Document:

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                                                                     EXHIBIT 4.2

                            CENTERPOINT ENERGY, INC.

                                       To

                              JPMORGAN CHASE BANK,

                                     Trustee

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

                          SUPPLEMENTAL INDENTURE NO. 1

                            Dated as of May 19, 2003

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

                     3.75% Convertible Senior Notes due 2023

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                            CENTERPOINT ENERGY, INC.

                          SUPPLEMENTAL INDENTURE NO. 1

                     3.75% Convertible Senior Notes due 2023

         SUPPLEMENTAL INDENTURE No. 1, dated as of May 19, 2003, between
CENTERPOINT ENERGY, INC., a Texas corporation (the "Company"), and JPMORGAN
CHASE BANK, as Trustee (the "Trustee").

                                    RECITALS

         The Company has heretofore executed and delivered to the Trustee an
Indenture, dated as of May 19, 2003 (the "Original Indenture" and, as hereby
supplemented and amended, the "Indenture"), providing for the issuance from time
to time of one or more series of the Company's Securities.

         Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of one new series of Securities to be designated as the
"3.75% Convertible Senior Notes due 2023 (the "Notes"), the form and substance
of such Notes and the terms, provisions and conditions thereof to be set forth
as provided in the Original Indenture and this Supplemental Indenture No. 1.

         Section 301 of the Original Indenture provides that various matters
with respect to any series of Securities issued under the Indenture may be
established in an indenture supplemental to the Indenture.

         Subparagraph (7) of Section 901 of the Original Indenture provides that
the Company and the Trustee may enter into an indenture supplemental to the
Indenture to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301 of the Original Indenture.

         For and in consideration of the premises and the issuance of the series
of Securities provided for herein, it is mutually covenanted and agreed, for the
equal and proportionate benefit of the Holders of the Securities of such series,
as follows:

                                    ARTICLE I

                  Relation to Indenture; Additional Definitions

         Section 101 Relation to Indenture. This Supplemental Indenture No. 1
constitutes an integral part of the Original Indenture.

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         Section 102 Additional Definitions. For all purposes of this
Supplemental Indenture No. 1:

                  Capitalized terms used herein shall have the meaning specified
         herein or in the Original Indenture, as the case may be;

                  "$3.8 Billion Credit Facility" means that certain
         $3,850,00,000 Amended and Restated Credit Agreement, dated as of
         October 10, 2002, among the Company, as borrower, the banks party
         thereto, Citibank, N.A., as syndication agent, and JPMorgan Chase Bank,
         as administration agent, as amended by a First Amendment, effective as
         of December 5, 2002, and a Second Amendment, effective as of February
         28, 2003, to such Credit Agreement;

                  "Additional Amounts" has the meaning set forth in Section
         204(f) hereof;

                  "Affiliate" of, or a Person "affiliated" with, a specific
         Person means a Person that directly, or indirectly through one or more
         intermediaries, controls, or is controlled by, or is under common
         control with, the Person specified. For purposes of this definition,
         "control" (including the terms "controlled by" and "under common
         control with") means the possession, direct or indirect, of the power
         to direct or cause the direction of the management and policies of a
         Person, whether through the ownership of voting shares, by contract, or
         otherwise.

                  "Beneficial Owner" shall be determined in accordance with Rule
         13d-3 promulgated by the Commission under the Exchange Act;

                  "Bid Solicitation Agent" has the meaning set forth in Section
         212 hereof;

                  "Business Day" means, with respect to any Note, any day other
         than a Saturday, a Sunday or a day on which banking institutions in The
         City of New York are authorized or required by law, regulation or
         executive order to close. If any Interest Payment Date, Maturity Date,
         Redemption Date, Purchase Date or Fundamental Change Purchase Date of a
         Note falls on a day that is not a Business Day, the required payment
         will be made on the next succeeding Business Day with the same force
         and effect as if made on the relevant date that the payment was due and
         no interest will accrue on such payment for the period from and after
         the Interest Payment Date, Maturity Date, Redemption Date, Purchase
         Date or Fundamental Change Purchase Date, as the case may be, to the
         date of that payment on the next succeeding Business Day. The
         definition of "Business Day" in this Supplemental Indenture No. 1 and
         the provisions described in the preceding sentence shall supersede the
         definition of Business Day in the Original Indenture and Section 113 of
         the Original Indenture;

                  "Capital Lease" means a lease that, in accordance with
         accounting principles generally accepted in the United States of
         America, would be recorded as a capital lease on the balance sheet of
         the lessee;

                  "CenterPoint Houston" means CenterPoint Energy Houston
         Electric, LLC, a Texas limited liability company;

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                  "CERC" means CenterPoint Energy Resources Corp., a Delaware
         corporation;

                  "Common Equity" of any Person means capital stock of such
         Person that is generally entitled to (1) vote in the election of
         directors of such Person or (2) if such Person is not a corporation,
         vote or otherwise participate in the selection of the governing body,
         partners, managers or others that will control the management or
         policies of such Person;

                  "Common Stock" means the common stock, par value $.01 per
         share, of the Company;

                  "Company Notice" has the meaning provided in Section 701
         hereof;

                  "Company Notice Date" has the meaning provided in Section 701
         hereof;

                  "Contingent Interest" has the meaning provided in Section
         204(a) hereof;

                  "Continuing Director" means a director who either was a member
         of the Board of Directors on May 13, 2003 or who becomes a member of
         the Board of Directors subsequent to that date and whose appointment,
         election or nomination for election by the Company's shareholders is
         duly approved by a majority of the Continuing Directors on the Board of
         Directors at the time of such approval, either by a specific vote or by
         approval of the proxy statement issued by the Company on behalf of the
         Board of Directors in which such individual is named as nominee for
         director.

                  "Conversion Agent" means the office or agency designated by
         the Company where Notes may be presented for conversion;

                  "Conversion Date" has the meaning provided in Section 802
         hereof;

                  "Conversion Price" means $1,000 divided by the Conversion
         Rate;

                  "Conversion Rate" has the meaning provided in Section 801
         hereof;

                  "CPDI Regulations" has the meaning provided in Section 213
         hereof;

                  "Distributed Assets or Securities" has the meaning provided in
         Section 806(c) hereof;

                  "Distribution Compliance Period" means the period which
         expires immediately after one year following the later of: (a) the
         commencement of the offering of the Notes to Persons other than
         "distributors" (as defined in Regulation S) in reliance upon Regulation
         S; and (b) the last date of closing of the offering of the Notes;

                  "Equity Interests" means any capital stock, partnership, joint
         venture, member or limited liability or unlimited liability company
         interest, beneficial interest in a trust or similar entity or other
         equity interest or investment of whatever nature;

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                  "ex-date" has the meaning provided in the definition of
         Spin-off Market Price.

                  "Fair Market Value" means the amount which a willing buyer
         would pay a willing seller in an arm's length transaction;

                  A "Fundamental Change" shall be deemed to have occurred at
         such time after the original issuance of the Notes as any of the
         following occurs: (a) the Common Stock or other common stock into which
         the Notes are convertible is neither listed for trading on a United
         States national securities exchange nor approved for trading on the
         Nasdaq National Market or another established automated
         over-the-counter trading market in the United States; (b) a "person" or
         "group" within the meaning of Section 13(d) of the Exchange Act, other
         than the Company, any Subsidiary of the Company or any employee benefit
         plan of the Company or any such Subsidiary, files a Schedule TO (or any
         other schedule, form or report under the Exchange Act) disclosing that
         such person or group has become the direct or indirect ultimate
         Beneficial Owner of Common Equity of the Company representing more than
         50% of the voting power of the Company's Common Equity; (c)
         consummation of any share exchange, consolidation or merger of the
         Company pursuant to which the Common Stock will be converted into Cash,
         securities or other property or any sale, lease or other transfer (in
         one transaction or a series of transactions) of all or substantially
         all of the consolidated assets of the Company and its Subsidiaries,
         taken as a whole, to any Person (other than the Company or one or more
         of the Company's Subsidiaries); provided, however, that a transaction
         where the holders of the Company's Common Equity immediately prior to
         such transaction own, directly or indirectly, more than 50% of the
         aggregate voting power of all classes of Common Equity of the
         continuing or surviving corporation or transferee immediately after
         such event shall not be a Fundamental Change; (d) Continuing Directors
         cease to constitute at least a majority of the Board of Directors;
         provided, however, that a Fundamental Change shall not be deemed to
         have occurred in respect of any of the foregoing if either (i) the Last
         Reported Sale Price per share of Common Stock for any five Trading Days
         within the period of 10 consecutive Trading Days ending immediately
         before the later of the Fundamental Change or the public announcement
         thereof shall equal or exceed 105% of the Conversion Price of the Notes
         in effect immediately before the Fundamental Change or the public
         announcement thereof; or (ii) at least 90% of the consideration
         (excluding cash payments for fractional shares) in the transaction or
         transactions constituting the Fundamental Change consists of shares of
         capital stock traded on a national securities exchange or quoted on the
         NASDAQ National Market (or which shall be so traded or quoted when
         issued or exchanged in connection with such Fundamental Change) (such
         securities being referred to as "Publicly Traded Securities") and as a
         result of such transaction or transactions the Notes become convertible
         into such Publicly Traded Securities (excluding cash payments for
         fractional shares). For purposes of the foregoing the term "Capital
         Stock" of any Person means any and all shares (including ordinary
         shares or American Depositary Shares), interests, participations or
         other equivalents however designated of corporate stock or other equity
         participations, including partnership interests, whether general or
         limited, of such Person and any rights (other than debt securities
         convertible or exchangeable into an equity interest), warrants or
         options to acquire an equity interest in such Person.

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                  "Fundamental Change Purchase Date" has the meaning provided in
         Section 501 hereof;

                  "Fundamental Change Purchase Notice" has the meaning provided
         in Section 503 hereof;

                  "Fundamental Change Purchase Price" has the meaning provided
         in Section 501 hereof;

                  "Global Notes" has the meaning set forth in Section 208(a)
         hereof;

                  The term "Indebtedness" as applied to any Person, means bonds,
         debentures, notes and other instruments or arrangements representing
         obligations created or assumed by any such Person, in respect of: (i)
         obligations for money borrowed (other than unamortized debt discount or
         premium); (ii) obligations evidenced by a note or similar instrument
         given in connection with the acquisition of any business, properties or
         assets of any kind; (iii) obligations as lessee under a Capital Lease;
         and (iv) any amendments, renewals, extensions, modifications and
         refundings of any such indebtedness or obligations listed in clause
         (i), (ii) or (iii) above. All indebtedness secured by a lien upon
         property owned by such Person of such type, although such Person has
         not assumed or become liable for the payment of such indebtedness,
         shall for all purposes hereof be deemed to be indebtedness of such
         Person. All indebtedness for borrowed money incurred by any other
         Persons which is directly guaranteed as to payment of principal by such
         Person shall for all purposes hereof be deemed to be indebtedness of
         any such Person, but no other contingent obligation of such Person in
         respect of indebtedness incurred by any other Persons shall for any
         purpose be deemed to be indebtedness of such Person;

                  "Initial Purchasers" means Citigroup Global Markets Inc, Bank
         of America Securities LLC, J.P. Morgan Securities Inc., Deutsche Bank
         Securities Inc., Credit Suisse First Boston LLC, Wachovia Securities,
         Inc., ABN AMRO Rothschild LLC, Barclays Capital Inc., Commerzbank
         Capital Markets Corp. and RBC Dain Rauscher Inc., as initial purchasers
         in the offering of the Notes pursuant to the Offering Memorandum dated
         May 13, 2003 relating thereto;

                  "Interest Payment Date" has the meaning set forth in Section
         204(a) hereof;

                  "Last Reported Sale Price" of Common Stock on any date means
         the closing sale price per share (or, if no closing sale price is
         reported, the average of the bid and ask prices or, if more than one in
         either case, the average of the average bid and the average ask prices)
         on that date as reported in composite transactions for the principal
         U.S. securities exchange on which Common Stock is traded or, if the
         Common Stock is not listed on a U.S. national or regional securities
         exchange, as reported by the Nasdaq National Market. If the Common
         Stock is not listed for trading on a U.S. national or regional
         securities exchange and not reported by the Nasdaq National Market on
         the relevant date, the "last reported sale price" shall be the last
         quoted bid price for Common Stock in the over-the-counter market on the
         relevant date as reported by the National

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         Quotation Bureau or similar organization. If the Common Stock is not so
         quoted, the "last reported sale price" will be the average of the
         mid-point of the last bid and ask prices for the Common Stock on the
         relevant date from each of at least three nationally recognized
         independent investment banking firms selected by the Company for this
         purpose.

                  "Market Price" means the average of the Last Reported Sale
         Prices of Common Stock for the 20 Trading Day period ending on the
         applicable date of determination (if the applicable date of
         determination is a Trading Day or, if not, then on the last Trading Day
         prior to such applicable date of determination), appropriately adjusted
         to take into account the occurrence, during the period commencing on
         the first of the Trading Days during such 20 Trading Day period and
         ending on the applicable date of determination, of any event that would
         result in an adjustment of the Conversion Rate under this Supplemental
         Indenture.

                  "Maturity Date" has the meaning set forth in Section 203
         hereof;

                  "Non-U.S. Person" means persons other than "U.S. persons" as
         defined in Regulation S under the Securities Act;

                  "Notes" has the meaning set forth in the second paragraph of
         the Recitals hereof;

                  "Option Issue Date" means the settlement date for the issuance
         of Option Notes (as such term is defined in the Purchase Agreement);

                  "Original Indenture" has the meaning set forth in the first
         paragraph of the Recitals hereof;

                  "Original Issue Date" has the meaning provided in Section
         204(a) hereof;

                  "Purchase Agreement" means that certain Purchase Agreement
         dated May 13, 2003 among the Company and the Initial Purchasers which
         provides for the sale by the Company to the Initial Purchasers of the
         Notes;

                  "Purchase Date" has the meaning provided in Section 601(a)
         hereof;

                  "Purchase Notice" has the meaning provided in Section
         601(a)(i) hereof;

                  "Purchase Price" has the meaning provided in paragraph 8 of
         the Notes;

                  "Qualified Institutional Buyer" has the meaning assigned to
         such term in Rule 144A under the Securities Act;

                  "Redemption Price" has the meaning set forth in paragraph 6 of
         the Notes;

                  "Registrable Securities" has the meaning assigned to such term
         in the Registration Rights Agreement;

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                  "Registration Default" has the meaning assigned to such term
         in the Registration Rights Agreement;

                  "Registration Rights Agreement" means that certain
         Registration Rights Agreement, dated as of May 19, 2003, by and among
         the Company and the Initial Purchasers;

                  "Regular Record Date" has the meaning set forth in Section
         204(a) hereof;

                  "Regulation S" means Regulation S under the Securities Act;

                  "Restricted Common Stock Legend" means the legend labeled as
         such, substantially in the form set forth in Exhibit H hereof;

                  "Rights Plan" means that certain Rights Agreement dated
         January 1, 2002, between the Company and JPMorgan Chase Bank, as rights
         agent, as amended from time to time.

                  "Shelf Registration Statement" has the meaning assigned to
         such term in the Registration Rights Agreement;

                  "Significant Subsidiary" means CERC, CenterPoint Houston and
         Texas Genco, and any other Subsidiary which, at the time of the
         creation of a pledge, mortgage, security interest or other lien upon
         any Equity Interests of such Subsidiary, has consolidated gross assets
         (having regard to the Company's beneficial interest in the shares, or
         the like, of that Subsidiary) that represents at least 25% of the
         Company's consolidated gross assets appearing in the Company's most
         recent audited consolidated financial statements;

                  "Spin-off Market Price" per share of Common Stock of the
         Company or the Equity Interests in a subsidiary or other business unit
         of the Company on any day means the average of the daily Last Reported
         Sale Price for the 10 consecutive Trading Days commencing on and
         including the fifth Trading Day after the "ex date" with respect to the
         issuance or distribution requiring such computations. As used herein,
         the term "ex date," when used with respect to any issuance or
         distribution, shall mean the first date on which the security trades
         regular way on the New York Stock Exchange or such other national
         regional exchange or market in which the security trades without the
         right to receive such issuance or distribution.

                  "Subsidiary" of any entity means any corporation, partnership,
         joint venture, limited liability company, trust or estate of which (or
         in which) more than 50% of (i) the issued and outstanding Equity
         Interests having ordinary voting power to elect a majority of the Board
         of Directors or comparable governing body of such corporation or entity
         (irrespective of whether at the time capital stock of any other class
         or classes of such corporation shall or might have voting power upon
         the occurrence of any contingency), (ii) the interest in the capital or
         profits of such limited liability company, partnership, joint venture
         or other entity, or (iii) the beneficial interest in such trust or
         estate is at the

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         time directly or indirectly owned or controlled by such entity, by such
         entity and one or more of its other Subsidiaries, or by one or more of
         such entity's other Subsidiaries;

                  "Trading Day" means (a) if the applicable security is listed,
         admitted for trading or quoted on the New York Stock Exchange, the
         NASDAQ National Market or another national security exchange, a day on
         which the New York Stock Exchange, the NASDAQ National Market or
         another national security exchange is open for business or (b) if the
         applicable security is not so listed, admitted for trading or quoted,
         any day other than a Saturday or Sunday or a day on which banking
         institutions in the State of New York are authorized or obligated by
         law, regulation or executive order to close.

                  "Texas Genco" means Texas Genco Holdings, Inc., a Texas
         corporation;

                  "Trading Price" of the Notes on any date of determination
         means the average of the secondary market bid quotations per $1,000
         principal amount of Notes obtained by the Bid Solicitation Agent for
         $10 million principal amount of Notes at approximately 4:00 p.m., New
         York City time, on such determination date from three unaffiliated,
         nationally recognized securities dealers the Company selects, provided
         that if: (i) at least three such bids are not obtained by the Bid
         Solicitation Agent, or (ii) in the Company's reasonable judgment, the
         bid quotations are not indicative of the secondary market value of the
         Notes, then the Trading Price of the Notes will equal (a) the then
         applicable Conversion Rate of the Notes multiplied by (b) the average
         Last Reported Sale Price of Common Stock for the five Trading Days
         ending on such determination date, appropriately adjusted to take into
         account the occurrence, during the period commencing on the first of
         such Trading Days during such five Trading Day period and ending on
         such determination date, of any event described in Section 806 of this
         Supplemental Indenture No. 1.

                  "Transfer Restricted Securities" means the Registrable
         Securities under the Registration Rights Agreement.

                  All references herein to Articles and Sections, unless
         otherwise specified, refer to the corresponding Articles and Sections
         of this Supplemental Indenture No. 1; and

                  The terms "herein," "hereof," "hereunder" and other words of
         similar import refer to this Supplemental Indenture No. 1.

                                   ARTICLE II

                            The Series of Securities

         Section 201 Title of the Securities. The Notes shall be designated as
the "3.75% Convertible Senior Notes due 2023." The Notes shall be treated for
all purposes under the Indenture as a single class or series of Securities.

         Section 202 Limitation on Aggregate Principal Amount. The Trustee shall
authenticate and deliver Notes for original issue on the Original Issue Date in
the aggregate principal amount of $500,000,000 upon a Company Order for the
authentication and delivery thereof and

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satisfaction of Sections 301 and 303 of the Original Indenture. Such order shall
specify the amount of the Notes to be authenticated, the date on which the
original issue of Notes is to be authenticated and the name or names of the
initial Holder or Holders. The Trustee shall authenticate and deliver Notes for
original issue on the Option Issue Date in the aggregate principal amount of up
to $75,000,000 upon a Company Order for the authentication and delivery thereof
and satisfaction of Sections 301 and 303 of the Original Indenture. Such order
shall specify the amount of the Notes to be authenticated, the date on which the
original issue of Notes is to be authenticated and the name or names of the
initial Holder or Holders. The aggregate principal amount of Notes that may be
outstanding shall not exceed $575,000,000.

         Section 203 Stated Maturity. The Stated Maturity of the Notes shall be
May 15, 2023 (the "Maturity Date"). The principal amount of the Notes shall be
payable on the Maturity Date unless the Notes are earlier redeemed, purchased or
converted in accordance with the terms of the Indenture.

         Section 204 Interest and Interest Rates.

         (a)      The Notes shall bear interest at a rate of 3.75% per year,
from May 19, 2003 (the "Original Issue Date") or from the most recent Interest
Payment Date (as defined below) to which payment has been made or duly provided
for, payable semiannually in arrears on May 15 and November 15 of each year,
beginning November 15, 2003 (each an "Interest Payment Date") to the persons in
whose names the Notes are registered at the close of business on May 1 and
November 1 (each a "Regular Record Date") (whether or not a Business Day), as
the case may be, immediately preceding such Interest Payment Date. The Notes
shall also provide for payment of contingent interest ("Contingent Interest") in
certain circumstances as specified in paragraph 5 of the Notes.

         (b)      Holders of Notes at the close of business on a Regular Record
Date will receive payment of interest, including Contingent Interest, if any,
payable on the corresponding Interest Payment Date notwithstanding the
conversion of such Notes at any time after the close of business on such Regular
Record Date. Notes surrendered for conversion by a Holder during the period from
the close of business on any Regular Record Date to the opening of business on
the immediately following Interest Payment Date must be accompanied by payment
of an amount equal to the interest, including Contingent Interest, if any, that
the Holder is to receive on the Notes; provided, however, that no such payment
need be made if (1) the Company has specified a Redemption Date that is after a
Regular Record Date and on or prior to the immediately following Interest
Payment Date, (2) the Company has specified a Purchase Date following a
Fundamental Change that is during such period or (3) any overdue interest
(including overdue Contingent Interest, if any) exists at the time of conversion
with respect to such Notes to the extent of such overdue interest. The Holders
of the Notes and any Common Stock issuable upon conversion thereof will continue
to be entitled to receive Additional Amounts in accordance with the Registration
Rights Agreement.

         (c)      Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and shall either (i) be paid to the Person in whose name such Note (or one or
more Predecessor Securities) is registered at the close of business on the
Special Record Date for the payment of such Defaulted Interest to be

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fixed by the Trustee, notice whereof shall be given to Holders of the Notes not
less than 10 days prior to such Special Record Date, or (ii) be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes may be
listed or traded, and upon such notice as may be required by such exchange or
automated quotation system, all as more fully provided in the Indenture.

         (d)      The amount of interest, including Contingent Interest, if any,
payable for any period shall be computed on the basis of a 360-day year of
twelve 30-day months. The amount of interest, including Contingent Interest, if
any, payable for any partial period shall be computed on the basis of a 360-day
year of twelve 30-day months and the days elapsed in any partial month. In the
event that any date on which interest is payable on a Note is not a Business
Day, then a payment of the interest, including Contingent Interest, if any,
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay)
with the same force and effect as if made on the date the payment was originally
payable.

         (e)      If any principal of the Notes or any portion of such principal
is not paid when due (whether upon acceleration, upon the date set for payment
of the Redemption Price pursuant to paragraph 6 of the Notes, upon the date set
for payment of a Purchase Price or Fundamental Change Purchase Price pursuant to
paragraph 8 of the Notes or upon the Stated Maturity) or if interest (including
Contingent Interest, if any) due hereon or any portion of such interest is not
paid when due in accordance with paragraph 1 or paragraph 5 or 11 of the Note,
then in each such case the overdue amount shall bear interest at the rate of
3.75% per annum, compounded semiannually (to the extent that the payment of such
interest shall be legally enforceable), which interest shall accrue from the
date such overdue amount was due to the date payment of such amount, including
interest thereon, has been made or duly provided for. All such interest shall be
payable on demand.

