Document:

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                                                                  EXHIBIT 4.12.1

                                                                  EXECUTION COPY

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                          PASS THROUGH TRUST AGREEMENT

                          Dated as of December 19, 2000

                                     between

                 TIVERTON POWER ASSOCIATES LIMITED PARTNERSHIP,

                  RUMFORD POWER ASSOCIATES LIMITED PARTNERSHIP,

                                       and

              STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
                             NATIONAL ASSOCIATION,
                   not in its individual capacity, but solely
                             as Pass Through Trustee

                  Tiverton and Rumford 2000 Pass Through Trust

                         9.00% Pass Through Certificates

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<TABLE>
<S>          <C>                                                                     <C>
SECTION 1.   DEFINITIONS..............................................................6

     Section 1.1.    Definitions......................................................6

     Section 1.2.    Compliance Certificates and Opinions............................11

     Section 1.3.    Form of Documents Delivered to Pass Through Trustee.............12

     Section 1.4.    Acts of Holders.................................................13

     Section 1.5.    Conflict with Trust Indenture Act...............................14

SECTION 2.   ACQUISITION OF LESSOR NOTES; ORIGINAL ISSUANCE OF
             CERTIFICATES............................................................14

     Section 2.1.    Issuance of Certificates; Acquisition of Lessor Notes...........14

     Section 2.2.    Acceptance by Pass Through Trustee..............................15

     Section 2.3.    Limitation of Powers............................................15

SECTION 3.   THE CERTIFICATES........................................................15

     Section 3.1.    Form, Denomination and Execution of Certificates................15

     Section 3.2.    Authentication of Certificates..................................16

     Section 3.3.    Temporary Certificates..........................................16

     Section 3.4.    Registration of Transfer and Exchange of Certificates...........17

     Section 3.5.    Mutilated, Destroyed, Lost or Stolen Certificates...............19

     Section 3.6.    Persons Deemed Owners...........................................19

     Section 3.7.    Cancellation....................................................19

     Section 3.8.    Limitation of Liability for Payments............................19

     Section 3.9.    Book-Entry and Definitive Certificates..........................20

     Section 3.10.   Form of Certification...........................................23

SECTION 4.   DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS.........................23

     Section 4.1.    Certificate Account and Special Payments Account................23

     Section 4.2.    Distributions from Certificate Account and Special Payments
                     Account.........................................................24

     Section 4.3.    Statements to Certificateholders................................25

     Section 4.4.    Investment of Special Payment Moneys............................26

SECTION 5.   FINANCIAL STATEMENTS AND OTHER REPORTS..................................26

SECTION 6.   DEFAULT.................................................................27

     Section 6.1.    Events of Default...............................................27

     Section 6.2.    Incidents of Sale of Lessor Notes...............................28
</TABLE>
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<TABLE>

<S>                  <C>                                                             <C>
     Section 6.3.    Judicial Proceedings Instituted by Pass Through Trustee.........28

     Section 6.4.    Control by Certificateholders...................................29

     Section 6.5.    Waiver of Defaults..............................................30

     Section 6.6.    Undertaking to Pay Court Costs..................................30

     Section 6.7.    Right of Certificateholders to Receive Payments Not to Be
                     Impaired........................................................31

     Section 6.8.    Certificateholders May Not Bring Suit Except Under Certain
                     Conditions......................................................31

     Section 6.9.    Remedies Cumulative.............................................32

SECTION 7.   THE PASS THROUGH TRUSTEE................................................32

     Section 7.1.    Certain Duties and Responsibilities.............................32

     Section 7.2.    Notice of Defaults..............................................33

     Section 7.3.    Certain Rights of Pass Through Trustee..........................33

     Section 7.4.    Not Responsible for Recitals; Issuance of Certificates..........34

     Section 7.5.    May Hold Certificates...........................................34

     Section 7.6.    Money Held in Pass Through Trust................................35

     Section 7.7.    Compensation, Reimbursement and Indemnification.................35

     Section 7.8.    Corporate Trustee Required; Eligibility.........................35

     Section 7.9.    Resignation and Removal: Appointment of Successor...............36

     Section 7.10.   Acceptance of Appointment by Successor..........................37

     Section 7.11.   Merger, Conversion, Consolidation or Succession to Business.....38

     Section 7.12.   Maintenance of Agencies.........................................38

     Section 7.13.   Money for Certificate Payments to Be Held in Trust..............39

     Section 7.14.   Registration of Lessor Notes in Pass Through Trustee's Name.....40

     Section 7.15.   Withholding Taxes; Information Reporting........................40

SECTION 8.   CERTIFICATEHOLDERS' LISTS AND REPORTS...................................40

     Section 8.1.    The Partnerships to Furnish Pass Through Trustee with Names
                     and Addresses of Certificateholder..............................40

     Section 8.2.    Preservation of Information.....................................41

     Section 8.3.    Reports by the Partnerships.....................................41

     Section 8.4.    Reports by the Pass Through Trustee.............................41

SECTION 9.   SUPPLEMENTAL TRUST AGREEMENTS...........................................41

     Section 9.1.    Supplemental Trust Agreement Without Consent of
                     Certificateholders..............................................41
</TABLE>

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<TABLE>
<S>                  <C>                                                             <C>
     Section 9.2.    Supplemental Trust Agreements with Consent of
                     Certificateholders..............................................42

     Section 9.3.    Documents Affecting Immunity or Indemnity.......................43

     Section 9.4.    Execution of Supplemental Trust Agreements......................43

     Section 9.5.    Effect of Supplemental Trust Agreements.........................44

     Section 9.6.    Reference in Certificates to Supplemental Trust Agreements......44

     Section 9.7.    Conformity with Trust Indenture Act.............................44

SECTION 10.  AMENDMENTS AND CONSENTS TO COLLATERAL TRUST
             INDENTURE AND OTHER LESSOR NOTE DOCUMENTS...............................44

SECTION 11.  TERMINATION OF PASS THROUGH TRUST.......................................45

     Section 11.1.   Termination of the Pass Through Trust...........................45

SECTION 12.  MISCELLANEOUS PROVISIONS................................................46

     Section 12.1.   Amendments and Waivers..........................................46

     Section 12.2.   Limitation on Rights of Certificateholders......................46

     Section 12.3.   Certificates Nonassessable and Fully Paid.......................46

     Section 12.4.   Notices, etc. to Partnerships and Pass Through Trustee..........46

     Section 12.5.   Notices to Holders; Waiver......................................48

     Section 12.6.   Successors and Assigns..........................................48

     Section 12.7.   Business Day....................................................48

     Section 12.8.   Governing Law...................................................49

     Section 12.9.   Severability....................................................49

     Section 12.10.  Benefits of Pass Through Trust Agreement........................49

     Section 12.11.  Counterparts....................................................49

     Section 12.12.  Headings and Table of Contents..................................49

     Section 12.13.  Further Assurances..............................................49

     Section 12.14.  Effectiveness...................................................49

     Section 12.15.  Statement of Intent.............................................49
</TABLE>

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SCHEDULE:

      Schedule 1  Participation Agreement

EXHIBITS:

      Exhibit A   Form of Certificate
      Exhibit B   Form of Pass Through Trustee's Certificate of Authentication
      Exhibit C   Form of Transfer Certificate
      Exhibit D   Form of Purchase Letter for Institutional Accredited Investors

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                          PASS THROUGH TRUST AGREEMENT

               This PASS THROUGH TRUST AGREEMENT, dated as of December 19, 2000
(this "Pass Through Trust Agreement"), with respect to the formation of the
Tiverton and Rumford 2000 Pass Through Trust (the "Pass Through Trust"), between
TIVERTON POWER ASSOCIATES LIMITED PARTNERSHIP, a Rhode Island limited
partnership ("Tiverton"), RUMFORD POWER ASSOCIATES LIMITED PARTNERSHIP, a Maine
limited partnership ("Rumford," together, the "Partnerships"), and STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States, as Pass
Through Trustee (the "Pass Through Trustee").

                              W I T N E S S E T H:

               WHEREAS, the Partnerships, the Pass Through Trustee, and certain
other parties named therein have entered into the Participation Agreement
referred to on Schedule 1 hereto, pursuant to which the Partnerships have agreed
to (a) sell to the Owner Lessor certain interests in the Tiverton facility and
Rumford facility (together, the "Facilities"), and (b) lease from the Owner
Lessor such Facilities;

               WHEREAS, Tiverton and Rumford will consummate the sale to and
lease from the Owner Lessor of the Facilities on the Closing Date;

               WHEREAS, on the Closing Date, the Owner Lessor will enter into a
Collateral Trust Indenture and issue, on a non-recourse basis, Lessor Notes
thereunder to finance a portion of the purchase price for the Facilities;

               WHEREAS, subject to the terms and conditions of this Pass Through
Trust Agreement, the Pass Through Trust will purchase the Lessor Notes issued in
connection with the purchase of the Facilities from Tiverton and Rumford on the
Closing Date and will hold all such Lessor Notes in trust for the benefit of the
Certificateholders;

               WHEREAS, the Pass Through Trustee, upon the execution and
delivery of this Pass Through Trust Agreement, hereby declares the creation of
this Pass Through Trust for the benefit of the Certificateholders, and the
initial Certificateholders as the grantors of the Pass Through Trust and by
their respective acceptances of the Certificates join in the creation of this
Pass Through Trust with the Pass Through Trustee; and

               WHEREAS, to facilitate the sale of the Lessor Notes to the Pass
Through Trust and the purchase of the Lessor Notes by the Pass Through Trust,
the Partnerships are, on a joint and several basis, undertaking to perform
certain administrative and ministerial duties hereunder and are also undertaking
to pay the fees and expenses of the Pass Through Trustee.

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               NOW, THEREFORE, in consideration of the foregoing premises, the
mutual agreements herein contained, and of the other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:

SECTION 1.  DEFINITIONS

        Section 1.1. Definitions.

               (a)    Unless the context hereof otherwise requires, capitalized
terms used in this Pass Through Trust Agreement, including those in the
recitals, and not otherwise defined herein shall have the respective meanings
set forth in Appendix A to the Participation Agreement. The general provisions
of Appendix A to such Participation Agreement shall apply to the terms used in
this Pass Through Trust Agreement and specifically defined herein.

               (b)    As used in this Pass Through Trust Agreement, the
following terms shall have the respective meanings assigned thereto as follows:

                      "Act", when used with respect to any Holder, shall have
               the meaning specified in Section 1.4.

                      "Authorized Agent" shall mean any Paying Agent or
               Registrar.

                      "Avoidable Tax" shall have the meaning specified in
               7.9(e).

                      "Book-Entry Certificate" shall mean a beneficial interest
               in the Certificates, ownership and transfers of which shall be
               made through book entries by a Clearing Agency as described in
               Section 3.9.

                      "Cedelbank" shall have the meaning specified in Section
               3.9.

                      "Certificate" shall mean any one of the certificates
               executed and authenticated by the Pass Through Trustee,
               substantially in the form of Exhibit A hereto.

                      "Certificate Account" shall mean that account or accounts
               created and maintained pursuant to Section 4.1(a).

                      "Certificate Owner" shall mean, when used in Section 3.9,
               the Person for whom a Clearing Agency Participant acts.

                      "Certificate Owner Request" shall mean a request to the
               Pass Through Trustee to receive the reports and other information
               the Partnerships or any other Person is required to furnish to
               the Pass Through Trustee pursuant to the Operative Documents,
               which request certifies that the Person making the request is a
               Certificateholder or Certificate Owner. Any Certificateholder or
               Certificate Owner making a Certificate Owner Request may specify
               its election to receive such information from the Pass Through
               Trustee on an ongoing basis.

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                      "Certificateholder" or "Holder" shall mean the Person in
               whose name a Certificate is registered in the Register.

                      "Clearing Agency" shall mean an organization registered as
               a "clearing agency" pursuant to Section 17A of the Exchange Act.

                      "Clearing Agency Participant" shall mean a broker, dealer,
               bank, other financial institution or other Person for whom from
               time to time a Clearing Agency effects, directly or indirectly,
               book-entry transfers and pledges of securities deposited with the
               Clearing Agency.

                      "Collateral Trust Indenture" shall mean (i) an Indenture
               of Trust, Mortgage and Security Agreement between the Owner
               Lessor and the Indenture Trustee, entered into pursuant to the
               Participation Agreement, as the same may be amended or
               supplemented in accordance with its terms and (ii) any Indenture
               of Trust, Mortgage and Security Agreement, or analogous document,
               between the Partnerships and a Indenture Trustee, entered into in
               connection with the assumption by the Partnerships of the
               indebtedness evidenced by any Lessor Note, as the same may be
               amended or supplemented in accordance with its terms.

                      "Consideration" shall have the meaning specified in
               Section 2.1.

                       "Default" shall mean any event which is or, after notice
               or lapse of time or both would become, an Event of Default.

                      "Definitive Certificates" shall have the meaning specified
               in Section 3.9.

                      "Direction" shall have the meaning specified in Section
               1.4(c).

                      "Distribution Date" shall mean, with respect to
               distributions of Scheduled Payments, each January 15 and July 15
               until payment of all the Scheduled Payments to be made under the
               Lessor Notes have been made, commencing on July 15, 2001.

                      "DTC" shall mean The Depository Trust Company and any
               successor that is a Clearing Agency.

                      "Euroclear" shall have the meaning specified in Section
               3.9.

                      "Event of Default" shall have the meaning specified in
               Section 6.1(a).

                      "Exchange Act" shall mean the Securities Exchange Act of
               1934, as amended.

                      "Fractional Undivided Interest" shall mean the fractional
               undivided interest in the Pass Through Trust that is evidenced by
               a Certificate.

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                      "Holder" shall have the meaning set forth in the
               definition of "Certificateholder".

                       "Indenture Trustee" shall mean a bank or trust company
               acting as indenture trustee under the Collateral Trust Indenture,
               and any successor to such Indenture Trustee as such trustee. The
               term "Indenture Trustee" refers to any one or all of such
               Indenture Trustees, as the context requires.

                      "Institutional Accredited Investor" shall mean an
               institutional "accredited investor", as such term is defined in
               Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

                      "Lease" shall mean a Facility Lease Agreement between the
               Owner Lessor, as the lessor, and each respective Partnership, as
               the lessee, entered into pursuant to the Participation Agreement,
               as such Lease may be amended or supplemented in accordance with
               its terms. The term "Lease" refers to any one or all of such
               Leases, as the context requires.

                      "Lease Event of Default" shall mean any Lease Event of
               Default (as such term is defined in a Lease).

                      "Lease Indenture Default" shall mean any event which is,
               or after notice or lapse of time or both would become, a Lease
               Indenture Event of Default.

                      "Lease Transaction" shall mean a sale leaseback
               transaction in respect of an Undivided Interest between Tiverton
               or Rumford, as applicable, and the Owner Lessor that is financed
               in part by the issuance of Lessor Notes to the Pass Through
               Trust, as contemplated by the Participation Agreement and the
               agreements and instruments referred to therein.

                      "Lessor Note" shall mean any one of the Notes (as defined
               in the Collateral Trust Indenture) issued under the Collateral
               Trust Indenture, including any Lessor Note (as so defined) issued
               under the Collateral Trust Indenture in replacement or
               substitution therefor, held by the Pass Through Trustee.

                      "Lessor Note Documents" shall mean, with respect to any
               Lessor Note, the Collateral Trust Indenture, Participation
               Agreement and the Lease entered into pursuant to the
               Participation Agreement.

                      "Letter of Representations" shall mean the agreement among
               the Partnerships, the Pass Through Trustee and the initial
               Clearing Agency.

                      "Outstanding" shall mean, when used with respect to
               Certificates, as of the date of determination, and subject to
               Section 1.4(c), all Certificates theretofore authenticated and
               delivered under this Pass Through Trust Agreement, except:

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                      (i)    Certificates theretofore canceled by the Registrar
               or delivered to the Pass Through Trustee or the Registrar for
               cancellation;

                      (ii)   Certificates for which money in the full amount
               thereof has been theretofore deposited with the Pass Through
               Trustee or any Paying Agent in trust for the holders of such
               Certificates as provided in Section 4.1 pending distribution of
               such money to the Certificateholders pursuant to the final
               distribution payment to be made pursuant to Section 11.1; and

                      (iii)  Certificates in exchange for or in lieu of which
               other Certificates have been authenticated and delivered pursuant
               to this Pass Through Trust Agreement.

                      "Owner Lessor" shall mean a Delaware limited liability
               company indirectly owned by an institutional investor.

                      "Owner Participant" shall mean a Delaware limited
               liability company indirectly owned by an institutional investor.

                      "Participation Agreement" shall mean the Participation
               Agreement among Tiverton, Rumford, the Owner Participant, the
               Owner Lessor, an Indenture Trustee and the Pass Through Trustee,
               providing for the Lease Transaction, as identified on Schedule 1
               hereto.

                      "Partnerships" shall have the meaning specified in the
               Preamble hereto.

                      "Pass Through Trust" shall mean the trust created by this
               Pass Through Trust Agreement, the estate of which consists of the
               Trust Property.

                      "Pass Through Trustee" shall mean State Street Bank and
               Trust Company of Connecticut, National Association, not in its
               individual capacity, but solely as Pass Through Trustee under
               this Pass Through Trust Agreement, and each other Person that may
               be acting as a Pass Through Trustee in accordance with the
               provisions provided herein.

                      "Paying Agent" shall mean the paying agent maintained and
               appointed pursuant to Section 7.12.

                      "Permanent Regulation S Global Certificate" shall have the
               meaning specified in Section 3.9.

                      "Permitted Government Investment" shall mean the
               obligations of the United States of America for the payment of
               which the full faith and credit of the United States of America
               is pledged, maturing in not more than 60 days or such lesser time
               as is necessary for payment of any Special Payments on a Special
               Distribution Date.

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                      "Record Date" shall mean (i) for Scheduled Payments to be
               distributed on any Distribution Date, other than the final
               distribution, the day (whether or not a Business Day) which is
               fifteen days preceding such Distribution Date, and (ii) for
               Special Payments to be distributed on any Special Distribution
               Date, other than the final distribution, the day (whether or not
               a Business Day) which is fifteen days preceding such Special
               Distribution Date.

                      "Register" and "Registrar" shall mean the register
               maintained and the registrar appointed pursuant to Sections 3.4
               and 7.12.

                      "Regulation S Global Certificate" shall have the meaning
               specified in Section 3.9.

                      "Request" shall mean a request by the Partnerships, the
               Owner Lessor, or any Indenture Trustee setting forth the subject
               matter of the request accompanied by an Officer's Certificate and
               an Opinion of Counsel as provided in Section 1.2.

                      "Responsible Officer" shall mean, with respect to any
               Person, (i) its Chairman of the Board, its President, any Senior
               Vice President, the Chief Financial Officer, any Vice President,
               the Treasurer or any other management employee (a) that has the
               power to take the action in question and has been authorized,
               directly or indirectly, by the Board of Directors or equivalent
               body of such Person, (b) working under the direct supervision of
               such Chairman of the Board, President, Senior Vice President,
               Chief Financial Officer, Vice President or Treasurer and (c)
               whose responsibilities include the administration of the Overall
               Transaction and (ii) with respect to the Pass Through Trustee and
               the Indenture Trustee an officer in their respective corporate
               trust departments.

                      "Restricted Certificate" shall have the meaning specified
               in Section 3.1.

                      "Restricted Global Certificate" shall have the meaning
               specified in Section 3.9.

                      "Scheduled Payment" shall mean, with respect to a
               Distribution Date, any payment (other than a Special Payment) of
               principal and interest on a Lessor Note, due from the Owner
               Lessor, which payment represents the payment of a regularly
               scheduled installment of principal then due on such Lessor Note,
               or the payment of regularly scheduled interest accrued on such
               Lessor Note.

                      "SEC" shall mean the Securities and Exchange Commission,
               as from time to time constituted, created under the Exchange Act.

                      "Securities Act" shall mean the Securities Act of 1933, as
               amended.

                      "Special Distribution Date" shall mean (i) with respect to
               the prepayment, redemption or otherwise prepayment of any Lessor
               Notes, the day on which such prepayment, redemption or otherwise
               prepayment is scheduled to occur pursuant to the terms of the
               Collateral Trust Indenture, and (ii) with respect to any Special

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               Payment relating to a Lessor Note other than as described in
               clause (i) of the definition of Special Payment, the earliest
               second day of a month for which it is practicable for the Pass
               Through Trustee to give notice pursuant to Section 4.2(c).

                      "Special Payment" shall mean (i) any payment of principal,
               premium, if any, and interest on a Lessor Note resulting from the
               redemption or otherwise prepayment of such Lessor Note pursuant
               to the applicable provisions of the Collateral Trust Indenture,
               (ii) any payment of principal and interest (including any
               interest accruing upon default) on, or any other amount in
               respect of, such Lessor Note upon a Lease Indenture Event of
               Default in respect thereof or upon the exercise of remedies under
               the Collateral Trust Indenture relating to such Lessor Note,
               (iii) any Special Payment referred to in clause (i) of this
               definition or any Scheduled Payment which is not in fact paid
               within five days of the Special Distribution Date or Distribution
               Date applicable thereto, or (iv) any proceeds from the sale of
               any Lessor Note by the Pass Through Trustee pursuant to Section 6
               hereof.

                      "Special Payments Account" shall mean the account or
               accounts created and maintained pursuant to Section 4.1(b).

                      "Temporary Regulation S Global Certificate" shall have the
               meaning specified in Section 3.9.

                      "Transfer Date" shall mean the closing date of the public
               offering of the Certificates.

                      "Trust Indenture Act" shall mean the Trust Indenture Act
               of 1939, as amended and as in force on the date on which this
               Pass Through Trust Agreement was executed and delivered, except
               as provided in Section 9.7; provided, however, that in the event
               the Trust Indenture Act of 1939 is amended after such date,
               "Trust Indenture Act" shall mean, to the extent required by any
               such amendment, the Trust Indenture Act of 1939 as so amended.

                      "Trust Property" shall mean the Lessor Notes held as the
               property of the Pass Through Trust created hereby and all monies
               at any time paid thereon and all monies due and to become due
               thereunder, funds from time to time deposited in the Certificate
               Account and the Special Payments Account and any proceeds from
               the sale by the Pass Through Trustee pursuant to Section 6 hereof
               of any Lessor Note.

        Section 1.2. Compliance Certificates and Opinions.

               (a)    Upon any application or request by either Partnership, the
Owner Lessor or any Indenture Trustee to the Pass Through Trustee to take any
action under any provision of this Pass Through Trust Agreement, such
Partnership, the Owner Lessor or such Indenture Trustee, as the case may be,
shall furnish to the Pass Through Trustee an Officer's Certificate

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stating that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Pass Through Trust Agreement relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Pass Through Trust Agreement relating to such particular application or
request, no additional certificate or opinion need be furnished.

               (b)    Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Pass Through Trust Agreement
shall include:

               (1)    a statement that each individual signing such certificate
        or opinion has read such covenant or condition and the definitions
        herein relating thereto;

               (2)    a brief statement as to the nature and scope of the
        examination or investigation upon which the statements or opinions
        contained in such certificate or opinion are based;

               (3)    a statement that, in the opinion of each such individual,
        he has made such examination or investigation as is necessary to enable
        him to express an informed opinion as to whether or not such covenant or
        condition has been complied with; and

               (4)    a statement as to whether, in the opinion of each such
        individual, such condition or covenant has been complied with.

        Section 1.3. Form of Documents Delivered to Pass Through Trustee.

               (a)    In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters and any such
Person may certify or give an opinion as to such matters in one or several
documents.

               (b)    Any Officer's Certificate may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless the signer of such Officer's Certificate knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
an Officer's Certificate stating that the information with respect to such
factual matters is in the possession of the signer of such Officer's
Certificate, unless such counsel knows that the certificate or opinions or
representations with respect to such matters are erroneous.

               (c)    Any Opinion of Counsel stated to be based on the opinion
of other counsel shall be accompanied by a copy of such other opinion.

               (d)    Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements, opinions or
other instruments under this

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Pass Through Trust Agreement, they may, but need not, be consolidated and form
one instrument.

        Section 1.4. Acts of Holders.

               (a)    Any direction, consent, waiver, demand, authorization,
request, approval or other action provided by this Pass Through Trust Agreement
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent or agents duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Pass Through Trustee and, where it is hereby
expressly required, to the Partnerships, the Owner Lessor or any Indenture
Trustee. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Pass Through Trust Agreement and (subject to Section 7.1)
conclusive in favor of the Pass Through Trustee, the Partnerships, the Owner
Lessor and any Indenture Trustee, if made in the manner provided in this
Section.

               (b)    The fact and date of the execution by any Person of any
such instrument or writing may be proved in any reasonable manner which the Pass
Through Trustee deems sufficient.

               (c)    In determining whether the Holders of the requisite
Fractional Undivided Interests of Certificates Outstanding have given any
direction, consent, waiver or other action (a "Direction"), under this Pass
Through Trust Agreement, Certificates owned by the Partnerships, the Owner
Lessor, the Owner Participant or any Affiliate of any such Person shall be
disregarded and deemed not to be Outstanding under this Pass Through Trust
Agreement for purposes of any such determination. In determining whether the
Pass Through Trustee shall be protected in relying upon any such Direction, only
Certificates which the Pass Through Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of
the Certificates Outstanding, such Certificates shall not be so disregarded as
aforesaid, and (ii) if any amount of Certificates so owned by any such Person
have been pledged in good faith, such Certificates shall not be disregarded as
aforesaid if the pledgee establishes to the satisfaction of the Pass Through
Trustee the pledgee's right so to act with respect to such Certificates and that
the pledgee is not one of the Partnerships, the Owner Lessor, the Owner
Participant or any Affiliate of any such Person.

               (d)    Any Act by the Holder of any Certificate shall bind the
Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Act is made upon
such Certificate.

               (e)    Except as otherwise provided in Section 1.4(c),
Certificates owned by or pledged to any Person shall have an equal and
proportionate benefit under the provisions of this Pass Through Trust Agreement,
without preference, priority or distinction as among all of the Certificates.

                                       13
<PAGE>   15

               (f)    Notwithstanding anything herein to the contrary, the
Certificates will vote and consent together on all matters as one class and will
not have the right to vote or consent as a separate class on any matter.

               (g)    The Pass Through Trustee may fix in advance a record date
for the determination of the Holders entitled to give any request, demand,
authorization, direction, notice, consent, waiver or other Act solicited by the
Partnerships, but the Pass Through Trustee shall not have any obligation to do
so.

        Section 1.5. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with a provision of the Trust Indenture Act that
is required or deemed under such Act to be a part of and govern this Pass
Through Trust Agreement, such required or deemed provision shall, so long as the
Certificates shall be subject to the Trust Indenture Act, control. If any
provision of this Pass Through Trust Agreement modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.

SECTION 2. ACQUISITION OF LESSOR NOTES; ORIGINAL ISSUANCE OF CERTIFICATES

        Section 2.1. Issuance of Certificates; Acquisition of Lessor Notes.

               (a)    The Pass Through Trustee, at or promptly following the
execution and delivery of this Pass Through Trust Agreement, shall also execute
and deliver the Participation Agreement, in the form delivered to the Pass
Through Trustee on or prior to the date of the execution and delivery hereof.
Upon delivery of an authentication order by each of the Partnerships and the
satisfaction of the closing conditions with respect to the Lessor Notes in
Section 4 of the Participation Agreement, the Pass Through Trustee shall
execute, deliver and authenticate, on behalf of the Pass Through Trust,
Certificates equaling in the aggregate the total principal amount of the Lessor
Notes deposited into the Pass Through Trust on the Transfer Date. The
Certificates so executed, delivered and authenticated on the Transfer Date shall
evidence the entire ownership of the Pass Through Trust. The Pass Through Trust
shall issue such Certificates on the Transfer Date, in authorized denominations
and in such Fractional Undivided Interests, so as to result in the receipt of
consideration (the "Consideration") in an amount equal to the aggregate
principal amount of such Lessor Notes referred to in the second preceding
sentence. The Pass Through Trust shall purchase Lessor Notes on the Transfer
Date at an aggregate purchase price equal to the amount of the Consideration so
received. Except as provided in Sections 3.4 and 3.5 hereof, the Pass Through
Trustee shall not execute or deliver Certificates in excess of the aggregate
amount specified in this paragraph.

               (b)    The Partnerships' Assumption of Lessor Notes. If either
Partnership shall assume the obligations of the Owner Lessor under its Lessor
Note pursuant to the Collateral Trust Indenture, the Pass Through Trustee shall,
upon its receipt of written instructions from such Partnership, surrender the
applicable Lessor Notes issued pursuant to the Collateral Trust Indenture to the
Indenture Trustee in exchange for new Lessor Notes of the same aggregate
outstanding principal amount as the Lessor Notes so surrendered, bearing
interest at the same rate, and having the same maturity and amortization
schedule, and otherwise of similar tenor,

                                       14
<PAGE>   16

issued under the Collateral Trust Indenture and any new Collateral Trust
Indenture entered into by such Partnership and the Indenture Trustee in
connection with such assumption, and thereafter each reference to such Lessor
Notes in this Pass Through Trust Agreement shall be deemed to mean a reference
to such new Lessor Notes.

               (c)    Authentication. Any authentication order delivered by
either of the Partnerships hereunder shall be signed by one of such
Partnership's authorized signatories and shall specify the amount and maturity
of the Certificates to be authenticated and the date on which the original issue
of Certificates is to be authenticated. The Pass Through Trustee may appoint an
authenticating agent to authenticate the Certificates. Unless limited by the
terms of such appointment, an authenticating agent may authenticate the
Certificates whenever the Pass Through Trustee may do so. Each reference in this
Pass Through Trust Agreement to authentication by the Pass Through Trustee
includes authentication by such agent. An authenticating agent has the same
rights as any Registrar, Paying Agent or agent for service of notices and
demands.

        Section 2.2. Acceptance by Pass Through Trustee. The Pass Through
Trustee, upon the execution and delivery of this Pass Through Trust Agreement,
acknowledges on behalf of the Pass Through Trust its acceptance of all right,
title, and interest in and to the Lessor Notes acquired pursuant to Section 2.1
hereof and declares that the Pass Through Trustee holds and will hold such
right, title, and interest, together with all other property constituting the
Trust Property, for the benefit of all present and future Certificateholders,
upon the trusts herein set forth. By its payment for and acceptance of each
Certificate issued to it hereunder, each initial Certificateholder as grantor of
the Pass Through Trust thereby joins in the creation and declaration of the Pass
Through Trust. The Pass Through Trustee shall be under no duty or obligation to
inspect, review or examine the Lessor Notes to determine that they are genuine,
valid, binding, enforceable or appropriate for the represented purpose or that
they are other than what they purport to be on their face.

        Section 2.3. Limitation of Powers. The Pass Through Trust is constituted
solely for the purpose of making the investment in the Lessor Notes, and, except
as set forth herein, the Pass Through Trustee is not authorized or empowered to
acquire any other investments or engage in any other activities and, in
particular, the Pass Through Trustee is not authorized or empowered to do
anything that would cause the Pass Through Trust to fail to qualify as a pass
through entity for federal income tax purposes (including, as subject to this
restriction, acquiring any Undivided Interest or any portion thereof by bidding
the Lessor Notes or otherwise, or taking any action with respect to any
Undivided Interest or any portion thereof once acquired).

SECTION 3. THE CERTIFICATES

        Section 3.1. Form, Denomination and Execution of Certificates. The
Certificates shall be issued in registered form without coupons and shall be
substantially in the form attached hereto as Exhibit A, with such omissions,
variations and insertions as are permitted by this Pass Through Trust Agreement,
and may have such letters, numbers or other marks of identification and such
legends or endorsements printed, lithographed or engraved thereon, as may be
required to comply with the rules of any securities exchange on which such
Certificates may be listed or to conform to any usage in respect thereof, or as
may, consistently herewith, be prescribed by the

                                       15
<PAGE>   17

Pass Through Trustee or by the officer executing such Certificates, such
determination by said officer to be evidenced by his signing the Certificates.

               Except as provided in Section 3.9, definitive Certificates shall
be printed, lithographed or engraved or produced by any combination of these
methods, all as determined by the officer executing such Certificates, as
evidenced by his execution of such Certificates.

               During the period beginning on the Closing Date and ending on the
date two years from the Closing Date, all Certificates issued on the Closing
Date, and all Certificates issued upon registration of transfer of, or in
exchange for, such Certificates, shall be "Restricted Certificates" and shall be
subject to the restrictions on transfer provided in the legend set forth on the
face of the form of certificate in Exhibit A; provided, however, that the term
"Restricted Certificates" shall not include Certificates as to which such
restrictions on transfer have been terminated in accordance with Section 3.4.
All Restricted Certificates shall bear the legend set forth on the face of the
Certificate in Exhibit A. Certificates which are not Restricted Certificates
shall not bear such legend.

               The Certificates shall be issued in minimum denominations of
$100,000 or integral multiples of $1,000 in excess thereof.

               The Certificates shall be executed on behalf of the Pass Through
Trust by manual or facsimile signature of a Responsible Officer of the Pass
Through Trustee. Certificates bearing the manual or facsimile signature of an
individual who was, at the time when such signature was affixed, authorized to
sign on behalf of the Pass Through Trustee shall be valid and binding
obligations of the Pass Through Trust, notwithstanding that such individual has
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such office at the date of such Certificates. No
Certificate shall be entitled to any benefit under this Pass Through Trust
Agreement, or be valid for any purpose unless there appears on such Certificate
a certificate of authentication substantially in the form set forth in Exhibit B
hereto executed by the Pass Through Trustee by manual signature, and such
certificate of authentication upon any Certificate shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.

        Section 3.2. Authentication of Certificates. Upon delivery of an
authentication order by the Partnerships, the Pass Through Trustee shall cause
to be delivered Certificates duly authenticated by the Pass Through Trustee, in
authorized denominations equaling in the aggregate the aggregate principal
amount set forth in the authentication order evidencing the entire ownership of
the Pass Through Trust.

        Section 3.3. Temporary Certificates. Pending the preparation of
definitive Certificates, the Pass Through Trustee may execute, authenticate and
deliver temporary Certificates which are printed, lithographed, typewritten, or
otherwise produced, in any denomination, containing substantially the same terms
and provisions as set forth in Exhibit A, except for such appropriate
insertions, omissions, substitutions and other variations relating to their
temporary nature as the officer executing such temporary Certificates may
determine, as evidenced by his or her execution of such temporary Certificates.

                                       16
<PAGE>   18

               If temporary Certificates are issued, the Partnerships will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the Corporate Trust Office of the Pass Through Trustee, or at
the office or agency of the Pass Through Trustee maintained in accordance with
Section 7.12, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Certificates, the Pass Through Trustee shall execute,
authenticate and deliver in exchange therefor definitive Certificates of
authorized denominations of a like aggregate Fractional Undivided Interest.
Until so exchanged, such temporary Certificates shall in all respects be
entitled to the same benefits under this Pass Through Trust Agreement as
definitive Certificates.

        Section 3.4. Registration of Transfer and Exchange of Certificates.

               (a)    The Pass Through Trustee shall cause to be kept, at the
office or agency to be maintained by it in accordance with the provisions of
Section 7.12, a register (the "Register") in which, subject to the provisions of
this Section 3.4 and the Certificates, the Pass Through Trustee shall provide
for the registration of Certificates (registering owners of Certificates and the
principal of and any interest on the Lessor Notes represented by the
Certificates held by each owner) and of transfers and exchanges of Certificates
as herein provided. The Pass Through Trustee shall initially be the registrar
(the "Registrar") for the purpose of registering Certificates and transfers and
exchanges of Certificates as herein provided.

               (b)    Every Restricted Certificate shall be subject to the
restrictions on transfer provided in the legend required to be set forth on the
face of each Restricted Certificate pursuant to Section 3.1, and the Holder of
each Restricted Certificate, by such Holder's acceptance thereof, agrees to be
bound by such restrictions on transfer. Whenever any Restricted Certificate is
presented or surrendered for registration of transfer or for exchange for a
Certificate registered in a name other than that of the Holder, such Restricted
Certificate must be accompanied by a certificate in substantially the form set
forth in Exhibit C hereto, dated the date of such surrender and signed by the
Holder of such Restricted Certificate, or such Holder's attorney duly authorized
in writing, as to compliance with such restrictions on transfer. Neither the
Pass Through Trustee nor any Registrar shall be required to accept for such
registration of transfer or exchange any Restricted Certificate not so
accompanied by a properly completed certificate. Notwithstanding the preceding
two sentences, a properly completed certificate shall not be required in
connection with any transfer of any Restricted Certificate through the
facilities of DTC or any other United States securities clearance and settlement
organization; provided, that such transfer does not require a change in the name
(other than to another nominee of DTC or such other securities clearance and
settlement organization) in which such Restricted Certificate is then
registered. Any transfer of ownership of Certificates shall be effective only
when such transfer is reflected on the Register.

        Whenever any Restricted Certificate is proposed to be transferred by a
Holder to an Institutional Accredited Investor, the Pass Through Trustee shall
have received from such Institutional Accredited Investor, prior to such
transfer, a signed letter substantially in the form of Exhibit D relating to
certain representations and agreements regarding restrictions on transfer of
such Restricted Certificate. In addition, if such Restricted Certificate
evidences a Fractional

                                       17
<PAGE>   19

Undivided Interest of less than $100,000, the Institutional Accredited Investor
must, prior to such transfer, furnish to the Registrar an Opinion of Counsel to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.

               The restrictions imposed by this Section 3.4 and Section 3.1 upon
the transferability of any particular Restricted Certificate shall cease and
terminate if and when such Restricted Certificate has been (i) sold pursuant to
an effective registration statement under the Securities Act, or (ii)
transferred pursuant to Rule 144 under the Securities Act (or any successor
provision thereto), unless the Holder thereof is an affiliate of either of the
Partnerships within the meaning of Rule 144 (or such successor provision). Any
Restricted Certificate as to which such restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon
surrender of such Restricted Certificate for exchange to the Pass Through
Trustee or any Registrar in accordance with the provisions of this Section 3.4
(accompanied, in the event that such restrictions on transfer have terminated by
reason of a transfer pursuant to Rule 144 or any successor provision, by an
Opinion of Counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to each of the Partnerships,
addressed to each of the Partnerships and the Pass Through Trustee and in form
acceptable to each of the Partnerships, to the effect that the transfer of such
Restricted Certificate has been made in compliance with Rule 144 or such
successor provision), be exchanged for a new Certificate, of authorized
denominations of a like aggregate Fractional Undivided Interest, which shall not
bear the restrictive legend required by Section 3.1. The Pass Through Trustee
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the aforementioned Opinion of Counsel.

               (c)    Upon surrender for registration of transfer of any
Certificate that is not a Restricted Certificate at the Corporate Trust Office
or such other office or agency, the Pass Through Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates, in authorized denominations of a like
aggregate Fractional Undivided Interest.

               (d)    At the option of a Certificateholder, Certificates may be
exchanged for other Certificates, in authorized denominations and of a like
aggregate Fractional Undivided Interest, upon surrender of the Certificates to
be exchanged at any such office or agency; provided, that a Restricted
Certificate may only be exchanged for another Restricted Certificate, until such
restrictions on such Restricted Certificate shall cease and terminate in
accordance with the terms of this Section 3.4. Whenever any Certificates are so
surrendered for exchange, the Pass Through Trustee shall execute, authenticate
and deliver the Certificates that the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to each of the Partnerships and the
Pass Through Trustee and the Registrar duly executed by the Certificateholder
thereof or its attorney duly authorized in writing.

               (e)    No service charge shall be made to a Certificateholder for
any registration of transfer or exchange of Certificates, but the Pass Through
Trustee shall require payment of a

                                       18
<PAGE>   20

sum sufficient to cover any tax or charge that may be imposed in connection with
any transfer or exchange of Certificates.

               (f)    All Certificates surrendered for registration of transfer
and exchange shall be canceled and disposed of in accordance with the usual
practices of the Pass Through Trustee.

        Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If any
mutilated Certificate is surrendered to the Registrar, or the Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and in the case of such destruction, loss or theft, there is
delivered to the Registrar, the Pass Through Trustee, the Partnerships and the
Owner Lessor such security, indemnity or bond as may be required by them to
protect each of them and the Pass Through Trust from any loss that any of them
may suffer if a Certificate is replaced, then, in the absence of notice to the
Registrar or the Pass Through Trustee that such Certificate has been acquired by
a bona fide purchaser, the Pass Through Trustee, on behalf of the Pass Through
Trust, shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like Fractional Undivided Interest with the same final Distribution Date. In
connection with the issuance of any new Certificate under this Section 3.5, the
Pass Through Trustee shall require the payment of a sum sufficient to cover any
tax or other charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Pass Through Trustee and the
Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 3.5 shall constitute conclusive evidence of the appropriate
Fractional Undivided Interest in the Pass Through Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.

        Section 3.6. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Pass Through Trustee, the
Partnerships, the Owner Lessor, the Registrar and any Paying Agent may treat the
person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.2
and for all other purposes whatsoever, and neither the Pass Through Trustee,
either Partnership, the Owner Lessor, the Registrar nor any Paying Agent shall
be affected by any notice to the contrary.

        Section 3.7. Cancellation. All Certificates surrendered for payment,
transfer or exchange shall, if surrendered to any Person a party hereto other
than the Registrar, be delivered by such Person to the Registrar for
cancellation. No Certificates shall be authenticated in lieu of or in exchange
for any Certificates canceled as provided in this Section 3.7, except as
expressly permitted by this Pass Through Trust Agreement. All canceled
Certificates held by the Registrar shall be disposed of in accordance with the
usual practice of the Pass Through Trustee and, if destroyed, a certification of
their destruction shall be delivered to the Pass Through Trustee.

        Section 3.8. Limitation of Liability for Payments. All payments or
distributions made to Certificateholders under this Pass Through Trust Agreement
shall be made only from the Trust Property and only to the extent that the Pass
Through Trustee shall have received sufficient income or proceeds from the Trust
Property to make such payments in accordance with the terms of Section 4 of this
Pass Through Trust Agreement. Each Holder of a Certificate, by its acceptance of
such Certificate, agrees that it will look solely to the income and proceeds
from the

                                       19
<PAGE>   21

Trust Property to the extent available for distribution to the Holder thereof as
provided in this Pass Through Trust Agreement. Nothing in this Pass Through
Trust Agreement shall be construed as an agreement, or otherwise creating an
obligation, of (a) either of the Partnerships, the Pass Through Trust or the
Pass Through Trustee to pay any of the principal, premium, if any, or interest
due from time to time under the Lessor Notes, or (b) either of the Partnerships,
the Pass Through Trust or the Pass Through Trustee to pay any amount due from
time to time in respect of the Certificates. The liability of the Owner Lessor
under the applicable Lessor Notes shall be limited as set forth therein and in
the Collateral Trust Indenture.

        Section 3.9. Book-Entry and Definitive Certificates.

               (a)    Except for Certificates issued to Institutional Accredited
Investors which must be issued in the form of definitive, fully registered
Certificates ("Definitive Certificates"), the Certificates may be issued in the
form of one or more typewritten Certificates representing the Book-Entry
Certificates to be delivered to DTC, the initial Clearing Agency, by, or on
behalf of, the Pass Through Trustee. In such case, the Certificates delivered to
DTC shall initially be registered on the Register in the name of Cede & Co., the
nominee of the initial Clearing Agency, and no Certificate Owner will receive a
definitive certificate representing such Certificate Owner's interest in the
Certificates, except as provided above and in subsection (d) below. As to the
Book-Entry Certificates, unless and until Definitive Certificates have been
issued pursuant to subsection (d) below:

                      (i)    the provisions of this Section 3.9 shall be in full
               force and effect;

                      (ii)   the Partnerships, the Owner Lessor, the Paying
               Agent, the Registrar and the Pass Through Trustee may deal with
               the Clearing Agency for all purposes (including the making of
               distributions on the Certificates) as the authorized
               representative of the Certificate Owners;

                      (iii)  to the extent that the provisions of this Section
               3.9 conflict with any other provisions of this Pass Through Trust
               Agreement (other than the provisions of any supplemental
               agreement amending this Section 3.9 as permitted by this Pass
               Through Trust Agreement), the provisions of this Section 3.9
               shall control;

                      (iv)   the rights of Certificate Owners shall be exercised
               only through the Clearing Agency and shall be limited to those
               established by law and agreements between such Certificate Owners
               and the Clearing Agency Participants; and until Definitive
               Certificates are issued pursuant to subsection (d) below, the
               Clearing Agency will make book-entry transfers among the Clearing
               Agency Participants and receive and transmit distributions of
               principal and interest and premium, if any, on the Certificates
               to such Clearing Agency Participants; and

                      (v)    whenever this Pass Through Trust Agreement requires
               or permits actions to be taken based upon instructions or
               directions of

                                       20
<PAGE>   22

               Certificateholders holding Certificates evidencing a specified
               percentage of the Fractional Undivided Interests in the Pass
               Through Trust, the Clearing Agency shall be deemed to represent
               such percentage only to the extent that it has received
               instructions to such effect from Certificate Owners and/or
               Clearing Agency Participants owning or representing,
               respectively, such required percentage of the beneficial interest
               in Certificates and has delivered such instructions to the Pass
               Through Trustee. The Pass Through Trustee shall have no
               obligation to determine (and shall incur no liability in
               connection with any determination of) whether the Clearing Agency
               has in fact received any such instructions.

