Document:

<PAGE>   1
                                                                    EXHIBIT 10.2

                            INSTRUMENT OF ASSIGNMENT
                         Asset Purchase Agreement (MPC)

1.   Reference is made to: (i) the Asset Purchase Agreement dated as of October
31, 1998, as amended by Amendment No. 1 thereto dated as of June 29, 1999 and
Amendment No. 2 thereto dated as of October 29, 1999 (such agreement, as so
amended, being hereinafter called the "APA") between The Montana Power Company
("MPC") and PP&L Global, Inc. ("Global"); and (ii) the Notice of Election dated
August 16, 1999 from MPC with respect to the exclusion of the Colstrip 4
Generation Assets. Capitalized terms used herein without definition have the
respective meanings specified in the APA.

2.   In accordance with clause (c)(i) of Section 13.10 of the APA, Global has
determined to assign, and does hereby ASSIGN, all of its rights, interests and
obligations under the APA (including its rights under Article X) to two of its
indirect, wholly-owned subsidiaries as follows: (A) to Colstrip Comm Serv, LLC,
a Delaware limited liability company ("CCS"), that portion of such rights,
interests and obligations as relates to the Specified Assets (as hereinafter
defined); and (B) to PP&L Montana, LLC, a Delaware limited liability company
(together with CCS, the "Assignees"; individually, each as "Assignee") the
balance of such rights, interests and obligations. For its part, each Assignee
has agreed to be bound by all terms, conditions and provisions of the APA to the
extent applicable to the matters assigned to it.

3.   By its acceptance set forth below, each Assignee agrees to be bound by all
terms, conditions and provisions of the APA to the extent applicable to the
matters assigned to it.

4.   Global acknowledges and agrees that (as provided in Section 13.10 of the
APA) this instrument shall not relieve Global of its obligations as assigning
party under the APA.

5.   Subject to the provisions of Section 13.10 of the APA, each Assignee shall
be a Purchaser for all purposes of the APA.

6.   The "Specified Assets" are the personal and real property tangible and
intangible rights and interests as specified in Schedule 1 hereto.

7.   The instrument shall be governed by, and construed in accordance with, the
laws of the State of New York.

8.   The assignment and assumption effected hereby shall be effective on
December 17, 1999.

<PAGE>   2

                                   This instrument is executed and
                                   delivered, on this 17th day of
                                   December, 1999.

                                   PP&L GLOBAL, INC.

                                   By: /s/ Robert W. Burke
                                       ---------------------------------------
                                       Name:  Robert W. Burke
                                       Title: Vice President and Chief Counsel

Accepted:

PP&L MONTANA, LLC

By: /s/ Roger Petersen
--------------------------------------
    Name:  Roger Petersen
    Title: President

Accepted:

COLSTRIP COMM SERV, LLC

By: /s/ Roger Petersen
--------------------------------------
    Name:  Roger Petersen
    Title: President

                                       2
<PAGE>   3

                                   SCHEDULE I

                                SPECIFIED ASSETS

<PAGE>   4
                               EXHIBIT A - LEASES
                               ------------------
                      ASSIGNMENT AND ASSUMPTION AGREEMENT
                               (MPC TO COMM SERV)

<TABLE>
<CAPTION>
ITEM     NAME OF LESSEE                  DATE            LAND OWNER
<S>      <C>                            <C>              <C>
Lease    Colstrip Cable TV               12-31-96        Project 1 & 2
Lease    Bob & LaDonna Cope              4-1-81          Project 1 & 2
Lease    Larry Semenza                   3-1-99          Project 1 & 2

Lease    Coal & Cattle Co. Players       3-1-87          Project 1 to 4
Lease    Colstrip Rod & Gun Club/ &
         Colstrip Trap Club              9-30-98         Project 1 to 4

Lease    Vern Ganser                     2-28-98         Project 1 & 2
Lease    Jim Rogers, Jr.                 4-1-98          Project 1 & 2
Lease    Dan Ova                         6-1-99          Project 1 & 2
Lease    Gregg Koczur                    6-1-99          Project 1 & 2

Lease    Jim Rogers, Jr.                 4-1-98          Project 3 & 4

Lease    Bob & LaDonna Cope              1-1-81          Project 3 & 4

Lease    Dan Ova                         6-1-99          Project 3 & 4
Lease    Gregg Koczur                    6-1-99          Project 3 & 4
Lease    Colstrip High School FFA        2-2-92          Project 3 & 4
Lease    Comnet 2000                     5-13-94         Project 3 & 4
Lease    Colstrip Saddle Club, Colstrip
         Roping Club                     7-24-98         Project 3 & 4

Lease    Bailey Egan                     10-1-96         Project 3 & 4
</TABLE>

A & A Exhibit A - Leases - MPC to Comm Serv       Page 1 of 1
<PAGE>   5
                              EXHIBIT B - RENTALS
                       ASSIGNMENT AND ASSUMPTION AGREEMENT
                               (MPC TO COMM SERV)

COLSTRIP 3 & 4 TOWNSITE PROPERTIES

<TABLE>
<CAPTION>
  TAXPAYER                                                             STATUS AS OF
   NUMBER                 AREA                     ADDRESS               11/15/99             LOT            BLOCK
-----------               ----                     -------             ------------           ---            -----
<S>                    <C>                     <C>                    <C>                    <C>            <C>
MOBILE HOME LOTS
              AMENDED PLAT OF BIG TIMBER SUBDIVISION CORRECTED PLAT OF EASTSIDE TOWNSITE EXPANSION
   1361                BIG TIMBER               1327 LARAMIE               RENTED              12              1
   1382                BIG TIMBER               1155 LARAMIE               VACANT               6              3
   1383                BIG TIMBER               1149 LARAMIE               RENTED               7              3
   1386                BIG TIMBER               1210 LARAMIE               VACANT              10              3
   1387                BIG TIMBER               1216 ABILENE               RENTED              11              3
   1388                BIG TIMBER               1222 ABILENE               RENTED              12              3
   1393                BIG TIMBER               1217 ABILENE               VACANT              17              3
   1395                BIG TIMBER               1205 ABILENE               RENTED              19              3
                     BIG TIMBER SUBDIVISION AMENDED PLAT OF EASTSIDE TOWNSITE EXPANSION
   1410                BIG TIMBER              1464 PIEDMONT               RENTED              1C              6
   1415                BIG TIMBER               1656 VISTA            RENTED-2 TENANTS         1H              6
   1416                BIG TIMBER               1652 VISTA                 RENTED              1J              6
   1428                BIG TIMBER              1550 PIEDMONT               VACANT              3E              7
   1429                BIG TIMBER              1560 PIEDMONT               RENTED              3F              7
   1431                BIG TIMBER               1611 VISTA                 RENTED              3H              7
   1434                BIG TIMBER               1635 VISTA                 RENTED              3L              7
   1440                BIG TIMBER              1531 PIEDMONT               VACANT              2C              8
   1441                BIG TIMBER              1537 PIEDMONT               RENTED              2D              8
   1443                BIG TIMBER              1549 PIEDMONT               VACANT              2F              8
</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv            Page 1 of 9
<PAGE>   6
<TABLE>
<CAPTION>

<S>       <C>                  <C>                                <C>                      <C>       <C>
   1444       BIG TIMBER                  1555 PIEDMONT                     LEASED           2G        8
   1448       BIG TIMBER                    1707 VISTA                      VACANT            3        8
   1450       BIG TIMBER                    1725 VISTA                      VACANT            5        8
   1451       BIG TIMBER           LT 6 BLK 8 - NO ACCESS STRIP                               6        8
   1458       BIG TIMBER                   1490 BRIDGER               RENTED - 2 TENANTS     2D        9
   1460       BIG TIMBER                   1489 BRIDGER                     RENTED           2F        9
   1462       BIG TIMBER                   1477 BRIDGER                     VACANT           3B        9
   1463       BIG TIMBER                  1457 PIEDMONT                     VACANT           3C        9
   1465       BIG TIMBER                   1688 BOZEMAN                     RENTED           3E        9
   1467       BIG TIMBER                   1699 BOZEMAN                     VACANT           3G        9
   1469       BIG TIMBER                   1685 BOZEMAN                     VACANT           4A        9
   1470       BIG TIMBER                   1697 BOZEMAN                     RENTED           4B        9
   1471       BIG TIMBER                    1704 VISTA                      VACANT           4C        9
   1472       BIG TIMBER                    1710 VISTA                      RENTED           4D        9
   1473       BIG TIMBER                    1716 VISTA                      RENTED           4E        9

</TABLE>

<TABLE>
<CAPTION>

TAXPAYER                                                                 STATUS AS OF
 NUMBER        AREA                           ADDRESS                      11/15/99          LOT     BLOCK
--------       ----                           -------                    ------------        ---     -----
                                   AMENDED PLAT OF STILLWATER SUBDIVISION
<S>       <C>                 <C>                                <C>                       <C>       <C>
   1598       STILLWATER                  2716 CHISHOLM                     VACANT            1        8
   1599       STILLWATER                  2726 CHISHOLM                     VACANT            2        8
   1600       STILLWATER                  2732 CHISHOLM                     VACANT            3        8
   1601       STILLWATER                  2738 CHISHOLM                     VACANT            4        8
   1602       STILLWATER                  2744 CHISHOLM                     VACANT            5        8
   1603       STILLWATER                  2750 CHISHOLM                     RENTED            6        8
   1604       STILLWATER                  2756 CHISHOLM                     VACANT            7        8
   1605       STILLWATER                  2762 CHISHOLM                     RENTED            8        8
   1607       STILLWATER                  2703 CHISHOLM                     RENTED            1        9
   1608       STILLWATER                  2709 CHISHOLM                RENTED - 2 TENANTS     2        9
   1609       STILLWATER                  2715 CHISHOLM                     RENTED            3        9
   1611       STILLWATER                  2727 CHISHOLM                     RENTED            5        9
   1612       STILLWATER                   2804 ROUNDUP                     RENTED            6        9
   1613       STILLWATER                   2810 ROUNDUP                     VACANT            7        9
</TABLE>

A & A EXHIBIT B - RENTALS - MPC TO COMM SERV       Page 2 of 9

<PAGE>   7
<TABLE>

<S>            <C>                          <C>                <C>                 <C>        <C>
     1615           STILLWATER                    2822 ROUNDUP          VACANT               9          9
     1616           STILLWATER                    2829 ROUNDUP          RENTED              10          9
     1618           STILLWATER                    2823 ROUNDUP       RENTED-2 TENANTS       11          9
     1620           STILLWATER                    2817 ROUNDUP          RENTED              12          9
     1621           STILLWATER                    2811 ROUNDUP          RENTED              13          9
     1622           STILLWATER                    2805 ROUNDUP          RENTED              14          9
     1623           STILLWATER                    2753 CHISHOLM         VACANT              15          9
     1624           STILLWATER                    2761 CHISHOLM         VACANT              16          9
     1626           STILLWATER                    2904 DURANGO          VACANT              18          9
     1627           STILLWATER                    2691 WAGONEER     INDUSTRIAL LOT           1         11
     1629           STILLWATER                    2670 ZANE GREY    INDUSTRIAL LOT           5         11
     1526           STILLWATER                    2604 ZANE GREY        RENTED               1          4
     1527           STILLWATER                    2610 ZANE GREY        VACANT               2          4
     1528           STILLWATER                    2616 ZANE GREY        RENTED               3          4
     1529           STILLWATER                    2622 ZANE GREY        VACANT               4          4
     1531           STILLWATER                    2634 ZANE GREY        VACANT               6          4
     1536           STILLWATER                    2668 ZANE GREY        RENTED              11          4
     1537           STILLWATER                    2607 ZANE GREY        VACANT               1          5
     1538           STILLWATER                    2621 ZANE GREY        RENTED               2          5
     1540           STILLWATER                    2635 ZANE GREY        VACANT               4          5
     1541           STILLWATER                    2639 ZANE GREY        RENTED               5          5
     1542           STILLWATER                    2645 ZANE GREY        RENTED               6          5
</TABLE>
<TABLE>
<CAPTION>
  TAXPAYER                                                            STATUS AS OF
   NUMBER             AREA                            ADDRESS           11/15/99            LOT       BLOCK
  --------            ----                            -------         ------------          ----      -----
              AMENDED PLAT OF SWEETGRASS SUBDIVISION FIRST FILING
<S>            <C>                          <C>                <C>                 <C>        <C>
     1630           SWEETGRASS                    3720 CHINOOK          VACANT               1          1
     1631           SWEETGRASS                    3712 CHINOOK          RENTED               2          1
     1632           SWEETGRASS                    3706 CHINOOK          RENTED               3          1
     1633           SWEETGRASS                    3702 CHINOOK          RENTED               4          1
     1634           SWEETGRASS                    3703 CHINOOK          RENTED               5          1
     1635           SWEETGRASS                    3707 CHINOOK          RENTED               6          1
     1636           SWEETGRASS                    3715 CHINOOK          RENTED               7          1
     1637           SWEETGRASS                    3721 CHINOOK          RENTED               8          1

</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv                Page 3 of 9

<PAGE>   8
<TABLE>
<CAPTION>

<S>       <C>                 <C>                      <C>                         <C>         <C>
 1638        SWEETGRASS            3910 PROSPECTOR               RENTED               9           1
 1639        SWEETGRASS            3914 PROSPECTOR               RENTED              10           1
 1640        SWEETGRASS            3920 PROSPECTOR               VACANT              11           1
 1641        SWEETGRASS            3926 PROSPECTOR               VACANT              12           1
 1642        SWEETGRASS            3932 PROSPECTOR               RENTED              13           1
 1643        SWEETGRASS            3938 PROSPECTOR          RENTED-2 RENTERS         14           1
 1644        SWEETGRASS              3800 CHINOOK                RENTED               1           2
 1645        SWEETGRASS              3806 CHINOOK                RENTED               2           2
 1646        SWEETGRASS              3812 CHINOOK                VACANT               3           2
 1647        SWEETGRASS              3818 CHINOOK                RENTED               4           2
 1648        SWEETGRASS              3826 CHINOOK                VACANT               5           2
 1649        SWEETGRASS              3834 CHINOOK                RENTED               6           2
 1650        SWEETGRASS              3840 CHINOOK                RENTED               7           2
 1651        SWEETGRASS              3844 CHINOOK                RENTED               8           2
 1652        SWEETGRASS              3850 CHINOOK                RENTED               9           2
 1653        SWEETGRASS              3858 CHINOOK                RENTED              10           2
 1654        SWEETGRASS              3864 CHINOOK                RENTED              11           2
 1655        SWEETGRASS              3868 CHINOOK                RENTED              12           2
 1656        SWEETGRASS              3874 CHINOOK          RENTED - 2 TENANTS        13           2
 1657        SWEETGRASS              3880 CHINOOK                RENTED              14           2
 1658        SWEETGRASS              3886 CHINOOK                RENTED              15           2
 1659        SWEETGRASS              3892 CHINOOK                VACANT              16           2
 1660        SWEETGRASS              3898 CHINOOK                RENTED              17           2
 1661        SWEETGRASS            3903 PROSPECTOR               VACANT              18           2
 1662        SWEETGRASS            3907 PROSPECTOR               RENTED              19           2
 1663        SWEETGRASS            3913 PROSPECTOR               RENTED              20           2
 1664        SWEETGRASS            3919 PROSPECTOR               VACANT              21           2
 1665        SWEETGRASS            3925 PROSPECTOR               VACANT              22           2
 1666        SWEETGRASS            3931 PROSPECTOR               RENTED              23           2
 1667        SWEETGRASS              3897 CHINOOK                RENTED               1           3
 1668        SWEETGRASS              3891 CHINOOK                RENTED               2           3
 1669        SWEETGRASS              3863 CHINOOK                RENTED               3           3
 1670        SWEETGRASS              3845 CHINOOK                VACANT               4           3
 1671        SWEETGRASS              3827 CHINOOK                VACANT               5           3
 1689        SWEETGRASS             3060 CHEYENNE                VACANT               7           5
 1690        SWEETGRASS             3066 CHEYENNE                RENTED               8           5

