Document:

<PAGE>

                                                                     Exhibit 4.3

                              AMENDED AND RESTATED

                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                   RELIANT ENERGY TRANSITION BOND COMPANY LLC

<PAGE>

                                Table of Contents

<TABLE>
<S>                                                                                    <C>
ARTICLE I DEFINITIONS ...............................................................   1
  SECTION 1.01. Capitalized Terms ...................................................   1
  SECTION 1.02. Other Definitional Provisions .......................................   6
ARTICLE II FORMATION OF THE LIMITED LIABILITY COMPANY ...............................   7
  SECTION 2.01. Formation; Filings ..................................................   7
  SECTION 2.02. Name, Registered Agent and Office ...................................   7
  SECTION 2.03. Business Purpose ....................................................   7
  SECTION 2.04. Term ................................................................   8
  SECTION 2.05. No State Law Partnership ............................................   8
  SECTION 2.06. Authority of Member .................................................   9
  SECTION 2.07. Liability to Third Parties ..........................................   9
  SECTION 2.08. No Personal Liability of Member, Special Members, Managers, Etc .....   9
  SECTION 2.09. Separateness ........................................................   9
  SECTION 2.10. Limited Liability and Bankruptcy Remoteness .........................  11
ARTICLE III CAPITAL CONTRIBUTIONS ...................................................  11
  SECTION 3.01. Capital Contributions ...............................................  11
ARTICLE IV MANAGEMENT ...............................................................  11
  SECTION 4.01. Management by Managers ..............................................  11
  SECTION 4.02. Acts by Managers ....................................................  11
  SECTION 4.03. Number and Qualifications ...........................................  12
  SECTION 4.04. Independent Managers ................................................  12
  SECTION 4.05. Appointment and Vacancy .............................................  13
  SECTION 4.06. Term ................................................................  13
  SECTION 4.07. Removal .............................................................  13
  SECTION 4.08. Resignation .........................................................  13
  SECTION 4.09. Place of Meetings of Managers .......................................  13
  SECTION 4.10. Meetings of Managers ................................................  13
  SECTION 4.11. Quorum; Majority Vote ...............................................  13
  SECTION 4.12. Methods of Voting; Proxies ..........................................  13
  SECTION 4.13. Actions Without a Meeting ...........................................  14
  SECTION 4.14. Telephone and Similar Meetings ......................................  14
  SECTION 4.15. Managers ............................................................  14
  SECTION 4.16. Compensation ........................................................  14
ARTICLE V OFFICERS ..................................................................  14
  SECTION 5.01. Designation; Term; Qualifications ...................................  14
  SECTION 5.02. Removal and Resignation .............................................  15
  SECTION 5.03. Vacancies ...........................................................  15
  SECTION 5.04. Compensation ........................................................  15
ARTICLE VI MEMBER ...................................................................  15
  SECTION 6.01. Powers ..............................................................  15
  SECTION 6.02. Compensation of Member ..............................................  15
  SECTION 6.03. Actions by the Member ...............................................  16
  SECTION 6.04. Control by Member ...................................................  16
</TABLE>

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<TABLE>
<S>                                                                                      <C>
  SECTION 6.05.  Special Member ......................................................   16
ARTICLE VII COMMON INTEREST ..........................................................   17
  SECTION 7.01.  General .............................................................   17
  SECTION 7.02.  Distributions .......................................................   18
  SECTION 7.03.  Rights on Liquidation, Dissolution or Winding Up ....................   18
  SECTION 7.04.  Redemption ..........................................................   19
  SECTION 7.05.  Voting Rights .......................................................   19
ARTICLE VIII ALLOCATIONS; DISTRIBUTIONS; EXPENSES; TAXES; BOOKS; AND REPORTS .........   19
  SECTION 8.01.  Allocations .........................................................   19
  SECTION 8.02.  Distributions .......................................................   20
  SECTION 8.03.  Limitation Upon Distributions .......................................   20
  SECTION 8.04.  Expenses ............................................................   20
  SECTION 8.05.  Tax Elections .......................................................   20
  SECTION 8.06.  Annual Tax Information ..............................................   21
  SECTION 8.07.  Tax Matters Member ..................................................   21
  SECTION 8.08.  Maintenance of Books ................................................   21
  SECTION 8.09.  Reports .............................................................   21
ARTICLE IX INDEMNIFICATION ...........................................................   21
  SECTION 9.01.  Mandatory Indemnification of Member, the Special Members and the
  Managers  ..........................................................................   21
  SECTION 9.02.  Mandatory Advancement of Expenses ...................................   22
  SECTION 9.03.  Indemnification of Officers, Employees and Agents ...................   22
  SECTION 9.04.  Nonexclusivity of Rights ............................................   22
  SECTION 9.05.  Contract Rights .....................................................   23
  SECTION 9.06.  Insurance ...........................................................   23
  SECTION 9.07.  Savings Clause ......................................................   23
  SECTION 9.08.  Other Ventures ......................................................   23
  SECTION 9.09.  Other Arrangements Not Excluded .....................................   23
  SECTION 9.10.  Survival ............................................................   24
ARTICLE X MISCELLANEOUS PROVISIONS ...................................................   24
  SECTION 10.01. Offset ..............................................................   24
  SECTION 10.02. Notices .............................................................   24
  SECTION 10.03. Benefits of Agreement; No Third-Party Rights ........................   24
  SECTION 10.04. Effect of Waiver or Consent .........................................   24
  SECTION 10.05. Governing Law; Severability .........................................   24
  SECTION 10.06. No Bankruptcy Petition; No Dissolution ..............................   25
  SECTION 10.07. Amendment ...........................................................   26
  SECTION 10.08. Headings and Sections ...............................................   26
  SECTION 10.09. Binding Agreement ...................................................   26
  SECTION 10.10. Counterparts ........................................................   27
</TABLE>

                                       ii

<PAGE>

                              AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                   RELIANT ENERGY TRANSITION BOND COMPANY LLC

     AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of
October 24, 2001 (as it may be further amended, supplemented or otherwise
modified and in effect from time to time, this "Agreement"), of RELIANT ENERGY
TRANSITION BOND COMPANY LLC, a Delaware limited liability company (the
"Company"), having its principal office at 1111 Louisiana Street, Suite 4667,
Houston, Texas 77002.

     WHEREAS, Reliant Energy, Incorporated, a Texas corporation ("Reliant
Energy"), as sole Member, caused the Certificate of Formation of the Company
(the "Certificate of Formation") to be filed with the Delaware Secretary of
State (the "Secretary of State") on November 10, 1999, executed a Limited
Liability Company Agreement dated November 10, 1999 (the "Original LLC
Agreement") and caused the Amended and Restated Certificate of Formation of the
Company to be filed with the Secretary of State on October 22, 2001; and

     WHEREAS, this Agreement amends and restates the Original LLC Agreement in
all respects, and from and after the date hereof constitutes the governing
instrument of the Company;

     NOW THEREFORE, the parties hereto hereby amend and restate the Original LLC
Agreement as follows:

                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.01. Capitalized Terms. For all purposes of this Agreement, the
                   -----------------
following terms shall have the meanings set forth below:

     "Act" shall mean the Delaware Limited Liability Company Act, as amended, as
in effect on the date hereof (currently Chapter 18 of Title 6, Sections 18-101
through 18-1109 of the Delaware Code) and as it may be amended hereafter, from
time to time.

     "Administration Agreement" shall mean the Administration Agreement, dated
as of October 24, 2001, between the Company and Reliant Energy, as
Administrator, as the same may be further amended, supplemented or otherwise
modified and in effect from time to time.

     "Affiliate" shall mean, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, control when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.

<PAGE>

     "Agreement" shall mean this Amended and Restated Limited Liability Company
Agreement of the Company as the same may be further amended, supplemented or
otherwise modified from time to time in accordance with the provisions hereof.

     "Bankruptcy" shall mean, with respect to any Person, if such Person (i)
makes an assignment for the benefit of creditors, (ii) files a petition
commencing a voluntary bankruptcy, (iii) is adjudged a bankrupt or insolvent, or
has entered against it an order for relief, in any bankruptcy or insolvency
proceedings, (iv) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation or similar
relief under any statute, law or regulation, (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against it in any proceeding of this nature, (vi) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the Person
or of all or any substantial part of its properties, or (vii) if 120 days after
the commencement of any proceeding against the Person seeking reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation, the proceeding has not been dismissed, or if within
90 days after the appointment without such Person's consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial part
of its properties, the appointment is not vacated or stayed, or if within 90
days after the expiration of any such stay, the appointment is not vacated. The
foregoing definition of "Bankruptcy" is intended to replace and shall supersede
and replace the definition of "Bankruptcy" set forth in Sections 18-101(1) and
18-304 of the Act.

     "Basic Documents" shall mean this Agreement, the Certificate of Formation,
the Sale Agreement, any Bill of Sale, the Servicing Agreement, the
Administration Agreement, the Indenture, any Supplemental Indenture, the
Intercreditor Agreement and the Underwriting Agreement.

     "Bill of Sale" shall mean the Bill of Sale, issued by Reliant Energy to the
Company as of October 24, 2001, pursuant to the Sale Agreement, together with
any other Bill of Sale delivered in accordance therewith.

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

     "Certificate of Formation" shall mean the Certificate of Formation of the
Company as filed in accordance with the Act with the Secretary of State on
November 10, 1999, as amended and restated and filed with the Secretary of State
on October 22, 2001, as the same may be further amended, supplemented or
otherwise modified and in effect from time to time.

     "Class" shall mean any class of Transition Bonds issued and authenticated
by the Company pursuant to the Indenture, as specified in the Supplemental
Indenture therefor.

     "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time (or any successor law), and Treasury Regulations promulgated thereunder.

                                        2

<PAGE>

     "Common Interest" shall mean the limited liability company interest of the
Member in the Company as described in Article VII. The Company shall have one
class of Common Interest.

     "Company" shall mean Reliant Energy Transition Bond Company LLC, a Delaware
limited liability company.

     "Financing Order" shall mean the Financing Order issued by the PUCT on May
31, 2000 (PUC Docket No. 21665) pursuant to the Texas Electric Choice Plan, as
interpreted by the PUCT on September 18, 2001 (PUC Docket No. 21665, SOAH Docket
No. ###-##-####).

     "Fiscal Year" shall mean, unless the Managers shall at any time determine
otherwise pursuant to the requirements of the Code, a calendar year.

     "GAAP" shall mean the generally accepted accounting principles promulgated
or adopted by the Financial Accounting Standards Board and its successors from
time to time.

     "Governmental Authority" shall mean any court or any federal or state
regulatory body, administrative agency or governmental instrumentality.

     "Indenture" shall mean the Indenture dated as of October 24, 2001, between
the Company, as Issuer, the Trustee and the Securities Intermediary and shall
include the forms and terms of the Transition Bonds established thereunder, as
the same may be further amended, supplemented or otherwise modified and in
effect from time to time.

     "Independent Manager" shall mean, with respect to the Company, a Manager
who is not, and within the previous five years was not (except solely by virtue
of such Person's serving as, or affiliation with any other Person serving as, an
independent director or manager, as applicable, of Reliant Energy, the Company
or any bankruptcy remote special purpose entity that is an Affiliate of Reliant
Energy or the Company), (i) a stockholder, member, partner, director, officer,
employee, Affiliate, customer, supplier, creditor or independent contractor of,
or any Person that has received any benefit in any form whatsoever from (other
than in such Manager's capacity as a ratepayer or customer of Reliant Energy in
the ordinary course of business), or any Person that has provided any service in
any form whatsoever to, or any major creditor (or any Affiliate of any major
creditor) of, the Company, Reliant Energy or any of their Affiliates, or (ii)
any Person owning beneficially, directly or indirectly, any outstanding shares
of common stock, any limited liability company interests or any partnership
interests, as applicable, of the Company, Reliant Energy, or any of their
Affiliates, or of any major creditor (or any Affiliate of any major creditor) of
any of the foregoing, or a stockholder, member, partner, director, officer,
employee, Affiliate, customer, supplier, creditor or independent contractor of,
or any Person that has received any benefit in any form whatever from (other
than in such Person's capacity as a ratepayer or customer of Reliant Energy in
the ordinary course of business), or any Person that has provided any service in
any form whatever to, such beneficial owner or any of such beneficial owner's
Affiliates, or (iii) a member of the immediate family of any person described
above; provided that the indirect or beneficial ownership of stock through a
mutual fund or similar diversified investment vehicle with respect to which the
owner does not have discretion or control over the investments held by such
diversified investment vehicle shall not preclude such owner from

                                        3

<PAGE>

being an Independent Manager. For purposes of this definition, "major creditor"
shall mean a natural person or business entity to which the Company, Reliant
Energy or any of their Affiliates has outstanding indebtedness for borrowed
money or credit on open account in a sum sufficiently large as would reasonably
be expected to influence the judgment of the proposed Independent Manager
adversely to the interests of the Company when the interests of that Person are
adverse to those of the Company.

     "Intercreditor Agreement" shall mean the Intercreditor Agreement, dated as
of October 24, 2001, among AEP Credit, Inc., The Bank of New York, the Company,
Reliant Energy and Bankers Trust Company, as the same may be further amended,
supplemented or otherwise modified and in effect from time to time.

     "Manager" shall mean any manager (as defined in the Act) of the Company,
including the Independent Managers.

     "Member" shall mean Reliant Energy, in its capacity as a member in the
Company under this Agreement, or any successor thereto as a member pursuant to
Article VI; provided, however, the term "Member" shall not include the Special
Members.

     "Officer's Certificate" means a certificate signed by an officer or Manager
of the Company who is authorized to act for the Company in matters relating to
the Company.

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

     "Proceeding" shall have the meaning set forth in Section 9.01.

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

     "Qualified Costs" has the meaning assigned to that term in the Texas
Electric Choice Plan and the Financing Order.

     "Rating Agency" shall mean any rating agency rating the Transition Bonds of
any Class or Series at the time of issuance thereof at the request of the
Company, which initially shall be Moody's Investors Service Inc., Standard &
Poor's, a division of The McGraw-Hill Companies, and Fitch, Inc. If no such
organization or successor is any longer in existence, "Rating Agency" shall mean
a nationally recognized statistical rating organization or other comparable
Person designated by the Company, written notice of which designation shall be
given to the Trustee and the Member.

     "Rating Agency Condition" shall mean, with respect to any action, the
notification in writing to each Rating Agency of such action, and confirmation
from Standard & Poor's Rating Services and Fitch, Inc. to the Trustee and the
Company that such action will not result in a reduction or withdrawal of the
then current rating by such Rating Agency of any outstanding Series or Class of
Transition Bonds.

                                        4

<PAGE>

     "Reliant Energy" shall mean Reliant Energy, Incorporated, a Texas
corporation, or its successor.

     "Sale Agreement" shall mean the Transition Property Sale Agreement dated as
of October 24, 2001, between Reliant Energy and the Company, as the same may be
further amended, supplemented or otherwise modified and in effect from time to
time.

     "Secretary of State" shall have the meaning given thereto in the second
recital hereof.

     "Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the United States Securities and Exchange Commission
promulgated thereunder.

     "Securities Intermediary" shall mean the party named as such in the
Indenture or its successor or any successor Securities Intermediary under the
Indenture.

     "Series" shall mean any Series of Transition Bonds issued and authenticated
by the Company pursuant to the Indenture, as specified in the Supplemental
Indenture therefor.

     "Servicing Agreement" shall mean the Transition Bond Servicing Agreement
dated as of October 24, 2001 between the Company and Reliant Energy, as the same
may be further amended, supplemented or otherwise modified and in effect from
time to time.

     "Special Member" shall mean, upon such Person's admission to the Company as
a member of the Company pursuant to Section 6.05, a Person acting as Independent
Manager, in such Person's capacity as a member of the Company. A "Special
Member" shall have the rights and duties expressly set forth in this Agreement.

     "Supplemental Indenture" shall mean a supplemental indenture entered into
by the Company and the Trustee pursuant to Article IX of the Indenture.

     "Texas Electric Choice Plan" shall mean the Act of May 21, 1999, 76th Leg.
R.S. ch. 405, 1999.

     "Transition Bonds" shall mean any of the transition bonds (as defined in
the Texas Electric Choice Plan) issued by the Company in accordance with the
Indenture.

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

     "Transition Property" shall mean the rights and interests of Reliant Energy
or its successor under the Financing Order, once those rights are first
transferred to the Company or pledged in connection with the issuance of the
Transition Bonds, including the irrevocable right to impose, collect and receive
through Transition Charges payable by retail electric customers within Reliant
Energy's certificated service area as it existed on May 1, 1999, an amount
sufficient to cover the Qualified Costs of Reliant Energy authorized in the
Financing Order, the right to receive Transition Charges in amounts and at times
sufficient to pay principal and

                                        5

<PAGE>

interest and make other deposits in connection with the Transition Bonds and all
revenues and collections resulting from Transition Charges.

     "Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

     "Trustee" shall mean the party named as such in the Indenture or its
successor or any successor Trustee under the Indenture.

     "Underwriting Agreement" shall mean the Underwriting Agreement, dated
October 17, 2001, between Reliant Energy, the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., Goldman, Sachs & Co.,
Banc One Capital Markets, Inc., Credit Suisse First Boston Corporation, Lehman
Brothers, Inc. and Loop Capital Markets, LLC.

     SECTION 1.02. Other Definitional Provisions.
                   -----------------------------

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

          (b) As used in this Agreement and in any certificate or other
documents made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
in this Agreement or in any such certificate or other document are inconsistent
with the meanings of such terms under GAAP, the definitions contained in this
Agreement or in any such certificate or other document shall control.

          (c) The words "hereof," "herein," "hereunder," and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section references contained
in this Agreement are references to Sections in this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."

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

          (e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.

                                        6

<PAGE>

                                   ARTICLE II

                   FORMATION OF THE LIMITED LIABILITY COMPANY

     SECTION 2.01. Formation; Filings. Pursuant to the Act and in accordance
                   ------------------
with the further terms and provisions hereof, the Member and, when signed by the
Special Members, the Special Members, hereby continue the Company as a limited
liability company. The Certificate of Formation of the Company has been executed
and filed with the Secretary of State by Marc Kilbride, as an "authorized
person" within the meaning of the Act. Upon the filing of the Certificate of
Formation with the Secretary of State, his powers as an "authorized person"
ceased, and the Member thereupon became the designated "authorized person" and
shall continue as the designated "authorized person" within the meaning of the
Act. The Member shall execute or cause to be executed from time to time all
other instruments, certificates, notices and documents, and shall do or cause to
be done all such filing, recording, publishing and other acts, in each case, as
may be necessary or appropriate from time to time to comply with all applicable
requirements for the formation and/or operation and, when appropriate,
termination of a limited liability company in the State of Delaware and all
other jurisdictions where the Company shall desire to conduct its business.