         (f)      The interest rate borne by the Registrable Securities will be
increased by .25% per annum upon the occurrence of a Registration Default, which
rate will increase by an additional .25% per annum if such Registration Default
has not been cured within 90 days after the occurrence thereof and will continue
to increase by .25% at the beginning of each subsequent 90-day period until all
Registration Defaults have been cured ("Additional Amounts"); provided that the
aggregate amount of any such increase in the interest rate on the Registrable
Securities shall in no event exceed .50% per annum. All accrued Additional
Amounts shall be paid to Holders of Registrable Securities in the same manner
and at the same time as regular payments of interest on the Registrable
Securities. Following the cure of all Registration Defaults, the accrual of
Additional Amounts shall cease and the interest rate on the Registrable
Securities will revert to 3.75% per annum.

         Section 205 Paying Agent and Conversion Agent; Place of Payment. The
Trustee shall initially serve as the Paying Agent and Conversion Agent for the
Notes. The Company may appoint and change any Paying Agent or Conversion Agent
or approve a change in the office through which any Paying Agent acts without
notice, other than notice to the Trustee. The Company or any of its Subsidiaries
or any of their Affiliates may act as Paying Agent or Conversion Agent. The
Place of Payment where the Notes may be presented or surrendered for payment
shall be the Corporate Trust Office of the Trustee.

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         Section 206 Place of Registration or Exchange; Notices and Demands With
Respect to the Notes. The place where the Holders of the Notes may present the
Notes for registration of transfer or exchange and may make notices and demands
to or upon the Company in respect of the Notes shall be the Corporate Trust
Office of the Trustee.

         Section 207 Percentage of Principal Amount. The Notes shall be
initially issued at 100% of their principal amount plus accrued interest, if
any, from May 19, 2003.

         Section 208 Global Notes.

         (a)      The Notes are being offered and sold to Qualified
Institutional Buyers as defined in Rule 144A in reliance on Rule 144A under the
Securities Act or to Non-U.S. Persons in offshore transactions in reliance on
Regulation S under the Securities Act and shall be issued initially in the form
of one or more permanent Global Securities in definitive, fully registered,
book-entry form, without interest coupons (collectively, the "Global Notes").

         (b)      Each of the Global Notes shall represent such of the Notes as
shall be specified therein and shall each provide that it shall represent the
aggregate principal amount of Notes from time to time endorsed thereon and that
the aggregate principal amount of Notes represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges, redemptions,
purchases or conversions. Any endorsement of a Global Note to reflect the
amount, or any increase or decrease in the aggregate principal amount, of Notes
represented thereby shall be reflected by the Trustee on Schedule A attached to
the Note and made by the Trustee in accordance with written instructions or such
other written form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a beneficial interest
in the Global Note.

         (c)      The Depository Trust Company shall initially serve as
Depositary with respect to the Global Notes. Such Global Notes shall bear the
legends set forth in the form of Security attached as Exhibit A hereto.

         Section 209 Form of Securities. The Global Notes shall be substantially
in the form attached as Exhibit A hereto.

         Section 210 Securities Registrar. The Trustee shall initially serve as
the Security Registrar for the Notes.

         Section 211 Sinking Fund Obligations. The Company shall have no
obligation to redeem or purchase any Notes pursuant to any sinking fund or
analogous requirement.

         Section 212 Bid Solicitation Agent. The Trustee shall initially serve
as the bid solicitation agent (the "Bid Solicitation Agent") for purposes of
obtaining secondary market bid quotations for determining Trading Prices. The
Company may change the Bid Solicitation Agent at any time; provided, however,
the Bid Solicitation Agent shall not be an Affiliate of the Company. The Bid
Solicitation Agent shall solicit bids from nationally recognized securities
dealers that are believed by the Company to be willing to bid for the Notes.

                                       11

<PAGE>

         Section 213 Tax Treatment of Notes The Company agrees, and by
purchasing a beneficial ownership interest in the Notes each Holder, and any
person (including an entity) that acquires a direct or indirect beneficial
interest in the Notes, will be deemed to have agreed (i) for United States
federal income tax purposes to treat the Notes as Indebtedness of the Company
that is subject to the Contingent Payment Debt Instrument regulations under
Treas. Reg. Sec. 1.1275-4 (the "CPDI Regulations"), (ii) for all tax purposes to
treat the Notes as Indebtedness of the Company, (iii) for purposes of the CPDI
Regulations, to treat the fair market value of any stock beneficially received
by a beneficial holder upon any conversion of the Notes as a contingent payment,
(iv) to be bound by the Company's determination that the Notes are contingent
payment debt instruments subject to the "noncontingent bond method" of accruing
original issue discount within the meaning of the CPDI Regulations with respect
to the Notes, (v) to accrue original issue discount at the comparable yield as
determined by the Company, and (vi) to be bound by the Company's projected
payment schedule with respect to the Notes. The provisions of this Supplemental
Indenture shall be interpreted to further this intention and agreement of the
parties. The comparable yield and the schedule of projected payments are not
determined for any purpose other than for the determination of interest accruals
and adjustment thereof in respect of the Notes for United States federal income
tax purposes. The comparable yield and the schedule of projected payments do not
constitute a projection or representation regarding the future stock price or
the amounts payable on the Notes. For purposes of the foregoing, the Company's
determination of the "comparable yield" is 5.81% per annum, compounded
semiannually. A Holder of Notes may obtain the amount of original issue
discount, issue date, comparable yield and projected payment schedule (which
schedule is attached as Exhibit J) by telephoning the Company's Treasury
Department at (713) 207-7019 or submitting a written request for such
information to: CenterPoint Energy, Inc., 1111 Louisiana, Houston, Texas 77002,
Attention: Treasury Department.

         Section 214 Defeasance and Discharge; Covenant Defeasance.

         (a)      Article Fourteen of the Original Indenture, including without
limitation, Sections 1402 and 1403 (as modified by Section 214(b) hereof)
thereof, shall apply to the Notes.

         (b)      Notwithstanding Section 214(a), (i) the Company shall not be
released from its obligations under Article VIII hereof, which obligations shall
survive any defeasance and discharge under Section 1402 of the Original
Indenture or covenant defeasance under Section 1403 of the Original Indenture,
and (ii) the occurrence of any event specified in Section 501(4) of the Original
Indenture with respect to Article VIII hereof shall be deemed to be or result in
an Event of Default in accordance with the terms of Article Five of the Original
Indenture.

         (c)      Notwithstanding Section 1403 of the Original Indenture, the
occurrence of any event specified in Section 1001(d)(i) of this Supplemental
Indenture shall be deemed not to be or result in an Event of Default with
respect to the Notes on and after the date the conditions set forth in Section
1404 of the Original Indenture are satisfied and such covenant defeasance
remains in full force and effect pursuant to Article Fourteen of the Original
Indenture.

                                       12

<PAGE>

                                  ARTICLE III

                               Additional Covenant

         Section 301 Limitations on Liens. The Company shall not pledge,
mortgage, hypothecate, or grant a security interest in, or permit any such
mortgage, pledge, security interest or other lien upon any Equity Interests now
or hereafter owned by the Company in any Significant Subsidiary to secure any
Indebtedness, without making effective provisions whereby the outstanding Notes
shall be equally and ratably secured with or prior to any and all such
Indebtedness and any other Indebtedness similarly entitled to be equally and
ratably secured; provided, however, that this provision shall not apply to or
prevent the creation or existence of:

         (a)      any mortgage, pledge, security interest, lien or encumbrance
         upon the capital stock of Texas Genco to secure obligations under the
         $3.8 Billion Credit Facility or any extension, renewal, refunding,
         amendment or replacement thereof;

         (b)      any mortgage, pledge, security interest, lien or encumbrance
         upon the Equity Interests of CenterPoint Energy Transition Bond
         Company, LLC or any other special purpose Subsidiary created on or
         after the date of this Supplemental Indenture by the Company in
         connection with the issuance of securitization bonds for the economic
         value of generation-related regulatory assets and stranded costs;

         (c)      any mortgage, pledge, security interest, lien or encumbrance
         upon any Equity Interests in a Person which was not affiliated with the
         Company prior to one year before the grant of such mortgage, pledge,
         security interest, lien or encumbrance (or the Equity Interests of a
         holding company formed to acquire or hold such Equity Interests)
         created at the time of the Company's acquisition of the Equity
         Interests or within one year after such time to secure all or a portion
         of the purchase price for such Equity Interests; provided that the
         principal amount of any Indebtedness secured by such mortgage, pledge,
         security interest, lien or encumbrance does not exceed 100% of such
         purchase price and the fees, expenses and costs incurred in connection
         with such acquisition and acquisition financing;

         (d)      any mortgage, pledge, security interest, lien or encumbrance
         existing upon Equity Interests in a Person which was not affiliated
         with the Company prior to one year before the grant of such mortgage,
         pledge, security interest, lien or encumbrance at the time of the
         Company's acquisition of such Equity Interests (whether or not the
         obligations secured thereby are assumed by the Company or such
         Subsidiary becomes a Significant Subsidiary); provided that (i) such
         mortgage, pledge, security interest, lien or encumbrance existed at the
         time such Person became a Significant Subsidiary and was not created in
         anticipation of the acquisition, and (ii) any such mortgage, pledge,
         security interest, lien or encumbrance does not by its terms secure any
         Indebtedness other than Indebtedness existing or committed immediately
         prior to the time such Person becomes a Significant Subsidiary;

         (e)      liens for taxes, assessments or governmental charges or levies
         to the extent not past due or which are being contested in good faith
         by appropriate proceedings diligently

                                       13

<PAGE>

         conducted and for which the Company has provided adequate reserves for
         the payment thereof in accordance with generally accepted accounting
         principles;

         (f)      pledges or deposits in the ordinary course of business to
         secure obligations under workers' compensation laws or similar
         legislation;

         (g)      materialmen's, mechanics', carriers', workers' and repairmen's
         liens imposed by law and other similar liens arising in the ordinary
         course of business for sums not yet due or currently being contested in
         good faith by appropriate proceedings diligently conducted;

         (h)      attachment, judgment or other similar liens, which have not
         been effectively stayed, arising in connection with court proceedings;
         provided that such liens, in the aggregate, shall not secure judgments
         which exceed $50,000,000 aggregate principal amount at any one time
         outstanding; provided further that the execution or enforcement of each
         such lien is effectively stayed within 30 days after entry of the
         corresponding judgment (or the corresponding judgment has been
         discharged within such 30 day period) and the claims secured thereby
         are being contested in good faith by appropriate proceedings timely
         commenced and diligently prosecuted;

         (i)      other liens not otherwise referred to in paragraphs (a)
         through (h) above, provided that the Indebtedness secured by such liens
         in the aggregate, shall not exceed 1% of the Company's consolidated
         gross assets appearing in the Company's most recent audited
         consolidated financial statements at any one time outstanding;

         (j)      any mortgage, pledge, security interest, lien or encumbrance
         on the Equity Interests of any Subsidiary that was otherwise permitted
         under this Section 301 if such Subsidiary subsequently becomes a
         Significant Subsidiary; or

         (k)      any extension. renewal or refunding of Indebtedness secured by
         any mortgage, pledge, security interest, lien or encumbrance described
         in paragraphs (a) through (j) above; provided that the principal amount
         of any such Indebtedness is not increased by an amount greater than the
         fees, expenses and costs incurred in connection with such extension,
         renewal or refunding.

                                   ARTICLE IV

                        Optional Redemption of the Notes

         Section 401 Right to Redeem; Notice to Trustee, Paying Agent and
Holders. On or after May 15, 2008, the Company may, at its option, redeem the
Notes in whole, or in part, at any time in accordance with the provisions of
paragraph 6 of the Notes. If the Company elects to redeem Notes pursuant to
paragraph 6 of the Notes, it shall notify in writing the Trustee, the Paying
Agent and each Holder of Notes to be redeemed, as provided in Section 1104 of
the Indenture and Section 404 hereof.

         Section 402 Fewer Than All Outstanding Notes to Be Redeemed. If fewer
than all of the outstanding Notes are to be redeemed, the Trustee shall select
the Notes to be redeemed in

                                       14

<PAGE>

principal amounts of $1,000 or integral multiples thereof. In the case that the
Trustee shall select the Notes to be redeemed, the Trustee may effectuate such
selection by lot, pro rata, or by any other method that the Trustee considers
fair and appropriate. The Trustee will make such selection promptly following
receipt of the notice of redemption from the Company provided pursuant to
Section 404 hereof.

         Section 403 Selection of Notes to Be Redeemed. If any Notes selected
for partial redemption are thereafter surrendered for conversion in part before
termination of the conversion right with respect to the portion of the Notes so
selected, the converted portion of such Notes shall be deemed (so far as may
be), solely for purposes of determining the aggregate principal amount of Notes
to be redeemed by the Company, to be the portion selected for redemption. Notes
which have been converted during a selection of Notes to be redeemed may be
treated by the Trustee as outstanding for the purpose of such selection. Nothing
in this Section 403 shall affect the right of any Holder to convert any Notes
pursuant to Article VIII hereof before the termination of the conversion right
with respect thereto.

         Section 404 Notice of Redemption. In addition to those matters set
forth in Section 1104 of the Indenture, a notice of redemption sent to Holders
of Notes shall state:

         (a)      the then current Conversion Rate;

         (b)      the name and address of the Paying Agent and the Conversion
Agent;

         (c)      that the Notes called for redemption may be converted at any
time before the close of business on the Business Day immediately preceding the
Redemption Date; and

         (d)      that Holders who wish to convert Notes must comply with the
procedures in paragraph 10 of the Notes.

         Section 405 Effect of Notice of Redemption. Once notice of redemption
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price, except for Notes that are converted in
accordance with the provisions of Article VIII hereof and paragraph 10 of the
Notes. Upon presentation and surrender to the Paying Agent, Notes called for
redemption shall be paid at the Redemption Price as defined in paragraph 6 of
the Notes.

         Section 406 Deposit of Redemption Price. On or before 10:00 a.m. (New
York City time) on the Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or an Affiliate of the Company is acting as the
Paying Agent, shall segregate and hold in trust) an amount of money sufficient
to pay the aggregate Redemption Price of all the Notes to be redeemed on that
date other than the Notes or portions thereof called for redemption which on or
prior thereto have been delivered by the Company to the Security Registrar for
cancellation or have been converted. The Trustee and Paying Agent shall, as
promptly as practicable, return to the Company any money not required for that
purpose because of conversion of the Notes in accordance with the provisions of
Article VIII hereof. If such money is then held by the Company or a Subsidiary
in trust and is not required for such purpose, it shall be discharged from such
trust.

                                       15

<PAGE>

                                    ARTICLE V

                       Purchase Upon a Fundamental Change

         Section 501 Purchase at the Option of the Holder Upon a Fundamental
Change. If a Fundamental Change shall occur at any time prior to May 15, 2008,
each Holder shall have the right, at such Holder's option, to require the
Company to purchase any or all of such Holder's Notes for cash on the date that
is no later than 35 days after the date of the Company Notice of the occurrence
of such Fundamental Change (subject to extension to comply with applicable law,
as provided in Section 704) (the "Fundamental Change Purchase Date"). The Notes
shall be repurchased in integral multiples of $1,000 of the principal amount.
The Company shall purchase such Notes at a price (the "Fundamental Change
Purchase Price") equal to 100% of the principal amount of the Notes to be
purchased plus accrued and unpaid interest, including Contingent Interest and
Additional Amounts, if any, to the Fundamental Change Purchase Date. No Notes
may be purchased at the option of the Holders upon a Fundamental Change if there
has occurred and is continuing an Event of Default (other than an Event of
Default that is cured by the payment of the Fundamental Change Purchase Price of
the Notes).

         Section 502 Notice of Fundamental Change. The Company, or at its
request (which must be received by the Paying Agent at least three Business Days
(or such lesser period as agreed to by the Paying Agent) prior to the date the
Paying Agent is requested to give such notice as described below), the Paying
Agent in the name of and at the expense of the Company, shall mail to all
Holders and the Trustee and the Paying Agent a Company Notice of the occurrence
of a Fundamental Change and of the purchase right arising as a result thereof,
including the information required by Section 701 hereof, on or before the 30th
day after the occurrence of such Fundamental Change.

         Section 503 Exercise of Option. For a Note to be so purchased at the
option of the Holder, the Paying Agent must receive such Note duly endorsed for
transfer, together with a written notice of purchase (a "Fundamental Change
Purchase Notice") and the form entitled "Form of Fundamental Change Purchase
Notice" on the reverse thereof duly completed, on or before the 35th day after
the date of the Company Notice of the occurrence of such Fundamental Change,
subject to extension to comply with applicable law. The Fundamental Change
Purchase Notice shall state:

         (a)      if certificated, the certificate numbers of the Notes which
         the Holder shall deliver to be purchased, or, if not certificated, the
         Fundamental Change Purchase Notice must comply with appropriate
         Depositary procedures;

         (b)      the portion of the principal amount of the Notes which the
         Holder shall deliver to be purchased, which portion must be $1,000 in
         principal amount or an integral multiple thereof; and

         (c)      that such Notes shall be purchased as of the Fundamental
         Change Purchase Date pursuant to the terms and conditions specified in
         paragraph 8 of the Notes and in this Supplemental Indenture.

                                       16

<PAGE>

         Section 504 Procedures. The Company shall purchase from a Holder,
pursuant to Article V hereof, Notes if the principal amount of such Notes is
$1,000 or a multiple of $1,000 if so requested by such Holder.

         Any purchase by the Company contemplated pursuant to the provisions of
Article V hereof shall be consummated by the delivery of the Fundamental Change
Purchase Price to be received by the Holder promptly following the later of the
Fundamental Change Purchase Date or the time of book-entry transfer or delivery
of the Notes.

         Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Fundamental Change Purchase Notice contemplated by
Section 503 shall have the right at any time prior to the close of business on
the Business Day prior to the Fundamental Change Purchase Date to withdraw such
Fundamental Change Purchase Notice (in whole or in part) by delivery of a
written notice of withdrawal to the Paying Agent in accordance with Section 702.

         The Paying Agent shall promptly notify the Company of the receipt by it
of any Fundamental Change Purchase Notice or written notice of withdrawal
thereof.

         On or before 10:00 a.m. (New York City time) on the Fundamental Change
Purchase Date, the Company shall deposit with the Paying Agent (or if the
Company or an Affiliate of the Company is acting as the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the aggregate Fundamental
Change Purchase Price of the Notes to be purchased pursuant to Article V hereof.
Payment by the Paying Agent of the Fundamental Change Purchase Price for such
Notes shall be made promptly following the later of the Fundamental Change
Purchase Date or the time of book-entry transfer or delivery of such Notes. If
the Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Fundamental Change Purchase Price of such Notes on the
Business Day following the Fundamental Change Purchase Date, then, on and after
such date, such Notes shall cease to be outstanding and interest (including
Contingent Interest and Additional Amounts, if any) on such Notes shall cease to
accrue, whether or not book-entry transfer of such Notes is made or such Notes
are delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Fundamental Change Purchase Price
upon delivery or transfer of the Notes). Nothing herein shall preclude any
withholding tax required by law.

         The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of the
Fundamental Change Purchase Price and shall notify the Trustee of any default by
the Company in making any such payment. If the Company or an Affiliate of the
Company acts as Paying Agent, it shall segregate the money held by it as Paying
Agent and hold it as a separate trust fund. The Company at any time may require
a Paying Agent to deliver all money held by it to the Trustee and to account for
any funds disbursed by the Paying Agent. Upon doing so, the Paying Agent shall
have no further liability for the cash delivered to the Trustee.

                                       17

<PAGE>

         All questions as to the validity, eligibility (including time of
receipt) and acceptance of any Notes for redemption shall be determined by the
Company, whose determination shall be final and binding.

                                   ARTICLE VI

                                Optional Purchase

         Section 601 Purchase of Notes by the Company at the Option of the
Holder.

         (a)      On each of May 15, 2008, May 15, 2013 and May 15, 2018 (each,
a "Purchase Date"), Holders shall have the option to require the Company to
purchase any Notes at the Purchase Price specified in paragraph 8 of the Notes,
upon:

                  (i)      delivery to the Paying Agent by the Holder of a
         written notice of purchase (a "Purchase Notice") at any time from the
         opening of business on the date that is 20 Business Days prior to a
         Purchase Date until the close of business on the fifth Business Day
         prior to such Purchase Date, stating:

                           (1)      if certificated, the certificate numbers of
                  the Notes which the Holder will deliver to be purchased, or,
                  if not certificated, the Purchase Notice must comply with
                  appropriate Depositary procedures;

                           (2)      the portion of the principal amount of the
                  Notes which the Holder will deliver to be purchased, which
                  portion must be $1,000 in principal amount or an integral
                  multiple thereof; and

                           (3)      that such Notes shall be purchased as of the
                  Purchase Date pursuant to the terms and conditions specified
                  in paragraph 8 of the Notes and in this Supplemental
                  Indenture; and

                  (ii)     delivery or book-entry transfer of such Notes to the
         Paying Agent prior to, on or after the Purchase Date (together with all
         necessary endorsements) at the offices of the Paying Agent, such
         delivery or transfer being a condition to receipt by the Holder of the
         Purchase Price therefor; provided, however, that such Purchase Price
         shall be so paid pursuant to this Section 601 only if the Notes so
         delivered or transferred to the Paying Agent shall conform in all
         respects to the description thereof in the related Purchase Notice.

         (b)      The Company shall purchase from a Holder, pursuant to the
terms of this Section 601, Notes if the principal amount of such Notes is $1,000
or a multiple of $1,000 if so requested by such Holder.

         (c)      Any purchase by the Company contemplated pursuant to the
provisions of this Section 601 shall be consummated by the delivery of the
Purchase Price to be received by the Holder promptly following the later of the
Purchase Date or the time of book-entry transfer or delivery of the Notes.

                                       18

<PAGE>

         (d)      Notwithstanding anything herein to the contrary, any Holder
delivering to the Paying Agent the Purchase Notice contemplated by this Section
601 shall have the right at any time prior to the close of business on the
Business Day prior to the Purchase Date to withdraw such Purchase Notice (in
whole or in part) by delivery of a written notice of withdrawal to the Paying
Agent in accordance with Section 702.

         (e)      The Paying Agent shall promptly notify the Company of the
receipt by it of any Purchase Notice or written notice of withdrawal thereof.

         (f)      On or before 10:00 a.m. (New York City time) on the Purchase
Date, the Company shall deposit with the Paying Agent (or if the Company or an
Affiliate of the Company is acting as the Paying Agent, shall segregate and hold
in trust) money sufficient to pay the aggregate Purchase Price of the Notes to
be purchased pursuant to this Section 601. Payment by the Paying Agent of the
Purchase Price for such Notes shall be made promptly following the later of the
Purchase Date or the time of book-entry transfer or delivery of such Notes. If
the Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Purchase Price of such Notes on the Business Day following
the Purchase Date, then, on and after such date, such Notes shall cease to be
outstanding and interest (including Contingent Interest and Additional Amounts,
if any) on such Notes shall cease to accrue, whether or not book-entry transfer
of such Notes is made or such Notes are delivered to the Paying Agent, and all
other rights of the Holder shall terminate (other than the right to receive the
Purchase Price upon delivery or transfer of the Notes).

