Advanced Delivery and Chemical Systems Nevada, Inc. - Page 5

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               In 1996, ADCS granted to ADCS-Korea a nonexclusive license             
          to manufacture and to sell in South Korea TEOS and other                    
          chemicals over which ADCS had control, in return for which ADCS             
          was to receive a royalty of 10 percent of gross sales.                      
               The activities and operations of ADCS-Korea were conducted             
          pursuant to a written joint venture agreement under which ADCS              
          retained control of the management of ADCS-Korea.  The executives           
          of ADCS and, after July 9, 1996, the executives of petitioner,              
          were active on a daily basis in supervising and managing the                
          activities of ADCS-Korea.  Senior executives of ADCS and of                 
          petitioner frequently traveled to South Korea to participate in             
          the management of ADCS-Korea.                                               
               In July of 1995, ADCS moved its sales and executive offices            
          from San Jose, California, to Austin, Texas, near its new                   
          manufacturing plant in Burnet, Texas.                                       
               During 1996, ADCS and petitioner considered and investigated           
          establishing a chemical manufacturing plant in Belgium or in                
          Scotland at an estimated cost of $3.5 million.                              
               In January of 1996, ADCS adopted a plan of reorganization              
          involving, among other things, a transfer of all of ADCS’                   
          operating assets to Advanced Delivery & Chemical Systems, Ltd.              
          (ADCS-Limited), a Texas business limited partnership.  The                  
          transfer to a Texas limited partnership of the operating assets             
          of a corporation doing business in Texas constituted, during the            

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Last modified: May 25, 2011