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million to $10 million for JPMS' fiscal year ending July 31, 1990.
Mr. DeJoria's $2 million salary for that year was to remain intact.
J. Discussions and Agreement With Gillette
In 1987, the Gillette Co. (Gillette) was interested in
entering the salon-only (or professional-only) products segment of
the hair care market. JPMS was one of the primary candidates that
Gillette considered purchasing.
In the fall of 1987, Gillette and Messrs. DeJoria and Mitchell
discussed a potential joint venture between Gillette and JPMS to
distribute a Gillette permanent wave product through the JPMS
distribution system. Gillette also sought an option to purchase
JPMS, but Messrs. DeJoria and Mitchell would agree only to grant
Gillette a right of first refusal.
Accordingly, on December 18, 1987, Aapri Cosmetics, Inc., a
wholly owned subsidiary of Gillette, and JPMS entered a joint
venture, which began on January 1, 1988, and was to last for an
initial 2-year period. The joint venture agreement provided
Gillette with a right of first refusal to purchase JPMS at a
formula price of 10 times JPMS' prior 12 months' operating income,
after deducting the maximum Federal and State corporate income
taxes (assumed to be 50 percent of income), and excluding from
JPMS' operating income officers' salaries and car expenses. Until
July 1988, the price payable pursuant to the right of first refusal
was capped at $150 million. Gillette's ultimate goal in entering
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