Archie L. and Louise B. Honbarrier - Page 8




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               The yearend balances in Central’s accumulated adjustments              
          account6 reported on Central’s Federal income tax returns for the           
          years 1991 through 1996 show undistributed earnings as follows:             
                         Year              Account Balance                            
                         1991                $8,378,797                               
                         1992                9,893,868                                
                         1993                10,693,387                               
                         1994                7,333,838                                
                         1995                6,449,973                                
                         1996                6,592,738                                
               On several occasions, Charles L. Odom, a certified public              
          accountant and Mr. Honbarrier’s tax and financial adviser,                  
          recommended that Central make distributions to shareholders if              
          such funds were not needed in Central’s business.  In a                     
          memorandum to attorney Charles Lynch, dated November 5, 1993, Mr.           
          Odom stated:  “Central has $10 million in undistributed S Corp              
          earnings and would like [to] make a significant distribution to             
          shareholders, but needs its capital for expansion and replacement           
          of aging equipment.”                                                        
               Unlike Colonial, Central did not invest in tax-exempt bonds.           
          Central held passive investments in the form of short-term liquid           
          investments, such as certificates of deposit, because it needed             
          cash and cash equivalents to operate its business.  As of yearend           
          1991 through yearend 1996, Central held cash and short-term                 
          investments in the following amounts:                                       


               6The accumulated adjustments account reflects undistributed            
          earnings of Central on which Central’s shareholders had paid tax.           
          See sec. 1368.                                                              





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