               (b)    With respect to Book-Entry Certificates, whenever notice
or other communication to the Certificateholders is required under this Pass
Through Trust Agreement, unless and until Definitive Certificates shall have
been issued pursuant to subsection (d) below, the Pass Through Trustee shall
give all such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency and/or the Clearing Agency
Participants (and, upon receipt of a valid Certificate Owner Request, to the
Certificateholder or Certificate Owner making such request), and shall make
available additional copies as reasonably requested by such Clearing Agency
Participants.

               (c)    Unless and until Definitive Certificates are issued
pursuant to subsection (d) below, on the Record Date prior to each applicable
Distribution Date and Special Distribution Date, the Pass Through Trustee will
request from the Clearing Agency a "Securities Position Listing" setting forth
the names of all Clearing Agency Participants reflected on the Clearing Agency's
books as holding interests in the Certificates on such Record Date. The Pass
Through Trustee shall mail to each such Clearing Agency Participant the
statements described in Section 4.3 hereof.

               (d)    If with respect to the Certificates (i) the Partnerships
or either of them advise the Pass Through Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
and the Partnerships are unable to locate a qualified successor, (ii) the
Partnerships (or, following the occurrence of a Lease Event of Default, the
Owner Lessor) at their option, advise the Pass Through Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency or
(iii) after the occurrence of an Event of Default, Certificate Owners of
Book-Entry Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the Pass Through Trust, by Act of said
Certificate Owners delivered to the Partnerships and the Pass Through Trustee,
advise the Partnerships, the Owner Lessor, the Pass Through Trustee and the
Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, then the Pass Through Trustee
shall notify all Certificate Owners, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Certificates.
Upon surrender to the Pass Through Trustee of all the Certificates held by the
Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration of Definitive Certificates in the names of Certificate
Owners, the Pass Through Trust shall issue and deliver the Definitive
Certificates in accordance with the instructions of the Clearing Agency. None of
the Partnerships, the Owner Lessor, the Registrar, the Paying Agent or the Pass
Through Trustee

                                       21
<PAGE>   23

shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such registration
instructions. Upon the issuance of Definitive Certificates, the Pass Through
Trustee shall recognize the Person in whose name the Definitive Certificates are
registered in the Register as Certificateholder hereunder. Neither the
Partnerships nor the Pass Through Trustee shall be liable if the Partnerships
are unable to locate a qualified successor Clearing Agency.

               (e)    The Certificates sold in offshore transactions in reliance
on Regulation S under the Securities Act will be represented initially by a
single, temporary Book-Entry Certificate, in definitive, fully registered form
without interest coupons (the "Temporary Regulation S Global Certificate") and
will be deposited with the Pass Through Trustee as custodian for DTC and
registered in the name of a nominee of DTC for the accounts of Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), and Cedelbank ("Cedelbank"). Each Temporary Regulation S Global
Certificate will be exchangeable for a single, permanent Book-Entry Certificate
(the "Permanent Regulation S Global Certificate," and together with the
Temporary Regulation S Global Certificate, the "Regulation S Global
Certificate") on or after 40 days after the later of the commencement of the
offering of the Certificates and the Closing Date upon certification that the
beneficial interests in such Book-Entry Certificate are owned by persons who are
not U.S. persons as defined in Regulation S. Prior to the expiration of such
40-day period, beneficial interests in the Temporary Regulation S Global
Certificate may be held only through Euroclear or Cedelbank, and any resale or
other transfer of such interests to U.S. persons shall not be permitted during
such period unless such resale or transfer is made pursuant to Rule 144A or
Regulation S under the Securities Act and in accordance with the certification
requirements specified in Section 3.9(f) below. The aggregate original principal
amount of the Regulation S Global Certificate may from time to time be increased
or decreased by adjustments made on the records of the Pass Through Trustee, as
custodian for DTC, in connection with a corresponding decrease or increase in
the aggregate original principal amount of a Definitive Certificate or the
Restricted Global Certificate, as hereinafter provided.

               (f)    The Certificates sold in reliance on Rule 144A under the
Securities Act will be represented by a single, permanent Book-Entry
Certificate, in definitive, fully registered form without interest coupons (the
"Restricted Global Certificate"), which will be deposited with the Pass Through
Trustee as custodian for DTC and registered in the name of a nominee of DTC.
Prior to the 40th day after the later of the commencement of the offering of the
Certificates and the Closing Date, a beneficial interest in the Temporary
Regulation S Global Certificate may be transferred to a person who takes
delivery in the form of an interest in the Restricted Global Certificate only
upon receipt by the Pass Through Trustee of a written certification from the
transferor (in the form of Exhibit C hereto) to the effect that such transfer is
being made to a person who the transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction. Beneficial
interests in the Restricted Global Certificate may be transferred to a person
who takes delivery in the form of an interest in the Regulation S Global
Certificate whether before, on or after such 40th day, only upon receipt by the
Pass Through Trustee of a written certification (in the form of Exhibit C
hereto) to the effect that such transfer is being made in accordance with
Regulation S under the Securities Act and, if such transfer occurs prior

                                       22
<PAGE>   24

to such 40th day, the interest will be held immediately thereafter only through
Euroclear or Cedelbank. The aggregate initial principal amount of the Restricted
Global Certificate may from time to time be increased or decreased by
adjustments made on the records of the Pass Through Trustee, as custodian for
DTC, in connection with a corresponding decrease or increase in the aggregate
initial principal amount of a Definitive Certificate or a Regulation S Global
Certificate, as hereinafter provided.

               (g)    Any beneficial interest in one of the Book-Entry
Certificates that is transferred to a person who takes delivery in the form of
an interest in another Book-Entry Certificate will, upon transfer, cease to be
an interest in such first Book-Entry Certificate and become an interest in such
other Book-Entry Certificate and, accordingly, will thereafter be subject to all
transfer restrictions, if any, and other procedures applicable to beneficial
interests in such other Book-Entry Certificate for so long as it remains such an
interest. Upon the transfer of Definitive Certificates to a qualified
institutional buyer or in accordance with Regulation S, such Definitive
Certificates will be exchanged for an interest in a Book-Entry Certificate.

               (h)    The Partnerships and the Pass Through Trustee, if
necessary, shall each enter into the Letter of Representations with respect to
the Certificates and fulfill its responsibilities thereunder.

        Section 3.10. Form of Certification. In connection with any
certification contemplated by Section 3.4, relating to compliance with certain
restrictions relating to transfers of Restricted Certificates, such
certification shall be provided substantially in the form of Exhibit C hereto,
with only such changes as shall be reasonably approved by the Partnerships and
reasonably acceptable to the Pass Through Trustee.

SECTION 4. DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS

        Section 4.1. Certificate Account and Special Payments Account.

               (a)    The Pass Through Trust shall establish and maintain on
behalf of the Certificateholders the Certificate Account with the Pass Through
Trustee as one or more non-interest bearing accounts. The Pass Through Trustee
shall hold the Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals therefrom only as
provided in this Pass Through Trust Agreement. On each day when a Scheduled
Payment is made and identified as such under the Collateral Trust Indenture to
the Pass Through Trust, as holder of the Lessor Notes issued under Collateral
Trust Indenture, the Pass Through Trustee upon receipt shall immediately deposit
the aggregate amount of such Scheduled Payment in the Certificate Account.

               (b)    The Pass Through Trust shall establish and maintain on
behalf of the Certificateholders the Special Payments Account with the Pass
Through Trustee as one or more accounts, which shall be non-interest bearing
except as provided in Section 4.4. The Pass Through Trustee shall hold the
Special Payments Account in trust for the benefit of the Certificateholders, and
shall make or permit withdrawals therefrom only as provided in this Pass Through
Trust Agreement. On each day when a Special Payment is made and identified as
such under the Collateral Trust Indenture to the Pass Through Trustee, as holder
of the Lessor Notes

                                       23
<PAGE>   25

issued under the Collateral Trust Indenture, the Pass Through Trustee upon
receipt shall immediately deposit the aggregate amounts of such Special Payments
in the Special Payments Account.

               (c)    The Pass Through Trustee shall present to the applicable
Indenture Trustee each Lessor Note on the date of its stated final maturity, or
in the case of any Lessor Note which is to be redeemed or otherwise prepaid in
whole pursuant to the Collateral Trust Indenture, on the applicable redemption
or other prepayment date under the Collateral Trust Indenture.

        Section 4.2. Distributions from Certificate Account and Special Payments
Account.

               (a)    On each Distribution Date if the Pass Through Trustee
receives payment of the Scheduled Payments due on any Lessor Notes on such date
by 12:00 noon, New York time, on such date, the Pass Through Trustee shall
distribute out of the Certificate Account the entire amount deposited therein
pursuant to Section 4.1(a). If a Scheduled Payment is received by the Pass
Through Trustee after 12:00 noon, New York time, on a Distribution Date, such
payment shall be distributed on the next Business Day. If a Scheduled Payment is
not received by the Pass Through Trustee on a Distribution Date but is received
prior to the time such payment would become a Special Payment, such payment
shall be distributed (i) on the date received, if received by 12:00 noon, New
York time, on such date or (ii) on the next Business Day, if received after
12:00 noon, New York time, on such date. There shall be so distributed to each
Certificateholder of record on the Record Date with respect to such Distribution
Date (other than as provided in Section 11.1 concerning the final distribution)
(i) if (A) DTC is the Certificateholder of record, or (B) a Certificateholder
holds a Certificate or Certificates in an aggregate amount greater than
$10,000,000 or (C) a Certificateholder holds a Certificate or Certificates in an
aggregate amount greater than $1,000,000 and so requests to the Pass Through
Trustee, by wire transfer in immediately available funds to an account
maintained by such Certificateholder with a bank, or (ii) if none of the above
apply, by check mailed to such Certificateholder at the address appearing in the
Register, such Certificateholder's pro rata share (based on the aggregate
Fractional Undivided Interest held by such Certificateholder) of the aggregate
amount in the Certificate Account.

               (b)    On each Special Distribution Date with respect to any
Special Payment if the Pass Through Trustee receives the Special Payments due on
the required date by 12:00 noon, New York time, on such date, the Pass Through
Trustee shall distribute out of the Special Payments Account the entire amount
deposited therein with respect to such Special Payment pursuant to this Section
4.1(b). If a Special Payment is received by the Pass Through Trustee after 12:00
noon, New York time, on a Special Distribution Date, such payment shall be
distributed on the next Business Day. If a Special Payment is not received by
the Pass Through Trustee on a Special Distribution Date, such payment shall be
distributed (i) on the date received, if received by 12:00 noon, New York time,
on such date or (ii) on the next Business Day, if received after 12:00 noon, New
York time, on such date. There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Special Distribution Date
(other than as provided in Section 11.1 concerning the final distribution) (i)
if (A) DTC is the Certificateholder of record, or (B) a Certificateholder holds
a Certificate or Certificates in an aggregate amount greater than $10,000,000 or
(C) a Certificateholder holds a Certificate or Certificates in an aggregate
amount greater than $1,000,000 and so requests to the Pass Through

                                       24
<PAGE>   26

Trustee, by wire transfer in immediately available funds to an account
maintained by the Certificateholder with a bank, or (ii) if none of the above
apply, by check mailed to such Certificateholder at the address appearing in the
Register, such Certificateholder's pro rata share (based on the aggregate
Fractional Undivided Interest held by such Certificateholder) of the aggregate
amount in the Special Payments Account on account of such Special Payment.

               (c)    The Pass Through Trustee shall, at the expense of the
Partnerships, cause notice of each Special Payment to be mailed to (i) each
Certificateholder, at the address of such Certificateholder as it appears in the
Register and (ii) any Certificate Owner who has made a valid Certificate Owner
Request, at the address specified in such Certificate Owner Request. In the
event of prepayment of any Lessor Notes, such notice shall be mailed not less
than 20 days prior to the date any such Special Payment is scheduled to be
distributed. In the case of any other Special Payments, such notice shall be
mailed as soon as practicable after the Pass Through Trustee has confirmed that
it has received funds for such Special Payment. Notices mailed by the Pass
Through Trustee shall set forth:

                      (i)    the Special Distribution Date and the Record Date
               therefor (except as otherwise provided in Section 11.1);

                      (ii)   the amount of the Special Payment per $1,000 of
               face amount of Certificates and the amount thereof constituting
               principal, premium, if any, and interest;

                      (iii)  the reason for the Special Payment; and

                      (iv)   if the Special Distribution Date is the same date
               as a Distribution Date, the total amount to be received on such
               date per $1,000 of face amount of Certificates.

If the amount of premium payable upon the prepayment of a Lessor Note has not
been calculated at the time that the Pass Through Trustee mails notice of a
Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed. If a Distribution Date or Special Distribution Date is not a
Business Day, distribution shall be made on the immediately following Business
Day.

        Section 4.3. Statements to Certificateholders.

               (a)    On each Distribution Date and Special Distribution Date,
the Pass Through Trustee will include with each distribution to
Certificateholders a statement, giving effect to such distribution to be made on
such date, setting forth the following information (per a $1,000 face amount
Certificate):

                      (i)    the amount of such distribution allocable to
               principal and the amount allocable to premium if any; and

                      (ii)   the amount of such distribution allocable to
               interest.

                                       25
<PAGE>   27

               (b)    Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Pass
Through Trustee shall furnish (i) to each Person who at any time during such
calendar year was a Certificateholder of record and (ii) to any Person who at
any time during such calendar year was a Certificate Owner who has made a valid
Certificate Owner Request and provided the Pass Through Trustee with such
pertinent information as the Pass Through Trustee shall reasonably request, a
statement containing the sum of the amounts determined pursuant to clauses
(a)(i) and (a)(ii) with respect to the Pass Through Trust for such calendar year
or, in the event such Person was a Certificateholder of record or Certificate
Owner during a portion of such calendar year, for the applicable portion of such
year, and such other items as are readily available to the Pass Through Trustee
and which a Certificateholder or Certificate Owner shall reasonably request as
necessary for the purpose of such Certificateholder's or Certificate Owner's
preparation of its Federal income tax returns.

        Section 4.4. Investment of Special Payment Moneys. Any money received by
the Pass Through Trustee pursuant to Section 4.1(b) representing a Special
Payment which is not to be promptly distributed shall, to the extent
practicable, be invested in Permitted Government Investments by the Pass Through
Trustee pending distribution of such Special Payment pursuant to Section 4.2.
Any investment made pursuant to this Section 4.4 shall be in such Permitted
Government Investments having maturities not later than the date that such
moneys are required to be paid to make the payment required under Section 4.2 on
the applicable Special Distribution Date and the Pass Through Trustee shall hold
any such Permitted Government Investments until maturity. The Pass Through
Trustee shall have no liability with respect to any investment made pursuant to
this Section 4.4, other than by reason of the willful misconduct or negligence
of the Pass Through Trustee. All income and earnings from such investments shall
be distributed on such Special Distribution Date as part of such Special
Payment.

SECTION 5. FINANCIAL STATEMENTS AND OTHER REPORTS

        For so long as any Certificates remain Outstanding, the Partnerships
shall furnish:

               (a)    to Certificateholders, Certificate Owners and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act so long as the Certificates are not
freely transferable under the Securities Act; and

               (b)    to the Pass Through Trustee, who in turn shall provide
such information, upon a Certificate Owner Request, to Certificateholders and
Certificate Owners:

                      (i)    within 60 days following the end of each of the
               first three fiscal quarters of the Partnerships during each
               fiscal year, a copy of Form 10-Q (or any successor form) filed by
               the Partnerships with the SEC for such fiscal quarter, or if the
               Partnerships are not then subject to the reporting requirements
               of the Exchange Act, unaudited consolidated quarterly financial
               statements for the Partnerships for such fiscal quarter in the
               form required by Section 5.3(b) of the Participation Agreement;

                      (ii)   within 120 days following the end of the fiscal
               year of the Partnerships, a copy of the Form 10-K (or any
               successor form) filed by the

                                       26
<PAGE>   28

               Partnerships with the SEC for such fiscal year, or, if the
               Partnerships are not then subject to the reporting requirements
               of the Exchange Act, audited consolidated annual financial
               statements in the form required by Section 5.3(a) of the
               Participation Agreement; and

                      (iii)  within 20 days after the occurrence thereof, (A) a
               copy of any current report on Form 8-K (or any successor form)
               filed by the Partnerships with the SEC, if any, and (B) notice of
               the following events (1) a Change of Control; (2) any litigation
               or claim against the Partnerships, or the Tiverton or Rumford
               facilities which could reasonably be expected to have a Material
               Adverse Effect; (3) the appointment of a receiver over either of
               the Partnerships or the confirmation of a plan of reorganization
               or liquidation for either of the Partnerships; or (4) the
               resignation or dismissal of the independent accountants engaged
               by the Partnerships.

SECTION 6. DEFAULT

        Section 6.1. Events of Default.

               (a)    If any Lease Indenture Event of Default under the
Collateral Trust Indenture (an "Event of Default") shall occur and be
continuing, then, and in each and every case, so long as such Lease Indenture
Event of Default shall be continuing, the Pass Through Trustee may vote all of
the Lessor Notes issued under the Collateral Trust Indenture held in the Pass
Through Trust, and upon the Direction of the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c)), the Pass Through Trustee
shall vote a corresponding majority of such Lessor Notes, in favor of directing
the Indenture Trustee to declare the unpaid principal amount of such Lessor
Notes then outstanding and accrued interest thereon to be due and payable under,
and to the extent permitted by and in accordance with, the provisions of the
Collateral Trust Indenture.

               In addition, if an Event of Default shall have occurred and be
continuing, the Pass Through Trustee may in its discretion, and upon the
Direction of the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest of the Fractional
Undivided Interests evidenced by all Certificates at the time Outstanding
(determined as provided in Section 1.4(c)) shall, by such officer or agent as it
may appoint, sell, convey, transfer and deliver all or a portion of such Lessor
Note or Lessor Notes issued under the Collateral Trust Indenture with respect to
which the Event of Default has occurred, without recourse to or warranty by the
Pass Through Trustee or any Certificateholders to any Person. In any such case,
the Pass Through Trustee shall sell, assign, contract to sell or otherwise
dispose of and deliver such Lessor Note or Lessor Notes in one or more parcels
at public or private sale or sales, at any location or locations at the option
of the Pass Through Trustee, all upon such terms and conditions as it may
reasonably deem advisable and at such prices as it may reasonably deem
advisable, for cash. The Pass Through Trustee shall give notice to the
Partnerships and the Owner Lessor promptly after any such sale.

               In the event that the Pass Through Trustee shall deem it
advisable to sell any or all

                                       27
<PAGE>   29

of the Lessor Notes in accordance with the provisions of this Section, the
parties agree that if registration of any such Lessor Notes shall be required,
in the opinion of counsel for the Pass Through Trustee under the Securities Act
of 1933, as amended, or other applicable law, and regulations promulgated
thereunder, and if the Partnerships shall not effect, or cause to be effected,
such registration promptly, the Pass Through Trustee may sell any such Lessor
Notes at a private sale, and no Person shall attempt to maintain that the prices
at which such Lessor Notes are sold are inadequate by reason of the failure to
sell at public sale, or hold the Pass Through Trustee liable thereafter.

        Section 6.2. Incidents of Sale of Lessor Notes. Upon any sale of all or
any part of the Lessor Notes made either under the power of sale given under
this Pass Through Trust Agreement or otherwise for the enforcement of this Pass
Through Trust Agreement, the following shall be applicable:

               (1)    Certificateholders and Pass Through Trustee May Purchase
        Lessor Notes. Any Certificateholder, the Pass Through Trustee in its
        individual or any other capacity or any other Person may bid for and
        purchase any of the Lessor Notes and, upon compliance with the terms of
        sale, may hold, retain, possess and dispose of such Lessor Notes in
        their or its or his own absolute right without further accountability.

               (2)    Receipt of Pass Through Trustee Shall Discharge Purchaser.
        The receipt of immediately available funds by the Pass Through Trustee
        or the officer or agent appointed by the Pass Through Trustee shall be a
        sufficient discharge to any purchaser for his purchase money, and, after
        paying such purchase money and receiving such receipt, such purchaser or
        his personal representative or assigns shall not be obliged to see to
        the application of such purchase money, or be in any way answerable for
        any loss, misapplication or non-application thereof.

               (3)    Application of Moneys Received upon Sale. Any moneys
        collected by the Pass Through Trustee, upon any sale made either under
        the power of sale given by this Pass Through Trust Agreement or
        otherwise for the enforcement of this Pass Through Trust Agreement,
        shall be applied as provided in Section 4.2.

        Section 6.3. Judicial Proceedings Instituted by Pass Through Trustee.

               (a)    Pass Through Trustee May Bring Suit. If there shall be a
failure to make payment of the principal of, premium, if any, or interest on any
Lessor Note, or if there shall be any failure to pay Rent (as defined in a
Lease) under the Lease related to any Lessor Note when due and payable, then the
Pass Through Trustee, in its own name, and as trustee of an express trust, as
holder of such Lessor Notes shall be, to the extent permitted by and in
accordance with the terms of the Lessor Note Documents, entitled and empowered
(but not obligated) to institute any suits, actions or proceedings at law, in
equity or otherwise, for the collection of the sums so due and unpaid on such
Lessor Notes or under such Lease and may prosecute any such claim or proceeding
to judgment or final decree with respect to the whole amount of any such sums so
due and unpaid; subject, however, to the limitations of liability set forth in
the Lessor Notes and the Lessor Note Documents.

                                       28
<PAGE>   30

               (b)    Pass Through Trustee May File Proofs of Claim; Appointment
of Pass Through Trustee as Attorney-in-Fact in Judicial Proceedings. The Pass
Through Trustee in its own name, or as trustee of an express trust, or as
attorney-in-fact for the Certificateholders, or in any one or more of such
capacities (irrespective of whether distributions on the Certificates shall then
be due and payable, or the payment of the principal on the Lessor Notes shall
then be due and payable, as therein expressed or by declaration or otherwise and
irrespective of whether the Pass Through Trustee shall have made any demand to
the applicable Indenture Trustee for the payment of overdue principal, premium
(if any) or interest on the Lessor Notes), shall, subject to the terms of the
Lessor Note Documents, be entitled and empowered to file such proofs of claim
and other papers or documents as may be necessary or advisable in order to have
the claims of the Pass Through Trustee and of the Certificateholders allowed in
any receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization or any other judicial proceedings relative to the Partnerships or
the Owner Lessor, or the Owner Participant, or their respective creditors or
property. Subject to the terms of the Lessor Note Documents, any receiver,
assignee, trustee, liquidator or sequestrator (or similar official) in any such
judicial proceeding is hereby authorized by each Certificateholder to make
payments in respect of such claim to the Pass Through Trustee, and in the event
that the Pass Through Trustee shall consent to the making of such payments
directly to the Certificateholders, to pay to the Pass Through Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Pass Through Trustee, its agents and counsel and any other
amounts due the Pass Through Trustee under Section 7.7. Subject to Section 6.4,
nothing contained in this Pass Through Trust Agreement shall be deemed to give
to the Pass Through Trustee any right to accept or consent to any plan of
reorganization or otherwise by action of any character in any such proceeding to
waive or change in any way any right of any Certificateholder.

        Section 6.4. Control by Certificateholders. The Holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest of the Fractional Undivided Interests evidenced by all Certificates
at the time Outstanding (determined as provided in Section 1.4(c)) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Pass Through Trustee, or exercising any trust or
power conferred upon the Pass Through Trustee, under this Pass Through Trust
Agreement, including any right of the Pass Through Trustee as holder of the
Lessor Notes, provided that:

               (1)    such Direction shall not be in conflict with any rule of
        law or with this Pass Through Trust Agreement and would not involve the
        Pass Through Trustee in personal liability or expense;

               (2)    the Pass Through Trustee shall not determine that the
        action so directed would expose it to personal liability or be unjustly
        prejudicial to the Certificateholders not taking part in such direction;

               (3)    the Pass Through Trustee may take any other action deemed
        proper by the Pass Through Trustee which is not inconsistent with such
        Direction;

               (4)    such Holders shall have offered to the Pass Through
        Trustee security or indemnity against the costs, expenses or liabilities
        which may be incurred thereby; and

                                       29
<PAGE>   31

               (5)    if a Lease Indenture Event of Default shall have occurred
        and be continuing, such Direction shall not obligate the Pass Through
        Trustee to vote more than a corresponding majority of the related Lessor
        Notes held by the Pass Through Trust in favor of directing any action by
        the Indenture Trustee with respect to such Lease Indenture Event of
        Default.

        Section 6.5. Waiver of Defaults. The Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c)) may on behalf of the
Certificateholders of all the Certificates waive any Default or Event of Default
hereunder and its consequences or may instruct the Pass Through Trustee to waive
any default under the Collateral Trust Indenture and its consequences, except:

               (1)    a default in the deposit of any Scheduled Payment or
        Special Payment under Section 4.1 or in the distribution of any payment
        under Section 4.2 on the Certificates; or

               (2)    a default in the payment of the principal of, premium, if
        any, or interest on any Lessor Notes; or

               (3)    a default in respect of a covenant or provision hereof
        which under Section 9 hereof cannot be modified or amended without the
        consent of the Holder of each Outstanding Certificate affected.

               Upon any such waiver, such Default shall cease to exist with
respect to this Pass Through Trust Agreement, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Pass
Through Trust Agreement and any direction given by the Pass Through Trustee on
behalf of such Holders to the applicable Indenture Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any subsequent or other
Default, Event of Default or impair any right consequent thereon. Upon any such
waiver with respect to a Default under the Collateral Trust Indenture, the Pass
Through Trustee shall vote a corresponding majority of the Lessor Notes issued
under the Collateral Trust Indenture to waive the corresponding Lease Indenture
Default or Lease Indenture Event of Default.

               With respect to consents, approvals, waivers and authorizations
which under the terms of Section 8 of the Collateral Trust Indenture may be
given by the applicable Indenture Trustee without the necessity of the consent
of any of the holders of Lessor Notes issued with respect to the Collateral
Trust Indenture, no consent, approval, waiver or authorization shall be required
hereunder on the part of the Pass Through Trustee or the Certificateholders.

        Section 6.6. Undertaking to Pay Court Costs. All parties to this Pass
Through Trust Agreement, and each Certificateholder by his acceptance of a
Certificate, shall be deemed to have agreed that any court may in its discretion
require, in any suit, action or proceeding for the enforcement of any right or
remedy under this Pass Through Trust Agreement, or in any suit, action or
proceeding against the Pass Through Trustee for any action taken or omitted by
it as Pass Through Trustee hereunder, the filing by any party litigant in such
suit, action or proceeding of an undertaking to pay the costs of such suit,
action or proceeding, and that such court may, in

                                       30
<PAGE>   32

its discretion, assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, action or proceeding, having due regard
to the merits and good faith of the claims or defenses made by such party
litigant; provided, however, that the provisions of this Section 6.6 shall not
apply to (a) any suit, action or proceeding instituted by any Holder, or group
of Holders, holding in the aggregate Certificates evidencing Fractional
Undivided Interests aggregating more than 10% of the Pass Through Trust, (b) any
suit, action or proceeding instituted by any Certificateholder for the
enforcement of the distribution of payments pursuant to Section 4.2 hereof on or
after the respective due dates expressed herein or (c) any suit, action or
proceeding instituted by the Pass Through Trustee.

        Section 6.7. Right of Certificateholders to Receive Payments Not to Be
Impaired. Anything in this Pass Through Trust Agreement to the contrary
notwithstanding, but subject to Section 3.8 hereof, the right of any
Certificateholder to receive distributions of payments required pursuant to
Section 4.2 hereof on the Certificates when due, or to institute suit for the
enforcement of any such payment on or after the applicable Distribution Date or
Special Distribution Date, shall not be impaired or affected without the consent
of such Certificateholder.

        Section 6.8. Certificateholders May Not Bring Suit Except Under Certain
Conditions. A Certificateholder shall not have the right to institute any suit,
action or proceeding at law or in equity or otherwise with respect to this Pass
Through Trust Agreement, for the appointment of a receiver or for the
enforcement of any other remedy under this Pass Through Trust Agreement, unless:

               (1)    such Certificateholder previously shall have given written
        notice to the Pass Through Trustee of a continuing Event of Default;

               (2)    the Holders of Certificates evidencing Fractional
        Undivided Interests aggregating not less than a majority in interest of
        the Fractional Undivided Interests evidenced by all Certificates at the
        time Outstanding (determined as provided in Section 1.4(c)) shall have
        requested the Pass Through Trustee in writing to institute such suit,
        action or proceeding and shall have offered to the Pass Through Trustee
        indemnity as provided in Section 7.3(e);

               (3)    the Pass Through Trustee shall have refused or neglected
        to institute any such suit, action or proceeding for 60 days after
        receipt of such notice, request and offer of indemnity; and

               (4)    no Direction inconsistent with such written request has
        been given to the Pass Through Trustee during such 60-day period by the
        Holders of Certificates evidencing Fractional Undivided Interests
        aggregating not less than a majority in interest of the Fractional
        Undivided Interests evidenced by all Certificates at the time
        Outstanding (determined as provided in Section 1.4(c)).

               It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Trust Property or the lien of the Collateral Trust
Indenture on any property subject thereto, or the rights of the
Certificateholders

                                       31
<PAGE>   33

or the holders of the Lessor Notes, (ii) obtain or seek to obtain priority over
or preference to any other such Holder, or (iii) enforce any right under this
Pass Through Trust Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders subject to the
provisions of this Pass Through Trust Agreement.

        Section 6.9. Remedies Cumulative. Every remedy given hereunder to the
Pass Through Trustee or to any of the Certificateholders shall not be exclusive
of any other remedy or remedies, and every such remedy shall be cumulative and
in addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.

SECTION 7. THE PASS THROUGH TRUSTEE

        Section 7.1. Certain Duties and Responsibilities.

               (a)    Prior to an Event of Default of which a Responsible
Officer of the Pass Through Trustee has actual knowledge:

               (1)    the Pass Through Trustee shall not be liable except for
        the performance of such duties as are specifically set out in this Pass
        Through Trust Agreement; and

               (2)    the Pass Through Trustee may conclusively rely, as to the
        truth of the statements and the correctness of the opinions expressed
        therein, in the absence of bad faith on the part of the Pass Through
        Trustee, upon Officer's Certificates or Opinions of Counsel conforming
        to the requirements of this Pass Through Trust Agreement;

but the Pass Through Trustee shall, at any time that the Certificates shall be
subject to the Trust Indenture Act, examine any evidence furnished to it
pursuant to this Pass Through Trust Agreement or Section 314 of the Trust
Indenture Act to determine whether or not such evidence conforms to the
requirements of this Pass Through Trust Agreement; provided, however, that the
Pass Through Trustee shall not be responsible for the accuracy or content of
such evidence.

               (b)    In case an Event of Default has occurred and is
continuing, the Pass Through Trustee shall exercise each of the rights and
powers vested in it by this Pass Through Trust Agreement, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his own affairs.

               (c)    No provision of this Pass Through Trust Agreement shall be
construed to relieve the Pass Through Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

               (1)    this paragraph (c) shall not be construed to limit the
        effect of paragraph (a) of this Section 7.1;

               (2)    the Pass Through Trustee shall not be liable in its
        individual capacity for any error of judgment made in good faith by a
        Responsible Officer of the Pass Through Trustee, unless it shall be
        proved that the Pass Through Trustee was negligent in ascertaining the
        pertinent facts; and

                                       32
<PAGE>   34

               (3)    the Pass Through Trustee shall not be liable with respect
        to any action taken or omitted to be taken by it in good faith in
        accordance with the Direction of the Holders of Certificates evidencing
        Fractional Undivided Interests aggregating not less than a majority in
        interest of the Fractional Undivided Interests evidenced by all
        Certificates at the time Outstanding (determined as provided in Section
        1.4(c)) (A) relating to the time, method and place of conducting any
        proceeding for any remedy available to the Pass Through Trustee, or (B)
        exercising any trust or power conferred upon the Pass Through Trustee,
        under this Pass Through Trust Agreement.

               (d)    Whether or not herein expressly so provided, every
provision of this Pass Through Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Pass Through Trustee
shall be subject to the provisions of this Section 7.1.

        Section 7.2. Notice of Defaults. The Pass Through Trustee shall give to
the Certificateholders, at any time that the Certificates shall be subject to
the Trust Indenture Act, in the manner and to the extent required by Section
313(c) of the Trust Indenture Act, and to each of the Partnerships, the Owner
Lessor and the applicable Indenture Trustee in accordance with Section 12.4,
notice of all Defaults actually known to a Responsible Officer of the Pass
Through Trustee within 90 days after the occurrence thereof; provided, however,
that, except in the case of a Default in the payment of the principal of,
premium, if any, or interest on any Lessor Note, the Pass Through Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors or
Responsible Officers of the Pass Through Trustee in good faith determine that
the withholding of such notice is in the interests of the Certificateholders.

        Section 7.3. Certain Rights of Pass Through Trustee. Except as otherwise
provided in Section 7.1:

               (a)    the Pass Through Trustee may rely and shall be protected
in acting or refraining from acting in reliance upon any Act, Direction,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;

               (b)    any request or direction of either of the Partnerships,
the Owner Lessor or any Indenture Trustee mentioned herein shall be sufficiently
evidenced by a Request;

               (c)    whenever in the administration of this Pass Through Trust
Agreement the Pass Through Trustee shall deem it desirable that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, the Pass Through Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officer's Certificate of either of the Partnerships, the Owner Lessor or the
applicable Indenture Trustee;

               (d)    the Pass Through Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in

                                       33
<PAGE>   35

respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;

               (e)    the Pass Through Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Pass Through Trust
Agreement at the request or direction of any of the Certificateholders pursuant
to this Pass Through Trust Agreement, unless such Certificateholders shall have
offered to the Pass Through Trustee reasonable security or indemnity against the
cost, expenses and liabilities which might be incurred by it in compliance with
such request or direction;

               (f)    the Pass Through Trustee shall not be bound to make any
investigation into the facts or matters stated in any Act, Direction,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document;

               (g)    the Pass Through Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Pass Through Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it hereunder with due care;

               (h)    the Pass Through Trustee shall not be personally liable
for any action taken, suffered or omitted by it in good faith and believed by it
to be authorized or within the discretion of rights or powers conferred upon it
by this Pass Through Trust Agreement;

               (i)    the right of the Pass Through Trustee to perform any
discretionary act enumerated in this Pass Through Trust Agreement shall not be
construed as a duty, and the Pass Through Trustee shall not be answerable for
other than its negligence or willful misconduct in the performance of such act;

               (j)    the Pass Through Trustee shall not be required to give any
bond or surety in respect of the execution of the trust fund created hereby or
the powers granted hereunder; and

               (k)    the Pass Through Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to record this Pass Through Trust Agreement.

        Section 7.4. Not Responsible for Recitals; Issuance of Certificates. The
recitals contained herein and in the Certificates, except the certificates of
authentication, shall not be taken as the statements of the Pass Through
Trustee, and the Pass Through Trustee assumes no responsibility for their
correctness. The Pass Through Trustee makes no representations as to the
validity or sufficiency of this Pass Through Trust Agreement, the Lessor Notes,
the Lessor Note Documents, or the Certificates, or the collateral securing the
Lessor Notes, except that the Pass Through Trustee hereby represents and
warrants that this Pass Through Trust Agreement has been, and each Certificate
will be, executed and delivered by one of its officers who is duly authorized to
execute and deliver such document on its behalf.

                                       34
<PAGE>   36

        Section 7.5. May Hold Certificates. The Pass Through Trustee, any Paying
Agent, Registrar or any other agent, in their respective individual or any other
capacity, may become the owner or pledgee of Certificates and may otherwise deal
with the Partnerships, Owner Lessor, Owner Participant or Indenture Trustee with
the same rights it would have if it were not the Pass Through Trustee, Paying
Agent, Registrar or such other agent, subject to Section 7.8 in the case of the
Pass Through Trustee.

        Section 7.6. Money Held in Pass Through Trust. Money held by the Pass
Through Trustee or the Paying Agent in trust hereunder need not be segregated
from other funds except to the extent required herein or by law and neither the
Pass Through Trustee nor the Paying Agent shall have any liability for interest
upon any such moneys except as provided for herein.

        Section 7.7. Compensation, Reimbursement and Indemnification. Each of
the Partnerships agrees, on a joint and severable basis:

               (1)    to pay, or cause to be paid, to the Pass Through Trustee
        from time to time the compensation separately agreed to by the Pass
        Through Trustee and the Partnerships for all services rendered by it
        hereunder (which compensation shall not be limited by any provision of
        law in regard to the compensation of a trustee of an express trust); and

               (2)    except as otherwise expressly provided herein, to
        reimburse, or cause to be reimbursed, the Pass Through Trustee upon its
        request for all reasonable out-of-pocket expenses, disbursements and
        advances incurred or made by the Pass Through Trustee in accordance with
        any provision of this Pass Through Trust Agreement (including the
        reasonable compensation and the expenses and disbursements of its agents
        and counsel), except any such expense, disbursement or advance as may be
        attributable to its negligence, willful misconduct or bad faith.

               In addition, the Pass Through Trustee shall be entitled to
reimbursement from, and shall have a lien prior to the Certificates upon, all
property and funds held or collected by the Pass Through Trustee in its capacity
as Pass Through Trustee for any tax incurred without negligence, bad faith or
willful misconduct, on its part, arising out of or in connection with the
acceptance or administration of this Pass Through Trust (other than any tax
attributable to the Pass Through Trustee's compensation for serving as such),
including any costs and expenses incurred in contesting the imposition of any
such tax. If the Pass Through Trustee reimburses itself for any such tax, it
will within 30 days mail a brief report setting forth the circumstances thereof
to all Certificateholders as their names and addresses appear in the Register.

        Section 7.8. Corporate Trustee Required; Eligibility. There shall at all
times be a Pass Through Trustee hereunder which (a) shall be, at any time that
the Certificates shall be subject to the Trust Indenture Act, a Person eligible
to act as a trustee under Section 310(a) of the Trust Indenture Act and (b)
shall be a corporation organized and doing business under the laws of the United
States of America or of any state, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$150,000,000, and subject to supervision or examination by Federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 7.8, the combined capital and
surplus

                                       35
<PAGE>   37
of such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Pass Through Trustee shall cease to be eligible in accordance with the
provisions of clause (a) of this Section 7.8 at a time when it is required to be
so qualified, it shall resign immediately in the manner and with the effect
hereinafter specified in this Section 7.

        Section 7.9. Resignation and Removal: Appointment of Successor.

               (a)    No resignation or removal of the Pass Through Trustee and
no appointment of a successor Pass Through Trustee pursuant to this Section 7.9
shall become effective until the acceptance of appointment by the successor Pass
Through Trustee under Section 7.10.

               (b)    The Pass Through Trustee may resign at any time by giving
written notice thereof to the Partnerships, the Authorized Agents, the Owner
Lessor, the Owner Participant and each Indenture Trustee. If an instrument of
acceptance by a successor Pass Through Trustee shall not have been delivered to
the Partnerships, the Owner Lessor, the Owner Participant and each Indenture
Trustee within 30 days after the giving of such notice of resignation, the
resigning Pass Through Trustee may petition any court of competent jurisdiction
for the appointment of a successor Pass Through Trustee.

               (c)    The Pass Through Trustee may be removed at any time by Act
of the Holders holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Pass Through Trust
delivered to the Pass Through Trustee and to the Partnerships, the Owner Lessor
and each Indenture Trustee.

               (d)    If at any time:

                      (1)    the Pass Through Trustee fails to, at any time that
               the Certificates shall be subject to the Trust Indenture Act,
               comply with the requirements of Section 310 of the Trust
               Indenture Act after written request for such compliance by a
               Certificateholder that has been a bona fide Certificateholder for
               at least six months; or

                      (2)    the Pass Through Trustee shall cease to be eligible
               under Section 7.8 hereof and shall fail to resign after written
               request therefor by the Partnerships (or, following the
               occurrence of a Lease Event of Default, the Owner Lessor) or by
               any such Certificateholder; or

                      (3)    the Pass Through Trustee shall become incapable of
               acting or shall be adjudged bankrupt or insolvent or a receiver
               of the Pass Through Trustee or of its property shall be appointed
               or any public officer shall take charge or control of the Pass
               Through Trustee or of its property or affairs for the purpose of
               rehabilitation, conservation or liquidation;

then, in any case, (i) the Partnerships (or, following the occurrence of a Lease
Event of Default, the Owner Lessor), may remove the Pass Through Trustee or (ii)
subject to Section 6.6 hereof, any Certificateholder who has been a bona fide
Holder of a Certificate for at least six months

                                       36
<PAGE>   38

may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Pass Through Trustee and the
appointment of a successor Pass Through Trustee.

               (e)    If a Responsible Officer of the Pass Through Trustee shall
obtain Actual Knowledge of an Avoidable Tax (as hereinafter defined) which has
been or is likely to be asserted, the Pass Through Trustee shall promptly notify
the Partnerships and the Owner Lessor thereof and shall, within 30 days of such
notification, resign hereunder unless within such 30-day period the Pass Through
Trustee shall have received notice that the Partnerships or the Owner Lessor has
agreed to pay such tax. The Partnerships shall promptly appoint a successor Pass
Through Trustee in a jurisdiction where there are no Avoidable Taxes. As used
herein an "Avoidable Tax" means a state or local tax: (i) upon (w) the Pass
Through Trust, (x) the Trust Property, (y) Holders of the Certificates or (z)
the Pass Through Trustee for which the Pass Through Trustee is entitled to seek
reimbursement from the Trust Property, and (ii) that would be avoided if the
Pass Through Trustee were located in another state, or jurisdiction within a
state, within the United States. A tax shall not be an Avoidable Tax if the
Partnerships or the Owner Lessor shall agree to pay, and shall pay, such tax.

               (f)    If the Pass Through Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Pass Through Trustee for any cause, the Partnerships (or, following the
occurrence of a Lease Event of Default, the Owner Lessor) shall promptly appoint
a successor Pass Through Trustee. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Pass
Through Trustee shall be appointed by Act of the Holders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Pass Through Trust, delivered to the Partnerships, the Owner
Lessor, the Owner Participant, the Indenture Trustees and the retiring Pass
Through Trustee, the successor Pass Through Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Pass
Through Trustee and supersede the successor Pass Through Trustee appointed as
provided above. If no successor Pass Through Trustee shall have been so
appointed as provided above and accepted appointment in the manner hereinafter
provided, any Certificateholder who has been a bona fide Holder of a Certificate
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Pass Through Trustee.

               (g)    The successor Pass Through Trustee shall give notice of
the resignation and removal of the Pass Through Trustee and appointment of the
successor Pass Through Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Holders of Certificates as their names
and addresses appear in the Register. Each notice shall include the name of such
successor trustee and the address of its Corporate Trust Office.

        Section 7.10. Acceptance of Appointment by Successor. Every successor
Pass Through Trustee appointed hereunder shall execute, acknowledge and deliver
to the Partnerships, the Owner Lessor and to the retiring Pass Through Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Pass Through Trustee shall become effective and such
successor Pass Through Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Pass

                                       37
<PAGE>   39

Through Trustee; but, on request of either of the Partnerships (or, following
the occurrence of a Lease Event of Default, the Owner Lessor) to the successor
Pass Through Trustee, such retiring Pass Through Trustee shall execute and
deliver an instrument transferring to such successor Pass Through Trustee all
the rights, powers and trusts of the retiring Pass Through Trustee and shall
duly assign, transfer and deliver to such successor Pass Through Trustee all
property and money held by such retiring Pass Through Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.7. Upon request of
any such successor Pass Through Trustee, the Partnerships, the Owner Lessor, the
retiring Pass Through Trustee and such successor Pass Through Trustee shall
execute and deliver any and all instruments containing such provisions as shall
be necessary or desirable to transfer and confirm to, and for more fully and
certainly vesting in, such successor Pass Through Trustee all such rights,
powers and trusts.

               No successor Pass Through Trustee shall accept its appointment
unless at the time of such acceptance such successor Pass Through Trustee shall
be qualified and eligible under this Section 7.

