SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) September 19, 1997
(September 5, 1997)
HELMSTAR GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-9224 13-2689850
- --------------------------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
2 World Trade Center, Suite 2112, New York, New York 10048
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 775-0400
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Disposition of Assets.
On September 5, 1997, Helmstar Group, Inc. announced that it had sold
all of the stock of its wholly-owned subsidiary, Citizens Mortgage Service
Company, to IMN Financial Corp.
The fixed purchase price was approximately $275,000, however, the
purchase price may be increased based on the outcome of certain transactions in
process as of the closing date.
Citizens Mortgage Service Company is a mortgage banker licensed in
Pennsylvania, New Jersey, Maryland, and Delaware. It is approved to originate
and service residential mortgage loans for the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Federal Housing
Administration, the Government National Mortgage Association, and the Veterans
Administration.
The sale of Citizens Mortgage Service Company was completed pursuant to
the terms of the Stock Purchase Agreement, a copy of which is attached hereto as
Exhibit A.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of businesses acquired.
N/A
(b) Pro Forma Financial Information.
1. Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) as of June 30, 1997, the end of the
period covered by the Company's most recent Form
10-QSB.
2. Pro Forma Condensed Consolidated Statements of
Operations (Unaudited) for the year ended December
31, 1996 and the six months ended June 30, 1997
giving effect to the sale of Citizens Mortgage
Service Company.
(c) Exhibits.
Exhibit A: Stock Purchase Agreement dated
September 5, 1997 by and
between IMN Financial Corp.,
Helmstar Group, Inc., and
McAdam, Taylor & Co., Inc.
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
The following Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) as of June 30, 1997 gives effect to the sale of Citizens Mortgage
Service Company ("Citizens") as if such transaction had occurred as of June 30,
1997. The sale of Citizens in the transaction described in Item 2 on page 2 of
this Form 8-K were eliminated in this financial statement. The pro forma
information is based on the historical statements of the Company, giving effect
to the sale of Citizens and the adjustments in the accompanying Notes to the Pro
Forma Condensed Consolidated Balance Sheet (Unaudited) and the Pro Forma
Condensed Consolidated Statements of Operations (Unaudited).
The pro forma statement may not be indicative of the financial position
that actually would have occurred had the disposition taken place on June 30,
1997. The pro forma statement should be read in conjunction with the financial
statements and notes thereto of the Company in its Annual Report on Form 10-KSB
for the year ended December 31, 1996 and the Company's Quarterly Report on Form
10-QSB for the interim period ended June 30, 1997.
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1997
Historical
Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents ........... $ 945,258 $ (368,874)(A) $ 576,384
Marketable securities ............... 3,203,759 3,203,759
Joint ventures including advances ... 82,234 82,234
Other investments ................... 35,000 35,000
Mortgage loans held for sale ........ 2,648,359 (2,648,359)(B)
Furniture, equipment and
leasehold improvements - at cost,
less accumulated depreciation and
amortization of $456,880 ........ 266,505 (144,223)(C) 122,282
Other assets ........................ 436,451 317 (D) 436,768
------------ ------------ ------------
TOTAL ...................... $ 7,617,566 $ (3,161,139) $ 4,456,427
============ ============ ============
LIABILITIES
Notes payable ....................... $ 2,414,665 $ (2,414,665)(E)
Accrued expenses and other
liabilities ..................... 1,256,446 (293,934)(E) $ 962,512
------------ ------------ ------------
Total liabilities .......... 3,671,111 (2,708,599) 962,512
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock - authorized
10,000,000 shares, par value
$.10; issued 6,749,600 shares ... 674,960 674,960
Paid-in surplus ..................... 14,984,510 14,984,510
(Deficit) ........................... (8,784,417) (452,540)(F) (9,236,957)
------------ ------------ ------------
Total ...................... 6,875,053 (452,540) 6,422,513
Less treasury stock, at cost -
1,233,227 shares ................ (2,928,598) (2,928,598)
------------ ------------ ------------
Total stockholders' equity . 3,946,455 (452,540) 3,493,915
------------ ------------ ------------
TOTAL ...................... $ 7,617,566 $ (3,161,139) $ 4,456,427
============ ============ ============
See the Notes to the Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and the
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
</TABLE>
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
The following Pro Forma Condensed Consolidated Statements of Operations
(Unaudited) for the year ended December 31, 1996 and the six months ended June
30, 1997 give effect to the sale of Citizens as if such transaction had occurred
as of January 1, 1996. Additionally, the impact of withdrawing from mortgage
banking as a separate activity has been reflected in such financial statements.
(Citizens had completed a bulk sale of substantially all of its mortgage
servicing rights in December 1995 and withdrew from mortgage servicing as a
separate activity in 1996.) The operating results of Citizens for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively, are
eliminated in these financial statements. The pro forma information is based on
the historical statements of the Company, giving effect to the sale of Citizens
and the adjustments in the accompanying Notes to the Pro Forma Condensed
Consolidated Balance Sheet (Unaudited) and the Pro Forma Condensed Consolidated
Statements of Operations (Unaudited).
These pro forma statements may not be indicative of the results of
operations that actually would have occurred had the disposition taken place at
the beginning of the period indicated. Additionally, they do not purport to
indicate the results which may be obtained in the future. These pro forma
statements should be read in conjunction with the financial statements and notes
thereto of the Company in its Annual Report on Form 10-KSB for the year ended
December 31, 1996 and the Company's Quarterly Report on Form 10-QSB for the
interim period ended June 30, 1997.
