Document:

<PAGE>
                                                                     EXHIBIT 4.1

               CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC

                                     Issuer

                                       and

                             ______________________

                                     Trustee

                                       and

                             ______________________

                             Securities Intermediary

                                FORM OF INDENTURE

                                 Dated as of [ ]

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

                            Securing Transition Bonds

                               Issuable in Series

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                           <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.......................................................    2
         SECTION 1.01. DEFINITIONS.........................................................................    2
         SECTION 1.02. INCORPORATION BY REFERENCE OF THE TRUST INDENTURE ACT...............................    2
         SECTION 1.03. RULES OF CONSTRUCTION...............................................................    2

ARTICLE II THE TRANSITION BONDS............................................................................    3
         SECTION 2.01. FORM ...............................................................................    3
         SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY..............................................    3
         SECTION 2.03. DENOMINATIONS; TRANSITION BONDS ISSUABLE IN SERIES..................................    4
         SECTION 2.04. TEMPORARY TRANSITION BONDS..........................................................    5
         SECTION 2.05. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.................................    6
         SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN TRANSITION BONDS...............................    7
         SECTION 2.07. PERSONS DEEMED OWNER................................................................    8
         SECTION 2.08. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST; INTEREST ON OVERDUE
                               PRINCIPAL AND PREMIUM, IF ANY; PRINCIPAL, PREMIUM AND INTEREST RIGHTS
                               PRESERVED...................................................................    8
         SECTION 2.09. CANCELLATION........................................................................    9
         SECTION 2.10. AMOUNT; AUTHENTICATION AND DELIVERY OF TRANSITION BONDS.............................   10
         SECTION 2.11. BOOK-ENTRY TRANSITION BONDS.........................................................   14
         SECTION 2.12. NOTICES TO CLEARING AGENCY..........................................................   15
         SECTION 2.13. DEFINITIVE TRANSITION BONDS.........................................................   15

ARTICLE III COVENANTS......................................................................................   16
         SECTION 3.01. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.................................   16
         SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.....................................................   16
         SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST..............................................   17
         SECTION 3.04. EXISTENCE...........................................................................   18
         SECTION 3.05. PROTECTION OF TRUST ESTATE..........................................................   18
         SECTION 3.06. OPINIONS AS TO TRUST ESTATE.........................................................   18
         SECTION 3.07. PERFORMANCE OF OBLIGATIONS; COMMISSION FILINGS......................................   19
         SECTION 3.08. NEGATIVE COVENANTS..................................................................   21
         SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE...................................................   22
         SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC.........................................................   22
         SECTION 3.11. SUCCESSOR OR TRANSFEREE.............................................................   23
         SECTION 3.12. NO OTHER BUSINESS...................................................................   23
         SECTION 3.13. NO BORROWING........................................................................   23
         SECTION 3.14. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES...................................   24
         SECTION 3.15. CAPITAL EXPENDITURES................................................................   24
         SECTION 3.16. RESTRICTED PAYMENTS.................................................................   24
         SECTION 3.17. NOTICE OF EVENTS OF DEFAULT.........................................................   24
         SECTION 3.18. PURCHASE OF SUBSEQUENT TRANSITION PROPERTY..........................................   24
         SECTION 3.19. INSPECTION..........................................................................   26
         SECTION 3.20. SALE AGREEMENT, INTERCREDITOR AGREEMENT, ADMINISTRATION AGREEMENT AND SERVICING
                               AGREEMENT COVENANTS.........................................................   26
         SECTION 3.21. TAXES ..............................................................................   29

ARTICLE IV SATISFACTION AND DISCHARGE; DEFEASANCE..........................................................   29
         SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE.................................   29
         SECTION 4.02. CONDITIONS TO DEFEASANCE............................................................   31
         SECTION 4.03. APPLICATION OF TRUST MONEY..........................................................   32
         SECTION 4.04. REPAYMENT OF MONEYS HELD BY PAYING AGENT............................................   33

ARTICLE V REMEDIES ........................................................................................   33
         SECTION 5.01. EVENTS OF DEFAULT...................................................................   33
         SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT..................................   34
         SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.....................   35
         SECTION 5.04. REMEDIES; PRIORITIES................................................................   37
         SECTION 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE...........................................   39
         SECTION 5.06. LIMITATION OF PROCEEDINGS...........................................................   39
         SECTION 5.07. UNCONDITIONAL RIGHTS OF TRANSITION BONDHOLDERS TO RECEIVE PRINCIPAL, PREMIUM, IF
                               ANY, AND INTEREST...........................................................   40
         SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES..................................................   40
         SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE......................................................   40
         SECTION 5.10. DELAY OR OMISSION NOT A WAIVER......................................................   40
         SECTION 5.11. CONTROL BY TRANSITION BONDHOLDERS...................................................   40
         SECTION 5.12. WAIVER OF PAST DEFAULTS.............................................................   41
         SECTION 5.13. UNDERTAKING FOR COSTS...............................................................   41
         SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS....................................................   42
         SECTION 5.15. ACTION ON TRANSITION BONDS..........................................................   42

ARTICLE VI THE TRUSTEE.....................................................................................   42
         SECTION 6.01. DUTIES AND LIABILITIES OF TRUSTEE...................................................   42
         SECTION 6.02. RIGHTS OF TRUSTEE...................................................................   44
         SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE........................................................   44
         SECTION 6.04. TRUSTEE'S DISCLAIMER................................................................   44
         SECTION 6.05. NOTICE OF DEFAULTS..................................................................   45
         SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.......................................................   45
         SECTION 6.07. COMPENSATION AND INDEMNITY..........................................................   46
         SECTION 6.08. REPLACEMENT OF TRUSTEE..............................................................   47
         SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER.........................................................   48
         SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.......................................   48
         SECTION 6.11. ELIGIBILITY; DISQUALIFICATION.......................................................   49
         SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER....................................   50
         SECTION 6.13. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE.......................................   50

ARTICLE VII TRANSITION BONDHOLDERS' LISTS AND REPORTS......................................................   50
         SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF TRANSITION BONDHOLDERS.............   50
         SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO TRANSITION BONDHOLDERS...............   50
         SECTION 7.03. REPORTS BY ISSUER...................................................................   51
         SECTION 7.04. REPORTS BY TRUSTEE..................................................................   51
         SECTION 7.05. PROVISION OF SERVICER REPORTS.......................................................   52

ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES..........................................................   52
         SECTION 8.01. COLLECTION OF MONEY.................................................................   52
         SECTION 8.02. COLLECTION ACCOUNT..................................................................   52
         SECTION 8.03. RELEASE OF TRUST ESTATE.............................................................   59
         SECTION 8.04. ISSUER OPINION OF COUNSEL...........................................................   59
         SECTION 8.05. REPORTS BY INDEPENDENT ACCOUNTANTS..................................................   60
         SECTION 8.06. REP DEPOSIT ACCOUNT.................................................................   60

ARTICLE IX SUPPLEMENTAL INDENTURES.........................................................................   60
         SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF TRANSITION BONDHOLDERS...................   60
         SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF TRANSITION BONDHOLDERS......................   62
         SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES................................................   64
         SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE....................................................   64
         SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT.................................................   64
         SECTION 9.06. REFERENCE IN TRANSITION BONDS TO SUPPLEMENTAL INDENTURES............................   64
         SECTION 9.07. PUCT CONSENT........................................................................   64

ARTICLE X REDEMPTION OF TRANSITION BONDS...................................................................   65
         SECTION 10.01. [RESERVED].........................................................................   65
         SECTION 10.02. MANDATORY REDEMPTION BY ISSUER.....................................................   65
         SECTION 10.03. FORM OF REDEMPTION NOTICE..........................................................   66
         SECTION 10.04. PAYMENT OF REDEMPTION PRICE........................................................   67

ARTICLE XI MISCELLANEOUS...................................................................................   67
         SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC..........................................   67
         SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.............................................   68
         SECTION 11.03. ACTS OF TRANSITION BONDHOLDERS.....................................................   68
         SECTION 11.04. NOTICES, ETC.......................................................................   69
         SECTION 11.05. NOTICES TO TRANSITION BONDHOLDERS; WAIVER..........................................   69
         SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS............................................   70
         SECTION 11.07. Notices to Luxembourg Stock Exchange...............................................   70
         SECTION 11.08. CONFLICT WITH TRUST INDENTURE ACT..................................................   70
         SECTION 11.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS...........................................   71
         SECTION 11.10. SUCCESSORS AND ASSIGNS.............................................................   71
         SECTION 11.11. SEPARABILITY.......................................................................   71
         SECTION 11.12. BENEFITS OF INDENTURE..............................................................   71
         SECTION 11.13. LEGAL HOLIDAYS.....................................................................   71
         SECTION 11.14. GOVERNING LAW......................................................................   71
         SECTION 11.15. COUNTERPARTS.......................................................................   71
         SECTION 11.16. ISSUER OBLIGATION..................................................................   71
         SECTION 11.17. NO PETITION........................................................................   72
         SECTION 11.18. INTERCREDITOR AGREEMENT............................................................   72

SCHEDULE 1.  FORM OF SEMIANNUAL SERVICER'S CERTIFICATE

SCHEDULE 3a. STATUTORY TRUE-SALE OPINION

SCHEDULE 3b. STATE LAW SECURITY INTEREST OPINION

SCHEDULE 3c. UCC OPINION

APPENDIX A.  MASTER DEFINITIONS
</TABLE>

                                       -v-

<PAGE>
       CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH
               318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:

<TABLE>
<CAPTION>
                          TRUST INDENTURE ACT SECTION                            INDENTURE SECTION(S)
----------------------------------------------------------------------------     --------------------
<S>                                                                              <C>
Section 310(a)(1)...........................................................     6.11

Section 310(a)(2)...........................................................     6.11

Section 310(a)(3)...........................................................     6.10(b)

Section 310(a)(4)...........................................................     Not Applicable

Section 310(a)(5)...........................................................     6.11

Section 310(b)..............................................................     6.08, 6.11

Section 311(a)..............................................................     6.12

Section 311(b)..............................................................     6.12

Section 311(c)..............................................................     Not Applicable

Section 312(a)..............................................................     7.01, 7.02

Section 312(b)..............................................................     7.02

Section 312(c)..............................................................     7.02

Section 313(a)..............................................................     7.04

Section 313(b)..............................................................     7.04

Section 313(c)..............................................................     7.04

Section 313(d)..............................................................     7.04

Section 314(a)..............................................................     3.09, 7.03

Section 314(b)..............................................................     3.07

Section 314(b)(1)...........................................................     Not Addressed

Section 314(b)(2)...........................................................     3.06

Section 314(c)(1)...........................................................     11.01

Section 314(c)(2)...........................................................     11.01

Section 314(c)(3)...........................................................     11.02

Section 314(d)..............................................................     8.03, 8.04, 9.02

Section 314(e)..............................................................     11.01

Section 315(a)..............................................................     6.01. 6.02

Section 315(b)..............................................................     6.05

Section 315(c)..............................................................     6.01

Section 315(d)..............................................................     6.01

Section 315(e)..............................................................     5.13

Section 316(a)..............................................................     5.11, 5.12

Section 316(a)(1)(A)........................................................     5.11

Section 316(a)(1)(B)........................................................     5.12

Section 316(a)(2)...........................................................     Not Applicable

Section 316(b)..............................................................     5.07

Section 316(c)..............................................................     Not Addressed

Section 317(a)(1)...........................................................     5.03

Section 317(a)(2)...........................................................     5.03

Section 317(b)..............................................................     3.03

Section 318(a)..............................................................     11.08
</TABLE>

NOTE: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Indenture.

                                      -vi-

<PAGE>

      INDENTURE dated as of [ ], between CenterPoint Energy Transition Bond
Company II, LLC, a Delaware limited liability company (the "Issuer"), ________
___________________________, a ________ banking corporation, in its capacity as
trustee (the "Trustee"), and ____________________________________, in its
capacity as the Securities Intermediary hereunder, (the "Securities
Intermediary").

      The Issuer has duly authorized the execution and delivery of this
Indenture to provide for one or more Series of Transition Bonds, issuable as
provided in this Indenture. Each Series of Transition Bonds will be issued only
under a separate Series Supplement to this Indenture, duly executed and
delivered by the Issuer and the Trustee. The Issuer is entering into this
Indenture, and the Trustee is accepting the trusts created hereby, each for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and each intending to be legally bound hereby.

      The Transition Bonds of each Series shall be non-recourse obligations and
shall be secured by and payable solely out of the Transition Property and the
other Trust Estate securing such Series of Transition Bonds. If and to the
extent such Transition Property and the other Trust Estate are insufficient to
pay all amounts owing with respect to the Transition Bonds secured thereby,
then, except as otherwise expressly provided herein, the Holders shall have no
claim in respect of such insufficiency against the Issuer or any other Person,
and the Holders, by their acceptance of such Transition Bonds, waive any such
claim.

      All things necessary to (a) make the Transition Bonds, when executed and
duly issued by the Issuer and authenticated and delivered by the Trustee
hereunder, valid obligations, and (b) make this Indenture a valid agreement of
the Issuer, in each case, in accordance with their respective terms, have been
done.

      In consideration of the foregoing, the Issuer, the Trustee and the
Securities Intermediary agree as follows:

      That under one or more Series Supplements, the Issuer will Grant to the
Trustee a Lien on and trust interest in the property described therein (such
property with respect to a particular Series being the "Series Trust Estate" and
all such property, collectively, the "Trust Estate"). Each Series Trust Estate
shall secure the obligations of the Issuer as more particularly described in the
applicable Series Supplement.

      AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties
hereto that all Transition Bonds are to be issued, countersigned, registered and
delivered and the Trust Estate is to be held and applied, subject to the further
covenants, conditions, releases, uses and trusts hereinafter set forth, and the
Issuer, for itself and any successor, does hereby covenant and agree to and with
the Trustee and its successors in said trust, for the benefit of the Holders, as
follows:

<PAGE>

                                    ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

      SECTION 1.01. DEFINITIONS. Capitalized terms used but not otherwise
defined in this Indenture have the respective meanings set forth in Appendix A
hereto unless the context otherwise requires.

      SECTION 1.02. INCORPORATION BY REFERENCE OF THE TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. Each of the
following TIA terms used in this Indenture has the following meaning:

            "Commission" means the Securities and Exchange Commission.

            "indenture securities" means the Transition Bonds.

            "indenture security holder" means a Holder.

            "indenture to be qualified" means this Indenture.

            "indenture trustee" or "institutional trustee" means the Trustee.

            "obligor" on the indenture securities means the Issuer and any other
      obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule have the
meaning assigned to them by such definitions.

      SECTION 1.03. RULES OF CONSTRUCTION.

            (i) An accounting term not otherwise defined has the meaning
      assigned to it in accordance with generally accepted accounting principles
      as in effect from time to time;

            (ii) "including" means including without limitation;

            (iii) with respect to terms defined in Appendix A hereto, the
      meanings shall be equally applicable to both the singular and plural forms
      of such terms and shall refer to either gender as may be appropriate;

            (iv) unless otherwise specified, references herein to Sections or
      Articles are to Sections or Articles of this Indenture; and

            (v) the words "herein," "hereof," "hereunder" and other words of
      similar import refer to this Indenture as a whole and not to any
      particular Article, Section or other subdivision.

                                      -2-

<PAGE>

                                   ARTICLE II

                              THE TRANSITION BONDS

      SECTION 2.01. FORM. The Transition Bonds and the Trustee's certificate of
authentication shall be in substantially the forms set forth in the related
Series Supplement, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture or by the
related Series Supplement and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the Managers of the Issuer executing
such Transition Bonds, as evidenced by their execution of such Transition Bonds.
Any portion of the text of any Transition Bond may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Transition
Bond. Each Transition Bond shall be dated the date of its authentication.

      The Transition Bonds shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the Managers of the Issuer executing
such Transition Bonds, as evidenced by their execution of such Transition Bonds.

      Each Transition Bond shall bear upon its face the designation so selected
for the Series and Tranche, if any, to which it belongs. The terms of all
Transition Bonds of the same Series shall be the same, unless such Series is
comprised of one or more Tranches, in which case the terms of all Transition
Bonds of the same Tranche shall be the same.

      Each Transition Bond shall state that the Texas Electric Choice Plan
provides that the State of Texas pledges "for the benefit and protection of
financing parties and the electric utility, that it will not take or permit any
action that would impair the value of the transition property, or except as
permitted . . . [through the Transition Charge Adjustment Process] . . . reduce,
alter, or impair the transition charges to be imposed, collected, and remitted
to financing parties, until the principal, interest, and premium, and any other
charges incurred and contracts to be performed in connection with the related
transition bonds have been paid and performed in full."

      SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Transition Bonds
shall be executed on behalf of the Issuer by a Manager. The signature of any
such Manager on the Transition Bonds may be manual or facsimile.

      Transition Bonds bearing the manual or facsimile signature of individuals
who were at any time Managers shall bind the Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Transition Bonds.

      At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Transition Bonds executed on behalf of the
Issuer to the Trustee pursuant to an Issuer Order for authentication; and the
Trustee shall authenticate and deliver such Transition Bonds as in this
Indenture provided and not otherwise.

                                      -3-

<PAGE>

      No Transition Bond shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears on such
Transition Bond a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Transition Bond shall
be conclusive evidence, and the only evidence, that such Transition Bond has
been duly authenticated and delivered hereunder.

      If and for so long as any Series of Transition Bonds is listed on the
Luxembourg Stock Exchange and the rules and regulations of such exchange so
require, a transfer or other agent appointed pursuant to Section 3.02 shall be
authorized on behalf of the Trustee to execute and deliver such certificate of
authentication.

      SECTION 2.03. DENOMINATIONS; TRANSITION BONDS ISSUABLE IN SERIES. The
Transition Bonds of each Series shall be issuable as registered Transition Bonds
in Authorized Denominations.

      The Transition Bonds may, at the election of and as authorized by a
Manager and set forth in a Series Supplement, be issued in one or more Series
(each of which may be comprised of one or more Tranches), and shall be
designated generally as the "Transition Bonds" of the Issuer, with such further
particular designations added or incorporated in such title for the Transition
Bonds of any particular Series or Tranche as a Manager of the Issuer may
determine and as set forth in the Series Supplement therefor.

      Each Series of Transition Bonds shall be created by a Series Supplement
authorized by a Manager and establishing the terms and provisions of such Series
and, if applicable, any Tranches thereof. The several Series and Tranches
thereof may differ as between Series and Tranches, in respect of any of the
following matters:

      (a) designation of the Series and, if applicable, the Tranches thereof;

      (b) the aggregate initial principal amount of the Transition Bonds of the
Series and, if applicable, each Tranche thereof;

      (c) the Bond Rate of the Series and, if applicable, each Tranche thereof
or the formula, if any, used to calculate the applicable Bond Rate or Bond Rates
for the Series and each Tranche thereof;

      (d) the Payment Dates for the Series and, if applicable, each Tranche
thereof;

      (e) the Expected Final Payment Date of the Series, and, if applicable,
each Tranche thereof;

      (f) the Series Final Maturity Date for the Series and, if applicable, the
Tranche Final Maturity Date for each Tranche thereof;

      (g) the Series Issuance Date for the Series;

      (h) the Series Trust Estate;

                                      -4-

<PAGE>

      (i) the place or places for payments with respect to the Series and, if
applicable, each Tranche thereof;

      (j) the Authorized Denominations for the Series and, if applicable, each
Tranche thereof;

      (k) the provisions, if any, for redemption of the Series by the Issuer
and, if applicable, each Tranche thereof;

      (l) whether the Transition Bonds of the Series are to be Book-Entry
Transition Bonds and the extent to which Section 2.11 will apply;

      (m) the Expected Amortization Schedule for the Series and, if applicable,
each Tranche thereof;

      (n) the Required Capital Amount with respect to the Series;

      (o) the Calculation Dates and Adjustment Dates for the Series;

      (p) the credit enhancement, if any, applicable to the Series and each
Tranche thereof and, with respect to Floating Rate Bonds, the terms of the
applicable Swap Agreement and the identity of the Swap Counterparty; and

      (q) any other terms of the Series or Tranche that are not inconsistent
with the provisions of this Indenture.

      SECTION 2.04. TEMPORARY TRANSITION BONDS. Pending the preparation of
definitive Transition Bonds pursuant to Section 2.13, or by agreement of the
purchasers of all Transition Bonds or, in the case of Transition Bonds held in a
book-entry only system by a Clearing Agency, a Manager on behalf of the Issuer
may execute, and upon receipt of an Issuer Order, the Trustee shall authenticate
and deliver temporary Transition Bonds which are printed, lithographed,
typewritten, mimeographed or otherwise produced of the tenor of the definitive
Transition Bonds in lieu of which they are issued and with such variations not
inconsistent with the terms of this Indenture as a Manager executing such
Transition Bonds may determine, as evidenced by its execution of such Transition
Bonds.

      If temporary Transition Bonds are issued, the Issuer will cause definitive
Transition Bonds to be prepared without unreasonable delay except where
temporary Transition Bonds are held by a Clearing Agency. After the preparation
of definitive Transition Bonds, the temporary Transition Bonds shall be
exchangeable for definitive Transition Bonds upon surrender of the temporary
Transition Bonds at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Transition Bonds, a Manager on behalf
of the Issuer shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like Series (and, if applicable, Tranche) and initial
principal amount of definitive Transition Bonds in Authorized Denominations.
Until so exchanged, the temporary Transition Bonds shall in all respects be
entitled to the same benefits under this Indenture as definitive Transition
Bonds.

                                      -5-

<PAGE>

      SECTION 2.05. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Transition Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the
Transition Bond Registrar shall provide for the registration of Transition Bonds
and the registration of transfers of Transition Bonds. The Trustee shall be
Transition Bond Registrar for the purpose of registering Transition Bonds and
transfers of Transition Bonds as herein provided. Upon any resignation of any
Transition Bond Registrar, the Issuer shall promptly appoint a successor or, if
it elects not to make such an appointment, assume the duties of Transition Bond
Registrar.

      If a Person other than the Trustee is appointed by the Issuer as
Transition Bond Registrar, the Issuer shall give the Trustee and any transfer,
paying, or listing agent of the Issuer prompt written notice of the appointment
of such Transition Bond Registrar and of the location, and any change in the
location, of the Transition Bond Register, and the Trustee and any such agent
shall have the right to inspect the Transition Bond Register at all reasonable
times and to obtain copies thereof, and the Trustee shall have the right to rely
conclusively upon a certificate executed on behalf of the Transition Bond
Registrar by a duly authorized officer thereof as to the names and addresses of
the Holders of the Transition Bonds and the principal amounts and number of such
Transition Bonds.

      Upon surrender for registration of transfer of any Transition Bond at the
office or agency of the Issuer to be maintained as provided in Section 3.02, a
Manager on behalf of the Issuer shall execute, and the Trustee shall
authenticate and the Transition Bondholder shall obtain from the Trustee, in the
name of the designated transferee or transferees, one or more new Transition
Bonds in any Authorized Denominations of a like Series (and, if applicable,
Tranche) and aggregate outstanding principal amount.

      At the option of the Holder, Transition Bonds may be exchanged for other
Transition Bonds of a like Series (and, if applicable, Tranche) and aggregate
outstanding principal amount in Authorized Denominations upon surrender of the
Transition Bonds to be exchanged at such office or agency. Whenever any
Transition Bonds are so surrendered for exchange, a Manager on behalf of the
Issuer shall execute, and the Trustee shall authenticate, and the Transition
Bondholder shall obtain from the Trustee the Transition Bonds which the
Transition Bondholder making the exchange is entitled to receive.

      All Transition Bonds issued upon any registration of transfer or exchange
of Transition Bonds shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Transition Bonds surrendered upon such registration of transfer or exchange.

      Every Transition Bond presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in the form set forth in the applicable Series Supplement
or such other form as is satisfactory to the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an Eligible Guarantor Institution in the form set forth
in such Transition Bond.

                                      -6-

<PAGE>

      No service charge shall be made to a Holder for any registration of
transfer or exchange of Transition Bonds (except as may be required by the rules
and regulations of the Luxembourg Stock Exchange with respect to any Transition
Bonds listed thereon), but, other than in respect of exchanges pursuant to
Section 2.04 or 9.05 not involving any transfer, the Issuer or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Transition Bonds.

      The preceding provisions of this Section notwithstanding, except to the
extent otherwise required by the rules and regulations of the Luxembourg Stock
Exchange with respect to any Transition Bonds listed thereon, the Issuer shall
not be required to make, and the Transition Bond Registrar need not register,
transfers or exchanges of Transition Bonds selected for redemption or transfers
or exchanges of any Transition Bond for a period of 15 days preceding the Final
Maturity Date with respect to such Transition Bond.

      SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN TRANSITION BONDS. If
(i) any mutilated Transition Bond is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Transition Bond, and (ii) there is delivered to the Trustee such security or
indemnity as may be required by it to hold the Issuer and the Trustee harmless,
then, in the absence of written notice to the Issuer, the Transition Bond
Registrar or the Trustee that such Transition Bond has been acquired by a bona
fide purchaser, a Manager on behalf of the Issuer shall execute, and upon a
Manager's written request the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Transition Bond, a replacement Transition Bond of like Series (and, if
applicable, Tranche), tenor and initial principal amount in Authorized
Denominations, bearing a number not contemporaneously outstanding; provided,
however, that if any such destroyed, lost or stolen Transition Bond, but not a
mutilated Transition Bond, shall have become or within seven days shall be due
and payable, or shall have been called for redemption, instead of issuing a
replacement Transition Bond, the Issuer may pay such destroyed, lost or stolen
Transition Bond when so due or payable or upon the Redemption Date without
surrender thereof. If, after the delivery of such replacement Transition Bond or
payment of a destroyed, lost or stolen Transition Bond pursuant to the proviso
to the preceding sentence, a bona fide purchaser of the original Transition Bond
in lieu of which such replacement Transition Bond was issued, or in respect of
which such payment was made, presents for payment such original Transition Bond,
the Issuer and the Trustee shall be entitled to recover such replacement
Transition Bond (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Transition Bond from such Person to whom such
replacement Transition Bond was delivered or any assignee of such Person, except
a bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Trustee in connection therewith.

      Upon the issuance of any replacement Transition Bond under this Section,
the Issuer or the Trustee may require the payment by the Holder of such
Transition Bond of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee and its counsel) connected
therewith.

                                      -7-

<PAGE>

      Every replacement Transition Bond issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Transition Bond shall
constitute an original additional contractual obligation of the Issuer, whether
or not the mutilated, destroyed, lost or stolen Transition Bond shall be at any
time enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Transition Bonds
duly issued hereunder.

      The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Transition Bonds.

      SECTION 2.07. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Transition Bond, the Issuer, the Trustee, the
Transition Bond Registrar and any agent of the Issuer, the Transition Bond
Registrar or the Trustee may treat the Person in whose name any Transition Bond
is registered (as of the day of determination) as the owner of such Transition
Bond for the purpose of receiving payments of Principal of and premium, if any,
and Interest on such Transition Bond and for all other purposes whatsoever,
whether or not such Transition Bond be overdue, and neither the Issuer, the
Trustee, the Transition Bond Registrar nor any agent of the Issuer, the
Transition Bond Registrar or the Trustee shall be affected by notice to the
contrary.

      SECTION 2.08. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST;
INTEREST ON OVERDUE PRINCIPAL AND PREMIUM, IF ANY; PRINCIPAL, PREMIUM AND
INTEREST RIGHTS PRESERVED.

      (a) The Transition Bonds of each Series shall accrue Interest as provided
in the related Series Supplement, at the applicable Bond Rate specified therein,
and such Interest shall be payable on each Payment Date as specified therein.
Any installment of Interest, principal or premium, if any, payable on any
Transition Bond which is punctually paid or duly provided for by the Issuer on
the applicable Payment Date shall be paid to the Person in whose name such
Transition Bond (or one or more Predecessor Transition Bonds) is registered on
the Record Date for such Payment Date, by check mailed first-class, postage
prepaid, to such Person's address as it appears on the Transition Bond Register
on such Record Date, or in such other manner as may be provided in the related
Series Supplement, except that (i) upon application to the Trustee by any Holder
owning Transition Bonds of any Series or Tranche in the principal amount of
$10,000,000 or more not later than the applicable Record Date payment will be
made by wire transfer to an account maintained and specified by such Holder and
(ii) with respect to Book-Entry Transition Bonds, payments will be made by wire
transfer in immediately available funds to the account designated by the Holder
of the applicable global Transition Bond unless and until such global Transition
Bond is exchanged for definitive Transition Bonds (in which event payments shall
be made as provided above) and except for the final installment of principal and
premium, if any, payable with respect to such Transition Bond on a Payment Date
which shall be payable as provided in clause (b) below. The funds represented by
any such checks returned undelivered shall be held in accordance with Section
3.03.

