Document:

<PAGE>   1

                                                                  EXHIBIT 4.12.3

                                                                  EXECUTION COPY

              APPENDIX A - DEFINITIONS AND RULES OF INTERPRETATION

RULES OF INTERPRETATION

        In this Appendix A and each Operative Document (as hereinafter defined),
unless otherwise provided herein or therein:

                (a) the terms set forth in this Appendix A or in any such
Operative Document shall have the meanings herein provided for and any term used
in an Operative Document and not defined therein or in this Appendix A but in
another Operative Document shall have the meaning herein or therein provided for
in such other Operative Document;

                (b) any term defined in this Appendix A by reference to another
document, instrument or agreement shall continue to have the meaning ascribed
thereto whether or not such other document, instrument or agreement remains in
effect;

                (c) words importing the singular include the plural and vice
versa;

                (d) words importing a gender include any gender;

                (e) a reference to a part, clause, section, paragraph, article,
party, annex, appendix, exhibit, schedule or other attachment to or in respect
of an Operative Document is a reference to a part, clause, section, paragraph,
or article of, or a party, annex, appendix, exhibit, schedule or other
attachment to, such Operative Document unless, in any such case, otherwise
expressly provided in any such Operative Document;

                (f) a reference to any statute, regulation, proclamation,
ordinance or law includes all statutes, regulations, proclamations, ordinances
or laws varying, consolidating or replacing the same from time to time, and a
reference to a statute includes all regulations, policies, protocols, codes,
proclamations and ordinances issued or otherwise applicable under that statute
unless, in any such case, otherwise expressly provided in any such statute or in
such Operative Document;

                (g) a definition of or reference to any document, schedule,
exhibit, instrument or agreement includes an amendment or supplement to, or
restatement, replacement, modification or novation of, any such document,
schedule, exhibit, instrument or agreement unless otherwise specified in such
definition or in the context in which such reference is used;

                (h) a reference to a particular section, paragraph or other part
of a particular statute shall be deemed to be a reference to any other section,
paragraph or other part substituted therefor from time to time;

<PAGE>   2

                (i) if a capitalized term describes, or shall be defined by
reference to, a document, instrument or agreement that has not as of any
particular date been executed and delivered and such document, instrument or
agreement is attached as an exhibit to the Participation Agreement (as
hereinafter defined), such reference shall be deemed to be to such form and,
following such execution and delivery and subject to paragraph (g) above, to the
document, instrument or agreement as so executed and delivered;

                (j) a reference to any Person (as hereinafter defined) includes
such Person's successors and permitted assigns;

                (k) any reference to "days" shall mean calendar days unless
"Business Days" (as hereinafter defined) are expressly specified;

                (l) if the date as of which any right, option or election is
exercisable, or the date upon which any amount is due and payable, is stated to
be on a date or day that is not a Business Day, such right, option or election
may be exercised, and such amount shall be deemed due and payable, on the next
succeeding Business Day with the same effect as if the same was exercised or
made on such date or day (without, in the case of any such payment, the payment
or accrual of any interest or other late payment or charge, provided such
payment is made on such next succeeding Business Day);

                (m) any reference to the satisfaction, release and/or discharge
of the Collateral Trust Indenture or the Collateral Documents (each as
hereinafter defined) or the Lien (as hereinafter defined) thereof or words of
similar import shall, whether or not so expressly stated, be deemed to be a
reference to the satisfaction, release and discharge in full and cancellation of
the Lien of the Collateral Trust Indenture or the Collateral Documents, as the
case may be, in accordance with the express provisions thereof.

                (n) words such as "hereunder", "hereto", "hereof" and "herein"
and other words of similar import shall, unless the context requires otherwise,
refer to the whole of the applicable document and not to any particular article,
section, subsection, paragraph or clause thereof; and

                (o) a reference to "including" shall mean including without
limiting the generality of any description preceding such term, and for purposes
hereof and of each Operative Document the rule of ejusdem generis shall not be
applicable to limit a general statement, followed by or referable to an
enumeration of specific matters, to matters similar to those specifically
mentioned.

DEFINED TERMS

                "467 LOAN PRINCIPAL BALANCE" with respect to a Facility Lease,
shall have the meaning set forth in Section 3.2(d) of such Facility Lease.

                "ACCEPTABLE BANK" shall mean, for the purposes of Section 5.3 of
each Facility Lease, a banking institution the senior long-term unsecured debt
of which is rated at least A by

                                       2
<PAGE>   3

S&P and by Moody's, and which maintains an office or corresponding bank located
in New York City.

                "ACTUAL KNOWLEDGE" shall mean, with respect to any Transaction
Party, actual knowledge of, or receipt of written notice by, an officer (or
other employee whose responsibilities include the administration of the Overall
Transaction) of such Transaction Party.

                "ADDITIONAL CERTIFICATES" shall mean any additional certificates
issued by the Pass Through Trust in connection with the issuance of Additional
Lessor Notes.

                "ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any,
the Owner Participant shall provide (in its sole and absolute discretion) to
finance all or a portion of the cost of any Improvement financed pursuant to
Section 11.1 of the Participation Agreement.

                "ADDITIONAL LESSOR NOTES" shall mean, collectively, the Tiverton
Additional Lessor Notes and the Rumford Additional Lessor Notes.

                "ADMINISTRATOR" shall mean Wilmington Trust Company pursuant to
an LLC Administration Agreement between the Owner Lessor and Wilmington Trust
Company dated as of the Closing Date.

                "AFFILIATE" of a particular Person shall mean, at any time, (a)
any Person directly or indirectly controlling, controlled by or under common
control with such particular Person and (b) any Person beneficially owning or
holding, directly or indirectly, 10% or more of any class of voting or equity
interest of such first Person or any corporation of which such first Person
beneficially owns or holds, in the aggregate, directly or indirectly, 10% or
more of any class of voting or equity interest. For purposes of this definition,
"control" when used with respect to any particular Person shall mean the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing; provided, however, that under no circumstances shall the Lease
Indenture Company be considered to be an Affiliate of either the Indenture
Trustee or any Certificateholder, nor shall any of the Indenture Trustee or any
Certificateholder be considered to be an Affiliate of the Lease Indenture
Company, nor shall the Lease Indenture Company, the Indenture Trustee, solely
because any Operative Document contemplates that any of them may request or act
at the instruction of any such Person or such Person's Affiliate.

                "AFTER-TAX BASIS" shall mean, in the context of determining the
amount of a payment to be made on such basis, the payment of an amount which,
after reduction by the net increase in Taxes of the recipient (actual or
constructive) of such payment, which net increase shall be calculated by taking
into account any reduction in such Taxes resulting from any Tax benefits
realized or to be realized by the recipient as a result of such payment, shall
be equal to the amount required to be paid. In calculating the amount payable by
reason of this provision, all income taxes payable and tax benefits realized or
to be realized shall be determined on the assumptions that (i) the recipient
shall be subject to the applicable income taxes at the highest marginal tax
rates then applicable to corporate taxpayers taxed on the same basis as the
recipient that are in effect in the applicable jurisdictions at the time such
amount is received or properly

                                       3
<PAGE>   4

accrued, and (ii) all related tax benefits are utilized at the highest marginal
rates then applicable to corporate taxpayers taxed on the same basis as the
recipient that are then in effect in the applicable jurisdictions.

                "AGREEMENT PERIOD" shall have the meaning set forth in Section
7.8 of the Participation Agreement.

                "ALLOCATED RENT" with respect to a Facility Lease, shall have
the meaning specified in Section 3.2(b) of such Facility Lease.

                "APPLICABLE LAW" shall mean, without limitation, all applicable
laws, including, without limitation, all Environmental Laws, and treaties,
judgments, decrees, injunctions, writs and orders of any court, arbitration
board or Governmental Entity and rules, regulations, orders, ordinances,
licenses and permits of any Governmental Entity.

                "APPLICABLE PERMIT" shall mean any Permit, including any zoning,
environmental protection, pollution, sanitation, FERC, safety, siting or
building Permit, (a) that is necessary at any given time in light of the stage
of development, construction or operation of the Facilities or Facility Sites to
acquire, operate, maintain, repair, own or use the Facilities or Facility Sites
as contemplated by the Operative Documents, to sell electricity therefrom, to
enter into any Operative Document or to consummate any transaction contemplated
thereby, or (b) that is necessary so that none of the Owner Lessor, the Owner
Participant, the Indenture Trustee, the Pass Through Trustee or any
Certificateholder nor any Affiliate of any of them may be deemed by any
Governmental Entity to be subject to regulation under PUHCA or under any other
Applicable Law relating to electric utilities, generators, wholesalers or
retailers, in each case as a result of the operation of the Facilities or either
of them or the sale of electricity therefrom.

                "APPLICABLE RATE" shall mean the Prime Rate plus 1% per annum.

                "APPRAISER" shall mean Deloitte & Touche LLP Valuation Group.

                "APPRAISAL PROCEDURE" shall mean (except with respect to the
Closing Appraisal and any appraisal to determine Fair Market Sales Value or Fair
Market Rental Value during any period when a Lease Event of Default shall have
occurred and be continuing), an appraisal conducted by an appraiser or
appraisers in accordance with the following procedures. Within ten (10) Business
Days of written notice from the initiating party of the commencement of an
Appraisal Procedure, the Owner Participant and the applicable Facility Lessee
will each appoint one Independent Appraiser, which Independent Appraisers shall
attempt to agree upon the Fair Market Sales Value or Fair Market Rental Value
that is the subject of the appraisal. If either the Owner Participant or the
applicable Facility Lessee does not appoint its appraiser within such ten
Business Day period, the determination of the other appraiser shall be
conclusive and binding on the Owner Participant and such Facility Lessee. If the
appraisers appointed by the Owner Participant and such Facility Lessee are
unable to agree upon the value, period, amount or other determination in
question within thirty (30) days, such appraisers shall jointly appoint a third
Independent Appraiser or, if such appraisers do not appoint a third Independent
Appraiser, the Owner Participant and such Facility Lessee shall jointly appoint
the third Independent Appraiser. In such case, the average of the determinations
of the three appraisers shall be conclusive and

                                       4
<PAGE>   5

binding on the Owner Participant and such Facility Lessee, unless the
determination of one appraiser is disparate from the middle determination by
more than twice the amount by which the third determination is disparate from
the middle determination, in which case the determination of the most disparate
appraiser shall be excluded, and the average of the remaining two determinations
shall be conclusive and binding on the Owner Participant and such Facility
Lessee. Any appraisal determined in accordance with the foregoing must be
delivered within thirty (30) days after the date on which the last of the
appraisers is appointed pursuant to the process set forth above.

                "ASSIGNED DOCUMENTS" shall have the meaning specified in clause
(2) of the Granting Clause of the Collateral Trust Indenture.

                "ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
rate of interest set forth or implicit in the terms of such lease (or, if not
practicable to determine such rate, the weighted average rate of interest borne
by the Certificates outstanding under the Pass Through Trust Agreement
(calculated, in the event of the issuance of any original issue discount Lessor
Notes, based on the imputed interest rate with respect thereto)), compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).

                "AVERAGE LIFE" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of (A) the numbers of years from the date
of determination to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption or similar payment with respect to
such Indebtedness or Preferred Stock multiplied by (B) the amount of such
payment by (ii) the sum of all such payments.

                "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code
of 1978, as amended from time to time, 11 U. S.C. Section 101 et seq.

                "BANKRUPTCY LAW" means Title 11 of the United States Code or any
similar Federal or State law for the relief of debtors.

                "BASIC LEASE TERM" with respect to a Facility Lease, shall have
the meaning specified in Section 3.1 of such Facility Lease.

                "BASIC RENT" with respect to a Facility Lease, shall have the
meaning specified in Section 3.2(a) of such Facility Lease.

                "BENEFICIARY" OR "BENEFICIARIES" with respect to a Calpine
Guaranty, shall have the meaning set forth in Section 4 of such Calpine
Guaranty.

                "BILL(s) OF SALE" shall mean, individually or collectively as
the context may require, the Tiverton Bill of Sale or Rumford Bill of Sale.

                                       5
<PAGE>   6

                "BOARD OF DIRECTORS" means the Board of Directors or General
Partner, as applicable, of the Guarantor or the Facility Lessees, as the context
requires, or any authorized committee of either thereof.

                "BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Guarantor to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Indenture Trustee.

                "BURDENSOME TERMINATION NOTICE" with respect to a Facility
Lease, shall mean a notice required in accordance with Section 13.1 or Section
13.2, as the case may be, of such Facility Lease upon the exercise of a
termination option by the applicable Facility Lessee.

                "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which commercial banking institutions are authorized or
required by law, regulation or executive order to be closed in New York, New
York, the city and the state in which the Corporate Trust Office of the
Indenture Trustee is located or the city and state in which the Pass Through
Trustee is located.

                "CALPINE" shall mean Calpine Corporation, a Delaware
corporation.

                "CALPINE DOCUMENTS" shall mean have the meaning set forth in
Section 3.1 of the Calpine Guaranty (Tiverton) or the Calpine Guaranty
(Rumford), as the context may require.

                "CALPINE GUARANTY" OR "CALPINE GUARANTIES" shall mean,
individually or collectively as the context may require, the Calpine Guaranty
(Tiverton) and the Calpine Guaranty (Rumford).

                "CALPINE GUARANTY EVENT OF DEFAULT" shall mean any of the
"Events of Default" as specified in Section 7.1 of the Calpine Guaranty
(Tiverton) and/or the Calpine Guaranty (Rumford), as the case may be.

                "CALPINE GUARANTY (RUMFORD)" shall mean the Calpine Guaranty and
Payment Agreement (Rumford) dated as of the Closing Date in favor of the
Beneficiaries, substantially in the form of Exhibit H-2 to the Participation
Agreement.

                "CALPINE GUARANTY (TIVERTON)" shall mean the Calpine Guaranty
and Payment Agreement (Tiverton) dated as of the Closing Date in favor of the
Beneficiaries, substantially in the form of Exhibit H-1 to the Participation
Agreement.

                "CALPINE PARTIES" shall mean Calpine, the Facility Lessees,
Calpine Eastern Corporation, and each other Affiliate of Calpine that is party
to any Operative Document.

                "CAPITAL STOCK" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation or any and all equivalent ownership interests in a Person (other
than a corporation).

                                       6
<PAGE>   7

                "CAPITALIZED LEASE OBLIGATIONS" of any Person means the rental
obligations under any lease of any property (whether real, personal or mixed) of
which the discounted present value of the rental obligations of such Person as
lessee, in conformity with GAAP, is required to be capitalized on the balance
sheet of such Person; the Stated Maturity of any such lease shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without payment
of a penalty.

                "CERTIFICATE PURCHASE AGREEMENT shall mean the Certificate
Purchase Agreement, dated the Closing Date, among the Facility Lessees, Calpine,
and the Initial Purchasers.

                "CERTIFICATEHOLDER INDEMNITEE" shall have the meaning set forth
in Section 9.2(a) of the Participation Agreement.

                "CERTIFICATEHOLDERS" shall mean each of the holders of
Certificates, and each of such holder's successors and permitted assigns.

                "CERTIFICATES" shall mean the 9.00% Pass Through Certificates
issued on the Closing Date and any certificates issued in replacement therefor
pursuant to Section 3.3, 3.4 or 3.5 of the Pass Through Trust Agreement.

                "CLAIM(s)" individually or collectively as the context may
require, shall mean any liability (including in respect of negligence (whether
passive or active or other torts), strict or absolute liability in tort or
otherwise, warranty, latent or other defects (regardless of whether or not
discoverable), statutory liability, property damage, bodily injury or death),
obligation, loss, settlement, damage, penalty, claim, action, suit, proceeding
(whether civil or criminal), judgment, penalty, fine and other legal or
administrative sanction, judicial or administrative proceeding, cost, expense or
disbursement, including reasonable legal, investigation and expert fees,
expenses and reasonable related charges, of whatsoever kind and nature.

                "CLOSING"' shall have the meaning specified in Section 2.2(a) of
the Participation Agreement.

                "CLOSING APPRAISAL" shall mean the appraisal, dated as of the
Closing Date, prepared by the Appraiser with respect to the Owner Lessor's
Interest in each Facility and the related Facility Site.

                "CLOSING DATE" shall mean the Scheduled Closing Date or such
later date on which the Closing shall occur.

                "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.

                "COLLATERAL DOCUMENTS" shall mean the Collateral Trust Indenture
and the financing statements.

                                       7
<PAGE>   8

                "COLLATERAL TRUST INDENTURE" shall mean the Indenture of Trust,
Mortgage and Security Agreement, dated as of the Closing Date, between the Owner
Lessor and the Indenture Trustee, in substantially the form of Exhibit I to the
Participation Agreement.

                "COMMENCEMENT DATE" with respect to a Facility Site Lease, shall
have the meaning specified in Section 2.1(a) of such Facility Site Lease.

                "COMPETITOR" shall have the meaning specified in Section 7.1(b)
of the Participation Agreement.

                "COMPONENT" shall mean any appliance, part, instrument,
appurtenance, accessory, furnishing, equipment or other property of whatever
nature that may from time to time be incorporated in the Facility, except to the
extent constituting Improvements or spare parts while being held for future use.

                "CONSOLIDATED CURRENT LIABILITIES," as of the date of
determination, means the aggregate amount of consolidated liabilities of the
Guarantor and its consolidated Restricted Subsidiaries which may properly be
classified as current liabilities (including taxes accrued as estimated), after
eliminating (i) all inter-company items between the Guarantor and its
Subsidiaries and (ii) all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP.

                "CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of
determination, as applied to the Guarantor, the total amount of Consolidated
assets (less accumulated depreciation or amortization, allowances for doubtful
receivables, other applicable reserves and other properly deductible items)
under GAAP which would appear on a Consolidated balance sheet of the Guarantor
and its Subsidiaries, determined in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom, to the extent
otherwise included, the amounts of: (i) Consolidated Current Liabilities; (ii)
minority interests in consolidated Restricted Subsidiaries held by Persons other
than the Guarantor or a Restricted Subsidiary; (iii) excess of cost over fair
value of assets of businesses acquired, as determined in good faith by the Board
of Directors; (iv) any revaluation or other write-up in value of assets
subsequent to December 31, 1993 as a result of a change in the method of
valuation in accordance with GAAP; (v) unamortized debt discount and expenses
and other unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or developmental expenses
and other intangible items; (vi) treasury stock; and (vii) any cash set apart
and held in a sinking or other analogous fund established for the purpose of
redemption or other retirement of Capital Stock to the extent such obligation is
not reflected in Consolidated Current Liabilities.

                "CONSOLIDATED SUBSIDIARY" shall mean with respect to any Person
at any date any Subsidiary or other entity the accounts of which would be
consolidated in accordance with GAAP with those of such Person in its
consolidated financial statements as of such date.

                "CONSOLIDATION" means, with respect to any Person, the
consolidation of accounts of such Person and each of its subsidiaries if and to
the extent the accounts of such

                                       8
<PAGE>   9

Person and such subsidiaries are consolidated in accordance with GAAP. The term
"Consolidated" shall have a correlative meaning.

                "CORPORATE TRUST OFFICE" shall mean, with respect to the
Indenture Trustee, the office of such Person in the city in which at any
particular time its corporate trust business shall be principally administered.

                "CSFB" shall mean Credit Suisse First Boston.

                "CSFB-OP LETTER AGREEMENT" shall mean the letter agreement dated
as the Closing Date among the Owner Participant, the OP Guarantor and CSFB, as
in effect on the Closing Date.

                "CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

                "DEBT PORTION OF PERIODIC RENT" means for any Rent Payment Date
with respect to a Facility Lease, the difference between (i) the Periodic Rent
scheduled to be paid under such Facility Lease on such Rent Payment Date and
(ii) the Equity Portion of Periodic Rent for such Rent Payment Date.

                "DEBT PORTION OF TERMINATION VALUE" in respect of any
determination of Termination Value or amount determined by reference to the
Termination Value payable pursuant to the Tiverton Operative Documents and/or
the Rumford Operative Documents, as the case may be, shall mean an amount equal
to the excess of (i) the Termination Value set forth opposite the Termination
Date corresponding to such date of determination on Schedule 2 of the applicable
Facility Lease, and, if such date of determination is a Rent Payment Date,
Periodic Rent due on that date (to the extent payable in arrears) minus (ii) the
sum of (A) the Equity Portion of Termination Value set forth opposite the
Termination Date corresponding to such date of determination on Exhibit A to the
applicable Calpine Guaranty, and, (B) if such date of determination is a Rent
Payment Date, the Equity Portion of Periodic Rent due on that date. The Debt
Portion of Termination Value is set forth on Exhibit B to the applicable Calpine
Guaranty.

                "DEFAULT" means any event which is, or after notice or passage
of time or both would be, a Calpine Guaranty Event of Default.

                "DELAYED PERMIT", with respect to a Facility Lease, means a
material environmental permit required under Applicable Law in connection with
the sale on the Closing Date of such Facility to the Owner Lessor, which permit
has not been obtained by the applicable Facility Lessee when required by
applicable law if such failure would reasonably be expected to (i) have a
material adverse effect on the applicable Facility or (ii) result in a criminal
or material civil liability to the Owner Lessor or the Owner Participant.

                "DEPRECIATION DEDUCTION" shall have the meaning specified in
Section 1(a) of the Tax Indemnity Agreement.

                "DISCOUNT RATE" shall mean each Facility Lessee's incremental
borrowing rate as determined by such Facility Lessee in accordance with FASB 13.

                                       9
<PAGE>   10

                "DOLLARS" or the sign "$" shall mean United States dollars or
other lawful currency of the United States.

                "DRAWING EVENT" means any of the following events:

                (A) Calpine has failed to replace the Letter of Credit with a
Qualifying Letter of Credit within the respective time periods specified in
Section 5.46(b), (c) or (d) of the Participation Agreement or comply with its
obligations under Section 5.46(i) of the Participation Agreement;

                (B) a Lease Event of Default has occurred and is continuing
under the Tiverton Facility Lease or the Rumford Facility Lease and (i) pursuant
to Sections 5.6(b) or 5.6(c) of the Collateral Trust Indenture, the Owner
Lessor, as between itself and the Indenture Trustee, is permitted to exercise
remedies against Calpine under any of the Calpine Guaranties or (ii) the Owner
Lessor shall be entitled to exercise its rights under Section 2.1(d) of any of
the Calpine Guaranties;

                (C) the Indenture Trustee (as assignee of the Owner Lessor) has
either (1) exercised remedies under Sections 17.1(b), (c), (d) or (e) of either
of the Tiverton Facility Lease or the Rumford Facility Lease, (2) demanded
payment of all or a portion of Termination Value, the Equity Portion of
Termination Value or the Debt Portion of Termination Value under any of the
Calpine Guaranties or any of the Facility Leases or (3) foreclosed upon the
Indenture Estate;

                (D) the Collateral Trust Indenture has terminated in accordance
with Section 9.1 thereof and a Lease Event of Default pursuant to the Tiverton
Facility Lease or the Rumford Facility Lease has occurred and is continuing; or

                (E) a Lease Event of Default pursuant to Section 16(g) or 16(h)
of the Tiverton Facility Lease or the Rumford Facility Lease, or "Event of
Default" under Section 17(f) or Section 17(g) of the Calpine Guaranty (Tiverton)
or the Calpine Guaranty (Rumford) shall have occurred or be continuing.

                "EASEMENTS" shall mean the Tiverton Easements and the Rumford
Easements.

                "ECA SHORTFALL EVENT" means a failure of the Guarantor to
maintain the coverage of the Qualifying Letter of Credit or the Equity
Collateral Account at the levels required by Section 5.46 of the Participation
Agreement, after notice by the Owner Participant of such failure and the lapse
of the cure period referred to in Section 5.46(k) of the Participation
Agreement.

                "EFFECTIVE DATE" shall mean December 19, 2000.

                "ENFORCEMENT NOTICE" shall have the meaning specified in Section
5.1 of the Collateral Trust Indenture.

                "ENGINEERING CONSULTANT" shall mean S&W Consultants, Inc.

                                       10
<PAGE>   11

                "ENGINEERING REPORT" shall mean, with respect to the Facilities,
the report of the Engineering Consultant, dated December, 2000.

                "ENVIRONMENTAL CONDITION" shall mean any action, omission,
event, condition or circumstance, including, without limitation, the presence of
any Hazardous Substance, which does or reasonably could (i) require assessment,
investigation, abatement, correction, removal or remediation, (ii) give rise to
any obligation or liability of any nature (whether civil or criminal, arising
under a theory of negligence or strict liability, or otherwise) under any
Environmental Law, (iii) create or constitute a public or private nuisance or
trespass, or (iv) constitute a violation of or non-compliance with any
Environmental Law.

                "ENVIRONMENTAL CONSULTANT" shall mean Earth Tech, Inc.

                "ENVIRONMENTAL LAWS" shall mean any international, national,
Native American, provincial, regional, federal, state, municipal or local laws,
ordinances, rules, orders, statutes, decrees, judgments, injunctions,
directives, permits, licenses, approvals, codes, regulations, common or
decisional law (including principles of tort, negligence, trespass, nuisance,
strict liability, contribution and indemnification) or other requirement of any
Governmental Entity relating to the environment, the safety or health of human
beings or other living organisms, natural resources or toxic, explosive,
corrosive, flammable, infectious, radioactive or other Hazardous Substances, as
each may from time to time be amended, supplemented or supplanted.

                "ENVIRONMENTAL REPORTS" shall mean (a) that certain Phase I
Environmental Site Assessment (Maine Power Associates, 43 Rumford Industrial
Parkway, Rumford, Maine) prepared for Calpine by the Environmental Consultant
dated December 2000 and (b) that certain Phase I Environmental Site Assessment
(Tiverton Power Facility, 304 Progress Way, Tiverton, Rhode Island) prepared for
Calpine by the Environmental Consultant dated December 2000.

                "EQUITY COLLATERAL ACCOUNT" shall mean the Equity Collateral
Account referred to in Section 5.46 of the Participation Agreement.

                "EQUITY INVESTMENT" shall mean the amount specified with respect
thereto on Schedule 1-A to the Participation Agreement.

                "EQUITY PORTION OF PERIODIC RENT" shall mean for any Rent
Payment Date (A) with respect to the Rumford Facility, the difference between
(i) Periodic Rent scheduled to be paid under the Rumford Facility Lease on such
Rent Payment Date and (ii) the principal and interest scheduled to be paid on
the Rumford Lessor Notes on such Rent Payment Date, and (B) with respect to the
Tiverton Facility, the difference between (i) Periodic Rent scheduled to be paid
under the Tiverton Facility Lease on such Rent Payment Date and (ii) the
principal and interest scheduled to be paid on the Tiverton Lessor Notes on such
Rent Payment Date.

                "EQUITY PORTION OF TERMINATION VALUE" in respect of any
determination of Termination Value or amount determined by reference to
Termination Value payable pursuant to the Tiverton Operative Documents and/or
the Rumford Operative Documents, as the case may be, shall mean an amount equal
to the excess, if any, of (i) the Termination Value set forth opposite the
Termination Date corresponding to such date of determination on Schedule 2 of
the

                                       11
<PAGE>   12

applicable Facility Lease, and, if such date of determination is a Rent Payment
Date, Periodic Rent due on that date (to the extent payable in arrears) over
(ii) the balance, including scheduled (in accordance with the payment terms of
the related Lessor Notes) accrued interest, on the related Lessor Notes
scheduled (in accordance with the payment terms of such Lessor Notes) to be
outstanding on such date of determination corresponding to such Facility Lease.
The Equity Portion of Termination Value is set forth on Exhibit A to the
applicable Calpine Guaranty.

                "ERISA" shall mean the Employee Retirement Income Security Act
of 1974.

                "ERISA AFFILIATE" shall mean each person (as defined in Section
3(9) of ERISA) which together with either of the Facility Lessees or a
Subsidiary of either of the Facility Lessees would be deemed to be a "single
employer" (i) within the meaning of Section 414(b), (c), (m) and/or (o) of the
Code or (ii) as a result of either of the Facility Lessees or a Subsidiary of
either of the Facility Lessees being or having been a general partner of such
person.

                "EVENT OF LOSS" shall mean, with respect to either Facility, any
of the following events:

                        (i) the loss of such Facility or use thereof due to
destruction or damage that renders repair uneconomic or that renders such
Facility permanently unfit for normal use or which does not satisfy the
preconditions for repair of such Facility set forth below; or

                        (ii) any damage that results in an insurance settlement
with respect to such Facility on the basis of a total loss or an agreed
constructive or a compromised total loss of such Facility; or

                        (iii) (a) seizure, condemnation, confiscation or taking
of, or requisition (a "Requisition") of title to such Facility by any
Governmental Entity that shall have resulted in loss by the Owner Lessor of
title to such Facility, following exhaustion of all permitted appeals or an
election by the applicable Facility Lessee in its discretion not to pursue such
appeals or rights; provided that no such contest (or exercise) shall extend
beyond the earlier of the date which is (x) six months after the loss of such
title, or (y) 48 months prior to the end of the Basic Lease Term or any Renewal
Lease Term then in effect or elected by such Facility Lessee or (b) Requisition
of use of such Facility or title to or the use of the related Facility Site by
any Governmental Entity that shall have resulted in the loss of possession of
such Facility or all or any part of the related Facility Site that is required
for the use or operation of such Facility; provided that in any case involving
Requisition of use of such Facility, or all or any part of the related Facility
Site that is required for the use or operation, of such Facility, such event
shall be an Event of Loss only if loss of possession continues beyond the Basic
Lease Term or any Renewal Lease Term then in effect or elected by the such
Facility Lessee; or

                        (iv) (A) if elected in writing by the Owner Participant,
such election to be made only in circumstances where the termination of the
Facility Lease with respect to such Facility shall remove the basis of the
regulation described below, subjection of the Owner Participant or the Owner
Lessor to any public utility regulation of any Governmental Entity or law which
in the reasonable opinion of the Owner Participant is burdensome, or the
subjection of

                                       12
<PAGE>   13

the Owner Participant's or the Owner Lessor's interest in the Facility Leases to
any rate of return regulation by any Governmental Entity, in either case by
reason of the participation of the Owner Lessor or the Owner Participant in the
transactions contemplated by the Operative Documents and not, in any event, as a
result of (a) investments, loans or other business activities of the Owner
Participant or any of its Affiliates in respect of equipment or facilities
similar in nature to the Facilities or any part thereof or in any other
electrical, cogeneration or other energy or utility related equipment or
facilities or the general business or other activities of the Owner Participant
or any of its Affiliates or the nature of any of the properties or assets from
time to time owned, leased, operated, managed or otherwise used or made
available for use by the Owner Participant or any of its Affiliates or (b) a
failure of the Owner Participant to perform routine, administrative or
ministerial actions the performance of which would not subject the Owner
Participant to any adverse consequence (in the reasonable opinion of such Owner
Participant acting in good faith), provided that the Facility Lessees and the
Owner Lessor and Owner Participant agree to cooperate and to take reasonable
measures to alleviate the source or consequence of any regulation constituting
an Event of Loss under this paragraph (iv), so long as there shall be no adverse
consequences to the Owner Lessor or Owner Participant as a result of such
cooperation or the taking of reasonable measures ,or (B) if elected in writing
by the Owner Participant, any failure to obtain any Delayed Permit by June 30,
2001, provided that such period shall be extended to December 31, 2001 if the
relevant Facility Lessee certifies (in an Officer's Certificate) on or before
June 30, 2001 to the Owner Participant that it is reasonable to expect that the
Facility Lessee will obtain such permit by on or before December 31, 2001, and
sets forth in such Officer's Certificate relevant facts in support of such
certification, or (C) if elected in writing by the Owner Participant, any
failure by the Facility Lessees to obtain, within 180 days following the Closing
Date, an order of FERC in which FERC disclaims jurisdiction over the Owner
Participant and the Owner Lessor (the events and circumstances described in any
of clause (A), (B) or (C) herein, a "Regulatory Event of Loss").

                        (v) if elected by the Owner Participant, the FERC Owner
Lessor EWG Orders shall not have been obtained and become final within ninety
(90) days of the Closing Date, such election to be conditioned upon receipt of a
reasoned legal opinion of nationally recognized independent counsel (Owner
Participant's outside counsel at Closing to be deemed to meet such
qualifications) that any pending proceeding, if adversely determined, would
reasonably be expected to have a material adverse effect on the Owner
Participant or subject the Owner Participant or the Owner Lessor to regulation
as a public utility company or a holding company under the Holding Company Act.

                The date of occurrence of an Event of Loss described in clauses
(i) or (ii) above shall be the date of the applicable Facility Lessee's notice
to the Owner Lessor, the Owner Participant, the Indenture Trustee and the Pass
Through Trustee pursuant to Section 10.1 of the applicable Facility Lease that
it does not elect to rebuild the applicable Facility pursuant to Section 10.3 of
the applicable Facility Lease but to pay Termination Value and terminate such
Facility Lease with respect to such Facility pursuant to Section 10.2 thereof,
or the date an Event of Loss is deemed to occur pursuant to the last sentence of
Section 10.1 of such Facility Lease. The date of occurrence of an Event of Loss
described in clause (iii)(a) above shall be the earlier of (A) the date which is
six months following the loss of title, (B) the date upon which the applicable
Facility Lessee shall have concluded all efforts to contest such loss of title
or exercise its rights of eminent domain, and (C) the date which is 48 months
prior to the end of the Basic

                                       13
<PAGE>   14

Lease Term or any Renewal Lease Term then in effect or elected by the Facility
Lessee (if an event described in clause (iii)(a) shall be continuing at such
time). The date of occurrence of an Event of Loss described in clause (iii)(b)
above shall be the date of requisition of title to the relevant Facility Site
or, in the case of a requisition of use of such Facility Site, the date which is
the scheduled expiration date of the Basic Lease Term or any Renewal Lease Term
then in effect or elected by the applicable Facility Lessee, as the case may be
(if an event described in clause (iii)(b) shall be continuing at such time). The
date of occurrence of an Event of Loss described in clause (iv) above shall be
the date on which the Facility Lessees receive the Owner Participant's election
made in accordance with such clause (iv) during any period when an event is
continuing which upon election by Owner Participant in accordance with such
clause (iv) would constitute a Regulatory Event of Loss. The date of occurrence
of an Event of Loss described in clause (v) above shall be the date on which the
Facility Lessees receive the Owner Participant's election made in accordance
with such clause (v).

                "EXCEPTED PAYMENTS" shall mean and include (i)(A) any right,
title or interest to any indemnity (whether or not constituting Supplemental
Rent and whether or not a Lease Event of Default exists) payable to either the
Owner Lessor, the Administrator, the Lease Indenture Company, or the Owner
Participant or to their respective Indemnitees and successors and permitted
assigns (other than the Indenture Trustee) pursuant to Section 2.3, 9.1, 9.2,
11.1 or 11.2 of the Participation Agreement, and any payments under any Tax
Indemnity Agreement or (B) any amount payable by a Facility Lessee to the Owner
Lessor or the Owner Participant to reimburse any such Person for its costs and
expenses in exercising its rights under the Operative Documents, (ii)(A)
insurance proceeds, if any, payable to the Owner Lessor or the Owner Participant
under insurance separately maintained by the Owner Lessor or the Owner
Participant with respect to the Facilities as permitted by Section 3(b) of
Schedule 5.45 to the Participation Agreement or (B) proceeds of personal injury
or property damage liability insurance maintained under any Operative Document
for the benefit of the Owner Lessor or the Owner Participant, (iii) any amount
payable to the Owner Participant as the purchase price of the Owner
Participant's right and interest in the Member Interest, (iv) all other fees
expressly payable to the Owner Participant under the Operative Documents, (v)
all right, title and interest in any Qualifying Letter of Credit, the Equity
Collateral Account and proceeds of drawings by the Owner Lessor under any
Qualifying Letter of Credit and all funds on deposit in the Equity Collateral
Account, (vi) all right, title and interest in (x) amounts constituting the
Equity Portion of Termination Value, the Equity Portion of Periodic Rent or any
interest thereon payable to the Owner Lessor by the Guarantor as the result of a
proceeding brought by the Owner Lessor as permitted by Section 5.6(b) of the
Collateral Trust Indenture and which, pursuant to such section, the Owner Lessor
is entitled to retain for its own account and (y) amounts payable following
foreclosure, sale or transfer to the extent provided in Section 2.1(d) of each
of the Calpine Guaranties; (vii) any payments in respect of interest, or any
payments made on an After-Tax Basis, to the extent attributable to payments
referred to in clause (i) through (vi) above; (viii) any amounts paid to the
Owner Lessor as reimbursement for amounts expended pursuant to Section 21 of
each of the Tiverton Facility Lease and the Rumford Facility Lease; (ix) all
right, title and interest in the credit support arrangements referred to in
clause (iv) of Section 3.6(a) of each of the Guaranties; (x) proceeds of the
items referred to in clause (i) through (ix) above; and (xi) any rights to
demand, collect, sue for, or otherwise receive and enforce payment of the
foregoing amounts, including under the Calpine Guaranties, but without limiting
clause (vi) of this definition above.

                                       14
<PAGE>   15

                "EXCESS AMOUNT" shall have the meaning specified in Section 14.3
of the Participation Agreement, and, with respect to the Collateral Trust
Indenture, the meaning specified in Section 9.13 thereof.

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

                "EXCLUDED TAXES" shall have the meaning specified in Section
9.2(b) of the Participation Agreement.

                "EXEMPT WHOLESALE GENERATOR" or "EWG" shall mean an entity which
is an "exempt wholesale generator" as defined in Section 32 of PUHCA.

                "FACILITY" shall mean either the Tiverton Facility or the
Rumford Facility, as the case may be.

                "FACILITIES" shall mean a collective reference to the Tiverton
Facility and the Rumford Facility.

                "FACILITY LEASE(s)" shall mean, individually or collectively as
the context may require, Tiverton Facility Lease and Rumford Facility Lease.

                "FACILITY LEASE TERM" with respect to a Facility Lease, shall
mean the term of such Facility Lease, including the Basic Lease Term and all
Renewal Lease Terms.

                "FACILITY LESSEE(s)" shall mean individually or collectively as
the context may require, (i) Tiverton Lessee as lessee under the Tiverton
Facility Lease or (ii) Rumford Lessee as lessee under the Rumford Facility
Lease.

                "FACILITY SITE(s)" shall mean, individually or collectively as
the context may require, (i) the Tiverton Site or (ii) the Rumford Site.

                "FACILITY SITE LEASE(s)" shall mean, individually or
collectively as the context may require, the Tiverton Site Lease and the Rumford
Site Lease.

                "FACILITY SITE SUBLEASE(s)" shall mean, individually or
collectively as the context may require, the Facility Site Sublease (Tiverton)
and the Facility Site Sublease (Rumford).

