Richard E. and Mary Ann Hurst - Page 13

                                       - 13 -                                         
          A.  Complete Termination of Interest in HMI                                 
               The Hursts’ argument is simple--they say that Richard (who             
          had owned all the HMI stock) walked completely away from the com-           
          pany, and has no interest in it other than making sure that the             
          new owners keep current on their notes and rent.  The Commission-           
          er’s argument is more complicated.  While acknowledging that each           
          relationship between the Hursts and their old company--creditor             
          under the notes, landlord under the lease, employment of a non-             
          owning family member--passes muster, he argues that the total               
          number of related obligations resulting from the transaction gave           
          the Hursts a prohibited interest in the corporation by giving               
          Richard Hurst a financial stake in the company’s continued                  
               In analyzing whether this holistic view is to prevail, we              
          look at the different types of ongoing economic benefits that the           
          Hursts were to receive from HMI: (a) The debt obligations in the            
          form of promissory notes issued to the Hursts by HMI and the new            
          owners, (b) their lease of the Safety Drive building to HMI; and            
          (c) the employment contract between HMI and Mrs. Hurst.                     
               1.   Promissory Notes                                                  
               There were several notes trading hands at the deal’s clos-             
          ing.  One was the $250,000 note issued by HMI to the Hursts for             
          their RHI stock.  The second was the $2 million, 15-year note,              
          payable in quarterly installments, issued to Mr. Hurst by HMI in            

Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011