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PROPOSAL f•OR THE MONT hNA POWER CORL UUS]NE55 <br />FOR WES7MOREr,ANn COAL COMPANY <br />Westmoreland Coal Company {"WCC") proposes to acquire the stock of Westem Energy <br />Co. (``WECO"} and its subsidiary, Westem SynCoal, L.I..C. ("SynCoal"),Basin . <br />Resources, Inc. ("Basin");North Central Energy Company {"NCE"), and Horizon Coal <br />Services;-Inc.-("Horizon")for $102.00 million, in U.S. dollars, subject to the following <br />terms and conditions. <br />A. Cpmnonents of Value- - <br />WCG's offer of $102.00 million consists of the following components ofvalue. Almost <br />all of the positive value resides in WECO and SynCoal, with lesser value provided by <br />NCE, and )-lorizon, and a net liability presented by Basin. To ensure maximum value to <br />the Company, WCC is proposing certain options for structuring the transaction. Our <br />reference value of $102.00 million is based on WCC not acquiring Basin under Option A, <br />as described below. However, to facilitate the Company's complete exit from the coal <br />business, WCC is prepared to acquire Basin as outlined under Option B. <br />'Individual Enti Value <br />WECO and SynCoal $96.05 million <br />Without Basin (Option A) $ 0.00 million <br />With Basin (Option B) ($ 7.20 million) <br />NCIr $ 0.90 million <br />Horizon $ 5.05 million <br />Net Valuation for All 'Entities <br />Without Basin (Option A} $302.00 million <br />With Basin (Option B) $ 94.80 million <br />Basin Options. Basin has a negative net value due to currently recognized <br />UMWA post-retirement tnedira! obligations of 51.10 million and an additional <br />$3.00 million obligation, plus a $500,000 claims reimbursement, likely to be <br />incurred under summary judgment issued in Aguilar v. Basin 1esources. WCC is <br />higbJy sensitive to issues involving UMWA retirees and the potential <br />ramifications of acqutring Basin's position in this litigation. To mitigate our <br />concerns, we submit the following options. <br />• Option A. The Company would retain Basin and its liabilities to <br />di cpnse of as it sees fit. WCC would not acquire~Basin and there <br />would be no value, positive or negative, considered for Basin in <br />the transaction. <br />Q/1250 <br />WESTNORELANO COAL Co. ANp THE NO0.TH AMERICAN C04L CORPORATION <br />90 39tfd Wtlldl WIP 65'[09b86TL 55~b'[ <br />L00Z(9L/E0 <br />