Salvador A. and Kathleen M. Gaudiano - Page 4

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          Under the terms of the lease, Four A retained title to the                  
          equipment.                                                                  
               During 1993, Four A and Black Mountain entered into a new              
          agreement concerning the equipment referred to by the parties as            
          a "Promissory Note and Agreement" (the agreement).  According to            
          the terms of the agreement, Four A granted, sold, and conveyed              
          all of its right, title, and interest in and to the equipment to            
          Black Mountain.  Four A retained a security interest in the                 
          equipment as protection against nonpayment by Black Mountain.               
               The agreement required Black Mountain to pay a total                   
          purchase price of $445,000 for the equipment.  The purchase price           
          was to be paid monthly out of Black Mountain's production at a              
          rate of 17 cents per ton of coal produced in the preceding month.           
               The agreement also provided that if Black Mountain failed to           
          make production payments, then the entire indebtedness became               
          immediately due and payable.  In such event, Black Mountain could           
          retain the equipment by paying the balance of the debt.  If Black           
          Mountain chose not to pay the remaining balance, it was required            
          to return the equipment to Four A.  The agreement provided that             
          the debt was nonrecourse.  In late 1995 or early 1996, Black                
          Mountain ceased making production payments and surrendered the              
          equipment to Four A.  The equipment was ultimately sold to a                
          third party.                                                                







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Last modified: May 25, 2011