Tricon Metals & Services, Inc. - Page 6

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          Petitioner's shareholders' equity is as follows:                            
          FYE                Shareholders'                                            
          Aug. 31                Equity                                               
          1981                $1,719,074                                              
          1982                 2,070,404                                              
          1983                 2,490,070                                              
          1984                 3,191,644                                              
          1985                 3,755,202                                              
          1986                 4,243,775                                              
          1987                 4,958,268                                              
          1988                 5,523,189                                              
          1989                 7,260,559                                              
          1990                 6,251,019                                              
          1991                 7,815,983                                              
          1992                10,163,504                                              
          Petitioner has never paid dividends.                                        
               In the 1970's, petitioner and its shareholders borrowed                
          funds to expand petitioner's facilities.  The terms of the                  
          financing arrangement prohibited petitioner from paying dividends           
          to its shareholders.  In 1985, and again in 1987, petitioner                
          entered into a bond guaranty agreement (guaranty agreement) with            
          AmSouth Bank N.A. in connection with another expansion of                   
          petitioner's facilities.  The guaranty agreement was operative              
          through 1992, and it prohibited petitioner from paying dividends            
          to its shareholders while the bonds were outstanding.                       
          4.  Ferguson's Executive Duties                                             
               Ferguson became petitioner's president and chief executive             
          officer (CEO) in 1988, after Bell's death.  After becoming CEO,             
          Ferguson continued to serve as petitioner's treasurer.  In                  
          November 1988, petitioner created two additional vice president             
          positions, for a total of three vice presidents, and the three              




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