     SECTION 2.02. Name, Registered Agent and Office.
                   ---------------------------------

          (a) The name of the Company shall be "Reliant Energy Transition Bond
Company LLC." All business of the Company shall be conducted in such name and
all contracts, property and other assets of the Company shall be held in that
name, and the Member shall not have any ownership interests in such contracts,
property or other assets in the Company's individual name.

          (b) The address of the registered office of the Company in the State
of Delaware is the Corporation Trust Center, 1209 Orange Street in the city of
Wilmington, County of New Castle, 19801. The name of its registered agent at
that address is The Corporation Trust Company. The Delaware State file number
for the Company is #3124465.

          (c) The Company may also have offices at such other places both within
and without the State of Delaware as the Member may from time to time determine.

     SECTION 2.03. Business Purpose. The nature of the business or purpose to be
                   ----------------
conducted or promoted by the Company is to engage exclusively in the following
business and financial activities:

          (a) to authorize, issue, sell and deliver one or more Series or
Classes of Transition Bonds under the Indenture and, in connection therewith, to
execute and deliver Supplemental Indentures providing for the issuance of
additional Series of Transition Bonds, each as permitted by and in accordance
with the terms of the Indenture and to enter into any agreement or document
providing for the authorization, issuance, sale and delivery of the Transition
Bonds;

          (b) to purchase, acquire, own, hold, administer, service, and enter
into agreements for the servicing of, finance, manage, sell, assign, pledge,
collect amounts due on and otherwise

                                        7

<PAGE>

deal with the Transition Property and other assets to be acquired pursuant to
the Basic Documents and any proceeds or rights associated therewith;

          (c) to negotiate, authorize, execute, deliver, assume the obligations
under, and perform its duties under, the Basic Documents and any other agreement
or instrument or document relating to the activities set forth in clauses (a)
and (b) above, including but not limited to agreements with third-party credit
enhancers and additional swap or hedge agreement counterparties relating to any
Series or Class of Transition Bonds; provided, that each party to any agreement
with the Company shall covenant that it shall not, prior to the date which is
one year and one day after the termination of the Indenture and the payment in
full of each Series of the Transition Bonds and any other amounts owed under the
Indenture, including, without limitation, any amounts owed to third-party credit
enhancers and any amounts owed under any swap or hedge agreement, acquiesce,
petition or otherwise invoke or cause the Company to invoke the process of any
court or Governmental Authority for the purpose of commencing or sustaining a
case against the Company under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Company or any substantial part of
the property of the Company; or ordering the winding up or liquidation of the
affairs of the Company; and provided, further, that the Company shall be
permitted to incur additional indebtedness or other liabilities payable to
service providers and trade creditors in the ordinary course of business in
connection with the foregoing activities;

          (d) to invest proceeds from the Transition Property and its other
assets and any capital and income of the Company in accordance with the Basic
Documents or as otherwise determined by the Managers and not inconsistent with
this Section or the Basic Documents;

          (e) to do such other things and carry on any other activities which
the Managers determine to be necessary, convenient or incidental to any of the
foregoing purposes, and have and exercise all of the powers and rights conferred
upon limited liability companies formed pursuant to the Act that are related or
incidental to any of the foregoing; and

          (f) to enter into and perform the Basic Documents and all documents,
agreements, certificates or financing statements contemplated thereby or related
thereto, all without any further act, vote or approval of any Member, Manager,
officer or other Person notwithstanding any other provision of this Agreement,
the Act or applicable law, rule or regulation. The foregoing authorization shall
not be deemed a restriction on the powers of the Member or any Manager or
officer to enter into other agreements on behalf of the Company.

     SECTION 2.04. Term. The term of the Company shall continue until the
                   ----
Company is dissolved and liquidated in accordance with Section 7.03. The
existence of the 5Company as a separate legal entity shall continue until the
cancellation of the Certificate of Formation in accordance with the Act.

     SECTION 2.05. No State Law Partnership. The Member and the Special Members
                   ------------------------
intend that the Company shall not be a partnership (including, without
limitation, a general partnership or a limited partnership) or joint venture,
and that neither the Member, any Special Members nor any Manager shall be a
partner or joint venturer of the Member, any Special

                                        8

<PAGE>

Member or any Manager with respect to the business of the Company, for any
purposes, and this Agreement shall not be construed to suggest otherwise.

     SECTION 2.06. Authority of Member. Subject to Section 4.04, the Member,
                   -------------------
acting in such capacity, shall have the authority or power to act for or on
behalf of the Company, to do any act that would be binding on the Company, or to
incur any expenditures, debts, liabilities or obligations on behalf of the
Company.

     SECTION 2.07. Liability to Third Parties. Except as otherwise expressly
                   --------------------------
provided by the Act, neither the Member, any Special Member nor any Manager
shall be liable for the debts, obligations or liabilities of the Company
(whether arising in contract, tort or otherwise), including without limitation
under a judgment, decree or order of a court, solely by reason of being the
Member or acting as a Special Member or Manager.

     SECTION 2.08. No Personal Liability of Member, Special Members, Managers,
                   -----------------------------------------------------------
Etc. (a) Neither the Member nor any Special Member shall be subject in such
----
capacity to any personal liability whatsoever to any Person in connection with
the assets or the acts, obligations or affairs of the Company, and (b) no
Manager or officer of the Company shall be subject in such capacity to any
personal liability whatsoever to any Person, other than the Company or its
Member, in connection with the assets or the affairs of the Company; and,
subject to the provisions of Article IX, all such Persons shall look solely to
the assets of the Company for satisfaction of claims of any nature arising in
connection with the affairs of the Company; provided, that such protection from
personal liability shall apply to the fullest extent permitted by applicable
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment provides further
protection from personal liability or permits the Company to provide greater or
broader indemnification rights than such law permitted the Company to provide
prior to such amendment).

     SECTION 2.09. Separateness.
                   ------------

          (a) Except as expressly permitted by the Basic Documents, the funds
and other assets of the Company shall not be commingled with those of any other
entity, and the Company shall maintain its own bank accounts separate from the
Member and any other Person.

          (b) The Company shall not guarantee or otherwise hold itself out as
being liable for the debts of any other entity, and shall conduct its own
business in its own name.

          (c) The Company shall not form, or cause to be formed, any
subsidiaries.

          (d) The Company shall act solely in its limited liability company name
and through its duly authorized Member, Special Members, Managers, officers or
agents in the conduct of its business, and shall conduct its business so as not
to mislead others as to the identity of the entity or assets with which they are
concerned.

          (e) The Company shall maintain separate records, books of account and
financial statements and shall not commingle its records and books of account
with the records and books of account of any other entity or the Member.

                                        9

<PAGE>

          (f) The Managers shall hold appropriate meetings to authorize all of
its limited liability company actions, which meetings may be held by telephone
conference call, provided, that in lieu of any such meeting and without prior
notice, the Managers may act by written consent in accordance with Section 4.13.
The Company shall observe all formalities required by this Agreement.

          (g) The Company shall at all times ensure that its capitalization is
adequate in light of its business and purpose.

          (h) Neither the Member, any Special Member nor any Manager shall
guarantee, become liable on or hold itself out as being liable for the debts of
the Company. The Company shall not guarantee or become obligated for the debts
of the Member, any Special Member or any Manager, any Affiliate thereof or any
other Person, or otherwise hold out its credit as being available to satisfy the
obligations of the Member, any Special Member, any Manager or any other Person
(except for the Company's obligations under the Basic Documents), shall not
pledge its assets for the benefit of any entity other than the Trustee, shall
not make loans or advances to any Person, and shall not acquire obligations or
securities of the Member, any Special Member, any Manager or any Affiliate
thereof.

          (i) The Company shall pay its own liabilities out of its own funds,
including fees and expenses of the Administrator pursuant to the Administration
Agreement and the Servicer pursuant to the Servicing Agreement.

          (j) The Company shall maintain an arm's-length relationship with its
Affiliates.

          (k) The Company shall allocate fairly and reasonably the salaries of
and the expenses related to providing the benefits of officers or other
employees shared with the Member, any Special Member or any Manager.

          (l) The Company shall allocate fairly and reasonably any overhead for
office space shared with the Member, any Special Member or any Manager.

          (m) The Company shall use its own separate stationery, invoices,
checks and other business forms.

          (n) The Company shall correct any known misunderstanding regarding its
separate identity.

          (o) The Company shall at all times hold itself out to the public as a
legal entity separate from the Member and any other Person.

          (p) The Company shall file its own tax returns, if any, as may be
required under applicable law, to the extent (a) not part of a consolidated
group filing a consolidated return or returns or (b) not treated as a division
for tax purposes of another taxpayer, and pay any taxes so required to be paid
under applicable law.

     Failure of the Company, or the Member, any Special Member or any Manager on
behalf of the Company, to comply with any of the foregoing covenants or any of
the covenants

                                       10

<PAGE>

contained in this Agreement shall not affect the status of the Company as a
separate legal entity or the limited liability of the Member, any Special Member
or any Manager.

     SECTION 2.10. Limited Liability and Bankruptcy Remoteness. Without limiting
                   -------------------------------------------
the generality of Section 2.09, the Company shall be operated in such a manner
as the Managers deem reasonable and necessary or appropriate to preserve (a) the
limited liability of Reliant Energy (or its successor) as the Member and the
limited liability of the Special Members, (b) the separateness of the Company
from the business of Reliant Energy (or its successor), as the Member, or any
other Affiliate thereof and (c) until the expiration of the period of one year
and one day specified in Section 10.06, the special purpose, bankruptcy- remote
status of the Company.

                                  ARTICLE III

                              CAPITAL CONTRIBUTIONS

     SECTION 3.01. Capital Contributions. The Member was deemed admitted as the
                   ---------------------
Member of the Company upon the execution and delivery of the Original LLC
Agreement. The Member has contributed the amount of cash to the Company listed
on Schedule A attached hereto.

                                   ARTICLE IV

                                   MANAGEMENT

     SECTION 4.01. Management by Managers. The powers of the Company shall be
                   ----------------------
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, the Managers.

     SECTION 4.02. Acts by Managers.
                   ----------------

          (a) The Managers shall be obliged to devote only as much of their time
to the Company's business as shall be reasonably required in light of the
Company's business and objectives. A Manager shall perform his or her duties as
a Manager in good faith, in a manner he or she reasonably believes to be in the
best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances.

          (b) Every Manager is an agent of the Company for the purpose of its
business, and the act of every Manager, including the execution in the name of
the Company of any instrument for carrying on the business of the Company, binds
the Company, unless such act is in contravention of this Agreement or unless the
Manager so acting otherwise lacks the authority to act for the Company and the
Person with whom he or she is dealing has knowledge of the fact that he or she
has no such authority.

          (c) The Managers shall have the right and authority to take all
actions which the Managers deem necessary, useful or appropriate for the
day-to-day management and conduct of the Company's business.

                                       11

<PAGE>

          (d) The Managers may exercise all powers of the Company and do all
such lawful acts and things as are not required or directed by the Act, other
applicable law, or this Agreement to be exercised or done by the Member. All
instruments, contracts, agreements and documents providing for the acquisition
or disposition of property of the Company shall be valid and binding on the
Company if executed by one or more of the Managers. All instruments, contracts,
agreements and documents of whatsoever type executed on behalf of the Company
shall be executed in the name of the Company by one or more Managers.

     SECTION 4.03. Number and Qualifications. The number of Managers of the
                   -------------------------
Company shall not be less than three nor more than five, as may be determined by
the Member from time to time, but no decrease in the number of Managers shall
have the effect of shortening the term of any incumbent Manager.

     SECTION 4.04. Independent Managers.
                   --------------------

          (a) The Company shall have at all times at least two individuals who
are each Independent Managers. The Independent Managers may not delegate their
duties, authorities or responsibilities hereunder. If any Independent Manager
resigns, dies or becomes incapacitated, or such position is otherwise vacant, no
action requiring the unanimous affirmative vote of the Managers shall be taken
until a successor Independent Manager is appointed by the Member and qualifies
and approves such action.

          (b) Notwithstanding any other provision of this Agreement and any
provision of law that otherwise so empowers the Company, the Member, any Special
Member, any Manager or any other Person, the Company shall not, and none of the
Member, any Special Member, any Manager or any other Person on behalf of the
Company shall, without the prior unanimous consent of the Managers, including
each of the Independent Managers, do any of the following: (i) engage in any
business or activity other than those set forth in Section 2.03; (ii) except as
provided in the Basic Documents, incur any indebtedness, other than the
Transition Bonds and ordinary course expenses as set forth in Section 2.03, or
assume or guarantee any indebtedness of any other entity; (iii) make a general
assignment for the benefit of creditors; (iv) file a petition commencing a
voluntary bankruptcy; (v) file a petition or answer seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution (to the fullest
extent permitted by law) or similar relief under any statute, law or regulation;
(vi) file an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
(to the fullest extent permitted by law) or similar relief under any statute,
law or regulation, or the entry of any order appointing a trustee, liquidator or
receiver of it or of its assets or any substantial portion thereof; (vii) seek,
consent to or acquiesce in the appointment of a trustee, receiver or liquidator
of it or of all or any substantial part of its assets; (viii) consolidate or
merge with or into any other entity or convey or transfer substantially all of
its properties and assets substantially as an entirety to any entity, or (ix)
amend this Agreement, or take any other action, in furtherance of any such
action. With regard to any action contemplated by the preceding sentence, or
with regard to any action taken or determination made at any time when the
Company is insolvent, each Independent Manager will to the fullest extent
permitted by law, including Section 18-1101(c) of the Act, owe its primary
fiduciary duty to the Company (including the creditors of the Company).

                                       12

<PAGE>

          (c) No Independent Manager shall at any time serve as trustee in
bankruptcy for any Affiliate of the Company.

     SECTION 4.05. Appointment and Vacancy. The Member will appoint each
                   -----------------------
Manager, including any Manager to be appointed by reason of an increase in the
number of Managers.

     SECTION 4.06. Term. Each Manager shall hold office until his successor
                   ----
shall be selected by the Member and qualified, or until his or her earlier
death, resignation or removal as provided in this Agreement.

     SECTION 4.07. Removal. Subject to Section 4.15, the Member may remove, with
                   -------
or without cause, any Manager.

     SECTION 4.08. Resignation. Any Manager may resign at any time. Such
                   -----------
resignation shall be made in writing and shall take effect at the time specified
therein or, if no time is specified therein, at the time of its receipt by the
remaining Managers; provided, that the resignation of an Independent Manager
shall not be effective until a replacement Independent Manager (i) shall have
accepted his or her appointment as an Independent Manager, and (ii) shall have
executed a counterpart to this Agreement as required by Section 6.05. The
acceptance of a resignation shall not be necessary to make it effective, unless
so expressly provided in the resignation.

     SECTION 4.09. Place of Meetings of Managers. Any meetings of the Managers
                   -----------------------------
may be held either within or without the State of Delaware at such place or
places as shall be determined from time to time by resolution of the Managers.

     SECTION 4.10. Meetings of Managers. Meetings of the Managers may be held
                   --------------------
when called by any Managers or Manager. The Manager or Managers calling any
meeting shall cause notice to be given of such meeting, including therein the
time, date and place of such meeting, to each Manager at least two Business Days
before such meeting. The business to be transacted at, or the purpose of, any
meeting of the Managers shall be specified in the notice or waiver of notice of
any such meeting. If fewer than all the Managers are present in person, by
telephone or by proxy, business transacted at any such meeting shall be confined
to the business or purposes specifically stated in the notice or waiver of
notice of such meeting.

     SECTION 4.11. Quorum; Majority Vote. At all meetings of the Managers, the
                   ---------------------
presence in person, by telephone or by proxy of a majority of the Managers shall
be necessary and sufficient to constitute a quorum for the transaction of
business unless a greater number is required by this Agreement or by law. The
act of a majority of the Managers present in person, by telephone or by proxy at
a meeting at which a quorum is present in person, by telephone or by proxy shall
be the act of the Managers, except as otherwise provided by law or this
Agreement. If a quorum shall not be present in person, by telephone or by proxy
at any meeting of the Managers, the Managers present in person, by telephone or
by proxy at the meeting may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
in person, by telephone or by proxy.

     SECTION 4.12. Methods of Voting; Proxies. A Manager may vote either in
                   --------------------------
person, by telephone, by electronic transmission or by proxy executed in writing
by the Manager; provided

                                       13

<PAGE>

that the Person designated to act as proxy for an Independent Manager must be an
Independent Manager.

     SECTION 4.13. Actions Without a Meeting. Any action required or permitted
                   -------------------------
to be taken at a meeting of the Managers may be taken without a meeting, without
prior notice, and without a vote, if a consent in writing, setting forth the
action so taken, is signed by the Managers having not fewer than the minimum
number of votes that would be necessary to take the action at a meeting at which
all Managers entitled to vote on the action were present and voted. Copies of
any such consents shall be filed with the minutes and permanent records of the
Company.

     SECTION 4.14. Telephone and Similar Meetings. The Managers, or members of
                   ------------------------------
any committee thereof, may participate in and hold meetings by means of
conference telephone or similar communications equipment by means of which all
Persons participating in the meeting can hear each other. Such participation in
any such meeting shall constitute presence in person at such meeting, except
where a Person participates in such meeting for the express purpose of objecting
to the transaction of any business on the ground that such meeting is not
lawfully called or convened.

     SECTION 4.15. Managers. The Member and each Manager shall take all actions
                   --------
necessary from time to time to ensure that at all times the number of Managers
shall be not less than three nor more than five; provided, however, that
pursuant to Section 4.04, the Company shall at all times have at least two
Independent Managers. The Managers upon the execution of this Agreement shall be
those persons identified on Schedule C.

     SECTION 4.16. Compensation. The Managers, other than the Independent
                   ------------
Managers, shall not receive any compensation from the Company. The compensation
for the performance of Reliant Energy, as Administrator under the Administration
Agreement, shall include the compensation of Persons serving as Managers, other
than the Independent Managers. The compensation of the Independent Managers
shall be paid by the Company and shall be fixed from time to time by the
Managers consistent with the prevailing market rate for independent managers in
similar undertakings.

                                   ARTICLE V

                                    OFFICERS

     SECTION 5.01. Designation; Term; Qualifications. The Managers may, from
                   ---------------------------------
time to time, designate one or more Persons to be officers of the Company. Any
officer so designated shall have such title and authority and perform such
duties as the Managers may, from time to time, delegate to him or her. Each
officer shall hold office for the term for which such officer is designated and
until his or her successor shall be duly designated and shall qualify or until
his or her death, resignation or removal as provided in this Agreement. Any
Person may hold any number of offices. No officer need be a Manager, the Member,
a Delaware resident or a United States citizen. The persons identified on
Schedule D are hereby designated the initial officers of the Company.

