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loans available to Kannex in the aggregate amount of $180 million
from November 2, 1989, through August 1, 1990. The shares of
Kannex stock held by Coign and Glamis were pledged to ABN as
security for the loans. Kannex entered into a management
agreement with ABN Trust and a financial services agreement with
ABN New York, executed by den Baas, under which ABN New York
agreed to provide advice on hedging strategies to reduce Kannex's
interest rate exposure and to provide other services at Kannex's
request. The agreement does not make provision for either the
amount or calculation of ABN New York's compensation.
Southampton, a wholly owned subsidiary of Colgate, was
incorporated under Delaware law on October 24, 1989, for the
purpose of becoming a partner in Colgate's liability management
partnership. Belasco served as Southampton's president and
Pohlschroeder as its vice president and treasurer. During the
taxable years at issue, Southampton filed a consolidated return
with Colgate.
Merrill Lynch MLCS, Inc. (MLCS), was incorporated under
Delaware law on October 27, 1989. MLCS is the wholly owned
subsidiary of Merrill Lynch Capital Services (Merrill Capital),
which operates as the swap dealer for the Merrill Lynch Group.
Taylor was MLCS's president and Paul Pepe (Pepe), a member of his
staff, its vice president.
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