</TABLE>

A & A EXHIBIT B - Rentals - MPC to Comm Serv          Page 4 of 9

<PAGE>   9
<TABLE>
<CAPTION>
<S>                <C>                     <C>                                    <C>                           <C>            <C>
1692                  SWEETGRASS               3078 CHEYENNE                          VACANT                      10              5
1693                  SWEETGRASS               3084 CHEYENNE                         VACANT                      11              5
1694                  SWEETGRASS               3090 CHEYENNE                         RENTED                      12              5
1695                  SWEETGRASS               3096 CHEYENNE                         VACANT                      13              5
1698                  SWEETGRASS               3061 CHEYENNE                         VACANT                       3              6
</TABLE>

<TABLE>
<CAPTION>
TAXPAYER                                                                          STATUS AS OF
 NUMBER                  AREA                     ADDRESS                           11/15/99                    LOT            BLOCK
--------                 ----                     -------                         ------------                  ---            -----
                                                AMENDED PLAT OF SWEETGRASS SUBDIVISION FIRST FILING
<S>                <C>                     <C>                                    <C>                           <C>            <C>
1702                  SWEETGRASS               3085 CHEYENNE                         VACANT                       7              6
1703                  SWEETGRASS               3091 CHEYENNE                         VACANT                       8              6
1704                  SWEETGRASS               3097 CHEYENNE                         VACANT                       9              6
1707                  SWEETGRASS               3136 ANTELOPE                         RENTED                      12              6
1708                  SWEETGRASS               3130 ANTELOPE                         VACANT                      13              6
1709                  SWEETGRASS               3124 ANTELOPE                         RENTED                      14              6
1710                  SWEETGRASS               3118 ANTELOPE                         VACANT                      15              6
1733                  SWEETGRASS               3137 ANTELOPE                         RENTED                      20              7
1744                  SWEETGRASS               3224 APPALOOSA                        VACANT                       5              8
</TABLE>

<TABLE>
<CAPTION>
TAXPAYER                                                                          STATUS AS OF
 NUMBER                  AREA                     ADDRESS                           11/15/99                    LOT            BLOCK
--------                 ----                     -------                         ------------                  ---            -----
                                                       COLSTRIP TOWNSITE MOBILE HOME LOTS
<S>                <C>                     <C>                                    <C>                           <C>            <C>
                   COLSTRIP TOWNSITE           118 COTTONWOOD                        VACANT
                   COLSTRIP TOWNSITE           124 COTTONWOOD                        RENTED
                   COLSTRIP TOWNSITE           130 COTTONWOOD                        RENTED
                   COLSTRIP TOWNSITE           135 COTTONWOOD                        VACANT
                   COLSTRIP TOWNSITE           136 COTTONWOOD                        VACANT
                   COLSTRIP TOWNSITE           141 COTTONWOOD                        RENTED
                   COLSTRIP TOWNSITE           142 COTTONWOOD                        VACANT
                   COLSTRIP TOWNSITE           147 COTTONWOOD                        VACANT
                   COLSTRIP TOWNSITE           148 COTTONWOOD                        VACANT
                   COLSTRIP TOWNSITE           153 COTTONWOOD                        RENTED
</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv                      Page 5 of 9

<PAGE>   10
<TABLE>
<CAPTION>

<S>                <C>                     <C>                                    <C>
                    COLSTRIP TOWNSITE              154 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              159 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              160 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              165 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              166 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              171 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              172 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              177 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              178 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              183 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              184 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              189 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              190 COTTONWOOD                         RENTED
                    COLSTRIP TOWNSITE              195 COTTONWOOD                         VACANT
                    COLSTRIP TOWNSITE              196 COTTONWOOD                         RENTED
</TABLE>
NOTE: ABOVE 25 LOTS TAXPAYER #1143 & 1144, COLSTRIP TOWNSITE BLOCKS 43 & 46

<TABLE>
<CAPTION>
TAXPAYER                                                    STATUS AS OF
 NUMBER             AREA                 ADDRESS              11/15/99        LOT            BLOCK
--------            ----                 -------            ------------      ---            -----

HOUSE LOTS                          CIMARRON SUBDIVISION SECOND FILING
----------
<S>             <C>                 <C>                       <C>             <C>            <C>
  1867             CIMARRON           6625 BROWNING              VACANT           4              3
  1880             CIMARRON           6780 HOLLISTER             VACANT          18              3
  1879             CIMARRON           6782 HOLLISTER             VACANT          17              3
  1948             CIMARRON           6815 CIMARRON              VACANT           3              6
  1949             CIMARRON           6817 CIMARRON              VACANT           4              6
</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv                      Page 6 of 9
<PAGE>   11
<TABLE>
<CAPTION>
TAXPAYER                                                                          STATUS AS OF
 NUMBER                  AREA                     ADDRESS                           11/15/99                    LOT            BLOCK
--------                 ----                     -------                         ------------                  ---            -----
<S>                <C>                     <C>                                    <C>                           <C>            <C>
                                                 CIMARRON SUBDIVISION SECOND FILING
HOUSES/DUPLEXES/APARTMENTS
1869                  CIMARRON               6639 BROWNING                         HOUSE/VACANT                  12              3
1876                  CIMARRON               6690 HOLLISTER                        HOUSE/VACANT                  14              3
1881                  CIMARRON               6778 HOLLISTER                        HOUSE/VACANT                  19              3
1882                  CIMARRON               6776 HOLLISTER                        HOUSE/VACANT                  20              3
1883                  CIMARRON               6774 HOLLISTER                        HOUSE/VACANT                  21              3
1886                  CIMARRON               6766 HOLLISTER                        HOUSE/LEASED                  24              3
1904                  CIMARRON               6814 CIMARRON                         HOUSE/RENTED                  16              4
1907                  CIMARRON               6804 CIMARRON                         HOUSE/LEASED                  19              4
1900                  CIMARRON               6822 CIMARRON                         HOUSE/VACANT                  12              4
1877                  CIMARRON               6790 CIMARRON                         HOUSE/LEASED                  15              3

                                                 CIMARRON SUBDIVISION FIRST FILING
RANCH STYLE $525/MO OTHER STYLE $510/MO
1859                  CIMARRON               6616-6618 BROWNING                   DUPLEX APT/2 VACANT            32              2
1860                  CIMARRON               6612-6614 BROWNING                   DUPLEX APT/2 RENTED            33              2
1861                  CIMARRON               6608-6610 BROWNING                   DUPLEX APT/1 RENTED            34              2
1862                  CIMARRON               6604-6606 BROWNING                   DUPLEX APT/2 RENTED            35              2
1863                  CIMARRON               6600-6602 BROWNING                   DUPLEX APT/2 RENTED            36              2

1929                  CIMARRON             6950-6952 WINCHESTER                   DUPLEX APT/2 RENTED            21              5
1930                  CIMARRON             6954-6956 WINCHESTER                   DUPLEX APT/1 RENTED            22              5
1931                  CIMARRON             6958-6960 WINCHESTER                   DUPLEX APT/2 RENTED            23              5
1932                  CIMARRON             6962-6964 WINCHESTER                   DUPLEX APT/2 RENTED            24              5
1933                  CIMARRON             6966-6968 WINCHESTER                   DUPLEX APT/2 RENTED            25              5
1934                  CIMARRON             6971-6973 WINCHESTER                   DUPLEX APT/2 RENTED            26              5
1935                  CIMARRON             6967-6969 WINCHESTER                   DUPLEX APT/2 RENTED            27              5
</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv                      Page 7 of 9
<PAGE>   12
<TABLE>
<CAPTION>
<S>                <C>                     <C>                                    <C>                           <C>            <C>
1936                  CIMARRON              6963-6965 WINCHESTER                  DUPLEX APT/1 RENTED            28              5
1937                  CIMARRON              6959-6961 WINCHESTER                  DUPLEX APT/1 RENTED            29              5
1938                  CIMARRON              6955-6957 WINCHESTER                  DUPLEX APT/2 VACANT            30              5
1939                  CIMARRON              6951-6953 WINCHESTER                  DUPLEX APT/2 RENTED            31              5
</TABLE>

4-PLEX APT. 2 BDRM $450/MO 3 BDRM $510/MO

<TABLE>
<CAPTION>
<S>                <C>                     <C>                                    <C>                           <C>            <C>
1940                  CIMARRON              6701 TO 6707 HOLLISTER                4-PLEX APT./3 RENTED          32A,B,C,D        5
1941                  CIMARRON              6711 TO 6717 HOLLISTER                4-PLEX APT./2 RENTED          32E,F,G,H        5
1942                  CIMARRON              6721 TO 6727 HOLLISTER                4-PLEX APT./4 RENTED          32I,J,K,L        5
1943                  CIMARRON              6731 TO 6737 HOLLISTER                4-PLEX APT./4 RENTED          32M,N,O,P        5
1944                  CIMARRON              6741 TO 6747 HOLLISTER                4-PLEX APT./4 RENTED          32R,S,T,U        5
1945                  CIMARRON              6751 TO 6757 HOLLISTER                4-PLEX APT./4 RENTED          32V,W,X,Y        5
1958                  CIMARRON              6700 TO 6706 HOLLISTER                4-PLEX APT./2 RENTED           1A,B,C,D        7
1959                  CIMARRON              6732 TO 6738 HOLLISTER                4-PLEX APT./3 RENTED           1E,F,G,H        7
1960                  CIMARRON              6752 TO 6758 HOLLISTER                4-PLEX APT./4 RENTED           1I,J,K,L       7
</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv                      Page 8 of 9
<PAGE>   13
COLSTRIP 1 & 2 TOWNSITE PROPERTIES

<TABLE>
<CAPTION>
TAXPAYER                                                                          STATUS AS OF
 NUMBER                  AREA                     ADDRESS                           11/15/99                    LOT            BLOCK
--------                 ----                     -------                         ------------                  ---            -----
<S>                <C>                     <C>                                    <C>                           <C>            <C>
APARTMENTS                                 2 2 BDRM $360/mo; 2 3 Bdrm
                                                   $410./mo
                                                                                     RENTED
                   COLSTRIP TOWNSITE              15 ASH A-D                      4 PLEX UNIT 2                  18              1
                   COLSTRIP TOWNSITE              18 ASH A-D                      4 PLEX UNIT 3                  23              1
                   COLSTRIP TOWNSITE              29 ASH A-D                      4 PLEX UNIT 2                  19              1
                   COLSTRIP TOWNSITE              30 ASH A-D                      4 PLEX UNIT 3                  22              1
                   COLSTRIP TOWNSITE              45 ASH A-D                      4 PLEX UNIT 3                  20              1
                   COLSTRIP TOWNSITE              46 ASH A-D                      4 PLEX UNIT 4                  21              1
                   COLSTRIP TOWNSITE            21 CHERRY A-D                     4 PLEX UNIT 2                                 50
                   COLSTRIP TOWNSITE            27 CHERRY A-D                     4 PLEX UNIT 2                                 50

 HOUSES
  1083             COLSTRIP TOWNSITE            323 WILDRYE                       HOUSE   VACANT                  1              9
</TABLE>

A & A Exhibit B - Rentals - MPC to Comm Serv                      Page 9 of 9
<PAGE>   14
                                                            Colstrip Other Lands

                             SPECIAL WARRANTY DEED

     FOR A VALUABLE CONSIDERATION, the receipt of which is acknowledged, the
undersigned,

          THE MONTANA POWER COMPANY,
          a Montana corporation, successor by merger to
          The Montana Power Company, a New Jersey corporation

          hereinafter called Grantor,

hereby grants, assigns and transfers unto

          COLSTRIP COMM SERV, LLC
          303 North Broadway, Suite 400
          Billings, MT 59101

          hereinafter called Grantee,

the real property, easements and other rights in real property in Rosebud
County, Montana, described on Exhibit A attached hereto and made a part hereof,
together with all tenements, hereditaments, and appurtenances thereunto
belonging or in anyway appertaining, including the water rights listed on
Exhibit B attached hereto and made a part hereof, excepting and reserving to
Grantor, and its successor and assigns, all right, title and interest in the
easements and other rights in real property described on Exhibit C and Exhibit D
attached hereto and made a part hereof.

     TO HAVE AND TO HOLD unto the Grantee, and to its successors and assigns,
forever, SUBJECT TO THE FOLLOWING:

     (a)  Reservations and exceptions in patents from the United States and the
          State of Montana.

     (b)  Recorded and apparent easements and rights-of-way.

     (c)  Mineral and royalty reservations or conveyances of record, oil and gas
          leases of record, and mineral and coal leases of record.

     (d)  All building, use, zoning, sanitary and environmental restrictions,
          and waivers.

     (e)  Taxes and assessments, including special improvement district
          assessments, for 1999 and subsequent years.

     (f)  Rights of tenants or lessees of any of the property.

     (g)  All exceptions and reservations made by Grantor herein, including but
          not limited to those listed on Exhibit C and Exhibit D.

     (h)  All Permitted Liens as defined in the Asset Purchase Agreement dated
          as of October 31, 1998, as amended on June 29, 1999 and on October 29,
          1999, between Grantor and Grantee (as amended, the "Asset Purchase
          Agreement"), to the extent they are not included in exceptions (a)
          through (g) above.

     (i)  Terms and conditions of a Ownership and Operation Agreement between
          The Montana Power Company, Puget Sound Power and Light Company, The
          Washington Water Power Company, Portland General Electric Company, and
          Pacific Power & Light

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                            TO COLSTRIP OTHER LANDS
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<PAGE>   15
                                                            Colstrip Other Lands

               Company dated May 6, 1981, as amended October 11, 1991 and July
               13, 1998 ("Ownership and Operation Agreement").