        Section 7.11. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Pass Through Trustee may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Pass Through Trustee shall be a
party, or any Person succeeding to all or substantially all of the corporate
trust business of the Pass Through Trustee, shall be the successor of the Pass
Through Trustee hereunder, provided such Person shall be otherwise qualified and
eligible under this Section 7, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any
Certificates shall have been authenticated, but not delivered, by the Pass
Through Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Pass Through Trustee may adopt such
authentication and deliver the Certificates so authenticated with the same
effect as if such successor Pass Through Trustee had itself authenticated such
Certificates.

        Section 7.12. Maintenance of Agencies.

               (a)    There shall at all times be maintained in the Borough of
Manhattan, The City of New York, an office or agency where Certificates may be
presented or surrendered for registration of transfer or for exchange, and for
payment thereof and where notices and demands to or upon the Pass Through
Trustee in respect of the Certificates or of this Pass Through Trust Agreement
may be served. Written notice of the location of each such other office or
agency and of any change of location thereof shall be given by the Pass Through
Trustee to the Partnerships, the Owner Lessor, the Owner Participant, each
Indenture Trustee and the Certificateholders. In the event that no such office
or agency shall be maintained or no such notice of location or of change of
location shall be given, presentations and demands may be made and notices may
be served at the Corporate Trust Office of the Pass Through Trustee.

               (b)    There shall at all times be a Registrar and a Paying Agent
hereunder. Each such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the United States
or any state, with a combined capital and surplus of at least $150,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by Federal or state authorities. The Pass Through Trustee

                                       38
<PAGE>   40

shall initially be the Paying Agent and, as provided in Section 3.4, Registrar
hereunder. Each Registrar shall furnish to the Pass Through Trustee (unless they
are the same entity), at stated intervals of not more than six months, and at
such other times as the Pass Through Trustee may request in writing, a copy of
the Register.

               (c)    Any Person into which any Authorized Agent may be merged
or converted or with which it may be consolidated, or any Person resulting from
any merger, consolidation or conversion to which any Authorized Agent shall be a
party, or any Person succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor Person is otherwise eligible under this Section 7.12, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor Person.

               (d)    Any Authorized Agent may at any time resign by giving
written notice of resignation to the Pass Through Trustee, the Partnerships, the
Owner Lessor, the Owner Participant and each Indenture Trustee. The Partnerships
(or, following the occurrence of a Lease Event of Default, the Owner Lessor)
may, and at the request of the Pass Through Trustee shall, at any time terminate
the agency of any Authorized Agent by giving written notice of termination to
such Authorized Agent and to the Pass Through Trustee. Upon the resignation or
termination of an Authorized Agent or in case at any time any such Authorized
Agent shall cease to be eligible under this Section 7.12 (when, in either case,
no other Authorized Agent performing the functions of such Authorized Agent
shall have been appointed), the Partnerships (or, following the occurrence of a
Lease Event of Default, the Owner Lessor) shall promptly appoint one or more
qualified successor Authorized Agents reasonably satisfactory to the Pass
Through Trustee, to perform the functions of the Authorized Agent which has
resigned or whose agency has been terminated or who shall have ceased to be
eligible under this Section 7.12. The Partnerships (or, following the occurrence
of a Lease Event of Default, the Owner Lessor) shall give written notice of any
such appointment made by it to the Pass Through Trustee, the Partnerships, the
Owner Lessor and each Indenture Trustee; and in each case the Pass Through
Trustee shall mail notice of such appointment to all Holders as their names and
addresses appear on the Register.

               (e)    Each Partnership agrees to pay, or cause to be paid, from
time to time to each Authorized Agent the compensation as set forth in the
schedule agreed to by each Authorized Agent and such Partnership for its
services and to reimburse it for its reasonable expenses.

        Section 7.13. Money for Certificate Payments to Be Held in Trust. All
moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited in a non interest bearing account and held in
trust for the benefit of the Holders of the Certificates entitled to such
payment, subject to the provisions of this Section 7.13. Moneys so deposited and
held in trust shall constitute a separate trust fund for the benefit of the
Holders of the Certificates with respect to which such money was deposited.

               The Pass Through Trustee will cause each Paying Agent other than
the Pass Through Trustee to execute and deliver to it an instrument in which
such Paying Agent shall

                                       39
<PAGE>   41

agree with the Pass Through Trustee, subject to the provisions of this Section
7.13, that such Paying Agent will:

               (1)    hold all sums held by it for payments on Certificates in
        trust for the benefit of the Persons entitled thereto until such sums
        shall be paid to such Persons or otherwise disposed of as herein
        provided;

               (2)    give the Pass Through Trustee notice in writing of any
        default by any obligor upon the Lessor Notes in the making of any such
        payment; and

               (3)    at any time during the continuance of any such default,
        upon the written request of the Pass Through Trustee, forthwith pay to
        the Pass Through Trustee all sums so held in trust by such Paying Agent.

               The Pass Through Trustee may at any time, for the purpose of
obtaining the satisfaction and discharge of this Pass Through Trust Agreement or
for any other purpose, direct any Paying Agent to pay to the Pass Through
Trustee all sums held in trust by such Paying Agent, such sums to be held by the
Pass Through Trustee upon the same trusts as those upon which such sums were
held by such Paying Agent; and, upon such payment by any Paying Agent to the
Pass Through Trustee, such Paying Agent shall be released from all further
liability with respect to such money.

        Section 7.14. Registration of Lessor Notes in Pass Through Trustee's
Name. The Pass Through Trustee agrees that all Lessor Notes and Permitted
Government Investments, if any, shall be issued in the name of the Pass Through
Trustee or its nominee and held by the Pass Through Trustee, or, if not so held,
the Pass Through Trustee or its nominee shall be reflected as the owner of such
Lessor Notes or Permitted Government Investments, as the case may be, in the
register of the issuer of such Lessor Notes or Permitted Government Investments
under the applicable provisions of the Uniform Commercial Code in effect where
the Pass Through Trustee holds such Lessor Notes or Permitted Government
Investments, or other applicable law then in effect.

        Section 7.15. Withholding Taxes; Information Reporting. The Pass Through
Trustee, as trustee, shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Pass Through Trustee agrees (i) to act as such withholding
agent and, in connection therewith, whenever any present or future taxes or
similar charges are required to be withheld with respect to any amounts payable
in respect of the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders of the
Certificates, (ii) that it will file any necessary withholding tax returns or
statements when due, and (iii) that, as promptly as possible after the payment
thereof, it will deliver to each Holder of a Certificate appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Holders may reasonably request from time to time.
The Pass Through Trustee agrees to file any other information reports as it may
be required to file under United States law. Any amounts withheld and paid to a
relevant taxing authority pursuant to this Section 7.15 shall be deemed to have
been paid to the related Certificateholders for all purposes under the Operative
Documents.

                                       40
<PAGE>   42

SECTION 8. CERTIFICATEHOLDERS' LISTS AND REPORTS

        Section 8.1. The Partnerships to Furnish Pass Through Trustee with Names
and Addresses of Certificateholder. Each Partnership will furnish to the Pass
Through Trustee within fifteen days after each Record Date with respect to a
Scheduled Payment, and at such other times as the Pass Through Trustee may
request in writing, a list, in such form as the Pass Through Trustee may
reasonably require, of all information in the possession or control of such
Partnership as to the names and addresses of the Holders of Certificates, in
each case as of a date not more than sixty days prior to the time such list is
furnished; provided, however, that so long as the Pass Through Trustee is the
sole Registrar, no such list need be furnished; and provided, further, however,
that no such list need be furnished for so long as a copy of the Register is
being furnished to the Pass Through Trustee pursuant to Section 7.12(b).

        Section 8.2. Preservation of Information. The Pass Through Trustee shall
preserve, in as current a form as is reasonably practicable, the names and
addresses of Holders of Certificates contained in the most recent list furnished
to the Pass Through Trustee as provided in Section 7.12(b) or Section 8.1, as
the case may be, and the names and addresses of Holders of Certificates received
by the Pass Through Trustee in its capacity as Registrar, if so acting. The Pass
Through Trustee may destroy any list furnished to it as provided in Section
7.12(b) or Section 8.1, as the case may be, upon receipt of a new list so
furnished.

        Section 8.3. Reports by the Partnerships. Each Partnership shall, at any
time that the Certificates shall be subject to the Trust Indenture Act, comply
with Section 314 of the Trust Indenture Act and shall file, furnish and deliver
the reports, information, documents, certificates and opinions required
thereunder, and, at any time that the Certificates shall be subject to the Trust
Indenture Act, acknowledge and agree that, for purposes of Section 314 of the
Trust Indenture Act, each Partnership shall be considered to be the "obligor"
upon the Certificates. Without limiting the generality of the foregoing, at any
time that the Certificates shall be subject to the Trust Indenture Act, each
Partnership shall deliver to the Pass Through Trustee the annual certificate
required under clause (4) of Section 314(a) of the Trust Indenture Act within
120 days following the end of each fiscal year of such Partnership (which ends
on December 31) ending after the date hereof. The provisions of this Section 8.3
shall not be construed to impose any obligation or liability on the Partnerships
to pay any of the principal, premium, if any, or interest in respect of the
Lessor Notes or the Certificates.

        Section 8.4. Reports by the Pass Through Trustee. At any time that the
Certificates shall be subject to the Trust Indenture Act, the Pass Through
Trustee shall transmit, on or before May 15 of each year, reports with respect
to events described in Section 313(a) of the Trust Indenture Act in accordance
with and to the extent required under Section 313(a) of the Trust Indenture Act.
Additionally, the Pass Through Trustee shall comply with the reporting
requirements imposed under Treasury Regulation 1.67.

SECTION 9. SUPPLEMENTAL TRUST AGREEMENTS

        Section 9.1. Supplemental Trust Agreement Without Consent of
Certificateholders. Without the consent of the Holder of any Certificates, the
Partnerships may, and the Pass Through Trustee (subject to Section 9.3) shall,
at any time and from time to time enter into one

                                       41
<PAGE>   43

or more agreements supplemental hereto, in form satisfactory to the Pass Through
Trustee, for any of the following purposes:

               (1)    to evidence the succession of another corporation to
        either Partnership and the assumption by any such successor of the
        obligations of such Partnership herein contained;

               (2)    to add to the covenants of the Partnerships, for the
        protection of the Holders of the Certificates;

               (3)    to surrender any right or power herein conferred upon the
        Partnerships;

               (4)    to cure any ambiguity, to correct or supplement any
        provision herein which may be defective or inconsistent with any other
        provision herein or to make any other provisions with respect to matters
        or questions arising under this Pass Through Trust Agreement; provided
        that any such action will not adversely affect in any material respect
        the interests of the Holders of the Certificates;

               (5)    to correct or amplify the description of property that
        constitutes Trust Property or the conveyance of such property to the
        Pass Through Trustee;

               (6)    to evidence and provide for a successor Pass Through
        Trustee;

               (7)    to comply with requirements of the SEC, any applicable
        law, rules or regulations of any exchange or quotation system on which
        the Certificates are listed, or any regulatory body;

               (8)    at any time that the Certificates shall be subject to the
        Trust Indenture Act, to modify, eliminate or add to the provisions of
        this Pass Through Trust Agreement to the extent as shall be necessary to
        qualify or continue the qualification of this Pass Through Trust
        Agreement (including any supplemental agreement) under the Trust
        Indenture Act or under any similar Federal statute hereafter enacted, or
        to add to this Pass Through Trust Agreement such other provisions as may
        be expressly permitted by the Trust Indenture Act, excluding, however,
        the provisions referred to in Section 316(a)(2) of the Trust Indenture
        Act as in effect at the date as of which this instrument was executed or
        any corresponding provision in any similar Federal statute hereafter
        enacted;

               (9)    to modify, amend or supplement any provision herein to
        reflect changes relating to the assumption and substitution of any
        Lessor Note pursuant to Section 2.10(b) of the Collateral Trust
        Indenture; or

               (10)   to add, eliminate, or change any provision under this Pass
        Through Trust Agreement that will not adversely affect the interests of
        the Certificateholders in any material respect.

provided that in each case the Pass Through Trustee shall have received an
opinion of counsel, which may be counsel to the Partnerships, to the effect that
such supplemental agreement does not cause the Pass Through Trust to become
taxable as an "association" within the meaning of

                                       42
<PAGE>   44

Treasury Regulation Section 301.7701-4 or to be taxable as other than a pass
through entity for Federal income tax purposes.

        Section 9.2. Supplemental Trust Agreements with Consent of
Certificateholders. With the consent of the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c) hereof), by Act of said
Holders delivered to the Partnerships and the Pass Through Trustee, the
Partnerships may (with the consent of the Owner Lessor, such consent not to be
unreasonably withheld), and the Pass Through Trustee (subject to Section 9.3
hereof) shall, enter into an agreement or agreements supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Pass Through Trust Agreement or of modifying in any
manner the rights and obligations of the Holders of the Certificates under this
Pass Through Trust Agreement; provided, however, that no such supplemental
agreement shall, without the consent of the Holder of each Outstanding
Certificate affected thereby:

               (1)    reduce in any manner the amount of, or delay the timing
        of, any receipt by the Pass Through Trustee of payments on the Lessor
        Notes held in the Pass Through Trust, or distributions that are required
        to be made herein on any Certificate of such Pass Through Trust, or
        change any date of payment on any such Certificate, or change the place
        of payment where, or the coin or currency in which, any such Certificate
        is payable, or impair the right of any Holder of any such Certificate to
        institute suit for the enforcement of any such payment or distribution
        on or after the Distribution Date or Special Distribution Date
        applicable thereto; or

               (2)    except as provided in this Pass Through Trust Agreement,
        permit the disposition of any Lessor Note in the Trust Property, or
        permit the creation of any lien on the Trust Property, or otherwise
        deprive any Certificateholder of the benefit of the ownership of the
        Lessor Notes held in the Pass Through Trust or the lien of the
        Collateral Trust Indenture; or

               (3)    reduce the percentage of the aggregate Fractional
        Undivided Interests which is required to approve any such supplemental
        agreement, or reduce such percentage required for any waiver provided
        for in this Pass Through Trust Agreement.

Notwithstanding the foregoing, no such supplemental agreement shall be entered
into unless the Pass Through Trustee shall have received an opinion of counsel,
which may be counsel to the Partnerships or either of them, to the effect that
such supplemental agreement does not cause the Pass Through Trust to become
taxable as an "association", within the meaning of Treasury Regulation Section
301.7701-4 or to be taxable as other than a pass through entity for Federal
income tax purposes.

               It shall not be necessary for any Act of Certificateholders under
this Section 9.2 to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Act shall approve the substance
thereof.

                                       43
<PAGE>   45

        Section 9.3. Documents Affecting Immunity or Indemnity. If in the
opinion of the Pass Through Trustee any document required to be executed by it
pursuant to the terms of Section 9.1 or 9.2 affects any interest, right, duty,
immunity or indemnity in favor of the Pass Through Trustee under this Pass
Through Trust Agreement, the Pass Through Trustee may in its discretion decline
to execute such document.

        Section 9.4. Execution of Supplemental Trust Agreements. In executing,
or accepting the additional trusts created by, any supplemental agreement
permitted by this Section 9 or the modification thereby of the trusts created by
this Pass Through Trust Agreement, the Pass Through Trustee shall be entitled to
receive, and (subject to Section 7.1) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental agreement
is authorized or permitted by this Pass Through Trust Agreement.

        Section 9.5. Effect of Supplemental Trust Agreements. Upon the execution
of any supplemental agreement under this Section 9, this Pass Through Trust
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Pass Through Trust Agreement for all
purposes; and every Holder of Certificates theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.

        Section 9.6. Reference in Certificates to Supplemental Trust Agreements.
Certificates authenticated and delivered after the execution of any supplemental
agreement pursuant to this Section 9 may bear a notation in form approved by the
Pass Through Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.

        Section 9.7. Conformity with Trust Indenture Act. Every supplemental
agreement under this Section 9 executed at a time that the Certificates shall be
subject to the Trust Indenture Act, shall conform to requirements of the Trust
Indenture Act as in effect on the date such supplemental agreement is executed.

SECTION 10. AMENDMENTS AND CONSENTS TO COLLATERAL TRUST INDENTURE AND OTHER
            LESSOR NOTE DOCUMENTS

               (a)    In the event that the Pass Through Trustee, as holder of
any Lessor Note in trust for the benefit of the Certificateholders, receives a
request for a consent to any amendment, modification, waiver or supplement under
the Collateral Trust Indenture or other Lessor Note Document that requires the
consent of the holder of such Lessor Note, the Pass Through Trustee shall
forthwith send a notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder registered on the Register as of such date.
Any such notice shall describe the proposed amendment, modification, waiver or
supplement (or attach a copy thereof). The Pass Through Trustee shall request
from the Certificateholders Directions as to (i) whether or not to direct the
applicable Indenture Trustee to take or refrain from taking any action which a
holder of such Lessor Note has the option to direct, (ii) whether or not to give
or execute any waivers, consents, amendments, modifications or supplements as a
holder of such Lessor Note and (iii) how to vote any Lessor Note if a vote has
been called for with respect thereto. Any such request shall specify a date by
which Certificateholders are requested to respond. Provided such a request for
Certificateholder Direction shall have been made, in

                                       44
<PAGE>   46

directing any action or casting any vote or giving any consent as the holder of
any Lessor Note, the Pass Through Trustee shall vote or consent with respect to
such Lessor Note in the same proportion as the Certificates were actually voted
by Acts of Holders delivered to the Pass Through Trustee at least two Business
Days prior to the date the Pass Through Trustee directs such action or casts
such vote or gives such consent. Notwithstanding the foregoing, but subject to
Section 6.4, in the case that an Event of Default hereunder shall have occurred
and be continuing, the Pass Through Trustee may, in its own discretion and at
its own direction, consent and notify the applicable Indenture Trustee of such
consent to any amendment, modification, waiver or supplement under the
Collateral Trust Indenture or other Lessor Note Document.

               (b)    With respect to consents, approvals, waivers and
authorizations which under the terms of Section 8 of the Collateral Trust
Indenture may be given by the Indenture Trustee without the necessity of the
consent of any of the holders of Lessor Notes, no consent, approval, waiver or
authorization shall be required hereunder on the part of the Pass Through
Trustee or the Certificateholders.

               (c)    Neither the Pass Through Trustee nor any Certificateholder
shall have any obligation to purchase any Additional Lessor Notes issued under
the Collateral Trust Indenture.

SECTION 11. TERMINATION OF PASS THROUGH TRUST

        Section 11.1. Termination of the Pass Through Trust. The respective
obligations and responsibilities of the Partnerships and the Pass Through
Trustee created hereby and the Pass Through Trust created hereby shall terminate
upon the distribution to all Certificateholders of all amounts required to be
distributed to them pursuant to this Pass Through Trust Agreement and the
disposition of all property held as part of the Trust Property; provided,
however, that if and to the extent that any of the options, rights and
privileges granted under this Pass Through Trust Agreement, would, in the
absence of the limitation imposed by this sentence, be invalid or unenforceable
as being in violation of the rule against perpetuities or any other rule or law
relating to the vesting of interest in property or the suspension of the power
of alienation of property, then it is agreed that notwithstanding any other
provision of this Pass Through Trust Agreement, such options, rights and
privileges, subject to the respective conditions hereof governing the exercise
of such options, rights and privileges, will be exercisable only during (a) the
longer of (i) a period which will end twenty-one (21) years after the death of
the last survivor of the descendants living on the date of the execution of this
Pass Through Trust Agreement of the following Presidents of the United States:
Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy,
Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W.
Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided
under the Uniform Statutory Rule Against Perpetuities or (b) the specific
applicable period of time expressed in this Pass Through Trust Agreement,
whichever of (a) or (b) is shorter.

               Notice of any termination, specifying the Distribution Date (or
Special Distribution Date, as the case may be) upon which the Certificateholders
may surrender their Certificates to the Pass Through Trustee for payment of the
final distribution and cancellation, shall be mailed promptly by the Pass
Through Trustee to Certificateholders not earlier than the 60th day and not
later than the 20th day next preceding such final distribution specifying (A)
the

                                       45
<PAGE>   47

Distribution Date (or Special Distribution Date, as the case may be) upon which
final payment of the Certificates will be made upon presentation and surrender
of Certificates at the office or agency of the Pass Through Trustee therein
specified, (B) the amount of any such final payment, and (C) that the Record
Date otherwise applicable to such Distribution Date (or Special Distribution
Date, as the case may be) is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office or agency of the
Pass Through Trustee therein specified. The Pass Through Trustee shall give such
notice to the Registrar at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Certificates, the Pass Through Trustee
shall cause to be distributed to Certificateholders amounts distributable on
such Distribution Date or Special Distribution Date, as the case may be,
pursuant to Section 4.2 hereof.

               In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Pass Through Trustee shall
give a second written notice to the remaining Certificateholders to surrender
their Certificates for cancellation and receive the final distribution with
respect thereto. In the event that any money held by the Pass Through Trustee
for the payment of distributions on the Certificates shall remain unclaimed for
two years (or such lesser time as the Pass Through Trustee shall be satisfied,
after sixty days' written notice from the Partnerships, is one month prior to
the escheat period provided under applicable law) after the final distribution
date with respect thereto, the Pass Through Trustee shall pay to each Indenture
Trustee the appropriate amount of money relating to such Indenture Trustee and
shall give written notice thereof to the Owner Lessor, the Owner Participant and
the Partnerships.

SECTION 12. MISCELLANEOUS PROVISIONS

        Section 12.1. Amendments and Waivers. No term, covenant, agreement or
condition of this Pass Through Trust Agreement may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.

        Section 12.2. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this Pass
Through Trust Agreement or the Pass Through Trust, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Pass Through Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

        Section 12.3. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Pass
Through Trust, the Fractional Undivided Interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Pass
Through Trust or for any reason whatsoever, and Certificates upon authentication
thereof by the Pass Through Trustee pursuant to Section 3.2 hereof are and shall
be deemed fully paid. No Certificateholder shall have any right (except as
expressly provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Pass Through Trust
established hereunder, or the obligations of the parties hereto, nor shall
anything set forth

                                       46
<PAGE>   48

herein, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association.

        Section 12.4. Notices, etc. to Partnerships and Pass Through Trustee.
Unless otherwise expressly specified or permitted by the terms hereof, all
communications and notices provided for herein to a party hereto shall be in
writing or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery thereof,
including by overnight mail or courier service, (b) in the case of notice by
United States mail, certified or registered, postage prepaid, return receipt
requested, upon receipt thereof, or (c) in the case of notice by such a
telecommunications device, upon transmission thereof, provided such transmission
is promptly confirmed by either of the methods set forth in clauses (a) or (b)
above, in each case addressed to such party and copy party at its address set
forth below or at such other address as such party or copy party may from time
to time designate by written notice to the other party:

               If to Tiverton:

                      c/o Calpine Corporation
                      50 West San Fernando Street, 5th Floor
                      San Jose, California 95113
                      Telephone No.: (408) 995-5115
                      Facsimile No.: (408) 995-0505
                      Attention: Asset Manager and General Counsel

                      c/o Calpine Corporation
                      The Pilot House, 2nd Floor
                      Lewis Wharf
                      Boston, Massachusetts 02110
                      Telephone No.: (617) 723-7200
                      Facsimile No.: (617) 723-7635

               If to Rumford:

                      c/o Calpine Corporation
                      50 West San Fernando Street, 5th Floor
                      San Jose, California 95113
                      Telephone No.: (408) 995-5115
                      Facsimile No.: (408) 995-0505
                      Attention: Asset Manager and General Counsel

                      c/o Calpine Corporation
                      The Pilot House, 2nd Floor
                      Lewis Wharf
                      Boston, Massachusetts 02110
                      Telephone No.: (617) 723-7200
                      Facsimile No.: (617) 723-7635

                                       47
<PAGE>   49

               If to the Pass Through Trustee:

                      State Street Bank and Trust Company of Connecticut,
                      National Association
                      225 Asylum Street, Goodwin Square
                      Hartford, Connecticut 06103
                      Telephone No.: (860) 244-1822
                      Facsimile No.: (860) 244-1889
                      Attention: Corporate Trust Department

               With a Copy to:

                      State Street Bank and Trust Company of California,
                      National Association
                      633 West 5th Street, 12th Floor
                      Los Angeles, California 90071
                      Telephone No.: (213) 362-7373
                      Facsimile No.: (213) 362-7357
                      Attention: Corporate Trust Department

        Section 12.5. Notices to Holders; Waiver. Except as otherwise expressly
provided herein, where this Pass Through Trust Agreement provides for notice to
Holders of any event, such notice shall be sufficiently given if in writing and
mailed, first-class postage prepaid, to each Holder affected by such event, at
such Holder's address as it appears in the Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice.

               In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders, then such notification as shall be made by overnight courier, or in any
other manner acceptable to the Pass Through Trustee, shall constitute a
sufficient notification for every purpose hereunder.

               Where this Pass Through Trust Agreement provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Pass Through Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.

               In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
any other Holder, and any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given.

                                       48
<PAGE>   50

        Section 12.6. Successors and Assigns.

               (a)    This Pass Through Trust Agreement shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof.

               (b)    Except as expressly provided herein or in the other
Operative Documents, no party hereto may assign its interests or transfer its
obligations herein without the consent of the other parties hereto.

        Section 12.7. Business Day. In any case where any Distribution Date or
Special Distribution Date relating to any Certificate is not a Business Day,
then (notwithstanding any other provision of this Pass Through Trust Agreement)
the payment otherwise payable on such date shall be payable on the next
succeeding Business Day with the same force and effect as if made on such
Distribution Date or Special Distribution Date and, provided that such payment
is made on such succeeding Business Day, no interest shall accrue on the amount
of such payment from and after such scheduled date to the time of such payment
on such next succeeding Business Day.

        Section 12.8. Governing Law. This Pass Through Trust Agreement, the
Certificates and the rights and duties of the parties hereunder and thereunder
shall be in all respects governed by and construed in accordance with the law of
the State of New York, including all matters of construction, validity and
performance (without giving effect to the conflicts of laws provisions thereof,
other than New York General Obligations Law Section 5-1401).

        Section 12.9. Severability. Any provision of this Pass Through Trust
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

        Section 12.10. Benefits of Pass Through Trust Agreement. Nothing in this
Pass Through Trust Agreement or in the Certificates, express or implied, shall
give to any person, other than the Partnerships, the Pass Through Trustee, the
Owner Lessor and each Indenture Trustee, and their respective successors, and
the Holders of Certificates as expressly provided herein, any benefit or any
legal or equitable right, remedy or claim under this Pass Through Trust
Agreement.

        Section 12.11. Counterparts. This Pass Through Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.

        Section 12.12. Headings and Table of Contents. The headings of the
sections of this Pass Through Trust Agreement and the Table of Contents are
inserted for purposes of convenience only and shall not be construed to affect
the meaning or construction of any of the provisions hereof.

                                       49
<PAGE>   51
        Section 12.13. Further Assurances. Each party hereto will promptly and
duly execute and deliver such further documents and assurances for and take such
further action reasonably requested by the other party, all as may be reasonably
necessary to carry out more effectively the intent and purpose of this Pass
Through Trust Agreement.

        Section 12.14. Effectiveness. This Pass Through Trust Agreement has been
dated as of the date first above written for convenience only. This Pass Through
Trust Agreement shall be effective on December 19, 2000, the date of execution
and delivery by the Partnerships and the Pass Through Trustee.

        Section 12.15. Statement of Intent. It is intended that, if the Pass
Through Trust were ever to be classified as a partnership for Federal income tax
purposes, that the Pass Through Trust be excluded from the application of
Subchapter K of the Internal Revenue Code, in accordance with Treasury
Regulation 1.761-2(b)(2)(ii).

                                       50
<PAGE>   52

               IN WITNESS WHEREOF, the Partnerships and the Pass Through Trustee
have caused this Pass Through Trust Agreement to be duly executed and delivered
by their respective officers thereunto duly authorized.

                                        TIVERTON POWER ASSOCIATES
                                        LIMITED PARTNERSHIP

                                        By: /s/ ERIC PRYOR
                                           -------------------------------------
                                           Name: Eric Pryor
                                           Title: Authorized Agent

                                        RUMFORD POWER ASSOCIATES
                                        LIMITED PARTNERSHIP

                                        By: /s/ ERIC PRYOR
                                           -------------------------------------
                                           Name: Eric Pryor
                                           Title: Authorized Agent

                                        STATE STREET BANK AND TRUST COMPANY OF
                                        CONNECTICUT, NATIONAL ASSOCIATION,
                                        as Pass Through Trustee

                                        By: /s/ MARK HENSON
                                           -------------------------------------
                                           Name: Mark Henson
                                           Title: Assistant Vice President

<PAGE>   53

                                                                      SCHEDULE 1

                             Participation Agreement

               The Participation Agreement providing for Lease Transactions to
be financed by the purchase of Lessor Notes hereunder, and the parties thereto,
is as follows: the Participation Agreement, dated as of December 19, 2000, among
(i) Tiverton Power Associates Limited Partnership, a limited partnership
organized under the laws of the State of Rhode Island, (ii) Rumford Power
Associates Limited Partnership, a limited partnership organized under the laws
of the State of Maine, (iii) Calpine Corporation, a Delaware corporation, as
Guarantor, (iv) PMCC Calpine New England Investment LLC, a Delaware limited
liability company, as Owner Lessor, (v) PMCC Calpine NEIM LLC, a Delaware
limited liability company, as the Owner Participant, (vi) State Street Bank and
Trust Company of Connecticut, National Association, a national banking
association organized and existing under the laws of the United States, not in
its individual capacity, except as expressly provided herein, but solely as
Indenture Trustee under the Collateral Trust Indenture, and (vii) State Street
Bank and Trust Company of Connecticut, National Association, a national banking
association organized and existing under the laws of the United States, not in
its individual capacity, but solely as Pass Through Trustee.

                                     SCH 1-1
<PAGE>   54

                                                                       EXHIBIT A

                               FORM OF CERTIFICATE

        THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND UNDER APPLICABLE STATE SECURITIES LAWS, AND THIS
CERTIFICATE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
CERTIFICATE IS HEREBY NOTIFIED THAT THE SELLER OF THIS CERTIFICATE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.

        THE HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF THE ISSUER AND
CALPINE CORPORATION THAT (A) THIS CERTIFICATE MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (i) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS CERTIFICATE FROM IT OF THE RESALE
RESTRICTION REFERRED TO IN (A) ABOVE.

        [IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.]

                                     EXH A-1
<PAGE>   55

                  TIVERTON AND RUMFORD 2000 PASS THROUGH TRUST

                               9.00% Pass Through
                                   Certificate

                                CUSIP: _________

                     Final Distribution Date: July 15, 2018

               evidencing a fractional undivided interest in a trust,
               the property of which includes certain notes secured
               by certain property leased to Tiverton Power
               Associates Limited Partnership and Rumford Power
               Associates Limited Partnership

Certificate No. __                    $[_________] Fractional Undivided Interest

               THIS CERTIFIES THAT Cede & Co., as nominee of The Depository
Trust Company, for value received, is the registered owner of a $______________
(__________ dollars) Fractional Undivided Interest in the Tiverton and Rumford
2000 Pass Through Trust (the "Pass Through Trust") created pursuant to a Pass
Through Trust Agreement, dated as of December 19, 2000 (the "Agreement") between
Tiverton Power Associates Limited Partnership, a Rhode Island limited
partnership ("Tiverton"), Rumford Power Associates Limited Partnership, a Maine
limited partnership (together with Tiverton, the "Partnerships"), and State
Street Bank and Trust Company of Connecticut, National Association, as trustee
(the "Pass Through Trustee"), a summary of certain of the pertinent provisions
of which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement. This Certificate is one of the duly authorized Certificates
designated as "9.00% Pass Through Certificates" (herein called the
"Certificates"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The property of the Pass Through Trust includes certain Lessor
Notes (the "Trust Property"). The Lessor Notes are secured by a security
interest in certain undivided interests in the Facility, and liability
thereunder is limited to the income and proceeds of such security.

               Subject to and in accordance with the terms of the Agreement,
from funds then available to the Pass Through Trustee, there will be distributed
on each January 15 and July 15 (a "Distribution Date"), commencing on July 15,
2001, to the person in whose name this Certificate is registered at the close of
business on the day of the month which is fifteen days preceding the
Distribution Date, an amount in respect of the Scheduled Payments on the Lessor
Notes due on such Distribution Date, the receipt of which has been confirmed by
the Pass Through Trustee, equal to the product of the percentage interest in the
Pass Through Trust evidenced by this

                                     EXH A-2
<PAGE>   56

Certificate and an amount equal to the sum of such Scheduled Payments. Subject
to and in accordance with the terms of the Agreement, in the event that Special
Payments on the Lessor Notes are received by the Pass Through Trustee, from
funds then available to the Pass Through Trustee, there shall be distributed on
the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered at the close of business on the day of the month which
is fifteen days preceding the Special Distribution Date, an amount in respect of
such Special Payments on the Lessor Notes, the receipt of which has been
confirmed by the Pass Through Trustee, equal to the product of the percentage
interest in the Pass Through Trust evidenced by this Certificate and an amount
equal to the sum of such Special Payments so received. The Special Distribution
Date shall be determined as provided in the Agreement. If a Distribution Date or
Special Distribution Date is not a Business Day, distribution shall be made on
the immediately following Business Day. The Pass Through Trustee shall mail
notice of each Special Payment and the Special Distribution Date therefor to the
Holders of the Certificates.

               Distributions on this Certificate will be made by the Pass
Through Trustee (i) if (A) The Depository Trust Company ("DTC"), or its nominee,
is the Certificateholder of record of this Certificate, or (B) a
Certificateholder holds a Certificate or Certificates in an aggregate amount
greater than $10,000,000, or (C) a Certificateholder holds a Certificate or
Certificates in an aggregate amount greater than $1,000,000 and so requests to
the Pass Through Trustee, by wire transfer in immediately available funds to an
account maintained by such Certificateholder with a bank, or (ii) if none of the
above apply, by check mailed to such Certificateholder at the address appearing
in the Register, without the presentation or surrender of this Certificate or
the making of any notation hereon. Except as otherwise provided in the Agreement
and notwithstanding the above, the final distribution on this Certificate will
be made after notice mailed by the Pass Through Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency of the Pass Through Trustee specified in such notice.

               Unless this Certificate is presented by an authorized
representative of DTC to the Partnerships or their agent for registration of
transfer, exchange or payment, and any Certificate issued is registered in the
name of Cede & Co., or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co., or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL in as much as the registered owner hereof, Cede & Co., has an interest
herein.

               Each Person who acquires or accepts this Certificate or an
interest herein will be deemed by such acquisition or acceptance to have
represented and warranted that either: (i) no Plan assets have been used to
purchase this Certificate or an interest herein or (ii) the purchase and holding
of this Certificate or interest herein are either exempt from the prohibited
transaction restrictions of ERISA and the Code pursuant to one or more
prohibited transaction statutory or administrative exemptions or do not
constitute a prohibited transaction under such restrictions of ERISA and the
Code.

                                     EXH A-3
<PAGE>   57

               This Certificate shall be governed by and construed in accordance
with the law of the State of New York.

               Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

               Unless the certificate of authentication hereon has been executed
by the Pass Through Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     EXH A-4
<PAGE>   58

               IN WITNESS WHEREOF, the Pass Through Trustee has caused this
Certificate to be duly executed.

                                        TIVERTON AND RUMFORD 2000 PASS
                                        THROUGH TRUST

                                        By: STATE STREET BANK AND TRUST
                                            COMPANY OF CONNECTICUT,
                                            NATIONAL ASSOCIATION,
                                            as Pass Through Trustee

                                          By: _________________________________
                                              Name:
                                              Title:

                                     EXH A-5
<PAGE>   59

                            [Reverse Of Certificate]

               The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Partnerships, the Pass Through
Company or the Pass Through Trustee or any affiliate thereof. The Certificates
are limited in right of payment, all as more specifically set forth in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Pass Through Trustee shall have received sufficient income or proceeds from
the Trust Property to make such payments in accordance with the terms of the
Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to such Holder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Pass Through Trustee, and at such other places, if any,
designated by the Pass Through Trustee, by any Certificateholder upon request.

               The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Partnerships and the rights of the Certificateholders under the Agreement at any
time by the Partnerships and the Pass Through Trustee with the consent of the
Holders of Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest of the Fractional Undivided Interests
evidenced by all Certificates at the time Outstanding. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

               As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Pass Through Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, the City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Pass Through Trustee and the Registrar duly executed by
the Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate Fractional Undivided Interest in the Pass Through Trust will
be issued to the designated transferee or transferees.

               The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and any integral multiples of $1,000 in excess thereof. As provided in
the Agreement and subject to certain limitations therein

                                     EXH A-6
<PAGE>   60

set forth, Certificates are exchangeable for new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided Interest in the
Pass Through Trust, as requested by the Holder surrendering the same.

               No service charge will be made for any such registration of
transfer or exchange, but the Pass Through Trustee shall require payment of an
amount sufficient to cover any tax or charge payable in connection therewith.

               The Pass Through Trustee, the Partnerships, the Owner Lessor, the
Registrar and any agent of the Pass Through Trustee or the Registrar may treat
the person in whose name this Certificate is registered as the owner hereof for
all purposes, and neither the Pass Through Trustee, the Partnerships, the Owner
Lessor, the Registrar nor any such agent shall be affected by any notice to the
contrary.

The obligations and responsibilities created by the Agreement and the Pass
Through Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.

                                     EXH A-7
<PAGE>   61

                                                                       EXHIBIT B

          FORM OF PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                                December 19, 2000

State Street Bank and Trust Company of Connecticut, National Association
225 Asylum Street
Goodwin Square
Hartford, Connecticut 06103

Re:  Preparation and Registration of Lessor Notes

Ladies and Gentlemen:

               Reference is made to the $366,000,000 in aggregate principal
amount of the 9.00% Pass Through Certificates due July 15, 2018 (the "Pass
Through Certificates") of the Tiverton and Rumford 2000 Pass Through Trust
representing undivided beneficial interests in $366,000,000 aggregate principal
amount of secured lease obligation notes (the "Lessor Notes") of PMCC Calpine
New England Investment LLC, a Delaware limited liability company (the "Owner
Lessor"), issued pursuant to the Indenture of Trust, Mortgage and Security
Agreement, dated as of December 19, 2000, between the Owner Lessor and State
Street Bank and Trust Company of Connecticut, National Association, as Indenture
Trustee, comprising $190,000,000 aggregate principal amount of Lessor Notes
relating to the Tiverton Generating Station and $176,000,000 aggregate principal
amount of Lessor Notes relating to the Rumford Generating Station.

               You are hereby directed to have the Lessor Notes prepared and
registered in the name of State Street Bank and Trust Company of Connecticut,
National Association, as Pass Through Trustee (the "Pass Through Trustee") under
the Pass Through Trust Agreement, dated as of December 19, 2000, among Tiverton
Power Associates Limited Partnership, a Rhode Island limited partnership,
Rumford Power Associates Limited Partnership, a Maine limited partnership, and
the Pass Through Trustee, and to have the Lessor Notes delivered to the Pass
Through Trustee at 9:00 a.m., Eastern Standard Time, on December 19, 2000.

                                     EXH B-1

<PAGE>   62

                            [CONTINUED ON NEXT PAGE]

                                     EXH B-2
<PAGE>   63

                                        Very truly yours,

                                        PMCC Calpine New England Investment LLC

                                        By  PMCC Calpine NEIM LLC,
                                            its Sole Member

                                            By: ________________________________
                                                Name:
                                                Title:

                                     EXH B-3
<PAGE>   64

                                                                       EXHIBIT C

                          FORM OF TRANSFER CERTIFICATE

                                   CERTIFICATE

                  TIVERTON AND RUMFORD 2000 PASS THROUGH TRUST

                            PASS THROUGH CERTIFICATES

               This is to certify that as of the date hereof with respect to
$__________ (__________ dollars) Fractional Undivided Interest of the
above-captioned securities presented or surrendered on the date hereof (the
"Surrendered Certificates") for registration of transfer, or for exchange where
the securities issuable upon such exchange are to be registered in a name other
than that of the undersigned Holder (each such transaction being a "transfer"),
the undersigned Holder (as defined in the Pass Through Trust Agreement)
certifies that the transfer of Surrendered Certificates associated with such
transfer complies with the restrictive legend set forth on the face of the
Surrendered Certificates for the reason checked below:

[ ] Transfer to Tiverton and Rumford    [ ] Transfer outside the United States
    2000 Pass Through Trust                 in compliance with Rule 904 of the
                                            Securities Act.

[ ] Transfer inside the United States   [ ] Transfer inside the United States
    to a Qualified Institutional Buyer      to an Institutional Accredited
    in compliance with Rule 144A under      Investor that has previously
    the Securities Act.                     furnished to the Pass Through
                                            Trustee a signed letter containing
[ ] Transfer pursuant to an exemption       certain representations and
    from registration provided by Rule      agreements relating to restrictions
    144 under the Securities Act (if        on transfer and if such transfer is
    available).                             in respect of an aggregate
                                            Fractional Undivided Interest of
                                            less than $100,000, an opinion of
                                            counsel acceptable to the
                                            Partnerships that such transfer is
                                            in compliance with the Securities
                                            Act.

                                [Name of Holder]

                                ----------------

Dated: _____________, _____*

*To be dated the date of presentation or surrender

                                     EXH C-1
<PAGE>   65

                                                                       EXHIBIT D

             FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS

Tiverton Power Associates Limited Partnership/
Rumford Power Associates Limited Partnership
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113

Credit Suisse First Boston Corporation
  As Representative of the
  Several Initial Purchasers
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629

Dear Sirs and Madams,

               We are delivering this letter in connection with an offering of
Pass Through Certificates (the "Securities") evidencing a fractional interest in
a pass through trust, the property of which consists of certain notes secured by
certain property leased by Tiverton Power Associates Limited Partnership, a
Rhode Island limited partnership, and Rumford Power Associates Limited
Partnership, a Maine limited partnership (the "Lessees"), the obligations of the
Lessees under the leases and the related lease documents being guaranteed by
Calpine Corporation, a Delaware Corporation (the "Company"), all as described in
the Confidential Offering Circular (the "Offering Circular") relating to the
offering.

               We hereby confirm that:

               (i) we are an "accredited investor" within the meaning of Rule
        501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
        "Securities Act"), or an entity in which all of the equity owners are
        accredited investors within the meaning of Rule 501 (a) (1), (2) or (3)
        under the Securities Act (an "Institutional Accredited Investor");

               (ii) (A) any purchase of the Securities by us will be for our own
        account or for the account of one or more other Institutional Accredited
        Investors or as fiduciary for the account of one or more trusts, each of
        which is an "accredited investor" within the meaning of Rule 501 (a) (7)
        under the Securities Act and for each of which we exercise sole
        investment discretion or (B) we are a "bank," within the meaning of
        Section 3(a) (2) of the Securities Act, or a "savings and loan
        association" or other institution described in Section 3(a) (5) (A) of
        the Securities Act that is acquiring the Securities as fiduciary for the
        account of one or more institutions for which we exercise sole
        investment discretion;

                                     EXH. D-1
<PAGE>   66

               (iii) in the event that we purchase any of the Securities, we
        will acquire Securities having a minimum purchase price of not less than
        $100,000 for our own account or for any separate account for which we
        are acting;

               (iv) we have such knowledge and experience in financial and
        business matters that we are capable of evaluating the merits and risks
        of purchasing the Securities;

               (v) we are not acquiring the Securities with a view to
        distribution thereof or with any present intention of offering or
        selling any of the Securities, except inside the United States in
        accordance with Rule l44A under the Securities Act or outside the United
        States in accordance with Regulation S under the Securities Act, as
        provided below; provided that the disposition of our property and the
        property of any accounts for which we are acting as fiduciary shall
        remain at all times within our control; and

               (vi) we have received a copy of the Offering Circular relating to
        the offering of the Securities and acknowledge that we have had access
        to such financial and other information, and have been afforded the
        opportunity to ask such questions of representatives of the Lessees and
        the Company and receive answers thereto, as we deem necessary in
        connection with our decision to purchase the Securities.

               We understand that the Securities are being offered in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Securities have not been and will
not be registered under the Securities Act, and we agree, on our own behalf and
on behalf of each account for which we acquire any Securities, that if in the
future we decide to resell, pledge or otherwise transfer such Securities, such
Securities may be offered, resold, pledged or otherwise transferred only (i) in
the United States to a person who we reasonably believe is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, (ii) outside the United
States in a transaction in accordance with Rule 904 under the Securities Act,
(iii) pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder (if available) or (iv) pursuant to an effective
registration statement under the Securities Act, in each of cases (i) through
(iv), in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction. We understand that the
registrar and transfer agent for the Securities will not be required to accept
for registration of transfer any Securities acquired by us, except upon
presentation of evidence satisfactory to the Lessees and the Company and the
transfer agent that the foregoing restrictions on transfer have been complied
with. We further understand that any Securities acquired by us will be in the
form of definitive physical certificates and that such certificates will bear a
legend reflecting the substance of this paragraph.

