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D. Putative Nature of San Nicholas’ Business
According to the private placement memorandum dated October
10, 1983 (the offering memorandum), San Nicholas was formed in
order “to undertake a comprehensive research and development
program on the plant Simmondsia Chinesis (Jojoba).” The offering
memorandum described how this program was to be carried out:
The Partnership will enter into a research and
development contract * * * with U.S. Agri Research and
Development Corp. (the “R & D Contractor”), who will
conduct the experiments in various test sites * * * as
well as its laboratory or greenhouse facilities that it
in its sole discretion deems advisable. In addition,
the R & D Contract sets forth that a site in the
vicinity of Desert Center and Blythe, California of
from 30-50 acres will be delineated as the applied
research site upon which all technology and improved
cultivars developed on behalf of the Partnership during
the term of the contract will be placed “in field.”
The Partnership will also have the right but not be
obligated to enter into a License Agreement * * * to
license to U.S. Agri Research and Development Corp. all
technology developed on behalf of the Partnership for a
period of forty (40) years and receive therefrom an
amount equal to 85% of the products produced from the
developed technology.[6]
Copies of the research and development (R&D) contract and
the license agreement referred to in the preceding paragraph were
attached as exhibits to the offering memorandum. The R&D
contract identified U.S. Agri Research and Development Corp.
6 Although San Nicholas may not have been obligated to
enter into a license agreement with U.S. Agri Research and
Development Corp., it was a foregone conclusion that it would do
so. Indeed, the research and development (R&D) contract and the
license agreement were executed concurrently. Notably, execution
of the license agreement by San Nicholas served to automatically
terminate the R&D contract pursuant to the terms of the latter
contract. See infra, subdivision “I” of the Findings of Fact.
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