          (j)  Terms and conditions of a Construction and Ownership Agreement
               between The Montana Power Company and Puget Sound Power & Light
               Company dated July 30, 1974, as amended October 21, 1998
               ("Construction and Ownership Agreement").

          (k)  Colstrip Townsite Services Agreement dated ____________, 1987
               between Colstrip Community Services Company, Western Energy
               Company, The Montana Power Company, Puget Sound Power and Light
               Company, Portland General Electric Company, Pacificorp and the
               Washington Water Power Company, as amended by letter agreements
               extending its term to July 1, 2000.

          Excepting the matters referenced in subparagraphs (a) through (k)
above and conveyances and encumbrances for curative purposes, Grantor does
hereby warrant and forever defend all and singular the interests in real
property, easements and other rights set forth in Exhibit A unto the Grantee,
its successors and assigns, against every person whomsoever lawfully claiming or
to claim the same or any part thereof by, through or under Grantor, but against
none other.

          So long as the Project (as defined in the Ownership and Operation
Agreement or in the Construction and Ownership Agreement) or any part thereof as
originally constructed, reconstructed or added to is used or useful for the
generation of electrical power and energy, or to the end of the period permitted
by applicable law, whichever occurs first, Grantee, by acceptance of this
Special Warranty Deed, waives its right to partition whether by partition in
kind or sale and division of the proceeds thereof, and agrees that it will not
resort to any action at law or in equity to partition and further waives the
benefit of all laws that may now or hereafter authorize such partition of the
properties comprising Colstrip Units 3 and 4 or Colstrip Units 1 and 2. It is
agreed that this covenant shall be deemed to run with the land.

     For purposes of this Deed the following terms are defined:

               "Colstrip Units 1 and 2" shall mean the two 333 MW (gross
               capacity) coal-fire steam electric generating units located in
               Colstrip, Montana, and referred to herein as "Colstrip Unit 1"
               and Colstrip Unit 2" respectively.

               "Colstrip Units 3 and 4" shall mean the two 805 MW (gross
               capacity) coal-fired steam electric generating units located in
               Colstrip, Montana, and referred to herein as "Colstrip Unit 3"
               and Colstrip Unit 4" respectively.

     DATED: December __, 1999.

                                        THE MONTANA POWER COMPANY

                                        By
                                           -------------------------------------

                                        Its
                                            ------------------------------------

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<PAGE>   16
                                                            Colstrip Other Lands

STATE OF MONTANA       )
                       ) ss:
County of Yellowstone  )

     This instrument was acknowledged before me on December  , 1999, by
                                                           --

--------------------------------------------------------------------------------
                             [Name(s) of Person(s)]

as
   -----------------------------------------------------------------------------
       [Type of Authority, e.g., officer, trustee, partner, attorney-in-fact]
of THE MONTANA POWER COMPANY.

                                          --------------------------------------
                                          Notary Public for the State of Montana
                                          Residing at Billings, Montana
                                          My commission expires:
                                                                 ---------------
(SEAL)

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<PAGE>   17
                                                            Colstrip Other Lands

                                  PREAMBLE TO

                                  EXHIBITS TO

                             SPECIAL WARRANTY DEED

1.   As used in this Deed, the following defined terms have the meanings
     indicated below:

a.   "Apportioned" with respect to an easement means to divide or allocate
     the rights and obligations under the easement between Grantor and Grantee,
     such that Grantee will own the rights and bear the obligations under the
     easement to the extent the easement is used in connection with the
     operation of the Unit and Grantor will retain all other rights and
     obligations under the easement.

b.   "Deed" means the Special Warranty Deed to which this Preamble is attached,
     including the Exhibits and this Preamble.

c.   "DNRC" means the Montana Department of Natural Resources and Conservation.

d.   "Exhibits" means Exhibit A, B and C (and Exhibit D if attached) attached to
     and made a part of this Deed.

e.   "Excluded Assets" has the meaning ascribed to it in the Asset Purchase
     Agreement.

f.   "FERC License" - intentionally omitted.

g.   "Interconnection Agreement" means the Generation Interconnection Agreement
     of even date herewith between Grantor and Grantee.

h.   "MPC" and "MPCO" mean The Montana Power Company.

i.   "Point of Interconnection" means the Point of Interconnection for the
     Unit, if any, as defined in the Interconnection Agreement.

j.   "Prior Easements" means easements, other than those described in Exhibit D,
     in existence prior to the execution of this Deed which were intended to be
     used for the same purposes as those easements reserved in Exhibit C.

k.   "Project Boundary" - intentionally omitted.

l.   "Separation Agreement" means the Separation of Assets Agreement of even
     date herewith between Grantor and Grantee.

m.   "Unit" means Colstrip Other Lands extended to the Point of Interconnection,
     if any, excepting Excluded Assets.

n.   Terms defined elsewhere in this Deed shall have the meanings ascribed
     thereto.

2.   All recording data and recording references set forth in the Exhibits
refer to the records in the office(s) of the Clerk and Recorder of the
county(ies) referenced on the first page of this Deed and references to
certificates of survey, subdivision plats, townsites or the like refer to
plats as filed in the office(s) of the Clerk and Recorder of said county(ies).

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                                    PREAMBLE
<PAGE>   18
                                                            Colstrip Other Lands

     3.   "Recording References" are only for informational purposes and for
purposes of complying with the Montana Subdivision and Platting Act, Mont. Code
Ann., Title 76, Chapter 3, and shall not be construed as expanding, limiting or
otherwise affecting the lands, estates or interests transferred.

     4.   All maps, schedules and exhibits referred to in the Exhibits are
attached thereto and by reference made a part thereof.

     5.   to the extent of any conflict between Prior Easements and the
easements reserved in Exhibit C, the easements reserved in Exhibit C shall
govern as between Grantee and Grantor, but nothing in this Deed shall otherwise
affect or abrogate any rights under the Prior Easements.

                           (intentionally left blank)

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                                    PREAMBLE

<PAGE>   19
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

        AN UNDIVIDED 50% INTEREST AS TENANT IN COMMON IN AND TO THE REAL
        PROPERTY AND EASEMENTS DESCRIBED IN SCHEDULE II OF EXHIBIT "A".

                       SCHEDULE I: INTENTIONALLY OMITTED

                   SCHEDULE II: COLSTRIP UNITS 1 AND 2 OTHER

Parcel 6  That portion of Section 28 in Township 2 North, Range 41 East, PMM,
          described as Tract 1B of Amended Tract 1 of Certificate of Survey No.
          27872 filed July 9, 1981, for record in the office of the Clerk and
          Recorder of Rosebud County, Montana as Document No. 32272.

Parcel 7  That portion of Section 27 in Township 2 North, Range 41 East, PMM,
          described as Tract 1B-1, Tract 1B-2, Tract 1B-3 and Tract 1B-4 of
          Amended Tract 1B of Amended Tract 1 of Certificate of Survey No.
          27874 filed December 1, 1982 for record in the office of the Clerk
          and Recorder of Rosebud County, Montana as Document No. 37509,
          Excepting therefrom Certificate of Survey No. 27087 and Tract 3 of
          Certificate of Survey No. 27874, subject to dedication of Tract 1B-4
          (Power Road and Pinebutte Drive) as a public roadway.

Parcel 8  That portion of Section 27 in Township 2 North, Range 41 East, PMM,
          described as Tract E1, and Tract 1C of Certificate of Survey No.
          35013 filed March 26, 1982 for record in the office of the Clerk and
          Recorder of Rosebud County, Montana as Document No. 35013, subject to
          dedication of Tract 1C (Power Road) as a public roadway.

Parcel 8A That portion of Section 27 in Township 2 North, Range 41 East, PMM,
          described as Tract E of Certificate of Survey No. 35013 filed March
          26, 1982 for record in the office of the Clerk and Recorder of
          Rosebud County, Montana as Document No. 35013.

Parcel 8B That portion of Section 27 in Township 2 North, Range 41 East, PMM,
          described as Tract 1-B-1 of Amended Tracts 1-A and 1-B of Certificate
          of Survey No. 35013 and dedication of Tracts D and F, filed
          September 15, 1986 for record in the office of the Clerk and Recorder
          of Rosebud County, Montana as Document No. 54728.

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                                   EXHIBIT A
<PAGE>   20
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                            Continued (Schedule II)

Parcel 9       That portion of Section 34 in Township 2 North, Range 41 East,
               PMM, described as Tract 1-A, Tract 1-B, Tract 1-B-1, Tract 1-B-2,
               Tract 1-D, and Tract 1-E of Certificate of Survey No. 54257
               amending Certificate of Survey No. 27875 (Tract 1), No. 27878
               Certificate of Survey No. 34994 and dedication of tracts 1-A-2,
               1-B-2, 1-B and 1-D filed July 30, 1986 for record in the office
               of the Clerk and Recorder of Rosebud County, Montana, as Document
               No. 54257, subject to dedication of Tract 1-A-2, Tract 1-B, Tract
               1-B-2, and Tract 1-D (Willow Avenue) as a public roadway.

Parcel 10      Intentionally deleted and replaced by 10A, B, C and D.

Parcel 10A     That portion of the W 1/2 SE 1/4, Section 27 and the W 1/2 E 1/2
               of Section 34, Township 2 North, Range 41 East, described as
               Parcel 10A of Certificate of Survey No. 85560 filed March 17,
               1999 for record in the office of the Clerk and Recorder of
               Rosebud County, Montana under Document No. 85560.

Parcel 10B     That portion of the W 1/2 E 1/2 of Section 34, Township 2 North,
               Range 41 East, described as Parcel 10B of Certificate of
               Survey No. 85560 filed March 17, 1999 for record in the office of
               the Clerk and Recorder of Rosebud County, Montana under Document
               No. 85560.

Parcel 10C     That portion of the E 1/2, Section 27, S 1/2 SW 1/4 SW 1/4,
               Section 26, W 1/2 NW 1/4, Section 35, and NE 1/4 NE 1/4 NE 1/4,
               Section 34, all in Township 2 North, Range 41 East, described as
               Parcel 10C of Certificate of Survey No. 85789 filed April 19,
               1999 for record in the office of the Clerk and Recorder of
               Rosebud County, Montana under Document No. 85789.

Parcel 10D     A tract of land in Section Twenty-six (26), Township Two (2)
               North, Range Forty-one (41) East, Principal Montana Meridian;
               described as follows: Beginning at the South Quarter corner of
               Section 26, T2N, R41E, PMM; thence N00 (degrees) 10'05"E along
               the north-south mid-section line of Section 26 a distance of
               653.62 feet; thence S89 (degrees) 44'30"W a distance of 661.87
               feet; thence N00 (degrees) 11'04"E a distance of 1963.29 feet to
               the east-west mid-section line of said Section; thence N89
               (degrees) 57'08"E along said east-west mid-section line a
               distance of 1986.53 feet; thence S00 (degrees) 14'49"W a distance
               of 2618.32 feet to the south line of said Section; thence N89
               (degrees) 52'55"W along said south line a distance of 1321.62
               feet to the point of beginning; together with the right to
               construct and maintain such private access on, over, under or
               across Grantor's adjoining properly lying southerly and westerly
               of the said property in Section 26 hereinabove described as may
               be required by Grantees, their successors or assigns, for or
               reasonably incidental to the use and enjoyment of the above
               described tract of land. As used in this deed the term "Private
               Access" has reference to a corridor two hundred (200) feet in
               width within which will be located all facilities necessary or
               useful for the full use and enjoyment of the tracts of land
               herein conveyed to Grantees, and includes, but is not limited to,
               roadways, pipelines for water, gas or other substances, ditches,
               conduits, canals, conveyers, electric transmission and
               distribution lines and all other related facilities. Such Private
               Access shall be installed and maintained in accordance with
               reasonable and necessary standards as prescribed by Grantor.

                                      -2-

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                                   EXHIBIT A

<PAGE>   21
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                            Continued (Schedule II)

               This description was used in a deed recorded October 31, 1972 in
               Book 72 Deeds, page 500, and also shown as description 2 of
               Certificate of Survey No. 1660 on file in the office of the Clerk
               and Recorder of Rosebud County, Montana. The Grantor in the Deed
               and referred to in the Grant of Easement across adjacent land
               owned by the Grantor was Burlington Northern Inc.

Parcel 11      Lots 18, 19, 20, 21, 22 and 23, Block 1, Lot 1 in Block 9, and
               all of Block 50, of the COLSTRIP TOWNSITE, Rosebud County,
               Montana, according to the official plat thereof on file and of
               record in the office of the Clerk and Recorder of said County,
               under Document No. 11034.

Parcel 12A     Intentionally omitted.

Parcel 12B     Intentionally omitted

Parcel 12C     Township 2 North, Range 41-East, PMM, Rosebud County

               Section 5: S 1/2, NE 1/4, Excepting therefrom that portion as
               deeded to the Sate of Montana for Highway right of way.

               Section 8: All, Excepting therefrom the Burlington Northern
               Railroad Right of Way; also Excepting therefrom that portion as
               deeded to the State of Montana for Highway right of way.

                           (intentionally left blank)

                                      -3-

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                                   EXHIBIT A
<PAGE>   22
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                      SCHEDULE III: INTENTIONALLY OMITTED

AN UNDIVIDED 15% INTEREST AS TENANTS IN COMMON IN AND TO THE REAL PROPERTY AND
EASEMENTS DESCRIBED IN SCHEDULE IV

                           SCHEDULE IV: UNIT 3 OTHER

Parcel 20  That portion of Section 28 in Township 2 North, Range 41 East, PMM,
           described as Tract 1A of Amended Tract 1 of Certificate of Survey No.
           27872 filed July 9, 1981, for record in the office of the Clerk and
           Recorder of Rosebud County, Montana as Document No. 32272.

Parcel 21  (intentionally deleted)

Parcel 22  That portion of Section 21 in Township 2 North, Range 41 East, PMM,
           described as Tract 1A-1 of Amended Tract 1A of Amended Tract 1 of
           Certificate of Survey No. 27879 filed October 19, 1982 for record in
           the Clerk and Recorder of Rosebud County, Montana as Document No.
           37085.

