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Under the terms of the Stock Redemption Agreement, the 705 shares
of PK Ventures’ stock that were not redeemed from Kane remained
subject to both the Voting Trust Agreement and the Pledge
Agreement.
Also on December 7, 1990, Rose, PK Ventures, and the Printon
Kane Group executed a document entitled “Agreement” (litigation
agreement) whereby they agreed to share the litigation costs
incurred to sue Raymond James & Associates. The litigation
subject to the litigation agreement involved the business and
activities of Zephyr. As a result of Zephyr’s bankruptcy, the
Zephyr purchasers had lost all of the cash that they had
contributed to Zephyr.
Transfers From PK Ventures to the Zephyr Purchasers
PK Ventures did not receive promissory notes from the Zephyr
purchasers in exchange for the $1 million that it transferred to
them. No accrued interest attributable to this transfer was
posted to PK Ventures’ general ledger or reported in its audited
financial statements.
The Zephyr purchasers did not repay any portion of the
$1 million that had been transferred to them from PK Ventures.
PK Ventures neither took legal action against the Zephyr
purchasers to force repayment of the $1 million transfer nor did
it attempt to negotiate a partial collection of this amount with
any of the Zephyr purchasers. PK Ventures issued Forms 1099 to
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