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the new tax-exempt bonds (i.e., the 1995 tax-exempt bonds), which
occurred on January 1, 1995.10
Pursuant to the modified 1985 sale and leaseback, in 1992
petitioner paid $423,736 to Morgan Stanley for lease advisory
fees associated with modifying the 1985 sale and leaseback and
$397,339.79 to Mudge, Rose, Guthrie, Alexander & Ferdon (Mudge,
Rose) for legal services associated with modifying the 1985 sale
and leaseback and as bond counsel for Mercer County in the
concomitant refinancing of the 1984 tax-exempt bonds.
The modified 1985 sale and leaseback granted petitioner the
right to request the owner participants to take reasonable
actions to refinance the 1984 tax-exempt bonds. That modified
sale and leaseback required the owner participants to cooperate
in order to ensure that such refinancing was implemented.11
10The modified 1985 sale and leaseback changed the defini-
tion of “Notes” in the 1985 sale and leaseback to include the
series B refunding note. The series B refunding note evidenced
the owner participant’s obligation to make payments on the 1995
tax-exempt bonds and served a function in the modified 1985 sale
and leaseback similar to the function served by the series B
secured note in the 1985 sale and leaseback. The series B
refunding note was substituted in the modified 1985 sale and
leaseback for the series B secured note in determining the
minimum annual basic rent due from petitioner under the modified
1985 sale and leaseback after the 1984 tax-exempt bonds were
refinanced on Jan. 1, 1995.
11The modified 1985 sale and leaseback provided in pertinent
part:
The Lessee [petitioner] shall have the right, at its
option and upon prior written notice to the Owner
(continued...)
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