Warren L. Baker, Jr. and Dorris J. Baker - Page 10




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          premium due according to the percentage established in table I of           
          the “Schedule of Payments Referred to in State Farm Agent’s                 
          Agreement” (schedule of payments) attached to the agreement.  For           
          many of the policies, commissions would be paid during the first,           
          second, third, fourth, and fifth policy year, depending upon the            
          type of policy and its length.  Section VI of the schedule of               
          payments provides as follows:                                               
               Upon termination of this Agreement by death or                         
               otherwise any unpaid compensation provided for under                   
               this Schedule of Payments then due and payable shall be                
               paid as soon as ascertainable, and there shall be no                   
               further liability on the part of the Company under the                 
               terms of this Schedule of Payments.                                    
               During the operation of the agency and pursuant to the                 
          agreement, petitioner operated a trust fund.  When petitioner               
          terminated his relationship with State Farm, the trust account              
          was closed and audited by State Farm.                                       
          II.  Petitioner’s Retirement                                                
               Petitioner retired and terminated his relationship with                
          State Farm on February 28, 1997.  At that time, he held                     
          approximately 4,000 existing policies generated from 1,800                  
          households.  Approximately 90 percent of the policies were                  
          assigned to one successor agent.  The successor agent received              
          reduced compensation (that is, a lower percentage) for the                  
          assigned policies.                                                          
               Petitioner returned State Farm’s property, such as policy              
          and policyholder descriptions, which he gathered in master                  





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