         (g)      The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of the Purchase Price and shall notify the Trustee of any default by the
Company in making any such payment. If the Company or an Affiliate of the
Company acts as Paying Agent, it shall segregate the money held by it as Paying
Agent and hold it as a separate trust fund. The Company at any time may require
a Paying Agent to deliver all money held by it to the Trustee and to account for
any funds disbursed by the Paying Agent. Upon doing so, the Paying Agent shall
have no further liability for the cash delivered to the Trustee.

                                   ARTICLE VII

          Conditions and Procedures for Purchases at Option of Holders

         Section 701 Notice of Purchase Date or Fundamental Change. The Company
shall send notices (each, a "Company Notice") to the Holders (and to beneficial
owners as required by applicable law) at their addresses shown in the Security
Register maintained by the Security Registrar, and delivered to the Trustee and
Paying Agent, not less than 20 Business Days prior to each Purchase Date, or on
or before the 30th day after the occurrence of the Fundamental Change, as the
case may be (each such date of delivery, a "Company Notice Date"). Each Company
Notice shall include a form of Purchase Notice or Fundamental Change Purchase
Notice to be completed by a Holder and shall state:

                                       19

<PAGE>

         (a)      the applicable Purchase Price or Fundamental Change Purchase
         Price, excluding accrued and unpaid interest, Conversion Rate at the
         time of such notice (and any adjustments to the Conversion Rate) and,
         to the extent known at the time of such notice, the amount of interest
         (including Contingent Interest and Additional Amounts, if any), if any,
         that will be payable with respect to the Notes on the applicable
         Purchase Date or Fundamental Change Purchase Date;

         (b)      if the notice relates to a Fundamental Change, the events
         causing the Fundamental Change and the date of the Fundamental Change;

         (c)      the Purchase Date or Fundamental Change Purchase Date;

         (d)      the last date on which a Holder may exercise its purchase
         right;

         (e)      the name and address of the Paying Agent and the Conversion
         Agent;

         (f)      that Notes must be surrendered to the Paying Agent to collect
         payment of the Purchase Price or Fundamental Change Purchase Price;

         (g)      that Notes as to which a Purchase Notice or Fundamental Change
         Purchase Notice has been given may be converted only if the applicable
         Purchase Notice or Fundamental Change Purchase Notice has been
         withdrawn in accordance with the terms of this Supplemental Indenture;

         (h)      that the Purchase Price or Fundamental Change Purchase Price
         for any Notes as to which a Purchase Notice or a Fundamental Change
         Purchase Notice, as applicable, has been given and not withdrawn shall
         be paid by the Paying Agent promptly following the later of the
         Purchase Date or Fundamental Change Purchase Date, as applicable, or
         the time of book-entry transfer or delivery of such Notes;

         (i)      the procedures the Holder must follow under Article V or VI
         hereof, as applicable, and Article VII hereof;

         (j)      briefly, the conversion rights of the Notes;

         (k)      that, unless the Company defaults in making payment of such
         Purchase Price or Fundamental Change Purchase Price on Notes covered by
         any Purchase Notice or Fundamental Change Purchase Notice, as
         applicable, interest (including Contingent Interest and Additional
         Amounts, if any) will cease to accrue on and after the Purchase Date or
         Fundamental Change Purchase Date, as applicable;

         (l)      the CUSIP or ISIN number of the Notes; and

         (m)      the procedures for withdrawing a Purchase Notice or
         Fundamental Change Purchase Notice.

         In connection with providing such Company Notice, the Company will
issue a press release and publish a notice containing the information in such
Company Notice in a newspaper

                                       20

<PAGE>

of general circulation in The City of New York or publish such information on
the Company's then existing Web site or through such other public medium as the
Company may use at the time.

         At the Company's request, made at least five Business Days prior to the
date upon which such notice is to be mailed, and at the Company's expense, the
Paying Agent shall give the Company Notice in the Company's name; provided,
however, that, in all cases, the text of the Company Notice shall be prepared by
the Company.

         Section 702 Effect of Purchase Notice or Fundamental Change Purchase
Notice; Effect of Event of Default. Upon receipt by the Company of the Purchase
Notice or Fundamental Change Purchase Notice specified in Section 601 or Section
503, as applicable, the Holder of the Notes in respect of which such Purchase
Notice or Fundamental Change Purchase Notice, as the case may be, was given
shall (unless such Purchase Notice or Fundamental Change Purchase Notice is
withdrawn as specified in the following two paragraphs) thereafter be entitled
to receive solely the Purchase Price or Fundamental Change Purchase Price with
respect to such Notes. Such Purchase Price or Fundamental Change Purchase Price
shall be paid by the Paying Agent to such Holder promptly following the later of
(x) the Purchase Date or the Fundamental Change Purchase Date, as the case may
be, with respect to such Notes (provided the conditions in Section 601 or
Section 503, as applicable, have been satisfied) and (y) the time of delivery or
book-entry transfer of such Notes to the Paying Agent by the Holder thereof in
the manner required by Section 601 or Section 503, as applicable. Notes in
respect of which a Purchase Notice or Fundamental Change Purchase Notice, as the
case may be, has been given by the Holder thereof may not be converted for
shares of Common Stock on or after the date of the delivery of such Purchase
Notice or Fundamental Change Purchase Notice, as the case may be, unless such
Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has
first been validly withdrawn as specified in the following two paragraphs.

         A Purchase Notice or Fundamental Change Purchase Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent at any time prior to 5:00 p.m. New York City time
on the Business Day prior to the Purchase Date or the Fundamental Change
Purchase Date, as the case may be, to which it relates specifying:

         (a)      if certificated, the certificate number of the Notes in
         respect of which such notice of withdrawal is being submitted, or, if
         not certificated, the written notice of withdrawal must comply with
         appropriate Depositary procedures;

         (b)      the principal amount of the Notes with respect to which such
         notice of withdrawal is being submitted; and

         (c)      the principal amount, if any, of such Notes which remains
         subject to the original Purchase Notice or Fundamental Change Purchase
         Notice, as the case may be, and which has been or shall be delivered
         for purchase by the Company.

         There shall be no purchase of any Notes pursuant to Article V or
Article VI hereof if an Event of Default has occurred and is continuing (other
than a default that is cured by the payment of the Purchase Price or Fundamental
Change Purchase Price, as the case may be). The

                                       21

<PAGE>

Paying Agent shall promptly return to the respective Holders thereof any Notes
(x) with respect to which a Purchase Notice or Fundamental Change Purchase
Notice, as the case may be, has been withdrawn in compliance with this
Supplemental Indenture, or (y) held by it during the continuance of an Event of
Default (other than a default that is cured by the payment of the Purchase Price
or Fundamental Change Purchase Price, as the case may be) in which case, upon
such return, the Purchase Notice or Fundamental Change Purchase Notice with
respect thereto shall be deemed to have been withdrawn.

         Section 703 Notes Purchased in Part. Any Notes that are to be purchased
only in part shall be surrendered at the office of the Paying Agent (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing) and the Company shall execute and the Trustee or the Authenticating
Agent shall authenticate and deliver to the Holder of such Notes, without
service charge, a new Note or Notes, of any authorized denomination as requested
by such Holder in aggregate principal amount equal to, and in exchange for, the
portion of the principal amount of the Notes so surrendered which is not
purchased or redeemed.

         Section 704 Covenant to Comply with Securities Laws Upon Purchase of
Notes. In connection with any offer to purchase Notes under Article V or Article
VI hereof, the Company shall, to the extent applicable, (a) comply with Rules
13e-4 and 14e-1 (and any successor provisions thereto) under the Exchange Act,
if applicable; (b) file the related Schedule TO (or any successor schedule, form
or report) under the Exchange Act, if applicable; and (c) otherwise comply with
all applicable federal and state securities laws so as to permit the rights and
obligations under Article V or Article VI hereof to be exercised in the time and
in the manner specified in Article V or Article VI hereof.

         Section 705 Repayment to the Company. The Trustee and the Paying Agent
shall return to the Company any cash or property that remains unclaimed as
provided in paragraph 14 of the Notes, together with interest that the Trustee
or Paying Agent, as the case may be, has agreed to pay, if any, held by them for
the payment of a Purchase Price or Fundamental Change Purchase Price, as the
case may be; provided, however, that to the extent that the aggregate amount of
cash or property deposited by the Company pursuant to Section 601(f) or 504, as
applicable, exceeds the aggregate Purchase Price or Fundamental Change Purchase
Price, as the case may be, of the Notes or portions thereof which the Company is
obligated to purchase as of the Purchase Date or Fundamental Change Purchase
Date, as the case may be, then promptly on and after the Business Day following
the Purchase Date or Fundamental Change Purchase Date, as the case may be, the
Trustee and the Paying Agent shall return any such excess to the Company
together with interest that the Trustee or Paying Agent, as the case may be, has
agreed to pay, if any.

         Section 706 Officers' Certificate. At least five Business Days before
the Company Notice Date, the Company shall deliver an Officers' Certificate to
the Trustee (provided, that at the Company's option, the matters to be addressed
in such Officers' Certificate may be divided among two such certificates)
specifying:

         (a)      the manner of payment selected by the Company; and

                                       22

<PAGE>

         (b)      whether the Company desires the Trustee to give the Company
         Notice required by Section 701 herein.

                                  ARTICLE VIII

                               Conversion of Notes

         Section 801 Right to Convert. A Holder may convert its Notes for Common
Stock at any time during which the conditions stated in paragraph 10 of the
Notes are met. The number of shares of Common Stock issuable upon conversion of
a Note per $1,000 principal amount (the "Conversion Rate") shall be that set
forth in paragraph 10 in the Notes, subject to adjustment as herein set forth.
The initial Conversion Rate is 86.3558 shares of Common Stock issuable upon
conversion of a Convertible Note per $1,000 principal amount.

         A Holder may convert a portion of the principal amount of Notes if the
portion is $1,000 or a multiple of $1,000.

         Section 802 Conversion Procedures. To convert Notes, a Holder must
satisfy the requirements in this Section 802 and in paragraph 10 of the Notes.
The date on which the Holder satisfies all those requirements is the conversion
date (the "Conversion Date"). As soon as practicable, but in no event later than
the fifth Business Day following the Conversion Date, the Company shall deliver
to the Holder, through the Conversion Agent, a certificate for the number of
full shares of Common Stock issuable upon the conversion and cash in lieu of any
fractional share determined pursuant to Section 803. The Person in whose name
the certificate is registered shall be treated as a stockholder of record on and
after the Conversion Date; provided, however, that no surrender of Notes on any
date when the stock transfer books of the Company shall be closed shall be
effective to constitute the Person or Persons entitled to receive the shares of
Common Stock upon such conversion as the record holder or holders of such shares
of Common Stock on such date, but such surrender shall be effective to
constitute the Person or Persons entitled to receive such shares of Common Stock
as the record holder or holders thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books are open;
such conversion shall be at the Conversion Rate in effect on the date that such
Notes shall have been surrendered for conversion, as if the stock transfer books
of the Company had not been closed. Upon conversion of Notes, such Person shall
no longer be a Holder of such Notes.

         No payment or adjustment shall be made for dividends on or other
distributions with respect to any Common Stock except as provided in Section 806
or as otherwise provided in this Indenture.

         On conversion of Notes, that portion of accrued interest including
accrued Contingent Interest, if any, with respect to the converted Notes shall
not be canceled, extinguished or forfeited, but rather shall be deemed to be
paid in full to the Holder thereof through delivery of the Common Stock
(together with the cash payment, if any, in lieu of fractional shares) in
exchange for the Notes being converted pursuant to the provisions hereof, and
the Fair Market Value of such shares of Common Stock (together with any such
cash payment in lieu of fractional shares) shall be treated as issued, to the
extent thereof, first in exchange for interest

                                       23

<PAGE>

accrued and unpaid through the Conversion Date and accrued and unpaid Contingent
Interest, and the balance, if any, of such Fair Market Value of such Common
Stock (and any such cash payment) shall be treated as issued in exchange for the
principal amount of the Notes being converted pursuant to the provisions hereof.
Notwithstanding conversion of any Notes, the Holders of the Notes and any Common
Stock issuable upon conversion thereof will continue to be entitled to receive
Additional Amounts in accordance with the Registration Rights Agreement.

         If a Holder converts more than one Note at the same time, the number of
shares of Common Stock issuable upon the conversion shall be based on the total
principal amount of the Notes converted.

         Upon surrender of a Note that is converted in part, the Company shall
execute, and the Trustee or the Authenticating Agent shall authenticate and
deliver to the Holder, a new Note in an authorized denomination equal in
principal amount to the unconverted portion of the Note surrendered.

         If the last day on which Notes may be converted is a legal holiday in a
place where a Conversion Agent is located, the Notes may be surrendered to that
Conversion Agent on the next succeeding day that it is not a legal holiday.

         Section 803 Cash Payments in Lieu of Fractional Shares. The Company
shall not issue a fractional share of Common Stock upon conversion of Notes.
Instead the Company shall deliver cash for the current market value of the
fractional share. The current market value of a fractional share shall be
determined to the nearest 1/10,000th of a share by multiplying the Last Reported
Sale Price of a full share of Common Stock on the Trading Day immediately
preceding the Conversion Date by the fractional amount and rounding the product
to the nearest whole cent.

         Section 804 Taxes on Conversion. If a Holder converts Notes, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion. However, the Holder
shall pay any such tax which is due because the Holder requests the shares to be
issued in a name other than the Holder's name. The Conversion Agent may refuse
to deliver the certificates representing the Common Stock being issued in a name
other than the Holder's name until the Conversion Agent receives a sum
sufficient to pay any tax which shall be due because the shares are to be issued
in a name other than the Holder's name. Nothing herein shall preclude any
withholding tax required by law.

         Section 805 Covenants of the Company. The Company shall, prior to
issuance of any Notes hereunder, and from time to time as may be necessary,
reserve out of its authorized but unissued Common Stock a sufficient number of
shares of Common Stock to permit the conversion of the Notes.

         All shares of Common Stock delivered upon conversion of the Notes shall
be newly issued shares or treasury shares, shall be duly and validly issued and
fully paid and nonassessable and shall be free from preemptive rights and free
of any lien or adverse claim.

                                       24

<PAGE>

         The Company shall endeavor promptly to comply with all federal and
state securities laws regulating the order and delivery of shares of Common
Stock upon the conversion of Notes, if any, and shall cause to have listed or
quoted all such shares of Common Stock on each United States national securities
exchange or over-the-counter or other domestic market on which the Common Stock
is then listed or quoted.

         Section 806 Adjustments to Conversion Rate. The Conversion Rate shall
be adjusted from time to time, without duplication, as follows:

         (a)      In case the Company shall (i) pay a dividend, or make a
distribution, exclusively in shares of its capital stock, on the Common Stock;
(ii) subdivide its outstanding Common Stock into a greater number of shares;
(iii) combine its outstanding Common Stock into a smaller number of shares; or
(iv) reclassify its Common Stock, the Conversion Rate in effect immediately
prior to the record date or effective date, as the case may be, for the
adjustment pursuant to this Section 806(a) as described below, shall be adjusted
so that the Holder of any Notes thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock of the Company which
such Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Notes been converted
immediately prior to such record date or effective date, as the case may be. An
adjustment made pursuant to this Section 806(a) shall become effective
immediately after the applicable record date in the case of a dividend or
distribution and shall become effective immediately after the applicable
effective date in the case of subdivision, combination or reclassification of
the Company's Common Stock. If any dividend or distribution of the type
described in clause (i) above is not so paid or made, the Conversion Rate shall
again be adjusted to the Conversion Rate which would then be in effect if such
dividend or distribution had not been declared.

         (b)      In case the Company shall issue rights or warrants to all
holders of the Common Stock entitling them (for a period expiring within 60 days
after the date of issuance of such rights or warrants) to subscribe for or
purchase Common Stock at a price per share less than the Market Price per share
of Common Stock on the record date fixed for determination of shareholders
entitled to receive such rights or warrants, the Conversion Rate in effect
immediately after such record date shall be adjusted so that the same shall
equal the Conversion Rate determined by multiplying the Conversion Rate in
effect immediately after such record date by a fraction of which (i) the
numerator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock offered for
subscription or purchase, and (ii) the denominator shall be the number of shares
of Common Stock outstanding on such record date plus the number of shares which
the aggregate offering price of the total number of shares so offered would
purchase at the Market Price per share of Common Stock on the earlier of such
record date or the Trading Day immediately preceding the ex date for such
issuance of rights or warrants. Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become effective
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Conversion Rate shall be readjusted
to the Conversion Rate which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of delivery
of only the number of shares of Common Stock actually delivered. If such rights
or warrants are not so issued, the Conversion

                                       25

<PAGE>

Rate shall again be adjusted to be the Conversion Rate which would then be in
effect if such record date for the determination of shareholders entitled to
receive such rights or warrants had not been fixed. In determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into account
any consideration received by the Company for such rights or warrants, the value
of such consideration, if other than cash, to be determined by the Board of
Directors.

         (c)      In case the Company shall, by dividend or otherwise,
distribute to all holders of Common Stock any assets, debt securities or rights
or warrants to purchase any of its securities (excluding (i) any dividend,
distribution or issuance covered by those referred to in Section 806(a) or
806(b) hereof, (ii) any dividend or distribution paid exclusively in cash, and
(iii) all distributions of common stock of Reliant Resources, Inc., a Delaware
corporation, or of Texas Genco made by the Company prior to the date of this
Supplemental Indenture) (any of the foregoing hereinafter in this Section 806(c)
called the "Distributed Assets or Securities") in an aggregate amount per share
of Common Stock that, combined together with the aggregate amount of any other
such distributions to all holders of its Common Stock made within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 806(c) has been made, exceeds 15% of the
Market Price on the Trading Day immediately preceding the declaration of such
distribution, then, the Conversion Rate shall be adjusted so that the same shall
equal the Conversion Rate determined by multiplying the Conversion Rate in
effect immediately prior to the close of business on the record date mentioned
below by a fraction of which (A) the numerator shall be the Market Price per
share of the Common Stock on the earlier of such record date or the Trading Day
immediately preceding the ex date for such dividend or distribution, and (B) the
denominator shall be (1) the Market Price per share of the Common Stock on the
earlier of such record date or the Trading Day immediately preceding the ex date
for such dividend or distribution less (2) the Fair Market Value on the earlier
of such record date or the Trading Day immediately preceding the ex date for
such dividend or distribution (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a certificate filed with the
Trustee and the Paying Agent) of the Distributed Assets or Securities so
distributed applicable to one share of Common Stock. Such adjustment shall
become effective immediately after the record date for the determination of
shareholders entitled to receive such distribution; provided, however, that, if
(i) the Fair Market Value of the portion of the Distributed Assets or Securities
so distributed applicable to one share of Common Stock is equal to or greater
than the Market Price of the Common Stock on the record date for the
determination of shareholders entitled to receive such distribution or (ii) the
Market Price of the Common Stock on the record date for the determination of
shareholders entitled to receive such distribution is greater than the Fair
Market Value per share of such Distributed Assets or Securities by less than
$1.00, then, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder shall have the right to receive upon conversion, in
addition to the shares of Common Stock, the kind and amount of assets, debt
securities, or rights or warrants comprising the Distributed Assets or
Securities the Holder would have received had such Holder converted such Notes
immediately prior to the record date for the determination of shareholders
entitled to receive such distribution. In the event that such distribution is
not so paid or made, the Conversion Rate shall again be adjusted to the
Conversion Rate which would then be in effect if such distribution had not been
declared.

                                       26

<PAGE>

         (d)      In case the Company shall make (i) any distributions, by
dividend or otherwise, during any quarterly fiscal periods consisting
exclusively of cash to all holders of outstanding shares of Common Stock in an
aggregate amount that, together with (ii) other all-cash distributions made to
all holders of outstanding shares of Common Stock during such quarterly fiscal
period, and (iii) any cash and the Fair Market Value, as of the expiration of
any tender or exchange offer (other than consideration payable in respect of any
odd-lot tender offer) of consideration payable in respect of any tender or
exchange offer by the Company or any of the Company's Subsidiaries for all or
any portion of shares of Common Stock concluded during such quarterly fiscal
period, exceed the product of $0.10 (appropriately adjusted from time to time
for any stock dividends on or subdivisions or combinations of the Common Stock)
multiplied by the number of shares of Common Stock outstanding on the record
date for such distribution, then, and in each such case, the Conversion Rate
shall be adjusted so that the same shall equal the Conversion Rate determined by
multiplying the Conversion Rate in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive such distribution by a fraction of which (A) the
numerator shall be the Market Price per share of the Common Stock on the earlier
of such record date or the Trading Day immediately preceding the ex date for
such dividend or distribution and (B) the denominator shall be (1) the Market
Price per share of Common Stock on the earlier of such record date or the
Trading Day immediately preceding the ex date for such dividend or distribution
plus (2) $0.10 (appropriately adjusted from time to time for any stock dividends
on or subdivisions or combination of Common Stock) less (3) an amount equal to
the quotient of (x) the combined amount distributed or payable in the
transactions described in clauses (i), (ii) and (iii) above during such
quarterly fiscal period and (y) the number of shares of Common Stock outstanding
on such record date, such adjustment to become effective immediately after the
record date for the determination of shareholders entitled to receive such
distribution.

         (e)      With respect to Section 806(c) above, in the event that the
Company makes any distribution to all holders of Common Stock consisting of
Equity Interests in a Subsidiary or other business unit of the Company, the
Conversion Rate shall be adjusted so that the same shall equal the Conversion
Rate determined by multiplying the Conversion Rate in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive such distribution by a fraction of
which (i) the numerator shall be (x) the Spin-off Market Price per share of the
Common Stock on such record date plus (y) the Spin-off Market Price per Equity
Interest of the Subsidiary or other business unit of the Company on such record
date and (ii) the denominator shall be the Spin-off Market Price per share of
the Common Stock on such record date, such adjustment to become effective 10
Trading Days after the effective date of such distribution of Equity Interests
in a Subsidiary or other business unit of the Company.

         (f)      Upon conversion of the Notes, the Holders shall receive, in
addition to the Common Stock issuable upon such conversion, the rights issued
under the Rights Plan or under any future shareholder rights plan the Company
implements (notwithstanding the occurrence of an event causing such rights to
separate from the Common Stock at or prior to the time of conversion) unless,
prior to conversion, the rights have expired, terminated or been redeemed or
exchanged in accordance with the Rights Plan. If, and only if, the Holders of
Notes receive rights under such shareholder rights plans as described in the
preceding sentence upon

                                       27

<PAGE>

conversion of their Notes, then no other adjustment pursuant to this Section 806
shall be made in connection with such shareholder rights plans.

         (g)      For purposes of this Section 806, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
shall not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.

         (h)      Notwithstanding the foregoing, in no event shall the
Conversion Rate exceed the maximum conversion rate specified under this Section
806(h) (the "Maximum Conversion Rate") as a result of an adjustment pursuant to
Section 806(c) and Section 806(d) hereof. The Maximum Conversion Rate shall
initially be 129.5337 and shall be appropriately adjusted from time to time for
any stock dividends on or subdivisions or combinations of the Common Stock. The
Maximum Conversion Rate shall not apply to any adjustments made pursuant to any
of the events in Section 806(a) or Section 806(b) hereof.

         Section 807 Calculation Methodology. No adjustment in the Conversion
Price need be made unless the adjustment would require an increase or decrease
of at least 1% in the Conversion Price then in effect, provided that any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment. Except as stated in this
Article VIII, the Conversion Rate will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing. Any adjustments that are
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under Article VII, Section 806 and this Section 807
shall be made to the nearest cent or to the nearest 1/10,000th of a share, as
the case may be.