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1996
----------------------------
Historical
Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Profit from joint ventures ... $ 557,037 $ 557,037
Investment income ............ 428,954 428,954
Loan servicing fees .......... 36,131 $ (36,131)(G)
Loan origination fees ........ 1,770,464 (1,770,464)(H)
Financial consulting fees .... 116,000 116,000
Interest income .............. 463,868 (218,824)(I) 245,044
Other income ................. (24,922) 30,922 (J) 6,000
Gain on sale of mortgage
servicing rights ........ 142,083 (142,083)(K)
----------- ----------- -----------
Total Revenues .......... 3,489,615 (2,136,580) (1,353,035)
----------- ----------- -----------
Expenses:
Compensation and related costs 3,593,614 (2,230,213)(L) 1,363,401
Occupancy cost ............... 369,018 (183,281)(M) 185,737
Amortization of mortgage
servicing rights ........ 4,521 (4,521)(N)
General and administrative ... 1,506,562 (1,051,328)(O) 455,234
Professional fees ............ 149,963 (63,751)(P) 86,212
Interest ..................... 237,902 (131,861)(Q) 106,041
----------- ----------- -----------
Total Expenses .......... 5,861,580 (3,664,955) 2,196,625
----------- ----------- -----------
(Loss) before taxes .............. (2,371,965) 1,528,375 (843,590)
Income tax (benefit) ............. (7,885) (7,385)(R) (15,270)
----------- ----------- -----------
NET (LOSS)........................ $(2,364,080) $ 1,535,760 $ (828,320)
=========== =========== ===========
Net (loss) per common share ...... $ (.43) $ (.15)
=========== ===========
Weighted average number of
common shares outstanding .... 5,544,480 5,544,480
=========== ===========
See the Notes to the Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and the
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HELMSTAR GROUP, INC. & SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Six Months ended June 30, 1997
------------------------------
Historical
Helmstar Group, Inc. Pro Forma
& Subsidiaries Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Profit from joint ventures .... $ 363,851 $ 363,851
Investment income ............. 53,400 53,400
Loan servicing fees ........... 70 $ (70)(G)
Loan origination fees ......... 734,991 (734,991)(H)
Financial consulting fees...... 90,000 90,000
Interest income ............... 174,762 (72,139)(I) 102,623
Other income .................. 1,768 (1,768)(J)
----------- ----------- -----------
Total Revenues ........... 1,418,842 (808,968) 609,874
----------- ----------- -----------
Expenses:
Compensation and related costs 1,503,086 (874,340)(L) 628,746
Occupancy cost ................ 157,653 (74,202)(M) 83,451
General and administrative .... 606,383 (370,310)(O) 236,073
Professional fees and provision
for contingencies
and settlements .......... 107,434 (18,237)(P) 89,197
Interest ...................... 141,968 (72,349)(Q) 69,619
----------- ----------- -----------
Total Expenses ........... 2,516,524 (1,409,438) 1,107,086
----------- ----------- -----------
(Loss) before taxes ............... (1,097,682) 600,470 (497,212)
Income tax provision .............. 3,016 3,016
----------- ----------- -----------
NET (LOSS)......................... $(1,100,698) $ 600,470 $ (500,228)
=========== =========== ===========
Net (loss) per common share ....... $ (.20) $ (.09)
=========== ===========
Weighted average number of
common shares outstanding ..... 5,525,542 5,525,542
=========== ===========
See the Notes to the Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and the
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
and Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
(1) For purposes of determining the pro forma effect of the sale of Citizens
on the Company's Condensed Consolidated Balance Sheet, the following pro
forma adjustments have been made:
<TABLE>
<CAPTION>
June 30, 1997
-------------
<S> <C> <C>
(A) Eliminate Citizens' cash (750,503)
Record receipt of sales proceeds 111,629
Record receipt of cash from
Citizens after June 30, 1997
(such payable was forgiven in
connection with the sale) 270,000
----------
(368,874)
==========
(B) Eliminate Citizens' mortgage
loans held for sale (2,648,359)
(C) Eliminate Citizens' furniture,
equipment and leasehold
improvements (144,223)
(D) Eliminate Citizens' other assets (195,265)
Record sales proceeds receivable 195,582
----------
317
==========
(E) Eliminate Citizens' notes payable (2,414,665)
Eliminate Citizens' accrued
expenses and other liabilities (293,934)
----------
(2,708,599)
==========
(F) Record Citizens' operating loss
from July 1, 1997 through
the sales date (150,000)
Record the loss on the sale
of Citizens (302,540)
----------
(452,540)
==========
(2) For purposes of determining the pro forma effect of the sale of Citizens on
the Company's Condensed Consolidated Statements of Operations, the following pro
forma adjustments have been made:
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
(2) (continued)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
Dec. 31, June 30,
1996 1997
--------- -------
<S> <C> <C> <C>
(G) Eliminate Citizens' loan
servicing fees (36,131) (70)
(H) Eliminate Citizens' loan
origination fees (1,770,464) (734,991)
(I) Eliminate Citizens'
interest income earned in
connection with loans held
during the period between
closing and delivery to
the applicable purchasers (218,824) (72,139)
(J) Eliminate Citizens' other
income 30,922 (1,768)
(K) Eliminate Citizens' gain
on the sale of mortgage
servicing rights resulting
from the sale of its
mortgage servicing portfolio
and withdrawal from mortgage
servicing as a separate
activity during 1996 (142,083)
(L) Eliminate Citizens'
compensation and
related costs (2,230,213) (874,340)
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited) and
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
(2) (continued)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
Dec. 31, June 30,
1996 1997
----------- ---------
<S> <C> <C> <C>
(M) Eliminate Citizens'
occupancy cost (183,281) (74,202)
(N) Eliminate Citizens'
amortization of mortgage
servicing rights (4,521)
(O) Eliminate Citizens' general
and administrative
expenses (1,051,328) (370,310)
(P) Eliminate Citizens'
professional fees (63,751) (18,237)
(Q) Eliminate Citizens' interest
expense on its notes
payable related to its
mortgage origination
activities (131,861) (72,349)
(R) Eliminate Citizens'
income tax benefit (7,385)
</TABLE>
Income tax will not be incurred from the disposition or from any of the
pro forma adjustments because the Company has sufficient operating losses for
Federal and state income tax purposes to offset any gain.
(3) Net (loss) per common share is based on the weighted average number of
common shares outstanding during each period. The common share equivalents
relating to the Company's incentive compensation plan have been excluded from
the computation, because they are antidilutive.
<PAGE>
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.
HELMSTAR GROUP, INC.
Registrant
/s/ George W. Benoit
--------------------
George W. Benoit
President
Date: September 19, 1997
<PAGE>
EXHIBIT A
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and dated as of
September 5, 1997, between IMN Financial Corp., a Delaware corporation, whose
principal office is located at 520 Broadhollow Road, Melville, New York 11747
("IMNF"), Helmstar Group, Inc., a Delaware corporation whose principal office is
located at Two World Trade Center, Suite 2112, New York, New York 10048
("Helmstar") and McAdam, Taylor & Co. Inc., a New York corporation, whose
principal office is located at Two World Trade Center, Suite 2112, New York, New
York 10048 ("MT").
W I T N E S S E T H
WHEREAS, MT is a wholly-owned subsidiary of Helmstar, and
WHEREAS, Citizen's Mortgage Service Company, a Pennsylvania corporation
whose principal office is located at 500 Office Center Drive, Suite 120, Fort
Washington, Pennsylvania 19034 ("CMSC"), is a wholly-owned subsidiary of MT and
MT desires to sell all of the stock of CMSC to IMNF and IMNF desires to purchase
all of the CMSC stock by this Agreement, and
WHEREAS, the parties hereto desire that CMSC shall operate as a
wholly-owned subsidiary of IMNF by this Agreement;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, and other good and
valuable consideration, the receipt of which is hereby acknowledged, Helmstar,
MT and IMNF hereby agree as follows:
1. Purchase and Sale of Stock.
1.1 Purchase and Sale. On the Closing Date, as defined herein, IMNF
shall purchase from MT and MT will sell and transfer to IMNF, all of the issued
and outstanding shares of stock of CMSC of every kind and description (the
"Stock").