                "FACILITY SITE SUBLEASE (RUMFORD)" shall mean the Facility Site
Sublease (Rumford) dated as of December 19, 2000 among the Rumford Site
Sublessor and the Rumford Site Sublessee.

                "FACILITY SITE SUBLEASE (TIVERTON)" shall mean the Facility Site
Sublease (Tiverton) dated as of December 19, 2000 among the Tiverton Site
Sublessor and the Tiverton Site Sublessee.

                "FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" shall
mean with respect to any property or service as of any date, the cash rent or
cash price obtainable in an arm's-length lease, sale or supply, respectively,
between an informed and willing lessee or

                                       15
<PAGE>   16

purchaser under no compulsion to lease or purchase and an informed and willing
lessor or seller or supplier under no compulsion to lease or sell or supply of
the property or service in question, and shall, in the case of any Facility or
the Owner Lessor's Interest, be determined (except pursuant to Section 17 of the
Facility Leases or as otherwise provided below or in the Operative Documents) on
the basis and assumption that (i) the conditions contained in Sections 7 and 8
of the Facility Leases shall have been complied with in all respects, (ii) the
lessee or buyer shall have rights in, or an assignment of, the Operative
Documents to which the Owner Lessor is a party and the obligations relating
thereto, (iii) the Facility or the Owner Lessor's Interest, as the case may be,
is free and clear of all Liens (other than Owner Lessor's Liens, Owner
Participant's Liens and Indenture Trustee Liens), (iv) taking into account the
remaining term of the Facility Site Leases, and (v) in the case the Fair Market
Rental Value, taking into account the terms of the Facility Lease and the other
Operative Documents. If the Fair Market Sales Value of the Owner Lessor's
Interest is to be determined during the continuance of a Lease Event of Default
or in connection with the exercise of remedies by the Owner Lessor pursuant to
Section 17 of the Facility Lease, such value shall be determined by an
Independent Appraiser appointed solely by the Owner Lessor on an "as-is",
"where-is" and "with all faults" basis and shall take into account all Liens
(other than Owner Lessor's Liens, Owner Participant's Liens and Indenture
Trustee Liens); provided, however, in any such case where the Owner Lessor shall
be unable to obtain constructive possession sufficient to realize the economic
benefit of the Owner Lessor's Interest, Fair Market Sales Value of the Owner
Lessor's Interest shall be deemed equal to $0 (zero). If in any case other than
in the preceding sentence the parties are unable to agree upon a Fair Market
Sales Value of the Owner Lessor's Interest within 30 days after a request
therefor has been made, the Fair Market Sales Value of the Owner Lessor's
Interest shall be determined by appraisal pursuant to the Appraisal Procedures.
Any fair market value determination of a Severable Improvement shall take into
consideration any liens or encumbrances to which the Severable Improvement being
appraised is subject and which are being assumed by the transferee.

                "FASB 13" shall mean the Statement of the Financial Accounting
Standards Board No. 13, as amended and interpreted from time to time.

                "FASB 98" shall mean the Statement of the Financial Accounting
Standards Board No. 98, as amended and interpreted from time to time.

                "FEDERAL POWER ACT" or "FPA" shall mean the Federal Power Act,
as amended.

                "FERC" shall mean the Federal Energy Regulatory Commission of
the United States or any successor or predecessor agency thereto.

                "FERC ORDERS" shall mean any or all of the following of the FERC
Orders required pursuant to Section 4.37 of the Participation Agreement:

                        (i) a determination by FERC of EWG status of each
Facility Lessee and Owner Lessor and the Owner Participant;

                        (ii) an approval from FERC for each Facility Lessee to
sell power at market-based rates effective on or before the Closing Date;

                                       16
<PAGE>   17

                        (iii) either an approval by FERC of the issuance of
securities and the assumption of obligations necessary to effect the
sale/leaseback pursuant to Section 204 of the Federal Power Act or blanket
authorization to issue securities and assume obligations under such Section; and

                        (iv) an approval of the transfer of certain general and
limited partnership interests from affiliates of Energy Management, Inc. to
Calpine Corporation and its affiliates under Section 203 of the Federal Power
Act.

                "FERC OWNER LESSOR EWG ORDERS" shall mean the orders issued by
the FERC determining that the Owner Lessor and the Owner Participant are EWGs.

                "FINAL DETERMINATION" shall have the meaning specified in
Section 9 of the Tax Indemnity Agreement.

                "FIRST RENEWAL LEASE TERM" with respect to a Facility Lease,
shall have the meaning specified in Section 15.1(a) of such Facility Lease.

                "FIRST WINTERGREEN RENEWAL LEASE OPTION" with respect to a
Facility Site Lease, shall have the meaning specified in Section 2.2(a)(i) of
such Facility Site Lease.

                "FMV RENEWAL LEASE OPTION" with respect to a Facility Lease
Term, shall have the meaning set forth in Section 2.2(a)(iii) of such Facility
Site Lease.

                "FMV RENEWAL LEASE TERM" with respect to a Facility Lease, shall
have the meaning specified in Section 15.2 of such Facility Lease.

                "FORECLOSURE TRANSFER" with respect to a Facility Site Lease,
shall have the meaning set forth in Section 19.3 of such Facility Site Lease.

                "GAAP" shall mean generally accepted accounting principles.

                "GOVERNMENTAL ACTIONS" shall mean all authorizations, consents,
approvals, waivers, exceptions, variances, filings, permits, orders, licenses,
exemptions and declarations of or with any Governmental Entity and shall include
those citing, environmental and operating permits and licenses (including the
Applicable Permits) that are required for the use and operation of the
Facilities and the Facility Sites.

                "GOVERNMENTAL ENTITY" shall mean and include any international,
national, Native American, provincial, regional, state, municipal or local
government, any political subdivision of any thereof or any board, commission,
department, division, organ, instrumentality, court or agency of any thereof.

                "GUARANTOR" shall mean Calpine Corporation.

                "GUARANTOR ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the
Guarantor Assignment and Assumption Agreement (Tiverton) or the Guarantor
Assignment and Assumption Agreement (Rumford), as the context may require.

                                       17
<PAGE>   18

                "GUARANTOR ASSIGNMENT AND ASSUMPTION AGREEMENT (RUMFORD)" shall
mean an assignment and assumption agreement in form and substance substantially
in the form of Exhibit N-2 to the Participation Agreement.

                "GUARANTOR ASSIGNMENT AND ASSUMPTION AGREEMENT (TIVERTON)" shall
mean an assignment and assumption agreement in form and substance substantially
in the form of Exhibit N-1 to the Participation Agreement.

                "HAZARDOUS SUBSTANCE" shall mean any pollutant, contaminant,
hazardous substance, hazardous waste, toxic substance, petroleum or
petroleum-derived substance, waste, or additive, asbestos, PCBs, radioactive
material, or other compound, element, material or substance in any form
whatsoever (including products) regulated, restricted or controlled by or under
any Environmental Law.

                "HOLDING COMPANY ACT" shall mean the Public Utility Holding
Company Act of 1935, as amended.

                "IMPROVEMENT" shall mean an addition, betterment or enlargement
of the Facilities. Improvements shall include any Required Improvements or
Optional Improvements, but do not include Components.

                "INCOME TAXES" shall have the meaning set forth in Section
9.2(b)(i) of the Participation Agreement.

                "INCUR" means, as applied to any obligation, to create, incur,
issue, assume, guarantee or in any other manner become liable with respect to,
contingently or otherwise, such obligation, and "Incurred," "Incurrence" and
"Incurring" shall each have a correlative meaning; provided, however, that any
amendment, modification or waiver of any provision of any document pursuant to
which Indebtedness was previously Incurred shall not be deemed to be an
Incurrence of Indebtedness as long as (i) such amendment, modification or waiver
does not (A) increase the principal or premium thereof or interest rate thereon,
(B) change to an earlier date the Stated Maturity thereof or the date of any
scheduled or required principal payment thereon or the time or circumstances
under which such Indebtedness may or shall be redeemed, (C) if such Indebtedness
is contractually subordinated in right of payment to the Obligations (Tiverton)
or the Obligations (Rumford), as the context may require, modify or affect, in
any manner adverse to the Beneficiaries, such subordination or (D) if the
Guarantor is the obligor thereon, provide that a Restricted Subsidiary shall be
an obligor and (ii) such Indebtedness would, after giving effect to such
amendment, modification or waiver as if it were an Incurrence, comply with
clause (i) of the first proviso to the definition of "Refinancing Indebtedness."

                "INDEBTEDNESS" of any Person shall mean (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or services, (iv) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (v)
all Lease Obligations of such Person

                                       18
<PAGE>   19

(including payments of Termination Value and any other amounts owed pursuant to
the Operative Documents), (vi) all obligations, contingent or otherwise, of such
Person under acceptance, letter of credit or similar facilities, (vii) all
unconditional obligations of such Person to purchase, redeem, retire, defease or
otherwise acquire for value any capital stock or other equity interests of such
Person or any warrants, rights or options to acquire such capital stock or other
equity interests, (viii) all obligations under "swaps", "caps", "floors",
"collars", or other interest rate hedging contracts or similar arrangements,
(ix) all Indebtedness of any other Person of the type referred to in clauses (i)
through (ix), guaranteed by such Person or for which such Person shall otherwise
(including pursuant to any keepwell, makewell or similar arrangement) become
directly or indirectly liable, and (x) all Indebtedness of the type referred to
in clauses (i) through (xi) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, the amount of such obligation being deemed to be the
lesser of the value of such property or the amount of the obligation so secured.

                "INDEMNITEE" shall have the meaning specified in Section 9.1(a)
of the Participation Agreement.

                "INDEMNITOR" with respect to a Facility Site Lease, shall have
the meaning set forth in Section 13.3 of such Facility Site Lease.

                "INDENTURE BANKRUPTCY DEFAULT" shall mean any event or
occurrence, which, with the passage of time or the giving of notice or both,
would become an Lease Indenture Event of Default under Section 4.2(e) or (f) of
the Collateral Trust Indenture.

                "INDENTURE DEFAULT" shall mean any event or occurrence, which,
with the passage of time or the giving of notice or both, would become an Lease
Indenture Event of Default.

                "INDENTURE ESTATE" shall have the meaning specified in the
Granting Clause of the Collateral Trust Indenture.

                "INDENTURE TRUSTEE OFFICE" shall mean the office to be used for
notices to the Indenture Trustee from time to time pursuant to Section 9.5 of
the Collateral Trust Indenture.

                "INDENTURE TRUSTEE'S ACCOUNT" shall mean the account specified
with respect thereto on Schedule 1-B to the Participation Agreement or such
other account of the Indenture Trustee, as the Indenture Trustee may from time
to time specify in a notice to the other parties to the Participation Agreement.

                "INDENTURE TRUSTEE'S LIENS" shall mean any Lien on the Lessor
Estate, any of the Facilities, the Facility Sites or any part thereof or any
interest therein arising as a result of (i) Taxes against or affecting the Lease
Indenture Company or the Indenture Trustee, or any Affiliate thereof that are
not related to, or that are in violation of, any Operative Document or the
transactions contemplated thereby, (ii) Claims against or any act or omission of
the Lease Indenture Company or the Indenture Trustee, or Affiliate thereof that
is not related to, or that is

                                       19
<PAGE>   20

in violation of, any of such Person's representations, warranties, covenants or
agreements in an Operative Document or the transactions contemplated thereby or
that is in breach of any covenant or agreement of the Lease Indenture Company or
the Indenture Trustee specified therein, (iii) Taxes imposed upon the Lease
Indenture Company or the Indenture Trustee, or any Affiliate thereof that are
not indemnified against by the Facility Lessees pursuant to any Operative
Document or (iv) Claims against or affecting the Lease Indenture Company or the
Indenture Trustee, or any Affiliate thereof arising out of the voluntary or
involuntary transfer by the Lease Indenture Company or the Indenture Trustee of
any portion of the interest of the Lease Indenture Company or the Indenture
Trustee in the Lessor Estate, other than pursuant to the Operative Documents.

                "INDEPENDENT APPRAISER" shall mean a disinterested, licensed
industrial property appraiser who is a member of the Appraisal Institute having
experience in the business of evaluating facilities similar to the Facilities.

                "INITIAL LETTER OF CREDIT" shall mean the letter of credit dated
as of the Closing Date issued by CSFB in favor of the Owner Participant, as
Beneficiary.

                "INITIAL PURCHASERS" shall mean CSFB, TD Securities (USA) Inc.,
and ING Barings LLC.

                "INITIAL SUBLEASE TERM" with respect to a Facility Site
Sublease, shall have the meaning set forth in Section 2.1(a) of such Facility
Site Sublease.

                "INITIAL TERM" with respect to a Facility Site Lease, shall have
the meaning specified in Section 2.1(a) of such Facility Site Lease.

                "INSURANCE CONSULTANT" shall mean Marsh USA, Inc.

                "INVESTMENT BANKER" shall have the meaning set forth in Section
2.10(d) of the Collateral Trust Indenture.

                "INVESTMENT COMPANY ACT" shall mean the Investment Company Act
of 1940.

                "INVESTMENT GRADE" with respect to a Rating Agency, shall mean,
with respect to S&P, BBB- or higher, and with respect to Moody's, Baa3 or
higher, or, if after the Closing Date a different system of ratings is
established, the term shall mean a rating in one of such Rating Agency's generic
rating categories that is comparable to such ratings.

                "IRS" shall mean the Internal Revenue Service of the United
States Department of Treasury or any successor agency.

                "L/C BANK" shall mean the Acceptable Bank providing a letter of
credit pursuant to Section 5.3 of the Facility Lease.

                "L/C TERMINATION VALUE" means in respect to any date specified
in Part II of Exhibit L of the Participation Agreement, the amount set forth
opposite such date in Part II of

                                       20
<PAGE>   21

Exhibit L to the Participation Agreement, as adjusted in accordance with Section
5.46(i) of the Participation Agreement.

                "LEASE DEBT" shall mean the debt evidenced by the Lessor Notes.

                "LEASE DEBT RATE" shall mean the applicable interest rate
accruing on Lessor Notes.

                "LEASE DEFAULT" shall mean any event or occurrence, which, with
the passage of time or the giving of notice or both, would become a Lease Event
of Default.

                "LEASE EVENT OF DEFAULT" with respect to a Facility Lease, shall
have the meaning specified in Section 16 of such Facility Lease.

                "LEASE INDENTURE COMPANY" shall mean State Street Bank & Trust
Company of Connecticut, N.A., in its individual capacity under the Operative
Documents.

                "LEASE INDENTURE EVENT OF DEFAULT" shall have the meaning set
forth in Section 4.2 in the Collateral Trust Indenture.

                "LEASE OBLIGATIONS" shall mean, without duplication, (i)
indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes, (ii) with respect to operating
leases of electric generating facilities, the termination value or similar
amount payable by the lessee under such lease and (iii) the principal amount of
financial obligations under any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness of the lessee for tax
purposes but is classified as an operating lease under GAAP.

                "LEASE TERM" shall mean the Basic Lease Term together with the
First Renewal Lease Term and Second Renewal Lease Term.

                "LEASEHOLD LIEN" with respect to a Facility Site Lease or a
Facility Site Sublease, shall have the meaning set forth in Section 16.4 of such
Facility Site Lease or Section 15.3 of such Facility Site Sublease.

                "LEASEHOLD MORTGAGEE" with respect to a Facility Site Lease or a
Facility Site Sublease, shall have the meaning set forth in Section 16.4 of such
Facility Site Lease or Section 15.3 of such Facility Site Sublease.

                "LESSEE 467 LOAN INTEREST" with respect to a Facility Lease,
shall have the meaning specified in Section 3.2(d) of such Facility Lease.

                "LESSEE 467 LOAN PRINCIPAL BALANCE" with respect to a Facility
Lease, shall have the meaning set forth in Section 3.2(d) of such Facility
Lease.

                "LESSOR 467 LOAN INTEREST" with respect to a Facility Lease,
shall have the meaning specified in Section 3.2(d) of such Facility Lease.

                                       21
<PAGE>   22

                "LESSOR 467 LOAN PRINCIPAL BALANCE" with respect to a Facility
Lease, shall have the meaning set forth in Section 3.2(d) of such Facility
Lease.

                "LESSOR ESTATE" shall mean all the estate, right, title and
interest of the Owner Lessor in, to and under the Facilities, the Facility Sites
and the Operative Documents, including all funds advanced to the Owner Lessor by
the Owner Participant, all installments and other payments of Periodic Rent,
Supplemental Rent or Termination Value under the Facility Leases, condemnation
awards, purchase price, sale proceeds, insurance proceeds and all other
proceeds, rights and interests of any kind for or with respect to the estate,
right, title and interest of the Owner Lessor in, to and under the Facilities,
the Facility Sites and the Operative Documents and any of the foregoing, but
shall not include Excepted Payments.

                "LESSOR NOTES" shall mean, collectively, the Tiverton Lessor
Notes and the Rumford Lessor Notes.

                "LESSOR PUT RENEWAL LEASE TERM" with respect to a Facility
Lease, shall have the meaning specified in Section 15.3 of such Facility Lease.

                "LIEN" shall mean any mortgage, security deed, security title,
pledge, lien, charge, encumbrance, lease, and security interest or title
retention arrangement.

                "LLC ADMINISTRATION AGREEMENTS" shall mean (i) the agreement
dated as of December 18, 2000 between the Owner Lessor and the Administrator as
in effect on the Closing Date and (ii) the agreement dated as of December 18,
2000 between the Owner Participant and the Administrator as in effect on the
Closing Date.

                "LLC AGREEMENT" shall mean the Limited Liability Company
Agreement, dated as of December 18, 2000, between the Owner Participant and the
Administrator, pursuant to which the Owner Lessor shall be governed.

                "MAJORITY IN INTEREST OF NOTEHOLDERS" as of any date of
determination, shall mean Noteholders holding in aggregate more than 50% of the
total outstanding principal amount of the Notes; provided, however, that any
Note held by a Facility Lessee, the Guarantor or any Affiliate of either such
party shall not be considered outstanding for purposes of this definition.

                "MAKE-WHOLE AMOUNT" shall mean, with respect to any Lessor Note
subject to redemption pursuant to the Lease Indenture, an amount equal to the
Discounted Present Value of such Lessor Note less the unpaid principal amount of
such Lessor Note; provided that the Make Whole Premium shall not be less than
zero. For purposes of this definition, the "Discounted Present Value" of any
Lessor Note subject to redemption pursuant to the Lease Indenture shall be equal
to the discounted present value of all principal and interest payments scheduled
to become due after the date of such redemption in respect of such Lessor Note,
calculated using a discount rate equal to the sum of (i) the yield to maturity
on the U.S. Treasury security having an average life equal to the remaining
average life of such Lessor Note and trading in the secondary market at the
price closest to par and (ii) 50 basis points; provided, however, that if there
is no U.S. Treasury security having an average life equal to the remaining
average life of such Lessor Note, such discount rate shall be calculated using a
yield to maturity interpolated or extrapolated on a

                                       22
<PAGE>   23

straight-line basis (rounding to the nearest calendar month, if necessary) from
the yields to maturity for two U.S. Treasury securities having average lives
most closely corresponding to the remaining life of such Lessor Note and trading
in the secondary market at the price closest to par.

                "MANAGER" shall mean Credit Suisse First Boston.

                "MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" shall
mean a material adverse effect on (a) the economic prospects, operations,
assets, financial position, results of operation or business of the Guarantor,
including a material adverse effect on (i) the Facilities which adversely
affects the ability of the Guarantor to perform its obligations under the
Operative Documents or (ii) the validity or enforceability of the Operative
Documents, (b) the Indenture Estate or the Lessor Estate, the security interests
in the Lessor Estate, or (c) with respect to the Owner Participant's (but not
the Certificateholders') interest in the Facilities, the residual value or
remaining useful life of the Facilities.

                "MEMBER INTEREST" shall mean the interest of the Owner
Participant in the Owner Lessor.

                "MEMORANDUM OF FACILITY SITE LEASE" or "MEMORANDA OF FACILITY
SITE LEASE" shall mean, individually or collectively as the context may require,
the Memorandum of Facility Site Lease (Rumford) or the Memorandum of Facility
Site Lease (Tiverton).

                "MEMORANDUM OF FACILITY SITE LEASE (RUMFORD)" shall mean the
Memorandum of Facility Site Lease, dated as of the Closing Date, between Rumford
Lessee, as landlord, and the Owner Lessor, as tenant, and filed with Oxford
County, Maine Registry of Deeds .

                "MEMORANDUM OF FACILITY SITE LEASE (TIVERTON)" shall mean the
Memorandum of Facility Site Lease, dated as of the Closing Date, between
Tiverton Lessee, as landlord, and the Owner Lessor, as tenant, and filed with
the Land Evidence Records of the Town of Tiverton, State of Rhode Island.

                "MEMORANDUM OF FACILITY SITE SUBLEASE" or "MEMORANDA OF FACILITY
SITE SUBLEASE" shall mean, individually or collectively as the context may
require, the Memorandum of Facility Site Sublease (Rumford) and the Memorandum
of Facility Site Sublease (Tiverton).

                "MEMORANDUM OF FACILITY SITE SUBLEASE (RUMFORD)" shall mean the
Memorandum of Facility Site Sublease, dated as of the Closing Date, between the
Owner Lessor, as sublandlord, and Rumford Lessee, as subtenant, and filed with
Oxford County, Maine Registry of Deeds .

                "MEMORANDUM OF FACILITY SITE SUBLEASE (TIVERTON)" shall mean the
Memorandum of Facility Site Sublease, dated as of the Closing Date, between the
Owner Lessor, as sublandlord, and Tiverton Lessee, as subtenant, and filed with
the Land Evidence Records of the Town of Tiverton, State of Rhode Island.

                                       23
<PAGE>   24

                "MEMORANDUM OF LEASE" or "MEMORANDA OF LEASE" shall mean,
individually or collectively as the context may require, the Memorandum of Lease
(Rumford) and the Memorandum of Lease (Tiverton).

                "MEMORANDUM OF LEASE (RUMFORD)" shall mean the Memorandum of
Facility Lease, dated as of the Closing Date, between the Owner Lessor and the
Rumford Lessee and filed with Oxford County, Maine Registry of Deeds .

                "MEMORANDUM OF LEASE (TIVERTON)" shall mean the Memorandum of
Facility Lease, dated as of the Closing Date, between the Owner Lessor and the
Tiverton Lessee and filed with the Land Evidence Records of the Town of
Tiverton, State of Rhode Island.

                "MOODY'S" shall mean Moody's Investors Service, Inc. and any
successor thereto.

                "MULTIEMPLOYER PLAN" shall mean any Plan that is a multiemployer
plan (as defined in Section 4001(a)(3) of ERISA).

                "NOTE REGISTER" shall have the meaning specified in Section 2.8
of the Collateral Trust Indenture.

                "NOTEHOLDER(s)" shall mean any holder of record (as reflected on
the Note Register) from time to time of a Lessor Note outstanding.

                "NOTES" shall mean, individually or collectively as the context
may require, (i) the Tiverton Lessor Notes and Tiverton Additional Lessor Notes
or (ii) the Rumford Lessor Notes and Rumford Additional Lessor Notes, each
issued pursuant to the Collateral Trust Indenture.

                "NOTICE PERIOD" shall have the meaning set forth in Section 7.8
of the Participation Agreement.

                "OBLIGATIONS" shall mean, collectively, the Obligations
(Rumford) and the Obligations (Tiverton).

                "OBLIGATIONS (RUMFORD)" shall have the meaning set forth in
Section 2.2 of the Calpine Guaranty and Payment Agreement (Rumford).

                "OBLIGATIONS (TIVERTON)" shall have the meaning set forth in
Section 2.2 of the Calpine Guaranty and Payment Agreement (Tiverton).

                "OBSOLESCENCE TERMINATION DATE" with respect to a Facility
Lease, shall have the meaning specified in Section 14.1 of such Facility Lease.

                "OFFERING CIRCULAR" shall mean the Offering Circular, dated
December 15, 2000, with respect to the Certificates.

                                       24
<PAGE>   25

                "OFFICER" shall mean, solely with respect to the Guarantor, the
Chairman, the President, any Vice President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, the Secretary, any Assistant Treasurer,
any Assistant Secretary or the Controller or Principal Accounting Officer of the
Guarantor.

                "OFFICER'S CERTIFICATE" shall mean with respect to any Person, a
certificate signed (i) in the case of a corporation, by the Chairman of the
Board, the President, or a Vice President of such Person or any Person
authorized by or pursuant to the organizational documents, the by-laws or any
resolution of the Board of Directors or Executive Committee of such Person
(whether general or specific) to execute, deliver and take actions on behalf of
such Person in respect of any of the Operative Documents, (ii) in the case of a
partnership, by the Chairman of the Board of Directors, the President or any
Vice President, the Treasurer or an Assistant Treasurer of a corporate general
partner and (iii) in the case of an Indenture Trustee, a certificate signed by a
Responsible Officer of such Indenture Trustee.

                "OFFICIAL RECORDS" with respect to a Facility Site Lease, shall
have the meaning specified in the recitals to such Facility Site Lease.

                "OP ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an
assignment and assumption agreement in form and substance substantially in the
form of Exhibit J to the Participation Agreement.

                "OP GUARANTOR" shall mean Philip Morris Capital Corporation or
any Person that shall guaranty the obligations of a Transferor under the
Operative Documents in accordance with Section 7.1 of the Participation
Agreement.

                "OP PARENT GUARANTY" shall mean, as applicable, (i) that certain
guaranty of Philip Morris Capital Corporation dated as of the Closing Date in
favor of the Facility Lessees, the Owner Lessor, the Indenture Trustee, the Pass
Through Trustee and the Certificateholders, or (ii) any other guaranty agreement
provided by an OP Guarantor in form and substance substantially in the form of
Exhibit G to the Participation Agreement.

                "OPERATIVE DOCUMENTS" shall mean the Participation Agreement,
the Bills of Sale, the Facility Leases, the Certificates, the Facility Site
Leases, the Facility Site Subleases, the Collateral Trust Indenture, the Lessor
Notes, the Pass Through Trust Agreement, the LLC Agreement, the Tax Indemnity
Agreement, the Calpine Guaranties, the OP Parent Guaranty (if any) and any
Qualifying Letter of Credit.

                "OPERATOR" shall mean Calpine Eastern Corporation or any
replacement Operator appointed pursuant to the Operative Documents.

                "OPINION OF COUNSEL" shall mean, with respect to any Calpine
Party, a written opinion (i) from Ronald W. Fischer or any other internal
counsel of Calpine, as to matters contained in such opinions delivered at
Closing, and as to all other matters, Thelen Reid & Priest and/or Steptoe &
Johnson, or any other outside legal counsel reasonably acceptable to the Owner
Participant, (ii) in form and substance (with respect to qualifications,
exception, assumption and the like) substantially equivalent to the legal
opinions delivered at Closing, with any material

                                       25
<PAGE>   26

modification or supplements thereto to be reasonably acceptable to the Owner
Participant, or in any such other form as may be reasonably acceptable to the
Owner Participant, and (iii) the scope of which shall cover due authorization,
execution, delivery and enforceability of the applicable agreement(s), and
exemption from regulation, in each case, substantially in the form set forth in
the opinions delivered at Closing with any material modifications thereto to be
reasonably acceptable to the Owner Participant.

                "OPTIONAL IMPROVEMENT" with respect to a Facility Lease, shall
have the meaning specified in Section 8.2 of such Facility Lease.

                "OPTION CLOSING DATE" with respect to a Facility Site Lease,
shall have the meaning set forth in Section 5.2 of such Facility Site Lease.

                "OVERALL TRANSACTION" shall mean all of the transactions
contemplated by the Operative Documents.

                "OVERDUE RATE" shall mean a rate per annum equal to the prime
commercial lending rate of the Chase Manhattan Bank (as publicly announced to be
effect from time to time, such rate to be adjusted automatically, without
notice, on the effective date of any change in such rate) plus 1%.

                "OWNER LESSOR" shall mean PMCC Calpine New England Investment
LLC, a Delaware limited liability company created for the benefit of the Owner
Participant.

                "OWNER LESSOR'S ACCOUNT" shall mean Citibank, N.A., New York,
NY, ABA # 021000089, Account: Philip Morris Capital Corporation, Account #
3024-1278.

                "OWNER LESSOR'S INTEREST" shall mean the Owner Lessor's right,
title and interest in and to the ownership of the Facilities and the Facility
Sites, as applicable.

                "OWNER LESSOR'S LIEN(s)" individually or collectively as the
context may require, shall mean any Lien on the Lessor Estate, the Facility
Sites or the Easements, or any part of any thereof or interest therein arising
as a result of (i) Taxes against or affecting the Owner Lessor or any Affiliate
thereof that are not related to, or that are in violation of, any Operative
Document or the transactions contemplated thereby, (ii) Claims against or any
act or omission of the Owner Lessor or Affiliate thereof that is not related to,
or that is in violation of, any Operative Document or the transactions
contemplated thereby or that is in breach of any covenant or agreement of the
Owner Lessor specified therein, (iii) Taxes imposed upon the Owner Lessor or any
Affiliate thereof that are not indemnified against by the Facility Lessees
pursuant to any Operative Document or (iv) Claims against or affecting the Owner
Lessor or any Affiliate thereof arising out of the voluntary or involuntary
transfer by the Owner Lessor of any portion of the interest of the Owner Lessor
in the Owner Lessor's Interest, other than pursuant to the Operative Documents.

                "OWNER PARTICIPANT" shall mean PMCC Calpine NEIM LLC, a Delaware
limited liability company.

                                       26
<PAGE>   27

                "OWNER PARTICIPANT'S ACCOUNT" shall mean the account maintained
by the Owner Participant at the bank specified with respect thereto on Schedule
1-C to the Participation Agreement, or such other account of the Owner
Participant, as the Owner Participant may from time to time specify in a notice
to the Indenture Trustee pursuant to Section 9.5 of the Collateral Trust
Indenture.

                "OWNER PARTICIPANT'S COMMITMENT" shall mean the Owner
Participant's investment in the Owner Lessor contemplated by Section 2.1(a) of
the Participation Agreement.

                "OWNER PARTICIPANT'S LIEN(s)" individually or collectively as
the context may require, shall mean any Lien on the Lessor Estate, the Facility
Sites or the Easements, or any part of any thereof or interest therein arising
as a result of (i) Claims against or any act or omission of the Owner
Participant that is not related to, or that is in violation of, any Operative
Document or the transactions contemplated thereby or that is in breach of any
covenant or agreement of the Owner Participant set forth therein, (ii) Taxes
against the Owner Participant that are not indemnified against by the applicable
Facility Lessee pursuant to the Operative Documents or (iii) Claims against or
affecting the Owner Participant arising out of the voluntary or involuntary
transfer by the Owner Participant of any portion of the interest of the Owner
Participant in the Member Interest, other than any transfer (x) pursuant to the
exercise of any of the applicable Facility Lessee's (or any Affiliate thereof)
rights under the Operative Documents or (y) during the continuance of a Lease
Event of Default.

                "OWNER PARTICIPANT'S NET ECONOMIC RETURN" shall mean the Owner
Participant's anticipated (i) after-tax yield, calculated according to the
multiple investment sinking fund method of analysis, and (ii) periodic GAAP
income and aggregate after-tax cash flow.

                "OWNERSHIP INTEREST" shall mean, with respect to a Facility
Lessee (or any assigns of such Facility Lessee), any and all equity interest in
such Facility Lessee (or such assignee of such Facility Lessee) howsoever
designated (whether capital stock, partnership interest, member interest or any
equivalent interest).

                "PARTICIPATION AGREEMENT" shall mean the Participation
Agreement, dated as of December 19, 2000, among the Facility Lessees, the
Guarantor, the Owner Lessor, the Owner Participant, State Street Bank & Trust
Company of Connecticut, as Indenture Trustee, and State Street Bank & Trust
Company of Connecticut, as Pass Through Trustee.

                "PARTNERSHIP AGREEMENT" shall mean the Tiverton Partnership
Agreement or the Rumford Partnership Agreement, as the context may require.

                "PASS THROUGH COMPANY" shall mean State Street Bank and Trust
Company of Connecticut, N.A., in its individual capacity, together with its
successors and permitted assigns.

                "PASS THROUGH TRUST AGREEMENT" shall mean the Pass Through Trust
Agreement, dated as of December 19, 2000, between the Facility Lessees and the
Pass Through Trustee.

                                       27
<PAGE>   28

                "PASS THROUGH TRUSTEE" shall mean State Street Bank and Trust
Company of Connecticut, N.A., not in its individual capacity, but solely as Pass
Through Trustee under the Pass Through Trust Agreement, and each other Person
that may from time to time be acting as a Pass Through Trustee in accordance
with the provisions of the Pass Through Trust Agreement.

                "PASS THROUGH TRUST" shall mean the pass through trusts created
pursuant to the Pass Through Trust Agreement.

                "PAYING AGENT" shall have the meaning set forth in Section 2.6
of the Collateral Trust Indenture.

                "PERIODIC RENT" with respect to a Facility Lease, shall mean the
sum of Basic Rent and Renewal Rent, if any, as specified in Schedule 1 to such
Facility Lease.

                "PERMIT" shall mean any action, approval, certificate, consent,
waiver, exemption, variance, franchise, order, permit, authorization, right or
license of or from, and any filing with a Governmental Entity.

                "PERMITTED CLOSING DATE LIENS" shall mean Permitted Liens
described in clause (a), (b), (f), (g) and (i) of the definition thereof.

                "PERMITTED ENCUMBRANCES" shall mean with respect to the Facility
Sites, all matters shown as exceptions on Schedule B to each of the Title
Policies as in effect on the Closing Date.

                "PERMITTED INVESTMENTS" shall mean investments in securities
that are: (i) direct obligations of the United States or any agency thereof;
(ii) obligations fully guaranteed by the United States or any agency thereof;
(iii) certificates of deposit or bankers acceptances issued by commercial banks
(or any of their affiliates) organized under the laws of the United States or of
any political subdivision thereof or under the laws of Canada, Japan,
Switzerland or any country that is a member of the European Economic Community
having a combined capital and surplus of at least $250 million and having
long-term unsecured debt securities then rated "A" or better by S&P or "A2" or
better by Moody's (but at the time of investment not more than $25,000,000 may
be invested in such certificates of deposit from any one bank); (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above, entered into with any
financial institution meeting the qualifications specified in clause (iii)
above; (v) open market commercial paper of any corporation incorporated or doing
business under the laws of the United States or of any political subdivision
thereof having a rating of at least "A-1" from S&P and "P-1" from Moody's (but
at the time of investment not more than $25,000,000 may be invested in such
commercial paper from any one company); (vi) auction rate securities or money
market preferred stock having one of the two highest ratings obtainable from
either S&P or Moody's (or, if at any time neither S&P nor Moody's is rating such
obligations, then from another nationally recognized rating service acceptable
to the Depositary); and (vii) investments in money market funds or money market
mutual funds sponsored by any securities broker dealer of recognized national
standing (or an affiliate thereof), having an investment policy that requires
substantially all the invested assets of

                                       28
<PAGE>   29

such fund to be invested in investments described in any one or more of the
foregoing clauses having a rating of "A" or better by S&P or "A2" or better by
Moody's.

                "PERMITTED LIENS" shall mean (a) the rights and interests of the
parties as provided in the Operative Documents, as well as the rights of
sublessees and/or assignees to the extent set forth in or expressly permitted
pursuant to the Facility Leases or any other Operative Document, (b) as to
Facility Lessees, Owner Lessor's Liens, Owner Participant's Liens and Indenture
Trustee's Liens, (c) Liens for any tax, assessment or other governmental charge,
either secured by a bond reasonably acceptable to the Indenture Trustee and the
Pass Through Trustee and, so long as no Lease Indenture Event of Default which
is not a Lease Event of Default exists, the Owner Lessor, or not yet due or
being contested in good faith and by appropriate proceedings, so long as (i)
such proceedings shall not reasonably be expected to give rise to criminal
liability or material civil liability on the part of the Owner Lessor, the Owner
Participant, the Indenture Trustee, the Pass Through Trustee or any
Certificateholders, and would not otherwise reasonably be expected to have a
Material Adverse Effect, or (ii) adequate reserves consistent with GAAP
requirements have been established and are maintained, so as to assure such
Persons that any taxes, assessments or other charges determined to be due will
be promptly paid in full when such contest is determined, (d) materialmen's,
mechanics', workers', repairmen's, employees' or other like Liens arising in the
ordinary course of business or in connection with the maintenance or repair of
the Facilities, for amounts not yet due or for amounts being contested in good
faith and by appropriate proceedings, so long as (i) such proceedings shall not
reasonably be expected to give rise to criminal liability or material civil
liability on the part of the Owner Lessor, the Owner Participant, the Indenture
Trustee, the Pass Through Trustee or any Certificateholders, and would not
otherwise reasonably be expected to have a Material Adverse Effect, and (ii)
adequate reserves consistent with GAAP requirements have been established and
are maintained, so as to ensure that any amounts determined to be due will be
promptly paid in full when such contest is determined, (e) Liens arising out of
judgments or awards, but only so long as an appeal or proceeding for review is
being prosecuted in good faith and so long as (i) such proceedings shall not
reasonably be expected to give rise to criminal liability or material civil
liability on the part of the Owner Lessor, the Owner Participant, the Indenture
Trustee, the Pass Through Trustee or any Certificateholders, and would not
otherwise reasonably be expected to have a Material Adverse Effect, and (ii)
adequate reserves consistent with GAAP requirements have been established and
are maintained, so as to ensure that any amounts determined to be due will be
promptly paid in full when such contest is determined, or are fully covered by
insurance, (f) mineral rights the use and enjoyment of which do not materially
interfere with the use and enjoyment of the Facilities, (g) Permitted
Encumbrances, (h) Liens, deposits or pledges to secure statutory obligations or
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or for purposes of like general nature in the
ordinary course of its business, (i) existing Liens that have been disclosed to
the Transaction Parties prior to the Closing Date and which are reasonably
acceptable to the Transaction Parties, and (j) Liens incident to the ordinary
course of business that are not incurred in connection with the obtaining of any
loan, advance or credit in respect of borrowed money permitted to be incurred
pursuant to the Operative Documents so long as such Liens (x) do not in the
aggregate materially impair the use of the property or assets of the Facility
Lessees or the value of such property or assets for the purposes of such
business and (y) shall not reasonably be expected to give rise to criminal
liability or unindemnified, material civil liability on the part of the Owner
Lessor, the Owner Participant, the Indenture Trustee, the Pass Through Trustee
or any

                                       29
<PAGE>   30

Certificateholders, and would not otherwise reasonably be expected to have a
Material Adverse Effect.

                "PERSON" shall mean any individual, corporation, cooperative,
partnership, joint venture, association, joint-stock company, limited liability
company, other entity, trust, unincorporated organization or government or any
agency or political subdivision thereof or any other entity.

