Exhibit 10.1

TRANSITION PROPERTY SALE AGREEMENT

between

CENTERPOINT ENERGY TRANSITION BOND COMPANY IV, LLC

Issuer

and

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC

Seller

Dated as of January 19, 2012

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

     1   

Section 1.01         Definitions

     1   

Section 1.02         Other Definitional Provisions

     1   

ARTICLE II CONVEYANCE OF THE TRANSITION PROPERTY

     2   

Section 2.01         Conveyance of the Transition Property

     2   

Section 2.02         Conditions to Conveyance of the Transition Property

     3   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

     4   

Section 3.01         Organization and Good Standing

     4   

Section 3.02         Due Qualification

     4   

Section 3.03         Power and Authority

     4   

Section 3.04         Binding Obligation

     4   

Section 3.05         No Violation

     5   

Section 3.06         No Proceedings

     5   

Section 3.07         Approvals

     5   

Section 3.08         The Transition Property

     6   

Section 3.09         Solvency

     7   

Section 3.10         The Financing Order

     7   

Section 3.11         State Action

     7   

Section 3.12         No Court Order

     8   

Section 3.13         Approvals Concerning the Transition Property

     8   

Section 3.14         Assumptions

     8   

Section 3.15         Creation of the Transition Property

     9   

Section 3.16         Prospectus

     9   

Section 3.17         Nature of Representations and Warranties

     9   

ARTICLE IV COVENANTS OF THE SELLER

     10   

Section 4.01         Seller’s Existence

     10   

Section 4.02         No Liens or Conveyances

     10   

Section 4.03         Delivery of Collections

     10   

Section 4.04         Notice of Liens

     10   

Section 4.05         Compliance With Law

     11   

Section 4.06         Covenants Related to the Transition Property

     11   

Section 4.07         Protection of Title

     12   

Section 4.08         Taxes

     12   

Section 4.09         Filings Pursuant to Financing Order

     13   

ARTICLE V ADDITIONAL UNDERTAKINGS OF SELLER

     13   

SECTION 5.01     LIABILITY OF THE SELLER; INDEMNITIES

     13   

Section 5.02         Merger or Consolidation of, or Assumption of the
Obligations of, the Seller

     16   

Section 5.03         Limitation on Liability of the Seller and Others

     17   

ARTICLE VI MISCELLANEOUS PROVISIONS

     18   

Section 6.01         Amendment

     18   

 

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Section 6.02         Notices

     19   

Section 6.03         Assignment by the Seller

     20   

Section 6.04         Assignment to the Indenture Trustee

     20   

Section 6.05         Limitations on Rights of Others

     20   

Section 6.06         Severability

     20   

Section 6.07         Separate Counterparts

     20   

Section 6.08         Headings

     20   

Section 6.09         Governing Law

     21   

Section 6.10         Nonpetition Covenants

     21   

APPENDIX A     DEFINITIONS

EXHIBIT A         BILL OF SALE

SCHEDULE 1     TRANSITION PROPERTY

 

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TRANSITION PROPERTY SALE AGREEMENT (this “Agreement”) dated as of January 19,
2012, between CENTERPOINT ENERGY TRANSITION BOND COMPANY IV, LLC, a Delaware
limited liability company (the “Issuer”), and CENTERPOINT ENERGY HOUSTON
ELECTRIC, LLC, a Texas limited liability company, as seller (the “Seller”).

WHEREAS, the Issuer desires to purchase the Transition Property created pursuant
to the Restructuring Act and the Financing Order;

WHEREAS, the Seller is willing to sell its rights and interests under the
Financing Order to the Issuer whereupon such rights and interests will become
the Transition Property;

WHEREAS, the Issuer, in order to finance the purchase of the Transition
Property, will issue the Transition Bonds under the Indenture; and

WHEREAS, the Issuer, to secure its obligations under the Transition Bonds and
the Indenture, will pledge its right, title and interest in the Transition
Property and this Agreement to the Indenture Trustee for the benefit of the
Transition Bondholders.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. Capitalized terms used herein and not otherwise
defined herein have the meanings assigned to them in Appendix A to this
Agreement.

Section 1.02 Other Definitional Provisions.

(a) “Agreement” means this Transition Property Sale Agreement, as the same may
be amended, modified, supplemented or restated from time to time.

(b) Non-capitalized terms used herein which are defined in the Restructuring
Act, as the context requires, have the meanings assigned to such terms in the
Restructuring Act, but without giving effect to amendments to the Restructuring
Act after the date hereof which have a material adverse effect on the Issuer or
the Transition Bondholders.

(c) All terms defined in this Agreement shall have such defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.

 

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(d) The words “hereof,” “herein,” “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Section, Schedule, Appendix and Exhibit
references contained in this Agreement are references to Sections, Schedules,
Appendices and Exhibits in or to this Agreement unless otherwise specified; and
the term “including” shall mean “including without limitation.”

(e) The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms.

ARTICLE II

CONVEYANCE OF THE TRANSITION PROPERTY

Section 2.01 Conveyance of the Transition Property.

(a) In consideration of the Issuer’s payment to or upon the order of the Seller
of $1,684,569,000 (the “Purchase Price”), subject to the satisfaction or waiver
of the conditions specified in Section 2.02, the Seller does hereby irrevocably
sell, transfer, assign, set over and otherwise convey to the Issuer, without
recourse (subject to the obligations of the Seller herein) or warranty, except
as set forth herein, all right, title and interest of the Seller in, to and
under the Financing Order as identified in the Bill of Sale delivered pursuant
to Section 2.02(i) on or prior to the Transfer Date whereupon such rights and
interests under the Financing Order shall become the Transition Property (such
sale, transfer, assignment, setting over and conveyance of the Transition
Property to include, to the fullest extent permitted by the Restructuring Act,
the right to impose, collect and receive the Transition Charges, as the same may
be adjusted from time to time). Such sale, transfer, assignment, setting over
and conveyance of the Transition Property is hereby expressly stated to be a
sale or other absolute transfer and, pursuant to Section 39.308 of the
Restructuring Act and other applicable law, is a true sale and is not a secured
transaction and title, legal and equitable, has passed to the Issuer. The
preceding sentence is the statement referred to in Section 39.308 of the
Restructuring Act. The Seller agrees and confirms that upon payment of the
Purchase Price and the execution and delivery of this Agreement and the Bill of
Sale, the sale, transfer and assignment hereunder shall be effective and the
Seller shall have no right, title or interest in, to or under the Transition
Property.

(b) Subject to the satisfaction or waiver of conditions specified in
Section 2.02, the Issuer does hereby purchase the Transition Property from the
Seller for the consideration set forth in Section 2.01(a).

(c) The Seller and the Issuer each acknowledge and agree that the purchase price
for the Transition Property sold pursuant to this Agreement is equal to its fair
market value at the time of sale.

 

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(d) Notwithstanding the foregoing, in the event that the sale, transfer,
assignment, setting over and conveyance of the Transition Property is determined
by any court of competent jurisdiction not to be a true sale as contemplated by
the parties and as provided in Section 39.308 of the Restructuring Act, then
such sale, transfer, assignment, setting over and conveyance shall be treated as
a pledge of and grant of a security interest in the Transition Property under
Section 39.309 of the Restructuring Act and under the Uniform Commercial Code as
enacted in the State of Texas and each other applicable jurisdiction (the
“UCC”), and the Seller shall be deemed to have granted, and does hereby grant,
as of the date hereof, a security interest to the Issuer on behalf of itself and
the Indenture Trustee in the Transition Property to secure a payment obligation
incurred by the Seller in the amount paid by the Issuer for the Transition
Property.