Parcel 23  That portion of Section 33 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 Amended of Certificate of Survey No. 85920,
           filed May 4, 1999 for record in the office of the Clerk and Recorder
           of Rosebud County, Montana as Document No. 85920, excepting
           therefrom:

           (a)  Tract 2 of Certificate of Survey No. 44126

           (b)  Castle Rock Lake Subdivision First Filing Document No. 37500

           (c)  Castle Rock Lake Subdivision Second Filing Document No. 37501

           (d)  Castle Rock Lake Subdivision Third Filing Document No. 37502

           (e)  Cimarron Subdivision First Filing Document No. 37503

           (f)  Plat of Amended Lots 19 and 20, Block 5 Cimarron Subdivision
                First Filing Document No. 86070

                                      -4-

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                                   EXHIBIT A
<PAGE>   23
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                           (Continued) (Schedule IV)

           (g)  Amended Plat of Cimarron Subdivision Second Filing Document No.
                39051

           (h)  Cimarron Subdivision Third Filing Document No. 37505

Parcel 24  That portion of Sections 21 and 22 in Township 2 North, Range 41
           East, PMM, described as Tract 1 of Certificate of Survey No. 44906
           filed August 4, 1984 for record in the office of the Clerk and
           Recorder of Rosebud County, Montana as Document No. 44906.

Parcel 25  That portion of Section 22 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 of Certificate of Survey No. 44909 filed August
           14, 1984 for record in the office of the Clerk and Recorder of
           Rosebud County, Montana as Document No. 44909.

Parcel 26  That portion of Section 21 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 of Certificate of Survey No. 44910 filed August
           14, 1984 for record in the office of the Clerk and Recorder of
           Rosebud County, Montana as Document No. 44910.

Parcel 27  That portion of Section 22 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 of Certificate of Survey No. 44911 filed August
           14, 1984 for record in the office of the Clerk and Recorder of
           Rosebud County, Montana as Document No. 44911.

Parcel 28  That portion of Section 22 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 of Certificate of Survey No. 44912 filed August
           14, 1984 for record in the office of the Clerk and Recorder of
           Rosebud County, Montana as Document No. 44912.

Parcel 29  That portion of Section 22 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 of Certificate of Survey No. 44907 filed August
           14, 1984 for record in the office of the Clerk and Recorder of
           Rosebud County, Montana as Document No. 44907.

Parcel 30  That portion of Section 22 in Township 2 North, Range 41 East, PMM,
           described as Tract 1 of Certificate of Survey No. 44908 filed August
           14, 1984 for record in the office of the Clerk and Recorder of
           Rosebud County, Montana as Document No. 44908.

Parcel 31  That portion of Section 27 in Township 2 North, Range 41 East, PMM,
           described as Tract 1A-1, Tract 1A-2, and Tract 1A-3 of Amended Tract
           1A of Amended Tract 1 of Certificate of Survey No. 27874 filed
           December 1, 1982 for record in the office of the Clerk and Recorder
           of Rosebud County, Montana as Document No. 37510, subject to
           Dedication of Tract 1A-3 (Pinebutte Drive) as a public roadway.

                                      -5-

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                                   EXHIBIT A
<PAGE>   24
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                           (Continued (Schedule IV)

Parcel 32  Township 2 North, Range 42 East P.M.M., Rosebud County, Montana

           Section 31: N 1/2
           Section 32: N 1/2
           Section 30: S 1/2 SE 1/4, S 1/2 SE 1/4 SW 1/4

           Township 1 North, Range 42 East, P.M.M., Rosebud County, Montana

           Section 4: SW 1/4

Parcel 33  Lot 12, Block 1, and Lots 6, 7, 10, 11, 12, 17 and 19, Block 3, of
           The Amended Plat of BIG TIMBER SUBDIVISION, Corrected Plat of
           Eastside Townsite Expansion, Rosebud County, Montana, according to
           the official plat thereof on file and of record in the office of the
           Clerk and Recorder of said County, under Document No. 29033.

           Lots 1C, 1H and 1J, Block 6, Lots 3E, 3F, 3H, 3L, Block 7, Lots 2C,
           2D, 2F, 2G, 3, 5, and 6, Block 8, and Lots 2D, 2F, 3B, 3C, 3E, 3G,
           4A, 4B, 4C, 4D, and 4E, Block 9, of The Plat of BIG TIMBER
           SUBDIVISION, Amended Plat of Eastside Townsite Expansion, Rosebud
           County, Montana, according to the official plat thereof on file and
           of record in the office of the Clerk and Recorder of said County,
           under Document No. 29032.

           Lots 1, 2, 3, 4, 5, 6, 7, and 8, of Block 8, Lots 1, 2, 3, 5, 6, 7,
           9, 10, 11, 12, 13, 14, 15, 16 and 18, of Block 9, Lots 1 and 5, of
           Block 11, Lots 1, 2, 3, 4, 6 and 11, Block 4, and Lots 1, 2, 4, 5 and
           6, Block 5, of The Amended Plat of STILLWATER SUBDIVISION, Rosebud
           County, Montana, according to the official plat thereof on file and
           of record in the office of the Clerk and Recorder of said County,
           under Document No. 29031.

           Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14, Block 1, Lots
           1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,
           20, 21, 22 and 23, Block 2, Lots 1, 2, 3, 4 and 5, Block 3, Lots 7,
           8, 10, 11, 12 and 13, Block 5, Lots 3, 7, 8, 9, 12, 13, 14 and 15,
           Block 6, Lot 20, Block 7, Lots 5 and 11, Block 8, and Lot 5, Block 11
           of The Amended Plat of SWEETGRASS SUBDIVISION, First Filing, Rosebud
           County, Montana, according to the official plat thereof on file and
           of record in the office of the Clerk and Recorder of said County,
           under Document No. 40609.

                                      -6-
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                                   EXHIBIT A

<PAGE>   25
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                           (Continued (Schedule IV)

Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13, Block 1, Lots 1, 2, 3, 4, 6,
7, 8 and 13, Block 2, Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16,
18, 19 and 20, Block 3, Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15, 16,
17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30 and 31, Block 6, and
Lots 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 20, 21, 22 and
23, Block 7, of the Amended Plat of STILLWATER SUBDIVISION, Rosebud County,
Montana, according to the official plat thereof on file and of record in the
office of the Clerk and Recorder of said County, under Document No. 40611.

Lots 4 and 18, Block 3, Lot 12 Block 4, Lots 3 and 4, Block 6, of CIMARRON
SUBDIVISION, Second Filing, Rosebud County, Montana, according to the official
plat thereof on file and of record in the office of the Clerk and Recorder of
said County, under Document No. 37504.

Lots 6, 7, 10 and 31, Block 4, of CASTLE ROCK LAKE SUBDIVISION, Second Filing,
Rosebud County, Montana, according to the official plat thereof on file and of
record in the office of the Clerk and Recorder of said County, under Document
No. 37501.

Lots 32, 33 and 34, Block 4, of CASTLE ROCK LAKE SUBDIVISION, Third Filing,
Rosebud County, Montana, according to the official plat thereof on file and of
record in the office of the Clerk and Recorder of said County, under Document
No. 37502.

Tracts 5, 8, 11, 33, 34, 35, 36, 37, 38, 39, 40, 41, 43, 44, 45, 47, 48, 49, of
SWEETGRASS ACREAGE TRACTS SUBDIVISION. This Subdivision Plat Amends a portion
of Amended Plat of Sweetgrass Subdivision, First Filing, Sweetgrass
Subdivision, Second Filing, and a portion of Amended Plat of Sweetgrass
Subdivision, Third Filing, Rosebud County Montana, according to the official
plat thereof on file and of record in the office of the Clerk and Recorder of
said County, under Document No. 44417.

Lots 12, 14, 15, 19, 20, 21, and 24, Block 3, and Lot 16, Block 4, of CIMARRON
SUBDIVISION, Second Filing, Rosebud County, Montana, according to the official
plat thereof on file and of record in the office of the Clerk and Recorder of
said County, under Document No. 37504.

                                      -7-

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                                   EXHIBIT A
<PAGE>   26
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                            (Continued (Schedule IV)

Lots 32, 33, 34, 35 and 36, Block 2, Lots 21, 22, 23, 24, 25, 26, 27, 28, 29,
30, 31, 32A, 32B, 32C, 32D, 32E, 32F, 32G, 32H, 32I, 32J, 32K, 32L, 32M, 32N,
32O, 32P, 32R, 32S, 32T, 32U, 32V, W, X, Y, Block 5, and Lots 1A, B, C, D, 1E,
F, G, H, 1I, J, K, L, 1M, 32Q, and 32Z, Block 7, and Lot 19, Block 4, of
CIMARRON SUBDIVISION, First Filing, Rosebud County, Montana, according to the
official plat thereof on file and of record in the office of the Clerk and
Recorder of said County.

Lot 1B, Block 8, and Lots 1B, 2, and 3, Block 9, of CIMARRON SUBDIVISION, Third
Filing, Rosebud County, Montana, according to the official plat thereof on file
and of record in the office of the Clerk and Recorder of said County, under
Document No. 37505.

Lots 2A, 2B and 2C, Block 11, of the Second Amended Plat of Block 11 of
STILLWATER SUBDIVISION, Rosebud County, Montana, according to the official plat
thereof on file and of record in the office of the Clerk and Recorder of said
County, under Document No. 73210.

Lots 1A, 1B, 1C, 1D, 1E and 1F, Block 1 and Lots 1A, 1B, 1C and 1D, Block 2 of
CASTLEROCK LAKE SUBDIVISION, First Filing, Rosebud County, Montana, according
to the official plat thereof on file and of record in the office of the Clerk
and Recorder of said County, under Document No. 37500.

Lot 2 in Block 43 and Lots 1 and 2 in Block 46 of the CORRECTED PLAT OF THE
AMENDED PLAT OF BLOCKS 43 AND 46 OF COLSTRIP TOWNSITE, Rosebud County, Montana,
according to the official plat thereof on file and of record in the office of
the Clerk and Recorder of said County, under Document No. 28708.

Parcel 34  Intentionally deleted

                                      -8-

12/10/1999-Other Lands      TO COLSTRIP OTHER LANDS
                                   EXHIBIT A
<PAGE>   27
                                                            Colstrip Other Lands

                                  EXHIBIT "A"

                            TO SPECIAL WARRANTY DEED

                       SCHEDULE V: INTENTIONALLY OMITTED

                       SCHEDULE VI: INTENTIONALLY OMITTED

                           (intentionally left blank)

                                      -9-
12/10/1999-Other Lands        TO COLSTRIP OTHER LANDS
                                     EXHIBIT A
<PAGE>   28
                                                            Colstrip Other Lands

                                  EXHIBIT "B"

                            TO SPECIAL WARRANTY DEED

                                 WATER RIGHTS

     1.   Grantor's interest in the water right under Statement of Claim
          No. 42KJ W094426-00(G).

     2.   Grantor's interest in the water right under Statement of Claim
          No. 42KJ W094430-00(G).

     3.   An undivided 15.00% interest in Statement of Claim
          No. 42A W173938-00(S).

     4.   An undivided 15.00% interest in Statement of Claim
          No. 42A W173939-00(G).

     5.   An undivided 15.00% interest in Statement of Claim
          No. 42A W173943-00(S).

               All water rights listed above are subject to final adjudication
               under Montana Code Annotated, Title 85, Chapter 2, Part 2.

                           (intentionally left blank)

                                      -1-
12/10/1999-Other Lands        TO COLSTRIP OTHER LANDS
                                     EXHIBIT B
<PAGE>   29
                                                            Colstrip Other Lands

                                  EXHIBIT "C"

                            TO SPECIAL WARRANTY DEED

                          RESERVATIONS AND EXCEPTIONS

I.   EASEMENTS.

     A.   All easements other than the Exhibit D easements granted or reserved
to Grantor or its predecessors in interest in the property described in Exhibit
A to the extent such easements are not used or held for use in connection with
the Unit, and to the extent such easements are used in part in connection with
the operation of the Unit and in part for purposes other than in connection with
the operation of the Unit, such easements shall be Apportioned.

     B.   Easements of the width specified below upon which to construct,
operate, maintain, repair, replace, upgrade, relocate and remove overhead or
underground electric power lines, communication systems, including without
limitation fiber optic cable, necessary appurtenances and guy wires which may
extend beyond the easement width, over, under, along and across that certain
real property located in Rosebud County, Montana and described below, together
with reasonable right of ingress and egress from the right-of-way over lands
conveyed to Grantee using existing roads and trails where practicable, the
right to use and keep all of said easement areas free and clear of any and all
permanent obstructions except property line fences and the right to trim, clear
and remove all timber, brush or vegetation from the rights-of-way which may
endanger said lines or facilities; provided, however, that the facilities of
Grantee shall be so installed and operated as not to burden or unreasonably
interfere with those of Grantor or its successors or assigns as owner or
project user of any of the thermal electric generating facilities known as
Colstrip Units #1, #2, #3 and #4 located near Colstrip, Montana (including,
without limitation, the "Common Facilities" as defined in the Common Facilities
Agreement) or the transmission line facilities described in the Colstrip
Project Transmission Agreement, all as amended from time to time (collectively,
the "Project"), the construction on the Project lands of additional generating
units, the ultimate full utilization of the land for the Project or Grantor's
fulfillment of Grantor's obligations to other owners or project users of the
Project. In the event Grantor proposes to install or operate facilities which
would require the relocation of Grantee's installed facilities, Grantor shall
have the right to require such relocation, if Grantor bears all direct and
indirect costs of such relocation. The rights and obligations of Grantor and
Grantee shall be binding upon and inure to the benefit of their respective
successors and assigns. This easement does not modify or diminish the
respective rights or obligations of Grantor or Grantee as owners and project
user of the Project.

     1.   Width-         20 feet
          Description-   That portion of Parcels 6, 7 and 9 of Exhibit A having
                         the easement centerline described and depicted on
                         Map 5.

     2.   Width-         20 feet
          Description-   That portion of Parcels 7, 8, 10A and 10C of Exhibit A
                         having the easement centerline described and depicted
                         on Map 6.

     3.   Width-         20 feet
          Description-   That portion of Parcels 8, 8A and 10C of Exhibit A
                         having the easement centerline depicted on Map 7.

                                      -1-
12/10/1999-Other Lands        TO COLSTRIP OTHER LANDS
                                     EXHIBIT C
<PAGE>   30
                                                            Colstrip Other Lands

                                   EXHIBIT C

                      TO SPECIAL WARRANTY DEED (Continued)

     4.   Width -                  20 feet
          Description -            That portion of Parcels 7, 10A, 10B, 10C of
                                   Exhibit A having the easement centerline
                                   described and depicted on Map 8.

     5.   Width -                  20 feet and 40 feet
          Description -            That portion of Parcels 9, 10A and 10B of
                                   Exhibit A having the easement centerlines
                                   described and depicted on Map 13.

     6.   Width -                  The perimeter of the easement area
                                   (approximately 200 feet in width) is
                                   described on Map 14.
          Description -            That portion of Parcels 8, 8A and 10C of
                                   Exhibit A enclosed within the perimeter of
                                   the easement area as depicted on Map 14.