                "PLAN" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) either of the Facility Lessees or a Subsidiary of
either of the Facility Lessees or an ERISA Affiliate, and each such plan for the
five year period immediately following the latest date on which such Facility
Lessee, or a Subsidiary of such Facility Lessee or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.

                "POWER MARKET CONSULTANT" shall mean CC Pace.

                "PREFERRED STOCK", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.

                "PRICING ASSUMPTIONS" shall mean the "Pricing Assumptions"
(attached as Schedule 2 to the Participation Agreement) for each Facility
Lease,.

                "PRIME RATE" shall mean the rate of interest publicly announced
by Citibank, N.A. from time to time as its prime rate.

                "PROCEEDS" shall mean the proceeds from the sale of the
Certificates by the Pass Through Trust to the Certificateholders on the Closing
Date.

                "PROPORTIONAL RENTAL AMOUNT" shall have the meaning given the
term "proportional rental amount" in Treasury Regulations section 1.467-2(c) and
unless and until such time s there is an adjustment pursuant to Section 3.4 of
the applicable Facility Lease it shall be the amounts set forth in Section 1-C
to the Facility Leases.

                "PRUDENT INDUSTRY PRACTICE" shall mean, at a particular time,
(a) any of the practices, methods and acts engaged in or approved by a
significant portion of the competitive electric generating industry at such
time, or (b) with respect to any matter to which clause (a) does not apply, any
of the practices, methods and acts which, in the exercise of reasonable judgment
at the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition. "Prudent Industry Practice" is not intended
to be limited to the optimum practice, method or act to the exclusion of all
others, but rather to be a spectrum of possible practices, methods or acts
having due regard for, among other things, manufacturers' warranties and the
requirements of any Governmental Entity of competent jurisdiction.

                                       30
<PAGE>   31

                "PUHCA" shall mean the Public Utility Holding Company Act of
1935, as amended.

                "PURCHASE PRICE" with respect to the Tiverton Facility, shall
mean $237,500,000.00, and with respect to the Rumford Facility, shall mean
$220,000,000.00.

                "QUALIFYING CASH BIDS" with respect to a Facility Lease, shall
have the meaning specified in Section 13.2 of such Facility Lease.

                "QUALIFYING LETTER OF CREDIT" shall mean (I) the Initial Letter
of Credit, and (II) any other irrevocable standby letter of credit (i) in favor
of the Owner Participant issued by a Qualifying Letter of Credit Bank (ii) which
shall be drawable or presentable in New York (or such other location as the
Owner Participant shall agree in its sole and absolute discretion) in Dollars
and in whole upon presentation of a drawing certificate pursuant to which a
beneficiary of such letter of credit certifies that a Drawing Event has occurred
and is continuing; (iii) to the extent such letter of credit is a new or
replacement Qualifying Letter of Credit, such new or replacement Qualifying
Letter of Credit must be issued at least 30 days (or 45 days in the
circumstances described in Section 5.46(b) of the Participation Agreement) prior
to the stated expiration of the existing letter of credit; (iv) the maturity of
such letter of credit may be shorter than the last day of the Lease Term of the
Tiverton Facility Lease or the Lease Term of the Rumford Facility Lease,
whichever is later, provided, however, that (a) such letter of credit shall have
a maturity of at least 364 days from the date of issuance and be automatically
renewed for at least one year unless notice of non-renewal is received by the
Owner Lessor at least 60 days prior to the expiration of the Qualifying Letter
of Credit, and (b) the relevant Owner Lessor shall receive such new or
replacement Qualifying Letter of Credit not later than 30 days prior to the
expiration of the then outstanding letter of credit; and (v) shall otherwise
contain terms that are substantially the same as those set forth in the Initial
Letter of Credit and the CSFB LOC Indemnity Letter (as in effect on the
Closing), with such substantive changes (proposed because Calpine has been
unable to obtain such terms) as are reasonably acceptable to the Owner
Participant. The Owner Participant agrees, that in considering any changes
referred to in clause (v) of the preceding sentence, it will base its acceptance
or non-acceptance of such changes on an evaluation of whether the terms in
question are available pursuant to then current practices of banks meeting the
definition of "Qualifying Letter of Credit Bank" with respect to comparable
letters of credit being issued in comparable transactions, and if the Owner
Participant fails to so accept such changes it will set forth its basis
therefor. Subject to the same conditions set forth in the preceding sentence
(including with respect to the acceptance or non-acceptance of the legal
opinions referred to below by the Owner Participant), each Qualifying Letter of
Credit shall be supported by legal opinions substantially in the forms of legal
opinions delivered with the Initial Letter of Credit.

                "QUALIFYING LETTER OF CREDIT BANK" shall mean a banking
institution organized in the United States or in another country the
Dollar-denominated long-term indebtedness of which is rated on the date on which
the relevant Qualifying Letter of Credit is issued, AAA by S&P and Aaa by
Moody's (or if rated by only one Rating Agency, rated as aforesaid by such
Rating Agency), (i) the unsecured long-term senior Dollar-denominated debt
obligations of which are rated A or better by S&P and A2 or better by Moody's,
(ii) having a branch in New York City at which the Qualifying Letter of Credit
can be drawn upon, (iii) having, on the date

                                       31
<PAGE>   32

on which the relevant Qualifying Letter of Credit is issued, a consolidated
stockholders equity determined in accordance with GAAP of at least US$ 3.5
billion and (iv) which banking institution is reasonably acceptable to the Owner
Participant. Notwithstanding the foregoing, CSFB shall be deemed a "Qualifying
Letter of Credit Bank" so long as it meets the requirement of clause (i) above.

                "RATING AGENCIES" shall mean S&P and Moody's.

                "REASONABLE BASIS" for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association (or any successor to
such opinion).

                "REBUILDING CLOSING DATE" with respect to a Facility Lease,
shall have the meaning specified in Section 10.3(e) of such Facility Lease.

                "RECEIVING PARTY" shall have the meaning set forth in Section
14.21 of the Participation Agreement.

                "REDEMPTION DATE" shall mean, when used with respect to any Note
to be redeemed, the date fixed for such redemption by or pursuant to the
Collateral Trust Indenture or the respective Note, which date shall be a
Termination Date.

                "REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness of the Guarantor or a
Restricted Subsidiary existing on the date of the Guaranty or Incurred in
compliance with the Indenture, dated as of August 10, 2000, between the
Guarantor and Wilmington Trust Company, as Trustee (including Indebtedness of
the Guarantor that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) if the Indebtedness being
refinanced is contractually subordinated in right of payment to the Obligations
(Tiverton) or the Obligations (Rumford), as the context may require, the
Refinancing Indebtedness shall be contractually subordinated in right of payment
to such Obligations to at least the same extent as the Indebtedness being
refinanced, (ii) the Refinancing Indebtedness is scheduled to mature either (a)
no earlier than the Indebtedness being refinanced or (b) after the Stated
Maturity of the Obligations (Tiverton) or the Obligations (Rumford), as the
context may require, (iii) the Refinancing Indebtedness has an Average Life at
the time such Refinancing Indebtedness is Incurred that is equal to or greater
than the Average Life of the Indebtedness being refinanced and (iv) such
Refinancing Indebtedness is in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding (plus fees and expenses, including
any premium, swap breakage and defeasance costs) under the Indebtedness being
refinanced; and provided, further, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Subsidiary of the Guarantor that refinances

                                       32
<PAGE>   33

Indebtedness of the Guarantor or (y) Indebtedness of the Guarantor or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.

                "REGISTRAR" shall have the meaning set forth in Section 2.8 of
the Collateral Trust Indenture.

                "REGULATORY EVENT OF LOSS" shall have meaning specified in
clause (iv) of the definition of "Event of Loss".

                "REIMBURSEMENT AGREEMENT" shall mean the Letter of Credit and
Reimbursement Agreement, dated as of December 19, 2000, between Calpine and
CSFB.

                "RELATED PARTY" shall mean, with respect to any Person or its
successors and assigns, an Affiliate of such Person or its successors and
assigns and any director, officer, servant, employee or agent of that Person or
any such Affiliate or their respective successors and assigns; provided that the
Owner Lessor shall not be treated as a Related Party to any Owner Participant
except that, for purposes of Section 9 of the Participation Agreement, the Owner
Lessor will be treated as a Related Party to an Owner Participant to the extent
that the Owner Lessor acts on the express direction or with the express consent
of an Owner Participant.

                "RELEASE" shall mean any release, pumping, pouring, emptying,
injecting, escaping, leaching, migrating, dumping, seepage, spill, flow, leak,
discharge, disposal or emission.

                "RENEWAL RENT" with respect to a Facility Lease, shall mean the
rent payable during any Renewal Lease Term, in each case as determined in
accordance with Section 15.4 of such Facility Lease.

                "RENEWAL LEASE TERM" with respect to a Facility Lease, shall
mean the First Renewal Lease Term, the Second Renewal Term, any FMV Renewal
Lease Term or the Lessor Put Renewal Term.

                "RENEWAL SITE LEASE TERM(s)" individually or collectively as the
context shall require, with respect to a Facility Site Lease, shall have the
meaning set forth in Section 2.2(b) of such Facility Site Lease.

                "RENEWAL TERM" with respect to a Facility Site Sublease, shall
have the meaning set forth in Section 2.1(b) of such Facility Site Sublease.

                "RENT" shall mean Basic Rent, Renewal Rent and Supplemental
Rent.

                "RENT PAYMENT DATE" with respect to a Facility Lease, shall
mean, with respect to each Facility Lease March 19, 2001, each January 15 and
July 15 occurring thereafter (through and including July 15, 2036) and December
19, 2036.

                "RENT PAYMENT PERIOD" with respect to a Facility Lease, shall
mean (i) in the case of the first Rent Payment Period the period commencing on
the Closing Date and ending on March 19, 2001, (ii) in the case of the second
Rent Payment Period, the period commencing on

                                       33
<PAGE>   34

March 19, 2001 and ending on July 15, 2001 and (iii) in all cases thereafter
(except for the last Rent Payment Period which period shall commence on July 19,
2036 and end on, and include, December 19, 2036), each six-month period
commencing on each Rent Payment Date through and including the following January
15 or July 15 as the case may be.

                "REPLACEMENT COMPONENT" with respect to a Facility Lease, shall
have the meaning specified in Section 7.2 of such Facility Lease.

                "REQUIRED IMPROVEMENT" with respect to a Facility Lease, shall
have the meaning specified in Section 8.1 of such Facility Lease.

                "REQUISITION" shall have the meaning specified in clause (iii)
of the definition of "Event of Loss".

                "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 SUBSIDIARY" means any Subsidiary of the Guarantor
that is not designated an Unrestricted Subsidiary by the Board of Directors.

                "REVENUES" shall have the meaning specified in clause (3) of the
Granting Clause of the Collateral Trust Indenture.

                "RUMFORD ADDITIONAL LESSOR NOTES" shall have the meaning
specified in Section 2.12 of the Collateral Trust Indenture.

                "RUMFORD BILL OF SALE" shall mean the Rumford Bill of Sale,
dated as of the Closing Date, between Rumford Lessee and the Owner Lessor,
substantially in the form of Exhibit B-2 to the Participation Agreement duly
completed, executed and delivered on the Closing Date pursuant to which the
Owner Lessor will acquire the Rumford Facility from the Tiverton Lessee.

                "RUMFORD EASEMENTS" shall mean the easements defined in the
recitals to the Rumford Facility Site Lease and the Rumford Facility Site
Sublease.

                "RUMFORD FACILITY" shall mean a 265 MW nameplate capacity
gas-fired combined cycle merchant power plant located in Rumford, Maine and more
fully described in Exhibit A-2 to the Participation Agreement. The Rumford
Facility does not include the Rumford Facility Site.

                                       34
<PAGE>   35

                "RUMFORD FACILITY LEASE" shall mean, the Facility Lease
Agreement (Rumford), dated as of December 19, 2000, between the Owner Lessor and
Rumford Lessee, substantially in the form of Exhibit C-2 to the Participation
Agreement.

                "RUMFORD FACILITY SITE RENT" shall have the meaning set forth in
Section 4.1 of the Rumford Facility Site Lease.

                "RUMFORD LEASE" shall have the meaning set forth in the recitals
to the Rumford Sublease.

                "RUMFORD LESSEE" shall mean Rumford Power Associates Limited
Partnership.

                "RUMFORD LESSOR NOTE(s)" shall have the meaning specified in
Section 2.2 of the Collateral Trust Indenture.

                "RUMFORD NOTES" shall mean any Rumford Lessor Notes or Rumford
Additional Lessor Notes issued pursuant to the Collateral Trust Indenture.

                "RUMFORD OPERATIVE DOCUMENTS" shall mean the Participation
Agreement, the Rumford Bill of Sale, the Rumford Facility Lease, the
Certificates, the Rumford Facility Site Lease, the Rumford Facility Site
Sublease, the Collateral Trust Indenture, the Rumford Lessor Notes, the Pass
Through Trust Agreement, the LLC Agreement, the Tax Indemnity Agreement, the
Calpine Guaranty (Rumford), the OP Parent Guaranty (if any), the Certificate
Purchase Agreement and the Qualifying Letter of Credit.

                "RUMFORD PARCEL" shall have the meaning specified in Section
2.1(a) of the Rumford Site Lease and Section 2.1(a) of the Rumford Site
Sublease.

                "RUMFORD POWER ASSOCIATES" shall mean Rumford Power Associates
Limited Partnership.

                "RUMFORD SITE" shall have the meaning set forth in the recitals
to the Facility Site Lease and the Facility Site Sublease.

                "RUMFORD SITE LEASE" shall mean the Facility Site Lease
(Rumford), dated as of December 19, 2000, between the Rumford Lessee and the
Owner Lessor, substantially in the form of Exhibit D-2 to the Participation
Agreement.

                "RUMFORD SITE LESSEE" shall mean PMCC Calpine New England
Investment LLC.

                "RUMFORD SITE LESSOR" shall mean Rumford Power Associates
Limited Partnership.

                "RUMFORD SUBLEASE" shall have the meaning set forth in the
recitals to the Rumford Site Lease.

                                       35
<PAGE>   36

                "RUMFORD SITE SUBLESSEE" shall mean Rumford Power Associates
Limited Partnership.

                "RUMFORD SITE SUBLESSEE EVENT OF DEFAULT" shall have the meaning
set forth in Section 13.1 of the Facility Site Sublease (Rumford).

                "RUMFORD SITE SUBLESSOR" shall mean PMCC Calpine New England
Investment LLC.

                "R.W. BECK REPORTS" shall mean, collectively, that certain (i)
letter dated September 26, 2000 to Mr. Paul J. Colatrella of Bayersiche Hypo-und
Vereinsbank AG from R.W. Beck, Inc., and (ii) letter dated November 21, 2000 to
Mr. Mohammed J. Alam of Fortis Capital Corp. from R. W. Beck, Inc.

                "SALE/LEASEBACK TRANSACTION" means an arrangement relating to
property now owned or hereafter acquired whereby the Guarantor or a Subsidiary
transfers such property to a Person and leases it back from such Person, other
than leases for a term of not more than 36 months or between the Guarantor and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.

                "SCHEDULED CLOSING DATE" shall mean December 19, 2000.

                "SEC" shall mean the Securities and Exchange Commission.

                "SECOND RENEWAL LEASE TERM" with respect to a Facility Lease,
shall have the meaning specified in Section 15.1(b) of such Facility Lease.

                "SECOND WINTERGREEN RENEWAL LEASE OPTION" with respect to a
Facility Site Lease, shall have the meaning set forth in Section 2.2(a)(ii) of
such Facility Site Lease.

                "SECTION 467 INTEREST" with respect to a Facility Lease, shall
have the meaning set forth in Section 3.2(d) of such Facility Lease.

                "SECTION 467 LOAN" with respect to a Facility Lease, shall have
the meaning specified in Section 3.2(d) of such Facility Lease.

                "SECURED INDEBTEDNESS" shall have the meaning specified in
Section 1(b) of the Collateral Trust Indenture.

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

                "SEVERABLE IMPROVEMENT" shall mean any Improvement that is
readily removable without causing material damage to the applicable Facility.

                "SIGNIFICANT LEASE DEFAULT" shall mean, with respect to a
Facility Lease, (i) an event that is, or solely with the passage of time or the
giving of notice (or both) would become, a "Lease Event of Default" under
clauses (a), (b), (c), (g), (h) or (m) of Section 16 of such Facility

                                       36
<PAGE>   37

Lease and (ii) the failure of a Facility Lessee to comply in any material
respect with its obligations under Section 6 of the Facility Lease corresponding
to such Facility Lessee.

                "SIGNIFICANT SUBSIDIARY" means any Subsidiary (other than an
Unrestricted Subsidiary) that would be a "Significant Subsidiary" of the
Guarantor within the meaning of Rule 1-02 under Regulation S-X promulgated by
the SEC.

                "SITE LEASE EVENT OF DEFAULT" with respect to a Facility Site
Lease, shall have the meaning set forth in Section 14.1 of such Facility Site
Lease.

                "S&P" shall mean Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. or any successor thereto.

                "STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency).

                "SUBSIDIARY" shall mean, with respect to any Person (the
"parent"), any corporation or other entity of which sufficient securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by such parent.

                "SUPPLEMENTAL FINANCING" shall have the meaning specified in
Section 11.1 of the Participation Agreement.

                "SUPPLEMENTAL RENT" shall mean any and all amounts, liabilities
and obligations (other than Basic Rent and Renewal Rent) which the Facility
Lessees assume or agree to pay under the Operative Documents (whether or not
identified as "Supplemental Rent") to the Owner Lessor or any other Person,
including Termination Value.

                "SURVEY(s)" shall mean the Survey (Rumford) and/or the Survey
(Tiverton), as the context may require.

                "SURVEY (RUMFORD)" shall mean the survey of the Rumford Site, to
be dated after the Closing Date, which inter alia, will show the location of the
Rumford Site.

                "SURVEY (TIVERTON)" shall mean the survey of the Tiverton Site,
to be dated the Closing Date, which inter alia, will show the location of the
Tiverton Site.

                "TAX" or "TAXES" shall mean all fees, taxes (including, without
limitation, income taxes, sales taxes, use taxes, stamp taxes, value-added
taxes, excise taxes, ad valorem taxes and property taxes (personal and real,
tangible and intangible)), levies, assessments, withholdings and other charges
and impositions of any nature, plus all related interest, penalties, fines and
additions to tax, now or hereafter imposed by any federal, state, local or
foreign government or other taxing authority.

                                       37
<PAGE>   38

                "TAX ADVANCE" shall have the meaning specified in Section
9.2(g)(iii)(5) of the Participation Agreement.

                "TAX ASSUMPTIONS" shall mean the items described in Section 1 of
the Tax Indemnity Agreement.

                "TAX BENEFIT" shall have the meaning set forth in Section 9.2(e)
of the Participation Agreement.

                "TAX CLAIM" shall have the meaning set forth in Section
9.2(g)(i) of the Participation Agreement.

                "TAX EVENT" shall mean any event or transaction that will be a
taxable transaction to the direct or indirect holders of the Lessor Notes.

                "TAX INDEMNITEE" shall have the meaning set forth in Section
9.2(a) of the Participation Agreement.

                "TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity
Agreement, dated as of the Closing Date, between the Facility Lessees and the
Owner Participant.

                "TAX LAW CHANGE" shall have the meaning specified in Section
12(a) of the Participation Agreement.

                "TAX REPRESENTATION" shall mean each of the items described in
Section 4 of the Tax Indemnity Agreements.

                "TAXES AND ASSESSMENTS" with respect to a Facility Site Lease,
shall have, collectively, the meaning set forth in Section 18.1 of such Facility
Site Lease.

                "TERM" with respect to a Facility Site Lease or a Facility Site
Sublease, shall have the meaning set forth in Section 2.2(b) of such Facility
Site Lease or Facility Site Sublease.

                "TERMINATION DATE" with respect to a Facility Lease, shall mean
each of the monthly dates during the Facility Lease Term identified as a
"Termination Date" on Schedule 2 of such Facility Lease.

                "TERMINATION PAYMENT DATE" with respect to a Facility Lease,
shall have the meaning specified in Section 10.2(a) of such Facility Lease.

                "TERMINATION VALUES" with respect to a Facility Lease, shall
have the meaning specified in Schedule 2 to such Facility Lease.

                "TIA" shall mean the Trust Indenture Act of 1939.

                "TITLE POLICIES" shall mean (i) with respect to the Tiverton
Lessee, the title insurance policy (#75272) dated as of December 19, 2000 and
(ii) with respect to the Rumford Lessee, the title insurance policy (#206-269)
dated as of December 19, 2000.

                                       38
<PAGE>   39

                "TIVERTON ADDITIONAL LESSOR NOTES" shall have the meaning
specified in Section 2.12 of the Collateral Trust Indenture.

                "TIVERTON BILL OF SALE" shall mean the Tiverton Bill of Sale,
dated as of the Closing Date, between Tiverton Lessee and the Owner Lessor,
substantially in the form of Exhibit B-1 to the Participation Agreement duly
completed, executed and delivered on the Closing Date pursuant to which the
Owner Lessor will acquire the Tiverton Facility from the Tiverton Lessee.

                "TIVERTON EASEMENTS" shall mean the easements appurtenant,
easements in gross, license agreements and other rights running in favor of the
Tiverton Lessee and/or appurtenant to the Tiverton Site.

                "TIVERTON FACILITY" shall mean a 265 MW nameplate capacity
gas-fired combined cycle merchant power plant located in Tiverton, Rhode Island
and more fully described in Exhibit A-1 to the Participation Agreement. The
Tiverton Facility does not include the Tiverton Facility Site.

                "TIVERTON FACILITY LEASE" shall mean the Facility Lease
Agreement (Tiverton), dated as of December 19, 2000, between the Owner Lessor
and Tiverton Lessee, substantially in the form of Exhibit C-1 to the
Participation Agreement.

                "TIVERTON FACILITY SITE RENT" shall have the meaning set forth
in Section 4.1 of the Tiverton Facility Site Lease.

                "TIVERTON LEASE" shall have the meaning set forth in the
recitals to the Tiverton Sublease.

                "TIVERTON LESSEE" shall mean Tiverton Power Associates Limited
Partnership.

                "TIVERTON LESSOR NOTE(s)" shall have the meaning specified in
Section 2.2 of the Collateral Trust Indenture.

                "TIVERTON NOTES" shall mean any Tiverton Lessor Notes or
Tiverton Additional Lessor Notes issued pursuant to the Collateral Trust
Indenture.

                "TIVERTON OPERATIVE DOCUMENTS" shall mean the Participation
Agreement, the Tiverton Bill of Sale, the Tiverton Facility Lease, the
Certificates, the Tiverton Facility Site Lease, the Tiverton Facility Site
Sublease, the Collateral Trust Indenture, the Tiverton Lessor Notes, the Pass
Through Trust Agreement, the LLC Agreement, the Tax Indemnity Agreement, the
Calpine Guaranty (Tiverton), the OP Parent Guaranty (if any), the Certificate
Purchase Agreement and the Qualifying Letter of Credit.

                "TIVERTON PARCEL" shall have the meaning specified in Section
2.1(a) of the Tiverton Site Lease and of the Tiverton Site Sublease.

                "TIVERTON POWER ASSOCIATES" shall mean Tiverton Power Associates
Limited Partnership.

                                       39
<PAGE>   40

                "TIVERTON SITE" shall have the meaning set forth in the recitals
to the Facility Site Lease and the Facility Site Sublease.

                "TIVERTON SITE LEASE" shall mean the Facility Site Lease
(Tiverton), dated as of December 19, 2000, between the Tiverton Lessee and the
Owner Lessor, substantially in the form of Exhibit D-1 to the Participation
Agreement.

                "TIVERTON SITE LESSEE" shall mean PMCC Calpine New England
Investment LLC.

                "TIVERTON SITE LESSOR" shall mean Tiverton Power Associates
Limited Partnership.

                "TIVERTON SUBLEASE" shall have the meaning set forth in the
recitals to the Tiverton Site Lease.

                "TIVERTON SITE SUBLESSEE" or "TIVERTON SUBLESSEE" as the context
may require, shall mean Tiverton Power Associates, Limited Partnership.

                "TIVERTON SITE SUBLESSEE EVENT OF DEFAULT" shall have the
meaning set forth in Section 13.1 of the Facility Site Sublease (Tiverton).

                "TIVERTON SITE SUBLESSOR" shall mean PMCC Calpine New England
Investment LLC.

                "TRANSACTION COSTS" shall mean the following costs, to the
extent substantiated or otherwise supported in reasonable detail:

                (i) the reasonable costs of reproducing and printing the
Operative Documents and all costs and fees, including but not limited to filing
and recording fees and recording, transfer, mortgage, intangible and similar
taxes in connection with the execution, delivery, filing and recording of the
Facility Leases, the Facility Site Leases, the Facility Site Subleases and any
other Operative Document and any other document required to be filed or recorded
pursuant to the provisions hereof or of any other Operative Document and any
Uniform Commercial Code filing fees in respect of the perfection of any security
interests created by any of the Operative Documents or as otherwise reasonably
required by the Owner Lessor or the Indenture Trustee and surveyor fees;

                (ii) the reasonable fees and expenses of Dewey Ballantine LLP,
counsel to CSFB, for their services rendered in connection with the negotiation,
execution and delivery of the Participation Agreement and the other Operative
Documents;

                (iii) the reasonable fees and expenses of Hunton and Williams,
counsel to the Owner Participant and the Owner Lessor for their services
rendered in connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;

                                       40
<PAGE>   41

                (iv) the reasonable fees and expenses of Verill & Dana, Maine
counsel to the Initial Purchasers;

                (v) the reasonable fees and expenses of Peabody & Arnold, Rhode
Island counsel to the Initial Purchasers;

                (vi) the reasonable fees and expenses of Thelen Reid & Priest
LLP, counsel to the Facility Lessees and the Guarantors for their services
rendered in connection with the negotiation, execution and delivery of the
Participation Agreement and other Operative Documents;

                (vii) the reasonable fees and expenses of Hinckley, Allen &
Snyder, Rhode Island counsel to the Facility Lessees;

                (viii) the reasonable fees and expenses of Drummond Woodsom &
MacMahon, Maine counsel to the Facility Lessees;

                (ix) the reasonable fees and expenses of Steptoe & Johnson,
special regulatory counsel to the Facility Lessees;

                (x) the reasonable fees and expenses of Latham & Watkins,
counsel to the Underwriters, for their services rendered in connection with the
negotiation, execution and delivery of the Participation Agreement and the other
Operative Documents;

                (xi) the reasonable fees and expenses for services rendered in
connection with the recording of the Memorandum of Lease, the Memorandum of
Facility Site Lease, the Memorandum of Facility Site Sublease and the other
applicable Operative Documents;

                (xii) the reasonable fees and expenses of Bingham Dana, counsel
for the Indenture Trustee and the Lease Indenture Company and the Pass Through
Company and the Pass Through Trustee, for their services rendered in connection
with the negotiation, execution and delivery of the Participation Agreement and
the other Operative Documents;

                (xiii) the initial fees and expenses of the Indenture Trustee in
connection with the execution and delivery of the Participation Agreement and
the other Operative Documents to which either one is or will be a party;

                (xiv) the fees and expenses of the Engineering Consultant, for
its services rendered in connection with delivering the Engineering Report
required by Section 4.17 of the Participation Agreement;

                (xv) the fees and expenses of the other consultants listed in
Section 4.17 of the Participation Agreement, for their respective services
rendered in connection with delivering the reports required by such Section
4.17;

                (xvi) the fees and expenses of the Appraiser, for its services
rendered in connection with delivering the Closing Appraisal required by Section
4.15 of the Participation Agreement;

                                       41
<PAGE>   42

                (xvii) the fees and expenses of the Environmental Consultant
retained by the Owner Participant;

                (xviii) the debt and equity arrangement fees set forth in the
letter agreement dated October 16, 2000 between CSFB and Calpine, and its
reasonable out-of-pocket costs and expenses payable to Underwriters;

                (xix) the debt arrangement fees set forth in the Certificate
Purchase Agreement to be dated as of the Closing Date among the Facility
Lessees, Calpine and the Initial Purchasers, and its reasonable out-of-pocket
costs and expenses;

                (xx) all reasonable costs and expenses incurred pursuant to the
syndication of the debt and equity;

                (xxi) the fees and expenses of the Rating Agencies in connection
with the rating of the Certificates;

                (xxii) the out-of-pocket expenses of the Owner Participant
incurred in connection with the Overall Transaction;

                (xxiii) the reasonable fees and expenses of Curtis, Thaxter,
Stevens Broder & Micoleau LLC, Maine counsel to the Owner Participant and the
Owner Lessor; and

                (xxiv) the reasonable fees and expenses of Edwards & Angell,
LLP, Rhode Island counsel to the Owner Participant and the Owner Lessor.

                Notwithstanding the foregoing, Transaction Costs shall not
include internal costs and expenses such as salaries and overhead of whatsoever
kind or nature nor costs incurred by the parties to the Participation Agreement
pursuant to arrangements with third parties for services (other than those
expressly referred to above), such as computer time procurement (other than
out-of-pocket expenses of the Owner Participant), financial analysis and
consulting, advisory services, and costs of a similar nature.

                "TRANSACTION PARTY" shall mean, individually or collectively, as
the context shall require, all or any of the parties to the Operative Documents
(including the Lease Indenture Company and the Pass Through Company).

                "TRANSACTIONS" shall mean, collectively, each of the
transactions contemplated under the Participation Agreement and the other
Operative Documents.

                "TRANSFEREE" shall mean a transferee of the Owner Participant
permitted by Section 7.1 of the Participation Agreement.

                "TRANSFEREE GUARANTOR" shall have the meaning set forth in
Section 7.1(a)(iii) of the Participation Agreement.

                "TREASURY REGULATIONS" shall mean regulations, including
temporary regulations, promulgated under the Code.

                                       42
<PAGE>   43

                "TRUST INDENTURE ACT" shall mean

                "UNDERWRITERS" shall mean Credit Suisse First Boston, TD
Securities and ING Barings LLC.

                "UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount,
if any, by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial assumptions
at such time consistent with those prescribed by the PBGC for purposes of
Section 4044 of ERISA, exceeds the fair market value of all plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions).

                "UNIFORM COMMERCIAL CODE" or "UCC" shall mean the Uniform
Commercial Code as in effect in the applicable jurisdiction.

                "UNITED STATES PERSON" shall have the meaning specified in
Section 7701(a)(30) of the Code or any successor provision thereto.

                "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided by the Indenture, dated as of August
10, 2000, between the Guarantor and Wilmington Trust Company, as Trustee and
(ii) any Subsidiary of an Unrestricted Subsidiary.

                "U.S. GOVERNMENT OBLIGATIONS" shall have the meaning set forth
in Section 9.1(b) of the Collateral Trust Indenture.

                "VERIFIER" with respect to a Facility Lease, shall have the
meaning specified in Section 3.4(c) of such Facility Lease.

                "WHOLLY OWNED SUBSIDIARY" means a Subsidiary (other than an
Unrestricted Subsidiary) all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Guarantor or another Wholly Owned Subsidiary.

                                       43<PAGE>   1
                                                                  Exhibit 4.12.4

WHEN RECORDED, RETURN TO:

THOMAS M. SIMPSON, ESQ.
LATHAM & WATKINS
885 THIRD AVE.
NEW YORK, NEW YORK  10022

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

                       OPEN-END MORTGAGE TO SECURE PRESENT
                        AND FUTURE LOANS UNDER CHAPTER 25
                     OF TITLE 34 OF THE GENERAL LAWS OF THE
                              STATE OF RHODE ISLAND

                          INDENTURE OF TRUST, MORTGAGE
                             AND SECURITY AGREEMENT

                          Dated as of December 19, 2000

                                     between

                     PMCC CALPINE NEW ENGLAND INVESTMENT LLC

                                       and

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

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

                         TIVERTON AND RUMFORD FACILITIES

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
<S>                <C>                                                                    <C>
SECTION 1.         DEFINITIONS..............................................................4

SECTION 2.         THE NOTES................................................................5

Section 2.1.          Limitation on Notes...................................................5

Section 2.2.          Lessor Notes..........................................................6

Section 2.3.          Execution and Authentication of Notes.................................6

Section 2.4.          Issuance and Terms of the Lessor Notes................................6

Section 2.5.          Payments from Indenture Estate Only; No Personal Liability of the
                         Owner Lessor, the Owner Participant or the Indenture Trustee.......7

Section 2.6.          Method of Payment.....................................................7

Section 2.7.          Application of Payments...............................................8

Section 2.8.          Registration, Transfer and Exchange of Notes..........................9

Section 2.9.          Mutilated, Destroyed, Lost or Stolen Notes............................9

Section 2.10.         Redemptions; Assumption..............................................10

Section 2.11.         Payment of Expenses on Transfer......................................13

Section 2.12.         Additional Lessor Notes..............................................13

Section 2.13.         Restrictions of Transfer Resulting from Federal Securities Laws;
                         Legend............................................................15

Section 2.14.         Security for and Parity of Notes.....................................15

Section 2.15.         Acceptance of the Indenture Trustee..................................15

SECTION 3.         RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE...15

Section 3.1.          Distribution of Periodic Rent........................................15

Section 3.2.          Payments Following Event of Loss or Other Early Termination..........17

Section 3.3.          Payments After Lease Indenture Event of Default......................18

Section 3.4.          Investment of Certain Payments Held by the Indenture Trustee.........19

Section 3.5.          Application of Certain Other Payments................................19

Section 3.6.          Other Payments.......................................................19

Section 3.7.          Excepted Payments....................................................20

Section 3.8.          Distributions to the Owner Lessor....................................20

Section 3.9.          Payments Under Assigned Documents....................................20

Section 3.10.         Disbursement of Amounts Received by the Indenture Trustee............20
</TABLE>

                                       -i-
<PAGE>   3

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                          PAGE
<S>                <C>                                                                    <C>
SECTION 4.         COVENANTS OF OWNER LESSOR; DEFAULTS; REMEDIES OF INDENTURE TRUSTEE......21

Section 4.1.          Covenants of Owner Lessor............................................21

Section 4.2.          Occurrence of Lease Indenture Event of Default.......................21

Section 4.3.          Remedies of the Indenture Trustee....................................23

Section 4.4.          Right to Cure Certain Lease Events of Default........................25

Section 4.5.          Rescission of Acceleration...........................................27

Section 4.6.          Return of Indenture Estate, Etc......................................28

Section 4.7.          Power of Sale and Other Remedies.....................................29

Section 4.8.          Appointment of Receiver..............................................30

Section 4.9.          Remedies Cumulative..................................................30

Section 4.10.         Waiver of Various Rights by the Owner Lessor.........................30

Section 4.11.         Discontinuance of Proceedings........................................31

Section 4.12.         No Action Contrary to the Facility Lessees' Rights Under the
                         Facility Leases...................................................31

Section 4.13.         Right of the Indenture Trustee to Perform Covenants, Etc.............31

Section 4.14.         Further Assurances...................................................31

Section 4.15.         Waiver of Past Defaults..............................................32

SECTION 5.         DUTIES OF INDENTURE TRUSTEE; CERTAIN RIGHTS AND DUTIES OF OWNER LESSOR..32

Section 5.1.          Notice of Action Upon Lease Indenture Event of Default...............32

Section 5.2.          Actions Upon Instructions Generally..................................32

Section 5.3.          Action Upon Payment of Notes or Termination of Facility Leases.......32

Section 5.4.          Compensation of the Indenture Trustee; Indemnification...............33

Section 5.5.          No Duties Except as Specified; No Action Except Under Facility
                         Leases, Indenture or Instructions.................................33

Section 5.6.          Certain Rights of the Owner Lessor...................................34

Section 5.7.          Restrictions on Dealing with Indenture Estate........................35

Section 5.8.          Filing of Financing Statements and Continuation Statements...........35

SECTION 6.         INDENTURE TRUSTEE AND OWNER LESSOR......................................36

Section 6.1.          Acceptance of Trusts and Duties......................................36

Section 6.2.          Absence of Certain Duties............................................37
</TABLE>

                                      -ii-
<PAGE>   4

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                          PAGE
<S>                <C>                                                                    <C>
Section 6.3.          Representations and Warranties.......................................38

Section 6.4.          No Segregation of Moneys; No Interest................................38

Section 6.5.          Reliance; Agents; Advice of Experts..................................39

SECTION 7.         SUCCESSOR INDENTURE TRUSTEES AND SEPARATE TRUSTEES......................39

Section 7.1.          Resignation or Removal of the Indenture Trustee; Appointment of
                          Successor........................................................39

Section 7.2.          Appointment of Additional and Separate Trustees......................44

SECTION 8.         SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS........42

Section 8.1.          Supplemental Indenture and Other Amendment With Consent; Conditions
                         and Limitations...................................................42

Section 8.2.          Supplemental Indentures and other Amendments Without Consent.........43

Section 8.3.          Conditions to Action by the Indenture Trustee........................44

SECTION 9.         MISCELLANEOUS...........................................................45

Section 9.1.          Surrender, Defeasance and Release....................................45

Section 9.2.          Conveyances Pursuant to Section 4.2 of Site Leases and Subleases.....46

Section 9.3.          Appointment of the Indenture Trustee as Attorney; Further Assurances.46

Section 9.4.          Indenture for Benefit of Certain Persons Only........................46

Section 9.5.          Notices; Furnishing Documents, etc...................................47

Section 9.6.          Severability.........................................................48

Section 9.7.          Limitation of Liability..............................................48

Section 9.8.          Written Changes Only.................................................48

Section 9.9.          Counterparts.........................................................49

Section 9.10.         Successors and Permitted Assigns.....................................49

Section 9.11.         Headings and Table of Contents.......................................49

Section 9.12.         Governing Law........................................................49

Section 9.13.         Reorganization Proceedings with Respect to the Lessor Estate.........49

Section 9.14.         Withholding Taxes: Information Reporting.............................50

Section 9.15.         Fixture Financing Statement..........................................50
</TABLE>

                                      -iii-
<PAGE>   5

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                 PAGE
<S>                   <C>                                        <C>
APPENDIX

Appendix A            Definitions

EXHIBITS

Exhibit A-1           Description of Tiverton Site
Exhibit A-2           Description of Rumford Site
Exhibit B-1           Form of Tiverton Lessor Note
Exhibit B-2           Form of Rumford Lessor Note
Exhibit C             Form of Certificate of Authentication
Exhibit D-1           Description of Tiverton Facility
Exhibit D-2           Description of Rumford Facility
</TABLE>

                                      -iv-
<PAGE>   6

                       OPEN-END MORTGAGE TO SECURE PRESENT

                        AND FUTURE LOANS UNDER CHAPTER 25

                     OF TITLE 34 OF THE GENERAL LAWS OF THE

                              STATE OF RHODE ISLAND

                 INDENTURE OF TRUST, MORTGAGE AND SECURITY TRUST

        This OPEN-END MORTGAGE TO SECURE PRESENT AND FUTURE LOANS UNDER CHAPTER
25 OF TITLE 34 OF THE GENERAL LAWS OF THE STATE OF RHODE ISLAND, INDENTURE OF
TRUST, MORTGAGE AND SECURITY AGREEMENT (this "Indenture"), dated as of December
19, 2000, between PMCC Calpine New England Investment LLC, a Delaware limited
liability company as mortgagor (the "Owner Lessor") and STATE STREET BANK AND
TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION as mortgagee on behalf of the
Noteholders (the "Indenture Trustee").