      (b) The principal of each Transition Bond of each Series (and, if
applicable, Tranche) shall be payable in installments on each Payment Date
specified in the Expected Amortization

                                      -8-

<PAGE>
Schedule included in the form of Transition Bond attached to the Series
Supplement for such Transition Bonds, but only to the extent that moneys are
available for such payment pursuant to Section 8.02; provided that installments
of principal not paid when scheduled to be paid shall be paid upon receipt of
moneys available for such purpose, in the manner set forth in the applicable
Expected Amortization Schedule. Failure to pay principal of each Transition Bond
of a Series in accordance with such Expected Amortization Schedule because
moneys are not available pursuant to Section 8.02 to make such payments shall
not constitute a Default or Event of Default under this Indenture with respect
to that Series. Notwithstanding the foregoing, the entire unpaid principal
amount of the Transition Bonds of any Series or Tranche shall be due and
payable, if not previously paid (i) on the Series Final Maturity Date (or, if
applicable, Tranche Final Maturity Date) therefor, (ii) on the date on which the
Transition Bonds of all Series have been declared immediately due and payable in
accordance with Section 5.02 or (iii) on the Redemption Date, if any, therefor.
The Trustee shall notify the Person in whose name a Transition Bond is
registered at the close of business on the Record Date preceding the Payment
Date on which the Issuer expects that the final installment of principal of and
premium, if any, and Interest on such Transition Bond will be paid. Such notice
shall be mailed no later than five days prior to such Expected Final Payment
Date and shall specify that such final installment of principal and premium, if
any, will be payable only upon presentation and surrender of such Transition
Bond and shall specify the place where such Transition Bond may be presented and
surrendered for payment of such installment, which, so long as any Transition
Bonds are listed on the Luxembourg Stock Exchange, shall include the office of
the paying agent in Luxembourg appointed pursuant to Section 3.02. Notices in
connection with redemptions of Transition Bonds shall be mailed to Transition
Bondholders as provided in Section 10.03.

      (c) If the Issuer defaults in a payment of Interest on the Transition
Bonds of any Series, the Issuer shall pay defaulted Interest (plus Interest on
such defaulted Interest at the applicable Bond Rate to the extent lawful) in any
lawful manner. The Issuer may pay such defaulted Interest to the Persons who are
Transition Bondholders on a subsequent special record date, which date shall be
at least fifteen Business Days prior to the special payment date. The Issuer
shall fix or cause to be fixed any such special record date and payment date,
and, at least 10 days before any such special record date, the Issuer shall mail
to each affected Transition Bondholder a notice that states the special record
date, the payment date and the amount of defaulted Interest to be paid.

      SECTION 2.09. CANCELLATION. All Transition Bonds surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by the Trustee. The Issuer may at any time deliver to the Trustee for
cancellation any Transition Bonds previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and all
Transition Bonds so delivered shall be promptly canceled by the Trustee. No
Transition Bonds shall be authenticated in lieu of or in exchange for any
Transition Bonds canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Transition Bonds may be held or
disposed of by the Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided that such Issuer Order
is timely and the Transition Bonds have not been previously disposed of by the
Trustee.

                                      -9-

<PAGE>

      SECTION 2.10. AMOUNT; AUTHENTICATION AND DELIVERY OF TRANSITION BONDS. The
aggregate principal amount of Transition Bonds that may be authenticated and
delivered under this Indenture shall not exceed [ ].

      Transition Bonds of each Series created and established by a Series
Supplement may from time to time be executed by a Manager on behalf of the
Issuer and delivered to the Trustee for authentication and thereupon the same
shall be authenticated and delivered by the Trustee upon Issuer Request and upon
delivery to the Trustee at the Issuer's expense of the following; provided,
however, that except with respect to items (1), (4)(a)(i) and (4)(a)(vi) below,
compliance with the following conditions and delivery of the following documents
shall be required only in connection with the original issuance of a Transition
Bond or Bonds of such Series:

      (1) Issuer Action. An Issuer Order authorizing and directing the
execution, authentication and delivery of the Transition Bonds by the Trustee
and specifying the principal amount of Transition Bonds to be authenticated.

      (2) Authorizing Certificate. A certified resolution of the Managers
authorizing the execution and delivery of the Series Supplement for the
Transition Bonds applied for and the execution, authentication and delivery of
such Transition Bonds.

      (3) Series Supplement. A Series Supplement in form satisfactory to the
Trustee for the Series of Transition Bonds being issued, which shall set forth
the provisions and form of the Transition Bonds of such Series (and, if
applicable, each Tranche thereof).

      (4) Certificates of the Issuer and the Seller.

            (a) An Issuer Officer's Certificate dated as of the Series Issuance
      Date, stating:

                  (i) that no Default has occurred and is continuing under this
            Indenture and that the issuance of the Transition Bonds being issued
            will not result in any Default;

                  (ii) that the Issuer has not assigned any interest or
            participation in the Series Trust Estate, except for the Grant
            contained in the applicable Series Supplement; that the Issuer has
            the power and authority to Grant the Series Trust Estate, and to
            Grant a security interest in and a Lien upon the Series Trust
            Estate, to the Trustee, free and clear of any other security
            interest, Liens, adverse claims and options; and that such security
            interest is a perfected security interest in all right, title and
            interest in and to the Series Trust Estate free and clear of any
            Lien, except the Lien of this Indenture;

                  (iii) that the Issuer has appointed an Independent registered
            public accounting firm contemplated in Section 8.05 and identifying
            such firm;

                  (iv) that attached thereto are duly executed, true and
            complete copies of the applicable Sale Agreement, Servicing
            Agreement, Administration Agreement, and Intercreditor Agreement;

                                      -10-

<PAGE>

                  (v) that all filings with the PUCT pursuant to the Texas
            Electric Choice Plan and the Financing Order and all filings
            required under the Texas Electric Choice Plan and all UCC financing
            statements with respect to the Series Trust Estate for that Series
            of Transition Bonds that are required to be filed by the terms of
            the Financing Order, the Texas Electric Choice Plan, the applicable
            Sale Agreement, the applicable Servicing Agreement or this Indenture
            have been filed as required; and

                  (vi) that all conditions precedent provided in the Basic
            Documents relating to the authentication and delivery of the
            Transition Bonds have been complied with.

            (b) An Officer's Certificate from the Seller, dated as of the Series
      Issuance Date, to the effect that:

                  (i) in the case of the Transition Property to be transferred
            to the Issuer on such date, immediately prior to the conveyance
            thereof to the Issuer pursuant to the applicable Sale Agreement, the
            Seller was the sole owner of the rights and interests under the
            Financing Order that will comprise the Transition Property upon
            transfer to the Issuer and such ownership interest was perfected;
            such Transition Property has been validly transferred and sold to
            the Issuer free and clear of all Liens (other than Liens created by
            the Issuer pursuant to this Indenture) and such transfer is
            absolute, irrevocable and has been perfected; the Seller has the
            power and authority to own, sell and assign the rights and interests
            under the Financing Order that will comprise the Transition Property
            upon transfer to the Issuer; and the Seller has duly authorized such
            sale and assignment to the Issuer; and

                  (ii) the Financing Order creating such Transition Property
            attached to such certificate is in full force and effect and the
            copy of the Financing Order attached thereto is true and complete.

      (5) Issuer Opinion of Counsel. An Issuer Opinion of Counsel, portions of
which may be delivered by counsel for the Issuer and portions of which may be
delivered by counsel for the Seller and/or the Servicer, dated as of the Series
Issuance Date subject to customary qualifications, acceptable to the Trustee, to
the collective effect that (or, in the case of subsections (d), (e) and (f)
below, in the form of):

            (a) regarding the Financing Order, that (i) such Financing Order is
      final and non-appealable and in full force and effect and (ii) the
      Transition Bonds being issued are authorized to be issued under the
      Financing Order;

            (b) regarding the Issuer:

                  (i) the Issuer has the power and authority to execute and
            deliver the Series Supplement and this Indenture and to issue the
            Transition Bonds being issued, each of the Series Supplement and
            this Indenture and such Transition Bonds have been duly authorized,
            executed and delivered, and the Issuer is duly

                                      -11-

<PAGE>

            organized and is validly existing in good standing under the laws of
            the jurisdiction of its organization;

                  (ii) no authorization, approval or consent of any governmental
            body is required for the valid issuance, authentication or delivery
            of such Transition Bonds, except for any such authorization,
            approval or consent as already has been obtained and such
            registrations as are required under the Blue Sky and securities laws
            of any State;

                  (iii) the Transition Bonds being issued, when executed and
            authenticated in accordance with the provisions of the Indenture and
            delivered, will constitute valid and binding obligations of the
            Issuer except as such enforceability may be subject to bankruptcy,
            insolvency, reorganization or other laws relating to or affecting
            creditors' rights generally and to general principles of equity
            (regardless of whether such enforceability is considered in a
            proceeding in equity or at law) entitled to the benefits of the
            Indenture and the related Series Supplement;

                  (iv) this Indenture (including the related Series Supplement),
            the applicable Sale Agreement, the applicable Administration
            Agreement, the applicable Servicing Agreement and any applicable
            Intercreditor Agreement are valid and binding agreements of the
            Issuer, enforceable against the Issuer in accordance with their
            respective terms, except as such enforceability may be subject to
            bankruptcy, insolvency, reorganization or other laws relating to or
            affecting creditors' rights generally and to general principles of
            equity (regardless of whether such enforceability is considered in a
            proceeding in equity or at law);

            (c) regarding the Seller, the Servicer, CenterPoint Houston and the
      Administrator: the applicable Sale Agreement, the applicable Servicing
      Agreement, any applicable Intercreditor Agreement, and the applicable
      Administration Agreement are valid and binding agreements of the Seller,
      the Servicer, CenterPoint Houston and the Administrator, respectively (as
      to which any such Person is a party), enforceable against the Seller, the
      Servicer, CenterPoint Houston and the Administrator in accordance with
      their terms except as such enforceability may be subject to bankruptcy,
      insolvency, reorganization or other laws relating to or affecting
      creditors' rights generally and to general principles of equity
      (regardless of whether such enforcement is considered in a proceeding in
      equity or at law);

            (d) Schedule 2a attached hereto with respect to the sale and
      transfer of the Transition Property from the Seller to the Issuer;

            (e) Schedule 2b attached hereto with respect to the Grant of a
      security interest under the Texas Electric Choice Plan in such Series
      Trust Estate to the Trustee for the benefit of the Transition Bondholders;

                                      -12-

<PAGE>

            (f) Schedule 2c attached hereto with respect to the Grant of a
      security interest under the UCC in such Series Trust Estate to the Trustee
      for the benefit of the Transition Bondholders;

            (g) the Indenture has been duly qualified under the Trust Indenture
      Act and either (i) the Series Supplement for the Transition Bonds applied
      for has been duly qualified under the Trust Indenture Act or (ii) no such
      qualification of such Series Supplement is necessary;

            (h) all instruments furnished to the Trustee conform to the
      requirements of this Indenture and constitute all the documents required
      to be delivered hereunder for the Trustee to authenticate and deliver the
      Transition Bonds applied for and all conditions precedent provided for in
      this Indenture relating to the authentication and delivery of such
      Transition Bonds (unless waived in writing by the Trustee) have been
      complied with;

            (i) either (A) the registration statement covering the Transition
      Bonds is effective under the Securities Act of 1933 and, to the best of
      such counsel's knowledge and information, no stop order suspending the
      effectiveness of such registration statement has been issued under the
      Securities Act of 1933 nor have proceedings therefor been instituted by
      the Commission or (B) the Transition Bonds are exempt from the
      registration requirements under the Securities Act of 1933;

            (j) the applicable Sale Agreement, the applicable Servicing
      Agreement, and the applicable Administration Agreement have been duly
      authorized, executed and delivered by the Seller, the Servicer, the Issuer
      and the Administrator, respectively (as to which any such Person is a
      party);

            (k) any applicable Intercreditor Agreement has been duly authorized,
      executed and delivered by CenterPoint Houston, the Servicer and the
      Issuer; and

            (l) the Issuer is not now and, following the issuance of the
      Transition Bonds will not be, required to be registered under the
      Investment Company Act of 1940, as amended.

      (6) Accountant's Certificate or Opinion. A certificate or opinion
complying with the requirements of Section 11.01, addressed to the Issuer and
the Trustee of an Independent registered public accounting firm of recognized
national reputation to the effect that (a) such accountants are Independent
within the meaning of the Indenture, and are independent public accountants
within the meaning of the standards of the Public Company Accounting Oversight
Board (United States), and (b) with respect to the Series Trust Estate, they
have reviewed calculations made by the Issuer and determined that, based on the
assumptions used by the Issuer in calculating the initial Transition Charges
with respect to the transferred Transition Property or, if applicable, the most
recent revised Transition Charges with respect to the transferred Transition
Property, and taking into account amounts on deposit in the Excess Funds
Subaccount, as of the Series Issuance Date for such Series (after giving effect
to the issuance of such Series and the application of the proceeds therefrom)
such Transition Charges are sufficient

                                      -13-

<PAGE>

to (i) pay Operating Expenses when incurred plus any amounts due under any
interest rate protection agreement, (ii) pay Interest on each Series of
Transition Bonds at their respective Bond Rates when due, (iii) pay Principal of
the Transition Bonds of all Series in accordance with their respective Expected
Amortization Schedules and (iv) replenish any amounts drawn from the Capital
Subaccount as of each Payment Date.

      (7) Rating Agency Condition. The Trustee shall receive written
confirmation from each Rating Agency that such Series of Transition Bonds will
be rated as set forth in the applicable Series Supplement.

      (8) Bill of Sale. If the issuance of a Series of Transition Bonds is a
Financing Issuance, the Bill of Sale delivered to the Issuer under the
applicable Sale Agreement with respect to the Transition Property being
purchased with the proceeds of such Financing Issuance.

      (9) Moneys for Refunding. If the issuance of a Series of Transition Bonds
is a Refunding Issuance, the amount of money necessary to pay the outstanding
Principal balance of, and premium and Interest on, the Transition Bonds being
refunded to the Redemption Date for the Transition Bonds, is to be deposited
into a separate account with the Trustee.

      (10) Required Capital Amount. Evidence satisfactory to the Trustee that
the Required Capital Amount for such Series has been credited to the Capital
Subaccount.

      SECTION 2.11. BOOK-ENTRY TRANSITION BONDS. Unless otherwise specified in
the related Series Supplement, each Series of Transition Bonds, upon original
issuance, will be issued in the form of a typewritten Transition Bond or
Transition Bonds representing the Book-Entry Transition Bonds, to be delivered
to DTC, as the initial Clearing Agency, by, or on behalf of, the Issuer. Such
Transition Bond shall initially be registered on the Transition Bond Register in
the name of Cede & Co., the nominee of the initial Clearing Agency, and no
Transition Bond Owner will receive a definitive Transition Bond representing
such Transition Bond Owner's interest in such Transition Bond, except as
provided in Section 2.13. Unless and until definitive, fully registered
Transition Bonds of any Series (the "Definitive Transition Bonds") replacing the
Book-Entry Transition Bonds have been issued to Transition Bondholders of that
Series pursuant to Section 2.13 or pursuant to any applicable Series Supplement
relating thereto:

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

      (b) the Transition Bond Registrar and the Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including the
payment of Principal of and premium, if any, and Interest on the Transition
Bonds and the giving of instructions or directions hereunder) as the sole Holder
of the Transition Bonds, and shall have no obligation to the Transition Bond
Owners;

      (c) to the extent that the provisions of this Section conflict with any
other provisions of this Indenture, the provisions of this Section shall
control;

      (d) the rights of Transition Bond Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Transition Bond Owners and the Clearing Agency or the
Clearing Agency Participants. Pursuant to the

                                      -14-

<PAGE>

DTC Agreement, unless and until Definitive Transition Bonds are issued pursuant
to Section 2.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments of
Principal of and premium, if any, and Interest on the Transition Bonds to such
Clearing Agency Participants; and

      (e) whenever this Indenture requires or permits actions to be taken based
upon instructions or directions of Holders of Transition Bonds evidencing a
specified percentage of the Outstanding Amount of the Transition Bonds or a
Series or Tranche thereof, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such effect
from Transition Bond Owners or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial interest
in the Transition Bonds or such Series or Tranche and has delivered such
instructions to the Trustee.

      SECTION 2.12. NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Transition Bondholders is required under this Indenture,
unless and until Definitive Transition Bonds shall have been issued to
Transition Bond Owners pursuant to Section 2.13 and the applicable Series
Supplement, the Trustee, the Servicer and the Paying Agent shall give all such
notices and communications specified herein to be given to Transition
Bondholders to the Clearing Agency, and shall have no obligation to the
Transition Bond Owners.

      SECTION 2.13. DEFINITIVE TRANSITION BONDS. If (i) the Clearing Agency or
the Issuer advises the Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities as nominee and
depository with respect to any Book-Entry Series or Tranche of Transition Bonds
and the Issuer is unable to locate a qualified successor, (ii) the Issuer
advises the Trustee in writing that it elects to discontinue use of the
book-entry-only transfers through the Clearing Agency with respect to any Series
or Tranche of Transition Bonds and to deliver certificated Transition Bonds to
the Clearing Agency or (iii) after the occurrence of an Event of Default,
Transition Bond Owners representing beneficial interests aggregating at least a
majority of the Outstanding Amount of the Transition Bonds of all Series
maintained as Book-Entry Transition Bonds advise the Issuer and, through the
Clearing Agency, the Trustee in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interests of the
Transition Bond Owners of such Series, then the Clearing Agency shall notify all
affected Transition Bond Owners, the Issuer and the Trustee of the occurrence of
any such event and of the availability of Definitive Transition Bonds to
affected Transition Bond Owners requesting the same. Upon surrender by the
Clearing Agency to the Trustee of the typewritten Transition Bond or Transition
Bonds representing the Book-Entry Transition Bonds of that Series, accompanied
by registration instructions, a Manager on behalf of the Issuer shall execute
and the Trustee shall authenticate the Definitive Transition Bonds in accordance
with the instructions of the Clearing Agency. None of the Issuer, the Transition
Bond Registrar or the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. [Any Definitive Transition Bonds listed on the Luxembourg
Stock Exchange shall be made available to the Transition Bondholders through the
office of the transfer agent appointed pursuant to the second paragraph of
Section 3.02.] Upon the issuance of Definitive Transition Bonds, the Trustee
shall recognize the Holders of the Definitive Transition Bonds as Transition
Bondholders.

                                      -15-

<PAGE>

      Definitive Transition Bonds will be transferable and exchangeable at the
offices of the Transition Bond Registrar or, with respect to any Transition
Bonds listed on the Luxembourg Stock Exchange, at the offices of the transfer
agent appointed pursuant to the second paragraph of Section 3.02. With respect
to any transfer of such listed Transition Bonds, the new Definitive Transition
Bonds registered in the names specified by the transferee and the original
transferor shall be available at the offices of such transfer agent.

                                   ARTICLE III

                                    COVENANTS

      SECTION 3.01. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The
Issuer will duly and punctually pay the Principal of and premium, if any, and
Interest on the Transition Bonds in accordance with the terms of the Transition
Bonds, this Indenture and the applicable Series Supplement; provided that except
on the Series Final Maturity Date, the Tranche Final Maturity Date or the
Redemption Date for a Series or Tranche of Transition Bonds or upon the
acceleration of the Transition Bonds following the occurrence of an Event of
Default, the Issuer shall only be obligated to pay the Principal of such
Transition Bonds on each Payment Date therefor to the extent moneys are
available for such payment pursuant to Section 8.02. Amounts properly withheld
under the Code or other applicable tax laws by any Person from a payment to any
Transition Bondholder of Interest or Principal or premium, if any, shall be
considered as having been paid by the Issuer to such Transition Bondholder for
all purposes of this Indenture.

      SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in
the Borough of Manhattan, the City of New York, an office or agency where
Transition Bonds may be surrendered for registration of transfer or exchange,
and where notices and demands to or upon the Issuer in respect of the Transition
Bonds and this Indenture may be served. The Issuer hereby initially appoints the
Corporate Trust Office of the Trustee to serve as its agent for the foregoing
purposes. The Issuer will give prompt written notice to the Trustee of the
location, and of any change in the location, of any such office or agency. If at
any time the Issuer shall fail to maintain any such office or agency or shall
fail to furnish the Trustee with the address thereof, such surrenders, notices
and demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Trustee as its agent to receive all such surrenders, notices
and demands.

      To the extent any of the Transition Bonds are listed on the Luxembourg
Stock Exchange and the rules of such exchange so require, (i) the Issuer will
maintain in Luxembourg (A) an office and a transfer agent where Transition Bonds
may be surrendered for registration of transfer or exchange, (B) an office and a
listing agent where notices and demands to or upon the Issuer in respect of the
Transition Bonds and this Indenture may be served, and (C) an office and a
paying agent where payments in respect of the Transition Bonds may be made and
(ii) any reference in this Indenture to the office or agency of the Issuer
referred to in this Section 3.02 shall also refer to such offices, and the
transfer, listing and paying agents, of the Issuer in Luxembourg, as applicable.
The Issuer shall give the Trustee and any other agent appointed under this
Section 3.02 written notice of the location and identity, and of any change in
the location or identity, of any such office or agency.

                                      -16-

<PAGE>

      SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02(a), all payments of Principal of, or premium and Interest on, the
Transition Bonds that are to be made from amounts withdrawn from the Collection
Account pursuant to Section 8.02(d) or (e) or Section 4.03 shall be made on
behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account for payments of Transition Bonds shall
be paid over to the Issuer except as provided in this Section and in Section
8.02.

      The Issuer shall cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee (and during such time as the Trustee acts as Paying Agent, it
hereby so agrees), subject to the provisions of this Section, that such Paying
Agent will:

      (a) hold all sums held by it for the payment of Principal of, or premium
or Interest on, the Transition Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided;

      (b) give the Trustee written notice of any Default by the Issuer (or any
other obligor upon the Transition Bonds) of which the Paying Agent has actual
knowledge in the making of any payment required to be made with respect to the
Transition Bonds;

      (c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent;

      (d) immediately resign as a Paying Agent and forthwith pay to the Trustee
all sums held by the Paying Agent in trust for the payment of Transition Bonds
if at any time the Paying Agent ceases to meet the standards required of Paying
Agents at the time of its appointment; and

      (e) comply with all requirements of the Code and other applicable tax laws
with respect to the withholding from any payments made by it on any Transition
Bonds of any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.

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

      Subject to applicable laws with respect to escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
of Principal of, premium, if any, or Interest on any Transition Bond and
remaining unclaimed for two years after such amount has become due and payable
shall be discharged from such trust and be paid to the Issuer upon delivery by
the Issuer of an Issuer Order; and the Holder of such Transition Bond shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee or such Paying

                                      -17-

<PAGE>

Agent with respect to such trust money shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Issuer cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Trustee
may also adopt and employ, at the expense of the Issuer, any other reasonable
means of notification of such repayment (including mailing notice of such
repayment to Holders whose Transition Bonds have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Trustee or of
any Paying Agent, at the last address of record for each such Holder).

      SECTION 3.04. EXISTENCE. Subject to Section 3.10, the Issuer shall keep in
full effect its existence, rights and franchises as a statutory limited
liability company under the laws of the State of Delaware (unless it becomes, or
any successor Issuer hereunder is or becomes, organized under the laws of any
other State or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Transition Bonds, the Trust Estate and each other instrument or agreement
included in the Trust Estate.

      SECTION 3.05. PROTECTION OF TRUST ESTATE. The Issuer shall from time to
time execute and deliver, and file if required, all such supplements and
amendments hereto and all such filings (including filings with the PUCT pursuant
to the Texas Electric Choice Plan), financing statements, continuation
statements, instruments of further assurance and other instruments, and shall
take such other action reasonably necessary to:

      (a) maintain and preserve the Grant, Lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the purposes
hereof;

      (b) perfect, publish notice of or protect the validity of any Grant made
or to be made by this Indenture, including all Series Supplements;

      (c) enforce any of the Trust Estate, including its rights under any Swap
Agreement;

      (d) preserve and defend title to the Trust Estate and the rights of the
Trustee and the Transition Bondholders in the Trust Estate against the claims of
all Persons and parties; or

      (e) pay any and all taxes levied or assessed upon all or any part of the
Trust Estate.

The Issuer hereby authorizes the Trustee to execute upon written direction any
filing with the PUCT, financing statement, continuation statement or other
instrument required to be filed pursuant to this Section.

      SECTION 3.06. OPINIONS AS TO TRUST ESTATE. (a) On or before March 31 in
each calendar year, while any Series is outstanding, beginning on March 31,
2006, the Issuer

                                      -18-

<PAGE>

shall furnish to the Trustee an Issuer Opinion of Counsel stating that, in the
opinion of such counsel, either (i) all necessary action has been taken with
respect to the recording, filing, re-recording and re-filing of this Indenture,
any Supplemental Indentures and any other requisite documents and, with respect
to the execution and filing of any filings pursuant to the Texas Electric Choice
Plan, the Financing Order or the UCC, financing statements and continuation
statements as are necessary to maintain the Lien and security interest, and the
first priority thereof, created by this Indenture and reciting the details of
such action or (ii) no such action is necessary to maintain such Lien and
security interest, and the first priority thereof. Such Issuer Opinion of
Counsel shall also describe the recording, filing, re-recording and re-filing of
this Indenture, any Supplemental Indentures and any other requisite documents,
and the execution and filing of any filings pursuant to the Texas Electric
Choice Plan, the Financing Order or the UCC, financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the Grant, Lien and security interest of this Indenture until March
31 in the following calendar year.

      (b) Prior to the effectiveness of any amendment to any Sale Agreement or
Servicing Agreement, the Issuer shall furnish to the Trustee an Issuer Opinion
of Counsel either (i) stating that, in the opinion of such counsel, all filings,
including filings pursuant to the UCC, have been executed and filed that are
necessary fully to preserve and protect the interest of the Issuer and the
Trustee in the Transition Property and the proceeds thereof, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest.

      SECTION 3.07. PERFORMANCE OF OBLIGATIONS; COMMISSION FILINGS.

      (a) The Issuer (i) shall diligently pursue any and all actions to enforce
its rights under the Basic Documents and each other instrument or agreement
included in the Trust Estate and (ii) shall not take any action and will use its
best efforts not to permit any action to be taken by others that would release
any Person from any of such Person's covenants or obligations under any such
Basic Document, instrument or agreement or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such Basic Document, instrument or agreement,
except, in each case, as expressly provided in such Basic Document or such other
instrument or agreement.

      (b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Trustee in an Issuer Officer's Certificate shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Administrator to assist the Issuer in performing its duties under this
Indenture.

      (c) The Issuer shall punctually perform and observe all of its obligations
and agreements contained in the Basic Documents and in all other instruments and
agreements included in the Trust Estate.

      (d) The Issuer shall file with the Commission such periodic reports, if
any, as are required (without regard to the number of Holders of Bonds to the
extent permitted by and

                                      -19-

<PAGE>

consistent with the Issuer's obligations under applicable law) from time to time
under Section 13 or Section 15(d) of the Exchange Act so long as any Transition
Bonds remain Outstanding, and the Issuer shall not voluntarily suspend or
terminate its filing obligations with the Commission. The Issuer shall also, to
the extent permitted by and consistent with the Issuer's obligations under
applicable law, post on its website or furnish or file in the periodic reports
and other reports to be filed with the Commission pursuant to the Exchange Act,
as described below, the following information in respect of each series of
Outstanding Transition Bonds to the extent such information is reasonably
available to the Issuer:

            (ii) a statement of Transition Charge remittances to the Trustee (to
      be included in the Form 10-Q or Form 10-K filed subsequent to the
      respective report);

            (iii) a statement reporting the balance in the Collection Account
      and the balance in each subaccount of the Collection Account as of the end
      of each quarter or the most recent date available (to be included in the
      Form 10-Q or Form 10-K);

            (iv) a statement showing the balance of Outstanding Transition Bonds
      that reflects the actual periodic payments made on the Transition Bonds
      (to be included in the Form 10-Q or Form 10-K);

            (v) the [semiannual] Servicer's Certificate which is required to be
      submitted pursuant to the applicable Servicing Agreement (to be filed with
      a Form 10-Q, Form 10-K or Form 8-K);

            (vi) the text (or a link to the website where a reader can find the
      text) of each true-up filing in respect of the Outstanding Series of
      Transition Bonds and the results of each true-up filing (to be included in
      either a Form 10-Q, Form 10-K or Form 8-K);

            (vii) any change in the long-term or short-term credit ratings of
      the Servicer assigned by the Rating Agencies (to be filed or furnished in
      a Form 8-K);

            (viii) material legislative or regulatory developments directly
      relevant to the Outstanding Transition Bonds (to be filed or furnished in
      a Form 8-K); and

            (ix) a quarterly statement (to be included in each Form 10-Q and
      Form 10-K) affirming that, to the Issuer's knowledge, in all material
      respects, for each materially significant REP, (A) each REP has been
      billed in compliance with the requirements outlined in the Financing
      Order; (B) each REP has made payments in compliance with the requirements
      outlined in the Financing Order; and (C) each REP satisfies the
      creditworthiness requirements of the Financing Order or describing the
      Servicer's actions if (A), (B) or (C) has not occurred.

