Document:

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                                                                   EXHIBIT 10.71

                                                                  EXECUTION COPY

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                              AMENDED AND RESTATED

                             PARTICIPATION AGREEMENT

                                      among

                           BUZZARD POWER CORPORATION,

                                    as Lessee

                      SCRUBGRASS GENERATING COMPANY, L.P.,

                                    as Lessor

                        ENVIRONMENTAL POWER CORPORATION,

                             BANKERS TRUST COMPANY,

                                 as Bond Trustee

                             BANKERS TRUST COMPANY,

                              as Disbursement Agent

                                CREDIT LYONNAIS,

                       acting through its New York Branch,

                   as Agent for the LOC Issuers and the Banks

                             Dated December 22, 1995

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                                TABLE OF CONTENTS

                                    ARTICLE I

                       DEFINITIONS; RULES OF CONSTRUCTION;

                        ORIGINAL PARTICIPATION AGREEMENT

SECTION 1.1.      Definitions; Rules of Construction........................  2

SECTION 1.2.      Original Participation Agreement..........................  3

                                   ARTICLE II

                    AGREEMENT TO PARTICIPATE; EFFECTIVE DATE

SECTION 2.1.      Agreement to Participate..................................  3

SECTION 2.2.      Time and Place of Closing.................................  4

                                   ARTICLE III

                              CONDITIONS OF CLOSING

SECTION 3.1.      Closing Conditions........................................  4

                                   ARTICLE IV

                              INTENTIONALLY OMITTED

                                    ARTICLE V

                              INTENTIONALLY OMITTED

x                                  ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

SECTION 6.1.      Representations and Warranties of Lessor..................  8

SECTION 6.2.      Representations and Warranties of Lessee..................  8

SECTION 6.3.      Representations and Warranties of EPC..................... 13
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                                                                            PAGE

SECTION 6.4.      Representations and Warranties of Bond Trustee............ 16

SECTION 6.5.      Representations and Warranties of Disbursement Agent...... 17

                                   ARTICLE VII

                               COVENANTS OF LESSOR

SECTION 7.1.      Defend Title.............................................. 18

SECTION 7.2.      Lessor QF Casualty........................................ 18

                                  ARTICLE VIII

                               COVENANTS OF LESSEE

SECTION 8.1.      Reporting Requirements.................................... 18

SECTION 8.2.      Certificate; Other Information............................ 19

SECTION 8.3.      Corporate Existence....................................... 20

SECTION 8.4.      Notices................................................... 20

SECTION 8.5.      Further Assurances, etc................................... 21

SECTION 8.6.      Inspection of Property.................................... 22

SECTION 8.7.      Conduct of Business....................................... 22

SECTION 8.8.      Limitation on Debt........................................ 22

SECTION 8.9.      Limitations on Liens...................................... 22

SECTION 8.10.     Prohibition of Fundamental Changes........................ 23

SECTION 8.11.     Prohibition on Disposition of Assets...................... 23

SECTION 8.12.     Transactions with Affiliates and Others................... 23

SECTION 8.13.     Defend Title.............................................. 23

SECTION 8.14.     Plans..................................................... 23

SECTION 8.15.     No Amendments or Assignments; Compliance.................. 23

SECTION 8.16.     Payment of Taxes and Claims............................... 24

SECTION 8.17.     Books and Records......................................... 24

SECTION 8.18.     Maintenance of Adequate Fuel Supply....................... 24

SECTION 8.19.     Additional Contracts...................................... 24

SECTION 8.20.     Guarantees................................................ 24

SECTION 8.21.     Abandonment............................................... 25

SECTION 8.22.     Investments............................................... 25

SECTION 8.23.     Change of Name; Office.................................... 25

SECTION 8.24.     Restricted Payments....................................... 25

SECTION 8.25.     Licenses and Governmental Approvals; Maintenance

                  of Properties............................................. 25

                                       ii
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                                                                            PAGE

SECTION 8.26.     No Subsidiaries........................................... 25

SECTION 8.27.     ERISA Plan................................................ 25

SECTION 8.28.     Environmental Matters..................................... 26

SECTION 8.29.     No Contracts with Utilities............................... 26

SECTION 8.30.     Compliance with Transaction Documents..................... 26

SECTION 8.31.     Compliance with Laws...................................... 27

SECTION 8.32.     Operations and Maintenance Agreement and Management

                  Services Agreement........................................ 27

SECTION 8.33.     Qualifying Facility....................................... 27

SECTION 8.34.     Covenants of the Lessee................................... 27

SECTION 8.35.     Lessee Consent to Transaction Documents................... 27

                                   ARTICLE IX

                                COVENANTS OF EPC

SECTION 9.1.      Reporting Requirements; Audits............................ 28

SECTION 9.2.      Corporate Existence....................................... 28

SECTION 9.3.      Notices................................................... 29

SECTION 9.4.      Further Assurances, etc................................... 29

SECTION 9.5.      No Amendments or Assignments; Compliance.................. 29

SECTION 9.6.      Separate Operation of Lessee.............................. 30

                                    ARTICLE X

                                    INDEMNITY

SECTION 10.1.     Indemnity................................................. 31

SECTION 10.2.     General Tax Indemnification............................... 34

SECTION 10.3.     Manner of Indemnification................................. 41

                                   ARTICLE XI

                           LEASE TERMINATION COVENANTS

SECTION 11.1.     Lessee Agreement to Lease Termination..................... 41

SECTION 11.2.     Lease Termination Covenants............................... 42

                                      iii
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                               TABLE OF CONTENTS

                                                                            PAGE

                                   ARTICLE XII

                                   ASSIGNMENT

SECTION 12.1.     Benefit of Agreement, Etc................................. 43

SECTION 12.2.     Transfer of Interests of Lessor........................... 43

                                  ARTICLE XIII

                              INTENTIONALLY OMITTED

                                   ARTICLE XIV

                             LIMITATION ON RECOURSE

                                   ARTICLE XV

                                  MISCELLANEOUS

SECTION 15.1.     Notices................................................... 44

SECTION 15.2.     Governing Law............................................. 44

SECTION 15.3.     Headings.................................................. 44

SECTION 15.4.     Counterparts.............................................. 44

SECTION 15.5.     Survival of Agreements.................................... 44

SECTION 15.6.     Confidentiality........................................... 45

SECTION 15.7.     Severability.............................................. 45

SECTION 15.8.     Transaction Costs......................................... 45

SECTION 15.9.     Lessor Obligations Not Limited by Amended and

                  Restated Lease............................................ 45

SECTION 15.10.    Performance of Obligations to Bank Parties................ 46

SECTION 15.11.    Intentionally Omitted..................................... 46

SECTION 15.12.    Financial Statements...................................... 46

Schedule I        Transaction Documents in Effect on Effective Date

                                       iv
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                               TABLE OF CONTENTS

                                                                            PAGE

Schedule II       INTENTIONALLY OMITTED

Schedule III      Consents, Permits to be Obtained after Effective Date

Schedule IV       Notice Provisions

Schedule V        Lessee Disclosure Schedule

Schedule VI       EPC Disclosure Schedule

EXHIBIT A         Amended and Restated Lease

EXHIBIT B         INTENTIONALLY OMITTED

EXHIBIT C         Tax Indemnity Agreement

EXHIBIT D         Amended and Restated Lessee Working Capital Loan Agreement

Appendix I        Definitions

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                  AMENDED AND RESTATED PARTICIPATION AGREEMENT

         This AMENDED AND RESTATED PARTICIPATION AGREEMENT (hereinafter referred

to as the "PARTICIPATION AGREEMENT" or "THIS AGREEMENT"), dated December 22,

1995, is entered into by and among:

                  (a) Buzzard Power Corporation, a Delaware corporation

         ("LESSEE"),

                  (b) Scrubgrass Generating Company, L.P., a Delaware limited

         partnership ("LESSOR"),

                  (c) Environmental Power Corporation, a Delaware corporation

         ("EPC"),

                  (d) Bankers Trust Company ("BOND TRUSTEE"), not in its

         individual capacity but solely as trustee under the Indenture,

                  (e) Bankers Trust Company ("DISBURSEMENT AGENT," in its

         capacity as disbursement agent and not as representative of any entity

         or person), and

                  (f) Credit Lyonnais, acting through its New York Branch

         ("CREDIT LYONNAIS"), as agent for the Bond LOC Issuer, the Contract LOC

         Issuer and the Banks listed on Schedule I attached to the Amended and

         Restated Reimbursement Agreement (as defined in Appendix I hereto)

         (collectively, the "BANKS"), ("AGENT").

         WHEREAS, Lessee, Lessor, EPC, Bond Trustee, Disbursement Agent,

National Westminster Bank Plc, acting through its New York Branch ("NatWest"),

as issuer of certain letters of credit under the Original Reimbursement

Agreement (as defined below) (NatWest in such capacity, the "ORIGINAL LOC

ISSUER") and NatWest as agent for the Original LOC Issuer and the Banks listed

on Schedule I to the Original Reimbursement Agreement (as defined below) (such

Banks, the "ORIGINAL BANKS") (NatWest in such capacity, the "ORIGINAL AGENT")

are parties to a Participation Agreement dated as of December 15, 1990, as

amended by Amendment Number One to Participation Agreement dated as of July 15,

1991, Amendment Number Two to Participation Agreement dated as of December 19,

1991, Amendment Number Three to Participation Agreement dated as of November 30,

1992, and Amendment Number Four to Participation Agreement dated as of June 17,

1994 (as so amended or otherwise modified and supplemented and as in effect

immediately before the amendment and restatement thereof contemplated hereby

becomes effective, the "ORIGINAL PARTICIPATION AGREEMENT") which sets forth

certain agreements and relationships between and among themselves relating to

the construction, financing, leasing, and operation of a coal and coal-waste

fired approximately 85 megawatt (net) small power production plant to be located

in Venango County, Pennsylvania, as more particularly described on Exhibit A to

the Lease (the "FACILITY"), and the real property on which it is located (the

"SITE");

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         WHEREAS, the Lessor, the Original Banks, the Original LOC Issuer and

the Original Agent are parties to a Reimbursement and Loan Agreement dated as of

December 15, 1990 (as amended, supplemented and otherwise modified and in effect

to but excluding the date hereof, the "ORIGINAL REIMBURSEMENT AGREEMENT"), which

provides for, among other things, the making of loans to and the issuance of

letters of credit for the account of the Lessor, all to be secured by all of the

Lessor's right, title and interest in and to, INTER ALIA, the Project and all

Project Revenues (as each such term is defined in the Original Participation

Agreement) or other proceeds therefrom;

         WHEREAS, NatWest has resigned as Agent under (and as defined in) the

Original Participation Agreement, the Original Reimbursement Agreement and

certain other documents entered into in connection therewith;

         WHEREAS, the Original Banks have appointed Credit Lyonnais, acting

through its New York Branch, as successor Agent under (and as defined in) the

Original Participation Agreement, the Original Reimbursement Agreement and

certain other documents entered into in connection therewith (and the Lessor has

acknowledged and ratified such appointment);

         WHEREAS, the Lessor, the Banks, the Original LOC Issuer and Credit

Lyonnais, as Agent, have entered into the Amended and Restated Reimbursement

Agreement (as defined in Appendix I hereto), providing for the amendment and

restatement of the Original Reimbursement Agreement;

         WHEREAS, it is a condition precedent to the effectiveness of the

Amended and Restated Reimbursement Agreement that the parties hereto enter into

this Agreement; and

         WHEREAS, the parties hereto desire to amend and restate the Original

Participation Agreement in certain respects as set forth herein;

         NOW, THEREFORE, in consideration of the premises and of the mutual

representations, warranties and agreements contained in this Agreement, the

parties to this Agreement agree as follows:

         ARTICLE I

                       DEFINITIONS; RULES OF CONSTRUCTION;

                        ORIGINAL PARTICIPATION AGREEMENT

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         SECTION 1.1. DEFINITIONS; RULES OF CONSTRUCTION. Capitalized terms used

herein shall, unless the context otherwise requires or they are otherwise

defined herein, have the meanings set forth in Appendix I hereto. References in

this Agreement to articles, sections, paragraphs and clauses are to articles,

sections, paragraphs and clauses of this Agreement unless otherwise indicated.

All references herein to any agreement shall be to such agreement as properly

amended or modified to the date of reference. All references to a particular

entity shall include a reference to such entity's successors and permitted

assigns. Except as otherwise required by the context, such definitions shall be

equally applicable to the singular or plural forms of the terms defined. The

words "herein," "hereof" and "hereunder" shall refer to this Agreement as a

whole and not to any particular section or subsection of this Agreement.

         SECTION 1.2. ORIGINAL PARTICIPATION AGREEMENT. Effective on the

Effective Date, the Original Participation Agreement shall automatically,

without any further notice, consent or other act, be amended and restated hereby

and to the extent this Participation Agreement restates the Original

Participation Agreement, the Original Participation Agreement is restated and to

the extent this Participation Agreement amends the Original Participation

Agreement, the Original Participation Agreement is amended.

         ARTICLE II

                    AGREEMENT TO PARTICIPATE; EFFECTIVE DATE

         SECTION 2.1. AGREEMENT TO PARTICIPATE. In reliance on the agreements,

representations, warranties and covenants contained in or made pursuant to this

Agreement and the other Transaction Documents, and subject to the terms and

conditions set forth in this Agreement, the parties hereto agree as follows:

                  (a) ON THE EFFECTIVE DATE. Subject to fulfillment,

         satisfaction or waiver in accordance with the terms thereof, prior to

         or on the Effective Date, of the conditions set forth in Section 3.1

         hereof and in Section 8.01 of the Amended and Restated Reimbursement

         Agreement, on the Effective Date:

                           (i)   Lessor, Agent, NatWest and the Banks, severally

                  and not jointly, will enter into the Amended and Restated

                  Reimbursement Agreement;

                           (ii)  Lessor, Agent, Lessee, Falcon, SPC, East Bay,

                  EPC and USGen will enter into the Omnibus Reaffirmation

                  Agreement;

                           (iii) Lessor and Lessee will enter into the Amended

                  and Restated Lease and the Memorandum of Amended and Restated

                  Lease;

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                           (iv)  Each of Lessor, Lessee, Disbursement Agent and

                  Agent will enter into the Amended and Restated Disbursement

                  Agreement; and

                           (v)   The Participants will enter into such other

                  agreements, certificates and other documents and take such

                  other actions as are necessary to institute the foregoing and

                  consummate the transactions contemplated thereby to be

                  consummated on the Effective Date.

         SECTION 2.2. TIME AND PLACE OF CLOSING. The closing of the events

occurring on the Effective Date shall take place on the Effective Date, at the

offices of Skadden, Arps, Slate, Meagher & Flom, 1440 New York Avenue, N.W.,

Washington, D.C., or at such other time and place as the parties to this

Agreement shall agree.

         ARTICLE III

                              CONDITIONS OF CLOSING

         SECTION 3.1. CLOSING CONDITIONS. The obligation of each of Agent, the

LOC Issuers and the Banks to enter into the Transaction Documents to which it is

a party on the Effective Date shall be subject to the fulfillment, satisfaction

or waiver, prior to or on the Effective Date and in accordance with the Amended

and Restated Reimbursement Agreement, of each condition set forth in Section

8.01 of the Amended and Restated Reimbursement Agreement. In addition, the

obligations of each Participant to enter into the Transaction Documents to which

it is a party on the Effective Date shall be subject to the fulfillment or

satisfaction of the following conditions precedent by each other Participant, or

the waiver of such conditions by each Participant receiving the benefit thereof:

                  (a) EXECUTION AND DELIVERY OF TRANSACTION DOCUMENTS; EXISTING

         TRANSACTION DOCUMENTS. Each Participant shall have full power and

         authority to execute and deliver the Transaction Documents to which it

         is a party, to enter into the transactions contemplated thereby and to

         perform its obligations thereunder. Those Transaction Documents in

         effect on the Effective Date (as set forth on Schedule I hereto) shall

         have been duly authorized, executed and delivered by the parties

         thereto, shall be in form and substance satisfactory to each

         Participant, and shall be in full force and effect and shall not have

         been amended, modified or supplemented except as may have been agreed

         to in writing by each of the parties thereto.

                  (b) NO MATERIAL CHANGE. Since the date of their most recent

         balance sheets and financial statements, no material adverse change

         shall have occurred in the status of the business, operations,

         condition (financial or otherwise) or prospects of Lessor, Lessee, the

         Bond Trustee and the Disbursement Agent.

                                       4
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                  (c) NO CHANGE IN LAW; VIOLATION OF LAW. There shall have been

         no change in any existing Law, nor any new Law proposed or promulgated,

         the impact of which in either case would materially and adversely

         affect the Project; and no Requirement of Law shall be in effect or

         shall have occurred the effect of which is to prevent any party to this

         Agreement or any other Transaction Document from fulfilling its

         obligations hereunder or thereunder. The obligations of each

         Participant to execute and deliver the Transaction Documents to which

         it is a party, to enter into the transactions contemplated thereby and

         to perform its obligations thereunder shall not violate or contravene

         any Requirement of Law.

                  (d) NO LITIGATION. No action, proceeding or investigation

         shall have been instituted or be threatened, nor shall any action

         before any Governmental Authority have been instituted or be

         threatened, nor shall any order, judgment or decree have been issued or

         proposed to be issued by any Governmental Authority, each to set aside,

         restrain, enjoin or prevent the consummation of this Agreement or the

         transactions contemplated hereby or by the other Transaction Documents

         or that would have a material adverse effect on the Project or on the

         ability of any party to this Agreement or any of the other Transaction

         Documents to perform its obligations hereunder and thereunder.

                  (e) CONSENTS AND APPROVALS. (i) All actions, consents,

         waivers, exemptions, franchises, Governmental Approvals and rights (A)

         that are both required to be taken, given or obtained, as the case may

         be, by or from any Governmental Authority, and necessary to be taken,

         given or obtained by the Effective Date or (B) that are in the opinion

         of Lessor, the Bank Parties or Lessee, or the special counsel of any

         such party, advisable in connection with the operation of the Project

         and the lease of the Facility and the Site and that are or should be

         capable of being taken, given or obtained as of the Effective Date,

         shall have been duly taken, given or obtained, as the case may be,

         shall be in full force and effect on the Effective Date, shall not be

         subject to any pending proceedings or appeals (administrative, judicial

         or otherwise) and either the time within which any appeal from any such

         proceeding may be taken or review thereof may be obtained shall have

         expired or no review thereof may be obtained or appeal therefrom taken,

         and shall be adequate to authorize the consummation of the transactions

         contemplated by this Agreement and the other Transaction Documents and

         the performance by each of the Participants of its obligations under

         this Agreement and such of the other Transaction Documents to which it

         is a party.

                  (ii) There shall not have occurred any event which would

         adversely affect the anticipated delivery or issuance of, and when

         needed, all filings, notices and registrations or other actions with

         respect to any Government Authority necessary, required or appropriate

         in connection with the execution, delivery and performance of this

         Agreement or the other Transaction Documents or any transactions

         contemplated herein or therein or in any other agreement entered into

         in connection herewith or therewith, including without limitation all

         environmental Governmental Approvals necessary or appropriate for the

         Project; and no approval of any other Person that has not been obtained

         shall be required to be obtained in connection with the Project as of

         the Effective Date, whether in connection with an

                                       5
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         agreement binding on any party to a Transaction Document or otherwise.

                  (f) REPRESENTATIONS AND WARRANTIES TRUE. Each of the

         representations and warranties made in Article VI hereof by each of the

         Participants shall be true and correct on the Effective Date as though

         made on and as of the Effective Date.

                  (g) NO DEFAULT. There shall exist no Default or Event of

         Default under any Transaction Document.

                  (h) OFFICERS' CERTIFICATES. Each of the Participants (other

         than the Agent and the LOC Issuer) shall have delivered an Officer's

         Certificate, to the effect that (i) the representations and warranties

         of such party contained in this Agreement and in any other Transaction

         Document are true and correct on and as of the Effective Date as though

         made on and as of the Effective Date, (ii) each Transaction Document to

         which it is a party entered into on the Effective Date has been duly

         authorized, executed and delivered by it and (iii) each of the

         obligations of such party to be performed by it on or prior to the

         Effective Date pursuant to the terms of this Agreement has been duly

         performed or waived by the other Participants.

                  (i) AUTHORIZATION BY PARTIES TO THIS AGREEMENT. All action

         required to be taken by or on behalf of each Participant to authorize

         the execution, delivery and performance of this Agreement and the other

         Transaction Documents to which it is a party and the consummation of

         the transactions contemplated hereby and thereby shall have been duly

         and validly taken and each Participant (other than Agent, the LOC

         Issuers and the Banks) shall have delivered certified copies of its

         charter documents and by-laws, if any, and certified resolutions

         authorizing the execution, delivery and performance of each of the

         Transaction Documents to which it is a party, and certificates of the

         incumbency and specimen signatures of the officers of such party

         signing any such Transaction Documents, and any other certificates and

         other evidence to such effect as the other parties to this Agreement

         and their counsel may reasonably request shall have been delivered.

                  (j) AUTHORIZATION BY CERTAIN OTHER PARTIES. All action

         required to be taken by or on behalf of any party to the Transaction

         Documents (other than the Participants) to authorize the execution,

         delivery and performance of the Transaction Documents to which it is a

         party and the consummation of the transactions contemplated thereby

         shall have been duly and validly taken and such certificates, opinions

         and other evidence to such effect as each Participant and the special

         counsel of each Participant may reasonably request shall have been

         delivered.

                  (k) INSURANCE. All insurance required as of the Effective Date

         by Section 10.04 of the Amended and Restated Reimbursement Agreement

         shall be in effect, as demonstrated by evidence satisfactory to Lessor

         and the Bank Parties; and there shall have been delivered to Lessor and

         the Bank Parties copies of insurance certificates required as of

                                       6
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         the Effective Date pursuant to Section 8.01(i) of the Amended and

         Restated Reimbursement Agreement.

                  (l) OPINIONS. Opinions of the firm or legal counsel set forth

         below in substantially the form and substance heretofore agreed upon by

         the parties hereto and as to such other matters as may be requested by

         Lessor, Agent, Bond Trustee, Disbursement Agent and Lessee shall have

         been delivered to Lessor, the Banks, Agent, Disbursement Agent and Bond

         Trustee:

                           (i)   Hunton & Williams, special counsel to Lessee

                  and EPC;

                           (ii)  Buchanan Ingersoll, P.C., special Pennsylvania

                  counsel to Lessor and Lessee;

                           (iii) Hunton & Williams, special counsel to Lessor;

                           (iv)  Hawkins, Delafield & Wood, special counsel to

                  Bond Trustee and Disbursement Agent;

                           (v)   Richard M. Loomis, Esq., counsel to Pine; and

                           (vi)  Richard C. Jones, Esq., counsel to Falcon and

                  SPC.

                  (m) ENGINEERING REPORTS. There shall have been delivered to

         the Bank Parties and Lessor a report of the Independent Engineer,

         satisfactory to the recipients and covering such matters as they may

         request.

