Indmar Products Co., Inc. - Page 6

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          percent.  On November 21, 1995, petitioner executed a promissory            
          note (1995 note) with Mr. Rowe for $605,681 (i.e., his                      
          outstanding balance) of the $807,081 total outstanding balance of           
          the transfers.  The 1995 note was payable on demand, was freely             
          transferable, had no maturity date or payment schedule, and had a           
          stated interest rate of 10 percent.                                         
               On January 1, 1998, when the outstanding transfers totaled             
          $1,222,133, petitioner executed two written line of credit                  
          agreements with the Rowes for $1,000,000 and $750,000.  The line            
          of credit agreements provided that the balances were payable on             
          demand, and the notes were freely transferable.  In addition, the           
          agreements provided a stated interest rate of 10 percent and had            
          no maturity date or payment schedule.                                       
               Petitioner was profitable, and numerous banks sought to lend           
          petitioner money.  As a result, FTB worked diligently to retain             
          petitioner’s business, made funds immediately available upon                
          petitioner’s request, and was willing to lend petitioner 100                
          percent of the transferred amounts.  FTB, however, required                 
          petitioner to subordinate (i.e., to FTB’s outstanding loans with            
          petitioner) all transfers.                                                  
               In 1993, FTB lent petitioner $1,850,000.  The loan agreement           
          stated “no payments shall be made by Borrower to satisfy any                
          * * * [stockholder] indebtedness for so long as the Loans shall             
          remain unpaid.”  Petitioner, however, made partial repayments to            

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