Section 2.02 Conditions to Conveyance of the Transition Property. The obligation
of the Seller to sell, and the obligation of the Issuer to purchase the
Transition Property on the Transfer Date shall be subject to and conditioned
upon the satisfaction or waiver of each of the following conditions:

(i) on or prior to the Transfer Date, the Seller shall deliver to the Issuer a
duly executed Bill of Sale identifying the Transition Property, substantially in
the form of Exhibit A hereto;

(ii) as of the Transfer Date, the representations and warranties of the Seller
in this Agreement shall be true and correct in all material respects, no
material breach by the Seller of its covenants in this Agreement shall exist,
the Seller shall have delivered to the Issuer and the Indenture Trustee an
Officer’s Certificate to such effect and no Servicer Default shall have occurred
and be continuing;

(iii) as of the Transfer Date:

(A) the Issuer shall have sufficient funds available to pay the Purchase Price,
and

(B) all conditions set forth in the Indenture to the issuance of the Transition
Bonds intended to provide such funds shall have been satisfied or waived;

(iv) on or prior to the Transfer Date, the Seller shall have taken all actions
required under the Restructuring Act, the Financing Order and other applicable
law for the Issuer to have ownership of the Transition Property, free and clear
of all Liens other than Liens created by the Issuer pursuant to the Indenture;
and the Issuer, or the Servicer on behalf of the Issuer, shall have taken any
action required for the Issuer to grant the Indenture Trustee a first priority
perfected security interest in the Trust Estate and maintain such security
interest as of such date (including all actions required under the Restructuring
Act, the Financing Order and the UCC);

(v) the Seller shall have delivered to each Rating Agency and to the Issuer any
Opinions of Counsel requested by the Rating Agencies;

 

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(vi) the Seller shall have delivered to the Indenture Trustee and the Issuer an
Officer’s Certificate confirming the satisfaction of each relevant condition
precedent specified in this Section 2.02; and

(vii) the Seller shall have received the Purchase Price in funds immediately
available on the Transfer Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

As of the Transfer Date, the Seller makes the following representations and
warranties on which the Issuer has relied and will rely in acquiring the
Transition Property. The following representations and warranties are made under
existing law as in effect as of the Transfer Date. The Seller shall not be in
breach of any representation or warranty herein as a result of a change in
applicable law occurring after the Transfer Date, including by means of
legislative enactment, regulatory action, constitutional amendment or voter
initiative. The representations and warranties shall survive the sale of the
Transition Property to the Issuer and the pledge thereof on the Transfer Date to
the Indenture Trustee pursuant to the Indenture.

Section 3.01 Organization and Good Standing. The Seller is a limited liability
company duly organized and in good standing under the laws of the State of
Texas, with limited liability company power and authority to own its properties
and to conduct its business as currently owned or conducted.

Section 3.02 Due Qualification. The Seller is duly qualified to do business as a
foreign limited liability company in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such qualifications,
licenses or approvals (except where the failure to so qualify or obtain such
licenses and approvals would not be reasonably likely to have a material adverse
effect on the Seller’s business, operations, assets, revenues or properties).

Section 3.03 Power and Authority. The Seller has the limited liability company
power and authority to obtain the Financing Order and to execute and deliver
this Agreement and to carry out its terms; the Seller has the limited liability
company power and authority to own the rights and interests under the Financing
Order, and to sell and assign the rights and interests under the Financing Order
to the Issuer, whereupon (subject to the effectiveness of the Issuance Advice
Letter) such rights and interests will become the Transition Property; and the
execution, delivery and performance of this Agreement have been duly authorized
by the Seller by all necessary limited liability company action.

 

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Section 3.04 Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms, subject to bankruptcy, receivership, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors’ or secured
parties’ rights generally from time to time in effect and to general principles
of equity (including concepts of materiality, reasonableness, good faith and
fair dealing), regardless of whether considered in a proceeding in equity or at
law.

Section 3.05 No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not: (i) conflict with
or result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the certificate of
formation or the amended and restated limited liability company agreement of the
Seller, or any indenture, mortgage, credit agreement or other agreement or
instrument to which the Seller is a party or by which it or its properties is
bound; (ii) result in the creation or imposition of any Lien upon any of the
Seller’s properties pursuant to the terms of any such indenture, agreement or
other instrument (except for any Lien created in favor of the Transition
Bondholders pursuant to Section 39.309 of the Restructuring Act or any Lien
created by the Issuer under the Basic Documents); or (iii) violate any existing
law or any existing order, rule or regulation applicable to the Seller of any
Governmental Authority having jurisdiction over the Seller or its properties.

Section 3.06 No Proceedings. Except as disclosed in the Issuer’s prospectus
dated January 3, 2012 and the related prospectus supplement dated January 11,
2012 relating to the Transition Bonds (together, the “Prospectus”), there are no
proceedings pending and, to the Seller’s knowledge, (x) there are no proceedings
threatened and (y) there are no investigations pending or threatened before any
Governmental Authority having jurisdiction over the Seller or its properties
involving or relating to the Seller or the Issuer or, to the Seller’s knowledge,
any other Person:

(i) asserting the invalidity of this Agreement, any of the other Basic
Documents, the Transition Bonds, the Restructuring Act or the Financing Order;

(ii) seeking to prevent the issuance of the Transition Bonds or the consummation
of any of the transactions contemplated by this Agreement or any of the other
Basic Documents;

(iii) seeking any determination or ruling that could reasonably be expected to
materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement, any of the other
Basic Documents or the Transition Bonds; or

(iv) challenging the Seller’s treatment of the Transition Bonds as debt of
CenterPoint Energy, Inc. for federal or state income, gross receipts or
franchise tax purposes.

 

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Section 3.07 Approvals. Except for filings under the UCC and the Restructuring
Act, no approval, authorization, consent, order or other action of, or filing
with, any Governmental Authority is required under an applicable law, rule or
regulation in connection with the execution and delivery by the Seller of this
Agreement, the performance by the Seller of the transactions contemplated hereby
or the fulfillment by the Seller of the terms hereof, except those that have
been obtained or made and those that the Seller, in its capacity as Servicer
under the Servicing Agreement, is required to make in the future pursuant to the
Servicing Agreement.

Section 3.08 The Transition Property.

(a) Information. Subject to Section 3.14, all written information, as amended or
supplemented from time to time prior to the date this representation is made,
provided by the Seller to the Issuer with respect to the Transition Property
(including the Financing Order and the Issuance Advice Letter) is correct in all
material respects.

(b) Effect of Transfer. It is the intention of the parties hereto that (other
than for United States federal income tax purposes and, to the extent consistent
with applicable state tax laws, state income and franchise tax purposes) the
sale, transfer, assignment, setting over and conveyance herein contemplated
constitutes a sale or other absolute transfer of all right, title and interest
of the Seller in, to and under the Financing Order from the Seller to the Issuer
whereupon (subject to the effectiveness of the Issuance Advice Letter) such
rights and interests shall become the Transition Property; upon execution and
delivery of this Agreement and the Bill of Sale and payment of the Purchase
Price, the Seller will have no right, title or interest in, to or under the
Transition Property; and that such Transition Property would not be a part of
the estate of the Seller as debtor in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law.

(c) Transfer Filings.

(i) The Seller is the sole owner of the rights and interests under the Financing
Order to be sold to the Issuer on the Transfer Date.

(ii) On the Transfer Date, immediately upon the sale hereunder, the Transition
Property will have been validly sold, assigned, transferred, set over and
conveyed to the Issuer free and clear of all Liens (except for any Lien created
in favor of the Transition Bondholders pursuant to Section 39.309 of the
Restructuring Act or any Lien created by the Issuer under the Basic Documents).

(iii) All actions or filings (including filings with the Texas Secretary of
State in accordance with the rules prescribed under the Restructuring Act and
the UCC) necessary in any jurisdiction to give the Issuer a perfected ownership
interest (subject to any Lien created in favor of the Transition Bondholders
pursuant to Section 39.309 of the Restructuring Act or any Lien created by the
Issuer under the Basic Documents) in the Transition Property and to grant to the
Indenture Trustee a first priority perfected security interest in the Transition

 

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Property, free and clear of all Liens of the Seller or anyone else (except for
any Lien created in favor of the Transition Bondholders pursuant to
Section 39.309 of the Restructuring Act or any Lien created by the Issuer under
the Basic Documents), have been taken or made.