      In addition, the Issuer shall, to the extent permitted by and consistent
with the Issuer's obligations under applicable law, cause to be posted on the
website associated with the Issuer's parent's website:

            A. the Final Prospectus for each series of Outstanding Transition
      Bonds;

                                      -20-

<PAGE>

            B. the [semiannual] Servicer's Certificate delivered for each Series
      of Transition Bonds pursuant to each Servicing Agreement;

            C. the periodic reports described above in this subsection (d); and

            D. a current organization chart for the Issuer and the Servicer
      (unless the Servicer is not related to the Issuer, in which case the
      Servicer shall post two separate organization charts), in each case
      disclosing the parents and material subsidiaries of the Issuer and the
      Servicer.

      (e) The Issuer shall make all filings required under the Texas Electric
Choice Plan relating to the transfer of the ownership or security interest in
the Transition Property other than those required to be made by the Seller or
any Servicer pursuant to the Basic Documents.

      SECTION 3.08. NEGATIVE COVENANTS. So long as any Transition Bonds are
Outstanding, the Issuer shall not:

            (i) except as expressly permitted by this Indenture, any
      Supplemental Indenture, any Sale Agreement or any Servicing Agreement,
      sell, transfer, exchange or otherwise dispose of any of the assets of the
      Issuer, unless directed to do so by the Trustee in accordance with Article
      V;

            (ii) terminate its existence, dissolve or liquidate in whole or in
      part, except as Section 3.10 permits;

            (iii) claim any credit on, or make any deduction from the Principal
      or premium, if any, or Interest payable in respect of, the Transition
      Bonds (other than amounts properly withheld from such payments under the
      Code) or assert any claim against any present or former Transition
      Bondholder by reason of the payment of taxes levied or assessed upon the
      Issuer or any part of the Trust Estate;

            (iv) (A) permit the validity or effectiveness of this Indenture to
      be impaired, or permit the Lien of this Indenture to be amended,
      hypothecated, subordinated, terminated or discharged, or permit any Person
      to be released from any covenants or obligations with respect to the
      Transition Bonds under this Indenture except as may be expressly permitted
      hereby, (B) permit any Lien (other than the Lien created by this
      Indenture) to be created on or extend to or otherwise arise upon or burden
      the Trust Estate or any part thereof or any interest therein or the
      proceeds thereof or (C) permit the Lien of this Indenture not to
      constitute a continuing valid first priority security interest in the
      Trust Estate;

            (v) except as contemplated by this Indenture, any Supplemental
      Indenture, any Sale Agreement, or any Servicing Agreement, enter into any
      swap, hedge or other similar financial arrangement;

            (vi) elect to be classified as an association taxable as a
      corporation for federal income tax purposes or otherwise take any action,
      file any tax return or make any election inconsistent with the treatment
      of the Issuer, for purposes of federal taxes and, to the

                                      -21-

<PAGE>

      extent consistent with applicable state tax law, state income and
      franchise tax purposes, as a disregarded entity that is not separate from
      the sole owner of the Issuer; or

            (vii) take any action that is the subject of a Rating Agency
      Condition if such action would result in a reduction or withdrawal of the
      then-current rating on any Outstanding Series or Tranche of Transition
      Bonds.

      SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Trustee, within 120 days after the end of each fiscal year of the Issuer
(which, as of the date hereof, is the calendar year) commencing with the fiscal
year [ ], an Issuer Officer's Certificate (a copy of which the Issuer will
deliver to each Rating Agency and the PUCT) stating, as to the Manager signing
such Issuer Officer's Certificate, that

            (i) a review of the activities of the Issuer during such year (or
      relevant portion thereof) and of performance under this Indenture has been
      made under such Manager's supervision; and

            (ii) to the best of such Manager's knowledge, based on such review,
      the Issuer has complied with all conditions and covenants under this
      Indenture throughout such fiscal year (or relevant portion thereof), or,
      if there has been a default in compliance with any such condition or
      covenant, describing each such default known to the Manager and the nature
      and status thereof.

      SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The
Issuer shall not consolidate or merge with or into or convert into any other
Person or sell substantially all of its assets to any other Person, unless:

            (i) the Person (if other than the Issuer) formed by or surviving
      such consolidation, merger or conversion or to whom substantially all of
      such assets are sold shall be a Person organized and existing under the
      laws of the United States of America or any State and shall expressly
      assume by a Supplemental Indenture, executed and delivered to the Trustee,
      in form satisfactory to the Trustee, the due and punctual payment of the
      Principal of and premium, if any, and Interest on all Outstanding
      Transition Bonds and the performance or observance of every agreement and
      covenant of this Indenture on the part of the Issuer to be performed or
      observed, all as provided herein and in the applicable Series Supplement
      or Series Supplements;

            (ii) the Person (if other than the Issuer) formed by or surviving
      such consolidation, merger or conversion or to whom substantially all of
      such assets are sold shall expressly assume all obligations and succeed to
      all rights of the Issuer under the Basic Documents to which the Issuer is
      a party (or under which the Issuer has rights) pursuant to an assignment
      and assumption agreement executed and delivered to the Trustee, in form
      satisfactory to the Trustee;

            (iii) immediately after giving effect to such consolidation, merger,
      conversion or sale, no Default or Event of Default shall have occurred and
      be continuing;

                                      -22-

<PAGE>

            (iv) prior notice to the Rating Agencies shall have been provided
      and the Rating Agency Condition shall have been satisfied with respect to
      such consolidation, merger, conversion or sale;

            (v) the Issuer shall have received an opinion of Independent counsel
      (and shall have delivered copies thereof to the Trustee) to the effect
      that such consolidation, merger, conversion or sale (a) will not have any
      material adverse tax consequence to the Issuer or any Transition
      Bondholder, (b) complies with this Indenture and all of the conditions
      precedent herein relating to such transaction and (c) will result in the
      Trustee maintaining a continuing valid first priority perfected security
      interest in the Trust Estate;

            (vi) none of the Transition Property, any Financing Order or the
      Issuer's rights under the Texas Electric Choice Plan or the Financing
      Order shall be impaired thereby; and

            (vii) any action as is necessary to maintain the Lien created by
      this Indenture shall have been taken.

      SECTION 3.11. SUCCESSOR OR TRANSFEREE.

      (a) Upon any consolidation, merger or conversion of the Issuer in
accordance with Section 3.10, the Person formed by or surviving such
consolidation, merger or conversion (if other than the Issuer) shall succeed to,
and be substituted for, and may exercise every right and power of, the Issuer
under this Indenture with the same effect as if such Person had been named as
the Issuer herein.

      (b) Except for such obligations set forth in Section 6.07, upon any sale
by the Issuer of substantially all of its assets in a sale which complies with
Section 3.10, immediately upon the delivery of written notice to the Trustee
from the Person acquiring such assets stating that the Issuer is to be so
released, the Issuer will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer with respect to
the Transition Bonds and from every covenant and agreement of the Basic
Documents to be observed or performed on the part of the Issuer.

      SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than purchasing and owning the Transition Property provided for
in Financing Orders issued by the PUCT from time to time, issuing Transition
Bonds from time to time, pledging its interest in the Trust Estate to the
Trustee under this Indenture in order to secure the Issuer's obligations as set
forth in the Series Supplements, entering into and performing under the Basic
Documents relating to the Transition Bonds and any Swap Agreement executed in
connection therewith, and performing activities that are necessary, suitable or
convenient to accomplish these purposes or are incidental thereto.

      SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Transition Bonds and any obligations under any
credit enhancement or Swap Agreement for any Series of Transition Bonds and
except as contemplated by the Basic Documents.

                                      -23-

<PAGE>

      SECTION 3.14. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
contemplated by the Basic Documents, the Issuer shall not make any loan or
advance or credit to, or guarantee (directly or indirectly or by an instrument
having the effect of assuring another's payment or performance on any obligation
or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person other
than any Eligible Investments.

      SECTION 3.15. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty) other than Transition Property purchased from the
Seller pursuant to, and in accordance with, any Sale Agreement.

      SECTION 3.16. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to any owner of a beneficial interest in the Issuer or otherwise with
respect to any ownership or equity interest in, or ownership security of, the
Issuer, (ii) redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that if no Event
of Default shall have occurred and be continuing, the Issuer may make, or cause
to be made, any such distributions to any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer using funds distributed to the Issuer pursuant to Section
8.02(d) or which are not otherwise subject to the Lien of this Indenture to the
extent that such distributions would not cause the book value of the remaining
equity in the Issuer to decline below 0.5% of the original principal amount of
all Series of Transition Bonds which remain outstanding. The Issuer will not,
directly or indirectly, make payments to or distributions from the Collection
Account except in accordance with the Basic Documents.

      SECTION 3.17. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to deliver to
the Trustee, the PUCT, the Rating Agencies and, to the extent the rules and
regulations of the Luxembourg Stock Exchange so require, any agent in Luxembourg
appointed pursuant to the second paragraph of Section 3.02 written notice in the
form of an Issuer Officer's Certificate of any Default or Event of Default
hereunder or under any of the Basic Documents, its status and what action the
Issuer is taking or proposes to take with respect thereto within five Business
Days after the occurrence thereof.

      SECTION 3.18. PURCHASE OF SUBSEQUENT TRANSITION PROPERTY. (a) The Issuer
may from time to time purchase or acquire Subsequent Transition Property from
the Seller pursuant to a Sale Agreement, subject to the conditions specified in
paragraph (b) below.

      (b) The Issuer shall be permitted to purchase or acquire from the Seller
Subsequent Transition Property and the proceeds thereof only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:

                                      -24-

<PAGE>

            (i) The Seller shall have provided the Issuer, the PUCT, the Trustee
      and the Rating Agencies with an Addition Notice, which shall be given not
      later than 10 days prior to the related Subsequent Transfer Date,
      specifying the Subsequent Transfer Date for such Subsequent Transition
      Property and the aggregate amount of the Transition Charges related to
      such Subsequent Transition Property, and shall have provided any
      information reasonably requested by any of the foregoing Persons with
      respect to the Subsequent Transition Property then being conveyed to the
      Issuer;

            (ii) The Texas Electric Choice Plan, such Sale Agreement and the
      related Financing Order shall be in full force and effect and a filing
      shall have been made pursuant to Section 39.309(d) of the Texas Electric
      Choice Plan;

            (iii) As of such Subsequent Transfer Date, the Seller will not be
      insolvent and will not have been made insolvent (within the meaning of the
      Bankruptcy Code or the Delaware Uniform Fraudulent Transfer Act) by such
      sale and transfer and the Seller is not aware of any pending insolvency
      with respect to itself;

            (iv) The Rating Agency Condition shall have been satisfied with
      respect to such sale and transfer;

            (v) As of such Subsequent Transfer Date, no material breach by the
      Seller of its representations, warranties or covenants in such Sale
      Agreement and no Servicer Default shall exist;

            (vi) As of such Subsequent Transfer Date, the Issuer shall have
      sufficient funds available to pay the purchase price for the Subsequent
      Transition Property to be sold to it on such date and all conditions to
      the subsequent issuance of one or more Series of new Transition Bonds
      intended to provide such funds set forth in Section 2.10 shall have been
      satisfied or waived;

            (vii) The Issuer shall have delivered to the Trustee an Officer's
      Certificate confirming the satisfaction of each condition precedent
      specified in this paragraph (b);

            (viii) (A) The Issuer shall have delivered to the Rating Agencies
      (with a copy to the PUCT) any Opinions of Counsel required by the Rating
      Agencies and (B) the Issuer shall have delivered to the Trustee the
      Opinion of Counsel required by Section 3.06(b);

            (ix) the Seller shall have received and delivered to the Issuer and
      the Trustee: (i) an opinion of outside tax counsel (as selected by the
      Seller, and in form and substance reasonably satisfactory to the Issuer
      and the Trustee) to the effect that the Issuer will not be subject to
      United States federal income tax as an entity separate from its sole owner
      and that the Transition Bonds issued in connection with the purchase of
      such Subsequent Transition Property will be treated as debt of the
      Issuer's sole owner for United States federal income tax purposes, (ii) an
      opinion of outside tax counsel (as selected by the Seller, and in form and
      substance reasonably satisfactory to the Issuer and the Trustee) or, if
      the Seller so chooses, a ruling from the Internal Revenue Service, in
      either case to the effect that, for United States federal income tax
      purposes, the issuance of such Transition Bonds will not result in gross
      income to the Seller, and (iii) an opinion of outside tax

                                      -25-
<PAGE>

      counsel (as selected by the Seller, and in form and substance reasonably
      satisfactory to the issuer and the Trustee) to the effect that such
      subsequent issuance will not adversely affect the characterization of any
      such Transition Bonds then Outstanding as obligations of the Issuer's sole
      owner. The opinion of outside tax counsel described above may, if the
      Seller so chooses, be conditioned on the receipt by the Seller of one or
      more letter rulings from the Internal Revenue Service and in rendering
      such opinion outside tax counsel shall be entitled to rely on the rulings
      contained in such ruling letters and to rely on the representations made,
      and information supplied, to the Internal Revenue Service in connection
      with such letter rulings; and

            (x) The Seller and the Issuer shall have taken any action required
      to maintain the first perfected ownership interest of the Issuer in the
      Subsequent Transition Property and the proceeds thereof, and the Issuer
      shall have taken any action required to maintain the first priority
      perfected security interest of the Trustee in the Subsequent Transition
      Property and the proceeds thereof.

      SECTION 3.19. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee, during the Issuer's
normal business hours, to examine all the books of account, records, reports,
and other papers of the Issuer, to make copies and extracts therefrom, to cause
such books to be audited annually by an Independent registered public accounting
firm, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees and an Independent registered public accounting
firm, all at such reasonable times and as often as may be reasonably requested.
The Trustee shall hold and shall cause its representatives to hold, in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Trustee may reasonably determine
that such disclosure is consistent with its obligations hereunder.

      SECTION 3.20. SALE AGREEMENT, INTERCREDITOR AGREEMENT, ADMINISTRATION
AGREEMENT AND SERVICING AGREEMENT COVENANTS.

      (a) The Issuer agrees to take all such lawful actions to enforce its
rights under any Sale Agreement, any Intercreditor Agreement, the Administration
Agreement and any Servicing Agreement and to compel or secure the performance
and observance by the Seller, the Administrator, the Servicer and CenterPoint
Houston of each of their respective obligations to the Issuer under or in
connection with any Sale Agreement, any Intercreditor Agreement, the
Administration Agreement and any Servicing Agreement in accordance with the
terms thereof. So long as no Event of Default occurs and is continuing, but
subject to Section 3.20(f), the Issuer may exercise any and all rights,
remedies, powers and privileges lawfully available to the Issuer under or in
connection with any Sale Agreement, any Intercreditor Agreement, the
Administration Agreement and any Servicing Agreement; provided that such action
shall not adversely affect the interests of the Holders in any material respect.

      (b) If an Event of Default occurs and is continuing, the Trustee may, and
at the direction (which direction shall be in writing) of the holders of a
majority of the Outstanding Amount of Transition Bonds of all Series or Tranches
affected thereby shall, exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Seller, CenterPoint Houston, the

                                      -26-
<PAGE>

Administrator and the Servicer, as the case may be, under or in connection with
the Administration Agreement and the applicable Sale Agreement, Intercreditor
Agreement and Servicing Agreement, including the right or power to take any
action to compel or secure performance or observance by the Seller, CenterPoint
Houston, the Administrator or the Servicer of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Administration Agreement and the applicable Sale
Agreement, Intercreditor Agreement and Servicing Agreement, and any right of the
Issuer to take such action shall be suspended.

      (c) Except as set forth in Section 3.20(e) of this Indenture, with the
prior written consent of the Trustee and the consent of the PUCT pursuant to
Section 9.07 if the amendment increases ongoing qualified costs as defined in
the Financing Order, the Administration Agreement, any Sale Agreement,
Intercreditor Agreement (except that any amendment to an Intercreditor Agreement
shall not require the consent of the PUCT) and Servicing Agreement may be
amended in accordance with the provisions thereof, so long as the Rating Agency
Condition is satisfied in connection therewith, at any time and from time to
time, without the consent of the Transition Bondholders of the related Series;
provided that such amendment shall not adversely affect the interest of any
Transition Bondholder of that Series in any material respect.

      (d) Except as set forth in Section 3.20(e) of this Indenture, if the
Issuer, the Seller, CenterPoint Houston, the Administrator, the Servicer or any
other party to the respective agreement proposes to amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
waiver, supplement, termination or surrender of, the terms of any Sale
Agreement, Intercreditor Agreement, Administration Agreement, or Servicing
Agreement, or waive timely performance or observance by the Seller, CenterPoint
Houston, the Administrator or the Servicer under any Sale Agreement,
Intercreditor Agreement, Administration Agreement or Servicing Agreement, in
each case in such a way as would materially and adversely affect the interests
of Transition Bondholders of any Series, the Issuer shall first notify the
Rating Agencies of the proposed amendment, modification, waiver, supplement,
termination or surrender and shall notify the Trustee and the PUCT in writing
and the Trustee shall notify the Transition Bondholders of such Series of the
proposed amendment, modification, waiver, supplement, termination or surrender
and whether the Rating Agency Condition has been satisfied with respect thereto.
The Trustee shall consent to such proposed amendment, modification, waiver,
supplement, termination or surrender only with the prior written consent of the
holders of a majority of the Outstanding Amount of Transition Bonds of the
Series or Tranches materially and adversely affected thereby and, if the
proposed amendment, modification, waiver, supplement, termination or surrender
would increase ongoing qualified costs as defined in the Financing Order, the
consent of the PUCT pursuant to Section 9.07 other than with respect to any
Intercreditor Agreement. If any such amendment, modification, waiver,
supplement, termination or surrender shall be so consented to by the Trustee or
such Holders, the Issuer agrees to execute and deliver, in its own name and at
its own expense, such agreements, instruments, consents and other documents as
shall be necessary or appropriate in the circumstances. For so long as any of
the Transition Bonds are listed on the Luxembourg Stock Exchange and the rules
of that exchange so require, notice of such proposed action will be published by
an agent to be appointed by the Issuer in accordance with such rules promptly
following its effectiveness.

                                      -27-
<PAGE>

      (e) If the Issuer or the Servicer proposes to amend, modify, waive,
supplement, terminate or surrender, or to agree to any amendment, modification,
supplement, termination, waiver or surrender of, the Transition Charge
Adjustment Process, the Issuer shall notify the PUCT and the Trustee in writing
and the Trustee shall notify the Transition Bondholders of such proposal and the
Trustee shall consent thereto only with the consent of the PUCT pursuant to
Section 9.07 and the prior written consent of the holders of a majority of the
Outstanding Amount of Transition Bonds of the Series or Tranches affected
thereby and only if the Rating Agency Condition has been satisfied with respect
thereto.

      (f) Promptly following a default by the Seller under any Sale Agreement,
by the Administrator under the Administration Agreement, by CenterPoint Houston
or any successor to CenterPoint Houston under any Intercreditor Agreement, or
the occurrence of a Servicer Default under any Servicing Agreement, and at the
Issuer's expense, the Issuer agrees to take all such lawful actions as the
Trustee may request to compel or secure the performance and observance by each
of the Seller, CenterPoint Houston, the Administrator or the Servicer of their
obligations under and in accordance with that Sale Agreement, Administration
Agreement, Intercreditor Agreement or Servicing Agreement, as the case may be,
in accordance with the terms thereof, and to exercise any and all rights,
remedies, powers and privileges lawfully available to the Issuer under or in
connection with such agreements to the extent and in the manner directed by the
Trustee, including the transmission of notices of any default by the Seller,
CenterPoint Houston, the Administrator or the Servicer, respectively, thereunder
and the institution of legal or administrative actions or Proceedings to compel
or secure performance of their obligations under that Sale Agreement,
Administration Agreement, Intercreditor Agreement or Servicing Agreement, as
applicable.

      (g) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under any Servicing Agreement, the Issuer shall (i) promptly give
written notice thereof to the Trustee, the PUCT and the Rating Agencies, (ii)
specify in such notice the action, if any, the Issuer is taking with respect to
such default and (iii) take such reasonable steps as are available to it to
remedy such defaults or shall take such actions as shall have been directed by
the Trustee, as the case may be, provided that, notwithstanding the foregoing,
the Issuer shall not take any action to terminate the Servicer's rights and
powers under that Servicing Agreement unless a Servicer Default shall have
occurred and be continuing, and the Trustee shall not direct the Issuer to take
such action unless a Servicer Default shall have occurred and be continuing.

      (h) As promptly as possible after the giving of notice of termination to
the Servicer, the PUCT and the Rating Agencies of the Servicer's rights and
powers pursuant to that Servicing Agreement, the Trustee upon the written
direction of the majority of the Outstanding Amount of Transition Bonds of the
related Series and subject to the provisions of the related Intercreditor
Agreement shall appoint a successor Servicer (the "Successor Servicer"), and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Issuer and the Trustee. A person shall qualify as a
Successor Servicer only if such Person satisfies the requirements set forth in
that Servicing Agreement. If within 30 days after the delivery of the notice
referred to above, a Successor Servicer shall not have been appointed and
accepted its appointment as such, the Trustee may petition the PUCT or a court
of competent jurisdiction to appoint a Successor Servicer. In connection with
any such appointment, the Issuer may make such arrangements for the compensation
of such Successor Servicer as it and such Successor

                                      -28-
<PAGE>

Servicer shall agree, subject to the limitations set forth below and in that
Servicing Agreement, and in accordance with that Servicing Agreement, the Issuer
shall enter into an agreement with such Successor Servicer for the servicing of
the Transition Property related to that Series (such agreement to be in form and
substance satisfactory to the Trustee).

      (i) Upon termination of the Servicer's rights and powers pursuant to any
Servicing Agreement, the Trustee shall promptly notify the Issuer, the PUCT, the
Transition Bondholders of the related Series and the Rating Agencies in writing
of such termination. As soon as a Successor Servicer is appointed, the Issuer
shall notify the Trustee, the PUCT, the Transition Bondholders of the related
Series and the Rating Agencies of such appointment, specifying in such notice
the name and address of such Successor Servicer.

      SECTION 3.21. TAXES. So long as any of the Transition Bonds are
outstanding, the Issuer shall pay all taxes, assessments and governmental
charges imposed upon it or any of its properties or assets or with respect to
any of its franchises, business, income or property before any penalty accrues
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 Trust Estate.

                                   ARTICLE IV

                     SATISFACTION AND DISCHARGE; DEFEASANCE

      SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE.

      (a) The Transition Bonds of any Series, all moneys payable with respect
thereto and this Indenture as it applies to such Series shall cease to be of
further effect and the Lien hereunder shall be released with respect to such
Series, Interest shall cease to accrue on the Transition Bonds of such Series
and the Trustee, on written demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Transition Bonds of such Series, when

            (A) either

                        (1) all Transition Bonds of such Series theretofore
                  authenticated and delivered (other than (i) Transition Bonds
                  that have been destroyed, lost or stolen and that have been
                  replaced or paid as provided in Section 2.06 and (ii)
                  Transition Bonds for whose payment money has theretofore been
                  deposited in trust or segregated and held in trust by the
                  Issuer and thereafter repaid to the Issuer or discharged from
                  such trust, as provided in Section 3.03) have been delivered
                  to the Trustee for cancellation; or

                        (2) the Issuer has irrevocably deposited or caused to be
                  irrevocably deposited with the Trustee cash, in trust for such
                  purpose, in an amount sufficient to make payments of Principal
                  of and, premium, if any, and Interest on the Transition Bonds
                  of such Series and to pay and

                                      -29-
<PAGE>

                  discharge the entire indebtedness on such Transition Bonds not
                  theretofore delivered to the Trustee;

            (B) the Issuer has paid or caused to be paid all other sums payable
      hereunder by the Issuer with respect to such Series; and

            (C) the Issuer has delivered to the Trustee an Issuer Officer's
      Certificate, an Issuer Opinion of Counsel and (if required by the TIA or
      the Trustee) an Independent Certificate from an Independent registered
      public accounting firm, each stating that all conditions precedent herein
      provided for relating to the satisfaction and discharge of this Indenture
      with respect to Transition Bonds of such Series have been complied with.

      (b) Subject to Sections 4.01(c) and 4.02, the Issuer at any time may
terminate (i) all its obligations under this Indenture with respect to the
Transition Bonds of any Series ("Legal Defeasance Option") or (ii) its
obligations under Sections 3.05, 3.06 (other than with respect to the Defeasance
Subaccounts and all funds and U.S. Government Obligations therein), 3.07(a), (b)
and (c), 3.08, 3.10, 3.16 and 3.19 and the operation of Section 5.01(iv) (other
than with respect to the Defeasance Subaccount and U.S. Government Obligations
therein) ("Covenant Defeasance Option") with respect to any Series of Transition
Bonds. The Issuer may exercise the Legal Defeasance Option with respect to any
Series of Transition Bonds notwithstanding its prior exercise of the Covenant
Defeasance Option with respect to such Series.

      If the Issuer exercises the Legal Defeasance Option with respect to any
Series, the maturity of the Transition Bonds of such Series may not be (a)
accelerated because of an Event of Default or (b) except as provided in Section
4.02, redeemed. If the Issuer exercises the Covenant Defeasance Option with
respect to any Series, the maturity of the Transition Bonds of such Series may
not be accelerated because of an Event of Default specified in Section 5.01(iv).

      Upon satisfaction of the conditions set forth herein to the exercise of
the Legal Defeasance Option or the Covenant Defeasance Option with respect to
any Series of Transition Bonds, the Trustee, on written demand of and at the
expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of the obligations that are terminated pursuant to
such exercise.

      (c) Notwithstanding Sections 4.01(a) and (b) above, (i) rights of
registration of transfer and exchange, (ii) rights of substitution of mutilated,
destroyed, lost or stolen Transition Bonds, (iii) rights of Transition
Bondholders to receive payments of Principal, premium, if any, and Interest, but
only from the amounts deposited with the Trustee for such payments, (iv)
Sections 4.03 and 4.04, (v) the rights, obligations and immunities of the
Trustee hereunder (including the rights of the Trustee under Section 6.07 and
the obligations of the Trustee under Section 4.03) and (vi) the rights of
Transition Bondholders under this Indenture with respect to the property
deposited with the Trustee payable to all or any of them, shall survive until
the Transition Bonds of the Series as to which this Indenture or certain
obligations hereunder have been satisfied and discharged pursuant to Section
4.01(a) or 4.01(b) and have been paid in full. Thereafter, the obligations in
Sections 6.07 and 4.04 with respect to such Series shall survive.

