Merrill Lynch & Co., Inc. & Subsidiaries - Page 22




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          assets from ML Leasing for a period of 5 years.  In addition,               
          Inspiration suggested that “Merrill Lynch may have to arrange               
          with the lessee and the secured noteholders to waive certain                
          restrictions on transfer of ownership” in order to accommodate              
          its request.  Inspiration also pointed out that the existing                
          draft purchase agreement did not contain a representation from              
          petitioner that the cashflows as presented to Inspiration were              
          correct.  Inspiration advised that in order for a lender or a               
          purchaser to make financing decisions based on “these cash flows,           
          a legal due diligence review will be insufficient and it will be            
          essential for Merrill Lynch to represent that the cash flows [of            
          the leases] are accurate.”  Inspiration concluded its letter by             
          expressing its continued interest in completing the transaction.            
               In order to give the parties to the letter of intent                   
          additional time to finalize their deal, the parties on August 29,           
          1986, agreed to extend the term of the nonbinding letter of                 
          intent to September 19, 1986, and negotiations and discussions              
          continued with Inspiration after August 29, 1986.16                         
               Shortly after August 29, 1986, petitioner’s appraiser and              
          Inspiration’s appraiser completed their analysis of residual                
          values.  Both appraisers valued the residual values of the leases           


               16A Sept. 8, 1986, interoffice memorandum from Mr. Sands               
          stated that although Inspiration still had not secured financing            
          to purchase ML Leasing, Inspiration was optimistic that it would            
          do so.  Mr. Sands also indicated that Inspiration’s financing               
          efforts were going very well.                                               





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