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whether this was accomplished by an IRC-Systems amendment to the
original option agreement or a separate RIC-Systems agreement.
1. Research and Development Agreement
The R & D Agreement obligated IRC to pay to Systems a fixed
fee of $875,000 in consideration of Systems’ performance of
research activities.10 In this connection, section 2.02 of the
R & D Agreement provides as follows:
2.02. Payments. In consideration for the
performance of the Funded Research Effort, SII
[Systems] shall receive a fixed fee of $875,000.00.
Such fee shall be paid in seven (7) installments in
accordance with the payment schedule set forth on
Exhibit B, which hereby is incorporated herein and made
a part hereof. The obligation of IRC to make payments
to SII pursuant to this Section 2.02 shall be
contingent upon the delivery to IRC by SII of the
monthly reports required pursuant to Section 4.01
hereof, and the absence of any default under Section
7.03 hereof. In consideration of such fixed fee, SII
shall complete the entire Funded Research Effort
irrespective of the actual cost thereof. Regardless of
whether a commercially marketable technology or product
results from the Funded Research Effort, no part of any
10We note that the FSAAs disallowed research or experimental
expenditures deductions in the amounts of $241,700 (IRC) and
$631,289 (RIC), for a total of $872,989. This is very close to
the $875,000 fixed fee provided for in the R & D Agreement.
Also, this is almost exactly the $873,000 that petitioners ask us
to find as IRC’s and RIC’s payment obligation under the R & D
Agreement. However, the parties have not enlightened us as to
whether this is an indication that the June 13, 1984, amendment
involved RIC’s taking over some specified portion of IRC’s
original obligations under the R & D Agreement. In light of the
lack of record evidence as to what was involved in the June 13,
1984, amendment to the R & D Agreement, we cannot tell whether
(1) petitioners intend to suggest that the June 13, 1984,
amendment slightly reduced the contractual fee obligation, or (2)
the $873,000 statement is merely petitioners’ typographical error
that went unnoticed by respondent.
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