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D. Hanan, to establish the value of the stock.3 All three experts
created earnings models that generally served as the bases of their
analyses, and all experts used comparable companies, discounted
cashflow, and/or comparable acquisitions analyses. The experts
treated their comparable companies analyses as the estimated
publicly traded value of the minority interest of JPMS stock to
determine an initial value of the company before applying discounts
for lack of marketability.
In deriving their earnings models, all the experts made
adjustments to JPMS’s financial data. Most significant were
adjustments (or lack thereof) to Mr. DeJoria’s compensation. The
estate’s experts, Messrs. Weiksner and McGraw, assumed that Mr.
DeJoria’s compensation would be $12 million in 1990 and $17 million
thereafter. Respondent’s expert, Mr. Hanan, created three models.
The initial model assumed that a 49-percent shareholder could
negotiate a reduction in Mr. DeJoria’s compensation to $5 million
3 Respondent also offered the report and testimony of E.
James Brennan to evaluate the reasonable level of compensation
for services provided by Messrs. Mitchell and DeJoria before Mr.
Mitchell’s death and to make an estimate of the reasonable level
of compensation for Mr. DeJoria for the 5 fiscal years following
Mr. Mitchell’s death. Mr. Brennan opined that the amounts
Messrs. Mitchell and DeJoria paid themselves for the 1984-89
fiscal years were far greater than the maximum amounts paid to
comparable top executives at equivalent enterprises for employee
services. Mr. Brennan concluded that the maximum level of
reasonable compensation for Mr. DeJoria for 1990-94 would range
between $820,300 and $1,159,420, on the basis of projections of
an increase in sales revenue for those years.
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