Paul E. Hathaway and Brenda J. Hathaway - Page 8

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          basis.  On a semiannual basis, August 15 and February 15, any               
          commissions exceeding the draw, less items bought from TAG, see             
          table infra p. 11, were paid to the sales representative.  In the           
          rare situation when a sales representative had not earned any               
          commissions, and thus would not have any commissions in reserve,            
          that sales representative ordinarily would not receive a                    
          semimonthly draw.                                                           
               TAG issued to Hathaway Forms W-2 showing compensation paid             
          in the amounts of $102,837.28 and $129,283.50 for 1989 and 1990,            
          respectively.  TAG withheld Federal income taxes and Social                 
          Security (F.I.C.A.) taxes from these amounts.  TAG also issued to           
          Hathaway Forms 1099 showing noncash items provided by TAG in the            
          amounts of $23,277.56 and $19,219.11 for 1989 and 1990,                     
          respectively.  See table infra p. 11.                                       
               Hathaway participated in TAG’s pension plan and TAG provided           
          to Hathaway long-term disability insurance and life insurance,              
          all fully funded by TAG.  TAG also funded two-thirds of his                 
          medical insurance benefits.                                                 
               During the years in issue, Hathaway and TAG’s other sales              
          representatives were responsible for paying their own expenses              
          for traveling, lodging, telephone, and food.  However, TAG paid             
          part of Hathaway’s moving expenses in 1969 when he relocated to             
          Iowa.  See supra note 3.  TAG, TAG sales representatives, and               
          retail distributors of TAG merchandise shared the expense of                

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