Dharma Enterprises - Page 13

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          of a $1 million, four-color printing press.  The purchase of the            
          four-color press prompted petitioner and DM to amend the license            
          agreement to reduce the amount of the royalty payments.  An                 
          unrelated bank denied petitioner a loan for this press unless the           
          royalty payments were decreased.  Although petitioner borrowed              
          the money from DM and the Meditation Center instead of the bank,            
          petitioner and DM still decreased the royalties to ensure that              
          petitioner would be able to repay the loan.                                 
               Tulku serves as honorary chairman of petitioner's board of             
          directors.  Petitioner views Tulku's chairmanship as a public               
          endorsement of petitioner as a Nyingma organization.  Petitioner            
          paid the following amounts to Tulku for his chairmanship in                 
          taxable years ending May 31:                                                
                         Year                Compensation                             
                         1991                $25,440                                  
                         1992                26,140                                   
                         1993                26,640                                   
          Tulku is not active in petitioner's business operations and has             
          never attended a board meeting.  However, Tulku frequently                  
          discusses SMMT with Maitland.                                               
               During the years in issue, all of petitioner's directors               
          were associated with, had studied and practiced, or were                    
          interested in, the Nyingma school of Tibetan Buddhism and the               
          general Buddhist teachings known as Dharma.  In addition, most of           
          petitioner's directors lived at the various Nyingma                         
          organizations.  DM and petitioner had two common directors.  Two            
          of petitioner's directors, one of which was Maitland, served as             
          directors of the Nyingma Centers Corp., an umbrella corporation             

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