1.2 Delivery at Closing. At the Closing, as defined herein, MT will
deliver certificate(s) for the Stock duly endorsed so as to make IMNF the sole
owner of the Stock, free and clear of all claims, liens, equities, encumbrances
and restrictions of any kind caused or created by MT and/or CMSC, Helmstar or
any other shareholder of CMSC prior to Closing.
1.3 Purchase Price and Payment Terms. The total price to be paid by
IMNF for and in consideration of the sale and transfer of the Stock shall be
equal to the sum of the amounts determined in Sections 1.3(a) - 1.3(g) (the
"Purchase Price").
1.3(a) IMNF will pay to MT, in accordance with Section 1.3(h), an
amount equal to the excess of CMSC's cash and cash equivalents over CMSC's
accounts payable and accrued liabilities determined as of the close of business
on the Closing Date. If such amount is negative, the Purchase Price shall be
reduced accordingly. For purposes of this Section 1.3(a), accounts payable and
accrued liabilities shall exclude any payables related to the financing of
CMSC's residential mortgage inventory and interest expense thereon. Within
thirty (30) days after the Closing Date, CMSC shall prepare a schedule of its
cash, cash equivalents, accounts payable, and accrued liabilities in accordance
with the form attached as Schedule 1.3A.
<PAGE>
1.3(b) IMNF will pay to MT, in accordance with Section 1.3(h), an
amount equal to twenty percent (20%) of the net book value as of the Closing
Date of the fixed assets of CMSC. Within thirty (30) days after the Closing
Date, CMSC shall prepare a schedule of its fixed assets as of the close of
business on the Closing Date in accordance with the form attached as Schedule
1.3B.
1.3(c) Within six (6) business days after the Closing Date, CMSC
shall prepare a schedule of its residential mortgage inventory as of the close
of business on the Closing Date in accordance with the form attached as Schedule
1.3C. IMNF will pay to MT, in accordance with Seciton 1.3(i), an amount equal to
the excess of the Sales Price on each residential mortgage over any Unaccrued
Direct Costs associated with each residential mortgage. The Sales Price shall
equal the amount paid by an investor who shall have purchased any residential
mortgage increased by any interest income paid by the mortgagor of such
residential mortgage to CMSC after the Closing Date. Sales Price shall include
any recovery from a third party in connection with the disposition of a
residential mortgage or the property that is encumbered by such mortgage. Direct
Costs consist of payables related to the financing of CMSC's residential
mortgage inventory and direct out-of-pocket expenses related to CMSC's
residential mortgages including sales commissions, net of any offsets related to
employee advances included in accounts receivable as of the close of business on
the Closing Date, warehouse lender fees, investor fees, interest expense on any
payable incurred to finance the residential mortgage inventory, recording fees,
and assignment fees. Direct Costs shall not include any items which were
expensed prior to the close of business on the Closing Date. Unaccrued Direct
Costs are those Direct Costs which were not included in accounts payable or
accrued liabilities under Section 1.3(a) as of the Closing Date. If Unaccrued
Direct Costs exceed the Sales Price of any residential mortgage, MT shall pay
IMNF an amount equal to such excess as a reduction of the Purchase Price.
1.3(d) Within six (6) business days after the Closing Date, CMSC
shall prepare a schedule of its residential mortgages in process as of the close
of business on the Closing Date in accordance with the form attached as Schedule
1.3D. IMNF will pay to MT, in accordance with Section 1.3(i), an amount equal to
the principal balance of each residential mortgage in process multiplied by
twenty five basis points (.25%).
1.3(e) IMNF will pay to MT, in accordance with Section 1.3(i), an
amount equal to CMSC's prepaid insurance premiums related to the period
following the Closing Date. Notwithstanding anything to the contrary, if CMSC
cancels an insurance policy as of the Closing Date, any refund actually received
by CMSC shall be the amount payable by IMNF to MT hereunder.
1.3(f) Within six (6) business days after the Closing Date, CMSC
shall prepare a schedule of its commercial mortgage loan originations and
equipment leasing transactions in process in accordance with the form attached
as Schedule 1.3F as of the close of business on the Closing Date. IMNF will pay
to MT, in accordance with Section 1.3(i), twenty five percent (25%) of any Net
Profit earned in connection with any commercial mortgage loan originations and
equipment leasing transactions in process. Net Profit shall equal all fees,
commissions, rents, expense reimbursements, and revenues derived from funding or
arranging commercial mortgage loans and equipment leasing transactions less
Unaccrued Direct Costs except that for this purpose, Direct Costs shall have
been incurred in connection with commercial mortgage loan originations or
equipment leasing transactions rather than in connection with residential
mortgages as such transactions are closed.
<PAGE>
1.3(g) IMNF will pay to MT one dollar ($1.00) on the Closing
Date.
1.3(h) On the Closing Date, the amounts payable pursuant to
Sections 1.3(a) and 1.3(b) shall be based on estimated balances prepared by
CMSC. IMNF shall pay to MT, on the Closing Date, eighty percent (80%) of the sum
payable based on such estimates. The actual balances will be determined within
thirty (30) days following the Closing Date. If the amount paid by IMNF based on
the estimated balances is less than the amount determined based on the actual
balances, IMNF will pay the difference to MT. If the amount paid by IMNF on the
Closing Date is greater than the amount based on actual balances, MT will pay
the difference to IMNF. Any payment required as a result of the determination of
actual balances shall be made within five (5) business days of MT's acceptance
of the schedules to be delivered by CMSC pursuant to Sections 1.3(a) and 1.3(b).
1.3(i) The amounts payable to MT pursuant to Sections 1.3(c),
1.3(d) and 1.3(f) shall be payable if and as when such mortgages and equipment
leasing transactions are closed and funded and, if applicable, purchased by an
investor. Payment to MT shall be made within five (5) business days of CMSC's
receipt of proceeds from any transaction described in Sections 1.3(c), 1.3(d),
or 1.3(f).
1.3(j) Any amount payable to MT pursuant to Section 1.3(e) shall
be paid within thirty (30) business days of the Closing Date, except if an
insurance policy is canceled by CMSC as of the Closing Date. Any amount refunded
to CMSC in connection with the cancellation of an insurance policy shall be paid
within six (6) business days of CMSC's receipt thereof. On the Closing Date MT
shall deliver to IMNF forms for Schedules 1.3A, 1.3B, 1.3C, 1.3D and 1.3F.
1.3(k) IMNF and MT shall use their best efforts to resolve any
disputes with respect to the determination of the Purchase Price. IMNF may
utilize its independent auditor as its representative in resolving any dispute.