                                   WITNESSETH:

        WHEREAS, pursuant to the Participation Agreement, the Owner Lessor has
purchased the Tiverton Facility from Tiverton Power Associates Limited
Partnership and the Rumford Facility from Rumford Power Associates Limited
Partnership (the "Facility Lessees");

        WHEREAS, the Owner Lessor has entered into a Facility Lease, dated as of
the date hereof with each of the Facility Lessees pursuant to which the Facility
Lessees have leased from the Owner Lessor for a term of years the Facilities,
which they sold to the Owner Lessor pursuant to the Bills of Sale;

        WHEREAS, the Tiverton Facility is more particularly described on Exhibit
D-1 hereto and made a part hereof, and the Rumford Facility is more particularly
described on Exhibit D-2 hereto and made a part hereof;

        WHEREAS, the Facility Lessees have leased the Tiverton and Rumford
Ground Interests (as hereinafter defined) with the right to nonexclusive
possession thereof to the Owner Lessor pursuant to the certain Tiverton Site
Lease and Rumford Site Lease, respectively, a memorandum of which shall be
recorded with this Indenture in the appropriate registry of [deeds/land records]
described in Exhibits A-1 and A-2, respectively, attached hereto, and the Owner
Lessor simultaneously therewith has leased the Facility Lessees' respective
Ground Interest back to the Facility Lessees pursuant to the Tiverton Site
Sublease and Rumford Site Sublease, respectively;

        WHEREAS, the Tiverton and Rumford Sites are more particularly described
in Exhibits A-1 and A-2, respectively, attached hereto;

<PAGE>   7

        WHEREAS, in accordance with this Indenture, the Owner Lessor will (i)
execute and deliver the Tiverton Lessor Notes and the Rumford Lessor Notes, the
proceeds of which will be used by the Owner Lessor to finance a portion of the
Purchase Price for the Rumford Facility and the Tiverton Facility purchased from
the Facility Lessees, and (ii) grant to the Indenture Trustee the security
interests herein provided;

        WHEREAS, this Indenture is regarded as a mortgage deed under the laws of
the States of Rhode Island and Maine, as a security agreement under the Uniform
Commercial Codes of the States of New York, Rhode Island, Maine, Connecticut,
Massachusetts and California and as a fixture filing under the laws of the
States of Rhode Island and Maine;

        WHEREAS, the Owner Lessor and the Indenture Trustee desire to enter into
this Indenture, to, among other things, provide for (a) the issuance by the
Owner Lessor of the Lessor Notes to be issued on the Closing Date, and
Additional Lessor Notes from time to time and (b) the conveyance and assignment
to the Indenture Trustee on the Closing Date of the Facilities conveyed to the
Owner Lessor and the Owner Lessor's right, title and interest in and under the
Operative Documents executed in connection therewith and all payments and other
amounts received hereunder or thereunder in accordance herewith (excluding
Excepted Payments);

        WHEREAS, all things have been done to make the Notes, when executed by
the Owner Lessor, authenticated and delivered hereunder and issued, the valid
obligations of the Owner Lessor; and

        WHEREAS, all things necessary to make this Indenture the valid, binding
and legal obligation of the Owner Lessor, for the uses and purposes herein set
forth, in accordance with its terms, have been done and performed and have
happened.

        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, and in order to secure
(i) the prompt payment when and as due of the principal of and the Make-Whole
Amount, if any, and interest on the Notes and of all other amounts owing with
respect to all Notes from time to time outstanding hereunder, and the prompt
payment when and as due of any and all other amounts from time to time owing in
respect of the Secured Indebtedness and (ii) the performance and observance by
the Owner Lessor for the benefit of the holders of the Notes and the Indenture
Trustee of all other obligations, agreements, and covenants of the Owner Lessor
set forth hereinafter and in the Notes, the Operative Documents and the other
documents, certificates and agreements delivered in connection therewith:

                                GRANTING CLAUSE:

The Owner Lessor hereby irrevocably grants, conveys, assigns, transfers,
pledges, bargains, sells and confirms unto the Indenture Trustee and its
successors and permitted assigns, for the benefit of the holders of the Notes
from time to time, a first priority security interest in and mortgage lien on
all estate, right, title and interest of the Owner Lessor, WITH MORTGAGE
COVENANTS and grants a security interest in, to and under the following
described property, rights, interests and privileges, whether now held or
hereafter acquired

                                        2
<PAGE>   8

(which collectively, including all property hereafter specifically subjected to
the security interest created by this Indenture by any supplement hereto,
exclusive of Excepted Payments) are included within, and are hereafter referred
to as, the "Indenture Estate"):

            (1) the Facilities (described in Exhibits D-1 and D-2 attached
hereto) conveyed to the Owner Lessor pursuant to the Bills of Sale located on
the Tiverton Site and the Rumford Site (said Sites being more particularly
described in Exhibits A-1 and A-2 attached hereto), and the leasehold estates in
the Ground Interest (as hereinafter defined) granted to the Owner Lessor by the
Tiverton Site Lease, the Tiverton Sublease, the Rumford Site Lease and the
Rumford Sublease, together with all titles, estates, interests, rights, powers
and privileges of the Owner Lessor in respect thereof;

            (2) all the estate, right, title and interest of the Owner Lessor
in, to and under the Bills of Sale, the Facility Leases, the Facility Site
Leases and Facility Site Subleases, the Calpine Guaranties and the Participation
Agreement (collectively, the "Assigned Documents"), including (a) all amounts of
Periodic Rent and Supplemental Rent and payments of any kind payable under the
Facility Leases, including Termination Value, insurance proceeds and
condemnation, requisition and other awards and payments of any kind for or with
respect to any part of the Indenture Estate as contemplated in the Assigned
Documents and (b) all rights of the Owner Lessor to exercise any election or
option or to make any decision or determination or to give or receive any
notice, consent, waiver or approval or to take any other action under or in
respect of any Assigned Document, as well as all the rights, powers and remedies
on the part of the Owner Lessor, whether arising under any Assigned Document or
by statute or at law or equity or otherwise, and whether or not arising out of
any Significant Lease Default, Lease Indenture Event of Default or Event of
Default (except to the extent provided under Section 5.6 hereof);

            (3) all rents (including Periodic Rent and Supplemental Rent payable
under the Facility Leases), issues, profits, royalties, products, revenues, and
other income of all property from time to time subjected or required to be
subjected to the Lien of this Indenture, including all payments or proceeds
payable to the Owner Lessor after termination of the Facility Leases with
respect to the Facilities or any portion thereof as the result of the sale,
lease or other disposition of the Facilities or any portion thereof and the
Ground Interests or any portion thereof, and all the estate, right, title, and
interest, of every nature whatsoever of the Owner Lessor in and to the same and
every part thereof (the "Revenues");

            (4) all moneys, securities and other investment property now or
hereafter deposited or paid or required to be deposited or paid with the
Indenture Trustee pursuant to any term of this Indenture or any other Assigned
Document and held or required to be held by or for the benefit of the Indenture
Trustee hereunder;

            (5) all the estate, right, title and interest of the Owner Lessor in
and to any right to restitution from the Facility Lessees in respect of any
determination of invalidity of any Assigned Document;

            (6) all rights of the Owner Lessor to amounts paid or payable by the
Facility Lessees to the Owner Lessor under the Participation Agreement and all
rights of the Owner Lessor to enforce payment of any such amounts;

                                        3
<PAGE>   9

            (7) all other property, rights and privileges of every kind and
description, real, personal and mixed, tangible and intangible and all interests
therein, now held or hereafter acquired by the Owner Lessor pursuant to any term
of any Assigned Document, whether located on the Tiverton or Rumford Site or
elsewhere and whether or not subjected to the Lien of this Indenture by a
supplement hereto; and

            (8) all proceeds of the foregoing;

        BUT EXCLUDING from such property, rights and privileges all Excepted
Payments and SUBJECT TO the rights of the Owner Lessor and the Owner Participant
hereunder, including under Sections 4.3(d), 4.4 and 5.6 hereof;

        TO HAVE AND TO HOLD the Indenture Estate and all parts, rights, members
and appurtenances thereof, unto the Indenture Trustee and the successors and
permitted assigns of the Indenture Trustee, for the benefit and security of the
Noteholders from time to time, forever, and in fee simple as to all parts
thereof constituting real property;

        PROVIDED, HOWEVER, that if the principal of and the Make-Whole Amount,
if any, and interest on the Notes, and all other Secured Indebtedness hereunder
shall have been paid and the Owner Lessor shall have performed and complied with
all the covenants, agreements, terms and provisions hereof, then this Indenture
and the rights hereby granted shall terminate and cease.

        Concurrently with the delivery of this Indenture, the Owner Lessor is
delivering to the Indenture Trustee the chattel paper originally-executed
counterpart of each of the Facility Leases. All property referred to in this
Granting Clause, whenever acquired by the Owner Lessor, shall secure all
obligations under and with respect to the Notes at any time outstanding. Any and
all properties referred to in this Granting Clause which are hereafter acquired
by the Owner Lessor, shall, without further conveyance, assignment or act by the
Owner Lessor or the Indenture Trustee thereby become and be subject to the
security interest hereby granted as fully and completely as though specifically
described herein.

        This Indenture is intended to constitute a security agreement as
required under the Uniform Commercial Codes of the States of New York, Rhode
Island, Maine, Connecticut, Massachusetts and California.

        The Indenture Trustee, for itself and its successors and permitted
assigns, hereby agrees that it shall hold the Indenture Estate, in trust for the
benefit and security of (i) the holders from time to time of the Notes from time
to time outstanding, without any priority of any one Note over any other except
as herein otherwise expressly provided and (ii) the Indenture Trustee, and for
the uses and purposes and subject to the terms and provisions set forth in this
Indenture. It is expressly agreed that anything herein contained to the contrary
notwithstanding, the Owner Lessor shall remain liable under the Assigned
Documents to perform all of the obligations assumed by it thereunder, all in
accordance with and pursuant to the terms and provisions thereof, and the
Indenture Trustee and the Noteholders shall have no obligation or liability
under any Assigned Document by reason of or arising out of the assignment
hereunder, nor shall the Indenture Trustee or the Noteholders be required or
obligated in any manner, except as herein

                                        4
<PAGE>   10

expressly provided, to perform or fulfill any obligation of the Owner Lessor
under or pursuant to any such Assigned Document or, except as herein expressly
provided, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim, or
to take any action to collect or enforce the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times).

        Accordingly, the Owner Lessor, for itself and its successors and
permitted assigns, agrees that all Notes are to be issued and delivered and that
all property subject or to become subject hereto is to be held subject to the
further covenants, conditions, uses and trusts hereinafter set forth, and the
Owner Lessor, for itself and its successors and permitted assigns, hereby
covenants and agrees with the Indenture Trustee, for the benefit and security of
the holders from time to time of the Notes from time to time outstanding and to
protect the security of this Indenture, and the Indenture Trustee agrees to
accept the trusts and duties hereinafter set forth, as follows:

SECTION 1. DEFINITIONS

        (b) (a) Unless the context hereof shall otherwise require, capitalized
terms used, including those in the recitals, and not otherwise defined herein
shall have the respective meanings set forth in Appendix A attached hereto. The
general provisions of such Appendix A shall apply to the terms used in this
Indenture and specifically defined herein.

        (c) (b) In addition, the following terms shall have the following
meanings.

        "Ground Interests" means the interest in the Rumford Site as described
in Exhibit A-2 or the Tiverton Site as described in Exhibit A-1 leased to the
Owner Lessor and subleased to the applicable Lessee pursuant to the Rumford Site
Lease and Rumford Site Sublease and the Tiverton Site Lease and Tiverton Site
Sublease, respectively.

        "Secured Indebtedness" means principal of and the Make-Whole Amount, if
any, and interest on and other amounts due under all Notes and all other sums
payable to the Indenture Trustee or the Noteholders from time to time hereunder
and under the Participation Agreement and the other Operative Documents by the
Facility Lessees, the Owner Participant and the Owner Lessor, including:

              (i) (i) The indebtedness evidenced by the Lessor Notes, together
        with interest thereon at the rate provided in each Lessor Note and the
        Make-Whole Amount thereon and together with any and all renewals,
        modifications, consolidations and extensions of the indebtedness
        evidenced by such Lessor Notes, and principal of such Lessor Notes being
        due and payable as provided in such Lessor Notes;

              (ii) (ii) Any and all other indebtedness now owing or which may
        hereafter be owing by the Owner Lessor to or for the benefit of the
        Indenture Trustee under the Operative Documents including indemnities
        and other Supplemental Rent payable by the Facility Lessees under the
        Operative Documents, whether evidenced by Additional Lessor Notes issued
        pursuant to Section 2.12 hereof or otherwise, however and whenever
        incurred or evidenced, whether direct or indirect, absolute or
        contingent, due or to become due, together with interest thereon at the
        rate provided in each Additional Lessor Note and the Make-Whole Amount
        thereon (if any) and together with any and all

                                        5
<PAGE>   11

        renewals, modifications, consolidations and extensions of the
        indebtedness evidenced by such Additional Lessor Notes, and principal of
        such Additional Lessor Notes being due and payable as provided in each
        such Additional Lessor Note.

              (iii) (iii) Any and all additional advances made by the Indenture
        Trustee to protect or preserve the Indenture Estate or the security
        interest and other interests created hereby on the Indenture Estate or
        for taxes, assessments or insurance premiums as hereinafter provided or
        for performance of any of the Owner Lessor's obligations hereunder or
        for any other purpose provided herein, including advances made pursuant
        to Section 4.13 hereof (whether or not the Owner Lessor remains the
        owner of the Indenture Estate at the time of such advances); and

              (iv) (iv) Any and all expenses incident to the collection of the
        Secured Indebtedness and the foreclosure hereof by action in any court
        or by exercise of the power of sale herein contained.

SECTION 2. THE NOTES

        Section 2.1. Limitation on Notes. No Notes may be issued under the
provisions of, or become secured by, this Indenture except in accordance with
the provisions of this Section 2. The aggregate principal amount of the Notes
which may be authenticated and delivered and outstanding at any one time under
this Indenture shall be limited to the principal amount of the Lessor Notes
issued on the Closing Date to the Pass Through Trustee, plus the aggregate
principal amount of Additional Lessor Notes issued pursuant to Section 2.12.

        Section 2.2. Lessor Notes. There is hereby created and established
hereunder a note in the aggregate principal amount of $190,000,000 with a final
maturity date of July 15, 2018, substantially in the form set forth in Exhibit
B-1 to this Indenture (the "Tiverton Lessor Notes"). There is hereby created and
established hereunder a note in the aggregate principal amount of $176,000,000
with a final maturity date of July 15, 2018, substantially in the form set forth
in Exhibit B-2 to this Indenture (the "Rumford Lessor Notes" and, together with
the Tiverton Lessor Note, the "Lessor Notes").

        Section 2.3. Execution and Authentication of Notes. Each Note issued
hereunder shall be executed and delivered on behalf of the Owner Lessor by one
of its authorized signatories, be in fully registered form, be dated the date of
original issuance of such Note and be in denominations of not less than $1,000.
Any Note may be signed by a Person who, at the actual date of the execution of
such Note, is an authorized signatory of the Owner Lessor although at the
nominal date of such Note such Person may not have been an authorized signatory
of the Owner Lessor. No Note shall be secured by or be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose unless there
appears thereon a certificate of authentication in the form contained in Exhibit
C (or in the appropriate form provided for in any supplement hereto executed
pursuant to Section 2.12 hereof), executed by the Indenture Trustee by the
manual signature of one of its authorized officers, and such certificate upon
any Note shall be conclusive evidence that such Note has been duly authenticated
and delivered hereunder. The Indenture Trustee shall authenticate and deliver
the Lessor Note for original issue on the Closing Date in the principal amount
specified in Section 2.2, upon a written order of the Owner Lessor.

                                        6
<PAGE>   12

The Indenture Trustee shall authenticate and deliver Additional Lessor Notes,
upon a written order of the Owner Lessor and satisfaction of the conditions
specified in Section 2.12. Such order shall specify the principal amount of the
Additional Lessor Notes to be authenticated and the date on which the original
issue of Additional Lessor Notes is to be authenticated.

        Section 2.4.  Issuance and Terms of the Lessor Notes.

        (a) Issuance of the Lessor Notes at the Closing. On the Closing Date,
the Lessor Notes shall be issued to the Pass Through Trust in the amounts set
forth in Section 2.2 hereof, and shall be dated the Closing Date.

        (b) Principal and Interest. The principal amount of each Lessor Note
shall be due and payable in a series of installments having a final payment date
of July 15, 2018. The principal of each Lessor Note shall be due and payable in
installments on the dates and in the amounts set forth in the Schedule(s)
attached to such Lessor Note on the date of issuance and authentication thereof.
The Schedule(s) to each Lessor Note to the contrary notwithstanding, the last
payment made under such Lessor Note shall be equal to the then unpaid balance of
the principal of such Lessor Note plus all accrued and unpaid interest on, and
any other amounts due under, such Lessor Note. Each Lessor Note shall bear
interest on the principal from time to time outstanding from and including the
date of issuance thereof (computed on the basis of a 360-day year of twelve
30-day months) until paid in full at the rate set forth in such Lessor Note.
Interest on each Lessor Note shall be due and payable in arrears semi-annually
commencing on July 15, 2001, and on each July 15 and January 15 thereafter until
paid in full. If any day on which principal, Make-Whole Amount, if any, or
interest on the Lessor Notes are payable is not a Business Day, payment thereof
shall be made on the next succeeding Business Day with the same effect as if
made on the date on which such payment was due.

        (c) Overdue Payments. Interest (computed on the basis of a 360-day year
of twelve 30-day months) on any overdue principal, Make-Whole Amount (if any)
and, to the extent permitted by Applicable Law, interest and any other amounts
payable shall be paid on demand at the Overdue Rate.

        (d) Indemnity Amounts. The Owner Lessor agrees to pay to the Indenture
Trustee for distribution in accordance with Section 3.5 hereof any and all
indemnity amounts received by the Owner Lessor which are payable by the Facility
Lessees to (i) the Indenture Trustee, (ii) the Pass Through Trust, or (iii) the
Pass Through Trustee.

        Section 2.5. Payments from Indenture Estate Only; No Personal Liability
of the Owner Lessor, the Owner Participant or the Indenture Trustee. Except as
otherwise specifically provided in this Indenture or the Participation
Agreement, all payments in respect of the Notes or under this Indenture shall be
made only from the Indenture Estate, and the Owner Lessor shall have no
obligation for the payment thereof except to the extent that there shall be
sufficient income or proceeds from the Indenture Estate to make such payments in
accordance with the terms of Section 3 hereof; and the Owner Participant shall
not have any obligation for payments in respect of the Notes or under this
Indenture. The Indenture Trustee and each Noteholder, by its acceptance thereof,
agrees that it will look solely to the income and proceeds from the Indenture
Estate to the extent available for distribution to the Indenture Trustee or such

                                        7
<PAGE>   13

Noteholder, as the case may be, as herein provided and that, except as expressly
provided in this Indenture, the Participation Agreement or any other Operative
Document, none of the Owner Participant, the Owner Lessor, the Lease Indenture
Company, nor the Indenture Trustee shall be personally liable to such Noteholder
or the Indenture Trustee for any amounts payable hereunder, under such Note or
for any performance to be rendered under any Assigned Document or for any
liability under any Assigned Document. Without prejudice to the foregoing, the
Owner Lessor will duly and punctually pay or cause to be paid the principal of,
Make-Whole Amount, if any, and interest on all Notes according to their terms
and the terms of this Indenture. Nothing contained in this Section 2.5 limiting
the liability of the Owner Lessor shall derogate from the right of the Indenture
Trustee and the Noteholders to proceed against the Indenture Estate and the
Calpine Guaranties to secure and enforce all payments and obligations due
hereunder and under the Assigned Documents and the Notes.

        (a) In furtherance of the foregoing, to the fullest extent permitted by
law, each Noteholder (and each assignee of such Person), by its acceptance
thereof, agrees that neither it nor the Indenture Trustee will exercise any
statutory right to negate the agreements set forth in this Section 2.5.

        (b) Nothing herein contained shall be interpreted as affecting the
representations, warranties or agreements of the Owner Lessor set forth in the
Participation Agreement or the LLC Agreement.

        Section 2.6. Method of Payment. The Owner Lessor shall maintain an
office or agency where Notes may be presented for payment (the "Paying Agent").
The Owner Lessor may have one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Owner Lessor initially appoints
the Indenture Trustee as Paying Agent in connection with the Notes.

        (a) The Owner Lessor shall deposit with the Paying Agent a sum
sufficient to pay such principal and interest when so becoming due. The Owner
Lessor shall require each Paying Agent (other than the Indenture Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Noteholders or the Indenture Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Notes and shall notify the
Indenture Trustee of any default by the Owner Lessor in making any such payment.

        (b) The principal of and the Make-Whole Amount, if any, and interest on
each Note shall be paid by the Paying Agent from amounts available in the
Indenture Estate on the dates provided in the Notes by mailing a check for such
amount, payable in New York Clearing House funds, to each Noteholder at the last
address of each such Noteholder appearing on the Note Register, or by whichever
of the following methods shall be specified by notice from a Noteholder to the
Indenture Trustee: (i) by crediting the amount to be distributed to such
Noteholder to an account maintained by such Noteholder with the Indenture
Trustee, (ii) by making such payment to such Noteholder in immediately available
funds at the Indenture Trustee Office, or (iii) in the case of the Lessor Notes
and in the case of other Notes, if such Noteholder is the Pass Through Trustee,
or a bank or other institutional investor, by transferring such amount in
immediately available funds for the account of such Noteholder to the banking
institution having bank wire transfer facilities as shall be specified by such
Noteholder, such

                                        8
<PAGE>   14

transfer to be subject to telephonic confirmation of payment. Any payment made
under any of the foregoing methods shall be made free and clear of and without
reduction for or on account of all wire and like charges and without any
presentment or surrender of such Note, unless otherwise specified by the terms
of the Note, except that, in the case of the final payment in respect of any
Note, such Note shall be surrendered to the Indenture Trustee for cancellation
after such payment. All payments in respect of the Notes shall be made (1) as
soon as practicable prior to the close of business on the date the amounts to be
distributed by the Indenture Trustee are actually received by the Indenture
Trustee if such amounts are received by 12:00 noon New York City time, on a
Business Day, or (2) on the next succeeding Business Day if received after such
time or on any day other than a Business Day. One or more of the foregoing
methods of payment may be specified in a Note. Prior to due presentment for
registration of transfer of any Note, the Owner Lessor and the Indenture Trustee
may deem and treat the Person in whose name any Note is registered on the Note
Register as the absolute owner and holder of such Note for the purpose of
receiving payment of all amounts payable with respect to such Note and for all
other purposes, and neither the Owner Lessor nor the Indenture Trustee shall be
affected by any notice to the contrary. All payments made on any Note in
accordance with the provisions of this Section 2.6 shall be valid and effective
to satisfy and discharge the liability on such Note to the extent of the sums so
paid and (except as provided herein) neither the Indenture Trustee nor the Owner
Lessor shall have any liability in respect of such payment.

        Section 2.7. Application of Payments. Each payment on any outstanding
Note shall be applied, first, to the payment of accrued interest (including
interest on overdue principal and the Make-Whole Amount, if any, and, to the
extent permitted by Applicable Law, overdue interest) on such Note to the date
of such payment, second, to the payment of the principal amount of, and the
Make-Whole Amount, if any, on such Note then due (including any overdue
installments of principal) thereunder and third, to the extent permitted by
Section 2.10 of this Indenture, the balance, if any, remaining thereafter, to
the payment of the principal amount of, and the Make-Whole Amount, if any, on
such Note. The order of application of payments prescribed by this Section 2.7
shall not be deemed to supersede any provision of Section 3 hereof regarding
application of funds.

        Section 2.8. Registration, Transfer and Exchange of Notes. The Owner
Lessor shall maintain an office or agency where Notes may be presented for
registration of transfer or for exchange (the "Registrar"). The Registrar shall
keep a register of the Notes and of their transfer and exchange. The Owner
Lessor may have one or more co-registrars. The Owner Lessor initially appoints
the Indenture Trustee as Registrar in connection with the Notes. The Indenture
Trustee shall maintain at the Indenture Trustee Office a register in which it
will provide for the registration, registration of transfer and exchange of
Notes (such register being referred to herein as the "Note Register"). If any
Note is surrendered at said office for registration of transfer or exchange
(accompanied by a written instrument of transfer duly executed by or on behalf
of the holder thereof, together with the amount of any applicable transfer
taxes), the Owner Lessor will execute and the Indenture Trustee will
authenticate and deliver, in the name of the designated transferee or
transferees, if any, one or more new Notes (subject to the limitations specified
in Sections 2.3 and 2.13 hereof) in any denomination or denominations not
prohibited by this Indenture, as requested by the Person surrendering the Note,
dated the same date as the Note so surrendered and of like tenor and aggregate
unpaid principal amount. Any Note or Notes issued

                                        9
<PAGE>   15

in a registration of transfer or exchange shall be valid obligations of the
Owner Lessor entitled to the same security and benefits to which the Note or
Notes so transferred or exchanged were entitled, including rights as to interest
accrued but unpaid and to accrue so that there will not be any loss or gain of
interest on the Note or Notes surrendered. Every Note presented or surrendered
for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Indenture Trustee duly executed by the holder thereof or his attorney
duly authorized in writing, and the Indenture Trustee may require an opinion of
counsel as to compliance of any such transfer with the Securities Act. The
Indenture Trustee shall make a notation on each new Note of the amount of all
payments of principal previously made on the old Note or Notes with respect to
which such new Note is issued and the date on which such new Note is issued and
the date to which interest on such old Note or Notes shall have been paid. The
Indenture Trustee shall not be required to register the transfer or exchange of
any Note during the 10 days preceding the due date of any payment on such Note.

               Each Noteholder, by its acceptance of a Note, shall be deemed to
have consented to, and agreed to be bound by, the terms and conditions hereof,
of such Note (and any instrument of assignment or transfer) and of the other
Operative Documents.

        Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes. Upon receipt by
the Owner Lessor and the Indenture Trustee of evidence satisfactory to each of
them of the loss, theft, destruction or mutilation of any Note and, in case of
loss, theft or destruction, of indemnity satisfactory to each of them, and upon
reimbursement to the Owner Lessor and the Indenture Trustee of all reasonable
expenses incidental thereto and payment or reimbursement for any transfer taxes,
and upon surrender and cancellation of such Note, if mutilated, the Owner Lessor
will execute and the Indenture Trustee will authenticate and deliver in lieu of
such Note, a new Note, dated the same date as such Note and of like tenor and
principal amount. Any indemnity provided by the holder of a Note pursuant to
this Section 2.9 must be sufficient in the reasonable judgment of the Owner
Lessor and the Indenture Trustee to protect the Owner Lessor, the Indenture
Trustee, the Paying Agent, the Registrar and any co-registrar or co-paying agent
from any loss which any of them may suffer if a Note is replaced.

        Section 2.10. Redemptions; Assumption.

        (a) Except as provided in paragraphs (c) and (d) of this Section 2.10 or
as provided in any indenture supplemental hereto, the applicable Notes shall be
redeemed at a price equal to the principal amount of the Notes redeemed,
together with accrued interest on such principal amount so redeemed to the
Redemption Date, in whole or, to the extent set forth in clause (i), (ii), (iii)
or (iv), in part, in the event of:

              (i) a termination of either of the Facility Leases pursuant to
        Section 10 thereof as a result of the occurrence of an Event of Loss
        (other than a Regulatory Event of Loss or an Event of Loss described in
        clause (v) of the definition of "Event of Loss");

             (ii) a termination of either of the Facility Leases pursuant to
        Section 10 thereof as a result of a Regulatory Event of Loss (other than
        a termination as a result of a Regulatory Event of Loss set forth in
        subsection (B) of clause (iv) of the definition of

                                       10
<PAGE>   16

        "Event of Loss"), unless the applicable Facility Lessee effects an
        assumption of the applicable Notes in accordance with paragraph (b) of
        this Section 2.10;

              (iii) a termination pursuant to Section 13.1 of either of the
        Facility Leases, unless the applicable Facility Lessee purchases the
        applicable Facility and effectuates an assumption of the applicable
        Notes in accordance with paragraph (b) of this Section 2.10; and

               (iv) a termination pursuant to clause (a) of Section 14.1 of
        either of the Facility Leases.

Any such redemption shall be made in accordance with the applicable provisions
of Section 3 hereof.

        (b) Unless a Significant Lease Default or a Lease Event of Default shall
have occurred and be continuing after giving effect to such assumption, the
obligations and liabilities of the Owner Lessor hereunder and under all of the
Tiverton Notes or the Rumford Notes may be assumed in whole (but not in part) by
the Tiverton Lessee or the Rumford Lessee, respectively, in the event of the
occurrence of (i) a Regulatory Event of Loss affecting the applicable Facility,
or (ii) a termination by the Tiverton Lessee or the Rumford Lessee,
respectively, pursuant to Section 13.1 or 13.2 of the Facility Lease to which
such Facility Lessee is a party, where in connection with such termination the
respective Facility Lessee acquires the applicable Facility, in each case,
pursuant to an assumption agreement (which assumption agreement may be combined
with the indenture supplemental to this Indenture hereinafter referred to in
this Section 2.10(b), and shall provide for the assumption by the applicable
Facility Lessee of the obligations and liabilities of the Owner Lessor and the
Owner Participant under the Operative Documents pertaining to the Facility
leased by such Facility Lessee) which shall make such obligations and
liabilities fully recourse to the applicable Facility Lessee and shall otherwise
be in form and substance acceptable to the Indenture Trustee and the Owner
Lessor. Such assumption agreement shall be accompanied by an Opinion of Counsel.
The applicable Facility Lessee will execute and deliver, and the Indenture
Trustee will authenticate, to each Noteholder in exchange for such old Note a
new Note, in a principal amount equal to the outstanding principal amount of
such old Note and otherwise in substantially similar form and tenor to such old
Note but indicating that the applicable Facility Lessee are the issuers thereof.
When such assumption agreement becomes effective, the Owner Lessor shall be
released and discharged without further act from all obligations and liabilities
assumed by the applicable Facility Lessee. All documentation in connection with
any such assumption (including an indenture supplemental to this Indenture which
shall, among other things, contain provisions appropriately amending references
to the Facility Leases in this Indenture and contain covenants by the applicable
Facility Lessee similar to those contained in the Facility Leases (other than
any covenants which were solely for the benefit of the Owner Participant),
changed as appropriate, and amendments or supplements to the other Operative
Documents, officers' certificates, opinions of counsel and regulatory approvals)
shall be prepared by and at the expense of the applicable Facility Lessee
acceptable in form and substance to the Indenture Trustee. As a condition to the
effectiveness of the assumption by the applicable Facility Lessee and the
release of the Owner Lessor and the Indenture Estate thereby effected, (A) the
Indenture Trustee shall have received an Opinion of Counsel of the applicable
Facility Lessee, including, in the case of clause (2) below, a nationally

                                       11
<PAGE>   17

recognized counsel selected by the applicable Facility Lessee and reasonably
acceptable to the Noteholders (it being acknowledged and agreed that the
applicable Facility Lessee's counsel on the Closing Date shall be deemed
acceptable), addressed to the Indenture Trustee and the Noteholders, to the
effect (1) set forth in the definition of "Opinion of Counsel", and (2) that
such assumption agreement and the assumption of the applicable Notes thereunder
would not cause a Tax Event to occur, (3) the Lien of this Indenture shall
continue to be a first priority perfected mortgage and security interest on the
Indenture Estate, and (4) addressing such other issues as the Indenture Trustee
shall reasonably request, and (B) Moody's and S&P shall have confirmed that such
assumption will not result in a downgrading of the rating on the Certificates.

        (c) The Owner Lessor may, at its option, redeem any Additional Lessor
Notes in whole, or in part, on any date to the extent permitted by, and at the
prices set forth in, the supplemental indenture establishing the terms,
conditions and designations of such Additional Lessor Notes, together with the
accrued interest on such principal amount plus the Make Whole Amount, if any, so
redeemed.

        (d) The Lessor Notes shall be redeemed, in whole or, solely to the
extent provided in clause (iii) below, in part, as provided below, at the
redemption price equal to the principal amount thereof, together with accrued
interest on such principal amount, plus the Make-Whole Amount, as follows:

              (i) The Lessor Notes shall be redeemed at such redemption price
        upon receipt of moneys by the Indenture Trustee as a result of an
        optional refinancing pursuant to Section 11.2 of the Participation
        Agreement. The Owner Lessor's failure to consummate such redemption as a
        result of an event described in this clause (i) following delivery of
        such notice shall not constitute a Lease Indenture Event of Default or
        any other default under the Operative Documents.

              (ii) The Lessor Notes shall be redeemed at such redemption price
        upon an optional prepayment, if the Owner Lessor elects to so redeem the
        Lessor Notes, as described in the next two succeeding sentences. In the
        case of a redemption pursuant to this clause (ii), the Owner Lessor
        shall indemnify the Indenture Trustee and the Facility Lessees for any
        and all costs and expenses incurred in connection with such redemption
        or, in the event no redemption occurs following delivery of notice of
        redemption, the failure to consummate any such redemption. The Owner
        Lessor's failure to consummate such redemption as a result of an event
        described in this clause (ii) following delivery of such notice shall
        not constitute a Lease Indenture Event of Default or any other default
        under the Operative Documents.

              (iii) The Lessor Notes shall be redeemed, in whole or in part,
        at such redemption price upon the exercise by either of the Facility
        Lessees of their rights to terminate their respective Facility Lease as
        a result of an event described in Section 13.2 or clause (b) of Section
        14.1 of the Facility Leases. The Owner Lessor's failure to consummate
        such redemption as a result of an event described in Section 13.2 of the
        Facility Leases following delivery of such notice shall not constitute a
        Lease Indenture Event of Default or any other default under the
        Operative Documents;

                                       12
<PAGE>   18

              (iv) The Lessor Notes shall be redeemed at such redemption price
        upon termination of either of the Facility Leases pursuant to Section 10
        thereof as a result of the occurrence of an Event of Loss described in
        clause (v) of the definition of "Event of Loss"; and

              (v) The Lessor Notes shall be redeemed at such redemption price
        upon termination of either of the Facility Leases pursuant to Section 10
        thereof as a result of the occurrence of and Event of Loss described in
        subclause (B) or (C) of clause (iv) of the definition of "Event of
        Loss".

The Make-Whole Amount, if any, payable with respect to the Notes will be
determined by an investment banking institution of national standing in the
United States (the "Investment Banker") selected by the applicable Facility
Lessee or, if the Owner Lessor or the Indenture Trustee does not receive notice
of such selection at least ten days prior to a scheduled prepayment date or if a
Lease Event of Default under the applicable Facility Lease shall have occurred
and be continuing, selected by the Owner Lessor.

        (e) In connection with a termination of a Facility Lease and redemption
of the Notes pertaining to the Facility leased under such Facility Lease in part
as contemplated by clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) or (d)(iii), the
applicable Lessor Note shall be redeemed in part as follows: (1) any amounts
payable by the Tiverton Facility Lessee shall be applied first to the Tiverton
Notes in accordance with Section 2.7 hereof and otherwise in accordance with
Section 3 hereof; and (2) any amounts payable by the Rumford Facility Lessee
shall be applied first to the Rumford Notes in accordance with Section 2.7
hereof and otherwise in accordance with Section 3 hereof.

        (f) If the Owner Lessor elects to redeem Notes, or Notes are otherwise
required to be redeemed pursuant to this Section 2.10, the Owner Lessor shall
notify the Indenture Trustee in writing of the Redemption Date, the Section of
this Indenture pursuant to which the redemption will occur. The Owner Lessor
shall give each notice to the Indenture Trustee provided for in this Section
2.10 at least 30 days before the Redemption Date unless the Indenture Trustee
consents in writing to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an opinion of counsel from the Facility Lessees to the
effect that such redemption will comply with the conditions herein.

        (g) At least 20 days but not more than 60 days before a Redemption Date,
the Indenture Trustee shall deliver notification of such redemption by
first-class mail to each Holder of Notes to be redeemed at such Holder's
registered address; provided, that no notice shall be required so long as the
Pass Through Trustee and the Indenture Trustee are the same entity. Each such
notice shall state:

              (i)    the Redemption Date;

              (ii)   the redemption price;

              (iii)  (the name and address of the Paying Agent;

                                       13
<PAGE>   19

               (iv)  that Notes called for redemption must be surrendered to the
        Paying Agent to collect the redemption price;

               (v)   that, unless the Owner Lessor defaults in making such
        redemption payment, interest on Notes called for redemption ceases to
        accrue on and after the redemption date; and

               (vi)  the paragraph of this Indenture pursuant to which the
        Notes called for redemption are being redeemed.

        (h) [Intentionally omitted.]

        (i) Upon surrender to the Paying Agent, such Notes shall be paid at the
redemption price stated in the notice, plus accrued interest to the Redemption
Date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.

        Section 2.11. Payment of Expenses on Transfer. Upon the issuance of a
new Note or Notes pursuant to Section 2.8 or 2.9 hereof, the Owner Lessor or the
Indenture Trustee may require from the party requesting such new Note or Notes
payment of a sum to reimburse the Owner Lessor and the Indenture Trustee for, or
to provide funds for, the payment of any tax or other governmental charge in
connection therewith or any charges and expenses connected with such tax or
governmental charge paid or payable by the Owner Lessor or the Indenture
Trustee.

        Section 2.12. Additional Lessor Notes.

        (a) Additional Notes (each, an "Additional Lessor Note") of the Owner
Lessor may be issued under and secured by this Indenture, at any time or from
time to time, in addition to the Lessor Note and subject to the conditions
hereinafter provided in this Section 2.12, for cash in the amount equal to the
original principal amount of such Additional Lessor Notes, for the purpose of
(i) providing funds in connection with Supplemental Financing pursuant to
Section 11.1 of the Participation Agreement for the payment of all or any
portion of Modifications to the Facilities pursuant to Section 8 of the Facility
Leases, or (ii) redeeming any previously issued Notes pursuant to an optional
refinancing pursuant to Section 11.2 of the Participation Agreement and
providing funds for the payment of all reasonable costs and expenses in
connection therewith.