Section 3.09 Solvency. After giving effect to the sale of the Transition
Property hereunder, the Seller:

(i) is solvent and expects to remain solvent,

(ii) is adequately capitalized to conduct its business and affairs considering
its size and the nature of its business and intended purposes,

(iii) is not engaged and does not expect to engage in a business for which its
remaining property represents an unreasonably small portion of its capital,

(iv) reasonably believes that it will be able to pay its debts as they come due,
and

(v) is able to pay its debts as they come due and does not intend to incur, or
believes that it will incur, indebtedness that it will not be able to repay at
its maturity.

Section 3.10 The Financing Order.

(a) The Financing Order was issued by the PUCT on October 27, 2011 in accordance
with the Restructuring Act; the Financing Order and the process by which it was
issued comply with all applicable laws, rules and regulations of the State of
Texas and the federal laws of the United States, and the Financing Order is
final, non-appealable and in full force and effect.

(b) As of the date of issuance of the Transition Bonds, the Transition Bonds
will be entitled to the protections provided by the Restructuring Act and the
Financing Order, and the Financing Order and the Transition Charges authorized
therein will have become irrevocable and not subject to reduction, impairment or
adjustment by further action of the PUCT, except as permitted by Section 39.307
of the Restructuring Act, and the Issuance Advice Letter has been filed in
accordance with the Financing Order. The PUCT did not issue any order prior to
noon on the fourth business day after pricing of the Transition Bonds that the
Transition Bonds do not comply with Ordering Paragraph Five of the Financing
Order, and the initial Transition Charges and the final terms of the Transition
Bonds set forth in the Issuance Advice Letter have become effective.

 

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Section 3.11 State Action.

(a) Under the Restructuring Act, the State of Texas has pledged that it will not
take or permit any action that would impair the value of the Transition Property
or, except as permitted in Section 39.307 of the Restructuring Act, reduce,
alter or impair the Transition Charges until the principal, interest and
premium, if any, and any other charges incurred and contracts to be performed in
connection with the Transition Bonds, have been paid and performed in full.

(b) Under the laws of the State of Texas and the federal laws of the United
States, the State of Texas could not constitutionally take any action of a
legislative character, including the repeal or amendment of the Restructuring
Act, which would substantially limit, alter or impair the Transition Property or
other rights vested in the Transition Bondholders pursuant to the Financing
Order, or substantially limit, alter, impair or reduce the value or amount of
the Transition Property, unless such action is a reasonable exercise of the
State of Texas’ sovereign powers and of a character reasonable and appropriate
to the important public purpose justifying such action, and, under the takings
clauses of the State of Texas and United States Constitutions, the State of
Texas could not repeal or amend the Restructuring Act or take any other action
in contravention of its pledge quoted above without paying just compensation to
the Transition Bondholders, as determined by a court of competent jurisdiction,
if doing so would constitute a permanent appropriation of a substantial property
interest of the Transition Bondholders in the Transition Property and deprive
the Transition Bondholders of their reasonable expectations arising from their
investments in the Transition Bonds; however, there is no assurance that, even
if a court were to award just compensation, it would be sufficient to pay the
full amount of principal of and interest on the Transition Bonds.

Section 3.12 No Court Order. There is no order by any court of competent
jurisdiction providing for the revocation, alteration, limitation or other
impairment of the Restructuring Act, the Financing Order, the Issuance Advice
Letter, the Transition Property or the Transition Charges or any rights arising
under any of them or that seeks to enjoin the performance of any obligations
under the Financing Order.

Section 3.13 Approvals Concerning the Transition Property. Under the laws of the
State of Texas and the federal laws of the United States, no other approval,
authorization, consent, order or other action of, or filing with any
Governmental Authority is required in connection with the creation or transfer
of the Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Transition Property from the Seller, except those that have been
obtained or made.

Section 3.14 Assumptions. Based on information available to the Seller on the
date hereof, the assumptions used in calculating the Transition Charges in the
Issuance Advice Letter are reasonable and made in good faith; however,
notwithstanding the foregoing, THE SELLER MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, THAT AMOUNTS ACTUALLY COLLECTED ARISING FROM THE TRANSITION
CHARGES WILL IN FACT BE SUFFICIENT TO MEET THE PAYMENT OBLIGATIONS ON THE
TRANSITION BONDS OR THAT THE ASSUMPTIONS USED IN CALCULATING SUCH TRANSITION
CHARGES WILL IN FACT BE REALIZED.

 

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Section 3.15 Creation of the Transition Property.

(a) Upon the effectiveness of the Issuance Advice Letter, the transfer of the
Seller’s rights and interests under the Financing Order related to the
Transition Bonds and the Issuer’s purchase of the Transition Property from the
Seller pursuant to this Agreement, the Transition Property will constitute a
present property right.

(b) Upon the effectiveness of the Issuance Advice Letter, the transfer of the
Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Transition Property from the Seller pursuant to this Agreement,
the Transition Property includes:

 

  (1) the right to impose, collect and receive the Transition Charges, including
the right to receive Transition Charges in amounts and at times sufficient to
pay principal and interest on the Transition Bonds,

 

  (2) all rights and interest of the Seller under the Financing Order,

 

  (3) the rights to file for periodic adjustments of the Transition Charges as
provided in the Financing Order, and

 

  (4) all revenues and collections resulting from the Transition Charges.

(c) Upon the effectiveness of the Issuance Advice Letter, the transfer of the
Seller’s rights and interests under the Financing Order and the Issuer’s
purchase of the Transition Property from the Seller on such Transfer Date
pursuant to this Agreement, the Transition Property will not be subject to any
Lien created by a previous indenture.

Section 3.16 Prospectus. As of the date hereof, the information describing the
Seller under the caption “The Seller, Initial Servicer and Sponsor of the
Transition Property” in the Prospectus is true and correct in all material
respects.

Section 3.17 Nature of Representations and Warranties. The representations and
warranties set forth in Section 3.08 and Section 3.10 through Section 3.16,
insofar as they involve conclusions of law, are made not on the basis that the
Seller purports to be a legal expert or to be rendering legal advice, but rather
to reflect the parties’ good faith understanding of the legal basis on which the
parties are entering into this Agreement and the other Basic Documents and the
basis on which the Transition Bondholders are purchasing the

 

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Transition Bonds, and to reflect the parties’ agreement that, if such
understanding turns out to be incorrect or inaccurate, the Seller will be
obligated to indemnify the Issuer and its permitted assigns (to the extent
required by and in accordance with Section 5.01), and that the Issuer and its
permitted assigns will be entitled to enforce any rights and remedies under the
Basic Documents on account of such inaccuracy to the same extent as if the
Seller had breached any other representations or warranties hereunder.

ARTICLE IV

COVENANTS OF THE SELLER

Section 4.01 Seller’s Existence. Subject to Section 5.02, so long as any of the
Transition Bonds are outstanding, the Seller (i) shall keep in full force and
effect its existence and remain in good standing under the laws of the state of
its organization, and shall obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or will be necessary to
protect the validity and enforceability of this Agreement and each other
instrument or agreement to which the Seller is a party necessary to the proper
administration of this Agreement and the transactions contemplated hereby and
(ii) hereby agrees to continue to operate its transmission and distribution
system in order to provide electric services to retail electric customers in the
Seller’s certificated service area, provided that this clause (ii) shall not
prohibit the Seller from selling, assigning or otherwise divesting its
transmission and distribution system or any part thereof in accordance with this
Agreement and the Financing Order.