MT may utilize Richard A. Eisner & Company, L.L.P., as its representative in
resolving any dispute. If a dispute regarding the determination of that portion
of the Purchase Price determined in accordance with Sections 1.3(a), 1.3(b) or
1.3(e) remains unresolved for a period greater than ninety (90) days after the
Closing Date, or if a dispute regarding the determination of any other portion
of the Purchase Price remains unresolved for a period greater than one (1) year
after the Closing Date, such dispute shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in New York City in accordance
with the rules of the American Arbitration Association then in effect. Judgement
may be entered on the arbitrator's award in any court having jurisdiction. The
expenses of such arbitration shall be borne by such parties and in such
proportions as the arbitrators shall determine.
2. Closing
2.1 Closing. The closing date, the date upon which all transactions
constituting conditions precedent to the sale shall have been consummated
("Closing Date"), shall be held at the offices of IMNF, 520 Broadhollow Road,
Melville, New York 11747, on September 5, 1997.
3. Representations and Warranties by Helmstar and MT. Helmstar and MT each
represent and warrant to IMNF as follows:
3.1 Organization, Powers, Qualification and Authority. CMSC is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and in all other jurisdictions where the
<PAGE>
nature of its business conducted therein requires such qualification; except
where failure to be so qualified would not have a material adverse effect on the
business or financial condition of CMSC. CMSC has all requisite corporate power
and authority to own its properties and assets and carry on its business as now
conducted; and has all requisite power and authority to enter into, perform and
carry out this Agreement.
3.2 Capital Stock. CMSC's authorized capital stock consists of one
class of voting common stock, consisting of one hundred ninety five (195)
shares, each share having a par value of one thousand dollars ($1,000). Of the
authorized capital stock, one hundred thirty five (135) shares are validly
issued and outstanding, fully paid and nonassessable at the date hereof, all of
which such shares are owned by MT. There are no options, warrants or rights to
acquire any capital stock of CMSC or securities convertible into or exchangeable
for, or which otherwise confer on the holder or holders thereof any right
(whether or not upon the happening of any contingency or after any lapse of
time, and whether or not upon the payment or delivery of any consideration) to
acquire, any capital stock of CMSC, nor is CMSC committed to issue any such
option, warrant, right or security.
3.3 Dissolution; Forfeiture. No action at law or suit in equity and no
other investigation or proceeding whatsoever is now pending or threatened: (i)
to liquidate, dissolve or disincorporate CMSC, (ii) to declare any of the
corporate rights, powers, franchises or privileges of CMSC to be null and void
or otherwise than in full force and effect; (iii) to declare that CMSC or any of
its directors, officers, agents or employees have exceeded or violated any of
their corporate rights, powers, franchises or privileges; or (iv) to obtain any
decree, order, judgment or other judicial determination or administrative or
other ruling that will or may impede or detract from any of the corporate
rights, powers, franchises or privileges now vested in or claimed by CMSC.
3.4 Financial Statements.
(a) There have heretofore been furnished to IMNF copies of the
audited financial statements of CMSC as at December 31, 1996, for the fiscal
year then ended, all reported on by Richard A. Eisner & Co. LLP , Independent
Auditors for CMSC. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly present in all material respects the
financial position of CMSC as at the dates indicated and the results of the
operations of CMSC for the periods indicated.
(b) There have heretofore been furnished to IMNF copies of an
interim balance sheet of CMSC as at July 31, 1997 and a statement of operations
of CMSC for the seven month period then ended , signed and certified by Mr.
Steven P. Strauss, Chief Financial Officer of CMSC (hereinafter collectively
referred to as the "Interim Financial Statement"). The Interim Financial
Statement has been prepared in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements referred
to in Subsection (a) above (except that there are no notes appended thereto),
and fairly present in all material respects the financial position of CMSC as at
July 31, 1997, and the results of operations of CMSC for the seven month period
then ended.
3.5 Dividends; Stock Acquisitions; Stock Issues. Since July 31, 1997,
CMSC has not: (i) declared or paid any dividends (either in cash, property or
its stock of any class) upon, nor made or become committed to make any
distribution with respect to, nor purchased, redeemed or otherwise beneficially
<PAGE>
acquired, any of its outstanding capital stock of any class, nor become
committed so to do; nor (ii) split up, combined or reclassified any of its
outstanding stock of any class, nor become committed to issue any additional
capital stock of any class (whether or not from treasury stock, heretofore
authorized but unissued stock or newly acquired stock) or any options, rights or
warrants to acquire, or securities convertible into or exchangeable for or which
otherwise confer upon the holder or holders thereof any right to acquire, any
shares of capital stock of any class of CMSC; and CMSC will not take any such
actions from the date hereof to the Closing Date.
3.6 Properties. CMSC has and will have on the Closing Date all
requisite corporate power and authority to own and hold, and (except for assets
disposed of in the ordinary course of business) will have on the Closing Date
good and marketable title to, all of the properties and assets reflected in the
most recent of the balance sheets referred to in Paragraph 3.4 above, subject to
no mortgage, pledge, lien, encumbrance, charge or security interest, except
only: (i) liens in respect of pledges or deposits under workers' compensation
laws or similar legislation; (ii) liens for property taxes, assessments or like
governmental charges not yet delinquent and payable without penalty; (iii)
defects and exceptions, none of which (individually or in the aggregate)
materially interfere with the use by CMSC of such properties for the purposes
for which they are held; and (iv) the liens described in Schedule 3.6A, attached
hereto, which schedule describes each such lien, describes the transaction or
other circumstances out of which it arises, describes the amount of the
obligation it secures, identifies the property effected thereby, identifies the
owner of such property, and is complete and correct. Said Schedule 3.6A will
also describe all notes payable of CMSC as of December 31, 1996. Attached hereto
is Schedule 3.6B, which is complete and correct, listing all real property owned
by CMSC as of the date hereof. All of the properties and assets of CMSC are in
existence, in the possession of CMSC and in good working order and repair
(ordinary wear and tear excepted), except for minor defects which do not
materially interfere with their use, or except as described in Schedule 3.6C,
excepted hereto.
3.7 Changes in Condition. Prior to the Closing, CMSC has forgiven and
forever discharged MT with respect to any amounts due to CMSC from MT.
Otherwise, except as set forth in Schedule 3.7, since July 31, 1997, there has
been no change in the assets, liabilities, condition (financial or otherwise) or
business of CMSC from that set forth in or reflected in the Interim Financial
Statement, except changes in the ordinary course of business, none of which
(individually or in aggregate) have been materially adverse. Since July 31,
1997, CMSC has not been adversely effected in any material manner as a result of
any fire, explosion, accident, flood, earthquake, seismic or tidal wave,
windstorm, strike, lockout, labor dispute, riot, civil commotion or disturbance,
sabotage, confiscation, condemnation or purchase of any property by governmental
authority, activities of armed forces, or acts of God or the public enemy,
except as shown on Schedule 3.7, attached hereto.
