Document:

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                                                                    Exhibit 10.2

                     TRANSITION PROPERTY SERVICING AGREEMENT

                                     BETWEEN

                           CPL TRANSITION FUNDING LLC

                                   NOTE ISSUER

                                       AND

                         CENTRAL POWER AND LIGHT COMPANY

                                    SERVICER

                      DATED AS OF ___________________, 2001

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                   <C>                                                                 <C>
ARTICLE I             DEFINITIONS............................................................1
    SECTION 1.01.     Definitions............................................................1

ARTICLE II            APPOINTMENT AND AUTHORIZATION..........................................2
    SECTION 2.01.     Appointment of Servicer; Acceptance of Appointment.....................2
    SECTION 2.02.     Authorization..........................................................2
    SECTION 2.03.     Dominion and Control Over the Transition Property......................2

ARTICLE III           ROLE OF SERVICER.......................................................2
    SECTION 3.01.     Duties of Servicer.....................................................2
    SECTION 3.02.     Servicing and Maintenance Standards....................................5
    SECTION 3.03.     Certificate of Compliance..............................................5
    SECTION 3.04.     Annual Report by Independent Public Accountants........................5
    SECTION 3.05.     Monitoring of Third-Party Collectors...................................6

ARTICLE IV            SERVICES RELATED TO TRUE-UP ADJUSTMENTS................................9
    SECTION 4.01.     True-Up Adjustments....................................................9
    SECTION 4.02.     Limitation of Liability...............................................12

ARTICLE V             THE TRANSITION PROPERTY...............................................13
    SECTION 5.01.     Custody of Transition Property Records................................13
    SECTION 5.02.     Duties of Servicer as Custodian.......................................13
    SECTION 5.03.     Instructions; Authority to Act........................................15
    SECTION 5.04.     Custodian's Indemnification...........................................15
    SECTION 5.05.     Effective Period and Termination......................................15

ARTICLE VI            THE SERVICER..........................................................15
    SECTION 6.01.     Representations and Warranties of Servicer............................15
    SECTION 6.02.     Indemnities of Servicer; Release of Claims............................17
    SECTION 6.03.     Binding Effect of Servicing Obligations...............................19
    SECTION 6.04.     Limitation on Liability of Servicer and Others........................20
    SECTION 6.05.     CPL Not to Resign as Servicer.........................................20
    SECTION 6.06.     Servicing Compensation................................................21
    SECTION 6.07.     Compliance with Applicable Law........................................22
    SECTION 6.08.     Access to Certain Records and Information Regarding Transition
                      Property .............................................................22
    SECTION 6.09.     Appointments..........................................................22
    SECTION 6.10.     No Servicer Advances..................................................22
    SECTION 6.11.     Remittances...........................................................22
    SECTION 6.12.     Maintenance of Operations.............................................23

ARTICLE VII           DEFAULT...............................................................24
    SECTION 7.01.     Servicer Default......................................................24
</TABLE>

                                        i

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<TABLE>
<S>                   <C>                                                                  <C>
    SECTION 7.02.     Appointment of Successor..............................................25
    SECTION 7.03.     Waiver of Past Defaults...............................................26
    SECTION 7.04.     Notice of Servicer Default............................................26
    SECTION 7.05.     Cooperation with Successor............................................26

ARTICLE VIII          MISCELLANEOUS PROVISIONS..............................................26
    SECTION 8.01.     Amendment.............................................................26
    SECTION 8.02.     PUCT Condition........................................................27
    SECTION 8.03.     Maintenance of Accounts and Records...................................28
    SECTION 8.04.     Notices...............................................................28
    SECTION 8.05.     Assignment............................................................29
    SECTION 8.06.     Limitations on Rights of Others.......................................29
    SECTION 8.07.     Severability..........................................................29
    SECTION 8.08.     Separate Counterparts.................................................29
    SECTION 8.09.     Headings..............................................................29
    SECTION 8.10.     GOVERNING LAW.........................................................29
    SECTION 8.11.     Assignment to Indenture Trustee.......................................30
    SECTION 8.12.     Nonpetition Covenants.................................................30
    SECTION 8.13.     Limitation of Liability...............................................30

EXHIBITS AND SCHEDULES
    Exhibit A         Form of Monthly Servicer's Certificate
    Exhibit B         Form of Certificate of Compliance
    Exhibit C         Form of Semi-Annual Servicer Certificate
    Schedule 4.01(a)  Expected Amortization Schedule
    Schedule 6.01(f)  No Proceedings
</TABLE>

                                       ii
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                                     ANNEXES

               Annex I       Servicing Procedures

                                      iii
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               This TRANSITION PROPERTY SERVICING AGREEMENT (this "Agreement"),
dated as of ____________, 2001, is between CPL Transition Funding LLC, a
Delaware limited liability company (the "Note Issuer"), and Central Power and
Light Company, a Texas corporation, as Servicer (the "Servicer").

                                    RECITALS

               WHEREAS, pursuant to the Securitization Law and the Initial
Financing Order, the Seller and the Note Issuer are concurrently entering into
the Sale Agreement pursuant to which the Seller is selling and the Note Issuer
is purchasing certain Transition Property created pursuant to the Securitization
Law and the Initial Financing Order described therein, and the Seller may sell
other Transition Property to the Note Issuer pursuant to the Sale Agreement.

               WHEREAS, in connection with its ownership of the Transition
Property and in order to collect the associated Transition Charges, the Note
Issuer desires to engage the Servicer to carry out the functions described
herein. The Servicer currently performs similar functions for itself with
respect to its own charges to its customers. In addition, the Note Issuer
desires to engage the Servicer to act on its behalf in obtaining Annual True-Up
Adjustments, Non-Standard True-Up Adjustments and Interim True-Up Adjustments
from the PUCT. The Servicer desires to perform all of these activities on behalf
of the Note Issuer.

               NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

               SECTION 1.01.    Definitions.

               (a)     Unless otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to them in that certain Indenture
(including Appendix A thereto) dated as of the date hereof between the Note
Issuer and U.S. Bank National Association, as the Indenture Trustee, as the same
may be amended, supplemented or otherwise modified from time to time.

               (b)     All terms defined 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.

               (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, Schedule,
Exhibit, Annex and Attachment references contained in this Agreement are
references to Sections, Schedules, Exhibits, Annexes and Attachments in or to
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.

<PAGE>

               (e)     Non-capitalized terms used herein which are defined in
the Utilities Code shall, as the context requires, have the meanings assigned to
such terms in the Utilities Code, but without giving effect to amendments to the
Utilities Code after the date hereof which have a material adverse effect on the
Note Issuer or the Holders.

                                   ARTICLE II
                          APPOINTMENT AND AUTHORIZATION

               SECTION 2.01.  Appointment of Servicer; Acceptance of
Appointment. Subject to Section 6.05 and Article VII, the Note Issuer hereby
appoints the Servicer, and the Servicer hereby accepts such appointment, to
perform the Servicer's obligations pursuant to this Agreement on behalf of and
for the benefit of the Note Issuer or any assignee thereof in accordance with
the terms of this Agreement and applicable law. This appointment and the
Servicer's acceptance thereof may not be revoked except in accordance with the
express terms of this Agreement.

               SECTION 2.02.  Authorization. With respect to all or any portion
of the Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
Governmental Authority, including with the PUCT. The Note Issuer shall execute
and deliver to the Servicer such documents as have been prepared by the Servicer
for execution by the Note Issuer and shall furnish the Servicer with such other
documents as may be in the Note Issuer's possession, in each case as the
Servicer may determine to be necessary or appropriate to enable it to carry out
its servicing and administrative duties hereunder. Upon the Servicer's written
request, the Note Issuer shall furnish the Servicer with any powers of attorney
or other documents necessary or appropriate to enable the Servicer to carry out
its duties hereunder.

               SECTION 2.03.  Dominion and Control Over the Transition
Property. Notwithstanding any other provision herein, the Note Issuer shall have
dominion and control over the Transition Property, and the Servicer, in
accordance with the terms hereof, is acting solely as the servicing agent and
custodian for the Note Issuer with respect to the Transition Property and the
Transition Property Records. The Servicer shall not take any action that is not
authorized by this Agreement, that is not consistent with its customary
procedures and practices, or that shall impair the rights of the Note Issuer in
the Transition Property, in each case unless such action is required by
applicable law or court or regulatory order.

                                   ARTICLE III
                                ROLE OF SERVICER

               SECTION 3.01.  Duties of Servicer. The Servicer, as agent for
the Note Issuer, shall have the following duties:

                                        2
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               (a)     Duties of Servicer Generally. The Servicer's duties in
general shall include management, servicing and administration of the Transition
Property; obtaining meter reads, calculating usage (including demand and
including any such usage by Customers served by a REP), billing, collections and
posting of all payments in respect of the Transition Property; responding to
inquiries by Customers, REPs, the PUCT, or any other Governmental Authority with
respect to the Transition Property; delivering Bills to Customers and REPs,
investigating and handling delinquencies, processing and depositing collections
and making periodic remittances; furnishing periodic reports to the Note Issuer,
the Indenture Trustee and the Rating Agencies; making all filings with the PUCT
and taking such other action as may be necessary to perfect the Note Issuer's
ownership interests in and the Indenture Trustee's lien on the Transition
Property; making all filings and taking such other action as may be necessary to
perfect the Indenture Trustee's lien on and security interest in all Note
Collateral not constituting Transition Property; selling as the agent for the
Note Issuer as its interests may appear defaulted or written off accounts in
accordance with the Servicer's usual and customary practices; and taking all
necessary action in connection with True-Up Adjustments as set forth herein.
Certain of the duties set forth above may be performed by REPs pursuant to PUCT
Regulations and, if any, REP Service Agreements. Anything to the contrary
notwithstanding, the duties of the Servicer set forth in this Agreement shall be
qualified in their entirety by any PUCT Regulations as in effect at the time
such duties are to be performed. Without limiting the generality of this Section
3.01(a), in furtherance of the foregoing, the Servicer hereby agrees that it
shall also have, and shall comply with, the duties and responsibilities relating
to data acquisition, usage and bill calculation, billing, customer service
functions, collections, payment processing and remittance set forth in Annex I
hereto, as it may be amended from time to time. For the avoidance of doubt, the
term "usage" when used herein refers to both kilowatt hour consumption and
kilowatt demand.

               (b)     Reporting Functions.

                       (i)     Monthly Servicer's Certificate. On or before the
               [_________] calendar day of each month (or if such day is not a
               Servicer Business Day, on the immediately preceding Servicer
               Business Day), the Servicer shall prepare and deliver to the
               Note Issuer, the Indenture Trustee and the Rating Agencies a
               written report substantially in the form of Exhibit A hereto (a
               "Monthly Servicer's Certificate") setting forth certain
               information relating to TC Payments received by the Servicer
               during the Collection Period immediately preceding such date.

                       (ii)    Notification of Laws and Regulations. The
               Servicer shall immediately notify the Note Issuer, the Indenture
               Trustee and the Rating Agencies in writing of any Requirements
               of Law or PUCT Regulations hereafter promulgated that have a
               material adverse effect on the Servicer's ability to perform its
               duties under this Agreement.

                       (iii)   Other Information. Upon the reasonable request
               of the Note Issuer, the Indenture Trustee or any Rating Agency,
               the Servicer shall provide to

                                        3
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               the Note Issuer, the Indenture Trustee or such Rating Agency, as
               the case may be, any public financial information in respect of
               the Servicer, or any material information regarding the
               Transition Property to the extent it is reasonably available to
               the Servicer, as may be reasonably necessary and permitted by
               law to enable the Note Issuer, the Indenture Trustee or the
               Rating Agencies to monitor the performance by the Servicer
               hereunder. In addition, so long as any of the Notes of any
               Series are outstanding, the Servicer shall provide the Note
               Issuer and the Indenture Trustee, within a reasonable time after
               written request therefor, any information available to the
               Servicer or reasonably obtainable by it that is necessary to
               calculate the Transition Charges applicable to each TC Customer
               Class.

                       (iv)    Preparation of Reports to be Filed with the SEC.
               The Servicer shall prepare any reports required to be filed by
               the Note Issuer under the securities laws, including a copy of
               each Servicer's Certificate described in Section 4.01(c)(ii),
               the annual Certificate of Compliance described in Section 3.03,
               and the Annual Accountant's Report described in Section 3.04.