         Section 808 When No Adjustment Required. No adjustment to the
Conversion Rate need be made:

         (a)      upon the issuance of any shares of Common Stock pursuant to
         any present or future plan providing for the reinvestment of dividends
         or interest payable on securities of the Company and the investment of
         additional optional amounts in shares of Common Stock under any plan;

         (b)      upon the issuance of any shares of Common Stock or options or
         rights to purchase those shares pursuant to any present or future
         employee, director or consultant benefit plan or program of or assumed
         by the Company or any of its Subsidiaries;

         (c)      upon the issuance of any shares of Common Stock pursuant to
         any option, warrant, right, or exercisable, exchangeable or convertible
         security not described in paragraph (b) above and outstanding as of the
         date of this Supplemental Indenture;

         (d)      upon the issuance of any shares of Common Stock pursuant to
         warrants granted in connection with the Company's $3.8 Billion Credit
         Facility;

         (e)      for a change in the par value or no par value of the Common
         Stock; or

                                       28

<PAGE>

         (f)      for accrued and unpaid interest (including Contingent Interest
         or Additional Amount, if any).

         To the extent the Notes become convertible into cash, assets, or
property (other than capital stock of the Company or securities to which Section
812 applies), no adjustment shall be made thereafter as to the cash, assets or
property. Interest shall not accrue on such cash.

         Section 809 Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Holders a notice of the adjustment.
The Company shall file with the Trustee and the Conversion Agent such notice.
The certificate shall, absent manifest error, be conclusive evidence that the
adjustment is correct. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such certificate except to
exhibit the same to any Holder desiring inspection thereof.

         Section 810 Voluntary Increase. The Company may make such increases in
the Conversion Rate, in addition to those required by Section 806, as the Board
of Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. To the extent permitted by applicable
law, the Company may from time to time increase the Conversion Rate by any
amount for any period of time if the period is at least 20 days, the increase is
irrevocable during the period and the Board of Directors shall have made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. Whenever the Conversion Rate is so
increased, the Company shall mail to Holders and file with the Trustee and the
Conversion Agent a notice of such increase. Neither the Trustee nor any
Conversion Agent shall be under any duty or responsibility with respect to any
such notice except to exhibit the same to any Holder desiring inspection
thereof. The Company shall mail the notice at least 15 days before the date the
increased Conversion Rate takes affect. The notice shall state the increased
Conversion Rate and the period it shall be in effect.

         Section 811 Notice to Holders Prior to Certain Actions. In case:

         (a)      The Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Conversion Rate pursuant to Section 806;

         (b)      The Company shall authorize the granting to all or
substantially all the holders of its Common Stock of rights or warrants to
subscribe for or purchase any share of any class or any other rights or
warrants;

         (c)      Of any reclassification or reorganization of the Common Stock
of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or

         (d)      Of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,

                                       29

<PAGE>

the Company shall cause to be filed with the Trustee and to be mailed to each
Holder at its address appearing on the Security Register, as promptly as
possible but in any event at least 15 days prior to the applicable date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution, or rights or warrants
are to be determined or (y) the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, dissolution, liquidation
or winding-up is expected to become effective or occur, and the date as of which
it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, reorganization, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up.

         Section 812 Effect of Reclassification, Consolidation, Merger, Binding
Share Exchange or Sale. If any of the following events occur, namely (a) any
reclassification or change of outstanding shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); (b) any
consolidation, merger, combination or binding share exchange of the Company with
another corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock; or (c) any sale or
conveyance of the properties and assets of the Company as, or substantially as,
an entirety to any other corporation as a result of which holders of Common
Stock shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then the
Company or the successor or purchasing corporation, as the case may be, shall
execute with the Trustee a Supplemental Indenture, providing that each Note
shall be convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, binding share
exchange, sale or conveyance by a holder of a number of shares of Common Stock
issuable upon conversion of such Note immediately prior to such
reclassification, change, consolidation, merger, combination, binding share
exchange, sale or conveyance. Such Supplemental Indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 812.

         The Company shall cause notice of the execution of such Supplemental
Indenture to be mailed to each Holder, at its address appearing on the Security
Register, within 20 days after execution thereof. Failure to deliver such notice
shall not affect the legality or validity of such supplemental indenture.

         The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
binding share exchanges, sales and conveyances.

         If this Section 812 applies to any event or occurrence, Section 806
shall not apply.

                                       30

<PAGE>

         Section 813 Responsibility of Trustee. The Trustee and any other
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder to either calculate the Conversion Rate or determine whether any
facts exist which may require any adjustment of the Conversion Rate, or with
respect to the nature or extent or calculation of any such adjustment when made,
or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same and shall be protected in
relying upon an Officers' Certificate with respect to the same. The Trustee and
any other Conversion Agent shall not be accountable with respect to the validity
or value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any Notes and the Trustee and any other Conversion Agent make no
representations with respect thereto. Subject to the provisions of Article Five
of the Original Indenture, neither the Trustee nor any Conversion Agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Notes for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Section. Without limiting the generality of the foregoing, neither the
Trustee nor any Conversion Agent shall be under any responsibility to determine
the correctness of any provisions contained in any Supplemental Indenture
entered into pursuant to Article VIII hereof relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Holders upon the conversion of their Notes after any event referred to in
such Section 812 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Article Five of the Original Indenture, may accept
as conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, the Officers' Certificate (which the Company shall be
obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.

         Section 814 Simultaneous Adjustments. In the event that Section 806
requires adjustments to the Conversion Rate under more than one of Sections
806(a), (b), (c) or (d), and the Record Dates for the distributions giving rise
to such adjustments shall occur on the same date, then such adjustments shall be
made by applying, first, the provisions of Section 806(c), second, the
provisions of Section 806(a) and third, the provisions of Section 806(b);
provided, however, that nothing in this Section 814 shall be done to evade the
principle set forth in Section 806(h) hereof that the Maximum Conversion Rate
shall not apply to any adjustments made with respect to any of the events in
Section 806(a) or Section 806(b) hereof.

         Section 815 Successive Adjustments. After an adjustment to the
Conversion Rate under Section 806, any subsequent event requiring an adjustment
under Section 806 shall cause an adjustment to the Conversion Rate as so
adjusted.

         Section 816 General Considerations. Whenever successive adjustments to
the Conversion Rate are called for pursuant to Article VIII hereof, such
adjustments shall be made to the Market Price as may be necessary or appropriate
to effectuate the intent of Article VIII hereof and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors.

                                       31

<PAGE>

                                   ARTICLE IX

                            Restrictions on Transfer

         Section 901 Transfer and Exchange.

         (a)      Transfer and Exchange of Notes in Definitive Form. In addition
to the requirements set forth in Section 305 of the Original Indenture, Notes in
definitive form that are Transfer Restricted Securities presented or surrendered
for registration of transfer or exchange pursuant to Section 305 of the Original
Indenture shall be accompanied by the following additional information and
documents, as applicable, upon which the Security Registrar may conclusively
rely:

                  (i)      if such Transfer Restricted Securities are being
         delivered to the Security Registrar by a Holder for registration in the
         name of such Holder, without transfer, a certification from such Holder
         to that effect (in substantially the form of Exhibit B hereto); or

                  (ii)     if such Transfer Restricted Securities are being
         transferred (1) to a Qualified Institutional Buyer in accordance with
         Rule 144A under the Securities Act or (2) pursuant to an exemption from
         registration in accordance with Rule 144 under the Securities Act (and
         based upon an opinion of counsel if the Company or the Trustee so
         requests) or (3) pursuant to an effective registration statement under
         the Securities Act, a certification to that effect from such Holder (in
         substantially the form of Exhibit B hereto); or

                  (iii)    if such Transfer Restricted Securities are being
         transferred to a Non-U.S. Person pursuant to an exemption from
         registration in accordance with Rule 904 of Regulation S under the
         Securities Act, certifications to that effect from such transferor (in
         substantially the form of Exhibits B and C hereto) and an opinion of
         counsel to that effect if the Company or the Trustee so requests; or

                  (iv)     if such Transfer Restricted Securities are being
         transferred in reliance on and in compliance with another exemption
         from the registration requirements of the Securities Act, a
         certification to that effect from such Holder (in substantially the
         form of Exhibit B hereto) and an opinion of counsel to that effect if
         the Company or the Trustee so requests.

         (b)      Transfer and Exchange of the Notes.

                  (i)      The transfer and exchange of Global Notes or
         beneficial interests therein shall be effected through the Depositary,
         in accordance with Section 305 of the Original Indenture and Article IX
         hereof (including the restrictions on transfer set forth therein and
         herein) and the rules and procedures of the Depositary therefor, which
         shall include restrictions on transfer comparable to those set forth
         therein and herein to the extent required by the Securities Act.

                                       32

<PAGE>

                  (ii)     The transfer and exchange of Global Notes or
         beneficial interests therein for certificated notes (or vice versa)
         shall be effected through the Trustee and the Depositary, as the case
         may be, in accordance with Section 305 of the Original Indenture and
         Article IX hereof (including the restrictions on transfer set forth
         therein and herein) and the rules and procedures of the Depositary
         therefor, which shall include restrictions on transfer comparable to
         those set forth therein and herein to the extent required by the
         Securities Act.

         Section 902 Legends.

         (a)      Except as permitted by Section 902(b) hereof, each certificate
evidencing the Global Notes or certificated notes in definitive form (and all
Notes issued in exchange therefor or substitution thereof) shall bear a legend
in substantially the following form:

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

            THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
            THAT (A) THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION
            HEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
            ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
            BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
            UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
            OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE
            TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
            (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
            SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
            (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
            SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH
            ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES,
            AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,

                                       33

<PAGE>

            NOTIFY ANY PURCHASER OF THE SECURITY FROM IT OF THE RESALE
            RESTRICTIONS REFERRED TO IN (A) ABOVE.

            THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE
            IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY AND THE COMMON STOCK
            ISSUABLE UPON CONVERSION HEREOF UNLESS IN COMPLIANCE WITH THE
            SECURITIES ACT.

            THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
            SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND
            PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO
            REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
            INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
            TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
            SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE
            AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

            THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE
            BENEFITS OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 19,
            2003 ENTERED INTO BY THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS
            OF SECURITIES FROM TIME TO TIME.

            THE HOLDER OF THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
            SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS OF, A RIGHTS
            AGREEMENT, DATED AS OF JANUARY 1, 2002, BETWEEN THE COMPANY AND
            JPMORGAN CHASE BANK, AS RIGHTS AGENT.

Each certificate evidencing the Global Notes also shall bear the legend
specified for Global Notes in the form of Note attached hereto as Exhibit A.

         (b)      Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
pursuant to Rule 144 under the Securities Act or an effective registration
statement under the Securities Act, which shall be certified to the Trustee and
Security Registrar upon which each may conclusively rely:

                  (i)      in the case of any Transfer Restricted Security
         represented by a certificated note, the Security Registrar shall permit
         the Holder thereof to exchange such Transfer Restricted Security for a
         certificated note that does not bear the legend set forth in Section
         902(a) hereof and rescind any restriction on the transfer of such
         Transfer Restricted Security; and

                                       34

<PAGE>

                  (ii)     in the case of any Transfer Restricted Security
         represented by a Global Note, such Transfer Restricted Security shall
         not be required to bear the legend set forth in Section 902(a) hereof
         if all other interests in such Global Note have been or are
         concurrently being sold or transferred pursuant to Rule 144 under the
         Securities Act or pursuant to an effective registration statement under
         the Securities Act.

         Section 903 Registration Rights Agreement.

         The Company shall perform its obligations under the Registration Rights
Agreement and shall comply in all material respects with the terms and
conditions contained therein including, without limitation, the payment of
Additional Amounts.

         Section 904 Restriction on Common Stock Issuable Upon Conversion.

         (a)      Shares of Common Stock to be issued upon conversion of Notes
prior to the effectiveness of a Shelf Registration Statement shall be physically
delivered in certificated form to the Holders converting such Notes and the
certificate representing such shares of Common Stock shall bear the Restricted
Common Stock Legend unless removed in accordance with Section 904(c).

         (b)      If (i) shares of Common Stock to be issued upon conversion of
Notes prior to the effectiveness of a Shelf Registration Statement are to be
registered in a name other than that of the Holder of such Notes or (ii) shares
of Common Stock represented by a certificate bearing the Restricted Common Stock
Legend are transferred subsequently by such Holder, then, unless the Shelf
Registration Statement has become effective and such shares are being
transferred pursuant to the Shelf Registration Statement, the Holder must
deliver to the transfer agent for the Common Stock and to the Company a
certificate in substantially the form of Exhibit I as to compliance with the
restrictions on transfer applicable to such shares of Common Stock and neither
the transfer agent nor the registrar for the Common Stock shall be required to
register any transfer of such Common Stock not so accompanied by a properly
completed certificate.

         (c)      Except in connection with a Shelf Registration Statement, if
certificates representing shares of Common Stock are issued upon the
registration of transfer, exchange or replacement of any other certificate
representing shares of Common Stock bearing the Restricted Common Stock Legend,
or if a request is made to remove such Restricted Common Stock Legend from
certificates representing shares of Common Stock, the certificates so issued
shall bear the Restricted Common Stock Legend, or the Restricted Common Stock
Legend shall not be removed, as the case may be, unless there is delivered to
the Company such reasonably satisfactory evidence, which, in the case of a
transfer made pursuant to Rule 144 under the Securities Act of 1933, may include
an opinion of counsel, as may be reasonably required by the Company, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of Rule
144A, Rule 144 or Regulation S under the Securities Act of 1933 and that such
shares of Common Stock are securities that are not "restricted" within the
meaning of Rule 144 under the Securities Act of 1933. Upon provision to the
Company of such reasonably satisfactory evidence, the Company shall cause the
transfer agent for the Common Stock to countersign and deliver certificates
representing shares of Common Stock that do not bear the legend.

                                       35

<PAGE>

         Section 905 Delivery of Certain Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder or any beneficial holder of Notes or shares of Common Stock
issued upon conversion thereof, the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder or any
beneficial holder of Notes or holder of shares of Common Stock issued upon
conversion of Notes, or to a prospective purchaser of any such security
designated by any such holder, as the case may be, to the extent required to
permit compliance by such Holder or holder with Rule 144A under the Securities
Act in connection with the resale of any such security. "Rule 144A Information"
shall be such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act.

                                    ARTICLE X

                        Remedies; Modification and Waiver

         Section 1001 Additional Events of Default; Acceleration of Maturity.

         (a)      Solely with respect to the Notes issued hereby, Section 501(1)
of the Original Indenture is hereby deleted in its entirety, and the following
is substituted in lieu thereof as an Event of Default in addition to the other
events set forth in Section 501 of the Original Indenture:

                  "(1)     default in the payment of any interest upon any
         Security of that series, including Contingent Interest and Additional
         Amounts, if any, when it becomes due and payable, and continuance of
         such default for a period of 30 days;"

         (b)      Solely with respect of the Notes issued hereby, Section 501(5)
of the Original Indenture is hereby deleted in its entirety, and the following
is substituted in lieu thereof as an Event of Default in addition to the other
events set forth in Section 501 of the Original Indenture:

                           "(5)     the entry by a court having jurisdiction in
                  the premises of (A) a decree or order for relief in respect of
                  the Company, CERC or CenterPoint Houston in an involuntary
                  case or proceeding under any applicable federal or state
                  bankruptcy, insolvency, reorganization or other similar law or
                  (B) a decree or order adjudging the Company, CERC or
                  CenterPoint Houston a bankrupt or insolvent, or approving as
                  properly filed a petition seeking reorganization, arrangement,
                  adjustment or composition of or in respect of the Company,
                  CERC or CenterPoint Houston under any applicable federal or
                  state law, or appointing a custodian, receiver, liquidator,
                  assignee, trustee, sequestrator or other similar official of
                  the Company, CERC or CenterPoint Houston or of any substantial
                  part of its respective property, or ordering the winding up or
                  liquidation of its respective affairs, and the continuance of
                  any such decree or order for relief or any such other decree
                  or order unstayed and in effect for a period of 90 consecutive
                  days; provided that any specified event in (A), (B) or (C)
                  involving CERC or CenterPoint Houston shall not constitute

                                       36

<PAGE>

                  an Event of Default if, at the time such event occurs, CERC or
                  CenterPoint Houston, as the case may be, shall no longer be an
                  Affiliate of the Company; or"

         (c)      Solely with respect to the Notes issued hereby, Section 501(6)
of the Original Indenture is hereby deleted in its entirety, and the following
is substituted in lieu thereof as an Event of Default in addition to the other
events set forth in Section 501 of the Original Indenture:

                           "(6)     the commencement by the Company, CERC or
                  CenterPoint Houston of a voluntary case or proceeding under
                  any applicable federal or state bankruptcy, insolvency,
                  reorganization or other similar law or of any other case or
                  proceeding to be adjudicated a bankrupt or insolvent, or the
                  consent by any of them to the entry of a decree or order for
                  relief in respect of the Company, CERC or CenterPoint Houston
                  in an involuntary case or proceeding under any applicable
                  federal or state bankruptcy, insolvency, reorganization or
                  other similar law or to the commencement of any bankruptcy or
                  insolvency case or proceeding against any of them, or the
                  filing by any of them of a petition or answer or consent
                  seeking reorganization or relief under any applicable federal
                  or state law, or the consent by any of them to the filing of
                  such petition or to the appointment of or taking possession by
                  a custodian, receiver, liquidator, assignee, trustee,
                  sequestrator or other similar official of the Company, CERC or
                  CenterPoint Houston or of any substantial part of their
                  respective property, or the making by any of them of an
                  assignment of a substantial part of their respective property
                  for the benefit of creditors, or the admission by any of them
                  in writing of the inability of any of the Company, CERC or
                  CenterPoint Houston to pay their respective debts generally as
                  they become due, or the taking of corporate action by the
                  Company, CERC or CenterPoint Houston in furtherance of any
                  such action; provided that any such specified event involving
                  CERC or CenterPoint Houston shall not constitute an Event of
                  Default if, at the time such event occurs, CERC or CenterPoint
                  Houston, as the case may be shall no longer be an Affiliate of
                  the Company; or"

         (d)      Solely with respect to the Notes issued hereby, and pursuant
to Section 501(7) of the Original Indenture, the following shall each constitute
an "Event of Default" in addition to the other events set forth in Section 501
of the Original Indenture:

                           "(i)     The default by the Company, CERC or
                  CenterPoint Houston in a scheduled payment at maturity, upon
                  redemption or otherwise, in the aggregate principal amount of
                  $50 million or more, after the expiration of any applicable
                  grace period, of any Indebtedness or the acceleration of any
                  Indebtedness of the Company, CERC or CenterPoint Houston in
                  such aggregate

                                       37

<PAGE>

                  principal amount, so that it becomes due and payable prior to
                  the date on which it would otherwise have become due and
                  payable and such payment default is not cured or such
                  acceleration is not rescinded within 30 days after notice to
                  the Company in accordance with the terms of the Indebtedness;
                  provided that such payment default or acceleration of CERC or
                  CenterPoint Houston shall not to be an Event of Default if, at
                  the time such event occurs, CERC or CenterPoint Houston, as
                  the case may be, shall not be an Affiliate of the Company;

                           (ii)     The Company defaults in its obligation to
                  redeem the Notes after exercising its redemption option
                  pursuant to Article IV hereof;

                           (iii)    The Company defaults in its obligation to
                  convert the Notes upon exercise of a Holder's conversion right
                  in accordance with the terms of the Notes and Article VIII
                  hereof; and

                           (iv)     The Company defaults in its obligation to
                  purchase Notes upon the occurrence of a Fundamental Change or
                  the exercise by a Holder of its option to require the Company
                  to repurchase such Holder's Notes in accordance with the terms
                  of Article V or Article VI hereof, as applicable.

         Section 1002 Modification and Waiver. In addition to those matters set
forth in Section 902 of the Indenture (including the terms and conditions of the
Notes set forth herein), with respect to the Notes, no amendment or Supplemental
Indenture shall without the consent of the Holder of each Note affected thereby:

         (a)      Reduce the Redemption Price, Purchase Price or Fundamental
         Change Purchase Price of the Notes;

         (b)      Change the terms applicable to redemption or purchase of the
         Notes in a manner adverse to the Holder;

         (c)      Alter the manner of calculation or rate of Contingent Interest
         or Additional Amounts payable on any Note or extend the time for
         payment of any such amount.

In addition, with respect to the Notes, notwithstanding Sections 513 and 1006 of
the Original Indenture, approval of the Holders of each outstanding Note shall
be required to:

         (a)      Waive any default by the Company in any payment of the
         Redemption Price, Purchase Price or Fundamental Change Purchase Price
         with respect to any Notes; or

         (b)      Waive any default which constitutes a failure to convert any
         Note in accordance with its terms and the terms of Article VIII hereof.

                                       38

<PAGE>

The reference to "interest" in Section 513(1) of the Original Indenture shall
include Contingent Interest and Additional Amounts, if any.

                                   ARTICLE XI

                            Miscellaneous Provisions

         Section 1101 The Indenture, as supplemented and amended by this
Supplemental Indenture No. 1, is in all respects hereby adopted, ratified and
confirmed.

         Section 1102 This Supplemental Indenture No. 1 may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

         Section 1103 THIS SUPPLEMENTAL INDENTURE NO. 1 AND EACH NOTE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

         Section 1104 If any provision in this Supplemental Indenture No. 1
limits, qualifies or conflicts with another provision hereof which is required
to be included herein by any provisions of the Trust Indenture Act, such
required provision shall control.

         Section 1105 In case any provision in this Supplemental Indenture No. 1
or the Notes 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.

                                       39

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed, as of the day and year first written above.

                                         CENTERPOINT ENERGY, INC.

                                         By: /s/ GARY L. WHITLOCK
                                            ------------------------------------
                                             Name: Gary L. Whitlock
                                             Title: Executive Vice President and
                                                    Chief Financial Officer

Attest:
/s/ RICHARD B. DAUPHIN
--------------------------
Name: Richard B. Dauphin
Title: Assistant Corporate Secretary

(SEAL)

                                         JPMORGAN CHASE BANK, as Trustee

                                         By: /s/ CAROL LOGAN
                                            ------------------------------------
                                             Name: Carol Logan
                                             Title: Vice President and
                                                    Trust Officer

(SEAL)

                                       40

<PAGE>

                                    Exhibit A

                             [FORM OF FACE OF NOTE]

                                                                   [Global Note]
                                                             [Certificated Note]

[IF THIS SECURITY IS TO BE A GLOBAL NOTE -] THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY.

[For as long as this Global Security is deposited with or on behalf of The
Depository Trust Company it shall bear the following legend.] Unless this
certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to CenterPoint Energy, Inc. or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

                            CENTERPOINT ENERGY, INC.

                     3.75% Convertible Senior Notes due 2023

No. __________                                                     $__________ *
                                                             CUSIP No. ________

         CENTERPOINT ENERGY, INC., a corporation duly organized and existing
under the laws of the State of Texas (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _______________, or registered
assigns, the principal sum of ____________________ Dollars on May 15, 2023. This
Note shall bear interest as specified on the other side of this Note. This

------------------------
         *        REFERENCE IS MADE TO SCHEDULE A ATTACHED HERETO WITH RESPECT
TO DECREASES AND INCREASES IN THE AGGREGATE PRINCIPAL AMOUNT OF NOTES EVIDENCED
BY THIS CERTIFICATE.