3.8 Tax Returns and Payments. The balance sheets of CMSC referred to in
Paragraph 3.4 hereof adequately provide for accruals of unpaid taxes (on the
basis of the rates applicable for the years in question) including, without
limitation, all federal, state, local and foreign income, profits, franchise,
sales, use, occupation, property, excise or other taxes, if any, for all periods
ended on or prior to the dates thereof. All tax returns of CMSC required by law
(including, without limiting the generality of the foregoing, all income,
unemployment compensation, social security, sales, compensating use, excise,
<PAGE>
privilege and franchise tax laws of the United States or any state, territory or
municipal or political subdivision thereof) to be filed on or before the Closing
Date have been, or will be, duly and timely filed, other than those tax returns
subject to a valid extension of time as of such date. All taxes, assessments,
fees, interest, penalties and other governmental charges or impositions which
are, or should be, shown on said returns, reflected on billings by governmental
agencies, or required to be deposited on or before the Closing Date, have been,
or will be, duly and timely paid (other than those not yet due and payable,
those presently payable without penalty, and those currently being contested in
good faith).
CMSC has not received any notice of deficiency assessment or proposed
deficiency assessment, which has not been satisfied in full, of any United
States, state, municipal or other tax or penalty and has no knowledge of any
basis for any additional deficiency assessment of any such tax or penalty, nor
has it knowingly waived any law or regulation fixing, or consented to the
extension of, any period of time for the assessment of any tax or other
governmental imposition, or become committed so to do, except as shown on
Schedule 3.8, attached hereto.
3.9 Compliance with Other Instruments. As of the date hereof, CMSC is
not in violation of or in default with respect to any term or provision of its:
(i) Articles of Incorporation or Bylaws; (ii) material indentures, contracts,
agreements or instruments to which it may be bound; or (iii) any judgment,
order, writ, injunction or decree of any court or of any federal, state,
territorial, municipal or other commission, board or other administrative or
governmental agency or authority; and it is not in violation of any federal,
state, territorial, municipal or other statute, rule or regulation applicable to
it or by which it may be bound in any case in any manner so as presently to
affect it adversely in any material respect.
3.10 Undisclosed Liabilities. At the date of the most recent balance
sheet referred to in Paragraph 3.4 herein, there were no material, fixed and
determinable liabilities of CMSC which are not shown or reflected in such
balance sheet.
3.11 Books of Account. The books of account of CMSC are complete and
correct in all material respects, and all monies due or to become due from or
owing by, and all liabilities (actual, contingent or accrued) of, CMSC by reason
of any transaction, matter, cause or thing whatsoever which, in accordance with
generally accepted accounting practices or principles, should be entered therein
have been duly, correctly and completely entered therein.
3.12 Litigation, etc. CMSC is not a party to any pending, and has no
notice or knowledge of any threatened action, suit, proceeding or investigation
(at law or in equity or otherwise) in, before or by any court or any
governmental board, commission, agency, department or office in which an adverse
determination would have any material adverse effect on the business, assets or
financial condition of CMSC, except as shown on Schedule 3.12, attached hereto.
3.13 Accounts and Notes Receivable. Except as specified in Schedule
3.13, attached hereto, all accounts and notes receivable of CMSC are and on the
Closing Date will be valid, genuine and subsisting; arise and/or will arise out
of bona fide sales, performances of services, or repayable advances due from
employees.
<PAGE>
3.14 Overtime, Back-Wage, Vacation and Discrimination Claims. Except as
described in Schedule 3.14, which will be delivered by MT to IMNF on the Closing
Date, no present or former employee of CMSC has any claim against CMSC (whether
under federal or state law, under any employment agreement or otherwise) on
account of or for: (i) overtime pay, other than overtime pay for work done in
the current payroll period; (ii) wages or salary for any period other than the
current payroll period; (iii) vacation time off or pay in lieu of vacation time
off, other than (a) accumulated vacation pay as at the Closing Date as shown in
a schedule to be prepared by CMSC within six (6) business days after the Closing
Date, and (b) vacation time (or pay in lieu thereof) earned in or in respect of
the current fiscal year; or (iv) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work. No person or
party (including, but not limited to, governmental agencies of any kind) has
made any claim against, or asserted in writing any basis for any action or
proceeding against CMSC under or arising out of any statute, ordinance or
regulation relating to discrimination in employment or employment practices and
which would, if upheld, result in any material monetary loss to CMSC.
3.15 Contracts for Personal Services. CMSC is not a party to or bound
by any contract, agreement or undertaking with any person whatsoever for
personal services to be rendered by any person for CMSC, except as set forth in
Schedule 3.15A, attached hereto. Also attached to Schedule 3.15A and a part
thereof are copies of all letters of understanding with all salespersons of
CMSC. Attached hereto is Schedule 3.15B, showing the names, positions and annual
rates of compensation of all employees of CMSC.
3.16 Benefit Claims. CMSC's company health benefit plan is attached
hereto as part of Schedule 3.16. No person or party whatsoever now has or will
have on the Closing Date any claim known to CMSC under which CMSC has any
liability under any health, sickness, disability, medical, surgical, hospital or
similar health benefit plan or arrangement (whether or not legally binding)
maintained by CMSC, or to or by which CMSC is a party or is bound, or under any
workers' compensation or similar law, which is not fully covered by insurance
maintained with reputable, financially responsible insurers. A list of CMSC's
insurance contracts relating to all such benefit plans, arrangements and copies
of such insurance contracts and benefit plans themselves are attached hereto as
part of Schedule 3.16.
3.17 Leases. CMSC is not, either as lessee or lessor, a party to or
bound by any lease or any property or assets having a term of (or subject to
renewal or extension by any party other than CMSC for a total term, including
the initial term and any such renewal or extended term, aggregating) more than
one year, except only for the leases described on Schedule 3.17, attached
hereto, true copies of which have been heretofore delivered to IMNF.
3.18 Contracts for Purchase or Sale. Except as set forth on Schedule
1.3C or Schedule 3.18, CMSC is not a party to or bound by any contract,
agreement or undertaking with any person or party whatsoever (other than
insurance contracts entered into in the ordinary course of business) for the
purchase of any property or assets of any nature whatsoever which requires that
payment in excess of two thousand dollars ($2,000) for such property or assets
shall be made regardless of the Closing Date of this Agreement. CMSC is not a
party to, or bound by any other contract, agreement or undertaking for, the sale
by CMSC of any property or assets of any nature whatsoever which exceeds two
thousand dollars ($2,000) except only such as have been made in the ordinary
course of business or that expire by their terms or are otherwise cancelable by
CMSC (without any right of renewal or extension in any party other than CMSC) no
later than 30 days after the Closing Date.