                  (n) SECURITY INTEREST. Each of the Security Documents then

         required by the provisions of this Agreement, the Amended and Restated

         Reimbursement Agreement or any Requirement of Law, to have been

         executed and delivered shall have been duly filed, recorded and/or

         registered in each jurisdiction as may be required or appropriate by

         Law to establish, perfect, protect and preserve the rights, titles,

         interests, remedies, powers, privileges, Liens and security interests

         of the Bank Parties or Lessor thereunder or in respect thereof, and any

         giving of notice (including filing financing statements under the

         Uniform Commercial Code) or the taking of any other action to such end

         (whether similar or dissimilar) required by law shall have been given

         or taken, and the Bank Parties and Lessor shall have received evidence

         satisfactory to them as to any such filing, recording, registration,

         giving of notice and/or other action; no further acts shall be required

         to perfect the Lien of the Security Documents on the Collateral; and

         there shall have been delivered evidence satisfactory to the

         Participants and their special counsel to the effect that they have

         acquired the perfected security interests intended to be created

         pursuant to the Security Documents.

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                  (o) TITLE POLICIES. The policies of title insurance insuring

         the Project Mortgage shall have been endorsed as of the Effective Date

         as described in Section 8.01(f) of the Amended and Restated

         Reimbursement Agreement.

                  (p) FORMS OF DOCUMENTS; PROCEEDINGS. All agreements,

         certificates, opinions and other instruments to be delivered under this

         Agreement shall be in form and substance satisfactory, and all

         proceedings taken in connection therewith and with this Agreement shall

         be satisfactory, to the Participants and to the special counsel of each

         Participant.

         ARTICLE IV

                              INTENTIONALLY OMITTED

         ARTICLE V

                              INTENTIONALLY OMITTED

         ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

         SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF LESSOR. Lessor makes the

representations and warranties of Article IX of the Amended and Restated

Reimbursement Agreement as if they were fully set forth herein.

         SECTION 6.2. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee

represents and warrants as follows:

                  (a) Lessee hereby represents and warrants as of the Effective

         Date the following:

                           (i)   ORGANIZATION AND GOOD STANDING. Lessee is a

                  corporation duly organized, validly existing and in good

                  standing under the laws of the State of Delaware and is duly

                  qualified to do business and in good standing in each

                  jurisdiction in which the failure so to qualify would

                  adversely affect its business, properties or financial

                  condition. Lessee has all requisite corporate power and

                  authority to own, or hold under lease, and operate its

                  properties, to carry on its business as it is now conducted

                  and as contemplated by the Transaction Documents

                                       8
<PAGE>

                  and to enter into and perform its obligations under this

                  Agreement and the other Transaction Documents to which it is

                  or will be a party.and every other document delivered in

                  connection herewith or therewith to which it is or will be a

                  party. There are no agreements, written or oral, between

                  Lessee and any person relating to or affecting the capital

                  stock of Lessee, except for the Buzzard Stock Pledge

                  Agreement.

                           (ii)  DUE AUTHORIZATION; NO CONFLICTS. The execution,

                  delivery and performance by Lessee of this Agreement and the

                  other Transaction Documents and every other document delivered

                  in connection herewith or therewith to which it is or will be

                  a party have been duly and effectively authorized by all

                  necessary corporate action of Lessee. No other corporate

                  proceedings are necessary to authorize the execution and

                  delivery by Lessee of this Agreement or the other Transaction

                  Documents to which it is or will be a party or the

                  transactions contemplated herein or therein; and this

                  Agreement and each of the other Transaction Documents and

                  every other document delivered in connection herewith or

                  therewith, to which it is or will be a party is the valid and

                  binding obligation of Lessee, enforceable in accordance with

                  its terms, except as such enforceability may be limited by

                  applicable bankruptcy, insolvency or similar laws from time to

                  time in effect that affect creditors' rights generally or by

                  general principles of equity. Neither the execution and

                  delivery of this Agreement or any of the other Transaction

                  Documents to which Lessee is or will be a party nor the

                  consummation of the transactions contemplated hereby or

                  thereby nor compliance by Lessee with any of the provisions

                  hereof or thereof will (A) violate, or conflict with, or

                  result in a breach of any provisions of, or constitute a

                  default (or an event which, with notice or lapse of time or

                  both, would constitute a default) under, or result in the

                  termination of, or accelerate the performance required by, or

                  result in the creation of any Lien upon any of the properties

                  or assets of Lessee under any of the terms, conditions or

                  provisions of, the Articles of Incorporation or By-Laws of

                  Lessee in effect on the Effective Date or any note, bond,

                  mortgage, indenture, deed of trust, license, agreement or

                  other instrument or obligation to which Lessee is a party at

                  the Effective Date, or by which Lessee or any of its

                  properties or assets may be bound or affected as of the

                  Effective Date, or (B) violate any order, writ, injunction,

                  decree, arbitral award, statute, rule or regulation applicable

                  at the Effective Date to Lessee or any of its properties or

                  assets.

                           (iii) NO CONSENT REQUIRED. (A) No Governmental

                  Approval and no filing, recording or registration with any

                  Governmental Authority is now, or under existing Law in the

                  future will be, required or necessary on Lessee's behalf to

                  authorize the execution and delivery of this Agreement or the

                  other Transaction Documents to which Lessee is or will be a

                  party or (except as listed on Schedule III) the taking of any

                  future action contemplated hereby or thereby or for the

                  legality, validity, binding effect or enforceability thereof,

                  except such thereof as have been duly

                                       9
<PAGE>

                  obtained and are in full force and effect and documented to

                  the satisfaction of the other parties hereto and listed on

                  Schedule III; and (B) Lessee has no reason to believe that any

                  Governmental Approval or recording, registration or filing

                  required to be obtained by Lessee that is necessary for the

                  taking of any future action contemplated hereby or by the

                  other Transaction Documents will not be obtained or completed

                  in due course no later than the date required for the taking

                  of such action to permit the operation of the Facility as

                  contemplated by the Transaction Documents and the Effective

                  Date Projections.

                           (iv)  NO DEFAULT UNDER OTHER AGREEMENTS. Lessee is

                  not in default, and no condition exists that with notice or

                  lapse of time or both would constitute a default, under any

                  mortgage, deed of trust, indenture or other instrument or

                  agreement to which it is or will be a party or by which it or

                  any of its properties or assets may be bound, that might have

                  a material adverse effect on it or on any of the transactions

                  contemplated hereby or by the other Transaction Documents to

                  which it is or will be a party.

                           (v)   LITIGATION. (A) There is no (x) litigation,

                  proceeding, labor dispute, arbitration or government

                  investigation pending or, so far as known to Lessee,

                  threatened with respect to or otherwise relating to Lessee or

                  the properties or assets of Lessee, or, to the best of the

                  knowledge of Lessee, the Project, the transactions

                  contemplated by this Agreement or personnel employed by Lessee

                  with reference to actions taken by it in connection with the

                  Project, in such capacities, or (y) valid basis known to

                  Lessee for any litigation of the type described in clause (x)

                  above, or any other litigation, proceeding or investigation or

                  valid basis therefor known to Lessee which if adversely

                  determined could, in any one case or in the aggregate, have a

                  material adverse effect on Lessee or the Project or the

                  properties or assets of Lessee; and (B) there are no decrees,

                  injunctions or orders of any court or government department or

                  agency or arbitral awards outstanding against Lessee or the

                  properties or assets of Lessee.

                           (vi)  COMPLIANCE WITH LAW. (A) Lessee has complied in

                  all material respects with and is in all material respects in

                  compliance with all Requirements of Law; (B) Lessee has

                  received no written notice to the effect that, or otherwise

                  been advised in writing that, it is not in compliance with any

                  Requirement of Law or Governmental Approval; (C) Lessee has no

                  reason to believe that any currently existing circumstances

                  are likely to result in violations by Lessee of any such

                  Requirement of Law which could in any one case or in the

                  aggregate, have an adverse effect on the Project; and (D) to

                  the best of the knowledge of Lessee, there is not now pending

                  any proceeding, hearing or investigation with respect to the

                  adoption of amendments or modifications to any existing

                  Requirement of Law or Governmental Approval with respect to

                  such matters which, if adopted, would adversely affect Lessee

                  or the Project.

                                       10
<PAGE>

                           (vii) DISCLOSURE. The representations and warranties

                  of Lessee contained in the Transaction Documents to which it

                  is a party executed prior to the Effective Date, or in any

                  certificates and agreements furnished in connection with any

                  such Transaction Document were true and correct when made and

                  no such representation by Lessee in any such Transaction

                  Document contained any untrue statement of a material fact or

                  omitted to state a material fact necessary to make the

                  statements contained therein not misleading. The

                  representations and warranties of Lessee contained in the

                  Transaction Documents executed on the Effective Date to which

                  it is a party, or in any certificates or agreements furnished

                  in connection with any such Transaction Document, are true and

                  correct and no such representation by Lessee contains any

                  untrue statement of a material fact or omits to state a

                  material fact necessary to make the statements contained

                  therein not misleading. There is no fact peculiar to Lessee or

                  the Project and known to Lessee that materially adversely

                  affects or in the future may (so far as Lessee can now

                  reasonably foresee) materially adversely affect the business,

                  property or assets, or financial condition, of Lessee or the

                  Project that has not been set forth herein or therein.

                          (viii) TAX RETURNS. (A) Other than in respect of 1994

                  Federal and State income tax returns, Lessee has properly

                  filed or caused to be filed all Federal, state and other

                  income tax returns and reports and all other material tax

                  returns and reports that are required to have been filed and

                  has paid or caused to be paid all Taxes shown to be due or

                  payable on such returns or on any assessment received by it,

                  to the extent that such Taxes have become due and payable

                  (except to the extent being contested in good faith with due

                  diligence by appropriate proceedings and for the payment of

                  which reserves have been provided to the extent required under

                  GAAP); (B) there are no outstanding agreements or waivers

                  extending any statutory period of limitations applicable to

                  any Federal, state or other income tax return or other

                  material tax return of Lessee for any period; (C) Lessee is

                  not a party to any pending action or proceeding by any

                  Governmental Authority for the assessment of any Tax, and no

                  claim for assessment or collection of any Tax has been

                  asserted against it that has not been paid; and (D) there are

                  no tax Liens upon any property or assets of Lessee except for

                  property taxes not yet due.

                           (ix)  NO OTHER AGREEMENTS. Lessee is not a party to

                  any agreement or understanding, written or oral, that would

                  vary any of the terms and conditions of the Transaction

                  Documents, and, to the best of Lessee's knowledge, there are

                  no agreements or understandings that are relevant in any

                  material respect to the transactions contemplated by this

                  Agreement that have not been disclosed in writing to the other

                  parties hereto.

                           (x)   NO PUBLIC OFFERING. Other than in respect of a

                  potential sale of all of the assets and stock of EPC, each of

                  its Affiliates, and the Lessee in connection with

                                       11
<PAGE>

                  a private stock or asset sale in 1994, neither Lessee, nor any

                  affiliate (within the meaning of the Securities Act) of

                  Lessee, nor any Person authorized to act on behalf of Lessee

                  has, directly or indirectly, offered any security relating to

                  Lessee or the Project or solicited any offers to buy any such

                  interest or otherwise negotiated with respect thereto with any

                  Person.

                           (xi)  BROKERS' OR FINDERS' FEES. Except as disclosed

                  on Schedule V hereto, neither Lessee nor its Affiliates has

                  made any contract or had any dealings with or entered into,

                  nor will enter into, any agreement, arrangement or

                  understanding with any broker, leasing agent, finder or

                  similar Person with respect to this Agreement, any Transaction

                  Document or the transactions contemplated herein or therein

                  which will result in the obligation of Lessor, any Bank Party

                  or any other Participant to pay any finder's fee, brokerage

                  commission or similar payment in connection with the

                  transactions contemplated herein or therein.

                           (xii) COMPLIANCE WITH TRANSACTION DOCUMENTS, ETC. To

                  the best of Lessee's knowledge, except for amendments set

                  forth in the definitions of the respective documents set forth

                  in Appendix I, copies of which have been provided to Lessor

                  and Agent by Lessee or some other Person, the Transaction

                  Documents in effect on the Effective Date have not been

                  modified or amended as of the Effective Date and are in full

                  force and effect; to the best of Lessee's knowledge, there is

                  no default on the part of any party under any of such

                  documents; to the best of Lessee's knowledge no event that

                  would constitute a Default or Event of Default under the

                  Amended and Restated Reimbursement Agreement has occurred and

                  is continuing which default or event has not been cured or

                  been waived in accordance with the Amended and Restated

                  Reimbursement Agreement; as of the date hereof, Lessee has the

                  right, power, and ability to comply with all of the terms of

                  such documents to which it is a party and all conditions to

                  the continued effectiveness of such documents required to be

                  satisfied by it as of the date hereof have been satisfied.

                           (xiii) NO UTILITY OWNERSHIP OF LESSEE; NO INVESTMENT

                  COMPANY. Lessee has not performed any act or failed to perform

                  any act that would cause it to be deemed by any Governmental

                  Authority to be subject to finance, organizational or rate

                  regulation as an "electric utility", "electric corporation",

                  "electrical company", "public utility", "public utility

                  holding company", or similar entity under any Requirement of

                  Law, and no person controlled by such entity has any direct or

                  indirect ownership or equity interest in the Lessee or right

                  to acquire the same. The Lessee is not an "investment company"

                  or a company "controlled by" an "investment company" within

                  the meaning of the Investment Company Act of 1940, as amended.

                           (xiv) ERISA. Neither Lessee nor any of its ERISA

                  Affiliates maintains or contributes to (or has any obligation

                  to contribute to) any Plan or has any liability

                                       12
<PAGE>

                  under Title IV of ERISA by reason of the termination of any

                  Plan or the withdrawal from any Multiemployer Plan. Lessee

                  does not maintain any Employee Benefit Plan.

         SECTION 6.3. REPRESENTATIONS AND WARRANTIES OF EPC. EPC represents and

warrants as follows:

                  (a) ORGANIZATION AND GOOD STANDING. EPC is a corporation duly

         organized, validly existing and in good standing under the laws of the

         State of Delaware and is duly qualified to do business and in good

         standing in each jurisdiction in which the failure so to qualify would

         adversely affect its business, properties or financial condition. EPC

         has all requisite corporate power and authority to own, or hold under

         lease, and operate its properties, to carry on its business as it is

         now conducted and as contemplated by the Transaction Documents and to

         enter into and perform its obligations under this Agreement and the

         other Transaction Documents to which it is or will be a party and every

         other document delivered in connection herewith or therewith to which

         it is or will be a party. There are no agreements, written or oral,

         between EPC and any person relating to or affecting the capital stock

         of Lessee, except for the Buzzard Stock Pledge Agreement.

                  (b) DUE AUTHORIZATION; NO CONFLICTS. The execution, delivery

         and performance by EPC of this Agreement and the other Transaction

         Documents and every other document delivered in connection herewith or

         therewith to which it is or will be a party have been duly and

         effectively authorized by all necessary corporate action of EPC. No

         other corporate proceedings are necessary to authorize the execution

         and delivery by EPC of this Agreement or the other Transaction

         Documents to which it is or will be a party or the transactions

         contemplated herein or therein; and this Agreement and each of the

         other Transaction Documents and every other document delivered in

         connection herewith or therewith, to which it is or will be a party is

         the valid and binding obligation of EPC, enforceable in accordance with

         its terms, except as such enforceability may be limited by applicable

         bankruptcy, insolvency or similar laws from time to time in effect that

         affect creditors' rights generally or by general principles of equity.

         Except as disclosed on Schedule VI hereto, neither the execution and

         delivery of this Agreement or any of the other Transaction Documents to

         which EPC is or will be a party nor the consummation of the

         transactions contemplated hereby or thereby nor compliance by EPC with

         any of the provisions hereof or thereof will (A) violate, or conflict

         with, or result in a breach of any provisions of, or constitute a

         default (or an event which, with notice or lapse of time or both, would

         constitute a default) under, or result in the termination of, or

         accelerate the performance required by, or result in the creation of

         any Lien upon any of the properties or assets of EPC or the Project or

         the transactions contemplated by the Transaction Documents under any of

         the terms, conditions or provisions of, the Articles of Incorporation

         or By-Laws of EPC in effect on the Effective Date or any note, bond,

         mortgage, indenture, deed of trust, license, agreement or other

         instrument or obligation to which EPC is a party at the Effective Date,

         or by which EPC or any of its properties or assets or the Project or

         the

                                       13
<PAGE>

         transactions contemplated by the Transaction Documents may be bound or

         affected as of the Effective Date, or (B) violate any order, writ,

         injunction, decree, arbitral award, statute, rule or regulation

         applicable at the Effective Date to EPC or any of its properties or

         assets or to the Project or the transactions contemplated by the

         Transaction Documents.

                  (c) NO CONSENT REQUIRED. (A) No Governmental Approval and no

         filing, recording or registration with any Governmental Authority is

         now, or under existing Law in the future will be, required or necessary

         on EPC's behalf to authorize the execution and delivery of this

         Agreement or the other Transaction Documents to which EPC is or will be

         a party or (except as listed on Schedule III) the taking of any future

         action contemplated hereby or thereby or for the legality, validity,

         binding effect or enforceability thereof, except such thereof as have

         been duly obtained and are in full force and effect and listed on

         Schedule III; and (B) EPC has no reason to believe that any

         Governmental Approval or recording, registration or filing required to

         be obtained by EPC that is necessary for the taking of any future

         action contemplated hereby or by the other Transaction Documents will

         not be obtained or completed in due course no later than the date

         required for the taking of such action to permit the operation of the

         Facility as contemplated by the Transaction Documents and the Effective

         Date Projections.

                  (d) NO DEFAULT UNDER OTHER AGREEMENTS. Except as disclosed on

         Schedule VI hereto, EPC is not in default, and no condition exists that

         with notice or lapse of time or both would constitute a default, under

         any mortgage, deed of trust, indenture or other instrument or agreement

         to which it is a party or by which it or any of its properties or

         assets may be bound, that could have a material adverse effect on the

         Project or on any of the transactions contemplated hereby or by the

         other Transaction Documents to which it is a party; and EPC is not in

         violation of any Requirements of Law that could have a material adverse

         effect on the Project or on any of the transactions contemplated hereby

         or under any of the other Transaction Documents to which it is a party.

                  (e) LITIGATION. (A) Except as disclosed on Schedule VI to this

         Agreement, there is no (x) litigation, proceeding, labor dispute,

         arbitration or government investigation pending or, so far as known to

         EPC, threatened with respect to or otherwise relating to EPC or, to the

         best of EPC's knowledge, the Project or the transactions contemplated

         by this Agreement or the other Transaction Documents or personnel

         employed by EPC with reference to actions taken by it in connection

         with the Project, in such capacities, or (y) valid basis known to EPC

         for any litigation of the type described in clause (x) above, or any

         other litigation, proceeding or investigation or valid basis therefor

         known to EPC which if adversely determined could, in any one case or in

         the aggregate, have a material adverse effect on EPC or the Project;

         and (B) there are no decrees, injunctions or orders of any court or

         government department or agency or arbitral awards outstanding against

         EPC relating to EPC or, to the best of EPC's knowledge, the Project or

         the transactions contemplated by the Transaction Documents.

                                       14
<PAGE>

                  (f) COMPLIANCE WITH LAW. (A) EPC has complied in all material

         respects with all Requirements of Law relating to the Project or the

         transactions contemplated by the Transaction Documents, EPC has

         received no written notice to the effect that, or otherwise been

         advised in writing that, it is not in compliance with any Requirement

         of Law or Governmental Approval relating to the Project or the

         transactions contemplated by the Transaction Documents, and EPC has no

         reason to believe that any currently existing circumstances are likely

         to result in violations by EPC of any such Requirement of Law which

         could in any one case or in the aggregate, have an adverse effect on

         the obligations or performance of EPC under any Transaction Document or

         the Project; and (B) to the best of the knowledge of EPC, there is not

         now pending any proceeding, hearing or investigation with respect to

         the adoption of amendments or modifications to any existing Requirement

         of Law or Governmental Approval with respect to such matters which, if

         adopted, would adversely affect the obligations or performance of EPC

         under any Transaction Document or the Project.

                  (g) DISCLOSURE. The representations and warranties of EPC

         contained in the Transaction Documents to which it is a party executed

         prior to the Effective Date, or in any certificates or agreements

         furnished in connection with any such Transaction Document were true

         and correct when made and no such representation by EPC contained any

         untrue statement of a material fact or omitted to state a material fact

         necessary to make the statements contained therein not misleading. The

         representations and warranties of EPC contained in the Transaction

         Documents executed on the Effective Date to which it is a party, or in

         any certificates or agreements furnished in connection with any such

         Transaction Document, are true and correct and no such representation

         by EPC contains any untrue statement of a material fact or omits to

         state a material fact necessary to make the statements contained

         therein not misleading. There is no fact peculiar to EPC or the Project

         and known to EPC that materially adversely affects or in the future

         could (so far as EPC can now reasonably foresee) materially adversely

         affect the Project or the obligations or performance of EPC under the

         Transaction Documents.

                  (h) NO OTHER AGREEMENTS. EPC is not a party to any agreement

         or understanding, written or oral, that would vary any of the terms and

         conditions of the Transaction Documents, and, to the best of EPC's

         knowledge, there are no agreements or understandings that are relevant

         in any material respect to the transactions contemplated by this

         Agreement that have not been disclosed in writing to the other parties

         hereto.

                  (i) BROKERS' OR FINDERS' FEES. Except as disclosed on Schedule

         VI hereto, neither EPC nor its Affiliates has made any contract or had

         any dealings with or entered into, nor will enter into, any agreement,

         arrangement or understanding with any broker, leasing agent, finder or

         similar Person with respect to this Agreement, any Transaction Document

         or the transactions contemplated herein or therein which will result in

         the obligation of Lessor, any Bank Party or any other Participant to

         pay any finder's fee, brokerage commission or similar payment in

         connection with the transactions contemplated

                                       15
<PAGE>

         herein or therein.

                  (j) COMPLIANCE WITH TRANSACTION DOCUMENTS, ETC. To the best of

         EPC's knowledge, except for any amendments made in accordance with the

         terms of this Agreement, the Transaction Documents to which it is a

         party in effect on the Effective Date have not been modified or amended

         as of the Effective Date and are in full force and effect; to the best

         of EPC's knowledge, there is no default on the part of any party under

         any of such documents; as of the date hereof, all conditions to the

         continued effectiveness of such documents required to be satisfied by

         EPC as of the date hereof have been satisfied.

                  (k) NO UTILITY OWNERSHIP OF EPC. EPC is not and will not be,

         after giving effect to the transaction contemplated by this Agreement,

         deemed by any Governmental Authority to be subject to finance,

         organizational or rate regulation as an "electric utility", "electric

         corporation", "electrical company", "public utility", "public utility

         holding company" or similar entity under any Requirement of Law, and,

         except as described on Schedule VI hereto, to the best knowledge of

         EPC, no person controlled by such entity has any direct or indirect

         ownership or equity interest in EPC or right to acquire the same.