               (c)     Opinions of Counsel. The Servicer shall deliver to the
Note Issuer and the Indenture Trustee:

                       (i)     promptly after the execution and delivery of
               this Agreement and of each amendment hereto, promptly after the
               execution of each Sale Agreement and of each amendment thereto
               and on each Subsequent Transfer Date, an Opinion of Counsel from
               external counsel either (A) to the effect that, in the opinion
               of such counsel, all filings, including filings with the PUCT
               and the Texas Secretary of State and all filings pursuant to the
               UCC, that are necessary to fully preserve and protect the
               interests of the Indenture Trustee in the Transition Property
               have been executed and filed, and reciting the details of such
               filings or referring to prior Opinions of Counsel in which such
               details are given, or (B) to the effect that, in the opinion of
               such counsel, no such action shall be necessary to preserve and
               protect such interest; and

                       (ii)    within 90 days after the beginning of each
               calendar year beginning with the first calendar year beginning
               more than three months after the date hereof, an Opinion of
               Counsel from external counsel, dated as of a date during such
               90-day period, either (A) to the effect that, in the opinion of
               such counsel, all filings, including filings with the PUCT and
               the Texas Secretary of State and all filings pursuant to the
               UCC, have been executed and filed that are necessary to preserve
               fully and protect fully the interest of the Indenture Trustee in
               the Transition Property, and reciting the details of such
               filings or referring to prior Opinions of Counsel in which such
               details are given, or (B) to the effect that, in the opinion of
               such counsel, no such action shall be necessary to preserve and
               protect such interest.

                                        4
<PAGE>

               Each Opinion of Counsel referred to in clause (i) or (ii) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.

               SECTION 3.02.  Servicing and Maintenance Standards. On behalf of
the Note Issuer, the Servicer shall (a) manage, service, administer and make
collections in respect of the Transition Property with reasonable care and in
material compliance with applicable Requirements of Law, including all
applicable PUCT Regulations and guidelines, using the same degree of care and
diligence that the Servicer exercises with respect to similar assets for its own
account and, if applicable, for others; (b) follow customary standards, policies
and procedures for the industry in Texas in performing its duties as Servicer;
(c) use all reasonable efforts, consistent with its customary servicing
procedures, to enforce, and maintain rights in respect of, the Transition
Property and to bill and collect the Transition Charges; (d) comply with all
Requirements of Law including all applicable PUCT Regulations and guidelines,
applicable to and binding on it relating to the Transition Property; (e) file
all PUCT notices described in the Securitization Law and file and maintain the
effectiveness of UCC financing statements with respect to the property
transferred from time to time under the Sale Agreement, and (f) take such other
action on behalf of the Note Issuer to ensure that the Lien of the Indenture
Trustee on the Note Collateral remains perfected and of first priority. The
Servicer shall follow such customary and usual practices and procedures as it
shall deem necessary or advisable in its servicing of all or any portion of the
Transition Property, which, in the Servicer's judgment, may include the taking
of legal action, at the Note Issuer's expense but subject to the priority of
payment set forth in Section 8.02(e) of the Indenture.

               SECTION 3.03.  Certificate of Compliance. The Servicer shall
deliver to the Note Issuer, the Indenture Trustee and the Rating Agencies on or
before [_______] of each year, commencing [_______] to and including the
[_______] succeeding the Retirement of the Notes, an Officer's Certificate
substantially in the form of Exhibit B hereto (a "Certificate of Compliance"),
stating that: (i) a review of the activities of the Servicer during the twelve
months ended the preceding [_______] (or, in the case of the first Certificate
of Compliance to be delivered on or before [_______] , the period of time from
the date of this Agreement until [_______]) and of its performance under this
Agreement has been made under such officer's supervision, and (ii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all of its obligations in all material respects under this Agreement throughout
such twelve months (or, in the case of the Certificate of Compliance to be
delivered on or before [_______], the period of time from the date of this
Agreement until [_______]), or, if there has been a Servicer Default or an event
which with the giving of notice, the lapse of time, or both, would become a
Servicer Default, specifying each such default or event known to such officer
and the nature and status thereof.

               SECTION 3.04.  Annual Report by Independent Public Accountants.
(a) The Servicer, at its own expense in partial consideration of the Servicing
Fee paid to it, shall cause a firm of independent certified public accountants
(which may provide other services to the Servicer or the Seller) to prepare, and
the Servicer shall deliver to the Note Issuer, the Indenture

                                        5

<PAGE>

Trustee and the Rating Agencies, a report addressed to the Servicer (the "Annual
Accountant's Report"), which may be included as part of the Servicer's customary
auditing activities, for the information and use of the Note Issuer, the
Indenture Trustee and the Rating Agencies on or before [_______] of each year,
beginning [_______] to and including the [_______] succeeding the Retirement of
the Notes, to the effect that such firm has performed certain procedures, agreed
between the Servicer and such accountants, in connection with the Servicer's
compliance with its obligations under this Agreement during the preceding twelve
months ended [_______] (or, in the case of the first Annual Accountant's Report
to be delivered on or before [_______], the period of time from the date of this
Agreement until [_______]), identifying the results of such procedures and
including any exceptions noted. In the event such accounting firm requires the
Indenture Trustee to agree or consent to the procedures performed by such firm,
the Note Issuer shall direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such letter
of agreement or consent in conclusive reliance upon the direction of the Note
Issuer, and the Indenture Trustee will not make any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of the
sufficiency, validity or correctness of such procedures.

               (b)     The Annual Accountant's Report shall also indicate that
the accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

               SECTION 3.05.  Monitoring of Third-Party Collectors. From time
to time, until the Retirement of the Notes, the Servicer shall, in accordance
with the Servicing Standard, take all actions with respect to Third-Party
Collectors required to be taken by the Servicer as set forth in the Tariffs and
any other applicable PUCT Regulations in effect from time to time and implement
such additional procedures and policies as are necessary to ensure that the
obligations of all Third-Party Collectors (including Applicable REPs) in
connection with Transition Charges are properly enforced in accordance with the
terms and provisions of the Tariffs and any other applicable PUCT Regulations in
effect from time to time. Such procedures and policies shall include the
following:

               (a)     Maintenance of Records and Information. In addition to
any actions required by the Tariffs, PUCT Regulations or other applicable law,
the Servicer shall:

                       (i)     maintain adequate records for promptly
               identifying and contacting each such Third-Party Collector
               (including any Applicable REP);

                        (ii)    maintain records of end-user Customers which are
               billed by Third-Party Collectors (including Applicable REPs) to
               permit prompt transfer of billing responsibilities in the event
               of default by such Third-Party Collectors (including Applicable
               REPs);

                        (iii)   maintain adequate records for enforcing
               compliance by all Third-Party Collectors with their obligations
               with respect to Transition Charges,

                                        6
<PAGE>

               including compliance by all Applicable REPs with all REP Credit
               Requirements, REP Deposit Requirements and REP Remittance
               Requirements; and

                       (iv)    provide to Third-Party Collectors such
               information necessary for such Third-Party Collectors to confirm
               the Servicer's calculation of Transition Charges and
               remittances, including, if applicable, charge-off amounts.

        The Servicer shall update the records described above no less frequently
than quarterly.

               (b)     Credit and Collection Policies. The Servicer shall, to
the fullest extent permitted under the Initial Financing Order or any Subsequent
Financing Order, as applicable, impose such terms with respect to credit and
collection policies applicable to Third-Party Collectors as may be reasonably
necessary to prevent the then-current rating of the Notes of any Series from
being downgraded, withdrawn or suspended. The Servicer shall, in accordance with
and to the extent permitted by the Utilities Code, applicable PUCT Regulations
and the terms of the Initial Financing Order and any Subsequent Financing Order,
include and impose the above-described terms in all tariffs filed under the
Utilities Code which would allow REPs or other utilities to issue single bills
which include Transition Charges to CPL's Customers . The Servicer shall
periodically review the need for modified or additional terms based upon, among
other things, (i) the relative amount of TC Payments received through REPs
relative to the Periodic Billing Requirement, (ii) the historical payment and
default experience of each REP and (iii) such other credit and collection
policies to which the REPs are subject, and if permitted by applicable law, will
set out any such modified or additional terms in a supplemental tariff filed
with the PUCT.

               (c)     Monitoring of Performance and Payment by REPs. In
addition to any actions required by the Tariffs, PUCT Regulations or other
applicable law, the Servicer shall undertake to do the following:

                       (i)     The Servicer shall require each REP to pay all
               Transition Charges (less any applicable charge-off allowances)
               billed to such REP in accordance with the provisions of the
               Initial Tariff, each Subsequent Tariff and PUCT Regulations
               (whether or not disputed). The Servicer shall monitor compliance
               by each REP with all REP Credit Requirements, REP Deposit
               Requirements and REP Remittance Requirements and take prompt
               action to enforce such requirements.

                       (ii)    The Servicer shall, consistent with its
               customary billing practices, bill each REP who provides
               consolidated billing to end-user Customers for all Transition
               Charges owed by such end-user Customers no less frequently than
               the billing cycle otherwise applicable to such end-user
               Customers.

                       (iii)   The Servicer shall work with REPs to resolve any
               disputes using the dispute resolution procedures established in
               the Initial Tariff, each Subsequent Tariff and any PUCT
               Regulations, in accordance with the Servicing Standard.

                                        7
<PAGE>

               (d)     Enforcement of REP Obligations. The Servicer shall, in
accordance with the terms of the Initial Tariff and each Subsequent Tariff,
ensure that each REP remits all TC Payments which it is obligated to remit to
the Servicer. In the event of any default by any REP, the Servicer shall enforce
all rights set forth in, and take all other steps permitted by, the Initial
Tariff or any Subsequent Tariff or other PUCT Regulations as it determines, in
accordance with the Servicing Standard, are reasonably necessary to ensure the
prompt payment of TC Payments by such REP and to preserve the rights of the
Holders with respect thereto, including, where appropriate, terminating the
right of any REP to bill and collect Transition Charges or petitioning the PUCT
to impose such other remedies or penalties as may be available under the
circumstances. Any agreement entered into between the Servicer and a defaulted
REP will be limited to the terms of this agreement and will satisfy the Rating
Agency Condition. In the event the Servicer has actual knowledge that an REP is
in default, including due to the downgrade by the Rating Agencies of any party
providing credit support for such REP, the Servicer shall promptly notify the
Indenture Trustee of the same and, shall, if applicable, instruct the Indenture
Trustee either:

                       (i)     to withdraw from such REP's REP Deposit Account
               and deposit into the Collection Account the lesser of (x) the
               amount of cash collateral on deposit in such REP Deposit Account
               at such time and (y) the amount of any Transition Charges then
               due and payable by such REP; or

                       (ii)    make demand under any letter of credit,
               guarantee or other credit support which may be drawn on at such
               time and deposit such proceeds into the REP Deposit Account for
               forwarding to the Collection Account as described in clause (i)
               above.

The Indenture Trustee shall, within two Business Days of receipt of such notice,
withdraw such funds from the REP Deposit Account or make demand under such
credit support, as applicable.

               (e)     Maintenance of REP Deposit Accounts. The Servicer shall
cause the Indenture Trustee to maintain one or more REP Deposit Accounts as
described in Section 8.02(g) of the Indenture. The Servicer shall provide
written direction to the Indenture Trustee regarding the allocation and release
of funds on deposit in the REP Deposit Accounts, as permitted or required by the
Indenture or any applicable Financing Order, Tariff or PUCT Regulations. The
Indenture Trustee shall be entitled to rely on written directions from the
Servicer pursuant to this Section 3.05.

               (f)     Affiliated Third-Party Collectors and REPs. In
performing its obligations under this Section 3.05, the Servicer shall deal with
Third-Party Collectors and REPs which are Affiliates of the Servicer on terms
which are no more favorable in the aggregate to such affiliated Third-Party
Collector or REP than those used by the Servicer in its dealings with
Third-Party Collectors and REPs that are not affiliates of the Servicer.

                                        8

<PAGE>

                                   ARTICLE IV
                     SERVICES RELATED TO TRUE-UP ADJUSTMENTS

               SECTION 4.01.  True-Up Adjustments. From time to time, until the
Retirement of the Notes, the Servicer shall identify the need for Annual True-Up
Adjustments, Interim True-Up Adjustments and Non-Standard True-Up Adjustments
and shall take all reasonable action to obtain and implement such True-Up
Adjustments, all in accordance with the following:

               (a)     Expected Amortization Schedule. The initial Expected
Amortization Schedule is attached hereto as Schedule 4.01(a). In connection with
the Note Issuer's issuance of any additional Series of Notes after the Closing
Date, the Servicer, on or prior to the Series Issuance Date therefor, shall
revise the Expected Amortization Schedule to add the requisite information for
each new Series of Notes and set forth, as of each Payment Date through the
scheduled Retirement of the Notes, the aggregate principal amounts of the Notes
of all Series, including such additional Series, expected to be outstanding on
such Payment Date. If the Expected Amortization Schedule is revised as set forth
above, the Servicer shall send a copy of such revised Expected Amortization
Schedule to the Note Issuer, the Indenture Trustee and the Rating Agencies
promptly thereafter.

               (b)     True-Up Adjustments.

