Tricon Metals & Services, Inc. - Page 5

                                        - 5 -5                                        
          Pursuant to the employment agreement, Ferguson's salary was set             
          at 2.4 percent of net sales, the same percentage of net sales               
          that Bell had received prior to his death.                                  
               Wood's attempt to gain control of petitioner proved                    
          unsuccessful, and after his defeat, Wood agreed to sell his stock           
          to petitioner.  On August 1, 1990, Wood sold his stock to                   
          petitioner for $2,850,000.  After petitioner purchased Wood's               
          stock, Ferguson remained petitioner's majority shareholder,                 
          owning approximately 75 percent of petitioner's outstanding                 
          stock.                                                                      
          3.  Petitioner's Financial Condition                                        
               Petitioner's financial statements reflect the following:               
          FYE        Net       Gross         Net      Retained                        
           Aug. 31    Sales      Profit       Income    Earnings                      
          1981   $6,064,513  $1,638,818    $321,150  $1,695,161                       
          1982    7,712,496   2,047,589     351,329   2,046,490                       
          1983    8,180,434   2,313,607     419,665   2,466,156                       
          1984   10,671,010   2,981,037     701,574   3,167,731                       
          1985   11,423,805   3,143,870     563,557   3,731,288                       
          1986   12,456,296   3,115,873     488,573   4,219,862                       
          1987   13,969,335   3,904,553     714,492   4,986,1951                      
          1988   17,394,166   5,053,862     861,683   7,290,7552                      
          1989   20,895,754   5,012,259   1,013,195   6,515,293                       
          1990   25,219,920   6,410,305   1,698,764   8,235,846                       
          1991   24,769,390   6,591,585   1,564,964   6,957,810                       
          1992   25,031,040   7,926,605   2,152,121   9,109,931                       


               1  Due to an accounting adjustment, the 1987 retained                  
          earnings figure was restated from $4,934,355 to $4,986,195.                 
               2  This figure is set forth in the financial statements for            
          the period Aug. 31, 1987, through Aug. 31, 1988.  Subsequent                
          financial statements show this figure as $7,290,577.  This                  
          discrepancy does not affect our analysis.                                   




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