River City Ranches #4 - Page 8

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               The yearling sheep that the Barnes family annually entered             
          in national shows were often sold at auction following completion           
          of the particular competition.                                              
               The Barnes family owned only a limited amount of pasture in            
          the Sacramento Valley.  Hence they would enter into rental                  
          arrangements to secure the additional pasture needed for Barnes             
          Ranches sheep operations.                                                   
               In April 1981, as a result of Mr. Hoyt's and Mr. Barnes'               
          earlier discussions and negotiations, RCR #1 (the first sheep               
          breeding partnership that Mr. Hoyt organized and promoted)                  
          entered into certain agreements with Barnes Ranches.  Pursuant to           
          these agreements, Barnes Ranches sold to RCR #1 a specified                 
          number of registered purebred Rambouillet and Suffolk breeding              
          ewes7 for no money down and the partnership's promissory note               
          (the sheep sale agreement).8  In general, the promissory note               

               7See infra note 10.                                                    
               8The parties disagree whether RCR #4, RCR #6, OGT 90 and the           
          other partnerships obtained actual ownership of specific sheep              
          and whether the promissory notes the partnerships issued were               
          valid indebtedness.  The terms "sale", "sold", "purchase",                  
          "partnership's sheep", and similar terms are used herein for                
          convenience and are not intended as ultimate findings or                    
          conclusions concerning the partnerships' acquisition of sheep.              
          Similarly, the use herein of such terms indicating that interest            
          or principal payments were due should not be construed as our               
          conveying any legal conclusion concerning the validity of the               
          partnerships' promissory notes.                                             

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