               We acknowledge that you, the Lessees, the Company and others will
rely upon our confirmations, acknowledgements and agreements set forth herein,
and we agree to notify you promptly in writing if any of our representations or
warranties herein ceases to be accurate and complete.

                                     EXH. D-2
<PAGE>   67

               THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.

Date:_________________                  ________________________________________
                                                  (Name of Purchaser)

                                        By:_____________________________________
                                           Name:

                                           Title:

                                     EXH. D-3<PAGE>   1

                                                                  EXHIBIT 4.12.2

                                                                  EXECUTION COPY

                             PARTICIPATION AGREEMENT

                          Dated as of December 19, 2000

                                      among

      TIVERTON POWER ASSOCIATES LIMITED PARTNERSHIP, as a Facility Lessee,

       RUMFORD POWER ASSOCIATES LIMITED PARTNERSHIP, as a Facility Lessee,

            PMCC CALPINE NEW ENGLAND INVESTMENT LLC, as Owner Lessor,

                        CALPINE CORPORATION, as Guarantor

                  PMCC CALPINE NEIM LLC, as Owner Participant,

    STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION,
                     not in its individual capacity, except
                    as expressly provided herein, but solely
                            as Indenture Trustee, and

          STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
                      ASSOCIATION, as Pass Through Trustee

                           CALPINE NEW ENGLAND PROJECT

================================================================================

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----

<S>                                                                            <C>
SECTION 1.     DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT........3

SECTION 2.     PARTICIPATION; CLOSING DATE; TRANSACTION COSTS.....................3

    Section 2.1.      Agreements to Participate...................................3
    Section 2.2.      Closing Date; Procedure for Participation...................4
    Section 2.3.      Transaction Costs...........................................6

SECTION 3.     REPRESENTATIONS AND WARRANTIES.....................................6

    Section 3.1.      Representations and Warranties of the Facility Lessees......6
    Section 3.2.      Representations and Warranties of the Owner Lessor.........16
    Section 3.3.      Intentionally Omitted......................................17
    Section 3.4.      Representations and Warranties of the Owner Participant....17
    Section 3.5.      Representations and Warranties of Indenture Trustee and
                      the Lease Indenture Company................................19
    Section 3.6.      Representations, Warranties and Covenants of Pass Through
                      Trustee and the Pass Through Company.......................21

SECTION 4.     CLOSING CONDITIONS................................................23

    Section 4.1.      Completion of the Facility.................................23
    Section 4.2.      Operative Documents........................................23
    Section 4.3.      Certificates and the Lessor Notes..........................23
    Section 4.4.      Equity Investment..........................................23
    Section 4.5.      Organizational Documents...................................23
    Section 4.6.      Representations and Warranties.............................24
    Section 4.7.      Defaults, Events of Default, Events of Loss................24
    Section 4.8.      Intentionally Omitted......................................24
    Section 4.9.      Consents...................................................24
    Section 4.10.     Governmental Actions.......................................24
    Section 4.11.     Insurance..................................................24
    Section 4.12.     Ratings....................................................24
    Section 4.13.     Environmental Report.......................................24
    Section 4.14.     Surveys; Site Description..................................25
    Section 4.15.     Appraisal; Condition of the Facility.......................25
    Section 4.16.     Letter from the Appraiser..................................25
    Section 4.17.     Other Reports..............................................25
    Section 4.18.     Opinion with Respect to Certain Tax Aspects................25
    Section 4.19.     Opinions of Counsel........................................25
    Section 4.20.     Recordings and Filings.....................................26
    Section 4.21.     Intentionally Omitted......................................26
</TABLE>

                                       i
<PAGE>   3

                                TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----

<S>                                                                            <C>
    Section 4.22.     Taxes......................................................26
    Section 4.23.     No Changes in Applicable Law...............................26
    Section 4.24.     Registered Agent for the Facility Lessees and the Owner
                      Lessor.....................................................26
    Section 4.25.     Operating Lease Treatment..................................26
    Section 4.26.     Rent Adjustments...........................................27
    Section 4.27.     Title Insurance............................................27
    Section 4.28.     Intentionally Omitted......................................27
    Section 4.29.     Intentionally Omitted......................................27
    Section 4.30.     Intentionally Omitted......................................27
    Section 4.31.     Intentionally Omitted......................................27
    Section 4.32.     Letter as to Number of Offerees............................27
    Section 4.33.     Lien Search................................................27
    Section 4.34.     Intentionally Omitted......................................27
    Section 4.35.     Litigation.................................................27
    Section 4.36.     No Material Adverse Change.................................27
    Section 4.37.     Regulatory Approvals.......................................27
    Section 4.38.     Private Placement Number...................................28
    Section 4.39.     Credit Ratings.............................................28
    Section 4.40.     Proceedings and Documents..................................28
    Section 4.41.     Intentionally Omitted......................................28
    Section 4.42.     Payment of Fees and Expenses...............................28
    Section 4.43.     Qualifying Letter of Credit................................28

SECTION 5.     COVENANTS OF FACILITY LESSEES AND GUARANTOR.......................28

    Section 5.1.      Maintenance of Existence...................................28
    Section 5.2.      Merger, Consolidation, Sale of Substantially All Assets....29
    Section 5.3.      Intentionally Omitted......................................29
    Section 5.4.      Intentionally Omitted......................................29
    Section 5.5.      Administrator Fees.........................................29
    Section 5.6.      Conduct of Business, Properties, Etc.......................30
    Section 5.7.      Obligations................................................30
    Section 5.8.      Books, Records, Access.....................................30
    Section 5.9.      Other Information..........................................30
    Section 5.10.     Warranty of Title to Facility Site.........................31
    Section 5.11.     ERISA......................................................31
    Section 5.12.     Certain Contracts and Agreements...........................31
    Section 5.13.     Certain Costs..............................................31
    Section 5.14.     Limitations on Liens.......................................32
    Section 5.15.     Investments................................................32
    Section 5.16.     Survey (Rumford)...........................................32
    Section 5.17.     Regulations................................................32
</TABLE>

                                       ii
<PAGE>   4
                                TABLE OF CONTENTS (continued)

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----

<S>                                                                            <C>
    Section 5.18.     Partnerships...............................................32
    Section 5.19.     Dissolution................................................32
    Section 5.20.     Termination of Contracts, Etc..............................32
    Section 5.21.     Name and Location..........................................33
    Section 5.22.     Use of Facility Site.......................................33
    Section 5.23.     Abandonment of Facility....................................33
    Section 5.24.     Taxes, Other Government Charges and Utility Charges........33
    Section 5.25.     Compliance with Laws, Instruments, Etc.....................33
    Section 5.26.     PUHCA......................................................34
    Section 5.27.     Intentionally Omitted......................................34
    Section 5.28.     Intentionally Omitted......................................34
    Section 5.29.     Intentionally Omitted......................................34
    Section 5.30.     Intentionally Omitted......................................34
    Section 5.31.     Further Assurances.........................................34
    Section 5.32.     Intentionally Omitted......................................35
    Section 5.33.     Intentionally Omitted......................................35
    Section 5.34.     Intentionally Omitted......................................35
    Section 5.35.     Intentionally Omitted......................................35
    Section 5.36.     Intentionally Omitted......................................35
    Section 5.37.     No Subsidiaries............................................35
    Section 5.38.     Permitted Business.........................................35
    Section 5.39.     Intentionally Omitted......................................35
    Section 5.40.     Guaranty and Contingent Obligations........................35
    Section 5.41.     Assignment of Rights.......................................36
    Section 5.42.     Intentionally Omitted......................................36
    Section 5.43.     Intentionally Omitted......................................36
    Section 5.44.     Support Arrangements.......................................36
    Section 5.45.     Insurance..................................................36
    Section 5.46.     Qualifying Letter of Credit; Equity Collateral Account.....36

SECTION 6.     COVENANTS OF THE OWNER LESSOR.....................................39

    Section 6.1.      Compliance with the LLC Agreement..........................39
    Section 6.2.      Owner Lessor's Liens.......................................39
    Section 6.3.      Amendments to Operative Documents..........................39
    Section 6.4.      Transfer of the Owner Lessor's Interest....................40
    Section 6.5.      Owner Lessor; Lessor Estate................................40
    Section 6.6.      Limitation on Indebtedness and Actions.....................40
    Section 6.7.      Change of Location.........................................40

SECTION 7.     COVENANTS OF THE OWNER PARTICIPANT................................40

    Section 7.1.      Restrictions on Transfer of Member Interest................40
    Section 7.2.      Owner Participant's Liens..................................43
</TABLE>

                                       iii
<PAGE>   5

                                TABLE OF CONTENTS (continued)

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----

<S>                                                                            <C>
    Section 7.3.      Amendments or Revocation of LLC Agreement..................43
    Section 7.4.      Bankruptcy Filings.........................................43
    Section 7.5.      Instructions...............................................43
    Section 7.6.      Intentionally Omitted......................................43
    Section 7.7.      Intentionally Omitted......................................43
    Section 7.8.      Right of First Refusal.....................................43

SECTION 8.     COVENANTS OF THE INDENTURE TRUSTEE AND THE PASS THROUGH TRUSTEE...44

    Section 8.1.      Indenture Trustee's Liens..................................44
    Section 8.2.      Pass Through Trustee's Covenant Not to Transfer Lessor
                      Notes......................................................44

SECTION 9.     INDEMNIFICATION...................................................44

    Section 9.1.      General Indemnity..........................................44
    Section 9.2.      General Tax Indemnity......................................51

SECTION 10.    FACILITY LESSEE'S RIGHT OF QUIET ENJOYMENT........................60

SECTION 11.    SUPPLEMENTAL FINANCING IMPROVEMENTS; OPTIONAL REFINANCINGS........60

    Section 11.1.     Financing Improvements.....................................60
    Section 11.2.     Optional Refinancing of Lease Debt.........................62
    Section 11.3.     Cooperation................................................63

SECTION 12.    CERTAIN ADJUSTMENTS TO PERIODIC RENT AND TERMINATION VALUE........63

SECTION 13.    TRANSFER OF THE FACILITY LESSEE OWNERSHIP.........................64

    Section 13.1.     Transfer of the Facility Lessee Ownership..................64

SECTION 14.    MISCELLANEOUS.....................................................66

    Section 14.1.     Consents; Cooperation......................................66
    Section 14.2.     Successor Owner Lessor.....................................66
    Section 14.3.     Bankruptcy of Lessor Estate................................66
    Section 14.4.     Waivers....................................................66
    Section 14.5.     Notices....................................................66
    Section 14.6.     Survival...................................................69
    Section 14.7.     Successors and Assigns.....................................70
    Section 14.8.     Business Day...............................................70
    Section 14.9.     Governing Law..............................................70
</TABLE>

                                       iv
<PAGE>   6

                                TABLE OF CONTENTS (continued)

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----

<S>                                                                            <C>
    Section 14.10.    Severability...............................................70
    Section 14.11.    Counterparts...............................................70
    Section 14.12.    Headings and Table of Contents.............................70
    Section 14.13.    Limitation of Liability....................................71
    Section 14.14.    Consent to Jurisdiction; Waiver of Trial by Jury; Process
                      Agent......................................................72
    Section 14.15.    Further Assurances.........................................72
    Section 14.16.    Effectiveness..............................................73
    Section 14.17.    Measuring Life.............................................73
    Section 14.18.    No Partnership, Etc........................................73
    Section 14.19.    Entire Agreement...........................................73
    Section 14.20.    Public Utility Regulation..................................73
    Section 14.21.    Confidentiality of Information.............................74
    Section 14.22.    Reliance...................................................74
    Section 14.23.    Intentionally Omitted......................................75
    Section 14.24.    Amendments, Etc............................................75
    Section 14.25.    Credit for Certain Disbursements...........................75
</TABLE>

                                       v
<PAGE>   7

APPENDICES:

        Appendix A    Definitions and Rules of Interpretation

SCHEDULES:

    Schedule 1-A          Equity Investment
    Schedule 1-B          Indenture Trustee's Account
    Schedule 1-C          Owner Participant's Account
    Schedule 2            Pricing Assumptions
    Schedule 3.1(m)       Environmental Matters - Hazardous Substances
    Schedule 4.20         Recording and Filings
    Schedule 5.45         Maintenance of Insurance

EXHIBITS:

    Exhibit A-1           Description of Tiverton Facility
    Exhibit A-2           Description of Rumford Facility
    Exhibit B-1           Form of Tiverton Bill of Sale
    Exhibit B-2           Form of Rumford Bill of Sale
    Exhibit C-1           Form of Tiverton Facility Lease Agreement
    Exhibit C-2           Form of Rumford Facility Lease Agreement
    Exhibit D-1           Form of Tiverton Site Lease
    Exhibit D-2           Form of Rumford Site Lease
    Exhibit E-1           Form of Tiverton Site Sublease
    Exhibit E-2           Form of Rumford Site Sublease
    Exhibit F             Form of Pass Through Trust Agreement
    Exhibit G             Form of OP Parent Guaranty
    Exhibit H-1           Form of Calpine Guaranty (Tiverton)
    Exhibit H-2           Form of Calpine Guaranty (Rumford)
    Exhibit I             Form of Collateral Trust Indenture
    Exhibit J             Form of OP Assignment and Assumption Agreement
    Exhibit K             List of Competitors
    Exhibit L             Required coverages for Qualifying Letters of Credit
                              & Equity Collateral Account
    Exhibit M             Form of Guarantor Assignment and Assumption Agreement

                                       vi
<PAGE>   8

                             PARTICIPATION AGREEMENT

               This PARTICIPATION AGREEMENT, dated as of December 19, 2000 (as
        amended, supplemented or otherwise modified from time to time, in
        accordance with the provisions hereof, this "Participation Agreement" or
        this "Agreement"), among (i) TIVERTON POWER ASSOCIATES LIMITED
        PARTNERSHIP, a limited partnership organized under the laws of the State
        of Rhode Island (the "Tiverton Lessee"), (ii) RUMFORD POWER ASSOCIATES
        LIMITED PARTNERSHIP, a limited partnership organized under the laws of
        the State of Maine (the "Rumford Lessee") (the Rumford Lessee, together
        with the Tiverton Lessee and each of their successors and permitted
        assigns, collectively, the "Facility Lessees," or individually, as the
        case may be, each a "Facility Lessee"), (iii) CALPINE CORPORATION, a
        Delaware corporation, as Guarantor (together with its successors and
        permitted assigns, the "Guarantor") under the Calpine Guaranty
        (Tiverton) and the Calpine Guaranty (Rumford) (the Calpine Guaranty
        (Rumford), together with the Calpine Guaranty (Tiverton), collectively,
        the "Calpine Guaranties," or individually, as the case may be, each a
        "Calpine Guaranty"), (iv) PMCC CALPINE NEW ENGLAND INVESTMENT LLC, a
        Delaware limited liability company (the "Owner Lessor"), (v) PMCC
        CALPINE NEIM LLC, a Delaware limited liability company (herein, together
        with its successors and permitted assigns, called the "Owner
        Participant"), (vi) STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
        NATIONAL ASSOCIATION, a national banking association organized and
        existing under the laws of the United States, not in its individual
        capacity, except as expressly provided herein, but solely as trustee
        under the Collateral Trust Indenture (herein in its capacity as trustee
        under the Collateral Trust Indenture, together with its successors and
        permitted assigns, called the "Indenture Trustee", and herein in its
        individual capacity, together with its successors and permitted assigns,
        called the "Lease Indenture Company"), and (vii) STATE STREET BANK AND
        TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
        association organized and existing under the laws of the United States,
        not in its individual capacity, but solely as trustee under the Pass
        Through Trust Agreement (herein in its capacity as trustee under the
        Pass Through Trust Agreement, the "Pass Through Trustee").

                                   WITNESSETH:

        WHEREAS, (a) Tiverton Lessee, an indirect, wholly-owned subsidiary of
Calpine, will, as of the Closing Date, own a 265 MW gas-fired combined cycle
merchant power plant located in Tiverton, Rhode Island and more fully described
in Exhibit A-1 hereto ("Tiverton Facility") and (b) Rumford Lessee, an indirect,
wholly-owned subsidiary of Calpine, will, as of the Closing Date, own a 265 MW
gas-fired combined cycle merchant power plant located in Rumford, Maine and more
fully described in Exhibit A-2 hereto ("Rumford Facility") (each of the Tiverton
Facility and the Rumford Facility, a "Facility" and, collectively, the
"Facilities");

        WHEREAS, (a) Tiverton Lessee desires to sell to the Owner Lessor the
Tiverton Facility pursuant

<PAGE>   9

to the Tiverton Bill of Sale, and to lease to the Owner Lessor the Tiverton Site
pursuant to the Tiverton Site Lease, and to lease the Tiverton Facility and
sublease the Tiverton Site from the Owner Lessor pursuant to the Tiverton
Facility Lease and the Tiverton Site Sublease, respectively and (b) Rumford
Lessee desires to sell to the Owner Lessor in the Rumford Facility pursuant to
the Rumford Bill of Sale, and to lease to the Owner Lessor the Rumford Site
pursuant to the Rumford Site Lease, and to lease the Rumford Facility and
sublease the Rumford Site from the Owner Lessor pursuant to the Rumford Facility
Lease and the Rumford Site Sublease, respectively (the Tiverton Site and the
Rumford Site, each a "Facility Site" and, collectively, the "Facility Sites" and
the Tiverton Bill of Sale and the Rumford Bill of Sale, each a "Bill of Sale"
and collectively, the "Bills of Sale");

        WHEREAS, the Owner Participant desires to cause the Owner Lessor to
purchase the Facilities from the Facility Lessees pursuant to the Bills of Sale,
to lease the Facility Sites from the Facility Lessees pursuant to the Facility
Site Leases, and to lease the Facilities and to sublease the Facility Sites to
the Facility Lessees pursuant to the Facility Leases and the Facility Site
Subleases, respectively;

        WHEREAS, the Owner Participant has entered into the LLC Agreement,
pursuant to which the Owner Participant has authorized the Owner Lessor to,
among other things and subject to the terms and conditions thereof and hereof,
issue the Lessor Notes and sell such Lessor Notes to the Pass Through Trust,
purchase the Facilities from the Facility Lessees pursuant to the Bills of Sale,
lease the Facility Sites from the Facility Lessees pursuant to the Facility Site
Leases, and lease the Facilities and sublease the Facility Sites to the Facility
Lessees pursuant to the Facility Leases and the Facility Site Subleases,
respectively;

        WHEREAS, in order to provide a portion of the Purchase Price payable by
the Owner Lessor in respect of its acquisition of the Facilities pursuant to the
Bills of Sale, the Owner Participant is willing to make an investment in the
Owner Lessor in an amount equal to the Equity Investment, all in the manner and
subject to the conditions set forth herein;

        WHEREAS, on the Closing Date, the Owner Lessor intends to sell to the
Pass Through Trust the Lessor Notes and to grant to the Indenture Trustee liens
and security interests in the Indenture Estate to secure its obligations
thereunder;

        WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Pass Through Trustee has entered into the Pass
Through Trust Agreement, pursuant to which the Pass Through Trustee has been
directed to use the Proceeds to purchase the Lessor Notes from the Owner Lessor
on the Closing Date;

        WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Facility Lessees have entered into the Certificate
Purchase Agreement with the Initial Purchasers and the Pass Through Trust
pursuant to which the Initial Purchasers will purchase the Certificates on the
Closing Date from the Pass Through Trust;

        WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the OP Guarantor has executed and delivered the OP
Parent Guaranty pursuant to which the OP Guarantor guarantees the payment and
performance obligations of the Owner Participant under the Operative Documents;

                                       2
<PAGE>   10

        WHEREAS, pursuant to the Calpine Guaranty (Tiverton) and the Calpine
Guaranty (Rumford), Calpine has guaranteed all of the respective obligations of
each Facility Lessee under the Participation Agreement and as of the Closing
Date shall guarantee all of the obligations of each Facility Lessee under the
other Operative Documents to which such Facility Lessee is a party; and

        WHEREAS, the parties hereto desire to consummate the transactions
contemplated hereby.

        NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT

        The capitalized terms used in this Participation Agreement, including
the foregoing recitals, and not otherwise defined herein shall have the
respective meanings specified in Appendix A hereto. The rules of interpretation
set forth in Appendix A shall apply to terms used in this Participation
Agreement and specifically defined herein.

SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS

         Section 2.1. Agreements to Participate. Subject to the terms and
conditions of this Agreement, and in reliance on the agreements, representations
and warranties made herein, the parties agree to participate in the transactions
described in this Section 2.1 on the Closing Date as follows:

        (a) the Owner Participant agrees to provide funds in an amount
sufficient to (i) fund the Equity Investment and (ii) pay the Transaction Costs
which the Owner Lessor is responsible to pay pursuant to Section 2.3(a) hereof
(collectively, the "Owner Participant's Commitment");

        (b) the Tiverton Lessee agrees to sell the Tiverton Facility to the
Owner Lessor on the terms and conditions set forth in the Tiverton Bill of Sale
and to lease the related Tiverton Site to the Owner Lessor on the terms and
conditions set forth in the Tiverton Site Lease; the Owner Lessor agrees to buy
the Tiverton Facility and to lease the Tiverton Site from the Tiverton Lessee,
and each agrees to execute and deliver the Tiverton Bill of Sale and the
Tiverton Site Lease;

        (c) the Rumford Lessee agrees to sell the Rumford Facility to the Owner
Lessor on the terms and conditions set forth in the Rumford Bill of Sale and to
lease the related Rumford Site to the Owner Lessor on the terms and conditions
set forth in the Rumford Site Lease; the Owner Lessor agrees to buy the Rumford
Facility and to lease the Rumford Site from the Rumford Lessee, and each agrees
to execute and deliver the Rumford Bill of Sale and the Rumford Site Lease;

                                       3
<PAGE>   11

         (d) the Owner Lessor agrees to lease the Tiverton Facility and to
sublease the Tiverton Site to the Tiverton Lessee on the terms and conditions
set forth in the corresponding Tiverton Facility Lease and Tiverton Site Lease;
the Tiverton Lessee agrees to lease the Tiverton Facility and sublease the
corresponding Tiverton Site from the Owner Lessor, and each agrees to execute
and deliver the respective Tiverton Site Sublease and Tiverton Facility Lease;

        (e) the Owner Lessor agrees to lease the Rumford Facility and to
sublease the Rumford Site to the Rumford Lessee on the terms and conditions set
forth in the corresponding Rumford Facility Lease and Rumford Site Lease; the
Rumford Lessee agrees to lease its Rumford Facility and sublease the
corresponding Rumford Site from the Owner Lessor, and each agrees to execute and
deliver the respective Rumford Site Sublease and Rumford Facility Lease;

        (f) the Indenture Trustee agrees to act as the trustee under and enter
into the Collateral Trust Indenture pursuant to which the Lessor Notes will be
issued;

        (g) the Pass Through Trustee agrees to use the Proceeds from the sale of
the Certificates by the Pass Through Trust to purchase the Lessor Notes from the
Owner Lessor;

        (h) the Owner Lessor agrees to sell to the Pass Through Trust the Lessor
Notes and to grant to the Indenture Trustee, for the benefit of the Pass Through
Trustee, certain liens and security interests in the Indenture Estate to secure
its obligations thereunder;

        (i) the Owner Lessor agrees to use the funds received from the Owner
Participant and the Pass Through Trust pursuant to clause (a)(i) and (g),
respectively, of this Section 2.1 on the Closing Date to pay the Purchase Price;

         (j) the Owner Participant and the Facility Lessees agree to enter into
the Tax Indemnity Agreement; and

        (k) the parties agree to enter into the agreements referred to above and
the other Operative Documents (other than the Operative Documents previously
entered into on the Effective Date), and to cause each Affiliate thereof that is
not a party hereto but is a party to an Operative Document to enter into such
Operative Document, as the case may be (in each case, if attached as an Exhibit
hereto, in substantially the form attached hereto).

        Section 2.2. Closing Date; Procedure for Participation.

        (a) Closing Date. The closing of the transactions contemplated hereby
(the "Closing") shall take place after 10:00 a.m., New York City time, on the
Scheduled Closing Date or such other date as the parties hereto shall mutually
agree (the "Closing Date"), at the offices of Latham & Watkins, 885 Third
Avenue, New York, New York 10022 or at such other place as the parties hereto
shall mutually agree.

        (b) Procedures for Funding. Unless the Closing Date shall have been
postponed pursuant to Section 2.2(c), subject to the terms and conditions of
this Participation Agreement, the Owner Participant shall make the Owner
Participant's Commitment available not later than 10:00 a.m., New York City
time, on the Scheduled Closing Date, by transferring or delivering

                                       4
<PAGE>   12

such amount, in funds immediately available on such Closing Date, to the Owner
Lessor in New York, New York.

        (c) Postponement of the Closing. The Scheduled Closing Date may be
postponed from time to time for any reason if the Facility Lessees give the
Owner Participant, the Owner Lessor, the Indenture Trustee and the Pass Through
Trustee a facsimile or telephonic (confirmed in writing) notice of such
postponement and notice of the date to which the Closing has been postponed,
such notice of postponement to be received by each party no later than noon, New
York City time, on the Scheduled Closing Date. If, prior to receipt of a
postponement notice under this Section 2.2(c), the Owner Participant shall have
provided funds in accordance with Section 2.2(b), such funds shall be returned
to the Owner Participant, as soon as reasonably practicable but in no event
later than the Business Day following the date of such notice, unless the Owner
Participant shall have otherwise directed. All funds made available pursuant to
Section 2.2(b) will be held by the Owner Lessor in trust for the Owner
Participant and shall not be part of the Indenture Estate or the Lessor Estate,
shall be invested by the Owner Lessor in accordance with clause (d) below and
such funds shall remain the sole property of the Owner Participant unless and
until released by the Owner Participant and made available to the Owner Lessor
and applied to pay the Purchase Price or Transaction Costs or returned to the
Owner Participant, as provided in this Agreement.

        (d) Investment of Funds. If, on the Scheduled Closing Date, the Owner
Participant has made the Owner Participant's Commitment available to the Owner
Lessor in accordance with Section 2.2(b), the Closing does not occur on such
date and the Owner Lessor is unable to return such funds to the Owner
Participant on such date, the Owner Lessor shall, subject to Section 2.2(c)
above, use reasonable efforts to invest such funds from time to time at the
written direction of Calpine, and at Calpine's sole expense and risk, in
Permitted Investments until such funds can be returned to the Owner Participant.
If, on the Scheduled Closing Date, the Owner Participant has made the Owner
Participant's Commitment available to the Owner Lessor in accordance with
Section 2.2(b), the Closing does not occur on such date and the Owner Lessor has
not returned such funds to the Owner Participant on or before 1:00 p.m., New
York City time, on such date, then Calpine shall reimburse the Owner Participant
for loss of the use of such funds at the Applicable Rate for each day, from and
including the day that such funds were made available to the Owner Lessor by the
Owner Participant to, but excluding the earlier of (i) the day that such funds
have been returned to the Owner Participant pursuant to Section 2.2(c) (funds
received by the Owner Participant after 1:00 p.m., New York City time, of any
day shall be deemed to be returned on the next succeeding Business Day) and (ii)
the Closing Date. Subject to payment for the account of the Owner Participant of
any reimbursement for loss of use of funds due to it at the Applicable Rate, any
net gain realized on the investment of such funds (including interest) shall be
paid to Calpine by the Owner Lessor on the earlier of (i) the date such funds
are returned to the Owner Participant pursuant to Section 2.2(c) and (ii) the
Closing Date. The Owner Lessor shall not be liable for any interest on or loss
resulting from such investments and, if such funds are made available to the
Owner Lessor and utilized to pay the Purchase Price or Transaction Costs on the
Closing Date, Calpine shall reimburse the Owner Lessor for any net loss realized
on the investment of such funds. If such funds are not so

                                       5
<PAGE>   13

utilized, Calpine shall, in addition to its obligation to reimburse the Owner
Participant for loss of use as provided above, reimburse the Owner Participant
on the date such funds are returned to the Owner Participant for any net loss
realized on the investment of such funds. In order to obtain funds for payment
of the Purchase Price or Transaction Costs or to return funds made available to
the Owner Lessor by the Owner Participant, the Owner Lessor is authorized to
sell any investments or obligations purchased as aforesaid.

        (e) Expiration of Commitments. The obligation of the Owner Participant
to make its Equity Investment shall expire at 11:59 p.m., New York City time, on
December 31, 2000. If the Closing Date has not occurred on or before December
31, 2000 the Transaction Parties shall have no obligation to consummate the
transactions contemplated under this Agreement and, except as provided in
Sections 2.3, 9.1 and 9.2, all obligations of the Transaction Parties shall
cease and terminate.

        Section 2.3. Transaction Costs.

        (a) If the transactions contemplated by this Agreement are consummated,
all Transaction Costs up to an amount equal to US$9,150,000.00, which shall be
substantiated or otherwise supported in reasonable detail (provided that legal
bills may be redacted to preserve attorney-client privilege), shall be paid
promptly after the Closing Date but in no event later than December 29, 2000 by
the Owner Lessor (with funds provided by the Owner Participant), assuming all
invoices have been approved by Calpine and received by the Owner Lessor by
December 26, 2000. All other Transaction Costs, fees, costs and expenses
incurred by the Facility Lessees, the Owner Lessor and the Owner Participant
shall be paid by Calpine. If the Overall Transaction is not consummated for any
reason (including as a result of the Facility Lessees' terminating this
Agreement pursuant to Section 12(a)), then Calpine shall bear all Transaction
Costs; provided, however, that Calpine shall not be obligated to pay Transaction
Costs incurred by the Owner Participant if the Overall Transaction is not
consummated on the basis of the provisions of this Agreement due to a failure of
the Owner Participant to satisfy any condition to the Closing required to be
satisfied by the Owner Participant.

        (b) Following the Closing Date, the Facility Lessees will be responsible
for, and will pay as Supplemental Rent on an After-Tax Basis to the
Administrator, the annual administration fees, if any, and expenses (including
reasonable and documented fees and expenses of its outside counsel) of
Wilmington Trust Company (as Administrator pursuant to the LLC Administration
Agreements and in its individual capacity), the Indenture Trustee (as such and
in its individual capacity) and the Pass Through Trustee.

SECTION 3. REPRESENTATIONS AND WARRANTIES

         Section 3.1. Representations and Warranties of the Facility Lessees.
Each of the Facility Lessees represent and warrant that (i) as of the Effective
Date, as set forth in clauses (a), (b) and (c) below and (ii) as of the Closing
Date, as set forth in each of the clauses of this Section 3.1:

        (a) Due Incorporation, etc. Each Facility Lessee is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Rhode Island (in the case of the Tiverton Lessee) or Maine
(in the case of the Rumford Lessee), is duly licensed or qualified and in good
standing in each jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary, and has the power
and authority to (i)

                                       6
<PAGE>   14

own or hold under lease the property it purports to own or hold under lease,
(ii) carry on its business as now being conducted and as presently proposed to
be conducted and (iii) take all actions as may be necessary to consummate the
transactions contemplated hereunder and under the other Operative Documents.
Each Facility Lessee is an indirect wholly-owned subsidiary of Calpine.

        (b) Authorization; Enforceability, etc. This Agreement and each of the
other Operative Documents to which such Facility Lessee is or will be a party
have been, or when executed and delivered will be, duly authorized, executed and
delivered by all necessary action by such Facility Lessee and, assuming the due
authorization, execution and delivery by each other party thereto, this
Agreement constitutes and, when executed and delivered, the other Operative
Documents to which such Facility Lessee is or will be a party will constitute
the legal, valid and binding obligations of such Facility Lessee which is a
party hereto or thereto, enforceable against such Facility Lessee in accordance
with their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of equity.

        (c) Non-Contravention. The execution, delivery and performance by each
Facility Lessee of this Agreement and each of the other Operative Documents to
which it is or will be a party, the consummation by such Facility Lessee of the
transactions contemplated hereby and thereby, and compliance by such Facility
Lessee with the terms and provisions hereof and thereof, do not and will not (i)
contravene any Applicable Law binding on such Facility Lessee or its property,
or its organizational documents, (ii) constitute a default by such Facility
Lessee under, or result in the creation of any Lien upon the property of such
Facility Lessee (other than pursuant to any Operative Document) under any
indenture, mortgage or other material contract, agreement or instrument to which
such Facility Lessee is a party or by which such Facility Lessee or any of its
property is bound, (iii) contravene the Partnership Agreement of such Facility
Lessee or (iv) require the consent or approval of any Person which has not
already been obtained, in each case with respect to clauses (i), (ii) and (iv)
above, which would reasonably be expected to have a Material Adverse Effect.

        (d) Government Actions. Such Facility Lessee has all Permits with, any
Governmental Entity or under any Applicable Law required (x) for the due
execution, delivery or performance by such Facility Lessee of this Agreement,
and the other Operative Documents to which such Facility Lessee is or will be a
party or (y) without regard to any other transactions or other actions of the
Owner Participant, the Owner Lessor or any Affiliate of any of them or any
assignee or transferee of any of the Owner Participant, the Owner Lessor (or any
Affiliate of any transferee or assignee) and assuming that none of the Owner
Participant, the Owner Lessor or any Affiliate of any of them or any assignee or
transferee of any of the Owner Participant (or any Affiliate of any such
transferee or assignee) is an "electric utility" or a "public utility" or a
"public utility holding company" or any similar entity subject to public utility
regulation under any Applicable Law immediately prior to the Closing, with
respect to the participation by the Owner Participant, the Owner Lessor in the
Overall Transaction, other than (i) any Permit where the failure to obtain or
maintain such Permit would not be reasonably likely to result in a Material
Adverse Effect, (ii) the FERC Orders, (iii) as may be required under Applicable
Law providing for the supervision or regulation of the Owner Participant, the
Owner Lessor or any Affiliate of any of them as a result of investing, lending
or other commercial activity in which

                                       7
<PAGE>   15

the Owner Participant, the Owner Lessor or any Affiliate of any of them is or
may be engaged other than the transactions contemplated hereby or by any of the
other Operative Documents, (iv) as may be required under existing Applicable
Laws to be obtained, given, accomplished or renewed at any time, or from time to
time, in each case, after the Closing Date and which such Facility Lessee has no
reason to believe will not be timely obtained and the lack of which would not
reasonably be expected to have a Material Adverse Effect or involve any danger
of criminal or material civil liability being incurred by the Owner Participant,
the Owner Lessor, the Indenture Trustee or the Pass Through Trustee, (v) in
connection with any modification to or rebuilding or replacement of the
Facilities or any portion thereof that may occur in the future, (vi) as may be
required in connection with any refinancing of the applicable Lessor Note or the
Certificates or the issuance of applicable Additional Lessor Notes or Additional
Certificates, (vii) as may be required in consequence of any transfer of the
Member Interest or any transfer of ownership of the applicable Facility or the
Owner Lessor's Interest, or any part thereof by the Owner Lessor or the exercise
by any such party of dispossessory remedies under the Operative Documents or any
relinquishment of the use or operation of such Facility by such Facility Lessee,
(viii) appropriate filing and recording to perfect the Lien of the Collateral
Trust Indenture, if required, and the ownership and leasehold interests conveyed
pursuant to this Agreement, or (ix) as may be required under any Applicable Law
enacted or adopted after the date hereof.

        (e) Litigation. There is no pending or, to the Actual Knowledge of such
Facility Lessee, threatened, action, suit, investigation or proceeding against
such Facility Lessee or any other Calpine Party before any Governmental Entity
which (i) questions the validity of the Tiverton Operative Documents or the
Rumford Operative Documents, as the case may be, or the ability of such Facility
Lessee or such other Calpine Party to perform its obligations under such
Operative Documents to which such Facility Lessee or such other Calpine Party is
or will be a party or (ii) if determined adversely to it, could reasonably be
expected to have a Material Adverse Effect or otherwise materially adversely
affect the Facility leased by such Facility Lessee.

        (f) No Defaults. Neither such Facility Lessee nor any other Calpine
Party is in default, and no condition exists that with notice or lapse of time
or both would constitute a default, under any mortgage, indenture or other
contract, agreement or instrument to which such Facility Lessee or such other
Calpine Party is a party or by which such Facility Lessee or such other Calpine
Party or its property is bound in any such case where any such default,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

        (g) Location of Chief Executive Office and Principal Place of Business,
etc. (1) (x) The chief executive office and principal place of business of the
Tiverton Lessee and the office where the Tiverton Lessee keeps its company
records concerning the Tiverton Facility, the Tiverton Site and the Tiverton
Operative Documents is located at: The Pilot House, 2nd Floor, Lewis Wharf,
Boston, Massachusetts 02110 and 50 West San Fernando Street, San Jose,
California 95113 and (y) the chief executive office and principal place of
business of the Rumford Lessee and the office where the Rumford Lessee keeps its
company records concerning the Rumford Facility, the Rumford Site and the
Rumford Operative Documents is located in the aforementioned addresses in Boston
and San Jose, respectively.

                                       8
<PAGE>   16

        (2) The Tiverton Facility is located on the Tiverton Site and the
Rumford Facility is located on the Rumford Site.

        (3) The condition of such Facility Lessee's applicable Facility is
substantially identical to the condition it was in when inspected by the
Appraiser in connection with the Closing Appraisal.

        (h) Title; Liens. (1) Each Facility Lessee has (i) good and valid title
to the respective Facility leased by such Facility Lessee, free and clear of all
Liens other than Permitted Closing Date Liens, and (ii) good and valid title to
its interests in its respective Facility Site and Easements free and clear of
all Liens other than Permitted Closing Date Liens.

        (2) Upon execution and delivery of the Operative Documents and recording
or filing (as appropriate) of the instruments and documents referred to in Part
I of Schedule 4.20 in accordance with Section 4.20, (A) good and valid title to
the applicable Facility will be duly, validly and effectively conveyed and
transferred to the Owner Lessor free and clear of all Liens other than Permitted
Closing Date Liens, and (B) good and valid leasehold interest in the related
Facility Site will be duly, validly and effectively granted to the Owner Lessor
upon the terms and conditions in the corresponding Facility Site Lease, free and
clear of all Liens other than Permitted Closing Date Liens.

        (3) When duly authorized, executed and delivered by each of the parties
thereto, the Collateral Trust Indenture will create a valid and, when the
filings and recordings to be made pursuant to Section 4.20 have been made, first
priority perfected Lien in favor of the Indenture Trustee in the Indenture
Estate and no filing, recording, registration or notice with, or payment of any
fees to, any federal or state Governmental Entity will be necessary to establish
or, except for such filings and recordings as will be made pursuant to Section
4.20, to perfect, or give record notice of, the Lien in favor of the Indenture
Trustee in the Indenture Estate to the extent such Lien may be perfected by
filings or recordings.

        (4) None of the Permitted Encumbrances will, on and after the Closing,
interfere with the use, operation or possession of the Facilities (as
contemplated by the Operative Documents) or the use of or the exercise by the
Owner Lessor of its rights under the applicable Bills of Sale or the Facility
Site Leases with respect to the Facilities, the Facility Sites or the Easements,
in each case, which could reasonably be expected to have a Material Adverse
Effect.

        (i) Regulation U, etc. No Calpine Party is engaged principally, or as
one of its principal activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (as defined in Regulations T, U
or X of the Federal Reserve Board), and no part of the proceeds of Lessor Notes
or the Equity Investment will be used by any Calpine Party, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve such Person in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220).

                                       9
<PAGE>   17

         (j) Holding Company Act. Such Facility Lessee is not an "electric
utility company," a "holding company", a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of the
Holding Company Act, and the execution, delivery and performance of the
Operative Documents to which such Facility Lessee is or will be a party will not
subject such Facility Lessee to such regulation under the Holding Company Act
and do not violate any provision of the Holding Company Act or any rule or
regulation thereunder.

         (k) Investment Company Act. Such Facility Lessee is not an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940.

         (l) Securities Act. Neither such Facility Lessee nor anyone authorized
by it has directly or indirectly offered or sold any interest in the Member
Interest, the Lessor Notes or the Certificates or any part thereof, or in any
similar security or lease, or in any security or lease the offering of which for
the purposes of the Securities Act would be deemed to be part of the same
offering as the offering of the Member Interest, the Lessor Notes or the
Certificates or any part thereof or solicited any offer to acquire any of the
same, in any such case, in violation of the registration requirements of Section
5 of the Securities Act.

         (m) Environmental Matters. Except as set forth in Schedule 3.1(m):

         (1) Such Facility Lessee has not received and does not have Actual
Knowledge of any written notice, letter, citation, order, warning, complaint,
inquiry, claim or demand from any Governmental Entity or any other Person that:
(i) there has been a Release, or there is a threat of Release, of Hazardous
Substances in, on, under or from the Facility leased by such Facility Lessee, or
the related Facility Site or any of the Easements relating to such Facility;
(ii) such Facility Lessee or any other Calpine Party is or is asserted to be
liable, in whole or in part, for the costs of cleaning up, remedying or
responding at any location (including any location at which any Hazardous
Substances have been generated, stored, treated or disposed by or on behalf of
such Facility Lessee or such other Calpine Party) to a Release or threatened
Release of any Hazardous Substance generated, used or stored at or Released in,
on, under or from the Facility leased by such Facility Lessee, or the related
Facility Site or any of the Easements relating to such Facility; (iii) either of
the Facilities or either of the Facility Sites is subject to a Lien in favor of
any Governmental Entity in response to a Release or threatened Release of
Hazardous Substances or (iv) either of the Facility Lessees, Facilities, or the
Facility Sites or any of the Easements is or is asserted to be in violation of
or not in compliance with any Environmental Law, in any case with respect to
clauses (ii), (iii) or (iv), which could reasonably be expected to have a
Material Adverse Effect;

         (2) Such Facility Lessee and the other Calpine Parties are in
compliance with and have complied with all Environmental Laws, except to the
extent that failure to so comply could not reasonably be expected to have a
Material Adverse Effect; and

         (3) To such Facility Lessee's Actual Knowledge, there is not and has
not been any Environmental Condition (A) at, on, under or from the Facility
leased by such Facility Lessee, or the related Facility Site or any of the
Easements relating to such Facility, or (B) at, on, under or

                                       10
<PAGE>   18

from any other location resulting from or arising in connection with the
operation by any Person of such Facility leased by such Facility Lessee, or the
related Facility Site or any of the Easements relating to such Facility, that in
each case could reasonably be expected to have a Material Adverse Effect or
involve any danger of (i) foreclosure, sale, forfeiture or loss of, or
imposition of a material lien on, such Facility leased by such Facility Lessee,
or the related Facility Site or any of such Easements, (ii) the impairment of
the ownership, use, operation or, maintenance of such Facility, Facility Site or
any of the Easements relating to such Facility in any material respect, or (iii)
any criminal or material civil liability being incurred by the Owner
Participant, the Owner Lessor, the Indenture Trustee or the Pass Through
Trustee.

         (4) All environmental permits necessary to own, operate, lease or
maintain the Facility leased by such Facility Lessee, the related Facility Site
and, to such Facility Lessees' Actual Knowledge, the Easements relating to such
Facility in accordance with the Operative Documents and Environmental Laws have
been obtained on behalf of the Owner Lessor or by the Lessee and they are final,
in proper form, and in full force and effect, with all appeal periods expired,
and such Facility Lessee is in compliance with the provisions of all such
permits, except where the failure to obtain, maintain the effectiveness of, or
comply with such permits would not reasonably be expected to have a Material
Adverse Effect or involve any danger of (i) foreclosure, sale, forfeiture or
loss of, or imposition of a material lien on, such Facility, Facility Site or
Easements, (ii) the impairment of the ownership (or leasehold or easement
interest in), use, operation or maintenance of such Facility, Facility Site or
Easements in any material respect, or (iii) any criminal or material civil
liability being incurred by the Owner Participant, the Owner Lessor, the
Indenture Trustee, the Pass Through Trustee or the Certificateholders.

         (n) Operation and Use. Assuming each Facility will continue to be
operated substantially as operated as of the Closing Date, the rights and
interests to be possessed on the Closing Date by (i) the Tiverton Lessee with
respect to the Tiverton Facility, the Tiverton Site and the Tiverton Easements
and (ii) the Rumford Lessee with respect to the Rumford Facility, the Rumford
Site and the Rumford Easements, and based upon such Facility Lessee's reasonable
expectations and on Applicable Law in effect on and as of the Closing Date, the
rights and interests made available to the Owner Lessor pursuant to the
Operative Documents and the rights contemplated by the related Facility Lease to
be made available under such Operative Documents, permit on a commercially
practicable basis during the applicable Facility Lease Term and the period
following the expiration or termination of such Facility Lease Term, as
applicable, until the end of each Facility's useful life as set forth in the
Closing Appraisal, (i) the location, occupation, interconnection, maintenance
and repair of each Facility, (ii) the use, operation and possession of each
Facility, (iii) as of the Closing Date, the use, operation, possession,
maintenance, replacement, renewal and repair of all Improvements required to be
made to each Facility, (iv) adequate ingress to and egress from each Facility in
connection with the ownership, use, operation, possession, maintenance or repair
of each Facility and (v) the transmission of electricity from each Facility
substantially in the manner currently transmitted as of the Closing Date.

