial, business or affiliated relationship.

6.        Confidentiality; Non-Solicitation and Proprietary Rights.

Concurrently with signing this Agreement, Employee and Employer will sign a Proprietary Rights and Inventions Agreement in the form attached hereto as Exhibit C (the “Proprietary Rights and Inventions Agreement”).

7.        Copies of Agreement.

Employee authorizes Employer to send a copy of the Proprietary Rights and Inventions Agreement to any and all future employers which Employee may have, and to any and all persons, firms, and corporations, with whom Employee may become affiliated in a business or commercial enterprise, and to inform any and all such employers, persons, firms or corporations that Employer intends to exercise its legal rights should Employee breach the terms of the Proprietary Rights and Inventions Agreement or should another party induce a breach of that agreement on Employee’s part.

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