                                       14

<PAGE>

     SECTION 5.02. Removal and Resignation. Any officer of the Company may be
                   -----------------------
removed as such, with or without cause, by the Managers at any time. Any officer
of the Company may resign as such at any time upon written notice to the
Company. Such resignation shall be made in writing and shall take effect at the
time specified therein or, if no time is specified therein, at the time of its
receipt by the Managers.

     SECTION 5.03. Vacancies. Any vacancy occurring in any office of the Company
                   ---------
may be filled by the Managers.

     SECTION 5.04. Compensation. The officers of the Company shall not receive
                   ------------
any compensation from the Company. The compensation for the performance of
Reliant Energy, as Administrator under the Administration Agreement, shall
include the compensation of Persons serving as officers of the Company.

                                   ARTICLE VI

                                     MEMBER

     SECTION 6.01. Powers. Subject to the provisions of this Agreement and the
                   ------
Act, all powers shall be exercised by or under the authority of, and the
business and affairs of the Company shall be controlled by, the Member pursuant
to Section 6.03. The Member may not and shall not resign from the Company.
Pursuant to Section 4.01, the Member has delegated such powers to the Managers.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the Member shall have the following powers,
subject to Section 4.04 in all cases:

     First: To select and remove the Managers and prescribe such powers and
duties for them as may be consistent with the Act and other applicable law and
this Agreement.

     Second: To conduct, manage and control the affairs and business of the
Company, and to make such rules and regulations therefor consistent with the Act
and other applicable law and this Agreement.

     Third: To change the registered office of the Company in Delaware from one
location to another; to fix and locate from time to time one or more other
offices of the Company; and to designate any place within or without the State
of Delaware for the conduct of the business of the Company.

     SECTION 6.02. Compensation of Member. The Company shall have authority to
                   ----------------------
pay to the Member reasonable compensation for the Member's services to the
Company (other than services to be provided to the Company by the Member
pursuant to the Administration Agreement and the Servicing Agreement, the
compensation for which is governed by such agreements), subject to the approval
of the PUCT or the deemed approval by the PUCT. With respect to the PUCT's
approval of the compensation of the Member,

          (a) any Manager may request the approval of the PUCT by delivering to
the PUCT's executive director and general counsel a written request for such
approval, which request shall contain:

                                       15

<PAGE>

               (i)   a reference to Docket No. 21655;

               (ii)  an Officer's Certificate stating that the proposed
     compensation has been approved by the Managers; and

               (iii) a statement identifying the person to whom the PUCT or its
     staff is to address its approval to the proposed compensation amount or
     request additional time;

          (b)  The PUCT shall, within fifteen days of receiving the request for
approval complying with Section 6.02(a) above, either

               (i)   provide notice of its approval or lack of approval to the
     person specified in Section 6.02(a)(iii) above, or

               (ii)  be conclusively deemed to have approved the proposed
     compensation,

unless, within fifteen days of receiving the request for approval complying with
Section 6.02(a) above, the PUCT or its staff delivers to the office of the
person specified in Section 6.02(a)(iii) above a written statement requesting an
additional amount of time not to exceed thirty days in which to consider whether
to approve the proposed compensation. If the PUCT or its staff requests an
extension of time in the manner set forth in the preceding sentence, then the
PUCT shall either provide notice of its approval or lack of approval to the
person specified in Section 6.02(a)(iii) above no later than the last day of
such extension of time or be conclusively deemed to have approved the proposed
compensation on the last day of such extension of time. It is understood that
the compensation paid to the Member under the provisions of this Section shall
be determined without regard to the income of the Company, shall not be deemed
to constitute distributions to the recipient of any profit, loss or capital of
the Company and shall be considered as an operating expense of the Company.

     SECTION 6.03. Actions by the Member. All actions of the Member may be taken
                   ---------------------
by written resolution of the Member which shall be signed on behalf of the
Member by an authorized officer of the Member and filed with the minutes and
records of the Company.

     SECTION 6.04. Control by Member. To the extent the Member takes any action
                   -----------------
with respect to the Company (including by means of its appointment of any
individual Manager or its control or employment of any individual Manager in any
other capacity), the Member, or any such Manager, as applicable, will act in
good faith in accordance with the terms of this Agreement, and make decisions
with respect to the business and daily operations of the Company independent of,
and not dictated by, in the case of the Manager, the Member, or in either case
any Affiliate of the foregoing, and, to the fullest extent permitted by law, any
such Manager shall bear a fiduciary duty to the Company (including its
creditors) under the circumstances set forth in Section 4.04.

     SECTION 6.05. Special Member. Upon the occurrence of any event that causes
                   --------------
the Member to cease to be a member of the Company (other than upon an assignment
by the Member of all of its limited liability company interest in the Company
and the admission of the transferee pursuant to Section 7.01), each person
acting as an Independent Manager pursuant to

                                       16

<PAGE>

Section 4.04 shall, without any action of any Person and simultaneously with the
Member ceasing to be a member of the Company, automatically be admitted to the
Company as a Special Member and shall continue the Company without dissolution.
No Special Member may resign from the Company or transfer its rights as Special
Member unless (i) a successor Special Member has been admitted to the Company as
Special Member by executing a counterpart to this Agreement, and (ii) such
successor has also accepted its appointment as Independent Manager, provided,
however, the Special Members shall automatically cease to be members of the
Company upon the admission to the Company of a substitute Member (who may be
approved by the personal representative of the last Member that ceased to be a
member of the Company). Each Special Member shall be a member of the Company
that has no interest in the profits, losses and capital of the Company and has
no right to receive any distributions of Company assets. Pursuant to Section
18-301(d) of the Act, a Special Member shall not be required to make any capital
contributions to the Company and shall not receive a limited liability company
interest in the Company. A Special Member, in its capacity as Special Member,
may not bind the Company. A Special Member, in its capacity as Special Member,
shall have no right to vote on, approve or otherwise consent to any action by,
or matter relating to, the Company, including, without limitation, the merger,
consolidation or conversion of the Company. In order to implement the admission
to the Company of each Special Member, each person acting as an Independent
Manager pursuant to Section 4.04 shall execute a counterpart to this Agreement.
Prior to its admission to the Company as Special Member, each person acting as
an Independent Manager pursuant to Section 4.04 shall not be a member of the
Company.

                                  ARTICLE VII

                                 COMMON INTEREST

     SECTION 7.01. General. (a) The Common Interest is hereby issued to the
                   -------
Member and shall be deemed fully paid and non-assessable. The Common Interest
constitutes personal property and shall be freely transferable and assignable in
whole but not in part upon registration of such transfer and assignment on the
books of the Company in accordance with the procedures established for such
purpose by the Managers. Upon registration of the transfer and assignment of the
Common Interest on the books of the Company, and without any further action of
any Person, the transferee/assignee shall be and become the sole Member of the
Company and shall have the rights and powers, and be subject to the restrictions
and liabilities, of the Member under this Agreement and the Act, and the
transferor/assignor shall cease to be the Member, each as of the date of such
registration. Notwithstanding the foregoing, the Common Interest may not be
transferred unless the Rating Agency Condition is satisfied. The Common Interest
of the Member shall be evidenced by a certificate in the form set forth in
Schedule B hereto.

          (b)  Certificates.
               ------------

               (i)  The Company shall issue one or more certificates in the name
                    of the Member. Each certificate shall be signed by a Manager
                    on behalf of the Company.

               (ii) The Company shall issue a certificate in place of any
                    certificate previously issued if the Holder of the Common
                    Interest represented

                                       17

<PAGE>

                    by such certificate, as reflected on the books and records
                    of the Company:

                    (A)  makes proof by affidavit, in form and substance
                         satisfactory to the Managers, that such previously
                         issued certificate has been lost, stolen or destroyed;

                    (B)  requests the issuance of a new certificate before the
                         Managers have notice that such previously issued
                         certificate has been acquired by a purchaser for value
                         in good faith and without notice of an adverse claim;

                    (C)  if requested by the Managers, delivers to the Company a
                         bond, in form and substance satisfactory to the
                         Managers, with such surety or sureties as the Managers
                         may direct, to indemnify the Company and the Managers
                         against any claim that may be made on account of the
                         alleged loss, destruction or theft of the previously
                         issued certificate; and

                    (D)  satisfies any other reasonable requirements imposed by
                         the Managers.

              (iii) Upon a Member's transfer in accordance with the provisions
                    of this Agreement of the Common Interest represented by a
                    certificate, the transferee of the Common Interest shall
                    deliver such certificate to the Managers for cancellation,
                    and a Manager shall thereupon issue a new certificate to
                    such transferee.

     SECTION 7.02. Distributions. The Member shall be entitled to receive, out
                   -------------
of the assets of the Company legally available therefor, when, as and if
declared by unanimous vote of the Managers, distributions payable in cash in
such amounts, if any, as the Managers shall declare. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not be
required to make a distribution to the Member on account of its interest in the
Company if such distribution would violate Sections 18-607 or 18-804 of the Act
or any other applicable law or any Basic Document.

     SECTION 7.03. Rights on Liquidation, Dissolution or Winding Up.
                   ------------------------------------------------

          (a) The Company shall be dissolved, and its affairs shall be wound up
upon the first to occur of the following: (i) the termination of the legal
existence of the last remaining member of the Company or the occurrence of any
other event which terminates the continued membership of the last remaining
member of the Company in the Company unless the business of the Company is
continued in a manner permitted by this Agreement or the Act or (ii) the entry
of a decree of judicial dissolution under Section 18-802 of the Act.

          (b) In the event of dissolution, the Company shall conduct only such
activities as are necessary to wind up its affairs (including the sale of the
assets of the Company in an orderly

                                       18

<PAGE>

manner), and the assets of the Company shall be applied in the manner, and in
the order of priority, set forth in Section 18-804 of the Act.

          (c) The Company shall terminate when (i) all of the assets of the
Company, after payment of or due provision for all debts, liabilities and
obligations of the Company shall have been distributed to the Member in the
manner provided for in this Agreement and (ii) the Certificate of Formation
shall have been canceled in the manner required by the Act.

          (d) Neither the sale of all or substantially all of the property or
business of the Company, nor the merger, conversion or consolidation of the
Company into or with another company or other entity, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purpose of this Section 7.03.

          (e) The commencement of a Bankruptcy, insolvency, receivership or
other similar proceeding by or against the Company shall not result in the
dissolution of the Company or in the cessation of the interest of the Member in
the Company.

          (f) Upon the occurrence of any event that causes the last remaining
member of the Company to cease to be a member of the Company, to the fullest
extent permitted by law, the personal representative of such member is hereby
authorized to, and shall, within 90 days after the occurrence of the event that
terminated the continued membership of such member in the Company, agree in
writing (i) to continue the Company and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of the Company, effective as of the occurrence of the event that
terminated the continued membership of the last remaining member of the Company
in the Company.

          (g) Notwithstanding any other provision of this Agreement, the
Bankruptcy of the Member or any Special Member shall not cause the Member or
Special Member, respectively, to cease to be a member of the Company, and upon
the occurrence of such an event, the business of the Company shall continue
without dissolution.

     SECTION 7.04. Redemption. The Common Interest shall not be redeemable.
                   ----------

     SECTION 7.05. Voting Rights. Subject to Section 4.04, the Member shall have
                   -------------
the sole right to vote on all matters as to which members of a limited liability
company shall be entitled to vote pursuant to the Act and other applicable law.

                                  ARTICLE VIII

                  ALLOCATIONS; DISTRIBUTIONS; EXPENSES; TAXES;
                               BOOKS; AND REPORTS

     SECTION 8.01. Allocations. Except as may be required by section 704(c) of
                   -----------
the Code and Treasury Regulation section 1.704-1(b)(2)(iv)(f)(4), all items of
income, gain, loss, deduction and credit of the Company for each Fiscal Year
shall be allocated to the Member. Any credit available for federal income tax
purposes shall be allocated to the Member in the same manner.

                                       19

<PAGE>

     SECTION 8.02. Distributions. All distributions shall be made to the Member
                   -------------
from surplus funds. Except as provided in Section 8.03, all distributions shall
be made in such amounts and at such times as determined by the Managers.

     SECTION 8.03. Limitation Upon Distributions. No distribution shall be
                   -----------------------------
declared and paid unless, after the distribution is made, no default has
occurred and is continuing under the Indenture or any Series of Transition Bonds
then outstanding.

     SECTION 8.04. Expenses. Except as otherwise provided in this Agreement, and
                   --------
subject to the provisions of the Basic Documents, the Company shall be
responsible for all expenses and the allocation thereof including without
limitation:

          (a) all expenses incurred by the Member or its Affiliates in
organizing the Company;

          (b) all expenses related to the payment of the principal of and
interest on and other amounts in respect of the Transition Bonds issued by the
Company;

          (c) all expenses related to the business of the Company and all
routine administrative expenses of the Company, including any amounts payable
under the Administration Agreement and the Servicing Agreement, the maintenance
of books and records of the Company and the preparation and dispatch to the
Member of checks, financial reports, tax returns and notices required pursuant
to this Agreement;

          (d) all expenses incurred in connection with any litigation or
arbitration involving the Company (including the cost of any investigation and
preparation) and the amount of any judgment or settlement paid in connection
therewith;

          (e) all expenses for indemnity or contribution payable by the Company
to any Person;

          (f) all expenses incurred in connection with the collection of amounts
due to the Company from any Person;

          (g) all expenses incurred in connection with the preparation of
amendments to this Agreement, the other Basic Documents and any documents
required by any of the foregoing;

          (h) all expenses incurred in connection with the liquidation,
dissolution and winding up of the Company; and

          (i) all expenses otherwise allocated in good faith to the Company by
the Managers.

     SECTION 8.05. Tax Elections. The Managers shall make the following
                   -------------
elections on behalf of the Company:

          (a) To elect the calendar year as the Company's Fiscal Year;

                                       20

<PAGE>

          (b) To elect the accrual method of accounting;

          (c) To elect to treat all organization and start-up costs of the
Company as deferred expenses amortizable over 60 months under Section 195 of the
Code; and

          (d) To elect with respect to such other federal, state and local tax
matters as the Managers shall agree upon from time to time.

     SECTION 8.06. Annual Tax Information. The Managers shall cause the Company
                   ----------------------
to deliver to the Member all information necessary for the preparation of the
Member's federal or state income tax return.

     SECTION 8.07. Tax Matters Member. The Member shall communicate and
                   ------------------
negotiate with the Internal Revenue Service on any tax matter on behalf of the
Member and the Company.

     SECTION 8.08. Maintenance of Books. The Company shall keep books and
                   --------------------
records of accounts and shall keep minutes of the proceedings of the Member, the
Managers and each committee of the Managers. The Fiscal Year shall be the
accounting year of the Company.

     SECTION 8.09. Reports. Within sixty (60) days following the end of each
                   -------
Fiscal Year during the term of the Company, the Managers shall cause to be
furnished to the Member a balance sheet, an income statement and a statement of
changes in Member's capital account for, or as of the end of, that Fiscal Year.
Such financial statements shall be prepared in accordance with the accounting
method selected by the Managers consistently applied (except as therein noted),
and shall be accompanied by an audit report from a nationally recognized
accounting firm. The Managers also may cause to be prepared or delivered such
other reports as they may deem appropriate. The Company shall bear the costs of
all such financial statements and reports.

                                   ARTICLE IX

                                 INDEMNIFICATION

     SECTION 9.01. Mandatory Indemnification of Member, the Special Members and
                   ------------------------------------------------------------
the Managers. Any Person who was or is a party or is threatened to be made a
------------
party to or is involved in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative (hereafter a "Proceeding"), or any appeal in such a Proceeding or
any inquiry or investigation that could lead to such a Proceeding by reason of
the fact that such Person is or was the Member, a Special Member or a Manager,
or by reason of the fact that the Member, such Special Member or such Manager is
or was serving at the request of the Company as a member, director, manager,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, limited liability
company or partnership, joint venture, partnership, trust, sole proprietorship,
employee benefit plan or other enterprise, shall be indemnified by the Company,
to the fullest extent permitted by applicable law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide greater or broader
indemnification rights than such law permitted the Company to provide prior to
such amendment) against judgments, penalties (including, without limitation,
excise and similar taxes and punitive damages), fines, settlements and
reasonable expenses (including,

                                       21

<PAGE>

without limitation, reasonable attorneys' fees) actually incurred by such Person
in connection with such Proceeding except that such Person shall not be entitled
to indemnification for any judgment, penalty, fine, settlement or expense
directly caused by such Person's fraud, gross negligence or willful misconduct.
It is expressly acknowledged that the indemnification provided in this Article
IX could involve indemnification for negligence or under theories of strict
liability. Notwithstanding anything herein to the contrary, for so long as any
Transition Bonds are outstanding, no payment from funds of the Company (as
distinct from funds from other sources, such as insurance) of any indemnity of
the Member, Special Member or any Manager under this Article IX shall be payable
except in amounts and out of funds available for payment of Company expenses as
provided in the Indenture.

     SECTION 9.02. Mandatory Advancement of Expenses. Expenses incurred by a
                   ---------------------------------
Person of the type entitled to be indemnified under Section 9.01 in defending
any Proceeding shall be paid or reimbursed by the Company in advance of the
final disposition of the Proceeding to the extent that such expenses are
Qualified Costs, without any determination as to such Person's ultimate
entitlement to indemnification under Section 9.01, upon receipt of a written
affirmation by such Person of such Person's good faith belief that such Person
has met the standard of conduct necessary for indemnification under this
Agreement and a written undertaking by or on behalf of such Person to repay all
amounts so advanced if it shall ultimately be determined that such Person is not
entitled to be indemnified by the Company as authorized in Section 9.01 or
otherwise. The written undertaking shall be an unlimited general obligation of
the Person but need not be secured and shall be accepted without reference to
financial ability to make repayment.

     SECTION 9.03. Indemnification of Officers, Employees and Agents. The
                   -------------------------------------------------
Company shall indemnify and pay and advance expenses to an officer, employee or
agent of the Company to the same extent and subject to the same conditions under
which it may indemnify and pay and advance expenses to the Member, any Special
Member or any Managers under this Article IX, and the Company shall indemnify
and pay and advance expenses to any Person who is or was an officer, employee or
agent of the Company and who is or was serving at the request of the Company as
a member, manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company or partnership, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against any
liability asserted against such Person and incurred by such Person in such a
capacity or arising out of such Person's status as such to the same extent and
subject to the same conditions that the Company may indemnify and pay and
advance expenses to the Member or a Special Member or any Manager under this
Article IX.