        (b) Before any Additional Lessor Notes shall be issued under the
provisions of this Section 2.12, the Owner Lessor shall have delivered to the
Indenture Trustee, not less than fifteen (15) (unless a shorter period shall be
satisfactory to the Indenture Trustee) days nor more than thirty (30) days prior
to the proposed date of issuance of any Additional Lessor Notes, a request and
authorization to issue such Additional Lessor Notes, which request and
authorization shall include the amount of such Additional Lessor Notes, the
proposed date of issuance thereof and (except in connection with a refinancing
of all of the Notes pursuant to Section 11.2 of the Participation Agreement) a
certification that the terms thereof are not inconsistent with this Indenture.
Additional Lessor Notes shall have a designation so as to distinguish such
Additional Lessor Notes from the Notes theretofore issued, but otherwise shall
rank pari passu with any Notes outstanding upon issuance of the Additional
Notes, be entitled to the same benefits and

                                       14
<PAGE>   20

security of this Indenture as any other such Notes then outstanding, be dated
the date of original issuance of such Additional Lessor Notes, bear interest at
such rates as shall be agreed between the Facility Lessees and the Owner Lessor
and indicated in the aforementioned request and authorization, and shall be
stated to be payable by their terms not later than the final maturity date of
the Lessor Notes issued on the Closing Date.

        (c) The terms, conditions and designations of such Additional Lessor
Notes (which shall be consistent with this Indenture, except in the case of a
refinancing of all of the Notes pursuant to Section 11.2 of the Participation
Agreement) shall be set forth in an indenture supplemental to this Indenture
executed by the Owner Lessor and the Indenture Trustee. Such Additional Lessor
Notes shall be executed as provided in Section 2.3 hereof and deposited with the
Indenture Trustee for authentication, but before such Additional Lessor Notes
shall be authenticated and delivered by the Indenture Trustee there shall be
filed with the Indenture Trustee the following, all of which shall be dated as
of the date of the supplemental indenture:

              (i) a copy of such supplemental indenture (which shall include the
        form of such Additional Lessor Notes and the certificate of
        authentication in respect thereof);

              (ii) an Officer's Certificate from the applicable Facility Lessee
        (1) stating that no Significant Lease Default or Lease Event of Default
        has occurred and is continuing under its respective Facility Lease, (2)
        stating that the conditions in respect of the issuance of such
        Additional Lessor Notes contained in this Section 2.12 have been
        satisfied, (3) specifying the amount of the costs and expenses relating
        to the issuance and sale of such Additional Lessor Notes, and (4)
        stating that payments pursuant to the applicable Facility Lease and all
        supplements thereto of Periodic Rent and Termination Value, together
        with all other amounts payable pursuant to the terms of the Facility
        Leases, are calculated to be sufficient to pay when due all of the
        principal of and interest on the outstanding Notes, after taking into
        account the issuance of such Additional Lessor Notes and any related
        redemption of Notes theretofore outstanding;

              (iii) with respect to any Supplemental Financing, an Officer's
        Certificate from the Owner Lessor stating that no Indenture Default
        under clauses (b) through (f) of Section 4.2 hereof or Lease Indenture
        Event of Default as to the Owner Lessor has occurred and is continuing;

              (iv) such additional documents, certificates and opinions as shall
        be reasonably required by the Indenture Trustee, and as shall be
        reasonably acceptable to the Indenture Trustee;

              (v) a request and authorization to the Indenture Trustee by the
        Owner Lessor to authenticate and deliver such Additional Lessor Notes to
        or upon the order of the Person or Persons noted in such request at the
        address set forth therein, and in such principal amounts as are stated
        therein, upon payment to the Indenture Trustee, but for the account of
        the Owner Lessor, of the sum or sums specified in such request and
        authorization;

              (vi) the consent of the applicable Facility Lessee to such
        request and authorization; and

                                       15
<PAGE>   21

              (vii) an Opinion of Counsel as to the authorization, validity and
        enforceability of the Additional Lessor Notes and that all conditions
        hereunder to the authentication and delivery of such Additional Lessor
        Notes have been complied with.

        (d) When the documents referred to in the foregoing clauses (i) through
(vii) above shall have been filed with the Indenture Trustee and when the
Additional Lessor Notes described in the above mentioned request and
authorization shall have been executed and authenticated as required by this
Indenture and the related supplemental indenture, the Indenture Trustee shall
deliver such Additional Lessor Notes in the manner described in clause (v)
above, but only upon payment to the Indenture Trustee of the sum or sums
specified in such request and authorization.

        (e) This Indenture is an open-end mortgage which secures existing
indebtedness, "future advances", "protective advances" and "contingent
obligations" as such terms are defined in 33 M.R.S.A. Section 505. The maximum
principal indebtedness secured by this Indenture, including future advances and
contingent obligations but excluding protective advances, shall not at any time
exceed the total amount of Seven Hundred Fifty Million Dollars ($750,000,000);
provided, however, that nothing herein contained shall limit the amount secured
by this Indenture if the Secured Indebtedness is increased by protective
advances; and provided, further, such limitation as to such future advances and
contingent obligations shall only pertain to the record priority of the amount
thereof secured hereby pursuant to 33 M.R.S.A. Section 505 and does not
otherwise limit the amount of total indebtedness of Owner Lessor secured hereby
or limit the liability of Owner Lessor to Indenture Trustee for such total
indebtedness, including future advances and contingent obligations. The future
advances secured hereby shall be made to or for the account of Owner Lessor and
may be made under the Additional Lessor Notes, or pursuant to promissory notes
or other instruments evidencing such future advances which may be hereafter
executed and delivered by Owner Lessor to Indenture Trustee. In the event that
any notice described in subsections 5(A) or 5(B) of 33 M.R.S.A. Section 505 is
recorded or is received by Indenture Trustee, any commitment, agreement, or
obligation to make future advances to or for the benefit of Owner Lessor shall
immediately terminate.

        (f) This Indenture permits and secures any and all current and future
advances made to or for the account of the Owner Lessor and may be made under
the Notes or the Additional Lessor Notes or other documents evidencing the
Secured Indebtedness, as may be signed by the Owner Lessor and such other
agreement(s) as may be entered into by and with the Indenture Trustee and signed
by the Owner Lessor. The unpaid principal balance of the indebtedness
outstanding under this Indenture shall at no time exceed Seven Hundred Fifty
Million Dollars ($750,000,000). The Indenture Trustee will accept notices
pursuant to Section 34-25-10(b) and 34-25-11 of the General Laws of the State of
Rhode Island at the address specified in Section 9.5 of this Indenture.

        Section 2.13. Restrictions of Transfer Resulting from Federal Securities
Laws; Legend. Each Note shall be delivered to the initial Noteholder thereof
without registration of such Note under the Securities Act and without
qualification of this Indenture under the Trust Indenture Act of 1939, as
amended. Prior to any transfer of any such Note, in whole or in part, to any
Person, the Noteholder thereof shall furnish to the applicable Facility Lessee,
the Indenture Trustee and the Owner Lessor an opinion of counsel, which opinion
and which counsel shall be reasonably satisfactory to the Indenture Trustee, the
Owner Lessor and the applicable Facility Lessee, to the

                                       16
<PAGE>   22

effect that such transfer will not violate the registration provisions of the
Securities Act or require qualification of this Indenture under the Trust
Indenture Act of 1939, as amended, and all Notes issued hereunder shall be
endorsed with a legend which shall read substantially as follows:

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
         MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH
         ACT.

        Section 2.14. Security for and Parity of Notes. All Notes issued and
outstanding hereunder shall rank on a parity with each other and shall as to
each other be secured equally and ratably by this Indenture, without preference,
priority or distinction of any thereof over any other by reason of difference in
time of issuance or otherwise.

        Section 2.15. Acceptance of the Indenture Trustee. Each Noteholder, by
its acceptance of a Note, shall be deemed to have consented to the appointment
of the Indenture Trustee.

SECTION 3. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE

        Section 3.1.  Distribution of Periodic Rent.

        (a) Periodic Rent Distribution. Except as otherwise provided in Section
3.2, 3.3 or 3.7 of this Indenture, each installment of Periodic Rent and any
payment of Supplemental Rent constituting interest on overdue installments of
Periodic Rent received by the Indenture Trustee shall be distributed by the
Indenture Trustee in the following order of priority:

        First, so much of such amounts as shall be required to pay in full the
        aggregate principal and accrued interest (as well as any interest on
        overdue principal and, to the extent permitted by Applicable Law, on
        overdue interest) then due and payable under the Notes shall be
        distributed to the Noteholders ratably, without priority of any
        Noteholder over any other Noteholder, in the proportion that the amount
        of such payment then due and payable under each such Note bears to the
        aggregate amount of the payments then due and payable under all such
        Notes; and

        Second, the balance, if any, of such amounts remaining shall be
        distributed to the Owner Lessor for distribution by it in accordance
        with the terms of the LLC Agreement.

        (b) Application of Other Amounts Held by the Indenture Trustee upon Rent
Default. If, as a result of any failure by either of the Facility Lessees to pay
Periodic Rent in full on any date when an installment of Periodic Rent is due,
there shall not have been distributed on any date (or within any applicable
period of grace) pursuant to Section 3.1(a) hereof the full amount then
distributable pursuant to clause "First" of Section 3.1(a) of this Indenture,
the Indenture Trustee shall distribute other payments of the character referred
to in Sections 3.5 and 3.6 hereof then held by it, or thereafter received by it,
to all Noteholders to the extent necessary to enable it to make all the
distributions then due pursuant to such clause "First." To the extent the
Indenture Trustee thereafter receives the deficiency in Periodic Rent, the
amount so received shall, unless a Significant Lease Default or Lease Indenture
Event of Default shall have occurred and be continuing, be applied to restore
the amounts held by the Indenture Trustee under Section 3.5 or

                                       17
<PAGE>   23

3.6 hereof and distributed pursuant to this Section 3.1(b), as the case may be.
The portion of each such payment made to the Indenture Trustee which is to be
distributed by the Indenture Trustee in payment of Notes shall be applied in
accordance with Section 2.7 hereof. Any payment received by the Indenture
Trustee pursuant to Section 4.3 hereof as a result of payment by the Owner
Lessor of principal or interest or both (as well as any interest on overdue
principal and, to the extent permitted by Applicable Law, on overdue interest)
then due on all Notes shall be distributed to the Noteholders, ratably, without
priority of one over the other, in the proportion that the amount of such
payment or payments then due and unpaid on all Notes held by each such
Noteholder bears to the aggregate amount of the payments then due and unpaid on
all Notes outstanding; and the Owner Lessor shall (to the extent of such payment
made by it) be subrogated to the rights of the Noteholders under this Section
3.1 to receive the payment of Periodic Rent or Supplemental Rent with respect to
which its payment under Sections 4.3(a) and (b) hereof relates, and the payment
of interest on account of such Periodic Rent or Supplemental Rent being overdue,
to the extent provided in and subject to the provisions of Section 4.3(a) and
(b) hereof.

        (c) Retention of Amounts by the Indenture Trustee. If at the time of
receipt by the Indenture Trustee of an installment of Periodic Rent (whether or
not then overdue) or of payment of interest on any overdue installment of
Periodic Rent, there shall have occurred and be continuing a Lease Indenture
Event of Default, the Indenture Trustee shall retain such installment of
Periodic Rent or payment of interest (to the extent not then required to be
distributed pursuant to clause "First" of Section 3.1(a)) as part of the
Indenture Estate and shall not distribute any such payment of Periodic Rent or
interest pursuant to clause "Second" of Section 3.1(a) until such time as the
Indenture Trustee shall have received notice that there shall not be continuing
any such Lease Indenture Event of Default or until such time as the Indenture
Trustee shall have received written instructions from a Majority in Interest of
Noteholders to make such a distribution; provided that such amounts must be
returned to the Owner Lessor within six (6) months from the receipt thereof by
the Indenture Trustee unless (i) the Indenture Trustee has declared the unpaid
principal of all Notes due and payable (or such amounts shall have automatically
become due and payable), pursuant to Section 4.2(a) and the Indenture Trustee is
diligently pursuing any dispossessary remedies available under Section 4.3
hereof (unless such remedies are stayed or prevented by operation of law) or
(ii) any other Lease Indenture Event of Default shall have occurred during the
intervening period and be continuing, in which case, such six-month period will
be restarted from the date such other Lease Indenture Event of Default shall
have occurred. Upon the cure or waiver of such Lease Indenture Event of Default,
withheld Periodic Rent shall, subject to clause (ii) of the immediately
preceding sentence, be distributed to the Owner Lessor (to the extent that all
payments to be distributed pursuant to clause "First" of Section 3.1(a) have
been made), and no further withholding of Periodic Rent on account of such Lease
Indenture Event of Default shall be effected.

        Section 3.2. Payments Following Event of Loss or Other Early
Termination.

        (a) Any payment received by the Indenture Trustee as a result of (x) an
Event of Loss (other than a Regulatory Event of Loss in respect of which the
Facility Lessees shall, pursuant to Section 2.10(b) hereof, assume the
obligations and liabilities of the Owner Lessor hereunder, in which event only
clauses "First" and "Fourth" below shall be applicable), (y) early terminations
of either of the Facility Leases pursuant to Section 13 thereof (other than a
termination in respect

                                       18
<PAGE>   24

of which either of the Facility Lessees shall, pursuant to Section 2.10(b)
hereof assume the obligations and liabilities of the Owner Lessor hereunder, in
which event only clauses "First" and "Fourth" below shall be applicable), or (z)
any early terminations of the Facility Leases, in whole or in part, pursuant to
Section 14 thereof, shall be distributed on the applicable Redemption Date to
the extent of available funds, in the following order of priority:

        First, so much of such payments and amounts as shall be required to
        reimburse the Indenture Trustee for any unpaid fees for its services
        under this Indenture and any expense (including any legal fees and
        disbursements) or loss incurred by it (to the extent incurred in
        connection with its duties as the Indenture Trustee and to the extent
        reimbursable and not previously reimbursed) shall be distributed to the
        Indenture Trustee for application to itself;

        Second, so much of such payment remaining as shall be required to pay in
        full the applicable redemption price (as described in Section 2.10(a) or
        2.10(d) hereof or any supplemental indenture hereto) (including,
        interest on overdue principal and, to the extent permitted by Applicable
        Law, overdue interest) upon all of the Notes which shall be distributed
        to the holders of such Notes, in each case ratably, without priority of
        any Noteholder over any other, in the proportion that the aggregate
        unpaid principal amount of all such Notes held by each such holder, plus
        the Make-Whole Amount, if any, and accrued but unpaid interest thereon
        to the scheduled date of distribution to the Noteholders bears to the
        aggregate unpaid principal amount of all such Notes held by all such
        holders, together with the Make-Whole Amount, if any, plus accrued but
        unpaid interest thereon to the date of scheduled distribution;

        Third, so much of such payments and amounts as shall be required to pay
        the then existing or prior Noteholders all other amounts then payable
        and unpaid to them as holders of the Notes which this Indenture by its
        terms secures shall be distributed to such existing or prior holders of
        Notes, ratably to each such holder, without priority of any such holder
        over any other, in the proportion that the amount of such payments or
        amounts to which each such holder is so entitled bears to the aggregate
        amount of such payments and amounts to which all such holders are so
        entitled; and

        Fourth, the balance, if any, of such payment remaining shall be
        distributed to the Owner Lessor for distribution in accordance with the
        LLC Agreement.

        Section 3.3. Payments After Lease Indenture Event of Default. All
payments received and all amounts held or realized by the Indenture Trustee
after a Lease Indenture Event of Default shall have occurred and be continuing
(including any amounts realized by the Indenture Trustee from the exercise of
any remedies pursuant to Section 17 of the Facility Lease or from the
application of Section 4.3 hereof) and after either (a) the Indenture Trustee
has declared a Facility Lease to be in default pursuant to Section 17 thereof or
(b) the Lessor Note shall have been declared or shall automatically have become
due and payable, together with all payments or amounts then held or thereafter
received by the Indenture Trustee hereunder, shall, so long as such declaration
shall not have been rescinded, be distributed forthwith by the Indenture Trustee
in the following order of priority:

                                       19
<PAGE>   25

        First, so much of such payments and amounts as shall be required to
        reimburse the Indenture Trustee for any unpaid fees for its services
        under this Indenture and any expense (including any legal fees and
        disbursements) or loss incurred by it (to the extent incurred in
        connection with its duties as the Indenture Trustee and to the extent
        reimbursable and not previously reimbursed) shall be distributed to the
        Indenture Trustee for application to itself;

        Second, so much of such payment remaining as shall be required to pay
        the aggregate unpaid principal amount of all Notes then outstanding and
        all accrued but unpaid interest on such Notes to the date of such
        distribution (including interest on overdue principal and, to the extent
        permitted by Applicable Law, overdue interest) shall be distributed to
        the holders of such Notes, in each case ratably without priority of any
        Noteholder over any other, in the proportion that the aggregate unpaid
        principal amount of all such Notes held by each such holder and accrued
        but unpaid interest thereon to the scheduled date of distribution to the
        Noteholders bears to the aggregate unpaid principal amount of all such
        Notes held by all such holders and accrued but unpaid interest thereon
        to the date of scheduled distribution to the Noteholders;

        Third, so much of such payments and amounts as shall be required to pay
        the then existing or prior Noteholders all other amounts then payable
        and unpaid to them as holders of the Notes which this Indenture by its
        terms secures, including the Make-Whole Amount, if any, required to be
        paid pursuant to Section 2.10(a)(v) hereof, in respect of such Notes
        required to be paid pursuant to Section 4.3(a) hereof, shall be
        distributed to such existing or prior holders of Notes, ratably to each
        such holder, without priority of any such holder over any other, in the
        proportion that the amount of such payments or amounts to which each
        such holder is so entitled bears to the aggregate amount of such
        payments and amounts to which all such holders are so entitled; and

        Fourth, the balance, if any, of such payments and amounts remaining
        shall be distributed to the Owner Lessor for distribution by it in
        accordance with the terms of the LLC Agreement.

        Section 3.4. Investment of Certain Payments Held by the Indenture
Trustee. Upon the written direction and at the risk and expense of the Owner
Lessor, the Indenture Trustee shall invest and reinvest any moneys held by the
Indenture Trustee pursuant to Section 3.1(c), 3.5 or 3.6 hereof in such
Permitted Investments as may be specified in such direction. The proceeds
received upon the sale or at maturity of any Permitted Investment and any
interest received on such Permitted Investment and any payment in respect of a
deficiency contemplated by the following sentence shall be held as part of the
Indenture Estate and applied by the Indenture Trustee in the same manner as the
moneys used to buy such Permitted Investment, and any Permitted Investment may
be sold (without regard to maturity date) by the Indenture Trustee whenever
necessary to make any payment or distribution required by this Section 3. If the
proceeds received upon the sale or at maturity of any Permitted Investment
(including interest received on such Permitted Investment) shall be less than
the cost thereof (including accrued interest), the Owner Lessor will pay or
cause to be paid to the Indenture Trustee an amount equal to such deficiency.

                                       20
<PAGE>   26

        Section 3.5. Application of Certain Other Payments. Except as otherwise
provided in Section 3.1(b) or 3.1(c) hereof, any payment received by the
Indenture Trustee for which provision as to the application thereof is made in
an Operative Document, but not elsewhere in this Indenture (including payments
received by the Indenture Trustee under the Calpine Guaranties), shall, unless a
Lease Indenture Event of Default shall have occurred and be continuing, be
applied forthwith to the purpose for which such payment was made in accordance
with the terms of such Operative Document. If at the time of the receipt by the
Indenture Trustee of any payment referred to in the preceding sentence there
shall have occurred and be continuing a Lease Indenture Event of Default, the
Indenture Trustee shall hold such payment as part of the Indenture Estate, but
the Indenture Trustee shall, except as otherwise provided in Section 3.1(b) or
3.1(c) hereof, cease to hold such payment and shall apply such payment to the
purpose for which it was made in accordance with the terms of such Operative
Document if and whenever there is no longer continuing any Lease Indenture Event
of Default; provided, however, that any such payment received by the Indenture
Trustee which is payable to the Facility Lessees shall not be held by the
Indenture Trustee unless a Significant Lease Default or Lease Event of Default
shall have occurred and be continuing.

        Section 3.6. Other Payments. Except as otherwise provided in Section 3.5
hereof:

        (a) any payment received by the Indenture Trustee for which no provision
as to the application thereof is made in the Participation Agreement, the
Facility Lease or elsewhere in this Section 3; and

        (b) all payments received and amounts realized by the Indenture Trustee
with respect to the Indenture Estate (including all amounts realized after the
termination of the Facility Lease), to the extent received or realized at any
time after payment in full of the principal of and, Make-Whole Amount, if any,
and interest on all Notes then outstanding and all other amounts due the
Indenture Trustee or the Noteholders, as well as any other amounts remaining as
part of the Indenture Estate after such payment in full of the principal of,
Make-Whole Amount, if any, and interest on all Notes outstanding;

        (c) shall be distributed forthwith by the Indenture Trustee in the order
of priority set forth in Section 3.3 hereof, omitting clause "Second" thereof.

        Section 3.7. Excepted Payments. Notwithstanding any other provision of
this Indenture including this Section 3 or any provision of any of the Operative
Documents to the contrary, any Excepted Payments received or held by the
Indenture Trustee at any time shall promptly be paid or distributed by the
Indenture Trustee to the Person or Persons entitled thereto.

        Section 3.8. Distributions to the Owner Lessor. Unless otherwise
directed in writing by the Owner Lessor, all amounts from time to time
distributable by the Indenture Trustee to the Owner Lessor in accordance with
the provisions hereof shall be paid by the Indenture Trustee in immediately
available funds to the Owner Participant's Account. Any amounts payable to the
Trust Company in its individual capacity shall be paid to the Trust Company.

        Section 3.9. Payments Under Assigned Documents. Notwithstanding anything
to the contrary contained in this Indenture, until the discharge and
satisfaction of the Lien of this

                                       21
<PAGE>   27

Indenture, all payments due or to become due under any Assigned Document to the
Owner Lessor (except so much of such payments as constitute Excepted Payments)
shall be made directly to the Indenture Trustee's Account and the Owner Lessor
shall give all notices as shall be required under the Assigned Documents to
direct payment of all such amounts to the Indenture Trustee hereunder. The Owner
Lessor agrees that if it should receive any such payments directed to be made to
the Indenture Trustee or any proceeds for or with respect to the Indenture
Estate or as the result of the sale or other disposition thereof or otherwise
constituting a part of the Indenture Estate to which the Owner Lessor is not
entitled hereunder, it will promptly forward such payments to the Indenture
Trustee or in accordance with the Indenture Trustee's instructions. The
Indenture Trustee agrees to apply payments from time to time received by it
(from the Facility Lessee, the Owner Lessor or otherwise) with respect to the
Facility Leases, any other Assigned Document or the Facilities in the manner
provided in Section 2.7 hereof, and this Section 3.

        Section 3.10. Disbursement of Amounts Received by the Indenture Trustee.
Subject to the last sentence of this Section 3.10 and Section 3.2, amounts to be
distributed by the Indenture Trustee pursuant to this Section 3 shall be
distributed on the date such amounts are actually received by the Indenture
Trustee. Notwithstanding anything to the contrary contained in this Section 3,
in the event the Indenture Trustee shall be required or directed to make a
payment under this Section 3 on the same date on which such payment is received,
any amounts received by the Indenture Trustee after 12:00 noon, New York City
time, or on a day other than a Business Day, may be distributed on the next
succeeding Business Day.

SECTION 4. COVENANTS OF OWNER LESSOR; DEFAULTS; REMEDIES OF INDENTURE TRUSTEE

        Section 4.1. Covenants of Owner Lessor. The Owner Lessor hereby
covenants and agrees as follows:

        (a) the Owner Lessor will duly and punctually pay the principal of,
Make-Whole Amount, if any, and interest on and other amounts due under the Notes
and hereunder in accordance with the terms of the Notes and this Indenture and
all amounts payable by it to the Noteholders under the Participation Agreement;
and

        (b) the Owner Lessor will not, except as provided in this Indenture
(including Sections 4.4, 5.6, 8.1 and 8.2) and except as to Excepted Payments
(i) enter into any agreement amending, modifying or supplementing any of the
Assigned Documents, or exercise any election or option, or make any decision or
determination, or give any notice, consent, waiver or approval, or take any
other action, under or in respect of any Assigned Document, (ii) accept and
retain any payment from, or settle or compromise any claim arising under, any of
the Assigned Documents, except that it may forward any payment to the Indenture
Trustee in accordance with Section 3.9, (iii) give any notice or exercise any
right or take any action under any of the Assigned Documents, or (iv) submit or
consent to the submission of any dispute, difference or other matter arising
under or in respect of any of the Assigned Documents to arbitration thereunder.

                                       22
<PAGE>   28

        Section 4.2. Occurrence of Lease Indenture Event of Default. Subject to
Section 4.4 hereof, the term "Lease Indenture Event of Default," wherever used
herein, shall mean any of the following events (whatever the reason for such
Lease Indenture Event of Default and whether it shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):

        (a) any Lease Event of Default (other than the failure of a Facility
    Lessee to pay any amount which shall constitute an Excepted Payment and
    other than a Lease Event of Default in consequence of a Facility Lessee's
    failure to maintain the insurance required by Section 11 of the Facility
    Leases if, and so long as, (i) such Lease Event of Default is waived by the
    Owner Lessor and the Owner Participant and (ii) the insurance maintained by
    each of the Facility Lessees still constitutes Prudent Industry Practice);
    or

        (b) the Owner Lessor shall fail (other than as a result of a Lease Event
    of Default) to make any payment in respect of the principal of, or
    Make-Whole Amount, if any, or interest on, the Notes within five Business
    Days after the same shall have become due; or

        (c) the Owner Lessor shall fail to perform or observe any material
    covenant, obligation or agreement to be performed or observed by it under
    this Indenture (other than any covenant, obligation or agreement contained
    in clause (b) of this Section 4.2), the Owner Lessor shall fail to perform
    or observe any material covenant, obligation or agreement to be performed by
    it under Section 6 of the Participation Agreement, the Owner Participant
    shall fail to perform or observe any material covenant, obligation or
    agreement to be performed by it under Section 7 of the Participation
    Agreement, or the OP Guarantor shall fail to perform or observe any material
    covenant, obligation or agreement to be performed by it under the OP
    Guaranty in each case, in any material respect, which failure shall continue
    unremedied for 30 days after receipt by such party of written notice
    thereof; provided, however, that if such condition cannot be remedied within
    such 30-day period, then the period within which to remedy such condition
    shall be extended up to 180 days, so long as such party diligently pursues
    such remedy and such condition is reasonably capable of being remedied
    within such extended period;

        (d) any representation or warranty made by the Owner Lessor in Section
    3.2 of the Participation Agreement or in the certificate delivered by the
    Owner Lessor at the Closing pursuant to Section 4.6 of the Participation
    Agreement or any representation or warranty made by the Owner Participant in
    Section 3.4 of the Participation Agreement (other than Section 3.4(i)) or
    the certificate delivered by the Owner Participant at the Closing pursuant
    to Section 4.6 of the Participation Agreement, or any representation or
    warranty made by the OP Guarantor (provided the OP Guaranty shall not have
    been terminated or released) under the OP Guaranty or in the certificate
    delivered by such OP Guarantor at the Closing pursuant to Section 4.6 of the
    Participation Agreement, shall prove to have been incorrect in any material
    respect when made and continues to be material and unremedied for a period
    of 30 days after receipt by such party of written notice thereof; provided,
    however, that if such condition cannot be remedied within such 30-day
    period, then the period within which to remedy such condition shall be
    extended up to an additional 120 days, so long as such party

                                       23
<PAGE>   29

    diligently pursues such remedy and such condition is reasonably capable of
    being remedied within such extended period;

        (e) the Owner Participant, the Owner Lessor or the OP Guarantor
    (provided the OP Guaranty shall not have been terminated or released) shall
    (i) commence a voluntary case or other proceeding seeking relief under Title
    11 of the Bankruptcy Code or liquidation, reorganization or other relief
    with respect to itself or its debts under any bankruptcy, insolvency or
    other similar law now or hereafter in effect, or apply for or consent to the
    appointment of a trustee, receiver, liquidator, custodian or other similar
    official of it or any substantial part of its property, or (ii) consent to,
    or fail to controvert in a timely manner, any such relief or the appointment
    of or taking possession by any such official in any voluntary case or other
    proceeding commenced against it, or (iii) file an answer admitting the
    material allegations of a petition filed against it in any such proceeding;
    or

        (f) an involuntary case or other proceeding shall be commenced against
    the Owner Participant, the Owner Lessor or the OP Guarantor (provided the OP
    Guaranty shall not have been terminated or released) seeking (i)
    liquidation, reorganization or other relief with respect to it or its debts
    under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other
    similar law now or hereafter in effect, or (ii) the appointment of a
    trustee, receiver, liquidator, custodian or other similar official with
    respect to it or any substantial part of its property or (iii) the
    winding-up or liquidation of the Owner Lessor; and such involuntary case or
    other proceeding shall remain undismissed and unstayed for a period of 60
    days.

        Section 4.3. Remedies of the Indenture Trustee.

        (a) In the event that a Lease Indenture Event of Default shall have
occurred and be continuing, the Indenture Trustee in its discretion may, or upon
receipt of written instructions from a Majority in Interest of Noteholders shall
declare, by written notice to the Owner Lessor and the Owner Participant, the
unpaid principal amount of all Notes, with accrued interest thereon, to be
immediately due and payable, upon which declaration such principal amount and
such accrued interest shall immediately become due and payable (except in the
case of a Lease Indenture Event of Default under Section 4.2(e) or (f), such
principal and interest shall automatically become due and payable immediately
without any such declaration or notice) without further act or notice of any
kind. If any Make-Whole amount is due and payable pursuant to Section 2.10(d)
(iii) or (iv) at the time of any such acceleration, such Make-Whole Amount shall
also be due and payable in connection with such acceleration.

        (b) If a Lease Indenture Event of Default shall have occurred and be
continuing, then and in every such case, the Indenture Trustee, as assignee
under the Facility Leases or hereunder or otherwise, may, and where required
pursuant to the provisions of Section 5 hereof shall, upon written notice to the
Owner Lessor, exercise any or all of the rights and powers and pursue any or all
of the remedies pursuant to this Section 4 and, in the event such Lease
Indenture Event of Default shall be a Lease Event of Default, any and all of the
remedies provided pursuant to this Section 4 and Section 17 of the Facility
Leases and, subject to Section 4.4, may take possession of all or any part of
the Indenture Estate and may exclude therefrom the Owner Participant, the Owner
Lessor and, in the event such Lease Indenture Event of Default shall be a Lease
Event of Default, the Facility Lessees and all persons claiming under them, and
may exercise all remedies

                                       24
<PAGE>   30

available to a secured party under the Uniform Commercial Code or any other
provision of Applicable Law. The Indenture Trustee may proceed to enforce the
rights of the Indenture Trustee and of the Noteholders by directing payment to
it of all moneys payable under any agreement or undertaking constituting a part
of the Indenture Estate, by proceedings in any court of competent jurisdiction
to recover damages for the breach hereof or for the appointment of a receiver or
for sale of all or any part of the Facilities or for foreclosure of the
Facilities, together with the Owner Lessor's interest in the Assigned Documents,
and by any other action, suit, remedy or proceeding authorized or permitted by
this Indenture, at law or in equity, or whether for the specific performance of
any agreement contained herein, or for an injunction against the violation of
any of the terms hereof, or in aid of the exercise of any power granted hereby
or by law, and in addition may foreclose upon, sell, assign, transfer and
deliver, from time to time to the extent permitted by Applicable Law, all or any
part of the Indenture Estate or any interest therein, at any private sale or
public auction with or without demand, advertisement or notice (except as herein
required or as may be required by law) of the date, time and place of sale and
any adjournment thereof, for cash or credit or other property, for immediate or
future delivery and for such price or prices and on such terms as the Indenture
Trustee, in its unfettered discretion, may determine, or as may be required by
law, so long as the Owner Participant and the Owner Lessor are afforded a
commercially reasonable opportunity to bid for all or such part of the Indenture
Estate in connection therewith unless Section 4.7 shall otherwise be applicable;
provided that 20 days shall be deemed to be a commercially reasonable
opportunity to bid for purposes of this Section 4.3(b). The Indenture Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Indenture Trustee and of the
Noteholders asserted or upheld in any bankruptcy, receivership or other judicial
proceedings.

        (c) To the fullest extent permitted by Applicable Law, all rights of
action and rights to assert claims under this Indenture or under any of the
Notes may be enforced by the Indenture Trustee without the possession of the
Notes at any trial or other proceedings instituted by the Indenture Trustee, and
any such trial or other proceedings shall be brought in its own name as
mortgagee of an express trust, and any recovery or judgment shall be for the
ratable benefit of the Noteholders as herein provided. In any proceedings
brought by the Indenture Trustee (and also any proceedings involving the
interpretation of any provision of this Indenture), the Indenture Trustee shall
be held to represent all the Noteholders, and it shall not be necessary to make
any such Persons parties to such proceedings.

        (d) Anything herein to the contrary notwithstanding, neither the
Indenture Trustee nor any Noteholder shall at any time, including at any time
when a Lease Indenture Event of Default shall have occurred and be continuing
and there shall have occurred and be continuing a Lease Event of Default, be
entitled to exercise any remedy under or in respect of this Indenture which
could or would divest the Owner Lessor of title to, or its ownership interest
in, any portion of the Indenture Estate unless, in the case of a Lease Indenture
Event of Default as a consequence of a Lease Event of Default under Section 16
of the Facility Lease, the Indenture Trustee shall have, to the extent it is
then entitled to do so hereunder and is not then stayed or otherwise prevented
from doing so by operation of law, commenced the exercise of one or more
remedies under both Facility Leases intending to dispossess the Facility Lessees
of the Facilities and is using good faith efforts in the exercise of such
remedies (and not merely asserting a right or claim to do so); provided that
during any period that the Indenture Trustee is stayed or otherwise prevented by

                                       25
<PAGE>   31

operation of law from exercising such remedies with respect to either Facility,
the Indenture Trustee will not divest the Owner Lessor of title to any portion
of the Indenture Estate until the earlier of (a) the expiration of the 180-day
period following the date of commencement of a stay or other prevention with
respect to the first such affected Facility (regardless of whether a prevention
or stay subsequently affects the other Facility during such 180-day period) or
(b) the date of repossession of both Facilities under the applicable Facility
Leases.

        (e) Anything herein to the contrary notwithstanding, in the case of a
Lease Indenture Event of Default as a consequence of a Lease Event of Default
under Section 16(a) of the Facility Leases with respect to the Equity Portion of
Periodic Rent only, the Indenture Trustee shall not, so long as no other Lease
Indenture Event of Default shall have occurred and be continuing, be entitled to
exercise remedies under this Indenture for a period of 180 days unless the Owner
Lessor or the Owner Participant consents to the declaration of a Lease Event of
Default by the Indenture Trustee.

        (f) Any provisions of the Facility Leases or this Indenture to the
contrary notwithstanding, if the Facility Lessees shall fail to pay any Excepted
Payment to any Person entitled thereto as and when due, such Person shall have
the right at all times, to the exclusion of the Indenture Trustee, to demand,
collect, sue for, enforce performance of obligations relating to, or otherwise
obtain all amounts due in respect of such Excepted Payment or to declare a Lease
Event of Default under Section 16 of the Facility Leases solely to enforce such
obligations in respect of any Excepted Payments (provided that any such
declaration shall not be deemed to constitute a Lease Indenture Event of Default
hereunder without the consent of the Indenture Trustee).

        Section 4.4.  Right to Cure Certain Lease Events of Default.

        (a) If either of the Facility Lessees shall fail to make any payment of
Periodic Rent due on any Rent Payment Date when the same shall have become due,
and if such failure of such Facility Lessee to make such payment of Periodic
Rent shall not constitute the fourth consecutive such failure or the eighth
cumulative failure of the Facility Lessee, then the Owner Lessor may (but need
not) pay to the Indenture Trustee, at any time prior to the expiration of ten
(10) Business Days after the Owner Lessor and the Owner Participant shall have
received notice from the Indenture Trustee or have Actual Knowledge of the
failure of the Facility Lessee to make such payment of Periodic Rent, an amount
equal to the principal of, Make-Whole Amount, if any, and interest on the Notes,
then due (otherwise than by declaration of acceleration) on such Rent Payment
Date, together with any interest due thereon on account of the delayed payment
thereof, and such payment by the Owner Lessor shall be deemed (for purposes of
this Indenture) to have cured any Lease Indenture Event of Default which arose
or would have arisen from such failure of such Facility Lessee.

        (b) If either of the Facility Lessees shall fail to make any payment of
Supplemental Rent when the same shall become due or otherwise fail to perform
any obligation under the Facility Leases or any other Operative Document, then
the Owner Lessor may (but need not) make such payment on the date such
Supplemental Rent was payable, together with any interest due thereon on account
of the delayed payment thereof, or perform such obligation at any time prior to
the expiration of ten (10) Business Days after the Owner Lessor or the Owner
Participant

                                       26
<PAGE>   32

shall have received notice or have Actual Knowledge of the occurrence of such
failure, and such payment or performance by the Owner Lessor shall be deemed to
have cured any Lease Indenture Event of Default which arose or would have arisen
from such failure of the Facility Lessee.