                                      -30-
<PAGE>

      SECTION 4.02. CONDITIONS TO DEFEASANCE. The Issuer may exercise the Legal
Defeasance Option or the Covenant Defeasance Option with respect to any Series
of Transition Bonds only if:

      (a) the Issuer irrevocably deposits or causes to be deposited in trust
with the Trustee cash or U.S. Government Obligations for the payment of
Principal of and premium, if any, and Interest on such Series of Transition
Bonds to the Expected Payment Date or Redemption Date therefor, as applicable,
and all other amounts due and payable hereunder, such deposit to be made in the
Defeasance Subaccount for such Series of Transition Bonds;

      (b) the deposit in the Defeasance Subaccount pursuant to subsection (a) of
this Section 4.02 constitutes proceeds from a refunding of the Transition Bonds;

      (c) the Issuer delivers to the Trustee a certificate from a nationally
recognized Independent registered public accounting firm expressing its opinion
that the payments of Principal and Interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited cash without
investment will provide cash at such times and in such amounts (but, in the case
of the Legal Defeasance Option only, not more than such amounts) as will be
sufficient to pay in respect of the Transition Bonds of such Series (i) subject
to clause (ii), Principal in accordance with the Expected Amortization Schedule
therefor, (ii) if such Series is to be redeemed, the Redemption Price therefor
on the Redemption Date therefor and (iii) Interest when due;

      (d) in the case of the Legal Defeasance Option, the expiration of 95 days
after the deposit is made and during such 95-day period no Default specified in
Section 5.01(v) or (vi) shall have occurred and be continuing at the end of the
period; provided, however, that in determining whether a default under Section
5.01(v) has occurred, the requirement that the decree or order shall remain
unstayed and in effect for 90 days shall be disregarded;

      (e) no Default has occurred and is continuing on the day of such deposit
and after giving effect thereto;

      (f) in the case of the Legal Defeasance Option, the Issuer delivers to the
Trustee an Issuer Opinion of Counsel stating that (i) the Issuer has received
from, or there has been published by, the Internal Revenue Service a ruling, or
(ii) since the date of execution of this Indenture, there has been a change in
the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion shall confirm that, the Holders of the Transition
Bonds of such Series will not recognize income, gain or loss for federal income
tax purposes as a result of the exercise of such Legal Defeasance Option and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred;

      (g) in the case of the Covenant Defeasance Option, the Issuer delivers to
the Trustee an Issuer Opinion of Counsel to the effect that the Holders of the
Transition Bonds of such Series will not recognize income, gain or loss for
federal income tax purposes as a result of the exercise of such Covenant
Defeasance Option and will be subject to federal income tax on the same

                                      -31-

<PAGE>

amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;

      (h) the Issuer delivers to the Trustee an Issuer Officer's Certificate and
an Issuer Opinion of Counsel, each stating that all conditions precedent to the
satisfaction and discharge of the Transition Bonds of such Series to the extent
contemplated by this Article IV have been complied with;

      (i) the Issuer delivers to the Trustee an Opinion of Counsel to the effect
that (i) in a case under the Bankruptcy Code in which CenterPoint Houston (or
any of its Affiliates, other than the Issuer) is the debtor, the court would
hold that the deposited cash or U.S. government obligations would not be in the
bankruptcy estate of CenterPoint Houston (or any of its Affiliates, other than
the Issuer, that deposited the cash or U.S. government obligations); and (ii) in
the event CenterPoint Houston (or any of its Affiliates, other than the Issuer,
that deposited the cash or U.S. government obligations), were to be a debtor in
a case under the Bankruptcy Code, the court would not disregard the separate
legal existence of CenterPoint Houston (or any of its Affiliates, other than the
Issuer, that deposited the cash or U.S. government obligations) and the Issuer
so as to order substantive consolidation under the Bankruptcy Code of the
Issuer's assets and liabilities with the assets and liabilities of CenterPoint
Houston (or any of its Affiliates, other than the Issuer, that deposited the
cash or U.S. government obligations), and

      (j) the Rating Agency Condition shall have been satisfied with respect to
the exercise of any Legal Defeasance Option or Covenant Defeasance Option.

      Notwithstanding any other provision of this Section 4.02 to the contrary,
no delivery of cash or U.S. Government Obligations to the Trustee under this
Section shall terminate any obligations of the Issuer under this Indenture with
respect to any Transition Bonds which are to be redeemed prior to the Expected
Final Payment Date therefor until such Transition Bonds shall have been
irrevocably called or designated for redemption on a date thereafter on which
such Transition Bonds may be redeemed in accordance with the provisions of this
Indenture and proper notice of such redemption shall have been given in
accordance with the provisions of this Indenture or the Issuer shall have given
the Trustee, in form satisfactory to the Trustee, irrevocable written
instructions to give, in the manner and at the times prescribed herein, notice
of redemption of such Series.

      SECTION 4.03. APPLICATION OF TRUST MONEY. All moneys or U.S. Government
Obligations deposited with the Trustee pursuant to Section 4.01 or 4.02 hereof
with respect to any Series of Transition Bonds shall be held in trust in the
Defeasance Subaccount for such Series and applied by it, in accordance with the
provisions of the Transition Bonds and this Indenture, to the payment, either
directly or through any Paying Agent, as the Trustee may determine, to the
Holders of the particular Transition Bonds for the payment or redemption of
which such moneys have been deposited with the Trustee, of all sums due and to
become due thereon for Principal, premium, if any, and Interest. Such moneys
shall be segregated and held apart solely for paying such Transition Bonds and
such Transition Bonds shall not be entitled to any amounts on deposit in the
Collection Account other than amounts on deposit in the Defeasance Subaccount
for such Transition Bonds.

                                      -32-
<PAGE>

      SECTION 4.04. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Indenture or the Covenant Defeasance
Option or Legal Defeasance Option with respect to the Transition Bonds of any
Series, all moneys then held by any Paying Agent other than the Trustee under
the provisions of this Indenture or any Intercreditor Agreement with respect to
such Transition Bonds shall, upon written demand of the Issuer, be paid to the
Trustee to be held and applied according to Section 3.03 and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.

                                   ARTICLE V

                                    REMEDIES

      SECTION 5.01. EVENTS OF DEFAULT. "Event of Default" with respect to any
Series, wherever used herein, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

            (i) default in the payment of any Interest on any Transition Bond of
      such Series when the same becomes due and payable and the continuation of
      such default for five Business Days;

            (ii) default in the payment of the then unpaid Principal of any
      Transition Bond of such Series on the Series Final Maturity Date for such
      Series or, if applicable, any Tranche of such Series on the Tranche Final
      Maturity Date for such Tranche;

            (iii) default in the payment of the Redemption Price for any
      Transition Bond on the Redemption Date therefor;

            (iv) default in the observance or performance of any covenant or
      agreement of the Issuer made in this Indenture (other than a covenant or
      agreement, a default in the observance or performance of which is
      specifically dealt with in clause (i), (ii) or (iii) above), any covenant
      or agreement of the Issuer made in any interest rate swap agreement, hedge
      agreement or credit enhancement agreement permitted under Section 3.13
      hereof and any Series Supplement, or any representation or warranty of the
      Issuer made herein or therein or in any certificate or other writing
      delivered pursuant hereto or in connection herewith proving to have been
      incorrect in any material respect as of the time when made (other than a
      covenant, agreement or representation or warranty expressly included
      herein or in a Series Supplement solely for the benefit of a different
      Series of Transition Bonds), and any such default shall continue or not be
      cured, for a period of 30 days after the earlier of (A) there shall have
      been given, by registered or certified mail, to the Issuer by the Trustee
      or to the Issuer and the Trustee by the Holders of at least 25% of the
      Outstanding Amount of Transition Bonds of such Series, a written notice
      specifying such default or incorrect representation or warranty and
      requiring it to be remedied and stating that such notice is a "Notice of
      Default" hereunder or (B) the date the Issuer has knowledge of the
      default;

                                      -33-
<PAGE>

            (v) the filing of a decree or order for relief by a court having
      jurisdiction in the premises in respect of the Issuer or any substantial
      part of the Trust Estate securing such Series in an involuntary case or
      Proceeding under any applicable federal or state bankruptcy, insolvency or
      other similar law now or hereafter in effect, or appointing a receiver,
      liquidator, assignee, custodian, trustee, sequestrator or similar official
      for the Issuer or its property or for any substantial part of the Series
      Trust Estate securing such Series, or ordering the winding-up or
      liquidation of the Issuer's affairs, and such decree or order shall remain
      unstayed and in effect for a period of 90 consecutive days;

            (vi) the commencement by the Issuer of a voluntary case or
      Proceeding under any applicable federal or state bankruptcy, insolvency or
      other similar law now or hereafter in effect, or the consent by the Issuer
      to the entry of an order for relief in an involuntary case under any such
      law, or the consent by the Issuer to the appointment or taking possession
      by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
      similar official of the Issuer or for any substantial part of the Series
      Trust Estate securing such Series, or the making by the Issuer of any
      general assignment for the benefit of creditors, or the failure by the
      Issuer generally to pay its debts as such debts become due, or the taking
      of action by the Issuer in furtherance of any of the foregoing;

            (vii) any act or failure to act by the State of Texas or any of its
      agencies (including the PUCT), officers or employees that violates or is
      not in accordance with the pledge of the State of Texas in Section 39.310
      of the Texas Electric Choice Plan, including the failure of the PUCT to
      implement the statutorily guaranteed true-up mechanism in accordance with
      the Financing Order; or

            (viii) any other event designated as an Event of Default in the
      related Series Supplement.

      SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default other than an Event of Default under Section 5.01(vii) occurs
and is continuing, then and in every such case either the Trustee or the Holders
holding not less than a majority of the Outstanding Amount of Transition Bonds
of the Series with respect to which an Event of Default has occurred, voting as
a class, may, but need not, declare all the Transition Bonds of such Series to
be immediately due and payable, by a notice in writing to the Issuer (and to the
Trustee if given by Transition Bondholders), and upon any such declaration the
unpaid principal amount of the Transition Bonds of such Series, together with
accrued and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable.

      At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article V provided, the Holders
holding not less than a majority of the Outstanding Amount of Transition Bonds
of such Series, by written notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if:

            (i) the Issuer has paid or deposited with the Trustee, for deposit
      in the General Subaccount of the Collection Account of such Series, a sum
      sufficient to pay

                                      -34-
<PAGE>

            (A) all payments of Principal of and premium, if any, and Interest
      on all Transition Bonds of such Series due and owing at such time as if
      such Event of Default had not occurred and was not continuing and all
      other amounts that would then be due hereunder or upon such Transition
      Bonds as if the Event of Default giving rise to such acceleration had not
      occurred and was not continuing; and

            (B) all sums paid or advanced by the Trustee hereunder with respect
      to such Series and the reasonable compensation, expenses, disbursements
      and advances of the Trustee and its agents and counsel with respect to
      such Series; and

            (ii) all Events of Default other than the nonpayment of the
      Principal of the Transition Bonds of the Series that has become due solely
      by such acceleration have been cured or waived as provided in Section
      5.12.

      No such rescission shall affect any subsequent Default or impair any right
consequent thereto.

      SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.

      (a) The Issuer covenants that if (i) Default is made in the payment of any
Interest on any Transition Bond when such Interest becomes due and payable and
such Default continues for five Business Days, (ii) Default is made in the
payment of the then unpaid Principal of any Transition Bond on the Series Final
Maturity Date or Tranche Final Maturity Date, as applicable, therefor, or (iii)
Default is made in the payment of the Redemption Price for any Transition Bond
on the Redemption Date therefor, the Issuer shall, upon demand of the Trustee,
pay to it, for the benefit of the Holders of the Transition Bonds of such
Series, such amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel and the whole amount then due
and payable on such Transition Bonds for Principal, premium, if any, and
Interest, with interest upon the overdue Principal and premium, if any, and, to
the extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of Interest, at the respective Bond Rate of such Series or
the applicable Tranche of such Series.

      (b) In case the Issuer shall fail forthwith to pay the amounts specified
in clause (a) above upon such demand, the Trustee, in its own name and as
trustee of an express trust, may institute a Proceeding for the collection of
the sums so due and unpaid, and may prosecute such Proceeding to judgment or
final decree, and may enforce the same against the Issuer or other obligor upon
such Transition Bonds and collect in the manner provided by law out of the
Series Trust Estate and the proceeds thereof, the whole amount then due and
payable on the Transition Bonds of such Series for Principal, premium, if any,
and Interest, with interest upon the overdue principal and premium, if any, and,
to the extent payment at such rate of interest shall be legally enforceable,
upon overdue installments of interest, at the respective rate borne by the
Transition Bonds of such Series or the applicable Tranche of such Series and in
addition thereto such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel.

                                      -35-
<PAGE>

      (c) If an Event of Default other than the Event of Default described in
Section 5.01(vii) occurs and is continuing, the Trustee may, as more
particularly provided in Section 5.04, proceed to protect and enforce its rights
and the rights of the Transition Bondholders of all materially and adversely
affected Series by such appropriate Proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law,
including foreclosing or otherwise enforcing the Lien on the Series Trust Estate
securing those Series of Transition Bonds or applying to the PUCT or a court of
competent jurisdiction for sequestration of revenues arising with respect to
such Transition Property.

      (d) In case there shall be pending, relative to the Issuer or any other
obligor upon any Series of Transition Bonds or any Person having or claiming an
ownership interest in the Series Trust Estate securing that Series, Proceedings
under Title 11 of the United States Code or any other applicable federal or
State bankruptcy, insolvency or other similar law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the Issuer
or its property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to the Issuer or other obligor upon
that Series of Transition Bonds, or to the creditors or property of the Issuer
or such other obligor, the Trustee, irrespective of whether the principal of
that Series of Transition Bonds shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered to the extent permitted by applicable law, by
intervention in such Proceedings or otherwise:

            (i) to file and prove a claim or claims for the whole amount of
      Principal, premium, if any, and Interest owing and unpaid in respect of
      the Transition Bonds and to file such other papers or documents as may be
      necessary or advisable in order to have the claims of the Trustee
      (including any claim for reasonable compensation to the Trustee and each
      predecessor Trustee, and their respective agents, attorneys and counsel,
      and for reimbursement of all expenses and liabilities incurred, and all
      advances made, by the Trustee and each predecessor Trustee, except as a
      result of negligence or bad faith) and of the Transition Bondholders
      allowed in such Proceedings;

            (ii) unless prohibited by applicable law and regulations, to vote on
      behalf of the Holders of Transition Bonds in any election of a trustee, a
      standby trustee or Person performing similar functions in any such
      Proceedings;

            (iii) to collect and receive any moneys or other property payable or
      deliverable on any such claims and to distribute all amounts received with
      respect to the claims of the Transition Bondholders and of the Trustee on
      their behalf; and

            (iv) to file such proofs of claim and other papers or documents as
      may be necessary or advisable in order to have the claims of the Trustee
      or the Holders of Transition Bonds allowed in any judicial Proceedings
      relative to the Issuer, its creditors and its property;

                                      -36-
<PAGE>

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Transition Bondholders
to make payments to the Trustee, and, in the event that the Trustee shall
consent to the making of payments directly to such Transition Bondholders, to
pay to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.

      (e) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Transition Bondholder any plan of reorganization, arrangement, adjustment or
composition affecting the Transition Bonds or the rights of any Holder thereof
or to authorize the Trustee to vote in respect of the claim of any Transition
Bondholder in any such Proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.

      (f) All rights of action and of asserting claims under this Indenture, or
under any Series of Transition Bonds, may be enforced by the Trustee without the
possession of any of those Transition Bonds or the production thereof in any
trial or other Proceedings relative thereto, and any such action or Proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders of those Transition Bonds.

      (g) In any Proceedings brought by the Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Transition Bonds, and it shall not be necessary to make any
Transition Bondholder a party to any such Proceedings.

      SECTION 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default other than
the Event of Default described in Section 5.01(vii) occurs and is continuing,
the Trustee shall do one or more of the following at the written direction of
the holders of a majority of the Outstanding Amount of Transition Bonds of such
Series or Tranche affected thereby or may do one or more of the following in
reliance upon Sections 6.01 and 6.02 of this Indenture (subject, in either
event, to Section 5.05):

            (i) institute Proceedings in its own name and as trustee of an
      express trust for the collection of all amounts then payable on the
      Transition Bonds or under this Indenture with respect thereto, whether by
      declaration or otherwise, enforce any judgment obtained and collect from
      the Issuer or the Servicer moneys adjudged due;

            (ii) institute Proceedings from time to time for the complete or
      partial foreclosure of this Indenture with respect to the Series Trust
      Estate securing such Series;

            (iii) exercise any remedies of a secured party under the UCC or
      Section 39.309(f) of the Texas Electric Choice Plan or any other
      applicable law and take

                                      -37-
<PAGE>

      any other appropriate action to protect and enforce the rights and
      remedies of the Trustee and the Holders of the Transition Bonds of such
      Series;

            (iv) sell the Series Trust Estate securing such Series or any
      portion thereof or rights or interest therein, at one or more public or
      private sales called and conducted in any manner permitted by law; and

            (v) exercise all rights, remedies, powers, privileges and claims of
      the Issuer against the Seller, the Administrator, CenterPoint Houston and
      the Servicer under or in connection with, and pursuant to the terms of,
      the Administration Agreement or any applicable Sale Agreement,
      Intercreditor Agreement or Servicing Agreement or against any Swap
      Counterparty under or in connection with, and pursuant to the terms of,
      any applicable Swap Agreement;

provided, however, that the Trustee may not sell or otherwise liquidate any
portion of the Series Trust Estate securing such Series following an Event of
Default, other than an Event of Default described in Section 5.01(i), (ii) or
(iii), with respect to such Series unless (A) the Holders of 100% of the
Outstanding Amount of the Transition Bonds of all Series consent thereto, (B)
the proceeds of such sale or liquidation distributable to the Transition
Bondholders of such Series are sufficient to discharge in full all amounts then
due and unpaid upon such Transition Bonds for Principal, premium, if any, and
Interest or (C) the Trustee determines that the Series Trust Estate securing
such Series will not continue to provide sufficient funds for all payments on
the Transition Bonds of such Series as they would have become due if the
Transition Bonds had not been declared due and payable, and the Trustee obtains
the written consent of Holders of 66-2/3% of the Outstanding Amount of the
Transition Bonds of such Series. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Trustee may, but need not,
obtain and conclusively rely upon an opinion of an Independent investment
banking firm or Independent registered public accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Series Trust Estate for such purpose.

      If an Event of Default occurs and is continuing, the amounts on deposit in
the Collection Account shall continue to be distributed in accordance with
Sections 8.02(d) and (e) (including the last paragraph of Section 8.02(e), upon
acceleration in accordance with Section 5.02).

      (b) If an Event of Default under Section 5.01(vii) occurs and is
continuing, the Trustee, for the benefit of the Transition Bondholders, shall be
entitled and empowered to the extent permitted by applicable law to institute or
participate in Proceedings reasonably necessary to compel performance of or to
enforce the pledge of the State of Texas in Section 39.310 of the Texas Electric
Choice Plan and to collect any monetary damages incurred by the Transition
Bondholders or the Trustee as a result of any such Event of Default, and may
prosecute any such Proceeding to final judgment or decree. Such remedy shall be
the only remedy that the Trustee may exercise if the only Event of Default that
has occurred and is continuing is an Event of Default under Section 5.01(vii).

      (c) If the Trustee collects any money pursuant to this Article V, it shall
pay out such money in accordance with the priorities set forth in Section
8.02(d) and (e).

                                      -38-
<PAGE>

      SECTION 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE. If the Transition
Bonds of a Series have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Trustee may, but need not, elect, as provided
in Section 5.11(iii), to maintain possession of the Series Trust Estate securing
that Series in accordance with Section 5.04(a). It is the desire of the parties
hereto and the Transition Bondholders that there be at all times sufficient
funds for the payment of Principal of and premium, if any, and Interest on the
Transition Bonds of any Series, and the Trustee shall take such desire into
account when determining whether or not to maintain possession of the Series
Trust Estate securing that Series or sell or liquidate the same. In determining
whether to maintain possession of the Series Trust Estate or sell or liquidate
the same, the Trustee may, but need not, obtain and conclusively rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Series Trust Estate for such purpose.

      SECTION 5.06. LIMITATION OF PROCEEDINGS. No Holder of any Transition Bond
of any Series shall have any right to institute any Proceeding, judicial or
otherwise, or to avail itself of the remedies provided in Section 39.309(f) of
the Texas Electric Choice Plan, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:

            (i) such Holder has previously given written notice to the Trustee
      of a continuing Event of Default with respect to the affected Series;

            (ii) the Holders of not less than a majority of the Outstanding
      Amount of the Transition Bonds of such Series have made written request to
      the Trustee to institute such Proceeding in respect of such Event of
      Default in its own name as Trustee hereunder;

            (iii) such Holder or Holders have offered to the Trustee security or
      indemnity reasonably satisfactory to the Trustee against the costs,
      expenses and liabilities to be incurred in complying with such request;

            (iv) the Trustee for 60 days after its receipt of such notice,
      request and offer of indemnity has failed to institute such Proceedings;
      and

            (v) no direction inconsistent with such written request has been
      given to the Trustee during such 60-day period by the Holders of a
      majority of the Outstanding Amount of the Transition Bonds of such Series,

it being understood and intended that no one or more Holders of Transition Bonds
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Transition Bonds or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided.

      In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Transition Bonds,
each representing less than a majority

                                      -39-
<PAGE>

of the Outstanding Amount of the Transition Bonds of all Series, the Trustee may
determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.

      SECTION 5.07. UNCONDITIONAL RIGHTS OF TRANSITION BONDHOLDERS TO RECEIVE
PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. Notwithstanding any other provisions
in this Indenture, the Holder of any Transition Bond shall have the right, which
is absolute and unconditional, and shall not be impaired without the consent of
each such Holder, (a) to receive payment of (i) the Interest, if any, on such
Transition Bond on or after the due dates thereof expressed in such Transition
Bond or in this Indenture, (ii) the unpaid Principal, if any, of such Transition
Bonds on or after the Final Maturity Date therefor or (iii) in the case of
redemption, the unpaid Principal, if any, of and premium, if any, and Interest,
if any, on such Transition Bond on or after the Redemption Date therefor and (b)
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.

      SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Transition Bondholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Transition Bondholder, then and in every such case the Issuer, the Trustee
and the Transition Bondholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Transition Bondholders shall continue as though no such Proceeding had been
instituted.

      SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Trustee or to the Transition Bondholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

      SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission by the
Trustee or any Transition Bondholder to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the Trustee
or to the Transition Bondholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Transition
Bondholders, as the case may be.

      SECTION 5.11. CONTROL BY TRANSITION BONDHOLDERS. The Majority Holders (or,
if less than all Series or Tranches are affected, the Holders of a majority of
the Outstanding Amount of the Transition Bonds of the affected Series or Tranche
or Tranches) shall have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Trustee with respect
to the Transition Bonds (or the Transition Bonds of such affected Series or
Tranche or Tranches) or exercising any trust or power conferred on the Trustee

                                      -40-
<PAGE>

with respect to the Transition Bonds (or the Transition Bonds of such affected
Series or Tranche or Tranches); provided that

            (i) such direction shall not be in conflict with any rule of law or
      with this Indenture;

            (ii) subject to the express terms of Section 5.04, any direction to
      the Trustee to sell or liquidate the Trust Estate shall be by the Holders
      of Transition Bonds representing not less than 100% of the Outstanding
      Amount of the Transition Bonds of all Series;

            (iii) if the conditions set forth in Section 5.05 have been
      satisfied and the Trustee elects to retain the Series Trust Estate
      securing such Series pursuant to such Section and elects not to sell or
      liquidate the same, then any direction to the Trustee by Holders of
      Transition Bonds representing less than 100% of the Outstanding Amount of
      the Transition Bonds of all affected Series to sell or liquidate such
      Series Trust Estate shall be of no force and effect; and

            (iv) the Trustee may take any other action deemed proper by the
      Trustee that is not inconsistent with such direction;

provided, however, that, subject to Section 6.01, the Trustee need not take any
action that it determines might involve it in liability for which it reasonably
believes it will not be indemnified to its reasonable satisfaction against the
costs, expenses and liabilities which might be incurred by it in complying with
this request. The Trustee also need not take any action that it determines might
materially and adversely affect the rights of any Transition Bondholders not
consenting to such action.

      SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Transition Bonds of a Series or Tranche
affected as provided in Section 5.02, the holders of a majority of the
Outstanding Amount of Transition Bonds of such Series or Tranche affected
thereby, by written notice to the Trustee, may waive any past Default or Event
of Default and its consequences except a Default (i) in payment of Principal of
or premium, if any, or Interest on any of the Transition Bonds or (ii) in
respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Transition Bond of such Series or
Tranche affected. In the case of any such waiver, the Issuer, the Trustee and
the Holders of the Transition Bonds shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.

      Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.

      SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Transition Bond by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any

                                      -41-
<PAGE>

right or remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to (a) any suit instituted by
the Trustee, (b) any suit instituted by any Transition Bondholder, or group of
Transition Bondholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Transition Bonds of a Series or (c) any suit
instituted by any Transition Bondholder for the enforcement of the payment of
(i) Interest on any Transition Bond on or after the due dates expressed in such
Transition Bond and in this Indenture, (ii) the unpaid Principal, if any, of any
Transition Bond on or after the Series Final Maturity Date or Tranche Final
Maturity Date, if applicable, therefor or (iii) in the case of redemption, the
unpaid Principal of and premium, if any, and Interest on any Transition Bond on
or after the Redemption Date therefor.

      SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.

      SECTION 5.15. ACTION ON TRANSITION BONDS. The Trustee's right to seek and
recover judgment on the Transition Bonds or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the Lien of this Indenture nor any
rights or remedies of the Trustee or the Transition Bondholders shall be
impaired by the recovery of any judgment by the Trustee against the Issuer or by
the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the other assets of the Issuer.

                                   ARTICLE VI

                                   THE TRUSTEE

      SECTION 6.01. DUTIES AND LIABILITIES OF TRUSTEE.

      (a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.

                                      -42-
<PAGE>

      (b) Except during the continuance of an Event of Default:

            (i) the Trustee undertakes to perform such duties and only such
      duties as are specifically set forth in this Indenture and no implied
      covenants or obligations shall be read into this Indenture against the
      Trustee; and

            (ii) in the absence of bad faith on its part, the Trustee may
      conclusively rely, as to the truth of the statements and the correctness
      of the opinions expressed therein, upon certificates or opinions furnished
      to the Trustee and conforming to the requirements of this Indenture.

      (c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:

            (i) this paragraph (c) does not limit the effect of paragraph (b) of
      this Section;

            (ii) the Trustee shall not be liable for any error of judgment made
      in good faith by a Responsible Officer unless it is proved that the
      Trustee was negligent in ascertaining the pertinent facts; and

            (iii) the Trustee shall not be liable with respect to any action it
      takes or omits to take in good faith in accordance with a direction
      received by it hereunder.

      (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 6.01.

      (e) The Trustee shall not be liable for interest on any money received by
it except as provided in this Indenture.

      (f) Money held in trust by the Trustee need not be segregated from other
funds held by the Trustee except to the extent required by law or the terms of
this Indenture, the Administration Agreement, the applicable Sale Agreement,
Intercreditor Agreement or Servicing Agreement or any applicable Swap Agreement.

      (g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any liability, financial or otherwise, in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds to believe that repayments
of such funds or indemnity reasonably satisfactory to it against such risk or
liability is not reasonably assured to it.

      (h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 6.01 and to the provisions of the TIA.

      (i) Under no circumstances shall the Trustee be liable for any
indebtedness of the Issuer, the Seller, the Administrator or the Servicer
evidenced by or arising under the Transition Bonds or any Basic Document.

                                      -43-

<PAGE>

      SECTION 6.02. RIGHTS OF TRUSTEE.

      (a) The Trustee may rely conclusively and shall be fully protected in
acting or refraining from acting in accordance with any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.

      (b) Before the Trustee acts or refrains from acting, it may require an
Issuer Officer's Certificate or an Issuer Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on an Issuer Officer's Certificate or an Issuer Opinion of Counsel.

      (c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
thereunder.

      (d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.

      (e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Transition Bonds shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.

      (f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by or pursuant to this Indenture at the request, order or
direction of any of the Holders unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request, order
or direction.

      (g) In the event that the Trustee is also acting in the capacity of Paying
Agent, Securities Intermediary or Transition Bond Registrar hereunder, the
rights, protections, immunities and indemnities afforded to the Trustee pursuant
to this Article VI shall also be afforded to the Trustee in its capacity as
Paying Agent, Securities Intermediary or Transition Bond Registrar.

      SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual
or any other capacity may become the owner or pledgee of Transition Bonds and
may otherwise deal with the Issuer or its affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Transition Bond Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 6.11 and 6.12.

      SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Transition

                                      -44-
<PAGE>

Bonds. The Trustee shall not be accountable for the Issuer's use of the proceeds
from the Transition Bonds, and the Trustee shall not be responsible for any
statement of the Issuer in the Indenture or in any document issued in connection
with the sale of the Transition Bonds or in the Transition Bonds other than the
Trustee's certificate of authentication. The Trustee shall not be responsible
for the form, character, genuineness, sufficiency, value or validity of any of
the Trust Estate, or for or in respect of the validity or sufficiency of the
Transition Bonds (other than the certificate of authentication for the
Transition Bonds) or the Basic Documents and the Trustee shall in no event
assume or incur any liability, duty or obligation to any Holder of a Transition
Bond, other than as expressly provided for in this Indenture. The Trustee shall
not be liable for the default or misconduct of the Issuer, the Seller, the
Administrator, the Servicer or a Manager or any Manager of the Issuer under any
Basic Document or otherwise and the Trustee shall have no obligation or
liability to perform the obligations of the Issuer.

      SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing
with respect to any Tranche or Series and if it is actually known to a
Responsible Officer of the Trustee, the Trustee shall mail to the PUCT, each
Rating Agency and to each Holder of Transition Bonds of all Series affected
thereby notice of the Default within 10 Business Days after it is actually known
to a Responsible Officer of the Trustee. Except in the case of a Default in
payment of Principal of or premium, if any, or Interest on any Transition Bond,
the Trustee may withhold the notice if and so long as a Responsible Officer of
the Trustee in good faith determines that withholding the notice is in the
interests of Transition Bondholders.

      SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.

      (a) So long as Transition Bonds are Outstanding and the Trustee is the
Securities Registrar and Paying Agent, within the prescribed period of time for
tax reporting purposes after the end of each calendar year, the Trustee shall
deliver to each relevant current or former Holder of Transition Bonds such
information as may be required to enable such Holder to prepare its federal and
State income tax returns.

      (b) With respect to each Series and Tranche of Transition Bonds, on or
prior to each Payment Date therefor, upon receipt by the Trustee from the
Servicer of the "[Semiannual] Servicer's Certificate," the form of which is
attached hereto as Schedule 1, the Trustee shall deliver such [Semiannual]
Servicer's Certificate to each Holder of Transition Bonds, to the PUCT and to
each Rating Agency which will include (to the extent applicable) the following
information (and any other information so specified in the Series Supplement for
such Series) as to the Transition Bonds of such Series and Tranche with respect
to such Payment Date or the period since the previous Payment Date, as
applicable:

            (i) the amount to be paid to Holders of the Transition Bonds of such
      Series and Tranche in respect of principal, such amount also to be
      expressed as a dollar amount per thousand;

            (ii) the amount to be paid to Holders of the Transition Bonds of
      such Series and Tranche in respect of interest, such amount also to be
      expressed as a dollar amount per thousand;

                                      -45-
<PAGE>

            (iii) the Transition Bond Balance, after giving effect to the
      payments to be made on such Payment Date, and the Projected Transition
      Bond Balance, in each case for such Series and Tranche and as of such
      Payment Date;

            (iv) the amount on deposit in the Capital Subaccount for such Series
      as of such Payment Date;

            (v) the amount, if any, on deposit in the Excess Funds Subaccount
      for such Series as of such Payment Date;

            (vi) the amount to be paid to and by any counterparty under any Swap
      Agreement for such Series;

            (vii) the amount to be paid to the Trustee relating to that Series
      on such Payment Date;

            (viii) the amount to be paid to the Servicer relating to that Series
      on such Payment Date; and

            (ix) any other transfers and payments relating to that Series made
      pursuant to this Indenture.

      (c) If any Transition Bonds are listed on the Luxembourg Stock Exchange
and rules of such exchange so require, the Issuer's listing agent shall arrange
for publication in accordance with such rules a notice that such certificate
shall be available with the Issuer's listing agent in Luxembourg appointed
pursuant to the second paragraph of Section 3.02.

      (d) The Trustee's responsibility for disbursing the information described
in subsection (b) above to Holders of a Series of Transition Bonds is limited to
the availability, timeliness and accuracy of the information provided by the
Servicer pursuant to Section 3.04 and Annex 1 of the applicable Servicing
Agreement and pursuant to any applicable Intercreditor Agreement.

      SECTION 6.07. COMPENSATION AND INDEMNITY. SUBJECT IN ALL RESPECTS TO THE
PROVISIONS OF ARTICLE VIII HEREOF, THE ISSUER SHALL PAY TO THE TRUSTEE FROM TIME
TO TIME REASONABLE COMPENSATION FOR ITS SERVICES. TO THE EXTENT PERMITTED BY
LAW, THE TRUSTEE'S COMPENSATION SHALL NOT BE LIMITED BY ANY LAW ON COMPENSATION
OF A TRUSTEE OF AN EXPRESS TRUST. THE ISSUER SHALL REIMBURSE THE TRUSTEE FOR ALL
REASONABLE OUT-OF-POCKET EXPENSES, DISBURSEMENTS AND ADVANCES INCURRED OR MADE
BY IT, INCLUDING COSTS OF COLLECTION, IN ADDITION TO THE COMPENSATION FOR ITS
SERVICES. SUCH EXPENSES SHALL INCLUDE THE REASONABLE COMPENSATION AND EXPENSES,
DISBURSEMENTS AND ADVANCES OF THE TRUSTEE'S AGENTS, COUNSEL, ACCOUNTANTS AND
EXPERTS. THE ISSUER SHALL INDEMNIFY AND HOLD HARMLESS THE TRUSTEE AND ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY AND ALL LOSSES OR
OTHER AMOUNTS WHATSOEVER (INCLUDING COUNSEL FEES AND EXPENSES) DIRECTLY OR
INDIRECTLY INCURRED BY THE TRUSTEE IN CONNECTION WITH THE ADMINISTRATION OF THIS
TRUST, THE ENFORCEMENT OF THIS TRUST AND ALL OF THE TRUSTEE'S RIGHTS, POWERS AND
DUTIES UNDER THIS INDENTURE AND THE PERFORMANCE BY THE TRUSTEE OF THE DUTIES AND
OBLIGATIONS OF THE TRUSTEE UNDER OR PURSUANT TO THIS INDENTURE AND ANY SALE
AGREEMENT, ADMINISTRATION AGREEMENT, SERVICING

                                      -46-
<PAGE>

AGREEMENT AND INTERCREDITOR AGREEMENT; PROVIDED, HOWEVER, THAT NOTWITHSTANDING
THE FOREGOING, THE FAILURE TO PAY TO THE TRUSTEE BY THE ISSUER (INCLUDING
WITHOUT LIMITATION FROM COLLECTIONS DEPOSITED INTO THE COLLECTION ACCOUNT OR
THROUGH THE TRANSITION CHARGE ADJUSTMENT PROCESS) ANY AMOUNTS IN RESPECT OF
INDEMNIFICATION HEREUNDER IN EXCESS OF AN AGGREGATE AMOUNT EQUAL TO ANY
INDEMNITY AMOUNTS PAYABLE TO THE TRUSTEE IN ACCORDANCE WITH SECTION 8.02(d) OF
THIS INDENTURE SHALL NOT CONSTITUTE A DEFAULT OR EVENT OF DEFAULT UNDER SECTION
5.01 OF THIS INDENTURE. THE TRUSTEE SHALL NOTIFY THE ISSUER PROMPTLY OF ANY
CLAIM FOR WHICH IT MAY SEEK INDEMNITY. FAILURE BY THE TRUSTEE SO TO NOTIFY THE
ISSUER SHALL NOT RELIEVE THE ISSUER OF ITS OBLIGATIONS HEREUNDER. THE ISSUER
SHALL DEFEND THE CLAIM AND THE TRUSTEE MAY HAVE SEPARATE COUNSEL AND THE ISSUER
SHALL PAY THE FEES AND EXPENSES OF SUCH COUNSEL. NOTWITHSTANDING THE FOREGOING,
THE ISSUER NEED NOT REIMBURSE ANY EXPENSE OR INDEMNIFY AGAINST ANY LOSS INCURRED
BY THE TRUSTEE (I) THROUGH THE TRUSTEE'S OWN WILLFUL MISCONDUCT, NEGLIGENCE OR
BAD FAITH OR (II) TO THE EXTENT THE TRUSTEE WAS REIMBURSED FOR OR INDEMNIFIED
AGAINST ANY SUCH LOSS BY THE SELLER OR THE SERVICER PURSUANT TO ANY SALE
AGREEMENT, ADMINISTRATION AGREEMENT, INTERCREDITOR AGREEMENT OR SERVICING
AGREEMENT. THE OBLIGATIONS OF THE ISSUER UNDER THIS SECTION SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT AND THE EARLIER RESIGNATION OR REMOVAL OF THE
TRUSTEE.

      When the Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(v) or (vi) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or State bankruptcy,
insolvency or similar law.

      SECTION 6.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time
upon 30 days' written notice to the Issuer. The Issuer shall remove the Trustee
by written notice if:

            (i) the Trustee fails to comply with Section 6.11;

            (ii) the Trustee is adjudged a bankrupt or insolvent;

            (iii) a receiver or other public officer takes charge of the Trustee
      or its property; or

            (iv) the Trustee otherwise becomes incapable of acting.

      If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the "Retiring Trustee"), the Issuer shall promptly appoint a successor Trustee.

      In addition, the Majority Holders may remove the Trustee by so notifying
the Issuer and the Trustee in writing and such Holders may appoint a successor
Trustee.

      A successor Trustee shall deliver a written acceptance of its appointment
to the Retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the Retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture and
any Intercreditor Agreement. No resignation or removal of the Trustee will
become effective until the acceptance of the appointment by a successor Trustee.

                                      -47-
<PAGE>

The successor Trustee shall mail a notice of its succession to the Transition
Bondholders. The Retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee.

      If a successor Trustee does not take office within 60 days after the
Retiring Trustee resigns or is removed, the Retiring Trustee at the expense of
the Issuer, the Issuer or the Majority Holders may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

      If the Trustee fails to comply with Section 6.11, any Transition
Bondholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.

      Notwithstanding the replacement of the Trustee pursuant to this Section
6.08, the Issuer's obligations under Section 6.07 shall continue for the benefit
of the Retiring Trustee.

      SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association shall, without any further act, be the successor Trustee. Notice of
any such event shall be promptly given to the PUCT and to each Rating Agency by
the successor Trustee and any agent in Luxembourg appointed pursuant to the
second paragraph of Section 3.02.

      In case at the time such successor or successors by merger, conversion,
consolidation or transfer shall succeed to the trusts created by this Indenture
any of the Transition Bonds shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
Retiring Trustee, and deliver such Transition Bonds so authenticated; and in
case at that time any of the Transition Bonds shall not have been authenticated,
any successor to the Trustee may authenticate such Transition Bonds either in
the name of any Retiring Trustee hereunder or in the name of the successor to
the Trustee; and in all such cases such certificates shall have the full force
and effect granted by the Transition Bonds or by this Indenture and this force
and effect shall be equal to any certificate issued by the Trustee.

      SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

      (a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust Estate, and to vest in such Person or
Persons, in such capacity and for the benefit of the Transition Bondholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section 6.10, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Transition Bondholders
of the appointment

                                      -48-
<PAGE>

of any co-trustee or separate trustee shall be required under Section 6.08
hereof. Notice of any such appointment shall be promptly given to each Rating
Agency and the PUCT by the Trustee.

      (b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

            (i) all rights, powers, duties and obligations conferred or imposed
      upon the Trustee shall be conferred or imposed upon and exercised or
      performed by the Trustee and such separate trustee or co-trustee jointly
      (it being understood that such separate trustee or co-trustee is not
      authorized to act separately without the Trustee joining in such act),
      except to the extent that under any law of any jurisdiction in which any
      particular act or acts are to be performed, the Trustee shall be
      incompetent or unqualified to perform such act or acts, in which event
      such rights, powers, duties and obligations (including the holding of
      title to the Trust Estate or any portion thereof in any such jurisdiction)
      shall be exercised and performed singly by such separate trustee or
      co-trustee, but solely at the direction of the Trustee;

            (ii) no trustee hereunder shall be personally liable by reason of
      any act or omission of any other trustee hereunder; and

            (iii) the Trustee may at any time accept the resignation of or
      remove any separate trustee or co-trustee.

      (c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Indenture and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to the Trustee. Every
such instrument shall be filed with the Trustee.

      (d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

      SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee and any
co-trustee shall at all times satisfy the requirements of TIA Section 310(a)(1)
and (a)(5) and Section 26(a)(1) of the Investment Company Act of 1940, as
amended. In addition, the Trustee and any co-trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and it shall have a long term debt rating
of "Baa3" or better by Moody's, "BBB-" or better by S&P and, if Fitch provides a
rating thereon, "BBB-" or better by Fitch. The Trustee and any co-trustee shall
comply with TIA Section 310(b), including the optional provision permitted by
the second sentence of TIA Section

                                      -49-
<PAGE>

310(b), including the optional provision permitted by the second sentence of TIA
Section 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.

      SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated

      SECTION 6.13. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE. The Trustee
hereby represents and warrants that:

      (a) the Trustee is a banking corporation validly existing in good standing
under the laws of the State of New York; and

      (b) the Trustee has full power, authority and legal right to execute,
deliver and perform this Indenture and all the Basic Documents to which the
Trustee is a party and has taken all necessary action to authorize the
execution, delivery and performance by it of this Indenture and such Basic
Documents.

                                  ARTICLE VII

                    TRANSITION BONDHOLDERS' LISTS AND REPORTS

      SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF TRANSITION
BONDHOLDERS. The Issuer shall furnish or cause to be furnished to the Trustee
(a) not more than five days after the earlier of (i) each Record Date with
respect to each Series and (ii) six months after the last Record Date with
respect to each Series, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Transition Bonds of such
Series as of such Record Date, and (b) at such other times as the Trustee may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Trustee is the Transition Bond Registrar, no such list shall be required to be
furnished. In addition, the Issuer shall furnish such list to any listing,
transfer or paying agent appointed under the second paragraph of Section 3.02 to
the extent such information is required by the rules and regulations of the
Luxembourg Stock Exchange.

      SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO TRANSITION
BONDHOLDERS.

      (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Transition Bonds
contained in the most recent list furnished to the Trustee as provided in
Section 7.01 and the names and addresses of Holders of Transition Bonds received
by the Trustee in its capacity as Transition Bond Registrar. The Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.

                                      -50-
<PAGE>

      (b) Transition Bondholders may communicate with other Transition
Bondholders pursuant to Section 312(b) of the TIA, with respect to their rights
under this Indenture or under the Transition Bonds.

      (c) The Issuer, the Trustee and the Transition Bond Registrar shall have
the protection of Section 312(c) of the TIA.

      SECTION 7.03. REPORTS BY ISSUER.

            (a) The Issuer shall:

                  (i) so long as the Issuer is required to file such documents
            with the Commission, provide to the Trustee and, so long as any
            Transition Bonds are listed on the Luxembourg Stock Exchange and its
            rules so require, with the listing agent of the Issuer in Luxembourg
            appointed pursuant to the second paragraph of Section 3.02, within
            15 days after the Issuer is required to file the same with the
            Commission, copies of the annual reports and of the information,
            documents and other reports (or copies of such portions of any of
            the foregoing as the Commission may from time to time by rules and
            regulations prescribe) which the Issuer may be required to file with
            the Commission pursuant to Section 13 or 15(d) of the Exchange Act;

                  (ii) provide to the Trustee, file with the Commission and, so
            long as any Transition Bonds are listed on the Luxembourg Stock
            Exchange and its rules so require, provide to the listing agent of
            the Issuer in Luxembourg appointed pursuant to the second paragraph
            of Section 3.02, in accordance with rules and regulations prescribed
            from time to time by the Commission or the Luxembourg Stock
            Exchange, respectively, such additional information, documents and
            reports with respect to compliance by the Issuer with the conditions
            and covenants of this Indenture as may be required from time to time
            by such rules and regulations; and

                  (iii) supply to the Trustee (and the Trustee shall transmit by
            mail to all Transition Bondholders described in TIA Section 313(c))
            and, so long as any Transition Bonds are listed on the Luxembourg
            Stock Exchange and its rules so require, to the listing agent of the
            Issuer in Luxembourg appointed pursuant to the second paragraph of
            Section 3.02, such summaries of any information, documents and
            reports required to be filed by the Issuer pursuant to clauses (i)
            and (ii) of this Section 7.03(a) as may be required by rules and
            regulations prescribed from time to time by the Commission.

            (b) Unless the Issuer otherwise determines, the fiscal year of the
      Issuer shall end on December 31 of each year.

      SECTION 7.04. REPORTS BY TRUSTEE. If required by TIA Section 313(a),
within 60 days after the end of each fiscal year of the Issuer, commencing with
the year after the issuance of the Transition Bonds of any Series, the Trustee
shall mail to each Holder of Transition Bonds of such Series as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA

                                      -51-
<PAGE>

Section 313(b); provided, however, that the initial report so issued shall be
delivered not more than 12 months after the initial issuance of each Series.

      A copy of each report at the time of its mailing to Transition Bondholders
shall be filed by the Trustee with the Commission and each stock exchange, if
any, on which the Transition Bonds are listed (to the extent required by the
rules of such exchange). The Issuer shall notify the Trustee if and when the
Transition Bonds are listed on any stock exchange.

      SECTION 7.05. PROVISION OF SERVICER REPORTS. Upon the written request of
any Transition Bondholder, the PUCT or any Rating Agency to the Trustee
addressed to the Corporate Trust Office, the Trustee shall provide such
Transition Bondholder, the PUCT or Rating Agency, as applicable, with a copy of
any [Semiannual] Servicer's Certificate, Annual Accountant's Report and any
other report of the Servicer referred to in the applicable Servicing Agreement.
If any Transition Bonds are listed on the Luxembourg Stock Exchange and its
rules so require, the Trustee at the written direction of the Issuer shall also
arrange for publication in accordance with such rules of a notice that a copy of
such Servicer's certificate, Annual Accountant's Report or other report shall be
available with the Issuer's listing agent in Luxembourg appointed pursuant to
the second paragraph of Section 3.02.

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

      SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture. The Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.

      SECTION 8.02. COLLECTION ACCOUNT.

                  (a) (i) On or prior to the Series Issuance Date for each
            Series issued hereunder, the Issuer shall open, at the Trustee's
            Corporate Trust Office, or at another Eligible Institution, one or
            more segregated non-interest-bearing trust accounts in the Trustee's
            name for the deposit of Collections for that Series of Transition
            Bonds and all other amounts received with respect to the Series
            Trust Estate securing that Series (each a "Collection Account" and
            collectively, the "Collection Accounts"). The Collection Account for
            each Series shall initially be divided into subaccounts, which need
            not be separate accounts: a general subaccount (the "General
            Subaccount"), an overcollateralization subaccount (the
            "Overcollateralization Subaccount"), a capital subaccount (the
            "Capital

                                      -52-
<PAGE>

            Subaccount"), an excess funds subaccount (the "Excess Funds
            Subaccount") and one or more class subaccounts for any Tranche of
            any Series of Transition Bonds that has a floating rate of interest
            as specified in any Series Supplement (each, a "Tranche
            Subaccount"). On or prior to the Series Issuance Date for any Series
            of Transition Bonds, the Member shall deposit into the Capital
            Subaccount for that Series an amount equal to the Required Capital
            Amount for that Series. Unless otherwise specified in any Series
            Supplement, the overcollateralization amount and scheduled
            overcollateralization level for the Overcollateralization Subaccount
            of each Series shall at all times be zero. All amounts in the
            Collection Account for any Series not allocated to any other
            subaccount shall be allocated to the General Subaccount for that
            Series. Prior to the initial Payment Date for a Series, all amounts
            in the Collection Account for that Series (other than funds
            deposited into the Capital Subaccount, up to the Required Capital
            Amount for that Series) shall be allocated to the General Subaccount
            for that Series. All payments received by the Trustee from any Swap
            Counterparty in respect of any Swap Agreement related to that Series
            shall be deposited in the related Tranche Subaccount. Prior to
            depositing funds or U.S. Government Obligations in the Collection
            Account pursuant to Section 4.01 or 4.02, the Issuer shall establish
            defeasance subaccounts (each a "Defeasance Subaccount") for each
            Series for which funds shall be deposited, as subaccounts of the
            Collection Account. All references to the Collection Account shall
            be deemed to include reference to all subaccounts contained therein.
            Withdrawals from and deposits to each of the foregoing subaccounts
            of any Collection Account shall be made as set forth in Section 4.03
            and Section 8.02(d) and (e). Each Collection Account shall at all
            times be maintained as an Eligible Securities Account and only the
            Trustee shall have access to that Collection Account for the purpose
            of making deposits in and withdrawals from that Collection Account
            in accordance with this Indenture. Funds in a Collection Account
            shall not be commingled with any other moneys, including moneys in
            any other Collection Account. All moneys deposited from time to time
            in a Collection Account, all deposits therein pursuant to this
            Indenture, and all investments made in Eligible Investments with
            such moneys, including all income or other gain from such
            investments, shall be held by the Trustee in that Collection Account
            as part of the Series Trust Estate securing that Series as herein
            provided.

                  (ii) The Securities Intermediary also agrees that (A) each of
            the Collection Accounts is, or on the date of its creation will be,
            and shall at all times be maintained by the Securities Intermediary
            as, a "securities account" (within the meaning of Section 8-501 of
            the New York UCC), (B) the "securities intermediary's jurisdiction"
            (within the meaning of Article 8 of the New York UCC) of the
            Securities Intermediary is the State of New York, (C) all cash and
            other property in each of the Accounts shall be treated by the
            Securities Intermediary as a "financial asset" (as defined in
            Section 8-102(a)(9) of the New York UCC), (E) the "entitlement
            holder" (as such term is defined in Section 8-102(a)(7) of the New
            York UCC or, with respect to Book-Entry Securities, in the
            applicable Federal Book-Entry Regulations) shall be the Trustee for
            the benefit of the Transition Bondholders, (E) any financial asset
            in registered form or payable to, or to the order of, a Person, and
            credited to any of the Accounts shall be

                                      -53-
<PAGE>

            registered in the name of, payable to the order of, or specially
            indorsed to, the Securities Intermediary or in blank, or credited to
            another securities account maintained in the name of the Securities
            Intermediary, and in no case will any financial assets credited to
            any of the Accounts be registered in the name of, payable to or to
            the order of, or specially indorsed to the Issuer or the Trustee,
            except to the extent the foregoing have been specially indorsed by
            the Issuer or the Trustee, as applicable, to the Securities
            Intermediary or in blank, (F) the Securities Intermediary shall not
            change the names or account numbers of any of the Accounts without
            the prior written consent of the Trustee and shall not change the
            entitlement holder, and (G) the Securities Intermediary shall at all
            times act as a "securities intermediary" (within the meaning of
            Section 8-102(a)(14) of the New York UCC or, with respect to
            Book-Entry Securities, in the applicable Federal Book-Entry
            Regulations) and shall credit to each of the Accounts each financial
            asset to be held in or credited to each of the Accounts pursuant to
            this Indenture.

                  (iii) Each of the Accounts shall remain at all times with a
            securities intermediary (within the meaning of Section 8-102(a)(14)
            of the New York UCC or, with respect to Book-Entry Securities, in
            the applicable Federal Book-Entry Regulations) having a combined
            capital and surplus of at least $50,000,000 and having a long-term
            debt rating of at least "A2" by Moody's and at least "AA-" by S&P.
            The Securities Intermediary shall give notice to the Issuer and the
            Transition Bondholders of the location of the Accounts and of any
            change thereof (provided that no such change shall be made without
            the prior approval of the Majority Holders), prior to the use
            thereof.

                  (iv) Anything herein to the contrary notwithstanding, the
            Issuer irrevocably agrees that the Securities Intermediary may, and
            the Securities Intermediary agrees that it shall, comply with
            "entitlement orders" (as defined in Section 8-102(8) of the New York
            UCC) originated by the Trustee and relating to each of the Accounts
            (and all securities entitlements within the meaning of Section
            8-102(a)(17) of the New York UCC or, with respect to Book-Entry
            Securities, within the meaning of applicable Federal Book-Entry
            Regulations carried in such Account) without further consent by the
            Issuer or any other Person so long as this Indenture is in effect.
            The Securities Intermediary agrees that it shall at all times comply
            with the "entitlement orders" (as defined in Section 8-102(8) of the
            New York UCC) originated by the Trustee and shall not comply with
            "entitlement orders" of any other Person. The Trustee and the
            Securities Intermediary hereby represent that they have not, and
            hereby agree that they will not, enter into any agreement or take
            any action which gives any Person other than the Trustee, "control"
            (as defined in Section 8-106 of the New York UCC) over any of the
            Accounts.

                  (v) The Trustee shall have sole dominion and exclusive control
            over all property in each Collection Account and the Securities
            Intermediary shall apply such amounts therein as provided in this
            Section 8.02. The Trustee at the written direction of the Servicer
            shall also pay from the Collection Account any

                                      -54-
<PAGE>

            amounts requested to be paid by or to the Servicer pursuant to of
            the applicable Servicing Agreement.

                  (vi) Collections shall be deposited in the applicable General
            Subaccount as provided in the applicable Servicing Agreement. All
            deposits to and withdrawals from a Collection Account, all
            allocations to the subaccounts of such Collection Account and any
            amounts to be paid to the applicable Servicer under Section 8.02(d)
            shall be made by the Trustee in accordance with the written
            instructions provided by such Servicer in the Servicer's Certificate
            or upon other written notice provided by such Servicer pursuant to
            such Servicing Agreement, as applicable.

                  (vii) There are no other agreements entered into between the
            Securities Intermediary, the Trustee and the Issuer with respect to
            the Accounts, other than this Indenture. In the event of any
            conflict between this Section 8.02 (or any portion thereof), any
            other provision of this Indenture or any other agreement now
            existing or hereafter entered into, the terms of this Section 8.02
            shall prevail.

      (b) So long as no Default or Event of Default has occurred and is
continuing, the Trustee upon Issuer Order will, as entitlement holder, cause the
Securities Intermediary to invest and reinvest all or a portion of the funds in
the Collection Account for each Series in Eligible Investments; provided,
however, that (i) such Eligible Investments shall not mature later than the next
Payment Date for such Series (except as otherwise provided in any Series
Supplement), (ii) such Eligible Investments shall not be sold, liquidated or
otherwise disposed of at a loss prior to the maturity thereof, and (iii) no
funds in the Defeasance Subaccount for any Series of Transition Bonds shall be
invested in Eligible Investments or otherwise, except that U.S. Government
Obligations deposited by the Issuer with the Trustee pursuant to Sections 4.01
or 4.02 shall remain as such. All income or other gain from investments of
moneys deposited in the Collection Account for that Series shall be deposited by
the Trustee in the Collection Account for that Series, and any loss resulting
from such investments shall be charged to that Collection Account. The Issuer
shall not direct the Trustee to make any investment of any funds or to sell any
investment held in the Collection Account for a Series unless the security
interest granted and perfected in such account will continue to be perfected in
such investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment or sale, if requested by the Trustee, the Issuer shall
deliver to the Trustee an Issuer Opinion of Counsel, acceptable to the Trustee,
to such effect. Subject to Section 6.01(c), the Trustee shall not in any way be
held liable for the selection of Eligible Investments or for investment Losses
incurred thereon except for Losses attributable to the Trustee's failure to make
payments on such Eligible Investments issued by the Trustee, in its commercial
capacity as principal obligor and not as Trustee, in accordance with their
terms. The Trustee shall have no liability in respect of Losses incurred as a
result of the liquidation of any Eligible Investment prior to its stated
maturity or the failure of the Issuer to provide timely and specific written
investment direction. The Trustee shall have no obligation to invest or reinvest
any amounts held hereunder in the absence of written investment direction
pursuant to an Issuer Order.

                                      -55-
<PAGE>

      (c) Any Collections remitted by the Servicer to the Trustee with respect
to a Series of Transition Bonds, any Indemnity Amounts with respect to that
Series remitted to the Trustee by the Seller, the Issuer or the Servicer, any
amounts paid by a Swap Counterparty in accordance with a Swap Agreement relating
to that Series, any other amount otherwise received by the Trustee or the Issuer
related to that Series, and any other proceeds of Series Trust Estate securing
that Series received by the Servicer, the Issuer or the Trustee shall be
deposited in the General Subaccount for that Series, except that the Trustee
shall deposit in the Capital Subaccount for that Series the Required Capital
Amount.