     SECTION 9.04. Nonexclusivity of Rights. The indemnification and advancement
                   ------------------------
and payment of expenses provided by this Article IX (i) shall not be deemed
exclusive of any other rights to which the Member, a Special Member, a Manager
or other Person seeking indemnification may be entitled under any statute,
agreement, decision of the Member or disinterested Managers, or otherwise both
as to action in such Person's official capacity and as to action in another
capacity while holding such office, (ii) shall continue as to any Person who has
ceased to serve in the capacity which initially entitled such Person to
indemnity and advancement and payment of expenses, and (iii) shall inure to the
benefit of the heirs, executors,

                                       22

<PAGE>

administrators, successors and assigns of the Member, such Special Member, such
Manager or other Person.

     SECTION 9.05. Contract Rights. The rights granted pursuant to this Article
                   ---------------
IX shall be deemed to be contract rights, and no amendment, modification or
repeal of this Article IX shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings arising prior to any such
amendment, modification or repeal.

     SECTION 9.06. Insurance. The Company may purchase and maintain insurance or
                   ---------
other arrangement or both, at its expense, on behalf of itself or any Person who
is or was serving as the Member, a Special Member, a Manager, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
member, manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company or partnership, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, against any
liability, expense or loss, whether or not the Company would have the power to
indemnify such Person against such liability under the provisions of this
Article IX.

     SECTION 9.07. Savings Clause. If this Article IX or any portion of this
                   --------------
Agreement shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify and hold harmless
the Member, each Special Member, each Manager or any other Person indemnified
pursuant to this Article IX as to costs, charges and expenses (including,
without limitation, attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to the fullest extent permitted by
any applicable portion of this Article IX that shall not have been invalidated
and to the fullest extent permitted by applicable law.

     SECTION 9.08. Other Ventures. It is expressly agreed that the Member, any
                   --------------
Special Member, any Manager and any Affiliates, officers, directors, managers,
shareholders, members, partners or employees of the Member, any Special Member
or any Manager, may engage in other business ventures of every nature and
description, whether or not in competition with the Company, independently or
with others, and the Company shall not have any rights in and to any independent
venture or activity or the income or profits derived therefrom.

     SECTION 9.09. Other Arrangements Not Excluded. The indemnification and
                   -------------------------------
advancement of expenses authorized in or ordered by a court pursuant to this
Article IX:

          (a) does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any agreement,
decision of the Member or otherwise, for either an action of the Member, any
Special Member or any Manager, officer, employee or agent in the official
capacity of such Person or an action in another capacity while holding such
position, except that indemnification, unless ordered by a court pursuant to
Section 9.05 above, may not be made to or on behalf of the Member, any Special
Member or any Manager if a final adjudication established that its acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and was material to the cause of action; and

                                       23

<PAGE>

          (b) continues for a Person who has ceased to be the Member, a Special
Member, Manager, officer, employee or agent and inures to the benefit of the
successors, heirs, executors and administrators of such a Person.

     SECTION 9.10. Survival. The forgoing provisions of this Article IX shall
                   --------
survive any termination of this Agreement.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

     SECTION 10.01. Offset. Whenever the Company is to pay any sum to the
                    ------
Member, any amounts the Member owes the Company may be deducted from such sum
before payment.

     SECTION 10.02. Notices. Except as expressly set forth to the contrary in
                    -------
this Agreement, all notices, requests or consents provided for or permitted to
be given under this Agreement shall be in writing and shall be given either by
depositing such writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering such writing to the recipient in person, by reputable overnight
courier, or by facsimile transmission; and a notice, request or consent given
under this Agreement shall be effective on receipt by the Person to whom sent or
three business days after deposit in the United States mail, registered or
certified, postage prepaid and properly addressed. All notices, requests and
consents to be sent to the Member shall be sent to or made to 1111 Louisiana,
Houston, Texas 77002, Attention: Treasurer or such other address as the Member
may specify by notice to the Company and the Managers. Any notice, request, or
consent to the Company or the Managers must be given to the Managers at the
following address: 1111 Louisiana, Suite 4667, Houston, Texas 77002, Attention:
Manager. Whenever any notice is required to be given by law or this Agreement, a
written waiver thereof, signed by the Person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.

     SECTION 10.03. Benefits of Agreement; No Third-Party Rights. Subject to
                    --------------------------------------------
Section 10.09, none of the provisions of this Agreement shall be for the benefit
of or enforceable by any creditor of the Company or by any creditor of the
Member. Nothing in this Agreement shall be deemed to create any right in any
Person (other than Persons indemnified pursuant to Article IX) not a party
hereto, and this Agreement shall not be construed in any respect to be a
contract in whole or in part for the benefit of any third Person.

     SECTION 10.04. Effect of Waiver or Consent. A waiver or consent, express or
                    ---------------------------
implied, to or of any breach or default by any Person in the performance by such
Person of its obligations with respect to the Company shall not be a consent or
waiver to or of any other breach or default in the performance by such Person of
the same or any other obligations of such Person with respect to the Company.

     SECTION 10.05. Governing Law; Severability. This Agreement shall be
                    ---------------------------
governed by and shall be construed in accordance with the law of the State of
Delaware, excluding any conflicts-of-law rule or principle that might refer the
governance or the construction of this

                                       24

<PAGE>

Agreement to the law of another jurisdiction. In the event of a direct conflict
between the provisions of this Agreement and any mandatory provision of the Act,
then the applicable provision of the Act shall control. If any provision of this
Agreement or the application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of that provision to other Persons or circumstances shall not be
affected thereby and such provision shall be enforced to the fullest extent
permitted by law.

     SECTION 10.06. No Bankruptcy Petition; No Dissolution.
                    --------------------------------------

         (a)  To the fullest extent permitted by law, the Member, each Special
Member and each Manager hereby covenant and agree (or shall be deemed to have
hereby covenanted and agreed) that, prior to the date which is one year and one
day after the termination of the Indenture and the payment in full of every
Series of Transition Bonds and any other amounts owed under the Indenture,
including, without limitation, any amounts owed to third-party credit enhancers
or swap or hedge agreement counterparties with respect to the Transition Bonds,
it will not acquiesce, petition or otherwise invoke or cause the Company to
invoke the process of any court or Governmental Authority for the purpose of
commencing or sustaining a case against the Company under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Company or any substantial part of the property of the Company, or ordering the
winding up or liquidation of the affairs of the Company; provided, however, that
nothing in this Section 10.06 shall constitute a waiver of any right to
indemnification, reimbursement or other payment from the Company pursuant to
this Agreement.

         (b)  To the fullest extent permitted by law, the Member, each Special
Member and each Manager hereby covenants and agrees (or shall be deemed to have
hereby covenanted and agreed) that, until the termination of the Indenture and
the payment in full of any Series of the Transition Bonds and any other amounts
owed under the Indenture, including without limitation, any amounts owed to
third-party credit enhancers or under any swap or hedge agreement, the Member,
such Special Member and such Manager will not consent to, or make application
for, or institute or maintain any action for, the dissolution of the Company
under Section 18-801 or 18-802 of the Act or otherwise.

         (c)  In the event that the Member, any Special Member or any Manager
takes action in violation of this Section 10.06, the Company agrees that it
shall file an answer with the court or otherwise properly contest the taking of
such action and raise the defense that the Member, the Special Member or
Manager, as the case may be, has agreed in writing not to take such action and
should be estopped and precluded therefrom and such other defenses, if any, as
its counsel advises that it may assert.

         (d)  The provisions of this Section 10.06 shall survive the termination
of this Agreement and the resignation, withdrawal or removal of the Member, any
Special Member or any Manager. Nothing herein contained shall preclude
participation by the Member, any Special Member or a Manager in assertion or
defense of its claims in any such proceeding involving the Company.

                                       25

<PAGE>

         SECTION 10.07. Amendment. Subject to Section 4.04(b)(ix) hereof, so
                        ---------
long as the Rating Agency Condition is satisfied, the Trustee shall have given
its prior approval and, in the case of any amendment to Section 4.16, 5.04 or
6.02, the PUCT shall have given its prior written approval or be deemed to have
given its prior written approval, this Agreement may be modified, altered,
supplemented or amended in writing by the Member; provided further that neither
approval of the Trustee nor satisfaction of the Rating Agency Condition shall be
necessary if such modification, alteration, supplement or amendment is
necessary: (i) to cure any ambiguity or (ii) to correct or supplement any
provision in a manner consistent with the intent of this Agreement. With respect
to the PUCT's approval of any amendment to Section 4.16, 5.04 or 6.02,

             (a)   any Manager may request the approval of the PUCT by
delivering to the PUCT's executive director and general counsel a written
request for such approval, which request shall contain:

                   (i)   a reference to Docket No. 21655;

                   (ii)  an Officer's Certificate stating that the proposed
             amendment has been approved by all necessary parties; and

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

             (b)   The PUCT shall, within fifteen days of receiving the request
for approval complying with Section 10.07(a) above, either

                   (i)   provide notice of its approval or lack of approval to
             the person specified in Section 10.07(a)(iii) above, or

                   (ii)  be conclusively deemed to have approved the proposed
             amendment,

unless, within fifteen days of receiving the request for approval complying with
Section 10.07(a) above, the PUCT or its staff delivers to the office of the
person specified in Section 10.07(a)(iii) above a written statement requesting
an additional amount of time not to exceed thirty days in which to consider
whether to approve the proposed amendment. If the PUCT or its staff requests an
extension of time in the manner set forth in the preceding sentence, then the
PUCT shall either provide notice of its approval or lack of approval to the
person specified in Section 10.07(a)(iii) above no later than the last day of
such extension of time or be conclusively deemed to have approved the proposed
amendment on the last day of such extension of time.

         SECTION 10.08. Headings and Sections. The headings in this Agreement
                        ---------------------
are inserted for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Agreement or any
provision hereof.

         SECTION 10.09. Binding Agreement. Notwithstanding any other provision
                        -----------------
of this Agreement, the Member agrees that this Agreement constitutes a legal,
valid and binding Agreement of the Member, and is enforceable against the Member
by the Independent Managers,

                                       26

<PAGE>

in accordance with its terms. In addition, the Independent Managers shall be
intended beneficiaries of this Agreement.

         SECTION 10.10. Counterparts. This Agreement may be executed in any
                        ------------
number of counterparts, each of which shall be deemed an original of this
Agreement and all of which together shall constitute one and the same
instrument.

                                       27

<PAGE>

         IN WITNESS WHEREOF, this Amended and Restated Limited Liability Company
Agreement is hereby executed by the undersigned as of the date first written
above.

                                     MEMBER:

                                     RELIANT ENERGY, INCORPORATED

                                     __________________________________________
                                     Name:
                                     Title:

                                     Agreed to and Consented to by the Special
                                     Members and Independent Managers:

                                     __________________________________________

                                       28

<PAGE>

                                   SCHEDULE A

                   Schedule of Capital Contributions of Member

                                 COMMON INTEREST

            Member            Capital Contribution    Common Interest Percentage
            ------            --------------------    --------------------------
 Reliant Energy, Incorporated      $3,744,485                     100%

                                        1

<PAGE>

                                   SCHEDULE B

                         CERTIFICATE OF COMMON INTEREST

                                       of

                   RELIANT ENERGY TRANSITION BOND COMPANY LLC

                           A Limited Liability Company

                 Formed under the Laws of the State of Delaware

         This Certificate is issued and shall be held subject to the provisions
of the Amended and Restated Limited Liability Company Agreement of RELIANT
ENERGY TRANSITION BOND COMPANY LLC, dated as of October 24, 2001, as the same
may be amended from time to time.

         This Certificate of Common Interest certifies that Reliant Energy,
Incorporated, a Texas corporation, is the registered holder of the entire Common
Interest of the Company, which Common Interest shall be transferable only on the
books of the Company by the holder hereof in person or by a duly authorized
attorney upon surrender of this Certificate with a proper endorsement.

         IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by one of its duly authorized Managers this 24th day of October, 2001.

                                              RELIANT ENERGY TRANSITION BOND
                                              COMPANY LLC

                                              __________________________________
                                              Title:  Manager

                                        1

<PAGE>

                   RELIANT ENERGY TRANSITION BOND COMPANY LLC

         For Value Received the undersigned hereby sells, assigns and transfers
unto ___________________________________________________________________________
the entire Common Interest of the Company represented by the within Certificate
and does hereby irrevocably constitute and appoint______________________________
______________, Attorney, to transfer said Common Interest on the books of the
Company with full power of substitution in the premises.

Dated: __________________

_____________________________

                                        1

<PAGE>

                                   SCHEDULE C

                                   Managers*
                                   --------

Names
-----

Marc Kilbride
James S. Brian
Gary L. Whitlock

                              Independent Managers*
                              --------------------

Names
-----

Andrew L. Stidd
Bernard J. Angelo

_________________________
*       The Member adopted resolutions on October 22, 2001 appointing James S.
Brian and Gary L. Whitlock as additional Managers and upon the closing of the
offering and sale of the initial Series of Transition Bonds appointing Andrew L.
Stidd and Bernard J. Angelo as Independent Managers.

                                       1

<PAGE>
                                   SCHEDULE D

                                Initial Officers
                                ----------------

Names                                   Office
-----                                   ------

Gary L. Whitlock                        President
Marc Kilbride                           Treasurer
Scott E. Rozzell                        Secretary
Rufus S. Scott                          Assistant Secretary
Linda Geiger                            Assistant Secretary
Richard B. Dauphin                      Assistant Secretary

                                        1<PAGE>

                                                                     Exhibit 4.4

                   RELIANT ENERGY TRANSITION BOND COMPANY LLC

                                     Issuer

                                       and

                              BANKERS TRUST COMPANY

                                     Trustee

                                       and

                              BANKERS TRUST COMPANY

                             Securities Intermediary

                                    INDENTURE

                          Dated as of October 24, 2001

                             ______________________

                            Securing Transition Bonds

                               Issuable in Series

<PAGE>

                                Table of Contents

<TABLE>
<S>                                                                                                      <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...................................................   2

     SECTION 1.01. DEFINITIONS ........................................................................   2
     SECTION 1.02. INCORPORATION BY REFERENCE OF THE TRUST INDENTURE ACT...............................   2
     SECTION 1.03. RULES OF CONSTRUCTION...............................................................   2

ARTICLE II THE TRANSITION BONDS .......................................................................   3

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

ARTICLE III COVENANTS .................................................................................  15

     SECTION 3.01. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST ................................  15
     SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY ....................................................  16
     SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST..............................................  16
     SECTION 3.04. EXISTENCE ..........................................................................  18
     SECTION 3.05. PROTECTION OF TRUST ESTATE .........................................................  18
     SECTION 3.06. OPINIONS AS TO TRUST ESTATE ........................................................  18
     SECTION 3.07. PERFORMANCE OF OBLIGATIONS .........................................................  19
     SECTION 3.08. NEGATIVE COVENANTS .................................................................  19
     SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE ..................................................  20
     SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS ................................  20
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                                         <C>
     SECTION 3.11. SUCCESSOR OR TRANSFEREE ...............................................................  21
     SECTION 3.12. NO OTHER BUSINESS .....................................................................  21
     SECTION 3.13. NO BORROWING...........................................................................  22
     SECTION 3.14. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES .....................................  22
     SECTION 3.15. CAPITAL EXPENDITURES ..................................................................  22
     SECTION 3.16. RESTRICTED PAYMENTS ...................................................................  22
     SECTION 3.17. NOTICE OF EVENTS OF DEFAULT ...........................................................  22
     SECTION 3.18. INSPECTION ............................................................................  23
     SECTION 3.19. ADJUSTED OVERCOLLATERALIZATION BALANCE SCHEDULES ......................................  23
     SECTION 3.20. SALE AGREEMENT, INTERCREDITOR AGREEMENT, ADMINISTRATION
     AGREEMENT AND SERVICING AGREEMENT COVENANTS .........................................................  23
     SECTION 3.21. TAXES .................................................................................  25

ARTICLE IV SATISFACTION AND DISCHARGE; DEFEASANCE ........................................................  26

     SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE ...................................  26
     SECTION 4.02. CONDITIONS TO DEFEASANCE ..............................................................  27
     SECTION 4.03. APPLICATION OF TRUST MONEY ............................................................  29
     SECTION 4.04. REPAYMENT OF MONEYS HELD BY PAYING AGENT ..............................................  29

ARTICLE V REMEDIES .......................................................................................  29

     SECTION 5.01. EVENTS OF DEFAULT .....................................................................  29
     SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT ....................................  30
     SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE .......................  31
     SECTION 5.04. REMEDIES; PRIORITIES ..................................................................  33
     SECTION 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE .............................................  34
     SECTION 5.06. LIMITATION OF PROCEEDINGS .............................................................  35
     SECTION 5.07. UNCONDITIONAL RIGHTS OF TRANSITION BONDHOLDERS TO RECEIVE PRINCIPAL, PREMIUM, IF
     ANY, AND INTEREST ...................................................................................  35
     SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES ....................................................  35
     SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE ........................................................  36
     SECTION 5.10. DELAY OR OMISSION NOT A WAIVER ........................................................  36
     SECTION 5.11. CONTROL BY TRANSITION BONDHOLDERS .....................................................  36
     SECTION 5.12. WAIVER OF PAST DEFAULTS ...............................................................  37
     SECTION 5.13. UNDERTAKING FOR COSTS..................................................................  37
     SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS ......................................................  37
     SECTION 5.15. ACTION ON TRANSITION BONDS ............................................................  38
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                        <C>
ARTICLE VI THE TRUSTEE ..................................................................................  38

     SECTION 6.01. DUTIES AND LIABILITIES OF TRUSTEE ....................................................  38
     SECTION 6.02. RIGHTS OF TRUSTEE ....................................................................  39
     SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE .........................................................  40
     SECTION 6.04. TRUSTEE'S DISCLAIMER .................................................................  40
     SECTION 6.05. NOTICE OF DEFAULTS ...................................................................  40
     SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.........................................................  40
     SECTION 6.07. COMPENSATION AND INDEMNITY ...........................................................  42
     SECTION 6.08. REPLACEMENT OF TRUSTEE ...............................................................  42
     SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER ..........................................................  43
     SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE ........................................  44
     SECTION 6.11. ELIGIBILITY; DISQUALIFICATION.........................................................  45
     SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER .....................................  45
     SECTION 6.13. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE ........................................  45