                  (l) NO PUBLIC OFFERING. Other than in respect of a potential

         sale of all of the assets and stock of EPC, each of its Affiliates, and

         the Lessee in connection with a private stock or asset sale in 1994,

         neither EPC, nor any affiliate (within the meaning of the Securities

         Act) of EPC, nor any Person authorized to act on behalf of EPC has,

         directly or indirectly, offered any security relating to the Lessee or

         the Project or solicited any offers to buy any such interest or

         otherwise negotiated with respect thereto with any Person.

                  (m) FINANCIAL STATEMENTS. EPC has delivered to Lessor and

         Agent copies of the unaudited balance sheet and statements of income,

         cash flow and changes in financial condition of EPC of and as of

         September 30, 1995, certified by an Authorized Officer of EPC. Such

         financial statements fairly represent the financial condition of EPC as

         of and at such date.

                  (n) [INTENTIONALLY OMITTED.]

         SECTION 6.4. REPRESENTATIONS AND WARRANTIES OF BOND TRUSTEE. Bond

Trustee represents and warrants as follows:

                  (a) ORGANIZATION AND GOOD STANDING. Bond Trustee is a trust

         company duly organized, validly existing and in good standing under the

         laws of the State of New York and is duly qualified to do business and

         in good standing in each jurisdiction in which the failure so to

         qualify would adversely affect its business, properties or financial

         condition. Bond Trustee has all requisite corporate power and authority

         to enter into and perform its obligations under this Agreement and the

         other Transaction Documents to which it is a party and every other

         document delivered in connection herewith or therewith to which it is

                                       16
<PAGE>

         a party.

                  (b) DUE AUTHORIZATION; NO CONFLICTS. The execution, delivery

         and performance by Bond Trustee of this Agreement and the Indenture and

         every other document delivered in connection herewith or therewith to

         which it is a party have been duly authorized by all necessary

         corporate action of Bond Trustee. This Agreement and the Indenture and

         every other document delivered in connection herewith or therewith, to

         which it is a party is the valid and binding obligation of Bond

         Trustee, enforceable in accordance with its terms, except as such

         enforceability may be limited by applicable bankruptcy, insolvency or

         similar laws from time to time in effect that affect creditors' rights

         generally or by general principles of equity.

                  (c) NO CONSENT REQUIRED. To the best of its knowledge, no

         Governmental Approval and no filing, registration or recording is now,

         or under existing Law in the future will be, required or necessary on

         its behalf to authorize the execution and delivery of this Agreement or

         the Indenture or the taking of any future action contemplated hereby or

         thereby or for the legality, validity, binding effect or enforceability

         thereof.

         SECTION 6.5. REPRESENTATIONS AND WARRANTIES OF DISBURSEMENT AGENT.

Disbursement Agent represents and warrants as follows:

                  (a) ORGANIZATION AND GOOD STANDING. Disbursement Agent is a

         trust company duly organized, validly existing and in good standing

         under the laws of the State of New York and is duly qualified to do

         business and in good standing in each jurisdiction in which the failure

         so to qualify would adversely affect its business, properties or

         financial condition. Disbursement Agent has all requisite corporate

         power and authority to enter into and perform its obligations under

         this Agreement and the other Transaction Documents to which it is a

         party and every other document delivered in connection herewith or

         therewith to which it is a party.

                  (b) DUE AUTHORIZATION; NO CONFLICTS. The execution, delivery

         and performance by Disbursement Agent of this Agreement and the

         Disbursement Agreement and every other document delivered in connection

         herewith or therewith to which it is a party have been duly authorized

         by all necessary corporate action of Disbursement Agent. This Agreement

         and the Disbursement Agreement and every other document delivered in

         connection herewith or therewith, to which it is a party is the valid

         and binding obligation of Disbursement Agent, enforceable in accordance

         with its terms, except as such enforceability may be limited by

         applicable bankruptcy, insolvency or similar laws from time to time in

         effect that affect creditors' rights generally or by general principles

         of equity.

                  (c) NO CONSENT REQUIRED. To the best of its knowledge, no

         Governmental Approval and no filing, registration or recording is now,

         or under existing law in the future will be, required or necessary on

         its behalf to authorize the execution and delivery of this

                                       17
<PAGE>

         Agreement or the Disbursement Agreement or the taking of any future

         action contemplated hereby or thereby or for the legality, validity,

         binding effect or enforceability thereof.

         ARTICLE VII

                               COVENANTS OF LESSOR

         SECTION 7.1. DEFEND TITLE. Lessor will at all times at its own cost and

expense warrant and defend its title to the Project and the Easements against

the claims and demands of all Persons whomsoever, and will not create or suffer

to exist any Lien against the Project and the Easements, except Permitted Liens.

         SECTION 7.2. LESSOR QF CASUALTY. If a change in the direct or indirect

ownership or activities of Lessor after the Effective Date could result in a

termination of or could adversely affect the Qualifying Facility status of the

Facility (a "LESSOR QF CASUALTY"), Lessor shall, or shall cause the Partner

whose activities have caused such Lessor QF Casualty to, as the case may be,

immediately at its own expense (a) take such action as may be required to

restore the Qualifying Facility status of the Facility, (b) in the case of a

Partner, sell all or part of its interest to a third party, or (c) take such

other action as may be necessary to prevent Lessee, Lessor, any Bank Party, or

any other Partner of Lessor, as the case may be, from being materially adversely

affected as a result of the cessation of the Qualifying Facility status. Lessor

shall indemnify Lessee, any Bank Party, and any other Partner of Lessor for

added costs, expenses and losses incurred by reason of such Lessor QF Casualty.

         ARTICLE VIII

                               COVENANTS OF LESSEE

         SECTION 8.1. REPORTING REQUIREMENTS. Lessee shall furnish to Lessor and

Agent:

                  (a) as soon as practicable and in any event within 60 days

         after the end of the first, second and third quarterly accounting

         periods of each fiscal year of Lessee (commencing with the quarter

         ending September 30, 1995), an unaudited balance sheet of Lessee as of

         the last day of such quarterly period and the related unaudited

         statements of income, cash flow, and changes in financial position of

         Lessee for such quarterly period and (in the case of second and third

         quarterly periods) for the portion of the fiscal year ending with the

         last day of such quarterly period, setting forth in each case (without

         related footnotes) in comparative form corresponding unaudited figures

         from the preceding fiscal year, commencing in fiscal year 1994, all in

         reasonable detail and satisfactory in scope to Lessor and the Agent and

         accompanied by a written statement of an Authorized Officer of Lessee

         to the effect that such financial statements fairly represent Lessee's

         financial

                                       18
<PAGE>

         condition and results of operations;

                  (b) as soon as practicable and in any event within 120 days

         after the end of each fiscal year of Lessee (commencing with the fiscal

         year ended December 31, 1995), a balance sheet of Lessee as of the end

         of such year and the related statements of income, cash flow, and

         changes in financial position of Lessee, for such year, which financial

         statements shall include an accounting of revenues (if any) received

         under the Power Purchase Agreement and other income received during

         such year setting forth in each case in comparative form corresponding

         figures from the preceding fiscal year, in each case accompanied by an

         audit report (with the accompanying management letter) thereon of a

         firm of independent public accountants reasonably satisfactory to

         Lessor and Agent;

                  (c) simultaneously with the filing thereof with the Internal

         Revenue Service, a copy of Lessee's Federal income tax return;

                  (d) during the Lease Term, all written communications

         amending, modifying or affecting any Governmental Approvals then

         required to be in effect, certified as a true copy thereof by a duly

         authorized representative of Lessee; and

                  (e) from time to time, with reasonable promptness, such

         further information regarding the business, affairs and financial

         condition of Lessee, as Lessor or Agent may reasonably request.

         SECTION 8.2. CERTIFICATE; OTHER INFORMATION. Lessee shall furnish or

cause to be furnished to Lessor and Agent the following:

                  (a) concurrently with the delivery of the audited financial

         statements referred to in Section 8.1 with respect to periods after the

         Effective Date, a certificate of the independent public accountants

         that certified such financial statements stating that in making the

         examination necessary for the audit thereof no knowledge was obtained

         of any Default or Event of Default under the Amended and Restated

         Lease, except as specified in such certificate;

                  (b) concurrently with the delivery of the unaudited financial

         statements referred to in Section 8.1 with respect to periods after the

         Effective Date, an Officer's Certificate of Lessee stating that Lessee

         during the period covered by such financial statements has observed and

         performed in all material respects all of its covenants and other

         agreements and satisfied in all material respects every condition

         contained in the Amended and Restated Lease and this Agreement and the

         other Transaction Documents to be observed, performed or satisfied by

         it, and that Lessee has obtained no knowledge of any Default or Event

         of Default by Lessee under any Transaction Document at any time during

         such period or on the date of such certificate, or, if such has

         occurred, specifying the nature and status thereof, the period of

         existence thereof and what action Lessee has taken or proposes to take

         to

                                       19
<PAGE>

         remedy such Default or Event of Default by Lessee under any Transaction

         Document;

                  (c) promptly upon receipt thereof, copies of the following

         notices, reports or certificates delivered pursuant to the Transaction

         Documents:

                           (i)   with respect to periods after the Effective

                  Date, all communications delivered to or by Lessee under any

                  of the Principal Project Agreements, except for communications

                  of a nature or category, if any, as to which non-delivery has

                  been approved in writing by Lessor or Agent, as the case may

                  be;

                           (ii)  with respect to periods after the Effective

                  Date, all material communications made pursuant to the Power

                  Purchase Agreement; and

                           (iii) with respect to periods after the Effective

                  Date, notice of any material claim by either party to the

                  Power Purchase Agreement against the other;

                  (d) promptly upon receipt thereof, a copy of each report

         delivered to Lessee by the independent public accountants that certify

         Lessee's financial statements in connection with any annual or interim

         audit of its books;

                  (e) promptly, such additional financial and other information

         with respect to Lessee or the Facility or the Site as Lessor or Agent,

         as the case may be, may from time to time reasonably request; and

                  (f) as soon as practicable and in any event within 45 days

         after the end of each month, operating statements for such month, which

         operating statements shall include information as the Agent may

         reasonably request.

         SECTION 8.3. CORPORATE EXISTENCE. Lessee covenants that, so long as it

has any obligation under any Transaction Document other than under this Section

8.3, it will at all times cause to be done all things necessary to maintain,

preserve and renew its existence as a corporation organized under the laws of a

state of the United States of America.

         SECTION 8.4. NOTICES. Lessee shall promptly upon obtaining knowledge of

any of the following occurrences, deliver to Lessor and Agent, in sufficient

quantities for each of the Banks, notice in writing of the following:

                  (a) notice of any Default or Event of Default under the

         Amended and Restated Lease or any Transaction Document, specifically

         stating that a Default or an Event of Default, as the case may be, has

         occurred and describing such Default or Event of Default;

                  (b) the occurrence of any Event of Eminent Domain, a

         certificate of Lessee setting forth the details thereof and the action

         which Lessee is taking or proposes to take

                                       20
<PAGE>

         with respect thereto;

                  (c) the occurrence of any casualty, damage or loss to or in

         respect of the Project in an amount greater than $10,000, notice

         thereof, together with copies of any document relating thereto

         (including copies of any claim) in possession or control of Lessee or

         any agent of Lessee;

                  (d) any litigation or proceeding affecting Lessee, the Site or

         the Facility involving claims of $10,000 or more or relating to any

         injunction or similar action against any material aspect of the

         Project;

                  (e) the cancellation of any insurance required to be

         maintained pursuant to Article VI of the Amended and Restated Lease;

                  (f) the assertion of any Default or Event of Default under any

         Principal Project Agreement or the occurrence of an Event of Loss;

                  (g) any change in the business, operations, property,

         prospects or financial or other conditions of any Principal Project

         Participant which could materially adversely affect the Project or such

         Principal Project Participant's ability to perform its obligations, if

         any, under any Principal Project Agreement to which it is a party and

         of an actual change of law, rule or regulation which has or would have

         a Material Adverse Effect;

                  (h) promptly upon the giving or receipt thereof by Lessee, a

         copy of each written notice or demand given by or received by Lessee

         under this Agreement, the Amended and Restated Lease or any other

         Transaction Document;

                  (i) any assertion by any Governmental Authority or other

         Person that the Site, the Project or any portion thereof or the

         operation thereof does not comply in a material respect with a

         Requirement of Law or Governmental Approval; and

                  (j) an event or circumstance that with the passage of time of

         the giving of notice would result in a loss of the Qualifying Facility

         status of the Facility.

         SECTION 8.5. FURTHER ASSURANCES, ETC. Lessee shall take or cause to be

taken all action required to maintain and preserve the Lien of the Lessee

Security Agreement. Lessee will promptly and duly cause to be taken, executed,

acknowledged or delivered all such further acts, conveyances, documents and

assurances (including, without limitation, any financing statements,

continuation statements or similar filings) as any party hereto or to the

Transaction Documents may from time to time reasonably request in order more

effectively to carry out the intent and purposes of this Agreement and the

Transaction Documents and the transactions contemplated hereby or thereby.

         SECTION 8.6. INSPECTION OF PROPERTY. Lessee shall permit or cause to be

permitted any

                                       21
<PAGE>

Person designated in writing by Lessor or any Bank Party as a Person acting on

its behalf to visit and inspect the Facility, including the Operating Logs,

Maintenance Records, and Regulatory Records at such Person's expense and after

reasonable notice, and to discuss the affairs, finances and accounts of Lessee

with the officers and employees of the manager of the Facility or Lessee, as the

case may be, and their officers and employees, and to discuss the reports of the

accountants of Lessee with such accountants (PROVIDED, HOWEVER, that a

representative of Lessee shall have the right to be present at such

discussions), all at such reasonable times and as often as Lessor or any Bank

Party may reasonably request. During the Lease Term, Lessee will also permit or

cause to be permitted any Independent Engineer to visit and inspect the

Facility, at the expense of the Bank Parties and after reasonable notice, at

such reasonable times and as often as Agent may reasonably request. In the event

an Independent Engineer certifies that, in its professional opinion, there are

substantial defects in the Facility, upon receipt of a copy of such

certification giving the details of such substantial defects, Lessee shall

either give or cause to be given to Lessor and Agent a reasonably detailed

written explanation of the reasons why each such defect does not require

correction or shall correct or cause to be corrected each such defect within a

reasonable time.

         SECTION 8.7. CONDUCT OF BUSINESS. Lessee shall at all times engage

solely in the business of leasing the Site and the Facility, as the same may be

modified from time to time as permitted by the Transaction Documents. Lessee

will do or cause to be done all things necessary and desirable to (i) promptly

and diligently enforce its rights under the O&M Agreement and each other

Transaction Document in which it has rights, by assignment or otherwise, and

(ii) comply in all respects with all Requirements of Law and Governmental

Approvals applicable to it.

         SECTION 8.8. LIMITATION ON DEBT. Lessee shall not at any time incur or

in any manner become liable with respect to or permit to remain outstanding any

Debt, except (a) unsecured current liabilities (not the result of borrowing)

incurred in the ordinary course of business of Lessee for current purposes, not

represented by any note or other evidence of Debt to the extent not in excess of

$100,000 at any one time outstanding, (b) Debt of the Lessee arising under the

Amended and Restated Lease, (c) Debt incurred pursuant to the Amended and

Restated Lessee Working Capital Loan Agreement, (d) Debt that may be incurred on

or after the Effective Date by the Lessee pursuant to the Agreement, dated

November 30, 1992, among the Lessor, the Lessee, the Agent and U.S. Generating

Company, and (e) Debt incurred in connection with the Settlement Agreement.

         SECTION 8.9. LIMITATIONS ON LIENS. Lessee shall not create or suffer to

exist or permit any Lien upon or with respect to any of its properties except

liens of the type described in clauses (iii), (iv) and (vii) of the definition

of Permitted Liens, and Lessee shall not create or suffer to exist or permit any

Lien upon or with respect to any of the Collateral except Permitted Liens and

Lessor Liens.

         SECTION 8.10. PROHIBITION OF FUNDAMENTAL CHANGES. Lessee will not: (i)

enter into any transaction of merger or consolidation, (ii) change its form of

organization, (iii) liquidate or dissolve itself (or suffer any liquidation or

dissolution), or (iv) change its business from that of leasing an electric

generating facility which is a Qualifying Facility.

                                       22
<PAGE>

         SECTION 8.11. PROHIBITION ON DISPOSITION OF ASSETS. Lessee shall not

sell, lease (as lessor), transfer or otherwise dispose of any of the Collateral

except as permitted by Article V of the Amended and Restated Lease or sell,

lease (as lessor), transfer or otherwise dispose of any of its assets except as

permitted by Section 10.02 of the Amended and Restated Lease.

         SECTION 8.12. TRANSACTIONS WITH AFFILIATES AND OTHERS. Notwithstanding

any other provision of this Agreement, Lessee shall not (i) directly or

indirectly, purchase, acquire, exchange or lease any property from, or sell,

transfer or lease any property to, or borrow any money from, or enter into any

management or similar fee agreement with, any Affiliate or any officer, director

or employee of Lessee, or (ii) enter into any other transaction or arrangement

or make any payment to or otherwise deal with, in the ordinary course of

business or otherwise, any Affiliate of Lessee except, in the cases of both

clauses (i) and (ii) of this Section 8.12, transactions contemplated by the

Transaction Documents.

         SECTION 8.13. DEFEND TITLE. Lessee shall at all times during the Lease

Term, at its own cost and expense warrant and defend its leasehold title to the

Facility and the Site and its easement rights to the Easements against the

claims and demands of all Persons whomsoever, except with respect to Permitted

Liens and Lessor Liens.

         SECTION 8.14. PLANS. Lessee shall cause to be maintained at all times

at the Facility an accurate and complete set of operation and maintenance

manuals, vendor manuals and an accurate and complete set of "as built" drawings

for the Facility and an "as built" survey of the Facility Site, as and when

required by the Transaction Documents, which shall be amended and supplemented

from time to time to reflect on a current basis all improvements, additions and

modifications to the Facility, and a copy of the Operator's daily logs for not

less than the prior three years of operation.

         SECTION 8.15. NO AMENDMENTS OR ASSIGNMENTS; COMPLIANCE. Lessee shall

not amend, modify, waive compliance with or accept a waiver of compliance with

any provision of, terminate, assign any rights under, or consent to the

assignment by any other Person of any right such Person may have under, or agree

to, or permit or exercise any right in respect of any amendment, modification,

termination or waiver of compliance with any provision of, or any such

assignment of any rights under, any Transaction Document to which it is a party

(other than as required by the terms of such Transaction Document) without the

prior written consent of Lessor and Agent and the parties hereto agree that no

such amendment, modification, waiver, termination, assignment or agreement shall

be binding or effective without such consent, PROVIDED, however, that in any

event, unless an Event of Default has occurred and is continuing under the

Amended and Restated Reimbursement Agreement, Lessee shall have the right to the

exclusion of Agent, to (a) amend, modify, terminate, and give any waivers or

consents under, or otherwise exercise any and all rights with respect to the

Amended and Restated Lessee Working Capital Loan Agreement and the Tax Indemnity

Agreement, and (b) amend the Amended and Restated Lease to make adjustments to

Basic Rent (Equity) as contemplated by Section 3.04 thereof.

                                       23
<PAGE>

         SECTION 8.16. PAYMENT OF TAXES AND CLAIMS. Lessee shall before

delinquency pay and discharge or cause to be paid and discharged all taxes,

assessments and governmental charges or levies lawfully imposed upon it or upon

its income or profits or upon any of the Collateral and all lawful claims or

obligations that, if unpaid, would become a Lien upon the Collateral, real or

personal, or upon any part thereof; PROVIDED that Lessee shall not be required

to pay or cause to be paid any such tax, assessment, charge, levy, claim or

obligation if (a) the applicability, validity or amount thereof shall currently

be diligently contested in good faith by appropriate proceedings timely

instituted and diligently pursued, (b) Lessee sets aside on its books adequate

reserves with respect to the contested items in accordance with GAAP, (c) during

the period of such contest, the enforcement of any contested item is effectively

stayed and (d) in the sole determination of each of Lessor and Agent, the

non-payment of such contested item will not result in a material risk of loss to

the Project and will not affect Lessee's ability to fulfill its obligations

under the Amended and Restated Lease, this Agreement, the Lessee Security

Agreement or any other Transaction Document to which it is a party. Lessee shall

promptly pay or cause to be paid any valid, final judgment enforcing any such

tax, assessment, charge, levy or claim and cause the same to be satisfied of

record unless such judgment is then being appealed and enforcement thereof is

stayed pending appeal.

         SECTION 8.17. BOOKS AND RECORDS. Lessee shall, at all times keep or

cause to be kept proper books and records of all of its business and financial

affairs and all of the business and financial affairs of the Project in

accordance with GAAP. Lessee shall keep its books and records at the address set

forth for it in the Notice Provisions unless it has given notice of any such

change in accordance with the terms of Section 8.23 hereof.

         SECTION 8.18. MAINTENANCE OF ADEQUATE FUEL SUPPLY. Lessee shall at all

times maintain a supply of Fuel and limestone adequate for the operation of the

Facility for a period from the Effective Date to the scheduled maturity date of

the Bonds.

         SECTION 8.19. ADDITIONAL CONTRACTS. Lessee shall not enter into any

agreements of any nature, except Additional Contracts, without the prior written

consent of Lessor. In the event that Lessee proposes to enter into any

Additional Contract, prior to the execution of such Additional Contract, Lessee

shall (a) use its best efforts to enable Lessor to become a party to such

Additional Contract in lieu of Lessee, at the option of Lessor, and (b) use its

best efforts to cause the party or parties to such Additional Contract (other

than Lessee) to simultaneously enter into a consent and agreement with respect

to such Additional Contract similar in form and substance to the Consents.

         SECTION 8.20. GUARANTEES. Except as contemplated by the Transaction

Documents, Lessee shall not agree, contingently or otherwise, to purchase or

repurchase the Debt of, or assume, Guaranty (directly or indirectly or by

instrument having the effect of assuring another's payment or performance of any

obligation or capability of so doing, or otherwise), endorse or otherwise become

or remain liable, directly or indirectly, in connection with the obligations,

stock or dividends of any Person except by endorsement of negotiable instruments

for deposit or collection

                                       24
<PAGE>

in the ordinary course of business.

         SECTION 8.21. ABANDONMENT. Lessee shall not permit any Abandonment or

otherwise cease to diligently pursue the operation of the Project or materially

and voluntarily reduce the operation of the Project (except to the extent

required by customary maintenance procedures).

         SECTION 8.22. INVESTMENTS. Lessee shall not make any investments

(whether by purchase of stock, bonds, notes or other Securities, loan, advance

or otherwise) other than Permitted Investments.

         SECTION 8.23. CHANGE OF NAME; OFFICE. Lessee shall not change its name

or the location of its chief executive office or commence doing business under

any other name or at any other office except on 30 days' prior written notice to

Lessor and Agent.