         (o) Tax Returns. Such Facility Lessee and each other Calpine Party has
filed all federal, state and local income tax returns which are required to be
filed by it and has paid all Taxes shown to be due and payable on such returns
or pursuant to any assessment received by it (other than Taxes and assessments
the payment of which is being contested in good faith by such

                                       11
<PAGE>   19

Person and with respect to which appropriate accounting reserves have to the
extent required by GAAP been set aside) and neither such Facility Lessee or any
other Calpine Party has any Actual Knowledge of any actual or proposed
assessment in connection therewith which, either in any case or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

         (p) Jurisdiction. In accordance with Section 14.14 hereof, such
Facility Lessee has validly submitted to the jurisdiction of the Supreme Court
of the State of New York, New York County and the United States District Court
for the Southern District of New York.

         (q) Applicable Law. Such Facility Lessee is in compliance with all
Applicable Law, including all applicable zoning, use and building codes, laws,
regulations and ordinances relating to the operations, maintenance, use, lease
or ownership of its applicable Facility, the related Facility Site and the
applicable Easements, except where the noncompliance would not reasonably be
expected to have a Material Adverse Effect or involve any danger of (i)
foreclosure, sale, forfeiture or loss of, or imposition of a material lien on,
such Facility, such Facility Site or any of such Easements, (ii) the impairment
of the ownership, use, operation or maintenance of such Facility or such
Facility Site in any material respect, or (iii) any criminal or material civil
liability being incurred by the Owner Participant, the Owner Lessor, the
Indenture Trustee or the Pass Through Trustee, including subjecting the Owner
Participant or the Owner Lessor to regulation as a public utility under
Applicable Law. None of the Calpine Parties is in default of any judgments,
orders or decrees of any Governmental Entity relating to such Facility, such
Facility Site or any of such Easements.

         (r) ERISA. Assuming the accuracy of the representations of the other
parties hereto and the Certificateholders in the Certificates, the execution and
delivery of the Operative Documents and the issuance and sale of the Lessor
Notes under the Collateral Trust Indenture and the Certificates under the Pass
Through Trust Agreement will be exempt from, or will not involve any transaction
which is subject to, the prohibitions of either Section 406 of ERISA or Section
4975 of the Code and will not involve any transaction in connection with which a
penalty could be imposed under Section 502(i) of ERISA or a tax could be imposed
pursuant to Section 4975 of the Code.

         (s) Insurance. All insurance required to be obtained pursuant to
Schedule 5.45 is in full force and effect.

         (t) No Default; No Event of Loss. No Lease Default or Lease Event of
Default, exists or will exist upon execution and delivery of the Operative
Documents. No Event of Loss exists or will exist upon the execution and delivery
of the Operative Documents.

         (u) Special Assessments. There is no action pending or, to such
Facility Lessee's Actual Knowledge, threatened by a Governmental Entity or other
Person to specially assess the applicable Facility or the applicable Facility
Site for any public improvements constructed or to be constructed which would
reasonably be expected to have a Material Adverse Effect.

         (v) Utility Services. The Facilities and the Facility Sites have
available all services of public utilities necessary for use and operation of
the Facilities as currently being used and as contemplated by the applicable
Operative Documents, except where the failure to have any such

                                       12
<PAGE>   20

services or public utilities available would not result in a material adverse
effect with respect to either of the Facilities.

         (w) Eminent Domain. There is no action pending with respect to, or
threatened by a Governmental Entity or other Person to initiate, a Requisition
of any of such Facility, Facility Site or any of the Easements relating to such
Facility, which would reasonably be expected to have a Material Adverse Effect.

         (x) Permitted Liens. There are no violations or proceedings or actions
pending or threatened, with respect to any easements, reciprocal easement
agreements, declarations, development agreements or recorded restrictions or
covenants relating, in the case of the Tiverton Lessee, to the Tiverton
Facility, the Tiverton Facility Site or any of the Tiverton Easements, and in
the case of the Rumford Lessee, to the Rumford Facility, the Rumford Facility
Site or any of the Rumford Easements, which would reasonably be expected to have
a Material Adverse Effect.

         (y) Access; Egress. Access to and egress from the Facility leased by
such Facility Lease and the related Facility Site is available and provided by
public streets and/or private roads fully accessible by such Facility Lessee. To
such Facility Lessee's Actual Knowledge, there are no plans of any Governmental
Entity to change the highway or road system in the vicinity of its related
Facility or its related Facility Site, or to restrict or change access from any
such highway or road to such Facility or such Facility Site, in either case, in
any manner which would reasonably be expected to have a Material Adverse Effect.

         (z) Notices. To such Facility Lessee's Actual Knowledge, (i) there are
no outstanding written notices from any Governmental Entity of any violation of,
or that its applicable Facility or Facility Site is not in compliance with, any
and all Applicable Laws relating to such Facility and such Facility Site or the
ownership, use, occupancy and operation thereof and (ii) there are no
outstanding written notices that any repairs or work or capital improvements are
required to be done at or with respect to such Facility or Facility Site by any
Governmental Entity or by any insurance company which currently issues any
insurance to such Facility Lessee or by any board of fire underwriters or other
body exercising similar functions, except, in either case with respect to (i) or
(ii) above, where such violation, noncompliance or repairs could not reasonably
be expected to have a Material Adverse Effect.

         (aa) Business. Such Facility Lessee has not conducted any business
other than the acquisition, construction, development, ownership, operation,
maintenance, leasing and financing of such Facility Lessee's applicable Facility
and Facility Site and activities incidental thereto.

         (bb) Intentionally Omitted.

         (cc) Intellectual Property. To the Actual Knowledge of such Facility
Lessee, such Facility Lessee has the right to use all patents, trademarks,
service marks, trade names, copyrights, licenses and other rights which are
necessary for the operation of its business as presently conducted and to
transfer all such rights to the Owner Lessor subsequent to termination

                                       13
<PAGE>   21

of the related Facility Lease, except to the extent failure to possess such
rights would not reasonably be likely to result in a Material Adverse Effect.

         (dd) Land Not in Flood Zone. No portion of the Facility leased by such
Facility Lessee, or the Easements relating to such Facility or the Facility Site
relating to such Facility includes improved real property that is located in an
area that has been identified by the Director of the Federal Emergency
Management Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, as amended.

         (ee) No Fraudulent Conveyances. Each Facility Lessee is consummating
the transactions contemplated hereby, including transfer of certain of its
assets and properties to the Owner Lessor, in good faith and without any intent
to defraud creditors of such Facility Lessee or subsequent purchasers. The
execution and delivery of the Operative Documents to which such Facility Lessee
is a party will not render such Facility Lessee insolvent under GAAP or leave
such Facility Lessee with assets whose present fair valuation of assets is less
than the present fair valuation of such Facility Lessee's debts. As used in this
Section 3.1(ee), "debts" includes any and all liabilities, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent, and
whether or not such liabilities are required under GAAP to be shown on each
Facility Lessee's balance sheet. The execution and delivery of the Operative
Documents to which each Facility Lessee is a party will not leave it with
property remaining in its hands which would constitute unreasonably small assets
or capital, and each Facility Lessee has and, after giving effect to such
transactions will have, an adequate amount of assets and capital to engage in
its business now and in the future, based on the actual and anticipated needs
for capital of the businesses anticipated to be conducted by such Facility
Lessee, and based upon the other information described herein. After giving
effect to the transactions contemplated under the Operative Documents, each
Facility Lessee will be able to pay all of its debts and liabilities, including
unrecorded contingent liabilities, as they mature, each Facility Lessee will
have positive cash flow after paying all of its scheduled and anticipated debt
as it matures, and each Facility Lessee will realize sufficient monies from
current assets in the ordinary and usual course of business to pay recurring
current debt, short-term debt and long-term debt as such debts mature.

         (ff) No Additional Fees. Except for the fees referred to in clause
(xviii) and (xix) of the definition of Transaction Costs, such Facility Lessee
has not paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of arranging the financing of the
transactions contemplated by the Operative Documents.

         (gg) Status under Certain Statutes. Neither the Facility Lessees, the
Owner Participant, the Owner Lessor, the Indenture Trustee, the Pass Through
Trustee nor any Certificateholder solely as a result of execution, delivery and
performance of, and the consummation of the transactions contemplated by the
Operative Documents shall be or become (i) subject to regulation as a "public
utility company," "holding company," an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company" within the meaning of PUHCA or (ii)
a "public utility" (except that the Facility Lessees will each be a public
utility subject to the Federal Power Act with authority to sell wholesale
electricity at market-based rates and with waivers of regulations customarily
granted to a public utility that sells wholesale power

                                       14
<PAGE>   22

at market-based rates), a "transmitting utility," or an "electric utility"
within the meaning of the Federal Power Act (iii) subject to state regulation of
rates, or (iv) organizational requirements for electric utilities.

         (hh) Material Omission. Neither the Offering Circular (including any
preliminary offering circular approved by such Facility Lessee for distribution)
nor the written information furnished to the Owner Lessor, the Owner
Participant, the Indenture Trustee and the Pass Through Trustee by or on behalf
of such Facility Lessee or any of its Affiliates in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading; provided, that no representation or warranty is made with regard to
(i) any projections or other forward-looking statements provided by or on behalf
of the Facility Lessee, or (ii) the descriptions of the Operative Documents or
the tax consequences to beneficial owners of Certificates; provided, further,
each of the Transaction Parties acknowledge and agrees that (i) Calpine has
heretofore provided to the Appraiser, solely in order to assist the Appraiser in
connection with the preparation of the appraisal to be delivered by the
Appraiser to certain of the Transaction Parties at the Closing, certain (1)
general market information, (2) information about the Maine and Rhode Island
energy markets and (3) information passed along from other Persons and (ii) that
the Facility Lessee makes no representation or warranty whatsoever with respect
to the information described in clause (i) above except to the extent expressly
set forth in Section 4(b) of the Tax Indemnity Agreement.

         (ii) Exempt Wholesale Generator. Each Facility Lessee is an "exempt
wholesale generator" under PUHCA. The Facility leased by such Facility Lessee is
interconnected with the high voltage network operated by ISO New England and has
access to transmission services and ancillary services sufficient to sell the
net generating capacity of such Facility at wholesale, and such Facility Lessee
has the authority to sell wholesale electric power from the net generating
capacity of such generating Facility at market-based rates.

         (jj) FERC Orders. The Facility Lessees have duly filed with FERC the
filings referenced in Section 4.37 and, except with respect to the determination
by FERC of EWG status, received from FERC the orders referenced therein.

         (kk) Fully Taxable. As of the Closing Date, each Person owning an
Ownership Interest (i) is fully taxable at the highest federal tax rate and (ii)
expects to be fully taxable at the highest federal tax rate throughout the Lease
Term; for the avoidance of doubt, this representation is not intended to be
construed as nor shall it be deemed to be a guaranty as to any such Person's
future taxation.

         (ll) Commencement of Commercial Operations and Compliance. To the
knowledge of the Tiverton Lessee, the Tiverton Facility has commenced commercial
operations with at least 260 MW of capacity and complies in all material
respects with the other specifications set forth in the purchase and
construction contracts for such Facility, and to the knowledge of the Rumford
Lessee, the Rumford Facility has commenced commercial operations with at least
260 MW of capacity and complies in all material respects with the other
specifications set forth in the purchase and construction contracts for such
Facility, except as disclosed in the R.W. Beck

                                       15
<PAGE>   23

Reports delivered to the Owner Participant, the Owner Lessor, and the Indenture
Trustee prior to the Closing Date.

         Section 3.2. Representations and Warranties of the Owner Lessor. The
Owner Lessor represents and warrants that (i) as of the Effective Date, as set
forth in clauses (a), (b) and (c) below and (ii) as the Closing Date, as set
forth in each of the clauses of this Section 3.2:

         (a) Due Organization. The Owner Lessor is a duly organized and validly
existing limited liability company under the laws of the State of Delaware of
which the Owner Participant is the sole member, and has the power and authority
to enter into and perform its obligations under this Agreement and each of the
other Operative Documents to which it is a party.

         (b) Due Authorization, Enforceability; etc. (1) (i) This Agreement and
each of the other Operative Documents (other than the Lessor Notes) to which the
Owner Lessor is or will be a party has been or when executed and delivered will
be duly authorized, executed and delivered by the Owner Lessor, and (ii)
assuming the due authorization, execution and delivery of this Agreement by each
party hereto other than the Owner Lessor, this Agreement constitutes and when
executed and delivered each of the other Operative Documents (other than the
Lessor Notes) to which it is or will be a party will be the legal, valid and
binding obligations of the Owner Lessor, enforceable against the Owner Lessor in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of equity.

         (2) Upon the execution of the Lessor Notes by the Owner Lessor in
accordance with the Collateral Trust Indenture and delivery of such Lessor Notes
against payment therefor, the Lessor Notes will constitute legal, valid and
binding obligations of the Owner Lessor, enforceable against the Owner Lessor in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of equity.

         (c) Non-Contravention. The execution and delivery by the Owner Lessor
of this Agreement and the other Operative Documents to which it is or will be a
party, the consummation by the Owner Lessor of the transactions contemplated
hereby and thereby, and the compliance by the Owner Lessor with the terms and
provisions hereof and thereof, do not and will not contravene any Applicable Law
of the United States of America or the State of Delaware, or the LLC Agreement
or the Owner Lessor's other organizational documents or contravene the
provisions of, or constitute a default by the Owner Lessor under any indenture,
mortgage or other material contract, agreement or instrument to which the Owner
Lessor is a party or by which the Owner Lessor or its property is bound, or in
the creation of any Owner Lessor's Lien; provided, however, that no
representation is made with respect to the right, power or authority of the
Owner Lessor to act as operator of the Facilities following a Lease Event of
Default.

        (d) Governmental Actions. Assuming the representations and warranties
of the Facility Lessees contained in paragraphs (j), (k), (l), (m), (q), (z),
(gg) and (ii) of Section 3.1 are true, no authorization or approval or other
action by, and no notice to or filing or registration with, any Governmental
Entity is required for the due execution, delivery or performance by the

                                       16
<PAGE>   24

Owner Lessor, as the case may be, of the LLC Agreement, the Collateral Trust
Indenture, the Lessor Notes, this Agreement or the other Operative Documents to
which the Owner Lessor is or will be a party, other than any such authorization
or approval or other action or notice or filing as has been duly obtained, taken
or given.

         (e) Litigation. There is no pending or, to the Actual Knowledge of the
Owner Lessor, threatened, action, suit, investigation or proceeding against the
Owner Lessor before any Governmental Entity which (i) questions the validity of
the Operative Documents or the ability of the Owner Lessor to perform its
obligations under the Operative Documents to which it is or will be a party or
(ii) if determined adversely to it, could reasonably be expected to materially
adversely affect the ability of the Owner Lessor to perform its obligations
under this Agreement or any other Operative Document to which it is or will be a
party or would materially adversely affect the Facilities, the Facility Sites or
any interest therein or part thereof or the Lien of the Indenture Trustee on the
Indenture Estate.

         (f) Liens. The Owner Lessor's right, title and interest in and to the
Lessor Estate is free of all Owner Lessor's Liens.

         (g) Location of Chief Executive Office; Principal Place of Business.
The chief executive office and principal place of business of the Owner Lessor
where the Owner Lessor will keep its corporate records concerning the
Facilities, the Facility Sites and the Operative Documents is located in
Stamford, Connecticut.

         (h) Securities Act. Neither the Owner Lessor nor anyone authorized by
it has directly or indirectly offered or sold any interest in the Member
Interest, the Lessor Notes or the Certificates or any part thereof, or in any
similar security or lease, the offering of which for the purposes of the
Securities Act would be deemed to be part of the same offering as the offering
of the Member Interest, the Lessor Notes or the Certificates or any part thereof
or solicited any offer to acquire any of the same in violation of the
registration requirements of Section 5 of the Securities Act.

         Section 3.3. Intentionally Omitted.

         Section 3.4. Representations and Warranties of the Owner Participant.
The Owner Participant represents and warrants (i) as of the Effective Date, as
set forth in clauses (a), (b) and (c) below and (ii) as of the Closing Date, as
set forth in each of the clauses of this Section 3.4:

         (a) Due Organization. The Owner Participant is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the power and authority to enter into and perform
its obligations under this Agreement, the LLC Agreement and the Tax Indemnity
Agreement. The Owner Participant is an indirect wholly owned subsidiary of
Philip Morris Capital Corporation.

         (b) Due Authorization, Enforceability; etc. This Agreement, the LLC
Agreement and the Tax Indemnity Agreement have been or when executed and
delivered will be duly authorized, executed and delivered by the Owner
Participant and assuming the due authorization, execution and delivery by each
other party thereto, this Agreement, the LLC Agreement, the Tax Indemnity
Agreement and any other Operative Document to which the Owner Participant is or

                                       17
<PAGE>   25

will be a party constitute or when executed and delivered will constitute the
legal, valid and binding obligations of the Owner Participant, enforceable
against the Owner Participant in accordance with their respective terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity.

         (c) Non-Contravention. The execution and delivery by the Owner
Participant of this Agreement, the LLC Agreement, the Tax Indemnity Agreement
and any other Operative Document to which the Owner Participant is or will be a
party, the consummation by the Owner Participant of the transactions
contemplated hereby and thereby, and the compliance by the Owner Participant
with the terms and provisions hereof and thereof, do not and will not contravene
any Applicable Law binding on the Owner Participant, or its organizational
documents, or contravene the provisions of, or constitute a default under any
indenture, mortgage or other material contract, agreement or instrument to which
the Owner Participant is a party or by which the Owner Participant or its
property is bound or result in the creation of any Owner Participant's Lien
(other than any Lien created under any Operative Document) upon the Lessor
Estate, the Facility Sites or any interest therein or part thereof (it being
understood that no representation or warranty is being made as to (i) any
Applicable Laws relating to the particular nature of the Facilities or the
Facility Sites or (ii) other than its representations set forth in Section
3.4(g), ERISA or Section 4975 of the Code).

         (d) Governmental Action. Assuming the representations and warranties of
the Facility Lessees contained in paragraphs (j), (k), (l), (m), (q), (z), (gg)
and (ii) of Section 3.1 are true, no authorization or approval or other action
by, and no notice to or filing or registration with, any Governmental Entity is
required for the due execution, delivery or performance by the Owner Participant
of this Agreement, the LLC Agreement, the Tax Indemnity Agreement or any other
Operative Document to which the Owner Participant is or will be a party, other
than any authorization or approval or other action or notice or filing as has
been duly obtained, taken or given (it being understood that no representation
or warranty is being made as to any Applicable Laws relating to the Facilities
or the Facility Sites).

        (e) Litigation. There is no pending or, to the Actual Knowledge of the
Owner Participant, threatened, action, suit, investigation or proceeding against
the Owner Participant before any Governmental Entity which (i) questions the
validity of the Operative Documents or the ability of the Owner Participant to
perform its obligations under the Operative Documents to which it is or will be
a party or (ii) if determined adversely to it, could reasonably be expected to
materially adversely affect the ability of the Owner Participant to perform its
obligations under the LLC Agreement, this Agreement or any other Operative
Document to which it is or will be a party or would materially adversely affect
the Facilities, the Facility Sites or any interest therein or part thereof or
the Lien of the Indenture Trustee on the Indenture Estate.

        (f) Liens. Each of the Lessor Estate, the Facility Sites, the
Easements and any interest therein or part thereof is free of any Owner
Participant's Liens.

        (g) ERISA. No part of the funds to be used by the Owner Participant to
make its investment pursuant to this Agreement, directly or indirectly,
constitutes or is deemed to constitute assets (within the meaning of ERISA and
any applicable rules, regulations and court

                                       18
<PAGE>   26

decisions thereunder) of any "employee benefit plan" (as defined in Section 3(3)
of ERISA) that is subject to ERISA, of any Transaction Party and ERISA Affiliate
thereof.

         (h) Acquisition for Investment. The Owner Participant is purchasing the
Member Interest to be acquired by it for its own account with no present
intention of distributing such Member Interest or any part thereof in any manner
which would require registration under or would violate the Securities Act, but
without prejudice, however, to the right of the Owner Participant at all times
to sell or otherwise dispose of all or any part of such Member Interest under an
exemption from registration available under such Act.

         (i) Securities Act. Neither the Owner Participant nor anyone authorized
by it has directly or indirectly offered or sold any interest in the Member
Interest, the Lessor Notes or the Certificates or any part thereof, or in any
similar security or lease, or in any security or lease the offering of which for
the purposes of the Securities Act would be deemed to be part of the same
offering as the offering of the Member Interest, the Lessor Notes or the
Certificates or any part thereof or solicited any offer to acquire any of the
same in violation of the registration requirements of Section 5 of the
Securities Act.

         (j) Holding Company Act and Federal Power Act. Immediately prior to
executing this Agreement, the Owner Participant is not an "electric utility",
"electric utility company", "public utility", "public-utility company", "holding
company" or a "subsidiary company" or "affiliate" of any of the foregoing, under
the Federal Power Act or the Holding Company Act.

         (k) Investment Company Act. The Owner Participant is not an "investment
company" or a company controlled by an "investment company" within the meaning
of the Investment Company Act of 1940.

         Section 3.5. Representations and Warranties of Indenture Trustee and
the Lease Indenture Company. The Lease Indenture Company and the Indenture
Trustee hereby severally represent and warrant (i) as of the Effective Date, as
set forth in clauses (a), (b) and (c) below and (ii) as of the Closing Date, as
set forth in each of the clauses of this Section 3.5:

         (a) Due Organization. The Lease Indenture Company is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States, has the corporate power and authority, as Indenture
Trustee and/or in its individual capacity to the extent expressly provided
herein or in the Collateral Trust Indenture, to enter into and perform its
obligations under the Collateral Trust Indenture, this Agreement and each of the
other Operative Documents to which it is or will be a party.

        (b) Due Authorization, Enforceability; etc. (1) (i) This Agreement has
been duly authorized, executed and delivered by the Indenture Trustee and the
Lease Indenture Company, and (ii) assuming the due authorization, execution and
delivery of this Agreement by each party hereto other than the Indenture Trustee
and the Lease Indenture Company, this Agreement constitutes a legal, valid and
binding obligation of the Lease Indenture Company and the Indenture Trustee,
enforceable against the Lease Indenture Company or the Indenture Trustee, as the
case may be, in accordance with its terms, except as the same may be limited by
applicable

                                       19
<PAGE>   27
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of equity.

         (2) (i) Each of the other Operative Documents to which the Indenture
Trustee is or will be a party has been or when executed and delivered will be
duly authorized, executed and delivered by the Indenture Trustee, and (ii)
assuming the due authorization, execution and delivery of each of the other
Operative Documents by each party thereto other than the Indenture Trustee, each
of the other Operative Documents to which the Indenture Trustee is or will be a
party constitutes or when executed and delivered will be a legal, valid and
binding obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and by general principles of
equity.

         (c) Non-Contravention. The execution and delivery by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee, as the
case may be, of this Agreement and the other Operative Documents to which it is
or will be a party, the consummation by the Lease Indenture Company, in its
individual capacity or as Indenture Trustee, as the case may be, of the
transactions contemplated hereby and thereby, and the compliance by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee, as the
case may be, with the terms and provisions hereof and thereof, do not and will
not contravene any Applicable Law of the State of Connecticut or the United
States of America governing the Lease Indenture Company or the banking or trust
powers of the Lease Indenture Company, or its articles of association or
by-laws, or contravene the provisions of, or constitute a default by the Lease
Indenture Company under or pursuant to any indenture, mortgage or other material
contract, agreement or instrument to which the Lease Indenture Company is a
party or by which the Lease Indenture Company or its property is bound, or
result in the creation of any Lien attributable to the Lease Indenture Company
upon the Indenture Estate, the Facility Sites or any interest therein or any
part thereof (other than the Lien of the Collateral Trust Indenture), which
would materially adversely affect the ability of the Lease Indenture Company, in
its individual capacity or as Indenture Trustee, as the case may be, to perform
its obligations under this Agreement or the other Operative Documents to which
it is or will be a party or would materially adversely affect the Facilities,
the Facility Sites or any interest therein or part thereof or the security
interest of the Indenture Trustee in the Indenture Estate; provided, however,
that no representation or warranty is made with respect to the right, power or
authority of the Lease Indenture Company or the Indenture Trustee to act as
operator of the Facilities following a Lease Event of Default.

         (d) Governmental Action. Assuming the representations and warranties of
the Facility Lessees contained in paragraphs (j), (k), (l), (m), (q), (z), (gg)
and (ii) of Section 3.1 are true, no authorization or approval or other action
by, and no notice to or filing or registration with, any Governmental Entity of
the State of Delaware or of the United State of America governing its banking or
trust powers is required for the due execution, delivery or performance by the
Lease Indenture Company or the Indenture Trustee, as the case may be, of this
Agreement or the other Operative Documents to which the Indenture Trustee is or
will be a party, other than any such authorization or approval or other action
or notice or filing as has been duly obtained, taken or given.

                                       20
<PAGE>   28

        (e) Litigation. There is no pending or, to the Actual Knowledge of the
Lease Indenture Company, threatened, action, suit, investigation or proceeding
against the Lease Indenture Company before any Governmental Entity which (i)
questions the validity of the Operative Documents or the ability of the Lease
Indenture Company or the Indenture Trustee to perform its obligations under the
Operative Documents to which it is or will be a party or (ii) if determined
adversely to it, could reasonably be expected to materially adversely affect the
ability of the Lease Indenture Company to perform its obligations under this
Agreement or any other Operative Document to which it is or will be a party or
could reasonably be expected to materially adversely affect the Facilities, the
Facility Sites or any interest therein or part thereof or the Lien of the
Indenture Trustee on the Indenture Estate.

         Section 3.6. Representations, Warranties and Covenants of Pass Through
Trustee and the Pass Through Company.

         The Pass Through Company and the Pass Through Trustee hereby severally
represent and warrant (i) as of the Effective Date, as set forth in clauses (a),
(b) and (c) below and (ii) as of the Closing Date, as set forth in each of the
clauses of this Section 3.6:

        (a) Due Organization. The Pass Through Company is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States, has the corporate power and authority, as Pass Through
Trustee and/or in its individual capacity to the extent expressly provided
herein or in the Pass Through Trust Agreements, to enter into and perform its
obligations under the Pass Through Trust Agreement, this Agreement and each of
the other Operative Documents to which it is or will be a party.

         (b) Due Authorization, Enforceability; etc.

             (i) (A) This Agreement has been duly authorized, executed and
delivered by the Pass Through Trustee and the Pass Through Company and (B)
assuming the due authorization, execution and delivery of this Agreement by each
party hereto other than each Pass Through Trustee and the Pass Through Company,
as the case may be, this Agreement constitutes a legal, valid and binding
obligation of the Pass Through Company and each Pass Through Trustee,
enforceable against the Pass Through Company or each Pass Through Trustee, as
the case may be, in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of creditors
generally and by general principles of equity.

             (ii) (A) Each of the other Operative Documents to which the Pass
Through Company or such Pass Through Trustee is or will be a party has been or
when executed and delivered will be duly authorized, executed and delivered by
the Pass Through Company or such Pass Through Trustee, as the case may be, and
(B) assuming the due authorization, execution and delivery of each of the other
Operative Documents by each party thereto other than the Pass Through Company or
such Pass Through Trustee, as the case may be, each of the other Operative
Documents to which the Pass Through Company or such Pass Through Trustee is or
will be a party constitutes or when executed and delivered will constitute a
legal, valid and binding obligation of the Pass Through Company or such Pass
Through Trustee, enforceable

                                       21
<PAGE>   29

against the Pass Through Company or such Pass Through Trustee, as the case may
be, in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of creditors
generally and by general principles of equity.

        (c) Non-Contravention. The execution and delivery by the Pass Through
Company, in its individual capacity or as Pass Through Trustee, as the case may
be, of this Agreement and the other Operative Documents to which it is or will
be a party, the consummation by the Pass Through Company, in its individual
capacity or as Pass Through Trustee, as the case may be, of the transactions
contemplated hereby and thereby, and the compliance by the Pass Through Company,
in its individual capacity or as Pass Through Trustee, as the case may be, with
the terms and provisions hereof and thereof, do not and will not contravene any
Applicable Law of the United States of America or the State of Connecticut
governing the Pass Through Company or the banking or trust powers of the Pass
Through Company, or its organizational documents or by-laws, or contravene the
provisions of, or constitute a default by the Pass Through Company under, or
result in the creation of any Lien attributable to the Pass Through Company upon
the Certificates or any indenture, mortgage or other material contract,
agreement or instrument to which the Pass Through Company is a party or by which
the Pass Through Company or its property is bound which would materially
adversely affect the ability of the Pass Through Company, in its individual
capacity or as Pass Through Trustee, as the case may be, to perform its
obligations under this Agreement or the other Operative Documents to which it is
a party or would materially adversely affect the Facilities, the Facility Sites
or any interest therein or part thereof or the security interest of any Pass
Through Trustee in the Indenture Estate; provided, however, that no
representation is made with respect to the right, power or authority of the Pass
Through Company or any Pass Through Trustee to act as operator of the Facilities
following a Lease Event of Default.

        (d) Governmental Action. Assuming the representations and warranties of
the Facility Lessees contained in paragraphs (j), (k), (l), (m), (q), (z), (gg)
and (ii) of Section 3.1 are true, no authorization or approval or other action
by, and no notice to or filing or registration with, any Governmental Entity
governing its banking or trust powers is required for the due execution,
delivery or performance by the Pass Through Company or any Pass Through Trustee,
as the case may be, of this Agreement or the other Operative Documents to which
such Pass Through Trustee is or will be a party, other than any such
authorization or approval or other action or notice or filing as has been duly
obtained, taken or given.

        (e) Litigation. There is no pending or, to the knowledge of the Pass
Through Company, threatened action, suit, investigation or proceeding against
the Pass Through Company either in its individual capacity or as Pass Through
Trustee, before any Governmental Entity which, if determined adversely to it,
would materially adversely affect the ability of the Pass Through Company, in
its individual capacity or as Pass Through Trustee, as the case may be, to
perform its obligations under this Agreement or the other Operative Documents to
which it is a party or would materially adversely affect the Facilities, the
Facility Sites or any interest therein or part thereof or the security interest
of any Pass Through Trustee in the Indenture Estate or which questions the
validity or enforceability of any Operative Document to which the Pass Through
Trustee or the Pass Through Company is a party.

                                       22
<PAGE>   30

SECTION 4. CLOSING CONDITIONS

         The obligations of the Owner Participant, the Owner Lessor, the Lease
Indenture Company, the Indenture Trustee, the Pass Through Company, the Pass
Through Trustee, the Guarantor and the Facility Lessees to consummate the
transactions contemplated hereby on the Closing Date shall be subject to the
following conditions, except that the obligations of any Person shall not be
subject to such Person's own performance or compliance, and each of the
Transaction Parties (other than the Certificateholders) shall provide such proof
of satisfaction of these conditions as any other Transaction Party shall
reasonably request.

        Section 4.1.  Completion of the Facility.

         (a) the Tiverton Facility shall have commenced commercial operations
with at least 260 MW of capacity and shall comply in all material respects with
the other specifications set forth in the purchase and construction contracts
for such Facility, and the Rumford Facility shall have commenced commercial
operations with at least 260 MW of capacity and shall comply in all material
respects with the other specifications set forth in the purchase and
construction contracts for such Facility, except as disclosed in the R.W. Beck
Reports delivered to the Owner Participant, the Owner Lessor and the Indenture
Trustee prior to the Closing Date.

         Section 4.2. Operative Documents. On or before the Closing Date, each
of the Operative Documents to be delivered at or before the Closing (as well as
any other agreements, certificates and other documents relating to the Overall
Transaction to be delivered at Closing (including, without limitation, the
Offering Circular)) shall have been duly authorized, executed and delivered by
the parties thereto (if attached as an Exhibit hereto, in substantially the form
attached as such Exhibit or if not so attached, in form and substance
satisfactory to each Transaction Party), shall each be in full force and effect,
and executed counterparts of each shall have been delivered to each of the
parties hereto (other than the Tax Indemnity Agreement, which shall only be
delivered to the parties thereto). Notwithstanding any of the foregoing, the
Calpine Guaranties, the OP Parent Guaranty and this Agreement shall be executed
on the Effective Date and shall, on the Closing Date, remain in full force and
effect.

         Section 4.3. Certificates and the Lessor Notes. Each of the conditions
precedent contained in the Certificate Purchase Agreement shall have been
satisfied or waived by the Initial Purchasers and such Initial Purchasers shall
have purchased the Certificates pursuant to and in accordance with, the terms of
the Certificate Purchase Agreement and the Proceeds shall have been provided to
the Owner Lessor through the purchase by the Pass Through Trustee of the Lessor
Notes.

         Section 4.4. Equity Investment. The Owner Participant shall have made
or caused to be made the Equity Investment available to the Owner Lessor at the
place and in the manner contemplated by Section 2.

         Section 4.5. Organizational Documents. Each of the Transaction Parties
shall have received certified copies of the organizational documents of each of
the other parties hereto and resolutions of the board of directors of each such
other corporate party duly authorizing the transaction and such documents and
such evidence as each party may reasonably request in order to establish the
authority of each such other party to consummate the transactions contemplated

                                       23
<PAGE>   31

by this Agreement, the taking of all corporate and other proceedings in
connection therewith and compliance with the conditions herein or therein set
forth and the incumbency of all officers signing any of the Operative Documents.
Each of the foregoing documents shall be reasonably satisfactory to each
recipient thereof.

         Section 4.6. Representations and Warranties. The representations and
warranties of each party hereto set forth in Section 3 shall be true and correct
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date.

         Section 4.7. Defaults, Events of Default, Events of Loss. No Lease
Event of Default, Lease Indenture Event of Default or Event of Loss or event
that with the passage of time or giving of notice or both would constitute a
Lease Event of Default, Lease Indenture Event of Default or an Event of Loss
shall have occurred and be continuing.

         Section 4.8. Intentionally Omitted.

         Section 4.9. Consents. All permits, licenses, approvals and consents
(including management, credit and other internal approvals of the Transaction
Parties) necessary to consummate the Overall Transaction and to own and operate
the Facilities as currently operated shall have been duly obtained and shall be
in full force and effect and in the form and substance satisfactory to each of
the Transaction Parties.

         Section 4.10. Governmental Actions. All actions, if any, required to
have been taken by any Governmental Entity on or prior to the Closing Date in
connection with the transactions contemplated by any Operative Document,
including, without limitation, the FERC Orders, shall have been taken and,
except with respect to the determination by FERC of EWG status, all Applicable
Permits required to be in effect on the Closing Date in connection with the
consummation of the transactions contemplated by the Operative Documents shall
have been issued and shall be in full force and effect; and all such Applicable
Permits shall be final, in full force and effect on the Closing Date and with
all appeal periods expired.

         Section 4.11. Insurance. Insurance (including all related endorsements)
complying with the requirements of Schedule 5.45 shall be in full force and
effect and all premiums thereon shall be current. The Owner Participant and the
Manager shall have received a certificate or certificates (or binders, if
certificates are not then available) dated the Closing Date of Marsh USA, Inc.
or an independent insurance broker or carrier reasonably satisfactory to such
Persons stating that such insurance complies with the requirements of Schedule
5.45, is in full force and effect and all premiums then due and payable in
connection therewith have been paid.

         Section 4.12. Ratings. The Certificates shall have been rated at least
Ba1 by Moody's and BB+ by S&P.

         Section 4.13. Environmental Report. The Owner Participant and the
Manager shall have received copies of the Environmental Reports which shall be
in form and substance satisfactory to such parties (with a copy to the Indenture
Trustee). Each Facility Lessee shall use reasonable efforts to cause the
Environmental Consultant to deliver at the same time a reliance letter addressed
to the Owner Lessor, the Manager and the Owner Participant allowing them to rely
on such reports as if addressed to each of them.

                                       24
<PAGE>   32

         Section 4.14. Surveys; Site Description. With respect to the Tiverton
Facility, the Owner Participant shall have received a copy of the Survey
(Tiverton) in form and substance satisfactory to the Owner Participant. With
respect to the Rumford Facility, the Owner Participant shall have received a
"boundaries" drawing in form and substance reasonably satisfactory to the Owner
Participant and a certificate of an independent engineer certifying that the
Rumford Facility is located on the Rumford Facility Site.

         Section 4.15. Appraisal; Condition of the Facility. The Owner
Participant shall have received the Closing Appraisal prepared by the Appraiser
addressed and delivered only to the Owner Participant and in form and substance
satisfactory to the Owner Participant, together with a letter of the Appraiser
certifying that its conclusions set forth in the Closing Appraisal are true and
correct as of the Closing Date.

         Section 4.16. Letter from the Appraiser. The Owner Lessor shall have
received a satisfactory letter of the Appraiser setting forth the conclusions of
the Closing Appraisal as to the fair market value and useful life of each
Facility as of the Closing Date and the methodology of determination thereof.

         Section 4.17. Other Reports. The Owner Participant shall have received
copies of the reports of the Engineering Consultant, the Insurance Consultant,
and the Power Market Consultant, each in form and substance reasonably
satisfactory to the Owner Participant.

         Section 4.18. Opinion with Respect to Certain Tax Aspects. The Owner
Participant shall have received the opinion, dated the Closing Date, of Hunton &
Williams LLP addressed and delivered only to the Owner Participant as to certain
tax matters and in form and substance satisfactory to the Owner Participant.

         Section 4.19. Opinions of Counsel. Each of the relevant Transaction
Parties shall have received an opinion or opinions, dated the Closing Date, of
(a) Ronald W. Fischer, Esq., in-house counsel to the Facility Lessees and
Guarantor, (b) Thelen Reid & Priest LLP, special counsel to the Facility Lessees
and Guarantor, (c) Steptoe & Johnson, special regulatory counsel to the Facility
Lessees, (d) Drummond Woodsom & MacMahon, Maine special counsel to the Facility
Lessees, (e) Hinckley, Allen & Snyder LLP, Rhode Island special counsel to the
Facility Lessees, (f) Doug Levene, Esq., in-house counsel to the Owner
Participant and the Owner Lessor, (g) Hunton & Williams, counsel to the Owner
Participant and to the Owner Lessor, (h) Verill & Dana, LLP, Maine counsel to
the Initial Purchasers, (i) Peabody & Arnold, Rhode Island counsel to the
Initial Purchasers, (j) Bingham Dana LLP, counsel to the Lease Indenture Company
and the Indenture Trustee and (k) Bingham Dana LLP, counsel to the Pass Though
Trustee and the Pass Through Company, (l) Dewey Ballantine LLP, special counsel
to CSFB, and (m) Roger Wiegley, Esq., counsel to CSFB, in each case in form and
substance reasonably satisfactory to each Transaction Party. Each such Person
expressly consents to the rendering by its counsel of the opinion referred to in
this Section 4.19 and acknowledges that such opinion shall be deemed to be
rendered at the request and upon the instructions of such Person, each of whom
has consulted with and has been advised by its counsel as to the consequences of
such request, instructions and consent. Furthermore, each such counsel shall, to
the extent requested, permit the Rating Agencies and the Initial Purchasers to
rely on their opinion as if such opinion were addressed to such parties.

                                       25
<PAGE>   33

         Section 4.20. Recordings and Filings. All filings and recordings listed
on Schedule 4.20 hereto shall have been duly made and all filing, recordation,
transfer and other fees payable in connection therewith shall have been paid;
and the filing of all precautionary financing statements under the Uniform
Commercial Code of Rhode Island, Maine and Delaware and any other documents as
may be reasonably requested by counsel to the Owner Participant, the Indenture
Trustee or the Pass Through Trustee to perfect (i) the right, title and interest
of the Owner Lessor in the Facilities and its leasehold interest in the Facility
Sites and Easements, or any part thereof or interest therein and (ii) and the
Lien of the Indenture Trustee on the Indenture Estate.

         Section 4.2.1 Intentionally Omitted.

         Section 4.22. Taxes. All Taxes, if any, due and payable on or before
the Closing Date in connection with the execution, delivery, recording and
filing of this Agreement or any other Operative Document, or any document or
instrument contemplated thereby shall have been duly paid in full.

         Section 4.23. No Changes in Applicable Law. No change shall have
occurred in Applicable Law or the interpretation thereof by any competent court
or other Governmental Entity that would make it illegal for the Owner
Participant, the Owner Lessor, the Indenture Trustee, the Pass Through Trustee
or either of the Facility Lessees, to participate in any of the transactions
contemplated by the Operative Documents or would materially adversely affect the
Facilities or the Facility Sites. On the Closing Date, each Certificateholder's
purchase of Lessor Notes shall (i) be permitted by the laws and regulations of
each jurisdiction to which such Certificateholder is subject, (ii) not violate
any Applicable Law (including Regulation U, T or X of the Board of Governors of
the Federal Reserve System) and (iii) not subject any Certificateholder to any
tax, penalty or liability under or pursuant to any Applicable Law, which
Applicable Law was not in effect on the date hereof. If requested by any
Certificateholder, such Certificateholder shall have received an Officer's
Certificate of the Owner Lessor, in form and substance satisfactory to such
Certificateholder, certifying as to such matters of fact as such
Certificateholder may reasonably specify to enable such Certificateholder to
determine whether such purchase is so permitted.

         Section 4.24. Registered Agent for the Facility Lessees and the Owner
Lessor. National Registered Agents, Inc. shall have been appointed by the
Facility Lessees, and CT Corporation System shall have been appointed by the
Owner Lessor, each as registered agent for service of process in the State of
New York as provided in the Operative Documents and each of National Registered
Agents, Inc. and CT Corporation System shall have accepted such appointments.

         Section 4.25. Operating Lease Treatment. As to each Facility Lessee,
the present value of Basic Rent payable during the Basic Lease Term under the
applicable Facility Lease (taking into account any rent adjustment through or
contemplated on the Closing Date), together with all rent payable under the
related Facility Site Lease and Facility Site Sublease, discounted at the
Discount Rate, shall satisfy the 90 percent test for operating lease
classification under FASB 13. Each Facility Lessee shall have received
confirmation from Arthur Andersen LLP that its applicable Facility Lease will be
treated as an operating lease under FASB 13 and FASB 98 for the purposes of
GAAP.

                                       26
<PAGE>   34

         Section 4.26. Rent Adjustments. As to each Facility Lessee, the
aggregate of all rent adjustments made on or before, or contemplated to be made
on, the Closing Date (other than adjustments to reflect a change in Transaction
Costs or the actual interest rates on the Certificates) shall not cause either
(i) the pre-tax net present value of Basic Rent discounted at 6% to increase by
more than 100 basis points or (ii) the total Basic Rent to increase by more than
2%.

         Section 4.27. Title Insurance. Each of the Title Policies shall have
been delivered to the Owner Participant, the Owner Lessor, the Indenture
Trustee, as the case may be, with copies to the Pass Through Trustee.

         Section 4.28. Intentionally Omitted.

         Section 4.29. Intentionally Omitted.

         Section 4.30. Intentionally Omitted.

         Section 4.31. Intentionally Omitted.

         Section 4.32. Letter as to Number of Offerees. (i) The Owner
Participant and the Certificateholders shall have received a certification from
the Facility Lessees as to the number of offerees by it of the Lessor Estate and
(ii) the Facility Lessees and the Initial Purchasers shall have received
certification from CSFB as to the number of offerees by it of the Lessor Estate
and the Certificates, respectively.

         Section 4.33. Lien Search. The Owner Participant (with a copy to the
Indenture Trustee) shall have received Lien searches with respect to each
Facility Lessee and its partners in form and substance satisfactory to such
parties.

         Section 4.34. Intentionally Omitted.

         Section 4.35. Litigation. There shall be no actions, investigations,
suits or proceedings pending or threatened against any of the Facility Lessees
and/or the Calpine Parties or their properties before any court or Governmental
Entity which, individually or in the aggregate, would, if adversely determined,
be reasonably likely to have a Material Adverse Effect (including, but not
limited to, a Facility Lessee, the Owner Participant, the Owner Lessor or the
Certificateholders being subject to or not exempted from regulation as a "public
utility company" or a "holding company" under PUHCA or under state laws and
regulations respecting the rates or the financial and organizational regulation
of electric utilities), nor shall any order, judgment or decree have been issued
or proposed by any Governmental Entity at the time of the Closing Date, to set
aside, restrain, enjoin or prevent the consummation of the Operative Documents
or any of the Transactions contemplated by any of the Operative Documents.