ARTICLE VII TRANSITION BONDHOLDERS' LISTS AND REPORTS ...................................................  45

     SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF TRANSITION BONDHOLDERS ..............  45
     SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO TRANSITION BONDHOLDERS ................  46
     SECTION 7.03. REPORTS BY ISSUER ....................................................................  46
     SECTION 7.04. REPORTS BY TRUSTEE ...................................................................  47
     SECTION 7.05. PROVISION OF SERVICER REPORTS.........................................................  47

ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES .......................................................  47

     SECTION 8.01. COLLECTION OF MONEY ..................................................................  47
     SECTION 8.02. COLLECTION ACCOUNT ...................................................................  48
     SECTION 8.03. RELEASE OF TRUST ESTATE ..............................................................  53
     SECTION 8.04. ISSUER OPINION OF COUNSEL ............................................................  54
     SECTION 8.05. REPORTS BY INDEPENDENT ACCOUNTANTS ...................................................  54
     SECTION 8.06. REP DEPOSIT ACCOUNT ..................................................................  54

ARTICLE IX SUPPLEMENTAL INDENTURES ......................................................................  55

     SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF TRANSITION BONDHOLDERS.....................  55
     SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF TRANSITION BONDHOLDERS .......................  56
     SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES .................................................  58
     SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE .....................................................  58
</TABLE>

                                      iii

<PAGE>

<TABLE>
<S>                                                                                                         <C>
     SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT ..................................................   58
     SECTION 9.06. REFERENCE IN TRANSITION BONDS TO SUPPLEMENTAL INDENTURES..............................   59
     SECTION 9.07. PUCT CONSENT .........................................................................   59

ARTICLE X REDEMPTION OF TRANSITION BONDS ................................................................   60

     SECTION 10.01. OPTIONAL REDEMPTION BY ISSUER .......................................................   60
     SECTION 10.02. MANDATORY REDEMPTION BY ISSUER ......................................................   60
     SECTION 10.03. FORM OF REDEMPTION NOTICE ...........................................................   60
     SECTION 10.04. PAYMENT OF REDEMPTION PRICE .........................................................   61

ARTICLE XI MISCELLANEOUS ................................................................................   61

     SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC ...........................................   61
     SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE ..............................................   62
     SECTION 11.03. ACTS OF TRANSITION BONDHOLDERS ......................................................   62
     SECTION 11.04. NOTICES, ETC., TO TRUSTEE, ISSUER, PUCT AND RATING AGENCIES .........................   63
     SECTION 11.05. NOTICES TO TRANSITION BONDHOLDERS; WAIVER ...........................................   64
     SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS .............................................   64
     SECTION 11.07. NOTICES TO LUXEMBOURG STOCK EXCHANGE ................................................   64
     SECTION 11.08. CONFLICT WITH TRUST INDENTURE ACT ...................................................   65
     SECTION 11.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS ............................................   65
     SECTION 11.10. SUCCESSORS AND ASSIGNS ..............................................................   65
     SECTION 11.11. SEPARABILITY ........................................................................   65
     SECTION 11.12. BENEFITS OF INDENTURE ...............................................................   65
     SECTION 11.13. LEGAL HOLIDAYS ......................................................................   65
     SECTION 11.14. GOVERNING LAW .......................................................................   65
     SECTION 11.15. COUNTERPARTS ........................................................................   66
     SECTION 11.16. ISSUER OBLIGATION ...................................................................   66
     SECTION 11.17. NO PETITION 66
</TABLE>

     SCHEDULE 1.  SCHEDULED OVERCOLLATERALIZATION LEVELS

     SCHEDULE 2.  SEMIANNUAL SERVICER'S CERTIFICATE

     SCHEDULE 3a

     SCHEDULE 3b

     SCHEDULE 3c

     APPENDIX A.  MASTER DEFINITIONS

                                       iv

<PAGE>

         INDENTURE dated as of October 24, 2001, between Reliant Energy
Transition Bond Company LLC, a Delaware limited liability company (the
"Issuer"), and Bankers Trust Company, a New York banking corporation, in its
 ------
capacity as trustee (the "Trustee") and Bankers Trust Company, in its capacity
                          -------
as the Securities Intermediary hereunder, (the "Securities Intermediary").
                                                -----------------------

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

                                 GRANTING CLAUSE

         The Issuer hereby absolutely and irrevocably Grants to the Trustee, as
trustee for the benefit of the Holders of the Transition Bonds from time to time
issued and outstanding, all of the Issuer's right, title and interest whether
now owned or hereafter acquired (and whether now existing or hereafter arising),
in, to and under (a) the Transition Property purchased by the Issuer from time
to time pursuant to the Sale Agreement and all proceeds thereof, (b) the Sale
Agreement, (c) all Bills of Sale delivered by the Seller pursuant to the Sale
Agreement, (d) the Servicing Agreement and any subservicing, agency,
intercreditor, or collection agreements executed in connection therewith,
including, without limitation, the Intercreditor Agreement, (e) the
Administration Agreement, (f) the Collection Account and all subaccounts thereof
(including for each Series, without limitation, the General Subaccount, the
Overcollateralization Subaccount, the Capital Subaccount, and the Reserve
Subaccount and any Defeasance Subaccount) and all cash, securities, instruments,
investment property or other assets credited to or deposited in the Collection
Account or any subaccount thereof from time to time or purchased with funds
therefrom, and all financial assets and securities entitlements carried therein
or credited thereto, (g) the REP Deposit Account, (h) any interest rate
protection agreement, swap agreement and hedge agreement, (i) all other property
of whatever kind owned from time to time by the Issuer other than any cash
released to the Issuer by the Trustee pursuant to Section 8.02, (j) all present
and future claims, demands, causes and choses in action in respect of any or all
of the foregoing and (k) all payments on or under and all proceeds of every kind
and nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, general intangibles,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, payment intangibles, letter-of-credit rights,
investment property, commercial tort claims, documents, rights to payment of any
and every kind, and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing (collectively, the "Trust Estate").
                                                         ------------

         Such Grants are made to the Trustee to have and to hold in trust to
secure the payment of principal of and premium, if any, and interest on, and any
other amounts (including all fees,

                                        1

<PAGE>

expenses, counsel fees and other amounts due and owing to the Trustee, and any
credit enhancement provider) owing in respect of, the Transition Bonds equally
and ratably without prejudice, preference, priority or distinction, except as
expressly provided in this Indenture and to secure performance by the Issuer of
all of the Issuer's obligations under this Indenture with respect to the
Transition Bonds, all as provided in this Indenture; provided, however, that in
                                                     --------  -------
no event shall the proceeds of the issuance of the Transition Bonds constitute a
portion of the Trust Estate.

         The Trustee, as trustee on behalf of the Holders of the Transition
Bonds, acknowledges such Grant, accepts the trusts hereunder in accordance with
the provisions hereof and agrees to perform its duties herein required.

                                   ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

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

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

                   "Commission" means the Securities and Exchange Commission.

                   "indenture securities" means the Transition Bonds.

                   "indenture to be qualified" means this Indenture.

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

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

         SECTION 1.03. RULES OF CONSTRUCTION.

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

                   (ii)  "including" means including without limitation;

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

                                        2

<PAGE>

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

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

                                   ARTICLE II

                              THE TRANSITION BONDS

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

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

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

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

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

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

                                        3

<PAGE>

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

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

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

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

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

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

               (i)   designation of the Series and, if applicable, the Classes
         thereof;

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

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

               (iv)  the Payment Dates for the Series and, if applicable, each
         Class thereof;

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

                                        4

<PAGE>

               (vi)   the Series Final Maturity Date for the Series and, if
         applicable, the Class Final Maturity Date for each Class thereof;

               (vii)  the Series Issuance Date for the Series;

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

               (ix)   the Authorized Denominations for the Series and, if
         applicable, each Class thereof;

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

               (xi)   the Expected Amortization Schedule for the Series and, if
         applicable, each Class thereof;

               (xii)  the Overcollateralization Amount with respect to the
         Series;

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

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

               (xv)   the credit enhancement, if any, applicable to the Series
         and each Class thereof; and

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

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

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

                                        5

<PAGE>

exchanged, the temporary Transition Bonds shall in all respects be entitled to
the same benefits under this Indenture as definitive Transition Bonds.

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

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

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

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

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

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

                                        6

<PAGE>

signature guaranteed by an Eligible Guarantor Institution in the form set forth
in such Transition Bond.

         No service charge shall be made to a Holder for any registration of
transfer or exchange of Transition Bonds (except as may be required by the rules
and regulations of the Luxembourg Stock Exchange with respect to any Transition
Bonds listed thereon), but, other than in respect of exchanges pursuant to
Section 2.04 or 9.06 not involving any transfer, the Issuer or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Transition Bonds.

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

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

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

                                        7

<PAGE>

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

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

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

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

         (a)  The Transition Bonds shall accrue interest as provided in the form
of Transition Bond attached to the Series Supplement for such Transition Bonds,
at the applicable Bond Rate specified therein, and such interest shall be
payable on each Payment Date as specified therein. Any installment of interest,
principal or premium, if any, payable on any Transition Bond which is punctually
paid or duly provided for by the Issuer on the applicable Payment Date shall be
paid to the Person in whose name such Transition Bond (or one or more
Predecessor Transition Bonds) is registered on the Record Date for such Payment
Date, by check mailed first-class, postage prepaid, to such Person's address as
it appears on the Transition Bond Register on such Record Date, by wire or in
such other manner as may be provided in the related Series Supplement, except
that with respect to Transition Bonds registered on a Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee and except for the final installment of
principal and premium, if any, payable with respect to such Transition Bond on a
Payment Date which shall be payable as provided in clause (b) below. The funds
represented by any such checks returned undelivered shall be held in accordance
with Section 3.03.

         (b)  The principal of each Transition Bond of each Series (and, if
applicable, Class) shall be payable in installments on each Payment Date
specified in the Expected Amortization Schedule included in the form of
Transition Bond attached to the Series Supplement for such Transition Bonds, but
only to the extent that moneys are available for such payment pursuant to
Section 8.02; provided that installments of principal not paid when scheduled to
              --------
be paid shall be paid upon receipt of moneys available for such purpose, in the
manner set forth in the applicable

                                        8

<PAGE>

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

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

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

         SECTION 2.10. AMOUNT; AUTHENTICATION AND DELIVERY OF TRANSITION BONDS.
The aggregate principal amount of Transition Bonds that may be authenticated and
delivered under the first Series Supplement to this Indenture shall not exceed
$748,897,000 plus the amount of any Refunding Issuance. The Issuer may issue
Transition Bonds of a new Series as a Financing Issuance or a Refunding
Issuance.

                                        9

<PAGE>

         Transition Bonds of a new Series may from time to time be executed by a
Manager on behalf of the Issuer and delivered to the Trustee for authentication
and thereupon the same shall be authenticated and delivered by the Trustee upon
Issuer Request and upon delivery by the Issuer, at the Issuer's expense, to the
Trustee of the following:

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

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

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

         (4) Certificates of the Issuer and the Seller.
             -----------------------------------------

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

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

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

                    (iii) that the Issuer has appointed a firm of Independent
              certified public accountants as contemplated in Section 8.05 and
              identifying such firm;

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

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

                                       10

<PAGE>

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

              (b) An Officer's Certificate from the Seller, dated as of the
         Series Issuance Date, to the effect that, (A) in the case of the
         Transition Property to be transferred to the Issuer on such date,
         immediately prior to the conveyance thereof to the Issuer pursuant to
         the Sale Agreement, the Seller was the sole owner of the rights and
         interests under the Financing Order that will comprise the Transition
         Property upon transfer to the Issuer and such ownership interest was
         perfected; such Transition Property has been validly transferred and
         sold to the Issuer free and clear of all Liens (other than Liens
         created by the Issuer pursuant to this Indenture) and such transfer is
         absolute, irrevocable and has been perfected; the Seller has the power
         and authority to own, sell and assign the rights and interests under
         the Financing Order that will comprise the Transition Property upon
         transfer to the Issuer; and the Seller has duly authorized such sale
         and assignment to the Issuer; and (B) the attached copy of the
         Financing Order creating such Transition Property is true and correct
         and is in full force and effect.

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

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

              (b) regarding the Issuer:

                    (i)   the Issuer has the power and authority to execute and
              deliver the Series Supplement and this Indenture and to issue the
              Transition Bonds being issued, each of the Series Supplement and
              this Indenture and such Transition Bonds have been duly
              authorized, executed and delivered, and the Issuer is duly
              organized and is validly existing in good standing under the laws
              of the jurisdiction of its organization;

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

                    (iii) the Transition Bonds being issued, when executed and
              authenticated in accordance with the provisions of the Indenture
              and delivered, will constitute valid and binding obligations of
              the Issuer except as such enforceability may be subject to
              bankruptcy, insolvency, reorganization or other

                                       11

<PAGE>

               laws relating to or affecting creditors' rights generally and to
               general principles of equity (regardless of whether such
               enforceability is considered in a proceeding in equity or at law)
               entitled to the benefits of the Indenture and the related Series
               Supplement;

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

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

               (d) Schedule 3a attached hereto with respect to the sale and
          transfer of the Transition Property from the Seller to the Issuer;

               (e) Schedule 3b attached hereto with respect to the grant of a
          security interest under the Texas Electric Choice Plan in such
          Transition Property to the Trustee for the benefit of the Transition
          Bondholders;

               (f) Schedule 3c attached hereto with respect to the grant of a
          security interest under the UCC in such Transition Property to the
          Trustee for the benefit of the Transition Bondholders;

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

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

                                       12

<PAGE>

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

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

               (k) the Intercreditor Agreement has been duly authorized,
         executed and delivered by Reliant Energy, the Servicer, and the Issuer;
         and

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

         (6) Accountant's Certificate or Opinion. A certificate or opinion
             -----------------------------------
complying with the requirements of Section 11.01, addressed to the Issuer and
the Trustee of a firm of Independent certified public accountants of recognized
national reputation to the effect that (a) such accountants are Independent
within the meaning of the Indenture, and are independent public accountants
within the meaning of the standards of The American Institute of Certified
Public Accountants, and (b) with respect to the Trust Estate, they have reviewed
calculations made by the Issuer and determined that, based on the assumptions
used by the Issuer in calculating the initial Transition Charges with respect to
the transferred Transition Property or, if applicable, the most recent revised
Transition Charges with respect to the transferred Transition Property, and
taking into account amounts on deposit in the Reserve Subaccount, as of the
Series Issuance Date for such Series (after giving effect to the issuance of
such Series and the application of the proceeds therefrom) such Transition
Charges are sufficient to (i) pay Operating Expenses when incurred plus any
amounts due under any interest rate protection agreement, (ii) pay interest on
each Series of Transition Bonds at their respective Bond Rates when due, (iii)
pay principal of the Transition Bonds of all Series in accordance with their
respective Expected Amortization Schedules and (iv) fund the Scheduled
Overcollateralization Level and replenish any shortfalls in the Capital
Subaccount as of each Payment Date.

         (7) Rating Agency Condition. With respect to the first Series of
             -----------------------
Transition Bonds issued pursuant to this Indenture, the Trustee shall receive
written confirmation from each Rating Agency that such Series of Transition
Bonds will be rated "AAA" by each of S&P and Fitch and "Aaa" by Moody's. With
respect to any subsequent Series of Transition Bonds issued pursuant to this
Indenture, the Rating Agency Condition shall have been satisfied.

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

                                       13

<PAGE>

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

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

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

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

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

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

               (iv)  the rights of Transition Bond Owners shall be exercised
         only through the Clearing Agency and shall be limited to those
         established by law and agreements between such Transition Bond Owners
         and the Clearing Agency or the Clearing Agency Participants. Pursuant
         to the DTC Agreement, unless and until Definitive Transition Bonds are
         issued pursuant to Section 2.13, the initial Clearing Agency will make
         book-entry transfers among the Clearing Agency Participants and receive
         and transmit payments of principal of and premium, if any, and interest
         on the Transition Bonds to such Clearing Agency Participants; and

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

                                       14

<PAGE>

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

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

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

                                   ARTICLE III

                                    COVENANTS

     SECTION 3.01. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The
Issuer will duly and punctually pay the Principal of and premium, if any, and
Interest on the Transition Bonds in accordance with the terms of the Transition
Bonds and this Indenture; provided that except on the Series Final Maturity
                          --------
Date, the Class Final Maturity Date or the Redemption Date for a Series or Class
of Transition Bonds or upon the acceleration of the

                                       15

<PAGE>

Transition Bonds following the occurrence of an Event of Default, the Issuer
shall only be obligated to pay the Principal of such Transition Bonds on each
Payment Date therefor to the extent moneys are available for such payment
pursuant to Section 8.02. Amounts properly withheld under the Code by any Person
from a payment to any Transition Bondholder of Interest or Principal or premium,
if any, shall be considered as having been paid by the Issuer to such Transition
Bondholder for all purposes of this Indenture.

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

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

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

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

               (i)  hold all sums held by it for the payment of Principal of, or
          premium or Interest on, the Transition Bonds in trust for the benefit
          of the Persons entitled thereto

                                       16

<PAGE>

     until such sums shall be paid to such Persons or otherwise disposed of as
     herein provided and pay such sums to such Persons as herein provided;

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

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

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

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

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

     Subject to applicable laws with respect to escheat of funds, any money held
by the Trustee or any Paying Agent in trust for the payment of any amount of
Principal of, premium, if any, or Interest on any Transition Bond and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer upon delivery by the Issuer
of an Issuer Order; and the Holder of such Transition Bond shall thereafter, as
an unsecured general creditor, look only to the Issuer for payment thereof (but
only to the extent of the amounts so paid to the Issuer), and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
                 --------  -------
before being required to make any such repayment, may at the expense of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including mailing notice of such repayment to Holders whose
Transition Bonds have been called but have not been surrendered for redemption
or whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Trustee or of any Paying Agent, at the last
address of record for each such Holder).

                                       17

<PAGE>

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

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

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

          (ii)  perfect, publish notice of or protect the validity of any Grant
     made or to be made by this Indenture;

          (iii) enforce any of the Trust Estate and any other collateral;

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

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

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

     SECTION 3.06. OPINIONS AS TO TRUST ESTATE. (a) On or before March 31 in
each calendar year, while any Series is outstanding, the Issuer shall furnish to
the Trustee an Issuer Opinion of Counsel stating that, in the opinion of such
counsel, either (i) all necessary action has been taken with respect to the
recording, filing, re-recording and re-filing of this Indenture, any
Supplemental Indentures and any other requisite documents and, with respect to
the execution and filing of any filings pursuant to the Texas Electric Choice
Plan, the Financing Order or the UCC, financing statements and continuation
statements as are necessary to maintain the Lien and security interest, and the
first priority thereof, created by this Indenture and reciting the details of
such action or (ii) no such action is necessary to maintain such Lien and
security interest, and the first priority thereof. Such Issuer Opinion of
Counsel shall also describe the recording, filing, re-recording and re-filing of
this Indenture, any Supplemental Indentures and any other requisite documents,
and the execution and filing of any filings pursuant to the Texas Electric
Choice Plan, the Financing Order or the UCC, financing statements and
continuation

                                       18

<PAGE>

statements that will, in the opinion of such counsel, be required to maintain
the Grant, Lien and security interest of this Indenture until March 31 in the
following calendar year.

