Carl J.D. Bauman and Margaret A. Bauman - Page 9

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          to receive the remaining 1 percent of ERL’s profits and losses.             
          The agreement explained that McIntyre, as managing general                  
          partner, had the responsibility of managing the partnership’s               
          affairs.  The offering materials further explained that McIntyre            
          would receive an acquisition fee equal to 22 percent of the total           
          cash contributions made by the limited partners to ERL in 1980,             
          1981, and 1982.  As managing general partner, McIntyre was also             
          entitled to a management fee in the amount of $1 per ton of coal            
          mined by or for the partnership.  Payment of this fee, however,             
          was conditioned on ERL’s realization of a minimum per-ton profit            
          of $4.  Additionally, the management fee was structured to                  
          terminate once the limited partners received cash distributions             
          equal to their total cash contributions.                                    
               The principal term of ERL’s lease with JAD was 30 years;               
          however, ERL could terminate the lease in the event the retrieval           
          of coal became economically prohibitive.  Additionally, if and to           
          the extent that ERL determined it to be economically feasible,              
          ERL had the option of extending the primary term of the lease on            
          a yearly basis.                                                             
               The terms of the lease obligated ERL to pay JAD an advance             
          production royalty of 8 percent of ERL’s gross coal sales.  The             
          lease also obligated ERL to pay JAD a minimum annual advance                
          royalty of $10 million.  ERL was required to pay the minimum                
          advance royalties annually and each such payment was due without            
          regard to actual production levels; however, such payments were             

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