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FOR 'r HE NOI2TFS 7~2~FSCAN CO.tyz, CORPOR7IT ION <br />The North American Coal Corporation ("NAG") is very pleased to <br />provide Goldman. Sachs & Co., as the authorized representative of <br />The~Montana Power Company ("MPC")~,~.wi.tb. the proposal herein <br />desaribed ("Pro osal" to <br />p I- purchase the assets of Northwestern <br />Resources Co. ("NRC"). NAC believes-this Proposal represents a <br />mutually beneficial transaction that maximizes MPC's value in <br />NRC. <br />1. Purchase Price: Sources of Financing <br />NAC his identified tax-advantaged structures which, when <br />implemented with MPC's cooperation, should allow MPC to <br />recog ze NAC's proposed payment stream as a pre-tax <br />equivna~lent of approximately $S1 million. <br />NAC believes that the tax-advantaged structure that we <br />desire to implement in the acquisition o£ NRC has proven <br />acceptable to Federal and state tax authn.riti_es in the past <br />and is straightforward and not overly complicated to <br />establish. <br />Based upon NAC's review of the documentation that we <br />received Erom Goldman, Sachs & Co., NAC proposes to purchase <br />the assets of NRC for an after-tax cash payment not to <br />exceed $33.5 million, payable as 87.5 of cash flow from <br />operations of the Jewett Mine over the Sirst eighteen months <br />beginning January 1, 2001. Further, NAC's Proposal includes <br />payments to MPC of 25~ of after-tax cash flow from <br />opera ions of the Jewett Mine for a period of twp years <br />begin~ing January 1, 2003. The computation of after-tax cash <br />Llew ~auld V.~e dCtC]:]~R1tiCd in a mutually acccYLaL1e ,uniii,ei in <br />accardanee with generally accepted accounting principles. <br />2. Asset Purchase Agreement <br />Given the nature and structure of the transaction described <br />above and NAC's inability to obtain confirmation of <br />important operational and financial information prior to the <br />requested proposal date, NAC is not able to provide a markup <br />of your draft Stack Purchase Agreement to adequately reflect <br />NAC's proposed transaction. <br />When NAC is selected as the successful bidder for the assets <br />of NRC, then NAC would negotiate definitive Asset Purchase <br />Agreements on an expedited basis. Such definitive agreement <br />would'be in such forms and include such representatipns, <br />warranties, covenants, conditions and indemnifications as <br />` Qnzss <br />LL 39Cd Wflltil WIf 65i09b86LL 55~bL L00Z/9L160 <br />