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

     SECTION 3.07. PERFORMANCE OF OBLIGATIONS.

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

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

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

     SECTION 3.08. NEGATIVE COVENANTS. The Issuer shall not:

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

          (ii)  terminate its existence, dissolve or liquidate in whole or in
     part;

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

                                       19

<PAGE>

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

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

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

     SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to
the Trustee, within 120 days after the end of each fiscal year of the Issuer
(which, as of the date hereof, is the calendar year) commencing with the fiscal
year 2001, an Issuer Officer's Certificate stating, as to the Manager signing
such Issuer Officer's Certificate, that

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

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

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

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

                                       20

<PAGE>

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

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

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

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

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

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

     SECTION 3.11. SUCCESSOR OR TRANSFEREE.

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

     (b) Upon any sale by the Issuer of substantially all of its assets in a
sale which complies with Section 3.10, Reliant Energy Transition Bond Company
LLC will be released from every covenant and agreement of this Indenture to be
observed or performed on the part of the Issuer with respect to the Transition
Bonds and from every covenant and agreement of the Basic Documents to be
observed or performed on the part of the Issuer.

     SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than purchasing and owning Transition Property, issuing
Transition Bonds from time to time, pledging its interest in the Trust Estate to
the Trustee under this Indenture in order to secure the Transition Bonds,
entering into and performing the Basic Documents relating to the Transition
Bonds and any interest rate protection agreement or hedge agreement executed in

                                       21

<PAGE>

connection therewith, and performing activities that are necessary, suitable or
convenient to accomplish these purposes or are incidental thereto.

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

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

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

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

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

                                       22

<PAGE>

     SECTION 3.18. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee, during the Issuer's
normal business hours, to examine all the books of account, records, reports,
and other papers of the Issuer, to make copies and extracts therefrom, to cause
such books to be audited annually by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Trustee shall
hold and shall cause its representatives to hold, in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Trustee may reasonably determine that such disclosure is
consistent with its obligations hereunder.

     SECTION 3.19. ADJUSTED OVERCOLLATERALIZATION BALANCE SCHEDULES. Not later
than the date on which a new Series of Transition Bonds is issued or any
Outstanding Series of Transition Bonds is redeemed or defeased, the Issuer shall
deliver to the Trustee a replacement Schedule 1 hereto, adjusted to reflect such
issuance, redemption or defeasance and setting forth the Scheduled
Overcollateralization Level for each Payment Date with respect to each Series.

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

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

     (b) If an Event of Default occurs and is continuing, the Trustee may, and
at the direction (which direction shall be in writing) of the Majority Holders
shall, exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Seller, Reliant Energy, the Administrator and the Servicer,
as the case may be, under or in connection with the Sale Agreement, the
Intercreditor Agreement, the Administration Agreement and the Servicing
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Seller, Reliant Energy, the Administrator or
the Servicer of each of their obligations to the Issuer thereunder and to give
any consent, request, notice, direction, approval, extension or waiver under the
Sale Agreement, the Intercreditor Agreement, the Administration Agreement and
the Servicing Agreement, and any right of the Issuer to take such action shall
be suspended.

                                       23

<PAGE>

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

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

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

     (f) Promptly following a default by the Seller under the Sale Agreement, by
the Administrator under the Administration Agreement, by Reliant Energy or any
successor to Reliant Energy under the Intercreditor Agreement, or the occurrence
of a Servicer Default under the Servicing Agreement, and at the Issuer's
expense, the Issuer agrees to take all such lawful actions as the Trustee may
request to compel or secure the performance and observance by each

                                       24

<PAGE>

of the Seller, Reliant Energy, the Administrator or the Servicer of their
obligations under and in accordance with the Sale Agreement, the Administration
Agreement, the Intercreditor Agreement or the Servicing Agreement, as the case
may be, in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with such agreements to the extent and in the manner directed
by the Trustee, including the transmission of notices of any default by the
Seller, Reliant Energy, the Administrator or the Servicer, respectively,
thereunder and the institution of legal or administrative actions or Proceedings
to compel or secure performance of their obligations under the Sale Agreement,
the Administration Agreement, the Intercreditor Agreement or the Servicing
Agreement, as applicable.

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

     (h) As promptly as possible after the giving of notice of termination to
the Servicer and the Rating Agencies of the Servicer's rights and powers
pursuant to Section 6.01 of the Servicing Agreement, the Trustee upon the
written direction of the Majority Holders and subject to the provisions of the
Intercreditor Agreement shall appoint a successor Servicer (the "Successor
                                                                 ---------
Servicer"), and such Successor Servicer shall accept its appointment by a
--------
written assumption in a form acceptable to the Issuer and the Trustee. A person
shall qualify as a Successor Servicer only if such Person satisfies the
requirements of Section 6.04 of the Servicing Agreement. If within 30 days after
the delivery of the notice referred to above, a Successor Servicer shall not
have been appointed and accepted its appointment as such, the Trustee may
petition the PUCT or a court of competent jurisdiction to appoint a Successor
Servicer. In connection with any such appointment, the Issuer may make such
arrangements for the compensation of such Successor Servicer as it and such
Successor Servicer shall agree, subject to the limitations set forth below and
in the Servicing Agreement, and in accordance with Section 6.04 of the Servicing
Agreement, the Issuer shall enter into an agreement with such Successor Servicer
for the servicing of the Transition Property (such agreement to be in form and
substance satisfactory to the Trustee).

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

     SECTION 3.21. TAXES. So long as any of the Transition Bonds are
outstanding, the Issuer shall pay all taxes, assessments and governmental
charges imposed upon it or any of its

                                       25

<PAGE>

properties or assets or with respect to any of its franchises, business, income
or property before any penalty accrues thereon if the failure to pay any such
taxes, assessments and governmental charges would, after any applicable grace
periods, notices or other similar requirements, result in a Lien on the Trust
Estate.

                                   ARTICLE IV

                     SATISFACTION AND DISCHARGE; DEFEASANCE

     SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE.

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

          (A)  either

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

                    (2) the Issuer has irrevocably deposited or caused to be
               irrevocably deposited with the Trustee cash, in trust for such
               purpose, in an amount sufficient to make payments of Principal of
               and, premium, if any, and Interest on the Transition Bonds of
               such Series and to pay and discharge the entire indebtedness on
               such Transition Bonds not theretofore delivered to the Trustee;

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

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

     (b)  Subject to Sections 4.01(c) and 4.02, the Issuer at any time may
terminate (i) all its obligations under this Indenture with respect to the
Transition Bonds of any Series ("Legal

                                       26

<PAGE>

Defeasance Option") or (ii) its obligations under Sections 3.04, 3.05, 3.06
(other than with respect to amounts in the Defeasance Subaccount), 3.07, 3.08,
3.09, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19 and 3.20 and the
operation of Section 5.01(iv) ("Covenant Defeasance Option") with respect to any
Series of Transition Bonds. The Issuer may exercise the Legal Defeasance Option
with respect to any Series of Transition Bonds notwithstanding its prior
exercise of the Covenant Defeasance Option with respect to such Series.

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

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

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

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

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

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

     (c) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of Independent accountants expressing its opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited

                                       27

<PAGE>

cash without investment will provide cash at such times and in such amounts
(but, in the case of the Legal Defeasance Option only, not more than such
amounts) as will be sufficient to pay in respect of the Transition Bonds of such
Series (i) subject to clause (ii), principal in accordance with the Expected
Amortization Schedule therefor, (ii) if such Series is to be redeemed, the
Redemption Price therefor on the Redemption Date therefor and (iii) interest
when due;

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

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

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

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

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

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

                                       28

<PAGE>

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

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

                                    ARTICLE V

                                    REMEDIES

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

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

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

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

          (iv)  default in the observance or performance of any covenant or
     agreement of the Issuer made in this Indenture (other than a covenant or
     agreement, a default in the observance or performance of which is
     specifically dealt with in clause (i), (ii) or (iii) above), any covenant
     or agreement of the Issuer made in any interest rate protection agreement,
     hedge agreement or credit enhancement agreement permitted under Section

                                       29

<PAGE>

     3.13 hereof and any Series Supplement, or any representation or warranty of
     the Issuer made herein or therein or in any certificate or other writing
     delivered pursuant hereto or in connection herewith proving to have been
     incorrect in any material respect as of the time when made, and any such
     default shall continue or not be cured, for a period of 30 days after the
     earlier of (A) there shall have been given, by registered or certified
     mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the
     Holders of at least 25% of the Outstanding Amount of the Transition Bonds
     of any affected Series or Class, a written notice specifying such default
     or incorrect representation or warranty and requiring it to be remedied and
     stating that such notice is a "Notice of Default" hereunder or (B) the date
     the Issuer has knowledge of the default;

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

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

          (vii) any act or failure to act by the State of Texas or any of its
     agencies (including the PUCT), officers or employees that violates or is
     not in accordance with the pledge of the State of Texas in Section 39.310
     of the Texas Electric Choice Plan.

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

     At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article V provided, the Majority
Holders, by written notice to the Issuer and the Trustee, may rescind and annul
such declaration and its consequences if:

                                       30

<PAGE>

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

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

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

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

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

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

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

     (b)  In case the Issuer shall fail forthwith to pay the amounts specified
in clause (a) above upon such demand, the Trustee, in its own name and as
trustee of an express trust, may institute a Proceeding for the collection of
the sums so due and unpaid, and may prosecute such Proceeding to judgment or
final decree, and may enforce the same against the Issuer or other obligor upon
such Transition Bonds and collect in the manner provided by law out of the
property of the Issuer or other obligor upon such Transition Bonds, wherever
situated, the moneys adjudged or decreed to be payable.

     (c)  If an Event of Default occurs and is continuing, the Trustee may, as
more particularly provided in Section 5.04, proceed to protect and enforce its
rights and the rights of the Transition Bondholders by such appropriate
Proceedings as the Trustee shall deem most

                                       31

<PAGE>

effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law
including foreclosing or otherwise enforcing the Lien on the Transition Property
securing the Transition Bonds or applying to the PUCT or a court of competent
jurisdiction for sequestration of revenues arising with respect to such
Transition Property.

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

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

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

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

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

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Transition Bondholders
to make payments to the Trustee, and, in the event that the Trustee shall
consent to the making of payments directly to such Transition Bondholders, to
pay to the Trustee such amounts as shall be sufficient to cover reasonable

                                       32

<PAGE>

compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.

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

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

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

     SECTION 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default other than
the Event of Default described in Section 5.01(vii) occurs and is continuing,
the Trustee shall do one or more of the following at the written direction of
the Majority Holders or may do one or more of the following in reliance upon
Sections 6.01 and 6.02 of this Indenture (subject, in either event, to Section
5.05):

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

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

          (iii) exercise any remedies of a secured party under the UCC or
     Section 39.309(f) of the Texas Electric Choice Plan or any other applicable
     law and take any other appropriate action to protect and enforce the rights
     and remedies of the Trustee and the Holders of the Transition Bonds of such
     Series;

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

                                       33

<PAGE>

          (v) exercise all rights, remedies, powers, privileges and claims of
     the Issuer against the Seller, the Administrator, Reliant Energy and the
     Servicer under or in connection with the Sale Agreement, the Administration
     Agreement, the Intercreditor Agreement or the Servicing Agreement as
     provided in Section 3.20(b);

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

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

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

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

                                       34

<PAGE>

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

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

          (ii)  the Holders of not less than 25% of the Outstanding Amount of
     the Transition Bonds of all Series have made written request to the Trustee
     to institute such Proceeding in respect of such Event of Default in its own
     name as Trustee hereunder;

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

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

          (v)   no direction inconsistent with such written request has been
     given to the Trustee during such 60-day period by the Majority Holders,

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

     In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Holders of Transition Bonds, each
representing less than a majority of the Outstanding Amount of the Transition
Bonds of all Series, the Trustee may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.

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

     SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Transition Bondholder has instituted any Proceeding to enforce any right or
remedy under

                                       35

<PAGE>

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

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

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

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

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

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

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

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

                                       36

<PAGE>

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

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

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

     SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Transition Bond by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to (a) any suit instituted by the Trustee, (b) any suit
instituted by any Transition Bondholder, or group of Transition Bondholders, in
each case holding in the aggregate more than 10% of the Outstanding Amount of
the Transition Bonds of a Series or (c) any suit instituted by any Transition
Bondholder for the enforcement of the payment of (i) Interest on any Transition
Bond on or after the due dates expressed in such Transition Bond and in this
Indenture, (ii) the unpaid Principal, if any, of any Transition Bond on or after
the Series Final Maturity Date or Class Final Maturity Date, if applicable,
therefor or (iii) in the case of redemption, the unpaid Principal of and
premium, if any, and Interest on any Transition Bond on or after the Redemption
Date therefor.

     SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby

                                       37

<PAGE>

expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.

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

                                   ARTICLE VI

                                   THE TRUSTEE

     SECTION 6.01. DUTIES AND LIABILITIES OF TRUSTEE.

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

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

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

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

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

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

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

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

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

                                       38

<PAGE>

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

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

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

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

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

     SECTION 6.02. RIGHTS OF TRUSTEE.

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

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

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

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

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

                                       39

<PAGE>

suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.

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

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

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

     SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Transition Bonds. The Trustee shall not be accountable for the Issuer's
use of the proceeds from the Transition Bonds, and the Trustee shall not be
responsible for any statement of the Issuer in the Indenture or in any document
issued in connection with the sale of the Transition Bonds or in the Transition
Bonds other than the Trustee's certificate of authentication. The Trustee shall
not be responsible for the form, character, genuineness, sufficiency, value or
validity of any of the Trust Estate, or for or in respect of the validity or
sufficiency of the Transition Bonds (other than the certificate of
authentication for the Transition Bonds) or the Basic Documents and the Trustee
shall in no event assume or incur any liability, duty or obligation to any
Holder of a Transition Bond, other than as expressly provided for in this
Indenture. The Trustee shall not be liable for the default or misconduct of the
Issuer, the Seller, the Administrator, the Servicer or a Manager or any Manager
of the Issuer under any Basic Document or otherwise and the Trustee shall have
no obligation or liability to perform the obligations of the Issuer.

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

     SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.

                                       40

<PAGE>

     (a)  The Trustee shall deliver to each Holder of Transition Bonds such
information as may be required to enable such Holder to prepare its federal and
State income tax returns.

     (b)  With respect to each Series and Class of Transition Bonds, on or
prior to each Payment Date therefor, upon receipt by the Trustee from the
Servicer of the "Semiannual Servicer's Certificate," the form of which is
attached hereto as Schedule 2, the Trustee shall deliver such Semiannual
Servicer's Certificate to each Holder of Transition Bonds and to each Rating
Agency which will include (to the extent applicable) the following information
(and any other information so specified in the Series Supplement for such
Series) as to the Transition Bonds of such Series and Class with respect to
such Payment Date or the period since the previous Payment Date, as applicable:

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

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

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

          (iv)   the amount on deposit in the Overcollateralization Subaccount
     for such Series and the Scheduled Overcollateralization Level for such
     Series as of such Payment Date;

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

          (vi)   the amount, if any, on deposit in the Reserve Subaccount as of
     such Payment Date;

          (vii)  the amount to be paid to any counterparty under any interest
     rate protection agreement;

          (viii) the amount to be paid to the Trustee since the preceding
     Payment Date;

          (ix)   the amount paid to the Servicer since the preceding Payment
     Date; and

          (x)    any other transfers and payments made pursuant to this
     Indenture.

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

                                       41

<PAGE>

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

     SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee for all
reasonable out-of-pocket expenses, disbursements and advances incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuer shall indemnify and hold harmless the Trustee and its
officers, directors, employees and agents from and against any and all Losses or
other amounts whatsoever (including counsel fees and expenses) directly or
indirectly incurred by the Trustee in connection with the administration of this
trust, the enforcement of this trust and all of the Trustee's rights, powers and
duties under this Indenture and the performance by the Trustee of the duties and
obligations of the Trustee under or pursuant to this Indenture, the Sale
Agreement, the Administration Agreement, the Servicing Agreement and the
Intercreditor Agreement; provided, however, that notwithstanding the foregoing,
                         --------  -------
the failure to pay to the Trustee by the Issuer (including without limitation
from collections deposited into the Collection Account or through the Transition
Charge Adjustment Process) any amounts in respect of indemnification hereunder
in excess of an aggregate amount equal to (x) any Indemnity Amounts payable to
the Trustee in accordance with Section 8.02(d) of this Indenture plus (y) any
additional Indemnity Amounts payable to the Trustee and recoverable in
connection with the Transition Charge Adjustment Process shall not constitute a
Default or Event of Default under Section 5.01 of this Indenture. The Trustee
shall notify the Issuer promptly of any claim for which it may seek indemnity.
Failure by the Trustee so to notify the Issuer shall not relieve the Issuer of
its obligations hereunder. The Issuer shall defend the claim and the Trustee may
have separate counsel and the Issuer shall pay the fees and expenses of such
counsel. Notwithstanding the foregoing, the Issuer need not reimburse any
expense or indemnify against any Loss incurred by the Trustee (i) through the
Trustee's own willful misconduct, negligence or bad faith or (ii) to the extent
the Trustee was reimbursed for or indemnified against any such Loss by the
Seller or the Servicer pursuant to the Sale Agreement, the Administration
Agreement, the Intercreditor Agreement or the Servicing Agreement. The
obligations of the Issuer under this Section shall survive the termination of
this Agreement and the earlier resignation or removal of the Trustee.

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

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

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

                                       42

<PAGE>

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

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

          (iv)  the Trustee otherwise becomes incapable of acting.

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

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

     A successor Trustee shall deliver a written acceptance of its appointment
to the Retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the Retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture and
the Intercreditor Agreement. No resignation or removal of the Trustee will
become effective until the acceptance of the appointment by a successor Trustee.
The successor Trustee shall mail a notice of its succession to the Transition
Bondholders. The Retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee.