        (c) The Owner Lessor, upon exercising its rights under paragraph (a) or
(b) of this Section 4.4 to cure either of the Facility Lessee's failure to pay
Periodic Rent or Supplemental Rent or to perform any other obligation under the
Facility Leases or any other Operative Document, shall not obtain any Lien on
any part of the Indenture Estate on account of such payment or performance nor,
except as expressly provided in the next sentence, pursue any claims against a
Facility Lessee or any other party, for the repayment thereof if such claims
would impair the prior right and security interest of the Indenture Trustee in
and to the Indenture Estate. Upon such payment or performance by the Owner
Lessor, the Owner Lessor shall (to the extent of such payment made by it and the
costs and expenses incurred in connection with such payments and performance
thereof together with interest thereon and so long as no event which would, with
the passing of time or giving of notice or both, become a Lease Indenture Event
of Default under Section 4.2(b), (e) or (f), or any Lease Indenture Event of
Default hereunder shall have occurred and be continuing) be subrogated to the
rights of the Indenture Trustee and the Noteholders to receive the payment of
Periodic Rent or Supplemental Rent, as the case may be, with respect to which
the Owner Lessor made such payment and interest on account of such Periodic Rent
Payment or Supplemental Rent payment being overdue in the manner set forth in
the next two sentences. If the Indenture Trustee shall thereafter receive such
payment of Periodic Rent, Supplemental Rent or such interest, the Indenture
Trustee shall, notwithstanding the requirements of Section 3.1 hereof,
forthwith, remit such payment of Periodic Rent or Supplemental Rent, as the case
may be (to the extent of the payment made by the Owner Lessor pursuant to this
Section 4.4) and such interest to the Owner Lessor in reimbursement for the
funds so advanced by it, provided that if (A) any event which, with the passing
of time or giving of notice or both, would become a Lease Indenture Event of
Default under Section 4.2(b), (e) or (f) hereof, or any Lease Indenture Event of
Default hereunder shall have occurred and be continuing or (B) any payment of
principal, interest, or Make-Whole Amount, if any, on any Note then shall be
overdue, such payment shall not be remitted to the Owner Lessor but shall be
held by the Indenture Trustee as security for the obligations secured hereby and
distributed in accordance with Section 3.1 hereof. The Owner Lessor shall not
attempt to recover any amount paid by it on behalf of a Facility Lessee pursuant
to this Section 4.4 except by demanding of a Facility Lessee payment of such
amount or by commencing an action against a Facility Lessee for the payment of
such amount, and except where a Lease Indenture Event of Default (other than a
Lease Event of Default) has occurred and is continuing, the Owner Lessor shall
be entitled to receive the amount of such payment and the costs and expenses
incurred in connection with such payments and performance thereof together with
interest thereon from a Facility Lessee (but neither the Owner Lessor nor the
Owner Participant shall have any right to collect such amounts by exercise of
any of the remedies under Section 17 of the Facility Leases) or, if paid by a
Facility Lessee to the Indenture Trustee, from the Indenture Trustee to the
extent of funds actually received by the Indenture Trustee.

        (d) Until the expiration of the period during which the Owner Lessor or
the Owner Participant shall be entitled to exercise rights under paragraph (a)
or (b) of this Section 4.4 with respect to any failure by either of the Facility
Lessees referred to therein, neither the Indenture

                                       27
<PAGE>   33

Trustee nor any Noteholder shall take or commence any action it would otherwise
be entitled to take or commence as a result of such failure by a Facility
Lessee, whether under this Section 4 or Section 17 of the Facility Leases or
otherwise.

        (e) Each Noteholder agrees, by acceptance thereof, that if (i) (x) a
Lease Indenture Event of Default, which also constitutes a Lease Event of
Default, shall have occurred and be continuing for a period of at least 90 days
without the Notes having been accelerated or the Indenture Trustee having
exercised any remedy under the Facility Leases intended to dispossess the
Facility Lessees of the Facilities, (y) the Notes have been accelerated pursuant
to Section 4.3(a) and such acceleration has not theretofore been rescinded, or
(z) an Enforcement Notice giving notice of the intent of the Indenture Trustee
to foreclose on the Facilities or otherwise dispossess of the Facilities has
been given pursuant to Section 5.1 within the previous 30 days, (ii) no Lease
Indenture Event of Default of the nature described in any of clauses (b) through
(f) of Section 4.2 hereof shall have occurred and be continuing and (iii) the
Owner Lessor shall give written notice to the Indenture Trustee of the Owner
Lessor's intention to purchase all of the Notes in accordance with this
paragraph, then, upon receipt within ten (10) Business Days after such notice
from the Owner Lessor of an amount equal to the sum of (x) the aggregate unpaid
principal amount of any unpaid Notes then held by the Noteholders, together with
accrued but unpaid interest thereon to the date of such receipt (as well as any
interest on overdue principal and, to the extent permitted by Applicable Law,
overdue interest), plus the aggregate amount, if any, of all sums which, if
Section 3.3 were then applicable, such Noteholder would be entitled to be paid
before any payments were to be made to the Owner Lessor but excluding any
Make-Whole Amount, such Noteholder will forthwith (and upon its receipt of the
payment referred to in clause (1) below, will be deemed to) sell, assign,
transfer and convey to the Owner Lessor (without recourse or warranty of any
kind other than of title to the Notes so conveyed) all of the right, title and
interest of such Noteholder in and to the Indenture Estate, this Indenture, all
Notes held by such Noteholder and the Assigned Documents, and the Owner Lessor
shall thereupon assume all such Noteholder's rights and obligations in such
documents; provided, that no such holder shall be required to so convey unless
(1) the Owner Lessor shall have simultaneously tendered payment on all other
Notes issued by the Owner Lessor at the time outstanding pursuant to this
paragraph and (2) such conveyance is not in violation of any Applicable Law. All
charges and expenses required to be paid in connection with the issuance of any
new Note or Notes in connection with this paragraph shall be borne by the Owner
Lessor. Notwithstanding the foregoing, the Owner Trust may exercise the right
set forth in this clause (e) prior to the end of the 90 day period set forth
above but, in such case, the Make-Whole Amount, if any, shall also be payable.

        Section 4.5. Rescission of Acceleration. If at any time after the
outstanding principal amount of the Notes shall have become due and payable by
acceleration pursuant to Section 4.3 hereof, (a) all amounts of principal,
Make-Whole Amount, if any, and interest which are then due and payable in
respect of all the Notes other than pursuant to Section 4.3 hereof shall have
been paid in full, together with interest on all such overdue principal and (to
the extent permitted by Applicable Law) overdue interest at the rate or rates
specified in the Notes, and an amount sufficient to cover all costs and expenses
of collection incurred by or on behalf of the holders of the Notes (including
counsel fees and expenses and all expenses and reasonable compensation of the
Indenture Trustee) and (b) every other Lease Indenture Event of Default shall
have been remedied, then a Majority in Interest of Noteholders may, by written
notice or notices to the

                                       28
<PAGE>   34

Owner Lessor, the Indenture Trustee and the Facility Lessees, rescind and annul
such acceleration and any related declaration of default under the Facility
Leases and their respective consequences, but no such rescission and annulment
shall extend to or affect any subsequent Lease Indenture Event of Default or
impair any right consequent thereon, and no such rescission and annulment shall
require any Noteholder to repay any principal or interest actually paid as a
result of such acceleration.

        Section 4.6. Return of Indenture Estate, Etc.

        (a) If at any time the Indenture Trustee has the right to take
possession of the Indenture Estate pursuant to Section 4.3 hereof, at the
request of the Indenture Trustee, the Owner Lessor promptly shall (i) execute
and deliver to the Indenture Trustee such instruments of title and other
documents and (ii) make all such demands and give all such notices as are
permitted by the terms of the Facility Leases to be made or given by the Owner
Lessor upon the occurrence and continuance of a Lease Event of Default, in each
case as the Indenture Trustee may deem necessary or advisable to enable the
Indenture Trustee or an agent or representative designated by the Indenture
Trustee, at such time or times and place or places as the Indenture Trustee may
specify, to obtain possession of all or any part of the Indenture Estate the
possession of which the Indenture Trustee shall at the time be entitled to
hereunder. If the Owner Lessor shall for any reason fail to execute and deliver
such instruments and documents after such request by the Indenture Trustee, the
Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee
the right to immediate possession and requiring the Owner Lessor to execute and
deliver such instruments and documents to the Indenture Trustee, to the entry of
which judgment the Owner Lessor hereby specifically consents, and (ii) pursue
all or any part of the Indenture Estate wherever it may be found and enter any
of the premises wherever all or part of the Indenture Estate may be or is
supposed to be and search for all or part of the Indenture Estate and take
possession of and remove all or part of the Indenture Estate.

        (b) Upon every such taking of possession, the Indenture Trustee may,
from time to time, as a charge against proceeds of the Indenture Estate, make
all such expenditures with respect to the Indenture Estate as it may deem
proper. In each such case, the Indenture Trustee shall have the right to deal
with the Indenture Estate and to carry on the business and exercise all rights
and powers of the Owner Lessor relating to the Indenture Estate, as the
Indenture Trustee shall deem best, and, the Indenture Trustee shall be entitled
to collect and receive all rents (including Periodic Rent and Supplemental
Rent), revenues, issues, income, products and profits of the Indenture Estate
and every part thereof (without prejudice to the right of the Indenture Trustee
under any provision of this Indenture to collect and receive cash held by, or
required to be deposited with, the Indenture Trustee hereunder) and to apply the
same to the management of or otherwise dealing with the Indenture Estate and of
conducting the business thereof, and of all expenditures with respect to the
Indenture Estate and the making of all payments which the Indenture Trustee may
be required or may elect to make, if any, for taxes, assessments, insurance or
other proper charges upon the Indenture Estate or any part thereof (including
the employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Owner Lessor and the Facility
Lessees relating to the Indenture Estate and the Operative Documents), or under
any provision of, this Indenture, as well as just and reasonable compensation
for the services of the Indenture Trustee and of all Persons properly engaged
and employed by the Indenture Trustee.

                                       29
<PAGE>   35

        Section 4.7. Power of Sale and Other Remedies.

        (a) In addition to all other remedies provided for herein if a Lease
Indenture Event of Default shall have occurred and be continuing, the Indenture
Trustee shall, subject to Sections 4.3 and 4.4, have the right to sell the
Indenture Estate or any part of the Indenture Estate at public sale or sales, in
order to pay the Secured Indebtedness, and all impositions, if any, with accrued
interest thereon, and all expenses of the sale and of all proceedings in
connection therewith, including reasonable attorney's fees, if incurred. At any
such public sale, the Indenture Trustee may execute and deliver to the purchaser
a conveyance of the Indenture Estate or any part of the Indenture Estate, and to
this end, the Owner Lessor hereby constitutes and appoints the Indenture Trustee
the agent and attorney in fact of the Owner Lessor to make such sale and
conveyance, and thereby to divest the Owner Lessor of all right, title or equity
that the Owner Lessor may have in and to the Indenture Estate and to vest the
same in the purchaser or purchasers at such sale or sales, and all the acts and
doings of said agent and attorney in fact are hereby ratified and confirmed and
any recitals in said conveyance or conveyances as to facts essential to a valid
sale shall be binding upon the Owner Lessor. The aforesaid power of sale and
agency hereby granted are coupled with an interest and are irrevocable by death
or otherwise, are granted as cumulative of the other remedies provided hereby or
by law for collection of the Secured Indebtedness and shall not be exhausted by
one exercise thereof but may be exercised until full payment of the Secured
Indebtedness. Further, if a Lease Indenture Event of Default shall have occurred
and be continuing, the Indenture Trustee may, in addition to and not in
abrogation of other rights and remedies provided in this Section, either with or
without entry or taking possession as herein provided or otherwise, proceed by a
suit or suits in law or in equity or by any other appropriate proceeding or
remedy (i) to enforce payment of the Notes or the performance of any term,
covenant, condition or agreement of this Indenture or any other right, and (ii)
to pursue any other remedy available to it, all as the Indenture Trustee shall
determine most effectual for such purposes. Upon any foreclosure sale, the
Indenture Trustee may bid for and purchase the Indenture Estate and shall be
entitled to apply all or any part of the Secured Indebtedness as a credit to the
purchase price. In the event of a foreclosure sale of the Indenture Estate, the
proceeds of said sale shall be applied as provided in Section 3.3 hereof. In the
event of any such foreclosure sale by the Indenture Trustee, the Owner Lessor
shall be deemed a tenant holding over and shall forthwith deliver possession to
the purchaser or purchasers at such sale or be summarily dispossessed according
to provisions of law applicable to tenants holding over. The Indenture Trustee,
at the Indenture Trustee's option, is authorized to foreclose this Indenture
subject to the rights of any tenants of the Indenture Estate, and the failure to
make any such tenants parties to any such foreclosure proceedings and to
foreclose their rights will not be, nor be asserted to be by the Owner Lessor, a
defense to any proceedings instituted by the Indenture Trustee to collect the
Secured Indebtedness.

        (b) In amplification of, and not in limitation of paragraph (a) of this
Section 4.7, the Owner Lessor represents and warrants that this Indenture is
given primarily for a business, commercial or agricultural purpose. Owner
Lessor, therefore, agrees that Indenture Trustee, its successors and permitted
assigns, shall have THE STATUTORY POWER OF SALE pursuant to the applicable
provisions of Titles 14 and 33 of the Maine Revised Statutes of 1964, as said
statutes have been and shall be amended, which POWER is expressly incorporated
herein by reference. Such Statutory Power of Sale shall be in addition to all
rights and remedies set forth herein or available under Applicable Law. In the
exercise of the Statutory Power of Sale,

                                       30
<PAGE>   36

Indenture Trustee, its successors and assigns or its or their agent or attorney,
may sell the Indenture Estate or such portion thereof as may remain subject to
the Indenture in case of any partial release thereof, either as a whole or in
parcels, together with all improvements that may be thereon, by a public sale on
or near any part of the Indenture Estate then subject to this Indenture or at
the Indenture Trustee's principal place of business or at any other office of
the Indenture Trustee or any attorney or agent thereof located in the same
county in which any part of the Indenture Estate is located, and the Indenture
Trustee, its successors and permitted assigns; and such sale shall forever bar
the Owner Lessor and all persons claiming under it from all right and interest
in the Indenture Estate, whether at law or in equity. In the exercise of THE
STATUTORY POWER OF SALE herein given, if the Indenture Trustee elects to sell in
parts or parcels, such sales may be held from time to time, and the POWER shall
not be fully executed until all of the Indenture Estate not previously sold
shall have been sold.

        (c) In amplification of, and not in limitation of paragraph (a) of this
Section 4.7, the Owner Lessor hereby further grants to Indenture Trustee, with
MORTGAGE COVENANTS for breach of which covenants and any other covenants
contained herein Indenture Trustee shall have THE STATUTORY POWER OF SALE, as
set forth in RI. Gen. Laws Section 34-11-22, as said statute shall have been and
shall be amended, which power is expressly incorporated herein by reference.
Such Statutory Power of Sale shall be in addition to all rights and remedies set
forth herein or available under Applicable Law. In the exercise of the Statutory
Power of Sale, Indenture Trustee, its successors and assigns or its or their
agent or attorney, may sell the Indenture Estate or such portion thereof as may
remain subject to the Indenture in case of any partial release thereof, either
as a whole or in parcels, together with all improvements that may be thereon,
pursuant to and in accordance with the requirements and provisions of said
statute. In the exercise of THE STATUTORY POWER OF SALE herein given, if the
Indenture Trustee elects to sell in parts or parcels, such sales may be held
from time to time, and the POWER shall not be fully executed until all of the
Indenture Estate not previously sold shall have been sold. This Indenture is
upon the STATUTORY CONDITION, and upon the further condition that all covenants
contained in this Indenture or in the Operative Documents and/or any other
documents evidencing the Secured Indebtedness, shall be kept and performed, and
for any breach of said STATUTORY CONDITION or further condition, the Indenture
Trustee shall have the STATUTORY POWER OF SALE. Said STATUTORY CONDITION and
STATUTORY POWER OF SALE, as well as the MORTGAGE COVENANTS contained in the
granting clause of this Indenture, are those contained in the General Laws of
the State of Rhode Island. Provided further however, to the extent permitted by
Applicable Law, publication, pursuant to said STATUTORY POWER OF SALE, of notice
of the time and place of sale may, at the sole discretion of the Indenture
Trustee, be made by publishing the same at least once each week for three (3)
successive weeks in a public newspaper published daily in the City of
Providence, Rhode Island, and not as otherwise provided in said STATUTORY POWER
OF SALE. It is expressly understood and agreed to by the Owner Lessor and the
Indenture Trustee that the power of sale contained in this Indenture shall, in
the event that the Indenture Estate is comprised of separate lots or separate
parcels of land or leasehold estates, survive the foreclosure of any portion of
the Indenture Estate and may be exercised on different occasions to separately
foreclose each and every lot or parcel of land or separate leasehold estate,
including, without limitation, the Owner Lessor's leasehold estate under the
Tiverton Site Lease and the Tiverton Site Sublease comprising the Indenture
until all of the Indenture Estate has been foreclosed in accordance with
Applicable Law and the terms of this Indenture.

                                       31
<PAGE>   37

        Section 4.8. Appointment of Receiver. If the outstanding principal
amount of the Notes shall have been declared due and payable pursuant to Section
4.3 hereof, as a matter of right, the Indenture Trustee shall be entitled to the
appointment of a receiver (who may be the Indenture Trustee or any successor or
nominee thereof) for all or any part of the Indenture Estate, whether such
receivership be incidental to a proposed sale of the Indenture Estate or the
taking of possession thereof or otherwise, and the Owner Lessor hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
Any receiver appointed for all or any part of the Indenture Estate shall be
entitled to exercise all the rights and powers with respect to the Indenture
Estate to the extent instructed to do so by the Indenture Trustee.

        Section 4.9. Remedies Cumulative. Each and every right, power and remedy
herein specifically given to the Indenture Trustee or otherwise in this
Indenture shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Indenture
Trustee, and the exercise or the beginning of the exercise of any right, power
or remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy. No delay or omission
by the Indenture Trustee in the exercise of any right, remedy or power or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Owner Participant,
the Owner Lessor or the Facility Lessees or to be an acquiescence therein.

        Section 4.10. Waiver of Various Rights by the Owner Lessor. The Owner
Lessor hereby waives and agrees, to the extent permitted by Applicable Law, that
it will never seek or derive any benefit or advantage from any of the following,
whether now existing or hereafter in effect, in connection with any proceeding
under or in respect of this Lease Indenture:

        (a) any stay, extension, moratorium or other similar law;

        (b) any Applicable Law providing for the valuation of or appraisal of
any portion of the Indenture Estate in connection with a sale thereof; or

        (c) any right to have any portion of the Indenture Estate or other
security for the Notes marshaled.

The Owner Lessor covenants not to hinder, delay or impede the exercise of any
right or remedy under or in respect of this Lease Indenture, and agrees, to the
extent permitted by Applicable Law, to suffer and permit its exercise as though
no laws or rights of the character listed above were in effect; provided that
this shall not affect or reduce Owner Lessor's rights under Sections 4.3 and 4.4
hereof. Owner Lessor agrees for itself, its successors and assigns, that the
acceptance, before the expiration of the right of redemption and after the
commencement of foreclosure proceedings of this Indenture, of insurance
proceeds, eminent domain awards, rents or anything else of value to be applied
on or to the Secured Indebtedness by Indenture Trustee or any person or party
holding under it shall not constitute a waiver of such foreclosure, and this

                                       32
<PAGE>   38

agreement by Owner Lessor shall be that agreement referred to in Section 6204 of
Title 14 of the Maine Revised Statutes of 1964, as may be amended, as necessary
to prevent such waiver of foreclosure. This agreement by Owner Lessor is
intended to apply to the acceptance and such application of any such proceeds,
awards, rents and other sums or anything else of value whether the same shall be
accepted from, or for the account of, Owner Lessor or from any other source
whatsoever by Indenture Trustee or by any person or party holding under
Indenture Trustee at any time or times in the future while any of the
obligations secured hereby shall remain outstanding.

        Section 4.11. Discontinuance of Proceedings. In case the Indenture
Trustee or any Noteholder shall have proceeded to enforce any right, power or
remedy under this Indenture by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Indenture Trustee or the Noteholder, then
and in every such case the Owner Lessor, the Indenture Trustee and the Facility
Lessees shall be restored to their former positions and rights hereunder with
respect to the Indenture Estate, and all rights, remedies and powers of the
Indenture Trustee or the Noteholder shall continue as if no such proceedings had
taken place.

        Section 4.12. No Action Contrary to the Facility Lessees' Rights Under
the Facility Leases. Notwithstanding any other provision of any of the Operative
Documents, so long as no Lease Event of Default under a Facility Lease shall
have been declared (or deemed to have been declared), the Indenture Trustee and
the Noteholders shall be subject to the Facility Lessees' rights under the
Facility Leases, and neither the Indenture Trustee nor any Noteholders shall
take or cause to be taken any action contrary to the right of the Facility
Lessees, including their respective rights to quiet use and possession of their
respective Facilities.

        Section 4.13. Right of the Indenture Trustee to Perform Covenants, Etc.
If the Owner Lessor shall fail to make any payment or perform any act required
to be made or performed by it hereunder or under the Facility Leases, the Site
Leases and Subleases or the Participation Agreement, or if the Owner Lessor
shall fail to release any Lien affecting the Indenture Estate which it is
required to release by the terms of this Indenture or the Participation
Agreement or the LLC Agreement, the Indenture Trustee, without notice to or
demand upon the Owner Lessor and without waiving or releasing any obligation or
defaults may (but shall be under no obligation to, and, except as provided in
the last sentence hereof, shall incur no liability in connection therewith) at
any time thereafter make such payment or perform such act for the account and at
the expense of the Indenture Estate and may take all such action with respect
thereto (including entering upon the Tiverton and Rumford Sites or any part
thereof, to the extent, of the Facilities for such purpose) as may be necessary
or appropriate therefor. No such entry shall be deemed an eviction. All sums so
paid by the Indenture Trustee and all costs and expenses (including legal fees
and expenses) so incurred, together with interest thereon from the date of
payment or incurrence, shall constitute additional indebtedness secured by this
Indenture and shall be paid from the Indenture Estate to the Indenture Trustee
on demand. The Indenture Trustee shall not be liable for any damages resulting
from any such payment or action unless such damages shall be a consequence of
willful misconduct or gross negligence on the part of the Indenture Trustee.

        Section 4.14. Further Assurances. The Owner Lessor covenants and agrees
from time to time to do all such acts and execute all such instruments of
further assurance as shall be

                                       33
<PAGE>   39

reasonably requested by the Indenture Trustee for the purpose of fully carrying
out and effectuating this Indenture and the intent hereof.

        Section 4.15. Waiver of Past Defaults. Any past Lease Indenture Event of
Default and its consequences may be waived by the Indenture Trustee or a
Majority in Interest of Noteholders, except a Lease Indenture Event of Default
(i) in the payment of the principal of, Make-Whole Amount, if any, and or
interest on any Note, subject to the provisions of Sections 5.1 and 8.1 hereof,
or (ii) in respect of a covenant or provision hereof which, under Section 8.2
8.1 hereof, cannot be modified or amended without the consent of each
Noteholder. Upon any such waiver and subject to the terms of such waiver, such
Lease Indenture Event of Default shall cease to exist, and any other Lease
Indenture Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Lease Indenture Event of Default or impair any right
consequent thereon.

SECTION 5. DUTIES OF INDENTURE TRUSTEE; CERTAIN RIGHTS AND DUTIES OF OWNER
           LESSOR

        Section 5.1. Notice of Action Upon Lease Indenture Event of Default. The
Indenture Trustee shall give prompt written notice to the Owner Lessor and the
Owner Participant of any Lease Indenture Event of Default with respect to which
the Indenture Trustee has Actual Knowledge and will give the Facility Lessees
and the Owner Participant not less than 30 days' prior written notice of the
date on or after which the Indenture Trustee intends to exercise remedies under
Section 4.3 (an "Enforcement Notice"), which notice may be given
contemporaneously with any notice contemplated by Section 4.3(a) or 4.3(b). The
Indenture Trustee shall take such action, or refrain from taking such action, as
the Majority in Interest of Noteholders shall instruct in writing.

        Section 5.2. Actions Upon Instructions Generally. Subject to the terms
of Sections 5.4, 5.5 and 5.6 hereof, upon written instructions at any time and
from time to time of a Majority in Interest of Noteholders, the Indenture
Trustee shall take such action, or refrain from taking such action, including
any of the following actions as may be specified in such instructions: (a) give
such notice, direction or consent or exercise such right, remedy or power or
take such action hereunder or under any Assigned Document, or in respect of any
part of or all the Indenture Estate, as it shall be entitled to take and as
shall be specified in such instructions; (b) take such action with respect to or
to preserve or protect the Indenture Estate (including the discharge of Liens)
as it shall be entitled to take and as shall be specified in such instructions;
and (c) waive, consent to, approve (as satisfactory to it) or disapprove all
matters required by the terms of any Operative Document to be satisfactory to
the Indenture Trustee. The Indenture Trustee may, and upon written instructions
from a Majority in Interest of Noteholders, the Indenture Trustee shall, execute
and file or cause to be executed and filed any financing statement (and any
continuation statement with respect to such financing statement) or any similar
instrument or document relating to the security interest or the assignment
created by this Indenture or granted by the Owner Lessor herein as may be
necessary to protect and preserve the security interest or assignment created by
or granted pursuant to this Indenture, to the extent otherwise entitled to do so
and as shall be specified in such instructions.

                                       34
<PAGE>   40

        Section 5.3. Action Upon Payment of Notes or Termination of Facility
Leases. Subject to the terms of Section 5.4 hereof, upon payment in full of the
principal of and interest on all Notes then outstanding and all other amounts
then due all Noteholders hereunder, and all other sums secured hereby or
otherwise required to be paid hereunder, under the Participation Agreement and
under the Facility Leases, the Indenture Trustee shall execute and deliver to,
or as directed in writing by, the Owner Lessor and the Facility Lessees an
appropriate instrument in due form for recording, releasing the Indenture Estate
from the Lien of this Indenture. Nothing in this Section 5.3 shall be deemed to
expand the instances in which the Owner Lessor is entitled to prepay the Notes.

        Section 5.4. Compensation of the Indenture Trustee; Indemnification.

        (a) The Owner Lessor will from time to time, on demand, pay to the
Indenture Trustee such compensation for its services hereunder as shall be
agreed to by the Owner Lessor and the Indenture Trustee, or, in the absence of
agreement, reasonable compensation for such services (which compensation shall
include reasonable fees and expenses of its outside counsel and shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust), and the Indenture Trustee agrees that it shall have no right
against the Noteholders or, except as provided in Section 3 and Section 4.3
hereof or this Section 5, the Indenture Estate, for any fee as compensation for
its services hereunder.

        (b) The Indenture Trustee shall not be required to take any action or
refrain from taking any action under Section 4, 5.2 or 9.1 hereof unless it and
any of its directors, officers, employees or agents shall have been indemnified
in manner and form satisfactory to the Indenture Trustee. The Indenture Trustee
shall not be required to take any action under Section 4 or Section 5.2, 5.3 or
9.1 hereof, nor shall any other provision of this Indenture be deemed to impose
a duty on the Indenture Trustee to take any action, if it shall have been
advised by counsel (who shall not be an employee of the Indenture Trustee) that
such action is contrary to the terms hereof or is otherwise contrary to
Applicable Law or (unless it shall have been indemnified in manner and form
satisfactory to the Indenture Trustee) may result in personal liability to the
Indenture Trustee.

        Section 5.5. No Duties Except as Specified; No Action Except Under
Facility Leases, Indenture or Instructions.

        (a) The Indenture Trustee shall not have any duty or obligation to
manage, control, use, sell, dispose of or otherwise deal with any part of the
Indenture Estate or otherwise take or refrain from taking any action under or in
connection with this Indenture or the other Assigned Documents except as
expressly provided by the terms of this Indenture or as expressly provided in
written instructions from a Majority in Interest of Noteholders in accordance
with Section 5.2 hereof; and no implied duties or obligations shall be read into
this Indenture against the Indenture Trustee.

        (b) The Indenture Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Indenture Estate except (a) as
required by the terms of the Facility Leases, to the extent applicable to the
Indenture Trustee as assignee of the Owner Lessor, (b) in accordance with the
powers granted to, or the authority conferred upon, the Indenture Trustee

                                       35
<PAGE>   41

pursuant to this Indenture or in accordance with the express terms hereof or
with written instructions from a Majority in Interest of Noteholders in
accordance with Section 5.2 hereof.

        Section 5.6. Certain Rights of the Owner Lessor. Notwithstanding any
other provision of this Indenture or any provision of any Operative Document to
the contrary, and in addition to any rights conferred on the Owner Lessor
hereby:

        (a) The Owner Lessor shall at all times, to the exclusion of the
Indenture Trustee, (i) retain all rights to demand and receive payment of, and
to commence an action for payment of, Excepted Payments but the Owner Lessor
shall have no remedy or right with respect to any such payment against the
Indenture Estate nor any right to collect any such payment by the exercise of
any of the remedies under Section 17 of the Facility Leases, except as expressly
set forth in this Section 5.6; (ii) retain all rights with respect to insurance
that Section 11 of the Facility Leases and Schedule 5.45 of the Participation
Agreement specifically confers upon the Owner Lessor and to waive any failure by
the Facility Lessees to maintain the insurance required by Section 11 of the
Facility Leases before or after the fact so long as the insurance maintained by
the Facility Lessees still conforms to Prudent Industry Practice; (iii) retain
all rights to adjust Periodic Rent and Termination Value as provided in Section
3.4 of the Facility Leases, Section 12 of the Participation Agreement or the Tax
Indemnity Agreement; provided, however, that after giving effect to any such
adjustment (x) the amount of Periodic Rent payable on each Rent Payment Date
shall be at least equal to the aggregate amount of all principal and accrued
interest payable on such Rent Payment Date on all Notes then outstanding and (y)
Termination Value shall in no event be less (when added to all other amounts
required to be paid by the Facility Lessees in respect of any early termination
of the Facility Leases) than an amount sufficient, as of the date of payment, to
pay in full the principal of, and interest on all Notes outstanding on and as of
such date of payment; (iv) retain the right to declare the Facility Lessees to
be in default with respect to any Excepted Payments pursuant to Section 17 of
the Facility Leases; (v) except in connection with the exercise of remedies
pursuant to the Facility Leases, retain all rights to exercise the Owner
Lessor's rights relating to the Appraisal Procedure and to confer and agree with
the Facility Lessees on Fair Market Rental Value, or any Renewal Lease Term and
(vi) retain all rights to compromise and settle claims against the Guarantor
under any Calpine Guaranty (but not claims against the Indenture Estate) with
respect to the Equity Portion of Termination Value and Equity Portion of
Periodic Rent (and all amounts of overdue interest relating to such amount);
provided that the Indenture Trustee shall have the right to settle claims
against the Guarantor inclusive of the Equity Portion of Termination Value and
Equity Portion of Periodic Rent (and all amounts of overdue interest relating to
such amount) for an amount which will result in payment in full to the Owner
Lessor of all such unpaid amounts as certified to the Indenture Trustee by the
Owner Lessor, and satisfaction of all claims of the Noteholders.

        (b) If there shall have occurred and be continuing a Lease Event of
Default under either Facility Lease, and the Indenture Trustee shall not have,
within the 180 day period after the earlier of (i) any declaration thereof or
(ii) receipt by the Indenture Trustee of notice of such Lease Event of Default
from the Owner Lessor, the Owner Participant, either Facility Lessee or any
Noteholder, to the extent it is not then stayed or otherwise prevented from
demanding payment of Termination Value under both Calpine Guaranties by
operation of law, commenced the exercise of one or more remedies against the
applicable Facility Lessee or the Guarantor under the applicable Calpine
Guaranty and, in either case, demanded payment in full of the

                                       36
<PAGE>   42

Termination Value under both Calpine Guaranties, then the Owner Lessor shall
thereafter have the right, shared with the Indenture Trustee, upon notice to the
Indenture Trustee, to exercise remedies and bring one or more proceedings
against the Guarantor under the Calpine Guaranties for the Equity Portion of
Termination Value and the Equity Portion of Periodic Rent (and unpaid interest
thereon) and to receive and retain directly the proceeds thereof; provided that
in any such action or proceeding the Owner Lessor shall compromise, settle and
receive only the Equity Portion of Termination Value, together with all unpaid
amounts of the Equity Portion of Periodic Rent (and all amounts of overdue
interest relating to such amount) and other amounts constituting Excepted
Payments and Owner Lessor shall not, and shall have no right to, compromise,
settle or receive any other amount comprising Termination Value or Periodic
Rent. In addition, the Owner Trustee shall retain the rights set forth in
Section 2.1(d) of each Calpine Guaranty.

        (c) If at any time (i) the Indenture Trustee shall have either exercised
remedies under Sections 17.1(b), (c), (d) or (e) of a Facility Lease, or
foreclosed on the Indenture Estate, (ii) a Lease Event of Default shall have
occurred under Section 16(g) or (h) of the Facility Leases or (iii) an "Event of
Default" as defined in the Calpine Guaranties shall have occurred under Section
(e) or (f) thereof, and in any such case the Indenture Trustee has not promptly,
to the extent it is not then stayed or otherwise prevented from demanding
payment of Termination Value under the Calpine Guaranties by operation of law,
demanded payment and proceeded (and continued to proceed) in good faith to
pursue the full Termination Value under the Calpine Guaranties, then the Owner
Lessor shall thereafter have the right, shared with the Indenture Trustee, upon
notice to the Indenture Trustee, to exercise remedies and bring one or more
proceedings against Guarantor under the Calpine Guaranties for the payment of
Termination Value; provided that in any such action or proceeding the Owner
Lessor shall compromise and settle only the Equity Portion of Termination Value,
together with all unpaid amounts of the Equity Portion of Periodic Rent (and all
amounts of overdue interest relating to such amount) and other amounts
constituting Excepted Payments and shall not, and shall have no right to,
compromise or settle any amount comprising Termination Value other than the
Equity Portion of Termination Value and the Equity Portion of Periodic Rent (and
all amounts of overdue interest relating to such amount); provided further that
any amounts otherwise payable to or received by the Owner lessor pursuant to any
action or proceeding referred to in this Section 5.6(c) shall constitute a
portion of the Indenture Estate and shall be deposited with and paid over to the
Indenture Trustee for application in accordance with the terms of this
Indenture. At all times that the Indenture Trustee is proceeding against Calpine
under the Calpine Guarantees, the Indenture Trustee shall pursue the full
Termination Value, together with all unpaid amounts of unpaid Periodic Rent (and
all amounts of overdue interest relating to such amount); provided that the
Indenture Trustee shall be entitled to compromise on behalf of the Noteholders
amounts constituting Termination Value under the Calpine Guaranties but not
constituting the Equity Portion of Termination Value or the Equity Portion of
Periodic Rent and so long as such compromise would not otherwise have a material
adverse effect on the Owner Participant.

        (d) The Owner Lessor shall have the right, but not to the exclusion of
the Indenture Trustee, (i) to receive from the Facility Lessees and the
Guarantor all notices, certificates, opinions of counsel and other documents and
all information that the Facility Lessees are permitted or required to give or
furnish to the Owner Lessor or the Owner Participant, as the case may be,
pursuant to the Facility Leases or any other Operative Document; (ii) to inspect
the

                                       37
<PAGE>   43

Facilities and the records relating thereto pursuant to Section 12 of the
Facility Leases; (iii) to provide such insurance as may be permitted by Section
11 of the Facility Leases; (iv) to provide notices to the Facility Lessees or
the Guarantor to the extent otherwise permitted by the Operative Documents; and
(v) to perform for the Facility Lessees as provided in Section 20 of the
Facility Leases;

        (e) So long as the Notes have not been accelerated pursuant to Section
4.3(a) hereof (or, if accelerated, such acceleration has theretofore been
rescinded) or the Indenture Trustee shall not have exercised any of its rights
pursuant to Section 4 hereof to take possession of, foreclose, sell or otherwise
take control of all or any part of the Indenture Estate, the Owner Lessor shall
retain the right to the exclusion of the Indenture Trustee to exercise the
rights of the Owner Lessor under, and to determine compliance by the Facility
Lessees with, the provisions of Sections 10 (other than Section 10.3 thereof),
13, 14 and 15 of the Facility Leases; provided, however, that if a Lease
Indenture Event of Default shall have occurred and be continuing, the Owner
Lessor shall cease to retain such rights upon notice from the Indenture Trustee
stating that such rights shall no longer be retained by the Owner Lessor;

        (f) Except as otherwise provided in this Section 5.6, so long as the
Notes have not been accelerated pursuant to Section 4.3(a) hereof (or, if
accelerated, such acceleration has theretofore been rescinded) or the Indenture
Trustee shall not have exercised any of its rights pursuant to Section 4 hereof
to take possession of, foreclose, sell or otherwise take control of all or any
part of the Indenture Estate, the Owner Lessor shall have the right, to be
exercised jointly with the Indenture Trustee, (i) to exercise the rights with
respect to the Facility Lessees' use and operation, modification or maintenance
of the Facility, (ii) to exercise the Owner Lessor's right under Section 13.1 of
the Participation Agreement to withhold or grant its consent to an assignment by
the Facility Lessees of their rights under the Facility Leases, and (iii) to
exercise the rights of the Owner Lessor under Section 10.3 of the Facility
Leases; provided, however, that if a Lease Indenture Event of Default shall have
occurred and be continuing, the Owner Lessor shall cease to exercise such rights
under this clause (iii) upon notice from the Indenture Trustee stating that such
rights shall no longer be retained by the Owner Lessor; provided further,
however, that (A) the Owner Lessor shall have no right to receive any Periodic
Rent or other payments other than Excepted Payments payable to the Owner Lessor,
or the Owner Participant, and (B) no determination by the Owner Lessor or the
Indenture Trustee that the Facility Lessees are in compliance with the
provisions of any applicable Assigned Document shall be binding upon or
otherwise affect the rights hereunder of the Indenture Trustee or any Noteholder
on the one hand or the Owner Lessor or the Owner Participant on the other hand;
and

        (g) Nothing in this Indenture shall give to, or create in, or otherwise
provide the benefit of to, the Indenture Trustee, any rights of the Owner
Participant under or pursuant to the Tax Indemnity Agreement or any other
Operative Document and nothing in this Section 5.6 or elsewhere in this
Indenture shall give to the Owner Lessor the right to exercise any rights
specifically given to the Indenture Trustee pursuant to any Operative Document;
and nothing in this Indenture shall give to, or create in, the Indenture Trustee
the right to, and the Indenture Trustee shall not, release the Guarantor of its
obligations under either Guaranty in respect of payment of the Equity Portion of
Termination Value, unpaid amounts of the Equity Portion of Periodic Rent (and
all amounts of overdue interest relating to such amount) and other amounts
constituting Excepted Payments, unless such release results in payment in full
to the Owner

                                       38
<PAGE>   44

Lessor of all such unpaid amounts as certified to the Indenture Trustee by the
Owner Lessor, and all claims of the Noteholders;

but nothing in clauses (a) through (f) above shall deprive the Indenture Trustee
of the exclusive right, so long as this Indenture shall be in effect, to declare
the Facility Leases to be in default under Section 16 thereof and thereafter to
exercise the remedies pursuant to Section 17 of the Facility Leases (except in
each case as expressly set forth in clause (iv) of Section 5.6(a) and Sections
5.6(b) and (c) above).

        (h) Following any foreclosure of the Owner Lessor's interests in the
Facility Leases in connection with a Lease Indenture Event of Default arising
from a Lease Event of Default, the Indenture Trustee shall not directly or
indirectly enter into any new lease of either or both Facilities with Calpine,
either Facility Lessee or any Affiliate thereof.

        Section 5.7. Restrictions on Dealing with Indenture Estate. Except as
provided in the Operative Documents, but subject to the terms of this Indenture,
the Owner Lessor shall not use, operate, store, lease, control, manage, sell,
dispose of or otherwise deal with either of the Facilities, the Tiverton Site,
the Rumford Site, any part of the Tiverton Site or the Rumford Site or any other
part of the Indenture Estate.