      (d) On each Payment Date for a particular Series of Transition Bonds or
other date specified in the Series Supplement with respect to that Series, the
Trustee pursuant to the written direction provided in the [Semiannual]
Servicer's Certificate shall by 12:00 noon (New York City time) apply all
amounts on deposit in the General Subaccount of the Collection Account for that
Series and any investment earnings on the subaccounts in the Collection Account
for that Series in the following priority unless otherwise set forth in any
Series Supplement herein (provided, that no Series Supplement may modify the Pro
Rata payment of amounts described herein as being paid Pro Rata):

            (i) fees and expenses (including reasonable legal fees and expenses)
      and Indemnity Amounts owed to the Trustee for such Payment Date shall be
      paid to the Trustee and, to the extent those amounts are not separately
      identified by the Trustee as being payable with respect to a Series,
      allocated among all Series of Transition Bonds Outstanding on a Pro Rata
      basis; provided that the Indemnity Amounts with respect to that Series
      paid during any calendar year pursuant to this clause (i) may not exceed
      the amount fixed therefor in the applicable Series Supplement;

            (ii) the Servicing Fee, which will be a fixed percentage of the
      initial principal amount of that Series of Transition Bonds, and all
      unpaid Servicing Fees from prior Payment Dates shall be paid to the
      Servicer;

            (iii) the administration fee payable under the Administration
      Agreement for such Payment Date shall be paid to the Administrator and
      fees of the Issuer's independent managers in connection with their acting
      as managers under the Issuer LLC Agreement shall be paid to such
      independent managers, each allocated Pro Rata among all Series of
      Transition Bonds Outstanding;

            (iv) all ordinary periodic Operating Expenses (such as accounting
      and audit fees, rating agency fees, legal fees and Servicer expenses under
      Sections 3.10 and 5.05 or equivalent provisions of the applicable
      Servicing Agreement) other than those referred to in clauses (i), (ii) and
      (iii) above shall be paid to the Persons entitled thereto; provided, that
      the fees and expenses of the independent managers of the Issuer shall be
      allocated Pro Rata among all Series of Transition Bonds Outstanding;

            (v) an amount equal to the sum of (x) Interest payable on such
      Series of Transition Bonds on such Payment Date and (y) any amounts in
      respect of periodic payments that are required to be made to any Swap
      Counterparty under any Swap

                                      -56-
<PAGE>

      Agreement entered into with respect to a Series as set forth in the
      applicable Series Supplement;

            (vi) an amount equal to any Principal of that Series or Tranche of
      Transition Bonds payable as a result of acceleration pursuant to Section
      5.02, any Principal of that Series or Tranche payable on a Series Final
      Maturity Date or Tranche Final Maturity Date for that Series or Tranche
      and any Principal of and premium, if any, on that Series or Tranche of
      Transition Bonds payable on a Redemption Date shall be allocated to that
      Series and, if there are insufficient funds to make that allocation in
      full, on a Pro Rata basis;

            (vii) an amount equal to Principal scheduled to be paid on that
      Series of Transition Bonds on such Payment Date according to the Expected
      Amortization Schedule, excluding any amounts provided for pursuant to
      clause (vi) above, shall be allocated to the corresponding Series and if
      there are insufficient funds to make that allocation in full, on a Pro
      Rata basis;

            (viii) any amounts payable to credit enhancement providers with
      respect to that Series, if any, shall be paid to such credit enhancement
      providers;

            (ix) all remaining unpaid Operating Expenses and any other amounts
      due and owing pursuant to the Basic Documents (including all remaining
      Indemnity Amounts) and any other amounts due and owing pursuant to any
      Swap Agreement (other than swap termination payments) shall be paid to the
      Persons entitled thereto without duplication of any other payment from any
      other source;

            (x) any amount necessary to replenish amounts drawn from the Capital
      Subaccount shall be allocated to the Capital Subaccount;

            (xi) all Swap Payments under any Swap Agreement related to that
      Series that would effect the termination of all obligations of the Issuer
      under such Swap Agreement, payable only after all of the Transition Bonds
      of that Series have been paid in full unless any of the following events
      has occurred: (a) an Event of Default (as defined in the Master Agreement
      (defined below)) under Section 5(a)(i) of the International Swaps and
      Derivatives Association, Inc. Master Agreement relating to that Series
      (the "Master Agreement"), between one or more Swap Counterparties and the
      Issuer, as a result of insufficient collection of Transition Charges
      relating to that Series of Transition Bonds (provided that any such
      termination Swap Payment shall not exceed an aggregate amount specified in
      the Supplemental Indenture relating to that Series); (b) an Event of
      Default under Section 5(a)(ii) of the Master Agreement caused by either
      the Issuer or the Trustee (provided that any such termination Swap Payment
      shall not exceed an aggregate amount specified in the Supplemental
      Indenture relating to that Series); (c) an Issuer's Event of Default (as
      defined in the Master Agreement) under Section 5(a)(vii) of the Master
      Agreement; (d) an Issuer's Event of Default under Section 5(a)(viii) of
      the Master Agreement; or (e) failure or termination of the security
      interest of the Trustee under this Indenture;

                                      -57-
<PAGE>

            (xii) so long as no Event of Default has occurred and is continuing,
      an amount equal to investment earnings on amounts in the Capital
      Subaccount for that Series shall be released to the Issuer; and

            (xiii) the balance, if any, shall be allocated to the Excess Funds
      Subaccount for that Series.

      The amounts paid during any calendar year in respect of the Trustee's fees
and expenses in clause (i), the Servicing Fee in clause (ii), the administration
and independent managers' fees in clause (iii), the ordinary periodic Operating
Expenses in clause (iv) and the remaining Operating Expenses in clause (ix)
above may not exceed in the aggregate for all Series an amount specified in the
related Supplemental Indenture (which amount may be based in part on whether
CenterPoint Houston is the Servicer of that Series of Transition Bonds) unless
the PUCT approves a different aggregate amount of such payments. If more than
one Series of Transition Bonds is outstanding, the payments described in the
preceding sentence will be made Pro Rata from the respective Collection Accounts
of each Series.

      Following repayment of all Transition Bonds of a Series, the balance, if
any, shall be released to the Issuer free from the Lien of the Indenture.

      "Pro Rata" means with respect to any Series or Tranche of Transition Bonds
a ratio, (A) in the case of clause (d)(v) above, the numerator of which is the
aggregate amount of Interest payable or net amount payable to a counterparty
under an interest rate protection agreement, as applicable, with respect to such
Series or Tranche on such Payment Date and the denominator of which is the sum
of the aggregate amounts of Interest payable and aggregate of the net amounts
payable under interest rate protection agreements with respect to all
Outstanding Series or Tranches on such Payment Date; and (B) in the case of all
other clauses in (d) above, the numerator of which is the aggregate amount of
Principal to be paid or payable pursuant to each such clause with respect to
such Series or Tranche on such Payment Date and the denominator of which is the
sum of the aggregate amounts of Principal to be paid or payable pursuant to each
such clause with respect to all Outstanding Series or Tranches on such Payment
Date, unless and to the extent, with respect to either clause (A) or (B) of this
paragraph, in the case of a Series comprised of two or more Tranches, the Series
Supplement for such Series provides otherwise.

      If, on any Payment Date for a Series of Transition Bonds, funds on deposit
in the General Subaccount for that Series are insufficient to make the payments
or transfers contemplated by clauses (i) through (xii) above, the Trustee shall
draw from amounts on deposit in the following subaccounts in the following order
up to the amount of such shortfall, in order to make such payments and
transfers:

            (i) from the Excess Funds Subaccount for such Series for allocations
      and payments contemplated by clauses (i) through (xi); and

            (ii) from the Capital Subaccount for such Series for allocations and
      payments contemplated by clauses (i) through (ix).

                                      -58-
<PAGE>

      (e) Upon an acceleration of the maturity of any Series of Transition Bonds
pursuant to Section 5.02, the aggregate amount of Principal of and Interest
accrued on each Transition Bond of that Series shall be payable, without
priority of interest over principal or of principal over interest and without
regard to Tranche.

      SECTION 8.03. RELEASE OF TRUST ESTATE.

      (a) All money and other property withdrawn from a Collection Account by
the Trustee for payment to the Issuer as provided in this Indenture in
accordance with Section 8.02 hereof shall be deemed released from the Indenture
when so withdrawn and applied in accordance with the provisions of Article VIII,
without further notice to, or release or consent by, the Trustee.

      (b) Other than as provided for in clause (a) above, the Trustee shall
release property from the Lien of this Indenture only as and to the extent
permitted by the Basic Documents and only upon receipt of an Issuer Request
accompanied by an Issuer Officer's Certificate, an Issuer Opinion of Counsel and
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or
an Issuer Opinion of Counsel in lieu of such Independent Certificates to the
effect that the TIA does not require any such Independent Certificate.

      (c) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Trustee may, and when required by the provisions of this Indenture
shall, execute instruments to release property from the Lien of this Indenture,
or convey the Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Indenture.
No party relying upon an instrument executed by the Trustee as provided in this
Article VIII shall be bound to ascertain the Trustee's authority, inquire into
the satisfaction of any conditions precedent or see to the application of any
moneys.

      (d) Subject to Section 8.03(b), the Trustee shall, at such time as there
are no Transition Bonds of a Series Outstanding and all sums due the Trustee
with respect to that Series pursuant to Section 6.07 have been paid, release any
remaining portion of the Series Trust Estate that secured that Series of
Transition Bonds from the Lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds or investments then on deposit in or
credited to the Collection Account for that Series of Transition Bonds.

      SECTION 8.04. ISSUER OPINION OF COUNSEL. The Trustee shall receive at
least five days' notice when requested by the Issuer to take any action pursuant
to Section 8.03, accompanied by copies of any instruments involved, and the
Trustee may also require, as a condition to such action, an Issuer Opinion of
Counsel, in form and substance satisfactory to the Trustee, stating the legal
effect of any such action, outlining the steps required to complete the same,
and concluding that all conditions precedent to the taking of such action have
been complied with and such action will not materially and adversely impair the
security for the Transition Bonds or the rights of the Transition Bondholders in
contravention of the provisions of this Indenture; provided, however, that such
Issuer Opinion of Counsel shall not be required to express an opinion as to the
fair value of the Trust Estate. Counsel rendering any such opinion may rely,
without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Trustee in connection with any
such action.

                                      -59-
<PAGE>

      SECTION 8.05. REPORTS BY INDEPENDENT ACCOUNTANTS. The Issuer shall appoint
a firm of Independent certified public accountants of recognized national
reputation for purposes of preparing and delivering the reports or certificates
of such accountants required by this Indenture and the related Series
Supplements. Upon any resignation by such firm, the Issuer shall promptly
appoint a successor thereto that shall also be a firm of Independent certified
public accountants of recognized national reputation. If the Issuer shall fail
to appoint a successor to a firm of Independent certified public accountants
that has resigned within 15 days after such resignation, the Trustee shall
promptly notify the Issuer of such failure in writing. If the Issuer shall not
have appointed a successor within 10 days thereafter, the Trustee shall promptly
appoint a successor firm of Independent certified public accountants of
recognized national reputation. The fees of such firm of Independent certified
public accountants and its successor shall be payable by the Issuer.

      SECTION 8.06. REP DEPOSIT ACCOUNT. Pursuant to the written direction of
the Servicer, the Issuer shall open, at the Trustee's Corporate Trust Office, or
at another Eligible Institution, one or more segregated non-interest-bearing
trust accounts in the Trustee's name (each a "REP Deposit Account"), each such
account for the benefit of one Depositing REP with respect to one Series of
Transition Bonds. Pursuant to and in accordance with the Financing Order,
amounts received from any REP as a security deposit with respect to a Series of
Transition Bonds shall be deposited into the applicable REP Deposit Account for
that Series. The REP Deposit Accounts shall at all times be maintained in an
Eligible Securities Account and only the Trustee shall have access to the REP
Deposit Accounts for the purpose of making deposits in and withdrawals from the
REP Deposit Accounts in accordance with this Indenture, any Servicing Agreement
and any Financing Order. Funds in the REP Deposit Accounts shall not be
commingled by the Issuer with any other moneys, and shall not be commingled by
the Trustee. All or a portion of the funds in the REP Deposit Accounts shall be
invested in Eligible Investments and reinvested by the Trustee pursuant to the
written direction of the Servicer. All income or other gain from investments of
moneys deposited in any REP Deposit Account shall be deposited by the Trustee
into such REP Deposit Account, and any loss resulting from such investments
shall be charged to such REP Deposit Account. In addition, each Depositing REP
shall be responsible for the payment of income taxes with respect to such
investments. The Trustee shall not in any way be held liable for the selection
of Eligible Investments for the REP Deposit Accounts or for investment losses
incurred thereon. The Trustee shall have no obligation to invest or reinvest any
amounts held hereunder in the absence of timely and specific written investment
direction from the Servicer. The Trustee shall release property from any REP
Deposit Account only as and to the extent directed by the Servicer pursuant to
the Financing Order and Servicing Agreement.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

      SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF TRANSITION
BONDHOLDERS.

      (a) Without the consent of the Holders of any Transition Bonds but with
prior notice to the Rating Agencies, the Issuer and the Trustee, when authorized
by an Issuer Order, with the

                                      -60-
<PAGE>

consent of the PUCT pursuant to Section 9.07 if such supplemental indenture
increases ongoing qualified costs as defined in the Financing Order (which
consent shall not be required with regard to the first Series Supplement), at
any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Trustee, for any of the following purposes:

            (i) to correct or amplify the description of any Series Trust
      Estate, or to better assure, convey and confirm unto the Trustee any
      Series Trust Estate, or to subject to the Lien of this Indenture
      additional property;

            (ii) to evidence the succession, in compliance with the applicable
      provisions hereof, of another Person to the Issuer, and the assumption by
      any applicable successor of the covenants of the Issuer contained herein
      and in the Transition Bonds;

            (iii) to add to the covenants of the Issuer, for the benefit of the
      Transition Bondholders, or to surrender any right or power herein
      conferred upon the Issuer;

            (iv) to convey, transfer, assign, mortgage or pledge any property to
      the Trustee for the benefit of the Holders, the Trustee and any Swap
      Counterparty;

            (v) to cure any ambiguity, to correct or supplement any provision
      herein or in any Supplemental Indenture which may be inconsistent with any
      other provision herein or in any Supplemental Indenture, to make any other
      provisions with respect to matters or questions arising under this
      Indenture or in any Supplemental Indenture, to change in any manner or
      eliminate any provisions of this Indenture or to modify in any manner the
      rights of the Transition Bondholders under this Indenture; provided,
      however, that (i) such action shall not, as evidenced by an Issuers'
      Opinion of Counsel, adversely affect in any material respect the interests
      of any Transition Bondholder and (ii) the Rating Agency Condition shall
      have been satisfied with respect thereto;

            (vi) to evidence and provide for the acceptance of the appointment
      hereunder by a successor Trustee with respect to the Transition Bonds and
      to add to or change any of the provisions of this Indenture as shall be
      necessary to facilitate the administration of the trusts hereunder by more
      than one Trustee, pursuant to the requirements of Article VI;

            (vii) to modify, eliminate or add to the provisions of this
      Indenture to such extent as shall be necessary to effect the qualification
      of this Indenture under the TIA or under any similar federal statute
      hereafter enacted and to add to this Indenture such other provisions as
      may be expressly required by the TIA;

            (viii) to set forth the terms of any Series that has not theretofore
      been authorized by a Series Supplement;

            (ix) to qualify the Transition Bonds for registration with a
      Clearing Agency; or

            (x) to satisfy any Rating Agency requirements.

                                      -61-
<PAGE>

      The Trustee is hereby authorized to join in the execution of any such
Supplemental Indenture and to make any further appropriate agreements and
stipulations that may be therein contained.

      (b) The Issuer and the Trustee, when authorized by an Issuer Order, may,
also without the consent of any of the Holders of the Transition Bonds, with the
consent of the PUCT pursuant to Section 9.07 if such indenture or supplemental
indenture increases ongoing qualified costs as defined in the Financing Order,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Transition Bonds under this Indenture; provided, however, that
(i) as evidenced by an Issuer's Opinion of Counsel, such action shall not
adversely affect in any material respect the interests of any Transition
Bondholder and (ii) the Rating Agency Condition shall have been satisfied with
respect thereto;

      (c) The Trustee may, but shall not be required to, enter into any
indenture supplemental hereto or to consent to or enter into any amendment of
the Basic Documents unless it shall have received an Opinion of Counsel,
addressed to the Trustee, satisfactory to it, that such supplement or amendment
is authorized or permitted by this Article IX.

      SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF TRANSITION
BONDHOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order,
also may, with the consent of the PUCT pursuant to Section 9.07 if the indenture
or supplemental increases ongoing qualified costs as defined in the Financing
Order, prior notice to the Rating Agencies and the consent of the Holders of not
less than a majority of the Outstanding Amount of the Transition Bonds of the
Series or Tranches to be affected, by Act of such Holders delivered to the
Issuer and the Trustee, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Transition Bonds under this Indenture;
provided, however, that no such Supplemental Indenture shall, without the
consent of the Holder of each Outstanding Transition Bond of the Series or
Tranches affected thereby:

            (i) change the date of payment of any installment of Principal of or
      premium, if any, or Interest on any Transition Bond, or reduce the
      principal amount thereof, the Bond Rate thereon or the Redemption Price or
      the premium, if any, with respect thereto, change the provisions of this
      Indenture and the related applicable Series Supplement relating to the
      application of collections on, or the proceeds of the sale of, the Trust
      Estate to payment of Principal of or premium, if any, or Interest on the
      Transition Bonds, or change the currency in which any Transition Bond or
      the Interest thereon is payable;

            (ii) impair the right to institute suit for the enforcement of the
      provisions of this Indenture requiring the application of funds available
      therefor, as provided in Article V, to the payment of any such amount due
      on the Transition Bonds on or after the respective due dates thereof (or,
      in the case of redemption, on or after the Redemption Date);

                                      -62-
<PAGE>

            (iii) reduce the percentage of the Outstanding Amount of the
      Transition Bonds or of a Series or Tranche thereof, the consent of the
      Holders of which is required for any such Supplemental Indenture, or the
      consent of the Holders of which is required for any waiver of compliance
      with provisions of this Indenture or defaults hereunder and their
      consequences provided for in this Indenture or modify or alter the
      provisions of the proviso to the definition of the term "Outstanding";

            (iv) reduce the percentage of the Outstanding Amount of Transition
      Bonds of affected Series required to direct the Trustee to direct the
      Issuer to sell or liquidate the Series Trust Estate securing such Series
      pursuant to Section 5.04 or to preserve the Series Trust Estate related to
      such Series pursuant to Section 5.05;

            (v) modify any provision of this Section 9.02 except to increase any
      percentage specified herein or to provide that those provisions of this
      Indenture or the other Basic Documents referenced in this Section cannot
      be modified or waived without the consent of the Holder of each
      Outstanding Transition Bond affected thereby;

            (vi) modify any of the provisions of this Indenture in such manner
      so as to affect the amount of any payment of Interest, Principal or
      premium payable on any Transition Bond on any Payment Date or change the
      Redemption Dates, Expected Amortization Schedules or Series Final Maturity
      Dates or Tranche Final Maturity Dates of any Transition Bonds;

            (vii) decrease the Required Capital Amount with respect to any
      Series;

            (viii) modify or alter the provisions of this Indenture regarding
      the voting of Transition Bonds held by the Issuer, CenterPoint Houston, an
      Affiliate of either of them or any obligor on the Transition Bonds;

            (ix) decrease the percentage of the aggregate principal amount of
      Transition Bonds required to amend the sections of this Indenture which
      specify the applicable percentage of the aggregate principal amount of the
      Transition Bonds necessary to amend any Basic Document; or

            (x) permit the creation of any Lien ranking prior to or on a parity
      with the Lien of this Indenture with respect to any part of the Trust
      Estate or, except as otherwise permitted or contemplated herein, terminate
      the Lien of this Indenture on any property at any time subject hereto or
      deprive the Holder of any Transition Bond of the security provided by the
      Lien of this Indenture.

      It shall not be necessary for the PUCT or any Act of Transition
Bondholders under this Section 9.02 to approve the particular form of any
proposed Supplemental Indenture, but it shall be sufficient if the PUCT or such
Act of Transition Bondholders shall approve the substance thereof.

      Promptly after the execution by the Issuer and the Trustee of any
Supplemental Indenture pursuant to this Section, the Trustee shall mail to the
PUCT and the Holders of the Transition Bonds to which such amendment or
Supplemental Indenture relates a notice setting forth in

                                      -63-

<PAGE>

general terms the substance of such Supplemental Indenture. Any failure of the
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such Supplemental Indenture. If any
Transition Bonds are listed on the Luxembourg Stock Exchange and the rules of
such exchange so require, the Issuer's listing agent shall arrange for
publication in accordance with such rules of a notice that the notice regarding
the Supplemental Indenture shall be available with the Issuer's listing agent in
Luxembourg appointed pursuant to the second paragraph of Section 3.02.

      SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by any Supplemental Indenture permitted
by this Article IX or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and subject to Sections
6.01 and 6.02, shall be fully protected in relying upon, an Issuer Opinion of
Counsel stating that the execution of such Supplemental Indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such Supplemental Indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.

      SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
Supplemental Indenture pursuant to the provisions hereof, this Indenture shall
be deemed to be modified and amended in accordance therewith with respect to
each Series or Tranche of Transition Bonds affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and immunities
under this Indenture of the Trustee, the Issuer and the Holders of the
Transition Bonds shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such Supplemental Indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.

      SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this
Indenture and every Supplemental Indenture executed pursuant to this Article IX
shall conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.

      SECTION 9.06. REFERENCE IN TRANSITION BONDS TO SUPPLEMENTAL INDENTURES.
Transition Bonds authenticated and delivered after the execution of any
Supplemental Indenture pursuant to this Article IX may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such Supplemental Indenture. If the Issuer or the Trustee shall
so determine, new Transition Bonds so modified as to conform, in the opinion of
the Trustee and the Issuer, to any such Supplemental Indenture may be prepared
and executed by the Issuer and authenticated and delivered by the Trustee in
exchange for Outstanding Transition Bonds.

      SECTION 9.07. PUCT CONSENT. To the extent the consent of the PUCT is
required to effect any amendment to, modification of, or supplemental indenture
to this Indenture or any provision of this Indenture,

                                      -64-
<PAGE>

      (a) The Issuer 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:

            (i) a reference to Docket No. 30485 and to any other Docket No.
      under which a Financing Order has been issued and a statement as to the
      possible effect of the amendment, modification or supplemental indenture
      on ongoing qualified costs;

            (ii) an Officer's Certificate stating that the proposed amendment,
      modification or supplemental indenture, as the case may be, has been
      approved by all parties to this Indenture; and

            (iii) a statement identifying the person to whom the PUCT or its
      staff is to address its consent to the proposed amendment, modification or
      supplemental indenture or request additional time;

      (b) The PUCT shall, within 30 days of receiving the request for consent
complying with Section 9.07(a) above, either

            (i) provide notice of its consent or lack of consent to the person
      specified in Section 9.07(a)(iii) above, or

            (ii) be conclusively deemed to have consented to the proposed
      amendment, modification or supplemental indenture,

unless, within 30 days of receiving the request for consent complying with
Section 9.07(a) above, the PUCT or its staff delivers to the office of the
person specified in Section 9.07(a)(iii) 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, modification or supplemental indenture. 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 Section 9.07(a)(iii) above no
later than the last day of such extension of time or be conclusively deemed to
have consented to the proposed amendment, modification or supplemental indenture
on the last day of such extension of time. Any amendment, modification or
supplemental indenture requiring the consent of the PUCT shall become effective
on the later of (i) the date proposed by the parties to such amendment,
modification or supplemental indenture and (ii) the first day after the
expiration of the 30-day period provided for in Section 9.07(b)(ii), or, if such
period has been extended pursuant thereto, the first day after the expiration of
such period as so extended.

                                   ARTICLE X

                         REDEMPTION OF TRANSITION BONDS

      SECTION 10.01. [Reserved]

      SECTION 10.02. MANDATORY REDEMPTION BY ISSUER. The Issuer shall redeem all
Transition Bonds of a Series that have been called for redemption pursuant to

                                      -65-
<PAGE>

Section 10.01 on the Redemption Date or Dates, if any, in the amounts required,
if any, and at the redemption price specified in the Series Supplement for such
Series, which in any case shall be not less than the outstanding Principal
amount of the Bonds to be redeemed, plus accrued Interest thereon to, but
excluding, such Redemption Date. If the Issuer is required to redeem the
Transition Bonds of a Series pursuant to this Section 10.02, it shall furnish
written notice of such requirement to the Trustee not later than 25 days prior
to the Redemption Date for such redemption and shall deposit with the Trustee
the redemption price of the Transition Bonds to be redeemed plus all other
amounts due and payable hereunder whereupon all such Transition Bonds shall be
due and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.03 hereof to each Holder of the Transition Bonds of such Series
pursuant to this Section 10.02.

      SECTION 10.03. FORM OF REDEMPTION NOTICE. Unless otherwise specified in
the Series Supplement relating to a Series of Transition Bonds, notice of
redemption under Section 10.01 or 10.02 hereof shall be given by the Trustee by
first-class mail, postage prepaid, mailed not less than five days nor more than
45 days prior to the applicable Redemption Date to each Holder of Transition
Bonds to be redeemed, as of the close of business on the Record Date preceding
the applicable Redemption Date at such Holder's address appearing in the
Transition Bond Register.

      All notices of redemption shall state:

      (1) the Redemption Date;

      (2) if less than all Outstanding Transition Bonds of any Series are to be
redeemed, the identification (and in the case of partial redemption of any
Transition Bonds, the principal amounts) of the particular Transition Bonds to
be redeemed;

      (3) the Redemption Price;

      (4) the place where such Transition Bonds are to be surrendered for
payment of the Redemption Price and accrued interest (which shall be the office
or agency of the Issuer to be maintained as provided in the first paragraph of
Section 3.02 hereof);

      (5) the CUSIP number, if applicable; and

      (6) the principal amount of Transition Bonds to be redeemed.

      Notice of redemption of the Transition Bonds to be redeemed shall be given
by the Trustee in the name and at the expense of the Issuer. For so long as any
Transition Bonds are listed on the Luxembourg Stock Exchange and the rules of
such exchange so require, the Issuer's listing agent shall arrange that such
notice will also be given by publication pursuant to such rules at least ten
(10) days prior to the Redemption Date. Failure to give notice of redemption, or
any defect therein, to any Holder of any Transition Bond selected for redemption
shall not impair or affect the validity of the redemption of any other
Transition Bond. Notice of optional redemption shall be irrevocable once given.

                                      -66-
<PAGE>

      SECTION 10.04. PAYMENT OF REDEMPTION PRICE. If notice of redemption has
been duly mailed, or duly waived by the Holders of all Transition Bonds called
for redemption, and the redemption moneys have been duly deposited with the
Trustee, then the Transition Bonds called for redemption shall be payable on the
applicable Redemption Date at the applicable Redemption Price. No further
Interest will accrue on the principal amount of any Transition Bonds called for
redemption after the Redemption Date for such redemption if payment of the
Redemption Price thereof has been duly provided for, and the Holder of such
Transition Bonds will have no rights with respect thereto, except to receive
payment of the Redemption Price thereof. Payment of the Redemption Price
together with accrued Interest shall be made by the Trustee to or upon the order
of the Holders of the Transition Bonds called for redemption upon surrender of
such Transition Bonds, and the Transition Bonds so redeemed shall cease to be of
further effect and the Lien of this Indenture shall be released with respect to
such Transition Bonds.

                                   ARTICLE XI

                                  MISCELLANEOUS

      SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. Upon any
application or request by the Issuer to the Trustee to take any action under any
provision of this Indenture, the Issuer shall furnish to the Trustee (i) an
Issuer Officer's Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Issuer Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with and
(iii) (if required by the TIA) an Independent Certificate from a firm of
certified public accountants meeting the applicable requirements of this Section
11.01, except that, in the case of any such application or request as to which
the furnishing of such documents is specifically required by any provision of
this Indenture, no additional certificate or opinion need be furnished.

            Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

            (i) a statement that each signatory of such certificate or opinion
      has read or has caused to be read such covenant or condition and the
      definitions herein relating thereto;

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

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

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

                                      -67-
<PAGE>

      SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents. Any certificate or opinion of the Issuer
may be based, insofar as it relates to legal matters, upon, in the absence of
bad faith, an Opinion of Counsel.

      Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

      Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely conclusively upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.

      SECTION 11.03. ACTS OF TRANSITION BONDHOLDERS.

      (a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Transition
Bondholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Transition Bondholders in person or
by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Transition Bondholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.

      (b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.

      (c) The ownership of Transition Bonds shall be proved by the Transition
Bond Register.

      (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Transition Bonds shall bind the Holder of
every Transition Bond issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of

                                      -68-
<PAGE>

anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such
Transition Bond.