<PAGE>
3.19 Insurance Contracts; Banking Relationships. All of CMSC's
contracts of insurance (not shown in any other schedule referred to in this
Agreement) in force at the date hereof are listed in Schedule 3.19A and copies
of such insurance contracts are attached thereto. The names and locations of all
banks in which CMSC has accounts and the names of all persons authorized to draw
on such accounts are set forth in Schedule 3.19B.
3.20 Brokerage; Indemnity. Neither Helmstar nor MT have retained any
broker or finder in connection with the transactions contemplated by this
Agreement, and Helmstar and MT, jointly and severally, will indemnify, defend
and hold harmless IMNF against all the claims for brokers' or finders' fees made
or asserted by any party claiming to have been employed by either of them, and
all costs and expenses (including the reasonable fees of counsel) of
investigating and defending such claims.
3.21 No Conflict with Other Agreements. Except with respect to any
lease, master agreement or seller-servicer guide relating to the sale or
servicing of mortgages, warehouse lines of credit, agency agreements relating to
the origination or placement of any mortgage loans or equipment leasing
transactions, or mortgage banking licenses, as to which no representations with
respect to any of the foregoing are made, neither the execution and delivery of
this Agreement nor compliance with its terms and provisions will conflict with
or result in a breach of any agreement or instrument to which CMSC is a party or
by which it may be bound or constitute a default thereunder or result in the
creation or imposition of any lien, charge, encumbrance or restriction of any
nature whatsoever upon, or give to anyone any interest or rights, including
rights of termination or cancellation, in or with respect to, any of the
properties, assets, contracts, or businesses of CMSC.
3.22 No Restrictions. CMSC is not subject to any charter, bylaw,
judgment or other restriction which would prevent the consummation of the
transactions contemplated by this Agreement. The board of directors of each of
Helmstar and MT have duly approved this Agreement and the transactions
contemplated herein as required under the laws of their respective states of
incorporation and have authorized the execution and delivery of this Agreement
by Helmstar and MT.
3.23 Disclosure. Neither the financial statements, any schedule
referred to herein nor this Agreement contains any untrue statements of a
material fact or knowingly omits to state a material fact (other than facts
generally known to the business community) necessary in order to make the
statements contained therein or herein not misleading.
3.24 Licenses, etc. CMSC owns or holds valid, subsisting licenses
necessary for the conduct of its business as now conducted, including valid
mortgage banking licenses. Attached hereto as Schedule 3.24 is a complete and
correct listing of all such licences, governmental permits, consents and
approvals including all Fannie Mae, Freddie Mac, Ginnie Mae and HUD approvals.
CMSC holds or has obtained all governmental permits, licenses, consents and
approvals necessary for the lawful conduct of its business; and MT and Helmstar,
to whatever extent it may become reasonably necessary will (at their expense up
to one hundred dollars ($100), and thereafter at IMNF's expense) do all things
and cooperate in all respects with IMNF to obtain the approval of the change of
control of CMSC as may be required to maintain in full force and effect all such
permits, licenses, consents and approvals.
<PAGE>
3.25 Warehouse Lines. As of the Closing Date CMSC has in place
warehouse lines of credit in the total amount of approximately six million
dollars ($6,000,000) which warehouse lines are in force. The names, locations
and amounts of all such warehouse lines of credit are set forth in Schedule
3.25.
3.26 Mortgage Originations and Leasing Transactions in Process. As of
September 4, 1997, CMSC has in place the following: approximately ten million
eight hundred fifty thousand dollars ($10,850,000) of residential mortgage
originations; approximately thirteen million five hundred fifty five thousand
dollars ($13,555,000) of commercial mortgage loan originations; and
approximately nineteen million four hundred thousand dollars ($19,400,000) of
equipment leasing transactions. The names, locations and amounts of all such
mortgage originations and leasing transactions in process are set forth in
Schedule 3.26.
3.27 CMSC New Jersey office closed. Thirty (30) days after the Closing
Date, CMSC will have closed its New Jersey office. Any cost associated with such
office closing, net of all applicable deposits, will be treated as a liability
to be included in accrued liabilities of CMSC set forth in paragraph 1.3 and
Schedule "1.3A" hereof.
3.28 Parent / Subsidiary Relationship of Helmstar / MT. Helmstar hereby
represents and warrants that MT is a wholly-owned subsidiary of Helmstar.
3.29 Parent / Subsidiary Relationship of MT / CMSC. MT hereby
represents and warrants that CMSC is a wholly-owned subsidiary of MT.
4. Representations and warranties by IMNF. IMNF represents and warrants to
Helmstar and MT as follows:
4.1 Organization and Standing. IMNF is a corporation duly organized and
existing and in good standing under the laws of the State of Delaware and has
full corporate power to carry out this Agreement.
4.2 Authority of IMNF. The execution and performance of this Agreement
by IMNF has been duly authorized and approved by its board of directors and
shareholder approval of IMNF is not required. Neither the execution nor the
performance by IMNF of this Agreement will result in the breach of any term or
provision of any other agreement to which IMNF is a party.
4.3 Brokerage; Indemnity. IMNF has not retained any broker or finder in
connection with the transactions contemplated by this Agreement, and IMNF will
indemnify, defend and hold harmless Helmstar and MT against all claims for
brokers' or finders' fees made or asserted by any party claiming to have been
employed by IMNF, and all costs and expenses (including the reasonable fees of
counsel) of investigating and defending such claims.
4.4 IMNF Filings. IMNF has filed with the Securities and Exchange
Commission all 10-K's, 10-Q's and 8-K's for all periods ending on or before June
30, 1997 and the same are true and correct. Accurate copies of all such 10-K's,
10-Q's and 8-K's for all periods ended on or after March 31, 1997 have
previously been furnished to MT and Helmstar. There has been no material adverse
change in the business of IMNF since the date of its last filing.
5. Certain covenants by Helmstar and MT. Helmstar and MT covenant and
agree with IMNF that:
<PAGE>
5.1 Resignations of all Directors and Officers. MT shall deliver to
IMNF at the Closing written resignations signed by all Directors and Officers of
CMSC dated as of September 5, 1997, except for Eric Fishman's.
5.2 Transfer of Authority to Access and Draw upon Bank Accounts. MT
shall cause CMSC to deliver to IMNF at the Closing all necessary documents and
signature transfer cards to transfer authority to access and draw upon each and
every bank account of every nature and kind, as set forth in Schedule 3.19B,
maintained by CMSC.
5.A Covenant's of IMNF.
(a) IMNF covenants and agrees with Helmstar that on or before the
sixtieth (60th) day following the Closing Date, IMNF will either (i) cause CMSC
to cancel all of the warehouse lines of credit set forth on Schedule 3.26 (the
"Warehouse Lines") or (ii) provide Helmstar with a written agreement from each
of the providers of the Warehouse Lines, releasing Helmstar from its guarantees
(the "Guarantees") with respect to all future drawdowns made by CMSC on such
Warehouse Lines. IMNF understands and agrees that anytime after the sixtieth
(60th) day following the Closing Date Helmstar may, without any notice to IMNF
or any liability to IMNF or CMSC terminate all such Guarantees.