                       (i)     Annual True-Up Adjustments and Filings. Each
               year no later than [_________], the Servicer shall: (A) update
               the data and assumptions underlying the calculation of the
               Transition Charges, including projected electricity usage during
               the next Calculation Period for each TC Customer Class and
               including interest and estimated expenses and fees of the Note
               Issuer to be paid during such period, the Weighted Average Days
               Outstanding and write-offs; (B) determine the Periodic Payment
               Requirements and Periodic Billing Requirement for the next
               Calculation Period based on such updated data and assumptions;
               (C) determine the Transition Charges to be allocated to each TC
               Customer Class during the next Calculation Period based on such
               Periodic Billing Requirement and the terms of the applicable
               Financing Orders and the Tariffs filed pursuant thereto and
               doing so the Servicer shall use the method of allocating
               Transition Charges then in effect as a result of the
               implementation of a Non-Standard True-Up Adjustment; (D) make
               all required notice and other filings with the PUCT to reflect
               the revised Transition Charges, including any Amendatory
               Tariffs, and (E) take all reasonable actions and make all
               reasonable efforts to effect such Annual True-Up Adjustment and
               to enforce the provisions of the Securitization Law and the
               applicable Financing Orders which relate thereto; provided,
               however, that if the Servicer determines that the forecasted
               billing units for one or more of the TC Customer Classes for an
               upcoming period decreases by more than 10% compared to the
               billing units for the threshold period set forth in the
               applicable Financing Order, the Servicer shall implement a
               Non-Standard True-Up Adjustment rather

                                        9

<PAGE>

               than an Annual True-Up Adjustment. The Servicer shall implement
               the revised Transition Charges, if any, resulting from such
               Annual True-Up Adjustment as of the Annual True-Up Adjustment
               Date.

                       (ii)    Non-Standard True-Up Adjustments and Filings. In
               the event that the Servicer determines that a Non-Standard
               True-Up Adjustment is required, the Servicer shall (A)
               recalculate the Transition Charges to reallocate such Transition
               Charges among TC Customer Classes in accordance with the
               procedures for Non-Standard True-Up Adjustments set forth in the
               applicable Financing Order and TC Tariff; (B) make all required
               notice and other filings with the PUCT to reflect the revised
               Transition Charges, including any Amendatory Tariffs; and (C)
               take all reasonable actions and make all reasonable efforts to
               effect such Non-Standard True-Up Adjustment and to enforce the
               provisions of the Securitization Law and the applicable Financing
               Orders which relate thereto. The Servicer shall implement the
               revised Transition Charges, if any, resulting from such
               Non-Standard True-Up Adjustment on the earlier of (i) the date
               such revised Transition Charges are approved by a final order of
               the PUCT in the related Non-Standard True-Up Adjustment
               proceeding and (ii) the proposed true-up adjustment date
               contained in the filing made by the Servicer with the PUCT with
               respect to such Non-Standard True-Up Adjustment. For the
               avoidance of doubt, no Annual True-Up Adjustment or Interim
               True-Up Adjustment shall be considered a Non-Standard True-Up
               Adjustment solely because Transition Charges are allocated under
               such Annual True-Up Adjustment or Interim True-Up Adjustment in
               the same manner as in a Non-Standard True-Up Adjustment.

                       (iii)   Interim True-Up Adjustments and Filings. Each
               year no later than [____] Servicer Business Days prior to each
               Payment Date, the Servicer shall compare the anticipated
               Unrecovered Balance, as of such Payment Date and after giving
               effect to payments to be made on such Payment Date, to the
               Projected Unrecovered Balance as of such Payment Date. If the
               Servicer determines that such Unrecovered Balance will exceed
               105% of such Projected Unrecovered Balance or will be less than
               95% of such Projected Unrecovered Balance and if any Outstanding
               Series of Notes which matures after ___, 20__, will not have
               been paid in full by its Expected Final Payment Date, then the
               Servicer shall: (A) update the data and assumptions underlying
               the calculation of the Transition Charges, including projected
               electricity usage during the next Calculation Period for each TC
               Customer Class and including interest and estimated expenses and
               fees of the Note Issuer to be paid during such period, the rate
               of delinquencies and write-offs; (B) determine the Periodic
               Payment Requirement and Periodic Billing Requirement for the
               next Calculation Period based on such updated data and
               assumptions; (C) determine the Transition Charges to be
               allocated to each TC Customer Class during the next Calculation
               Period based on such Periodic Billing Requirement and the terms
               of the applicable Financing Orders and the Tariffs filed
               pursuant thereto, and in doing so the Servicer shall use the
               method of allocating Transition Charges then in effect as a
               result of the implementation of a

                                       10
<PAGE>

               Non-Standard True-Up Adjustment; (D) make all required notice
               and other filings with the PUCT to reflect the revised
               Transition Charges, including any Amendatory Tariffs, and (E)
               take all reasonable actions and make all reasonable efforts to
               effect such Interim True-Up Adjustment and to enforce the
               provisions of the Securitization Law and the applicable
               Financing Orders which relate thereto. The Servicer shall
               implement the revised Transition Charges, if any, resulting from
               such Interim True-Up Adjustment on the Interim True-Up
               Adjustment Date.

               (c)     Reports.

                       (i)     Notification of Amendatory Tariff Filings and
               True-Up Adjustments. Whenever the Servicer files an Amendatory
               Tariff with the PUCT or implements revised Transition Charges
               with notice to the PUCT without filing an Amendatory Tariff if
               permitted by any applicable Financing Order, the Servicer shall
               send a copy of such filing or notice (together with a copy of
               all notices and documents which, in the Servicer's reasonable
               judgment, are material to the adjustments effected by such
               Amendatory Tariff or notice) to the Note Issuer, the Indenture
               Trustee and the Rating Agencies concurrently therewith. If, for
               any reason any revised Transition Charges are not implemented
               and effective on the applicable date set forth herein, the
               Servicer shall notify the Note Issuer, the Indenture Trustee and
               each Rating Agency by the end of the second Servicer Business
               Day after such applicable date.

                       (ii)    Servicer's Certificate. Not later than five
               Servicer Business Days prior to each Payment Date, the Servicer
               shall deliver a written report substantially in the form of
               Exhibit C hereto (the "Servicer's Certificate") to the Note
               Issuer, the Indenture Trustee and the Rating Agencies.

                       (iii)   Reports to Customers.

                       (A)     After each revised Transition Charge has gone
               into effect pursuant to a True-Up Adjustment, the Servicer
               shall, to the extent and in the manner and time frame required
               by applicable PUCT Regulations, if any, cause to be prepared and
               delivered to Customers any required notices announcing such
               revised Transition Charges.

                       (B)     The Servicer shall comply with the requirements
               of each Financing Order and Tariff with respect to the
               identification of Transition Charges on Bills. In addition, at
               least once each year, the Servicer shall (to the extent that it
               does not separately identify the Transition Charges as being
               owned by the Note Issuer in the Bills regularly sent to
               Applicable REPs or Customers) cause to be prepared and delivered
               to REPs and such Customers a notice stating, in effect, that the
               Transition Property and the Transition Charges are owned by the
               Note Issuer and not the Seller. Unless prohibited by applicable
               PUCT Regulations, the Servicer

                                       11
<PAGE>

               shall cause each Applicable REP, at least once each year, to
               include similar notices in the bills sent by Applicable REPs to
               Customers indicating additionally that the Transition Charges
               are not owned by the REP (to the extent that such REP does not
               include such information in the Bills regularly sent to
               Customers). Such notice shall be included either as an insert to
               or in the text of the Bills delivered to such Customers or shall
               be delivered to Customers by electronic means or such other
               means as the Servicer or the Applicable REP may from time to
               time use to communicate with its respective customers.

                       (C)     Except to the extent that applicable PUCT
               Regulations make the Applicable REP responsible for such costs,
               or the Applicable REP has otherwise agreed to pay such costs,
               the Servicer shall pay from its own funds all costs of
               preparation and delivery incurred in connection with clauses (A)
               and (B) above, including printing and postage costs as the same
               may increase or decrease from time to time.

                       (iv)    REP Reports. The Servicer shall provide to the
               Rating Agencies, upon request, any publicly available reports
               filed by the Servicer with the PUCT (or otherwise made publicly
               available by the Servicer) relating to REPs and any other
               non-confidential and non-proprietary information relating to
               REPs reasonably requested by the Rating Agencies.

               SECTION 4.02   Limitation of Liability. (a) The Note Issuer and
the Servicer expressly agree and acknowledge that:

                       (i)     In connection with any True-Up Adjustment, the
               Servicer is acting solely in its capacity as the servicing agent
               hereunder.

                       (ii)    Neither the Servicer nor the Note Issuer is
               responsible in any manner for, and shall have no liability
               whatsoever as a result of, any action, decision, ruling or other
               determination made or not made, or any delay (other than any
               delay resulting from the Servicer's failure to file the
               applications required by Section 4.01 in a timely and correct
               manner or any breach by the Servicer of its duties under this
               Agreement that adversely affects the Transition Property or the
               True-Up Adjustments), by the PUCT in any way related to the
               Transition Property or in connection with any True-Up
               Adjustment, the subject of any filings under Section 4.01, any
               proposed True-Up Adjustment, or the approval of any revised
               Transition Charges and the scheduled adjustments thereto.

                       (iii)   Except to the extent that the Servicer is liable
               under Section 6.02, the Servicer shall have no liability
               whatsoever relating to the calculation of any revised Transition
               Charges and the scheduled adjustments thereto, including as a
               result of any inaccuracy of any of the assumptions made in such
               calculation regarding expected energy usage volume and the
               Weighted Average Days

                                       12
<PAGE>

               Outstanding, write-offs and estimated expenses and fees of the
               Note Issuer, so long as the Servicer has acted in good faith and
               has not acted in a negligent manner in connection therewith, nor
               shall the Servicer have any liability whatsoever as a result of
               any Person, including the Holders, not receiving any payment,
               amount or return anticipated or expected or in respect of any
               Note generally.

               (b)     Notwithstanding the foregoing, this Section 4.02 shall
not relieve the Servicer of liability for any misrepresentation by the Servicer
under Section 6.01 or for any breach by the Servicer of its other obligations
under this Agreement.

                                    ARTICLE V
                             THE TRANSITION PROPERTY

               SECTION 5.01.  Custody of Transition Property Records. To assure
uniform quality in servicing the Transition Property and to reduce
administrative costs, the Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Indenture Trustee as custodian of any and all documents and
records that the Seller shall keep on file, in accordance with its customary
procedures, relating to the Transition Property, including copies of any
Financing Orders, Issuance Advice Letters, Tariffs and Amendatory Tariffs
relating thereto and all documents filed with the PUCT in connection with any
True-Up Adjustment and computational records relating thereto (collectively, the
"Transition Property Records"), which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Note Issuer (or, in the case of the
Subsequent Transition Property, will as of the applicable Subsequent Transfer
Date be constructively delivered to the Indenture Trustee, as pledgee of the
Note Issuer) with respect to all Transition Property.

               SECTION 5.02.  Duties of Servicer as Custodian. (a) Safekeeping.
The Servicer shall hold the Transition Property Records on behalf of the Note
Issuer and maintain such accurate and complete accounts, records and computer
systems pertaining to the Transition Property Records as shall enable the Note
Issuer and the Indenture Trustee, as applicable, to comply with this Agreement,
the Sale Agreement and the Indenture. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of care and diligence
that the Servicer exercises with respect to comparable assets that the Servicer
services for itself or, if applicable, for others. The Servicer shall promptly
report to the Note Issuer, the Indenture Trustee and the Rating Agencies any
failure on its part to hold the Transition Property Records and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed to
require an initial review or any periodic review by the Note Issuer or the
Indenture Trustee of the Transition Property Records. The Servicer's duties to
hold the Transition Property Records on behalf of the Note Issuer and the
Indenture Trustee set forth in this Section 5.02, to the extent such Transition
Property Records have not been previously transferred to a successor Servicer
pursuant to Article VII, shall terminate one year and one day after the earlier
of the date on which (i) the Servicer is

                                       13
<PAGE>

succeeded by a successor Servicer in accordance with Article VII and (ii) no
Notes of any Series are Outstanding.

               (b)     Maintenance of and Access to Records. The Servicer shall
maintain the Transition Property Records at [_______________] or at such other
office as shall be specified to the Note Issuer and the Indenture Trustee by
written notice at least 30 days prior to any change in location. The Servicer
shall make available for inspection, audit and copying to the Note Issuer and
the Indenture Trustee or their respective duly authorized representatives,
attorneys or auditors the Transition Property Records at such times during
normal business hours as the Note Issuer or the Indenture Trustee shall
reasonably request and which do not unreasonably interfere with the Servicer's
normal operations. Nothing in this Section 5.02(b) shall affect the obligation
of the Servicer to observe any applicable law (including any PUCT Regulation)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section 5.02(b).

