Utah Jojoba I Research, William G. Kellen, Tax Matters Partner - Page 25

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               In preparing his expert report, Chen reviewed copies of the             
          quarterly progress reports Pace, on behalf of U.S. Agri,                     
          submitted to Kellen, as general partner of Utah I, as required by            
          the original R&D agreement.  Although Chen found that the                    
          progress reports contained some general statements about starting            
          an "experimental procedure", by mid-1986 the progress reports                
          contained no references to any possible research activities.                 
          Generally, however, Chen concluded that the progress reports                 
          submitted by U.S. Agri were written in the manner of general                 
          farming reports containing information on the progress of Utah               
          I's jojoba crop.  The progress reports contained no discussion of            
          the different experiments as set forth in the amended research               
          plan, nor any description of how each plot was progressing                   
          relative to others or a control plot.                                        
               The handwritten notes Pace submitted were determined by Chen            
          to be inadequate for research purposes.  They contained no record            
          of weather conditions or growth measurements of the jojoba                   
          plants.  Furthermore, the time intervals between Pace's written              
          observations were irregular and too far apart for Pace's notes to            
          be of any scientific value.                                                  
               Chen also determined that the plant selection portion of the            
          amended research plan was merely an application of existing                  
          processes and techniques used to cull the best plants and was not            
          selective breeding.  Chen's report stated that U.S. Agri's                   





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