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Under the option and joint venture agreement, if HJI
exercised the option, the resulting joint venture would commence
on January 1, 1987, and continue until December 31, 2011. No
initial capital was to be contributed by the joint venturers.
Instead, the only capital of the joint venture would be
accumulated capital in the form of undistributed earnings of the
joint venture. The working capital required by the joint venture
for the first fiscal year would be supplied either by loans from
HJI or from other lenders. No property was to be acquired by the
joint venture except for cash and short term investment
securities and consumables, such as propagating seed, plant
cuttings, fertilizer, herbicide, and other miscellaneous
supplies, to be used within 1 year. Any other property needed to
conduct the business of the joint venture was to be furnished by
HJI or third parties. The joint venture however was to pay HJI
the fair rental value of all property furnished by HJI or its
affiliates, but in no event more than it would cost to rent
comparable property in the open market.
Pursuant to the option and joint venture agreement, the net
profits or net losses of the joint venture would be divided among
the joint venturers as follows: 90 percent to JDP until the date
upon which JDP had received distributions from the joint venture
in the amount equal to the principal sums (but not interest) paid
by JDP to HJI under the R & D Agreement (recoupment), and
thereafter 65 percent. The corresponding allocation was 10
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