(b) IMNF covenants and agrees with Helmstar that it or one of its
affiliates will (i) purchase all of the residential mortgages with respect to
the State of New Jersey set forth in Schedule 1.3C to be delivered after the
Closing Date and (ii) fund all residential mortgage loans in process with
respect to the State of New Jersey set forth in Schedule 1.3D to be delivered
after the Closing Date. IMNF further agrees that all such residential mortgages
and loans in process will continue to qualify for payment of Purchase Price in
accordance with Sections 1.3(c) and 1.3(d) hereof.
(c) IMNF covenants and agrees with Helmstar that in connection
with all payments made to Helmstar in accordance with Sections 1.3(c), 1.3(d),
1.3(e) and 1.3(f), IMNF will forward to Helmstar with each such payment a report
setting forth the details of such payment which report shall include, without
limitation, an identification of all residential mortgages sold and loans in
process funded.
6. Conditions to IMNF's Obligations. The obligations of IMNF to complete
and consummate this Agreement shall be subject to compliance by Helmstar and MT
with all of the agreements herein contained and to the satisfaction of the
following conditions precedent:
6.1 Representations and Warranties True. The representations and
warranties contained in Section 3 hereof shall be true and correct in all
material respects as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, and IMNF shall have received on the
Closing Date a certificate from Helmstar and MT dated the Closing Date signed by
the presidents and secretaries of Helmstar and MT to those effects.
6.2 Opinion of Counsel. On the Closing Date, Helmstar and MT shall
deliver to IMNF an opinion (in form and content satisfactory to IMNF), dated the
Closing Date, of September 5, 1997, of counsel for Helmstar and MT to the
following effects:
<PAGE>
(a) That CMSC is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania,
entitled to own or lease its properties and to carry on its business as and in
the places where to the knowledge of such counsel such properties are now owned,
or leased, or such businesses are now conducted.
(b) That, based solely upon the stock records of CMSC, CMSC is a
wholly-owned subsidiary of MT.
(c) That, based solely upon the stock records of MT, MT is a
wholly-owned subsidiary of Helmstar.
(d) That Helmstar and MT have full power and authority to make,
execute, deliver and perform this Agreement in accordance with its terms; this
Agreement has been duly authorized and approved by proper corporate action of
Helmstar and MT and constitutes the valid and legally binding obligations of
Helmstar and MT in accordance with its terms. All of the shares of stock
currently outstanding as reflected in paragraph 3.2 of this Agreement are
validly issued and outstanding and to the knowledge of such counsel are
currently not subject to any lien, pledge, encumbrance, restriction or claim,
and MT has full right and authority to transfer the same pursuant to this
transaction.
(e) To the knowledge of such counsel there is no action, suit,
proceeding or investigation pending or threatened against Helmstar, CMSC and MT
which might result in any material adverse change in the condition (financial or
otherwise) or business of CMSC (other than those referred to in Paragraph 3.12
hereof), or which questions the legality, validity or propriety of this
Agreement or of any actions taken or to be taken pursuant to or in connection
with this Agreement.
6.3 No Action to Prevent Completion. No action or proceeding shall have
been instituted or threatened on or prior to the Closing Date to set aside,
restrain or prohibit, or to obtain damages in respect of, this Agreement or the
consummation of the transactions contemplated herein which in the opinion of
IMNF makes it inadvisable to consummate such transactions.
6.4 Full Compliance. IMNF's obligations to complete and consummate this
Agreement shall be subject to material compliance by Helmstar and MT with all of
their agreements herein contained, and to the reasonable satisfaction of all of
the conditions of this Agreement.
7. Conditions to Helmstar's and MT's Obligations. Helmstar's and MT's
obligations to complete and consummate this Agreement shall be subject to
material compliance by IMNF with all of their agreements herein contained and to
the reasonable satisfaction of the following conditions precedent:
7.1 Representations and Warranties True. The representations and
warranties contained in Paragraph 4 hereof shall be true and correct in all
material respects as of the Closing Date.
7.2 Opinion of Counsel. At the Closing Date, IMNF shall deliver or
cause to be delivered to Helmstar and MT an opinion dated the Closing Date, of
the Counsel for IMNF to the following effects:
(a) That IMNF is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
<PAGE>
(b) That IMNF has full power and authority to make, execute,
deliver and perform this Agreement in accordance with its terms; this Agreement
has been duly authorized and approved by proper corporate action of IMNF and
constitutes the valid and legally binding obligation of IMNF in accordance with
its terms.
(c) That such Counsel does not know, and has no reason to
believe, that any action, suit, proceeding or investigation is pending or
threatened against IMNF which questions the legality, validity or propriety of
this Agreement or of any actions taken or to be taken pursuant to or in
connection with this Agreement.
In rendering such opinion, Counsel for IMNF may rely (and will
state in such opinion the belief that Helmstar and MT are justified in relying)
upon opinions of other counsels and upon the certificates of a principal officer
of IMNF as to matters of fact.
7.3 No Action to Prevent Completion. No action or proceeding shall have
been instituted or threatened on or prior to the Closing Date to set aside the
authorizations of the transfers hereunder or any of them, and no action or
proceeding shall have been instituted or threatened before any court or
governmental agency to restrain or prohibit, or to obtain substantial damages in
respect of, this Agreement or the consummation of the transactions contemplated
herein which in the opinion of Helmstar and MT makes it inadvisable to
consummate such actions.
7.4 Fishman Employment Guarantee. Eric Fishman shall have released
Helmstar from its guarantee of his employment agreement with CMSC.
8. Closing. This Agreement shall close when all of the deliveries referred
to heretofore in this Agreement, and all of the deliveries referred to in this
Paragraph 8, are made on or prior to the Closing Date.
8.1 IMNF, Helmstar and MT shall deliver to each other copies of the
resolutions of their boards of directors authorizing the execution and
performance of this Agreement and the acts of the officers of each in carrying
out the terms and provisions thereof.
8.2 IMNF, Helmstar and MT agree to execute and deliver such instruments
and take such other action as any of them may reasonably require in order to
carry out the intent of this Agreement.
8.3 Helmstar and MT shall deliver to IMNF a certificate of the
Secretary of State of Pennsylvania evidencing the good standing of CMSC as of a
date or dates not more than ten (10) days prior to the Closing Date.
8.4 MT will deliver to IMNF certificate(s) for the Stock sold to IMNF
by this Agreement.
8.5 MT shall deliver to IMNF all formal corporate records and devices
of CMSC, including the corporate minute book, corporate stock transfer records
and corporate seal of CMSC in their possession.