         Section 4.36. No Material Adverse Change. The annual reports,
information, documents and other reports referred to in Section 3.2(a) of each
of the Calpine Guaranties shall have been received by the Owner Participant, and
there shall have been no material adverse change in the financial condition,
business assets or operation of Calpine and its Consolidated Subsidiaries since
the date of such annual reports, information, documents and other reports.

                                       27
<PAGE>   35

         Section 4.37. Regulatory Approvals. Except with respect to the
determination by FERC of EWG status, the Owner Participant and the Pass Through
Trustee shall have received evidence of receipt of the FERC Orders.

         Section 4.38. Private Placement Number. A private placement number
issued by S&P's CUSIP Service bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Certificates.

         Section 4.39. Credit Ratings. The Certificates shall have been rated at
least Ba1 by Moody's and BB+ by S&P.

         Section 4.40. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to the Facility Lessees, the Owner Participant and the
Initial Purchasers and their respective special counsel, and such parties and
their respective special counsel shall have received all such information and
counterpart originals or certified or other copies of such documents and
certificates as each such party or its special counsel may reasonably request in
connection with the matters contemplated hereby and by the other Operative
Documents.

         Section 4.41. Intentionally Omitted.

         Section 4.42. Payment of Fees and Expenses.

         Without limiting the provisions of Section 2.3, all Transaction Costs
invoiced at least 3 Business Days prior to Closing to the Owner Participant with
a copy to the Facility Lessee shall be paid promptly after the Closing Date (but
no later than December 29, 2000).

         Section 4.43. Qualifying Letter of Credit.

         Calpine shall have caused the Initial Letter of Credit to be issued in
favor of the Owner Participant.

SECTION 5. COVENANTS OF FACILITY LESSEES AND GUARANTOR

         The Facility Lessees and the Guarantor, to the extent provided below,
covenant as follows;

         Section 5.1. Maintenance of Existence. Except as permitted by Section
5.2, each Facility Lessee, at its own cost and expense, will at all times do or
cause to be done all things necessary to preserve and keep in full force and
effect both its legal existence and its qualification to do business in any
state in which the conduct of its business or the ownership or leasing of assets
used in its business requires such qualification and where the failure to be so
qualified would reasonably be expected to have a Material Adverse Effect.

                                       28
<PAGE>   36

         Section 5.2. Merger, Consolidation, Sale of Substantially All Assets.
Each Facility Lessee covenants and agrees as follows:

        (a) Neither Facility Lessee will consolidate or merge with or into any
other Person, or sell, assign, convey, lease, transfer or otherwise dispose of,
all or substantially all of its properties or assets to any Person or Persons in
one or a series of transactions, unless (i) immediately after giving effect to
any such transaction or transactions, either (A) Calpine would own, directly or
indirectly, at least a majority of the Ownership Interest of each succeeding or
surviving entity (as well as at least a majority of the Ownership Interest of
any Facility Lessee who does not engage in such transaction), the Calpine
Guaranties remain in full force and effect (without a transferee of Calpine's
obligations thereunder having succeeded thereto in accordance with Section
8.4(b) thereof) and Calpine shall have reaffirmed in writing its obligations
under the Calpine Guaranties and the other Operative Documents to which Calpine
is a party in a manner reasonably satisfactory to the Owner Participant and
Owner Lessor or (B) Calpine's obligations under the Calpine Guaranties have been
succeeded to in accordance with Section 8.4(b) of the Calpine Guaranties, the
transferee of Calpine shall own, directly or indirectly, at least a majority of
the Ownership Interest of each succeeding or surviving entity (as well as at
least a majority of the Ownership Interest of any Facility Lessee who does not
engage in such transaction) and the Calpine Guaranties shall remain in full
force and effect, (ii) immediately after giving effect to such transaction, the
requirements set forth in Section 13.1(b)(i) through (vi) of this Agreement
(with appropriate conforming changes to take into account the nature of the
transactions referred to hereunder) have been satisfied in connection with such
transfer, and (iii) each succeeding or surviving entity shall be organized under
the laws of the United States, any state thereof or the District of Columbia.

         (b) Upon the consummation of such transaction described in Section
5.2(a), the resulting, surviving or succeeding entity, if other than the
applicable Facility Lessee, shall succeed to, and be substituted for, and may
exercise every right and power and shall perform every obligation of, such
Facility Lessee under this Participation Agreement and each other Operative
Document to which such Facility Lessee was a party immediately prior to such
transaction, with the same effect as if such entity had been named herein and
therein. The applicable Facility Lessee will pay the costs and expenses
(including reasonable attorneys' fees and expenses) of the Owner Participant,
the Owner Lessor, the Indenture Trustee, the Pass Through Trustee and the
Certificateholders in connection with any transaction contemplated by this
Section 5.2.

         Section 5.3. Intentionally Omitted.

         Section 5.4. Intentionally Omitted.

         Section 5.5. Administrator Fees. Each Facility Lessee and Calpine shall
pay the fees, costs and expenses of the Administrator (including the reasonable
compensation and expenses of its counsel) arising out of the Owner Lessor's and
the Owner Participant's discharge of their duties under or in connection with
the Operative Documents, all pursuant to the LLC Administration Agreements, as
in effect on the Closing Date.

                                       29
<PAGE>   37

         Section 5.6. Conduct of Business, Properties, Etc. Except as otherwise
expressly permitted under this Agreement, each Facility Lessee shall (a) perform
and comply with all of its contractual obligations under the Operative Documents
to which it is a party and all other material agreements and contracts by which
it is bound, unless (other than in connection with the Operative Documents) such
noncompliance would not cause a Material Adverse Effect, and (b) engage only in
the business contemplated by the Operative Documents to which it is a party.

         Section 5.7. Obligations. Each Facility Lessee shall pay all of its
obligations, howsoever arising, as and when due and payable except such as may
be contested in good faith or as to which a bona fide dispute may exist;
provided, that (i) adequate reserves consistent with GAAP requirements are
maintained for such contested or disputed obligations or (ii) such Facility
Lessee otherwise establishes and maintains adequate security arrangements for
the payment of such contested or disputed obligations which are reasonably
acceptable to the Owner Participant.

         Section 5.8. Books, Records, Access. Each Facility Lessee shall
maintain or cause to be maintained adequate books, accounts and records with
respect to itself, its applicable Facility and Facility Site and prepare all
financial statements required hereunder in accordance with GAAP and in
compliance with the regulations of any Governmental Entity having jurisdiction
thereof, and permit employees, agents and representatives of the Owner Lessor,
the Owner Participant, and, so long as the Lien of the Collateral Trust
Indenture shall have not been terminated or discharged, the Indenture Trustee,
the Pass Through Trustee and the Certificateholders, and such parties'
independent consultants, at all reasonable times during normal business hours
and upon reasonable prior notice and at no risk or (except during the existence
of a Lease Default or Lease Event of Default) expense to such Facility Lessee to
inspect, such Facility and Facility Site, to examine or audit all of or any of
such Facility Lessee's books, accounts and records and make copies and memoranda
thereof and, together with such consultants, to observe the operation,
maintenance and repair of such Facility; provided, however, any such inspection
shall be conducted in accordance with Section 12 of the applicable Facility
Lease.

         Section 5.9. Other Information. Each Facility Lessee shall furnish, or
shall cause to be furnished to, the Owner Lessor, the Owner Participant and, so
long as the Lien of the Collateral Trust Indenture has not been terminated or
discharged, the Indenture Trustee and the Pass Through Trustee, and their
respective authorized representatives from time to time such information as such
party shall reasonably request concerning the Facilities and Facility Sites
including information concerning the condition, operation, maintenance and use
of the Facilities and Facility Sites and such other financial or operating
information as it shall reasonably request and which is routinely made available
to creditors of the applicable Facility Lessee, to the extent it possesses such
information; provided that, each Facility Lessee reserves the right not to
provide any information that is not otherwise publicly available to any
transferee Owner Participant (or its Owner Lessor) if it reasonably believes in
its good faith judgment that such transferee Owner Participant or any Affiliate
thereof is a competitor or is an Affiliate of a competitor of such Facility
Lessee or its Affiliates in the competitive power market, unless, before
receiving any such information, such transferee Owner Participant shall have put
in place (to the reasonable satisfaction of such Facility Lessee) appropriate
confidentiality arrangements.

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<PAGE>   38

To the extent such information consists of information contained in records kept
by the Facility Lessees or any Affiliate, such information shall be furnished
without cost to the recipient.

         Section 5.10. Warranty of Title to Facility Site.

         (a) Each Facility Lessee shall maintain good and valid fee, title to,
or easement or other surface rights in, as applicable, its Facility Site and the
applicable Easements, subject only to Permitted Encumbrances. Each Facility
Lessee shall use its commercially reasonable efforts to remove all mechanic's
liens which constitute Permitted Encumbrances existing as of the Closing Date
within 2 (two) years after the Closing Date, provided that the failure to do so
shall not constitute, in whole or in part, the basis of any default under any
Operative Document.

         (b) Each Facility Lessee shall maintain good and valid title to all of
its other properties and assets (other than properties and assets disposed of in
the ordinary course of business including any sale, transfer or other
disposition of any obsolete, surplus or worn out equipment, parts, supplies or
other materials or assets to the extent permitted by the Operative Documents),
subject only to Permitted Liens or to the extent that failure to do so would
have a Material Adverse Effect.

         Section 5.11. ERISA. Neither Facility Lessee shall establish, maintain
or contribute to, any Plan. If any Plan is established, maintained or
contributed to by either Facility Lessee or any ERISA Affiliate, or if such
Facility Lessee or any ERISA Affiliate becomes obligated to contribute to any
Plan, (a) with respect to each such Plan, such Facility Lessee or such ERISA
Affiliate (i) shall have at all times fulfilled in all material respects their
obligations under the minimum funding standards of ERISA and the Code, (ii)
shall not allow any such Plan to have an Unfunded Current Liability, (iii)
shall, with respect to each Plan (and each related trust, if any) which is
intended to be qualified under Sections 401(a) and 501(a) of the Code, obtain a
determination letter from the Internal Revenue Service to the effect that such
Plan (and trust, if any) meets the requirements of Sections 401(a) and 501(a) of
the Code, and (iv) shall at all times be in compliance in all material respects
with applicable provisions of ERISA and the Code, and (b) within fifteen (15)
days after (i) the occurrence of any reportable event (as defined in Section
4043(c) of ERISA) with respect to any Plan, (ii) the complete or partial
withdrawal by such Facility Lessee or any ERISA Affiliate from any Multiemployer
Plan, (iii) to the extent such Facility Lessee or any ERISA Affiliate is
notified that any Multiemployer Plan has entered reorganization status, has
become insolvent, or has terminated (or any Multiemployer Plan notifies such
Facility Lessee or any ERISA Affiliate of its intent to terminate) under Section
4041A of ERISA, (iv) the institution of any action to terminate a Plan in a
distress termination under Section 4041(c) of ERISA, or (v) in the case of the
breach of any other covenant contained in this Section 5.11, such Facility
Lessee shall report such occurrence or breach to the Indenture Trustee, the Pass
Through Trustee, the Owner Lessor and the Owner Participant and furnish such
information as such Persons may reasonably request with respect thereto.

         Section 5.12. Certain Contracts and Agreements. Without the consent of
the Owner Participant, each Facility Lessee agrees that, except as required by
the Operative Documents, it will not enter into or become bound by any contract
or agreement providing for the sale of energy produced from the Facilities, or
the purchase of services to be performed at, for or in connection with, the
Facilities or any other contract or agreement relating to the Facilities that
(i)

                                       31
<PAGE>   39

has a term that extends beyond the Lease Term or the scheduled expiration of any
Renewal Lease Term then in effect or elected by such Facility Lessee, unless
such contract or agreement may be terminated by such Facility Lessee without
material costs or obligation prior to the Lease Term or the scheduled expiration
of such Renewal Lease Term, as the case may be or (ii) results in any lien,
encumbrance, restriction or agreement relating to a Facility which extends
beyond the expiration of the Lease Term for such Facility or which binds a
Facility or the owner of a Facility beyond the expiration of the Lease Term;
provided that nothing in this Section 5.12 shall prevent the Operator from
entering agreements to operate the Facilities in accordance with the Operative
Documents.

         Section 5.13. Certain Costs. The Facility Lessees, jointly and
severally, agree to pay to the Owner Lessor as Supplemental Rent (i) overdue
interest with respect to the Lessor Notes issued under the Collateral Trust
Indenture if the same is due and payable because of the occurrence of a Lease
Indenture Event of Default which is attributable to a Lease Event of Default and
(ii) an amount equal to any Make-Whole Amount which has become due and payable
with respect to the Lessor Notes under the Collateral Trust Indenture.

         Section 5.14. Limitations on Liens. Neither Facility Lessee shall,
directly or indirectly, create, assume or permit to exist any Lien, securing a
charge or obligation on the Facilities, the Facility Sites, the Easements or on
any of its other properties real or personal, whether now owned or hereafter
acquired, except Permitted Liens.

         Section 5.15. Investments. The Facility Lessees shall not make or
permit to remain outstanding any advances, loans or extensions of credit to, or
purchase or own any stock, bonds, notes, debentures or other securities of any
Person, except Permitted Investments.

         Section 5.16. Survey (Rumford). The Rumford Lessee shall use diligent
and commercially reasonable efforts to deliver a copy of the Survey (Rumford) as
soon as practicable, such survey to be an ALTA survey or other survey in form
and substance reasonably satisfactory to the Owner Participant, provided that
the failure to do so shall not constitute, in whole or in part, the basis of any
default under any Operative Document.

         Section 5.17. Regulations. The Facility Lessees shall not, directly or
indirectly, apply the proceeds of the sale of Lessor Notes or any other revenues
to the purchasing or carrying of any margin stock within the meaning of
Regulations T, U or X of the Federal Reserve Board, or any regulations,
interpretations or rulings thereunder.

         Section 5.18. Partnerships. The Facility Lessees shall not become a
general or limited partner in any partnership or a joint venturer in any joint
venture.

         Section 5.19. Dissolution. The Facility Lessees shall not liquidate or
dissolve, except pursuant to transactions permitted under Section 5.2.

         Section 5.20. Termination of Contracts, Etc. Each Facility Lessee shall
not without the prior written consent of the Owner Participant and, except as
otherwise provided in Section 8 of the Collateral Trust Indenture and so long as
the Lien of the Collateral Trust Indenture has not been terminated or
discharged, the Indenture Trustee, (a) cause or consent to or (b) permit, any

                                       32
<PAGE>   40

amendment, modification, extension, termination, variance or waiver of timely
compliance with any terms or conditions of any Operative Document.

         Section 5.21. Name and Location. Neither Facility Lessee shall change
its name or the location of its chief executive office or place of business
without notice to the Owner Lessor, the Indenture Trustee, the Pass Through
Trustee and the Owner Participant at least thirty (30) days prior to such
change.

         Section 5.22. Use of Facility Site. Each Facility Lessee shall not use,
or permit to be used, its applicable Facility Site or the related Easements for
any purpose other than for the operation and maintenance of the applicable
Facility, except as otherwise required or permitted under the Operative
Documents.

         Section 5.23. Abandonment of Facility. Neither Facility Lessee shall
voluntarily abandon the operation, maintenance or repair of its applicable
Facility, except as otherwise permitted by the Operative Documents.

         Section 5.24. Taxes, Other Government Charges and Utility Charges. Each
Facility Lessee shall pay, or cause to be paid, as and when due and prior to
delinquency, all taxes, assessments and governmental charges of any kind that
may at any time be lawfully assessed or levied against or with respect to such
Facility Lessee, the related Facility or its leasehold interests in the related
Facility Site, all utility and other charges incurred in the operation,
maintenance, use, occupancy and upkeep of such Facility or such Facility Site,
and all assessments and charges lawfully made by any Governmental Entity for
public improvements that may be secured by a Lien on any part of such Facility;
provided, that each such Facility Lessee may contest in good faith any such
taxes, assessments and other charges and, in such event, may permit the taxes,
assessments or other charges so contested to remain unpaid during any period,
including appeals, when such Facility Lessee is in good faith contesting the
same, so long as (a) adequate reserves consistent with GAAP requirements (or
other security arrangements reasonably satisfactory to the Indenture Trustee and
the Owner Participant) are established and maintained in an amount sufficient to
pay any such taxes, assessments or other charges, accrued interest thereon and
potential penalties or other costs relating thereto, or other adequate provision
for the payment thereof shall have been made, and (b) any tax, assessment or
other charge determined to be due, together with any interest or penalties
thereon, is immediately paid after resolution of such contest.

         Section 5.25. Compliance with Laws, Instruments, Etc. At its expense,
each Facility Lessee shall promptly (a) comply or cause compliance with all
Applicable Laws, including those relating to pollution control, environmental
protection, equal employment opportunity plans, Plans and employee safety, with
respect to each such Facility Lessee, the related Facility, Facility Site or
Easements, whether or not compliance therewith shall require structural changes
in such Facility or any part thereof or require major changes in operational
practices or interfere with the use and enjoyment of such Facility or any part
thereof, and (b) procure, maintain and comply, or cause to be procured,
maintained and complied with, all Applicable Permits, except (1) as may be
contested in accordance with Section 7 or 8 of the related Facility Lease and
(2) each Facility Lessee may, in good faith and by appropriate proceedings,
diligently contest the validity or application of any such Applicable Laws in
any reasonable manner which does not

                                       33
<PAGE>   41

involve any danger of (i) foreclosure, sale, forfeiture or loss of, or
imposition of a material Lien on the related Facility, (ii) impair the use,
operation or maintenance of the Facility in any material respect, (iii) any
criminal liability being incurred by the Owner Participant, the Owner Lessor,
the Indenture Trustee, the Lease Indenture Company, the Pass Through Trustee,
the Pass Through Company or any Certificateholder, (iv) the Owner Participant,
the Owner Lessor, the Indenture Trustee, the Lease Indenture Company, the Pass
Through Trustee, the Pass Through Company or any Certificateholder being
subjected to any unindemnified civil liability or of the Owner Participant or
the Owner Lessor being subject to regulation as a public utility under
Applicable Law, or (v) any Material Adverse Effect.

         Section 5.26. PUHCA. No Facility Lessee shall take any action or fail
to take any action within its control that would subject the Owner Lessor, the
Owner Participant, the Indenture Trustee or the Pass Through Trustee to
regulation under PUHCA.

         Section 5.27. Intentionally Omitted.

         Section 5.28. Intentionally Omitted.

         Section 5.29. Intentionally Omitted.

         Section 5.30. Intentionally Omitted.

         Section 5.31. Further Assurances. Each Facility Lessee, at its own
cost, expense and liability, will cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
may be necessary in order to carry out the intent and purposes of this
Participation Agreement and the other Operative Documents, and the transactions
contemplated hereby and thereby. The Facility Lessee, at its own cost, expense
and liability, will cause such financing statements and fixture filings (and
continuation statements with respect thereto) as may be necessary and such other
documents as the Owner Participant, the Owner Lessor and, so long as the Lien of
the Collateral Trust Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustee shall reasonably request to be
recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary in
order to establish, preserve, protect and perfect the right, title and interest
of the Owner Lessor in and to the Facilities, the Facility Sites under the
Facility Site Leases, any Component or any portion of any thereof or any
interest therein and the first priority Lien intended to be created by the
Collateral Trust Indenture therein and with respect to the Equity Collateral
Account. Each Facility Lessee shall promptly from time to time furnish to the
Owner Participant, the Owner Lessor or, so long as the Lien of the Collateral
Trust Indenture shall not have been terminated or discharged, the Indenture
Trustee or the Pass Through Trustee such information with respect to the
Facilities or the Facility Sites or the transactions contemplated by the
Operative Documents to which the Facility Lessee is a party as may be required
to enable the Owner Participant, the Owner Lessor or, so long as the Lien of the
Collateral Trust Indenture shall not have been terminated or discharged, the
Indenture Trustee or the Pass Through Trustee, as the case may be, to timely
file with any Governmental Entity any reports and obtain any licenses or permits
required to be filed or obtained by the Owner Lessor under any Operative
Document, the Owner Participant as the owner of the Member Interest or the
Indenture Trustee. Each Facility Lessee will preserve,

                                       34
<PAGE>   42

protect, defend and enforce, or cause to be preserved, protected, defended and
enforced, the rights of such Facility Lessee, the Owner Lessor and the Owner
Participant under each and every Operative Document to which it is a party
(including by assignment and assumption of the rights thereunder), including
using commercially reasonable efforts to prosecute suits to enforce any such
rights and, at the request of Indenture Trustee, so long as the Lien of the
Collateral Trust Indenture has not been discharged or terminated (and thereafter
at the request of the Owner Participant), permit the Indenture Trustee and the
Owner Participant, at their respective cost and expense, to participate in such
capacity as it may choose in any such suit, any defense thereof or in the
preparation therefor; provided, however, that upon the occurrence and during the
continuance of any Lease Event of Default, if the Indenture Trustee or the Owner
Participant request that certain actions be taken and such Facility Lessee fails
to take the requested action, or to cause the requested action to be taken
within (5) Business Days, the Indenture Trustee, so long as the Lien of the
Collateral Trust Indenture has not been discharged or terminated, and the Owner
Lessor may, at such Facility Lessee's reasonable expense, enforce, in its own
name, or such Facility Lessee's name, such rights of such Facility Lessee.

         Section 5.32. Intentionally Omitted.

         Section 5.33. Intentionally Omitted.

         Section 5.34. Intentionally Omitted.

         Section 5.35. Intentionally Omitted.

         Section 5.36. Intentionally Omitted.

         Section 5.37. No Subsidiaries. Neither Facility Lessee shall create or
suffer to exist any Subsidiaries of such Facility Lessee.

         Section 5.38. Permitted Business. Neither Facility Lessee shall engage
in any business or activities other than the lease, operation, maintenance and
marketing and sale of the output, fuel or other products from, the Facility
leased by such Facility Lessee. Notwithstanding any of the foregoing, no
Facility Lessee may change the nature of its business.

         Section 5.39. Intentionally Omitted.

         Section 5.40. Guaranty and Contingent Obligations. Neither Facility
Lessee will create, incur, assume or suffer to exist any guaranty or other
contingent obligations except (i) by reason of endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of each such Facility Lessee's business, (ii) indemnities in respect of
unfiled mechanics' liens and other liens permitted by clause (d) of the
definition of "Permitted Liens", (iii) contingent obligations set forth in, or
incurred in connection with, or indemnities set forth in, the Operative
Documents, (iv) customary indemnities provided by each such Facility Lessee in
connection with easements relating to its applicable interest in the Facilities
or the Facility Sites, (v) customary indemnities in favor of the title insurers
providing the title policies covering the Facility Sites or any portion thereof
or any easement or appurtenant right relating thereto in respect of claims by
the holder of mechanics' liens, and (vi) the indemnities referred to in Section
9.1 and 9.2 of the Participation Agreement or pursuant to the Tax Indemnity
Agreement.

                                       35
<PAGE>   43

         Section 5.41. Assignment of Rights. Neither Facility Lessee shall
assign any of its rights or obligations except as permitted by the Operative
Documents.

         Section 5.42. Intentionally Omitted.

         Section 5.43. Intentionally Omitted.

         Section 5.44. Support Arrangements.

         (a) Intentionally Omitted

         (b) Each Facility Lessee agrees that, to the extent that the rights
described in Section 3.1(n) which have already been made available to the Owner
Lessor prior to the expiration or termination of the related Facility Lease
Term, and any rights assigned pursuant to the last sentence of this Section
5.44(b), are insufficient to permit on a commercially practicable basis during
the period following the expiration or termination of such Facility Lease Term,
until the end of the applicable Facility's useful life as set forth in the
Closing Appraisal, (i) the location, occupation, interconnection (including with
respect to electricity, steam, gas and water), maintenance and repair of such
Facility, (ii) the use, operation and possession of such Facility, (iii) the
use, operation, possession, maintenance, replacement, renewal and repair of all
Improvements then required to be made to such Facility, (iv) adequate ingress to
and egress from such Facility in connection with the ownership, use, maintenance
or operation of such Facility, (v) adequate transmission of electricity from
such Facility to enable such Person to deliver the net electrical and steam
output of such Facility on a commercially reasonable basis and (vi) the
ownership by the Owner Lessor (or any successor) of such Facility, such Facility
Lessee will cause Calpine to provide, and Calpine will provide, the Owner Lessor
with any additional services relating to the ownership and operation of the
applicable Facility substantially in the same manner as operated as of the
Closing Date (to the extent Calpine or any Affiliate thereof then owns or
controls the physical assets and/or contractual rights necessary to provide such
services (or can enter into contracts on a commercially reasonable basis for
such ownership, control or other rights) and remains in the business of
providing such services) necessary to permit the Owner Lessor to use such
Facility as described in (i) through (vi) above. Such arrangements will provide
for fair market value compensation to Calpine (payable periodically on no more
frequently than a monthly and no less frequently than on a quarterly basis) and
will terminate upon the expiration or termination of the related Facility Site
Lease, or earlier at the option of the Owner Lessor. Each Facility Lessee shall
also, subject to obtaining any required third party consents, assign to the
Owner Lessor upon termination of the applicable Facility Lease any support or
similar agreements to the extent relating to the Facility it has with third
parties.

         Section 5.45. Insurance. The Facility Lessee shall comply with the
covenants set forth in Schedule 5.45.

         Section 5.46. Qualifying Letter of Credit; Equity Collateral Account.

         (a) The Guarantor shall cause the Initial Letter of Credit to be issued
on the Closing Date for the benefit of the Owner Participant and shall maintain
for the benefit of the Owner

                                       36
<PAGE>   44

Participant a Qualifying Letter of Credit (I) prior to January 1, 2011 or at all
times when the outstanding aggregate principal amount of either the Tiverton
Notes or the Rumford Notes is $50,000,000 or greater, if the Guarantor's
long-term unsecured indebtedness is not rated at least A- by S&P and A3 by
Moody's (and the Guarantor is not on credit watch with either such agency), and
(II) after January 1, 2011 and at all times so long as the aggregate principal
amount of each of (A) the Tiverton Notes or (B) the Rumford Notes is less than
$50,000,000 but the aggregate principal amount of the Tiverton Notes and Rumford
Notes is greater than $5.2 million, if such ratings are not at least BBB- by S&P
and Baa3 by Moody's, respectively (and the Guarantor is not on credit watch with
either credit agency). Each Qualifying Letter of Credit shall (i) be issued in
favor of the Owner Participant by a Qualifying Letter of Credit Bank, (ii) have
a drawing amount, as of the date of original issuance and thereafter, equal to
the applicable amounts of L/C Termination Value set forth in Exhibit L hereto
for the date set forth in such Exhibit L, as adjusted pursuant to Section
5.46(j), and (iii) have a stated expiration date not earlier than 364 days after
the date of issuance of such Qualifying Letter of Credit. The Guarantor shall
not be required to maintain the Qualifying Letter of Credit after the aggregate
principal amount of the Tiverton Notes and the Rumford Notes has been reduced to
$5.2 million or less. The Qualifying Letter of Credit shall secure the
Guarantor's obligation under the respective Calpine Guaranties to pay the Equity
Portion of Termination Value as set forth in Sections 2.1(a) and 2.1(b) of each
Calpine Guaranty.

         (b) If the Guarantor or the issuer of any Qualifying Letter of Credit
elects to terminate any Qualifying Letter of Credit (other than the Initial
Qualifying Letter of Credit) prior to the maturity date thereof, the Guarantor
and such issuer shall notify the Owner Participant and the Owner Lessor of its
intent to terminate the Qualifying Letter of Credit not less than 120 days prior
to the proposed termination date and the Guarantor shall replace such Qualifying
Letter of Credit on or before a date that is not less than 45 days prior to the
proposed termination date with a replacement Qualifying Letter of Credit.

         (c) If at any time subsequent to the issuance of a Qualifying Letter of
Credit, the issuer of such Qualifying Letter of Credit ceases to be a Qualifying
Letter of Credit Bank, the Guarantor shall, within 30 days of receiving Actual
Knowledge of such issuer failing to be a Qualifying Letter of Credit Bank,
replace such previously Qualifying Letter of Credit with a replacement
Qualifying Letter of Credit issued by a Qualifying Letter of Credit Bank.

         (d) The Guarantor shall replace any Qualifying Letter of Credit that is
scheduled to expire with a replacement Qualifying Letter of Credit no later than
30 days prior to the scheduled expiration date of any such Qualifying Letter of
Credit. The Guarantor will promptly forward to the Owner Participant any notice
of non-renewal or scheduled termination of a Qualifying Letter of Credit that it
receives from the issuer.

         (e) The Guarantor shall be permitted, from time to time, to replace any
Qualifying Letter of Credit with a replacement Qualifying Letter of Credit
(other than the Initial Qualifying Letter of Credit) as long as there shall be
no interruption in the coverage provided by the Qualifying Letter of Credit in
consequences of such optional replacement and so long as such replacement occurs
at least 30 days before any expiration of the Qualifying Letter of Credit being
replaced.

                                       37
<PAGE>   45

         (f) As provided in the Qualifying Letter of Credit, in the event that
the Qualifying Letter of Credit is not replaced as provided in paragraphs (b),
(c) or (d) above, the Owner Participant shall be entitled to draw the full
amount thereof and cause the proceeds of such drawing to be deposited into the
Equity Collateral Account. Any such drawing or deposit shall not relieve the
Guarantor from its obligations under paragraphs (a), (b), (c) and (d) above to
maintain a Qualifying Letter of Credit, unless the Guarantor is unable to
discharge such obligations using its commercial efforts, but the failure to
maintain a Qualifying Letter of Credit shall not constitute, in whole or in
part, the basis of any Lease Default or Lease Event of Default under any
Operative Document. The Guarantor shall ensure at all times that the amounts on
deposit in the Equity Collateral Account from time to time are at least equal to
the applicable L/C Termination Values set forth in Exhibit L hereto for each
date set forth in such Exhibit L, as adjusted pursuant to Section 5.46(j) hereof
and subject to Section 5.46(k) hereof, provided that the failure to do so shall
not constitute, in whole or in part, the basis of any Lease Default or Lease
Event of Default under any Operative Document, and except to the extent
expressly provided in Section 16(e) of each Facility Lease. If the Guarantor,
subsequent to the Equity Collateral Account deposit described above (and prior
to application of such proceeds to the account of the Owner Participant as set
forth in paragraph (g) below) establishes a new Qualifying Letter of Credit and
is otherwise in compliance with its obligations under paragraphs (a), (b), (c)
and (d) above, the Owner Lessor shall forthwith return by wire transfer of
immediately available funds, the amounts held in the Equity Collateral Account
to the Guarantor.

         (g) The Equity Collateral Account shall be a segregated pledged
account, the documentation of which will be in form and substance satisfactory
to the Owner Participant, subject to a first priority security interest in favor
of the Owner Participant, and maintained by the Owner Participant to secure the
Guarantor's obligation under the Calpine Guaranties to pay the Equity Portion of
Termination Value as set forth in Section 2.1 of both such Calpine Guaranties.
The Owner Lessor shall be entitled (1) to retain control over the amounts on
deposit therein, and (2) to foreclose upon the funds therein upon the occurrence
and during the continuance of a Drawing Event. The Owner Participant shall
direct the Owner Lessor to, and the Owner Lessor shall, forthwith pay over, by
wire transfer of immediately available funds, to the Guarantor, any balance of
amounts remaining in the Equity Collateral Account after the Equity Portion of
Termination Value as specified in Section 2.1(b) of each Calpine Guaranty,
together with other amounts then due and payable to the Owner Participant and
Owner Lessor by the Facility Lessees or the Guarantor under the Operative
Documents, have been paid.

         (h) Costs and Expenses. The Guarantor shall pay the reasonable and
documented costs and expenses incurred by the Owner Participant in connection
with the actions referred to in this Section 5.46, except costs and expenses
attributable to a transfer by the Owner Participant of its rights in the Member
Interest pursuant to Section 7.1 of the Participation Agreement.

         (i) Gross Ups For Withholding Taxes. (i) If at any time the issuer of
any Qualifying Letter of Credit shall not be a United States person (within the
meaning of Section 7701 of the Code) and any deduction or withholding of tax is
required by Applicable Law (in effect at the time of issuance of the Qualifying
Letter of Credit) to be made in respect of any drawing or payment thereunder,
then Guarantor shall cause the Qualifying Letter of Credit to provide that the
amount to be paid thereunder shall be increased by the amount of such deduction
or

                                       38
<PAGE>   46

withholding such that the amount received by the Owner Participant is not less
than the amount it would have received in the absence of the application of any
such deduction or withholding.

                  (ii) In the event that there occurs a change in Applicable Law
    subsequent to the date any Qualifying Letter of Credit is issued such that
    deduction or withholding of tax is applicable to any payment under any such
    Qualifying Letter of Credit, the Guarantor shall (within 30 days after a
    Responsible Officer has Actual Knowledge of such change) furnish to the
    applicable Owner Participant an additional Qualifying Letter of Credit in an
    available amount equal in aggregate to the amount of withholding tax that
    would be required to be deducted or withheld on any given date in connection
    with a payment under the Qualifying Letter of Credit on such date.

         (j) Adjustment to L/C Termination Value. Any time an adjustment is made
to Termination Value pursuant to Section 3.4 of either of the Tiverton Facility
Lease or the Rumford Facility Lease, appropriate adjustments shall be made to
the L/C Termination Values set forth in such Facility Lease.

         (k) In the event of a failure by the Guarantor to comply with its
obligation under Sections 5.46(f) or (g) within 10 Business Days after receipt
of written notice of non-compliance from the Owner Participant, the Owner
Participant shall be entitled to deliver a notice of ECA Shortfall Event
referred to in Section 16(e) of each Facility Lease.

SECTION 6. COVENANTS OF THE OWNER LESSOR

         Section 6.1. Compliance with the LLC Agreement. The Owner Lessor hereby
covenants and agrees that it will:

         (a) comply with all of the terms of the LLC Agreement applicable to it;
and

         (b) not amend, supplement, or otherwise modify Section 10 of the LLC
Agreement without the prior written consent of the applicable Facility Lessee so
long as no Significant Lease Default or Lease Event of Default has occurred and
is continuing and the Indenture Trustee so long as the Lien of the Collateral
Trust Indenture has not been terminated or discharged.

         Section 6.2. Owner Lessor's Liens. The Owner Lessor covenants that it
will not directly or indirectly create, incur, assume or suffer to exist any
Owner Lessor's Lien attributable to it and will promptly notify the applicable
Facility Lessee, the Owner Participant and the Indenture Trustee of the
imposition of any such Lien of which it has Actual Knowledge and shall promptly,
at its own expense, take such action as may be necessary to duly discharge such
Owner Lessor's Lien attributable to it.

         Section 6.3. Amendments to Operative Documents. The Owner Lessor
covenants that it will not unless such action is expressly permitted by the
Operative Documents (a) through its own action terminate any Operative Document
to which it is a party, (b) amend, supplement, waive or modify (or consent to
any such amendment, supplement, waiver or modification) such Operative Documents
in any manner or (c) except as provided in Section 11 hereof or Section

                                       39
<PAGE>   47

2.10 of the Collateral Trust Indenture, take any action to prepay or refund the
Lessor Notes or amend any of the payment terms of the Lessor Notes without, in
each case, the prior written consent of the applicable Facility Lessee so long
as no Significant Lease Default or Lease Event of Default shall have occurred
and be continuing and, in the case of clause (a) or (b), the Indenture Trustee
so long as the Lien of the Collateral Trust Indenture has not been terminated or
discharged.

         Section 6.4. Transfer of the Owner Lessor's Interest. Other than as
permitted by the Operative Documents, the Owner Lessor covenants that it will
not assign, pledge, sell, lease, convey or otherwise transfer any of its then
existing right, title or interest in and to the Owner Lessor's Interest, the
Lessor Estate or the other Operative Documents.

         Section 6.5. Owner Lessor; Lessor Estate. The Owner Lessor covenants
that it will not voluntarily take any action to subject the Owner Lessor or the
Lessor Estate to the provisions of any applicable bankruptcy, insolvency or
similar law (as now or hereafter in effect).

         Section 6.6. Limitation on Indebtedness and Actions. The Owner Lessor
covenants that it will not incur any indebtedness nor enter into any business or
activity except as required or expressly permitted by any Operative Document.

         Section 6.7. Change of Location. The Owner Lessor shall provide the
Owner Participant, the Indenture Trustee, the Certificateholders, the Pass
Through Trustee and the Facility Lessees 30 days' written notice of any
relocation of the Owner Lessor's chief executive office or the place where
documents and records relating to the Owner Lessor or the Lessor Estate are kept
from the location set forth in Section 3.2(g) and of any change in its name.

SECTION 7. COVENANTS OF THE OWNER PARTICIPANT

         Section 7.1. Restrictions on Transfer of Member Interest.

         (a) The Owner Participant covenants and agrees that it shall not during
the Facility Lease Term assign, convey or transfer any of its right, title or
interest in the Member Interest without the prior written consent of the
Facility Lessees and, so long as the Lien of the Collateral Trust Indenture has
not been terminated or discharged, without the prior written consent of the
Indenture Trustee; provided, however, that the Owner Participant may, without
such consent, assign to CSFB, on a contingent basis, the rights of the Owner
Participant to receive certain revenues and assets deriving from or attributable
to the Owner Participant's ownership of the Member Interest, pursuant to the
CSFB-OP Letter Agreement as in effect on the Closing Date, a copy of which has
been delivered to the Facility Lessees and the Indenture Trustee, and provided,
further, that the Owner Participant may, subject to Section 7.8, assign, convey
or transfer all or any part of its interest in the Member Interest without such
consent to a Person (the "Transferee") which shall assume the duties and
obligations of the Owner Participant under the Operative Documents with respect
to the interest being transferred pursuant to an OP Assignment and Assumption
Agreement substantially in the form of Exhibit J hereto, if each of the
following conditions shall have been satisfied on or prior to such transfer:

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<PAGE>   48

               (i) The Facility Lessees, the Indenture Trustee and the Pass
Through Trustee shall have received an opinion(s) of counsel (including an
opinion with respect to a guaranty pursuant to clause (iii) of this Section 7.1,
if applicable), which opinion(s) and counsel are reasonably satisfactory to the
Facility Lessees and consistent in scope to the opinions delivered on behalf of
the Owner Participant at the Closing, including that all regulatory approvals
required in connection with such transfer or necessary to assume the Owner
Participant's obligations under the Operative Documents shall have been
obtained;;

               (ii) the Transferee shall be a "United States person" within the
meaning of Section 7701(a)(30) of the Code;

               (iii) the Transferee shall be either (A) an Affiliate of the
transferor Owner Participant which does not otherwise qualify under clause (B)
below (but in any event, such Affiliate shall not be a Competitor of Calpine);
provided that all of the payment and performance obligations of the Transferee
with respect to the interest being transferred under the Operative Documents
shall be guaranteed by the transferor Owner Participant, or a Person then
providing a guaranty of the transferor Owner Participant's obligations
hereunder, pursuant to an OP Parent Guaranty or (B) a Person which meets, or the
payment and performance obligations of which with respect to the interest being
transferred under the Operative Documents are guaranteed (pursuant to a OP
Parent Guaranty) by a Person (the transferor Owner Participant or such other
guarantor, the "Transferee Guarantor") which meets, the following criteria: (1)
the tangible net worth of the Transferee or Transferee Guarantor, is at least
equal to $75 million calculated in accordance with GAAP; and (2) unless waived
in writing by the Facility Lessees prior to such transfer, such Transferee is
not a Competitor of Calpine; and

               (iv) upon consummation of such transfer, there shall not be more
than four (4) Owner Participants for the Overall Transaction; provided that any
related Owner Participants that shall have the same decision maker and vote
their interest together as a single vote shall count as one for purposes of this
clause (iv).

         Notwithstanding the foregoing, the restrictions set forth in Section
7.1 shall not inure to the benefit of the Facility Lessee if such transfer
occurs during the continuance of a Significant Lease Default or Lease Event of
Default.

         (b) For purposes of determining whether a Transferee is a "Competitor"
of Calpine, Calpine shall provide to the transferor Owner Participant on or
prior to the Closing Date a list of entities which Calpine reasonably believes
in its good faith judgment are competitors of Calpine or any of its Affiliates,
in the business in which Calpine or any of its Affiliates is engaged as of the
Closing Date, which list shall be attached to the Participation Agreement as
Exhibit K. Any such Person on such list shall be deemed to be a "Competitor" for
purposes of Section 7.1(a). The initial list of Competitors may be modified or
supplemented (in a manner consistent with the first sentence of this clause
(b)), from time to time, but no later than five Business Days after the Facility
Lessees receives each notice from the Owner Participant of its intent to
transfer its interest and, in addition, no more than once in any calendar year
plus each time the Facility Lessees receives such notice of transfer from the
Owner Participant, and such list as modified shall govern for the purposes of
this Section 7.1(b).

                                       41
<PAGE>   49

         (c) No Facility Lessee shall be responsible for any adverse tax
consequence to the Owner Lessor or the Owner Participant resulting from any
transfer pursuant to this Section 7.1 and the Pricing Assumptions shall not be
changed as a result of any such transfer.

         (d) The Owner Participant shall give the Owner Lessor, the Indenture
Trustee and the Facility Lessees 10 Business Days' prior written notice of such
transfer, specifying the name and address of any proposed Transferee and such
additional information as shall be necessary to determine whether the proposed
transfer satisfies the requirements of this Section 7.1. If requested by the
Owner Participant or the Indenture Trustee, the Facility Lessees will
acknowledge qualifying transfers. All reasonable fees, expenses and charges of
the Indenture Trustee, the Pass Through Trustee, any Qualifying Letter of Credit
Bank (if it should impose fees, expenses and charges), and the Facility Lessees
(including reasonable attorneys' fees and expenses in connection with any such
transfer or proposed transfer), including any of the foregoing relating to any
amendments to the Operative Documents required in connection therewith, shall be
paid by the Owner Lessor, without any right of indemnification from the Facility
Lessees or any other Person; provided, however, that the Owner Participant shall
have no obligation to pay fees, expenses or charges of the Facility Lessees as a
result of any transfer while a Significant Lease Default or a Lease Event of
Default is continuing, in which case the Facility Lessees shall be obligated to
pay such costs.

         (e) Upon any such transfer in compliance with this Section 7.1, (i)
such Transferee shall (x) be deemed the "Owner Participant" for all purposes,
and (y) enjoy the rights and privileges and perform the obligations of the Owner
Participant hereunder and under each of the OP Assignment and Assumption
Agreement, the Calpine Guaranties and each other Operative Document to which
such Owner Participant is a party, and each reference in this Agreement, the
Calpine Guaranties and each other Operative Document to the "Owner Participant"
shall thereafter be deemed to include such Transferee for all purposes and (ii)
the transferor Owner Participant and the OP Guarantor, if any, of such
transferor Owner Participant's obligations shall be released from all
obligations hereunder and under each other Operative Document to which such
transferor or OP Guarantor is a party or by which such transferor Owner
Participant or OP Guarantor is bound to the extent such obligations are
expressly assumed by a Transferee meeting the requirements of this Section 7.1;
provided, however, that in no event shall any such transfer waive or release the
transferor or its OP Guarantor from any liability accruing or existing in
respect of any period occurring on or prior to or occurring simultaneously with
such transfer.

         (f) The transfer restrictions set forth in Section 7.1 (other than the
requirement that the Owner Participant and the Transferee enter into an OP
Assignment and Assumption Agreement) shall also apply to any transfer of the
equity ownership interests of an Owner Participant which has as its sole (or
substantially equivalent to sole) business activity its participation in the
transactions contemplated by the Operative Documents. In the case of such a
transfer of equity ownership interests which satisfies such restrictions of this
Section 7.1, the Owner Participant's obligations under the Operative Documents
shall continue, but the Owner Participant shall, except in the case of a
transfer to a transferee described in clause (a)(iii)(A) above, procure a new OP
Parent Guaranty from a guarantor meeting the requirements of clause (a)(iii)(B)
above.

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<PAGE>   50

         Section 7.2. Owner Participant's Liens. The Owner Participant covenants
that it will not directly or indirectly create, incur, assume or suffer to exist
any Owner Participant's Lien and the Owner Participant shall promptly notify the
Facility Lessees and the Indenture Trustee of the imposition or existence of any
such Lien of which the Owner Participant has Actual Knowledge and shall
promptly, at its own expense, take such action as may be necessary to duly
discharge such Owner Participant's Lien.