               (c)     Release of Documents. Upon instruction from the
Indenture Trustee in accordance with the Indenture, the Servicer shall release
any Transition Property Records to the Indenture Trustee, the Indenture
Trustee's agent or the Indenture Trustee's designee, as the case may be, at such
place or places as the Indenture Trustee may designate, as soon as practicable.

               (d)     Defending Transition Property Against Claims. The
Servicer, on behalf of the Holders, shall institute any action or proceeding
necessary to compel performance by the PUCT, the State of Texas, each REP and
each party to the Intercreditor Agreement (and in the case of each REP at the
earliest possible time) of any of their respective obligations or duties under
the Securitization Law, any Financing Order, any Issuance Advice Letter, True-Up
Adjustment, any Tariff, any Amendatory Tariff or the Intercreditor Agreement,
and the Servicer agrees to take such legal or administrative actions, including
defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings, as may be reasonably necessary to
block or overturn any attempts to cause a repeal of, modification of or
supplement to or judicial invalidation of the Securitization Law or any
Financing Order or the rights of holders of Transition Property by legislative
enactment, voter initiative or constitutional amendment that would be materially
adverse to Holders or which would cause an impairment of the rights of the Note
Issuer or the Holders. In any proceedings related to the exercise of the power
of eminent domain by any municipality to acquire a portion of CPL's electric
distribution facilities, the Servicer shall assert that the court ordering such
condemnation must treat such municipality as a successor to CPL under the
Securitization Law and Financing Order. The costs of any such action shall be
payable by the Seller pursuant to Section 5.01(h) of the Sale Agreement.

                                       14
<PAGE>

               SECTION 5.03.  Instructions; Authority to Act. For so long as
any Notes remain Outstanding, the Servicer shall be deemed to have received
proper instructions with respect to the Transition Property Records upon its
receipt of written instructions signed by a Responsible Officer of the Indenture
Trustee.

               SECTION 5.04.  Custodian's Indemnification. The Servicer as
custodian shall indemnify the Note Issuer, the Independent Managers and the
Indenture Trustee (for itself and for the benefit of the Noteholders) and each
of their respective officers, directors, employees and agents for, and defend
and hold harmless each such Person from and against, any and all liabilities,
obligations, losses, damages, payments and claims, and reasonable costs or
expenses, of any kind whatsoever (collectively, "Losses") that may be imposed
on, incurred by or asserted against each such Person as the result of any
negligent act or omission in any way relating to the maintenance and custody by
the Servicer, as custodian, of the Transition Property Records; provided,
however, that the Servicer shall not be liable for any portion of any such
amount resulting from the willful misconduct, bad faith or gross negligence of
the Note Issuer, the Independent Managers or the Indenture Trustee, as the case
may be.

               Indemnification under this Section shall survive resignation or
removal of the Indenture Trustee or any Independent Manager and shall include
reasonable out-of-pocket fees and expenses of investigation and litigation
(including reasonable attorney's fees and expenses).

               SECTION 5.05.  Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section
5.05. If the Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of the Servicer shall
have been terminated under Section 7.01, the appointment of the Servicer as
custodian shall be terminated effective as of the date on which the termination
or resignation of the Servicer is effective. Additionally, if not sooner
terminated as provided above, the Servicer's obligations as Custodian shall
terminate one year and one day after the date on which no Notes of any Series
are Outstanding.

                                   ARTICLE VI
                                  THE SERVICER

               SECTION 6.01.  Representations and Warranties of Servicer. The
Servicer makes the following representations and warranties, as of the Closing
Date, as of each Subsequent Transfer Date relating to the sale of Subsequent
Transition Property, and as of such other dates as expressly provided in this
Section 6.01, on which the Note Issuer and the Indenture Trustee are deemed to
have relied in entering into this Agreement relating to the servicing of the
Transition Property. The representations and warranties shall survive the
execution and delivery of this Agreement, the sale of any Transition Property
and the pledge thereof to the Indenture Trustee pursuant to the Indenture.

                                       15

<PAGE>

               (a)     Organization and Good Standing. The Servicer is duly
organized and validly existing and is in good standing under the laws of the
state of its organization, with the requisite corporate or other power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted and to execute,
deliver and carry out the terms of this Agreement, and had at all relevant
times, and has, the requisite power, authority and legal right to service the
Transition Property and to hold the Transition Property Records as custodian.

               (b)     Due Qualification. The Servicer is duly qualified to do
business and is in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of property or
the conduct of its business (including the servicing of the Transition Property
as required by this Agreement) shall require such qualifications, licenses or
approvals (except where the failure to so qualify would not be reasonably likely
to have a material adverse effect on the Servicer's business, operations,
assets, revenues or properties or to its servicing of the Transition Property).

               (c)     Power and Authority. The Servicer has the requisite
corporate or other power and authority to execute and deliver this Agreement and
to carry out its terms; and the execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the part of the
Servicer under its organizational or governing documents and laws.

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

               (e)     No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
organizational documents of the Servicer, or any indenture or other agreement or
instrument to which the Servicer is a party or by which it or any of its
property is bound; nor result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than any Lien that may be granted under the Basic
Documents or any Lien created pursuant to Section 39.309 of the Securitization
Law); nor violate any existing law or any existing order, rule or regulation
applicable to the Servicer of any Governmental Authority having jurisdiction
over the Servicer or its properties.

               (f)     No Proceedings. Except as disclosed in the prospectus
and the related prospectus supplement, each dated ________, of the Issuer
relating to the Notes (together, the "Prospectus"), there are no proceedings or
investigations pending or, to the Servicer's knowledge, threatened, before any
Governmental Authority having jurisdiction over the Servicer

                                       16

<PAGE>

or its properties involving or relating to the Servicer or the Note Issuer or,
to the Servicer's knowledge, any other Person: (i) asserting the invalidity of
this Agreement or any of the other Basic Documents, (ii) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the other Basic Documents, (iii)
seeking any determination or ruling that could reasonably be expected to
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement, any of
the other Basic Documents or the Notes or (iv) seeking to adversely affect the
federal income tax or state income or franchise tax classification of the Notes
of any Series as debt.

               (g)     Approvals. No approval, authorization, consent, order or
other action of, or filing with, any Governmental Authority is required in
connection with the execution and delivery by the Servicer of this Agreement,
the performance by the Servicer of the transactions contemplated hereby or the
fulfillment by the Servicer of the terms hereof, except those that have been
obtained or made, those that the Servicer is required to make in the future
pursuant to Article IV and those that the Servicer may need to file in the
future to continue the effectiveness of any financing statement filed under the
UCC.

               (h)     Reports and Certificates. Each report and certificate
delivered in connection with an Issuance Advice Letter or delivered in
connection with any filing made to the PUCT by the Note Issuer with respect to
the Transition Charges or True-Up Adjustments will constitute a representation
and warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct in all material respects; provided, however, that to
the extent any such report or certificate is based in part upon or contains
assumptions, forecasts or other predictions of future events, the representation
and warranty of the Servicer with respect thereto will be limited to the
representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical performance.

               (i)     Conversion. In the event CPL converts into a Texas
limited liability company, such conversion will not:

                       (i)     interrupt CPL's existence;

                       (ii)    affect CPL's rights, title and interests in its
               real estate and other property or its power, authority or
               ability to perform its obligations under the Sale Agreement,
               this Agreement or the Basic Documents; or

                       (iii)   impair or diminish the liabilities and
               obligations of CPL, including, without limitation, its
               obligations under this Agreement or any other Basic Document.

               SECTION 6.02.  Indemnities of Servicer; Release of Claims. (a)
The Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement and the
Intercreditor Agreement.

                                       17
<PAGE>

               (b)     The Servicer shall indemnify the Note Issuer, the
Indenture Trustee (for itself and for the benefit of the Noteholders) and the
Independent Managers and each of their respective trustees, officers, directors,
employees and agents for, and defend and hold harmless each such Person from and
against, any and all Losses imposed on, incurred by or asserted against any such
Person as a result of (i) the Servicer's willful misconduct, bad faith or
negligence in the performance of its duties or observance of its covenants under
this Agreement or its reckless disregard of its obligations and duties under
this Agreement, (ii) the Servicer's breach of any of its representations and
warranties contained in this Agreement or (iii) any finding that interest
payable to a REP with respect to disputed funds must be paid by the Note Issuer
or from the Transition Property, except to the extent of Losses either resulting
from the willful misconduct or gross negligence of such Person seeking
indemnification hereunder or resulting from a breach of a representation or
warranty made by such Person seeking indemnification hereunder in any of the
Basic Documents that gives rise to the Servicer's breach.

               (c)     For purposes of Section 6.02(b), in the event of the
termination of the rights and obligations of CPL (or any successor thereto
pursuant to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation
by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be
the Servicer pending appointment of a successor Servicer pursuant to Section
7.02.

               (d)     Indemnification under this Section 6.02 shall survive
any repeal of, modification of, or supplement to, or judicial invalidation of,
the Securitization Law or any Financing Order and shall survive the resignation
or removal of the Indenture Trustee or any Independent Manager or the
termination of this Agreement and shall include reasonable out-of-pocket fees
and expenses of investigation and litigation (including reasonable attorney's
fees and expenses).

               (e)     Except to the extent expressly provided in this
Agreement or the other Basic Documents (including the Servicer's claims with
respect to the Servicing Fee, reimbursement for any Excess Remittance,
reimbursement for costs incurred pursuant to Section 5.02 (d) and the payment of
the purchase price of Transition Property), the Servicer hereby releases and
discharges the Note Issuer, the Independent Managers, and the Indenture Trustee
and each of their respective officers, directors and agents (collectively, the
"Released Parties") from any and all actions, claims and demands whatsoever,
whenever arising, which the Servicer, in its capacity as Servicer or otherwise,
shall or may have against any such Person relating to the Transition Property or
the Servicer's activities with respect thereto other than any actions, claims
and demands arising out of the willful misconduct, bad faith or gross negligence
of the Released Parties.

               (f)     Promptly after receipt by an Indemnified Person of
notice of the commencement of any action, proceeding or investigation, such
Indemnified Person shall, if a claim in respect thereof is to be made against
the Servicer under this Section 6.02(f), notify the Servicer in writing of the
commencement thereof. Failure by an Indemnified Person to so notify the Servicer
shall relieve the Servicer from the obligation to indemnify and hold harmless
such

                                       18
<PAGE>

Indemnified Person under this Section 6.02(f) only to the extent that the
Servicer suffers actual prejudice as a result of such failure. With respect to
any action, proceeding or investigation brought by a third party for which
indemnification may be sought under this Section 6.02(f), the Servicer shall be
entitled to conduct and control, at its expense and with counsel of its choosing
that is reasonably satisfactory to such Indemnified Person, the defense of any
such action, proceeding or investigation (in which case the Servicer shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person except as set forth below); provided that the
Indemnified Person shall have the right to participate in such action,
proceeding or investigation through counsel chosen by it and at its own expense.
Notwithstanding the Servicer's election to assume the defense of any action,
proceeding or investigation, the Indemnified Person shall have the right to
employ separate counsel (including local counsel), and the Servicer shall bear
the reasonable fees, costs and expenses of such separate counsel if (i) the
defendants in any such action include both the Indemnified Person and the
Servicer and the Indemnified Person shall have reasonably concluded that there
may be legal defenses available to it that are different from or additional to
those available to the Servicer, (ii) the Servicer shall not have employed
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person within a reasonable time after notice of the institution of
such action or (iii) the Servicer shall authorize the Indemnified Person to
employ separate counsel at the expense of the Servicer. Notwithstanding the
foregoing, the Servicer shall not be obligated to pay for the fees, costs and
expenses of more than one separate counsel for the Indemnified Persons other
than one local counsel, if appropriate.