Section 4.02 No Liens or Conveyances. Except for the conveyances hereunder or
any Lien under Section 39.309 of the Restructuring Act for the benefit of the
Issuer, the Indenture Trustee and the Transition Bondholders, the Seller shall
not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on, any of the Transition Property,
whether now existing or hereafter created, or any interest therein. The Seller
shall not at any time assert any Lien against or with respect to the Transition
Property, and shall defend the right, title and interest of the Issuer and the
Indenture Trustee, as assignee of the Issuer, in, to and under the Transition
Property against all claims of third parties claiming through or under the
Seller.

Section 4.03 Delivery of Collections. In the event that the Seller receives any
payment under the terms and provisions of the Intercreditor Agreement in respect
of the Transition Charges or the proceeds thereof other than in its capacity as
the Servicer, the Seller shall pay the Servicer all payments received by the
Seller in respect thereof, in accordance with the Intercreditor Agreement, as
soon as practicable after receipt thereof by the Seller.

Section 4.04 Notice of Liens. The Seller shall notify the Issuer and the
Indenture Trustee promptly after becoming aware of any Lien on the Transition
Property, other than the conveyance hereunder, any Lien created in favor of the
Transition Bondholders pursuant to Section 39.309 of the Restructuring Act or
any Lien created by the Issuer under the Indenture.

 

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Section 4.05 Compliance With Law. The Seller shall comply with its
organizational or governing documents and all applicable laws, treaties, rules,
regulations and determinations of any Governmental Authority applicable to the
Seller, except to the extent that failure to so comply would not materially
adversely affect the Issuer’s or the Indenture Trustee’s interests in the
Transition Property or under any of the Basic Documents or the Seller’s
performance of its obligations hereunder.

Section 4.06 Covenants Related to the Transition Property.

(a) So long as any of the Transition Bonds are outstanding, the Seller shall:

(i) treat the Transition Bonds as debt of the Issuer and not of the Seller,
except for financial reporting or tax purposes,

(ii) disclose in its financial statements that it is not the owner of the
Transition Property and that the assets of the Issuer are not available to pay
creditors of the Seller or any of its Affiliates (other than the Issuer),

(iii) disclose the effects of all transactions between the Seller and the Issuer
in accordance with generally accepted accounting principles, and

(iv) not own or purchase any Transition Bonds.

(b) So long as any of the Transition Bonds are outstanding,

(i) in all proceedings relating directly or indirectly to the Transition
Property, the Seller shall: (A) affirmatively certify and confirm that it has
sold all of its rights and interests under the Financing Order to the Issuer
(other than for financial reporting or tax purposes), and (B) not make any
statement or reference in respect of the Transition Property that is
inconsistent with the ownership thereof by the Issuer (other than for financial
reporting or tax purposes); and

(ii) the Seller shall not take any action in respect of the Transition Property
except solely in its capacity as the Servicer thereof pursuant to the Servicing
Agreement or as contemplated by the Basic Documents, including the Intercreditor
Agreement.

(c) The Seller agrees that upon the sale by the Seller of all of its rights and
interests under the Financing Order to the Issuer pursuant to this Agreement,
any payment to the Servicer by any Person responsible for remitting Transition
Charges to the Servicer under the terms of the Financing Order or the
Restructuring Act or applicable tariff shall discharge such Person’s obligations
in respect of the Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the Seller.

 

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Section 4.07 Protection of Title. The Seller shall execute and file such
filings, or cause to be executed and filed such filings, in such manner and in
such places as may be required by applicable law fully to preserve, maintain and
protect the interests of the Issuer and the Indenture Trustee in the Transition
Property, including all filings required under the Restructuring Act and the UCC
relating to the transfer of the ownership of the rights and interests under the
Financing Order by the Seller to the Issuer and the pledge of the Transition
Property by the Issuer to the Indenture Trustee. The Seller shall deliver (or
cause to be delivered) to the Issuer and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing. The Seller shall institute any action or
proceeding reasonably necessary to compel performance by the PUCT or the State
of Texas of any of their obligations or duties under the Restructuring Act, the
Financing Order or the Issuance Advice Letter relating to the transfer of the
rights and interests under the Financing Order by the Seller to the Issuer, and
the Seller agrees to take such legal or administrative actions, including
defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings, in each case as may be reasonably
necessary:

(a) to protect the Issuer and the Transition Bondholders from claims, state
actions or other actions or proceedings of third parties which, if successfully
pursued, would result in a breach of any representation set forth in Article
III; or

(b) so long as the Seller is also the Servicer, to block or overturn any
attempts to cause a repeal of, modification of or supplement to the
Restructuring Act, the Financing Order, the Issuance Advice Letter or the rights
of Transition Bondholders by legislative enactment, regulatory action or
constitutional amendment that would be materially adverse to the Issuer, the
Indenture Trustee or the Transition Bondholders.

The costs of any such actions or proceedings shall be reimbursed by the Issuer
to the Seller from amounts on deposit in the Collection Account as an Operating
Expense (as such terms are defined in the Indenture) in accordance with the
terms of the Indenture. The Seller’s obligations pursuant to this Section 4.07
shall survive and continue notwithstanding that the payment of Operating
Expenses pursuant to the Indenture may be delayed (it being understood that the
Seller may be required to advance its own funds to satisfy its obligation
hereunder). The Seller designates the Issuer as its agent and attorney-in-fact
to execute any filings of financing statements, continuation statements or other
instruments required of the Seller pursuant to this Section 4.07, it being
understood that the Issuer shall have no obligation to execute any such
instruments.

Section 4.08 Taxes. So long as any of the Transition Bonds are outstanding, the
Seller shall pay all material taxes, assessments and governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, businesses, income or property before any penalty accrues

 

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thereon if the failure to pay any such taxes, assessments and governmental
charges would, after any applicable grace periods, notices or other similar
requirements, result in a Lien on the Transition Property; provided that no such
tax need be paid if the Seller or any of its Affiliates is contesting the same
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if the Seller or such Affiliate has established appropriate
reserves as shall be required in conformity with generally accepted accounting
principles.

Section 4.09 Filings Pursuant to Financing Order. The Seller shall comply with
all filing requirements imposed upon the Seller in its capacity as such by the
Financing Order, including making any such post-closing filings.

ARTICLE V

ADDITIONAL UNDERTAKINGS OF SELLER

The Seller hereby undertakes the obligations contained in this Article V and
acknowledges that the Issuer shall have the right to assign its rights with
respect to such obligations to the Indenture Trustee for the benefit of the
Transition Bondholders.

Section 5.01 LIABILITY OF THE SELLER; INDEMNITIES.

(a) THE SELLER SHALL BE LIABLE IN ACCORDANCE HEREWITH ONLY TO THE EXTENT OF THE
OBLIGATIONS SPECIFICALLY UNDERTAKEN BY THE SELLER UNDER THIS AGREEMENT.

(b) THE SELLER SHALL INDEMNIFY THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF
AND ON BEHALF OF THE TRANSITION BONDHOLDERS, AND EACH OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD
HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL TAXES (OTHER THAN ANY
TAXES IMPOSED ON TRANSITION BONDHOLDERS SOLELY AS A RESULT OF THEIR OWNERSHIP OF
TRANSITION BONDS) THAT MAY AT ANY TIME BE IMPOSED ON OR ASSERTED AGAINST ANY
SUCH PERSON UNDER EXISTING LAW AS OF THE TRANSFER DATE AS A RESULT OF THE SALE
AND ASSIGNMENT OF THE SELLER’S RIGHTS AND INTERESTS UNDER THE FINANCING ORDER BY
THE SELLER TO THE ISSUER, THE ACQUISITION OR HOLDING OF THE TRANSITION PROPERTY
BY THE ISSUER OR THE ISSUANCE AND SALE BY THE ISSUER OF THE TRANSITION BONDS,
INCLUDING ANY SALES, GROSS RECEIPTS, TANGIBLE PERSONAL PROPERTY, PRIVILEGE,
FRANCHISE OR LICENSE TAXES, BUT EXCLUDING ANY TAXES IMPOSED AS A RESULT OF A
FAILURE OF SUCH PERSON TO PROPERLY WITHHOLD OR REMIT TAXES IMPOSED WITH RESPECT
TO PAYMENTS ON ANY TRANSITION BOND, IN THE EVENT AND TO THE EXTENT SUCH TAXES
ARE NOT RECOVERABLE AS QUALIFIED COSTS, IT BEING UNDERSTOOD THAT THE TRANSITION
BONDHOLDERS SHALL BE ENTITLED TO ENFORCE THEIR RIGHTS AGAINST THE SELLER UNDER
THIS SECTION 5.01(B) SOLELY THROUGH A CAUSE OF ACTION BROUGHT FOR THEIR BENEFIT
BY THE INDENTURE TRUSTEE IN ACCORDANCE WITH THE TERMS OF THE INDENTURE.