     7.   Width -                  The perimeter of the easement area
                                   (approximately 300 feet in width) is
                                   described on Map 15.
          Description -            That portion of Parcel 10C of Exhibit A
                                   enclosed within the perimeter of the easement
                                   area, as depicted on Map 15. The rights and
                                   purposes of the easement as set forth in the
                                   Easement Quit Claim Deed described in
                                   Exhibit D, item 25.

     8.   Description -            All easement and other rights for
                                   distribution lines along utility easements
                                   set forth in such subdivisions and townsite
                                   plats and restrictions and regulations
                                   therefor, together and with all rights for
                                   existing transmission lines therein wherever
                                   located.

     MAPS NUMBERED 1, 2, 3, 4, 9, 10, 11 AND 12 ARE INTENTIONALLY OMITTED.

     C.   Easements of the width specified below upon which to construct,
operate, maintain, repair, replace, upgrade, relocate and remove overhead or
underground communication lines, telecommunication systems, fiber optic lines,
telephone lines, related communication facilities, necessary appurtenances and
guy wires which may extend beyond the easement width, over, under, along and
across that certain real property described below, together with the reasonable
right of ingress to and egress from the rights-of-way over lands conveyed to
Grantee using existing roads and trails where practicable, the right to use and
keep all of said easement areas free and clear of any and all permanent
obstructions except property line fences and the right to trim, clear and remove
all timber, brush or vegetation from the rights-of-way which may endanger said
lines or facilities.

                                      -2-

12/10/1999-Other Lands      TO COLSTRIP OTHER LANDS
                                   EXHIBIT C

<PAGE>   31
                                                            Colstrip Other Lands

                                  EXHIBIT "C"

                      TO SPECIAL WARRANTY DEED (Continued)

     1.   Width-              10 feet for each line (5 feet on each side of the
                              centerline of the communication lines as they
                              presently exist)
          Description-        For all existing communication lines owned by
                              Grantor pursuant to the Separation Agreement as
                              said lines, or any portion of the right-of-way of
                              the specified width of said lines, are presently
                              located and existing across the lands conveyed by
                              this Deed.

     2.   Width-              10 feet for each line
          Description-        For future communication lines, to the extent
                              necessary or appropriate for Grantor's operations,
                              at locations across the lands conveyed by this
                              Deed to be mutually determined by Grantor and
                              Grantee.

     D.   Easements other than electric lines:

       1.   As to Parcel 7 of Exhibit A, that Access Road and Water Line
            Easements described and depicted in the instrument dated June 25,
            1999, recorded in Book 92 Deeds, page 255.

       2.   As to Parcel 10A of Exhibit A, that Access and Parking Easement
            described and depicted in the Quitclaim Deed dated June 25, 1999,
            recorded in Book 92 Deeds, page 243.

II.  INTERCONNECTION/SEPARATION RIGHTS GRANTED TO AND RESERVED BY GRANTOR

     To the extent not covered by specific easement reservations in Section I,
easements and other rights, as provided by and subject to the provisions of the
Interconnection Agreement and Separation Document, both incorporated herein by
reference, such easements and other rights for the Grantor's use of the real
property conveyed by the Deed, including but not limited to the right to
construct, operate, maintain, repair, upgrade and remove facilities thereon and
therein and the right of ingress and egress over, across, under and through
said real property.

     Notice is hereby given that the facilities which are or will be owned by
Grantor pursuant to the Asset Purchase Agreement, Interconnection Agreement or
Separation Document and which are located on or in the property conveyed by the
Deed are solely the property of Grantor and shall not be considered fixtures or
in any way part of the real property.

                                      -3-
12/10/1999-Other Lands        TO COLSTRIP OTHER LANDS
                                     EXHIBIT C

<PAGE>   32

                      [MAP #5 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   33

                      [MAP #5 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   34

                      [MAP #5 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   35

                      [MAP #6 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   36

                      [MAP #6 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   37

                      [MAP #6 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   38

                  [TO COLSTRIP OTHER LANDS EXHIBIT C - MAP 7]
<PAGE>   39

                      [MAP #8 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   40

                      [MAP #8 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   41

                      [MAP #13 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   42

                      [MAP #13 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   43

                      [MAP #14 OF ROSEBUD COUNTY, MONTANA]
<PAGE>   44

                  [TO COLSTRIP OTHER LANDS EXHIBIT C - MAP 15]
<PAGE>   45
                                                            Colstrip Other Lands

                                  EXHIBIT "D"

                            TO SPECIAL WARRANTY DEED

By reference to the documents hereafter described, all the terms, descriptions,
conditions and rights therein are incorporated in this Special Warranty Deed as
if set forth in their entirety for the purpose of this exception and
reservation to the Grantor. For convenience sake only, the parcel number from
Exhibit "A" is given, even though the lands impacted may only be a portion of
the parcel. The terms of the described documents will control as to the extent
of the easements.

     1.   Right-of-Way Easement dated May 13, 1968 granted to The Montana Power
          Company, recorded July 1, 1968 in Book 68 Deeds, page 461, impacts
          Parcel 11.

     2.   Right-of-Way Easement dated March 28, 1971 granted to The Montana
          Power Company, recorded January 10, 1975 in Book 73 Deeds, page 830,
          impacts Parcels 5 and 12C.

     3.   Right-of-Way Easement dated June 25, 1974 granted to The Montana Power
          Company, recorded May 20, 1975 in Book 74 Deeds, page 41, impacts
          Parcels 2, 2a, and 6 and other lands.

     4.   Right-of-Way Easement dated April 15, 1976 granted to The Montana
          Power Company, recorded April 21, 1976 in Book 74 Deeds, page 613,
          impacts Parcels 2a, 3, 6, and 7 and other lands.

     5.   Right-of-Way Easement dated October 22, 1982 granted to The Montana
          Power Company, recorded October 25, 1982 in Book 79 Deeds, page 278,
          impacts Parcels 6 and 7.

     6.   Right-of-Way Easement dated December 29, 1955 granted to The Montana
          Power Company, recorded January 2, 1976 in Book 74 Deeds, page 466,
          impacts Parcel 11 and other lands.

     7.   Right-of-Way Easement dated December 31, 1975 granted to The Montana
          Power Company, recorded January 8, 1976 in Book 74 Deeds, page 483,
          impacts Parcel 11 and other lands.

     8.   Right-of-Way Easement dated January 5, 1976 granted to The Montana
          Power Company, recorded January 13, 1976 in Book 74 Deeds, page 483,
          impacts Parcel 11 and other lands.

     9.   Right-of-Way Easement dated July 14, 1983 granted to The Montana Power
          Company, recorded July 19, 1983 in Book 79 Deeds, page 913, impacts
          Parcel 11 and other lands.

     10.  Quitclaim Deed dated June 25, 1999 granted to The Montana Power
          Company, recorded June 25, 1999 in Book 92 Deeds, page 243, impacts
          Parcel 10A.

     11.  Access Road and Waterline Easements dated June 25, 1999 granted to The
          Montana Power Company, recorded June 25, 1999 in Book 92 Deeds, page
          255, impacts Parcel 7.

                                      -1-

12/14/1999-Other Lands      TO COLSTRIP OTHER LANDS
                                   EXHIBIT D
<PAGE>   46
                                                            Colstrip Other Lands

                                   EXHIBIT D

                      TO SPECIAL WARRANTY DEED (Continued)

12.  Right-of-Way Easement dated October 14, 1924 granted to The Montana
     Power Company, recorded November 12, 1924 in Book 9 Misc., page 166,
     records of Rosebud County, Montana, and impacts Parcel 23.

13.  Right-of-Way Easement dated June 25, 1974 granted to The Montana Power
     Company, recorded May 20, 1975 in book 74 Deeds, page 41, records of
     Rosebud County, Montana, and impacts Parcel 20 and other lands.

14.  Right-of-Way Easement dated April 15, 1976, granted to The Montana Power
     Company, recorded April 21, 1976 in Book 73 Deeds, page 613, records of
     Rosebud County, Montana, and impacts parcels 20 and 31 and other lands.

15.  Right-of-Way Easement dated February 6, 1981, granted to The Montana Power
     Company, recorded February 17, 1981 in Book 78 Deeds, page 197, records of
     Rosebud County, Montana, and impacts Parcel 23.

16.  Right-of-Way Easement dated April 25, 1985, granted to The Montana Power
     Company, recorded May 3, 1985 in Book 81 Deeds, page 565, records of
     Rosebud County, Montana, and impacts Parcel 33.

17.  Electric Right-of-Way Easement dated April 25, 1988, granted to The Montana
     Power Company, recorded May 2, 1988 in Book 83 Deeds, page 718, records of
     Rosebud County, Montana, and impacts Parcel 27.

18.  Right-of-Way Easement dated January 13, 1989, granted to The Montana
     Power Company, recorded February 18, 1989 in Book 84 Deeds, page 459,
     records of Rosebud County, Montana, and impacts Parcels 25 and 27.

19.  Right-of-Way Easement dated December 29, 1975, granted to The Montana Power
     Company, recorded January 2, 1976 in Book 74 Deeds, page 466, records of
     Rosebud County, Montana, and impacts Parcel 33 and other lands.

20.  Right-of-Way Easement dated December 31, 1975, granted to The Montana Power
     Company, recorded January 8, 1976 in Book 74 Deeds, page 483, records of
     Rosebud County, Montana, and impacts Parcel 33 and other lands.

21.  Right-of-Way Easement dated January 5, 1976, granted to The Montana Power
     Company, recorded January 13, 1976 in Book 74 Deeds, page 485, records of
     Rosebud County, Montana, and impacts Parcel 33 and other lands.

22.  Right-of-Way Easement dated July 14, 1983, granted to The Montana Power
     Company, recorded July 19, 1983 in Book 79 Deeds, page 913, records of
     Rosebud County, Montana, and impacts Parcel 33 and other lands.

                                      -2-

12/14/1999-Other Lands      TO COLSTRIP OTHER LANDS
                                   EXHIBIT D
<PAGE>   47
                                                            Colstrip Other Lands

                                   EXHIBIT D

                      TO SPECIAL WARRANTY DEED (Continued)

23.  Right-of-Way Easements dated December 10, 1999, granted to The Montana
     Power Company, recorded December 14, 1999 in Book 92 Deeds, page 698,
     impacting Parcels 6, 7, 8, 8A, 9, 10A, 10B and 10C.

24.  Right-of-Way Easement dated September 9, 1999, granted to The Montana
     Power Company, recorded December 14, 1999 in Book 92 Deeds, page 728,
     impacting Parcels 20, 23, 26 and 31.

25.  Right-of-Way Easement dated December 10, 1999, granted to Avista
     Corporation, Portland General Electric Company, Pacificorp, dba (in
     Montana) as Pacific Power & Light Company, Puget Sound Energy, Inc. and
     The Montana Power Company, recorded December 14, 1999 in Book 92 Deeds,
     page 719, impacting Parcel 10C.

                           (intentionally left blank)

                                      -3-

12/14/1999-Other Lands      TO COLSTRIP OTHER LANDS
                                   EXHIBIT D<PAGE>   1

                                                                    Exhibit 10.3

                           CONSTRUCTION AND OWNERSHIP
                                   AGREEMENT

                                      INDEX
                                      -----

TITLE                                                                       PAGE
-----                                                                       ----

WITNESSETH .................................................................  1
 1.  Definitions ...........................................................  1
 2.  Ownership of Project
 3.  Design, Engineering and Construction
       Management ..........................................................  2
 4.  Construction ..........................................................  2
 5.  Construction Cost .....................................................  4
 6.  Payment of Cost of Project ............................................  5
 7.  Accounting and Reports ................................................  5
 8.  Licenses and Permits ..................................................  6
 9.  Insurance .............................................................  6
10.  Owners' Committee .....................................................  7
11.  Damage to or Destruction of Project:
       Disposition upon Abandonment ........................................  8
12.  Liabilities ...........................................................  8
13.  Defaults ..............................................................  9
14.  Uncontrollable Forces .................................................  9
15.  Waiver of Right to Partition ..........................................  9
16.  Transfer and Assignments: Secured
       Interests ........................................................... 10
17.  Obligations Are Several ............................................... 10
18.  Successors and Assigns ................................................ 11
19.  Notices ............................................................... 11
20.  Additional Documents .................................................. 11
21.  Capital Additions and Retirements ..................................... 11
22.  Construction of Additional Generating
       Units ............................................................... 11
23.  Regulatory Approval ................................................... 14
24.  Arbitration ........................................................... 15
25.  Rule Against Perpetuities or Similar
       Or Related Rules .................................................... 15
26.  Term .................................................................. 15
<PAGE>   2

                           CONSTRUCTION AND OWNERSHIP

                                    AGREEMENT

      THIS AGREEMENT, made as of the 30th day of July, 1971, by and between THE
MONTANA POWER COMPANY, a Montana corporation, hereinafter referred to as
"Montana" and PUGET SOUND POWER & LIGHT COMPANY, a Washington corporation,
hereinafter referred to as "Puget".

                                   WITNESSETH:

      WHEREAS, the parties desire to establish the terms and conditions relating
to their ownership, as tenants in common, and the planning, financing,
acquisition, construction, operation and maintenance of the Colstrip Steam
Electric Generating Project and related facilities, as hereinafter defined;

      NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein stated and the performance thereof, all as hereinafter set
forth, the parties hereto mutually agree as follows:

1. Definitions

      (a) "Project." Project means the coal fired thermal generating plant,
consisting of two units, each of 350 megawatt nominal rating and related
facilities as described in Exhibit "A" attached hereto and the necessary real
property, property rights, including access easements and appurtenances, as
described in Exhibit "B" hereto, located near Colstrip, Montana.

      (b) "Project Agreements" means this Agreement together with the following
agreements:

            (i)   Agreement for the Operation and Maintenance of Colstrip Steam
                  Electric Generating Plant, hereinafter referred to as the
                  "Operating Agreement";

            (ii)  Coal Supply Agreement, Colstrip Steam Electric Generating
                  Project, hereinafter called the "Coal Agreement";

            (iii) Transmission Agreement;

      (c) "Owners" shall mean Montana and Puget or their successor or assigns.

      (d) "Ownership Agreement" shall mean this Agreement.
<PAGE>   3

2. Ownership of Project

      Subject to the terms and conditions hereinafter set forth, ownership of
the Project shall be as follows:

      (a) The Project other than coal shall be owned by the parties hereto as
tenants in common, with each party's respective undivided interests being in the
following percentages:

                                 Montana  -  50%
                                 Puget    -  50%

Such percentages are hereafter referred to as the "Ownership Percentages". Each
Owner shall be entitled to schedule and take an amount of generation up to but
not to exceed its Ownership Percentage of the Project's net generating
capability.

