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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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Last modified: May 25, 2011