Basin Electric Power Cooperative - Page 17

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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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