      (b) All of the respective covenants and agreements set forth and contained
in the Project Agreements are incorporated herein by this reference and shall
bind and shall be and become the respective obligations of each Owner, its
successors and assigns. It is the specific intention of this provision that,
except for the parties' mutual Waiver of Right to Partition as set forth in
subsection 15(b) of this Ownership Agreement, all of the covenants and
conditions of all of the Project Agreements shall be personal to the parties and
not covenants running with the land and shall be binding upon any party which
acquires any rights, title or interest of any Owner of the Project in, to and
under the Project Agreements, pursuant to subsections (b) through (e) of Section
16.

3. Design, Engineering and Construction Management

      Montana has entered into a Contract for Engineering, Procurement and
Construction with Bechtel Corporation, (hereinafter "Bechtel Contract") dated
January 23, 1970. Puget became a party to said contract as of July 30, 1971.
Unless otherwise agreed, Montana and Puget will retain on a continuous basis,
the Bechtel Corporation or some other construction engineer or engineering firm
of national reputation recognized for knowledge, skill and experience in the
design and construction managements of electrical generating facilities until
the parties mutually agree that the Project has been completed.

4. Construction

      (a) The Project shall be constructed at the lowest reasonable cost and in
a prudent and skillful manner in accord both with standards prevailing in the
utility industry for projects of a similar size and nature and with applicable
laws and final orders or regulations of regulatory agencies having jurisdiction
and substantially in accordance with the description set forth in the attached
Exhibit "A". The Project shall substantially conform to designs, plans,
specifications

                                      -2-
<PAGE>   4

and construction schedules which have been or will be made available to the
parties as such are available. It is intended that the contracts for purchase of
equipment and construction of the Project shall be scheduled so as to provide
for a date of initial test and operation of the Project, presently scheduled for
May 1, 1975, for the first unit and May 1, 1976, for the second unit and for the
commercial operation of the first unit of the Project not later than July 1,
1975, and for the completion and commercial operation of the second unit of the
Project not later than July 1, 1976.

      (b) Any agreements, purchase contracts and orders entered into by Montana
in its own name providing for the purchase of materials, equipment and services
for the Project are hereby dedicated to the Project and ratified by Puget.
Montana, with reasonable expedition as agent for itself and Puget, shall enter
into additional contracts for such purposes as well as contracts for the
construction of the Project; Montana will continue as agent for itself and Puget
to incur obligations and make expenditures relating to the engineering and other
services necessary for continued Project planning and engineering.

      (c) With the assistance of Puget, Montana on its own behalf as to its own
interest and as agent for Puget shall supervise and perform engineering and
other services in connection with the engineering and construction of the
Project. Montana shall consult with Puget prior to making major decisions
involving the design and other engineering, purchasing, subcontracting and
construction of the Project.

      (d) As soon as practical after the execution of this Agreement, Montana
shall submit to Puget an estimate of total cost and a schedule setting forth the
estimated costs of constructing and completing the Project separately by months.
Montana shall thereafter submit quarterly revisions of such schedule to Puget,
together with a summary report of the Construction Costs accumulated to date and
other pertinent data including, when requested, copies of construction
contracts, purchase orders and other agreements relating to construction
progress.

      (e) Montana will maintain, or cause to be maintained separately,
appropriate documentation and records of all Project expenditures and charges
made and incurred by Montana, together with all other charges, payments and any
expenses or receipts relating to Project construction. Such records of Montana
shall be made available for inspection by Puget at all reasonable times.

      (f) Puget authorizes and directs Montana to schedule deliveries of
appropriate quantities of coal and other fuel to permit testing of the first and
second units of the Project as each said unit becomes ready therefor. Montana
shall appropriately record coal and other fuel used for such purposes and
furnish a copy of such record to

                                      -3-
<PAGE>   5

Puget. Montana will schedule generation from testing to the Owners according to
their respective Ownership Percentages.

      (g) Surplus commodities, materials, equipment and the other personal
property resulting from construction of the Project shall be disposed of in
accordance with Section XVI(b) of the Operating Agreement.

5. Construction Cost

      Construction Cost of the Project shall consist of payments made and
obligations incurred by either party in connection with the construction,
installation and acquisition of the Project, other than interest during
construction, for:

      (a) All costs of preliminary investigation in the Colstrip-Nichols area,
land and land acquisition, water development, development labor and other costs,
design, engineering, contractors' fees, construction labor, materials and
supplies, operator and other personnel training, testing, preparation of
Operation and Maintenance Manuals, and all other costs properly allocable to
Construction Costs. Any net receipts relating to construction shall be credited
against Construction Costs;

      (b) All costs of insurance obtained pursuant to paragraph 9 hereof, and
applicable to the period of construction;

      (c) All costs relating to injuries and damage claims which may be payable
and paid arising out of the construction of the Project less proceeds of
insurance maintained under paragraph 9 hereof or under the Bechtel Contract;

      (d) All federal, state or local taxes imposed upon the Project during the
construction period but excluding state and federal net income taxes levied upon
income derived by the Owners during said period;

      (e) The cost of all services performed and materials furnished by Montana
and Puget directly applicable to Project construction including:

            (i)   Payroll of employees, including principal department heads and
                  officers based upon an actual time or other agreeable basis,
                  including all normal and usual related employee benefit costs
                  such as Social Security taxes, unemployment insurance expense,
                  group life insurance, group hospitalization and medical
                  insurance, pension funding expense, workmen's compensation,
                  long-term disability and other insurance, vacations, holidays,
                  sick leave, etc.;

                                      -4-
<PAGE>   6

            (ii)  Materials and supplies, including related purchasing and
                  handling costs;

            (iii) Travel expenses, including use of Owners' transportation
                  equipment;

            (iv)  Construction power costs;

            (v)   Other miscellaneous costs.

      (f) No administration and general expenses will be allocated to the
Project during construction as all applicable overhead costs will be included
with the direct costs charged to the Project under subsection (e) above.

6. Payment of Cost of Project

      (a) Montana and Puget shall share Construction Costs according to their
respective Ownership Percentages. Notwithstanding completion of the Project,
each Owner shall remain liable for any claims arising out of the construction of
the Project and shall be entitled to any refunds, repayments, settlements or
other credits with such claims and credits divided according to their respective
Ownership Percentage share.

      (b) Montana shall submit to Puget a detailed accounting of all
Construction Costs and receipts through June 30, 1972 and Puget shall submit
such an accounting to Montana. Within fifteen (15) days after receipt of
Montana's accounting, Puget shall make an initial advance to Montana equal to
one-half (1/2) of the difference between Montana's statement and Puget's
statement, subject to later verification and acceptance of said accountings.
Montana's accounting shall include such carrying costs as are mutually agreed by
the Owners.

      (c) From and after the date hereof, not later than the 20th day of each
month, Montana will notify Puget of the estimated sums required for
disbursements on account of the construction of the Project during the
succeeding calendar month.

      (d) Montana will continue to process and pay Construction Costs on the
Project in its usual manner. Montana and Puget will establish a system of
advances mutually agreeable to both parties to provide Montana with funds to
cover Puget's share of Project's cost.

7. Accounting and Reports

      (a) Montana shall at all times maintain and appropriately preserve
separate books of account containing detailed entries of all items of cost and
receipts applicable to the construction of the

                                       5
<PAGE>   7

Project. Accounting for all of such costs shall be in accordance with customary
practices in the electric utility industry and the basic records and documents
shall be made available to Puget for inspection at all reasonable times. Montana
shall furnish to Puget upon request, photocopies of all construction contracts
and purchase orders and of all accounting entries and vouchers in such detail as
may be necessary in order that each Owner may properly record its percentage of
the Construction Cost of the Project on such Owner's own books and records.

      (b) Montana shall furnish to Puget monthly Construction Costs and progress
reports and such other reports as may from time to time reasonably be requested
by Puget. At the request of Puget, Montana shall provide certificates signed by
a responsible officer of Montana or an individual designated by him for such
signature setting forth the status of Project Construction Costs and application
of funds. The certificate shall be in such form and contain such information as
is reasonably requested by Puget.

      (c) Montana's books and records relating to Project Construction Costs
shall be open to inspection by Puget or any independent auditors nominated by
them. Either party may request an independent audit of such Project costs at any
time during construction and at the completion thereof, the cost of which shall
be a Construction Cost. The records shall also be made available on written
request by any of the companies to independent auditors and representatives of
any regulatory body or taxing authority having jurisdiction for inspection,
copying, audit or other proper business requirements.

8. Licenses and Permits

      Upon the expiration of any licenses or permits required for the ownership,
construction, maintenance, or operation of the Project or in the event new such
licenses or permits shall be required, the Owners as tenants in common agree to
file timely applications for the same as may be necessary or appropriate, such
licenses or permits to be held as tenants in common in accord with each parties'
respective Ownership Percentage.

9. Insurance

      (a) The Owners shall procure at the earliest practicable time and
thereafter maintain in effect at all times hereinafter provided, to the extent
available at reasonable cost and in accord with standards prevailing in the
utility industry for projects of similar size and nature, adequate insurance
coverage of the Project with responsible insurers, with each Owner as a named
assured and with losses payable to the respective Owners for their benefit as
their respective interests may appear, to protect and insure against:

                                       6
<PAGE>   8

Workmen's Compensation and Employer's Liability, public liability for bodily
injury and property damage, all risks of physical damage to property or
equipment, including transportation and installation perils, and such other
insurance as the Owners deem necessary, with reasonable limits and subject to
appropriate exclusions and deductibles. Self insurance under the State of
Montana's Workmen's Compensation laws may be substituted for the referenced
Workmen's Compensation and Employee's Liability insurance and the Owners agree
to cooperate to establish a procedure whereby the cost of such self insurance
shall be levelized over a three to five year period.

      (b) The premium costs for insurance coverages until the completion of
construction shall be a Construction Cost of the Project, and shall thereafter
be an operating expense and shall be borne by the Owners in their respective
percentage interests.

      (c) To the extent permitted by its insurance policies, each Owner waives
any rights of subrogation against the other Owner, its agents and employees, for
losses, costs, damages or expenses arising out of the construction, operation,
maintenance, reconstruction or repair of the Project.

10. Owners' Committee

      (a) As a means of securing effective cooperation, interchange of
information and management of the property owned as tenants in common, on a
prompt and orderly basis in connection with various administrative and technical
problems which may arise from time to time under the terms and conditions of the
Project Agreements, the Owners hereby establish an Owner's Committee.

      (b) Each Owner shall notify the other Owner promptly of the designation of
its representative on the Owners' Committee and of any subsequent change in its
designation. Either of the Owners may, by written notice to the other Owner,
designate an alternate or substitute to act as its representative, to act on the
Committee in the absence of the regular member of the Committee, or to act on
specified occasions or with respect to specified matters.

      (c) The Owners' Committee shall have no authority to modify any of the
provisions of this Agreement.

      (d) The Owners' Committee shall meet at such times and places as agreed
upon by the members or when requested by either Owner upon 10 days' notice in
writing.

      (e) Each Owner shall have the right through its officers, employees or
agents to inspect the Project and Project records at any reasonable time and to
require that the Project be constructed

                                       7
<PAGE>   9

in accordance with the standards provided in paragraph 4.

11. Damage to or Destruction of Project: Disposition upon Abandonment

      (a) If all or substantially all of the project be destroyed or damaged
beyond repair or damaged to the extent that the cost of repair substantially
exceeds the proceeds of insurance available for reconstruction or repair and the
Owners do not agree to reconstruct or repair the Project, or if for any reason
the Owners determine to abandon the Project, the salvageable portion of the
Project and the plant site shall be disposed of in accordance with a procedure
agreed upon by the Owners; the proceeds from such disposition shall be
distributed to the Owners in accordance with their respective percentages; any
demolition, removal and cleanup costs shall be charged against and borne by the
Owners in accordance with their respective percentages; provided, however, that
if either of the Owners of the Project elect to reconstruct the Project, the
value of the Project shall be appraised by independent appraisers and an amount
of money equal to such value multiplied by the percentage of such Owner not so
electing shall be paid by the Owner so electing; such Owner so receiving payment
shall convey its interest in the Project to the Owner so electing to
reconstruct.

      (b) In the event that less than substantially all of the Project shall be
destroyed or damaged, and the cost of repair, restoration or reconstruction does
not substantially exceed the proceeds of applicable insurance, unless otherwise
agreed by Owners the Project shall be repaired, restored, or reconstructed by
the Owners in such manner as to restore the Project to substantially the same
general character and use as the original project.

12. Liabilities

      (a) Each of the Owners releases the other Owner, its agents and employees,
for any consequential losses or damages arising out of the construction,
operation, maintenance, reconstruction and repair of the Project, including but
not limited to loss of use and loss of profit.

      (b) Any loss, cost, liability, damage and expense to the Owners or any
Owner, other than damages to Owners resulting from loss of use and occupancy of
the Project or any part thereof, resulting from the construction, operation,
maintenance, reconstruction or repair of the Project and based upon injury to or
death of persons or damage to or loss of property including the Project and
other property of Owners or other parties, to the extent not covered by
collectible insurance, shall be charged to Project Construction Costs or Project
Operating Expenses, whichever may be appropriate.

                                       8
<PAGE>   10

13. Defaults

      (a) Each Owner hereby agrees that it will make all payments and perform
all other obligations by it to be made or performed pursuant to all of the
terms, covenants and conditions contained in the several Project Agreements and
that a default of any of the terms, covenants and conditions contained in any of
the Project Agreements shall be an act of default under this Agreement.

      (b) In the event either Owner shall dispute an asserted default by it,
then such Owner shall make payment of any sums in dispute or perform the
obligation in dispute but may do so under protest. Such protest shall be in
writing and shall specify the reasons upon which the protest is based by copies
thereof being mailed to the other Owner. Upon resolution of such dispute, then
the payments advanced or made between Owners, as in this paragraph provided,
shall be adjusted appropriately.

14. Uncontrollable Forces

      No Owner shall be considered to be in default in the performance of any of
the obligations hereunder; other than obligations of either Owner to pay costs
and expenses, if failure of performance shall be due to uncontrollable forces.
The term "uncontrollable forces" shall mean any cause beyond the control of the
Owner affected and which, by the exercise of reasonable diligence, the party is
unable to overcome, and shall include but not be limited to an act of God, fire,
flood, explosion, strikes, labor disputes, labor or material shortages,
sabotage, an act of the public enemy, civil or military authority, including
court orders, injunctions, and orders of government agencies with proper
jurisdiction prohibiting acts necessary to performance hereunder or permitting
any such act only subject to unreasonable conditions, insurrection or riot, an
act of the elements, failure of equipment, or inability to obtain or ship
materials or equipment because of the effect of similar causes on suppliers or
carriers. Nothing contained herein shall be construed so as to require an Owner
to settle any strike or labor dispute in which it may be involved. Any party
rendered unable to fulfill any obligation by reason of uncontrollable forces
shall exercise due diligence to remove such inability with all reasonable
dispatch.