         SECTION 8.24. RESTRICTED PAYMENTS. Lessee shall not declare or pay any

dividends on, or make any other distribution or payment on account of, or

redeem, retire, purchase or otherwise acquire, directly or indirectly, any

shares of any class of stock of Lessee, whether now or hereafter outstanding, or

make any other distribution in respect thereof, either directly or indirectly,

whether in cash, property or in obligations of Lessee; PROVIDED, HOWEVER, that

Lessee may make such distributions from funds made available to Lessee pursuant

to item SEVENTEENTH of Section 5.02(a)(Y) of the Disbursement Agreement.

         SECTION 8.25. LICENSES AND GOVERNMENTAL APPROVALS; MAINTENANCE OF

PROPERTIES. Without limiting its express obligations contained elsewhere herein,

Lessee shall at all times preserve and keep in force and effect all rights,

franchises, licenses and permits necessary or material to the conduct of its

business, the operation of the Project or the maintenance of its existence and

will maintain and keep its property and the Collateral in good repair, working

order and condition (except for normal wear and tear), and from time to time

during the Lease Term, as specified in Articles IV and V of the Amended and

Restated Lease, make all needful and proper repairs, renewals and replacements

so that the leasing, operation and maintenance of the Facility and the Site and

any other business material to Lessee carried on in connection therewith may be

properly and advantageously conducted at all times.

         SECTION 8.26. NO SUBSIDIARIES. Lessee shall not acquire or create any

Subsidiary.

         SECTION 8.27. ERISA PLAN. Lessee shall comply in all respects with the

applicable provisions of ERISA and the regulations and interpretations

thereunder. Neither Lessee nor any of its ERISA Affiliates shall maintain or

have any obligation to contribute to any Plan or shall have any liability under

Title IV or ERISA by reason of the termination of any Plan or the withdrawal

from any Multiemployer Plan.

         SECTION 8.28. ENVIRONMENTAL MATTERS. (a) Lessee shall comply with all

                                       25
<PAGE>

Environmental Laws applicable to ownership, operation or use of the Site or the

Project, and shall cause the Operator and all tenants and other persons

occupying the Site or the Project to comply with all such Environmental Laws,

shall immediately pay or cause to be paid all costs and expenses incurred in

such compliance, and shall keep or cause to be kept the Site and the Project

free and clear of any Liens imposed pursuant to such Environmental Laws. Lessee

shall not generate, use, treat, store, release, transfer, discharge or dispose

of, or permit the generation, use, treatment, storage, release, transfer,

discharge or disposal of Hazardous Materials on the Site or the Project, or

transport or permit the transportation of Hazardous Materials to or from the

Site or the Project except in compliance with all applicable Environmental Laws.

         (b) Agent and Lessor shall each have the right but not the obligation

to participate in, as a party if it so elects, any legal proceeding or action

initiated in connection with any Environmental Notice. Without the prior written

consent of the Majority Banks, Lessee shall not enter into any settlement,

consent or compromise with respect to any Environmental Notice that might impair

the value of the Collateral; PROVIDED, HOWEVER, that such prior consent shall

not be necessary for Lessee to take any removal or remedial action if ordered by

a court of competent jurisdiction or if the presence of Hazardous Materials at

the Site or the Project poses an immediate significant threat to the health,

safety or welfare of any individual or otherwise requires an immediate removal

or remedial response.

         (c) During the Lease Term, Lessee shall conduct, or cause to be

conducted, any investigation, study, sampling and testing, and undertake any

cleanup, removal, remedial or other action necessary to remove and clean up all

Hazardous Materials from the Site of the Facility in accordance with the

requirements of all applicable Environmental Laws and in accordance with orders

and directives of all Governmental Authorities.

         SECTION 8.29. NO CONTRACTS WITH UTILITIES. Except for the Transaction

Documents, Lessee shall not enter into any contract or arrangement in which any

Utility is a party or has a material interest, except for contracts or

arrangements in the ordinary course of business of such Utility under standard

tariffs or negotiated rates approved or on file with and allowed to go into

effect by a regulatory authority having jurisdiction, unless Lessee (i) delivers

to Lessor in connection therewith an opinion of counsel acceptable to Lessor to

the effect that entering into such contract or arrangement will not adversely

affect the status of the Facility as a Qualifying Facility; and (ii) obtains the

written consent of Lessor in connection therewith. For the purposes of this

Section, "Utility" shall mean an "electric utility" or an "electric utility

holding company," as such terms are used in PURPA and the regulations thereunder

(18 CFR Part 292).

         SECTION 8.30. COMPLIANCE WITH TRANSACTION DOCUMENTS. Subject to Section

8.32, Lessee shall comply with and cause the Operator to comply with the terms

of all Transaction Documents as necessary for the operation of the Facility in

accordance with the standards set forth therein, and shall pursue and enforce

its rights under, and will not waive compliance with or forbear or delay in

exercising its rights under any of the Principal Project Agreements.

                                       26
<PAGE>

         SECTION 8.31. COMPLIANCE WITH LAWS. Lessee shall not use or operate (or

permit to be used or operated) the Facility, the Site or the Easements in

violation of any Requirements of Law or in violation of any certificate,

license, Governmental Approval or registration relating to the Facility or the

Site. Lessee shall do or cause to be done all things necessary to obtain and to

maintain in full force and effect all Government Approvals that are necessary

from time to time (i) to conduct its business as currently conducted and as

proposed to be conducted, (ii) to produce and sell electric energy, (iii) for

the leasing, operation, management and use of the Facility as a Qualifying

Facility, and (iv) to perform its obligations under the Transaction Documents.

         SECTION 8.32. OPERATIONS AND MAINTENANCE AGREEMENT AND MANAGEMENT

SERVICES AGREEMENT. (a) Lessee shall maintain the O&M Agreement in full force

and effect and shall not terminate or replace the Operator under the O&M

Agreement without the prior written consent of Lessor and Agent.

         (b) Lessee shall maintain the Project Management Agreement in full

force and effect and shall not terminate or replace the Project Manager under

the Project Management Agreement without the prior written consent of Lessor and

Agent.

         SECTION 8.33. QUALIFYING FACILITY. Lessee shall not engage in any

activities or, to the extent within its control, permit any actions or omissions

that would cause the Project to fail to meet the criteria for a Qualifying

Facility.

         SECTION 8.34. COVENANTS OF THE LESSEE. The covenants and agreements of

or with respect to the Lessee under this Article VIII shall remain in full force

and effect until the Lease Termination Date.

         SECTION 8.35. LESSEE CONSENT TO TRANSACTION DOCUMENTS. Lessee hereby

acknowledges and consents to all the terms and provisions of the Transaction

Documents, it being understood that such consent shall not be construed to

require its consent to any future supplement to, or amendment, waiver, or

modification of the terms of any such Transaction Documents.

         ARTICLE IX

                                COVENANTS OF EPC

         During any period during which Lessee or EPC has any obligation under

any Transaction Document EPC covenants as follows:

         SECTION 9.1. REPORTING REQUIREMENTS; AUDITS. (a) EPC shall furnish to

Lessor and Agent:

                  (i)   as soon as practicable and in any event within 60 days

         after the end of the

                                       27
<PAGE>

         first, second and third quarterly accounting periods of each fiscal

         year of EPC (commencing with the quarter ending September 30, 1995), an

         unaudited balance sheet of EPC as of the last day of such quarterly

         period and the related unaudited statements of income, cash flow, and

         changes in financial position of EPC for such quarterly period and (in

         the case of second and third quarterly periods) for the portion of the

         fiscal year ending with the last day of such quarterly period, setting

         forth in each case (without related footnotes) in comparative form

         corresponding unaudited figures from the preceding fiscal year,

         commencing in fiscal year 1994;

                  (ii)   as soon as practicable and in any event within 120 days

         after the end of each fiscal year of EPC (commencing with the fiscal

         year ended December 31, 1995), a balance sheet of EPC as of the end of

         such year and the related statements of income, cash flow, and changes

         in financial position of EPC for such year, in each case accompanied by

         an audit report (with the accompanying management letter) thereon of a

         firm of independent public accountants reasonably satisfactory to

         Lessee, Lessor and Agent;

                  (iii)  within five (5) days after the filing thereof a copy of

         all filings by EPC required by any Requirement of Law, including

         securities laws; and

                  (iv)  from time to time, with reasonable promptness, such

         further information regarding the business, affairs and financial

         condition of EPC, as Lessor or Agent may reasonably request.

         (b) EPC shall allow Lessor and Agent, or either of them, to cause an

audit to be made of the books and financial records of EPC, at Lessor's or the

Agent's expense, by auditors designated by such Persons and reasonably

acceptable to EPC; and EPC shall, upon the request of Lessor and Agent, or

either of them, cause its own accountants to conduct such an audit, at EPC's

expense.

         SECTION 9.2. CORPORATE EXISTENCE. EPC covenants that, so long as it has

any obligation under any Transaction Document other than under this Section 9.2,

it will (a) not commence a voluntary case under the Federal Bankruptcy Code,

file a petition seeking to take advantage of any law relating to bankruptcy,

insolvency, reorganization, winding-up or composition or readjustment of debts

or otherwise apply for or consent to the appointment of, or the taking of

possession by, a receiver, custodian, trustee or liquidator of itself or all or

a substantial part of its property, (b) not merge, reorganize or consolidate

into or with any other entity, unless the surviving entity (i) assumes all of

the obligations and liabilities and agrees to perform all of the duties of EPC

under each of the Transaction Documents to which EPC is a party, and (ii) if

such surviving entity holds any stock of Lessee, deliver to Lessor and Agent an

opinion of counsel, in form and substance and from counsel satisfactory to

Lessor and Agent, to the effect that such merger, reorganization or

consolidation will not have any adverse effect on the status of the Facility as

a Qualifying Facility, and (c) not voluntarily liquidate or dissolve, merge,

reorganize or consolidate, or otherwise change its corporate structure in such a

way as to change or impair its corporate existence, or take any action toward

such end, except in accordance with clause (b) above.

                                       28
<PAGE>

         SECTION 9.3. NOTICES. EPC shall promptly upon obtaining knowledge of

any of the following occurrences, deliver to Lessor and Agent notice in writing

of the following:

                  (a) notice of any Default or Event of Default under any

         Transaction Document, specifically stating that a Default or an Event

         of Default, as the case may be, has occurred and describing such

         Default or Event of Default;

                  (b) any litigation or proceeding affecting EPC, or relating to

         any injunction or similar action against any material aspect of the

         Project.

                  (c) the assertion of any Default or Event of Default under any

         Principal Project Agreement or the occurrence of an Event of Loss;

                  (d) any assertion by any Governmental Authority or other

         Person that EPC, in connection with the consummation or performance of

         any Transaction Document to which it is a party, the Site, the Project

         or any portion thereof or the operation thereof does not comply in a

         material respect with a Requirement of Law or Governmental Approval;

         and

                  (e) an event or circumstance relating to Lessee or EPC that

         with the passage of time of the giving of notice would result in a loss

         of the Qualifying Facility status of the Facility.

         SECTION 9.4. FURTHER ASSURANCES, ETC. EPC will promptly and duly cause

to be taken, executed, acknowledged or delivered all such further acts,

conveyances, documents and assurances (including, without limitation, any

financing statements, continuation statements or similar filings) as any party

hereto or to the Transaction Documents to which EPC is a party may from time to

time reasonably request in order more effectively to carry out the intent and

purposes of this Agreement and the Transaction Documents to which EPC is a party

and the transactions contemplated hereby or thereby.

         SECTION 9.5. NO AMENDMENTS OR ASSIGNMENTS; COMPLIANCE. EPC shall not

amend, modify, waive compliance with or accept a waiver of compliance with any

provision of, terminate, assign any rights under, or consent to the assignment

by any other Person of any right such Person may have under, or agree to, or

permit or exercise any right in respect of any amendment, modification,

termination or waiver of compliance with any provision of, or any such

assignment of any rights under, any Transaction Document to which it is a party

(other than as required by the terms of such Transaction Document) without the

prior written consent of Lessor and Agent and the parties hereto agree that no

such amendment, modification, waiver, termination, assignment or agreement shall

be binding or effective without such consent, PROVIDED, however, EPC may,

without the consent of any other person, contractually assign its right to

receive any or all dividends distributed from time to time by Lessee to EPC in

accordance with Section 8.24 hereof.

                                       29
<PAGE>

         SECTION 9.6. SEPARATE OPERATION OF LESSEE. EPC at all times when it is

the record or beneficial owner of a majority of the capital stock of Lessee,

shall at all times until the Obligations shall have been discharged in full,

cause the business of EPC to be conducted separately and independently from the

business of Lessee. In furtherance of such obligation, but without limiting its

generality, EPC shall:

                  (a) cause (i) either the chief executive officer or chief

         financial officer of Lessee to be a person who is not an officer of EPC

         and (ii) the board of directors of Lessee to be not identical with the

         officers or directors of EPC;

                  (b) maintain its principal executive office and any other

         offices physically separate and apart from any office of the Lessee;

                  (c) maintain its books, records and accounts separate and

         apart from the books, records and accounts of Lessee;

                  (d) maintain its funds and other assets separate and apart

         from the funds and assets of the Lessee, without commingling of any

         kind;

                  (e) not enter into any agreement, contract, arrangement or

         understanding of any kind with Lessee or any officer or director of

         Lessee, other than in an arm's-length transaction as between unrelated

         parties;

                  (f) maintain the separate and distinct corporate existence of

         Lessee;

                  (g) not consolidate the operations of Lessee for any purpose,

         including financial reporting, or refer to Lessee in any internal or

         external communication as a division or other unit of EPC or otherwise

         indicate that the assets, rights or obligations of Lessee under any

         Transaction Document, in respect of the Project or otherwise are

         assets, rights or obligations of EPC; PROVIDED, that EPC may

         consolidate the preparation of tax returns and the payment of taxes

         with that of Lessee and any other subsidiary of EPC;

                  (h) observe all corporate formalities as a shareholder of

         Lessee, including the holding of annual meetings to elect the directors

         of Lessee and maintenance of minutes;

                  (i) not, as the shareholder of Lessee, vote the capital stock

         of Lessee in favor of any resolutions approving the commencement of any

         proceeding which would constitute an Event of Default under Section

         13.01 of the Amended and Restated Lease; and

                  (j) disclose all material facts relating to the formation and

         capitalization of Lessee in appropriate public announcements as

         required by any Requirement of Law, which disclosure shall include the

         statement that certain assets have been transferred to Lessee and will

         not be available to meet the claims of the creditors of EPC.

                                       30
<PAGE>

         ARTICLE X

                                    INDEMNITY

                                       31
<PAGE>

         SECTION 10.1.     INDEMNITY.

                                       32
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                  (a) CLAIMS. Except to the extent provided in Section 10.1(b),

         from and after the Lease Commencement Date, Lessee hereby indemnifies

         each Indemnitee against, and agrees to protect, save and keep harmless

         each such Indemnitee from and against, on an After-Tax Basis, any and

         all liabilities, obligations, losses, damages, penalties, claims,

         actions, judgments, suits, costs, expenses, disbursements, causes of

         action and other legal proceedings of whatsoever nature, including

         legal fees and expenses, of whatsoever kind and nature (any of the

         foregoing being called a "CLAIM") imposed on, incurred by or asserted

         against such Indemnitee (whether because of an act or omission by such

         Indemnitee or otherwise (including without limitation negligence of any

         Indemnitee), whether or not also indemnified against by any other

         Person under any other document, whether or not the transactions

         contemplated hereby are consummated, whether or not the Amended and

         Restated Lease has terminated or expired, and whether or not based on

         strict liability or otherwise) in any way relating to or arising out of

         (i) the Project and any other property relating to the transactions

         contemplated by the Transaction Documents or any portion thereof or

         interest therein or the imposition of any Lien other than Lessor Liens

         (or incurrence of any liability to refund or pay over any amount as a

         result of the Lien) on all or any part thereof or any interest in any

         thereof (including, without limitation, any claim or penalty arising

         from (A) violations of Laws or actions in tort, (B) latent or other

         defects, whether or not discoverable by such Indemnitee, Lessee or any

         other Person, (C) loss of or damage to any property or the environment,

         (D) contaminants, Hazardous Materials or other waste, (E) death of or

         injury to any Person, or (F) any claim for patent, trademark or

         copyright infringement), (ii) the construction, requisition,

         acquisition, acceptance, rejection, delivery, non-delivery, transport,

         assembly, possession, repossession, control, condition, dismantling,

         return, abandonment, installation, storage, replacement, manufacture,

         subleasing, modification, transfer of title, rebuilding, rental,

         importation, exportation, acquisition, purchase, sale, financing,

         refinancing, leasing, ownership, maintenance, repair, redelivery,

         alteration, insuring, control, use, operation or disposition of all or

         any part of the Project and any other property relating to the

         transactions contemplated by the Transaction Documents or any portion

         thereof or interest therein, (iii) the Transaction Documents or the

         issuance of the Senior Debt or any other document executed and

         delivered in connection with the consummation or confirmation of the

         transactions contemplated by the Transaction Documents or any

         Indemnitee's interest in any of the foregoing, or the execution,

         amendment, supplement, issuance or delivery of any of the foregoing, or

         (A) the enforcement by any Indemnitee of any of its rights thereunder

         or any transaction contemplated thereby, (B) payments made pursuant to

         any of the foregoing, (C) any action or inaction by Lessee or Lessor in

         connection with any thereof or (D) the sale of electricity or steam or

         other products from the Project, (iv) the Collateral or the respective

         property, or the income or other proceeds received with respect to the

         property, held by Agent under the Security Documents and Disbursement

         Agent under the Disbursement Agreement, (v) the enforcement of any

         agreement, restriction or legal requirement affecting the Project and

         any other property relating to the transactions contemplated by the

         Transaction Documents or any portion thereof or interest therein, (vi)

         any right of any Bank Party to receive payment from Lessor as

         indemnification under the Amended and Restated Reimbursement

                                       33
<PAGE>

         Agreement, (vii) any claim for any finder's fee, brokerage commission

         or similar compensation in connection with the transactions

         contemplated by the Transaction Documents, or (viii) otherwise with

         respect to or in connection with the transactions contemplated by the

         Transaction Documents, whether similar or dissimilar to any of the

         foregoing.

                  (b) EXCLUSIONS FROM GENERAL INDEMNITY. The provisions of

         Section 10.1(a) and the indemnities contained therein shall not extend

         to any Claim with respect to any particular Indemnitee:

                           (i)   to the extent that such Claim arises from acts,

                  omissions or events which occur after the date on which all

                  obligations of Lessee (including those under Section 8.01 of

                  the Amended and Restated Lease) shall have terminated; or

                           (ii)  to the extent that such Claim arises from the

                  willful misconduct or gross negligence of such Indemnitee,

                  other than the gross negligence or willful misconduct imputed

                  to such Indemnitee (A) as a result of its ownership of or

                  other interest in the Project and any other property relating

                  to the transactions contemplated by the Transaction Documents

                  or any portion thereof or interest therein or (B) as a result

                  of Lessee's acting on behalf of such Indemnitee; or

                           (iii) which is a Tax, it being understood that

                  Section 10.2 and the Tax Indemnity Agreement exclusively

                  provide for the Lessee's liability with respect to Taxes; or

                           (iv)  with respect to Lessor or any Partner, as the

                  case may be, to the extent that such Claim arises out of a

                  Lessor QF Casualty or a voluntary offer or sale of its

                  interest in the Project by Lessor or such Partner to any

                  Person other than Lessee; or

                           (v)   with respect to Lessor or any Partner or

                  affiliate of either thereof to the extent that such Claim

                  arises from the incorrectness of any representation or

                  warranty of such Person contained in or made pursuant to this

                  Agreement or any of the other Transaction Documents; or

                           (vi)  with respect to Lessor or any Partner or

                  affiliate of either thereof to the extent that such Claim

                  arises from the failure of such Person to perform or observe

                  any covenant, agreement or condition on its part required to

                  be performed or observed in this Agreement or any other

                  Transaction Document (except to the extent such failure was

                  caused by a failure by Lessee or any affiliate thereof to

                  perform its obligations under any Transaction Documents, but

                  excluding from this exception any nonwillful failure by Lessee

                  to cause compliance by another Person with any terms of

                  any.Transaction Document where such compliance has been

                  delegated or assigned to such other Person); or

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<PAGE>

                           (vii) notwithstanding the terms of the last sentence

                  of Section 8.01(c) of the Amended and Restated Lease, and only

                  in the event that EPC owns all of the voting common stock of

                  Lessee, with respect to Lessor, any Partner or any affiliate

                  thereof to the extent that such Claim results from any matters

                  whatsoever as to which such Person caused such Claim or knew

                  of the existence of or factual basis for such Claim; except

                  that this exclusion from Lessee's indemnification obligations

                  shall not apply with respect to any Claim arising under

                  clauses (a)(i)(B), (C) and (D) above to the extent such Claim

                  was known to Lessee and not disclosed to Lessor or any

                  Partner.

                  (c) NO GUARANTY. Nothing act forth in this Section 10.1 shall

         constitute a guaranty by Lessee that the Facility will have any

         particular useful life or residual value at the end of the Lease Term.

                  (d) NOTICE AND ACTIONS. If any Indemnitee or Lessee shall have

         knowledge of any Claim hereby indemnified against, such Indemnitee or

         Lessee, as the case may be, shall give prompt written notice thereof in

         reasonable detail describing such Claim to Lessee or such Indemnitee,

         as the case may be, but (i) neither a failure by Lessee so to notify an

         Indemnitee nor a failure by an Indemnitee so to notify Lessee shall

         relieve Lessee from any liability which it may have to such Indemnitee,

         and (ii) nothing contained in this sentence shall be construed to limit

         the right of Lessee to pursue any claim it may have against such

         Indemnitee in a court of law or otherwise. Lessee may, at its expense,

         resist and defend any action, suit or proceeding in respect of which

         Lessee would be required to indemnify hereunder, or cause the same to

         be resisted and defended, by counsel for the insurer of the liability

         or by counsel designated by Lessee and reasonably approved by such

         Indemnitee. In the event Lessee assumes the defense of any such action,

         any Indemnitee shall have the right to employ separate counsel in such

         action and participate therein, and the fees and expenses of such

         counsel shall be at the expense of such Indemnitee except that such

         fees and expenses shall be for the account of Lessee if (x) the

         employment of such counsel has been specifically authorized by Lessee,

         or (y) the named parties to such action (including any impleaded

         parties) include both such Indemnitee and Lessee and representation of

         such Indemnitee and Lessee by the same counsel would be inappropriate

         under applicable standards of professional conduct due to actual or

         potential conflicting interests between them. Lessee shall not be

         liable for any settlement of any such action effected without its

         consent (which consent shall not be unreasonably withheld), but if such

         action is settled with the consent of Lessee or if there is a final

         judgment against the Indemnitee in any such action, Lessee agrees to

         indemnify and hold harmless any Indemnitee from and against any loss or

         liability by reason of such settlement or judgment hereby indemnified

         against. Notwithstanding any of the foregoing to the contrary, Lessee

         shall not be entitled to assume responsibility for and control of any

         such judicial or administrative proceedings (1) while a Default or

         Event of Default under any Transaction Document shall have occurred and

         be continuing, (2) if such proceedings will involve a material danger

         of the sale, forfeiture or

                                       35
<PAGE>

         loss of, or the creation of any material Lien (other than a Permitted

         Lien) on, the Project or any other property relating to the

         transactions contemplated by the Transaction Documents or any portion

         thereof or interest therein, or (3) if such proceedings will involve

         the potential imposition of criminal liability on any Indemnitee. Upon

         the payment in full of any indemnities pursuant to this Section 10.1 by

         Lessee, it shall be subrogated to any right of the Indemnitee in

         respect of the matter against which indemnity shall have been given.