         Section 7.3. Amendments or Revocation of LLC Agreement. Notwithstanding
anything to the contrary contained in the LLC Agreement, the Owner Participant
covenants that it will not (a) amend, supplement, or otherwise modify Section 10
of the LLC Agreement without the prior written consent of the Facility Lessees
so long as no Significant Lease Default or Lease Event of Default has occurred
and is continuing, and without the prior written consent of the Indenture
Trustee so long as the Lien of the Collateral Trust Indenture has not been
terminated or discharged, or (b) revoke, or otherwise waive compliance with or
terminate the LLC Agreement without the prior written consent of the Facility
Lessees so long as no Significant Lease Default or Lease Event of Default has
occurred and is continuing, and the Indenture Trustee so long as the Lien of the
Collateral Trust Indenture has not been terminated or discharged.

         Section 7.4. Bankruptcy Filings. The Owner Participant agrees that it
will not file a petition, or join in the filing of a petition, seeking
reorganization, arrangement, adjustment or composition of, or in respect of, the
Owner Lessor under the Bankruptcy Code, or any other applicable federal or state
law or the law of the District of Columbia.

         Section 7.5. Instructions. The Owner Participant agrees that it will
not instruct the Owner Lessor to take any action prohibited by this Agreement or
any other Operative Document.

         Section 7.6. Intentionally Omitted.

         Section 7.7. Intentionally Omitted.

         Section 7.8. Right of First Refusal. In the event the Owner Participant
desires to sell, lease, convey or otherwise transfer its Member Interest or
cause the Owner Lessor to sell all or substantially all of the Owner Lessor's
Interest at any time during the three (3) year period commencing on the
termination or expiration of the Facility Lease (except in the event that a
Lease Event of Default shall have existed at such time of termination or
expiration), any such sale or other transfer shall be subject to each Facility
Lessee's right of first refusal on the terms and conditions set forth in this
Section 7.8. The Owner Participant shall give the Facility Lessees prompt
written notice of all bona fide offers that have been received from any other
Person to purchase or acquire its interest of the Owner Lessor's Interest or the
Member Interest of the Owner Participant, and which offers it wishes to accept,
together with a full and complete statement of the price and all of the terms,
conditions and provisions contained in such offers. The Facility Lessees shall
thereafter have the right within a period of 45 days from and after the receipt
by them of such notice (the "Notice Period") to notify the Owner Participant of
its intent to exercise its right of first refusal; provided however, if both
Facility Lessees exercise their right of first refusal hereunder, then the
Facility Lessees shall collectively purchase or acquire 100% of the interest to
be conveyed in the Owner Lessor's Interest or the Member Interest of the Owner
Participant, as the case may be. If a Facility Lessee elects to exercise the
right provided in the

                                       43
<PAGE>   51

preceding sentence, it will within 60 days of such notice (the "Agreement
Period") execute a contract on the same terms and conditions as the offer giving
rise to such right. If neither of the Facility Lessees give such notice to the
Owner Participant within the 45 day period or execute such a contract within 60
days of such notice, the Owner Participant will be free to proceed under the
terms and conditions set forth in its notice to the Facility Lessees, unless the
failure to execute the contract within 60 days is attributable to acts or
omissions of the Owner Participant. In the event that such terms are revised in
any way that changes the agreement for sale, lease, conveyance or transfer such
that the terms of the sale are less favorable to the Owner Participant (it being
understood and agreed that any reduction in the price or a change in the terms
of payment thereof in a manner beneficial to the potential purchaser shall be
deemed to be less favorable to the Owner Participant), the Owner Participant
shall again comply with the notice and right of first refusal provisions of this
Section prior to entering into such revised agreement; provided that, for such
revised offer, the Notice Period shall be 10 Business Days from the date of such
new notice, and the Agreement Period shall not exceed 45 days from the date of
the Facility Lessees' notice accepting such new terms.

SECTION 8. COVENANTS OF THE INDENTURE TRUSTEE AND THE PASS THROUGH TRUSTEE

         Section 8.1. Indenture Trustee's Liens. Neither the Lease Indenture
Company, nor the Indenture Trustee will directly or indirectly create, incur,
assume or suffer to exist any Indenture Trustee's Lien attributable to it and
arising out of events or conditions not related to its rights in the Indenture
Estate or the administration thereof, and will promptly notify the Owner
Participant, the Owner Lessor and the Facility Lessees of the imposition of any
such Lien of which it has Actual Knowledge and shall promptly (and in any event
within 30 days of obtaining Actual Knowledge of such Lien), at its own expense,
take such action as may be necessary to duly discharge such Indenture Trustee's
Lien.

         Section 8.2. Pass Through Trustee's Covenant Not to Transfer Lessor
Notes.

         Section 8.2. The Pass Through Trustee agrees that it will not transfer
any Lessor Note (or any part thereof) to any entity (except to a successor Pass
Through Trustee appointed pursuant to the terms of the Pass through Trust
Agreement) until it receives from such entity a certification which makes a
representation and warranty as of the date of such transfer that no part of the
funds to be used by it for the purchase and holding of such Lessor Note (or any
part thereof) constitutes assets of any Plan or that such purchase and holding
will be covered by a prohibited transaction class exemption issued by the U.S.
Department of Labor.

SECTION 9. INDEMNIFICATION

         Section 9.1. General Indemnity.

         (a) Claims Indemnified. Subject to the exclusions stated in paragraph
(b) below, the Facility Lessees, jointly and severally, agree to indemnify,
protect, defend and hold harmless, and do hereby indemnify the Owner
Participant, the Owner Lessor, the Administrator (but only in connection with
the performance of its duties under the LLC Administration Agreements), the

                                       44
<PAGE>   52

Lease Indenture Company in its individual capacity, the Indenture Trustee, each
Certificateholder, the Pass Through Company in its individual capacity, the Pass
Through Trustee, and their respective Affiliates, successors, assigns, agents,
directors, officers and employees (each an "Indemnitee") against any and all
Claims (whether or not any of the transactions contemplated by the Operative
Documents are consummated) imposed on, incurred or suffered by or asserted
against any Indemnitee in any way relating to or resulting from or arising out
of or attributable to:

               (i) the construction, financing, refinancing, acquisition,
operation, rebuilding, warranty, ownership, possession, maintenance, repair,
lease, condition, alteration, modification, restoration, refurbishing, return,
purchase, sale or other disposition, insuring, sublease, or other use or non-use
of the Facilities, the Facility Sites, the Easements or any Component or any
portion of any thereof or any interest therein;

               (ii) the conduct of the business or affairs of any applicable
Facility Lessee or Calpine and any other business or affairs conducted at the
Facilities, the Easements or the Facility Sites;

               (iii) the manufacture, design, purchase, acceptance, rejection,
delivery or condition of, or improvement to, the Facilities, the Facility Sites,
the Easements or any Component, or any portion of any thereof or any interest
therein;

               (iv) the Facility Leases, the Facility Site Leases, the Facility
Site Subleases, or any other Operative Document, the execution or delivery
thereof or the performance, enforcement, attempted enforcement or amendment of
any terms thereof, or the transactions contemplated thereby or resulting
therefrom;

               (v) any Environmental Condition at, related to or caused by the
Facilities, the Easements or the Facility Sites or any Component, or any portion
thereof, including, for the avoidance of doubt, any such Environmental Condition
existing prior to the Closing Date;

               (vi) the offer, issuance, sale, acquisition or delivery of the
Lessor Notes, the Certificates, any Additional Lessor Notes, any Additional
Certificates or any refinancing thereof;

               (vii) the reasonable costs and expenses of the Transaction
Parties in connection with amendments or supplements to the Operative Documents
requested by an applicable Facility Lessee, or resulting from the actions of an
applicable Facility Lessee or in connection with any Lease Default or Lease
Event of Default;

               (viii) the imposition of any Lien other than with respect to a
particular Indemnitee (or a Related Party), an Owner Lessor's Lien, an Owner
Participant's Lien or Indenture Trustee's Lien attributable to such Indemnitee;

               (ix) any violation by, or liability relating to, any Facility
Lessee or any other Calpine Party of, or under, any Applicable Law, whether now
or hereafter in effect (including Environmental Laws), or any action of any
Governmental Entity or other Person taken with respect to the Facilities, the
Facility Sites, the Operative Documents or the interests of the Owner
Participant, the Owner Lessor, the Indenture Trustee or the Pass Through
Trustee, or under the

                                       45
<PAGE>   53

Operative Documents or the presence, use, storage, release, threatened release,
transportation, arrangement for transportation, treatment, arrangement for
treatment, manufacture, disposal or arrangement for disposal of any Hazardous
Substance in, at, under or from the Facilities, the Easements or the Facility
Sites, including, for the avoidance of doubt, any of the foregoing existing or
occurring prior to the Closing Date;

             (x) the non-performance or breach by any Person of any obligation
contained in this Agreement or any other Operative Document or the falsity or
inaccuracy of any representation, warranty or obligation of any Person contained
in this Agreement or any other Operative Document;

             (xi) the continuing fees (if any) and expenses of the Owner Lessor
and the Administrator pursuant to the LLC Administration Agreements (including
the reasonable compensation and expenses of their respective counsel) arising
out of the Owner Lessor's discharge of its duties under or in connection with
the Operative Documents (other than the Facility Leases and the Facility Site
Leases);

             (xii) the continuing fees (if any) and expenses of the Lease
Indenture Company, the Indenture Trustee, the Pass Through Company, the Pass
Through Trustee, (including the reasonable compensation and expenses of their
respective counsel, accountants and other professional persons) arising out of
the discharge of their respective duties as provided in the Operative Documents;
or

             (xiii) any Applicable Permits including any obligations imposed by
FERC in connection with the Facilities or the Facility Sites.

         (b) Claims Excluded. Any Claim, to the extent relating to or resulting
from or arising out of or attributable to any of the following, is excluded from
the Facility Lessees' obligations to indemnify, defend, protect and hold
harmless any Indemnitee under this Section 9.1:

             (i) (A) acts, omissions or events with respect to a particular
Facility first occurring after the later of (x) expiration or early termination
of a related Facility Lease and, where required by such Facility Lease,
surrender to the Owner Lessor or its successor of the relevant Facility Lessee's
interest in the related Facility in compliance with the provisions of such
Facility Lease and (y) if the Owner Lessor exercises its option set forth in
Article VI of the related Facility Site Lease, the performance by the applicable
Facility Lessee of all obligations required to be performed by it thereunder, or
(B), if the Closing Date does not occur, acts, omission or events occurring
after the date set forth in Section 2.2(e);

             (ii) with respect to a particular Indemnitee and Related Parties,
any offer, sale, assignment, transfer or other disposition (voluntary or
involuntary) by or on behalf of (A) in the case of the Owner Participant, the
Owner Participant of its Member Interest or with respect to any Related Party,
its direct or indirect interest in the Owner Participant, (B) in the case of the
Owner Lessor, and if such action is taken at the written direction of the Owner
Participant, the Owner Participant, and Related Parties, the Owner Lessor of all
or any of the Owner Lessor's Interest, (C) the Indenture Trustee of all or any
of its interest in the Lessor Notes, unless, in any such case referred to in
this paragraph (ii), such transfer is required by the terms of the Operative

                                       46
<PAGE>   54

Documents or occurs during the continuance of a Lease Event of Default;
(provided that this paragraph (ii) shall not serve to cap the indemnity to be
received by a transferee Indemnitee for a Claim (other than a Claim relating
solely to or arising solely out of any offer, transfer, sale, assignment or
other disposition of any such rights or interests) based on what the relevant
transferor Indemnitee would have received had no such transfer occurred);

             (iii) with respect to any Indemnitee, any Claim attributable to (i)
the gross negligence or willful misconduct of such Indemnitee or a Related Party
except to the extent such gross negligence or willful misconduct is attributable
to any breach by the Facility Lessees (or any of them) or any other Calpine
Party of any covenant, representation or warranty contained in any Operative
Document or (ii) any violation of Applicable Law by any such Person except to
the extent attributable to a violation of Applicable Law by the Facility Lessees
(or either of them) or any other Calpine Party or to any breach by the Facility
Lessees (or any of them) or such other Calpine Party of any covenant,
representation or warranty contained in any Operative Document;

             (iv) as to any Indemnitee, any Claim to the extent attributable to
the noncompliance of such Indemnitee or a Related Party, with any of the terms
of, or any misrepresentation or breach of warranty by such Indemnitee or Related
Party contained in any Operative Document made by such Indemnitee or Related
Party or any breach by such Indemnitee or a Related Party of any covenant
contained in any Operative Document or any breach by such Indemnitee or a
Related Party of any covenant contained in any Operative Document made by such
Indemnitee or Related Party except to the extent attributable to any breach by a
Facility Lessee or any other Calpine Party of any covenant, representation or
warranty contained in any Operative Document;

             (v) any Claim constituting or arising from an Owner Lessor's Lien;

             (vi) with respect to the Indenture Trustee and the Lease Indenture
Company, any Claim constituting or arising from a Indenture Trustee's Lien;

             (vii) with respect to the Owner Participant, any claim constituting
or arising from an Owner Participant's Lien;

             (viii) any Claim that is a Tax, or is a cost of contesting a Tax
whether or not the relevant Facility Lessee is required to indemnify therefor
pursuant to Section 9.2 hereof or under the Tax Indemnity Agreement;

             (ix) any failure on the part of the Administrator to distribute in
accordance with the LLC Agreement or the LLC Administration Agreements any
amounts received by it under the Operative Documents and distributable by it
thereunder;

             (x) a Claim arising out of a Indenture Default or Lease Indenture
Event of Default that is not also (or attributable to) a Lease Default or Lease
Event of Default;

             (xi) with respect to a particular Indemnitee and Related Party, any
obligation or liability expressly assumed in any Operative Document by the
Indemnitee seeking indemnification;

                                       47
<PAGE>   55

             (xii) any Claim that constitutes scheduled principal and/or
interest on the Lessor Notes, Additional Lessor Notes, or the corresponding
payments under the Certificates or any Additional Certificates; and

             (xiii) any Claim relating to the payment of any amount which
constitutes Transaction Costs which the Owner Participant is obligated to pay
pursuant to Section 2.3(a) hereof or any other amount to the extent such
Indemnitee or a Related Party has expressly agreed in any Operative Document to
pay such amount without express right of reimbursement;

provided that the terms "omission," "gross negligence" and "willful misconduct,"
when applied with respect to the Owner Lessor, the Owner Participant, the
Indenture Trustee, the Pass Through Trustee or any Affiliate of any thereof,
shall not include any liability imputed as a matter of law to such Indemnitee
solely by reason of any such entity's interest in the Facilities or the Facility
Sites or such Indemnitee's failure to act in respect of matters which are or
were the obligation of the Facility Lessees under this Agreement or any other
Operative Document. Nothing herein shall be deemed to constitute a guaranty of
any useful life or any present or future residual value of the Facilities or a
guaranty that any amount of any Secured Indebtedness will be paid.

         (c) Insured Claims. Subject to the provisions of paragraph (e) of this
Section 9.1, in the case of any Claim indemnified by the Facility Lessees
hereunder which is covered by a policy of insurance maintained by the Facility
Lessees, each Indemnitee agrees, unless it and each other Indemnitee shall waive
its rights to indemnification (for itself and each Related Party thereto) in a
manner reasonably acceptable to the Facility Lessees, to cooperate, at the sole
cost and expense of the Facility Lessees, with insurers in exercise of their
rights to investigate, defend or compromise such Claim.

         (d) After-Tax Basis. The Facility Lessees agree that any payment or
indemnity pursuant to this Section 9.1 in respect of any Claim shall be made on
an After-Tax Basis to the Indemnitees.

         (e) Claims Procedure. Each Indemnitee shall promptly after such
Indemnitee shall have Actual Knowledge thereof notify the Facility Lessees of
any Claim as to which indemnification is sought; provided, that the failure so
to notify the Facility Lessees shall not reduce or affect the Facility Lessees'
liability which it may have to such Indemnitee under this Section 9.1, and no
payment hereunder by the Facility Lessees to an Indemnitee shall be deemed to
constitute a waiver or release of any right or remedy that the Facility Lessee
may have against any such Indemnitee for actual damages resulting directly from
the failure or delay of such Indemnitee to give the Facility Lessees such
notice. Subject to the foregoing, any amount payable to any Indemnitee pursuant
to this Section 9.1 shall be paid within thirty (30) days after receipt of such
written demand therefor from such Indemnitee, accompanied by a certificate of
such Indemnitee stating in reasonable detail the basis for the indemnification
thereby sought and (if such Indemnitee is not a party hereto) an agreement to be
bound by the terms hereof as if such Indemnitee were such a party. The foregoing
shall not, however, constitute an obligation to disclose confidential
information of any kind without the execution of an appropriate confidentiality
agreement. Promptly after the Facility Lessees receive notification of such
Claim accompanied by a written statement describing in reasonable detail the
Claims which are the

                                       48
<PAGE>   56

subject of and basis for such indemnity and the computation of the amount so
payable, the Facility Lessees shall, without affecting its obligations
hereunder, notify such Indemnitee whether it intends to pay, object to,
compromise or defend any matter involving the asserted liability of such
Indemnitee. The Facility Lessees shall have the right to investigate and so long
as no Significant Lease Default or Lease Event of Default shall have occurred
and be continuing, the Facility Lessees shall have the right in its sole
discretion, to defend or compromise any Claim for which indemnification is
sought under this Section 9.1 which the Facility Lessees acknowledge is subject
to indemnification hereunder; provided that no such defense or compromise shall
involve any danger of (i) foreclosure, sale, forfeiture or loss of, or
imposition of a Lien on any part of the Facilities, the Facility Sites, the
Lessor Estate or the Indenture Estate or the impairment of the Facilities in any
material respect or (ii) any criminal liability being incurred or any material
adverse effect on such Indemnitee; provided, further, that no Claim shall be
compromised by the Facility Lessees on a basis that admits any criminal
violation or gross negligence or willful misconduct on the part of such
Indemnitee without the express written consent of such Indemnitee; and provided,
further, that to the extent that other Claims unrelated to the transactions
contemplated by the Operative Documents are part of the same proceeding
involving such Claim, the Facility Lessees may assume responsibility for the
contest or compromise of such Claim only if the same may be and is severed from
such other Claims (and each Indemnitee agrees to use reasonable efforts to
obtain such a severance). In the event that in the course of the investigation
or defense of a claim, the Facility Lessees shall in good faith reasonably
determine that it is not liable for indemnification with respect thereto under
this Section 9.1, it may give notice to the applicable Indemnitee of such fact;
and, in such case, any acknowledgment, theretofore made by the Facility Lessees
of liability with respect to such claim under this Section 9.1 shall be deemed
revoked, and the Facility Lessees may thereupon cease to defend such claim;
provided that (i) the Facility Lessees shall have given the Indemnitee
reasonable prior notice of its intention to renounce such acknowledgment, (ii)
the Facility Lessees' conduct regarding the defense of such claim or any
decision to withdraw from such defense shall not prejudice or have prejudiced
the Indemnitee's ability to contest such claim (taking into account, among other
things, the timing of the Facility Lessees' withdrawal and the theory or
theories upon which the Facility Lessees shall have based its defense), and
(iii) the Facility Lessees shall have given such Indemnitee all materials,
documents and records relating to its defense of such claim as such Indemnitee
shall have reasonably requested in connection with the assumption by such
Indemnitee of the defense of such claim at the cost and expense of such Facility
Lessee. In the event that the Facility Lessees shall cease to defend any claim
pursuant to the preceding sentence, the Facility Lessees shall indemnify each
Indemnitee, without regard to any exclusion that might otherwise apply
hereunder, to the extent that the actions of the Facility Lessees in defending
such claim or the manner or time of the Facility Lessees' election to withdraw
from the defense of such claim shall have caused such Indemnitee to incur any
loss, cost, liability or expense which such Indemnitee would not have incurred
had the Facility Lessees not ceased to defend such claim in such manner or such
time. If the Facility Lessees elect, subject to the foregoing, to compromise or
defend any such asserted liability, it may do so at its own expense and by
counsel selected by it. Upon the Facility Lessees' election to compromise or
defend such asserted liability and prompt notification to such Indemnitee of its
intent to do so, such Indemnitee shall cooperate at the Facility Lessees'
expense with all reasonable requests of the Facility Lessees in connection
therewith and will provide the Facility Lessee with all information not within
the control of the Facility Lessees as is reasonably

                                       49
<PAGE>   57

available to such Indemnitee which the Facility Lessees may reasonably request;
provided, however, that such Indemnitee shall not, unless otherwise required by
Applicable Law, be obligated to disclose to the Facility Lessees or any other
Person, or permit the Facility Lessees or any other Person to examine (i) any
income tax returns of the Owner Participant or (ii) any confidential information
or pricing information not generally accessible by the public possessed by the
Owner Participant (and, in the event that any such information is made
available, the Facility Lessees shall treat such information as confidential and
shall take all actions reasonably requested by such Indemnitee for purposes of
obtaining a stipulation from all parties to the related proceeding providing for
the confidential treatment of such information from all such parties). Where the
Facility Lessees, or the insurers under a policy of insurance maintained by the
Facility Lessees, undertake the defense of such Indemnitee with respect to a
Claim (with counsel reasonably satisfactory to such Indemnitee and without
reservation of rights against such Indemnitee), no additional legal fees or
expenses of such Indemnitee in connection with the defense of such Claim shall
be indemnified hereunder unless such fees or expenses were incurred at the
request of the Facility Lessees or such insurers. Notwithstanding the foregoing,
an Indemnitee may participate at its own expense in any judicial proceeding
controlled by the Facility Lessees pursuant to the preceding provisions, but
only to the extent that such party's participation does not in the reasonable
opinion of counsel to the Facility Lessees interfere with such control or
defense of such claim; provided, however, that such party's participation does
not constitute a waiver of the indemnification provided in this Section 9.1;
provided, further, that if and to the extent that (i) such Indemnitee is advised
by counsel that an actual or potential conflict of interest exists where it is
advisable for such Indemnitee to be represented by separate counsel or (ii)
there is a risk that such Indemnitee may be subject to criminal liability and
such Indemnitee informs the Facility Lessees that such Indemnitee desires to be
represented by separate counsel, such Indemnitee shall have the right to control
its own defense of such Claim and the reasonable fees and expenses of such
defense (including, without limitation, the reasonable fees and expenses of such
separate counsel) shall be borne by the Facility Lessees. So long as no Lease
Event of Default described in clause (a), (b), (g) or (h) of Section 16 of a
Facility Lease shall have occurred and be continuing, no Indemnitee shall enter
into any settlement or other compromise with respect to any Claim without the
prior written consent of the Facility Lessees unless (i) the Indemnitee waives
its rights to indemnification hereunder or (ii) the Facility Lessees have not
acknowledged their indemnity obligation with respect thereto and there is a
significant risk that a default judgment will be entered against such
Indemnitee. Nothing contained in this Section 9.1(e) shall be deemed to require
an Indemnitee to contest any Claim or to assume responsibility for or control of
any judicial proceeding with respect thereto.

        (f) Subrogation. To the extent that a Claim indemnified by the Facility
Lessees under this Section 9.1 is in fact paid in full by the Facility Lessees
or an insurer under an insurance policy maintained by the Facility Lessees, the
Facility Lessees (so long as no Lease Event of Default shall have occurred and
be continuing) or such insurer shall be subrogated to the rights and remedies of
the Indemnitee on whose behalf such Claim was paid to the extent of such payment
(other than rights of such Indemnitee under insurance policies maintained at its
own expense) with respect to the transaction or event giving rise to such Claim.
Should an Indemnitee receive any refund, in whole or in part, with respect to
any Claim paid by the Facility Lessees hereunder, it shall promptly pay over to
the Facility Lessees the lesser of (i) the amount refunded reduced by the amount
of any Tax incurred by reason of the receipt or accrual of such refund and
increased by the amount of any Tax (but not in excess of the amount of such

                                       50
<PAGE>   58

reduction) saved as a result of such payment or (ii) the amount the Facility
Lessees or any of their insurers has paid in respect of such Claim; provided
that, so long as a Significant Lease Default or Lease Event of Default shall
have occurred and is continuing such amount may be held by the Owner Lessor as
security for the Facility Lessees' obligations under the Facility Leases and the
other Operative Documents.

        (g) Minimize Claims. The Owner Participant, the Owner Lessor, and each
of the other Transaction Parties will use their respective reasonable and
diligent efforts to minimize Claims indemnifiable by the Facility Lessees under
this Section 9.1, including by complying with reasonable requests by the
Facility Lessees to do or to refrain from doing any act if such compliance is,
in the good faith opinion of the Owner Participant, the Owner Lessor, or such
other Transaction Party, as the case may be, of a purely ministerial nature or
otherwise has no unindemnified adverse impact on the Owner Participant, the
Owner Lessor, or such Transaction Party, as the case may be, or any Affiliate of
any thereof or on the business or operations of any of the foregoing.

        Section 9.2. General Tax Indemnity.

        (a) Indemnity. Except as provided in paragraph (b), the Facility Lessees
jointly and severally agree to indemnify each of the Owner Participant, the
Owner Lessor, the Lease Indenture Company in its individual capacity, the
Indenture Trustee, the Pass Through Company in its individual capacity, the Pass
Through Trustee, each Certificateholder and their respective successors and
assigns, the past and present partners or members of or holders of the ownership
interests in, as the case may be, the Owner Participant (each of the foregoing,
together with any Affiliate thereof, a "Tax Indemnitee") for, to hold each Tax
Indemnitee harmless from and to defend each Tax Indemnitee against all Taxes
that are imposed upon or with respect to or borne by or asserted against any Tax
Indemnitee, the Facilities, the Easements, the Facility Sites, or any portion or
Component thereof or any interest therein, or upon any Operative Document or
interest therein, or in any way arising out of, in connection with or relating
to, any of the following:

            (i) the construction, financing, refinancing, acquisition,
operation, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, rebuilding,
return, transport, assembly, repossession, servicing, dismantling, abandonment,
retirement, decommissioning, preparation, installation, storage, replacement,
purchase, sale or other disposition, insuring, sublease, or other use or non-use
of, the imposition of any lien (or incurrence of any liability to refund or pay
over any amount as a result of any lien) on, the Facilities, the Facility Sites,
the Easements or any portion or Component thereof or any interest therein;

            (ii) the Facilities, the Facility Sites, the Easements, any portion
thereof or Component or interest therein, the applicability of the Facility
Leases to the Facilities, or the conduct of the business or affairs of the
Facility Lessees or Calpine, the Facilities or the Facility Sites;

                                       51
<PAGE>   59

            (iii) the manufacture, design, purchase, acceptance, rejection,
delivery, non-delivery, redelivery or condition of, or improvement to, the
Facilities, the Easements, the Facility Sites or any portion or Component
thereof, or any interest therein;

            (iv) the Facility Leases, or any other Operative Document, the
execution or delivery thereof, any other documents contemplated thereby or the
performance, enforcement or amendment of any terms thereof;

            (v) the payment or receipt of Periodic Rent, Basic Rent and
Supplemental Rent or any other payment, receipt or earning under the Facility
Leases or the Facility Site Subleases or arising from the Facilities, the
Facility Sites, the Easements, or any portion or Component thereof or any
interest therein;

            (vi) any other amount paid or payable pursuant to the Operative
Documents;

            (vii) the conveyance of title to the Facilities; or

            (viii) otherwise relating to the transactions contemplated by the
Operative Documents.

        Notwithstanding anything herein to the contrary and without regard to
paragraph (b) hereof, the Facility Lessees will indemnify the Owner Participant
and the Owner Lessor on an After-Tax Basis for any Taxes collected by way of
withholding (and any interest, penalties or additions to tax associated
therewith) (or for the failure to withhold taxes) imposed on the Lessor Notes or
the Additional Lessor Notes or any other payments to each Certificateholder or
the Indenture Trustee (each a "Certificateholder Indemnitee"), including any
penalties, interest, or additions to tax applicable in connection therewith;
provided, however, that if the Facility Lessees are required, for any reason, to
indemnify the Owner Participant or the Owner Lessor with respect to any failure
to withhold such tax, and the withholding tax would otherwise be an Excluded Tax
under Section 9.2(b) without regard to the first sentence of this paragraph,
then the Certificateholder Indemnitee with respect to which such withholding was
not made will pay the amount of tax not withheld to the relevant taxing
authority if such taxes remain unpaid or will reimburse the Facility Lessees for
the amount of tax not withheld, but paid to such taxing authority, on demand,
plus interest at (a) the Lease Debt Rate during the period commencing on the
date the Facility Lessees shall have made the indemnity payment to such taxing
authority and ending the earlier of the date of repayment by such Tax Indemnitee
and five Business Days after the date the Facility Lessees demand reimbursement
thereof pursuant to this sentence, and (b) the Overdue Rate for the period
thereafter to the date the Facility Lessees actually receive such payment.

        (b) Excluded Taxes. The indemnity provided for in paragraph (a) above
shall not extend to any of the following Taxes (the "Excluded Taxes"):

            (i) Taxes imposed by the United States federal government or any
state or local government, any political subdivision of any of the foregoing,
imposed on, based on or measured by gross or net income, receipts, capital gain,
capital or net worth, or conduct of business (other than, in each case, Taxes
that are in the nature of sales, use, rental, license, value added (to the
extent value added taxes are not imposed in clear and direct substitution for
income

                                       52
<PAGE>   60

taxes), property or similar taxes ("Income Taxes")), including any such Taxes
collected by way of withholding, minimum or alternative minimum taxes, and
franchise taxes; provided that this exclusion (i) shall not affect any express
requirement that payments be made on an "after-tax" basis nor shall it apply to
Taxes that would have been imposed on a Certificateholder Indemnitee had the
transactions contemplated by the Operative Documents been the sole connection
between the jurisdiction imposing such Taxes and the Certificateholder
Indemnitee with respect to which such Taxes were imposed;

            (ii) Taxes imposed on a Tax Indemnitee other than a
Certificateholder Indemnitee that are attributable to any act, event or omission
by such Tax Indemnitee that occurs after expiration or other termination of the
Facility Leases and surrender of the Facilities to the Owner Lessor or its
successors (or in the case of a Certificateholder Indemnitee, Taxes imposed for
any period after the repayment of the Lease Debt) in accordance with the
Facility Leases, (in contrast to an act, event or omission occurring prior to or
simultaneous with such expiration, termination or surrender (or, in the case of
a Certificateholder Indemnitee, such repayment)), provided that this exclusion
shall not apply so long as a Lease Event of Default shall have occurred and be
continuing;

            (iii) Taxes imposed on a Tax Indemnitee that are attributable to the
gross negligence or willful misconduct of such Tax Indemnitee, unless such
negligence or misconduct is imputed to such Tax Indemnitee solely as a result of
its participation in the transactions contemplated by the Operative Documents
and not as a result of any action or inaction by such Tax Indemnitee;

            (iv) Taxes imposed on a Tax Indemnitee arising from a breach by such
Tax Indemnitee of any of its representations, warranties or covenants under any
Operative Document except to the extent attributable to any breach by the
Facility Lessees or any other Calpine Party of any covenant, representation or
warranty contained in any Operative Document;

            (v) Taxes (A)(x) arising out of, or caused by any voluntary direct
or indirect assignment, sale, transfer or other voluntary disposition or (y) an
involuntary direct or indirect transfer or disposition resulting from a
bankruptcy or similar proceeding for relief of debtors in which such Tax
Indemnitee is a debtor or a foreclosure by a creditor of such Tax Indemnitee, in
the case of either (x) or (y),(1) by the Owner Participant of all or part of its
Member Interest, (2) by the Owner Lessor of all or part of its interest in the
Facilities or the Facility Sites, or (3) by the Indenture Trustee of any
interest in the Lease Debt or the Indenture Estate, or (4) in the case of the
Owner Lessor or the Owner Participant of any direct or indirect interest in the
Owner Lessor or the Owner Participant, in each case to the extent imposed
directly by reason of any transfer described in this clause (v)(A), or (B)
imposed after any such transfer to the extent that, under law in effect on the
date of the transfer such Taxes exceed the amount of Taxes that would be
indemnified hereunder had there been no such assignment, sale, transfer or other
voluntary disposition, unless such transfer or disposition occurs during the
continuance of a Lease Event of Default or is otherwise pursuant to the Facility
Lessees' exercise of their rights under the Operative Documents;

                                       53
<PAGE>   61

            (vi) Taxes imposed on a Tax Indemnitee that would not have been
imposed but for the creation or existence of any Owner Lessor's Lien or Owner
Participant's Lien attributable to such Tax Indemnitee;

            (vii) Taxes that are included as a part of the cost of the
Facilities;

            (viii) Intentionally Omitted.

            (ix) With respect to the Owner Participant, Taxes for which the
Facility Lessees are obligated to indemnify the Owner Participant under the Tax
Indemnity Agreement (or which are expressly excluded from indemnification
thereunder);

            (x) Taxes that are imposed on a Tax Indemnitee (other than a
Certificateholder Indemnitee) resulting from the Owner Lessor not being treated
as a grantor trust or other conduit entity for federal, state or local income
tax purposes, but only to the extent such Taxes exceed Taxes indemnified
hereunder that otherwise would have been imposed and are otherwise
indemnifiable;

            (xi) Taxes imposed on a Tax Indemnitee that are attributable to the
failure of such Tax Indemnitee to comply with certification, information,
documentation, reporting or other similar requirements concerning the
nationality, residence, identity or connection with the jurisdiction imposing
such Taxes; provided that the foregoing exclusion shall only apply if such
compliance is required by statute or regulation of the jurisdiction imposing
such Taxes as a precondition to relief or exemption from or reduction in such
Taxes, such Tax Indemnitee is eligible to comply with such requirement, the
Facility Lessees shall have given such Tax Indemnitee timely written notice of
such requirement and the Tax Indemnitee shall have determined in good faith that
compliance with any such requirement shall not result in any identified
non-immaterial adverse effect to its interests or to those of its Affiliates;

            (xii) Taxes consisting of interest, penalties, additions to tax or
fines resulting from a failure of such Tax Indemnitee to properly and timely
file returns as required by a taxing authority unless such failure is
attributable to the Facility Lessees not providing information that it is
expressly required to provide under the Operative Documents;

            (xiii) Taxes imposed on any Tax Indemnitee resulting from an
amendment, modification, supplement to or waiver of any provision of, any
Operative Document which amendment, modification, supplement or waiver was not
requested by or consented to by the Facility Lessees, and as to which the
Facility Lessees are not a party and the Tax Indemnitee (or, in the case of the
Owner Participant, the Owner Lessor if acting at the express direction of the
Owner Participant or any Related Party) is a party, unless such amendment,
modification, supplement or waiver (A) was required by applicable law or the
Operative Documents, (B) may be necessary or appropriate to, and is in
conformity with, any amendment to any Operative Document requested by the
Facility Lessee in writing, or (C) was consented to by a Calpine Party;

            (xiv) Taxes imposed as a result of, or in connection with, any
"prohibited transaction," within the meaning of Section 4975 of the Code,
Section 406 of ERISA or any comparable laws of any Governmental Entity, engaged
in by any Tax Indemnitee (which for this

                                       54
<PAGE>   62

purpose shall include any ERISA Affiliate thereof) resulting from the breach by
such Tax Indemnitee of any of its representations or warranties contained in
Section 3.4(g) or Section 8.2 of the Participation Agreement;

            (xv) Taxes to the extent such Taxes would not have been imposed on a
Tax Indemnitee if such Tax Indemnitee or any related Tax Indemnitee were a
United States Person; and

            (xvi) Taxes imposed that would not have been imposed on a Tax
Indemnitee but for the activities in the taxing jurisdiction of such Tax
Indemnitee or any Affiliate thereof unrelated to the transactions contemplated
by the Operative Documents.

        (c) Payment. Notwithstanding anything to the contrary herein and without
regard to paragraph (b) hereof, any payment by the Facility Lessees pursuant to
this Section 9.2 shall be increased by amounts necessary to ensure that all such
payments are made on an After-Tax Basis. Each payment required to be made by the
Facility Lessees to a Tax Indemnitee pursuant to this Section 9.2 shall be paid
either (i) when due directly to the applicable taxing authority by the Facility
Lessees if they are permitted to do so, or (ii) where direct payment is not
permitted, and with respect to gross up amounts, in immediately available funds
to such Tax Indemnitee by the later of (A) 10 days following the Facility
Lessees' receipt of the Tax Indemnitee's written demand for the payment pursuant
to clause (g)(i) below (which demand shall be accompanied by a written statement
of the Tax Indemnitee describing in reasonable detail the Taxes for which the
Tax Indemnitee is demanding payment and the computation of such Taxes), (B)
subject to paragraph (g) below, in the case of amounts which are being contested
pursuant to such paragraph (g), at the time and in accordance with a final
determination of such contest or (C) in the case of any indemnity demand for
which the Facility Lessees have requested review and determination pursuant to
paragraph (d) below, the completion of such review and determination; provided,
however, in no event later than the date which is one Business Day prior to the
date on which such Taxes are required to be paid to the applicable taxing
authority. Any amount payable to the Facility Lessees pursuant to paragraph (e)
or (f) below shall be paid promptly after the Tax Indemnitee realizes a Tax
Benefit giving rise to a payment under paragraph (e) or receives a refund or
credit giving rise to a payment under paragraph (f), as the case may be, and
shall be accompanied by a statement of the Tax Indemnitee computing in
reasonable detail the amount of such payment. Upon the final determination of
any contest pursuant to paragraph (g) below in respect of any Taxes for which
the Facility Lessees have made a Tax Advance, the amount of the Facility
Lessees' obligation under paragraph (a) above shall be determined as if such Tax
Advance had not been made. Any obligation of the Facility Lessees under this
Section 9.2 and the Tax Indemnitee's obligation to repay the Tax Advance will be
satisfied first by set off against each other, and any difference owing by
either party will be paid within 10 days of such final determination.

        (d) Independent Examination. Within 10 days after the Facility Lessees
receives any computation from the Tax Indemnitee, the Facility Lessees may
request in writing that an independent public accounting firm selected by the
Tax Indemnitee and reasonably acceptable to the Facility Lessees review and
determine on a confidential basis the amount of any indemnity payment by the
Facility Lessees to the Tax Indemnitee pursuant to this Section 9.2 or any
payment by a Tax Indemnitee to the Facility Lessees pursuant to paragraph (e) or
(f) below. The

                                       55
<PAGE>   63

Tax Indemnitee shall cooperate with such accounting firm and supply it with all
information reasonably necessary for the accounting firm to conduct such review
and determination (but not tax returns and books); provided that such accounting
firm shall agree in writing in a manner reasonably satisfactory to the Tax
Indemnitee to maintain the confidentiality of such information. The parties
hereto agree that the independent public accounting firm's sole responsibility
shall be to verify the computation of any payment pursuant to this Section 9.2
and that matters of interpretation of this Participation Agreement or any other
Operative Document are not within the scope of the independent accountant's
responsibility. The fees and disbursements of such accounting firm will be paid
by the Facility Lessees; provided that such fees and disbursements will be paid
by the Tax Indemnitee if the verification results in an adjustment in the
Facility Lessees' favor of 5 percent or more of the indemnity payment or
payments computed by the Tax Indemnitee.

        (e) Tax Benefit. If, as the result of any Taxes paid or indemnified
against by the Facility Lessees under this Section 9.2, the aggregate Taxes
actually paid by the Tax Indemnitee for any taxable year and not subject to
indemnification pursuant to this Section 9.2 are less (whether by reason of a
deduction, credit, allocation or apportionment of income or otherwise) than the
amount of such Taxes that otherwise would have been payable by such Tax
Indemnitee (a "Tax Benefit"), then to the extent such Tax Benefit was not taken
into account in determining the amount of indemnification payable by the
Facility Lessees under paragraph (a) or (c) above and provided no Significant
Lease Default or Lease Event of Default shall have occurred and be continuing
(in which event the payment provided under this Section 9.2(e) shall be deferred
until the Significant Lease Default or Lease Event of Default has been cured),
such Tax Indemnitee shall pay to the Facility Lessees the lesser of (A) (y) the
amount of such Tax Benefit, plus (z) an amount equal to any United States
federal, state or local income tax benefit resulting to the Tax Indemnitee from
the payment under clause (y) above and this clause (z) (determined using the
same assumptions as set forth in the second sentence under the definition of
After-Tax Basis) and (B) the amount of the indemnity paid pursuant to this
Section 9.2 giving rise to such Tax Benefit; provided, however, that any excess
of (A) over (B) shall be carried forward and reduce the Facility Lessees'
obligations to make subsequent payments to such Tax Indemnitee pursuant to this
Section 9.2. If it is subsequently determined that the Tax Indemnitee was not
entitled to such Tax Benefit, the portion of such Tax Benefit that is required
to be repaid or recaptured will be treated as Taxes for which the Facility
Lessees must indemnify the Tax Indemnitee pursuant to this Section 9.2 without
regard to paragraph (b) hereof.

        Notwithstanding anything to the contrary herein, each Certificateholder
Indemnitee shall determine the allocation of any tax benefits, savings, credit,
deduction or allocation in its sole good faith discretion and each position to
be taken on its tax return shall be in its sole control and it shall not be
required to disclose any tax return or related documentation to any Person.

        (f) Refund. If a Tax Indemnitee obtains a refund or credit of all or
part of any Taxes paid, reimbursed or advanced by the Facility Lessees pursuant
to this Section 9.2, the Tax Indemnitee promptly shall pay to the Facility
Lessees (x) the amount of such refund or credit (net of any Tax payable by the
Tax Indemnitee as a result of the receipt or accrual of such refund or credit)
plus (y) an amount equal to any United States federal, state or local income tax
benefit realized by such Tax Indemnitee by reason of such payment to the
Facility Lessees (determined using the same assumptions as set forth in the
second sentence under the definition of After-Tax

                                       56
<PAGE>   64

Basis); provided that (A) if at the time such payment is due to the Facility
Lessees a Significant Lease Default or Lease Event of Default shall have
occurred and be continuing, such amount shall not be payable until such
Significant Lease Default or Lease Event of Default has been cured, and (B) the
amount payable to the Facility Lessees pursuant to this sentence shall not
exceed the amount of the indemnity payment in respect of such refunded or
credited Taxes that was made by the Facility Lessees. Any excess of (x) and (y)
over (B) in this Section 9.2(f) shall be carried forward and reduce the Facility
Lessees' obligations to make subsequent payments to such Tax Indemnitee pursuant
to this Section 9.2. If it is subsequently determined that the Tax Indemnitee
was not entitled to such refund or credit, the portion of such refund or credit
that is required to be repaid or recaptured will be treated as Taxes for which
the Facility Lessees must indemnify the Tax Indemnitee pursuant to this Section
9.2 without regard to paragraph (b) hereof. If, in connection with a refund or
credit of all or part of any Taxes paid, reimbursed or advanced by the Facility
Lessees pursuant to this Section 9.2, a Tax Indemnitee receives an amount
representing interest on such refund or credit, the Tax Indemnitee promptly
shall pay to the Facility Lessees (1) the amount of such interest that shall be
fairly attributable to such Taxes paid, reimbursed or advanced by the Facility
Lessees prior to the receipt of such refund or credit (net of Taxes payable in
respect of the receipt or accrual of such interest) and (2) any Tax savings
resulting from payments made by the Tax Indemnitee under (1) and (2).

        (g) Contest.

            (i) Notice of Contest. If a written claim for payment is made by any
taxing authority against a Tax Indemnitee for any Taxes with respect to which
the Facility Lessees may be liable for indemnity hereunder (a "Tax Claim"), such
Tax Indemnitee shall give the Facility Lessees written notice of such Tax Claim
promptly after its receipt, and shall furnish the Facility Lessees with copies
of such Tax Claim and all other writings received from the taxing authority to
the extent relating to such claim; provided that failure to so notify the
Facility Lessees shall not relieve the Facility Lessees of any obligation to
indemnify the Tax Indemnitee hereunder except to the extent that such failure
effectively precludes the ability to conduct a contest hereunder (and without
limiting any damage claim or remedy the Facility Lessees may otherwise have for
such failure).

            (ii) Control of Contest. Subject to subsection (g)(iii) below, the
Facility Lessee will be entitled to contest (acting through counsel selected by
the Facility Lessees and reasonably satisfactory to the Tax Indemnitee), and
control the contest of, any Tax Claim if (A) such Tax Claim may be pursued in
the name of the Facility Lessees and may be segregated procedurally from tax
claims for which the Facility Lessees are not obligated to indemnify the Tax
Indemnitee or (B) the Tax Indemnitee requests that the Facility Lessees control
such contest. In the case of all other Tax Claims, the Tax Indemnitee will
contest the Tax Claim if the Facility Lessees shall request that the Tax be
contested (subject to subsection (g)(iii) below), and the following rules shall
apply with respect to such contest:

                 (1) the Tax Indemnitee will control the contest of such Tax
Claim (acting through counsel selected by the Tax Indemnitee and reasonably
satisfactory to the Facility Lessees) at the Facility Lessees' expense,

                                       57
<PAGE>   65

                 (2) the decisions regarding what actions to be taken shall be
made by the Tax Indemnitee in its sole judgment, and

                 (3) the Tax Indemnitee shall not otherwise settle, compromise
or abandon such contest without the Facility Lessees' prior written consent
except as provided in paragraph (g)(iv) below.