        Section 5.8. Filing of Financing Statements and Continuation Statements.
Pursuant to Section 5.10 of the Participation Agreement, the Facility Lessees
have covenanted to maintain the priority of the Lien of this Indenture on the
Indenture Estate. The Indenture Trustee shall, at the written request and
expense of the Facility Lessees, as provided in the Participation Agreement,
execute and deliver to the Facility Lessees and the Facility Lessees will file,
if not already filed, such financing statements or other documents and such
continuation statements or other documents with respect to financing statements
or other documents previously filed relating to the Lien created by this
Indenture in the Indenture Estate as may be supplied to the Indenture Trustee by
the Facility Lessees. At any time and from time to time, upon the request of the
Facility Lessees or the Indenture Trustee, at the expense of the Facility
Lessees (and upon receipt of the form of document so to be executed), the Owner
Lessor shall promptly and duly execute and deliver any and all such further
instruments and documents as the Facility Lessees or the Indenture Trustee may
request in obtaining the full benefits of the security interest and assignment
created or intended to be created hereby and of the rights and powers herein
granted. Upon the reasonable instructions (which instructions shall be
accompanied by the form of document to be filed) at any time and from time to
time of the Facility Lessees or the Indenture Trustee, the Owner Lessor shall
execute and file any financing statement (and any continuation statement with
respect to any such financing statement), and any other document relating to the
security interest and assignment created by this Indenture as may be specified
in such instructions. In addition, the Indenture Trustee and the Owner Lessor
will execute such continuation statements with respect to financing statements
and other documents relating to the Lien created by this Indenture in the
Indenture Estate as may be specified from time to time in written instructions
of any Noteholder (which instructions may, by their terms, be operative only at
a future date and which shall be accompanied by the form of such continuation
statement or other document to be filed). Neither the Indenture Trustee nor,
except as otherwise herein expressly provided, the Owner Lessor shall have
responsibility for the protection, perfection or preservation of the Lien
created by this Indenture.

                                       39
<PAGE>   45

SECTION 6. INDENTURE TRUSTEE AND OWNER LESSOR

        Section 6.1. Acceptance of Trusts and Duties. The Indenture Trustee
accepts the trusts hereby created and applicable to it and agrees to perform the
same but only upon the terms of this Indenture, and agrees to receive and
disburse all moneys constituting part of the Indenture Estate in accordance with
the provisions hereof. If any Lease Indenture Event of Default shall have
occurred and be continuing, the Indenture Trustee shall, subject to the
provisions of Sections 4 and 5 hereof, exercise such of the rights and remedies
vested in it by this Indenture and shall at all times use the same degree of
care in their exercise as a prudent person would exercise or use in the
circumstances in the conduct of its own affairs. The Indenture Trustee shall not
be liable under any circumstances, except (a) for its own negligence or willful
misconduct, (b) in the case of any inaccuracy of any representation or warranty
of the Indenture Trustee or the Lease Indenture Company contained in Section 3.5
of the Participation Agreement, in the certificate delivered by the Indenture
Trustee at the Closing pursuant to Section 4.6 of the Participation Agreement,
or (c) for the performance of its obligations under Section 8 of the
Participation Agreement; and the Lease Indenture Company and the Indenture
Trustee shall not be liable for any action or inaction of the Owner Trust;
provided, however, that:

              (i) Prior to the occurrence of a Lease Indenture Event of Default
        of which a Responsible Officer of the Indenture Trustee shall have
        Actual Knowledge, and after the curing of all such Indenture Events of
        Default which may have occurred, the duties and obligations of the
        Indenture Trustee shall be determined solely by the express provisions
        of the Operative Documents to which it is a party, the Indenture Trustee
        shall not be liable except for the performance of such duties and
        obligations as are specifically set forth in the Operative Documents, no
        implied covenants or obligations shall be read into the Operative
        Documents against the Indenture Trustee and, in the absence of bad faith
        on the part of the Indenture Trustee, the Indenture Trustee may
        conclusively rely, as to the truth of the statements and the correctness
        of the opinions expressed therein, upon any notes or opinions furnished
        to the Indenture Trustee and conforming to the requirements of this
        Indenture;

              (ii) The Indenture Trustee shall not be liable in its individual
        capacity for an error of judgment made in good faith by a Responsible
        Officer or other officers of the Indenture Trustee, unless it shall be
        proven that the Indenture Trustee was negligent in ascertaining the
        pertinent facts;

            (iii) The Indenture Trustee shall not be liable in its individual
        capacity with respect to any action taken, suffered or omitted to be
        taken by it in good faith in accordance with this Indenture or at the
        direction of the Majority in Interest of Noteholders, relating to the
        time, method and place of conducting any proceeding or remedy available
        to the Indenture Trustee, or exercising or omitting to exercise any
        trust or power conferred upon the Indenture Trustee, under this
        Indenture;

              (iv) The Indenture Trustee shall not be required to take notice or
        be deemed to have notice or knowledge of any default, Lease Event of
        Default, Significant Lease Default or Lease Indenture Event of Default
        (except for a Lease Indenture Event of Default resulting from an event
        of nonpayment) unless a Responsible Officer of the

                                       40
<PAGE>   46

        Indenture Trustee shall have received written notice thereof. In the
        absence of receipt of such notice, the Indenture Trustee may
        conclusively assume that there is no default or Lease Indenture Event of
        Default;

              (v) The Indenture Trustee shall not be required to expend or risk
        its own funds or otherwise incur financial liability for the performance
        of any of its duties hereunder or the exercise of any of its rights or
        powers if there is reasonable ground for believing that the repayment of
        such funds or adequate indemnity against such risk or liability is not
        reasonably assured to it, and none of the provisions contained in this
        Indenture shall in any event require the Indenture Trustee to perform,
        or be responsible for the manner of performance of, any of the
        obligations of the Owner Lessor, under this Indenture; and

              (vi) The right of the Indenture Trustee to perform any
        discretionary act enumerated in this Indenture shall not be construed as
        a duty, and the Indenture Trustee shall not be answerable for other than
        its negligence or willful misconduct in the performance of such act.

        Section 6.2. Absence of Certain Duties. Except in accordance with
written instructions furnished pursuant to Section 5.2 hereof and except as
provided in Section 5.5 and 5.8 hereof, the Indenture Trustee shall have no duty
(a) to see to any registration, recording or filing of any Operative Document
(or any financing or continuation statements in respect thereto) or to see to
the maintenance of any such registration, recording or filing, (b) to see to any
insurance on the Facilities or the Facilities or to effect or maintain any such
insurance, (c) except as otherwise provided in Section 5.5 hereof or in Section
10 of the Participation Agreement, to see to the payment or discharge of any Tax
or any Lien of any kind owing with respect to, or assessed or levied against,
any part of the Indenture Estate, (d) to confirm or verify the contents of any
report, notice, request, demand, certificate, financial statement or other
instrument of the Facility Lessees, (e) to inspect the Facilities at any time or
ascertain or inquire as to the performance or observance of any of the Facility
Lessees' covenants with respect to the Facilities or (f) to exercise any of the
trusts or powers vested in it by this Indenture or to institute, conduct or
defend any litigation hereunder or in relation hereto at the request, order or
direction of any of the Noteholders, pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby (which in the case of the Majority in
Interest of Noteholders will be deemed to be satisfied by a letter agreement
with respect to such costs from such Majority in Interest of Noteholders).
Notwithstanding the foregoing, the Indenture Trustee shall furnish to each
Noteholder and to the Owner Lessor and the Owner Participant promptly upon
receipt thereof duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to the
Indenture Trustee hereunder or under any of the Operative Documents unless the
Indenture Trustee shall reasonably believe that each such Noteholder, the Owner
Lessor and the Owner Participant shall have received copies thereof.

                                       41
<PAGE>   47

        Section 6.3.  Representations and Warranties.

        (a) The Owner Lessor represents and warrants that it has not assigned or
pledged any of its estate, right, title or interest subject to this Indenture,
to anyone other than the Indenture Trustee.

        (b) NEITHER THE OWNER LESSOR NOR THE INDENTURE TRUSTEE MAKES, NOR SHALL
BE DEEMED TO HAVE MADE (i) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AS TO THE TITLE, VALUE, COMPLIANCE WITH PLANS OR SPECIFICATIONS, QUALITY,
DURABILITY, SUITABILITY, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE OF THE FACILITY, OR ANY PART
THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE FACILITIES OR ANY OTHER PART OF THE INDENTURE ESTATE, except
that the Owner Lessor represents and warrants that on the Closing Date it shall
have received whatever title or interest to the Facilities and the Tiverton and
Rumford Sites as were conveyed to it by the Facility Lessees and that on the
Closing Date the Facilities shall be free of Owner Lessor's Liens and the Owner
Participant's Liens; or (ii) any representation or warranty as to the validity,
legality or enforceability of this Indenture, the Notes or any of the other
Operative Documents, or as to the correctness of any statement contained in any
thereof, except that each of the Owner Lessor and the Indenture Trustee
represents and warrants that this Indenture and the Participation Agreement have
been, and, in the case of the Owner Lessor, the other Operative Documents to
which it is or is to become a party have been or will be, executed and delivered
by one of its officers who is and will be duly authorized to execute and deliver
such document on its behalf.

        Section 6.4. No Segregation of Moneys; No Interest. All moneys and
securities deposited with and held by the Indenture Trustee under this Indenture
for the purpose of paying, or securing the payment of, the principal of or
Make-Whole Amount or interest on the Notes shall be held in trust. Except as
specifically provided herein or in the Facility Leases, any moneys received by
the Indenture Trustee hereunder need not be segregated in any manner except to
the extent required by Applicable Law and may be deposited under such general
conditions as may be prescribed by Applicable Law, and neither the Owner Lessor
nor the Indenture Trustee shall be liable for any interest thereon; provided,
however, subject to Section 6.5 hereof, that any payments received or applied
hereunder by the Indenture Trustee shall be accounted for by the Indenture
Trustee so that any portion thereof paid or applied pursuant hereto shall be
identifiable as to the source thereof to the extent known to the Indenture
Trustee.

        Section 6.5. Reliance; Agents; Advice of Experts. The Indenture Trustee
shall be authorized and protected and incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed to be
genuine and believed to be signed by the proper party or parties. The Indenture
Trustee may accept in good faith a certified copy of a resolution of the general
partner (or equivalent body) of the Facility Lessees as conclusive evidence that
such resolution has been duly adopted by such Board and that the same is in full
force and effect. As to the amount of any payment to which any Noteholder is
entitled pursuant to Clause "Third" of Section 3.2 or Section 3.3 hereof, and as
to the amount of any payment to which any other

                                       42
<PAGE>   48

Person is entitled pursuant to Section 3.5 or Section 3.7 hereof, the Indenture
Trustee for all purposes hereof may rely on and shall be authorized and
protected in acting or refraining from acting upon an Officer's Certificate of
such Noteholder or other Person, as the case may be. As to any fact or matter
the manner of ascertainment of which is not specifically described herein, the
Indenture Trustee for all purposes hereof may rely on an Officer's Certificate
of the Owner Lessor or the Facility Lessees or a Noteholder as to such fact or
matter, and such certificate shall constitute full protection to the Indenture
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon. The Indenture Trustee shall have the right to request
instructions from the Owner Lessor or the Majority in Interest of Noteholders
with respect to taking or refraining from taking any action in connection with
the Lease Indenture or any other Operative Document to which it is a party, and
shall be entitled to act or refrain from taking such action unless and until the
Indenture Trustee shall have received written instructions from the Owner Lessor
or the Majority in Interest of Noteholders, and the Indenture Trustee shall not
incur liability by reason of so acting (except as provided in Section 6.1) or
refraining from acting. In the administration of the trusts hereunder, the
Indenture Trustee may execute any of the trusts or powers hereof and perform its
powers and duties hereunder directly or through agents or attorneys and may, at
the expense of the Indenture Estate (but subject to the priorities of payment
set forth in Section 3 hereof), consult with independent skilled Persons to be
selected and retained by it (other than Persons regularly in its employ) as to
matters within their particular competence, and the Indenture Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion, within such Person's area of competence,
of any such Person, so long as the Indenture Trustee shall have exercised
reasonable care in selecting such Person.

SECTION 7. SUCCESSOR INDENTURE TRUSTEES AND SEPARATE TRUSTEES

        Section 7.1. Resignation or Removal of the Indenture Trustee;
Appointment of Successor.

        (a) Resignation or Removal. The Indenture Trustee or any successor
thereto may resign at any time with or without cause by giving at least thirty
(30) days' prior written notice to the Owner Lessor, the Owner Participant, the
Facility Lessees and each Noteholder, such resignation to be effective on the
acceptance of appointment by the successor Indenture Trustee pursuant to the
provisions of subsection (b) below. In addition, a Majority in Interest of
Noteholders may at any time remove the Indenture Trustee with or without cause
by an instrument in writing delivered to the Owner Lessor, the Owner Participant
and the Indenture Trustee, and the Owner Lessor shall give prompt written
notification thereof to each Noteholder and the Facility Lessees. Such removal
will be effective on the acceptance of appointment by the successor Indenture
Trustee pursuant to the provisions of subsection (b) below. In the case of the
resignation or removal of the Indenture Trustee, a Majority in Interest of
Noteholders may appoint a successor Indenture Trustee by an instrument signed by
such holders. If a successor Indenture Trustee shall not have been appointed
within thirty (30) days after such resignation or removal, the Indenture Trustee
or any Noteholder may apply to any court of competent jurisdiction to appoint a
successor Indenture Trustee to act until such time, if any, as a successor shall
have been appointed by a Majority in Interest of Noteholders as above provided.
The successor Indenture Trustee so appointed by such court shall immediately and
without further act

                                       43
<PAGE>   49

be superseded by any successor Indenture Trustee appointed by a Majority in
Interest of Noteholders as above provided.

        (b) Acceptance of Appointment. Any successor Indenture Trustee shall
execute and deliver to the predecessor Indenture Trustee, the Owner Participant,
the Owner Lessor and all Noteholders an instrument accepting such appointment
and thereupon such successor Indenture Trustee, without further act, shall
become vested with all the estates, properties, rights, powers and duties of the
predecessor Indenture Trustee hereunder in the trusts hereunder applicable to it
with like effect as if originally named the Indenture Trustee herein; but
nevertheless, upon the written request of such successor Indenture Trustee or a
Majority in Interest of Noteholders, such predecessor Indenture Trustee shall
execute and deliver an instrument transferring to such successor Indenture
Trustee, upon the trusts herein expressed applicable to it, all the estates,
properties, rights and powers of such predecessor Indenture Trustee, and such
predecessor Indenture Trustee shall duly assign, transfer deliver and pay over
to such successor Indenture Trustee all moneys or other property then held by
such predecessor Indenture Trustee hereunder. To the extent required by
Applicable Law or upon request of the successor Indenture Trustee, the Owner
Lessor shall execute any and all documents confirming the vesting of such
estates, properties, rights and powers in the successor Indenture Trustee.

        (c) Qualifications. Any successor Indenture Trustee, however appointed,
shall be a trust company or bank with trust powers (i) which (A) has a combined
capital and surplus of at least $150,000,000, or (B) is a direct or indirect
subsidiary of a corporation which has a combined capital and surplus of at least
$150,000,000 provided such corporation guarantees the performance of the
obligations of such trust company or bank as Indenture Trustee, or (C) is a
member of a bank holding company group having a combined capital and surplus of
at least $150,000,000 provided the parent of such bank holding company group or
a member which itself has a combined capital and surplus of at least
$150,000,000 guarantees the performance of the obligations of such trust company
or bank, and (ii) is willing, able and legally qualified to perform the duties
of Indenture Trustee hereunder upon reasonable or customary terms. No successor
Indenture Trustee, however appointed, shall become such if such appointment
would result in the violation of any Applicable Law or create a conflict or
relationship involving a conflict of interest under the Trust Indenture Act of
1939, as amended.

        (d) Merger, etc. Any Person into which the Indenture 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 Indenture
Trustee shall be a party, or any Person to which substantially all the corporate
trust business of the Indenture Trustee may be transferred, shall, subject to
the terms of subsection (c) of this Section 7.1, be the Indenture Trustee under
this Indenture without further act.

        Section 7.2.  Appointment of Additional and Separate Trustees.

        (a) Appointment. Whenever (i) the Indenture Trustee shall deem it
necessary or prudent in order to conform to any law of any applicable
jurisdiction or to make any claim or bring any suit with respect to or in
connection with the Indenture Estate, this Indenture, the Facility Leases, the
Notes or any of the transactions contemplated by the Operative Documents, (ii)
the Indenture Trustee shall be advised by counsel, satisfactory to it, that it
is so necessary or

                                       44
<PAGE>   50

prudent in the interest of the Noteholders or (iii) a Majority in Interest of
Noteholders deems it so necessary or prudent and shall have requested in writing
the Indenture Trustee to do so, then in any such case the Indenture Trustee
shall execute and deliver from time to time all instruments and agreements
necessary or proper to constitute another bank or trust company or one or more
Persons approved by the Indenture Trustee either to act as additional trustee or
trustees of all or any part of the Indenture Estate, jointly with the Indenture
Trustee, or to act as separate trustee or trustees of all or any part of the
Indenture Estate, in any such case with such powers as may be provided in such
instruments or agreements, and to vest in such bank, trust company or Person as
such additional trustee or separate trustee, as the case may be, any property,
title, right or power of the Indenture Trustee deemed necessary or advisable by
the Indenture Trustee, subject to the remaining provisions of this Section 7.2.
The Owner Lessor hereby consents to all actions taken by the Indenture Trustee
under the provisions of this Section 7.2 and agrees, upon the Indenture
Trustee's request, to join in and execute, acknowledge and deliver any or all
such instruments or agreements; and the Owner Lessor hereby makes, constitutes
and appoints the Indenture Trustee its agent and attorney-in-fact for it and in
its name, place and stead to execute, acknowledge and deliver any such
instrument or agreement in the event that the Owner Lessor shall not itself
execute and deliver the same within fifteen (15) days after receipt by it of
such request so to do; provided, however, that the Indenture Trustee shall
exercise due care in selecting any additional or separate trustee if such
additional or separate trustee shall not be a Person possessing trust powers
under Applicable Law. If at any time the Indenture Trustee shall deem it no
longer necessary or prudent in order to conform to any such law or take any such
action or shall be advised by such counsel that it is no longer so necessary or
prudent in the interest of the Noteholders or in the event that the Indenture
Trustee shall have been requested to do so in writing by a Majority in Interest
of Noteholders, the Indenture Trustee shall execute and deliver all instruments
and agreements necessary or proper to remove any additional trustee or separate
trustee. In such connection, the Indenture Trustee may act on behalf of the
Owner Lessor to the same extent as is provided above. Notwithstanding anything
contained to the contrary in this Section 7.2(a), to the extent the laws of any
jurisdiction preclude the Indenture Trustee from taking any action hereunder
either alone, jointly or through a separate trustee under the direction and
control of the Indenture Trustee, the Owner Lessor, at the instruction of the
Indenture Trustee, shall appoint a separate trustee for such jurisdiction, which
separate trustee shall have full power and authority to take all action
hereunder as to matters relating to such jurisdiction without the consent of the
Indenture Trustee, but not subject to the same limitations in any exercise of
his power and authority as those to which the Indenture Trustee is subject.

        (b) The Indenture Trustee as Agent. Any additional trustee or separate
trustee at any time by an instrument in writing may constitute the Indenture
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by Applicable Law, to do all acts and things and exercise
all discretions which it is authorized or permitted to do or exercise, for and
in its behalf and in its name. In case any such additional trustee or separate
trustee shall become incapable of acting or cease to be such additional trustee
or separate trustee, the property, rights, powers, trusts, duties and
obligations of such additional trustee or separate trustee, as the case may be,
so far as permitted by Applicable Law, shall vest in and be exercised by the
Indenture Trustee, without the appointment of a new successor to such additional
trustee or separate trustee, unless and until a successor is appointed in the
manner hereinbefore provided.

                                       45
<PAGE>   51

        (c) Requests, etc. Any request, approval or consent in writing by the
Indenture Trustee to any additional trustee or separate trustee shall be
sufficient to warrant such additional trustee or separate trustee, as the case
may be, to take the requested, approved or consented to action.

        (d) Subject to Indenture, etc. Each additional trustee and separate
trustee appointed pursuant to this Section 7.2 shall be subject to, and shall
have the benefit of Sections 3 through 9 hereof insofar as they apply to the
Indenture Trustee. Notwithstanding any other provision of this Section 7.2, (i)
the powers, duties, obligations and rights of any additional trustee or separate
trustee appointed pursuant to this Section 7.2 shall not in any case exceed
those of the Indenture Trustee hereunder, (ii) all powers, duties, obligations
and rights conferred upon the Indenture Trustee in respect of the receipt,
custody, investment and payment of moneys or the investment of moneys shall be
exercised solely by the Indenture Trustee and (iii) no power hereby given to, or
exercisable as provided herein by, any such additional trustee or separate
trustee shall be exercised hereunder by such additional trustee or separate
trustee except jointly with, or with the consent of, the Indenture Trustee.

SECTION 8. SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS

        Section 8.1. Supplemental Indenture and Other Amendment With Consent;
Conditions and Limitations. At any time and from time to time, subject to
Sections 8.2 and 8.3 hereof, but only upon the written direction of a Majority
in Interest of Noteholders and the written consent of the Owner Lessor, (a) the
Indenture Trustee shall execute an amendment or supplement hereto for the
purpose of adding provisions to, or changing or eliminating provisions of, this
Indenture as specified in such request, and (b) the Indenture Trustee, as the
case may be, shall enter into or consent to such written amendment of or
supplement to any Assigned Document as each other party thereto may agree to and
as may be specified in such request, or execute and deliver such written waiver
or modification of or consent to the terms of any such agreement or document as
may be specified in such request; provided, however, that without the consent of
the Noteholders representing one hundred percent (100%) of the outstanding
principal amount of the Notes, such percentage to be determined in the same
manner as provided in the definition of the term "Majority in Interest of
Noteholders," no such supplement to or amendment of this Indenture or any
Assigned Document, or waiver or modification of or consent to the terms hereof
or thereof, shall (i) modify the definition of the terms "Majority in Interest
of Noteholders" or reduce the percentage of Noteholders required to take or
approve any action hereunder, (ii) change the amount or the time of payment of
any amount owing or payable under any Note or change the rate or manner of
calculation of interest payable on any Note, (iii) alter or modify the
provisions of Section 3 hereof with respect to the manner of payment or the
order of priorities in which distributions thereunder shall be made as between
the Noteholders and the Owner Lessor, (iv) reduce the amount (except to any
amount as shall be sufficient to pay the aggregate principal of, and interest on
all outstanding Notes) or extend the time of payment of Periodic Rent or
Termination Value except as expressly provided in Section 3.5 of the Facility
Leases, or change any of the circumstances under which Periodic Rent or
Termination Value is payable, (v) consent to any assignment of the Facility
Leases if in connection therewith the Facility Lessees will be released from its
obligation to pay Periodic Rent and Termination Value, except as expressly
provided in Section 13 of the Participation Agreement, or release the Facility

                                       46
<PAGE>   52

Lessees of their obligation to pay Periodic Rent or Termination Value or change
the absolute and unconditional character of such obligations as set forth in
Section 9 of the Facility Leases; or (vi) consent to any release of the
Guarantor under Section 8.4 of the Guaranty.

        Section 8.2. Supplemental Indentures and other Amendments Without
Consent. Without the consent of any Noteholders but subject to the provisions of
Section 8.3, and only after notice thereof shall have been sent to the
Noteholders and with the consent of the Owner Lessor, the Indenture Trustee
shall enter into any indenture or indentures supplemental hereto or execute any
amendment, modification, supplement, waiver or consent with respect to any other
Operative Document (a) to evidence the appointment of a co-manager in accordance
with the terms of the LLC Agreement, or to evidence the succession of a
successor as the Indenture Trustee hereunder, the removal of the Indenture
Trustee or the appointment of any separate or additional trustee or trustees, in
each case if done pursuant to the provisions of Section 7 hereof and to define
the rights, powers, duties and obligations conferred upon any such separate
trustee or trustees or co-trustee or co-trustees, (b) to correct, confirm or
amplify the description of any property at any time subject to the Lien of this
Indenture or to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee, (c) to provide for any evidence of the creation and
issuance of any Additional Notes pursuant to, and subject to the conditions of,
Section 2.12 and to establish the form and the terms of such Additional Notes,
(d) to cure any ambiguity in, to correct or supplement any defective or
inconsistent provision of, or to add to or modify any other provisions and
agreements in, this Indenture or any other Operative Document in any manner that
will not in the judgment of the Indenture Trustee materially adversely affect
the interests of the Noteholders, (e) to grant or confer upon the Indenture
Trustee for the benefit of the Noteholders any additional rights, remedies,
powers, authority or security which may be lawfully granted or conferred and
which are not contrary or inconsistent with this Indenture, (f) to add to the
covenants or agreements to be observed by the Facility Lessees or the Owner
Lessor and which are not contrary to this Indenture, to add Indenture Events of
Defaults for the benefit of Noteholders or surrender any right or power of the
Owner Lessor, provided it has consented thereto, (g) to effect the assumption of
all or, to the extent otherwise provided hereunder, part of the Lessor Notes by
the Facility Lessees, provided that the supplemental indenture will contain all
of the covenants applicable to the Facility Lessees contained in the Facility
Leases and the Participation Agreement for the benefit of the Indenture Trustees
or the holders of such Lessor Notes, such that the Facility Lessees' obligations
contained therein, if applicable in the event that the Facility Leases are
terminated, will continue to be in full force and effect, (h) 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, (i) to modify, eliminate or add to the provisions of any
Operative Documents to such extent as shall be necessary to qualify or continue
the qualification of this Lease Indenture or the Pass Through Trust Agreements
(including any supplements thereto) under the Trust Indenture Act, or similar
federal statute enacted after the Closing Date, and to add to this Indenture
such other provisions as may be expressly required or permitted by the Trust
Indenture Act of 1939, and (j) to effect any indenture or indentures
supplemental hereto or any amendment, modification, supplement, waiver or
consent with respect to any other Operative Document, provided such supplemental
indenture, amendment, modification, supplement, waiver or consent shall not
reasonably be expected to materially and adversely affect the interest of the
Noteholders; provided, however, that no such amendment, modification,
supplement, waiver or consent contemplated by this Section 8.2 shall, without
the consent of the holder of each then outstanding

                                       47
<PAGE>   53

Note, cause any of the events specified in clauses (i) through (v) of the first
sentence of Section 8.1 hereof to occur; and provided, further, that no such
amendment, modification, supplement, waiver or consent contemplated by this
Section 8.2 shall, without the consent of the holder of a Majority in Interest
of Noteholders, modify the provisions of Sections 5.2, 5.6, 6, or 13.1 or [__]
of the Participation Agreement, or modify in any material respect the provisions
of either Calpine Guaranty (other than, in each case, any amendment,
modification, supplement, waiver or consent having no adverse affect on the
interest of the Noteholders).

        Section 8.3. Conditions to Action by the Indenture Trustee. If in the
opinion of the Indenture Trustee any document required to be executed pursuant
to the terms of Section 8.1 or 8.2 or the election referred to in Section 9.13
hereof adversely affects any immunity or indemnity in favor of the Indenture
Trustee under this Indenture or the Participation Agreement, or would materially
increase its administrative duties or responsibilities hereunder or thereunder
or may result in personal liability for it (unless it shall have been provided
an indemnity satisfactory to the Indenture Trustee), the Indenture Trustee may
in its discretion decline to execute such document or the election. With every
such document and election, the Indenture Trustee shall be furnished with
evidence that all necessary consents have been obtained and with an opinion of
counsel that such document complies with the provisions of this Indenture, does
not deprive the Indenture Trustee or the holders of the Notes of the benefits of
the Lien hereby created on any property subject hereto or of the assignments
contained herein (except as otherwise consented to in accordance with Section
8.1 hereof) and that all consents required by the terms hereof in connection
with the execution of such document or the making of such election have been
obtained. The Indenture Trustee shall be fully authorized and protected in
relying on such opinion.

SECTION 9. MISCELLANEOUS

        Section 9.1. Surrender, Defeasance and Release.

        (a) Surrender and Cancellation of Indenture. This Indenture shall be
surrendered and cancelled and the trusts created hereby shall terminate and this
Indenture shall be of no further force or effect upon satisfaction of the
conditions set forth in the proviso to the Granting Clause hereof. Upon any such
surrender, cancellation, and termination, the Indenture Trustee shall pay all
moneys or other properties or proceeds constituting part of the Indenture Estate
(the distribution of which is not otherwise provided for herein) to the Owner
Lessor, and the Indenture Trustee shall, upon request and at the cost and
expense of the Owner Lessor, execute and deliver proper instruments
acknowledging such cancellation and termination and evidencing the release of
the security, rights and interests created hereby. If this Indenture is
terminated pursuant to this Section 9.1(a), the Indenture Trustee shall promptly
notify the Facility Lessees and the Owner Participant of such termination.

        (b) Release.

              (i) Whenever a Component is replaced pursuant to the Facility
        Leases, such component shall automatically and without further act of
        any Person be released from the Lien of this Lease Indenture and the
        Indenture Trustee shall, upon the written request of the Owner Lessor or
        the Facility Lessees, execute and deliver to, and as directed in

                                       48
<PAGE>   54

        writing by, the Facility Lessees or the Owner Lessor an appropriate
        instrument (in due form for recording) releasing the replaced Component
        from the Lien of this Indenture.

              (ii) Whenever the Facility Lessees are entitled to acquire or have
        transferred to it their respective Facilities pursuant to the express
        terms of the Facility Leases, the Indenture Trustee shall release the
        Indenture Estate from the Lien of this Indenture and execute and deliver
        to, or as directed in writing by, the Facility Lessees or the Owner
        Lessor an appropriate instrument (in due form for recording) releasing
        the Indenture Estate from the Lien of this Indenture; provided that all
        sums secured by this Indenture have been paid to the Persons entitled to
        such sums.

        Section 9.2. Conveyances Pursuant to Section 4.2 of Site Leases and
Subleases. Sales, grants of leases or easements and conveyances of portions of
the Tiverton and Rumford Sites, rights of way, easements or leasehold interest
made by the Facility Lessees in accordance with Section 4.2 of the Site Leases
and Subleases shall automatically, without further act of any Person, be
released from this Lease Indenture.

        Section 9.3. Appointment of the Indenture Trustee as Attorney; Further
Assurances. The Owner Lessor hereby constitutes the Indenture Trustee the true
and lawful attorney of the Owner Lessor irrevocably with full power as long as
the Lease Indenture is in effect (in the name of the Owner Lessor or otherwise)
to ask, require, demand, receive, compound and give acquittance for any and all
moneys and claims for moneys due and to become due under or arising out of the
Assigned Documents (except to the extent that such moneys and claims constitute
Excepted Payments), to endorse any checks or other instruments or orders in
connection therewith, to make all such demands and to give all such notices as
are permitted by the terms of the Facility Lease to be made or given by the
Owner Lessor upon the occurrence and continuance of a Lease Event of Default, to
enforce compliance by the Facility Lessees with all terms and provisions of the
Facility Leases (except as otherwise provided in Sections 4.3 and 5.6 hereof),
and to file any claims or take any action or institute any proceedings which the
Indenture Trustee may request in the premises.

        Section 9.4. Indenture for Benefit of Certain Persons Only. Nothing in
this Indenture, whether express or implied, shall be construed to give to any
Person other than the parties hereto, the Owner Participant, the Facility
Lessees (with respect to Sections 4.12 and 8.1 hereof) and the Noteholders (and
any successor or assign of any thereof) any legal or equitable right, remedy or
claim under or in respect of this Indenture, and this Indenture shall be for the
sole and exclusive benefit of the parties hereto, the Owner Participant, the
Facility Lessees (as provided in Sections 4.12 and 8.1 hereof) and the
Noteholders.

        Section 9.5. Notices; Furnishing Documents, etc. 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) and (b)

                                       49
<PAGE>   55

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 the Owner Lessor:

               PMCC Calpine New England Investment LLC
               c/o Phillip Morris Capital Corporation
               225 High Ridge, Suite 300
               Stamford, Connecticut  06905
               Telephone No.:  (914) 335-8170
               Facsimile No.:  (914) 335-8287
               Attention: Vice President-Leasing

        with a copy to:

               Philip Morris Capital Corporation
               225 High Ridge Road, Suite 300
               Stamford, Connecticut 06905
               Telephone No.: (914) 335-8347
               Facsimile No.: (914) 335-8256
               Attention: General Counsel

        with a copy to the Owner Participant:

               PMCC Calpine NEIM LCC
               c/o Phillip Morris Capital Corporation
               225 High Ridge, Suite 300
               Stamford, Connecticut  06905
               Telephone No.:  (914) 335-8170
               Facsimile No.:  (914) 335-8287
               Attention: Vice-President Leasing

        with a copy to:

               Philip Morris Capital Corporation
               225 High Ridge Road, Suite 300
               Stamford, Connecticut 06905
               Telephone No.: (914) 335-8347
               Facsimile No.: (914) 335-8256
               Attention: General Counsel

                                       50
<PAGE>   56

        If to the Indenture Trustee:

               State Street Bank and Trust Company of Connecticut, National
               Association
               633 West 5th Street, 12th Floor
               Los Angeles, California  90071
               Telephone No.:  (860) 244-1822
               Facsimile No.:  (860) 244-1889

        If to the Facility Lessees:

        If to the Tiverton Lessee:

               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 the Rumford Lessee:

               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

                                       51
<PAGE>   57

        If to the Pass Through Trustee:

               State Street Bank and Trust Company of Connecticut,
               National Association
               633 West 5th Street, 12th Floor
               Los Angeles, California  90071
               Telephone No.:  (860) 244-1822
               Facsimile No.:  (860) 244-1889

        Section 9.6. Severability. Any provision of this Indenture which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating or rendering unenforceable 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 9.7. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Indenture is executed and delivered
by, not individually or personally but solely as trustee of the Owner Lessor
under the LLC Agreement, General Foods Credit Corporation ("GFCC"), not
individually or personally but solely as the managing member of PMCC Calpine
NEIM LLC, the Owner Participant and the sole managing member of the Owner
Lessor, in the exercise of the powers and authority conferred and vested in it
pursuant thereto, (b) each of the representations, undertakings and agreements
herein made on the part of the Owner Lessor is made and intended not as personal
representations, undertakings and agreements by GFCC, but is made and intended
for the purpose for binding only the Owner Lessor, (c) nothing herein contained
shall be construed as creating any liability on GFCC, individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
or by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall GFCC, be personally liable for the payment of any
indebtedness or expenses of the Owner Lessor or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Owner Lessor under this Indenture.

        Section 9.8. Written Changes Only. Subject to Sections 8.1 and 8.2
hereof, no term or provision of this Indenture or any Note may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the parties hereto; and any waiver of the terms hereof or of any Note
shall be effective only in the specific instance and for the specific purpose
given.

        Section 9.9. Counterparts. This Indenture may be executed in separate
counterparts, each of which, when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.

        Section 9.10. Successors and Permitted Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and permitted assigns and
each Noteholder. Any request, notice, direction, consent, waiver or other
instrument or action by any Noteholder shall bind the successor and assigns
thereof.

                                       52
<PAGE>   58

        Section 9.11. Headings and Table of Contents. The headings of the
sections of this Indenture 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.

        Section 9.12. Governing Law. This Indenture and the Notes 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, other than
New York General Obligation Law Section 5-1401), except to the extent the laws
of the State of Rhode Island and the State of Maine are mandatorily applicable
under the laws of the State of Rhode Island and the State of Maine.

        Section 9.13. Reorganization Proceedings with Respect to the Lessor
Estate. If (a) the Lessor Estate becomes a debtor subject to the reorganization
provisions of Title 11 of the United States Code, or any successor provisions,
(b) pursuant to such reorganization provisions the Owner Participant is required
by reason of the Owner Participant's being held to have recourse liability that
it would not otherwise have had under Section 2.5 hereof 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 Notes and (c) any Noteholder or
the Indenture Trustee actually receives any Excess Amount (as hereinafter
defined) which reflects any payment by the Owner Participant on account of
clause (b) above, then such Noteholder or the Indenture Trustee, as the case may
be, shall promptly refund such Excess Amount, without interest, to the Owner
Participant after receipt by such Noteholder or the Indenture Trustee, as the
case may be, of a written request for such refund by the Owner Participant
(which request shall specify the amount of such Excess Amount and shall set
forth in detail the calculation thereof). For purposes of this Section 9.13,
"Excess Amount" means the amount by which such payment exceeds the amount which
would have been received by such holder and the Indenture Trustee in respect of
such principal or interest if the Owner Participant had not become subject to
the recourse liability referred to in clause (b) above. Nothing contained in
this Section 9.13 shall prevent the Indenture Trustee or any Noteholder from
enforcing any personal recourse obligations (and retaining the proceeds thereof)
of the Owner Participant under the Participation Agreement.

        The Noteholders and the Indenture Trustee agree that should the Lessor
Estate become a debtor subject to the reorganization provisions of the
Bankruptcy Code, they shall upon the request of the Owner Participant, and
provided that the making of the election hereinafter referred to is permitted to
be made by them under Applicable Law and will not have any adverse impact on any
Noteholder, the Indenture Trustee or the Indenture Estate other than as
contemplated by the preceding paragraph, make the election referred to in
Section 1111(b)(1)(A)(i) of Title 11 of the Bankruptcy Code or any successor
provision if, in the absence of such election, the Noteholders would have
recourse against the Owner Participant for the payment of the indebtedness
represented by the Notes in circumstance in which such Noteholders would not
have recourse under this Indenture if the Lessor Estate had not become a debtor
under the Bankruptcy Code.

        Section 9.14. Withholding Taxes: Information Reporting. The Indenture
Trustee shall exclude and withhold from each distribution of principal,
Make-Whole Amount, if any, and interest and other amounts due hereunder or under
the Lessor Notes and all withholding taxes applicable thereto as required by
law. The Indenture Trustee agrees (i) to act as such

                                       53
<PAGE>   59

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 Lessor Notes, to withhold such amounts and timely pay
the same to the appropriate authority in the name of and on behalf of the
Noteholders and to pay to the Noteholders from amounts received by Paying Agent
pursuant hereto such additional amounts so that the net amount actually received
by the Noteholders, after reduction for such withheld amounts, shall be equal to
the full amount of principal, Make-Whole Amount, interest and other amounts
otherwise due and payable hereunder; provided, however, that, notwithstanding
the foregoing, the Paying Agent shall be required to pay such additional amounts
only if and to the extent that (a) the Facility Lessee is required to indemnify
the Noteholders for such amounts under Section 9 of the Participation Agreement
and (b) the Facility Lessee has not paid such amounts within three (3) days
after notice of nonpayment, (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 Noteholder appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Noteholders may reasonably request from time to
time. The Indenture Trustee agrees to file any other information as it may be
required to file under United States law.

