
<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;


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                (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



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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



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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



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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.



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                "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).



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                "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.



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                "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



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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.



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                "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.



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                "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.



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