Carl J.D. Bauman and Margaret A. Bauman - Page 14

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          projected that ERL would sell in excess of 2 million tons of coal           
          per year.  This tabular analysis, however, bore the qualification           
          that all projections were hypothetical and were in no way                   
          warranted or guaranteed.                                                    
               The offering materials advised potential investors that                
          there were no assurances as to the accuracy of the recoverable              
          coal estimates upon which the substance of the offering materials           
          depended.  Potential investors were also advised by the offering            
          materials that ERL did not have any existing long-term contracts            
          for the sale of coal and that future demand for coal was                    
          unpredictable.  The offering materials further advised potential            
          investors that McIntyre had limited experience in the mining                
          business and that extensive competition should be expected from             
          entities with substantially superior financial, technical, and              
          intellectual resources.  The offering materials also discussed              
          the probable likelihood of labor disputes common to the                     
          geographic area in which the land covered by the lease was                  
               ERL executed the lease agreement for the coal property on              
          December 1, 1980.  The terms of the lease were consistent with              
          the representations presented in the offering materials.                    
               In 1980 and 1981, ERL received eight mining permits.  Two of           
          the mines were never operated; the remaining six mines produced             
          an approximate total of 167,000 tons of coal.  All ERL mining               
          operations ceased by the end of 1981, and no other coal was                 

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