        Any Noteholder which is organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date such Noteholder becomes
a Holder, (a) so notify the Indenture Trustee, (b) (i) provide the Indenture
Trustee with Internal Revenue Service form Form W-8 BEN or W-8 ECI, as
appropriate, or (ii) notify the Indenture Trustee that it is not entitled to an
exemption from United States withholding tax or a reduction in the rate thereof
on payments of interest. Any such Noteholder agrees by its acceptance of a Note,
on an ongoing basis, to provide like certification for each taxable year and to
notify the Indenture Trustee should subsequent circumstances arise affecting the
information provided the Indenture Trustee in clauses (a) and (b) above. The
Indenture Trustee shall be fully protected in relying upon, and each Noteholder
by its acceptance of a Note hereunder agrees to indemnify and hold the Indenture
Trustee harmless against all claims or liability of any kind arising in
connection with or related to the Indenture Trustee's reliance upon any such
documents, forms or information provided by such Holder to the Indenture
Trustee. In addition, if the Indenture Trustee has not withheld taxes on any
payment made to any Noteholder, and the Indenture Trustee is subsequently
required to remit to any taxing authority any such amount not withheld, such
Noteholder shall return such amount to the Indenture Trustee upon written demand
by the Indenture Trustee, but only to the extent the Indenture Trustee is not
obligated to pay additional amounts with respect to such taxes pursuant to this
Section 9.14. The Indenture Trustee shall be liable only for direct (but not
consequential) damages to any Noteholder due to the Indenture Trustee's
violation of the Code and only to the extent such liability is caused by the
Indenture Trustee's violation of the Code and only to the extent such liability
is caused by the Indenture Trustee's failure to act in accordance with its
standard of care under this Lease Indenture.

        Section 9.15. Fixture Financing Statement. This Indenture also is
intended to serve as a fixture financing statement under the Rhode Island and
Maine Uniform Commercial Codes. In connection therewith, the following
information is provided:

        (a) Name and address of Debtor:

                                       54
<PAGE>   60

               PMCC Calpine New England Investment LLC
               c/o Phillip Morris Capital Corporation
               225 High Ridge, Suite 300
               Stamford, Connecticut  06905
               Telephone No.:  (914) 335-8170
               Facsimile No.:  (914) 335-8287
               Attention: Vice President-Leasing
               Tax ID Number of Debtor:  ____________

        with a copy to:

               Philip Morris Capital Corporation
               225 High Ridge Road, Suite 300
               Stamford, Connecticut 06905
               Telephone No.: (914) 335-8347
               Facsimile No.: (914) 335-8256
               Attention: General Counsel

        (b) Name and Address of Secured Party (from which information concerning
the security interest may be obtained):

               State Street Bank and Trust Company of Connecticut, National
               Association, as Indenture Trustee
               633 West 5th Street, 12th Floor
               Los Angeles, California  90071
               Telephone No.:  (860) 244-1822
               Facsimile No.:  (860) 244-1889

        (c) The personal property covered by the security interest granted
hereunder includes goods which are or are to become fixtures upon the real
property described in Exhibits A-1 and A-2 hereto.

        (d) Recording: This Indenture is to be recorded in the real estate
records of the Town of Tiverton, Rhode Island and West Oxford County, Maine.

        (e) Type of Filing: This is a fixture filing under Section
30-9-401(1)(c) and R.I. Gen. Laws Section 6A-9-401(1)(b) and 6A-9-402(6).

                  (Remainder of Page Intentionally Left Blank)

                                       55
<PAGE>   61

        IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed on the day and year first above written.

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

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

                                    PMCC CALPINE NEW ENGLAND INVESTMENT LLC, as
                                    Owner Lessor

                                    By: PMCC Calpine NEIM LLC, its managing
                                        member

                                    By: General Foods Credit Corporation, its
                                        managing member

                                    By: /s/ ANIL BHATIA
                                       -----------------------------------------
                                       Name:
                                       Title:

<PAGE>   62

STATE OF NEW YORK     )
                      )      SS.:
COUNTY OF NEW YORK    )

        The foregoing instrument was acknowledged before me this 19th day of
December 2000, by Anil Bhatia, Authorized Signator of General Foods Credit
Corporation, Managing Member of PMCC Calpine NEIM LLC, Managing Member of PMCC
Calpine New England Investment LLC, and acknowledged the foregoing investment to
be his/her free act and deed in said capacity and the free act and deed of said
PMCC Calpine New England Investment LLC.

                                            /s/ ANN K. MALLARI
                                            ------------------------------------
                                            Notary Public
My Commission Expires

Ann K. Mallari
Notary Public, State of New York
No. 4936031
Qualified in New York County
Commission Expires July 5, 2002
--------------------------------

STATE OF NEW YORK     )
                      )      SS.:
COUNTY OF NEW YORK    )

        The foregoing instrument was acknowledged before me this 19th day of
December 2000, by Mark Henson, Assistant Vice President of State Street Bank and
Trust Company of Connecticut, National Association, a United States banking
corporation, to be the free act and deed on behalf of the corporation.

                                            /s/ ANN K. MALLARI
                                            ------------------------------------
                                            Notary Public
My Commission Expires

Ann K. Mallari
Notary Public, State of New York
No. 4936031
Qualified in New York County
Commission Expires July 5, 2002
----------------------------------

<PAGE>   63

                                   APPENDIX A

                                   DEFINITIONS

<PAGE>   64

                                                                     EXHIBIT A-1
                                                                              TO
                                                                 LEASE INDENTURE

                          DESCRIPTION OF TIVERTON SITE

                                       A-2
<PAGE>   65

                                                                     EXHIBIT A-2
                                                                              TO
                                                                 LEASE INDENTURE

                           DESCRIPTION OF RUMFORD SITE

                                       A-2
<PAGE>   66

                                                                     EXHIBIT B-1
                                                                              TO
                                                                 LEASE INDENTURE

                          FORM OF TIVERTON LESSOR NOTE

                     PMCC CALPINE NEW ENGLAND INVESTMENT LLC
                  NONRECOURSE PROMISSORY NOTE (TIVERTON) DUE IN
                      A SERIES OF INSTALLMENTS OF PRINCIPAL
                             WITH FINAL PAYMENT DATE
                                OF JULY 15, 2018

                   THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
               SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED,
                SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT

                                                  Issued at:  New York, New York

                                                  Issue Date:  December 19, 2000

$190,000,000

        PMCC CALPINE NEW ENGLAND INVESTMENT LLC, a Delaware limited liability
company (herein called the "Owner Lessor", which term includes any successor
person under the Collateral Trust Indenture hereinafter referred to), hereby
promises to pay to State Street Bank and Trust Company of Connecticut, National
Association, in its capacity as pass through trustee of the Tiverton and Rumford
2000 Pass Through Trust, (the "Pass Through Trustee")or its registered assigns,
the principal sum of $190,000,000, which is due and payable in a series of
installments of principal with a final payment date of July 15, 2018, as
provided below, together with interest at the rate of 9.00% per annum on the
principal remaining unpaid from time to time from and including the Issue Date
until paid in full. Interest on the outstanding principal amount under this Note
shall be due and payable in arrears semiannually at the rate specified above,
commencing on July 15, 2001, and on each July 15th and January 15th thereafter
until the principal of this Note is paid in full or made available for payment.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.

        The principal of this Note shall be due and payable in installments on
each of the dates set forth on Schedules 1 hereto. The installment of principal
payable on any such date shall be in an aggregate amount equal to the product of
the Principal Portion set forth on Schedule 1 multiplied by the percentage set
forth on Schedule 1 under the column headed "Principal Amount Payable" for such
date unless the Principal Portion has been prepaid; provided, that the final
installment of principal shall be equal to the then unpaid principal balance of
this Note.

<PAGE>   67

        Capitalized terms used in this Note that are not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture of Trust,
Mortgage and Security Agreement dated as of December 19, 2000 (the "Collateral
Trust Indenture"), between the Owner Lessor and State Street Bank and Trust
Company of Connecticut, National Association, as trustee (the "Indenture
Trustee").

        Interest (computed on the basis of a 360-day year of twelve 30-day
months) on any overdue principal and premium, if any, and (to the extent
permitted by Applicable Law) any overdue interest shall be paid, on demand, from
the due date thereof at the Overdue Rate for the period during which any such
principal, premium or interest shall be overdue.

        In the event any date on which a payment is due under this Note is not a
Business Day, then payment thereof shall be made on the next succeeding Business
Day with the same force and effect as if made on the date on which such payment
was due.

        Except as otherwise specifically provided in the Collateral Trust
Indenture and in the Participation Agreement, all payments of principal,
premium, if any, and interest on this Note, and all payments of any other
amounts due hereunder or under the Collateral Trust Indenture shall be made only
from the Indenture Estate, and the Indenture Trustee shall have no obligation
for the payment thereof except to the extent that the Indenture Trustee shall
have sufficient income or proceeds from the Indenture Estate to make such
payments in accordance with the terms of Section 3 of the Collateral Trust
Indenture. The holder hereof, by its acceptance of this Note, agrees that it
will look solely to the income and proceeds from the Indenture Estate to the
extent available for distribution to the holder hereof, as herein provided, and
that, none of the Owner Participant, the Owner Lessor or the Indenture Trustee
is or shall be personally liable to the holder hereof for any amounts payable
under this Note or under the Collateral Trust Indenture, or, except as expressly
provided in the Collateral Trust Indenture or, in the case of the Owner
Participant and the Owner Lessor, the Participation Agreement for any
performance to be rendered under the Collateral Trust Indenture or any Assigned
Document or for any liability under the Collateral Trust Indenture or any
Assigned Document.

        The principal of and premium, if any, and interest on this Note shall be
paid by the Indenture Trustee, without any presentment or surrender of this
Note, except that, in the case of the final payment in respect of this Note,
this Note shall be surrendered to the Indenture Trustee, by mailing a check for
the amount then due and payable, in New York Clearing House funds, to the
Noteholder, at the last address of the Noteholder appearing on the Note
Register, or by whichever of the following methods specified by notice from the
Noteholder to the Indenture Trustee: (a) by crediting the amount to be
distributed to the Noteholder to an account maintained by the Noteholder with
the Indenture Trustee, (b) by making such payment to the Noteholder in
immediately available funds at the Indenture Trustee Office, or (c) by
transferring such amount in immediately available funds for the account of the
Noteholder to the banking institution having bank wire transfer facilities as
shall be specified by the Noteholder, such transfer to be subject to telephonic
confirmation of payment. All payments due with respect to this Note shall be
made (i) as soon as practicable prior to the close of business on the date the
amounts to be

<PAGE>   68

distributed by the Indenture Trustee are actually received by the Indenture
Trustee if such amounts are received by 12:00 noon, New York City time, on a
Business Day or (ii) on the next succeeding Business Day if received after such
time or if received on any day other than a Business Day. Prior to due
presentment for registration of transfer of this Note, the Owner Lessor and the
Indenture Trustee may deem and treat the Person in whose name this Note is
registered on the Note Register as the absolute owner and holder of this Note
for the purpose of receiving payment of all amounts payable with respect to this
Note and for all other purposes, and neither the Owner Lessor nor the Indenture
Trustee shall be affected by any notice to the contrary. All payments made on
this Note in accordance with the provisions of this paragraph shall be valid and
effective to satisfy and discharge the liability on this Note to the extent of
the sums so paid and neither the Indenture Trustee nor the Owner Lessor shall
have any liability in respect of such payment.

        The holder hereof, by its acceptance of this Note, agrees that each
payment received by it hereunder shall be applied in the manner set forth in
Section 2.7 of the Collateral Trust Indenture, which provides that each payment
on the Note shall be applied as follows: first, to the payment of accrued
interest (including interest on overdue principal and, to the extent permitted
by Applicable Law, overdue interest) on this Note to the date of such payment;
second, to the payment of the principal amount of, and premium, if any, on this
Note then due (including any overdue installments of principal) thereunder; and
third, to the extent permitted by Section 2.10 of the Collateral Trust
Indenture, the balance, if any, remaining thereafter, to the payment of the
principal amount of, and premium, if any, on this Note.

        This Note is the Note referred to in the Collateral Trust Indenture as
the "Lessor Note". The Collateral Trust Indenture permits the issuance of
additional notes ("Additional Lessor Notes"), as provided in Section 2.12 of the
Collateral Trust Indenture, and the several Notes may be for varying principal
amounts and may have different maturity dates, interest rates, redemption
provisions and other terms. The properties of the Owner Lessor included in the
Indenture Estate are pledged or mortgaged to the Indenture Trustee to the extent
provided in the Collateral Trust Indenture as security for the payment of the
principal of and premium, if any, and interest on this Note and all other Notes
issued and outstanding from time to time under the Collateral Trust Indenture.

        Reference is hereby made to the Collateral Trust Indenture for a
statement of the rights of the holder of, and the nature and extent of the
security for, this Note and of the rights of, and the nature and extent of the
security for, the holders of the other Notes and of certain rights of the Owner
Lessor and the Owner Participant, as well as for a statement of the terms and
conditions of the trust created by the Collateral Trust Indenture, to all of
which terms and conditions the holder hereof agrees by its acceptance of this
Note.

        This Note is subject to redemption, in whole or in part as provided in
the Collateral Trust Indenture, as follows: (x) in the case of redemptions under
the circumstances set forth in Section 2.10(a) of the Collateral Trust
Indenture, at a price

<PAGE>   69

equal to the principal amount of this Note being redeemed together with accrued
interest on such principal amount to the Redemption Date, and (y) in the case of
redemptions under the circumstances set forth in Sections 2.10(d) of the
Collateral Trust Indenture, at a price equal to the principal amount of this
Note then outstanding together with accrued interest on such principal amount to
the Redemption Date, plus the Make-Whole Premium, if any; provided, however,
that no such redemption shall be made until notice thereof is given by the
Indenture Trustee to the holder hereof as provided in the Collateral Trust
Indenture.

        In case either (i) a Regulatory Event of Loss under the Facility Lease
shall occur or (ii) the Facility Lease shall have been terminated pursuant to
Section 13.1 thereof where the Facility Lessee purchases the Undivided Interest
from the Owner Lessor, the obligations of the Owner Lessor under this Note may,
subject to the conditions set forth in Section 2.10(b) of the Collateral Trust
Indenture, be assumed in whole by the Facility Lessee in which case the Owner
Lessor shall be released and discharged from all such obligations. In connection
with such an assumption, the holder of this Note may be required to exchange
this Note for a new Note evidencing such assumption.

        In case a Collateral Trust Indenture Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Note together with all
accrued but unpaid interest thereon may, subject to certain rights of the Owner
Lessor and the Owner Participant contained or referred to in the Collateral
Trust Indenture, be declared or may become due and payable in the manner and
with the effect provided in the Collateral Trust Indenture.

        There shall be maintained at the Indenture Trustee Office a register for
the purpose of registering transfers and exchanges of Notes in the manner
provided in the Collateral Trust Indenture. The transfer of this Note is
registrable, as provided in the Collateral Trust Indenture, upon surrender of
this Note for registration of transfer duly accompanied by a written instrument
of transfer duly executed by or on behalf of the registered holder hereof,
together with the amount of any applicable transfer taxes.

        It is expressly understood and agreed by the holder of this Note that
(a) this Note is executed and delivered by General Foods Credit Corporation, not
individually or personally but solely as the managing member (the "Managing
Member"), of PMCC Calpine NEIM LLC, the Owner Participant and the sole managing
member of the Owner Lessor, in the exercise of the powers and authority
conferred and vested in it pursuant thereto, (b) each of the undertakings and
agreements in this Note made on the part of the Owner Lessor is made and
intended not as personal undertakings and agreements by the Managing Member but
is made and intended for the purpose for binding only the Owner Lessor, (c)
nothing contained in this Note shall be construed as creating any liability on
the Managing Member individually or personally, to perform any covenant either
expressed or implied contained in this Note, all such liability, if any, being
expressly waived by the holder of this Note or by any Person claiming by,
through or under such holder, and (d) under no circumstances shall the Managing
Member, be personally liable for the payment of any indebtedness or expenses of
the Owner Lessor or be liable for the

<PAGE>   70

breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Owner Lessor under this Note.

        This Note shall be governed by the laws of the State of New York.

<PAGE>   71

        IN WITNESS WHEREOF, the Owner Lessor has caused this Note to be duly
executed as of the date hereof.

                                    PMCC CALPINE NEW ENGLAND
                                    INVESTMENT LLC
                                    a Delaware limited liability company,

                                      By:  PMCC Calpine NEIM LLC,
                                           a Delaware limited liability company,
                                           Managing Member

                                      By:  General Foods Credit Corporation,
                                           a Delaware corporation,
                                           Managing Member

                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:

<PAGE>   72

        This is the Lessor Note referred to in the within-mentioned Collateral
Trust Indenture duly executed as of the date hereof.

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

                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:

<PAGE>   73

                             FORM OF TRANSFER NOTICE

        FOR VALUE RECEIVED the undersigned registered holder hereby sell(s)
assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

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

-----------------------------------
(Please print or typewrite name and address including zip code of assignee)

-----------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing

-----------------------------------
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.

Date:
      ---------------------------   ------------------------------------
                                    (Signature of Transferor)

                                    NOTE: The signature to this assignment must
                                    correspond with the name as written upon the
                                    face of the within-mentioned instrument in
                                    every particular, without alteration or any
                                    change whatsoever.

<PAGE>   74

                                   SCHEDULE 1
                                     TO NOTE

                       Schedule Of Principal Amortization

                         Principal Portion: $190,000,000

<TABLE>
<CAPTION>
                                            Principal Amount Payable
    Payment Date                            (% of Principal Portion)
-----------------------------       --------------------------------------
<S>                                 <C>
Dec 19 2000                                                     0.00000000
Jul 15 2001                                                     0.00000000
Jan 15 2002                                                     0.00000000
Jul 15 2002                                                     0.00000000
Jan 15 2003                                                     0.00000000
Jul 15 2003                                                     0.00000000
Jan 15 2004                                                     0.00000000
Jul 15 2004                                                     0.66256831
Jan 15 2005                                                     0.00000000
Jul 15 2005                                                     0.00000000
Jan 15 2006                                                     0.00000000
Jul 15 2006                                                     2.96557377
Jan 15 2007                                                     0.00000000
Jul 15 2007                                                     2.48633880
Jan 15 2008                                                     1.95765027
Jul 15 2008                                                     0.00000000
Jan 15 2009                                                     2.54617486
Jul 15 2009                                                     0.00000000
Jan 15 2010                                                    49.18032787
Jul 15 2010                                                     0.00000000
Jan 15 2011                                                    13.74617486
Jul 15 2011                                                     0.00000000
Jan 15 2012                                                     7.85655738
Jul 15 2012                                                     0.00000000
Jan 15 2013                                                     3.75792350
Jul 15 2013                                                     0.00000000
Jan 15 2014                                                     4.21038251
Jul 15 2014                                                     0.00000000
Jan 15 2015                                                     4.10983607
Jul 15 2015                                                     0.00000000
Jan 15 2016                                                     5.10737705
Jul 15 2016                                                     0.00000000
Jan 15 2017                                                     0.86639344
Jul 15 2017                                                     0.00000000
Jan 15 2018                                                     0.00000000
Jul 15 2018                                                     0.54672131
</TABLE>

<PAGE>   75

                                                                     EXHIBIT B-2
                                                                              TO
                                                                 LEASE INDENTURE

                           FORM OF RUMFORD LESSOR NOTE

                     PMCC CALPINE NEW ENGLAND INVESTMENT LLC
                  NONRECOURSE PROMISSORY NOTE (RUMFORD) DUE IN
                      A SERIES OF INSTALLMENTS OF PRINCIPAL
                             WITH FINAL PAYMENT DATE
                                OF JULY 15, 2018

                   THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
               SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED,
                SOLD OR OFFERED FOR SALE IN VIOLATION OF SUCH ACT

                                                  Issued at:  New York, New York

                                                  Issue Date:  December 19, 2000

$176,000,000

        PMCC CALPINE NEW ENGLAND INVESTMENT LLC, a Delaware limited liability
company (herein called the "Owner Lessor", which term includes any successor
person under the Collateral Trust Indenture hereinafter referred to), hereby
promises to pay to State Street Bank and Trust Company of Connecticut, National
Association, in its capacity as pass through trustee of the Tiverton and Rumford
2000 Pass Through Trust (the "Pass Through Trustee"), or its registered assigns,
the principal sum of $176,000,000, which is due and payable in a series of
installments of principal with a final payment date of July 15, 2018, as
provided below, together with interest at the rate of 9.00% per annum on the
principal remaining unpaid from time to time from and including the Issue Date
until paid in full. Interest on the outstanding principal amount under this Note
shall be due and payable in arrears semiannually at the rate specified above,
commencing on July 15, 2001, and on each July 15th and January 15th thereafter
until the principal of this Note is paid in full or made available for payment.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.

        The principal of this Note shall be due and payable in installments on
each of the dates set forth on Schedules 1 hereto. The installment of principal
payable on any such date shall be in an aggregate amount equal to the product of
the Principal Portion set forth on Schedule 1 multiplied by the percentage set
forth on Schedule 1 under the column headed "Principal Amount Payable" for such
date unless the Principal Portion has been prepaid; provided, that the final
installment of principal shall be equal to the then unpaid principal balance of
this Note.

                                        4
<PAGE>   76

        Capitalized terms used in this Note that are not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture of Trust,
Mortgage and Security Agreement dated as of December 19, 2000 (the "Collateral
Trust Indenture"), between the Owner Lessor and State Street Bank and Trust
Company of Connecticut, National Association, as trustee (the "Indenture
Trustee").

        Interest (computed on the basis of a 360-day year of twelve 30-day
months) on any overdue principal and premium, if any, and (to the extent
permitted by Applicable Law) any overdue interest shall be paid, on demand, from
the due date thereof at the Overdue Rate for the period during which any such
principal, premium or interest shall be overdue.

        In the event any date on which a payment is due under this Note is not a
Business Day, then payment thereof shall be made on the next succeeding Business
Day with the same force and effect as if made on the date on which such payment
was due.

        Except as otherwise specifically provided in the Collateral Trust
Indenture and in the Participation Agreement, all payments of principal,
premium, if any, and interest on this Note, and all payments of any other
amounts due hereunder or under the Collateral Trust Indenture shall be made only
from the Indenture Estate, and the Indenture Trustee shall have no obligation
for the payment thereof except to the extent that the Indenture Trustee shall
have sufficient income or proceeds from the Indenture Estate to make such
payments in accordance with the terms of Section 3 of the Collateral Trust
Indenture. The holder hereof, by its acceptance of this Note, agrees that it
will look solely to the income and proceeds from the Indenture Estate to the
extent available for distribution to the holder hereof, as herein provided, and
that, none of the Owner Participant, the Owner Lessor or the Indenture Trustee
is or shall be personally liable to the holder hereof for any amounts payable
under this Note or under the Collateral Trust Indenture, or, except as expressly
provided in the Collateral Trust Indenture or, in the case of the Owner
Participant and the Owner Lessor, the Participation Agreement for any
performance to be rendered under the Collateral Trust Indenture or any Assigned
Document or for any liability under the Collateral Trust Indenture or any
Assigned Document.

        The principal of and premium, if any, and interest on this Note shall be
paid by the Indenture Trustee, without any presentment or surrender of this
Note, except that, in the case of the final payment in respect of this Note,
this Note shall be surrendered to the Indenture Trustee, by mailing a check for
the amount then due and payable, in New York Clearing House funds, to the
Noteholder, at the last address of the Noteholder appearing on the Note
Register, or by whichever of the following methods specified by notice from the
Noteholder to the Indenture Trustee: (a) by crediting the amount to be
distributed to the Noteholder to an account maintained by the Noteholder with
the Indenture Trustee, (b) by making such payment to the Noteholder in
immediately available funds at the Indenture Trustee Office, or (c) by
transferring such amount in immediately available funds for the account of the
Noteholder to the banking institution having bank wire transfer facilities as
shall be specified by the Noteholder, such transfer to be subject to telephonic
confirmation of payment. All payments due with respect to this Note shall be
made (i) as soon as practicable prior to the close of business on the date the
amounts to be

                                        5
<PAGE>   77

distributed by the Indenture Trustee are actually received by the Indenture
Trustee if such amounts are received by 12:00 noon, New York City time, on a
Business Day or (ii) on the next succeeding Business Day if received after such
time or if received on any day other than a Business Day. Prior to due
presentment for registration of transfer of this Note, the Owner Lessor and the
Indenture Trustee may deem and treat the Person in whose name this Note is
registered on the Note Register as the absolute owner and holder of this Note
for the purpose of receiving payment of all amounts payable with respect to this
Note and for all other purposes, and neither the Owner Lessor nor the Indenture
Trustee shall be affected by any notice to the contrary. All payments made on
this Note in accordance with the provisions of this paragraph shall be valid and
effective to satisfy and discharge the liability on this Note to the extent of
the sums so paid and neither the Indenture Trustee nor the Owner Lessor shall
have any liability in respect of such payment.

        The holder hereof, by its acceptance of this Note, agrees that each
payment received by it hereunder shall be applied in the manner set forth in
Section 2.7 of the Collateral Trust Indenture, which provides that each payment
on the Note shall be applied as follows: first, to the payment of accrued
interest (including interest on overdue principal and, to the extent permitted
by Applicable Law, overdue interest) on this Note to the date of such payment;
second, to the payment of the principal amount of, and premium, if any, on this
Note then due (including any overdue installments of principal) thereunder; and
third, to the extent permitted by Section 2.10 of the Collateral Trust
Indenture, the balance, if any, remaining thereafter, to the payment of the
principal amount of, and premium, if any, on this Note.

        This Note is the Note referred to in the Collateral Trust Indenture as
the "Lessor Note". The Collateral Trust Indenture permits the issuance of
additional notes ("Additional Lessor Notes"), as provided in Section 2.12 of the
Collateral Trust Indenture, and the several Notes may be for varying principal
amounts and may have different maturity dates, interest rates, redemption
provisions and other terms. The properties of the Owner Lessor included in the
Indenture Estate are pledged or mortgaged to the Indenture Trustee to the extent
provided in the Collateral Trust Indenture as security for the payment of the
principal of and premium, if any, and interest on this Note and all other Notes
issued and outstanding from time to time under the Collateral Trust Indenture.

        Reference is hereby made to the Collateral Trust Indenture for a
statement of the rights of the holder of, and the nature and extent of the
security for, this Note and of the rights of, and the nature and extent of the
security for, the holders of the other Notes and of certain rights of the Owner
Lessor and the Owner Participant, as well as for a statement of the terms and
conditions of the trust created by the Collateral Trust Indenture, to all of
which terms and conditions the holder hereof agrees by its acceptance of this
Note.

        This Note is subject to redemption, in whole or in part as provided in
the Collateral Trust Indenture, as follows: (x) in the case of redemptions under
the circumstances set forth in Section 2.10(a) of the Collateral Trust
Indenture, at a price

                                        6
<PAGE>   78

equal to the principal amount of this Note being redeemed together with accrued
interest on such principal amount to the Redemption Date, and (y) in the case of
redemptions under the circumstances set forth in Sections 2.10(d) of the
Collateral Trust Indenture, at a price equal to the principal amount of this
Note then outstanding together with accrued interest on such principal amount to
the Redemption Date, plus the Make-Whole Premium, if any; provided, however,
that no such redemption shall be made until notice thereof is given by the
Indenture Trustee to the holder hereof as provided in the Collateral Trust
Indenture.

        In case either (i) a Regulatory Event of Loss under the Facility Lease
shall occur or (ii) the Facility Lease shall have been terminated pursuant to
Section 13.1 thereof where the Facility Lessee purchases the Undivided Interest
from the Owner Lessor, the obligations of the Owner Lessor under this Note may,
subject to the conditions set forth in Section 2.10(b) of the Collateral Trust
Indenture, be assumed in whole by the Facility Lessee in which case the Owner
Lessor shall be released and discharged from all such obligations. In connection
with such an assumption, the holder of this Note may be required to exchange
this Note for a new Note evidencing such assumption.

        In case a Collateral Trust Indenture Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Note together with all
accrued but unpaid interest thereon may, subject to certain rights of the Owner
Lessor and the Owner Participant contained or referred to in the Collateral
Trust Indenture, be declared or may become due and payable in the manner and
with the effect provided in the Collateral Trust Indenture.

        There shall be maintained at the Indenture Trustee Office a register for
the purpose of registering transfers and exchanges of Notes in the manner
provided in the Collateral Trust Indenture. The transfer of this Note is
registrable, as provided in the Collateral Trust Indenture, upon surrender of
this Note for registration of transfer duly accompanied by a written instrument
of transfer duly executed by or on behalf of the registered holder hereof,
together with the amount of any applicable transfer taxes.

        It is expressly understood and agreed by the holder of this Note that
(a) this Note is executed and delivered by General Foods Credit Corporation, not
individually or personally but solely as the managing member ("Managing
Member"), of PMCC Calpine NEIM LLC, the Owner Participant and the sole managing
member of the Owner Lessor, in the exercise of the powers and authority
conferred and vested in it pursuant thereto, (b) each of the undertakings and
agreements in this Note made on the part of the Owner Lessor is made and
intended not as personal undertakings and agreements by the Managing Member but
is made and intended for the purpose for binding only the Owner Lessor, (c)
nothing contained in this Note shall be construed as creating any liability on
the Managing Member individually or personally, to perform any covenant either
expressed or implied contained in this Note, all such liability, if any, being
expressly waived by the holder of this Note or by any Person claiming by,
through or under such holder, and (d) under no circumstances shall the Managing
Member, be personally liable for the payment of any indebtedness or expenses of
the Owner Lessor or be liable for the

                                        7
<PAGE>   79

breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Owner Lessor under this Note.

        This Note shall be governed by the laws of the State of New York.

                                        8
<PAGE>   80

        IN WITNESS WHEREOF, the Owner Lessor has caused this Note to be duly
executed as of the date hereof.

                                    PMCC CALPINE NEW ENGLAND
                                    INVESTMENT LLC,
                                    a Delaware limited liability company,

                                      By:  PMCC Calpine NEIM LLC,
                                           a Delaware limited liability company,
                                                                 Managing Member

                                      By:  General Foods Credit Corporation,
                                           a Delaware corporation,
                                           Managing Member

                                      By:
                                         ---------------------------------------
                                      Name:
                                      Title:

<PAGE>   81

        This is the Lessor Note referred to in the within-mentioned Collateral
Trust Indenture duly executed as of the date hereof.

                                         STATESTREET BANK AND TRUST
                                             COMPANY OF CONNECTICUT,
                                             NATIONAL ASSOCIATION,
                                             not in its individual capacity, but
                                             solely as the Indenture Trustee

                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:

<PAGE>   82

                             FORM OF TRANSFER NOTICE

        FOR VALUE RECEIVED the undersigned registered holder hereby sell(s)
assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

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

----------------------------------
(Please print or typewrite name and address including zip code of assignee)

----------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing

----------------------------------
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.

Date:
      ----------------------       ---------------------------------------------
                                    (Signature of Transferor)

                                    NOTE: The signature to this assignment must
                                    correspond with the name as written upon the
                                    face of the within-mentioned instrument in
                                    every particular, without alteration or any
                                    change whatsoever.

<PAGE>   83

                                   SCHEDULE 1
                                     TO NOTE

                       Schedule Of Principal Amortization

                         Principal Portion: $176,000,000

<TABLE>
<CAPTION>
                                        Principal Amount Payable
     Payment Date                       (% of Principal Portion)
-----------------------------      ---------------------------------------
<S>                                <C>
Dec 19 2000                                                     0.00000000
Jul 15 2001                                                     0.00000000
Jan 15 2002                                                     0.00000000
Jul 15 2002                                                     0.00000000
Jan 15 2003                                                     0.00000000
Jul 15 2003                                                     0.00000000
Jan 15 2004                                                     0.00000000
Jul 15 2004                                                     0.66256831
Jan 15 2005                                                     0.00000000
Jul 15 2005                                                     0.00000000
Jan 15 2006                                                     0.00000000
Jul 15 2006                                                     2.96557377
Jan 15 2007                                                     0.00000000
Jul 15 2007                                                     2.48633880
Jan 15 2008                                                     1.95765027
Jul 15 2008                                                     0.00000000
Jan 15 2009                                                     2.54617486
Jul 15 2009                                                     0.00000000
Jan 15 2010                                                    49.18032787
Jul 15 2010                                                     0.00000000
Jan 15 2011                                                    13.74617486
Jul 15 2011                                                     0.00000000
Jan 15 2012                                                     7.85655738
Jul 15 2012                                                     0.00000000
Jan 15 2013                                                     3.75792350
Jul 15 2013                                                     0.00000000
Jan 15 2014                                                     4.21038251
Jul 15 2014                                                     0.00000000
Jan 15 2015                                                     4.10983607
Jul 15 2015                                                     0.00000000
Jan 15 2016                                                     5.10737705
Jul 15 2016                                                     0.00000000
Jan 15 2017                                                     0.86639344
Jul 15 2017                                                     0.00000000
Jan 15 2018                                                     0.00000000
Jul 15 2018                                                     0.54672131
</TABLE>

                                       B-1
<PAGE>   84

                                                                       EXHIBIT C
                                                                              TO
                                                                 LEASE INDENTURE

                      FORM OF CERTIFICATE OF AUTHENTICATION

                              Authentication Order

                                                               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.

                            [CONTINUED ON NEXT PAGE]

                                       C-1
<PAGE>   85

                                            Very truly yours,

                                            PMCC CALPINE NEW ENGLAND
                                            INVESTMENT LLC

                                            By  PMCC Calpine NEIM LLC,
                                                its Sole Member

                                                By:
                                                   -----------------------------
                                                   Name:
                                                   Title:

                                        2
<PAGE>   86

                                                                     EXHIBIT D-1
                                                                              TO
                                                                 LEASE INDENTURE

                        DESCRIPTION OF TIVERTON FACILITY
                                  ATTACHMENT 2

                            REAL PROPERTY DESCRIPTION

        The Transferred Property is composed of all of Seller's right, title and
interest in, to and under the following property (excluding, in any event, the
Excluded Property):

        That certain approximately 265-megawatt net nameplate capacity gas-fired
combined cycle electric generating facility (known also as the "Tiverton
Facility") together with all structures or improvements, all alterations thereto
or replacements thereof, and all other fixtures, attachments, appliances,
equipment, machinery and other articles (hereinafter collectively referred to as
the "Transferred Property"), in each case located on the land situated in
Tiverton, Rhode Island., as described more particularly in Exhibit A attached
hereto (the "Tiverton Facility Site").

        The Transferred Property shall include, but not be limited to, the
following principal components of the Tiverton Facility:

        1.  One Combustion Turbine -- General Electric Model PG7241 (Serial No.
            297273)

        2.  One Combustion Turbine Generator -- General Electric Model 7FH2
            (Serial No. 337X705)

        3.  One Steam Turbine -- General Electric Model A-10 (Serial No.
            270T429)

        4.  One Steam Turbine Generator -- General Electric 7A6 (Serial No.
            290T429)

        5.  One Air Cooled Condenser -- GEA Power Cooling Systems, Inc. (Serial
            No. 98-306)

        6.  One Heat Recovery Steam Generator -- Nooter-Eriksen three pressure
            level with reheater, contains a selective catalytic reduction for
            NOx reduction. Nooter-Erikson Job No. 988730

        The Transferred Property shall include such improvements located on the
easements appurtenant to the Tiverton Facility Site to the extent such property
is owned by Seller.

                                       D-1
<PAGE>   87

                                  ATTACHMENT 2

                                excluded property

The property described below constitutes "Excluded Property":

                                        2
<PAGE>   88

THE FOLLOWING EQUIPMENT LOCATED ON, AT OR NEAR THE TIVERTON FACILITY SITE:

        CTG TRANSFORMER - FERRANTI-PACKARD TYPE OA/FA/FA (17 kV:115kV RATING)
SERIAL NO. CL 19343-10102

        STG TRANSFORMER - FERRANTI-PACKARD TYPE OA/FA/FA (13.6kV:115kV RATING)
SERIAL NO. CL 19344-10101

        AUXILIARY TRANSFORMER - WAUKESHA ELECTRIC SYSTEM CLASS OA/FFA (18kV:4160
VOLT RATING) SERIAL NO. 0951014R1259

        ALTERNATE SOURCE TRANSFORMER - VIRGINIA TRANSFORMER - CLASS OA/OA/FFA
(12kV:480 VOLT RATING) SERIAL NO. 4411500A076-9465A

THE FOLLOWING BUILDINGS LOCATED ON THE TIVERTON FACILITY SITE:

        ADMINISTRATION AND OPERATIONS BUILDING

THE FOLLOWING TANGIBLE PROPERTY ASSOCIATED WITH THE TIVERTON FACILITY:

        ANY AND ALL BOOKS AND RECORDS

THE TANGIBLE EQUIPMENT ASSOCIATED WITH THE TIVERTON FACILITY WHICH IS ORDINARILY
AND CUSTOMARILY REPLACED DURING THE LIFE OF THE FACILITY INCLUDING, BUT NOT
LIMITED TO:

        INVENTORIES

        SPARE PARTS

        VEHICLES

        MAINTENANCE EQUIPMENT

        OFFICE EQUIPMENT AND SUPPLIES

        COMPUTER EQUIPMENT AND SOFTWARE

        LABORATORY EQUIPMENT

        SAFETY EQUIPMENT

THE FOLLOWING INTANGIBLE PROPERTY ASSOCIATED WITH THE TIVERTON FACILITY
INCLUDING, BUT NOT LIMITED TO:

        BANK ACCOUNTS

        ACCOUNTING INTANGIBLES

        INTELLECTUAL PROPERTY

                                        3
<PAGE>   89

        CONTRACTS

        GOVERNMENT PERMITS

                                        4
<PAGE>   90

                                                                     EXHIBIT D-2
                                                                              TO
                                                                 LEASE INDENTURE

                         DESCRIPTION OF RUMFORD FACILITY

        That certain approximately 265-megawatt net nameplate capacity gas-fired
combined cycle electric generating facility (known also as the "Rumford
Facility") located at the westerly end of Industrial Park Road, and commonly
known as Lots 7, 8 and appurtenant easements thereto as shown on the Plan of
Rumford Industrial Park, together with all structures or improvements, all
alterations thereto or replacements thereof, and all other fixtures,
attachments, appliances, equipment, machinery and other articles, in each case
located on the land, or on the easements appurtenant to the land, situated in
the Town of Rumford, County of Oxford, State of Maine.

                                        5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}]]