                                       A-1

<PAGE>

Note is convertible and is subject to redemption at the option of the Company
and to purchase by the Company at the option of the Holder as specified on the
other side of this Note.

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

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

            THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
            THAT (A) THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION
            HEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
            ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
            BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
            UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
            OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE
            TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
            (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
            SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
            (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
            SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH
            ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES,
            AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
            NOTIFY ANY PURCHASER OF THE SECURITY FROM IT OF THE RESALE
            RESTRICTIONS REFERRED TO IN (A) ABOVE.

            THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE
            IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY AND THE COMMON STOCK
            ISSUABLE UPON CONVERSION HEREOF UNLESS IN COMPLIANCE WITH THE
            SECURITIES ACT.

                                       A-2

<PAGE>

            THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
            SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND
            PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO
            REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
            INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
            TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
            SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE
            AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

            THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE
            BENEFITS OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 19,
            2003 ENTERED INTO BY THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS
            OF SECURITIES FROM TIME TO TIME.

            THE HOLDER OF THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
            SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS OF, A RIGHTS
            AGREEMENT, DATED AS OF JANUARY 1, 2002, BETWEEN THE COMPANY AND
            JPMORGAN CHASE BANK, AS RIGHTS AGENT.

            FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE,
            THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL
            ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S "COMPARABLE YIELD"
            FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO SECTION
            213 OF THE SUPPLEMENTAL INDENTURE, THE COMPANY AGREES, AND BY
            ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH
            BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED,
            FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (i) TO TREAT THE
            SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO THE CONTINGENT PAYMENT
            DEBT INSTRUMENT REGULATIONS UNDER SECTION 1.1275-4 OF THE UNITED
            STATES TREASURY REGULATIONS (THE "CPDI REGULATIONS"), AND, FOR
            PURPOSES OF THE CPDI REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF
            COMMON STOCK RECEIVED BY A BENEFICIAL HOLDER UPON ANY CONVERSION OF
            THE NOTES AS A CONTINGENT PAYMENT AND (ii) TO BE BOUND BY THE
            COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED
            PAYMENT SCHEDULE," WITHIN THE MEANING OF THE CPDI REGULATIONS, WITH
            RESPECT TO THE NOTES

                                       A-3

<PAGE>

            AND TO ACCRUE ORIGINAL ISSUE DISCOUNT AT THE COMPARABLE YIELD AS
            DETERMINED BY THE COMPANY. THE COMPANY'S DETERMINATION OF THE
            "COMPARABLE YIELD" IS 5.81% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE
            PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED
            TO THE SUPPLEMENTAL INDENTURE AS EXHIBIT J. YOU MAY OBTAIN THE
            AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, COMPARABLE YIELD AND
            PROJECTED PAYMENT SCHEDULE FOR THE SECURITY BY TELEPHONING THE
            COMPANY'S TREASURY DEPARTMENT AT (713) 207-7019 OR SUBMITTING A
            WRITTEN REQUEST FOR SUCH INFORMATION TO: CENTERPOINT ENERGY, INC.,
            1111 LOUISIANA, HOUSTON, TEXAS 77002, ATTENTION: TREASURY
            DEPARTMENT.

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                       A-4

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated: __________________________            CENTERPOINT ENERGY, INC.

                                             By:    ___________________________
                                             Name:  ___________________________
(SEAL)                                       Title: ___________________________

Attest:

_________________________________
Name:
Title:

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

                                             JPMORGAN CHASE BANK,
                                             As Trustee

Date of Authentication: _______________
                                             By: ______________________________
                                                 Authorized Signatory

                                             By: ______________________________
                                                      Authorized Signatory

                                       A-5

<PAGE>

                         [FORM OF REVERSE SIDE OF NOTE]

                            CENTERPOINT ENERGY, INC.

                     3.75% CONVERTIBLE SENIOR NOTES DUE 2023

1.       INTEREST

         This Note shall bear interest at a rate of 3.75% per year on the
principal hereof, from May 19, 2003 or from the most recent Interest Payment
Date (as defined below) to which payment has been made or duly provided for,
payable semiannually in arrears on May 15 and November 15 of each year,
beginning November 15, 2003 (each an "Interest Payment Date") to the persons in
whose names the Notes are registered at the close of business on May 1 and
November 1 (each a "Regular Record Date") (whether or not a Business Day), as
the case may be, immediately preceding such Interest Payment Date. This Note
shall also bear Contingent Interest in certain circumstances as specified in
paragraph 5 below. The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
interest payable for any partial period shall be computed on the basis of a
360-day year of twelve 30-day months and the days elapsed in any partial month.

         Holders of Notes at the close of business on a Regular Record Date will
receive payment of interest, including Contingent Interest, if any, payable on
the corresponding Interest Payment Date notwithstanding the conversion of such
Notes at any time after the close of business on such Regular Record Date. Notes
surrendered for conversion by a Holder during the period from the close of
business on any Regular Record Date to the opening of business on the
immediately following Interest Payment Date must be accompanied by payment of an
amount equal to the interest, including Contingent Interest, if any, that the
Holder is to receive on the Notes; provided, however, that no such payment need
be made if (1) the Company has specified a Redemption Date that is after a
Regular Record Date and on or prior to the immediately following Interest
Payment Date, (2) the Company has specified a Purchase Date following a
Fundamental Change that is during such period or (3) any overdue interest
(including overdue Contingent Interest, if any) exists at the time of conversion
with respect to such Notes to the extent of such overdue interest. The Holders
of the Notes and any Common Stock issuable upon conversion thereof will continue
to be entitled to receive Additional Amounts in accordance with the Registration
Rights Agreement.

         If the principal hereof or any portion of such principal is not paid
when due (whether upon acceleration, upon the date set for payment of the
Redemption Price pursuant to paragraph 6 hereof, upon the date set for payment
of a Purchase Price or Fundamental Change Purchase Price pursuant to paragraph 8
hereof or upon the Stated Maturity of this Note) or if interest (including
Contingent Interest, if any) due hereon or any portion of such interest is not
paid when due in accordance with this paragraph or paragraph 5 or 11 hereof,
then in each such case the overdue amount shall bear interest at the rate of
3.75% per annum, compounded semiannually (to the extent that the payment of such
interest shall be legally enforceable), which interest shall accrue from the
date such overdue amount was due to the date payment of such amount,

                                       A-6

<PAGE>

including interest thereon, has been made or duly provided for. All such
interest shall be payable on demand.

2.       METHOD OF PAYMENT

         Payment of the principal of (and premium, if any) and any such interest
on this Note will be made at the Corporate Trust Office of the Trustee, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Company payment of interest may be made (i) by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer in immediately available funds at
such place and to such account as may be designated in writing by the Person
entitled thereto as specified in the Security Register.

3.       PAYING AGENT, CONVERSION AGENT AND SECURITY REGISTRAR

         Initially, the Trustee, shall act as Paying Agent, Conversion Agent and
Security Registrar. The Company may appoint and change any Paying Agent,
Conversion Agent, Security Registrar or co-registrar or approve a change in the
office through which any Paying Agent acts without notice, other than notice to
the Trustee. The Company or any of its Subsidiaries or any of their Affiliates
may act as Paying Agent, Conversion Agent, Security Registrar or co-registrar.

4.       INDENTURE

         This Note is one of a duly authorized issue of securities of the
Company, issued and to be issued in one or more series under an Indenture, dated
as of May 19, 2003 (the "Original Indenture"), as supplemented by the First
Supplemental Indenture thereto, dated as of May 19, 2003 (the "Supplemental
Indenture" and, together with the Original Indenture, the "Indenture"), between
the Company and the Trustee. Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture. Reference is hereby
made to the Indenture for a statement of the respective rights thereunder of the
Company, the Trustee and the Holders and the terms upon which the Notes are to
be authenticated and delivered. The terms, conditions and provisions of the
Notes are those stated in the Indenture, those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, and those set forth in
the Notes.

         The Notes are general unsecured obligations of the Company limited to
$575,000,000 aggregate principal amount.

5.       CONTINGENT INTEREST

         The Company will pay Contingent Interest to the Holders of the Notes in
respect of any six-month interest period from May 15 to November 14 or November
15 to May 14 commencing on or after May 15, 2008 for which the average Trading
Price of a Note for the applicable five Trading Day reference period equals or
exceeds 120% of $1,000 per $1,000 principal amount of Notes as of the day
immediately preceding the first day of the applicable six-month interest period.
The "five Trading Day reference period" means the five Trading Days ending on
the second Trading Day immediately preceding the relevant six-month interest
period. For any six-month interest period in respect of which Contingent
Interest is payable, the Contingent Interest

                                       A-7

<PAGE>

payable on each $1,000 principal amount of Notes shall equal 0.25% of the
average Trading Price per $1,000 principal amount of Notes during the applicable
five Trading Day reference period.

         The record dates and payment dates for Contingent Interest, if any,
will be the same as the Regular Record Date and Interest Payment Dates for the
semi-annual interest payments on the Notes.

         Upon determination that Holders will be entitled to receive Contingent
Interest which may become payable, the Company shall notify the Holders. In
connection with providing such notice, the Company will issue a press release
and publish a notice containing information regarding the Contingent Interest
determination in a newspaper of general circulation in The City of New York or
publish such information on the Company's then existing Web site or through such
other public medium as the Company shall determine.

6.       REDEMPTION AT THE OPTION OF THE COMPANY

         No sinking fund is provided for the Notes. The Notes are redeemable for
cash in whole, or in part, at any time on or after May 15, 2008 at the option of
the Company at a redemption price ("Redemption Price") equal to 100% of the
principal amount of the Notes to be redeemed plus any accrued and unpaid
interest (including Contingent Interest and Additional Amounts, if any) to the
Redemption Date.

7.       NOTICE OF REDEMPTION AT THE OPTION OF THE COMPANY

         Notice of redemption at the option of the Company shall be mailed at
least 30 days but not more than 60 days before a Redemption Date to the Trustee,
the Paying Agent and each Holder of Notes to be redeemed at the Holder's
registered address. If money sufficient to pay the Redemption Price of all Notes
(or portions thereof) to be redeemed on the Redemption Date is deposited with
the Paying Agent prior to or on the Redemption Date, on and after the Redemption
Date interest (including Contingent Interest and Additional Amounts, if any), if
any, shall cease to accrue on such Notes or portions thereof. Notes in
denominations larger than $1,000 principal amount may be redeemed in part but
only in integral multiples of $1,000 principal amount.

8.       PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER; PURCHASE AT THE
         OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE

         (a)      Subject to the terms and conditions of the Indenture, a Holder
shall have the option to require the Company to purchase the Notes held by such
Holder on May 15, 2008, May 15, 2013 and May 15, 2018 (each, a "Purchase Date")
at a purchase price (the "Purchase Price") equal to 100% of the principal amount
of the Notes to be purchased plus any accrued and unpaid interest (including
Contingent Interest and Additional Amounts, if any) to such Purchase Date, upon
delivery of a Purchase Notice containing the information set forth in the
Indenture, from the opening of business on the date that is 20 Business Days
prior to such Purchase Date until the close of business on the fifth Business
Day prior to such Purchase Date and upon delivery of the Notes to the Paying
Agent by the Holder as set forth in the Indenture. The Company will pay the
Purchase Price in cash.

                                       A-8

<PAGE>

         Notes in denominations larger than $1,000 principal amount may be
purchased in part, but only in integral multiples of $1,000 principal amount.

         (b)      If a Fundamental Change shall occur at any time prior to May
15, 2008, each Holder shall have the right, at such Holder's option and subject
to the terms and conditions of the Indenture, to require the Company to purchase
any or all of such Holder's Notes or any portion of the principal amount thereof
that is equal to $1,000 or an integral multiple of $1,000 on the day that is 35
days after the date of the Company Notice of the occurrence of the Fundamental
Change (subject to extension to comply with applicable law) for a Fundamental
Change Purchase Price equal to 100% of the principal amount of Notes purchased
plus accrued and unpaid interest (including Contingent Interest and Additional
Amounts, if any) to the Fundamental Change Purchase Date, which Fundamental
Change Purchase Price shall be paid by the Company in cash, as set forth in the
Indenture.

         (c)      Holders have the right to withdraw any Purchase Notice or
Fundamental Change Purchase Notice, as the case may be, by delivery to the
Paying Agent of a written notice of withdrawal in accordance with the provisions
of the Indenture.

         (d)      If cash sufficient to pay a Fundamental Change Purchase Price
or Purchase Price, as the case may be, of all Notes or portions thereof to be
purchased as of the Purchase Date or the Fundamental Change Purchase Date, as
the case may be, is deposited with the Paying Agent on the Business Day
following the Purchase Date or the Fundamental Change Purchase Date, as the case
may be, interest (including Contingent Interest and Additional Amounts, if any)
shall cease to accrue on such Notes (or portions thereof) on and after such
date, and the Holder thereof shall have no other rights as such (other than the
right to receive the Purchase Price or Fundamental Change Purchase Price, as the
case may be, upon surrender of such Note).

9.       RANKING

         The Notes shall be unsecured and shall rank equally in right of payment
with all of the Company's other existing and future unsecured and unsubordinated
Indebtedness.

10.      CONVERSION

         Subject to the procedures set forth in the Indenture, a Holder may
convert Notes into Common Stock on or before the close of business on May 15,
2023 during the periods and upon satisfaction of at least one of the conditions
set forth below:

         (a)      in any calendar quarter (and only during such calendar
quarter) if the Last Reported Sale Price for Common Stock for at least 20
Trading Days during the period of 30 consecutive Trading Days ending on the last
Trading Day of the previous calendar quarter is greater than or equal to 120%
or, following May 15, 2008, 110% of the Conversion Price per share of Common
Stock on such last Trading Day;

         (b)      during any period in which both (A) the credit rating assigned
to the Notes by Moody's Investors Service, Inc. is lower than Ba2 and (B) the
credit rating assigned to the Notes by Standard & Poors Rating Services is lower
than BB;

                                       A-9

<PAGE>

         (c)      during any period in which the Notes no longer are assigned
credit ratings by at least one of Moody's Investors Services, Inc. and Standard
& Poor's Ratings Services or their successors;

         (d)      in the event that the Company calls the Notes for redemption,
at any time prior to the close of business on the second Business Day
immediately preceding the Redemption Date; or

         (e)      the Company becomes a party to a consolidation, merger or
binding share exchange pursuant to which the Common Stock would be converted
into cash or property (other than securities), in which case a Holder may
surrender Notes for conversion at any time from and after the date which is 15
days prior to the anticipated effective date for the transaction until 15 days
after the actual effective date of such transaction; or

         (f)      the Company elects to (i) distribute to all holders of Common
Stock assets, debt securities or rights to purchase securities of the Company,
which distribution has a per share value as determined by the Board of Directors
exceeding 15% of the Last Reported Sale Price of a share of Common Stock on the
Trading Day immediately preceding the declaration date for such distribution, or
(ii) distribute to all holders of Common Stock rights entitling them to
purchase, for a period expiring within 60 days after the date of such
distribution, shares of Common Stock at less than the Last Reported Sale Price
of Common Stock on the Trading Day immediately preceding the declaration date of
the distribution. In the case of the foregoing clauses (i) and (ii), the Company
must notify the Holders at least 20 Business Days immediately prior to the ex
date for such distribution. Once the Company has given such notice, Holders may
surrender their Notes for conversion at any time thereafter until the earlier of
the close of business on the Business Day immediately prior to the ex date or
the Company's announcement that such distribution will not take place; provided,
however, that a Holder may not exercise this right to convert if the Holder may
participate in the distribution without conversion. As used herein, the term "ex
date," when used with respect to any issuance or distribution, shall mean the
first date on which the Common Stock trades regular way on such exchange or in
such market without the right to receive such issuance or distribution.

         Notes in respect of which a Holder has delivered a notice of exercise
of the option to require the Company to purchase such Notes pursuant to Articles
V or VI of the Indenture may be converted only if the notice of exercise is
withdrawn in accordance with the terms of the Indenture.

         The initial Conversion Rate is 86.3558 shares of Common Stock per
$1,000 principal amount, subject to adjustment in certain events described in
the Indenture. The Company shall deliver cash or a check in lieu of any
fractional share of Common Stock.

         Holders of Notes at the close of business on a Regular Record Date will
receive payment of interest, including Contingent Interest, if any, payable on
the corresponding Interest Payment Date notwithstanding the conversion of such
Notes at any time after the close of business on such Regular Record Date. Notes
surrendered for conversion by a Holder during the period from the close of
business on any Regular Record Date to the opening of business on the
immediately following Interest Payment Date must be accompanied by payment of an
amount equal to the

                                      A-10

<PAGE>

interest, including Contingent Interest, if any, that the Holder is to receive
on the Notes; provided, however, that no such payment need be made if (1) the
Company has specified a Redemption Date that is after a Regular Record Date and
on or prior to the immediately following Interest Payment Date, (2) the Company
has specified a Purchase Date following a Fundamental Change that is during such
period, or (3) any overdue interest (including overdue Contingent Interest, if
any) exists at the time of conversion with respect to such Notes to the extent
of such overdue interest. The Holders of the Notes and any Common Stock issuable
upon conversion thereof will continue to be entitled to receive Additional
Amounts in accordance with the Registration Rights Agreement.

         To convert the Notes a Holder must (1) complete and manually sign the
irrevocable conversion notice on the back of the Notes (or complete and manually
sign a facsimile of such notice) and deliver such notice to the Conversion Agent
at the office maintained by the Conversion Agent for such purpose, (2) surrender
the Notes to the Conversion Agent, (3) furnish appropriate endorsements and
transfer documents if required by the Conversion Agent, the Company or the
Trustee and (4) pay any transfer or similar tax, if required.

         A Holder may convert a portion of the Notes only if the principal
amount of such portion is $1,000 or a multiple of $1,000. No payment or
adjustment shall be made for dividends on the Common Stock except as provided in
the Indenture. On conversion of the Notes, that portion of accrued and unpaid
interest attributable to the period from the Original Issue Date to the
Conversion Date and accrued and unpaid Contingent Interest with respect to the
converted portion of the Notes shall not be canceled, extinguished or forfeited,
but rather shall be deemed to be paid in full to the Holder thereof through the
delivery of the Common Stock (together with any cash payment in lieu of
fractional shares) in exchange for the portion of the Notes being converted
pursuant to the terms hereof; and the Fair Market Value of such shares of Common
Stock (together with any such cash payment in lieu of fractional shares) shall
be treated as issued, to the extent thereof, first in exchange for interest
accrued and unpaid through the Conversion Date and accrued and unpaid Contingent
Interest, and the balance, if any, of such Fair Market Value of such Common
Stock (and any such cash payment) shall be treated as issued in exchange for the
principal amount of the Notes being converted pursuant to the provisions hereof.
Notwithstanding the conversion of any Notes, the Holders of the Notes and any
Common Stock issuable upon conversion thereof will continue to be entitled to
receive Additional Amounts in accordance with the Registration Rights Agreement.

11.      DEFAULTED INTEREST

         Except as otherwise specified with respect to the Notes, any Defaulted
Interest on any Note shall forthwith cease to be payable to the registered
Holder thereof on the relevant Regular Record Date or accrual date, as the case
may be, by virtue of having been such Holder, and such Defaulted Interest may be
paid by the Company as provided for in Section 204 of the Supplemental
Indenture.

12.      DENOMINATIONS; TRANSFER; EXCHANGE

         The Notes are in registered form, without coupons, in denominations of
$1,000 principal amount and multiples of $1,000; provided, however, that Notes
issued to institutional accredited

                                      A-11

<PAGE>

investors will be issued only in denominations of $250,000 and integral
multiples of $1,000 in excess thereof. A Holder may transfer or convert Notes in
accordance with the Indenture. The Security Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. In
the event of any redemption or purchase in part, the Security Registrar need not
register the transfer of or exchange any Notes selected for redemption (except,
in the case of a Note to be redeemed in part, the portion of the Note not to be
redeemed) or any Notes in respect of which a Purchase Notice or Fundamental
Change Purchase Notice has been given and not withdrawn (except, in the case of
a Note to be purchased in part, the portion of the Note not to be purchased) for
a period of 15 days before the mailing of a Redemption Notice, Purchase Notice
or Fundamental Change Purchase Notice.

13.      PERSONS DEEMED OWNERS

         The registered Holder of this Note may be treated as the owner of this
Note for all purposes.

14.      UNCLAIMED MONEY OR PROPERTY

         The Trustee and the Paying Agent shall return to the Company upon
written request any money or property held by them for the payment of any amount
with respect to the Notes that remains unclaimed for two years, provided,
however, that the Trustee or such Paying Agent, before being required to make
any such return, shall at the expense of the Company cause to be published once
in a newspaper of general circulation in The City of New York or mail to each
such Holder notice that such money or property remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication or mailing, any unclaimed money or property then remaining
shall be returned to the Company. After return to the Company, Holders entitled
to the money or property must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another Person.

15.      AMENDMENT; WAIVER

         Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in aggregate principal amount of the Notes at the time
Outstanding and (ii) certain defaults or noncompliance with certain provisions
may be waived with the written consent of the Holders of a majority in aggregate
principal amount of the Notes at the time Outstanding. The Indenture or the
Notes may be amended without the consent of any Holders under circumstances set
forth in Section 901 of the Original Indenture. Any such consent or waiver by
the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note.

16.      DEFAULTS AND REMEDIES

         If an Event of Default occurs and is continuing, the Trustee, or the
Holders of at least 25% in aggregate principal amount of the Notes at the time
outstanding, may declare the

                                      A-12

<PAGE>

principal amount and any accrued and unpaid interest (including Contingent
Interest and Additional Amounts, if any), of all the Notes to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which shall result in the Notes being declared due and payable immediately upon
the occurrence of such Events of Default.

         Events of Default in respect of the Notes are set forth in Section 1001
of the Supplemental Indenture and Section 501 of the Original Indenture. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may refuse to enforce the Indenture or the Notes unless it receives
reasonable indemnity or security. Subject to certain limitations, conditions and
exceptions, Holders of a majority in aggregate principal amount of the Notes at
the time Outstanding may direct the Trustee in its exercise of any trust or
power, including the annulment of a declaration of acceleration. The Trustee may
withhold from Holders notice of any continuing default (except a default in
payment on any Notes) if it determines that withholding notice is in their
interests.

17.      CONSOLIDATION, MERGER, AND SALE OF ASSETS

         In the event of a consolidation, merger, or sale of assets to convey,
transfer or lease of all or substantially all of Company's property or assets as
described in Article VIII of the Original Indenture, the successor corporation
to the Company shall succeed to and be substituted for the Company, and may
exercise the Company's rights and powers under this Indenture, and thereafter,
except in the case of a lease, the Company shall be relieved of all obligations
and covenants under the Indenture and the Notes.

18.      TRUSTEE AND AGENT DEALINGS WITH THE COMPANY

         The Trustee, Paying Agent, Conversion Agent and Security Registrar
under the Indenture, each in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee, Paying Agent, Conversion Agent or Security Registrar.

19.      CALCULATIONS IN RESPECT OF THE NOTES

         The Company will be responsible for making all calculations called for
under the Notes. These calculations include, but are not limited to,
determination of the market prices for the Common Stock, accrued interest
payable on the Notes and Conversion Price of the Notes. The Company will make
these calculations in good faith and, absent manifest error, these calculations
will be final and binding on the Holders. The Company will provide to each of
the Trustee and the Conversion Agent a schedule of its calculations and each of
the Trustee and the Conversion Agent is entitled to rely upon the accuracy of
such calculations without independent verification. The Trustee will forward the
Company's calculations to any Holder upon the request of such Holder.