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

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

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

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

     In case at the time such successor or successors by merger, conversion,
consolidation or transfer shall succeed to the trusts created by this Indenture
any of the Transition Bonds shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
Retiring Trustee, and deliver such Transition Bonds so authenticated; and in
case at that time any of the Transition Bonds shall not have been authenticated,
any successor to the Trustee may authenticate such Transition Bonds either in
the

                                       43

<PAGE>

name of any Retiring Trustee hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force and
effect granted by the Transition Bonds or by this Indenture and this force and
effect shall be equal to any certificate issued by the Trustee.

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

     (a)  Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust Estate, and to vest in such Person or
Persons, in such capacity and for the benefit of the Transition Bondholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section 6.10, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Transition Bondholders
of the appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof. Notice of any such appointment shall be promptly given to
each Rating Agency by the Trustee.

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

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

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

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

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

                                       44

<PAGE>

this Indenture relating to the conduct of, affecting the liability of, or
affording protection to the Trustee. Every such instrument shall be filed with
the Trustee.

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

     SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times
satisfy the requirements of TIA Section 310(a) and Section 26(a)(1) of the
Investment Company Act of 1940, as amended. In addition, the Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and it shall have a long term debt
rating of "Baa3" or better by Moody's, "BBB-" or better by S&P and, if Fitch
provides a rating thereon, "BBB-" or better by Fitch. The Trustee shall comply
with TIA Section 310(b), including the optional provision permitted by the
second sentence of TIA Section 310(b)(9); provided, however, that there shall be
                                          --------  -------
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA Section 310(b)(1) are met.

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

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

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

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

                                  ARTICLE VII

                    TRANSITION BONDHOLDERS' LISTS AND REPORTS

     SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF TRANSITION
BONDHOLDERS. The Issuer shall furnish or cause to be furnished to the Trustee
(a) not more than five days after the earlier of (i) each Record Date with
respect to each Series and (ii) six months after the last Record Date with
respect to each Series, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Transition Bonds of such
Series as of such Record Date, (b) at such other times as the Trustee may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of

                                       45

<PAGE>

similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that so long as the Trustee is the
                        --------  -------
Transition Bond Registrar, no such list shall be required to be furnished. In
addition, the Issuer shall furnish such list to any listing, transfer or paying
agent appointed under Section 3.02 to the extent such information is required by
the rules and regulations of the Luxembourg Stock Exchange.

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

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

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

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

     SECTION 7.03. REPORTS BY ISSUER.

          (a)  The Issuer shall:

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

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

                    (iii) supply to the Trustee (and the Trustee shall transmit
          by mail to all Transition Bondholders described in TIA Section 313(c))
          and, so long as any Transition Bonds are listed on the Luxembourg
          Stock Exchange and its rules so

                                       46

<PAGE>

          require, to the listing agent of the Issuer in Luxembourg appointed
          pursuant to Section 3.02, such summaries of any information, documents
          and reports required to be filed by the Issuer pursuant to clauses (i)
          and (ii) of this Section 7.03(a) as may be required by rules and
          regulations prescribed from time to time by the Commission.

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

     SECTION 7.04. REPORTS BY TRUSTEE. If required by TIA Section 313(a),
within 60 days after the end of each fiscal year of the Issuer, commencing with
the year after the issuance of the Transition Bonds of any Series, the Trustee
shall mail to each Holder of Transition Bonds of such Series as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b); provided,
                                                                       --------
however, that the initial report so issued shall be delivered not more than 12
-------
months after the initial issuance of each Series.

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

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

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

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

                                       47

<PAGE>

     SECTION 8.02.      COLLECTION ACCOUNT.

          (a)  (i) On or prior to the Series Issuance Date for the first Series
     issued hereunder, the Issuer shall open, at the Trustee's Corporate Trust
     Office, or at another Eligible Institution, one or more segregated
     non-interest-bearing trust accounts in the Trustee's name for the benefit
     of the Holders (collectively, the "Collection Account"). The Collection
                                        ------------------
     Account shall initially be divided into subaccounts, which need not be
     separate accounts: a general subaccount (the "General Subaccount"), an
                                                   ------------------
     overcollateralization subaccount (the "Overcollateralization Subaccount"),
                                            --------------------------------
     a capital subaccount (the "Capital Subaccount"), a reserve subaccount (the
                                ------------------
     "Reserve Subaccount"), a series subaccount for each Series of Transition
      ------------------
     Bonds (each, a "Series Subaccount") and a class subaccount for any Class of
                     -----------------
     any Series of Transition Bonds that has a floating rate of interest as
     specified in any Series Supplement (each, a "Class Subaccount"). On or
                                                  ----------------
     prior to the Series Issuance Date for each Series issued after the Series
     Issuance Date for the first Series issued hereunder, the Issuer shall
     establish an additional Series Subaccount therefor and a Class Subaccount
     for any Class of such Series that has a floating rate of interest and in
     respect of which the Issuer has entered into an interest rate protection
     agreement, as subaccounts of the Collection Account. Prior to depositing
     funds or U.S. Government Obligations in the Collection Account pursuant to
     Section 4.01 or 4.02, the Issuer shall establish defeasance subaccounts
     (each a "Defeasance Subaccount") for each Series for which funds shall be
              ---------------------
     deposited, as subaccounts of the Collection Account. All amounts in the
     Collection Account not allocated to any other subaccount shall be allocated
     to the General Subaccount. Prior to the initial Payment Date, all amounts
     in the Collection Account (other than funds deposited into the Capital
     Subaccount, up to the Required Capital Amount) shall be allocated to the
     General Subaccount. All payments received by the Trustee from any
     counterparty to any interest rate protection agreement shall be deposited
     in the related Class Subaccount. All references to the Collection Account
     shall be deemed to include reference to all subaccounts contained therein.
     Withdrawals from and deposits to each of the foregoing subaccounts of the
     Collection Account shall be made as set forth in Sections 4.01, 4.02, 4.03
     and 8.02(d) and (e). The Collection Account shall at all times be
     maintained in an Eligible Securities Account and only the Trustee shall
     have access to the Collection Account for the purpose of making deposits in
     and withdrawals from the Collection Account in accordance with this
     Indenture. Funds in the Collection Account shall not be commingled by the
     Issuer with any other moneys, and shall not be commingled by the Trustee.
     All moneys deposited from time to time in the Collection Account, all
     deposits therein pursuant to this Indenture, and all investments made in
     Eligible Investments with such moneys, including all income or other gain
     from such investments, shall be held by the Trustee in the Collection
     Account as part of the Trust Estate as herein provided.

          (ii) The Securities Intermediary hereby agrees that (A) each of the
     Accounts is and shall at all times be maintained by the Securities
     Intermediary as, a "securities account" (within the meaning of Section
     8-501 of the New York

                                       48

<PAGE>

     UCC), (B) the "securities intermediary's jurisdiction" (within the meaning
     of Article 8 of the New York UCC) of the Securities Intermediary is the
     State of New York, (C) all cash and other property in each of the Accounts
     shall be treated by the Securities Intermediary as a "financial asset" (as
     defined in Section 8-102(a)(9) of the New York UCC), (D) the "entitlement
     holder" (as such term is defined in Section 8-102(a)(7) of the New York UCC
     or, with respect to Book-Entry Securities, in the applicable Federal
     Book-Entry Regulations) shall be the Trustee for the benefit of the
     Transition Bondholders, (E) any financial asset in registered form or
     payable to, or to the order of, a Person, and credited to any of the
     Accounts shall be registered in the name of, payable to the order of, or
     specially indorsed to, the Securities Intermediary or in blank, or credited
     to another securities account maintained in the name of the Securities
     Intermediary, and in no case will any financial assets credited to any of
     the Accounts be registered in the name of, payable to or to the order of,
     or specially indorsed to the Issuer or the Trustee, except to the extent
     the foregoing have been specially indorsed by the Issuer or the Trustee, as
     applicable, to the Securities Intermediary or in blank, (F) the Securities
     Intermediary shall not change the names or account numbers of any of the
     Accounts without the prior written consent of the Trustee and shall not
     change the entitlement holder, and (G) the Securities Intermediary shall at
     all times act as a "securities intermediary" (within the meaning of Section
     8-102(a)(14) of the New York UCC or, with respect to Book-Entry Securities,
     in the applicable Federal Book-Entry Regulations) and shall credit to each
     of the Accounts each financial asset to be held in or credited to each of
     the Accounts pursuant to this Indenture.

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

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

                                       49

<PAGE>

          Intermediary hereby represent that they have not, and hereby agree
          that they will not, enter into any agreement or take any action which
          gives any Person other than the Trustee, "control" (as defined in
          Section 8-106 of the New York UCC) over any of the Accounts.

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

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

     (c)  Any Collections remitted by the Servicer to the Trustee, any Indemnity
Amounts remitted to the Trustee by the Seller, the Issuer or the Servicer or
otherwise received by the Trustee or the Issuer, and any other proceeds of Trust
Estate received by the Servicer, the Issuer or the Trustee shall be deposited in
the General Subaccount, except that the Trustee shall deposit in the Capital
Subaccount the Required Capital Amount.

     (d)  On each Payment Date, the Trustee pursuant to the written direction
provided in the Semiannual Servicer's Certificate shall by 12:00 noon (New York
City time) apply all

                                       50

<PAGE>

amounts on deposit in the General Subaccount of the Collection Account and any
investment earnings on the subaccounts in the Collection Account in the
following priority:

          (i)    fees and expenses (including reasonable legal fees and
     expenses) and Indemnity Amounts owed to the Trustee for such Payment Date
     shall be paid to the Trustee; provided that the Indemnity Amounts paid
                                   --------
     during any calendar year pursuant to this clause (i) may not exceed
     $331,000 in the aggregate for all Series;

          (ii)   the Servicing Fee, all unpaid Servicing Fees from prior Payment
     Dates, and reimbursement of Excess Curve Payments demanded by the Servicer
     as set forth in Section 3.03 of the Servicing Agreement shall be paid to
     the Servicer;

          (iii)  the administration fee payable under the Administration
     Agreement between the Issuer and the Administrator, for such Payment Date,
     shall be paid to the Administrator and fees of the Issuer's independent
     managers, as specified in an agreement dated as of October 15, 2001 between
     the Issuer and its independent managers, shall be paid to such independent
     managers;

          (iv)   all Operating Expenses other than those referred to in clauses
     (i), (ii) and (iii) above shall be paid to the Persons entitled thereto;

          (v)    an amount equal to the sum of (x) Interest payable on each
     Series of Transition Bonds on such Payment Date and (y) any amounts in
     respect of periodic payments that are required to be made to any
     counterparty under any interest rate protection agreement entered into with
     respect to a Series as set forth in the applicable Series Supplement;

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

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

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

          (ix)   all remaining unpaid Operating Expenses, Indemnity Amounts and
     any other amounts due and owing pursuant to the Basic Documents or any
     interest rate protection agreement shall be paid to the Persons entitled
     thereto;

                                       51

<PAGE>

          (x)    any amount necessary to replenish any shortfalls in the Capital
     Subaccount shall be allocated to the Capital Subaccount;

          (xi)   an amount shall be allocated to the Overcollateralization
     Subaccount sufficient to cause the amount in the Overcollateralization
     Subaccount to equal the Scheduled Overcollateralization Level;

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

          (xiii) the balance, if any, shall be allocated to the Reserve
     Subaccount.

     Notwithstanding anything to the contrary in this Section 8.02(d), the
amounts paid during any calendar year pursuant to clauses (i), (iii), (iv) and
(ix) above may not exceed $511,000 in the aggregate for all Series unless a
different aggregate amount of such payments is approved by the PUCT in
connection with the Transition Charge Adjustment Process; in such event, the
aggregate amount for such payments may not exceed the amount approved by the
PUCT.

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

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

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

          (i)    from the Reserve Subaccount for allocations and payments
     contemplated by clauses (i) through (xii);

          (ii)   from the Overcollateralization Subaccount for allocations and
     payments contemplated by clauses (i) through (ix); and

                                       52

<PAGE>

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

     (e)  On each Payment Date for any Series, the amounts on deposit in the
Series Subaccount for that Series shall be applied or transferred as follows (in
the priority indicated): (i) to pay Interest due and payable on the Transition
Bonds of such Series on such Payment Date to the Holders of Transition Bonds of
such Series, (ii) the balance, if any, up to the amount of Principal required or
scheduled to be paid on the Transition Bonds of such Series on such Payment
Date, to pay such Principal to the Holders of Transition Bonds of such Series
and (iii) the balance, if any, to the General Subaccount for allocation on the
next Payment Date.

     All payments to the Transition Bondholders of a Series pursuant to (A)
clause (i) of the preceding paragraph shall be made pro rata based on the
respective aggregate amounts of Interest due and payable with respect to
Outstanding Transition Bonds of such Series held by such Holders, and (B) clause
(ii) of the preceding paragraph shall be made pro rata based on the respective
aggregate amounts of Principal required or scheduled to be paid with respect to
Outstanding Transition Bonds of such Series held by such Holders, unless and to
the extent, with respect to either clause (i) or (ii) above, in the case of a
Series comprised of two or more Classes, the Series Supplement for such Series
provides otherwise. All payments to Transition Bondholders of a Class pursuant
to clause (i) or (ii) of the preceding paragraph shall be made pro rata based on
the respective principal amounts of Transition Bonds of such Class held by such
Holders.

     Upon an acceleration of the maturity of the Transition Bonds pursuant to
Section 5.02, the aggregate amount of principal of and interest accrued on each
Transition Bond shall be payable, without priority of interest over principal or
of principal over interest and without regard to Series or Class, in the
proportion that the aggregate amount of principal of and interest accrued on
such Transition Bond bears to the aggregate amount of principal of and interest
accrued on all Transition Bonds.

     SECTION 8.03. RELEASE OF TRUST ESTATE.

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

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

     (c)  Subject to the payment of its fees and expenses pursuant to Section
6.07, the Trustee may, and when required by the provisions of this Indenture
shall, execute instruments to

                                       53

<PAGE>

release property from the Lien of this Indenture, or convey the Trustee's
interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee as provided in this Article VIII shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.

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

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

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

     SECTION 8.06. REP DEPOSIT ACCOUNT. Pursuant to the written direction of the
Servicer, the Issuer shall open, at the Trustee's Corporate Trust Office, or at
another Eligible Institution, one or more segregated non-interest-bearing trust
accounts in the Trustee's name (each a "REP Deposit Account"), each such account
                                        -------------------
for the benefit of one Depositing REP. Pursuant to and in accordance with
Finding of Fact No. 50 of the Financing Order, amounts received from any REP as
a security deposit shall be deposited into the applicable REP Deposit Account.
The REP Deposit Accounts shall at all times be maintained in an Eligible
Securities Account and only the Trustee shall have access to the REP Deposit
Accounts for the purpose of making deposits in and withdrawals from the REP
Deposit Accounts in accordance with this

                                       54

<PAGE>

Indenture, the Servicing Agreement and the Financing Order. Funds in the REP
Deposit Accounts shall not be commingled by the Issuer with any other moneys,
and shall not be commingled by the Trustee. All or a portion of the funds in the
REP Deposit Accounts shall be invested in Eligible Investments and reinvested by
the Trustee pursuant to the written direction of the Servicer. All income or
other gain from investments of moneys deposited in any REP Deposit Account shall
be deposited by the Trustee into such REP Deposit Account, and any loss
resulting from such investments shall be charged to such REP Deposit Account.
The Trustee shall not in any way be held liable for the selection of Eligible
Investments for the REP Deposit Accounts or for investment losses incurred
thereon. The Trustee shall have no obligation to invest or reinvest any amounts
held hereunder in the absence of timely and specific written investment
direction from the Servicer. The Trustee shall release property from any REP
Deposit Account only as and to the extent directed by the Servicer pursuant to
the Financing Order and Servicing Agreement.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

     SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF TRANSITION
BONDHOLDERS.

     (a)  Without the consent of the Holders of any Transition Bonds but with
prior notice to the Rating Agencies, the Issuer and the Trustee, when authorized
by an Issuer Order, with the consent of the PUCT pursuant to Section 9.07 (which
consent shall not be required with regard to the first Series Supplement), at
any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Trustee, for any of the following purposes:

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

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

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

          (iv)  to convey, transfer, assign, mortgage or pledge any property to
     the Trustee for the benefit of the Holders, the Trustee and any
     counterparty under an interest rate protection agreement;

          (v)   to cure any ambiguity, to correct or supplement any provision
     herein or in any Supplemental Indenture which may be inconsistent with any
     other provision herein or in any Supplemental Indenture or to make any
     other provisions with respect to matters or questions arising under this
     Indenture or in any Supplemental Indenture; provided,
                                                 --------

                                       55

<PAGE>

     however, that (i) such action shall not, as evidenced by an Issuers'
     -------
     Opinion of Counsel, adversely affect in any material respect the interests
     of any Transition Bondholder and (ii) the Rating Agency Condition shall
     have been satisfied with respect thereto;

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

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

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

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

          (x)    to satisfy any Rating Agency requirements.

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

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

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

     SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF TRANSITION
BONDHOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order,
also may, with the consent of the PUCT pursuant to Section 9.07, prior notice to
the Rating Agencies and the consent of the Holders of not less than a majority
of the Outstanding Amount of the Transition Bonds of each Series or Class to be
affected, by Act of such Holders delivered to the Issuer and the Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the

                                       56

<PAGE>

Transition Bonds under this Indenture; provided, however, that no such
                                       --------  -------
Supplemental Indenture shall, without the consent of the Holder of each
Outstanding Transition Bond of each Series or Class affected thereby:

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

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

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

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

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

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

          (vii)  decrease the Overcollateralization Amount or the Required
     Capital Amount with respect to any Series or the Scheduled
     Overcollateralization Level with respect to any Payment Date;

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

                                       57

<PAGE>

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

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

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

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

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

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

     SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this
Indenture and every Supplemental Indenture executed pursuant to this

                                       58

<PAGE>

Article IX shall conform to the requirements of the TIA as then in effect so
long as this Indenture shall then be qualified under the TIA.

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

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

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

          (i)   a reference to Docket No. 21655;

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

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

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

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

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

unless, within fifteen days of receiving the request for consent complying with
Section 9.07(a) above, the PUCT or its staff delivers to the office of the
person specified in Section 9.07(a)(iii) above a written statement requesting an
additional amount of time not to exceed thirty days in which to consider whether
to consent to the proposed amendment, modification or supplemental indenture. If
the PUCT or its staff requests an extension of time in the manner set forth in
the preceding sentence, then the PUCT shall either provide notice of its consent
or lack of consent to the person specified in Section 9.07(a)(iii) above no
later than the last day of such extension of time or be conclusively deemed to
have consented to the proposed amendment, modification or supplemental indenture
on the last day of such extension of time.