         Nothing under this Section 10.1 shall give any right to any Person

         other than Lessee and the Indemnitees, including any right of

         subrogation.

         SECTION 10.2. GENERAL TAX INDEMNIFICATION. (a) Except as provided in

Section 10.2(c), and subject to the Lessee's contest rights under Section

10.2(f), from and after the Lease Commencement Date, Lessee agrees to pay and

assume liability for, and to indemnify, protect, defend, save and keep harmless

each Indemnitee, on an After-Tax Basis, from and against any and all fees

(including, without limitation, license, filing, recording, documentation and

registration fees), taxes, impositions, levies, assessments, impositions, duties

or other charges or withholdings of any nature whatsoever (together with any

related interest, penalties, fines or additions to tax), including, without

limitation, rental, income, sales, use, transfer, leasing, property, value

added, ad valorem, excise (including, without limitation, any excise Taxes

imposed by section 4975 of the Code), receipts, stamp, withholding, franchise or

license taxes, imposed on or with respect to or asserted against any Indemnitee,

the Lessee, the Project or any component or Part thereof or any other property

relating to the transactions contemplated by the Transaction Documents, the

Senior Debt, the Collateral or any portion of any of the foregoing or any

Indemnitee's interest in any of the foregoing, by any Federal, state or local

taxing authority in the United States (including any territory or possession of

the United States) or any foreign country or political subdivision thereof or

any international authority, upon or with respect to (i) the Project and any

other property relating to the transactions contemplated by the Transaction

Documents or any portion thereof or interest therein, (ii) the construction,

requisition, acquisition, acceptance, rejection, delivery, non-delivery,

transport, assembly, possession, repossession, control, condition, dismantling,

return, abandonment, installation, storage, replacement, manufacture,

subleasing, modification, transfer of title, rebuilding, rental, importation,

exportation, acquisition, purchase, sale, financing, refinancing, leasing,

ownership, maintenance, repair, redelivery, alteration, insuring, control, use,

or operation of all or any part of the Project and any other property relating

to the transactions contemplated by the Transaction Documents or any portion

thereof or interest therein, (iii) the rental payments (including, without

limitation, all Basic Rent, Supplemental Rent, and Additional Rent), receipts or

earnings arising from the Project and any other property relating to the

transactions contemplated by the Transaction Documents or any portion thereof or

interest therein.or payable pursuant to the Amended and Restated Lease, or any

other payment or right to receive payment pursuant to the Transaction Documents

(including, without limitation, any payment of principal, interest, discount or

premium on or with respect to the Senior Debt), (iv) the Transaction Documents

or the issuance of the Senior Debt or any other document executed and delivered

in connection with the consummation or confirmation of the transactions

contemplated by the Transaction Documents or any Indemnitee's interest in any of

the foregoing, or the execution, amendment, supplement, issuance or delivery of

any of the foregoing, (v) the Collateral or the property, or the income or

                                       36
<PAGE>

other proceeds received with respect to the property, held by Agent under the

Security Documents or by Disbursement Agent under the Disbursement Agreement,

(vi) any taxes on any Bank Parties required to be paid by Lessor under the

Amended and Restated Reimbursement Agreement, or (vii) otherwise with respect to

or in connection with the transactions contemplated by the Transaction Documents

(all the foregoing being herein collectively called "TAXES" or, separately, a

"TAX").

         (b) In addition to the foregoing and without limitation thereto, except

as provided in Section 10.2(c) and subject to the Lessee's contest rights under

Section 10.2(f), Lessee hereby agrees to pay and assume liability for, and to

protect, defend, save and keep harmless each Indemnitee, on an After-Tax Basis,

from and against:

                  (i)   Any ad valorem or other Pennsylvania real property Taxes

         attributable to a reassessment including, without limitation, any

         reassessment resulting from (x) any event that occurs on the Lease

         Commencement Date (including, without limitation, the change in the

         ownership of the interests in the Partnership that takes place on the

         Lease Commencement Date and (y) a failure to complete construction of

         the Facility before any date which would result in a reassessment;

                  (ii)  Pennsylvania sales, transfer, use or rental taxes (and

         any related withholdings, interest, penalties, fines or additions to

         tax) imposed under existing Law upon Lessor or on or with respect to

         its acquisition of the Facility or the Site or with respect to the

         acquisition of the Facility or the lease thereof to Lessee; and

                  (iii) Excise tax liability arising under Section 4975 of the

         Code as a consequence of the initial purchase of Senior Debt or lending

         of funds on the Closing Date or the Effective Date with the general

         account assets of an insurance company being deemed to be Plan Assets

         giving rise to a "prohibited transaction."

         (c) The provisions of Subsections (a) or (b) of this Section 10.2 shall

not apply to, and Lessee shall not have any liability to any Indemnitee under

Subsections (a) or (b) with respect to:

                  (i)   Taxes to the extent on, based on, with respect to, or

         measured by, gross income (which are in lieu of net income taxes), net

         income (except to the extent necessary to make any payment required to

         be made on an After-Tax Basis) or in the nature of capital stock Taxes,

         franchise, net worth, or conduct of business Taxes, or the

         environmental Tax set forth in Section 59A of the Code (other than

         Taxes in the nature of sales, use, rental or transfer or similar

         Taxes).

                  (ii)  Taxes that are minimum Taxes or Taxes on any item of tax

         preference.

                  (iii) Taxes imposed on or with respect to an Indemnitee that

         result from (A) any voluntary transfer by such Indemnitee of any

         interest in the Project or the Partnership or any portion of any of the

         foregoing or any interest arising out of the Transaction Documents or

                                       37
<PAGE>

         the Senior Debt unless such transfer shall have occurred in connection

         with, or as a result of an Event of Default under any Transaction

         Document, (B) any involuntary transfer of any of the foregoing

         interests in connection with any bankruptcy or other proceeding for the

         relief of debtors in which such Indemnitee is the debtor or any

         foreclosure by a creditor of such Indemnitee with respect to any

         obligation unrelated to the Project or (C) any transfer of any interest

         in such Indemnitee (other than any transfer of any interest in such

         Indemnitee while an Event of Default has occurred).

                  (iv)  Taxes imposed on an Indemnitee, to the extent such Taxes

         result solely and directly from the willful misconduct or gross

         negligence of such Indemnitee.

                  (v)   Taxes to the extent imposed on any Indemnitee as a

         direct result of the willful failure of such Indemnitee, or any entity

         related or affiliated with such Indemnitee, to file timely and properly

         any return or any form, certificate or other document which would have

         entitled such Indemnitee to an exemption from, or reduction in, a tax

         indemnified against under this Section 10.2, or other tax benefit with

         respect to such Tax to the extent such benefit, had it been available,

         would have been taken into account in determining any indemnity payable

         under this Section 10.2; PROVIDED, HOWEVER, that this Section

         10.2(c)(v) shall not apply unless (A) Lessee shall timely have

         requested in writing that the Indemnitee take the specific action which

         forms the basis for potential exculpation of the Lessee hereunder and

         (B) the Indemnitee shall have determined in good faith that the action

         so requested by Lessee is not improper, which determination shall be

         made on a timely basis.

                  (vi)  Except as otherwise provided in the Amended and Restated

         Reimbursement Agreement with respect to Lessor indemnification

         obligations to the Bank Parties which indemnification obligations

         Lessee agrees to pay to Lessor as Supplemental Rent (Senior Debt),

         Taxes to the extent imposed on gross or net income of a Participant

         other than the Bank Parties by way of withholding on gross income under

         Sections 871, 881, 1441 or 1442 of the Code.

                  (vii) Any Tax imposed on the Bond Trustee or an affiliate with

         respect thereto measured by or with respect to, any trustee fees or

         expenses for services rendered in its capacity as trustee under the

         Indenture.

                  (viii) Any Tax to the extent that such Tax arises from acts,

         omissions or events which occur after the date on which all obligations

         of Lessee (including those under Section 8.01 of the Amended and

         Restated Lease) shall have terminated.

                  (ix)  Any Taxes that would not have been imposed but for the

         inaccuracy or breach of any representation, warranty or covenant by the

         Indemnitee; PROVIDED, that this subclause shall not apply to any

         Indemnitee that is a Bank Party.

                                       38
<PAGE>

                  (x)   Any Taxes that have been actually paid by virtue of

         being included in Transaction Costs or in the Purchase Price.

                  (xi)  Any Tax to the extent such Tax is actually utilized by

         the Indemnitee or an affiliate with respect thereto as a credit against

         Taxes not indemnified under this Section 10.2 and otherwise payable by

         such Indemnitee or an Affiliate thereof.

                  (xii) Any Taxes imposed on or with respect to an indemnitee or

         an Affiliate thereof to the extent of the excess of such Taxes over the

         amount of such Taxes that would have been imposed (or, if less, that

         would have been subject to indemnification under this Section 10.2) had

         there not been a transfer by a predecessor in interest of such

         Indemnitee or Affiliate of any interest in the Partnership, the

         Project, the Site, or any part thereof or any interest arising under

         any Transaction Document or the Senior Debt or any interest in any

         Indemnitee or any Affiliate; PROVIDED, HOWEVER, that this exclusion

         (xii) shall not apply to any transfer by Falcon that is required by any

         Requirement of Law or Governmental Approval to preserve the Facility's

         status as a Qualifying Facility, or to any other transfers by any

         Person occurring on or prior to the Lease Commencement Date.

                  Notwithstanding anything herein to the contrary, none of the

         foregoing exceptions shall apply with respect to any Tax imposed under

         or pursuant to section 4975 of the Code.

         (d) If any report, return or statement is required to be filed with

respect to any Tax imposed on an Indemnitee that is subject to indemnification

under this Section 10.2, Lessee shall timely prepare and (if legally permitted

to do so) file the same (except for any such report, return or statement which

such Indemnitee has notified Lessee that such Indemnitee intends to prepare and

file). If requested by Lessee in writing, such Indemnitee shall (subject to

reimbursement of such Indemnitee's out-of-pocket expenses) furnish Lessee with

such information reasonably necessary to prepare and file such returns as is

within such Indemnitee's control and not within the control of Lessee. Lessee

shall, if permitted by law, timely file such report, return or statement and

send a copy of such report, return or statement to such Indemnitee. If Lessee is

not so permitted to file such report, return or statement, Lessee shall timely

notify such Indemnitee of such requirement and prepare and deliver such report,

return or statement to such Indemnitee for filing by such Indemnitee and within

a reasonable time prior to the time such report, return or statement is to be

filed Lessee shall, to the extent permitted by law, cause all billings of such

Taxes to be made to such Indemnitee in care of Lessee, make payment thereof and,

from time to time on written request of such Indemnitee, furnish written

evidence of such payment.

         (e) Any Tax indemnified hereunder shall be paid by Lessee directly when

due to the applicable taxing jurisdiction if direct payment is permitted or to

an Indemnitee as provided in the succeeding sentence. Except as otherwise

provided in this Section 10.2, all amounts payable to an Indemnitee hereunder

(including any amount payable to an Indemnitee to hold it harmless on an

After-Tax Basis for the payment of any Tax by such Indemnitee or by Lessee on

behalf of such Indemnitee) shall be paid no later than the later to occur of (i)

10 days after such Indemnitee's

                                       39
<PAGE>

demand therefor (which demand shall set forth in reasonable detail the

computation of the amount payable) or (ii) the date the Tax to which such amount

payable hereunder relates is due or is to be paid, in immediately available

funds. Lessee shall furnish promptly upon written request such data as any

Indemnitee may reasonably request of the Lessee to enable such Indemnitee to

comply with the requirements of any taxing jurisdiction arising out of such

Indemnitee's participation in the transactions contemplated by this Agreement.

Each Indemnitee shall promptly forward to the Lessee any notice, bill or advice

received by it concerning any Tax for which it seeks indemnification hereunder.

If Lessee shall pay any amount directly to the appropriate taxing authority,

within a reasonable period of time after the date of each payment by Lessee of

any Tax which is indemnifiable hereunder, Lessee shall furnish to such

Indemnitee the original or a certified copy of a receipt for Lessee's payment of

such Tax or such other evidence of payment of such Tax as is reasonably

acceptable to such Indemnitee.

         (f) CONTEST; REFUNDS. In the event a taxing jurisdiction makes a claim

with respect to any Tax or if any proceeding shall be commenced against any

Indemnitee (including a written notice of such proceeding) for any Tax for which

Lessee may have an indemnity obligation under this Section 10.2 (a "TAX CLAIM"),

Lessee may contest such Tax Claim as set forth herein. In the event any

Indemnitee receives written notice of a Tax Claim which may be indemnified under

this Section 10.2 or if any proceeding shall be commenced against any Indemnitee

(including a written notice of such proceeding) for any Tax, as to which the

Lessee may have an indemnity obligation pursuant to Section 10.2, or if the

Indemnitee shall determine that any Tax as to which the Lessee may have an

indemnity obligation pursuant to Section 10.2 hereof may be payable, such

Indemnitee (i) shall promptly notify Lessee thereof in writing (PROVIDED,

HOWEVER, that the failure to give such notice shall not relieve Lessee of its

obligations hereunder), and (ii) shall not take any action with respect to such

claim or Tax without the consent of the Lessee for 30 days after the receipt of

such notice by the Lessee; PROVIDED, HOWEVER, that, if such Indemnitee shall be

required by law or regulation to take action prior to the end of such 30-day

period, such Indemnitee shall, in such notice to the Lessee, so inform the

Lessee, and such Indemnitee shall not take any action with respect to such claim

or Tax without the consent of the Lessee before the date such Indemnitee shall

be required to take any such action. So long as title to or interest in the

Project or any part thereof is not subjected to a material risk of loss or

forfeiture or the imposition of a Lien on the Project or Lessee provides a bond

or makes other provisions reasonably satisfactory to each Indemnitee to protect

its interest and there is no risk of the imposition of civil or criminal

penalties, Lessee may at its own expense defend against, and contest in its name

(if permitted by law) the imposition of, or request such Indemnitee to contest

the imposition of, any Tax Claim by (i) resisting payment thereof, if Lessee in

its reasonable discretion shall determine such course of action to be

appropriate, (ii) not paying the same except under protest, if protest is

necessary and proper, or (iii) if payment shall be made, using reasonable

efforts to obtain a refund thereof in appropriate administrative and judicial

proceedings, subject to the preconditions that (A) no Event of Default under the

Amended and Restated Lease has occurred and is continuing, (B) the proposed tax

deficiencies relating to such Tax Claim for the year in question and when

aggregated with all other taxable years affected thereby are at least $50,000,

(C) Lessee shall have acknowledged its liability to such Indemnitee for an

indemnity payment as a result of such Tax Claim if such Indemnitee shall

                                       40
<PAGE>

not prevail in the contest (PROVIDED, HOWEVER, that such acknowledgment shall

not preclude the Lessee from raising a defense to liability under this Agreement

if a court of competent jurisdiction has rendered a decision articulating the

cause of such Tax, and the cause is not one for which the Lessee is responsible

to pay any indemnity under this Agreement) and (D) such Indemnitee has been

provided with an opinion of independent tax counsel selected by Lessee and

reasonably acceptable to the Indemnitee (the cost of which shall be borne by

Lessee) to the effect that a reasonable basis in law or in fact (or in the case

of an appeal from a lower court decision, a more likely than not probability of

success) exists that such Indemnitee will prevail in such contest (or appeal).

Notwithstanding the foregoing, Lessee may not elect to assume responsibility for

contesting a Tax Claim (or if made, such election shall no longer be binding) if

an Indemnitee makes a good faith determination that the control of the contest

by Lessee would materially adversely affect its dealings with the taxing

authorities proposing the Tax Claim, or would otherwise adversely affect the

outcome of such contest and so notifies Lessee of such determination. Further,

in no event shall Lessee be permitted to contest the imposition of any tax for

which Lessor would be obligated to indemnify a Bank Party pursuant to the

Amended and Restated Reimbursement Agreement. In the event of such a

determination and notification, a contest under this Section 10.2(f) shall be

conducted by such Person and in such form as the Indemnitee shall determine in

its sole discretion, after considering in good faith any views offered by Lessee

with respect thereto.

         In no event shall any Indemnitee be required or Lessee permitted to

contest the imposition of any Tax for which Lessee may be obligated to indemnify

pursuant to this Section 10.2 unless (i) Lessee shall have agreed to pay and

shall pay to such Indemnitee on demand on an After-Tax Basis all reasonable

costs and expenses that such Indemnitee incurs in connection with contesting

such Tax Claim (including without limitation, all costs, expenses, reasonable

legal and accounting fees and disbursements) and (ii) if such contest shall be

conducted in a manner requiring the payment of the Tax Claim, Lessee shall have

advanced the amount thereof to such Indemnitee on an interest-free basis and

with no additional net after-tax cost to such Indemnitee (and such Indemnitee

shall pay to the Lessee any net realized tax benefits due to any imputed

interest deduction (net of imputed income) arising from such interest-free

advance from the Lessee plus the tax benefit from making any such payment). If

the Indemnitee is at any time required to include in income the amount of any

such advanced amount or any amount with respect thereto, Lessee shall at that

time pay to the Indemnitee the amount by which the Indemnitee's federal, state

and local income tax liability is increased on account of such inclusion and the

payment with respect thereto.

         Notwithstanding anything contained in this Section 10.2 to the

contrary, in no event shall any Indemnitee be required or Lessee permitted to

contest any Tax Claim if the subject matter thereof shall be of a continuing

nature and shall have previously been decided unfavorably pursuant to the

contest provisions of this Section 10.2 unless there shall have been a change in

the Law (which, for the purposes of this paragraph, shall mean amendments to

statutes or administrative regulations, administrative rulings and court

decisions), and such Indemnitee shall have received an opinion of independent

tax counsel selected by Lessee and reasonably acceptable to the Indemnitee

setting forth the facts and legal analysis on which it is based and furnished at

Lessee's sole expense,

                                       41
<PAGE>

to the effect that as a result of such change in the law it is more likely than

not that the position to be taken by such Indemnitee in the contest of such Tax

Claim will prevail. In no event shall an Indemnitee be required to appeal any

adverse decision of a court of competent jurisdiction beyond the first level of

appeals.

         Notwithstanding the foregoing provisions of this Section 10.2, an

Indemnitee, in its sole discretion (by written notice to Lessee) may

unconditionally waive its rights to the indemnities set forth in this Section

10.2 with respect to any Tax Claim, and refrain (and direct Lessee to refrain)

from contesting such Tax Claim, in which event Lessee shall not have any

liability to the Indemnitee hereunder with respect to such Tax Claim, it being

understood that any such waiver shall be without prejudice to the rights of the

Indemnitee with respect to any other Tax Claim.

         Upon receipt by an Indemnitee of a repayment or refund of all or any

part of any Tax indemnified against hereunder which Lessee has paid or for which

Lessee shall have reimbursed any Indemnitee pursuant to this Section 10.2

(provided, however, that any repayment or refund that an Indemnitee would have

received but for a counterclaim or other claim with respect to any Tax not

indemnifiable by the Lessee hereunder (a "deemed refund" or "deemed receipt")

shall be treated as received by such Indemnitee pursuant to this sentence), such

Indemnitee shall pay to Lessee as promptly as practicable (but in no event more

than 10 days) after the receipt thereof, the amount of such repayment or refund

(including any deemed refund or deemed receipt) plus any interest received by

such Indemnitee on such amounts net of Taxes thereon plus the amount of any tax

savings realized by such Indemnitee as a result of the payment made to Lessee;

PROVIDED, HOWEVER, that an Indemnitee shall not be obligated to make any such

payment to the extent the amount of such payment would exceed the amount of all

payments of Taxes which Lessee shall have previously made directly to or for the

benefit of such Indemnitee or for which Lessee shall have previously reimbursed

such Indemnitee pursuant to this Section 10.2, less the amount of all prior

payments by such Indemnitee to Lessee pursuant to this Section 10.2 and less any

unreimbursed expenses incurred by such Indemnitee in obtaining such repayment or

refund. Any Taxes that are imposed on any Indemnitee as a result of a

disallowance or reduction of any refund or repayment of Taxes referred to in the

preceding sentence as to which such Indemnitee previously had made a payment to

Lessee required hereby shall be treated as Taxes for which Lessee is obligated

to indemnify such Indemnitee pursuant to the provisions of this Section 10.2.

         (g) Any amount payable to Lessee pursuant to the terms of this Section

10.2 shall not be paid to Lessee if at the time of such payment an Event of

Default shall have occurred and be continuing under the Amended and Restated

Lease. At such time as there shall not be continuing any such Event of Default,

such amount shall be paid to Lessee to the extent not previously applied against

Lessee's obligations hereunder, without interest.

         SECTION 10.3. MANNER OF INDEMNIFICATION. Upon Lessee becoming liable to

any Indemnitee under this Article X, Lessee shall promptly submit or cause to be

submitted to Lessor and while the Senior Debt is outstanding, Agent, a

certificate providing a sufficient basis for Agent

                                       42
<PAGE>

or Lessor to prepare a Disbursement Certificate or other certificate pursuant to

the Amended and Restated Disbursement Agreement or the Amended and Restated

Reimbursement Agreement, as appropriate, to be submitted to Agent or the

Disbursement Agent, as appropriate.

         ARTICLE XI

                           LEASE TERMINATION COVENANTS

         SECTION 11.1. LESSEE AGREEMENT TO LEASE TERMINATION. Lessee hereby

acknowledges and agrees, for the benefit of each party hereto, that (a) upon the

occurrence of any Default under the Amended and Restated Lease which is an EPC

Group Default, Lessor may, at its option which may be exercised in its sole

discretion upon the consent of the Majority Banks under the Amended and Restated

Reimbursement Agreement, or (b) at any time, upon the concurrence of Lessee,

EPC, if it then holds the common stock of Lessee, and the Majority Banks, may

terminate the Amended and Restated Lease and, concurrently therewith, assume all

of Lessee's obligations thereunder or replace Lessee as "lessee" under the

Amended and Restated Lease with any Person chosen by Lessor. Upon election by

Lessor to so terminate Lessee's rights in and to the Amended and Restated Lease,

Lessee shall cooperate with Lessor to effect an orderly transfer to Lessor or

any successor Lessee of any assets relating to the Project of which Lessee has

possession or in which Lessee has any rights.

