Janet L. Wiest - Page 11




                                       - 10 -                                         
          F.  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.[10]                                              

               9(...continued)                                                        
          attorney; rather, petitioner merely “chatted” with Mr. Kellen as            
          a friend and business associate.                                            
               In addition, although Mr. Pace was an attorney, petitioner             
          never consulted him in that capacity.  Indeed, any advice that              
          Mr. Pace may have rendered was offered in his capacity as an                
          interested party to the San Nicholas promotion, see infra “G”, a            
          fact of which petitioner was aware.                                         
               10  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           
                                                             (continued...)           




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