               SECTION 6.03.  Binding Effect of Servicing Obligations. The
obligations to continue to provide service and to collect and account for
Transition Charges will be binding upon the Servicer and any other entity that
provides transmission and distribution services or direct wire services to a
Person that was a retail customer of CPL located within CPL's certificated
service area on May 1, 1999 (except for former customers not taking service from
CPL by reason of taking service from Sharyland Utilities, L.P. pursuant to
Commission Action in Docket No. 20292) or that became a retail customer for
electric services within such area after May 1, 1999 and is still located within
such area. Any Person (a) into which the Servicer may be merged, converted or
consolidated and which is a Permitted Successor, (b) that may result from any
merger, conversion or consolidation to which the Servicer shall be a party and
which is a Permitted Successor, (c) that may succeed to the properties and
assets of the Servicer substantially as a whole and which is a Permitted
Successor, (d) which results from the division of the Servicer into two or more
Persons and which is a Permitted Successor, or (e) which otherwise is a
Permitted Successor, which Person in any of the foregoing cases executes an
agreement of assumption to perform all of the obligations of the Servicer
hereunder, shall be the successor to the Servicer under this Agreement without
further act on the part of any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 6.01 shall have been
breached and no Servicer Default and no event which, after notice or lapse of
time, or both, would become a Servicer Default shall have occurred and be
continuing, (ii) the Servicer shall have delivered to the Note Issuer and the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel from
external counsel stating that such consolidation, conversion, merger,

                                       19
<PAGE>

division or succession and such agreement of assumption complies with this
Section 6.03 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (iii) the
Servicer shall have delivered to the Note Issuer, the Indenture Trustee and the
Rating Agencies an Opinion of Counsel from external counsel either (A) stating
that, in the opinion of such counsel, all filings to be made by the Servicer,
including filings with the PUCT pursuant to the Securitization Law and the UCC,
have been executed and filed and are in full force and effect that are necessary
to fully preserve and protect the interests of the Note Issuer and the Indenture
Trustee in the Transition Property and reciting the details of such filings or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests and (iv) the Servicer shall
have given the Rating Agencies prior written notice of such transaction. When
any Person (or more than one Person) acquires the properties and assets of the
Servicer substantially as a whole or otherwise becomes the successor, by merger,
conversion, consolidation, sale, transfer, lease or otherwise, to all or
substantially all the electric transmission and distribution business of the
Servicer (or, if transmission and distribution are not provided by a single
entity, provides wire service directly to customers taking services at
facilities, premises or loads located in CPL's Certificated Service area as it
existed on May 1, 1999 (except for former customers not taking service from CPL
by reason of taking service from Sharyland Utilities, L.P. pursuant to PUCT
action in Docket No. 20292)) in accordance with the terms of this Section 6.03,
then upon satisfaction of all of the other conditions of this Section, the
preceding Servicer shall automatically and without further notice be released
from all its obligations hereunder. Notwithstanding anything to the contrary
contained in this Section 6.03, the Servicer may convert into a Texas limited
liability company that shall be the successor to the Servicer under this
Agreement without the execution or filing of any document or any further act by
any of the parties to this Agreement, without execution of the above-described
agreement and without compliance with clauses (i), (ii), (iii) or (iv) above,
provided that such conversion shall not result in a breach of the Servicer's
representation and warranty in Section 6.01(i) hereof.

               SECTION 6.04.  Limitation on Liability of Servicer and Others.
Except as otherwise provided under this Agreement, neither the Servicer nor any
of the directors, officers, employees or agents of the Servicer shall be liable
to the Note Issuer or any other Person for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
or any such person against any liability that would otherwise be imposed by
reason of willful misconduct, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under this
Agreement. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on the advice of counsel reasonably acceptable
to the Indenture Trustee or on any document of any kind, prima facie properly
executed and submitted by any Person, respecting any matters arising under this
Agreement.

               Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action relating
to the Transition Property.

               SECTION 6.05.  CPL Not to Resign as Servicer. Subject to the
provisions of Section 6.03, CPL shall not resign from the obligations and duties
hereby imposed on it as

                                       20

<PAGE>

Servicer under this Agreement unless the Servicer delivers to the Indenture
Trustee and the PUCT an opinion of independent legal counsel to the effect that
the Servicer's performance of its duties under this Agreement shall no longer be
permissible under applicable law. No such resignation shall become effective
until a successor Servicer shall have assumed the responsibilities and
obligations of CPL in accordance with Section 7.02.

               SECTION 6.06.  Servicing Compensation. (a) In consideration for
its services hereunder, until the Retirement of the Notes, the Servicer shall
receive an annual fee (the "Servicing Fee") in an amount equal to (i) 0.05% of
the aggregate initial principal amount of all Outstanding Series of Notes for so
long as CPL or any of its Permitted Successors or assigns or an Affiliate of CPL
is the Servicer or (ii) an amount agreed upon by the Successor Servicer and the
Indenture Trustee, but not more than 0.60% of the aggregate initial principal
amount of all Outstanding Series of Notes if CPL, any Permitted Successor or
assign or an Affiliate is not the Servicer. The Servicing Fee shall be paid
semi-annually with half of the Servicing Fee being paid on each Payment Date. So
long as CPL or an affiliate thereof remains as Servicer, the Servicer shall not
cause Transition Charges to be billed separately to Customers or REPs from
amounts owed to the Servicer on its own account. The Servicer also shall be
entitled to retain as additional compensation (i) any interest earnings on TC
Payments received by the Servicer and invested by the Servicer during each
Collection Period prior to remittance to the Collection Account and (ii) all
late payment charges, if any, collected from Customers or REPs; provided,
however, that if the Servicer has failed to remit the TC Payments to the
Collection Account on the same Business Day that the Servicer received such TC
Payments on more than three occasions during the period that the Notes are
outstanding, then thereafter the Servicer will be required to pay to the
Indenture Trustee any interest earnings on TC Payments received by the Servicer
and invested by the Servicer during each Collection Period prior to remittance
to the Collection Account for so long as the Notes remain outstanding.

               (b)     The Servicing Fee set forth in Section 6.06(a) shall be
paid to the Servicer by the Indenture Trustee, on each Payment Date in
accordance with the priorities set forth in Section 8.02(e) of the Indenture, by
wire transfer of immediately available funds from the Collection Account to an
account designated by the Servicer. Any portion of the Servicing Fee not paid on
any such date should be added to the Servicing Fee payable on the subsequent
Payment Date.

               (c)     Except as expressly provided elsewhere in this
Agreement, the Servicer shall be required to pay from its own account expenses
incurred by the Servicer in connection with its activities hereunder (including
any fees to and disbursements by accountants, counsel, or any other Person, any
taxes imposed on the Servicer and any expenses incurred in connection with
reports to Holders) out of the compensation retained by or paid to it pursuant
to this Section 6.06, and shall not be entitled to any extra payment or
reimbursement therefor.

               (d)     The foregoing Servicing Fees constitute a fair and
reasonable price for the obligations to be performed by the Servicer. Such
Servicing Fee shall be determined without regard to the income of the Note
Issuer, shall not be deemed to constitute distributions to the

                                       21
<PAGE>
recipient of any profit, loss or capital of the Note Issuer and shall be
considered a fixed Operating Expense of the Note Issuer subject to the
limitations on such expenses set forth in the Financing Order.

                SECTION 6.07. Compliance with Applicable Law. The Servicer
covenants and agrees, in servicing the Transition Property, to comply in all
material respects with all laws applicable to, and binding upon, the Servicer
and relating to such Transition Property the noncompliance with which would have
a material adverse effect on the value of the Transition Property; provided,
however, that the foregoing is not intended to, and shall not, impose any
liability on the Servicer for noncompliance with any law that the Servicer is
contesting in good faith in accordance with its customary standards and
procedures.

                SECTION 6.08. Access to Certain Records and Information
Regarding Transition Property. The Servicer shall provide to the Holders and the
Indenture Trustee access to the Transition Property Records in such cases where
the Holders and the Indenture Trustee shall be required by applicable law to be
provided access to such records. Access shall be afforded without charge, but
only upon reasonable request and during normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the Servicer to observe any applicable law (including any PUCT Regulation)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section.

                SECTION 6.09. Appointments. The Servicer may at any time appoint
any Person to perform all or any portion of its obligations as Servicer
hereunder including a collection agent acting pursuant to the Intercreditor
Agreement; provided, however, that, unless such Person is an Affiliate of CPL,
the Rating Agency Condition shall have been satisfied in connection therewith
except that with respect to Moody's it shall be sufficient to provide ten days'
prior notice; provided further that the Servicer shall remain obligated and be
liable under this Agreement for the servicing and administering of the
Transition Property in accordance with the provisions hereof without diminution
of such obligation and liability by virtue of the appointment of such Person and
to the same extent and under the same terms and conditions as if the Servicer
alone were servicing and administering the Transition Property; and provided
further, however, that nothing herein (including the Rating Agency Condition)
shall preclude the execution by the Servicer of an REP Service Agreement with
any REP pursuant to applicable PUCT Regulations. The fees and expenses of any
such Person shall be as agreed between the Servicer and such Person from time to
time and none of the Note Issuer, the Indenture Trustee, the Holders or any
other Person shall have any responsibility therefor or right or claim thereto.
Any such appointment shall not constitute a Servicer resignation under Section
6.05.

                SECTION 6.10. No Servicer Advances. The Servicer shall not make
any advances of interest or principal on the Notes.

                SECTION 6.11. Remittances. (a) On each Servicer Business Day,
commencing [35] days after the Closing Date, the Servicer shall remit to the
General Subaccount

                                       22
<PAGE>

of the Collection Account the total TC Payments estimated to have been received
by the Servicer from or on behalf of Customers on such Servicer Business Day in
respect of all previously billed Transition Charges (the "Daily Remittance"),
which Daily Remittance shall be calculated according to the procedures set forth
in Annex I and shall be remitted as soon as reasonably practicable but in no
event later than the second Servicer Business Day after such payments are
estimated to have been received. Prior to each remittance to the General
Subaccount of the Collection Account pursuant to this Section, the Servicer
shall provide written notice to the Indenture Trustee of each such remittance
(including the exact dollar amount to be remitted).

                (b)     The Servicer agrees and acknowledges that it holds all
TC Payments collected by it for the benefit of the Indenture Trustee and the
Holders and that all such amounts will be remitted by the Servicer in accordance
with this Section without any surcharge, fee, offset, charge or other deduction
except (i) as set forth in clause (c) below and (ii) for late fees permitted by
Section 6.06. The Servicer further agrees not to make any claim to reduce its
obligation to remit all TC Payments collected by it in accordance with this
Agreement except (i) as set forth in clause (c) below and (ii) for late fees
permitted by Section 6.06.

                (c)     On or before each [ _________] commencing [ _______] ,
the Servicer shall calculate the amount of any Remittance Shortfall or Excess
Remittance for the prior Reconciliation Period and (A) if a Remittance Shortfall
exists, the Servicer shall make a supplemental remittance to the General
Subaccount of the Collection Account within two Servicer Business Days, or (B)
if an Excess Remittance exists, the Servicer shall be entitled either (i) to
reduce the amount of each Daily Remittance which the Servicer subsequently
remits to the General Subaccount of the Collection Account for application to
the amount of such Excess Remittance until the balance of such Excess Remittance
has been reduced to zero, the amount of such reduction becoming the property of
the Servicer or (ii) so long as such withdrawal would not cause the amounts on
deposit in the General Subaccount or the Reserve Subaccount to be insufficient
for the payment of the next installment of interest on the Notes or principal
due at maturity on the next Payment Date or upon acceleration on or before the
next Payment Date, to be paid immediately from the General Subaccount or the
Reserve Subaccount the amount of such Excess Remittance, such payment becoming
the property of the Servicer. If there is a Remittance Shortfall, the amount
which the Servicer remits to the General Subaccount of the Collection Account on
the relevant date set forth above shall be increased by the amount of such
Remittance Shortfall, such increase coming from the Servicer's own funds.

                (d)     Unless otherwise directed to do so by the Note Issuer,
the Servicer shall be responsible for selecting Eligible Investments in which
the funds in the Collection Account shall be invested pursuant to Section 8.03
of the Indenture.

                SECTION 6.12. Maintenance of Operations. Subject to Section
6.03, CPL agrees to continue to operate its electric transmission and
distribution system to provide service (or, if transmission and distribution are
split, to provide wire service directly to its customers) so long as it is
acting as the Servicer under this Agreement.