        In either case, the party conducting such contest shall consult in good
faith with the other party and its designated counsel with respect to such Tax
Claim and shall provide the other party with copies of any reports or claims (or
extracts therefrom) issued by the relevant auditing agents or taxing authority
relating to such Tax Claim.

            (iii) Conditions of Contest. Notwithstanding the foregoing, no
contest with respect to a Tax Claim will be required or permitted pursuant to
this Section 9.2, and the Facility Lessees shall be required to pay the
applicable Taxes without contest, unless:

                 (1) within 30 days after written notice by the Tax Indemnitee
to the Facility Lessees of such Tax Claim (or such shorter period, to be
specified by the Tax Indemnitee in such notice, as required for taking action
with respect to such Tax Claim), the Facility Lessees shall request in writing
to the Tax Indemnitee that such Tax Claim be contested,

                 (2) no Significant Lease Default or Lease Event of Default has
occurred and is continuing, unless the Facility Lessees have provided security
for the indemnity payment and the expenses of contest in a manner reasonably
acceptable to the Tax Indemnitee, both as to coverage and credit,

                 (3) there is no risk of sale, forfeiture or loss of, or the
creation of any Lien on any Facilities, the Facility Sites, or any portion or
Component thereof or any interest therein as a result of such Tax Claim;
provided that this clause (3) shall not apply if the Facility Lessees post
security satisfactory to the Tax Indemnitee, both as to coverage and credit, in
its sole discretion,

                 (4) there is no risk of imposition of any criminal penalties or
liabilities,

                 (5) if such contest involves payment of such Tax, the Facility
Lessees will advance such amount necessary to pay the Tax to the Tax Indemnitee
or its Affiliates on an interest-free basis and with no after-tax cost to such
Tax Indemnitee (a "Tax Advance"),

                 (6) The Facility Lessees agree to pay (and pays on demand) and
with no after-tax cost to such Tax Indemnitee or its Affiliates all reasonable
costs, losses and expenses incurred by the Tax Indemnitee in connection with the
contest of such claim (including, without limitation, all reasonable legal,
accounting and investigatory fees and disbursements and penalties, interest and
additions to tax),

                 (7) the Tax Indemnitee has been provided at the Facility
Lessees' sole expense with an opinion, reasonably acceptable to such Tax
Indemnitee, of independent tax counsel selected by the Tax Indemnitee and
reasonably acceptable to the Facility Lessees to the effect that there is a
Reasonable Basis for contesting such Tax Claim,

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<PAGE>   66

                 (8) in the case of a judicial appeal, the appeal is not to the
U.S. Supreme Court,

                 (9) if such contest is controlled by the Facility Lessees,
prior to commencement of a judicial action with respect to the contest, the
Facility Lessees shall have admitted in writing its liability to pay an
indemnity pursuant to this Section 9.2 with respect to such Tax, which admission
shall be binding on the Facility Lessees unless and to the extent such contest
is determined in a manner that conclusively demonstrates that the Facility
Lessees are not so liable,

                 (10) if the amount of Taxes at issue is in excess of $20,000,
and

                 (11) if the subject matter of such claim shall be of a
continuing or recurring nature and shall have previously been decided pursuant
to this paragraph (g), there shall have been a change in law after such
previously decided claim and such Tax Indemnitee receives, at the Facility
Lessees' sole cost, an opinion of counsel selected by such Tax Indemnitee and
reasonably acceptable to the Facility Lessees to the effect that such change is
favorable to the position asserted in the previous contest.

            (iv) Waiver of Indemnification. Notwithstanding anything to the
contrary contained in this Section 9.2, the Tax Indemnitee at any time may elect
to decline to take any action or any further action with respect to (and the
Facility Lessees shall not be permitted to contest) a Tax Claim and may in its
sole discretion settle or compromise any contest with respect to such Tax Claim
without the Facility Lessees' consent if the Tax Indemnitee:

                 (1) waives its right to any indemnity payment by the Facility
Lessees pursuant to this Section 9.2 in respect of such Tax Claim (and any other
claim for Taxes with respect to any other taxable year the contest of which is
effectively precluded by the Tax Indemnitee's declination to take action with
respect to the Tax Claim), and

                 (2) promptly repays to the Facility Lessees any Tax Advance and
any amount paid to such Tax Indemnitee under Section 9.2(a) above in respect of
such Taxes, but not any costs or expenses with respect to any such contest.

        Except as provided in the preceding sentence, any such waiver shall be
without prejudice to the rights of the Tax Indemnitee with respect to any other
Tax Claim.

        (h)    Reports.

               (i) If any report, statement or return is required to be filed by
a Tax Indemnitee with respect to any Tax that is subject to indemnification
under this Section 9.2, the Facility Lessees will (1) notify the Tax Indemnitee
in writing of such requirement not later than 30 days prior to the date such
report, statement or return is required to be filed (determined without regard
to extensions) and (2) either (y) unless directed by the Tax Indemnitee
otherwise, if permitted by applicable law, prepare such report, statement or
return for filing by the Facility Lessees in such manner as will show the
ownership of the Facilities by the Owner Lessor for United States federal, state
and local income tax purposes (if applicable), send a copy of such report,
statement or return to the Tax Indemnitee and timely file such report, statement
or return

                                       59
<PAGE>   67

with the appropriate taxing authority, or (z) in all other cases, prepare and
furnish to such Tax Indemnitee not later than 30 days prior to the date such
report, statement or return is required to be filed (determined without regard
to extensions) a proposed form of such report, statement or return for filing by
the Tax Indemnitee; provided that the only consequence for failure to file after
compliance by the Facility Lessees with the requirements hereof shall be a loss
of indemnification from the Facility Lessees in respect of any Tax to the extent
resulting from such failure.

            (ii) Each of the Tax Indemnitee and the Facility Lessees, as the
case may be, will timely provide the other, at the Facility Lessees' expense,
with all information in its possession that the other party may reasonably
require and request to satisfy its tax filing obligations.

        (i) Non-Parties. If a Tax Indemnitee is not a party to this Agreement,
the Facility Lessees may require such Tax Indemnitee to agree in writing, in a
form reasonably acceptable to the Facility Lessees, to the terms of this Section
9.2 prior to making any payment to such Tax Indemnitee under this Section.
Subject to the preceding sentence, the Facility Lessees' obligations under this
Section 9.2 shall inure to the benefit of each and every Tax Indemnitee without
regard to whether such Tax Indemnitee is a party to this Agreement.

SECTION 10. FACILITY LESSEE'S RIGHT OF QUIET ENJOYMENT

        Each party to this Agreement acknowledges notice of, and consents in all
respects to, the terms of the Facility Leases and the Facility Site Subleases
and expressly, severally and as to its own actions only, agrees that, so long as
no Lease Event of Default has occurred and is continuing, it shall not take or
cause to be taken any action or direct that any action be taken, which is
contrary to or inconsistent with any Facility Lessee's rights under its Facility
Lease and Facility Site Sublease, including the right to possession, use and
quiet enjoyment of such Facility, Easements and Facility Site.

SECTION 11. SUPPLEMENTAL FINANCING IMPROVEMENTS; OPTIONAL REFINANCINGS

        Section 11.1. Financing Improvements. Upon the request of a Facility
Lessee delivered at least 90 days prior to financing a portion of the cost of
any Improvement, the Owner Lessor and the Indenture Trustee agree to cooperate
with such Facility Lessee to (a) issue Additional Lessor Notes under the
Collateral Trust Indenture to finance such Improvement which will rank pari
passu with the applicable Lessor Notes and/or any applicable Additional Lessor
Notes then outstanding; (b) execute and deliver one or more supplements to the
Collateral Trust Indenture for purpose of subjecting the Owner Lessor's interest
in any such Improvements to the Liens thereof, and (c) execute and deliver an
amendment to the applicable Facility Lease to reflect the adjustments required
by clause (iv) below; provided, however, that (x) the Owner Participant shall
have been given the opportunity, but shall have no obligation, to provide all or
part of the funds required to finance any such Improvement by making an
Additional Equity Investment in such amount, if any, as it may determine in its
sole and absolute discretion, but such Facility Lessee shall have no obligation
to accept such Additional Equity Investment; and (y) the

                                       60
<PAGE>   68

conditions set forth below and in Section 2.12 of the Collateral Trust Indenture
shall have been satisfied. The obligation to finance such Improvements through
the issuance of Additional Lessor Notes under Section 2.12 of the Collateral
Trust Indenture (any financing of Improvements through the issuance of such
Additional Lessor Notes under the Collateral Trust Indenture being called a
"Supplemental Financing") is subject to the following additional conditions:

            (i) there shall be no more than one such financing in any calendar
year;

            (ii) the applicable Additional Lessor Notes (A) shall have a final
maturity no later than the final maturity of the Lessor Notes issued on the
Closing Date and (B) will be fully repaid out of additional Basic Rent, as
adjusted pursuant to the applicable Facility Lease, during the Facility Lease
Term;

            (iii) the applicable Additional Lessor Notes shall have an average
life to maturity equal to the average life to maturity of the Lessor Notes
issued on the Closing Date;

            (iv) appropriate adjustments to Basic Rent and Termination Value
(determined without regard to any tax benefits associated with such
Improvements, unless the Owner Participant is making an Additional Equity
Investment) shall be made to protect the Owner Participant's Net Economic
Return;

            (v) the applicable Facility Lessee shall have paid, on an After-Tax
Basis, all reasonable costs and expenses of the Transaction Parties, including
the reasonable fees and expenses of counsel to the Owner Participant, the Owner
Lessor, the Indenture Trustee, the Lease Indenture Company, the Pass Through
Company and the Pass Through Trustee, in each case to the extent incurred in
connection with any financing or refinancing pursuant to this Section 11 whether
or not the financing is consummated;

            (vi) no Significant Lease Default or Lease Event of Default shall
have occurred and be continuing unless the Improvements to be constructed with
the proceeds of the applicable Additional Lessor Notes shall cure such
Significant Lease Default or Lease Event of Default and such Improvements shall
be made in compliance with the Operative Documents;

            (vii) such Additional Lessor Notes represent an aggregate amount not
less than $20 million, nor greater than 100% of the costs of the Improvements
being financed; provided that the aggregate balance of the Notes for such
Facility never exceeds 80% of the fair market value (which fair market value
shall be determined by an appraiser selected by the Facility Lessees and
reasonably acceptable to the Owner Participant) of such Facility taking into
account the fair market value of such Improvements;

            (viii) the Owner Participant shall have received a favorable opinion
of its tax counsel satisfactory to such Owner Participant to the effect that
such financing creates no incremental tax risk not indemnified to the Owner
Participant's satisfaction (including additional indebtedness incurred to
finance the Improvements not constituting "qualified nonrecourse indebtedness"
within the meaning of Treasury Regulations Section 1-861-10T(b));

                                       61
<PAGE>   69

            (ix) the Owner Participant shall suffer no adverse accounting
effects under GAAP as a result of such financing;

            (x) the Facility Lessees shall have made or delivered such
representations, warranties, covenants, opinions or certificates as the Owner
Participant, the Indenture Trustee may reasonably request;

            (xi) the applicable Facility Lessee or the Guarantor shall have, at
such time, a credit rating of at least investment grade from S&P and Moody's;

            (xii) the applicable Facility Lessee shall pay to (a) the Owner
Participant a fee of $100,000 and (b) the Pass Through Trustee for the benefit
of the Certificateholders, to be shared by such Certificateholders on a pro rata
basis, a fee of $100,000 for each such financing, in each case other than the
first financing; and

            (xiii) Calpine shall have affirmed to the Transaction Parties that
the Calpine Guaranties cover the additional indebtedness contemplated by this
Section 11.1.

        Notwithstanding the prior provision dealing with the financing of
Improvements through the Facility Leases, the Facility Lessees shall at all
times have the right to fund Improvements to the Facilities other than through
the Facility Leases; provided that Required Improvements and non-Severable
Improvements may only be financed other than through the Facility Leases on an
unsecured basis. Notwithstanding any of the foregoing of this Section 11.1,
except for Required Improvements and Improvements relating to pollution control,
no Improvement shall materially decrease the value, residual value, utility or
remaining useful life of such Facility immediately prior to such Improvement or
cause such Facility to become limited-use property.

        Section 11.2. Optional Refinancing of Lease Debt. Each Facility Lessee
shall have the right, exercisable at any time on no more than three occasions,
to request the Owner Lessor (and the Owner Lessor shall reasonably consider and
not unreasonably withhold its consent), to refund or refinance the Lease Debt
(and all Certificates then outstanding), in whole but not in part, through the
issuance of Additional Lessor Notes; provided that all conditions to the
issuance of such Additional Lessor Notes contained in Section 2.12 of the
Collateral Trust Indenture shall have been satisfied and all applicable
Make-Whole Amounts shall have been paid. Any refinancing under this Section 11.2
shall also be subject to satisfaction of the following additional conditions:

            (i) the Owner Lessor shall be able to issue and sell such debt in an
amount adequate to accomplish such refunding or refinancing;

            (ii) such Additional Lessor Notes shall have a final maturity no
later than the final maturity date of the Lessor Notes issued on the Closing
Date and will be fully repaid out of Basic Rent during the Facility Lease Term;

            (iii) appropriate adjustments to Basic Rent and Termination Value
shall be made to protect the Owner Participant's Net Economic Return; provided
that no adjustments shall be made to the amortization schedule;

                                       62
<PAGE>   70

            (iv) no Significant Lease Default or Lease Event of Default shall
have occurred and be continuing;

            (v) the Owner Participant shall suffer no adverse accounting effects
under GAAP;

            (vi) such Facility Lessee shall have made or delivered such
representations, warranties, covenants, opinions and certificates as the Owner
Participant may reasonably request, which representations, warranties, covenants
and agreements shall be of no greater scope than those provided by such Facility
Lessee under the Operative Documents to which it is a party (except to the
extent necessitated by differences between existing Operative Documents and the
terms and conditions of the proposed refinancing);

            (vii) all documentation in connection with such refinancing shall be
reasonably satisfactory to the Owner Lessor and the Owner Participant;

            (viii) the Owner Participant shall receive a consent fee of $100,000
in the aggregate for each refinancing after the first such refinancing;

            (ix) the Lease Debt as financed constitutes qualified nonrecourse
indebtedness within the meaning of Treasury Regulations Section 1-861-10T(b) and
the Owner Participant shall have received an opinion satisfactory to it to such
effect; and

            (x) the Owner Participant shall receive an opinion satisfactory to
it that the refinancing (as opposed to the right to request such refinancing)
shall not result in any incremental tax risk not indemnified to the Owner
Participant's satisfaction.

        Calpine shall have affirmed in writing to the Transaction Parties that
the Calpine Guaranties cover the additional indebtedness contemplated by this
Section 11.1.

        Section 11.3. Cooperation. The Owner Participant will cooperate with and
assist the Facility Lessees in connection with any refinancing and/or assumption
of the Lease Debt, so long as such refinancing and/or assumption of the Lease
Debt is in accordance with the terms of the Operative Documents. The Owner
Participant will execute such agreements and documents as may be necessary with
respect to any such refinancing and will instruct the Owner Lessor to act
accordingly.

SECTION 12. CERTAIN ADJUSTMENTS TO PERIODIC RENT AND TERMINATION VALUE

        (a) Prior to or on the Closing Date, Periodic Rent and Termination Value
shall be adjusted, either upward or downward, in accordance with the Facility
Leases:

            (i) at the request of a Facility Lessee, to re-optimize the Lease
Debt; provided such re-optimization shall not adversely affect the Owner Lessor
or the Owner Participant;

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<PAGE>   71

            (ii) at the request of a Facility Lessee or the Owner Participant,
to reflect any changes in the Pricing Assumptions, including, without
limitation, (x) the initial interest rate on any of the applicable Lessor Notes
which is different from the applicable interest rate set forth in the Pricing
Assumptions, (y) an increase in the Transaction Costs from the amount assumed in
the Pricing Assumptions, unless the Facility Lessees have elected to pay such
increase, and (z) a Closing Date other than the Scheduled Closing Date; and

            (iii) at the request of a Facility Lessee or the Owner Participant
to reflect any enactment, promulgation, release or adoption of, amendment to or
change in the Code, Treasury Regulations, Revenue Rulings or Revenue Procedures
("Tax Law Change") enacted prior to the Closing;

provided that if any adjustment required by this paragraph (a) would result in
(i) a Facility Lease not qualifying as an operating lease for a Facility Lessee
under FASB 13 or FASB 98, or (ii) the aggregate of all rent adjustments made on
or before, or contemplated to be made on, the Closing Date (other than
adjustments to reflect a change in Transaction Costs or the actual interest rate
of the Certificates) shall cause either (x) the after-tax net present value of
Basic Rent discounted at 6% to increase by more than 100 basis points or (y) the
total Basic Rent to increase by more than 2%, then in either such case, the
Facility Lessees shall not be obligated to close the Overall Transaction.

        (b) After the Closing Date, Periodic Rent and Termination Value, as well
as the coverage under the Qualifying Letter of Credit, shall be adjusted at the
request of a Facility Lessee or the Owner Participant in accordance with the
terms of the related Facility Lease to which it is a party.

        (c) Any adjustment pursuant to this Section 12 shall be calculated (A)
to preserve the Owner Participant's Net Economic Return through the Basic Lease
Term and (B) to the extent consistent with (A) above, to maintain operating
lease treatment for each Facility Lessee; provided, however, that to the extent
consistent with preserving the Owner Participant's Net Economic Return, all
adjustments shall at the option of the Facility Lessees be calculated to (x)
minimize the average annual Periodic Rent over the Basic Lease Term for the
Facility Lessees' GAAP accounting purposes and/or (y) minimize the present value
to each Facility Lessee of Periodic Rent; and provided, further, that no such
adjustment shall require the Owner Participant to record a loss as of the date
such adjustment is made. Adjustments will be computed by the Owner Participant
based upon the Pricing Assumptions and the Tax Assumptions originally used to
calculate the Basic Rent and Termination Value. Adjustments made pursuant to
this Section 12 shall be subject to verification as provided in Section 3.4 of
each Facility Lease.

SECTION 13. TRANSFER OF THE FACILITY LESSEE OWNERSHIP

        Section 13.1. Transfer of the Facility Lessee Ownership.

        (a) Each Facility Lessee covenants and agrees that it shall not during
the Facility Lease Term assign any Facility Lease or any other Operative
Document, or any interest therein, without the prior written consent of the
Owner Lessor, the Owner Participant and, so long as the Lien of the Collateral
Trust Indenture has not been terminated or discharged, the Indenture

                                       64
<PAGE>   72

Trustee and the Pass Through Trustee. Notwithstanding the foregoing, upon
satisfaction of the conditions in paragraph (b) below, either Facility Lessee
may assign its respective Facility Lease or any other Operative Document to
which it is a party, or any interest therein to any Person, without the consent
of the Owner Lessor, the Owner Participant, the Indenture Trustee or any other
Transaction Party.

        (b) Assignment under Section 13(a) above by either Facility Lessee or by
both Facility Lessees shall be permitted if (A) after giving effect to such
assignment or assignments, either (x) Calpine owns, directly or indirectly, at
least a majority of the Ownership Interest of each assignee (as well as at least
a majority of the Ownership Interest of any non-assigning Facility Lessee), the
Calpine Guaranties remain in full force and effect (without a transferee of
Calpine's obligations thereunder having succeeded thereto in accordance with
Section 8.4(b) thereof), and Calpine shall have reaffirmed in writing its
obligations under the Calpine Guaranties or (y) Calpine's obligations under the
Calpine Guaranties have been succeeded to in accordance with Section 8.4(b)
thereof, the transferee of Calpine shall own, directly or indirectly, at least a
majority of the Ownership Interest of each assignee (as well as at least a
majority of the Ownership Interest of any non-assigning Facility Lessee) and the
Calpine Guaranties shall remain in full force and effect and (B) satisfaction of
the following conditions:

            (i) the transferee shall assume all the obligations of the
applicable Facility Lessee under the Operative Documents pursuant to an
assignment and assumption agreement in form and substance satisfactory to the
Owner Participant;

            (ii) the Owner Participant, the Owner Lessor and, so long as the
Lien of the Collateral Trust Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass Through Trustee shall have
received an Opinion of Counsel as to such assignment and assumption agreement
and the satisfaction of the requirements and conditions set forth in this
Section 13.1(b) (except for clauses (iii) and (vi) hereof;

            (iii) no Significant Lease Default or Lease Event of Default shall
have occurred and be continuing at the time of or immediately following such
transfer;

            (iv) the transfer shall not subject either of the Facility Lessees,
the Owner Participant, the Owner Lessor, the Indenture Trustee, the Pass Through
Trustee or any Certificateholder to regulation under PUHCA or state laws and
regulations regarding the rate and financial or organizational regulation of
electric utilities in the affected party's reasonable opinion, nor result in a
Regulatory Event of Loss;

            (v) the transferee shall be organized under the laws of the United
States, any state thereof or the District of Columbia; and

            (vi) the applicable Facility Lessee shall have paid, at no after-tax
cost to such parties, all reasonable documented out-of-pocket expenses
(including reasonable attorneys' fees and expenses) of the Owner Lessor, the
Administrator, the Owner Participant, the Indenture Trustee, the Lease Indenture
Company and the Pass Through Trustee in connection with such assignment.

                                       65
<PAGE>   73

SECTION 14. MISCELLANEOUS

        Section 14.1. Consents; Cooperation. The Owner Participant covenants and
agrees that it shall not unreasonably withhold its consent to any consent
requested of the Owner Lessor under the terms of the Operative Documents that by
its terms is not to be unreasonably withheld by the Owner Lessor.

        Section 14.2 Successor Owner Lessor. The parties hereto agree that the
transfer or assignment pursuant to the terms of the LLC Agreement by the Owner
Lessor to a successor Owner Lessor, will not violate the terms of any Operative
Document.

        Section 14.3. Bankruptcy of Lessor Estate. If (i) all or any part of the
Lessor Estate becomes the property of a debtor subject to the reorganization
provisions of Title 11 of the United States Code, as amended from time to time,
(ii) pursuant to such reorganization provisions the Owner Participant is
required, by reason of the Owner Participant being held to have recourse
liability to the debtor or the trustee of the debtor directly or indirectly, to
make payment on account of any amount payable as principal or interest on the
Lessor Notes, and (iii) the Indenture Trustee actually receives any Excess
Amount, as defined below, which reflects any payment by the Owner Participant on
account of clause (ii) above, the Indenture Trustee upon written request of the
Owner Participant shall promptly refund to the Owner Participant such Excess
Amount (and, to the extent so refunded, such amount owing under the Lessor Notes
shall be reinstated). For purposes of this Section 14.3, "Excess Amount" means
the amount by which such payment exceeds the amount which would have been
received by the Indenture Trustee if the Owner Participant had not become
subject to the recourse liability referred to in clause (ii) above, as stated in
the Owner Participant's written request to the Indenture Trustee. Nothing
contained in this Section 14.3 shall prevent the Indenture Trustee from
enforcing any personal recourse obligations (and retaining the proceeds thereof)
of the Owner Participant as contemplated by this Participation Agreement (other
than referred to in clause (ii)).

        Section 14.4. Waivers. No term, covenant, agreement or condition of this
Agreement may be terminated, amended or compliance therewith waived (either
generally or in a particular instance, retroactively or prospectively) except by
an instrument or instruments in writing executed by each party hereto.

        Section 14.5. Notices. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein shall be
in writing or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, without limitation, by overnight mail or courier service,
(b) in the case of notice by United States mail, certified or registered,
postage prepaid, return receipt requested, upon receipt thereof, or (c) in the
case of notice by such a telecommunications device, upon transmission thereof;
provided such transmission is promptly confirmed by either of the methods set
forth in clauses (a) or (b) above, in each case addressed to each party hereto
at its address set forth below or, in the case of any such party hereto, at such
other address as such party may from time to time designate by written notice to
the other parties hereto:

                                       66
<PAGE>   74

        If to the Tiverton Lessee:

               Tiverton Power Associates Limited Partnership
               The Pilot House, 2nd Floor
               Lewis Wharf
               Boston, MA 02110
               Attention: Asset Manager
               Telephone: (617) 723-7200
               Facsimile: (617) 723-7635

               with a copy to:

                      Calpine Corporation
                      50 West San Fernando Street, 5th Floor
                      San Jose, California  95113
                      Attention: Asset Manager and General Counsel,
                      Telephone: (408) 995-5115
                      Facsimile: (408) 995-0505

        If to the Rumford Lessee:

               Rumford Power Associates Limited Partnership
               The Pilot House, 2nd Floor
               Lewis Wharf
               Boston, MA 02110
               Attention:  Asset Manager
               Telephone: (617).723-7200
               Facsimile: (617) 723-7635

               with a copy to:

                      Calpine Corporation
                      50 West San Fernando Street, 5th Floor
                      San Jose, California  95113
                      Attention: Asset Manager and General Counsel,
                      Telephone: (408) 995-5115
                      Facsimile: (408) 995-0505

        If to the Guarantor:

               Calpine Corporation
               50 West San Fernando Street, 5th Floor
               San Jose, California  95113
               Attention: Asset Manager and General Counsel,
               Telephone: (408) 995-5115
               Facsimile: (408) 995-0505

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<PAGE>   75

        If to the Owner Lessor:

               PMCC Calpine New England Investment LLC
               c/o Philip Morris Capital Corporation
               225 High Ridge, Suite 300
               Stamford, CT 06905
               Telephone: (914) 335-8170
               Facsimile:  (914) 335-8287
               Attention:  Vice President - Leasing

               with a copy to:

                      Philip Morris Capital Corporation
                      225 High Ridge, Suite 300
                      Stamford, CT 06905
                      Telephone: (914) 335-8347
                      Facsimile:  (914) 335-8256
                      Attention:  General Counsel

        If to the Owner Participant:

               PMCC Calpine NEIM LLC
               c/o Philip Morris Capital Corporation
               225 High Ridge, Suite 300
               Stamford, CT 06905
               Telephone: (914) 335-8170
               Facsimile:  (914) 335-8287
               Attention:  Vice President - Leasing

               with a copy to:

                      Philip Morris Capital Corporation
                      225 High Ridge, Suite 300
                      Stamford, CT 06905
                      Telephone: (914) 335-8347
                      Facsimile:  (914) 335-8256
                      Attention:  General Counsel

                                       68
<PAGE>   76

        If to the Indenture Trustee:

               State Street Bank and Trust Company of Connecticut, National
                  Association
               225 Asylum Street, Goodwin Square
               Hartford, CT 06103
               Telephone No.: (860) 244-1822
               Facsimile No.: (860) 244-1889
               Attn: Corporate Trust Department

        copy to:

               State Street Bank and Trust Company of California, National
                  Association
               633 West 5th Street, 12th floor
               Los Angeles, California 90071
               Telephone No.: (213) 362-7373
               Facsimile No.: (213) 362-7357
               Attention: Corporate Trust Department

        If to the Pass Through Trustee:

               State Street Bank and Trust Company of Connecticut, National
                  Association
               225 Asylum Street, Goodwin Square
               Hartford, CT 06103
               Telephone No.: (860) 244-1822
               Facsimile No.: (860) 244-1889
               Attn: Corporate Trust Department

        copy to:

               State Street Bank and Trust Company of California, National
                  Association
               633 West 5th Street, 12th floor
               Los Angeles, California 90071
               Telephone No.: (213) 362-7373
               Facsimile No.: (213) 362-7357
               Attention: Corporate Trust Department

A copy of all notices provided for herein shall be sent by the party giving such
notice to each of the other parties hereto. In addition, the Facility Lessees
shall (unless otherwise directed by the applicable Rating Agency) provide to
each Rating Agency a copy of any information, report or notice it gives to the
Indenture Trustee hereunder or any other Operative Documents.

        Section 14.6. Survival. All warranties, representations, indemnities and
covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on behalf of any such party under this
Agreement shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby and in the other Operative Documents regardless of any investigation made
by any such party or on behalf of any such party. In addition, the
indemnifications by the Facility Lessees

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<PAGE>   77

under Sections 9.1 and 9.2 of this Agreement, subject to Sections 9.1(b) and
9.2(b), respectively, the Facility Site Leases and the Calpine Guaranties, shall
expressly survive the expiration or early termination (in either case, for
whatever reason) of the Facility Lease or the transfer or other disposition of
the respective interests of the Owner Participant, the Owner Lessor, the
Administrator, the Lease Indenture Company, the Indenture Trustee, the Pass
Through Trustee and the Certificateholders in, to and under this Agreement, the
Bills of Sale and the other Operative Documents. Except as expressly provided
above or in Section 22.3 of the Facility Leases, the Tax Indemnity Agreement or
as otherwise expressly provided in the Operative Documents, the representations,
warranties, covenants and agreements of the Transaction Parties under the
Operative Documents shall terminate and be of no further force and effect
effective upon the expiration or earlier termination of the Facility Leases.

        Section 14.7. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the Member
Interest of the Owner Participant permitted under Section 7.1 and each
successive transferee or transferees of Lessor Notes permitted under Section 2.8
of the Collateral Trust Indenture. Except as expressly provided herein or in the
other Operative Documents, no party hereto may assign its interests herein
without the prior written consent of the other parties hereto.

        Section 14.8. Business Day. Notwithstanding anything herein or in any
other Operative Document to the contrary, if the date on which any payment is to
be made pursuant to this Agreement or any other Operative Document is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
scheduled date and (provided such payment is made on such succeeding Business
Day) no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.

        Section 14.9. Governing Law. This Agreement has been delivered in the
State of New York and shall be in all respects governed by and construed in
accordance with the laws of the State of New York including all matters of
construction, validity and performance without giving effect to the conflicts of
laws provisions thereof except New York General Obligations Law Section 5-1401.

        Section 14.10. Severability. If any provision hereof shall be invalid,
illegal or unenforceable under Applicable Law, the validity, legality and
enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.

        Section 14.11. Counterparts This Agreement may be executed in any number
of counterparts, each executed counterpart constituting an original but all
together only one agreement.

        Section 14.12. Headings and Table of Contents The headings of the
sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.

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<PAGE>   78

        Section 14.13. Limitation of Liability

        (a) None of the Owner Participant, the Owner Lessor, the Indenture
Trustee, the Lease Indenture Company, the Pass Through Trustee, the Pass Through
Trustee Company or the Certificateholders shall have any obligation or duty to
the Facility Lessees or to others with respect to the transactions contemplated
hereby, except those obligations or duties expressly set forth in this Agreement
and the other Operative Documents to which such Person is a party, and none of
the Owner Participant, the Owner Lessor, the Indenture Trustee, the Lease
Indenture Company, the Pass Through Trustee, the Pass Through Company or the
Certificateholders shall be liable for performance by any other party hereto of
such other party's obligations or duties hereunder. Without limitation of the
generality of the foregoing, under no circumstances whatsoever shall the Owner
Participant be liable to the Facility Lessees for any action or inaction on the
part of the Owner Lessor in connection with the transactions contemplated
herein, whether or not such action or inaction is caused by willful misconduct
or gross negligence of the Owner Lessor, unless such action or inaction is at
the written direction of the Owner Participant.

        (b) Neither Facility Lessee or any other Calpine Party shall have any
obligation or duty to the Owner Participant, the Owner Lessor, the Indenture
Trustee, the Lease Indenture Company, the Pass Through Trustee, the Pass Through
Company, the Certificateholders or to others with respect to the transactions
contemplated hereby, except those obligations or duties expressly set forth in
this Agreement and the other Operative Documents, and neither of the Facility
Lessee or any other Calpine Party (except Calpine to the extent set forth in the
Calpine Guaranties) shall be liable for performance by any other party hereto of
such other party's obligations or duties hereunder.

        (c) The Lease Indenture Company and the Pass Through Company are
entering into the Operative Documents to which it is a party solely as trustees
under the Collateral Trust Indenture and the Pass Through Trust Agreement,
respectively, and not in their individual capacities, except as expressly
provided herein or therein, and in no case whatsoever shall the Lease Indenture
Company and the Pass Through Company be personally liable for, or for any loss
in respect of, any of the statements, representations, warranties, agreements or
obligations of the Owner Lessor hereunder or under any other Operative Document,
as to all of which the other parties hereto agree to look solely to the
Indenture Estate and the Lessor Estate, respectively; provided, however, that
the Lease Indenture Company and the Pass Through Trust Company shall be liable
hereunder for their own negligence or willful misconduct or for a breach of
their representations, warranties and covenants made in their individual
capacity under any Operative Document.

        (d) The right of the Indenture Trustee or the Pass Through Trustee to
perform any discretionary act enumerated herein or in any other Operative
Document (including, without limitation, the right to consent to any action
which requires their consent and the right to waive any provision of, or consent
to any change or amendment to, any of the Operative Documents) shall not be
construed as a duty, and neither the Indenture Trustee nor the Pass Through
Trustee shall be liable or answerable for other than its negligence or willful
misconduct in the performance of such acts. In connection with any such
discretionary acts, the Indenture Trustee may in its sole discretion (but shall
not, except as otherwise provided herein or in the Collateral Trust Indenture or
as otherwise required by Applicable Law, have any obligation to) request the

                                       71
<PAGE>   79

approval or instruction of the Pass Through Trustee as the holder of the Lessor
Notes, and the Pass Through Trustee may in its sole discretion (but shall not,
except as otherwise provided in the Operative Documents or as otherwise required
by Applicable Law, have any obligation to) request the approval of the
Certificateholders.

        (e) The Owner Participant will give the Facility Lessees at least 15
days' prior notice of any proposed amendment or supplement to the LLC Agreement
(other than an amendment solely effecting a transfer of the Owner Participant's
interest in the Lessor Estate) and deliver true, complete and fully executed
copies to the Facility Lessees of any amendment or supplement to the LLC
Agreement. No amendment or supplement to the LLC Agreement that would reasonably
be expected to materially adversely affect the interests of the Facility Lessees
or the Indenture Trustee shall become effective without the written consent of
the Indenture Trustee and the Facility Lessees.

        Section 14.14. Consent to Jurisdiction; Waiver of Trial by Jury; Process
Agent.

        (a) Each of the parties hereto (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the Supreme Court of the State of New York, New
York County (without prejudice to the right of any party to remove to the United
States District Court for the Southern District of New York) and to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York for the purposes of any suit, action or other proceeding
arising out of this Agreement, the other Operative Documents, or the subject
matter hereof or thereof or any of the transactions contemplated hereby or
thereby brought by any of the parties hereto or their successors or assigns;
(ii) hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State court, or in such
federal court; and (iii) to the extent permitted by Applicable Law, hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the above-named courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement, the other
Operative Documents, or the subject matter hereof or thereof may not be enforced
in or by such court.

        (b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY
SUCH SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, THE OTHER
OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES HERETO
OR THEIR SUCCESSORS OR ASSIGNS.

        (c) By the execution and delivery of this Agreement, the Facility
Lessees designate, appoint and empower National Registered Agents, Inc., 440
Ninth Avenue, 5th Floor, New York, New York 10001, and the Owner Lessor
designates, appoints and empowers CT Corporation System, with an office at 111
Eighth Avenue, New York, New York 10011, as its authorized agent to receive for
and on its behalf service of any summons, complaint or other legal process in
any such action, suit or proceeding in the State of New York for so long as any
obligation of the Facility Lessees or the Owner Lessor, as applicable, shall
remain outstanding

                                       72
<PAGE>   80

hereunder or under any of the other Operative Documents. Each Facility Lessee
shall grant an irrevocable power of attorney to CT Corporation System, in
respect of such appointment and shall maintain such power of attorney in full
force and effect for so long as any obligation of such Facility Lessee shall
remain outstanding hereunder or under any of the Operative Documents.

        Section 14.15. Further Assurances Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Participation Agreement and the other
Operative Documents.

        Section 14.16. Effectiveness. The Participation Agreement has been dated
as of the date first above written for convenience only. This Participation
Agreement shall be effective on the date of execution and delivery by each of
the parties hereto.

        Section 14.17. Measuring Life. If and to the extent that any of the
options, rights and privileges granted under this Agreement, would, in the
absence of the limitation imposed by this sentence, be invalid or unenforceable
as being in violation of the rule against perpetuities or any other rule or law
relating to the vesting of interests in property or the suspension of the power
of alienation of property, then it is agreed that notwithstanding any other
provision of this Agreement, such options, rights and privileges, subject to the
respective conditions hereof governing the exercise of such options, rights and
privileges, will be exercisable only during (a) the longer of (i) a period which
will end twenty-one (21) years after the death of the last survivor of the
descendants living on the date of the execution of this Agreement of the
following Presidents of the United States: Franklin D. Roosevelt, Harry S.
Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M.
Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and
William J. Clinton or (ii) the period provided under the Uniform Statutory Rule
Against Perpetuities or (b) the specific applicable period of time expressed in
this Agreement, whichever of (a) and (b) is shorter.

        Section 14.17. No Partnership, Etc. The parties hereto intend that
nothing contained in this Participation Agreement or any other Operative
Document shall be deemed or construed to create a partnership, joint venture or
other co-ownership arrangement by and among any of them.

        Section 14.18. Entire Agreement. This Agreement, together with the other
applicable Operative Documents, constitutes the entire agreement of the parties
hereto and thereto with respect to the subject matter hereof and thereof and
supersedes all oral and all prior written agreements and understandings with
respect to such subject matter; provided that, notwithstanding the foregoing,
the obligations of Calpine with respect to fees, expenses and indemnifications
set forth in the letter agreement, dated October 16, 2000 between Calpine and
CSFB shall not be superceded hereby and shall remain in full force and effect.

        Section 14.19. Public Utility Regulation The Facility Lessees, the Owner
Lessor and the Owner Participant agree to cooperate and to take reasonable
measures to alleviate the source or consequence of any regulation constituting a
Regulatory Event of Loss, at the cost and expense

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<PAGE>   81

of the Facility Lessees, so long as there shall be no adverse consequences to
the Owner Lessor or the Owner Participant as the result of such cooperation or
taking of reasonable measures.

        Section 14.21. Confidentiality of Information. Each of the parties
hereto agrees that any information (x) contained herein or in the other
Operative Documents (including any terms, conditions, agreements, financial
projections, and other financial and operating information contained herein or
therein, and the terms of any insurance policies required or otherwise
maintained pursuant hereto), (y) disclosed or to be disclosed by one such party
to another such party (for purposes of this Section 14.21, each of the parties
to this Agreement being referred to herein as a "Receiving Party") in connection
with this Agreement or any other Operative Document, or (z) otherwise received
in connection with this Agreement or any other Operative Document (or the
transactions contemplated thereby) and designated by the disclosing party in
writing as confidential, shall, in each case, be kept confidential by the
Receiving Party and shall not be used otherwise than in connection with the
business of the Parties contemplated hereunder except:

        (a) to the extent such information is generally available to the public
prior to the Receiving Party's receipt thereof, or which becomes public after
such receipt, but through no violation by such Receiving Party of this Section
14.21;

        (b) as may be required by Applicable Law or, upon prompt prior written
notice to the affected party, by judicial process;

        (c) as may be independently developed by the Receiving Party other than
in connection with the transactions contemplated hereby with respect to the
Facilities or the Facility Sites;

        (d) as may be disclosed to counsel, auditors or accountants to the
Receiving Party, or to the National Association of Insurance Commissioners;

        (e) to the extent used in connection with any litigation to which the
Receiving Party is a party, provided that the other parties hereto shall have
been given prompt prior written notice (to the extent permitted by law) of such
proposed disclosure;

        (f) as may be disclosed to any transferee or proposed transferee of the
Receiving Party; provided, however, that, prior to any such disclosure, any such
transferee or proposed transferee, as the case may be, shall have agreed in
writing to be bound by the terms of this Section 14.20; or

        (g) as may be necessary or desirable in connection with the enforcement
of remedies by any party to any of the Operative Documents.

        The foregoing obligation as to confidentiality and non-use shall survive
the termination of this Agreement for a period of five years.

        Section 14.22. Reliance. Calpine and the Facility Lessees agree that the
Transaction Parties may rely on the Environmental Reports.

                                       74
<PAGE>   82

        Section 14.23. Intentionally Omitted

        Section 14.24. Amendments, Etc. No Operative Document nor any of the
terms thereof (including the terms of this Section 14.24) may be terminated,
amended, supplemented, waived or modified, except by an instrument in writing
(a) signed in the case of a waiver, by the party against which enforcement of
such waiver is sought, and no such waiver shall become effective unless signed
copies thereof shall have been delivered to each such party or (b) in the case
of termination, amendments, supplements or modifications, consented to by all
parties hereto; provided, however, that the consent of the Facility Lessees is
not required in the case of amendments to any Operative Document to which the
Facility Lessees are not a party and which would not increase or accelerate the
Facility Lessees' or the Guarantor's obligations under any of the Operative
Documents nor impair the Facility Lessees' or the Guarantor's rights under any
of the Operative Documents; provided further, that the consent of the Facility
Lessees, the Indenture Trustee or the Pass Through Trustee shall not be required
(but the consent of the Guarantor shall be so required) for the amendment,
termination, replacement, supplement, waiver or modification of any Qualifying
Letter of Credit. Notwithstanding the foregoing, Section 5.6 of the Collateral
Trust Indenture shall not be amended without the Guarantor's consent.

        Section 14.25. Credit for Certain Disbursements. Notwithstanding any
other provision of this Agreement or any provision of any other Operative
Document, any payment to the Owner Participant under a Qualified Letter of
Credit (exclusive of any deposit into the Equity Collateral Account) or from the
Equity Collateral Account shall reduce, dollar-for-dollar, the obligation of the
Guarantor under the Calpine Guaranty (Tiverton), on the one hand, and the
Guarantor under the Calpine Guaranty (Rumford), on the other hand, the aggregate
amount of such reductions to be allocated between the respective amounts of the
Equity Portion of Termination Value applicable, on the date of such reduction,
to the Calpine Guaranty (Tiverton) and to the Calpine Guaranty (Rumford),
respectively. Upon the reduction referred to in the prior sentence becoming
effective, comparable and parallel reductions will automatically be made in the
Termination Values specified in the Facility Leases.

                                       75
<PAGE>   83

        IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.

                             TIVERTON POWER ASSOCIATES LIMITED PARTNERSHIP,
                             a Rhode Island limited partnership

                             By:   Calpine Tiverton, Inc.,
                                     a Delaware corporation
                                     its general partner

                               By:  /s/ ERIC PRYOR
                                    --------------------------------
                                     Name:
                                     Title:
                                     Date:

                            RUMFORD POWER ASSOCIATES LIMITED PARTNERSHIP,
                            a Maine limited partnership

                            By:   Calpine Rumford, Inc.,
                                    a Delaware corporation
                                    its general partner

                              By:   /s/ ERIC PRYOR
                                    --------------------------------
                                     Name:
                                     Title:
                                     Date:

                                       76
<PAGE>   84

                    PMCC CALPINE NEW ENGLAND INVESTMENT LLC, a Delaware
                        limited liability company

                    By: PMCC Calpine NEIM LLC, a Delaware limited liability
                        company, its managing member

                        By:  General Foods Credit Corporation, a Delaware
                        corporation, its managing member
                           Name:
                           Title:
                           Date:

                        By: /s/ ILLEGIBLE
                           ---------------------------------
                        Name:
                        Title:
                        Date:

              PMCC CALPINE NEIM LLC

                    By: General Foods Credit Corporation, its managing
                        member

                    By: /s/ ILLEGIBLE
                        ---------------------------------
                        Name:
                        Title:
                        Date:

                                       77
<PAGE>   85

                    STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
                        NATIONAL ASSOCIATION,
                    not in its individual capacity, except to
                    the extent expressly provided herein, but
                    solely as Indenture Trustee under the
                    Collateral Trust Indenture

                    By: /s/ MARK HENSON
                        ---------------------------------
                        Name: Mark Henson
                        Title: Assistant Vice President
                        Date:

                    STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
                        NATIONAL ASSOCIATION,
                    not in its individual capacity, except to
                    the extent expressly provided herein, but
                    solely as Pass Through Trustee under the
                    Pass Through Trust Agreement

                    By: /s/ MARK HENSON
                        ---------------------------------
                        Name: Mark Henson
                        Title: Assistant Vice President
                        Date:

                                       78
<PAGE>   86

                          CALPINE CORPORATION

                          By: /s/ ERIC PRYOR
                              ----------------------------
                              Name:
                              Title:
                              Date:

                                       79

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