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terminate in March 1988. DM terminated the agreements in part
because SMP had been behind on the royalty payments since its
inception. DM terminated SMP's license even though SMP had
become a profitable business and was growing rapidly. In 1987,
SMP had over $2.8 million in gross sales. Petitioner's ability
to take over SMP's printing business also instigated DM's
decision to terminate SMP's license.
DM immediately entered into negotiations with petitioner for
the license of intangible assets and the sale of printing
equipment. DM did not contact any other party regarding the
license. Maitland represented petitioner in the license
negotiations. Jack Petranker (Petranker) negotiated the license
agreement for DM. Petranker was a director and officer of DM and
replaced Maitland as dean of the Nyingma Institute. Petranker,
who had a law degree, prepared and filed the articles of
incorporation for petitioner and signed as petitioner's sole
incorporator. Petranker is not involved in petitioner's business
operations. Petranker also lent petitioner startup capital. In
March 1988, petitioner owed over $70,000 to Petranker.
When he formed petitioner, Maitland did not have any
experience in the printing industry. Maitland began working at
SMP as a production manager, without compensation, in July 1987
to learn about the printing business. SMP allowed Maitland to
work for it despite the fact that DM planned to enter into a
license agreement with petitioner. Maitland relied on SMP's
business plans to determine petitioner's expected profits and did
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