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modified 1985 sale and leaseback agreement.7) Under the modified
1985 sale and leaseback, petitioner agreed to, and did:
(1) Exercise its right under the 1985 sale and leaseback to elect
a five-year extension of the term of the lease8 and (2) pay the
reasonable costs incurred by the owner participant and Mercer
County in refinancing the 1984 tax-exempt bonds. With respect to
petitioner’s agreement to pay such reasonable costs, the modified
1985 sale and leaseback provided in pertinent part:
Any Bond Premium and accrued interest in respect of a
redemption permitted by * * * [the modified 1985 sale
and leaseback] shall be paid * * * by the Lessee [peti-
tioner] * * *. The Lessee shall pay, or shall reim-
burse the Owner Participant, the Owner Trustee, the
County, the Bank, the Funding Corp and the Indenture
Trustee * * * for all out-of-pocket costs and expenses
paid to unrelated third parties at arm’s length (in-
cluding counsel fees, investment banking fees, fees of
financial advisors, underwriting fees, * * *) incurred
by any of such parties in connection with any refunding
or attempted refunding permitted by or requested pursu-
ant to * * * [the modified 1985 sale and leaseback].
* * * the Lessee shall [also] pay to the Owner Partici-
pant, as additional Supplemental Rent, a tax gross-up
payment * * *.
In addition, pursuant to all six modified 1985 sale and leaseback
7The 1992 amendments to each 1985 sale and leaseback were
materially identical. Unless otherwise indicated, we shall for
convenience refer to the 1992 amendments and the modified 1985
sale and leaseback. However, any such references pertain to the
1992 amendments to all six 1985 sale and leaseback agreements and
all six modified 1985 sale and leaseback agreements.
8Petitioner and the owner participant agreed in the modified
1985 sale and leaseback that petitioner was to pay to the owner
participant semiannual rent of at least $390,006 during the five-
year extension of the term of the 1985 sale and leaseback.
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