 

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(c) THE SELLER SHALL INDEMNIFY THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF
AND ON BEHALF OF THE TRANSITION BONDHOLDERS, AND EACH OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD
HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL AMOUNTS OF PRINCIPAL OF
AND INTEREST ON THE TRANSITION BONDS NOT PAID WHEN DUE OR WHEN SCHEDULED TO BE
PAID IN ACCORDANCE WITH THEIR TERMS AND THE AMOUNT OF ANY DEPOSITS TO THE ISSUER
REQUIRED TO HAVE BEEN MADE IN ACCORDANCE WITH THE TERMS OF THE BASIC DOCUMENTS
WHICH ARE NOT MADE WHEN SO REQUIRED, IN EACH CASE AS A RESULT OF THE SELLER’S
BREACH OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR COVENANTS CONTAINED IN THIS
AGREEMENT.

(d) THE SELLER SHALL INDEMNIFY THE ISSUER AND THE INDENTURE TRUSTEE, FOR ITSELF
AND ON BEHALF OF THE TRANSITION BONDHOLDERS, AND EACH OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD
HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LIABILITIES,
OBLIGATIONS, CLAIMS, ACTIONS, SUITS OR PAYMENTS OF ANY KIND WHATSOEVER THAT MAY
BE IMPOSED ON OR ASSERTED AGAINST ANY SUCH PERSON (OTHER THAN ANY LIABILITIES,
OBLIGATIONS OR CLAIMS FOR OR PAYMENTS OF PRINCIPAL OF OR INTEREST ON THE
TRANSITION BONDS) TOGETHER WITH ANY REASONABLE COSTS AND EXPENSES INCURRED BY
SUCH PERSON, IN EACH CASE AS A RESULT OF THE SELLER’S BREACH OF ANY OF ITS
REPRESENTATIONS, WARRANTIES OR COVENANTS CONTAINED IN THIS AGREEMENT.

(e) THE INDEMNIFICATION OBLIGATIONS OF THE SELLER UNDER THIS SECTION 5.01 SHALL
RANK PARI PASSU WITH ALL OTHER GENERAL UNSECURED OBLIGATIONS OF THE SELLER.

(f) INDEMNIFICATION UNDER THIS SECTION 5.01 SHALL SURVIVE THE RESIGNATION OR
REMOVAL OF THE INDENTURE TRUSTEE AND THE TERMINATION OF THIS AGREEMENT AND SHALL
INCLUDE REASONABLE FEES AND EXPENSES OF INVESTIGATION AND LITIGATION (INCLUDING
REASONABLE ATTORNEYS’ FEES AND EXPENSES). THE SELLER SHALL NOT INDEMNIFY ANY
PARTY UNDER THIS SECTION 5.01 FOR ANY CHANGES IN APPLICABLE LAW AFTER THE
TRANSFER DATE, INCLUDING BY MEANS OF LEGISLATIVE ENACTMENT, REGULATORY ACTION,
CONSTITUTIONAL AMENDMENT OR VOTER INITIATIVE, OR FOR ANY LIABILITY RESULTING
SOLELY FROM A DOWNGRADE IN ANY RATING OF THE TRANSITION BONDS BY ANY RATING
AGENCY. THE SELLER SHALL NOT INDEMNIFY THE INDENTURE TRUSTEE OR ITS OFFICERS,
DIRECTORS, MANAGERS, EMPLOYEES OR AGENTS UNDER THIS SECTION 5.01 AGAINST ANY
LIABILITY, OBLIGATION, CLAIM, ACTION, SUIT OR PAYMENT OF ANY KIND ARISING OUT OF
THE WILLFUL MISCONDUCT, NEGLIGENCE OR BAD FAITH OF ANY SUCH PERSON OR RESULTING
FROM A BREACH OF A REPRESENTATION OR WARRANTY MADE BY SUCH PERSON IN ANY OF THE
BASIC DOCUMENTS THAT GIVES RISE TO THE SELLER’S BREACH.

 

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(g) THE SELLER SHALL NOT BE REQUIRED TO INDEMNIFY ANY PERSON UNDER THIS
SECTION 5.01 FOR ANY AMOUNT PAID OR PAYABLE BY SUCH PERSON IN THE SETTLEMENT OF
ANY ACTION, PROCEEDING OR INVESTIGATION WITHOUT THE PRIOR WRITTEN CONSENT OF THE
SELLER, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. PROMPTLY AFTER RECEIPT
BY ANY INDEMNIFIED PERSON OF NOTICE OF THE COMMENCEMENT OF ANY ACTION,
PROCEEDING OR INVESTIGATION, SUCH PERSON SHALL, IF A CLAIM IN RESPECT THEREOF IS
TO BE MADE AGAINST THE SELLER UNDER THIS SECTION 5.01, NOTIFY THE SELLER IN
WRITING OF THE COMMENCEMENT THEREOF. FAILURE BY ANY INDEMNIFIED PERSON TO SO
NOTIFY THE SELLER SHALL RELIEVE THE SELLER FROM THE OBLIGATION TO INDEMNIFY AND
HOLD HARMLESS SUCH INDEMNIFIED PERSON UNDER THIS SECTION 5.01 ONLY TO THE EXTENT
THAT THE SELLER SUFFERS ACTUAL PREJUDICE AS A RESULT OF SUCH FAILURE. WITH
RESPECT TO ANY ACTION, PROCEEDING OR INVESTIGATION BROUGHT BY A THIRD PARTY FOR
WHICH INDEMNIFICATION MAY BE SOUGHT UNDER THIS SECTION 5.01, THE SELLER SHALL BE
ENTITLED TO CONDUCT AND CONTROL, AT ITS EXPENSE AND WITH COUNSEL OF ITS CHOOSING
THAT IS REASONABLY SATISFACTORY TO SUCH INDEMNIFIED PERSON, THE DEFENSE OF ANY
SUCH ACTION, PROCEEDING OR INVESTIGATION (IN WHICH CASE THE SELLER SHALL NOT
THEREAFTER BE RESPONSIBLE FOR THE FEES AND EXPENSES OF ANY SEPARATE COUNSEL
RETAINED BY THE INDEMNIFIED PERSON EXCEPT AS SET FORTH BELOW); PROVIDED THAT THE
INDEMNIFIED PERSON SHALL HAVE THE RIGHT TO PARTICIPATE IN SUCH ACTION,
PROCEEDING OR INVESTIGATION THROUGH COUNSEL CHOSEN BY IT AND AT ITS OWN EXPENSE.
NOTWITHSTANDING THE SELLER’S ELECTION TO ASSUME THE DEFENSE OF ANY ACTION,
PROCEEDING OR INVESTIGATION, THE INDEMNIFIED PERSON SHALL HAVE THE RIGHT TO
EMPLOY SEPARATE COUNSEL (INCLUDING LOCAL COUNSEL), AND THE SELLER SHALL BEAR THE
REASONABLE FEES, COSTS AND EXPENSES OF SUCH SEPARATE COUNSEL IF (I) THE
DEFENDANTS IN ANY SUCH ACTION INCLUDE BOTH THE INDEMNIFIED PERSON AND THE SELLER
AND THE INDEMNIFIED PERSON SHALL HAVE REASONABLY CONCLUDED THAT THERE MAY BE
LEGAL DEFENSES AVAILABLE TO IT THAT ARE DIFFERENT FROM OR ADDITIONAL TO THOSE
AVAILABLE TO THE SELLER, (II) THE SELLER SHALL NOT HAVE EMPLOYED COUNSEL
REASONABLY SATISFACTORY TO THE INDEMNIFIED PERSON TO REPRESENT THE INDEMNIFIED
PERSON WITHIN A REASONABLE TIME AFTER NOTICE OF THE INSTITUTION OF SUCH ACTION,
(III) THE SELLER SHALL AUTHORIZE THE INDEMNIFIED PERSON TO EMPLOY SEPARATE
COUNSEL AT THE EXPENSE OF THE SELLER OR (IV) IN THE CASE OF THE INDENTURE
TRUSTEE, SUCH ACTION EXPOSES THE INDENTURE TRUSTEE TO A MATERIAL RISK OF
CRIMINAL LIABILITY OR FORFEITURE OR A SERVICER DEFAULT HAS OCCURRED AND IS
CONTINUING. NOTWITHSTANDING THE FOREGOING, THE SELLER SHALL NOT BE OBLIGATED TO
PAY FOR THE FEES, COSTS AND EXPENSES OF MORE THAN ONE SEPARATE COUNSEL FOR THE
INDEMNIFIED PERSONS OTHER THAN ONE LOCAL COUNSEL, IF APPROPRIATE.

NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL ANY SUCH FOREGOING INDEMNITY
EXTEND TO THE COLLECTIBILITY OF THE TRANSITION CHARGES FROM ANY PERSON
RESPONSIBLE FOR REMITTING TRANSITION CHARGES TO THE SERVICER UNDER THE TERMS OF
THE FINANCING ORDER, THE RESTRUCTURING ACT OR AN APPLICABLE TARIFF, OR THE
CREDITWORTHINESS OF ANY SUCH PERSON. THE REMEDIES PROVIDED IN THIS AGREEMENT ARE
THE SOLE AND EXCLUSIVE REMEDIES AGAINST THE SELLER FOR BREACH OF ITS
REPRESENTATIONS, WARRANTIES OR COVENANTS IN THIS AGREEMENT.

 

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Section 5.02 Merger or Consolidation of, or Assumption of the Obligations of,
the Seller.

Any Person:

(a) into which the Seller may be merged, converted or consolidated and which
succeeds to all or substantially all of the electric transmission and
distribution business of the Seller (or, if the transmission and distribution
business is split, which provides distribution service directly to a majority of
the retail electric customers in the Seller’s certificated service area as it
existed on May 1, 1999),

(b) which results from the division of the Seller into two or more Persons and
which succeeds to all or substantially all of the electric transmission and
distribution business of the Seller (or, if the transmission and distribution
business is split, which provides distribution service directly to a majority of
the retail electric customers in the Seller’s certificated service area as it
existed on May 1, 1999),

(c) which may result from any merger, conversion or consolidation to which the
Seller shall be a party and which succeeds to all or substantially all of the
electric transmission and distribution business of the Seller (or, if the
transmission and distribution business is split, which provides distribution
service directly to a majority of the retail electric customers in the Seller’s
certificated service area as it existed on May 1, 1999),

(d) which may purchase or otherwise succeed to the properties and assets of the
Seller substantially as a whole and which purchases or otherwise succeeds to all
or substantially all of the electric transmission and distribution business of
the Seller (or, if the transmission and distribution business is split, which
provides distribution service directly to a majority of the retail electric
customers in the Seller’s certificated service area as it existed on May 1,
1999), or

(e) which may otherwise purchase or succeed to all or substantially all of the
electric transmission and distribution business of the Seller (or, if the
transmission and distribution business is split, which provides distribution
service directly to a majority of the retail electric customers in the Seller’s
certificated service area as it existed on May 1, 1999),

which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Seller under this Agreement, shall be the
successor to the Seller hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that

(i) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Article III shall have been breached in any material
respect and no Servicer Default, and no event that, after notice or lapse of
time, or both, would become a Servicer Default, shall have occurred and be
continuing,

 

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(ii) the Rating Agencies shall have received prior written notice of such
transaction,

(iii) the Seller shall have delivered to the Issuer and the Indenture Trustee an
Officer’s Certificate and an Opinion of Counsel each stating that such
consolidation, conversion, merger, division or succession and such agreement of
assumption comply with this Section 5.02 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with,

(iv) the Seller shall have delivered to the Issuer and the Indenture Trustee an
Opinion of Counsel either

(A) stating that, in the opinion of such counsel, all filings to be made by the
Seller, including filings with the PUCT pursuant to the Restructuring Act and
the UCC, that are necessary fully to preserve and protect the respective
interests of the Issuer and the Indenture Trustee in the Transition Property
have been executed and filed, and reciting the details of such filings, or

(B) stating that, in the opinion of such counsel, no such action is necessary to
preserve and protect such interests, and

(v) the Seller shall have delivered to the Issuer, the Indenture Trustee and the
Rating Agencies an opinion of independent tax counsel (as selected by, and in
form and substance satisfactory to the Seller, and which may be based on a
ruling from the Internal Revenue Service) to the effect that, for federal income
tax purposes, such transaction will not result in a material adverse federal
income tax consequence to the Issuer, the Indenture Trustee or the Transition
Bondholders.

The Seller shall not consummate any transaction referred to in clauses (a), (b),
(c), (d) or (e) above except upon execution of the above described agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above.
When any Person acquires the properties and assets of the Seller substantially
as a whole and succeeds to all or substantially all of the electric transmission
and distribution business of the Seller (or, if the transmission and
distribution business is split, which provides distribution service directly to
a majority of the retail electric customers in the Seller’s certificated service
area as it existed on May 1, 1999), or otherwise becomes the successor to the
Seller in accordance with the terms of this Section 5.02, then upon the
satisfaction of all of the other conditions of this Section 5.02, the Seller
shall automatically and without further notice be released from its obligations
hereunder.

Section 5.03 Limitation on Liability of the Seller and Others. The Seller and
any manager, officer, employee or agent of the Seller may rely in good faith on
the advice of counsel or on any document of any kind, prima facie properly
executed and submitted by any Person, respecting any matters arising hereunder.
Subject to Section 4.07, the Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.

 

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ARTICLE VI

MISCELLANEOUS PROVISIONS

Section 6.01 Amendment.

(a) This Agreement may be amended in writing by the Seller and the Issuer,
provided that (i) the Rating Agency Condition has been satisfied in connection
therewith, (ii) the Indenture Trustee has consented thereto and (iii) in the
case of any amendment that increases ongoing Qualified Costs, the PUCT has
consented thereto or shall be conclusively deemed to have consented thereto.
Promptly after the execution of any such amendment or consent, the Issuer shall
furnish written notification of the substance of such amendment or consent to
each of the Rating Agencies. With respect to the PUCT’s consent to any amendment
to this Agreement,

(i) the Seller may request the consent of the PUCT by delivering to the PUCT’s
executive director and general counsel a written request for such consent, which
request shall contain:

(A) a reference to Docket No. 39809 and a statement as to the possible effect of
the amendment on ongoing Qualified Costs;

(B) an Officer’s Certificate stating that the proposed amendment has been
approved by all relevant parties; and

(C) a statement identifying the person to whom the PUCT or its staff is to
address its consent to the proposed amendment or request additional time; and

(ii) the PUCT shall, within 30 days of receiving the request for consent
complying with Section 6.01(a)(i) above, either

(A) provide notice of its consent or lack of consent to the person specified in
Section 6.01(a)(i)(C) above, or

(B) be conclusively deemed to have consented to the proposed amendment,

unless, within 30 days of receiving the request for consent complying with
Section 6.01(a)(i) above, the PUCT or its staff delivers to the office of the
person specified in Section 6.01(a)(i)(C) above a written statement requesting
an additional amount of time not to exceed 30 days in which to consider whether
to consent to the proposed amendment. If the PUCT or its staff requests an
extension of time in the manner set forth in the preceding sentence, then the
PUCT shall either provide notice of its consent or lack of consent to the person
specified in 6.01(a)(i)(C) above no later than the last day of such extension of
time or be conclusively deemed to have consented to the proposed amendment as of
the last day of such extension of time.