                                       23
<PAGE>

                                  ARTICLE VII
                                     DEFAULT

                SECTION 7.01. Servicer Default. If any one of the following
events (a "Servicer Default") shall occur and be continuing:

                (a)     any failure by the Servicer to remit to the Collection
Account on behalf of the Note Issuer any required remittance that shall continue
unremedied for a period of five Business Days after written notice of such
failure is received by the Servicer from the Note Issuer or the Indenture
Trustee or after discovery of such failure by an officer of the Servicer; or

                (b)     any failure on the part of the Servicer or, so long as
the Servicer is CPL or an affiliate thereof, any failure on the part of CPL, as
the case may be, duly to observe or to perform in any material respect any
covenants or agreements of the Servicer or CPL, as the case may be, set forth in
this Agreement (other than as provided in clause (a) of this Section 7.01) or
any other Basic Document to which it is a party in such capacity, which failure
shall (i) materially and adversely affect the rights of the Holders and (ii)
continue unremedied for a period of 60 days after the date on which (A) written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer or CPL, as the case may be, by the Note Issuer (with a copy to
the Indenture Trustee) or to the Servicer or CPL, as the case may be, by the
Indenture Trustee or (B) such failure is discovered by an officer of the
Servicer; or

                (c)     any representation or warranty made by the Servicer in
this Agreement or any Basic Document shall prove to have been incorrect when
made, which has a material adverse effect on the Holders and which material
adverse effect continues unremedied for a period of 60 days after the date on
which (A) written notice thereof, requiring the same to be remedied, shall have
been delivered to the Servicer (with a copy to the Indenture Trustee) by the
Note Issuer or the Indenture Trustee or (B) such failure is discovered by an
officer of the Servicer; or

                (d)     an Insolvency Event occurs with respect to the Servicer
or CPL; then, and in each and every case, so long as the Servicer Default shall
not have been remedied, either the Indenture Trustee may, or shall upon the
instruction of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes of all Series, by notice then given in writing
to the Servicer (and to the Indenture Trustee if given by the Holders) (a
"Termination Notice") terminate all the rights and obligations (other than the
obligations set forth in Section 6.02 and the obligation under Section 7.02 to
continue performing its functions as Servicer until a successor Servicer is
appointed) of the Servicer under this Agreement, subject to the terms of the
Intercreditor Agreement. In addition, upon a Servicer Default described in
Section 7.01(a), the Holders and the Indenture Trustee as financing parties
under the Securitization Law (or any of their representatives) shall be entitled
to (i) apply to the district court of Travis County for sequestration and
payment of revenues arising with respect to the Transition Property, (ii)
foreclose on or otherwise enforce the lien and security interests in any
Transition Property and (iii) apply to the Texas Commission for an order that
amounts arising from the Transition Charges be transferred to a separate account
for the benefit of the Holders, in accordance with

                                       24
<PAGE>

the Securitization Law. On or after the receipt by the Servicer of a Termination
Notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes, the Transition Property, the Transition Charges or
otherwise, shall, without further action, pass to and be vested in such
successor Servicer as may be appointed under Section 7.02; and, without
limitation, the Indenture Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Termination Notice, whether to complete the transfer of the Transition Property
Records and related documents, or otherwise. The predecessor Servicer shall
cooperate with the successor Servicer, the Note Issuer and the Indenture Trustee
in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all Transition Property Records
and all cash amounts that shall at the time be held by the predecessor Servicer
for remittance, or shall thereafter be received by it with respect to the
Transition Property or the Transition Charges. As soon as practicable after
receipt by the Servicer of such Termination Notice, the Servicer shall deliver
the Transition Property Records to the successor Servicer. In case a successor
Servicer is appointed as a result of a Servicer Default, all reasonable costs
and expenses (including reasonable attorney's fees and expenses) incurred in
connection with transferring the Transition Property Records to the successor
Servicer and amending this Agreement or the Intercreditor Agreement to reflect
such succession as Servicer pursuant to this Section shall be paid by the
predecessor Servicer upon presentation of reasonable documentation of such costs
and expenses. Termination of CPL as Servicer shall not terminate CPL's rights or
obligations under the Sale Agreement or the Intercreditor Agreement (except
rights thereunder deriving from its rights as the Servicer hereunder).

                SECTION 7.02. Appointment of Successor. (a) Upon the Servicer's
receipt of a Termination Notice pursuant to Section 7.01 or the Servicer's
resignation or removal in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement, and shall be entitled to receive the requisite portion of the
Servicing Fee, until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer's removal or resignation hereunder, the Indenture Trustee may at the
written direction and with the consent of the Holders of at least a majority of
the Outstanding Amount of the Notes shall appoint a successor Servicer with the
Note Issuer's prior written consent thereto (which consent shall not be
unreasonably withheld), and the successor Servicer shall accept its appointment
by a written assumption in form reasonably acceptable to the Note Issuer and the
Indenture Trustee and provide prompt written notice of such assumption to the
Note Issuer and the Rating Agencies. If within 30 days after the delivery of the
Termination Notice, a new Servicer shall not have been appointed, the Indenture
Trustee may petition the PUCT or a court of competent jurisdiction to appoint a
successor Servicer under this Agreement. A Person shall qualify as a successor
Servicer only if (i) such Person is permitted under PUCT Regulations to perform
the duties of the Servicer, (ii) the Rating Agency Condition shall have been
satisfied, except that with respect to Moody's it shall be sufficient to provide
ten days' prior notice and (iii) such Person enters into a

                                       25
<PAGE>

servicing agreement with the Note Issuer having substantially the same
provisions as this Agreement and into the Intercreditor Agreement (as the
Transition Bond Servicer).

                (b)     Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject to
all the responsibilities, duties and liabilities arising thereafter relating
thereto placed on the predecessor Servicer and shall be entitled to the
Servicing Fee and all the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement.

                SECTION 7.03. Waiver of Past Defaults. The Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes of
all Series may, on behalf of all Holders, waive in writing any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to the Collection Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.

                SECTION 7.04. Notice of Servicer Default. The Servicer shall
deliver to the Note Issuer, the Indenture Trustee, the PUCT and the Rating
Agencies, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 7.01(a), (b) or (c).

                SECTION 7.05. Cooperation with Successor. The Servicer covenants
and agrees with each Issuer that it will, on an ongoing basis, cooperate with
the successor Servicer and provide whatever information is, and take whatever
actions are, reasonably necessary to assist the successor Servicer in performing
its obligations hereunder.

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

                SECTION 8.01. Amendment. (a) This Agreement may be amended in
writing by the Servicer and the Note Issuer, with the prior written consent of
the Indenture Trustee, the satisfaction of the Rating Agency Condition and the
satisfaction of the condition set forth below in Section 8.02. Promptly after
the execution of any such amendment or consent, the Note Issuer shall furnish
written notification of the substance of such amendment or consent to each of
the Rating Agencies.

                Prior to the execution of any amendment to this Agreement, the
Note Issuer and the Indenture Trustee shall be entitled to receive and
conclusively rely upon an Opinion of Counsel stating that such amendment is
authorized or permitted by this Agreement and upon the Opinion of Counsel from
external counsel referred to in Section 3.01(c)(i). The Note Issuer and

                                       26
<PAGE>

the Indenture Trustee may, but shall not be obligated to, enter into any such
amendment which affects their own rights, duties, indemnities or immunities
under this Agreement or otherwise.

                (b)     Notwithstanding Section 8.01(a) or anything to the
contrary in this Agreement, the Servicer and the Note Issuer may amend Annex I
to this Agreement in writing with prior written notice given to the Indenture
Trustee and the Rating Agencies, but without the consent of the Indenture
Trustee, any Rating Agency or any Holder, solely to address changes to the
Servicer's method of calculating TC Payments as a result of changes to the
Servicer's current computerized customer information system, including changes
which would replace the remittances contemplated by the estimation procedures
set forth in Annex I with remittances of TC Collections determined to have been
actually received; provided that any such amendment shall not have a material
adverse effect on the Holders of then Outstanding Notes.

                SECTION 8.02. PUCT Condition. Notwithstanding anything to the
contrary in Section 8.01(a), no amendment or modification of this Agreement
shall be effective except upon satisfaction of the conditions precedent in this
Section 8.02.

                (a)     At least fifteen days prior to the effectiveness of any
such amendment or modification and after obtaining the other necessary approvals
set forth in Section 8.01(a) above (except that the consent of the Indenture
Trustee may be subject to the consent of Holders if such consent is required or
sought by the Indenture Trustee in connection with such amendment or
modification), the Servicer shall have delivered to the PUCT's executive
director and general counsel written notification of any proposed amendment,
which notification shall contain:

                        (i)     a reference to Docket No. 21528;

                        (ii)    an Officer's Certificate stating that the
                proposed amendment or modification has been approved by all
                parties to this Agreement; and

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

                (b)     If the PUCT or its staff shall have, within fifteen days
(subject to extension as provided in Section 8.02(c) below) of receiving a
notification complying with Section 8.02(a) above, delivered to the office of
the person specified in Section 8.02(a)(iii) above a written statement that the
PUCT might object to the proposed amendment or modification, then such proposed
amendment or modification shall not be effective unless and until the PUCT
subsequently delivers a written statement in writing that it does not object to
such proposed amendment or modification.

                (c)     If the PUCT or its staff shall have, within fifteen days
of receiving a notification complying with Section 8.02(a) above, delivered to
the office of the person specified in Section 8.02(a)(iii) above a written
statement requesting an additional amount of time not to exceed thirty days in
which to consider such proposed amendment or modification, then such proposed
amendment or modification shall not be effective if, within such extended
period, the

                                       27
<PAGE>

PUCT shall have delivered to the office of the person specified in Section
8.02(a)(iii) above a written statement as described in Section 8.02(b) above,
unless and until the PUCT subsequently delivers a written statement in writing
that it does not object to such proposed amendment or modification.

                (d)     If the PUCT or its staff shall have not delivered
written notice that the PUCT might object to such proposed amendment or
modification within the time periods described in Section 8.02(b) or Section
8.02(c) above, whichever is applicable, then the PUCT shall be conclusively
deemed not to have any objection to the proposed amendment or modification and
such amendment or modification may subsequently become effective upon
satisfaction of the other conditions specified in Section 8.01.

                (e)     Following the delivery of a notice to the PUCT by the
Servicer under Section 8.02(a) above, the Servicer and the Note Issuer shall
have the right at any time to withdraw from the PUCT further consideration of
any notification of a proposed amendment.

                SECTION 8.03. Maintenance of Accounts and Records. (a) The
Servicer shall maintain accounts and records as to the Transition Property
accurately and in accordance with its standard accounting procedures and in
sufficient detail to permit reconciliation between TC Payments received by the
Servicer and TC Collections from time to time deposited in the Collection
Account.

                (b)     The Servicer shall permit the Indenture Trustee and its
agents at any time during normal business hours, upon reasonable notice to the
Servicer and to the extent it does not unreasonably interfere with the
Servicer's normal operations, to inspect, audit and make copies of and abstracts
from the Servicer's records regarding the Transition Property and the Transition
Charges. Nothing in this Section 8.03(b) shall affect the obligation of the
Servicer to observe any applicable law (including any PUCT Regulation)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section 8.03(b).

                SECTION 8.04. Notices. Unless otherwise specifically provided
herein, all demands, notices and communications upon or to the Servicer, the
Note Issuer, the Indenture Trustee or the Rating Agencies under this Agreement
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented delivery service or, to the extent
receipt is confirmed telephonically, sent by telecopy or other form of
electronic transmission, (a) in the case of the Servicer, to Central Power and
Light Company, at 1 Riverside Plaza, Columbus, Ohio 43215, Attention of
Treasurer, telephone: (614) 223-1000, facsimile: (614) 223-2807 (b) in the case
of the Note Issuer to CPL Transition Funding LLC c/o American Electric Power
Company, Inc., at 1 Riverside Plaza, Columbus, Ohio 43215, Attention of
Treasurer, telephone: (614) 223-1000, facsimile: (614) 223-2807, (c) in the case
of the Indenture Trustee, to it at the Corporate Trust Office, telephone:
____________, facsimile: _____________, (d) in the case of the PUCT, to
__________, _____, (e) in the case of Moody's, to Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York,

                                       28
<PAGE>

New York 10007, telephone: (212) 553-3686, facsimile: (212) 553-0573, (f) in the
case of S&P, to Standard & Poor's, 55 Water Street, 40th Floor, New York, New
York 10041, Attention of Asset Backed Surveillance Department, telephone: (212)
438-2000, facsimile: (212) 438-2665, (g) in the case of Fitch, to Fitch, Inc.,
One State Street Plaza, New York, NY 10004, Attention of ABS Surveillance,
telephone: (212) 908-0500, facsimile: (212) 908-0355, or (h) as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.

                SECTION 8.05. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 6.03 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Servicer.

                SECTION 8.06. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Servicer and the Note Issuer
and, to the extent provided herein or in the Basic Documents, the Indenture
Trustee and the Holders, and the other Persons expressly referred to herein, and
such Persons shall have the right to enforce the relevant provisions of this
Agreement. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Transition Property or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

                SECTION 8.07. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision (if any)
or the remaining provisions hereof (unless such a construction shall be
unreasonable), and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

                SECTION 8.08. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.

                SECTION 8.09. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

                SECTION 8.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       29
<PAGE>

                SECTION 8.11. Assignment to Indenture Trustee. The Servicer
hereby acknowledges and consents to any mortgage, pledge, assignment and grant
of a security interest by the Note Issuer to the Indenture Trustee for the
benefit of the Holders pursuant to the Indenture of any or all of the Note
Issuer's rights hereunder.

                SECTION 8.12. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, the Servicer shall not, prior to
the date which is one year and one day after the termination of the Indenture,
with respect to the Note Issuer, acquiesce, petition or otherwise invoke or
cause the Note Issuer to invoke or join with any Person in provoking the process
of any Governmental Authority for the purpose of commencing or sustaining a case
against the Note Issuer under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Note Issuer or any substantial
part of the property of the Note Issuer or ordering the dissolution, winding up
or liquidation of the affairs of the Note Issuer.

                SECTION 8.13. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that this Agreement is executed and
delivered by the Indenture Trustee, not individually or personally but solely as
Indenture Trustee on behalf of the Holders, in the exercise of the powers and
authority conferred and vested in it.

