River City Ranches #4 - Page 9

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          required the partnership to pay Barnes Ranches the stated                   
          purchase price for the sheep over a 15-year term.  For the first            
          5 years, no principal payments on the note were required from the           
          partnership, but only annual interest payments at a specified               
          interest rate per annum.  Over the next 10 years, the partnership           
          was to pay the note's full principal amount in 10 equal annual              
          installments.  Barnes Ranches was further granted a security                
          interest in the partnership's breeding sheep, securing payment on           
          the partnership's promissory note.  Concurrent with their entry             
          into the sheep sale agreement, RCR #1 and Barnes Ranches also               
          entered into a 15-year management agreement (whose 15-year term             
          coincided with the promissory note's payment period), pursuant to           
          which Barnes Ranches obligated itself to undertake all management           
          with respect to the partnership's breeding sheep, pay all                   
          expenses, and provide stud ram services, in exchange for                    
          receiving all lambs produced and any culls (the sharecrop                   
          agreement).  The sharecrop agreement further obligated Barnes               
          Ranches to replace any partnership ewe that could no longer serve           
          as a breeding ewe with another ewe of a specified quality.  In              
          addition, Barnes Ranches guaranteed that there would be a net 5-            
          percent annual increase in the size of the partnership's breeding           
               Except for perhaps OGT 90, each of the other later sheep               
          breeding partnerships that Mr. Hoyt organized, including RCR #4             

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Last modified: May 25, 2011