20.      NO RECOURSE AGAINST OTHERS

         A director, officer or employee, as such, of the Company or any
Subsidiary of the Company or any stockholder as such, of the Company shall not
have any liability for any

                                      A-13

<PAGE>

obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Note, each Holder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Notes.

21.      AUTHENTICATION

         This Note shall not be valid until an authorized officer of the Trustee
or Authenticating Agent manually signs the Trustee's Certificate of
Authentication on the other side of this Note.

22.      ABBREVIATIONS

         Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

23.      GOVERNING LAW

         The Indenture and this Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of law rules of said state.

                                      A-14

<PAGE>

                                                                      SCHEDULE A

                             SCHEDULE OF ADJUSTMENTS

                  The initial aggregate principal amount of Securities evidenced
by the Certificate to which this Schedule is attached is _______________. The
notations on the following table evidence decreases and increases in the
aggregate principal amount of Securities evidenced by such Certificate.

<TABLE>
<CAPTION>
                                                                       Aggregate Principal
                 Decrease in Aggregate     Increase in Aggregate       Amount of Securities       Notation by
  Date of         Principal Amount of       Principal Amount of        Remaining After Such        Security
Adjustment             Securities                Securities            Decrease or Increase        Registrar
----------       ---------------------     ---------------------       --------------------       -----------
<S>              <C>                       <C>                         <C>                        <C>
</TABLE>

                                       S-1

<PAGE>

                                                                       Exhibit B

                FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE
                    OR REGISTRATION OF TRANSFER OF SECURITIES

Re:      3.75% Convertible Senior Notes due 2023 of CenterPoint Energy Inc. (the
         "Company")

         This Certificate relates to $_____ principal amount of Notes held in
**______ book-entry or *______ definitive form by _____________________ (the
"Transferor").

         The Transferor has requested the Trustee by written order to exchange
or register the transfer of a Note or Notes.

         In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture, dated as of May 19, 2003 (as amended or supplemented to date, the
"Indenture"), between the Company and JPMorgan Chase Bank, (the "Trustee")
relating to the above-captioned Notes and that the transfer of this Note does
not require registration under the Securities Act (as defined below) because:*

         [ ]      Such Note is being acquired for the Transferor's own account
without transfer.

         [ ]      Such Note is being transferred (i) to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")), in accordance with Rule 144A under the
Securities Act or (ii) pursuant to an exemption from registration in accordance
with Rule 904 of Regulation S under the Securities Act (and in the case of
clause (ii), based upon an opinion of counsel if the Company or the Trustee so
requests, together with a certification in substantially the form of Exhibit C
to Supplemental Indenture No. 1 to the Indenture).

         [ ]      Such Note is being transferred (i) pursuant to an exemption
from registration in accordance with Rule 144 under the Securities Act (and
based upon an opinion of counsel if the Company or the Trustee so requests) or
(ii) pursuant to an effective registration statement under the Securities Act.

         [ ]      Such Note is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company or the
Trustee so requests).

----------------------------
         *        FILL IN BLANK OR CHECK APPROPRIATE BOX, AS APPLICABLE.

                                      B-1

<PAGE>

You are entitled to rely upon this certificate and you are irrevocably
authorized to produce this certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.

                                           [INSERT NAME OF TRANSFEROR]

                                           By:   _______________________________
                                           Name:
                                           Title:
                                           Address:

Date: ______________________________

                                      B-2

<PAGE>

                                                                       Exhibit C

                FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
                     WITH TRANSFERS PURSUANT TO REGULATION S

                                                         ________________,______

JPMorgan Chase Bank, as Security Registrar
600 Travis, Suite 1150
Houston, Texas 77002
Attention: Institutional Trust Services

Ladies and Gentlemen:

                  In connection with our proposed sale of certain 3.75%
Convertible Senior Notes due 2023 (the "Notes"), of CenterPoint Energy, Inc.
(the "Company"), we represent that:

                  (i)      the offer or sale of the Notes was made in an
         "offshore transaction";

                  (ii)     at the time the buy order was originated, the
         transferee was outside the United States or we and any person acting on
         our behalf reasonably believed that the transferee was outside the
         United States;

                  (iii)    no directed selling efforts have been made by us in
         the United States in contravention of the requirements of Rule 903(a)
         or Rule 904(a) of Regulation S under the U.S. Securities Act of 1933,
         as applicable;

                  (iv)     if this transfer of the Note is being made prior to
         the expiration of the one-year Distribution Compliance Period, such
         interest that is being transferred is held immediately thereafter
         through The Euroclear System or Clearstream Banking, societe anonyme;
         and

                  (v)      the transaction is not part of a plan or scheme to
         evade the registration requirements of the U.S. Securities Act of 1933.

                                      C-1

<PAGE>

         You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S under the U.S. Securities Act of 1933.

                                           Very truly yours,

                                           Name of Transferor:

                                           By: _________________________________
                                               Name:
                                               Title:
                                               Address:

                                      C-2

<PAGE>

                                                                       Exhibit D

                            FORM OF CONVERSION NOTICE

To: CenterPoint Energy, Inc.

         The undersigned registered holder of this Note hereby exercises the
option to convert this Note, or portion hereof (which is $1,000 principal amount
or an integral multiple thereof) designated below, for shares of Common Stock of
CenterPoint Energy, Inc. in accordance with the terms of the Indenture referred
to in this Note, and directs that the shares, if any, issuable and deliverable
upon such conversion, together with any check for cash deliverable upon such
conversion, and any Notes representing any unconverted principal amount hereof,
be issued and delivered to the registered holder hereof unless a different name
has been indicated below. If shares or any portion of this Note not converted
are to be issued in the name of a Person other than the undersigned, the
undersigned shall pay all transfer taxes payable with respect thereto.

         This notice shall be deemed to be an irrevocable exercise of the option
to convert this Note.

Dated:                                          ________________________________

                                                ________________________________
                                                          Signature(s)

                                    Signature(s) must be guaranteed by a
                                    commercial bank or trust company or a member
                                    firm of a major stock exchange if shares of
                                    Common Stock are to be issued, or Notes to
                                    be delivered, other than to or in the name
                                    of the registered holder.

                                                ________________________________
                                                      Signature Guarantee

                                      D-1

<PAGE>

Fill in for registration of shares if
to be delivered, and Notes if to be
issued other than to and in the
name of registered holder:

_____________________________________       Principal Amount to be purchased (if
(Name)                                      less than all):

_____________________________________       $___________,000
(Street Address)

_____________________________________       Social Security or Other Taxpayer
(City, state and zip code)                  Number

Please print name and address

                                      D-2

<PAGE>

                                                                       Exhibit E

                   FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE

To: CenterPoint Energy, Inc.

         The undersigned registered holder of this Note hereby acknowledges
receipt of a notice from CenterPoint Energy, Inc. (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to repurchase this Note, or the portion hereof (which is
$1,000 principal amount or a integral multiple thereof) designated below, in
accordance with the terms of the Supplemental Indenture referred to in this Note
and directs that the check of the Company, in payment for this Note or the
portion thereof and any Notes representing any unrepurchased principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If any portion of this Note not
repurchased is to be issued in the name of a Person other than the undersigned,
the undersigned shall pay all transfer taxes payable with respect thereto.

Dated:                                          ________________________________
                                                          Signature(s)

                                    Signature(s) must be guaranteed by a
                                    commercial bank or trust company or a member
                                    firm of a major stock exchange if Notes are
                                    to be delivered, other than to or in the
                                    name of the registered holder.

                                                ________________________________
                                                      Signature Guarantee

Fill in for registration of Notes if to be issued other than to and in the name
of registered holder:

_____________________________________
(Name)

_____________________________________
(Street Address)

_____________________________________
(City, state and zip code)

Please print name and address
                                        Principal Amount to be purchased (if
                                        less than all): $__________,000

                                        Social Security or Other Taxpayer Number

                                      E-1

<PAGE>

                                                                       Exhibit F

                             FORM OF PURCHASE NOTICE

To: CenterPoint Energy, Inc.

         The undersigned registered holder of this Note hereby acknowledges
receipt of a notice from CenterPoint Energy, Inc. (the "Company") as to the
holder's option to require the Company to repurchase this Note and requests and
instructs the Company to repurchase this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) designated below, in
accordance with the terms of the Supplemental Indenture referred to in this Note
and directs that the check of the Company in payment for this Note or the
portion thereof and any Notes representing any unrepurchased principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If any portion of this Note not
repurchased is to be issued in the name of a Person other than the undersigned,
the undersigned shall pay all transfer taxes payable with respect thereto.

Dated:                                          ________________________________
                                                          Signature(s)

                                    Signature(s) must be guaranteed by a
                                    commercial bank or trust company or a member
                                    firm of a major stock exchange if Notes are
                                    to be delivered, other than to or in the
                                    name of the registered holder.

                                                ________________________________
                                                      Signature Guarantee

Fill in for registration of Notes if to be issued other than to and in the name
of registered holder:

_____________________________________
(Name)

_____________________________________
(Street Address)

_____________________________________
(City, state and zip code)

Please print name and address
                                        Principal Amount to be purchased (if
                                        less than all): $__________,000

                                        Social Security or Other Taxpayer Number

                                      F-1

<PAGE>

                                                                       Exhibit G

                                 ASSIGNMENT FORM

         For value received ___________________________ hereby sell(s),
assign(s) and transfer(s) unto _____________________ (Please insert social
security or other Taxpayer Identification Number of assignee) the within Note,
and hereby irrevocably constitutes and appoints __________ attorney to transfer
the said Note on the books of the Company, with full power of substitution in
the premises.

Dated:

                                                ________________________________
                                                          Signature(s)

                                            Signature(s) must be guaranteed by a
                                            commercial bank or trust company or
                                            a member firm of a major stock
                                            exchange if shares of Common Stock
                                            are to be issued, or Notes to be
                                            delivered, other than to or in the
                                            name of the registered holder.

                                                ________________________________
                                                      Signature Guarantee

NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Note in every particular without alteration
or enlargement or any change whatever.

                                      G-1

<PAGE>

                                                                       Exhibit H

                     FORM OF RESTRICTED COMMON STOCK LEGEND

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

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

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE IN
         HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS IN COMPLIANCE WITH
         THE SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
         SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND
         PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT
         ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE

                                      H-1

<PAGE>

         INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
         TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
         SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE
         AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
         OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 19, 2003 ENTERED
         INTO BY THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS OF SECURITIES
         FROM TIME TO TIME.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
         OF, A RIGHTS AGREEMENT, DATED AS OF JANUARY 1, 2002, BETWEEN THE
         COMPANY AND JPMORGAN CHASE BANK, AS RIGHTS AGENT.

                                      H-2

<PAGE>

                                                                       Exhibit I

                    FORM OF TRANSFER CERTIFICATE FOR TRANSFER
                           OF RESTRICTED COMMON STOCK

      (Transfers pursuant to Section 904(b) of the Supplemental Indenture)

[NAME AND ADDRESS OF COMMON STOCK TRANSFER AGENT]

                  Re: CenterPoint Energy, Inc. 3.75% Convertible Senior Notes
                  Due 2023 (the "Notes")

                  Reference is hereby made to the Indenture, dated as of May 19,
2003, as supplemented by the First Supplemental Indenture thereto, dated as of
May 19, 2003, between the Company and the Trustee (collectively, the
"Indenture"). Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.

                  This letter relates to _________ shares of Common Stock
represented by the accompanying certificate(s) that were issued upon conversion
of Notes and which are held in the name of [name of transferor] (the
"Transferor") to effect the transfer of such Common Stock.

                  In connection with the transfer of such shares of Common
Stock, the undersigned confirms that such shares of Common Stock are being
transferred:

                  CHECK ONE BOX BELOW

                  (1)      [ ]      to the Company; or

                  (2)      [ ]      to a "qualified institutional buyer" (as
                                    defined in Rule 144A under the Securities
                                    Act of 1933) in accordance with Rule 144A
                                    under the Securities Act of 1933;

                  (3)      [ ]      pursuant to and in compliance with
                                    Regulation S under the Securities Act of
                                    1933 in off-shore transactions to non-U.S.
                                    Persons; or

                  (4)      [ ]      pursuant to an exemption from registration
                                    under the Securities Act of 1933 provided by
                                    Rule 144 thereunder.

                  Unless one of the boxes is checked, the transfer agent will
refuse to register any of the Common Stock evidenced by this certificate in the
name of any person other than the registered holder thereof; provided, however,
that if box (2) or (3) is checked, the transfer agent may require, prior to
registering any such transfer of the Common Stock such certifications and other
information, and if box (3) is checked such legal opinions, as the Company has
reasonably requested in writing, by delivery to the transfer agent of a standing
letter of instruction, to

                                      I-1

<PAGE>

                                                                       Exhibit I

confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933.

                                           [Name of Transferor],

                                           By
                                              Name:
                                              Title:

Dated:

                                      I-2<PAGE>
                                                                     EXHIBIT 4.3

                            CENTERPOINT ENERGY, INC.

                                       To

                              JPMORGAN CHASE BANK,

                                     Trustee

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

                          SUPPLEMENTAL INDENTURE NO. 2

                            Dated as of May 27, 2003

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

                          5.875% Senior Notes due 2008

                              Series A and Series B

                          6.850% Senior Notes due 2015

                              Series A and Series B

<PAGE>

                            CENTERPOINT ENERGY, INC.
                          SUPPLEMENTAL INDENTURE NO. 2

                          5.875% Senior Notes due 2008
                          6.850% Senior Notes due 2015

         SUPPLEMENTAL INDENTURE No. 2, dated as of May 27, 2003, between
CENTERPOINT ENERGY, INC., a Texas corporation (the "Company"), and JPMORGAN
CHASE BANK, as Trustee (the "Trustee").

                                    RECITALS

         The Company has heretofore executed and delivered to the Trustee an
Indenture, dated as of May 19, 2003 (the "Original Indenture" and, as hereby
supplemented and amended, the "Indenture"), providing for the issuance from time
to time of one or more series of the Company's Securities.

         Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of four new series of Securities to be designated as the
"5.875% Senior Notes due 2008, Series A (the "2008 Series A Notes"), the "5.875%
Senior Notes due 2008, Series B" (the "2008 Series B Notes" and together with
the 2008 Series A Notes, the "2008 Notes"), the "6.850% Senior Notes due 2015,
Series A" (the "2015 Series A Notes") and the "6.850% Senior Notes due 2015,
Series B" (the "2015 Series B Notes" and together with the 2015 Series A Notes,
the "2015 Notes") (the 2008 Notes and the 2015 Notes are referred to
collectively as the "Notes"), the form and substance of such Notes and the
terms, provisions and conditions thereof to be set forth as provided in the
Original Indenture and this Supplemental Indenture No. 2.

         Section 301 of the Original Indenture provides that various matters
with respect to any series of Securities issued under the Indenture may be
established in an indenture supplemental to the Indenture.

         Subparagraph (7) of Section 901 of the Original Indenture provides that
the Company and the Trustee may enter into an indenture supplemental to the
Indenture to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301 of the Original Indenture.

         For and in consideration of the premises and the issuance of the series
of Securities provided for herein, it is mutually covenanted and agreed, for the
equal and proportionate benefit of the Holders of the Securities of such series,
as follows:

                                   ARTICLE I

                  Relation to Indenture; Additional Definitions

         Section 101 Relation to Indenture. This Supplemental Indenture No. 2
constitutes an integral part of the Original Indenture.

                                     - 1 -

<PAGE>

         Section 102 Additional Definitions. For all purposes of this
Supplemental Indenture No. 2:

                  Capitalized terms used herein shall have the meaning specified
         herein or in the Original Indenture, as the case may be;

                  "2008 Notes" has the meaning set forth in the second paragraph
         of the Recitals hereof;

                  "2015 Notes" has the meaning set forth in the second paragraph
         of the Recitals hereof;

                  "2008 Notes Maturity Date" has the meaning set forth in
         Section 203 hereof;

                  "2015 Notes Maturity Date" has the meaning set forth in
         Section 203 hereof;

                  "2008 Series A Notes" has the meaning set forth in the second
         paragraph of the Recitals hereof;

                  "2008 Series B Notes" has the meaning set forth in the second
         paragraph of the Recitals hereof;

                  "2015 Series A Notes" has the meaning set forth in the second
         paragraph of the Recitals hereof;

                  "2015 Series B Notes" has the meaning set forth in the second
         paragraph of the Recitals hereof;

                  "$3.85 Billion Credit Facility" means that certain
         $3,850,00,000 Amended and Restated Credit Agreement, dated as of
         October 10, 2002, among the Company, as borrower, the banks party
         thereto, Citibank, N.A., as syndication agent, and JPMorgan Chase Bank,
         as administration agent, as amended by a First Amendment, effective as
         of December 5, 2002, and a Second Amendment, effective as of February
         28, 2003, to such Credit Agreement;

                  "Additional Interest" has the meaning set forth in Section
         204(e) hereof;

                  "Affiliate" of, or a Person "affiliated" with, a specific
         Person means a Person that directly, or indirectly through one or more
         intermediaries, controls, or is controlled by, or is under common
         control with, the Person specified. For purposes of this definition,
         "control" (including the terms "controlled by" and "under common
         control with") means the possession, direct or indirect, of the power
         to direct or cause the direction of the management and policies of a
         Person, whether through the ownership of voting shares, by contract, or
         otherwise.

                  "Business Day" means, with respect to any Note, any day other
         than a Saturday, a Sunday or a day on which banking institutions in The
         City of New York are authorized or required by law, regulation or
         executive order to close. If any Interest Payment Date,

                                       2

<PAGE>

         Stated Maturity or Redemption Date of a Note falls on a day that is not
         a Business Day, the required payment will be made on the next
         succeeding Business Day with the same force and effect as if made on
         the relevant date that the payment was due and no interest will accrue
         on such payment for the period from and after the Interest Payment
         Date, Stated Maturity or Redemption Date, as the case may be, to the
         date of that payment on the next succeeding Business Day. The
         definition of "Business Day" in this Supplemental Indenture No. 2 and
         the provisions described in the preceding sentence shall supersede the
         definition of Business Day in the Original Indenture and Section 113 of
         the Original Indenture.

                  "Capital Lease" means a lease that, in accordance with
         accounting principles generally accepted in the United States of
         America, would be recorded as a capital lease on the balance sheet of
         the lessee;

                  "CenterPoint Houston" means CenterPoint Energy Houston
         Electric, LLC, a Texas limited liability company, and any successor
         thereto; provided, that at any given time, there shall not be more than
         one such successor;

                  "CERC" means CenterPoint Energy Resources Corp., a Delaware
         corporation, and any successor thereto; provided, that at any given
         time, there shall not be more than one such successor;

                  "Comparable Treasury Yield" has the meaning set forth in
         Section 402(a) hereof;

                  "Distribution Compliance Period" means the period which
         expires immediately after the 40th day following the later of: (a) the
         commencement of the offering of the Notes to Persons other than
         "distributors" (as defined in Regulation S) in reliance upon Regulation
         S; and (b) the date of closing of the offering of the Notes;

                  "Equity Interests" means any capital stock, partnership, joint
         venture, member or limited liability or unlimited liability company
         interest, beneficial interest in a trust or similar entity or other
         equity interest or investment of whatever nature;

                  "Exchange Offer" means the offer by the Company pursuant to
         the Registration Rights Agreement to the Holders of all outstanding
         Transfer Restricted Securities to exchange all such outstanding
         Transfer Restricted Securities held by such Holders for 2008 Series B
         Notes or 2015 Series B Notes, as applicable, in an aggregate principal
         amount equal to the aggregate principal amount of the Transfer
         Restricted Securities tendered in such exchange offer by such Holders;

                  "Exchange Offer Registration Statement" has the meaning
         assigned to such term in the Registration Rights Agreement;

                  "Global Notes" has the meaning set forth in Section 208(c)
         hereof;

                  "H.15 Statistical Release" has the meaning set forth in
         Section 402(b) hereof;

                                        3

<PAGE>

                  The term "Indebtedness" as applied to any Person, means bonds,
         debentures, notes and other instruments or arrangements representing
         obligations created or assumed by any such Person, in respect of: (i)
         obligations for money borrowed (other than unamortized debt discount or
         premium); (ii) obligations evidenced by a note or similar instrument
         given in connection with the acquisition of any business, properties or
         assets of any kind; (iii) obligations as lessee under a Capital Lease;
         and (iv) any amendments, renewals, extensions, modifications and
         refundings of any such indebtedness or obligations listed in clause
         (i), (ii) or (iii) above. All indebtedness of such type, secured by a
         lien upon property owned by such Person although such Person has not
         assumed or become liable for the payment of such indebtedness, shall
         also for all purposes hereof be deemed to be indebtedness of such
         Person. All indebtedness for borrowed money incurred by any other
         Persons which is directly guaranteed as to payment of principal by such
         Person shall for all purposes hereof be deemed to be indebtedness of
         any such Person, but no other contingent obligation of such Person in
         respect of indebtedness incurred by any other Persons shall for any
         purpose be deemed to be indebtedness of such Person;

                  "Independent Investment Banker" has the meaning set forth in
         Section 401(c) hereof.

                  "Initial Purchasers" means Citigroup Global Markets Inc.,
         Deutsche Bank Securities Inc., Wachovia Securities, Inc., Banc One
         Capital Markets, Inc., UBS Warburg LLC, Mizuho International plc,
         Scotia Capital (USA) Inc., TD Securities (USA) Inc. and
         Tokyo-Mitsubishi International plc as initial purchasers in the
         offering of the Notes pursuant to the Offering Memorandum dated May 21,
         2003 relating thereto;

                  "Interest Payment Date" has the meaning set forth in Section
         204(a) hereof;

                  "Issue Date" has the meaning provided in Section 204(a)
         hereof;

                  "Make-Whole Premium" has the meaning set forth in Section
         401(b) hereof;

                  "Non-U.S. Person" has the meaning set forth in Section 208(b)
         hereof;

                  "Notes" has the meaning set forth in the second paragraph of
         the Recitals hereof;

                  "Original Indenture" has the meaning set forth in the first
         paragraph of the Recitals hereof;

                  "Qualified Institutional Buyer" has the meaning assigned to
         such term in Rule 144A under the Securities Act;

                  "Redemption Price" has the meaning set forth in Section 401(a)
         hereof;

                  "Registrable Securities" has the meaning assigned to such term
         in the Registration Rights Agreement;

                                        4

<PAGE>

                  "Registration Default" has the meaning assigned to such term
         in the Registration Rights Agreement;

                  "Registration Rights Agreement" means that certain
         Registration Rights Agreement, dated as of May 27, 2003, by and among
         the Company and the Initial Purchasers;

                  "Regular Record Date" has the meaning set forth in Section
         204(a) hereof;

                  "Regulation S" means Regulation S under the Securities Act;

                  "Regulation S Global Notes" has the meaning set forth in
         Section 208(b) hereof;

                  "Regulation S Permanent Global Note" has the meaning set forth
         in Section 208(b) hereof;

                  "Regulation S Temporary Global Note" has the meaning set forth
         in Section 208(b) hereof;

                  "Remaining Term" has the meaning set forth in Section 402(a)
         hereof;

                  "Rule 144A Global Note" has the meaning set forth in Section
         208(a) hereof;

                  "Rule 144A Information" has the meaning set forth in Section
         504 hereof;

                  "Shelf Registration Statement" has the meaning assigned to
         such term in the Registration Rights Agreement;

                  "Significant Subsidiary" means, CERC, CenterPoint Houston and
         Texas Genco, and any other Subsidiary which, at the time of the
         creation of a pledge, mortgage, security interest or other lien upon
         any Equity Interests of such Subsidiary, has consolidated gross assets
         (having regard to the Company's beneficial interest in the shares, or
         the like, of that Subsidiary) that represents at least 25% of the
         Company's consolidated gross assets appearing in the Company's most
         recent audited consolidated financial statements;

                  "Subsidiary" of any entity means any corporation, partnership,
         joint venture, limited liability company, trust or estate of which (or
         in which) more than 50% of (i) the issued and outstanding capital stock
         or Equity Interests having ordinary voting power to elect a majority of
         the Board of Directors or comparable governing body of such corporation
         or other entity (irrespective of whether at the time capital stock of
         any other class or classes of such corporation or other entity shall or
         might have voting power upon the occurrence of any contingency), (ii)
         the interest in the capital or profits of such limited liability
         company, partnership, joint venture or other entity, or (iii) the
         beneficial interest in such trust or estate is at the time directly or
         indirectly owned or controlled by such entity, by such entity and one
         or more of its other Subsidiaries, or by one or more of such entity's
         other Subsidiaries;

                                        5

<PAGE>

                  "Texas Genco" means Texas Genco Holdings, Inc., a Texas
         corporation, and any successor thereto; provided, that at any given
         time, there shall not be more than one such successor;

                  "Transfer Restricted Securities" means the Registrable
         Securities under the Registration Rights Agreement.