                                       30
<PAGE>

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

                                      CPL TRANSITION FUNDING LLC

                                      By:                                   ,
                                           ---------------------------------
                                              as Manager
                                              Name:

                                      CENTRAL POWER AND LIGHT COMPANY

                                      By:
                                           ---------------------------------
                                              Name:
                                              Title:

Acknowledged and Accepted:

U.S. BANK NATIONAL ASSOCIATION

----------------------------------,
as Indenture Trustee

By:
     ------------------------------
        Name:
        Title:

                                       31
<PAGE>

                                    EXHIBIT A

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                         MONTHLY SERVICER'S CERTIFICATE

<PAGE>

                                    EXHIBIT B

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                            CERTIFICATE OF COMPLIANCE

                The undersigned hereby certifies that he/she is the duly elected
and acting _________________ of [NAME OF SERVICER], as servicer (the "Servicer")
under the Transition Property Servicing Agreement dated as of [__________], 2001
(the "Servicing Agreement") between the Servicer and CPL Transition Funding LLC
(the "Note Issuer") and further that:

                1.      A review of the activities of the Servicer and of its
performance under the Servicing Agreement during the twelve months ended
[________], [ ] has been made under the supervision of the undersigned pursuant
to Section 3.03 of the Servicing Agreement; and

                2.      To the best of the undersigned's knowledge, based on
such review, the Servicer has fulfilled all of its obligations in all material
respects under the Servicing Agreement throughout the twelve months ended
[________],[ _____], except as set forth on Annex A hereto.

                Executed as of this ______________ day of _________________,
____.

                                           [NAME OF SERVICER]

                                           By:
                                               ----------------------------
                                                   Name:
                                                   Title:

<PAGE>

                                     ANNEX A

                          TO CERTIFICATE OF COMPLIANCE

                            LIST OF SERVICER DEFAULTS

The following Servicer Defaults, or events which with the giving of notice, the
lapse of time, or both, would become Servicer Defaults known to the undersigned
occurred during the year ended

 [        ], [        ]:
  --------    --------

      Nature of Default                   Status

<PAGE>

                                    EXHIBIT C

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                             SERVICER'S CERTIFICATE

<PAGE>

                                SCHEDULE 4.01(a)

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

                         EXPECTED AMORTIZATION SCHEDULE

<PAGE>

                                     ANNEX I

                             TO TRANSITION PROPERTY

                               SERVICING AGREEMENT

The Servicer agrees to comply with the following servicing procedures:

        SECTION 1. DEFINITIONS.

        (a)     Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Agreement.

        (b)     Whenever used in this Annex I, the following words and phrases
shall have the following meanings:

                "Applicable MDMA" means with respect to each Customer, the meter
data management agent providing meter reading services for that Customer's
account.

                "Billed TCs" means the amounts of Transition Charges billed to
Customers, whether billed directly to such Customers by the Servicer or
indirectly through an Applicable REP pursuant to Consolidated REP Billing.

                "Budget Billing Plan" means the alternative payment plan offered
by the Servicer that allows residential and commercial customers who have
satisfactory credit the opportunity for a monthly budget payment which allows
the customer to pay roughly equal amounts each month based on its expected
average consumption for the year.

                "Closing Bill" means the final bill issued to a Customer at the
time service is terminated.

                "Price to Beat" has the meaning assigned to such term in Section
39.202 of the Utilities Code.

                "Price to Beat Period" means the period during which CPL and its
affiliated REP must, under Section 39.202 of the Utilities Code, offer rates to
residential and small commercial Customers which, on a bundled basis, equal the
Price to Beat.

                "Servicer Policies and Practices" means, with respect to the
Servicer's duties under this Annex I, the policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself and, if applicable, others.

<PAGE>

SECTION 2. DATA ACQUISITION.

        (a)     Installation and Maintenance of Meters. Except to the extent
that an REP is responsible for such services, the Servicer shall cause to be
installed, replaced and maintained meters in such places and in such condition
as will enable the Servicer to obtain usage measurements for each Customer at
least once every Billing Period. To the extent the REP is responsible for such
services, but not performing such services, the Servicer shall take all
reasonably necessary actions to obtain usage measurements for each Customer at
least once every Billing Period.

        (b)     Meter Reading. At least once each Billing Period, the Servicer
shall obtain usage measurements from the Applicable MDMA for each Customer;
provided, however, that the Servicer may determine any Customer's usage on the
basis of estimates in accordance with applicable PUCT Regulations.

        (c)     Cost of Metering. The Note Issuer shall not be obligated to pay
any costs associated with the metering duties set forth in this Section 2,
including the costs of installing, replacing and maintaining meters, nor shall
the Note Issuer be entitled to any credit against the Servicing Fee for any cost
savings realized by the Servicer or any REP as a result of new metering and/or
billing technologies.

        SECTION 3. USAGE AND BILL CALCULATION.

        The Servicer shall obtain a calculation of each Customer's usage (which
may be based on data obtained from such Customer's meter read or on usage
estimates determined in accordance with applicable PUCT Regulations) at least
once each Billing Period and shall determine therefrom each Customer's
individual Transition Charges to be included on such Customer's Bill; provided,
however, that in the case of Customers taking service under Consolidated REP
Billing, the Applicable REP, rather than the Servicer, may determine such
Customers' individual Transition Charges to be included on such Customer's Bills
based on billing factors provided by the Servicer, and, in such case, the
Servicer shall deliver to the Applicable REP such billing factors as are
necessary for the Applicable REP to calculate such Customers' respective
Transition Charges as such charges may change from time to time pursuant to the
True-Up Adjustments.

        SECTION 4. BILLING.

        The Servicer shall implement the Transition Charges as of the Closing
Date and shall thereafter bill each Customer or the Applicable REP for the
respective Customer's outstanding current and past due Transition Charges
accruing through the date on which such Transition Charges may no longer be
billed under the Tariff, all in accordance with the following:

        (a)     Frequency of Bills; Billing Practices. In accordance with the
Servicer's then-existing Servicer Policies and Practices for its own charges, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a Bill to each

                                       2
<PAGE>

Customer, or, beginning on the date of customer choice for any retail Customer,
in the case of a Customer taking service under Consolidated REP Billing, to the
Applicable REP, for such Customer's or REP's Customer's respective Transition
Charges once every applicable Billing Period, at the same time, with the same
frequency and on the same Bill as that containing the Servicer's own charges to
such Customer or REP, as the case may be. In the event that the Servicer makes
any material modification to these practices, it shall notify the Note Issuer,
the Indenture Trustee, and the Rating Agencies prior to the effectiveness of any
such modification; provided, however, that the Servicer may not make any
modification that will materially adversely affect the Holders.

        (b)     Format.

                (i)     Each Bill to a Customer shall contain the charge
corresponding to the respective Transition Charges owed by such Customer for the
applicable Billing Period. The Transition Charges shall be separately identified
if required by and in accordance with the terms of the related Financing Orders
and Tariffs. If such charges are not separately identified, the Servicer shall
provide, and unless prohibited by applicable PUCT regulations, shall cause each
Applicable REP to provide, Customers with the annual notice required by
Section 401(c)(iii)(B) of the Servicing Agreement.

                (ii)    In the case of each Customer served by an REP under
Consolidated REP Billing, the Servicer shall deliver to the Applicable REP
itemized charges for such Customer setting forth such Customer's Transition
Charges.

                (iii)   The Servicer shall conform to such requirements in
respect of the format, structure and text of Bills delivered to Customers and
REPs as applicable PUCT Regulations shall from time to time prescribe. To the
extent that Bill format, structure and text are not prescribed by the Utilities
Code or by applicable PUCT Regulations, the Servicer shall, subject to clauses
(i) and (ii) above, determine the format, structure and text of all Bills in
accordance with its reasonable business judgment, its Servicer Policies and
Practices with respect to its own charges and prevailing industry standards.

        (c)     Delivery. The Servicer shall deliver all Bills to Customers (i)
by United States Mail in such class or classes as are consistent with the
Servicer Policies and Practices followed by the Servicer with respect to its own
charges to its customers or (ii) by any other means, whether electronic or
otherwise, that the Servicer may from time to time use to present its own
charges to its customers. In the case of Customers taking service under
Consolidated REP Billing, the Servicer shall deliver all Bills to the Applicable
REP by such means as are prescribed by applicable PUCT Regulations, or if not
prescribed by applicable PUCT Regulations, by such means as are mutually agreed
upon by the Servicer and the Applicable REP and are consistent with PUCT
Regulations. The Servicer or an REP, as applicable, shall pay from its own funds
all costs of issuance and delivery of all Bills, including but not limited to
printing and postage costs as the same may increase or decrease from time to
time.

                                       3
<PAGE>

         (d)     Allocations of Transition Charges. Until the commencement of
the Price to Beat Period, Transition Charges shall be deducted from charges to
Customers otherwise owed under CPL's existing tariffs for electrical service in
order to ensure that the total amounts paid by Customers during such period are
unaffected by securitization. During the Price to Beat Period, for those
Customers that are being charged the Price to Beat, Transition Charges shall be
deducted from other charges to such Customers in order to ensure that the total
rates paid by such Customers equal the Price to Beat. For (i) Customers not
being charged the Price to Beat during the Price to Beat Period or (ii) all
Customers after the Price to Beat Period, Transition Charges will be added to
charges otherwise owed by such Customers.

        SECTION 5. CUSTOMER SERVICE FUNCTIONS.

        The Servicer shall handle all Customer inquiries and other Customer
service matters according to the same procedures it uses to service Customers
with respect to its own charges.

        SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.

        (a)     Collection Efforts, Policies, Procedures.

                (i)     The Servicer shall use reasonable efforts to collect all
Billed TCs from Customers and Third-Party Collectors (including REPs) as and
when the same become due and shall follow such collection procedures as it
follows with respect to comparable assets that it services for itself or others,
including with respect to the following:

                (A)     The Servicer shall prepare and deliver overdue notices
                        to Customers and REPs in accordance with applicable PUCT
                        Regulations and Servicer Policies and Practices.

                (B)     The Servicer shall apply late payment charges to
                        outstanding Customer and REP balances in accordance with
                        applicable PUCT Regulations and as required by the
                        Financing Order.

                (C)     The Servicer shall deliver verbal and written final
                        notices of delinquency and possible disconnection in
                        accordance with applicable PUCT Regulations and Servicer
                        Policies and Practices.

                (D)     The Servicer shall adhere to and carry out disconnection
                        policies and termination of REP billing in accordance
                        with the Utilities Code, the Financing Order, applicable
                        PUCT Regulations and the Servicer Policies and
                        Practices.

                (E)     The Servicer may employ the assistance of collection
                        agents to collect any past-due Transition Charges in
                        accordance with applicable PUCT Regulations and Servicer
                        Policies and Practices and the Tariffs.

                                       4
<PAGE>

                (F)     The Servicer shall apply Customer and REP deposits to
                        the payment of delinquent accounts in accordance with
                        applicable PUCT Regulations and Servicer Policies and
                        Practices and according to the priorities set forth in
                        Section 6(b)(ii), (iii) and (iv) of this Annex I.

                (ii)    The Servicer shall not waive any late payment charge or
any other fee or charge relating to delinquent payments, if any, or waive, vary
or modify any terms of payment of any amounts payable by a Customer, in each
case unless such waiver or action: (A) would be in accordance with the
Servicer's customary practices or those of any successor Servicer with respect
to comparable assets that it services for itself and for others; (B) would not
materially adversely affect the rights of the Holders; and (C) would comply with
applicable law; provided, however, that notwithstanding anything in the
Agreement or this Annex I to the contrary, the Servicer is authorized to write
off any Billed TCs, in accordance with its Servicer Policies and Practices, that
have remained outstanding for 180 days or more.

                (iii)   The Servicer shall accept payment from Customers and
Third-Party Collectors (other than REPs) in respect of Billed TCs in such forms
and methods and at such times and places as it accepts for payment of its own
charges. The Servicer shall accept payment from REPs in respect of Billed TCs in
such forms and methods and at such times and places as the Servicer and each REP
shall mutually agree in accordance with applicable PUCT Regulations and the
Servicer shall give prompt written notice to the Rating Agencies of any such
agreements.

        (b)     Payment Processing; Allocation; Priority of Payments.

                (i)     The Servicer shall post all payments received to
Customer accounts as promptly as practicable, and, in any event, substantially
all payments shall be posted no later than ____ Servicer Business Days after
receipt.

                (ii)    Subject to clause (iii) below, the Servicer shall apply
payments received to each Customer's or Applicable REP's account in proportion
to the charges contained on the outstanding Bill to such Customer or Applicable
REP.

                (iii)   Any amounts collected by the Servicer that represent
partial payments of the total Bill to a Customer or REP shall be allocated as
follows: (A) first to amounts owed to the Note Issuer and CPL (excluding any
late fees and interest charges), regardless of age, pro rata in proportion to
their respective percentages of the total amount of their combined outstanding
charges on such Bill; then (B) all late charges shall be allocated to the
Servicer.