15. Waiver of Right to Partition

      (a) The Owners and each of them shall accept title to the Project, as
tenants in common, and agree that their interests therein shall be held in such
tenancy in common.

      (b) So long as the Project or any part thereof as originally constructed,
reconstructed or added to is used or useful for the generation of electric power
and energy, or to the end of the period

                                      -9-
<PAGE>   11

permitted by applicable law, whichever first occurs, the Owners waive the right
to partition whether by partition in kind or sale and division of the proceeds
thereof, and agree that they will not resort to any action at law or in equity
to partition and further waive the benefit of all laws that may now or hereafter
authorize such partition of the properties comprising the Project. It is agreed
this covenant shall be deemed to run with the land.

16. Transfer and Assignments: Secured Interests

      The undivided interest of either Owner in the Project, and all or any part
thereof, and in the Project Agreements, may be transferred and assigned as
follows but not otherwise:

      (a) To any mortgagee, trustee, or secured party, as security for bonds or
other indebtedness of such Owner, present or future; and such mortgagee, trustee
or secured party may realize upon such security in foreclosure or other suitable
proceedings, and succeed to all right, title and interests of such Owner;

      (b) To any investor-owned corporation or entity in the utility business
into which or with which the Owner making the transfer may be merged or
consolidated;

      (c) To any corporation or entity the stock or ownership of which is wholly
owned by the Owner making the transfer;

      (d) To any other person; provided that the Owner shall first offer to
transfer its interest or any part thereof to the other Owner, at the amount of,
and on terms not less advantageous than, those of a bona fide offer from a buyer
able and willing to purchase such Owner's interest. The offer shall remain open
for the period specified by the Owner but not less than six (6) months;

      (e) To any other person where the Owners consent to such transfer in
advance in writing.

      No transfer or assignment of any interest in the Project or any Project
Agreement pursuant to subparagraphs (b) through (e) above may be made unless
simultaneously the Owner's interest or part thereof in all other Project
Agreements is similarly transferred or assigned to the same person or persons,
and such person or persons have assumed in writing all the duties and
obligations of the Owner transferring or assigning under this Agreement and
under all other Project Agreements. Transfers or assignments shall not relieve
an Owner of any obligation hereunder, except to the extent agreed in writing by
all other Owners.

17. Obligations are Several

      The duties, obligations and liabilities of Montana and Puget hereunder are
intended to be several and not joint or collective and neither shall be jointly
or severally liable for the acts, ommission, or obligations of the other.
Nothing herein contained shall be

                                      -10-
<PAGE>   12

construed to create an association, joint venture, partnership, or impose a
partnership duty, obligation or liability, between Montana and Puget. Neither
party shall have a right or power to bind the other party without its express
written consent, except as expressly provided in this Agreement. This Agreement
shall be construed in accordance with the laws of the State of Montana.

18. Successors and Assigns

      Subject to the restrictions on transfer and assignment herein provided,
all of the respective covenants and obligations of each of the Owners shall be
and become the respective obligations of the successors and assigns of each such
Owner. It is the specific intention of this provision that all such covenants
and obligations shall be binding upon any party which acquires any of the right,
title or interest of either of the Owners in the Project pursuant to subsections
(b) through (e) of Section 16.

19. Notices

      Any notice, demand or request provided for in this Agreement served, given
or made in connection therewith shall be deemed properly served, given or made
if given in person or sent by registered or certified mail, postage prepaid,
addressed to the party or parties at its or their principal place or places of
business to the attention of the president or chief executive officer of Montana
or Puget. Either party may at any time, and from time to time, change its
designation of the person to whom notice shall be given by giving notice to the
other party as hereinabove provided.

20. Additional Documents

      Each Owner, upon request by the other Owner, shall make, execute and
deliver any and all documents reasonably required to implement the terms of this
Agreement.

21. Capital Additions and Retirements

      Capital improvements, betterments, replacements and additions shall be
made and accounted for as provided in Article XII of the Operating Agreement.
Capital retirements shall be made as mutually agreed by the Owners.

22. Construction of Additional Generating Units and Provisions For Additional
    Facilities

      (a) Each Owner shall have the right to install and operate on the Project
land such facilities as are reasonably required to enable it to deliver to its
own system the power to which it is entitled under the Project Agreements, and
to establish interconnections between its system and that of the other Owner;

                                       11
<PAGE>   13

provided, however, that the facilities of either Owner shall be so installed and
operated as not to burden or unreasonably interfere with those of the other
Owner or the Project, the construction on the Project land of generating units
in addition to the first two units, or the ultimate full utilization of the
land. In the event that an Owner proposes to install or operate facilities which
would require the relocation of previously installed facilities of the other
Owner, or of the Project, but would otherwise meet the requirements of the
preceding sentence, the other Owner desiring to install or operate such
facilities shall have the right to call for such relocation if it bears the cost
thereof.

      (b) Montana either individually or jointly with other parties shall have
the right to construct and operate on Project real property (subject to the
provisions of subparagraph (c) giving Puget a right to participate therein)
additional generating units and necessary appurtenances thereto; provided,
however, that no unit with a planned net capability less than 180 MW shall be so
constructed and operated without the consent of Puget and that any additional
generating units and related appurtenances shall be so installed and operated as
not to burden or unreasonably interfere with the facilities of Puget, the
Project, or the ultimate full utilization of the Project Site for electric power
generation. In the event Montana individually or jointly with any other party
decides to construct and operate an additional generating unit or units and
appurtenances which would require the relocation of previously installed
facilities of Puget or the Project, it shall have the right to call for or
accomplish such relocation, as the case may be, if it bears the cost thereof. In
connection with any such additional units Montana individually or jointly with
other parties shall have the right to use any facilities installed as part of
the Project and to modify such facilities for use in connection with the
installation or operation of such additional generating units and appurtenances;
provided, however, that such use of Project facilities shall not burden or
unreasonably interfere with the Project, that the cost of any modification shall
be borne by Montana, and that Montana shall pay to the Project Owners a
reasonable monthly facilities' charge based on the portion of the Project
facilities devoted to the use of the additional units as compared to the portion
devoted to the generating units of the Project, which charge shall take into
account such costs as capital and other carrying charges, depreciation, O & M,
taxes, insurance and return on investment.

      (c) To the extent Montana individually or jointly with any other party
decides to construct and operate additional steam electric generating units at
the Project Site, Puget shall have the right to participate in the ownership of
such units to the extent it elects, but not to exceed fifty percent (50%) of the
total ownership of each unit, under terms and conditions substantially similar
to these Project Agreements taking into account

                                       12
<PAGE>   14

intervening changes in construction, ownership and operating costs and
conditions. Such right shall be exercised with respect to each individual
additional generating unit at the time that Montana makes a firm decision to
construct said additional unit and may not be cumulated for application against
later generating units.

      (d) In the event any or all of the next 1400 MW of such additional
generation, not including generation from units agreed to be constructed under
the Project Agreements, is not constructed on the Project Site but is
constructed elsewhere in Montana by Montana using Colstrip coal, Puget shall
have the right to participate in the ownership of such plants to the extent it
elects but not to exceed fifty percent (50%) of the total ownership of each unit
under terms and conditions substantially similar to these Project Agreements
taking into account intervening changes in construction, ownership and operating
costs and conditions. Such right to participate in off-site generation shall not
extend, however to generating facilities owned in whole or in part by Montana
constructed to serve a specific industrial load, generation developed or
utilized as a by-product of an industrial process, generation undertaken jointly
with another Montana utility, or generation undertaken jointly with a public or
quasi public agency and any such generation in which Puget does not have a right
to participate shall not reduce Puget's entitlement to participate in the
aforementioned 1400 MW of additional generation; provided, however, that to the
extent Puget has a right to participate in future generation under this
subsection (d) it must exercise such right with respect to each individual
additional generating unit at the time that Montana makes a firm decision to
construct said additional unit and such right to participate may not be
cumulated for application against later generating units.

      (e) After Montana has offered to Puget the opportunity to participate in
1400 MW of additional generation under paragraphs (c) or (d) above, Puget shall
have the right to participate in the ownership of any steam electric generation
undertaken by Montana which uses Colstrip area coal to the extent it elects but
not to exceed twenty-five percent (25%) of the total ownership in any such
generation plant. Puget's right to participate shall be upon a right of first
refusal basis whereby Montana will offer such right to Puget at the time that
Montana makes a firm decision to construct an additional unit upon terms and
conditions not less favorable to Puget than would be offered to any other bona
fide proposed participant. Such right shall not extend, however, to generating
facilities owned in whole or part by Montana constructed to serve a specific
industrial load, generation developed as a by-product of an industrial process,
generation undertaken jointly with another Montana utility, generation
undertaken jointly with a public or quasi public agency or to generating
facilities owned and operated solely by Montana.

                                      -13-
<PAGE>   15

      (f) All of the rights of Puget described in paragraphs (d) and (e) above
shall be subject to the following limitations:

            (1) Such rights to participate shall terminate to the extent not
            previously exercised on June 1, 1992;

            (2) If Puget elects to participate pursuant to subsections (c), (d),
            or (e) above, it will so advise Montana in writing within ninety
            (90) days of the receipt by it of written notice from Montana that
            it has made a firm decision. Prior to sending such notice, Montana
            shall make available to Puget any relevant information it has
            concerning the proposed plant;

            (3) Such rights are not assignable by Puget to any other entity
            without the consent of Montana except to a corporation whose stock
            or other ownership is wholly owned by Puget or except to a successor
            corporation to Puget resulting from a corporate reorganization in
            which there is no substantial change in beneficial ownership;

            (4) Such rights to the extent not previously exercised, may be
            withdrawn by Montana with respect to a proposed plant upon a
            sufficient showing of unsound financial or other adverse operating
            condition of Puget which has or may have a significant material
            bearing upon Puget's ability to perform its obligations and
            discharge its liabilities under agreements reasonably necessary to
            construct, own and operate such additional generating units;

            (5) Montana, unless otherwise mutually agreed, shall be the Operator
            of any steam electric generating plants constructed under the terms
            of this Section 22; and

            (6) Nothing contained in this Section 22 shall be construed to
            constitute a dedication of coal reserves owned by Western Energy
            Company, a subsidiary of Montana, nor an agreement to dedicate such
            reserves.

      (g)   (1) "Colstrip Area Coal" or "Colstrip Coal" as used in this Section
            22 means those coal reserves now or hereafter owned or controlled by
            Western Energy Company, a Montana corporation, within the sections
            shown on Exhibit "C" attached;

            (2) "Project Site" as used herein shall include the real property,
            property rights, easements and appurtenances described in Exhibit B.

23. Regulatory Approval

      It is understood that transfers of property under this Agree-

                                      -14-
<PAGE>   16

ment to another party hereto may be subject to the jurisdiction of state or
federal regulatory agencies and this Agreement shall not be effective as to such
transfers until approved by all regulatory authorities having jurisdiction.

24. Arbitration

      Any controversies arising out of or relating to any of the Project
Agreements other than the "Coal Agreement" including any failure of the Owners
to agree with respect to any matter requiring Owners' agreements hereunder,
which cannot be resolved through negotiations between the parties hereto within
thirty (30) days after inception of the matter in dispute, shall be submitted to
an Arbitrator, competent and experienced in electric utility industry accounting
and operations. If the parties cannot mutually agree upon such Arbitrator, then
upon petition of either party, such Arbitrator shall be appointed by the senior
United States District Judge for the District of Montana. The arbitration shall
be conducted under the rules of the American Arbitration Association. The
Arbitrator shall render his decision in writing not later than thirty (30) days
after the matter has been submitted to him, and such decision shall be
conclusive and binding upon the parties. The costs incurred by any arbitration
proceedings shall be borne equally by the Owners.

25. Rule Against Perpetuities Or Similar Or Related Rules

      If the duration of any term or condition of the Project Agreements shall
be subject to the rule against perpetuities or a similar or related rule then
the effectiveness of such term or condition shall not extend beyond (i) the
maximum period of time permitted under such rule, or (ii) the specific
applicable period of time expressed in this Agreement, whichever is shorter. For
purposes of applying the rule against perpetuities or a similar or related rule
the measuring lives in being shall be those of the officers of Montana listed by
name on page 104, Schedule of Officers, of the annual report, FPC Form 1, filed
by Montana with the Federal Power Commission for the year ended on December 31,
1971, and the officers of Puget listed by name on page 104, Schedule of
Officers, of the annual report, FPC Form 1, filed by Puget with the Federal
Power Commission for the year ended on December 31, 1971, together with all
those officers' children that are living on the date of execution of the Project
Agreements. As used in this paragraph the word "children" shall have its primary
and generally accepted meaning of descendants of the first degree.

26. Term

      This Agreement shall continue for so long as the Project or any part
thereof as originally constructed, reconstructed or added to is used or useful
for the generation of electric power and energy, or to the end of the period
permitted by applicable laws, whichever first occurs.

                                       15
<PAGE>   17

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
several counterparts.

                                     PUGET SOUND POWER & LIGHT COMPANY

ATTEST:                              By /s/ Ralph M. Davis
                                     -------------------------------------------
                                                                       President
/s/ W. E. Watson
-------------------------------
                      Secretary

                                     THE MONTANA POWER COMPANY

                                     By  /s/ Geo. W. O'Connor
                                     -------------------------------------------
                                                                       President

ATTEST:

/s/ John C. Hauck
-------------------------------
                      Secretary

STATE OF WASHINGTON     )
                        )       ss
COUNTY OF KING          )

      On this 1st day of September, 197 , before me, the undersigned, a Notary
Public in and for the State of Washington, personally appeared Ralph M. Davis,
known to me to be President of PUGET SOUND POWER & LIGHT COMPANY and
acknowledged to me that he executed the within instrument on behalf of that
corporation.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.

                                       /s/ G. C. Johnson
                                       -----------------------------------------
                                       Notary Public for the State of Washington
                                       Residing at Bellevue
                                       My Commission expires: May 3, 1973

                                      -16-
<PAGE>   18

STATE OF MONTANA        )
                        )       ss
COUNTY OF SILVER BOW    )

      On this 11th day of September, 197 , before me, the undersigned, a Notary
Public in and for the State of Montana, personally appeared Geo. W. O'Connor,
known to me to be the President of THE MONTANA POWER COMPANY and acknowledged to
me that he executed the within instrument on behalf of that corporation.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.