                  All references herein to Articles and Sections, unless
         otherwise specified, refer to the corresponding Articles and Sections
         of this Supplemental Indenture No. 2; and

                  The terms "herein," "hereof," "hereunder" and other words of
         similar import refer to this Supplemental Indenture No. 2.

                                   ARTICLE II

                            The Series of Securities

         Section 201 Title of the Securities. The 2008 Series A Notes shall be
designated as the "5.875% Senior Notes due 2008, Series A"; the 2008 Series B
Notes shall be designated as the "5.875% Senior Notes due 2008, Series B"; the
2015 Series A Notes shall be designated as the "6.850% Senior Notes due 2015,
Series A"; and the 2015 Series B Notes shall be designated as the "6.850% Senior
Notes due 2015, Series B." The 2008 Series A Notes and the 2008 Series B Notes
shall be treated for all purposes under the Indenture as a single class or
series of Securities. The 2015 Series A Notes and the 2015 Series B Notes shall
be treated for all purposes under the Indenture as a single class or series of
Securities.

         Section 202 Limitation on Aggregate Principal Amount. The Trustee shall
authenticate and deliver (i) 2008 Series A Notes for original issue on the Issue
Date in the aggregate principal amount of $200,000,000, (ii) 2008 Series B Notes
from time to time thereafter for issue only in exchange for a like principal
amount of 2008 Series A Notes, (iii) 2015 Series A Notes for original issue on
the Issue Date in the aggregate principal amount of $200,000,000 and (iv) 2015
Series B Notes from time to time thereafter for issue only in exchange for a
like principal amount of 2015 Series A Notes, in each case upon a Company Order
for the authentication and delivery thereof and satisfaction of Sections 301 and
303 of the Original Indenture. Such order shall specify the amount of the Notes
to be authenticated, the date on which the original issue of Notes is to be
authenticated and the name or names of the initial Holder or Holders. The
aggregate principal amount of 2008 Notes and 2015 Notes that may initially be
outstanding shall not exceed $200,000,000 and $200,000,000, respectively;
provided, however, that the authorized aggregate principal amount of either
series of the Notes may be increased above such amount by a Board Resolution to
such effect.

         Section 203 Stated Maturity. The stated maturity of the 2008 Notes
shall be June 1, 2008 (the "2008 Notes Maturity Date"). The stated maturity of
the 2015 Notes shall be June 1, 2015 (the "2015 Notes Maturity Date").

         Section 204 Interest and Interest Rates.

                                        6

<PAGE>

         (a)      The 2008 Notes shall bear interest at a rate of 5.875% per
year, from and including May 27, 2003 (the "Issue Date") to, but excluding, the
2008 Notes Maturity Date. The 2015 Notes shall bear interest at a rate of 6.850%
per year, from and including the Issue Date to, but excluding, the 2015 Notes
Maturity Date. Such interest shall be payable semiannually in arrears on June 1
and December 1 of each year (each an "Interest Payment Date"), beginning
December 1, 2003 to the persons in whose names the Notes are registered at the
close of business on May 15 and November 15 (each a "Regular Record Date")
(whether or not a Business Day), as the case may be, immediately preceding such
Interest Payment Date.

         (b)      Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and shall either (i) be paid to the Person in whose name such Note (or one or
more Predecessor Securities) is registered at the close of business on the
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of the Notes not less than
10 days prior to such Special Record Date, or (ii) be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange or automated quotation system on which the Notes may be listed or
traded, and upon such notice as may be required by such exchange or automated
quotation system, all as more fully provided in the Indenture.

         (c)      The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
interest payable for any partial period shall be computed on the basis of a
360-day year of twelve 30-day months and the days elapsed in any partial month.
In the event that any date on which interest is payable on a Note is not a
Business Day, then a payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay) with the same force and effect as if
made on the date the payment was originally payable.

         (d)      Any principal and premium, if any, and any installment of
interest, which is overdue shall bear interest at the rate of 5.875% per annum
on the 2008 Notes and 6.850% per annum on the 2015 Notes (in each case, to the
extent permitted by law), from the dates such amounts are due until they are
paid or made available for payment, and such interest shall be payable on
demand.

         (e)      The interest rate borne by the Registrable Securities will be
increased by .25% per annum upon the occurrence of each Registration Default,
which rate will increase by an additional .25% per annum if such Registration
Default has not been cured within 90 days after the occurrence thereof and will
continue until all Registration Defaults have been cured ("Additional
Interest"); provided that the aggregate amount of any such increase in the
interest rate on the Registrable Securities shall in no event exceed .50% per
annum; provided, further, that if the Exchange Offer Registration Statement is
not declared effective on or prior to the 270th calendar day following the Issue
Date and the Company shall request Holders of Registrable Securities to provide
the information called for by the Registration Rights Agreement for inclusion in
the Shelf Registration Statement, the Registrable Securities owned by Holders
who do not deliver such information to the Company or who do not provide
comments to the Company on the Shelf Registration Statement when required
pursuant to the Registration Rights Agreement shall not be entitled to any such
Additional Interest for any day after the 315th

                                        7

<PAGE>

calendar day following the Issue Date. All accrued Additional Interest shall be
paid to Holders of Registrable Securities in the same manner and at the same
time as regular payments of interest on the Registrable Securities. Following
the cure of all Registration Defaults, the accrual of Additional Interest shall
cease and the interest rate on the Registrable Securities will revert to 5.875%
per annum on the 2008 Notes and 6.850% per annum on the 2015 Notes.

         Section 205 Paying Agent; Place of Payment. The Trustee shall initially
serve as the Paying Agent for the Notes. The Company may appoint and change any
Paying Agent or approve a change in the office through which any Paying Agent
acts without notice, other than notice to the Trustee. The Company or any of its
Subsidiaries or any of their Affiliates may act as Paying Agent. The Place of
Payment where the Notes may be presented or surrendered for payment shall be the
Corporate Trust Office of the Trustee. At the option of the Company, payment of
interest may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or (ii) by wire
transfer in immediately available funds at such place and to such account as may
be designated in writing by the Person entitled thereto as specified in the
Security Register.

         Section 206 Place of Registration or Exchange; Notices and Demands With
Respect to the Notes. The place where the Holders of the Notes may present the
Notes for registration of transfer or exchange and may make notices and demands
to or upon the Company in respect of the Notes shall be the Corporate Trust
Office of the Trustee.

         Section 207 Percentage of Principal Amount. The 2008 Notes shall be
initially issued at 99.969% of their principal amount plus accrued interest, if
any, from May 27, 2003. The 2015 Notes shall be initially issued at 99.958% of
their principal amount plus accrued interest, if any, from May 27, 2003.

         Section 208 Global Notes.

         (a)      Notes offered and sold to Qualified Institutional Buyers
pursuant to Rule 144A shall be issuable in whole or in part in the form of one
or more permanent Global Securities in definitive, fully registered, book-entry
form, without interest coupons (collectively, the "Rule 144A Global Note"). The
Rule 144A Global Note shall be deposited on the Issue Date with, or on behalf
of, the Depositary. Interests in the Rule 144A Global Note shall be available
for purchase only by Qualified Institutional Buyers.

         (b)      Notes offered and sold in offshore transactions to persons
other than "U.S. persons," as defined in Regulation S under the Securities Act
(each, a "Non-U.S. Person") in reliance on Regulation S under the Securities Act
shall initially be issuable in whole or in part in the form of one or more
temporary Global Securities in definitive, fully registered, book-entry form,
without interest coupons (collectively, the "Regulation S Temporary Global
Note"). Beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in, and the Regulation S Temporary Global
Note shall become, a corresponding Global Security (the "Regulation S Permanent
Global Note" and, together with the Regulation S Temporary Global Note, the
"Regulation S Global Notes") within a reasonable period after the expiration of
the Distribution Compliance Period upon certification that the beneficial
interests in the Regulation S Temporary Global Note are owned by either Non-U.S.
Persons or U.S. persons

                                        8

<PAGE>

who purchased such interests pursuant to an exemption from, or in transactions
not subject to, the registration requirements of the Securities Act. Prior to
the expiration of the Distribution Compliance Period, interests in the
Regulation S Temporary Global Note may only be held through Euroclear Bank
S.A./N.V., as operator of the Euroclear System, and Clearstream Banking, societe
anonyme (as indirect participants in the Depositary), unless exchanged for
interests in the Rule 144A Global Notes in accordance with the transfer and
certification requirements described herein. Notwithstanding Section 305 of the
Original Indenture, in no event shall beneficial interests in the Regulation S
Temporary Global Note of a series be transferred or exchanged for Notes of such
series in definitive form prior to (x) the expiration of the Distribution
Compliance Period and (y) the receipt by the Security Registrar of any
certificates required pursuant to Rule 903(b)(3)(ii)(B) of Regulation S under
the Securities Act.

         (c)      Each of the Rule 144A Global Note and the Regulation S Global
Notes (collectively, the "Global Notes") shall represent such of the Notes as
shall be specified therein and shall each provide that it shall represent the
aggregate principal amount of Notes from time to time endorsed thereon and that
the aggregate principal amount of Notes represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges or
redemptions. Any endorsement of a Global Note to reflect the amount, or any
increase or decrease in the aggregate principal amount, of Notes represented
thereby shall be reflected by the Trustee on Schedule A attached to the Note and
made by the Trustee in accordance with written instructions or such other
written form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a beneficial interest
in the Global Note.

         (d)      The Depository Trust Company shall initially serve as
Depositary with respect to the Global Notes. Such Global Notes shall bear the
legends set forth in the form of Security attached as Exhibit A hereto.

         Section 209 Form of Securities. The Global Notes shall be substantially
in the form attached as Exhibit A hereto.

         Section 210 Securities Registrar. The Trustee shall initially serve as
the Security Registrar for the Notes.

         Section 211 Sinking Fund Obligations. The Company shall have no
obligation to redeem or purchase any Notes pursuant to any sinking fund or
analogous requirement or upon the happening of a specified event or at the
option of a Holder thereof.

         Section 212 Defeasance and Discharge; Covenant Defeasance.

         (a)      Article Fourteen of the Original Indenture, including without
limitation, Sections 1402 and 1403 (as modified by Section 212(b) hereof)
thereof, shall apply to each series of the Notes.

         (b)      Notwithstanding Section 1403 of the Original Indenture, the
occurrence of any event specified in Section 601(d)(i) of this Supplemental
Indenture shall be deemed not to be or result in an Event of Default with
respect to any series of the Notes on and after the date the conditions set
forth in Section 1404 of the Original Indenture with respect to such series are

                                        9

<PAGE>

satisfied and such covenant defeasance remains in full force and effect pursuant
to Article Fourteen of the Original Indenture.

                                  ARTICLE III

                               Additional Covenant

         Section 301 Limitations on Liens. The Company shall not pledge,
mortgage, hypothecate, or grant a security interest in, or permit any such
mortgage, pledge, security interest or other lien upon any Equity Interests now
or hereafter owned by the Company in any Significant Subsidiary to secure any
Indebtedness, without making effective provisions whereby the outstanding Notes
shall be equally and ratably secured with or prior to any and all such
Indebtedness and any other Indebtedness similarly entitled to be equally and
ratably secured; provided, however, that this provision shall not apply to or
prevent the creation or existence of:

         (a)      any mortgage, pledge, security interest, lien or encumbrance
         upon the capital stock of Texas Genco to secure obligations under the
         $3.85 Billion Credit Facility or any extension, renewal, refunding,
         amendment or replacement thereof;

         (b)      any mortgage, pledge, security interest, lien or encumbrance
         upon the Equity Interests of CenterPoint Energy Transition Bond
         Company, LLC or any other special purpose Subsidiary created on or
         after the date of this Supplemental Indenture by the Company in
         connection with the issuance of securitization bonds for the economic
         value of generation-related regulatory assets and stranded costs;

         (c)      any mortgage, pledge, security interest, lien or encumbrance
         upon any Equity Interests in a Person which was not affiliated with the
         Company prior to one year before the grant of such mortgage, pledge,
         security interest, lien or encumbrance (or the Equity Interests of a
         holding company formed to acquire or hold such Equity Interests)
         created at the time of the Company's acquisition of the Equity
         Interests or within one year after such time to secure all or a portion
         of the purchase price for such Equity Interests; provided that the
         principal amount of any Indebtedness secured by such mortgage, pledge,
         security interest, lien or encumbrance does not exceed 100% of such
         purchase price and the fees, expenses and costs incurred in connection
         with such acquisition and acquisition financing;

         (d)      any mortgage, pledge, security interest, lien or encumbrance
         existing upon Equity Interests in a Person which was not affiliated
         with the Company prior to one year before the grant of such mortgage,
         pledge, security interest, lien or encumbrance at the time of the
         Company's acquisition of such Equity Interests (whether or not the
         obligations secured thereby are assumed by the Company or such
         Subsidiary becomes a Significant Subsidiary); provided that (i) such
         mortgage, pledge, security interest, lien or encumbrance existed at the
         time such Person became a Significant Subsidiary and was not created in
         anticipation of the acquisition, and (ii) any such mortgage, pledge,
         security interest, lien or encumbrance does not by its terms secure any
         Indebtedness other than Indebtedness existing or committed immediately
         prior to the time such Person becomes a Significant Subsidiary;

                                       10

<PAGE>

         (e)      liens for taxes, assessments or governmental charges or levies
         to the extent not past due or which are being contested in good faith
         by appropriate proceedings diligently conducted and for which the
         Company has provided adequate reserves for the payment thereof in
         accordance with generally accepted accounting principles;

         (f)      pledges or deposits in the ordinary course of business to
         secure obligations under workers' compensation laws or similar
         legislation;

         (g)      materialmen's, mechanics', carriers', workers' and repairmen's
         liens imposed by law and other similar liens arising in the ordinary
         course of business for sums not yet due or currently being contested in
         good faith by appropriate proceedings diligently conducted;

         (h)      attachment, judgment or other similar liens, which have not
         been effectively stayed, arising in connection with court proceedings;
         provided that such liens, in the aggregate, shall not secure judgments
         which exceed $50,000,000 aggregate principal amount at any one time
         outstanding; provided further that the execution or enforcement of each
         such lien is effectively stayed within 30 days after entry of the
         corresponding judgment (or the corresponding judgment has been
         discharged within such 30 day period) and the claims secured thereby
         are being contested in good faith by appropriate proceedings timely
         commenced and diligently prosecuted;

         (i)      other liens not otherwise referred to in paragraphs (a)
         through (h) above, provided that the Indebtedness secured by such liens
         in the aggregate, shall not exceed 1% of the Company's consolidated
         gross assets appearing in the Company's most recent audited
         consolidated financial statements at any one time outstanding;

         (j)      any mortgage, pledge, security interest, lien or encumbrance
         on the Equity Interests of any Subsidiary that was otherwise permitted
         under this Section 301 if such Subsidiary subsequently becomes a
         Significant Subsidiary; or

         (k)      any extension, renewal or refunding of Indebtedness secured by
         any mortgage, pledge, security interest, lien or encumbrance described
         in paragraphs (a) through (j) above; provided that the principal amount
         of any such Indebtedness is not increased by an amount greater than the
         fees, expenses and costs incurred in connection with such extension,
         renewal or refunding.

                                   ARTICLE IV

                        Optional Redemption of the Notes

         Section 401 Redemption Price.

         (a)      The Company shall have the right to redeem any series of the
Notes, in whole or in part, at its option at any time from time to time at a
price equal to (i) 100% of the principal amount thereof plus (ii) accrued and
unpaid interest thereon, if any, including Additional Interest, if any, to but
excluding the Redemption Date plus (iii) the Make-Whole Premium, if any
(collectively, the "Redemption Price").

                                       11

<PAGE>

         (b)      The amount of the Make-Whole Premium with respect to any Note
(or portion thereof) to be redeemed will be equal to the excess, if any, of: (i)
the sum of the present values, calculated as of the Redemption Date, of: (A)
each interest payment that, but for such redemption, would have been payable on
the Note (or portion thereof) being redeemed on each Interest Payment Date
occurring after the Redemption Date (excluding any accrued and unpaid interest
for the period prior to the Redemption Date); and (B) the principal amount that,
but for such redemption, would have been payable at the 2008 Notes Maturity Date
or the 2015 Notes Maturity Date, as applicable, (or portion thereof) being
redeemed; over (ii) the principal amount of the Note (or portion thereof) being
redeemed. The present values of interest and principal payments referred to in
clause (i) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Comparable Treasury Yield (as
defined below) plus 50 basis points for the 2008 Notes and 50 basis points for
the 2015 Notes.

         (c)      The Make-Whole Premium shall be calculated by an independent
investment banking institution of national standing appointed by the Company;
provided, that if the Company fails to make such appointment at least 45 days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation shall be made by Citigroup
Global Markets Inc., or, if such firm is unwilling or unable to make such
calculation, by an independent investment banking institution of national
standing appointed by the Company (in any such case, an "Independent Investment
Banker").

         Section 402 Make-Whole Premium Calculation.

         (a)      For purposes of determining the Make-Whole Premium,
"Comparable Treasury Yield" means a rate of interest per annum equal to the
weekly average yield to maturity of United States Treasury securities that have
a constant maturity that corresponds to the remaining term to maturity of the
Notes to be redeemed, calculated to the nearest 1/12th of a year (the "Remaining
Term"). The Comparable Treasury Yield shall be determined as of the third
Business Day immediately preceding the applicable Redemption Date.

         (b)      The weekly average yields of United States Treasury securities
shall be determined by reference to the most recent statistical release
published by the Federal Reserve Bank of New York and designated "H.15 (519)
Selected Interest Rates" or any successor release (the "H.15 Statistical
Release"). If the H.15 Statistical Release sets forth a weekly average yield for
United States Treasury securities having a constant maturity that is the same as
the Remaining Term, then the Comparable Treasury Yield shall be equal to such
weekly average yield. In all other cases, the Comparable Treasury Yield shall be
calculated by interpolation, on a straight-line basis, between the weekly
average yields on the United States Treasury securities that have a constant
maturity closest to and greater than the Remaining Term and the United States
Treasury securities that have a constant maturity closest to and less than the
Remaining Term (in each case as set forth in the H.15 Statistical Release). Any
weekly average yields so calculated by interpolation shall be rounded to the
nearest 1/100th of 1%, with any figure of 1/200th of 1% or above being rounded
upward. If weekly average yields for United States Treasury securities are not
available in the H.15 Statistical Release or otherwise, then the

                                       12

<PAGE>

Comparable Treasury Yield shall be calculated by interpolation of comparable
rates selected by the Independent Investment Banker.

         Section 403 Partial Redemption. If the Company redeems any series of
the Notes in part pursuant to this Article Four, the Trustee shall select the
Notes to be redeemed on a pro rata basis or by lot or by such other method that
the Trustee in its sole discretion deems fair and appropriate. The Company shall
redeem Notes pursuant to this Article IV in multiples of $1,000 in original
principal amount. A new Note in principal amount equal to the unredeemed portion
of the original Note shall be issued upon cancellation of the original Note.

         Section 404 Notice of Optional Redemption. If the Company elects to
exercise its right to redeem all or some of the Notes pursuant to this Article
IV, the Company or the Trustee shall mail a notice of such redemption to each
Holder of a Note that is to be redeemed not less than 30 days and not more than
60 days before the Redemption Date. If any Note is to be redeemed in part only,
the notice of redemption shall state the portion of the principal amount to be
redeemed.

                                   ARTICLE V

                            Restrictions on Transfer

         Section 501 Transfer and Exchange.

         (a)      Transfer and Exchange of Notes in Definitive Form. In addition
to the requirements set forth in Section 305 of the Original Indenture, Notes in
definitive form that are Transfer Restricted Securities presented or surrendered
for registration of transfer or exchange pursuant to Section 305 of the Original
Indenture shall be accompanied by the following additional information and
documents, as applicable, upon which the Security Registrar may conclusively
rely:

                  (i)      if such Transfer Restricted Securities are being
         delivered to the Security Registrar by a Holder for registration in the
         name of such Holder, without transfer, a certification from such Holder
         to that effect (in substantially the form of Exhibit B hereto); or

                  (ii)     if such Transfer Restricted Securities are being
         transferred (1) to a Qualified Institutional Buyer in accordance with
         Rule 144A under the Securities Act or (2) pursuant to an exemption from
         registration in accordance with Rule 144 under the Securities Act (and
         based upon an opinion of counsel if the Company or the Trustee so
         requests) or (3) pursuant to an effective registration statement under
         the Securities Act, a certification to that effect from such Holder (in
         substantially the form of Exhibit B hereto); or

                  (iii)    if such Transfer Restricted Securities are being
         transferred to a Non-U.S. Person pursuant to an exemption from
         registration in accordance with Rule 904 of Regulation S under the
         Securities Act, certifications to that effect from such transferor (in
         substantially the form of Exhibits B and C hereto) and an opinion of
         counsel to that effect if the Company or the Trustee so requests; or

                                       13

<PAGE>

                  (iv)     if such Transfer Restricted Securities are being
         transferred in reliance on and in compliance with another exemption
         from the registration requirements of the Securities Act, a
         certification to that effect from such Holder (in substantially the
         form of Exhibit B hereto) and an opinion of counsel to that effect if
         the Company or the Trustee so requests.

         (b)      Transfer and Exchange of the Notes.

                  (i)      The transfer and exchange of Global Notes or
         beneficial interests therein shall be effected through the Depositary,
         in accordance with Section 305 of the Original Indenture and Article V
         hereof (including the restrictions on transfer set forth therein and
         herein) and the rules and procedures of the Depositary therefor, which
         shall include restrictions on transfer comparable to those set forth
         therein and herein to the extent required by the Securities Act.