         SECTION 11.2. LEASE TERMINATION COVENANTS. Agent, Bond Trustee and the

other parties hereto hereby acknowledge and agree that Lessor, upon agreement

with Lessee or otherwise, may terminate the Amended and Restated Lease, or

consent to the termination of the Amended and Restated Lease in accordance with

the terms of the Transaction Documents; PROVIDED that, prior to such

termination, no Event of Default under the Loan Documents shall exist and after

giving effect to the transactions contemplated by this Section, no Default or

Event of Default under the Loan Documents shall exist, and, provided further

that:

                  (a) Prior to or contemporaneously with the effective date of

         such termination:

                           (i)   Lessor shall, if necessary, have completed such

                  actions which shall, in the reasonable judgment of Agent and

                  Bond Trustee, be necessary or advisable, such that each of the

                  contracts, arrangements or other rights transferred to Lessee

                  pursuant to the Amended and Restated Lease (the "ASSIGNED

                  RIGHTS") shall become the property of Lessor or a replacement

                  lessee subject to no Lien other than Permitted Liens;

                           (ii)  Lessor shall (a) have completed such actions

                  which shall, in the reasonable judgment of Agent and Bond

                  Trustee be necessary or advisable, such that Lessor or a

                  replacement lessee shall own, free and clear of any Liens

                  other than the Permitted Liens, the collateral subject to the

                  Lessee Security Agreement (the

                                       43
<PAGE>

                  "LESSEE COLLATERAL") or (b) make such alternative arrangements

                  as shall be satisfactory to Agent and Bond Trustee;

                           (iii) There shall have been entered into such other

                  amendments of and modifications to the Transaction Documents

                  or such additional documents or instruments as shall be

                  necessary or advisable in the reasonable judgment of Agent to

                  grant to the Bank Parties or a trustee on behalf of the Bank

                  Parties, as the case may be, such security interests and other

                  rights which shall be on a basis consistent with the interests

                  and rights of the Bank Parties in the Security Documents;

                           (iv)  Lessor shall have delivered to Agent and Bond

                  Trustee an opinion of counsel in form and substance reasonably

                  satisfactory to Agent and Bond Trustee, addressed to Bond

                  Trustee and all Bank Parties, to the effect that, after giving

                  effect to such termination and all other actions taken in

                  connection therewith (including, without limitation, the

                  arrangements contemplated by this Section 11.2), (1) the

                  Facility continues to qualify and be certified as a Qualifying

                  Facility exempt from regulation under certain federal and

                  state Laws pursuant to PURPA and such certification shall

                  continue to be in full force and effect, (2) the Lien of the

                  Security Documents on the Collateral remains perfected and the

                  priority thereof has not been impaired, (3) all Governmental

                  Approvals and agreements necessary for operation of the

                  Project are and will be in full force and effect, and (4) such

                  other matters as the Bank Parties may request.

                  (b) On or prior to the date of termination of the Amended and

         Restated Lease, Lessor and Agent shall have entered into such

         supplemental security arrangements as will be effective to create, in

         favor of Agent or a trustee for the benefit of the Bank Parties legal,

         valid and enforceable mortgage Liens on or security interests in and to

         the Assigned Rights and Lessee Collateral and such liens and security

         interests shall constitute perfected Liens on and perfected security

         interests in such Assigned Rights and Lessee Collateral prior and

         superior to all other Liens other than Permitted Liens (the

         "SUPPLEMENTAL SECURITY ARRANGEMENTS") and Lessor shall have delivered

         to each of the Bank Parties, an opinion of counsel in form and

         substance satisfactory to Agent with respect to the creation,

         perfection and priority of such Liens and such other matters as the

         Bank Parties may request.

         ARTICLE XII

                                   ASSIGNMENT

         SECTION 12.1. BENEFIT OF AGREEMENT, ETC. This Agreement shall be

binding upon and inure to the benefit of and be enforceable by the parties

hereto and their respective successors and permitted assigns.

                                       44
<PAGE>

         SECTION 12.2. TRANSFER OF INTERESTS OF LESSOR. A General Partner may

not, so long as any Senior Debt remains outstanding, make any transfer or

assignment of all or any portion of its general partnership interest in Lessor

and corresponding rights or obligations under the Transaction Documents, except

in a Permitted Transfer. A General Partner may, following the payment in full

and discharge of all Senior Debt, transfer or assign all or any portion of its

general partnership interest in Lessor and corresponding rights or obligations

under the Principal Project Agreements then in effect, subject to the terms and

conditions of the Partnership Agreement. Subject to the terms of the Partnership

Agreement, each Limited Partner may transfer all or any portion of its

Partnership Interest at any time.

         ARTICLE XIII

                              INTENTIONALLY OMITTED

         ARTICLE XIV

                             LIMITATION ON RECOURSE

         Anything herein to the contrary notwithstanding, the obligations of

Lessor hereunder and under the other Transaction Documents, are special

obligations of Lessor and do not constitute a debt or obligation of (and no

recourse shall be had with respect thereto against) any Partner or Affiliate of

Lessor, or any shareholder, partner, officer or director of any such Partner or

any such Affiliate; no action shall be brought against any Partner or any

Affiliate thereof or any shareholder, partner, officer or director of any

thereof as such, and any judicial proceedings any Participant may institute

against Lessor shall be limited to seeking the preservation, enforcement,

foreclosure or other sale or disposition of the Liens and security interest now

or at any time hereafter securing the repayment of the Loans and performances by

Lessor of its other covenants and obligations hereunder and under the

Transaction Documents; no judgment for any deficiency upon the obligations of

Lessor under the Transaction Documents shall be obtainable by any Participant

against Lessor or any Partner or Affiliate of Lessor or any shareholder,

partner, officer or director of any thereof; PROVIDED that nothing in this

Article XIV shall be construed to limit in any respect the validity and

enforceability against any Partner of its obligations under the Security

Documents to which it is a party as an obligor (and not merely as a signatory

for another Person) or any of the rights of any Participant against Lessee or

EPC under any other Transaction Document.

         ARTICLE XV

                                  MISCELLANEOUS

                                       45
<PAGE>

         SECTION 15.1. NOTICES. Any notices and other communications required or

permitted under the terms and provisions of this Agreement shall be sufficient

if delivered in accordance with the Notice Provisions set forth in Schedule IV

hereto.

         SECTION 15.2. GOVERNING LAW. This Agreement shall in all respects be

governed by, and construed in accordance with, the laws of the State of New

York.

         SECTION 15.3. HEADINGS. The Table of Contents and headings in this

Agreement are strictly for the purpose of convenience and general reference only

and shall not affect the meaning or interpretation of any of the provisions of

this Agreement.

         SECTION 15.4. COUNTERPARTS. This Agreement may be executed in one or

more counterparts, and each of which when so executed and delivered shall be

deemed an original for all purposes but all of which together shall constitute

but one and the same instrument.

         SECTION 15.5. SURVIVAL OF AGREEMENTS. Subject to any provisions of the

Transaction Documents which impose limitations as to liability solely between

Lessor, Lessee and EPC (without regard to the rights of the Agent, the LOC

Issuers and the Banks which remain unaffected by any such limitations), the

representations, warranties and agreements (including indemnities) of the

parties to this Agreement and the parties' obligations under this Agreement

shall survive the execution and delivery of this Agreement and the expiration or

rescission of any of the Transaction Documents and shall be and continue in full

force and effect notwithstanding any investigations made by or on behalf of any

of the parties hereto.

         SECTION 15.6. CONFIDENTIALITY. Each party to this Agreement agrees

that, except as may be required by Law, and except for disclosure to the other

parties to the Transaction Documents, it will not make any public announcement

with respect to, and will use its best efforts in accordance with its customary

business practices not otherwise to disclose the participation of any Partner

(other than itself) in the Facility or publicly disclose the existence or terms

of this Agreement unless such announcement or disclosure has been previously

consented to in writing by the Lessor, which consent may be withheld in its

discretion.

         SECTION 15.7. SEVERABILITY. If any clause, provision, paragraph or

section of this Agreement shall be held illegal or invalid by any court, the

invalidity of such clause, provision, paragraph or section shall not affect any

of the remaining clauses, provisions, paragraphs or sections of this Agreement,

and this Agreement shall be construed and enforced as if such illegal or invalid

clause, provision, paragraph or section had not been contained in this

Agreement. If any agreement or obligation contained in this Agreement shall be

held to be in violation of Law, then such agreement or obligation shall be

deemed to be the agreement or obligation of the party thereto to the full extent

permitted by Law.

         SECTION 15.8. TRANSACTION COSTS. Lessor shall pay or cause to be paid

all of the

                                       46
<PAGE>

reasonable out-of-pocket costs, expenses and ongoing costs and expenses incurred

by Disbursement Agent, the Banks, the LOC Issuers and the Agent in connection

with the consummation of the transactions contemplated by this Agreement and in

accordance with Section 15.01 of the Amended and Restated Reimbursement

Agreement. Lessor shall also pay or cause to be paid by Lessee all of the

reasonable out-of-pocket costs, expenses and ongoing costs and expenses of the

following incurred in connection with the consummation of the transactions

contemplated by this Agreement:

                  (a)      Hunton & Williams, special counsel to Lessor,

                  (b)      Buchanan Ingersoll, P.C., special local Pennsylvania

         counsel to Lessor and Lessee,

                  (c)      Bond Trustee,

                  (d)      Hawkins, Delafield & Wood, counsel to Disbursement

         Agent and Bond Trustee, and

                  (e)      Hunton & Williams, special counsel to Lessee and EPC.

All costs incurred by any other party in connection with the consummation of the

transactions contemplated by this Agreement shall be borne by such party or as

otherwise provided in any agreement entered into in connection herewith.

         SECTION 15.9. LESSOR OBLIGATIONS NOT LIMITED BY AMENDED AND RESTATED

LEASE. No provision in the Amended and Restated Lease or any other Transaction

Document pertaining to a limitation or disclaimer of any obligations,

representations or responsibilities of Lessor solely as between Lessor and

Lessee shall in any way limit or affect any obligations or responsibilities

Lessor may incur with respect to other persons hereunder or under any other

Transaction Documents.

         SECTION 15.10. PERFORMANCE OF OBLIGATIONS TO BANK PARTIES. To the

extent that provisions of this Agreement purport to alter, modify or otherwise

affect any provisions of the Amended and Restated Reimbursement Agreement, such

provisions of this Agreement (other than Article XIV) shall be of no effect to

the extent they adversely affect the Bank Parties, and as to any such

provisions, the terms of the Amended and Restated Reimbursement Agreement shall

control in all respects. The provisions of this Agreement which require, or

permit action by, the consent, approval or authorization of, the furnishing of

any document, paper or information to, or the performance of any other

obligation to any of the Bank Parties, shall not be effective, and the Sections

hereof containing such provisions shall be read as though there were no such

requirements or permissions, after all the Obligations and all amounts due under

the Security Documents shall have been paid in full in accordance with their

terms and the Lien of the Security Documents shall have terminated in accordance

with the terms thereof.

                                       47
<PAGE>

         SECTION 15.11. INTENTIONALLY OMITTED.

         SECTION 15.12. FINANCIAL STATEMENTS. All financial statements and

reports to be delivered under this Agreement shall be made or prepared in

accordance with GAAP (including principles of consolidation where appropriate

but excluding footnote disclosure or interim financial statements) and on a

consistent basis.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       48
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have each caused this Agreement

to be executed by their duly authorized officers and attested on the date first

above written.

LESSOR:                            SCRUBGRASS GENERATING COMPANY, L.P., a

                                   Delaware limited partnership

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

AGENT:                             CREDIT LYONNAIS, acting through its New York

                                   Branch as Agent,

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

LESSEE:                            BUZZARD POWER CORPORATION, a Delaware

                                   corporation

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

DISBURSEMENT

AGENT:                             BANKERS TRUST COMPANY

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

                 [AMENDED AND RESTATED PARTICIPATION AGREEMENT]

                                       49
<PAGE>

BOND TRUSTEE:                      BANKERS TRUST COMPANY

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

EPC:                               ENVIRONMENTAL POWER CORPORATION

                                   By: /s/

                                       ----------------------------------

                                       Name:

                                       Title:

                 [AMENDED AND RESTATED PARTICIPATION AGREEMENT]

                                       50<PAGE>

--------------------------------------------------------------------------------

                                                                   Exhibit 4.1.2

                                                                  EXECUTION COPY

                             STOCKHOLDERS AGREEMENT

                                      among

                                SMTC Corporation

                                       and

                       The Stockholders referred to herein

                          Dated as of November 22, 2000

--------------------------------------------------------------------------------
<PAGE>

                                Table of Contents

                                                                           Page
                                                                           ----

1.    EFFECTIVENESS; DEFINITIONS.............................................2

      1.2.  Effectiveness....................................................2

      1.3.  Definitions......................................................2

2.    [RESERVED].............................................................2

3.    [RESERVED].............................................................2

4.    [RESERVED].............................................................2

5.    [RESERVED].............................................................2

6.    REGISTRATION RIGHTS....................................................2

      6.1.  Majority Investor Demand Registration Rights.....................2

            6.1.1. General...................................................2
            6.1.2. Form......................................................3
            6.1.3. Payment of Expenses.......................................3
            6.1.4. Additional Procedures.....................................3

      6.2.  Investors' Demand Registration Rights............................4

            6.2.1. General...................................................4
            6.2.2. Form......................................................4
            6.2.3. Payment of Expenses.......................................4
            6.2.4. Additional Procedures.....................................5

      6.3.  Piggyback Registration Rights....................................5

            6.3.1. General...................................................5
            6.3.2. Excluded Transactions.....................................5
            6.3.3. Payment of Expenses.......................................6
            6.3.4. Additional Procedures.....................................6

      6.4.  Certain Other Provisions.........................................6

            6.4.1. Underwriter's Cutback.....................................6
            6.4.2. Other Actions.............................................7
            6.4.3. Selection of Underwriters and Counsel.....................7
            6.4.4. Lock-Up...................................................8

      6.5.  Indemnification and Contribution.................................8

            6.5.1. Indemnities of the Company................................8
            6.5.2. Indemnities to the Company................................9
            6.5.3. Contribution.............................................10
            6.5.4. Limitation on Liability of Holders of Registrable
                     Securities.............................................10

                                        i
<PAGE>

                                Table of Contents
                                   (continued)

                                                                           Page
                                                                           ----

7.    TRANSFERS TO OTHER HOLDERS............................................10

8.    REMEDIES..............................................................11

      8.1.  Generally.......................................................11
      8.2.  [RESERVED]......................................................11

9.    LEGENDS...............................................................11

      9.1.  [RESERVED]......................................................11
      9.2.  1933 Act Legends................................................11
      9.3.  Stop Transfer Instruction.......................................11
      9.4.  Termination of 1933 Act Legend..................................11

10.   [RESERVED]............................................................11

11.   AMENDMENT, TERMINATION, ETC...........................................11

      11.1. Oral Modifications..............................................11
      11.2. Written Modifications...........................................11
      11.3. Termination.....................................................12

12.   DEFINITIONS...........................................................12

      12.1. Certain Matters of Construction.................................12
      12.2. Definitions.....................................................12

13.   MISCELLANEOUS.........................................................18

      13.1. Expenses of EMSIcon Transfers...................................18
      13.2. Authority; Effect...............................................18
      13.3. Notices.........................................................19
      13.4. Binding Effect, Etc.............................................20
      13.5. Descriptive Headings............................................20
      13.6. Counterparts....................................................20
      13.7. Severability....................................................20

14.   GOVERNING LAW, ETC....................................................20

      14.1. Governing Law...................................................20

      14.2. Consent to Jurisdiction.........................................20

      14.3. WAIVER OF JURY TRIAL............................................21

      14.4. Exercise of Rights and Remedies.................................21

                                       ii
<PAGE>

                             STOCKHOLDERS AGREEMENT

      The Stockholders Agreement (the "July 2000 Agreement") made as of July 27,
2000 by and among:

      (i)   SMTC Corporation (the "Company");

      (ii)  SMTC Manufacturing Corporation of Canada (f/k/a The Surface Mount
            Technology Centre, Inc.) ("SMTC-Canada");

      (iii) EMSIcon Investments ("EMSIcon"), LLC, Edward A. Johnson, James
            Holmes, J & E Enterprises, LLC, Allen & Company, Incorporated, Allen
            Value Partners, L.P., Allen Value Limited, Celerity EMSIcon, LLC,
            Bain Capital Fund VI, L.P., BCIP Associates II, BCIP Trust
            Associates II, BCIP Associates II-B, BCIP Associates II-C, BCM
            Capital Partners, L.P., Bain Capital V Mezzanine Fund, L.P., Sankaty
            High Yield Asset Partners, L.P., General Electric Capital
            Corporation, RGIP, LLC, J&L Investments, LLC ("J&L") and the members
            of Celerity EMSIcon, LLC listed on the signature pages thereto
            (collectively, the "HTM Investors");

      (iv)  P. N. Walker Consulting Inc., Paul Walker, Nichal Inc., Derek
            D'Andrade, Gary Walker, Philip Woodard and Kilmer Electronics Group
            Limited (collectively, the "SMTC Investors");

      (v)   Edward A. Johnson, James Laurion and each Person who, upon acquiring
            Shares in connection with the exercise of Options granted by the
            Company, became party hereto by executing a counterpart signature
            page thereto (collectively, the "Managers"),

      (vi)  Stanley C. Plzak, William M. Moeller, Richard V. Baxter, David E.
            Steel and Bruce D. Backer (collectively, the "Pensar Investors)"

is hereby amended and restated in its entirety pursuant to Section 11.2 of the
July 2000 Agreement by written agreement of the Majority Stockholders (as such
term is defined in the July 2000 Agreement) in the form of this Stockholders
Agreement (July 2000 Agreement as amended and restated hereby is referred to
herein as the "Agreement") as of November 22, 2000 to read as follows:

                                    Recitals

1. Pursuant to the terms of a Stock Purchase Agreement dated November 22, 2000,
the Company intends to acquire the capital stock of Qualtron Teoranta, an Irish
corporation ("Qualtron") and, in connection with such acquisition, the Sellers
(as defined in such Stock Purchase Agreement, and for purposes of this agreement
the "Qualtron Investors") will acquire Exchangeable Shares in consideration of
their interests in the capital stock of Qualtron.
<PAGE>

2. The parties desire to amend and restate the July 2000 Agreement on the date
hereof to add the Qualtron Investors as parties to this Agreement.

3. It is a condition to the closing of the acquisition of Qualtron that the
Qualtron Investors execute a counterpart signature page to this Agreement as
"Qualtron Investors."

                                    Agreement

      Therefore, the parties hereto hereby agree as follows:

1. EFFECTIVENESS; DEFINITIONS.

      1.2. Effectiveness. This Agreement shall become effective upon the closing
of the acquisition of Qualtron.

      1.3. Definitions. Certain terms are used in this Agreement as specifically
defined herein. These definitions are set forth or referred to in Section 12
hereof.

2. [RESERVED].

3. [RESERVED].

4. [RESERVED].

5. [RESERVED].

6. REGISTRATION RIGHTS. The Company will perform and comply, and cause each of
its subsidiaries to perform and comply, with such of the following provisions as
are applicable to it. Each holder of Shares will perform and comply with such of
the following provisions as are applicable to such holder.

      6.1. Majority Investor Demand Registration Rights.

            6.1.1. General. The Majority Stockholders (for purposes of this
      Section 6.1, "Initiating Investors"), by notice to the Company specifying
      the intended method or methods of disposition, may request that the
      Company effect the registration under the Securities Act for a Public
      Offering of all or a specified part of the Registrable Securities (x) held
      by such Initiating Investors or (y) issuable to such Initiating Investors
      upon Conversion of any Exchangeable Shares held by such Initiating
      Investors. The Company will then use its best efforts to effect the
      registration under the Securities Act of the Registrable Securities which
      the Company has been requested to register by such Initiating Investors
      together with all other Registrable Securities which the Company has been
      requested to register pursuant to Section 6.3 all to the extent requisite
      to permit the disposition (in accordance with the intended methods thereof
      as aforesaid) of the Registrable Securities which the Company has been so
      requested to register; provided, however, that the Company shall not be
      obligated to take any action to effect any such registration pursuant to
      this Section 6.1.1:

                                     - 2 -
<PAGE>

                  6.1.1.1. Within 180 days immediately following the effective
            date of any registration statement pertaining to an underwritten
            public offering of securities of the Company for its own account
            (other than a Rule 145 Transaction, or a registration relating
            solely to employee benefit plans); or

                  6.1.1.2. On any form other than Form S-3 (or any successor
            form) if the Company has previously effected three or more
            registrations of Registrable Securities under this Section 6.1.1 on
            any form other than Form S-3 (or any successor form); provided,
            however, that no registrations of Registrable Securities which shall
            not have become and remained effective in accordance with the
            provisions of this Section 6, and no registrations of Registrable
            Securities pursuant to which the Initiating Investors are not able
            to include at least 90% of the Registrable Securities which they
            desired to include, shall be included in the calculation of numbers
            of registrations contemplated by this clause (b).

            6.1.2. Form. Except as otherwise provided above, each registration
      requested pursuant to this Section 6.1.1 shall be effected by the filing
      of a registration statement on Form S-1 (or any other form which includes
      substantially the same information as would be required to be included in
      a registration statement on such form as currently constituted), unless
      the use of a different form has been agreed to in writing by holders of at
      least a majority of the Registrable Securities to be included in the
      proposed registration statement in question by the Initiating Investors
      (the "Majority Participating Stockholders").

            6.1.3. Payment of Expenses. The Company shall pay all reasonable
      expenses of the Initiating Investors incurred in connection with each
      registration of Registrable Securities requested pursuant to this Section
      6.1, other than underwriting discount and commission, if any, and
      applicable transfer taxes, if any.

            6.1.4. Additional Procedures. In the case of a registration pursuant
      to Section 6.1, whenever the Majority Participating Stockholders shall
      request that such registration shall be effected pursuant to an
      underwritten offering, the Company shall include such information in the
      written notices to holders of Registrable Securities and Convertible
      Securities referred to in Section 6.3. In such event, the right of any
      holder of Registrable Securities to have securities owned by such holder
      included in such registration pursuant to Section 6.1 shall be conditioned
      upon such holder's participation in such underwriting and the inclusion of
      such holder's Registrable Securities in the underwriting (unless otherwise
      mutually agreed upon by the Majority Participating Stockholders and such
      holder). If requested by such underwriters, the Company together with the
      holders of Registrable Securities proposing to distribute their securities
      through such underwriting will enter into an underwriting agreement with
      such underwriters for such offering containing such representations and
      warranties by the Company and such holders and such other terms and
      provisions as are customarily contained in underwriting agreements with
      respect to secondary distributions, including, without limitation,
      customary indemnity and contribution provisions (subject, in each case, to
      the limitations on such liabilities set forth in this Agreement).

