- 7 -
not prepare his own business plans. Maitland also examined SMP's
financial information and met with SMP's customers and suppliers
and with industry experts to determine SMP's production capacity
and profitability. SMP also trained petitioner's newly hired
employees. Several months after SMP provided this assistance to
petitioner, a merger of petitioner and SMP was proposed.
The merger occurred upon the termination of SMP's license
and rental agreements with DM. Petitioner remained as the
surviving corporation. All of SMP's members became members of
petitioner, and three became directors of petitioner. In
addition, the majority of SMP's employees began working for
petitioner. Petitioner took over SMP's printing business and
completed SMP's work in progress. Pursuant to the merger
agreement, petitioner assumed all of SMP's assets and
liabilities, including a $70,000 loan from Petranker.
Petitioner and DM entered into a sales agreement for the
printing equipment in November 1987 and a license agreement in
December 1987 to become effective at the termination of SMP's
license and rental agreement. The parties amended the license
agreement on two occasions.2 First, they amended the license in
1989 to list the licensed assets and clarify the terms of the
original license agreement. Second, they amended the license in
2 The stipulation of facts provides that the license
agreement was amended on three dates: June 1, 1989, Jan. 25,
1990, and Feb. 1, 1990. The Jan. 25, 1990, and Feb. 1, 1990,
amendments are similar in substantive terms, and both reduce the
royalty payments in equal amounts. For our convenience in this
opinion, we refer to the Jan. 25, 1990, and Feb. 1, 1990,
amendments as one amendment.
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