                  (ii)     The transfer and exchange of Global Notes or
         beneficial interests therein for certificated notes (or vice versa)
         shall be effected through the Trustee and the Depositary, as the case
         may be, in accordance with Section 305 of the Original Indenture and
         Article V hereof (including the restrictions on transfer set forth
         therein and herein) and the rules and procedures of the Depositary
         therefor, which shall include restrictions on transfer comparable to
         those set forth therein and herein to the extent required by the
         Securities Act.

         Section 502 Legends.

         (a)      Except as provided in this Section 502(a) and as permitted by
Section 502(b) and (c) hereof, each certificate evidencing the Global Notes or
certificated notes in definitive form (and all Notes issued in exchange therefor
or substitution thereof) shall bear a legend in substantially the following
form:

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

            THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
            THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
            TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE
            SELLER REASONABLY BELIEVES IS A QUALIFIED

                                       14

<PAGE>

            INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
            ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II)
            OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
            WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
            EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
            RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
            (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
            OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
            SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE
            SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
            ABOVE.

Except as permitted by Sections 502(b) and (c) hereof, each certificate
evidencing the Temporary Regulation S Global Note shall bear a legend in
substantially the following form:

            THE RIGHTS ATTACHING TO THIS SECURITY, AND THE CONDITIONS AND
            PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES, ARE
            AS SPECIFIED IN THIS SECURITY AND PURSUANT TO THE INDENTURE (AS
            DEFINED HEREIN).

Except as permitted by Sections 502(b) and (c) hereof, each certificate
evidencing the Global Notes or certificated notes offered and sold in reliance
on Regulation S shall bear a legend in substantially the following form:

            THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
            TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE UNITED
            STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
            AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE
            ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN
            AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
            SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED
            ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE
            SECURITIES ACT.

Each certificate evidencing the Global Notes also shall bear the legend
specified for Global Notes in the form of Note attached hereto as Exhibit A.

         (b)      Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
pursuant to Rule 144 under the

                                       15

<PAGE>

Securities Act or an effective registration statement under the Securities Act,
which shall be certified to the Trustee and Security Registrar upon which each
may conclusively rely:

                  (i)      in the case of any Transfer Restricted Security
         represented by a certificated note, the Security Registrar shall permit
         the Holder thereof to exchange such Transfer Restricted Security for a
         certificated note that does not bear the legend set forth in Section
         502(a) hereof and rescind any restriction on the transfer of such
         Transfer Restricted Security; and

                  (ii)     in the case of any Transfer Restricted Security
         represented by a Global Note, such Transfer Restricted Security shall
         not be required to bear the legend set forth in Section 502(a) hereof
         if all other interests in such Global Note have been or are
         concurrently being sold or transferred pursuant to Rule 144 under the
         Securities Act or pursuant to an effective registration statement under
         the Securities Act.

         (c)      Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt of a Company Order in
accordance with Section 303 of the Original Indenture, the Trustee shall
authenticate 2008 Series B Notes in exchange for 2008 Series A Notes and 2015
Series B Notes in exchange for 2015 Series A Notes accepted for exchange in the
Exchange Offer, which 2008 Series B Notes and 2015 Series B Notes shall not bear
the legend set forth in Section 502(a) hereof and shall not provide for
Additional Interest, and the Security Registrar shall rescind any restriction on
the transfer of such Notes, in each case unless the Holder of such 2008 Series A
Notes or 2015 Series A Notes (A) is a broker-dealer tendering Series A Notes
acquired directly from the Company or an "affiliate" (as defined in Rule 405
under the Securities Act) of the Company for its own account, (B) is a Person
who at the time of consummation of the Exchange Offer has an arrangement or
understanding with any Person to participate in the "distribution" (within the
meaning of the Securities Act) of the 2008 Series B Notes or the 2015 Series B
Notes, (C) is a Person who is an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company or (D) is a Person who will not be acquiring the
2008 Series B Notes or the 2015 Series B Notes in the ordinary course of such
Holder's business. The Company shall identify to the Trustee such Holders of the
Notes in a written certification signed by an officer of the Company and, absent
certification from the Company to such effect, the Trustee shall assume that
there are no such Holders.

         Section 503 Registration Rights Agreement. The Company shall perform
its obligations under the Registration Rights Agreement and shall comply in all
material respects with the terms and conditions contained therein including,
without limitation, the payment of Additional Interest.

         Section 504 Delivery of Certain Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder or any beneficial holder of Notes, the Company will promptly
furnish or cause to be furnished Rule 144A Information (as defined below) to
such Holder or any beneficial holder of Notes, or to a prospective purchaser of
any such security designated by any such holder, as the case may be, to the
extent required to permit compliance by such Holder or holder with Rule 144A
under the Securities Act in connection with the resale of any such security.
"Rule 144A Information" shall be such information as is specified pursuant to
Rule 144A(d)(4) under the Securities Act.

                                       16

<PAGE>

                                   ARTICLE VI

                        Remedies; Modification and Waiver

         Section 601 Additional Events of Default; Acceleration of Maturity.

         (a)      Solely with respect to the applicable series of Notes issued
hereby, Section 501(1) of the Original Indenture is hereby deleted in its
entirety, and the following is substituted in lieu thereof as an Event of
Default in addition to the other events set forth in Section 501 of the Original
Indenture:

                           "(1)     default in the payment of any interest upon
                  any Security of that series, including Additional Interest, if
                  any, when it becomes due and payable, and continuance of such
                  default for a period of 30 days;"

         (b)      Solely with respect to the Notes issued hereby, Section 501(5)
of the Original Indenture is hereby deleted in its entirety, and the following
is substituted in lieu thereof as an Event of Default in addition to the other
events set forth in Section 501 of the Original Indenture:

                           "(5)     the entry by a court having jurisdiction in
                  the premises of (A) a decree or order for relief in respect of
                  the Company, CERC or CenterPoint Houston in an involuntary
                  case or proceeding under any applicable federal or state
                  bankruptcy, insolvency, reorganization or other similar law or
                  (B) a decree or order adjudging the Company, CERC or
                  CenterPoint Houston a bankrupt or insolvent, or approving as
                  properly filed a petition seeking reorganization, arrangement,
                  adjustment or composition of or in respect of the Company,
                  CERC or CenterPoint Houston under any applicable federal or
                  state law, or appointing a custodian, receiver, liquidator,
                  assignee, trustee, sequestrator or other similar official of
                  the Company, CERC or CenterPoint Houston or of any substantial
                  part of its respective property, or ordering the winding up or
                  liquidation of its respective affairs, and the continuance of
                  any such decree or order for relief or any such other decree
                  or order unstayed and in effect for a period of 90 consecutive
                  days; provided that any specified event in (A) or (B)
                  involving CERC or CenterPoint Houston shall not constitute an
                  Event of Default if, at the time such event occurs, CERC or
                  CenterPoint Houston, as the case may be, shall no longer be an
                  Affiliate of the Company; or"

         (c)      Solely with respect to the Notes issued hereby, Section 501(6)
of the Original Indenture is hereby deleted in its entirety, and the following
is substituted in lieu thereof as an Event of Default in addition to the other
events set forth in Section 501 of the Original Indenture:

                                       17

<PAGE>

                           "(6)     the commencement by the Company, CERC or
                  CenterPoint Houston of a voluntary case or proceeding under
                  any applicable federal or state bankruptcy, insolvency,
                  reorganization or other similar law or of any other case or
                  proceeding to be adjudicated a bankrupt or insolvent, or the
                  consent by any of them to the entry of a decree or order for
                  relief in respect of the Company, CERC or CenterPoint Houston
                  in an involuntary case or proceeding under any applicable
                  federal or state bankruptcy, insolvency, reorganization or
                  other similar law or to the commencement of any bankruptcy or
                  insolvency case or proceeding against any of them, or the
                  filing by any of them of a petition or answer or consent
                  seeking reorganization or relief under any applicable federal
                  or state law, or the consent by any of them to the filing of
                  such petition or to the appointment of or taking possession by
                  a custodian, receiver, liquidator, assignee, trustee,
                  sequestrator or other similar official of the Company, CERC or
                  CenterPoint Houston or of any substantial part of its
                  respective property, or the making by any of them of an
                  assignment of a substantial part of its respective property
                  for the benefit of creditors, or the admission by any of them
                  in writing of the inability of any of the Company, CERC or
                  CenterPoint Houston to pay its respective debts generally as
                  they become due, or the taking of corporate action by the
                  Company, CERC or CenterPoint Houston in furtherance of any
                  such action; provided that any such specified event involving
                  CERC or CenterPoint Houston shall not constitute an Event of
                  Default if, at the time such event occurs, CERC or CenterPoint
                  Houston, as the case may be, shall no longer be an Affiliate
                  of the Company; or"

         (d)      Solely with respect to the Notes issued hereby in the case of
(i) below and solely with respect to the applicable series of Notes issued
hereby in the case of (ii) below, and pursuant to Section 501(7) of the Original
Indenture, the following shall each constitute an "Event of Default" in addition
to the other events set forth in Section 501 of the Original Indenture:

                           "(i)     The default by the Company, CERC or
                  CenterPoint Houston in a scheduled payment at maturity, upon
                  redemption or otherwise, in the aggregate principal amount of
                  $50 million or more, after the expiration of any applicable
                  grace period, of any Indebtedness or the acceleration of any
                  Indebtedness of the Company, CERC or CenterPoint Houston in
                  such aggregate principal amount, so that it becomes due and
                  payable prior to the date on which it would otherwise have
                  become due and payable and such payment default is not cured
                  or such acceleration is not rescinded within 30 days after
                  notice to the Company in accordance with the terms of the
                  Indebtedness; provided that such payment default or
                  acceleration of CERC or CenterPoint Houston shall not to be an
                  Event of Default if, at the time such event occurs,

                                       18

<PAGE>

                  CERC or CenterPoint Houston, as the case may be, shall not be
                  an Affiliate of the Company; and

                           (ii)     The Company defaults in its obligation to
                  redeem the Notes of that series after exercising its
                  redemption option pursuant to Article IV hereof;".

         Section 602 Modification and Waiver. In addition to those matters set
forth in Section 902 of the Indenture, with respect to the Notes, no amendment
or supplemental indenture shall without the consent of the Holder of each Note
affected thereby alter the manner of calculation or rate of Additional Amounts
payable on any Note or extend the time for payment of any such amount.

                                  ARTICLE VII

                            Miscellaneous Provisions

         Section 701 The Indenture, as supplemented and amended by this
Supplemental Indenture No. 2, is in all respects hereby adopted, ratified and
confirmed.

         Section 702 This Supplemental Indenture No. 2 may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

         Section 703 THIS SUPPLEMENTAL INDENTURE NO. 2 AND EACH NOTE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

         Section 704 If any provision in this Supplemental Indenture No. 2
limits, qualifies or conflicts with another provision hereof which is required
to be included herein by any provisions of the Trust Indenture Act, such
required provision shall control.

         Section 705 In case any provision in this Supplemental Indenture No. 2
or the Notes 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.

                                       19

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 2 to be duly executed, as of the day and year first written above.

                                           CENTERPOINT ENERGY, INC.

                                           By:    /s/ Gary L. Whitlock
                                              ----------------------------------
                                           Name:  Gary L. Whitlock
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

Attest:

       /s/ Richard B. Dauphin
------------------------------------
Name:  Richard B. Dauphin
Title: Assistant Corporate Secretary

(SEAL)

                                           JPMORGAN CHASE BANK, as Trustee

                                           By:    /s/ Carol Logan
                                              ----------------------------------
                                           Name:  Carol Logan
                                           Title: Vice President and Trust
                                                  Officer

(SEAL)

                                       20

<PAGE>

                                    Exhibit A

                           [FORM OF FACE OF SECURITY]
                                                         [Rule 144A Global Note]
                                                      [Regulation S Global Note]
                                                             [Certificated Note]

[IF THIS SECURITY IS TO BE A GLOBAL NOTE -] THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY.

[For as long as this Global Security is deposited with or on behalf of The
Depository Trust Company it shall bear the following legend.] Unless this
certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to CenterPoint Energy, Inc. or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

                            CENTERPOINT ENERGY, INC.

                      % Senior Notes due   , Series [A/B]

No. __________                                                   $  __________ *
                                                              CUSIP No. ________

         CENTERPOINT ENERGY, INC., a corporation duly organized and existing
under the laws of the State of Texas (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _______________, or registered
assigns, the principal sum of ____________________ Dollars on       , and to pay
interest thereon from May 27, 2003 or from the most recent Interest ____________

-----------------------------
         *        REFERENCE IS MADE TO SCHEDULE A ATTACHED HERETO WITH RESPECT
TO DECREASES AND INCREASES IN THE AGGREGATE PRINCIPAL AMOUNT OF SECURITIES
EVIDENCED BY THIS CERTIFICATE.

                                      A-1
<PAGE>
Payment Date to which interest has been paid or duly provided for,
semi-annually on June 1 and December 1 in each year, commencing December 1,
2003, at the rate of      % per annum, until the principal hereof is paid or
made available for payment, provided that any principal and premium, and any
such installment of interest, which is overdue shall bear interest at the rate
of % per annum (to the extent permitted by applicable law), from the dates such
amounts are due until they are paid or made available for payment, and such
interest shall be payable on demand. The amount of interest payable for any
period shall be computed on the basis of twelve 30-day months and a 360-day
year. The amount of interest payable for any partial period shall be computed on
the basis of a 360-day year of twelve 30-day months and the days elapsed in any
partial month. In the event that any date on which interest is payable on this
Security is not a Business Day, then a payment of the interest payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay) with the
same force and effect as if made on the date the payment was originally payable.
A "Business Day" shall mean any day other than a Saturday, a Sunday or a day on
which banking institutions in The City of New York are authorized or required by
law, regulation or executive order to close. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be May 15 or November
15 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Regular Record
Date and shall either be paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange or automated quotation system on which the Securities of
this series may be listed or traded, and upon such notice as may be required by
such exchange or automated quotation system, all as more fully provided in said
Indenture.

         Payment of the principal of (and premium, if any) and any such interest
on this Security will be made at the Corporate Trust Office of the Trustee, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made (i) by check mailed
to the address of the Person entitled thereto as such address shall appear in
the Security Register or (ii) by wire transfer in immediately available funds at
such place and to such account as may be designated in writing by the Person
entitled thereto as specified in the Security Register.

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

[DELETE THE FOLLOWING TWO-PARAGRAPH LEGEND, IF A REGULATION S GLOBAL NOTE.]
[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED

                                      A-2

<PAGE>

STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.

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

[INSERT IF A TEMPORARY REGULATION S GLOBAL NOTE] [THE RIGHTS ATTACHING TO THIS
SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THIS SECURITY AND PURSUANT TO THE
INDENTURE (AS DEFINED HEREIN).]

[INSERT REGULATION S LEGEND, IF A REGULATION S GLOBAL NOTE] [THIS SECURITY (OR
ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL
APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO
THEM IN REGULATION S UNDER THE SECURITIES ACT.]

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                      A-3

<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.

Dated:  _____________________              CENTERPOINT ENERGY, INC.

                                           By:  ________________________________
                                           Name:
(SEAL)                                     Title:

Attest:

_____________________________
Name:
Title:

                  This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

                                           JPMORGAN CHASE BANK,
                                           As Trustee

Date of Authentication:________________

                                           By:__________________________________
                                                     Authorized Signatory

                                      A-4

<PAGE>

                       [FORM OF REVERSE SIDE OF SECURITY]

                            CENTERPOINT ENERGY, INC.

                           % NOTES DUE , SERIES [A/B]

         This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of May 19, 2003 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and JPMorgan Chase Bank, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, initially limited in aggregate principal amount to
$200,000,000; provided, however, that the authorized aggregate principal amount
of the Securities may be increased above such amount by a Board Resolution to
such effect.

         The Company shall have the right to redeem the Securities of this
series, in whole or in part, at its option at any time from time to time at a
price equal to (i) 100% of the principal amount thereof plus (ii) accrued and
unpaid interest thereon, if any, including Additional Interest, if any, to (but
excluding) the Redemption Date plus (iii) the Make-Whole Premium, if any.

         The amount of the Make-Whole Premium with respect to any Security of
this Series (or portion thereof) to be redeemed will be equal to the excess, if
any, of: (i) the sum of the present values, calculated as of the Redemption
Date, of: (A) each interest payment that, but for such redemption, would have
been payable on the Securities of this series (or portion thereof) being
redeemed on each Interest Payment Date occurring after the Redemption Date
(excluding any accrued and unpaid interest for the period prior to the
Redemption Date); and (B) the principal amount that, but for such redemption,
would have been payable at [insert maturity date of the Securities of this
series] (or portion thereof) being redeemed; over (ii) the principal amount of
the Securities of this series (or portion thereof) being redeemed. The present
values of interest and principal payments referred to in clause (i) above will
be determined in accordance with generally accepted principles of financial
analysis. Such present values will be calculated by discounting the amount of
each payment of interest or principal from the date that each such payment would
have been payable, but for the redemption, to the Redemption Date at a discount
rate equal to the Comparable Treasury Yield (as defined below) plus 50 basis
points.

         For purposes of determining the Make-Whole Premium, "Comparable
Treasury Yield" means a rate of interest per annum equal to the weekly average
yield to maturity of United States Treasury securities that have a constant
maturity that corresponds to the remaining term to maturity of the Securities of
this series, calculated to the nearest 1/12th of a year (the "Remaining Term").
The Comparable Treasury Yield shall be determined as of the third Business Day
immediately preceding the Redemption Date.

                                      A-5

<PAGE>

         The weekly average yields of United States Treasury securities shall be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15 (519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
securities having a constant maturity that is the same as the Remaining Term,
then the Comparable Treasury Yield shall be equal to such weekly average yield.
In all other cases, the Comparable Treasury Yield shall be calculated by
interpolation, on a straight-line basis, between the weekly average yields on
the United States Treasury securities that have a constant maturity closest to
and greater than the Remaining Term and the United States Treasury securities
that have a constant maturity closest to and less than the Remaining Term (in
each case as set forth in the H.15 Statistical Release). Any weekly average
yields so calculated by interpolation shall be rounded to the nearest 1/100th of
1%, with any figure of 1/200th of 1% or above being rounded upward. If weekly
average yields for United States Treasury securities are not available in the
H.15 Statistical Release or otherwise, then the Comparable Treasury Yield shall
be calculated by interpolation of comparable rates selected by the Independent
Investment Banker.

         In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.

         The Securities of this series are not entitled to the benefit of any
sinking fund.

         The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.

         The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.

         If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange

                                      A-6

<PAGE>

herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.

         As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

         No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof;
provided, however, that Securities of this series that are Transfer Restricted
Securities issued to institutional accredited investors will be issued only in
denominations of $250,000 and integral multiples of $1,000 in excess thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of

                                      A-7

<PAGE>

like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.

         All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

         By its acceptance of this Security bearing a legend restricting
transfer, each Holder of this Security acknowledges the restrictions on transfer
of this Security set forth in the Indenture and such legend and agrees that it
will transfer this Security only as provided in the Indenture. In addition to
the rights provided to Holders of this Security under the Indenture, Holders
shall have all the rights set forth in that certain Registration Rights
Agreement, dated as of May 27, 2003, among the Company and the Initial
Purchasers, including without limitation the right to receive Additional
Interest as described in Section 2.5 thereof.

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

                                      A-8

<PAGE>

                                                                      SCHEDULE A

                             SCHEDULE OF ADJUSTMENTS

                  The initial aggregate principal amount of Securities evidenced
by the Certificate to which this Schedule is attached is _______________. The
notations on the following table evidence decreases and increases in the
aggregate principal amount of Securities evidenced by such Certificate.

<TABLE>
<CAPTION>
                                                                   Aggregate Principal
               Decrease in Aggregate     Increase in Aggregate     Amount of Securities     Notation by
 Date of        Principal Amount of       Principal Amount of      Remaining After Such       Security
Adjustment          Securities                Securities           Decrease or Increase      Registrar
----------     ---------------------     ---------------------     --------------------     -----------
<S>            <C>                       <C>                       <C>                      <C>
</TABLE>

                                      S-1

<PAGE>

                                                                       Exhibit B

                FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE
                    OR REGISTRATION OF TRANSFER OF SECURITIES

Re: % Senior Notes due , Series A, of CenterPoint Energy, Inc. (the "Company")

         This Certificate relates to $_____ principal amount of Notes held in
*______ book-entry or *______ definitive form by _____________________ (the
"Transferor").

         The Transferor has requested the Trustee by written order to exchange
or register the transfer of a Note or Notes.

         In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture, dated as of May 19, 2003 (as amended or supplemented to date, the
"Indenture"), between the Company and JPMorgan Chase Bank, (the "Trustee")
relating to the above-captioned Notes and that the transfer of this Note does
not require registration under the Securities Act (as defined below) because:*

         [ ]      Such Note is being acquired for the Transferor's own account
without transfer.

         [ ]      Such Note is being transferred (i) to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")), in accordance with Rule 144A under the
Securities Act or (ii) pursuant to an exemption from registration in accordance
with Rule 904 of Regulation S under the Securities Act (and in the case of
clause (ii), based upon an opinion of counsel if the Company or the Trustee so
requests, together with a certification in substantially the form of Exhibit C
to Supplemental Indenture No. 2 to the Indenture).

         [ ]      Such Note is being transferred (i) pursuant to an exemption
from registration in accordance with Rule 144 under the Securities Act (and
based upon an opinion of counsel if the Company or the Trustee so requests) or
(ii) pursuant to an effective registration statement under the Securities Act.

         [ ]      Such Note is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company or the
Trustee so requests).

---------------------------
         *        FILL IN BLANK OR CHECK APPROPRIATE BOX, AS APPLICABLE.

                                      B-1

<PAGE>

You are entitled to rely upon this certificate and you are irrevocably
authorized to produce this certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.

                                           [INSERT NAME OF TRANSFEROR]

                                           By:   _______________________________
                                           Name:
                                           Title:
                                           Address:

Date: _______________________

                                      B-2

<PAGE>

                                                                       Exhibit C

                FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
                     WITH TRANSFERS PURSUANT TO REGULATION S

                                                         _______________, ______

JPMorgan Chase Bank, as Security Registrar
600 Travis, Suite 1150
Houston, Texas 77002
Attention: Institutional Trust Services

Ladies and Gentlemen:

                  In connection with our proposed sale of certain % Senior Notes
due , Series A (the "Notes"), of CenterPoint Energy, Inc. (the "Company"), we
represent that:

                  (i)      the offer or sale of the Notes was made in an
         "offshore transaction";

                  (ii)     at the time the buy order was originated, the
         transferee was outside the United States or we and any person acting on
         our behalf reasonably believed that the transferee was outside the
         United States;

                  (iii)    no directed selling efforts have been made by us in
         the United States in contravention of the requirements of Rule 903(a)
         or Rule 904(a) of Regulation S under the U.S. Securities Act of 1933,
         as applicable;

                  (iv)     if this transfer of the Note is being made prior to
         the expiration of the Distribution Compliance Period, such interest
         that is being transferred is held immediately thereafter through The
         Euroclear System or Clearstream Banking, societe anonyme; and

                  (v)      the transaction is not part of a plan or scheme to
         evade the registration requirements of the U.S. Securities Act of 1933.

                                      C-1

<PAGE>

         You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S under the U.S. Securities Act of 1933.

                                           Very truly yours,

                                           Name of Transferor:

                                           By: _________________________________
                                               Name:
                                               Title:
                                               Address:

                                       C-2

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