      SECTION 11.04. NOTICES, ETC., TO TRUSTEE, ISSUER, PUCT AND RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Transition Bondholders or other documents provided or permitted by
this Indenture to be made upon, given or furnished to or filed with:

      (a) the Trustee by any Transition Bondholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing, delivered personally, via facsimile transmission, by reputable
overnight courier or by first-class mail, postage prepaid, to the Trustee at its
Corporate Trust Office, or

      (b) the Issuer by the Trustee or by any Transition Bondholder shall be
sufficient for every purpose hereunder if in writing, delivered personally, via
facsimile transmission, by reputable overnight courier or by first-class mail,
postage prepaid, to the Issuer addressed to: CenterPoint Energy Transition Bond
Company II, LLC, 1111 Louisiana Street, Suite 4655B, Houston, Texas 77002,
Attention: Manager, or at any other address previously furnished in writing to
the Trustee by the Issuer. The Issuer shall promptly transmit any notice
received by it from the Transition Bondholders to the Trustee.

      Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or a Manager shall be in writing, delivered personally, via facsimile
transmission, by reputable overnight courier or by first-class mail, postage
prepaid, to: (i) in the case of Moody's: Moody's Investors Service, Inc.,
Attention: ABS Monitoring Department, 99 Church Street, New York, New York
10007; (ii) in the case of Standard & Poor's: Standard & Poor's, a division of
The McGraw-Hill Companies, 55 Water Street New York, NY 10041, Attention: Asset
Backed Surveillance Department; and (iii) in the case of Fitch: Fitch, Inc., 1
State Street Plaza, New York, New York 10004, Attention: ABS Surveillance.

      Notices required to be given to the PUCT shall be in writing, delivered
personally, via facsimile transmission, by reputable overnight courier or by
first-class mail, postage prepaid, to Public Utility Commission of Texas, 1701
N. Congress Avenue, Austin, Texas 78711-3326, Attention: Executive Director and
General Counsel.

      SECTION 11.05. NOTICES TO TRANSITION BONDHOLDERS; WAIVER. Where this
Indenture provides for notice to Transition Bondholders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and delivered by first-class mail, postage prepaid, to each
Transition Bondholder affected by such event, at the address of such Transition
Bondholder as it appears on the Transition Bond Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Transition Bondholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Transition Bondholder shall affect the sufficiency of
such notice with respect to other Transition Bondholders, and any notice that is
mailed in the manner herein provided shall conclusively be presumed to have been
duly given.

                                      -69-
<PAGE>

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

      In case it shall be impractical to deliver notice in accordance with the
first paragraph of this Section 11.05 to the Holders of Transition Bonds when
such notice is required to be given pursuant to any provision of this Indenture,
then any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.

      Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.

      SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding
any provision of this Indenture or any of the Transition Bonds to the contrary,
the Issuer may enter into any agreement with any Holder of a Transition Bond
providing for a method of payment, or notice by the Trustee or any Paying Agent
to such Holder, that is different from the methods provided for in this
Indenture for such payments or notices. The Issuer will furnish to the Trustee a
copy of each such agreement and the Trustee will cause payments to be made and
notices to be given in accordance with such agreements.

      SECTION 11.07. NOTICES TO LUXEMBOURG STOCK EXCHANGE.

      (a) For so long as any Transition Bonds are listed on the Luxembourg Stock
Exchange and to the extent the rules of such exchange so require, the Issuer
shall notify the Luxembourg Stock Exchange and any agent appointed pursuant to
the second paragraph of Section 3.02 if any rating assigned to such Transition
Bonds is reduced or withdrawn and shall arrange for such notice to be published
pursuant to the rules of such exchange.

      (b) For so long as any Transition Bonds are listed on the Luxembourg Stock
Exchange and the rules of such exchange so require, the Trustee shall make
available to the Holders of such Transition Bonds and shall deposit in
accordance with the written direction of the Issuer on file with the Issuer's
listing agent in Luxembourg appointed pursuant to Section 3.02 copies of any
documents executed in connection with this Indenture reasonably requested by the
Issuer's listing agent and the reports of independent certified public
accountants obtained with respect to the Issuer pursuant to this Indenture.

      SECTION 11.08. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the TIA, such required
provision shall control.

      The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

                                      -70-
<PAGE>

      SECTION 11.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.

      SECTION 11.10. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Transition Bonds by the Issuer shall bind its successors
and permitted assigns, whether so expressed or not.

      All agreements of the Trustee in this Indenture shall bind its successors.

      The Trustee shall provide written notice to the Rating Agencies of any
assignment of its obligations under this Agreement.

      SECTION 11.11. SEPARABILITY. In case any provision in this Indenture or in
the Transition Bonds shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

      SECTION 11.12. BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Transition Bonds, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Transition Bondholders,
and any other party secured hereunder, and any other Person with an ownership
interest in any part of the Trust Estate, any benefit or any legal or equitable
right, remedy or claim under this Indenture.

      SECTION 11.13. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Transition Bonds or this Indenture) payment need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the date on which nominally due, and no interest
shall accrue for the period from and after any such nominal date.

      SECTION 11.14. GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS. NOTWITHSTANDING THE FOREGOING, FOR PURPOSES OF CHAPTER 8 OF THE
UCC AS ENACTED IN THE STATE OF TEXAS AND ARTICLE 8 OF THE UCC AS ENACTED IN THE
STATE OF NEW YORK, OR CHAPTER 8 OR ARTICLE 8 (OR CORRESPONDING PROVISION) OF THE
UCC AS ENACTED IN ANY OTHER STATE, THE JURISDICTION OF THE SECURITIES
INTERMEDIARY SHALL BE THE STATE OF NEW YORK.

      SECTION 11.15. COUNTERPARTS. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.

      SECTION 11.16. ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Trustee on the
Transition Bonds or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Member or any
Manager, employee or agent of the Issuer or (ii) any

                                      -71-
<PAGE>

stockholder, officer, director, employee or agent of the Trustee (it being
understood that none of the Trustee's obligations are in its individual
capacity).

      SECTION 11.17. NO PETITION. The Trustee, by entering into this Indenture,
and each Holder, by accepting a Transition Bond (or interest therein) issued
hereunder, hereby covenant and agree that they shall not, prior to the date that
is one year and one day after the termination of this Indenture, acquiesce,
petition or otherwise invoke or cause the Issuer or any Manager to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under any insolvency law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of its respective
property, or ordering the dissolution, winding up or liquidation of the affairs
of the Issuer. Nothing in this paragraph shall preclude, or be deemed to estop,
such Holder (A) from taking or omitting to take any action prior to such date in
(i) any case or proceeding voluntarily filed or commenced by or on behalf of the
Issuer under or pursuant to any such law or (ii) any involuntary case or
proceeding pertaining to the Issuer that is filed or commenced by or on behalf
of a person other than such Holder and is not joined in by such Holder (or any
person to which such holder shall have assigned, transferred or otherwise
conveyed any part of the obligations of the Issuer hereunder) under or pursuant
to any such law, or (B) from commencing or prosecuting any legal action that is
not an involuntary case or proceeding under or pursuant to any such law against
the Issuer or any of its properties.

      SECTION 11.18. INTERCREDITOR AGREEMENT. The Trustee is hereby authorized,
upon receipt of an Issuer Request, to execute and deliver any Intercreditor
Agreement provided to it by the Issuer that does not materially and adversely
affect any Holder's rights in and to any Series Trust Estate, or otherwise
hereunder. Such request shall be accompanied by an Officer's Certificate, upon
which the Trustee may rely conclusively with no duty of independent
investigation or inquiry, to the effect that such Intercreditor Agreement does
not materially and adversely affect any Holder's rights in and to any Series
Trust Estate or otherwise hereunder. Each Intercreditor Agreement shall be
binding on the Holders.

                                      -72-
<PAGE>

      IN WITNESS WHEREOF, the Issuer, the Trustee and the Securities
Intermediary have caused this Indenture to be duly executed by their respective
managers or officers thereunto duly authorized, all as of the day and year first
above written.

                                          CENTERPOINT ENERGY TRANSITION BOND
                                          COMPANY II, LLC

                                          By:__________________________________
                                          Name:________________________________
                                          Title:_______________________________

                                          DEUTSCHE BANK TRUST COMPANY
                                          AMERICAS, as Trustee

                                          By:__________________________________
                                          Name:________________________________
                                          Title:_______________________________

                                          DEUTSCHE BANK TRUST COMPANY AMERICAS,
                                          as Securities Intermediary

                                          By:__________________________________
                                          Name:________________________________
                                          Title:_______________________________

                                      -73-
<PAGE>

                                   SCHEDULE 1

                       [SEMIANNUAL] SERVICER'S CERTIFICATE

                                       1
<PAGE>

                                   SCHEDULE 2a

                          [STATUTORY TRUE-SALE OPINION]

                                       2
<PAGE>

                                   SCHEDULE 2b

                      [STATE LAW SECURITY INTEREST OPINION]

                                       3
<PAGE>

                                   SCHEDULE 2c

                                  [UCC OPINION]

                                       4
<PAGE>

                                   APPENDIX A

                               MASTER DEFINITIONS

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

      "Accounts" means, collectively, the Collection Account (and each
sub-account thereof, including, without limitation, the General Subaccount, the
Capital Subaccount, the Overcollateralization Subaccount, the Defeasance
Subaccount, the Excess Funds Subaccount and each Tranche Subaccount) and each
REP Deposit Account.

      "Act" has the meaning specified in Section 11.03 of the Indenture.

      "Addition Notice" means, with respect to the transfer of Subsequent
Transition Property to the Issuer, notice, which shall be given by the Seller to
the Issuer, the PUCT and the Rating Agencies not later than 10 days prior to the
related Subsequent Transfer Date, specifying the Subsequent Transfer Date for
such Subsequent Transition Property.

      "Adjustment Date" has the meaning specified in the applicable Servicing
Agreement.

      "Administration Agreement" means the Administration Agreement dated as of
[ ], between CenterPoint Houston, as Administrator, and the Issuer, as the same
may be amended and supplemented from time to time.

      "Administrator" means CenterPoint Houston as administrator under the
Administration Agreement and each successor to or assignee of CenterPoint
Houston in the same capacity.

      "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.

      "Annual Accountant's Report" has the meaning assigned to that term in the
applicable Servicing Agreement.

      "Authorized Denominations" means, with respect to any Series or Tranche of
Transition Bonds, $1,000 and integral multiples thereof, or such other
denominations as may be specified in the Series Supplement therefor.

      "Authorized Officer" means (i) with respect to any Person that is a
corporation or a limited liability company, 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
or any Assistant Treasurer, the Secretary or any Assistant Secretary of such
Person, (ii) with respect to any Person that is a partnership, the President,
any Vice President, Treasurer or Secretary (or Assistant Secretary) of a general
partner or managing

                                       1
<PAGE>

partner of such Person; provided that in respect of the Issuer, Authorized
Officer means any Manager or the Member and, with respect to the Member, any
officer who is authorized to act for the Member in matters relating to the
Issuer and who is identified on the list of Authorized Officers delivered by the
Member to the Trustee as of the date hereof (as such list may be modified or
supplemented from time to time thereafter).

      "Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended from time to time.

      "Basic Documents" means the Issuer LLC Agreement, the Issuer Certificate
of Formation, each Sale Agreement, each Servicing Agreement, each Intercreditor
Agreement, each Swap Agreement, the Administration Agreement, the Indenture, any
Supplemental Indentures, each DTC Agreement, each Underwriting Agreement and any
Bills of Sale.

      "Bill of Sale" means any bill of sale issued by the Seller to the Issuer
pursuant to any Sale Agreement evidencing the sale of Transition Property by the
Seller to the Issuer.

      "Bond Rate" means, with respect to each Series or, if applicable, each
Tranche of Transition Bonds, the rate at which interest accrues on the principal
balance of Transition Bonds of such Series or Tranche, as specified in the
Series Supplement therefor.

      "Book-Entry Security" means a security maintained in the form of entries
(including, without limitation, the security entitlements in, and the financial
assets based on, such security) in the commercial book-entry system of the
Federal Reserve System.

      "Book-Entry Transition Bonds" means beneficial interests in the Transition
Bonds, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11 of the Indenture.

      "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.

      "Calculation Date" means, with respect to each Series of Transition Bonds,
the date on which the calculations and filings set forth in Annex 1 to the
applicable Servicing Agreement will be made each year.

      "Capital Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.

      "CenterPoint Houston" means CenterPoint Energy Houston Electric, LLC, a
Texas limited liability company, or its successors.

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

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

                                       2
<PAGE>

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.

      "Collection Account" has the meaning specified in Section 8.02(a) of the
Indenture.

      "Collections" means amounts collected in respect of Transition Charges.

      "Commission" means the U.S. Securities and Exchange Commission, and any
successor thereof.

      "Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office as of the date of the execution of this Indenture is located at
Trust and Securities Services, 60 Wall Street, 26th Floor, MS NYC60 - 2606, New
York, New York 10005, Attn: Structured Finance Services, or at such other
address as the Trustee may designate from time to time by notice to the
Transition Bondholders and the Issuer, or the principal corporate trust office
of any successor Trustee (the address of which the successor Trustee will notify
the Transition Bondholders and the Issuer).

      "Covenant Defeasance Option" has the meaning specified in Section 4.01(b)
of the Indenture.

      "Customers" means all existing and future retail electric customers
located within CenterPoint Houston's service territory as it existed on May 1,
1999, except for (A) certain categories of existing customers whose load had
been lawfully served (i) by a fully operational qualifying facility before
September 1, 2001 if the facility was supported by substantially complete
filings for site-specific environmental permits on or before December 31, 1999,
or (ii) by an on-site power production facility with a rated capacity of 10
megawatts or less or (B) customers in a multiple certificated service territory
who requested to switch providers on or before May 1, 1999 or were not taking
service from the CenterPoint Houston on, and do not do so after, May 1, 1999.

      "Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.

      "Defeasance Subaccount" has the meaning specified in Section 8.02(a) of
the Indenture.

      "Definitive Transition Bonds" has the meaning specified in Section 2.11 of
the Indenture.

      "Depositing REP" means a retail electric provider, as that term is defined
in the Texas Electric Choice Plan, who provides the Trustee with a cash deposit
pursuant to the Financing Order.

      "DTC" means The Depository Trust Company.

      "DTC Agreement" means any applicable Letter of Representations among the
Issuer, the Trustee and DTC or other applicable Clearing Agency, relating to the
Clearing Agency's rights and obligations (in its capacity as Clearing Agency)
with respect to any Book-Entry Transition Bonds, as the same may be amended and
supplemented from time to time.

                                       3
<PAGE>

      "Eligible Guarantor Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein):

            (a) a bank;

            (b) a broker, dealer, municipal securities broker or dealer or
      government securities broker or dealer;

            (c) a credit union;

            (d) a national securities exchange, registered securities
      association or clearing agency; or

            (e) a savings association that is a participant in a securities
      transfer association.

      "Eligible Institution" means:

            (a) the corporate trust department of the Trustee, so long as any of
      the securities of the Trustee have a credit rating from each Rating Agency
      in one of its generic rating categories which signifies investment grade,
      or

            (b) the trust department of a depository institution organized under
      the laws of the United States of America or any State (or any domestic
      branch of a foreign bank), which

                  (i) has either

                        (A) with respect to any Eligible Investment having a
                  maturity of greater than one month, a long-term unsecured debt
                  rating of "AA-" by Standard & Poor's, "A2" by Moody's and, if
                  Fitch provides a rating thereon, the equivalent of the lower
                  of those two ratings by Fitch or

                        (B) with respect to any Eligible Investment having a
                  maturity of one month or less, a certificate of deposit rating
                  of "A-1+" by Standard & Poor's, "P-1" by Moody's and, if Fitch
                  provides a rating thereon, "F-1+" by Fitch, or any other
                  long-term, short-term or certificate of deposit rating
                  acceptable to the Rating Agencies, and

                  (ii) whose deposits are insured by the FDIC.

      "Eligible Investments" mean Book-Entry Securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:

            (a) direct obligations of, and obligations fully and unconditionally
      guaranteed as to timely payment by, the United States of America;

                                       4
<PAGE>

            (b) demand deposits, time deposits or certificates of deposit of any
      depository institution or trust company incorporated under the laws of the
      United States of America or any State thereof (or any domestic branch of a
      foreign bank) and subject to supervision and examination by federal or
      State banking or depository institution authorities; provided, however,
      that at the time of the investment or contractual commitment to invest
      therein, the commercial paper or other short-term unsecured debt
      obligations (other than such obligations the rating of which is based on
      the credit of a Person other than such depository institution or trust
      company) thereof shall have either (i) a long-term unsecured debt rating
      from Moody's, Standard & Poor's and, if Fitch provides a rating thereon,
      Fitch of at least "Aa3," "AA" and "AA," respectively, or (ii) a
      certificate of deposit rating from Moody's and Standard & Poor's of at
      least "P-1" and "A-1+," respectively, and, if Fitch provides a rating
      thereon, "F-1+" by Fitch;

            (c) commercial paper or other short term obligations of any Person
      organized under the laws of any State (other than CenterPoint Houston,
      Reliant Energy, Inc. or any of their affiliates) whose ratings, at the
      time of the investment or contractual commitment to invest therein, from
      Moody's and Standard & Poor's shall be at least "P-1" and "A-1+,"
      respectively and, if Fitch provides a rating thereon, "F-1+" by Fitch;

            (d) investments in money market funds having a rating from Moody's,
      Standard & Poor's and, if Fitch provides a rating thereon, Fitch of "Aaa,"
      "AAA" and "AAA," respectively (including funds for which the Trustee or
      any of its Affiliates act as investment manager or advisor);

            (e) bankers' acceptances issued by any depository institution or
      trust company referred to in clause (b) above;

            (f) repurchase obligations with respect to any security that is a
      direct obligation of, or fully guaranteed by, the United States of America
      or any agency or instrumentality thereof the obligations of which are
      backed by the full faith and credit of the United States of America, in
      either case entered into with a depository institution or trust company
      (acting as principal) described in clause (b) above;

            (g) repurchase obligations with respect to any security or whole
      loan entered into with

                  (i) a depository institution or trust company (acting as
            principal) described in clause (b) above (any depository institution
            or trust company being referred to in this definition as a
            "financial institution"),

                  (ii) a broker/dealer (acting as principal) registered as a
            broker or dealer under Section 15 of the Exchange Act (any
            broker/dealer being referred to in this definition as a
            "broker/dealer"), the unsecured short-term debt obligations of which
            are rated at least "P-1" by Moody's, "A-1+" by Standard & Poor's
            and, if Fitch provides a rating thereon, "F-1+" by Fitch at the time
            of entering into this repurchase obligation, or

                                       5
<PAGE>

                  (iii) an unrated broker/dealer, acting as principal, that is a
            wholly-owned subsidiary of a non-bank or bank holding company the
            unsecured short-term debt obligations of which are rated at least
            "P-1" by Moody's, "A-1+" by Standard & Poor's and, if Fitch provides
            a rating thereon, "F-1+" by Fitch at the time of purchase so long as
            the obligations of such unrated broker/dealer are unconditionally
            guaranteed by such non-bank or bank holding company; or

            (h) any other investment permitted by each of the Rating Agencies;

provided, that (a) any Book-Entry Security, instrument or security having a
maturity of one month or less that would be an Eligible Investment but for its
failure, or the failure of the obligor thereon, to have the rating specified
above shall be an eligible investment if such Book-Entry Security, instrument or
security, or the obligor thereon, has a short-term unsecured debt rating of at
least "P-1" by Moody's, "A-1+" by S&P and, if Fitch provides a rating thereon,
"F-1+" by Fitch, and (b) any Book-Entry Security, instrument or security having
a maturity of greater than one month that would be an eligible investment but
for its failure, or the failure of the obligor thereon, to have the rating
specified above shall be an eligible investment if such Book-Entry Security,
instrument or security, or the obligor thereon, has a long-term unsecured debt
rating of at least "AA-" by S&P or "Aa3" by Moody's (and, if Fitch provides a
rating thereon, "AA-" by Fitch) and a short-term unsecured debt rating of at
least "P-1" by Moody's or the equivalent thereof by S&P (and Fitch, if Fitch
provides a rating thereon).

      "Eligible Securities Account" means either:

            (a) a segregated non-interest-bearing trust account with an Eligible
      Institution or

            (b) a segregated non-interest-bearing trust account with the
      corporate trust department of a depository institution organized under the
      laws of the United States of America or any State (or any domestic branch
      of a foreign bank), having corporate trust powers and acting as trustee
      for funds deposited in such account, so long as any of the unsecured
      securities of such depository institution shall have a credit rating from
      each Rating Agency in one of its generic rating categories which signifies
      investment grade.

      "Event of Default" has the meaning specified in Section 5.01 of the
Indenture.

      "Excess Funds Subaccount" has the meaning specified in Section 8.02(a) of
the Indenture.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Expected Final Payment Date" means, with respect to each Series or, if
applicable, each Tranche of Transition Bonds, the date when all interest and
principal is scheduled to be paid for that Series or Tranche in accordance with
the Expected Amortization Schedule, as specified in the Series Supplement
therefor.

      "Expected Amortization Schedule" means, with respect to each Series or, if
applicable, each Tranche of Transition Bonds, the expected amortization schedule
for principal thereof, as specified in the Series Supplement therefor.

      "FDIC" means the Federal Deposit Insurance Corporation or any successor.

                                       6

<PAGE>

      "Federal Book-Entry Regulations" means (a) the federal regulations
contained in Subpart B ("Treasury/Reserve Automated Debt Entry System (TRADES)")
governing Book-Entry Securities consisting of U.S. Treasury bonds, notes and
bills, and Subpart D ("Additional Provisions") of 31 C.F.R. part 357, Section
357.10 through Section 357.14 and Section 357.41 through Section 357.44
(including related defined terms in 31 C.F.R. Section 357.2); and (b) to the
extent substantially identical to the federal regulations referred to in clause
(a) above (as in effect from time to time), the federal regulations governing
other Book-Entry Securities.

      "Final Maturity Date" means, for each Series or, if applicable, each
Tranche of Transition Bonds, the date by which all Principal and Interest on the
Transition Bonds is required to be paid, as specified in the Series Supplement
therefor.

      "Financing Issuance" means an issuance of a new Series of Transition Bonds
under the Indenture to provide funds to finance the purchase by the Issuer of
Transition Property.

      "Financing Order" means the Financing Order issued by the PUCT on March
16, 2005, in Docket No. 30485 and any subsequent financing order issued by the
PUCT to CenterPoint Houston pursuant to which CenterPoint Houston transfers its
rights and interests thereunder to the Issuer in connection with the issuance of
a separate Series of Transition Bonds.

      "Fitch" means Fitch Ratings or any successor thereto.

      "Floating Rate Bonds" means any Series or Tranche of Transition Bonds that
accrues interest at a variable rate determined as described in the related
Series Supplement, if any.

      "General Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.

      "Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, deliver, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Trust Estate or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal, interest and other payments in respect of the Trust Estate and all
other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring Proceedings in the name of the Granting party or otherwise and
generally to do and receive anything that the Granting party is or may be
entitled to do or receive thereunder or with respect thereto.

      "Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Tranche is registered on the Transition Bond
Register.

      "Indemnity Amounts" means any indemnification obligations payable by the
Servicer pursuant to any Servicing Agreement, the Seller pursuant to any Sale
Agreement or the Issuer pursuant to Section 6.07 of the Indenture.

      "Indenture" means this Indenture dated as of [ ], among the Issuer, the
Trustee and the Securities Intermediary, as the same may be amended and
supplemented from time to time by

                                       7
<PAGE>

one or more Series Supplements or Supplemental Indentures, and shall include the
forms and terms of the Transition Bonds established thereunder.

      "Independent" means, when used with respect to any specified Person, that
the Person

            (a) is in fact independent of the Issuer, any other obligor upon the
      Transition Bonds, CenterPoint Houston and any Affiliate of any of the
      foregoing Persons,

            (b) does not have any direct financial interest or any material
      indirect financial interest in the Issuer, any such other obligor,
      CenterPoint Houston or any Affiliate of any of the foregoing Persons and

            (c) is not connected with the Issuer, any such other obligor,
      CenterPoint Houston or any Affiliate of any of the foregoing Persons as an
      officer, employee, promoter, underwriter, trustee, partner, director or
      person performing similar functions.

      "Independent Certificate" means a certificate or opinion to be delivered
to the Trustee made by an Independent appraiser from a nationally reputable
appraisal firm or other expert appointed by an Issuer Order in the exercise of
reasonable care, and such opinion or certificate shall state that the signer has
read the definition of "Independent" in this Appendix A and that the signer is
Independent within the meaning thereof.

      "Initial Transfer Date" means the Series Issuance Date for the first
Series of Transition Bonds.

      "Intercreditor Agreement" means any intercreditor agreement that
CenterPoint Houston, as Seller, enters into with the Trustee, the Issuer,
CenterPoint Energy Transition Bond Company, LLC, Deutsche Bank Trust Company
Americas, as successor in interest to Bankers Trust Co., as trustee under that
certain indenture dated as of October 24, 2001, related to the transition bonds
issued by CenterPoint Energy Transition Bond Company, LLC, and other parties.

      "Interest" means, for any Payment Date for any Series or Tranche of
Transition Bonds, the sum, without duplication, of:

            (a) an amount equal to the amount of interest accrued at the
      applicable interest rates from the prior Payment Date or, with respect to
      the first Payment Date, the amount of interest accrued since the Initial
      Transfer Date, with respect to that Series or Tranche;

            (b) any unpaid interest plus, to the extent permitted by law, any
      interest accrued on this unpaid interest at the applicable interest rate;

            (c) if the Transition Bonds have been declared due and payable, all
      accrued and unpaid interest thereon; and

                                       8
<PAGE>

            (d) with respect to a Series or Tranche to be redeemed prior to the
      next Payment Date, the amount of interest that will be payable as interest
      on such Series or Tranche upon such redemption.

      "ISDA" means the International Swap Dealers Association, Inc.

      "Issuer" means CenterPoint Energy Transition Bond Company II, LLC, a
Delaware limited liability company, or any successor thereto pursuant to Section
3.11 of the Indenture.

      "Issuer Certificate of Formation" means the Certificate of Formation of
the Issuer that was filed with the Delaware Secretary of State on [ ], as the
same may be amended and restated from time to time.

      "Issuer LLC Agreement" means the Limited Liability Company Agreement
between the Issuer and CenterPoint Houston, as sole Member, dated as of [ ], as
the same may be amended and supplemented from time to time.

      "Issuer Opinion of Counsel" means one or more written opinions of counsel
who may, except as otherwise expressly provided in the Indenture, be employees
of or counsel to the Issuer and who shall be satisfactory to the Trustee and the
PUCT, and which opinion or opinions shall be addressed to the Trustee, as
Trustee, and shall be in a form reasonably satisfactory to the Trustee.

      "Issuer Officer's Certificate" means a certificate on behalf of the Issuer
signed by any Authorized Officer of the Issuer and delivered to the Trustee.

      "Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Trustee.

      "Legal Defeasance Option" has the meaning specified in Section 4.01(b) of
the Indenture.

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

      "Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.

      "Majority Holders" means the Holders of a majority of the Outstanding
Amount of the Transition Bonds of all Series.

      "Manager" means any manager of the Issuer.

      "Master Agreement" has the meaning specified in Section 8.02(d) of the
Indenture.

      "Member" means CenterPoint Houston, as the sole member of the Issuer, or
any successor thereto.

      "Moody's" means Moody's Investors Service, Inc., or any successor thereto.

                                       9
<PAGE>

      "Officer's Certificate" means, in respect of any Person, an officer's
certificate signed by an Authorized Officer of such Person; provided that unless
otherwise specified, any reference in the Indenture to an Officer's Certificate
shall be to an Officer's Certificate of any Authorized Officer of the Issuer.

      "Operating Expenses" means, with respect to the Issuer, all fees, costs
and expenses owed by the Issuer with respect to a Series of Transition Bonds,
including all amounts owed by the Issuer to the Trustee relating to that Series,
the Servicing Fee relating to that Series (but excluding costs and expenses
incurred by the Servicer except as specifically set forth in Section 5.08 of the
Servicing Agreement relating to that Series), the fees and expenses relating to
that Series payable by the Issuer to the Administrator under the Administration
Agreement (but excluding any costs and expenses incurred by the Administrator in
carrying out its duties under the Administration Agreement other than costs and
expenses for services provided by unaffiliated third parties relating to that
Series incurred by the Administrator in accordance with Sections 2 and 3 of the
Administration Agreement), the fees and expenses relating to that Series payable
by the Issuer to the independent managers of the Issuer, legal fees and expenses
of the Servicer pursuant to the applicable Servicing Agreement relating to that
Series, and legal and accounting fees, costs and expenses of the Issuer relating
to that Series.