8.6 MT shall deliver to IMNF written resignations signed by all
Directors and Officers of CMSC dated as of September 5, 1997, except for Eric
Fishman.
<PAGE>
8.7 MT shall deliver to IMNF all necessary documents and
signature transfer cards to transfer authority to access and draw upon each and
every bank account of every nature and kind, as set forth in Schedule 3.19B.
9. Indemnification.
9.1 Helmstar and MT shall indemnify and hold IMNF harmless after the
Closing Date from and against any and all of the following:
(a) The breach by Helmstar or MT of any warranty or
representation made by Helmstar or MT pursuant to this Agreement;
(b) The nonperformance of any covenant of Helmstar or MT;
(c) Any claim, action, suit or proceeding brought against IMNF
based on a liability of CMSC which was fixed and determinable on the Closing
Date and not set forth on Schedule 1.3A as finally agreed to by the parties.
(d) Any claims for unpaid taxes of any kind which are asserted or
levied against IMNF or the properties of CMSC after the Closing Date and which
relate to any period before the Closing Date provided that such taxes were not
included in accounts payable or accrued liabilities for purposes of Section
1.3(a); and
(e) All costs, assessments, judgments, demands (including costs
of defense and reasonable attorneys' fees) arising out of any claim, or the
defense thereof, made with respect to Paragraphs 9.1 (a) through 9.1 (d). IMNF
will seek in good faith by all reasonable means to defeat or reduce any damages
as to which indemnification may be sought so as to minimize such indemnification
and will give Helmstar and MT timely notice of, and the opportunity to
participate in at Helmstar and MT's expense, the defense or compromise of any
claim which may give rise to such indemnification. In no event shall Helmstar
and MT indemnify IMNF in an aggregate amount greater than the Purchase Price as
defined in Paragraph 1.3 hereof.
9.2 Except as provided in Subparagraph 9.1(d), no liability of Helmstar
and MT under this Agreement shall exist with respect to the representations,
warranties and covenants made in this Agreement or any schedule or certificate
furnished by them with respect thereto, except as to claims which are made
within three years of the Closing Date.
9.3 IMNF shall indemnify and hold Helmstar harmless from and against
any and all liabilities, expenses, costs, assessments, judgments and demands
(including reasonable attorneys fees) arising out of any claim made against
Helmstar on any of the Guarantees with respect to any drawdowns on the Warehouse
Lines made by CMSC at any time on or after the Closing Date.
10. Miscellaneous.
10.1 Expenses. Whether or not the transactions herein set forth shall
be consummated, IMNF will pay all expenses of the preparation and performance of
this Agreement incurred by IMNF, and Helmstar and MT will pay all expenses
incurred by them in connection with the preparation and performance of this
Agreement.
<PAGE>
10.2 Confidentiality. Except as contemplated by this Agreement or
necessary to carry out the transactions herein set forth, all information or
documents furnished hereunder by IMNF, Helmstar, MT and CMSC to the other shall
be kept confidential by the party to whom furnished at all times to the Closing
Date, and in the event such transactions are not consummated, each shall return
to the other all documents furnished hereunder and copies thereof and shall
continue to keep confidential all information furnished hereunder and not
thereafter use the same for its advantage.
10.3 Notices. Any notice required or permitted hereunder shall be in
writing and shall be given by overnight mail addressed, if to IMNF to: IMN
Financial Corp., 520 Broadhollow Road, Melville, New York 11747, Attention:
Counsel. If to Helmstar, CMSC and MT to: Helmstar Group, Inc., Two World Trade
Center, Suite 2112, New York, New York 10048, Attention: Mr. George W. Benoit,
President.
10.4 Best Efforts, Cooperation. IMNF, Helmstar and MT shall exert their
best efforts to obtain all consents and approvals necessary for the due and
punctual performance of this Agreement and the satisfaction of the conditions
hereof on their part to be satisfied, and all shall cooperate with the other
with respect thereto.
10.5 Entire Agreement. This Agreement constitutes and contains the
entire agreement of the parties and supersedes any and all prior negotiations,
correspondence, understandings and agreements between the parties respecting the
subject matter hereof.
10.6 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and permitted assigns of the parties hereto, whether herein so
expressed or not, but neither this Agreement nor any of the rights, interests or
obligations hereunder of any party hereunder shall be assigned without the prior
written consent of the other parties, except that IMNF may, without such
consent, assign to any of its wholly-owned corporate subsidiaries all of its
rights and privileges hereunder except that IMNF shall not be relieved of any of
its obligations to Helmstar or MT.
10.7 Controlling Law. This Agreement shall be governed by and construed
in accordance with the law of the state of New York.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
10.9 Access to Books and Records. IMNF agrees that following the
Closing Date it will cause CMSC to make available to Helmstar and MT, upon ten
(10) days prior written notice and only on normal business days (at the sole
cost and expense of Helmstar and MT), all of CMSC's books and records (a) which
may be required by Helmstar and MT in connection with the preparation of any tax
return or consolidated financial statements (including an audit of such
statements), (b) in connection with the defense of any action to which Helmstar,
MT or any affiliates of either Helmstar or MT are a party, or (c) in connection
with a dispute regarding the Purchase Price.
<PAGE>
10.10 Schedules. The following schedules are attached hereto and by
this reference incorporated herein. All schedules shall be delivered to IMNF at
the Closing unless otherwise indicated herein.
Schedule Subject Matter
-------- --------------
1.3A Cash, Cash Equivalents, Accounts Payable, &
Accrued Liabilities
1.3B Fixed Assets
1.3C Residential Mortgages Inventory
1.3D Residential Mortgages in Process
1.3F Commercial Mortgage Loan Originations and
Equipment Leasing Transactions in Process
3.6A Liens and Encumbrances
3.6B Real Property Owned
3.6C Defects in Properties or Assets
3.7 Changes in Condition
3.8 Taxes and Deficiency Assessments
3.12 Litigation
3.13 Accounts and Notes Receivable
3.14 Overtime, Back-Wage, Vacation, Discrimination
Claims
3.15A Personal Service Contracts
3.15B CMSC Employees
3.16 Insurance Contracts; Benefit Plans
3.17 Leases
3.18 Contracts for Purchase or Sale
3.19A All other Insurance and Indemnity Contracts
3.19B All Bank Accounts and names of Persons Authorized
to Draw
3.24 Licenses, etc.
3.25 Warehouse Lines
3.26 Mortgage Originations and Leasing Transactions in
Process
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HELMSTAR GROUP, INC.
By: /s/Roger J. Burns
-----------------
Roger J. Burns, Vice President
MCADAM, TAYLOR & CO., INC.
By: /s/Roger J. Burns
-----------------
Roger J. Burns, Vice President
IMN FINANCIAL CORP.
By: /s/Edward R. Capuano
--------------------
Edward R. Capuano, President
