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_ ; <br />Snell &Wilmer <br />L.L.P <br />Cheryl A. Linden, Esq. <br />Robert D. Clazk, Esq. <br />February 23, 2001 <br />approach. Mr. Robinson indicated that Marsh recently had replaced a bond in Colorado for <br />another client and offered to review our situation if we could provide details on the permit <br />and the reclamation exposure. <br />• CityInsurance - (Charles Morton, Executive Vice President; 360] MacCorkle Avenue, SE, <br />PO Box 1126, Charleston, WV 25324; Tel: 304/926-7412) - is Powderhorn's broker of <br />record for Frontier. Charles Morton has informed us that CityInsurance has no new leads on <br />alternative carriers, but advises that he has seer. reports that the financial position of Frontier <br />is improving. We are in the process of trying to obtain a copy of the article. <br />Part II. Efforts Involving Frontier <br />Ethan Fogel met with Bill Gorton, Frontier's counsel, on Friday, February 16, 2001, and <br />urged him to speak with Frontier regarding avenues through which Frontier might provide credit <br />support for the current bonds. Mr. Gorton agreed to address that issue at the meeting scheduled <br />for Wednesday, February 21. <br />On February 21, 2001, representatives of Quaker Coal Company met with representatives <br />of Frontier Insurance Company in Pittsburgh, Pennsylvania. Present for Quaker Coal were Donn <br />Checkering, David Gay, and Dennis Swan, as well as two attorneys from Dechert, Ethan Fogel <br />and Tom Munno. Present for Frontier was Bruce Maas, Vice President of Frontier, as well as <br />Frontier's outside attorneys, Bill Gorton and Blaine Eazly. The parties discussed several issues, <br />including the NOV issued by the DMG. Frontier stated that the issuance of the NOV was wrong <br />as a matter of law. Specifically, it is Frontier's position that the DMG could not base an NOV on <br />the revocation of its Certificate of Authority by the United States Department of Treasury. <br />Frontier believes that Quaker should appeal from the issuance of the NOV based on this <br />argument. Frontier stressed that it was not incapacitated, and expressed the belief that the DMG <br />might not understand Frontier's financial ability, particularly given its arrangement with a <br />subsidiary of Berkshire Hathaway Corp. Frontier believes that the DMG should withdraw the <br />NOV, once it understood Frontier's financial position, and it said it would undertake to have a <br />qualified individual from Frontier visit with or participate in a conference call with the DMG to <br />explain its financial viability. During the course of this conversation, Quaker stated that it <br />preferred to resolve this matter amicably, and that the easiest way to do this would be for <br />Frontier to obtain a surety satisfactory to the DMG. The parties discussed Frontier's obtaining a <br />new surety through various insurance mechanisms whereby Frontier would either supply the <br />DMG with acut-through endorsement from its reinsurers or would get a satisfactory surety to <br />issue a replacement bond and in return Frontier and its reinsurers would reinsure the new surety. <br />Frontier stated that it did not believe any such arrangement was possible, but said they would <br />internally explore the matter further. Based on Frontier's comments, it is highly unlikely that <br />Frontier would pay for a replacement bond or post a letter of credit (either in the amount of its <br />current bond or in the amount suggested by the DMG). At the end of the meeting, Quaker asked <br />