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Cheryl A. Linden, Esq. <br />Robert D. Clark, Esq. <br />January 26, 2001 <br />Page 3 <br />thus, it was incumbent upon Frontier to remedy this problem. Messrs. Fogel and Munno <br />identified a number of possible solutions to Mr. Gorton that are available to Frontier, including: <br />Frontier's posting a letter of credit satisfactory to the DMG; <br />2. Acquisition of a replacement bond by Frontier from a surety satisfactory to the <br />DMG; and <br />Obtaining acut-through endorsement satisfactory to the DMG from Frontier's <br />reinsurers, <br />Mr. Gorton stated that he would discuss these demands with Frontier and report back. <br />Part III. Other Efforts <br />On January 24, 2001, Ethan Fogel and others met with the members of the Secured <br />Lender Group and informed its members of the status of the Powderhorn NOV in Colorado, and <br />the implications to Quaker of the failure to remedy the NOV. Mr. Fogel made specific requests <br />of the Group, including "that the lender group advance funds, or in the alternative permit the <br />debtor to use the lenders' cash collateral, for the purpose of addressing the Colorado NOV issue. <br />These funds, in the approximate amount of $2.6 million, would be used either to cash <br />collateralize Powderhorn's obligations under its permit or to induce a bonding company to issue <br />a replacement bond with a view to addressing the issue raised by the NOV." This request is <br />memorialized in a January 25, 2001, letter transmitted to counsel for the Group, a copy of which <br />is enclosed. A prompt response was requested from the Group. <br />Please let me know should you have any questions regarding this report or any other <br />aspect of this matter. <br />Very truly yours, <br />Snell & Wilmer <br />Robert D. Comer <br />Enclosure <br />cc: Michael B. Long, Division Director, State of Colorado, Division of Minerals & Geology <br />RDC <br />7340.1 <br />