 

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Any amendment requiring the consent of the PUCT as provided in this
Section 6.01(a) shall become effective on the later of (i) the date proposed by
the parties to such amendment and (ii) the first day after the expiration of the
30 day period provided for in Section 6.01(a)(ii), or, if such period has been
extended pursuant thereto, the first day after the expiration of such period as
so extended.

(b) Prior to the execution of any amendment to this Agreement, the Issuer and
the Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment that affects their own rights,
duties or immunities under this Agreement or otherwise. Following delivery of a
notice to the PUCT by the Seller under Section 6.01(a) above, the Seller and
Issuer may at any time withdraw from the PUCT further consideration of any
notification of a proposed amendment.

Section 6.02 Notices. Unless otherwise specifically provided herein, all
demands, notices and communications upon or to the Seller, the Issuer, the
Indenture Trustee, the PUCT or the Rating Agencies under this Agreement shall be
in writing, delivered personally, via facsimile, reputable overnight courier or
by certified mail, return-receipt requested, and shall be deemed to have been
duly given upon receipt

(a) in the case of the Seller, to CenterPoint Energy Houston Electric, LLC, 1111
Louisiana Street, Houston, Texas 77002, Attention: Treasurer,

(b) in the case of the Issuer, to CenterPoint Energy Transition Bond Company IV,
LLC, 1111 Louisiana Street, Suite 4664B, Houston, Texas 77002, Attention:
Manager,

(c) in the case of Moody’s, to Moody’s Investors Service, Inc., ABS Monitoring
Department, 7 World Trade Center at 250 Greenwich Street, New York, New York
10007,

(d) in the case of Standard & Poor’s, to Standard & Poor’s Ratings Services, a
Standard & Poor’s Financial Services LLC business, 55 Water Street, New York,
New York 10041, Attention: Asset Backed Surveillance Department,

(e) in the case of Fitch, to Fitch, Inc., One State Street Plaza, New York, New
York 10004, Attention: ABS Surveillance,

(f) in the case the Indenture Trustee, at the address provided for notices or
communications to the Indenture Trustee in the Indenture, and

 

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(g) in the case of the PUCT, to 1701 N. Congress Avenue, Austin, Texas
78711-3326, Attention: Executive Director and General Counsel;

or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.

Section 6.03 Assignment by the Seller. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.

Section 6.04 Assignment to the Indenture Trustee. The Seller hereby acknowledges
and consents to any pledge, assignment and grant of a security interest by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
Transition Bondholders of all right, title and interest of the Issuer in, to and
under the Transition Property and the proceeds thereof and the assignment of any
or all of the Issuer’s rights hereunder to the Indenture Trustee.
Notwithstanding such assignment, in no event shall the Indenture Trustee have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.

Section 6.05 Limitations on Rights of Others. The provisions of this Agreement
are solely for the benefit of the Seller, the Issuer and the Indenture Trustee,
on behalf of itself and the Transition Bondholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.

Section 6.06 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

Section 6.07 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

Section 6.08 Headings. The headings of the various Articles and Sections herein
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.

 

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Section 6.09 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 6.10 Nonpetition Covenants. (a) Notwithstanding any prior termination of
this Agreement or the Indenture, the Seller shall not, prior to the date which
is one year and one day after the termination of the Indenture, petition or
otherwise invoke or cause the Issuer to invoke the process of any Governmental
Authority for the purpose of commencing or sustaining a case against the Issuer
under any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of the property of the
Issuer, or ordering the winding-up or liquidation of the affairs of the Issuer.

(b) Notwithstanding any prior termination of this Agreement or the Indenture,
the Issuer shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or cause the Seller
to invoke the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Seller under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Seller or any substantial part of the property of the Seller, or ordering the
winding-up or liquidation of the affairs of the Seller.

[Rest of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

 

CENTERPOINT ENERGY TRANSITION BOND COMPANY IV, LLC,

    as Issuer,

By:      

Name: Linda Geiger

Title:   Assistant Treasurer

 

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC,

    as Seller,

By:      

Name: Linda Geiger

Title:   Assistant Treasurer

 

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APPENDIX A—DEFINITIONS

The definitions contained in this Appendix A are applicable to the singular as
well as the plural forms of such terms.

“Administration Agreement” means the Administration Agreement, dated as of
January 19, 2012, between the Issuer and the Seller, as the same may be amended,
modified, supplemented or restated from time to time.

“Affiliate” means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, control, when used with respect to any
specified Person, means 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.

“Agreement” or “Sale Agreement” means this Transition Property Sale Agreement,
as the same may be amended, modified, supplemented or restated from time to
time.

“Basic Documents” means the Certificate of Formation of the Issuer which was
filed with the Secretary of State of the State of Delaware on October 14, 2011,
the Amended and Restated Limited Liability Company Agreement of the Issuer dated
as of January 19, 2012, this Sale Agreement, the Bill of Sale, the Servicing
Agreement, the Intercreditor Agreement, the Administration Agreement, the
Indenture and the Series Supplement.

“Bill of Sale” means the Bill of Sale, dated as of January 19, 2012, issued by
the Seller to the Issuer pursuant to this Sale Agreement evidencing the sale of
the Transition Property by the Seller to the Issuer.

“Business Day” means any day other than a Saturday or Sunday or a day on which
banking institutions in the City of Houston, Texas, or in the City of New York,
New York, are required or authorized by law or executive order to remain closed.

“CenterPoint Houston” means CenterPoint Energy Houston Electric, LLC, a Texas
limited liability company, or its successor.

“Financing Order” means the Financing Order issued by the PUCT on October 27,
2011 in Docket No. 39809 pursuant to the Restructuring Act.

“Fitch” means Fitch, Inc., or its successor.

“Governmental Authority” means any court or any federal or state regulatory
body, administrative agency or governmental instrumentality.

“Indenture” means the Indenture, dated as of January 19, 2012, among the Issuer
and the Indenture Trustee, and the Series Supplement (including the forms and
terms of the Transition Bonds), as the same may be amended and supplemented with
respect to the Transition Bonds from time to time.

 

Appendix A-1

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

“Indenture Trustee” means Deutsche Bank Trust Company Americas, or its successor
or any successor Indenture Trustee under the Indenture.

“Intercreditor Agreement” means the Intercreditor Agreement dated as of
January 19, 2012, among the Indenture Trustee, the Issuer, the Seller,
CenterPoint Energy Transition Bond Company, LLC, CenterPoint Energy Transition
Bond Company II, LLC, CenterPoint Energy Transition Bond Company III, LLC,
CenterPoint Energy Restoration Bond Company, LLC and the other parties thereto,
each in the capacities stated therein, as the same may be amended, modified
supplemented or restated from time to time.

“Issuance Advice Letter” means the issuance advice letter submitted to the PUCT
on January 11, 2012 by the Seller pursuant to the Financing Order in connection
with the issuance of the Transition Bonds.

“Issuer” means CenterPoint Energy Transition Bond Company IV, LLC, a Delaware
limited liability company, or its successor under the Indenture.

“Lien” means a security interest, lien, charge, pledge, equity or encumbrance of
any kind.

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

“Officer’s Certificate” means a certificate signed, in the case of the Seller,
by any manager, the chairman of the board, the chief executive officer, the
president, any vice chairman, any executive vice president, senior vice
president or vice president, the treasurer, assistant treasurer, the secretary
or any assistant secretary of the Seller.

