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<br />• <br />February 21, 2011 DRAFT Climax- Clinton Agreement <br />Purchase Agreement including, without limitation, the terms of Paragraph 5, remain in full <br />force and effect and are not modified by this Agreement. <br />2. Effects on water quality and quantity from modifications in terrain in the <br />Clinton Creek drainage. (a) Climax understands that the Reservoir Company is concerned <br />with water quality protection for the East Interceptor Ditch as McNulty Overburden Storage <br />Facility (OSF) is enlarged. McNulty OSF is located in McNulty Gulch. There is a partition <br />in place at the toe of McNulty OSF to partition the clean runoff water from the north end of <br />the valley from the impacted water from the OSF. Clean runoff water from the north end of <br />McNulty Gulch is collected in the East Interceptor Ditch and passed through Clinton Gulch <br />Reservoir. Impacted water from McNulty OSF is carried to the water treatment plant for <br />treatment. <br />(b) Should the expansion of McNulty OSF require that the partition be <br />moved or other action taken to ensure partitioning of clean and impacted water, Climax <br />agrees and commits to do what is necessary to abide by its contractual obligation under <br />• Paragraph 5 of the Reservoir Purchase Agreement to protect the water quality in Clinton <br />Gulch Reservoir. Paragraph 5(b) of the Reservoir Purchase Agreement references water <br />quality data in an Exhibit J attached thereto that may not be representative of current water <br />quality conditions. Climax will conduct sampling of Clinton Gulch Reservoir during <br />September of 2011 to update existing baseline water quality conditions in the reservoir. The <br />water quality protection provisions of Paragraph 5, for purposes of the mining activities <br />proposed in amendment AM-06 and this Agreement, will apply to protect current (as of <br />September 2011) water quality conditions, or to conditions as indicated by Exhibit J to the <br />Reservoir Purchase. Agreement, whichever shows better water quality in the Clinton Gulch <br />Reservoir. <br />(c) Climax acknowledges that any of its water use in the Clinton Creek <br />drainage will be pursuant to decreed water rights and will not affect the quantity of water <br />available to the Reservoir Company under its decreed rights. <br />3. Potential impacts from mining activities near the Clinton Gulch watershed. <br />Climax understands that the Reservoir Company is concerned that blasting activities near the <br />upper end of the watershed will affect water quality in Clinton Gulch Reservoir. Climax <br />agrees that the proposed activities will not affect the location, water quality or quantity of <br />water in Clinton Gulch Reservoir or Clinton Ditch. It is not Climax's intent to blast rock into <br />the Clinton drainage, and Climax will employ best management practices to ensure no <br />incidental fly rock affects Clinton. Mine plans do not include disturbances in upper Clinton <br />Gulch. Furthermore, Climax is bound in this respect by Paragraph 5 of the Reservoir <br />• Purchase Agreement.