                (iv)    The Servicer shall hold all over-payments for the
benefit of the Note Issuer and CPL and shall apply such funds to future Bill
charges in accordance with clauses (ii) and (iii) above as such charges become
due.

                (v)     For Customers on a Budget Billing Plan, the Servicer
shall treat TC Payments received from such Customers as if such Customers had
been billed for their

                                       5
<PAGE>

respective Transition Charges in the absence of the Budget Billing Plan; partial
payment of a Budget Billing Plan payment shall be allocated according to clause
(iii) above and overpayment of a Budget Billing Plan payment shall be allocated
according to clause (iv) above.

        (c)     Accounts; Records.

                The Servicer shall maintain accounts and records as to the
Transition Property accurately and in accordance with its standard accounting
procedures and in sufficient detail (i) to permit reconciliation between
payments or recoveries with respect to the Transition Property and the amounts
from time to time remitted to the Collection Account in respect of the
Transition Property and (ii) to permit the TC Collections held by the Servicer
to be accounted for separately from the funds with which they may be commingled,
so that the dollar amounts of TC Collections commingled with the Servicer's
funds may be properly identified and traced.

        (d)     Investment of TC Payments Received.

                Prior to each Daily Remittance, the Servicer may invest TC
Payments received at its own risk and (except as required by applicable PUCT
Regulations) for its own benefit. So long as the Servicer complies with its
obligations under the immediately preceding section (c), neither such
investments nor such funds shall be required to be segregated from the other
investment and funds of the Servicer.

        (e)     Calculation of Daily Remittance.

                (i)     For purposes of calculating the Daily Remittance, (i)
all Billed TCs shall be deemed to be collected the same number of days after
billing as is equal to the Weighted Average Days Outstanding then in effect and
(ii) the Servicer will, on each Servicer Business Day, remit to the Indenture
Trustee for deposit in the Collection Account an amount equal to the product of
the applicable Billed TCs multiplied by one hundred percent less the system wide
charge-off percentage used by the Servicer to calculate the most recent Periodic
Billing Requirement. Such product shall constitute the amount of Estimated TC
Collections for such Servicer Business Day. Pursuant to Section 6.11(c) of the
Agreement, on or before [February 1] of each year, the Servicer shall calculate
Net TC Write-Offs for the preceding Reconciliation Period and shall subtract
such Net TC Write-Offs from the Billed TCs billed during the preceding
Reconciliation Period in order to determine the amount of Actual TC Collections
for such Reconciliation Period. No Excess Remittance shall be withdrawn from the
Collection Account if such withdrawal would cause the amounts on deposit in the
General Subaccount or the Reserve Subaccount to be insufficient for the payment
of the next installment of interest or principal due at maturity on the next
Payment Date or upon acceleration on or before the next Payment Date on the
Notes. The Servicer shall be allowed to use the proceeds from any Excess
Remittance to reimburse any Applicable REPs for the excess of their remittances
over actual TC Payments received by such REPs in accordance with the terms of
PUCT Regulations or any applicable REP Service Agreements.

                                       6
<PAGE>

                (ii)    On or before [      ] of each year, in accordance with
Section 4.01(b) of the Agreement, the Servicer shall, in a timely manner so as
to perform all required calculations under such Section 4.01(b), update the
Weighted Average Days Outstanding and the system-wide charge-off percentage in
order to be able to calculate the Periodic Billing Requirement for the next
True-Up Adjustment and to calculate any change in the Daily Remittances for the
next Calculation Period.

                (iii)   The Servicer and the Note Issuer acknowledge that, as
contemplated in Section 8.01(b) of the Agreement, the Servicer may make certain
changes to its current computerized customer information system, which changes,
when functional, would affect the Servicer's method of calculating the TC
Payments estimated to have been received by the Servicer during each Collection
Period as set forth in this Annex. Should these changes to the computerized
customer information system become functional during the term of the Agreement,
the Servicer and the Note Issuer agree that they shall review the procedures
used to calculate the TC Payments estimated to have been received in light of
the capabilities of such new system and shall amend this Annex I in writing to
make such modifications and/or substitutions to such procedures as may be
appropriate in the interests of efficiency, accuracy, cost and/or system
capabilities; provided, however, that the Servicer may not make any modification
or substitution that will materially adversely affect the Noteholders. As soon
as practicable, and in no event later than 60 Business Days after the date on
which all Customer accounts are being billed under such new system, the Servicer
shall notify the Note Issuer, the Indenture Trustee and the Rating Agencies of
the same.

                (iv)    All calculations of collections, each update of the
Weighted Average Days Outstanding or system-wide charge off percentage and any
changes in procedures used to calculate the Estimated TC Payments pursuant to
this Section 6(e) shall be made in good faith, and in the case of any update
pursuant to clause (ii) or any change in procedures pursuant to clause (iii), in
a manner reasonably intended to provide estimates and calculations that are at
least as accurate as those that would be provided on the Closing Date utilizing
the initial procedures.

        (f)     Remittances.

                (i)     The Note Issuer shall cause to be established the
Collection Account in the name of the Indenture Trustee in accordance with the
Indenture.

                (ii)    The Servicer shall make remittances to the Collection
Account in accordance with Section 6.11 of the Agreement.

                (iii)   In the event of any change of account or change of
institution affecting the Collection Account, the Note Issuer shall provide
written notice thereof to the Servicer by five Business Days from the effective
date of such change.

                                       7<PAGE>
                                                                   Exhibit 4.1e

================================================================================

                      STATIA TERMINALS INTERNATIONAL N.V.,
                     STATIA TERMINALS CANADA, INCORPORATED,
                                   as Issuers,

                     THE SUBSIDIARY GUARANTORS PARTY HERETO

                                       and

                                  HSBC BANK USA

                    (formerly known as Marine Midland Bank),

                                   as TRUSTEE

                 11-3/4% First Mortgage Notes due 2003, Series A

                 11-3/4% First Mortgage Notes due 2003, Series B

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

                          FIFTH AMENDMENT TO INDENTURE

                         Dated as of September 30, 2001

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

================================================================================

<PAGE>

                          FIFTH AMENDMENT TO INDENTURE

FIFTH AMENDMENT (this "AMENDMENT"), dated as of September 30, 2001, to the
Indenture (the "INDENTURE"), dated as of November 27, 1996, among Statia
Terminals International N.V., a Netherlands Antilles corporation ("STATIA"),
Statia Terminals Canada, Incorporated, a corporation organized under the laws of
Nova Scotia ("STATIA CANADA", and together with Statia, the "ISSUERS"), the
Subsidiary Guarantors named therein (the "SUBSIDIARY GUARANTORS") and HSBC Bank
USA, formerly known as Marine Midland Bank (the "TRUSTEE"), as Trustee.
Capitalized terms used but not defined herein shall have the respective meaning
provided such terms in the Indenture.

                              W I T N E S S E T H :

                  WHEREAS, the Indenture as currently drafted is ambiguous as to
whether sales, transfers or other dispositions of assets between Wholly-Owned
Restricted Subsidiaries are, subject to the fulfillment of certain conditions,
excluded from the definition of "Asset Sale";

                  WHEREAS, the Indenture clearly intends to exclude from the
definition of "Asset Sale," sales, transfers or other dispositions of assets
between Wholly-Owned Restricted Subsidiaries, subject to the fulfillment of
certain conditions, since a Wholly-Owned Restricted Subsidiary could sell,
transfer or dispose of assets to Statia and Statia could then transfer the
assets to another Wholly-Owned Restricted Subsidiary without any such sale,
transfer or disposition constituting, subject to the fulfillment of certain
conditions, an "Asset Sale";

                  WHEREAS, the Issuers believe that the failure to provide for
an exclusion, subject to the fulfillment of certain conditions, for sales,
transfers or dispositions of assets between Wholly-Owned Restricted Subsidiaries
from the definition of "Asset Sale" was an oversight and thus creates an
ambiguity in the Indenture;

                  WHEREAS, the parties desire to amend the Indenture pursuant to
Section 9.01 of the Indenture to cure this ambiguity; and

                  WHEREAS, Statia Terminals Canada Holdings, Inc. ("STCHI"), a
corporation organized under the laws of Nova Scotia, Statia Terminals Canada
Partnership ("STCP"), a general partnership organized under the laws of Nova
Scotia, are newly formed Wholly-Owned Restricted Subsidiaries of Statia.

                  NOW, THEREFORE, IT IS AGREED:

         1. AMENDMENT. Clause (i) of the definition of "Asset Sale" in Section
1.01 of the Indenture is hereby amended and restated in its entirety as follows:

                           "(i) any sale, transfer or other disposition between
                           Statia and any of its Wholly-Owned Restricted
                           Subsidiaries or between two or more Wholly-Owned
                           Restricted Subsidiaries; PROVIDED, that in the event
                           any assets which constitute a portion of the
                           Collateral are so sold,

                                     - 2 -
<PAGE>

                           transferred or disposed of, Statia or the appropriate
                           Wholly-Owned Restricted Subsidiary, as the case may
                           be, shall acquire such Collateral subject to the Lien
                           of this Indenture and the Security Documents and
                           shall take or cause to be taken all action necessary
                           or appropriate to maintain, preserve and protect the
                           Security Interest in such Collateral granted by the
                           Security Documents,"

         2. ASSUMPTION. Each of STCHI and STCP expressly assumes and affirms all
the obligations of a Subsidiary Guarantor and Wholly-Owned Restricted Subsidiary
under the Indenture.

         3. TIA CONTROLS. If any provision of this Amendment limits or conflicts
with another provision which is required to be included in this Amendment by the
TIA, the required provision shall control.

         4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.

         5. COUNTERPARTS. This Amendment may be executed and agreed in any
number of counterparts and by the parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same agreement. A complete set of
counterparts shall be lodged with the signatories hereto.

         6. INDENTURE NOT OTHERWISE AMENDED. The terms and provisions of the
Indenture not amended hereby shall continue to remain in full force and effect.

         7. REFERENCES. From and after the date hereof, all references in the
Indenture shall be deemed to be references to the Indenture as amended hereby.

         8. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Amendment or
for or in respect of the recitals contained herein, all of which recitals are
made solely by the Issuers and the Subsidiary Guarantors.

                                      * * *

                                     - 3 -
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of this 30 day of September, 2001.

                                       STATIA TERMINALS INTERNATIONAL N.V.

                                       By: /s/ James G. Cameron
                                           -------------------------------------
                                       Name:  James G. Cameron
                                       Title: Managing Director

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS CANADA, INCORPORATED, on
                                       its own behalf and as managing partner of
                                       STATIA TERMINALS CANADA PARTNERSHIP

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS CANADA HOLDINGS, INC.,
                                       on its own behalf and as managing partner
                                       of STATIA TERMINALS CANADA PARTNERSHIP

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       HSBC BANK USA, as TRUSTEE

                                       By: /s/ Frank J. Godino
                                           -------------------------------------
                                       Name:  Frank J. Godino
                                       Title: Vice President

                                     - 4 -
<PAGE>

IN WITNESS WHEREOF, each of the undersigned Subsidiary Guarantors has caused
this Amendment to be duly executed as of this 30 day of September, 2001.

                                       STATIA TERMINALS CORPORATION N.V.

                                       By: /s/ Victor M. Lopez, Jr.
                                           -------------------------------------
                                       Name:  Victor M. Lopez
                                       Title: Controller

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS DELAWARE, INC.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS, INC.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS N.V.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       SABA TRUST COMPANY N.V.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                     - 5 -
<PAGE>

                                       BICEN DEVELOPMENT CORPORATION N.V.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       SEVEN SEAS STEAMSHIP COMPANY, INC.

                                       By: /s/ Victor M. Lopez, Jr.
                                           -------------------------------------
                                       Name:  Victor M. Lopez Jr.
                                       Title: Treasurer

                                       STATIA TUGS N.V.

                                       By: /s/ James G. Cameron
                                           -------------------------------------
                                       Name:  James G. Cameron
                                       Title: Managing Director

                                       SEVEN SEAS STEAMSHIP COMPANY (SINT
                                       EUSTATIUS) N.V.

                                       By: /s/ Victor M. Lopez, Jr.
                                           -------------------------------------
                                       Name:  Victor M. Lopez Jr.
                                       Title: Treasurer

                                       POINT TUPPER MARINE
                                       SERVICES LIMITED, on its
                                       own behalf and as managing
                                       partner of STATIA TERMINALS
                                       CANADA PARTNERSHIP

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                     - 6 -
<PAGE>

                                       STATIA LABORATORY SERVICES N.V.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS NEW JERSEY, INC.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                       STATIA TERMINALS ANTILLES N.V.

                                       By: /s/ James F. Brenner
                                           -------------------------------------
                                       Name:  James F. Brenner
                                       Title: Vice President

                                     - 7 -

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