Laidlaw Transportation, Inc. and Subsidiaries - Page 17

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          Federal income tax purposes.11  In February 1986, LIIBV opened              
          accounts with ABN Bank, New York.                                           
               LIL owned all of the stock of LIIBV during the years in                
          issue.  DeGroote was a director of LIIBV during the years in                
          issue.  LIIBV had other directors, including Netherlands                    
          residents.  Haworth became a director of LIIBV after the years in           
               On October 16, 1986, Haworth (using LTI letterhead) wrote              
          the following to Peter Deege, a director of LIIBV:                          
                    I should advise you that at our Monday meetings we                
               wish to do the following:                                              
               1.   Amend the loan agreements from B.V. to our U.S.                   
               subsidiaries to provide with effect from September 1,                  
                    (a) All sums to be due on demand at interest                      
                         rates equal to ABN New York prime plus 2                     
                         percent, payable on the last business days of                
                         each fiscal quarter.                                         
                    (b) Remove all financial ratio covenants.                         
                    (c) Remove the "ceilings" so that no limits will                  
                         exist.  All loans will be provided as                        
                         requested but subjected to availabilities of                 
                         B.V.'s funds.                                                
                    (d) In the case of Laidlaw Transportation, Inc.'s                 
                         subsidiaries, there will be two loan accounts                
                         established, one called principal account and                
                         the other called reinvested interest account.                
                    (e) To facilitate the quarterly and other changes                 
                         in loan amounts, all increases/decreases                     
                         would be entered on a grid promissory note.                  
                         This system allows the lender to adjust the                  
                         promissory note automatically without issuing                

               11 During the taxable years in issue, LIIBV was a foreign-             
          related person with respect to Transit and LWSI within the                  
          meaning of sec. 267(a)(3) and sec. 1.267(a)-3(b)(1), Income Tax             

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