                                     - 3 -
<PAGE>

      6.2. Investors' Demand Registration Rights.

            6.2.1. General. From and after July 30, 2003, each of the Majority
      Bain Investors, the Majority Celerity Investors and the Majority SMTC
      Investors, in each case, holding Shares that constitute at least 15% of
      the Registrable Securities (for purposes of this Section 6.2, "Initiating
      Investors"), by notice to the Company specifying the intended method or
      methods of disposition, may request that the Company effect the
      registration under the Securities Act for a Public Offering of all or a
      specified part of the Registrable Securities (x) held by such Initiating
      Investors or (y) issuable to such Initiating Investor upon Conversion of
      any Exchangeable Shares held by such Initiating Investor. The Company will
      then use its best efforts to effect the registration under the Securities
      Act of the Registrable Securities which the Company has been requested to
      register by such Initiating Investors together with all other Registrable
      Securities which the Company has been requested to register pursuant to
      Section 6.3 all to the extent requisite to permit the disposition (in
      accordance with the intended methods thereof as aforesaid) of the
      Registrable Securities which the Company has been so requested to
      register; provided, however, that the Company shall not be obligated to
      take any action to effect any such registration pursuant to this Section
      6.2.1:

                  6.2.1.1. Within 180 days immediately following the effective
            date of any registration statement pertaining to an underwritten
            public offering of securities of the Company for its own account
            (other than a Rule 145 Transaction, or a registration relating
            solely to employee benefit plans); or

                  6.2.1.2. On any form other than Form S-3 (or any successor
            form) if the Company has previously effected three or more
            registrations of Registrable Securities under this Section 6.2.1 on
            any form other than Form S-3 (or any successor form); provided,
            however, that no registrations of Registrable Securities which shall
            not have become and remained effective in accordance with the
            provisions of this Section 6, and no registrations of Registrable
            Securities pursuant to which the Initiating Investors are not able
            to include at least 90% of the Registrable Securities which they
            desired to include, shall be included in the calculation of numbers
            of registrations contemplated by this clause (b).

            6.2.2. Form. Except as otherwise provided above, each registration
      requested pursuant to this Section 6.2.1 shall be effected by the filing
      of a registration statement on Form S-1 (or any other form which includes
      substantially the same information as would be required to be included in
      a registration statement on such form as currently constituted), unless
      the use of a different form has been agreed to in writing by holders of at
      least a majority of the Registrable Securities to be included in the
      proposed registration statement in question by the Initiating Investors
      (the "Majority Participating Stockholders").

            6.2.3. Payment of Expenses. The Company shall pay all reasonable
      expenses of the Initiating Investors incurred in connection with each
      registration of Registrable Securities requested pursuant to this Section
      6.2, other than underwriting discount and commission, if any, and
      applicable transfer taxes, if any.

                                     - 4 -
<PAGE>

            6.2.4. Additional Procedures. In the case of a registration pursuant
      to Section 6.2, whenever the Majority Participating Stockholders shall
      request that such registration shall be effected pursuant to an
      underwritten offering, the Company shall include such information in the
      written notices to holders of Registrable Securities and Convertible
      Securities referred to in Section 6.3. In such event, the right of any
      holder of Registrable Securities to have securities owned by such holder
      included in such registration pursuant to Section 6.2 shall be conditioned
      upon such holder's participation in such underwriting and the inclusion of
      such holder's Registrable Securities in the underwriting (unless otherwise
      mutually agreed upon by the Majority Participating Stockholders and such
      holder). If requested by such underwriters, the Company together with the
      holders of Registrable Securities proposing to distribute their securities
      through such underwriting will enter into an underwriting agreement with
      such underwriters for such offering containing such representations and
      warranties by the Company and such holders and such other terms and
      provisions as are customarily contained in underwriting agreements with
      respect to secondary distributions, including, without limitation,
      customary indemnity and contribution provisions (subject, in each case, to
      the limitations on such liabilities set forth in this Agreement).

      6.3. Piggyback Registration Rights.

            6.3.1. General. Each time the Company proposes to register any
      shares of Common Stock under the Securities Act on a form which would
      permit registration of Registrable Securities for sale to the public, for
      its own account and/or for the account of any stockholder (pursuant to
      Section 6.1, Section 6.2 or otherwise) for sale in a Public Offering, the
      Company will give notice to all holders of Registrable Securities and
      holders of Convertible Securities of its intention to do so. Any such
      holder may, by written response delivered to the Company within 20 days
      after the effectiveness of such notice, request that all or a specified
      part of the Registrable Securities (a) held by such holder or (b) issuable
      to such holder upon Conversion of Exchangeable Shares held by such holder
      be included in such registration. The Company thereupon will use its
      reasonable efforts to cause to be included in such registration under the
      Securities Act all shares of Common Stock which the Company has been so
      requested to register by such holders, to the extent required to permit
      the disposition (in accordance with the methods to be used by the Company
      or other holders of shares of Common Stock in such Public Offering) of the
      Registrable Securities to be so registered. No registration of Registrable
      Securities effected under this Section 6.3 shall relieve the Company of
      any of its obligations to effect registrations of Registrable Securities
      pursuant to Section 6.1 or Section 6.2.

            6.3.2. Excluded Transactions. The Company shall not be obligated to
      effect any registration of Registrable Securities under this Section 6.3
      incidental to the registration of any of its securities in connection
      with:

                  6.3.2.1. Any Public Offering relating to employee benefit
            plans or dividend reinvestment plans;

                                     - 5 -
<PAGE>

                  6.3.2.2. Any Public Offering relating to the acquisition or
            merger after the date hereof by the Company or any of its
            subsidiaries of or with any other businesses; or

                  6.3.2.3. The Initial Public Offering and the Qualified Public
            Offering, unless such Public Offering has been initiated pursuant to
            Section 6.1.1 or 6.2.1.

            6.3.3. Payment of Expenses. The Company shall pay all reasonable
      expenses of a single legal counsel representing any and all holders of
      Registrable Securities incurred in connection with each registration of
      Registrable Securities requested pursuant to this Section 6.3.

            6.3.4. Additional Procedures. Holders of Shares participating in any
      Public Offering pursuant to this Section 6.3 shall take all such actions
      and execute all such documents and instruments that are reasonably
      requested by the Company to effect the sale of their Shares in such Public
      Offering, including, without limitation, being parties to the underwriting
      agreement entered into by the Company and any other selling shareholders
      in connection therewith and being liable in respect of the representations
      and warranties by, and the other agreements (including without limitation
      customary selling stockholder representations, warranties,
      indemnifications and "lock-up" agreements) for the benefit of the
      underwriters; provided, however, that (a) with respect to individual
      representations, warranties, indemnities and agreements of sellers of
      Shares in such Public Offering, the aggregate amount of such liability
      shall not exceed such holder's net proceeds from such offering and (b) to
      the extent selling stockholders give further representations, warranties
      and indemnities, then with respect to all other representations,
      warranties and indemnities of sellers of shares in such Public Offering,
      the aggregate amount of such liability shall not exceed the lesser of (i)
      such holder's pro rata portion of any such liability, in accordance with
      such holder's portion of the total number of Shares included in the
      offering or (ii) such holder's net proceeds from such offering.

      6.4. Certain Other Provisions.

            6.4.1. Underwriter's Cutback. In connection with any registration of
      shares, the underwriter may determine that marketing factors (including,
      without limitation, an adverse effect on the per share offering price)
      require a limitation of the number of shares to be underwritten.
      Notwithstanding any contrary provision of this Section 6 and subject to
      the terms of this Section 6.4.1, the underwriter may limit the number of
      shares which would otherwise be included in such registration by excluding
      any or all Registrable Securities from such registration (it being
      understood that the number of shares which the Company seeks to have
      registered in such registration shall not be subject to exclusion, in
      whole or in part, under this Section 6.4.1). Upon receipt of notice from
      the underwriter of the need to reduce the number of shares to be included
      in the registration, the Company shall advise all holders of the Company's
      securities that would otherwise be registered and underwritten pursuant
      hereto, and the number of shares of such securities, including Registrable
      Securities, that may be included in the registration shall be allocated in
      the following manner, unless the underwriter shall determine that
      marketing

                                     - 6 -
<PAGE>

      factors require a different allocation: shares, other than Registrable
      Securities, requested to be included in such registration by shareholders
      shall be excluded to the extent necessary to achieve the underwriter's
      cutback unless the Company has, with the consent of the Majority
      Stockholders, granted registration rights which are to be treated on an
      equal basis with Registrable Securities for the purpose of the exercise of
      the underwriter cutback; and, if a limitation on the number of shares is
      still required, the number of Registrable Securities and other shares of
      Common Stock that may be included in such registration shall be allocated
      among holders thereof in proportion, as nearly as practicable, to the
      respective amounts of Common Stock which each shareholder requested be
      registered in such registration. For purposes of any underwriter cutback,
      all Common Stock held by any holder of Registrable Securities which is a
      partnership or corporation shall also include any Common Stock held by the
      partners, retired partners, shareholders or affiliated entities of such
      holder, or the estates and family members of any such partners and retired
      partners and any trusts for the benefit of any of the foregoing persons,
      and such holder and other persons shall be deemed to be a single selling
      holder, and any pro rata reduction with respect to such selling holder
      shall be based upon the aggregate amount of Common Stock owned by all
      entities and individuals included in such selling holder, as defined in
      this sentence. No securities excluded from the underwriting by reason of
      the underwriter's marketing limitation shall be included in such
      registration. If any holder of Registrable Securities disapproves of the
      terms of the underwriting, it may elect to withdraw therefrom by written
      notice to the Company and the underwriter. The Registrable Securities so
      withdrawn shall also be withdrawn from registration.

            6.4.2. Other Actions. If and in each case when the Company is
      required to use its best efforts to effect a registration of any
      Registrable Securities as provided in this Section 6, the Company shall
      take appropriate and customary actions in furtherance thereof, including,
      without limitation: (a) promptly filing with the Commission a registration
      statement and using reasonable efforts to cause such registration
      statement to become effective, (b) preparing and filing with the
      Commission such amendments and supplements to such registration statements
      as may be required to comply with the Securities Act and to keep such
      registration statement effective for a period not to exceed 270 days from
      the date of effectiveness or such earlier time as the Registrable
      Securities covered by such registration statement shall have been disposed
      of in accordance with the intended method of distribution therefor or the
      expiration of the time when a prospectus relating to such registration is
      required to be delivered under the Securities Act, (c) use its best
      efforts to register or qualify such Registrable Securities under the state
      securities or "blue sky" laws of such jurisdictions as the sellers shall
      reasonably request; provided, however, that the Company shall not be
      obligated to file any general consent to service of process or to qualify
      as a foreign corporation in any jurisdiction in which it is not so
      qualified or to subject itself to taxation in respect of doing business in
      any jurisdiction in which it would not otherwise be so subject and (d)
      otherwise cooperate reasonably with, and take such customary actions as
      may reasonably be requested by the holders of Registrable Securities in
      connection with, such registration.

            6.4.3. Selection of Underwriters and Counsel. The underwriters and
      legal counsel to be retained in connection with any Public Offering shall
      be selected by the

                                     - 7 -
<PAGE>

      Board or, in the case of an offering following a request therefor under
      Section 6.1, the Initiating Investors.

            6.4.4. Lock-Up. Without the prior written consent of the
      underwriters managing any Public Offering, for a period beginning seven
      days immediately preceding and ending on the 90th day (or, in the case of
      the Initial Public Offering, the 180th day) following the effective date
      of the registration statement used in connection with such offering, no
      holder of Shares (whether or not a selling shareholder pursuant to such
      registration statement) shall (a) offer, pledge, sell, contract to sell,
      sell any option or contract to purchase, purchase any option or contract
      to sell, grant any option, right or warrant to purchase, lend, or
      otherwise Transfer, directly or indirectly, any shares of Common Stock or
      any securities convertible into or exercisable or exchangeable for such
      Common Stock or (b) enter into any swap or other arrangement that
      transfers to another, in whole or in part, any of the economic
      consequences of ownership of Common Stock, whether any such transaction
      described in clause (a) or (b) above is to be settled by delivery of such
      Common Stock or such other securities, in cash or otherwise; provided,
      however, that the foregoing restrictions shall not apply to (i)
      transactions relating to shares of Common Stock or other securities
      acquired in open market transactions after the completion of the Initial
      Public Offering, (ii) Transfers to a Permitted Transferee of such holder
      or (iii) Conversions of Exchangeable Shares or conversions or exchanges of
      shares of Common Stock into other classes of Common Stock, in either case
      without change of holder, (iv) transfers of Common Stock to any of the
      Pensar Investors, the Company or its affiliates pursuant to the Escrow
      Agreement dated July 27, 2000 among the Company, the Pensar Investors and
      Brown Brothers Harriman & Co., as Escrow Agents or (v) transfer of
      Exchangeable Shares to any of the Qualtron Investors, the Company or its
      affiliates pursuant to the Escrow Agreement dated on or about the date
      hereof among the Company, the Qualtron Investors and Brown Brothers
      Harriman & Co., as Escrow Agent.

      6.5. Indemnification and Contribution.

            6.5.1. Indemnities of the Company. In the event of any registration
      of any Registrable Securities or other debt or equity securities of the
      Company or any of its subsidiaries under the Securities Act pursuant to
      this Section 6 or otherwise, and in connection with any registration
      statement or any other disclosure document produced by or on behalf of the
      Company or any of its subsidiaries including, without limitation, reports
      required and other documents filed under the Exchange Act, and other
      documents pursuant to which any debt or equity securities of the Company
      or any of its subsidiaries are sold (whether or not for the account of the
      Company or its subsidiaries), the Company will, and hereby does, and will
      cause each of its subsidiaries, jointly and severally, to indemnify and
      hold harmless each seller of Registrable Securities, any Person who is or
      might be deemed to be a controlling Person of the Company or any of its
      subsidiaries within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act, their respective direct and indirect
      partners, advisory board members, directors, officers, trustees, members
      and shareholders, and each other Person, if any, who controls any such
      seller or any such holder within the meaning of Section 15 of the
      Securities Act or Section 20 of the Exchange Act (each such person being
      referred to herein as a

                                     - 8 -
<PAGE>

      "Covered Person"), against any losses, claims, damages or liabilities (or
      actions or proceedings in respect thereof), joint or several, to which
      such Covered Person may be or become subject under the Securities Act, the
      Exchange Act, any other securities or other law of any jurisdiction, the
      common law or otherwise, insofar as such losses, claims, damages or
      liabilities (or actions or proceedings in respect thereof) arise out of or
      are based upon (a) any untrue statement or alleged untrue statement of any
      material fact contained or incorporated by reference in any registration
      statement under the Securities Act, any preliminary prospectus or final
      prospectus included therein, or any related summary prospectus, or any
      amendment or supplement thereto, or any document incorporated by reference
      therein, or any other such disclosure document (including without
      limitation reports and other documents filed under the Exchange Act and
      any document incorporated by reference therein) or other document or
      report, (b) any omission or alleged omission to state therein a material
      fact required to be stated therein or necessary to make the statements
      therein not misleading or (c) any violation or alleged violation by the
      Company or any of its subsidiaries of any federal, state, foreign or
      common law rule or regulation applicable to the Company or any of its
      subsidiaries and relating to action or inaction in connection with any
      such registration, disclosure document or other document or report, and
      will reimburse such Covered Person for any legal or any other expenses
      incurred by it in connection with investigating or defending any such
      loss, claim, damage, liability, action or proceeding; provided, however,
      that neither the Company nor any of its subsidiaries shall be liable to
      any Covered Person in any such case to the extent that any such loss,
      claim, damage, liability, action or proceeding arises out of or is based
      upon an untrue statement or alleged untrue statement or omission or
      alleged omission made in such registration statement, any such preliminary
      prospectus, final prospectus, summary prospectus, amendment or supplement,
      incorporated document or other such disclosure document or other document
      or report, in reliance upon and in conformity with written information
      furnished to the Company or to any of its subsidiaries through an
      instrument duly executed by such Covered Person specifically stating that
      it is for use in the preparation thereof. The indemnities of the Company
      and of its subsidiaries contained in this Section 6.5.1 shall remain in
      full force and effect regardless of any investigation made by or on behalf
      of such Covered Person and shall survive any transfer of securities.

            6.5.2. Indemnities to the Company. The Company and any of its
      subsidiaries may require, as a condition to including any securities in
      any registration statement filed pursuant to this Section 6, that the
      Company and any of its subsidiaries shall have received an undertaking
      satisfactory to it from the prospective seller of such securities, to
      indemnify and hold harmless the Company and any of its subsidiaries, each
      director of the Company or any of its subsidiaries, each officer of the
      Company or any of its subsidiaries who shall sign such registration
      statement and each other Person (other than such seller), if any, who
      controls the Company and any of its subsidiaries within the meaning of
      Section 15 of the Securities Act or Section 20 of the Exchange Act and
      each other prospective seller of such securities with respect to any
      statement in or omission from such registration statement, any preliminary
      prospectus, final prospectus or summary prospectus included therein, or
      any amendment or supplement thereto, or any other disclosure document
      (including, without limitation, reports and other documents filed under
      the Exchange Act or any document incorporated therein) or other document

                                     - 9 -
<PAGE>

      or report, if such statement or omission was made in reliance upon and in
      conformity with written information furnished to the Company or any of its
      subsidiaries through an instrument executed by such seller specifically
      stating that it is for use in the preparation of such registration
      statement, preliminary prospectus, final prospectus, summary prospectus,
      amendment or supplement, incorporated document or other document or
      report. Such indemnity shall remain in full force and effect regardless of
      any investigation made by or on behalf of the Company, any of its
      subsidiaries or any such director, officer or controlling Person and shall
      survive any transfer of securities.

            6.5.3. Contribution. If the indemnification provided for in Sections
      6.5.1 or 6.5.2 is unavailable to a party that would have been entitled to
      indemnification pursuant to the foregoing provisions of this Section 6.5
      (an "Indemnitee") in respect of any losses, claims, damages or liabilities
      (or actions or proceedings in respect thereof) referred to therein, then
      each party that would have been an indemnifying party thereunder shall, in
      lieu of indemnifying such Indemnitee, contribute to the amount paid or
      payable by such Indemnitee as a result of such losses, claims, damages or
      liabilities (or actions or proceedings in respect thereof) in such
      proportion as is appropriate to reflect the relative fault of such
      indemnifying party on the one hand and such Indemnitee on the other in
      connection with the statements or omissions which resulted in such losses,
      claims, damages or liabilities (or actions or proceedings in respect
      thereof). The relative fault shall be determined by reference to, among
      other things, whether the untrue or alleged untrue statement of a material
      fact or the omission or alleged omission to state a material fact relates
      to information supplied by such indemnifying party or such Indemnitee and
      the parties' relative intent, knowledge, access to information and
      opportunity to correct or prevent such statement or omission. The parties
      agree that it would not be just or equitable if contribution pursuant to
      this Section 6.5.3 were determined by pro rata allocation or by any other
      method of allocation which does not take account of the equitable
      considerations referred to in the preceding sentence. The amount paid or
      payable by a contributing party as a result of the losses, claims, damages
      or liabilities (or actions or proceedings in respect thereof) referred to
      above in this Section 6.5.3 shall include any legal or other expenses
      reasonably incurred by such Indemnitee in connection with investigating or
      defending any such action or claim. No Person guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities
      Act) shall be entitled to contribution from any Person who was not guilty
      of such fraudulent misrepresentation.

            6.5.4. Limitation on Liability of Holders of Registrable Securities.
      The liability of each holder of Registrable Securities in respect of any
      indemnification or contribution obligation of such holder arising under
      this Section 6.5 shall not in any event exceed an amount equal to the net
      proceeds to such holder (after deduction of all underwriters' discounts
      and commissions) from the disposition of the Registrable Securities
      disposed of by such holder pursuant to such registration.

7. TRANSFERS TO OTHER HOLDERS. Shares Transferred by a holder of Shares to
another holder of shares under this Agreement shall be deemed for all purposes
hereof to be HTM Shares, SMTC Shares, Pensar Shares, Qualtron Shares, or the
Management Shares hereunder, of like kind with the other Shares held by the
acquiring holder.

                                     - 10 -
<PAGE>

8. REMEDIES.

      8.1. Generally. To the extent permitted by applicable law, the Company and
each holder of Shares shall have all remedies at law, in equity or otherwise in
the event of any breach or violation of this Agreement or any default hereunder
by the Company or any holder of Shares. The parties acknowledge and agree that
in the event of any breach of this Agreement, in addition to any other remedies
which may be available, each of the parties hereto shall be entitled to specific
performance of the obligations of the other parties hereto and, in addition, to
such other equitable remedies (including, without limitation, preliminary or
temporary relief) as may be appropriate in the circumstances.

      8.2. [RESERVED].

9. LEGENDS.

      9.1. [RESERVED].

      9.2. 1933 Act Legends. Each certificate representing Shares shall have the
following legend endorsed conspicuously thereupon:

      The securities represented by this certificate were issued in a private
placement, without registration under the Securities Act of 1933, as amended
(the "Act"), and may not be sold, assigned, pledged or otherwise transferred in
the absence of an effective registration under the Act covering the transfer or
an opinion of counsel, satisfactory to the issuer, that registration under the
Act is not required.

      9.3. Stop Transfer Instruction. The Company will instruct any transfer
agent not to register the Transfer of any Shares until the conditions specified
in the foregoing legends are satisfied.

      9.4. Termination of 1933 Act Legend. The requirement imposed by Section
9.2 shall cease and terminate as to any particular Shares (a) when, in the
opinion of Ropes & Gray, or other counsel reasonably acceptable to the Company,
such legend is no longer required in order to assure compliance by the Company
with the Securities Act or (b) when such Shares have been effectively registered
under the Securities Act or transferred pursuant to Rule 144. Wherever (x) such
requirement shall cease and terminate as to any Shares or (y) such Shares shall
be transferable under paragraph (k) of Rule 144, the holder thereof shall be
entitled to receive from the Company, without expense, new certificates not
bearing the legend set forth in Section 9.2.

10. [RESERVED].

11. AMENDMENT, TERMINATION, ETC.

      11.1. Oral Modifications. This Agreement may not be orally amended,
modified, extended or terminated, nor shall any oral waiver of any of its terms
be effective.

      11.2. Written Modifications. This Agreement may be amended, modified,
extended or terminated, and the provisions hereof may be waived, only by an
agreement in writing signed by

                                     - 11 -
<PAGE>

the Majority Stockholders; provided, however, that (a) the consent of the
Majority HTM Investors shall be required for any amendment, modification,
extension, termination or waiver which has a material adverse effect on the
rights of the holders of HTM Shares as such under this Agreement, (b) the
consent of the Majority SMTC Investors shall be required for any amendment,
modification, extension, termination or waiver which has a material adverse
effect on the rights of the holders of SMTC Shares as such under this Agreement,
(c) the consent of the Majority Pensar Investors shall be required for any
amendment, modification, extension, termination or waiver which has a material
adverse effect on the rights of the holders of Pensar Shares as such under this
Agreement (d) the consent of the Majority Qualtron Investors shall be required
for any amendment, modification, extension, termination or waiver which has a
material adverse effect on the rights of the holders of Qualtron Shares as such
under this Agreement and (e) the consent of the Majority Managers shall be
required for any amendment, modification, extension, termination or waiver which
has a material adverse effect on the rights of the holders of Management Shares
as such under this Agreement. Each such amendment, modification, extension,
termination and waiver shall be binding upon each party hereto and each holder
of Shares subject hereto. In addition, each party hereto and each holder of
Shares subject hereto may waive any right hereunder by an instrument in writing
signed by such party or holder.

      11.3. Termination. No termination under this Agreement shall relieve any
Person of liability for breach prior to termination.

