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l <br />iii iiiiiiiiiii~~iii <br />999 <br />To: Mike Long, Director, Division of Minerals and Geology (via email) <br />From: Robert D. Comer <br />Date: October 16, 2001 <br />Enclosed please find the October 2001 monthly report for the Powderhor Coal <br />Company. Please let me know should you have any questions. <br />Powderhom Coal Company <br />October Progress Report to the Colorado Division of Minerals and Geology <br />Reoreanization <br />On a positive note, Travelers Insurance Company has made a firm commitment to replace <br />X$40 Million dollars in bonds to the benefit of Quaker Coal Company and its subsidiaries. <br />On Friday, October 12, 2001, the court conducted a confirmation hearing for Quaker <br />Coal Company and has taken the competing plans submitted by Quaker and AEP under <br />advisement. The court has requested that tindings of fact and conclusions of law be submitted <br />on October 16, 2001. We understand that the court will confirm one of the plans on Friday, <br />October 19, 2001, and are hopeful that the court will rule in favor of Quaker. <br />Certain legal issues remain. These include such issues as whether the court will allow the <br />votes received on October 9, 2001, to be tabulated, given the deadline for voting was October <br />8th, which was Columbus Day and whether Colorado has a valid claim. I understand that the <br />court denied Colorado's motion to participate telephonically at the confirmation hearing but did <br />state it had taken notice of Colorado's preference. <br />In the September report, we informed the Board that there was an issue as to the amount <br />of AEP's claim under three coal supply contracts. Had AEP prevailed, it would have been in a <br />position to block Quaker's reorganization plan. The court has ruled in favor of Quaker on the <br />estimation of AEP's damages, and as a consequence, AEP does not have a blocking position. <br />Wexford Capital LLC has withdrawn its plan, leaving only American Electric Power's <br />(AEP) plan to compete with that of Quaker. In the wake of AEP increasing its offer to the <br />unsecured creditors to $20 million (from $15 million), the unsecured creditors have stated <br />support for AEP that can best be described as tentative and conditional. It has as conditions that <br />AEP be entitled to benefit from the Lender Agreement and that the Lenders not be entitled to <br />satisfy any remaining deficiency from Class 6 unsecured creditors' funds. <br />For reasons that are unclear to Quaker and Powderhom, counsel to the Mined Land <br />Reclamation Board continues to oppose the Quaker plan of reorganization, despite the myriad <br />accommodations made to the State of Colorado. It seems odd that the Board would oppose the <br />Quaker plan and support the AEP plan given the positive working relationship that has <br />developed between the Board, the Division and Powderhom over the past ten months. At every <br />heazing before the Boazd, Powderhom has offered to work with the State in revising the Plan and <br />[he Statement to reflect reasonable interests of the State (see ems., August 21, 2001 Monthly <br />Report to the Board). Powderhor has fulfilled each and every commitment it has made under <br />its Reclamation Plan and to this Board, including the acceleration of certain reclamation <br />activities such as the water management plan. <br />18742 <br />