      "Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to CenterPoint Houston or the Issuer, which counsel
shall be reasonably acceptable to the Trustee, the PUCT, the Issuer or the
Rating Agencies and which shall be in form reasonably satisfactory to the
Trustee or the PUCT, if applicable.

      "Outstanding" with respect to Transition Bonds means, as of the date of
determination, all Transition Bonds theretofore authenticated and delivered
under the Indenture except:

            (a) Transition Bonds theretofore canceled by the Transition Bond
      Registrar or delivered to the Transition Bond Registrar for cancellation;

            (b) Transition Bonds or portions thereof the payment for which money
      in the necessary amount has been theretofore deposited with the Trustee or
      any Paying Agent in trust for the Holders of such Transition Bonds;
      provided, however, that if such Transition Bonds are to be redeemed,
      notice of such redemption has been duly given pursuant to the Indenture or
      provision therefor, satisfactory to the Trustee; and

            (c) Transition Bonds in exchange for or in lieu of other Transition
      Bonds which have been authenticated and delivered pursuant to the
      Indenture unless proof satisfactory to the Trustee is presented that any
      such Transition Bonds are held by a bona fide purchaser;

      provided that in determining whether the Holders of the requisite
      Outstanding Amount of the Transition Bonds or any Series or Tranche
      thereof have given any request, demand, authorization, direction, notice,
      consent or waiver hereunder or under any Basic Document, Transition Bonds
      owned by the Issuer, any other obligor upon the Transition Bonds,
      CenterPoint Houston or any Affiliate of any of the foregoing Persons shall
      be disregarded and deemed not to be Outstanding, except that, in
      determining whether the

                                       10
<PAGE>

      Trustee shall be fully protected in relying upon any such request, demand,
      authorization, direction, notice, consent or waiver, only Transition Bonds
      that a Responsible Officer of the Trustee knows to be so owned shall be so
      disregarded. Transition Bonds so owned that have been pledged in good
      faith may be regarded as Outstanding if the pledgee establishes to the
      satisfaction of the Trustee the pledgee's right so to act with respect to
      such Transition Bonds and that the pledgee is not the Issuer, any other
      obligor upon the Transition Bonds, the Servicer or any Affiliate of any of
      the foregoing Persons.

      "Outstanding Amount" means the aggregate principal amount of all
Outstanding Transition Bonds or, if the context requires, all Outstanding
Transition Bonds of a Series or Tranche Outstanding at the date of
determination.

      "Overcollateralization Subaccount" has the meaning specified in Section
8.02(a) of the Indenture.

      "Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 of the Indenture
and is authorized by the Issuer to make the payments of Principal of or premium,
if any, or Interest on the Transition Bonds on behalf of the Issuer.

      "Payment Date" means, with respect to each Series or, if applicable, each
Tranche of Transition Bonds, each date or dates specified as Payment Dates for
such Series or Tranche in the Series Supplement therefor, provided that if any
such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.

      "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.

      "Predecessor Transition Bond" means, with respect to any particular
Transition Bond, every previous Transition Bond evidencing all or a portion of
the same debt as that evidenced by such particular Transition Bond; and, for the
purpose of this definition, any Transition Bond authenticated and delivered
under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or
stolen Transition Bond shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Transition Bond.

      "Principal" means, with respect to any Payment Date and each Series or, if
applicable, each Tranche of Transition Bonds the sum, without duplication, of:

            (a) the amount of principal scheduled to be paid on such Payment
      Date in accordance with the Expected Amortization Schedule;

            (b) the amount of principal due on the Final Maturity Date of any
      Series or Tranche if such Payment Date is the final Maturity Date;

            (c) the amount of principal due as a result of the occurrence and
      continuance of an Event of Default and acceleration of the Transition
      Bonds;

                                       11

<PAGE>

            (d) the amount of principal and premium, if any, due as a result of
      a redemption of Transition Bonds prior to such Payment Date; and

            (e) any unpaid and previously scheduled payments of principal and
      overdue payments of principal.

      "Pro Rata" has the meaning specified for such term in Section 8.02(d) of
the Indenture.

      "Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.

      "Projected Transition Bond Balance" means, as of any date, the anticipated
Outstanding Amount of Transition Bonds after giving effect to payment of the sum
of the amounts provided for in the Expected Amortization Schedules for each
outstanding Series of Transition Bonds and such date.

      "PUCT" means the Public Utility Commission of Texas or any successor
entity thereto.

      "Qualified Costs" has the meaning assigned to that term in the Texas
Electric Choice Plan and one or more Financing Orders, in each case as
applicable to the Series of Transition Bonds to which that Financing Order
relates.

      "Rating Agency" means any rating agency rating the Transition Bonds of any
Tranche or Series 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, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Issuer, written notice of which designation shall be given to the Trustee
and the Servicer.

      "Rating Agency Condition," with respect to the issuance of a new Series of
Transition Bonds, has the meaning set forth in Section 2.10(7) of the Indenture
and, with respect to any other action, means the notification in writing to each
Rating Agency of such action, and confirmation from S&P and Fitch to the Trustee
and the Issuer that such action will not result in a reduction or withdrawal of
the then current rating by such Rating Agency of any outstanding Series or
Tranche of Transition Bonds.

      "Record Date" means, with respect to any Payment Date for a Series or
Tranche, the date set forth as such in the Series Supplement therefor.

      "Redemption Date" means, with respect to each Series or, if applicable,
each Tranche of Transition Bonds, the date for the redemption of the Transition
Bonds of such Series or Tranche pursuant to Section 10.01 or 10.02 of the
Indenture or the Series Supplement for such Series or Tranche, which in each
case shall be a Payment Date.

      "Redemption Price" has the meaning set forth in Section 10.01 of the
Indenture.

      "Refunding Issuance" means issuance of a new Series of Transition Bonds
hereunder to pay the cost of refunding, through redemption or payment on the
Expected Final Payment Date

                                       12

<PAGE>

for a Series or Tranche of Transition Bonds, all or part of the Transition Bonds
of such Series or Tranche to the extent permitted by the terms thereof.

      "REP" means a retail electric provider under the Financing Order.

      "REP Deposit Account" has the meaning specified in Section 8.06 of the
Indenture.

      "Required Capital Amount" means a capital contribution in an amount equal
to the amount specified in the related Series Supplement, representing a capital
contribution from CenterPoint Houston.

      "Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any Vice President,
Director, Managing Officer, associate, Assistant Vice President, Secretary,
Assistant Secretary, or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.

      "Retiring Trustee" means a Trustee that resigns or vacates the office of
Trustee for any reason.

      "Sale Agreement" means the Sale Agreement for any Transition Property, in
each case, between the Seller and the Issuer, as the same may be amended and
supplemented from time to time.

      "Securities Intermediary" means ____________________________________, as
securities intermediary, or its successor or any successor securities
intermediary under the Indenture.

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

      "[Semiannual] Servicer's Certificate" means the statement prepared by the
Servicer and delivered to the Trustee with respect to each Series of Transition
Bonds on or prior to each Payment Date therefor, the form of which is attached
hereto as Schedule 1.

      "Series" means any series of Transition Bonds issued by the Issuer and
authenticated by the Trustee pursuant to the Indenture, as specified in the
Series Supplement therefor.

      "Series Final Maturity Date" means the Final Maturity Date for a Series.

      "Series Issuance Date" means, with respect to any Series, the date on
which the Transition Bonds of such Series are to be originally issued in
accordance with Section 2.10 of the Indenture and the Series Supplement for such
Series.

      "Series Supplement" means a Supplemental Indenture that authorizes a
particular Series of Transition Bonds.

                                       13
<PAGE>

      "Series Trust Estate" has the meaning specified in a Series Supplement for
a particular Series of Transition Bonds.

      "Servicer" means CenterPoint Houston and each successor to or assignee of
CenterPoint Houston, in its capacity as Servicer under the applicable Servicing
Agreement for a Series of Transition Bonds.

      "Servicer Default" means an event specified in the applicable Servicing
Agreement.

      "Servicing Agreement" means any Transition Property Servicing Agreement
between the Issuer and the Servicer for the related Transition Property and
acknowledged by the Trustee, as the same may be amended and supplemented from
time to time.

      "Servicing Fee" means the fee payable by the Issuer to the Servicer on
each Payment Date with respect to each Series of Transition Bonds in the amount
to be specified in the applicable Servicing Agreement.

      "Standard & Poor's" or "S&P" means Standard & Poor's, a division of The
McGraw-Hill Companies, or any successor thereto.

      "State" means any one of the 50 states of the United States of America or
the District of Columbia.

      "Subsequent Sale" means the sale of Transition Property after the date
hereof, subject to the satisfaction of the conditions specified in any Sale
Agreement and the Indenture.

      "Subsequent Transfer Date" means any date on which a Subsequent Sale will
be effective, specified in an Addition Notice.

      "Subsequent Transition Property" means Transition Property (identified in
the related Bill of Sale) sold by the Seller to the Issuer as of a Subsequent
Transfer Date pursuant to a Sale Agreement.

      "Successor Servicer" means a successor Servicer appointed by the Trustee
pursuant to the applicable Servicing Agreement which will succeed to all the
rights and duties of the Servicer under the Servicing Agreement.

      "Supplemental Indenture" means a supplemental indenture entered into by
the Issuer and the Trustee pursuant to Article IX of the Indenture.

      "Swap" means an interest rate swap, cap, floor, collar or other hedging
transaction that may be entered into by the Issuer in accordance with the
Indenture for the purpose of managing interest rate risk with respect to a
specified Series or Tranche of Floating Rate Bonds that are being issued
concurrently with the execution of the Swap.

      "Swap Agreement" means any ISDA Master Agreement relating to a Series of
Transition Bonds, together with the related Schedule and Confirmation, between
the Issuer and a Swap

                                       14
<PAGE>

Counterparty, as the same may be amended, supplemented or otherwise modified and
in effect from time to time, as permitted by the Indenture and any Series
Supplement.

      "Swap Counterparty" means the entity that is a party to a Swap with the
Issuer.

      "Swap Payment" means the payments made by the Issuer to the Swap
Counterparty pursuant to any Swap, subject to any netting of payments provided
in the applicable Swap.

      "Texas Electric Choice Plan" means the Act of May 21, 1999, 76th Leg. R.S.
ch. 405, 1999 (codified at Texas Utilities Code Section 39.001 et seq.).

      "Tranche" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series, as specified in the Series Supplement for that
Series.

      "Tranche Final Maturity Date" means the Final Maturity Date of a Tranche,
as specified in the Series Supplement for the related Series.

      "Tranche Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.

      "Transition Bond" means any of the transition bonds (as defined in the
Texas Electric Choice Plan) issued by the Issuer pursuant to the Indenture.

      "Transition Bond Balance" means, as of any date, the aggregate Outstanding
Amount of all Series of Transition Bonds on such date.

      "Transition Bond Owner" means, with respect to a Book-Entry Transition
Bond, the Person who is the beneficial owner of such Book-Entry Transition Bond,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).

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

      "Transition Bond Registrar" means the Trustee, in its capacity as keeper
of the Transition Bond Register, or any other Person appointed to act in such
capacity by the Issuer pursuant to Section 2.05 of the Indenture.

      "Transition Charge Adjustment Process" means the process by which
Transition Charges are adjusted pursuant to the applicable Servicing Agreement
and the Texas Electric Choice Plan.

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

                                       15

<PAGE>

      "Transition Property" means the rights and interests of the Seller or its
successor under any Financing Order once those rights are first transferred to
the Issuer or pledged in connection with the issuance of the Transition Bonds,
including the irrevocable 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, and
all Subsequent Transition Property.

      "Trust Estate" means all Series Trust Estate securing all Transition Bonds
issued under the Indenture.

      "Trust Indenture Act or TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.

      "Trustee" means ____________________________________, as trustee, or its
successor or any successor Trustee under the Indenture.

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

      "Underwriters" means the underwriters who purchase Transition Bonds of any
Series or Tranche from the Issuer and sell such Transition Bonds in a public
offering.

      "Underwriting Agreement" means any underwriting agreement entered into by
the Issuer, CenterPoint Houston and the underwriters parties thereto in
connection with the issuance of a separate Series of Transition Bonds in
accordance with a Financing Order.

      "U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.

                                       16<PAGE>

                                                                    EXHIBIT 10.1

                   FORM OF TRANSITION PROPERTY SALE AGREEMENT

                                     between

               CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC

                                     Issuer

                                       and

                    CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC

                                     Seller

                           Dated as of ______________

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                        <C>
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..................................................................        4
   Section 3.06       No Proceedings................................................................        5
   Section 3.07       Approvals.....................................................................        5
   Section 3.08       The Transition Property.......................................................        5
   Section 3.09       Solvency......................................................................        6
   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...........................................        8
   Section 3.16       Prospectus....................................................................        9
   Section 3.17       Nature of Representations and Warranties......................................        9

ARTICLE IV COVENANTS OF THE SELLER..................................................................        9
   Section 4.01       Seller's Existence............................................................        9
   Section 4.02       No Liens or Conveyances.......................................................        9
   Section 4.03       Delivery of Collections.......................................................       10
   Section 4.04       Notice of Liens...............................................................       10
   Section 4.05       Compliance With Law...........................................................       10
   Section 4.06       Covenants Related to the Transition Property..................................       10
   Section 4.07       Protection of Title...........................................................       11
   Section 4.08       Taxes.........................................................................       12
   Section 4.09       Filings Pursuant to Financing Order...........................................       12

ARTICLE V ADDITIONAL UNDERTAKINGS OF SELLER.........................................................       12
   Section 5.01       Liability of the Seller; Indemnities..........................................       12
   Section 5.02       Merger or Consolidation of, or Assumption of the Obligations of, the Seller...       14
   Section 5.03       Limitation on Liability of the Seller And Others..............................       16

ARTICLE VI MISCELLANEOUS PROVISIONS.................................................................       16
   Section 6.01       Amendment.....................................................................       16
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                        <C>
   Section 6.02       Notices.......................................................................       17
   Section 6.03       Assignment by the Seller......................................................       18
   Section 6.04       Assignment to the Indenture Trustee...........................................       18
   Section 6.05       Limitations on Rights of Others...............................................       18
   Section 6.06       Severability..................................................................       18
   Section 6.07       Separate Counterparts.........................................................       18
   Section 6.08       Headings......................................................................       19
   Section 6.09       Governing Law.................................................................       19
   Section 6.10       Nonpetition Covenants.........................................................       19

APPENDIX A            DEFINITIONS

SCHEDULE 1
</TABLE>

<PAGE>

     TRANSITION PROPERTY SALE AGREEMENT (this "Agreement") dated as of
__________, between CENTERPOINT ENERGY TRANSITION BOND COMPANY II, 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 Texas Electric Choice Plan 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 Transferred
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 Transferred
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 and supplemented from time to time.

          (b) Non-capitalized terms used herein which are defined in the Texas
     Electric Choice Plan, as the context requires, have the meanings assigned
     to such terms in the Texas Electric Choice Plan, but without giving effect
     to amendments to the Texas Electric Choice Plan 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.

          (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
     and Exhibit references contained in this Agreement are references to
     Sections, Schedules and Exhibits in or to

                                      -1-
<PAGE>

     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 $[ ] (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 Texas Electric Choice Plan, 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
     Texas Electric Choice Plan 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 Texas Electric Choice Plan. 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 paragraph (a) above.

          (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.

          (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 Texas Electric Choice Plan, 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
     Texas Electric

                                      -2-
<PAGE>

     Choice Plan and under Articles 8 and 9 of 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 and no material breach by the Seller of its covenants in this
     Agreement shall exist and 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 for the Transferred Transition Property to be purchased
          on such date, 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 Texas Electric Choice Plan, the Financing Order
     and other applicable law for the Issuer to have ownership of the
     Transferred 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 Texas Electric
     Choice Plan, 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;

          (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

                                      -3-
<PAGE>

          (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
Transferred 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 law occurring after the Transfer Date, including by means of
legislative enactment, constitutional amendment or voter initiative. The
representations and warranties shall survive the sale of the Transferred
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.

     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

                                      -4-
<PAGE>

default under, the articles of organization or limited liability company
regulations 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 Texas Electric Choice
Plan 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 [ ] and the related prospectus supplement dated [ ] 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 Texas Electric Choice Plan 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 income tax purposes.

     Section 3.07 Approvals. Except for filings under the UCC and the Texas
Electric Choice Plan, 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 Transferred Transition Property (including the Financing Order and
     the Issuance Advice Letter) is correct in all material respects.

                                      -5-
<PAGE>

          (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
     Transferred Transition Property; and that such Transferred 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 Transferred 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 Texas
          Electric Choice Plan 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
          Texas Electric Choice Plan 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 Texas Electric Choice Plan or any Lien created by the
          Issuer under the Basic Documents) in the Transferred Transition
          Property and to grant to the Indenture Trustee a first priority
          perfected security interest in the Transferred Transition 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 Texas Electric Choice Plan 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 Transferred
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,

                                      -6-
<PAGE>

          (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 believe 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 Texas Commission on [ ] in
     accordance with the Texas Electric Choice Plan; 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 Texas Electric
     Choice Plan 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
     Texas Commission, except as permitted by Section 39.307 of the Texas
     Electric Choice Plan, and the Issuance Advice Letter has been filed in
     accordance with the Financing Order. The Texas Commission has not issued
     any order prior to the third business day after submission of the Issuance
     Advice Letter that the Transition Bonds do not comply with Ordering
     Paragraph [ ] 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.

     Section 3.11 State Action.

     (a) Under the Texas Electric Choice Plan, 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 Texas
Electric Choice Plan, 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 Texas Electric
Choice Plan, 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 Texas Electric Choice Plan 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

                                      -7-
<PAGE>

     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 providing for
the revocation, alteration, limitation or other impairment of the Texas Electric
Choice Plan, the Financing Order, the Issuance Advice Letter, the Transferred
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 Transferred 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.

     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 and the
     Issuer's purchase of the Transition Property from the Seller pursuant to
     this Agreement, the Transferred Transition Property constitutes 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 Transferred Transition Property from the Seller
     pursuant to this Agreement, the Transferred Transition Property includes:

               (1)  the right to impose, collect and receive the Transition
                    Charges authorized in the Financing Order, 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,

                                      -8-
<PAGE>

               (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 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 Transferred Transition Property from the Seller on
     such Transfer Date pursuant to this Agreement, the Transferred Transition
     Property is not 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 Servicer 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 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 the Seller's retail electric
customers in its certificated service area, provided that this clause (ii) shall
not prohibit 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 Texas Electric Choice Plan for the
benefit of the Issuer, the Indenture Trustee and the Transition Bondholders, the
Seller shall not sell, pledge, assign or

                                      -9-
<PAGE>

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 Transferred 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 Transferred 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
collections 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 Transferred
Transition Property other than the conveyance hereunder, any Lien created in
favor of the Transition Bondholders pursuant to Section 39.309 of the Texas
Electric Choice Plan or any Lien created by the Issuer under the Indenture.

     Section 4.05 Compliance With Law. The Seller shall comply with its
organizational or governing documents and all 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 Transferred
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 is 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 or as
          required in connection with the SEC's administration of the 1935 Act,

               (ii) disclose in its financial statements that it is not the
          owner of the Transferred 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 is outstanding,

               (i) in all proceedings relating directly or indirectly to the
          Transferred 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

                                      -10-
<PAGE>

          (other than for financial reporting or tax purposes or as required in
          connection with the SEC's administration of the 1935 Act), and (B) not
          make any statement or reference in respect of the Transferred
          Transition Property that is inconsistent with the ownership thereof by
          the Issuer (other than for financial reporting or tax purposes or as
          required in connection with the SEC's administration of the 1935 Act);

               (ii) the Seller shall not take any action in respect of the
          Transferred 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; and

               (iii) the Issuer shall not sell transition bonds under a separate
          financing order in connection with the issuance of additional
          transition bonds unless the Rating Agency Condition shall have been
          satisfied with respect to the Transition Bonds outstanding.

          (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 Texas Electric Choice Plan or applicable tariff
     shall discharge such Person's obligations in respect of the Transferred
     Transition Property to the extent of such payment, notwithstanding any
     objection or direction to the contrary by the Seller.

     Section 4.07 Protection of Title. The Seller shall execute and file such
filings, and cause to be executed and filed such filings, in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interests of the Issuer and the Indenture Trustee in the Transferred
Transition Property, including all filings required under the Texas Electric
Choice Plan 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 Transferred 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 Texas Commission or the State of Texas of any of their
obligations or duties under the Texas Electric Choice Plan, the Financing Order
or the Issuance Advice Letter relating to the transfer of the ownership 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

                                      -11-
<PAGE>

          (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
     Texas Electric Choice Plan, the Financing Order, the Issuance Advice Letter
     or the rights of Transition Bondholders by legislative enactment 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 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, 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 is 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 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 Transferred 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

                                      -12-
<PAGE>

     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 TRANSFERRED 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.

          (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

                                      -13-

<PAGE>

     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 LAW AFTER THE TRANSFER DATE, INCLUDING BY MEANS OF
     LEGISLATURE ENACTMENT, 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.

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 TEXAS ELECTRIC CHOICE PLAN 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.

          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

                                      -14-
<PAGE>

     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,

          (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 Texas Commission
          pursuant to the Texas Electric Choice Plan and the UCC, that are
          necessary fully to preserve and protect the respective interests of
          the Issuer and the Indenture Trustee in the Transferred 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 (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.

                                      -15-
<PAGE>

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.

                                   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
     as defined in the Financing Order, the Texas Commission 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 Texas Commission's
     consent to any amendment to this Agreement,

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

                    (A) a reference to Docket No. [ ] 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 Texas
               Commission or its staff is to address its consent to the proposed
               amendment or request additional time;

                                      -16-
<PAGE>

               (ii) The Texas Commission 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 Texas Commission 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 Texas Commission or its
          staff requests an extension of time in the manner set forth in the
          preceding sentence, then the Texas Commission 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.

     Any amendment requiring the consent of the Texas Commission 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 Texas Commission by the
     Seller under Section 6.01(a) above, the Seller and Issuer may at any time
     withdraw from the Texas Commission 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 Texas Commission 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, Houston, Texas 77002, Attention: Treasurer,

          (b) in the case of the Issuer, to CenterPoint Energy Transition Bond
     Company II, LLC, 1111 Louisiana, Suite 4655B, Houston, Texas 77002,
     Attention: Manager,

                                      -17-
<PAGE>

          (c) in the case of Moody's, to Moody's Investors Service, Inc., [ABS
     Monitoring Department, 99 Church Street, New York, New York 10007],

          (d) in the case of Standard & Poor's, to Standard & Poor's, [55 Water
     Street, New York, New York 10041, Attention: Asset Backed Surveillance
     Department],

          (e) in the case of Fitch, to Fitch Ratings, [1 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

          (g) in the case of the Texas Commission, 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 Transferred 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.

                                      -18-
<PAGE>

     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.

     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]

                                      -19-
<PAGE>

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

                                          CENTERPOINT ENERGY TRANSITION BOND
                                          COMPANY II, LLC,
                                             as Issuer,

                                          By: ___________________________
                                              Name:
                                              Title:

                                          CENTERPOINT ENERGY HOUSTON ELECTRIC,
                                          LLC,
                                            as Seller,

                                          By: ___________________________
                                              Name:
                                              Title:

                                      -20-
<PAGE>

                            APPENDIX A - DEFINITIONS

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

     "1935 Act" means the Public Utility Holding Company Act of 1935, as
amended.

     "Administration Agreement" means the Administration Agreement, dated as of
[ ], between the Issuer and the Seller, as the same may be amended and
supplemented 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 this "Sale Agreement" or the "Sale Agreement" means this
Transition Property Sale Agreement, as the same may be amended and supplemented
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 December 3,
2004, as amended and restated on [ ], the Amended and Restated Limited Liability
Company Agreement of the Issuer dated as of [ ], this Sale Agreement, the Bill
of Sale, the Servicing Agreement, the Intercreditor Agreement, the
Administration Agreement, the Indenture, the Series Supplement [and the Swap
Agreement].

     "Bill of Sale" means any bill of sale issued by the Seller to the Issuer
pursuant to the 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 Texas Commission
on [ ] in Docket No. [ ] pursuant to the Texas Electric Choice Plan.

     "Fitch" means Fitch Ratings, 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 [ ], between the Issuer and
the Indenture Trustee, the Series Supplement (including the forms and terms of
the Transition Bonds

                                       A-1
<PAGE>

established thereunder), as the same may be amended and supplemented with
respect to the Transition Bonds from time to time.

     "Indenture Trustee" means ____________________________________, a _______
corporation, or its successor or any successor Indenture Trustee under the
Indenture.

     "Intercreditor Agreement" means the Intercreditor Agreement dated as of [
], among the Indenture Trustee, the Issuer, the Seller and CenterPoint Energy
Transition Bond Company, LLC, each in the capacities stated therein, as the same
may be amended and supplemented from time to time.

     "Issuance Advice Letter" means the issuance advice letter submitted to the
Texas Commission by the Seller pursuant to the Financing Order in connection
with the issuance of the Transition Bonds.

     "Issuer" means CenterPoint Energy Transition Bond Company II, 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.

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

     "Qualified Costs" has the meaning assigned to that term in the Texas
Electric Choice Plan and the Financing Order.

                                      A-2
<PAGE>

     "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, "Rating Agency" shall be 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 Texas
Commission and the Servicer.

     "Rating Agency Condition" means, with respect to any action, the
notification in writing to each Rating Agency of such action, and confirmation
from S&P and Fitch to the Indenture Trustee and the Issuer that such action will
not result in a reduction or withdrawal of the then current rating by such
Rating Agency of any outstanding class or tranche of Transition Bonds.

     "SEC" means the Securities and Exchange Commission.

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

     "Series Supplement" means the Supplemental Indenture dated [ ], which
authorizes 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 an event specified in [Section 6.01] of the
Servicing Agreement.

     "Servicing Agreement" means the Transition Property Servicing Agreement,
dated as of [ ], 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, a division of The
McGraw-Hill Companies, or its successor.

     "Supplemental Indenture" means a supplemental indenture entered into by the
Issuer and the Indenture Trustee pursuant to Article IX of the Indenture.

     "Swap Agreement" means and includes the ISDA Master Agreement, together
with the related Schedule and Confirmation, each dated [ ] between the Issuer
and [Counterparty], as swap counterparty thereunder, as the same may be amended
and supplemented from time to time.

     "Texas Commission" means the Public Utility Commission of Texas or any
successor.

     "Texas Electric Choice Plan" means the Act of May 21, 1999, 76th Leg. R.S.
ch. 405, 1999 (codified at Texas Utilities Code Section 39.001 et seq.).

                                      A-3
<PAGE>

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

     "Transferred Transition Property" means the Transition Property that has
been purchased by the Issuer pursuant to the Bill of Sale.

     "Transition Bond" means any of the Series 2005-____ Transition Bonds issued
by the Issuer pursuant to the Indenture and one or more Supplemental Indentures
authorizing such series and also has the meaning given such term in the Texas
Electric Choice Plan, as applicable to such series.

     "Transition Bondholder" means the 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 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.

                                      A-4
<PAGE>

                                    EXHIBIT A

                                  BILL OF SALE

     1. This Bill of Sale is being delivered pursuant to the Transition Property
Sale Agreement, dated as of [ ] (the "Sale Agreement"), between CenterPoint
Energy Houston Electric, LLC (the "Seller") and CenterPoint Energy Transition
Bond Company II, 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
$[______________], 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 Texas Electric Choice Plan, 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 Texas Electric Choice
Plan 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 Texas Electric Choice
Plan. 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
<PAGE>

     IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill
of Sale as of the ___ day of _________, ____.

                                          CENTERPOINT ENERGY TRANSITION BOND
                                          COMPANY II, LLC,
                                            as Issuer,

                                          By: ________________________
                                              Name:
                                              Title:

                                          CENTERPOINT ENERGY HOUSTON
                                          ELECTRIC, LLC,
                                            as Seller,

                                          By: ________________________
                                              Name:
                                              Title:

                                  Exhibit A-2
<PAGE>

                                   SCHEDULE 1
                                       to
                                  BILL OF SALE

                               Transition Property

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