                                       59

<PAGE>

                                   ARTICLE X

                         REDEMPTION OF TRANSITION BONDS

     SECTION 10.01. OPTIONAL REDEMPTION BY ISSUER. If so provided in the related
Series Supplement, the Issuer may, at its option, redeem all, but not less than
all, of all Transition Bonds of a Series on any Payment Date if, after giving
effect to payments that would otherwise be made on such Payment Date, the
Outstanding Amount of any such Series of Transition Bonds has been reduced to
less than five percent of the initial principal balance of such Series. The
redemption price in any case shall be equal to the outstanding principal amount
of the Bonds to be redeemed plus accrued and unpaid interest thereon at the Bond
Rate to, but excluding, the Redemption Date (the "Redemption Price"). If the
                                                  ----------------
Issuer elects to redeem the Transition Bonds of a Series pursuant to this
Section 10.01, it shall furnish written notice of such election to the Trustee
not later than 25 days prior to the Redemption Date for such redemption and
shall deposit with the Trustee the Redemption Price of the Transition Bonds to
be redeemed plus interest accrued thereon to such Redemption Date plus all other
amounts due and payable hereunder on or prior to such Redemption Date whereupon
all such Transition Bonds shall be due and payable on such Redemption Date upon
the furnishing of a notice complying with Section 10.03 hereof to each Holder of
the Transition Bonds of such Series pursuant to this Section 10.01.

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

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

     All notices of redemption shall state:

     (1) the Redemption Date;

                                       60

<PAGE>

     (2) the amount of such Transition Bonds to be redeemed;

     (3) the Redemption Price; and

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

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

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

                                   ARTICLE XI

                                  MISCELLANEOUS

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

                                       61

<PAGE>

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

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

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

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

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

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

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

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

     SECTION 11.03. ACTS OF TRANSITION BONDHOLDERS.

     (a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Transition
Bondholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Transition Bondholders in person or
by agents duly appointed in writing; and except as

                                       62

<PAGE>

herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Trustee, and, where it is hereby
expressly required, to the Issuer. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Transition Bondholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the Issuer,
if made in the manner provided in this Section.

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

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

     (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Transition Bonds shall bind the Holder of
every Transition Bond issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Transition Bond.

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

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

     (b) the Issuer by the Trustee or by any Transition Bondholder shall be
sufficient for every purpose hereunder if in writing, delivered personally, via
facsimile transmission, by reputable overnight courier or by first-class mail,
postage prepaid, to the Issuer addressed to: Reliant Energy Transition Bond
Company LLC, 1111 Louisiana Street, Suite 4667, Houston, Texas 77002, Attention:
Manager, or at any other address previously furnished in writing to the Trustee
by the Issuer. The Issuer shall promptly transmit any notice received by it from
the Transition Bondholders to the Trustee.

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

                                       63

<PAGE>

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

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

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

     In case it shall be impractical to deliver notice in accordance with the
first paragraph of this Section 11.04 to the Holders of Transition Bonds when
such notice is required to be given pursuant to any provision of this Indenture,
then any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.

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

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

     SECTION 11.07. NOTICES TO LUXEMBOURG STOCK EXCHANGE.

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

                                       64

<PAGE>

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

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

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

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

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

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

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

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

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

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

     SECTION 11.14. GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS

                                       65

<PAGE>

AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS. NOTWITHSTANDING THE FOREGOING, FOR
PURPOSES OF Chapter 8 of the UCC as enacted in the State of Texas and Article 8
of the UCC as enacted in the State of New York, or Chapter 8 or Article 8 (or
corresponding provision) of the UCC as enacted in any other State, THE
JURISDICTION OF THE SECURITIES INTERMEDIARY SHALL BE THE STATE OF NEW YORK.

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

     SECTION 11.16. ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Trustee on the
Transition Bonds or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Member or any
Manager, employee or agent of the Issuer or (ii) any stockholder, officer,
director, employee or agent of the Trustee (it being understood that none of the
Trustee's obligations are in its individual capacity).

     SECTION 11.17. NO PETITION. The Trustee, by entering into this Indenture,
and each Transition Bondholder, by accepting a Transition Bond, hereby covenant
and agree that they will not at any time institute against the Issuer, or join
in the institution against the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation Proceeding, or other Proceeding under any
United States federal or State bankruptcy or similar law in connection with any
obligations relating to the Transition Bonds, this Indenture or any of the Basic
Documents.

                                       66

<PAGE>

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

                                     RELIANT ENERGY TRANSITION BOND
                                     COMPANY LLC

                                     By:    ___________________________________
                                     Name:  ___________________________________
                                     Title: ___________________________________

                                     BANKERS TRUST COMPANY, as Trustee

                                     By:    ___________________________________
                                     Name:  ___________________________________
                                     Title: ___________________________________

                                     BANKERS TRUST COMPANY, as Securities
                                     Intermediary

                                     By:    ___________________________________
                                     Name:  ___________________________________
                                     Title: ___________________________________

                                       67

<PAGE>

                                   SCHEDULE 1

                     SCHEDULED OVERCOLLATERALIZATION LEVELS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
 Payment Date             Scheduled                  Payment Date            Scheduled
                     Overcollateralization                              Overcollateralization
                            Level                                              Level
-------------------------------------------------------------------------------------------
<S>                  <C>                             <C>                <C>
   03/15/02           $      156,020.21                 03/15/08        $    2,028,262.71
------------------------------------------------------------------------------------------
   09/15/02                  312,040.42                 09/15/08             2,184,282.92
------------------------------------------------------------------------------------------
   03/15/03                  468,060.63                 03/15/09             2,340,303.13
------------------------------------------------------------------------------------------
   09/15/03                  624,080.83                 09/15/09             2,496,323.33
------------------------------------------------------------------------------------------
   03/15/04                  780,101.04                 03/15/10             2,652,343.54
------------------------------------------------------------------------------------------
   09/15/04                  936,121.25                 09/15/10             2,808,363.75
------------------------------------------------------------------------------------------
   03/15/05                 1,092,141.6                 03/15/11             2,964,383.96
------------------------------------------------------------------------------------------
   09/15/05                1,248,161.67                 09/15/11             3,120,404.17
------------------------------------------------------------------------------------------
   03/15/06                1,404,181.88                 03/15/12             3,276,424.38
------------------------------------------------------------------------------------------
   09/15/06                1,560,202.08                 09/15/12             3,432,444.58
------------------------------------------------------------------------------------------
   03/15/07                1,716,222.29                 03/15/13             3,588,464.79
------------------------------------------------------------------------------------------
   09/15/07                1,872,242.50                 09/15/13             3,744,485.00
------------------------------------------------------------------------------------------
</TABLE>

                                      1

<PAGE>

                                   SCHEDULE 2

                        SEMIANNUAL SERVICER'S CERTIFICATE

                                       1

<PAGE>

                                   SCHEDULE 3a

                          [STATUTORY TRUE-SALE OPINION]

                                        2

<PAGE>

                                  SCHEDULE 3b

                      [STATE LAW SECURITY INTEREST OPINION]

                                        3

<PAGE>

                                  SCHEDULE 3c

                                 [UCC OPINION]

                                       4

<PAGE>

                                   APPENDIX A

                               MASTER DEFINITIONS

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

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

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

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

     "Administration Agreement" means the Administration Agreement dated as of
      ------------------------
October 24, 2001, between the Administrator and the Issuer, as the same may be
amended and supplemented from time to time.

     "Administrator" means Reliant Energy as administrator under the
      -------------
Administration Agreement or its successor in such capacity.

     "Affiliate" means, with respect to any specified Person, any other Person
      ---------
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, control, when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.

     "Annual Accountant's Report" has the meaning assigned to that term in
      --------------------------
Section 3.07 of the Servicing Agreement.

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

     "Authorized Officer" means (i) with respect to any Person that is a
      ------------------
corporation or a limited liability company, the Chairman, President, any Vice
President, Treasurer or Secretary of such Person, (ii) with respect to any
Person that is a partnership, the President, any Vice President, Treasurer or
Secretary (or Assistant Secretary) of a general partner or managing partner of
such Person; provided that in respect of the Issuer, Authorized Officer means
             --------
any Manager or the Member and, with respect to the Member, any officer who is
authorized to act for the Member in matters relating to the Issuer and who is
identified on the list of Authorized Officers delivered by the Member to the
Trustee as of the date hereof (as such list may be modified or supplemented from
time to time thereafter).

                                       1

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       2

<PAGE>

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

     "Corporate Trust Office" means the principal office of the Trustee at which
      ----------------------
at any particular time its corporate trust business shall be administered, which
office as of the date of the execution of this Indenture is located at Four
Albany Street, New York, New York 10006, Attn: Corporate Trust and Agency
Services - Structured Finance Team, or at such other address as the Trustee may
designate from time to time by notice to the Transition Bondholders and the
Issuer, or the principal corporate trust office of any successor Trustee (the
address of which the successor Trustee will notify the Transition Bondholders
and the Issuer).

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

     "Customers" means each person that
      ---------

                   (a) was a retail customer of electric service of Reliant
     Energy located within Reliant Energy's service territory on May 1, 1999, or
     that became a retail customer of electric service of Reliant Energy located
     within Reliant Energy's service territory after May 1, 1999,

                   (b) is still located within Reliant Energy's service
     territory, and

                   (c) is receiving electric transmission and/or distribution
     service from Reliant Energy or the successor to Reliant Energy's
     distribution business.

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

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

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

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

     "DTC" means The Depository Trust Company.
      ---

     "DTC Agreement" means the Letter of Representations between the Issuer, the
      -------------
Trustee and DTC, as the initial Clearing Agency, dated as of October 23, 2001,
relating to the Transition Bonds, as the same may be amended and supplemented
from time to time.

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

                   (a) a bank;

                                       3

<PAGE>

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

          (c) a credit union;

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

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

     "Eligible Institution" means:
      --------------------

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

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

              (i)  has either

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

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

              (ii) whose deposits are insured by the FDIC.

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

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

          (b) certificates of deposit of any depository institution or trust
     company incorporated under the laws of the United States of America or any
     State thereof (or any domestic branch of a foreign bank) and subject to
     supervision and examination by federal or State banking or depository
     institution authorities; provided, however, that at the time of the
                              --------  -------
     investment or contractual commitment to invest therein, the commercial
     paper or other short-term unsecured debt obligations (other than such
     obligations the rating of

                                       4

<PAGE>

     which is based on the credit of a Person other than such depository
     institution or trust company) thereof shall have either (i) a long-term
     unsecured debt rating from Moody's, Standard & Poor's and, if Fitch
     provides a rating thereon, Fitch of at least "Aa3," "AA" and "AA,"
     respectively, or (ii) a certificate of deposit rating from Moody's and
     Standard & Poor's of at least "P-1" and "A-1+," respectively, and, if Fitch
     provides a rating thereon, "F-1+" by Fitch;

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

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

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

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

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

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

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

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

                                       5

<PAGE>

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

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

     "Eligible Securities Account" means either:
      ---------------------------

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

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

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

     "Excess Curve Payments" has the meaning specified in the Servicing
      ---------------------
Agreement.

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

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

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

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

     "Federal Book-Entry Regulations" means (a) the federal regulations
      ------------------------------
contained in Subpart B ("Treasury/Reserve Automated Debt Entry System (TRADES)")
governing Book-Entry Securities consisting of U.S. Treasury bonds, notes and
bills, and Subpart D ("Additional Provisions") of 31 C.F.R. part 357, Section
357.10 through Section 357.14 and Section 357.41

                                       6

<PAGE>

through Section 357.44 (including related defined terms in 31 C.F.R. Section
357.2); and (b) to the extent substantially identical to the federal regulations
referred to in clause (a) above (as in effect from time to time), the federal
regulations governing other Book-Entry Securities.

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

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

     "Financing Order" means the Financing Order issued by the PUCT on May 31,
      ---------------
2000, (PUC Docket No. 21665) pursuant to the Texas Electric Choice Plan, as
interpreted by the PUCT on September 18, 2001 (PUC Docket No. 21665, SOAH Docket
No. ###-##-####).

     "Fitch" means Fitch, Inc., or any successor thereto.
      -----

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

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

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

     "Indemnity Amounts" means any indemnification obligations payable by the
      -----------------
Servicer pursuant to Section 5.02 of the Servicing Agreement, the Seller
pursuant to the Sale Agreement or the Issuer pursuant to Section 6.07 of the
Indenture.

     "Indenture" means this Indenture dated as of October 24, 2001, between the
      ---------
Issuer and the Trustee, as the same may be amended and supplemented from time to
time by one or more indentures supplemental hereto, and shall include the forms
and terms of the Transition Bonds established thereunder.

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

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

                                       7

<PAGE>

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

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

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

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

     "Intercreditor Agreement" means the Intercreditor Agreement dated October
      -----------------------
24, 2001, among the Issuer, Reliant Energy, in its individual capacity and as
the Servicer, the Trustee, AEP Credit, Inc., and The Bank of New York, as the
same may be amended and supplemented from time to time.

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

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

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

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

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

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

     "Issuer Certificate of Formation" means the Certificate of Formation of the
      -------------------------------
Issuer which was filed with the Delaware Secretary of State on November 10,
1999, as the same may be amended and restated from time to time.

                                       8

<PAGE>

     "Issuer LLC Agreement" means the Amended and Restated Limited Liability
      --------------------
Company Agreement between the Issuer and Reliant Energy, as sole Member, dated
as of October 24, 2001, as the same may be amended and supplemented from time to
time.

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

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

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

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

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

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

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

     "Manager" means any manager of the Issuer.
      -------

     "Member" means Reliant Energy, as the sole member of the Issuer.
      ------

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

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

     "Operating Expenses" means, with respect to the Issuer, all fees, costs and
      ------------------
expenses owed by the Issuer, including all amounts owed by the Issuer to the
Trustee, the Servicing Fee, the fee payable by the Issuer to the Administrator
under the Administration Agreement, the fees and expenses payable by the Issuer
to the Independent Managers of the Issuer, legal fees and expenses of the
Servicer pursuant to Section 3.10 of the Servicing Agreement, and legal and
accounting fees, costs and expenses of the Issuer.

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

                                       9

<PAGE>

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

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

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

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

     provided that in determining whether the Holders of the requisite
     --------
     Outstanding Amount of the Transition Bonds or any Series or Class thereof
     have given any request, demand, authorization, direction, notice, consent
     or waiver hereunder or under any Basic Document, Transition Bonds owned by
     the Issuer, any other obligor upon the Transition Bonds, Reliant Energy or
     any Affiliate of any of the foregoing Persons shall be disregarded and
     deemed not to be Outstanding, except that, in determining whether the
     Trustee shall be fully protected in relying upon any such request, demand,
     authorization, direction, notice, consent or waiver, only Transition Bonds
     that a Responsible Officer of the Trustee knows to be so owned shall be so
     disregarded. Transition Bonds so owned that have been pledged in good faith
     may be regarded as Outstanding if the pledgee establishes to the
     satisfaction of the Trustee the pledgee's right so to act with respect to
     such Transition Bonds and that the pledgee is not the Issuer, any other
     obligor upon the Transition Bonds, the Servicer or any Affiliate of any of
     the foregoing Persons.

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

     "Overcollateralization Amount" means, with respect to any Series of
      ----------------------------
Transition Bonds, the amount specified as such in the Series Supplement
therefor.

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

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

                                       10

<PAGE>

     "Payment Date" means, with respect to each Series or, if applicable, each
      ------------
Class of Transition Bonds, each date or dates specified as Payment Dates for
such Series or Class in the Series Supplement therefor.

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

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

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

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

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

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

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

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

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

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

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

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

     "Qualified Costs" has the meaning assigned to that term in the Texas
      ---------------
Electric Choice Plan and the Financing Order.

                                       11

<PAGE>

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

     "Rating Agency Condition" means, with respect to any action, the
      -----------------------
notification in writing to each Rating Agency of such action, and confirmation
from S&P and Fitch to the Trustee and the Issuer that such action will not
result in a reduction or withdrawal of the then current rating by such Rating
Agency of any outstanding Series or Class of Transition Bonds.

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

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

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

     "Refunding Issuance" means issuance of a new Series of Transition Bonds
      ------------------
hereunder to pay the cost of refunding, through redemption or payment on the
Expected Final Payment Date for a Series or Class of Transition Bonds, all or
part of the Transition Bonds of such Series or Class to the extent permitted by
the terms thereof.

     "Reliant Energy" means Reliant Energy, Incorporated, a Texas corporation,
      --------------
or its successor.

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

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

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

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

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

                                       12

<PAGE>

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

     "Sale Agreement" means the Transition Property Sale Agreement dated as of
      --------------
October 24, 2001, between the Seller and the Issuer, as the same may be amended
and supplemented from time to time.

     "Scheduled Overcollateralization Level" means, with respect to any Payment
      -------------------------------------
Date, the amount set forth as such in Schedule 1 of the Indenture, as such
Schedule has been adjusted in accordance with Section 3.19 of the Indenture to
reflect redemptions or defeasances of Transition Bonds and issuances of
additional Series of Transition Bonds.

     "Securities Intermediary" means Bankers Trust Company, as securities
      -----------------------
intermediary, or its successor or any successor securities intermediary under
the Indenture.

     "Seller" means Reliant Energy, or its successor, in its capacity as seller
      ------
of the Transition Property to the Issuer pursuant to the Sale Agreement.

     "Semiannual Servicer's Certificate" means the statement prepared by the
      ---------------------------------
Servicer and delivered to the Trustee with respect to each Series of Transition
Bonds on or prior to each Payment Date therefor, the form of which is attached
hereto as Schedule 2.

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

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

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

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

     "Servicer" means Reliant Energy, in its capacity as the servicer under the
      --------
Servicing Agreement, and each successor to Reliant Energy (in the same capacity)
pursuant to Section 5.03, 5.04 or 6.04 of the Servicing Agreement.

     "Servicer Default" means an event specified in Section 6.01 of the
      ----------------
Servicing Agreement.

     "Servicing Agreement" means the Transition Property Servicing Agreement
      -------------------
dated as of October 24, 2001, between the Issuer and the Servicer and
acknowledged by the Trustee, as the same may be amended and supplemented from
time to time.

     "Servicing Fee" means the fee payable by the Issuer to the Servicer on each
      -------------
Payment Date with respect to each Series of Transition Bonds in the amount to be
specified in the Section 5.07 of the Servicing Agreement.

                                       13

<PAGE>

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

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

     "Successor Servicer" means a successor Servicer appointed by the Trustee
      ------------------
pursuant to Section 6.04 of the Servicing Agreement.

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

     "Texas Electric Choice Plan" means the Act of May 21, 1999, 76th Leg. R.S.
      --------------------------
ch. 405, 1999.

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

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

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

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

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

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

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

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

                                       14

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