Freres Lumber Co., Inc. - Page 14

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                  4.     Covenants Not To Compete                                                          
                  The Walker family agreed to sign covenants not to compete                                
            with petitioner.  The covenants prohibited D.C. Walker, Mary                                   
            Walker, and Bebout from participating or engaging in the same                                  
            business as or any business similar to petitioner's within 140                                 
            miles of Lyons, Oregon, for 5 years.  The covenants prohibited                                 
            the Walkers from encouraging any prior employees, suppliers, or                                
            customers of Walker entities to curtail or reduce their                                        
            employment or business dealings with petitioner.                                               
                  Payments were combined into one payment schedule and                                     
            promissory note.  If petitioner did not make payments under the                                
            agreement, the Walker family would not be bound by the covenant                                
            until the price of the covenant was paid in full.                                              
                  5.     Payment                                                                           
                  Petitioner made a downpayment of $1 million and signed a                                 
            $3,650,000 note secured by a trust deed and Uniform Commercial                                 
            Code financing statements.  Petitioner made the promissory note                                
            payable to D.C. Walker Enterprises, Inc.                                                       
                  6.     Events After the Sale                                                             
                  D.C. Walker had no future plans when he sold the Walker                                  
            entities.  He went to Washington State to bid on timber.  He also                              
            unsuccessfully tried to buy a mill in Olympia, Washington.                                     
                  Buying the Walker entities' assets helped petitioner to                                  
            enter the export lumber market.  The Sumitomo Forestry Co.                                     

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Last modified: May 25, 2011