“Opinion of Counsel” means one or more written opinions of counsel who may be an
employee of or counsel to the Issuer or the Seller, which counsel shall be
reasonably acceptable to the Indenture Trustee, the Issuer or the Rating
Agencies, as applicable, and which shall be in form reasonably satisfactory to
the Indenture Trustee, if applicable.

“Person” means any individual, corporation, estate, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
business trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

“proceeding” means any suit in equity, action at law or other judicial or
administrative proceeding.

“Prospectus” has the meaning specified in Section 3.06 hereof.

“PUCT” means the Public Utility Commission of Texas or any successor.

“Purchase Price” has the meaning specified in Section 2.01(a) hereof.

“Qualified Costs” has the meaning assigned to that term in the Restructuring Act
and the Financing Order.

 

Appendix A-2

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“Rating Agency” means any rating agency rating the Transition Bonds at the time
of issuance thereof at the request of the Issuer, which initially shall be
Moody’s, Fitch and S&P. If no such organization or successor is any longer in
existence or is a nationally recognized statistical rating organization, “Rating
Agency” shall mean a nationally recognized statistical rating organization or
other comparable Person designated by the Issuer, written notice of which
designation shall be given to the Indenture Trustee, the PUCT and the Servicer.

“Rating Agency Condition” means, with respect to any action, the notification in
writing to each Rating Agency of such action at least 15 Business Days prior to
such action, and (i) so long as S&P generally will provide such confirmations
with respect to asset-backed securities issued by regulated electric utilities
that are backed by stranded costs, transition property, system restoration
property or other types of property specifically created or defined for those
securitizations by state legislatures, confirmation by S&P to the Servicer, the
Indenture Trustee and the Issuer that such action will not result in a
suspension, withdrawal or downgrade of the then-current rating by S&P of any
outstanding class or tranche of Transition Bonds, and (ii) that, prior to the
taking of the proposed action, no Rating Agency provides written notice to the
Issuer, the Indenture Trustee or the Servicer that such action would result in
the suspension, withdrawal or downgrade of the then-current rating of any
outstanding class or tranche of Transition Bonds.

“Restructuring Act” means the Act of May 21, 1999, 76th Leg. R.S. ch. 405, 1999
(codified at Texas Utilities Code Section 39.001 et seq.), as amended by Act of
May 29, 2007, H.B. 624 §§ 2-4, 80th Leg., R.S. (codified as an amendment to
Texas Utilities Code Sections 39.301-39.303).

“Seller” means CenterPoint Houston, or its successor, in its capacity as seller
of the Transition Property to the Issuer pursuant to this Sale Agreement.

“Series Supplement” means the First Supplemental Indenture, dated as of
January 19, 2012, among the Issuer and the Indenture Trustee, which specifies
the terms of the Transition Bonds.

“Servicer” means CenterPoint Houston, in its capacity as the servicer under the
Servicing Agreement, and each successor to or assignee of CenterPoint Houston
(in the same capacity) pursuant to the relevant sections of the Servicing
Agreement.

“Servicer Default” means the occurrence and continuation of one of the events
specified in Section 7.01 of the Servicing Agreement.

“Servicing Agreement” means the Transition Property Servicing Agreement, dated
as of January 19, 2012, between the Issuer and the Servicer and acknowledged by
the Indenture Trustee, as the same may be amended and supplemented from time to
time.

“Standard & Poor’s” or “S&P,” means Standard & Poor’s Ratings Services, a
Standard & Poor’s Financial Services LLC business, or its successor.

“Transfer Date” means the date on which the Transition Bonds are to be
originally issued in accordance with Section 2.10 of the Indenture.

 

Appendix A-3

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“Transition Bond” means any of the 2012 Senior Secured Transition Bonds issued
by the Issuer pursuant to the Indenture and the Series Supplement.

“Transition Bondholder” means a Person in whose name a Transition Bond is
registered on the Transition Bond Register.

“Transition Bond Register” has the meaning specified in Section 2.05 of the
Indenture.

“Transition Charges” means the nonbypassable amounts to be charged for the use
or availability of electric services, approved by the Texas Commission in the
Financing Order to recover Qualified Costs that may be collected by the Seller,
its successors, assignees or other collection agents as provided for in the
Financing Order.

“Transition Property” means the rights and interests of the Seller or its
successor under the Financing Order, once those rights are first transferred to
the Issuer or pledged in connection with the issuance of the Transition Bonds,
including the right to impose, collect and receive through Transition Charges
payable by retail electric customers within the Seller’s certificated service
area as it existed on May 1, 1999, an amount sufficient to cover the Qualified
Costs of the Seller authorized in the Financing Order, the right to receive
Transition Charges in amounts and at times sufficient to pay principal and
interest and make other deposits in connection with the Transition Bonds and all
revenues and collections resulting from Transition Charges.

“Trust Estate” has the meaning specified in the Series Supplement.

“UCC” means, unless the context otherwise requires, the Uniform Commercial Code,
as in effect in the relevant jurisdiction, as amended from time to time.

 

Appendix A-4

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EXHIBIT A

BILL OF SALE

1. This Bill of Sale is being delivered pursuant to the Transition Property Sale
Agreement, dated as of January 19, 2012 (the “Sale Agreement”), between
CenterPoint Energy Houston Electric, LLC (the “Seller”) and CenterPoint Energy
Transition Bond Company IV, LLC (the “Issuer”). All capitalized terms used but
not defined herein have the respective meanings ascribed thereto in the Sale
Agreement.

2. In consideration of the Issuer’s payment to the Seller of $1,684,569,000,
receipt of which is hereby acknowledged, the Seller does hereby irrevocably
sell, transfer, assign, set over and otherwise convey to the Issuer, without
recourse or warranty, except as set forth in the Sale Agreement, all right,
title and interest of the Seller in, to and under the Transition Property
identified on Schedule 1 hereto (such sale, transfer, assignment, setting over
and conveyance of the Transition Property includes, to the fullest extent
permitted by the Restructuring Act, the right to impose, collect and receive the
Transition Charges related to the Transition Property, as the same may be
adjusted from time to time). Such sale, transfer, assignment, setting over and
conveyance is hereby expressly stated to be a sale or other absolute transfer
and, pursuant to Section 39.308 of the Restructuring Act and other applicable
law, is a true sale and is not a secured transaction and title, legal and
equitable, has passed to the Issuer. The preceding sentence is the statement
referred to in Section 39.308 of the Restructuring Act. The Seller agrees and
confirms that, after giving effect to the sale evidenced by this Bill of Sale,
the Seller has no right, title or interest in, to or under the Transition
Property.

3. The Issuer does hereby purchase the Transition Property identified on
Schedule 1 hereto from the Seller for the consideration set forth in paragraph 2
above.

4. The Seller and the Issuer each acknowledge and agree that the purchase price
for the Transition Property sold pursuant to this Bill of Sale and the Sale
Agreement is equal to its fair market value on the date hereof.

5. The Seller confirms that each of the representations and warranties on the
part of the Seller contained in the Sale Agreement are true and correct in all
respects on the date hereof as if made on the date hereof.

6. This Bill of Sale may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.

7. THIS BILL OF SALE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

 

Exhibit A-1

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

IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of
Sale as of the 19th day of January, 2012.

 

CENTERPOINT ENERGY TRANSITION BOND COMPANY IV, LLC,

    as Issuer,

By:      

Name:

Title:

 

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC,

    as Seller,

By:      

Name:

Title:

 

Exhibit A-2

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

SCHEDULE 1

to

BILL OF SALE

Transition Property

All of the Seller’s rights, title and interest in, to and under the Financing
Order issued by the PUCT on October 27, 2011 (PUCT Docket No. 39809), pursuant
to the Restructuring Act, including rights to impose, collect and receive the
“transition charges” (as defined in the Restructuring Act) approved in such
Financing Order.