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CemCom agreed to exercise its option to license the technology
being developed by Research I. Consequently, on December 29,
1982, Mr. Townsend believed that CemCom had bound itself to make
substantial minimum royalty payments to Research I.
Accordingly, as of December 29, 1982, it was not certain
that CemCom would exercise its option under the technology
transfer agreement with Research II to license the new
technology. Additionally, the exercise of the option was
unlikely, given the amount of minimum royalties that CemCom owed
under the Research I agreement. Even if CemCom were to exercise
its option, CemCom would not be able to continue making the
minimum royalty payments for any sustained period.
During 1983 and 1984, research and development work was
performed by CemCom in creating and developing the new
technology on behalf of Research II. During that time, CemCom
provided Mr. Townsend with financial statements and progress
reports detailing CemCom's research and experimental projects
and activities. The Research II limited partners were kept
advised on CemCom's progress by a series of bulletins. The
research performed by CemCom during 1983 and 1984 resulted in
the creation and development of "Jetfix".
On July 31, 1984, CemCom's option to license the new
technology pursuant to the technology transfer agreement lapsed.
On September 27, 1984, Research II and CemCom entered into a
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