                                       /s/ William J. Carl
                                       -----------------------------------------
                                       Notary Public for the State of Montana
                                       Residing at Butte, Montana
                                       My Commission expires: July 17, 1974

                                      -17-
<PAGE>   19

                                            EXHIBIT A
                                            Construction and Ownership Agreement
                                            Colstrip Units #1 and #2

                             DESCRIPTION OF PROJECT

      The Project, located in Rosebud County, Montana, a coal-fired electric
power plant, will consist of two 350 MW nominally rated units, each with a
turbine-generator, coal-fired steam generator, condenser, pumps, motors,
feedwater heaters, cooling tower, pollution control system, and main and
auxiliary power systems; and facilities common to the two units, such as coal
receiving and coal storage systems, water treating systems, water pipeline,
intake and pumping system from the Yellowstone River, water storage facilities,
ash handling and disposal systems, waste water disposal systems, roads, utility
systems and other site development, offices, warehouses and machine shops,
laboratory and all other appurtenances and structures required for the efficient
and reliable operation of a modern steam-electric power plant up to and
including the high voltage terminals of the main power transformers. The Project
shall include trucks, automobiles, mobile equipment, machine shop equipment,
laboratory equipment, spare parts and other miscellaneous personal property
required for the efficient and reliable operation of a modern steam-electric
power plant. The Project shall also include the Project lands described in
Exhibit B, together with appurtenances, but excluding The Montana Power Company
substation site shown thereon. The easements or other real property rights for
the pipeline, intake and pumping station from the Yellowstone River shall be
part of the Project and shall be described in a supplement to Exhibit B at the
time acquired. Any necessary related facilities located off the Project lands
described in Exhibit B, together with related real property rights, to the
extent mutually agreed upon shall be a part of the Project and shall be
described in a supplement to Exhibit B at the time acquired.
<PAGE>   20

                                   EXHIBIT "B"

                                COLSTRIP PROJECT

                                  [MAP OMITTED]

                                     Map of
                                  Project Lands
<PAGE>   21

                                            EXHIBIT B
                                            Construction and Ownership Agreement
                                            Colstrip Units #1 and #2

                          DESCRIPTION OF PROJECT LANDS

      The Project lands shall be supplemented from time to time to encompass
additional acquisition of land, rights-of-way, easements and other real property
rights as may be required for project purposes.

      The Project lands include those lands described below in Description #1
"Outside Boundary" but excludes the following:

          Description #2 - Railroad rights-of-way
          Description #3 - Road rights-of-way
          Description #4 - The Montana Power Company Switchyard Property

1.    OUTSIDE BOUNDARY DESCRIPTIONS

      LAND IN SECTIONS 2 and 3, T1N, R41E, PMM, ROSEBUD COUNTY, MONTANA, and in
      SECTIONS 26, 27, 34 and 35, T2N, R41E, PMM, ROSEBUD COUNTY, MONTANA

Beginning at the Northwest corner of Section 27, T2N, R41E, PMM; thence
S89(degree)24'32"E along the north line of said Section 27 a distance of 2636.31
feet to the north quarter corner of said Section; thence S89(degree)10'10"E
along the north line of said Section a distance of 2631.24 feet to the northeast
corner of said Section; thence S00(degree)05'28"W along the common line between
Sections 26 and 27 a distance of 2655.52 feet to the common quarter corner
between said Sections; thence S00(degree)14'02"W along the common line between
said Sections a distance of 1970.64 feet; thence N89(degree)44'38"E a distance
of 1323.71 feet; thence S00(degree)12'02"W a distance of 655.24 feet to the
common line between Sections 26 and 35; thence S00(degree)50'19"E a distance of
1320.62 feet; thence N89(degree)57'50"E a distance of 666.37 feet; thence
S01(degree)01'24"E a distance of 662.04 feet; thence S89(degree)53'29"E a
distance of 668.53 feet to the north-south mid-section line of Section 35;
thence S01(degree)12'28"E along said north-south mid-section line a distance of
663.77 feet to the center of said Section; thence S89(degree)44'48"E along the
east-west mid-section line of said section a distance of 1274.91 feet; thence
S02(degree)22'02"E a distance of 2365.63 feet to the common line between Section
35, T2N, R41E, and Section 2, T1N, R41E; thence N89(degree)44'06"E along said
common line a distance of 1322.53 feet to the northeast corner of said Section
2; thence S00(degree)13'42"E along the east line of said Section 2 a distance of
1441.13 feet; thence S89(degree)38'49"W a distance of 1982.70 feet; thence
N00(degree)16'18"W a distance of 1444.18 feet to the common line between Section
2 and Section 35; thence S89(degree)44'06"W along said common line a distance of
400.51 feet; thence N05(degree)36'54"W a distance of 1581.65 feet; thence
N65(degree)04'46"W a distance of 1493.70 feet; thence S41(degree)52'20"W a
distance of 2126.31 feet to the common line between Section 34 and Section 35;
thence S02(degree)06'11"E a distance of 632.34 feet to the common corner of
Sections 34, 35, 2 and 3; thence S89(degree)43'02"W along the common line
between
<PAGE>   22
                                                                             -2-

Sections 34 and 3 a distance of 776.23 feet; thence S01(degree)31'17"W a
distance of 2782.94 feet to the east-west mid-section line of Section 3; thence
S89(degree)57'01"W along said east-west mid-section line a distance of 979.42
feet; thence N01(degree)06'09"E a distance of 2778.40 feet to the common line
between Sections 3 and 34; thence S89(degree)43'02"W along said common line a
distance of 871.66 feet to the common quarter corner between Sections 3 and 34;
thence N01(degree)10'21"W along the north-south mid-section line of Section 34 a
distance of 5070.94 feet to the common quarter corner between Sections 34 and
27; thence N86(degree)43'40"W along the common line between Sections 34 and 27 a
distance of 2653.92 feet to the south-west corner of Section 27; thence
N00(degree)24'07"E along the west line of Section 27 a distance of 2582.55 feet
to the west quarter corner of said Section; thence N00(degree)28'26"E along the
west line of Section 27 a distance of 2582.87 feet to the point of beginning,
containing 1310.55 acres.

      LAND IN SECTION 26, T2N, R41E, PMM, ROSEBUD COUNTY, MONTANA

Beginning at the south quarter of Section 26, T2N, R41E, PMM; thence
N00(degree)10'05"E along the north-south mid-section line of Section 26 a
distance of 653.62 feet; thence S89(degree)44'30"W a distance of 661.87 feet;
thence N00(degree)11'04"E a distance of 1963.29 feet to the east-west
mid-section line of said Section; thence N89(degree)57'08"E along said east-west
mid-section line a distance of 1986.53 feet; thence S00(degree)14'49"W a
distance of 2618.32 feet to the south line of said Section; thence
N89(degree)52'55"W along said south line a distance of 1321.62 feet to the point
of beginning, containing 109.29 acres.

2.    DESCRIPTION FOR RAILROAD RIGHTS-OF-WAY

      THROUGH THE EAST HALF OF SECTION 34 and THE WEST HALF OF SECTION 35, T2N,
      R41E, PMM, ROSEBUD COUNTY, MONTANA

Beginning at a point on the north-south mid-section line of Section 34, T2N,
R41E, PMM, which is located S01(degree)10'21"E a distance of 1863.96 feet from
the north quarter corner of said Section, which point is the center line of the
railroad right-of-way across said Section, said right-of-way extending northerly
50 feet and southerly 100 feet from said center line when measured at right
angles thereto; thence along said center line along a curve to the left with a
radius of 1209 feet a distance of 42.06 feet; thence N68(degree)49'37"E a
distance of 956.47 feet; thence along a curve to the right with a radius of
1432.69 feet a distance of 911.72 feet; thence S74(degree)42'43"E a distance of
819.74 feet to a point of intersection with the common line between Sections 34
and 35, which point is the center line of the railroad right-of-way across said
Section 35, said right-of-way extending northerly 150 feet and southerly 150
feet from said center line when measured at right angles thereto; thence
S74(degree)42'43"E a distance of 2783.71 feet to a point on the north-south
mid-section line of said Section 35 which point is located N01(degree)12'28"W a
distance of 263.19 feet from the
<PAGE>   23
                                                                             -3-

center of said Section 35. The area within this railroad right-of-way as shown
contains 28.597 acres.

      THROUGH THE WEST HALF, SOUTHEAST CORNER OF SECTION 35, T2N, R41E, PMM,
      ROSEBUD COUNTY, MONTANA

Beginning at a point on the east-west mid-section line of Section 35, T2N, R41E,
PMM, which is located S89(degree)44'48"E a distance of 908.29 feet from the
center of said Section, which point is the center line of the railroad
right-of-way across said W1/2SE1/4 of said Section, said right-of-way extending
150 feet northeasterly and 150 southwesterly from said center line when measured
at right angles thereto; thence along a curve to the right with a radius of
955.37 feet a distance of 513.32 feet to a point on the east line of the
W1/2SE1/4 of said Section which point is located S02(degree)22'02"E a distance
of 334.41 feet from the Northeast corner of the W1/2SE1/4 of said Section 35.
The area within this railroad right-of-way as shown contains 3.962 acres.

      THROUGH SECTION 27, T2N, R41E, PMM, ROSEBUD COUNTY, MONTANA

Beginning at a point on the west line of Section 27, T2N, R41E, PMM, which is
located N00(degree)24'07"E a distance of 1491.25 feet from the southwest corner
of said Section, which point is the center line of the railroad right-of-way
across said Section, said right-of-way extending 150 feet easterly and 100 feet
westerly from said center line when measured at right angles thereto; thence
along said center line S23(degree)52'57"E a distance of 1672.83 feet to a point
on the south line of said Section, which point is located S86(degree)43'40"E a
distance of 689.25 feet from the southwest corner of said Section. The area
within the railroad right-of-way as shown contains 9.998 acres.

      THROUGH SECTION 2, T1N, R41E, PMM, ROSEBUD COUNTY, MONTANA

Beginning at a point on the north line of Section 2, T1N, R41E, PMM, which is
located S89(degree)44'06"W a distance of 561.71 feet from the northeast corner
of said Section, said right-of-way extending 150 feet easterly and 150 westerly
from said center line when measured at right angles thereto; thence along said
center line S22(degree)10'32"E a distance of 650 feet; thence along said center
line on a curve to the left with a radius of 1146.28 feet a distance of 551.08
feet to an intersection with the east line of said Section which point is
located S00(degree)13'42"E a distance of 1046.48 feet from the northeast corner
of said Section. The area within the railroad right-of-way as shown contains
8.273 acres.

The total area of all the railroad rights-of-way as shown contains 50.830 acres.
<PAGE>   24
                                                                             -4-

3.    DESCRIPTION FOR THE ROAD RIGHTS-OF-WAY

      THROUGH THE EAST HALF OF SECTION 34, T2N, R41E, PMM, ROSEBUD COUNTY,
      MONTANA and THE WEST HALF OF SECTION 35, T2N, R41E, PMM, ROSEBUD COUNTY,
      MONTANA

Beginning at a point on the north-south mid-section line of Section 34, T2N,
R41E, PMM, Rosebud County, Montana, which is located S01(degree)18'21"E a
distance of 1586.01 feet from the north quarter corner of said Section; thence
along said road center line N79(degree)46'25"E a distance of 626.71 feet,
N80(degree)55'05"E a distance of 477.77 feet, along a curve to the right with a
radius of 2129.99 feet a distance of 38.99 feet to an intersection with the
northerly right-of-way line of the railroad, continuing along said curve to the
right a distance of 893.47 feet, S73(degree)59'57"E a distance of 700.01 feet,
S75(degree)04'07"E a distance of 400.02 feet, S74(degree)18'36"E a distance of
800.00 feet, S73(degree)55'10"E a distance of 1100.03 feet, S74(degree)30'52"E a
distance of 425.57 feet to a point on the north-south mid-section line of
Section 35, T2N, R41E, PMM, which point is located N01(degree)12'28"W a distance
of 234.14 feet from the center of said Section 35. The area within the 100-foot
right-of-way, exclusive of that within the railroad right-of-way, contains 3.685
acres.

      THROUGH THE WEST HALF, SOUTHEAST QUARTER OF SECTION 35, T2N, R41E, PMM,
      ROSEBUD COUNTY, MONTANA

Beginning at a point on the east-west mid-section line of Section 35, T2N, R41E,
PMM, Rosebud County, Montana which is located N89(degree)44'48"W a distance of
221.34 feet from the northeast corner of the W1/2SE1/4 of said Section; thence
S75(degree)58'46"E a distance of 191.90 feet to an intersection with the
northerly right-of-way line of the railroad; thence S75(degree)58'46"E a
distance of 38.57 feet to a point on the east line of the W1/2SE1/4 of said
Section, which point is located S02(degree)22'02"E a distance of 54.91 feet from
the north-east corner of the W1/2SE1/4 of said Section. The area within the
100-foot right-of-way, exclusive of that within the railroad right-of-way,
contains 0.081 acres.

The total area of all the road rights-of-way, exclusive of that within the
railroad rights-of-way, contains 3.766 acres.

4.    DESCRIPTION FOR THE MONTANA POWER COMPANY SWITCHYARD PROPERTY

      LAND IN THE SOUTHEAST QUARTER OF SECTION 27, T2N, R41E, PMM, ROSEBUD
      COUNTY, MONTANA

Beginning at the south quarter corner of Section 27, T2N, R41E, PMM, thence
S89(degree)18'52"E along the south line of said Section a distance of 172.26
feet;
<PAGE>   25
                                                                             -5-

thence N00(degree)14'02"E a distance of 45 feet to the point of beginning;
thence S89(degree)45'58"E a distance of 2,000 feet; thence N00(degree)14'02"E a
distance of 1,500 feet; thence N89(degree)45'58"W a distance of 2,000 feet;
thence S00(degree)14'02"W a distance of 1,500 feet to the point of beginning,
containing 68.87 acres.
<PAGE>   26

                                   EXHIBIT "C"

                      CONSTRUCTION and OWNERSHIP AGREEMENT
                           COLSTRIP UNITS Nos. 1 and 2

                                  [MAP OMITTED]
<PAGE>   27

                                                        EXHIBIT "C" Page 2
                                                        Construction & Ownership
                                                        Colstrip Units #1 & #2

                   Sections Included Within Exhibit "C" Border

T2N, R38E       Sections 12, 13, 23, 24, 25

T2N, R39E       Sections 19, 28, 29, 30, 31, 32, 33, 34, 35, 36

T1N, R39E       Sections 1, 2, 3, 5

T2N, R40E       Sections 20, 28, 29, 31, 32, 33

T1N, R40E       Sections 1, 2, 3, 4, 5, 6, 9, 10, 11, 12, 13, 14, 15, 1

T2N, R41E       Sections 13, 15, 23, 24, 25, 26, 27, 29, 31, 32, 33, 34, 35

T1N, R41E       Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 12, E1/2 13, 17, 18

T2N, R42E       Sections 19, 29

T1N, R42E       Sections 7, 17, 18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]