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the Trust had been created. Gregg Ritchie, an accountant with KPMG
who oversaw the preparation of JPMS' annual audited financial
statements, began to explore various scenarios for maintaining
JPMS' subchapter S status.
On April 4, 1991, Mr. DeJoria offered, through Mr. Ritchie, to
purchase the Trust's share of JPMS common stock for $47 million.
Mr. DeJoria's offer included $4.7 million in cash on April 15,
1991, with the balance in 10 annual installments of $4.23 million
commencing April 15, 1992 (the unpaid principal balance would bear
interest at 8 percent per year, payable quarterly). On April 10,
1991, Mr. Fujieki rejected the offer. Mr. Fujieki invited Mr.
DeJoria to make a higher bid; Mr. DeJoria refused, indicating that
his next offer would be $37 million ($10 million less than his
April 4, 1991, offer).
3. Compensation Dispute
Mr. DeJoria assumed many of Mr. Mitchell's corporate
responsibilities following Mr. Mitchell's death. Between April 22
and July 31, 1989, JPMS paid Mr. DeJoria $4,901,537 as compensation
for services rendered to JPMS. For JPMS' fiscal year ended July
31, 1990, Mr. DeJoria agreed to reduce his management fee from $15
million to $10 million, as promised to Mr. Mitchell. Mr. DeJoria
also received $2 million in salary for that year. In summary, JPMS
paid Mr. DeJoria the following amounts for fiscal years ended July
31, 1990 through 1994:
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