12. DEFINITIONS. For purposes of this Agreement:

      12.1. Certain Matters of Construction. In addition to the definitions
referred to or set forth below in this Section 12:

            (a) The words "hereof", "herein", "hereunder" and words of similar
      import shall refer to this Agreement as a whole and not to any particular
      Section or provision of this Agreement, and, unless otherwise provided,
      reference to a particular Section shall refer to the applicable Section of
      this Agreement and shall include all subsections thereof;

            (b) Definitions shall be equally applicable to both nouns and verbs
      and the singular and plural forms of the terms defined; and

            (c) The masculine, feminine and neuter genders shall each include
      the other.

      12.2. Definitions. The following terms shall have the following meanings:

      "Agreement" shall have the meaning set forth in the Preamble.

      "Bain Equity Funds" shall mean, collectively, Bain Capital Fund VI, L.P.,
BCIP Associates II, BCIP Trust Associates II, BCIP Associates II-B and BCIP
Associates II-C.

      "Bain Investors" shall mean, collectively, Bain Capital Fund VI, L.P.,
BCIP Associates II, BCIP Trust Associates II, BCIP Associates II-B, BCIP
Associates II-C, Bain Capital V Mezzanine Fund, L.P., BCM Capital Partners,
L.P., Sankaty High Yield Asset Partners, L.P.

                                     - 12 -
<PAGE>

      The "Beneficial Owner" of any Share shall be the owner of such Share and,
in the case of any Share owned by EMSIcon, the owner of the membership unit of
EMSIcon corresponding to such Share. The terms "Beneficial Ownership" and
"Beneficially Owned" shall have a corresponding meaning.

      "Celerity Investor" shall mean Celerity EMSIcon, LLC. "Commission" shall
mean the Securities and Exchange Commission.

      "Common Stock" shall mean the common stock, par value $.01, of the
Company.

      "Company" shall have the meaning set forth in the Preamble.

      "Conversion" shall mean the Transfer of an Exchangeable Share to the
Company or one of its subsidiaries in consideration of the receipt of Common
Stock whether pursuant to the Articles of Incorporation (as amended from time to
time) of SMTC-Canada, any agreement relating generally to the conversion of
Exchangeable Shares or otherwise, and "Convert" shall have a similar meaning.

      "Convertible Securities" shall mean any evidence of indebtedness, shares
of stock (other than Common Stock) or other securities which are directly or
indirectly convertible into or exchangeable or exercisable for shares of Common
Stock, including without limitation the Exchangeable Shares.

      "Covered Person" shall have the meaning set forth in Section 6.5.1.

      "EMSIcon" shall have the meaning set forth in the Preamble.

      "Equivalent Shares" shall mean as to any outstanding shares of Common
Stock, such number of shares of Common Stock, and as to any outstanding Options
or Convertible Securities, the maximum number of shares of Common Stock for
which or into which such Options or Convertible Securities may at the time be
exercised, exchanged or converted.

      "Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect from time to time.

      "Exchangeable Shares" shall mean the exchangeable shares of SMTC-Canada.

      "HTM" shall have the meaning set forth in the Recitals.

      "HTM Investors" shall have the meaning set forth in the Preamble.

      "HTM Shares" shall mean (a) all shares of Common Stock originally issued
to, or issued with respect to shares originally issued to, or held by, an HTM
Investor, whenever issued, including, without limitation, all shares of Common
Stock issued pursuant to the exercise of any Convertible Securities and (b) all
Convertible Securities originally granted or issued to an HTM Investor. As to
any particular HTM Shares, such shares shall cease to be HTM Shares when (w) a
registration statement with respect to the sale of such securities shall have
become effective

                                     - 13 -
<PAGE>

under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (x) such securities shall have been
Transferred pursuant to Rule 144 or Rule 701, (y) subject to the provisions of
Section 9, such securities shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration of them under the Securities Act and such securities may be
distributed without volume limitation or other restrictions on transfer under
Rule 144 (including without application of paragraphs (c), (e), (f) and (h) of
Rule 144) or (z) such securities shall have ceased to be outstanding. Except as
otherwise provided in this Agreement, Convertible Securities shall be treated as
a number of Shares equal to the number of Equivalent Shares represented by such
Convertible Securities in all cases where it is necessary to calculate the
number of Shares held by any holder of HTM Shares.

      "Indemnitee" shall have the meaning set forth in Section 6.5.3.

      "Initial Public Offering" means the initial Public Offering registered on
Form S-1 (or any successor form under the Securities Act).

      "Initiating Investors" shall have the meaning set forth in Sections 6.1.1,
6.2.1.1 and 6.2.1.2.

      "J&L" shall have the meaning set forth in the Preamble.

      "Majority Bain Investors" shall mean, as of any date, the holders of a
majority of the Shares then Beneficially Owned by the Bain Investors.

      "Majority Celerity Investors" shall mean, as of any date, the holders of a
majority of the Shares then Beneficially Owned by the Celerity Investor.

      "Majority HTM Investors" shall mean, as of any date, the holders of a
majority of the HTM Shares outstanding on such date.

      "Majority Managers" shall mean, as of any date, the holders of a majority
of the Management Shares outstanding on such date.

      "Majority Participating Stockholders" shall have the meaning set forth in
Section 6.2.1.1 and 6.2.1.4.

      "Majority Qualtron Investors" shall mean, as of any date, the holders of a
majority of thre Qualtron Shares outstanding on such date.

      "Majority SMTC Investors" shall mean, as of any date, the holders of a
majority of the SMTC Shares outstanding on such date.

      "Majority Stockholders" shall mean, as of any date, the holders of a
majority of the Shares outstanding on such date.

                                     - 14 -
<PAGE>

      "Management Shares" shall mean (a) all shares of Common Stock originally
issued to, or issued with respect to shares originally issued to, or held by, a
Manager, whenever issued, including, without limitation, all shares of Common
Stock issued pursuant to the exercise of any Convertible Securities and (b) all
Convertible Securities originally granted or issued to a Manager. As to any
particular Management Shares, such shares shall cease to be Management Shares
when (w) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (x) such
securities shall have been Transferred pursuant to Rule 144 or Rule 701, (y)
subject to the provisions of Section 9, such securities shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration of them under the
Securities Act and such securities may be distributed without volume limitation
or other restrictions on transfer under Rule 144 (including without application
of paragraphs (c), (e), (f) and (h) of Rule 144) or (z) such securities shall
have ceased to be outstanding. Except as otherwise provided in this Agreement,
Convertible Securities shall be treated as a number of Shares equal to the
number of Equivalent Shares represented by such Convertible Securities in all
cases where it is necessary to calculate the number of Shares held by any holder
of Management Shares.

      "Managers" shall have the meaning set forth in the Preamble.

      "Options" shall mean Convertible Securities in the form of options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
other Convertible Securities.

      "Pensar Investors" shall have the meaning set forth in the Preamble.

      "Pensar Shares" shall mean (a) all shares of Common Stock originally
issued to, or issued with respect to shares originally issued to, or held by, a
Pensar Investor, whenever issued, including, without limitation, all shares of
Common Stock issued pursuant to the exercise of any Convertible Securities and
(b) all Convertible Securities originally granted or issued to a Pensar
Investor. As to any particular Pensar Shares, such shares shall cease to be
Pensar Shares when (w) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (x) such securities shall have been Transferred pursuant to Rule 144
or Rule 701, (y) subject to the provisions of Section 9, such securities shall
have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration of them under the
Securities Act and such securities may be distributed without volume limitation
or other restrictions on transfer under Rule 144 (including without application
of paragraphs (c), (e), (f) and (h) of Rule 144) or (z) such securities shall
have ceased to be outstanding. Except as otherwise provided in this Agreement,
Convertible Securities shall be treated as a number of Shares equal to the
number of Equivalent Shares represented by such Convertible Securities in all
cases where it is necessary to calculate the number of Shares held by any holder
of Pensar Shares.

                                     - 15 -
<PAGE>

      "Permitted Transferee" shall mean (a) with respect to any holder of Shares
who is a natural Person, each spouse or child or other descendants of such
holder, each trust created solely for the benefit of one or more of the
aforementioned Persons and their spouses and each custodian or guardian of any
property of one or more of the aforementioned Persons in his capacity as such
custodian or guardian (each such Person set forth in this clause (a), a "Member
of the Immediate Family"), (b) with respect to Shares held by a natural Person
and distributed by will or other instrument taking effect at death of such
holder or by applicable laws of descent and distribution, such holder's estate,
executors, administrators, personal representatives, heirs, legatees or
distributees whether or not such recipients are Members of the Immediate Family
of such holder and (c) with respect to any holder of Shares, an Affiliate of
such holder or the holders of the beneficial interests (which, for purposes of
this clause (c), shall be deemed to include, without limitation, its partners,
members or stockholders) of such holder; provided, however, that no Transferee
pursuant to the above clauses (a), (b) or (c) shall be a "Permitted Transferee"
unless such Transferee has delivered to the Company a written acknowledgment and
agreement in form and substance reasonably satisfactory to the Company that such
Shares to be received by such Transferee shall remain HTM Shares, SMTC Shares or
Management Shares hereunder, as the case may be, and shall continue to be
subject to all of the provisions of this Agreement and that such Transferee
shall be bound by, and shall be a party to, this Agreement as the holder of HTM
Shares, SMTC Shares or Management Shares, as the case may be; provided, further,
that no Transfer by any party to a Permitted Transferee shall relieve such party
of any of its obligations hereunder.

      "Person" shall mean any individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization, entity or
division, or any government, governmental department or agency or political
subdivision thereof.

      "Public Offering" shall mean a public offering and sale of Common Stock
for cash pursuant to an effective registration statement under the Securities
Act.

      "Qualified Public Offering" shall mean a Public Offering, other than any
Public Offering or sale pursuant to a registration statement on Form S-8 or
comparable form, in which the aggregate price to the public of all such common
stock sold in such offering shall exceed $55 million.

      "Qualtron" shall have the meaning set forth in the Recitals.

      "Qualtron Investor" shall have the meaning set forth in the Recitals.

      "Qualtron Shares" shall mean (a) all shares of Common Stock originally
issued to, or issued with respect to shares originally issued to, or held by, a
Qualtron Investor, whenever issued, including, without limitation, all shares of
Common Stock issued pursuant to the exercise of any Convertible Securities and
(b) all Convertible Securities originally granted or issued to a Qualtron
Investor. As to any particular Qualtron Shares, such shares shall cease to be
Qualtron Shares when (w) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (x) such securities shall have been Transferred pursuant to Rule 144
or Rule 701, (y) subject to the provisions of Section 9, such securities shall

                                     - 16 -
<PAGE>

have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration of them under the
Securities Act and such securities may be distributed without volume limitation
or other restrictions on transfer under Rule 144 (including without application
of paragraphs (c), (e), (f) and (h) of Rule 144) or (z) such securities shall
have ceased to be outstanding. Except as otherwise provided in this Agreement,
Convertible Securities shall be treated as a number of Shares equal to the
number of Equivalent Shares represented by such Convertible Securities in all
cases where it is necessary to calculate the number of Shares held by any holder
of Qualtron Shares.

      "Registrable Securities" shall mean (a) all shares of Common Stock, (b)
all shares of Common Stock issuable upon exercise of any Convertible Security
and (c) all shares of Common Stock directly or indirectly issued or issuable
with respect to the securities referred to in clauses (a) or (b) above by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, in each case
constituting Shares. As to any particular Registrable Securities, such shares
shall cease to be Registrable Securities when (w) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (x) such securities shall have been
Transferred pursuant to Rule 144 or Rule 701, (y) subject to the provisions of
Section 9, such securities shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration of them under the Securities Act and such securities may be
distributed without volume limitation or other restrictions on transfer under
Rule 144 (including without application of paragraphs (c), (e), (f) and (h) of
Rule 144) or (z) such securities shall have ceased to be outstanding.

      "Rule 144" shall mean Rule 144 under the Securities Act (or any successor
Rule).

      "Rule 145 Transaction" shall mean a registration on Form S-4 pursuant to
Rule 145 of the Securities Act (or any successor Form or provision, as
applicable).

      "Rule 701" shall mean Rule 701 under the Securities Act (or any successor
Rule).

      "Sale" shall mean any Transfer for value.

      "Securities Act" shall mean the Securities Act of 1933, as in effect from
time to time.

      "Shares" shall mean all HTM Shares, SMTC Shares, Pensar Shares, Qualtron
Shares and Management Shares.

      "SMTC" shall have the meaning set forth in the Recitals.

      "SMTC - Canada" shall have the meaning set forth in the Preamble.

      "SMTC Investors" shall have the meaning set forth in the Preamble.

                                     - 17 -
<PAGE>

      "SMTC Shares" shall mean (a) all shares of Common Stock originally issued
to, or issued with respect to shares originally issued to, or held by, an SMTC
Investor, whenever issued, including, without limitation, all shares of Common
Stock issued pursuant to the exercise of any Convertible Securities and (b) all
Convertible Securities originally granted or issued to an SMTC Investor. As to
any particular SMTC Shares, such shares shall cease to be SMTC Shares when (w) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (x) such securities
shall have been Transferred pursuant to Rule 144 or Rule 701, (y) subject to the
provisions of Section 9, such securities shall have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent disposition of them
shall not require registration of them under the Securities Act and such
securities may be distributed without volume limitation or other restrictions on
transfer under Rule 144 (including without application of paragraphs (c), (e),
(f) and (h) of Rule 144) or (z) such securities shall have ceased to be
outstanding. Except as otherwise provided in this Agreement, Convertible
Securities shall be treated as a number of Shares equal to the number of
Equivalent Shares represented by such Convertible Securities in all cases where
it is necessary to calculate the number of Shares held by any holder of SMTC
Shares.

      "Stockholders" shall mean the HTM Investors, the SMTC Investors, the
Managers, the Pensar Investors and the Qualtron Investors.

      "Transfer" shall mean any sale, pledge, assignment, encumbrance or other
transfer or disposition of any Shares to any other Person, whether directly,
indirectly, voluntarily, involuntarily, by operation of law, pursuant to
judicial process or otherwise.

13. MISCELLANEOUS.

      13.1. Expenses of EMSIcon Transfers. In connection with any Transfer of
Shares by EMSIcon to the Beneficial Owner of such Shares, the Company will pay,
or cause one of its subsidiaries to pay, on behalf of EMSIcon or any such
Beneficial Owner, all fees payable to governmental authorities relating to
securities regulation and anti-trust enforcement in connection with, or
resulting from, such Transfer.

      13.2. Authority; Effect. Each party hereto represents and warrants to and
agrees with each other party that the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized on behalf of such party and do not violate any agreement or other
instrument applicable to such party or by which its assets are bound. This
Agreement does not, and shall not be construed to, give rise to the creation of
a partnership among any of the parties hereto, or to constitute any of such
parties members of a joint venture or other association.

                                     - 18 -
<PAGE>

      13.3. Notices. Any notices and other communications required or permitted
in this Agreement shall be effective if in writing and (a) delivered personally
or (b) sent (i) by FederalExpress, DHL or UPS or (ii) by registered or certified
mail, postage prepaid, in each case, addressed as follows:

            If to the Company to it:

                  c/o EMSIcon

            with a copy to:

                  SMTC Manufacturing Corporation of Canada
                  625 Hood Road
                  Markham, Ontario L3R 4N6
                  Canada
                  Attention: President

            If to EMSIcon, to it:

                   c/o Bain Capital, Inc.
                   Two Copley Place, 7th Floor
                   Boston, MA 02116
                   Attention: Stephen G. Pagliuca
                              Ian K. Loring

            with copies to:

                   Celerity Management Co., Inc.
                   11111 Santa Monica Boulevard, Suite 1127
                   Los Angeles, CA 90025
                   Attention: Stephen E. Adamson

                   and

                   Ropes & Gray
                   One International Place
                   Boston, Massachusetts 02110
                   Attention: Alfred O. Rose, Esq.

                   and

                   Brownstein, Hyatt & Farber, P.C.
                   410 Seventeenth Street
                   22nd Floor
                   Denver, CO 80202-4437
                   Attention: Jacquelyn Kilmer, Esq.

                                     - 19 -
<PAGE>

      If to any other holder of Shares, to him at the address set forth in the
stock record book of the Company.

      Notice to the holder of record of any shares of capital stock shall be
deemed to be notice to the holder of such shares for all purposes hereof.

      Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date received, if personally delivered, (b)
two business days after being sent by Federal Express, DHL or UPS and (c) three
business days after deposit with the U.S. Postal Service, if sent by registered
or certified mail. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to each of the other parties
hereto.

      13.4. Binding Effect, Etc. Except for restrictions on Transfer of Shares
set forth in other agreements, plans or other documents, this Agreement
constitutes the entire agreement of the parties with respect to its subject
matter, supersedes all prior or contemporaneous oral or written agreements or
discussions with respect to such subject matter, and shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. Upon execution by any party, this
Agreement shall become a valid and binding obligation of such party
notwithstanding the failure of any Stockholder to execute this Agreement.

      13.5. Descriptive Headings. The descriptive headings of this Agreement are
for convenience of reference only, are not to be considered a part hereof and
shall not be construed to define or limit any of the terms or provisions hereof.

      13.6. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.

      13.7. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law. The
provisions hereof are severable, and in the event any provision hereof should be
held invalid or unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof.

14. GOVERNING LAW, ETC.

      14.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of Delaware without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.

      14.2. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction
of the state courts of the United States District Court for the District of
Delaware for the purpose of any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based

                                     - 20 -
<PAGE>

upon this Agreement or relating to the subject matter hereof, (b) hereby waives
to the extent not prohibited by applicable law, and agrees not to assert, and
agrees not to allow any of its subsidiaries to assert, by way of motion, as a
defense or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or the
subject matter hereof or thereof may not be enforced in or by such court and (c)
hereby agrees not to commence or maintain any action, claim, cause of action or
suit (in contract, tort or otherwise), inquiry, proceeding or investigation
arising out of or based upon this Agreement or relating to the subject matter
hereof or thereof other than before one of the above-named courts nor to make
any motion or take any other action seeking or intending to cause the transfer
or removal of any such action, claim, cause of action or suit (in contract, tort
or otherwise), inquiry, proceeding or investigation to any court other than one
of the above-named courts whether on the grounds of inconvenient forum or
otherwise. Notwithstanding the foregoing, to the extent that any party hereto is
or becomes a party in any litigation in connection with which it may assert
indemnification rights set forth in this agreement, the court in which such
litigation is being heard shall be deemed to be included in clause (a) above.
Each party hereto hereby consents to service of process in any such proceeding
in any manner permitted by Delaware law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 13.3 is reasonably calculated to give actual notice.

      14.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES
HERETO THAT THIS SECTION 14.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY
ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 14.3 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.

      14.4. Exercise of Rights and Remedies. No delay of or omission in the
exercise of any right, power or remedy accruing to any party as a result of any
breach or default by any other party under this Agreement shall impair any such
right, power or remedy, nor shall it be construed as a waiver of or acquiescence
in any such breach or default, or of any similar breach or default occurring
later; nor shall any such delay, omission nor waiver of any single breach or
default be deemed a waiver of any other breach or default occurring before or
after that waiver

                                     - 21 -
<PAGE>

      IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement (or caused this Agreement to be executed on its behalf by its officer
or representative thereunto duly authorized) under seal as of the date first
above written.

THE COMPANY:                  SMTC CORPORATION

                              By  /s/ Paul Walker
                                --------------------------------
                                  Name: Paul Walker
                                  Title: President

THE STOCKHOLDERS:             EMSICON INVESTMENTS, LLC

                              By  /s/ Stephen Adamson
                                --------------------------------
                                  Name: Stephen Adamson
                                  Title: Managing Member

                              BAIN CAPITAL FUND VI, L.P.
                              By: Bain Capital Partners VI, L.P.,
                              its general partner
                                  By:  Bain Capital Investors VI, Inc.,
                                       its general partner

                              By /s/ Paul B. Edgerley
                                --------------------------------
                                  Name: Paul B. Edgerley
                                  Title: Authorized Signatory

                              SANKATY HIGH YIELD ASSET PARTNERS, L.P.

                              By /s/ Diane J. Exter
                                --------------------------------
                                  Name: Diane J. Exter
                                  Title: Executive Vice President & Portfolio
                                         Manager

                              BAIN CAPITAL V MEZZANINE FUND, L.P.
                              By: Bain Capital V Mezzanine Partners, L.P.,
                                       its general partner
                                  By:  Bain Capital Investors V, Inc.,
                                       its general partner

                              By  /s/ Paul B. Edgerley
                                --------------------------------
                                  Name: Paul B. Edgerley
                                  Title: Authorized Signatory
<PAGE>

                              BCM CAPITAL PARTNERS, L.P.
                              By:   Bain Capital V Mezzanine Partners, L.P.
                                    its general partner
                                   By: Bain Capital Investors V, Inc.,
                                       its general partner

                              By /s/ Paul B. Edgerley
                                --------------------------------
                                  Name: Paul B. Edgerley
                                  Title: Authorized Signatory

                              BCIP ASSOCIATES II
                              BCIP TRUST ASSOCIATES II
                              BCIP ASSOCIATES II-B
                              BCIP ASSOCIATES II-C
                              By:   Bain Capital, Inc.,
                              their Managing Partner

                              By  /s/ Paul B. Edgerley
                                --------------------------------
                                   Name: Paul B. Edgerley
                                   Title: Authorized Signatory

                              CELERITY EMSICON, LLC

                              By  /s/ Stephen Adamson
                                --------------------------------
                                   Name: Stephen Adamson
                                   Title:  An Authorized Person

                              P.N. WALKER CONSULTING INC.

                              By   /s/ Paul Walker
                                --------------------------------
                                  Name: Paul Walker
                                  Title: President

                              NICHAL INC.

                              By  /s/ Derrick D'Andrade
                                --------------------------------
                                   Name: Derrick D'Andrade
                                   Title: President
<PAGE>

                              KILMER ELECTRONICS GROUP LIMITED

                              By  /s/ Michael Griffiths
                                --------------------------------
                                   Name: Michael Griffiths
                                   Title: Secretary-Treasurer

                                 /s/ Gary Walker
                                --------------------------------
                                  Gary Walker

                                 /s/ Philip Woodard
                                --------------------------------
                                  Philip Woodard

                                 /s/ Paul Walker
                                --------------------------------
                                  Paul Walker

                                 /s/ Derrick D'Andrade
                                --------------------------------
                                  Derek D'Andrade

THE QUALTRON INVESTORS:

                                /s/ Cillian Feiritear
                                --------------------------------
                                  Cillian Feiritear

                                /s/ Patrick Dunne
                                --------------------------------
                                  Patrick Dunne

                                /s/ Patrick Moore
                                --------------------------------
                                  Patrick Moore, by his duly authorized
                                  attorney, Cillian Feiritear

                              ENTERPRISE EQUITY (IRL) LIMITED

                              By  /s/ Conor O'Connor
                                --------------------------------
                                   Name: Conor O'Connor
                                   Title: Chief Executive/Company Secretary

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