Edward and Ruth Kelly - Page 4

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                  Mr. Kelly has been a stockbroker for approximately 45 years.                            
            During the years at issue, he was employed full time by Shearson                              
            Lehman as office manager of its branch in Bay Shore, New York.                                
            Beginning in 1983, he also devoted considerable time to stock                                 
            option trading for his own account.  These trading activities and                             
            the market research that informed them would occupy at least 50                               
            percent of a typical workday during this period.  The annual                                  
            volume of his option trades appears to have fluctuated between                                
            about 450 and 900 during the years at issue.  Mr. Kelly was not a                             
            floor trader; he purchased options through a Shearson Lehman                                  
            broker who had a direct wire to the floor of the exchanges.  The                              
            amount of time he held the options varied from a few hours to a                               
            few weeks.  The parties have stipulated that he did not hold any                              
            property as inventory or primarily for sale to customers in the                               
            ordinary course of his trade or business, did not sell to                                     
            customers of his own, and performed no merchandising function                                 
            with respect to his options transactions.                                                     
                  Mr. Kelly paid commission fees to Shearson Lehman in                                    
            connection with the purchases and sales of options for his own                                
            account.  As an employee, he received a 30-percent discount                                   
            relative to the amount of commissions that a member of the public                             
            would pay.  He also earned and received commissions as an                                     
            employee in connection with his option trades.  The commission                                

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Last modified: May 25, 2011