Document:

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THIRD STREET FUNDING LLC,

Depositor

WELLS FARGO BANK, N.A.,

Master Servicer and Securities Administrator

PENNYMAC LOAN SERVICES, LLC,

Servicer

MOREQUITY, INC.,

Interim Subservicer

SELECT PORTFOLIO SERVICING, INC.,

Back-up Servicer

U.S. BANK NATIONAL ASSOCIATION,

Trustee

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

Custodian

POOLING AND SERVICING AGREEMENT

Dated July 30, 2009

American General Mortgage Loan Trust 2009-1

American General Mortgage Pass-Through Certificates, Series 2009-1

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS

Section 1.01.

Defined Terms.

5

Section 1.02.

Accounting.

35

ARTICLE II

CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES

Section 2.01.

Conveyance of Mortgage Loans.

36

Section 2.02.

Acceptance by Trustee or Custodian.

38

Section 2.03.

Repurchase or Substitution of Mortgage Loans.

39

Section 2.04.

Representations and Warranties of the Depositor.

42

Section 2.05.

Representations, Warranties and Covenants of the Servicer.

43

Section 2.06.

Representations, Warranties and Covenants of the Master Servicer.

45

Section 2.07.

Issuance of Certificates.

46

Section 2.08.

Execution and Delivery of Certificates.

47

ARTICLE III

ADMINISTRATION AND SERVICING OF THE TRUST FUND

Section 3.01.

Master Servicing and Servicing of the Mortgage Loans; Subservicing.

47

Section 3.02.

Delinquency and Default.

52

Section 3.03.

Collection of Mortgage Loan Payments.

53

Section 3.04.

Rights of the Depositor, the Securities Administrator and the Trustee in Respect of the Master Servicer.  53

Section 3.05.

[RESERVED].

54

Section 3.06.

Servicer Custodial Account, Master Servicer Custodial Account, Distribution Account; Exchangeable Certificates Grantor Trust Account; Interim Subservicer Custodial Account and Class P Account.  54

Section 3.07.

Collection of Taxes, Assessments and Similar Items; Escrow Accounts.

60

Section 3.08.

Permitted Withdrawals from the Servicer Custodial Account, the Master Servicer Custodial Account and the Distribution Account.  61

Section 3.09.

Maintenance of Hazard Insurance.

63

Section 3.10.

Fidelity Bond; Errors and Omissions Insurance.

64

Section 3.11.

REO Property.

65

Section 3.12.

Due-on-Sale Clauses; Assumption and Substitution Agreements.

66

Section 3.13.

Custodian to Cooperate; Release of Files.

66

Section 3.14.

Master Servicing and Servicing Compensation.

68

Section 3.15.

Annual Statement as to Compliance.

68

Section 3.16.

Annual Independent Certified Public Accountants’ Reports.

69

Section 3.17.

Access to Certain Documentation and Information Regarding the Mortgage Loans; Access to Servicing Systems and Data.  69

-i-

Section 3.18.

Liability of Parties; Indemnification.

69

Section 3.19.

Monthly Advances.

71

Section 3.20.

Compensating Interest.

73

Section 3.21.

Transfer of Servicing for the Mortgage Loans.

74

ARTICLE IV

FLOW OF FUNDS

Section 4.01.

Interest and Principal Distributions.

74

Section 4.02.

Distributions of Monthly Excess Cashflow Amounts.

75

Section 4.03.

Allocation of Losses.

79

Section 4.04.

Method of Distribution.

79

Section 4.05.

Distributions on Book-Entry Certificates.

80

Section 4.06.

Statements.

80

Section 4.07.

Remittance Reports; Master Servicer’s Certificate.

83

Section 4.08.

Servicer Reports to Sellers.

84

Section 4.09.

Compliance with Withholding Requirements.

84

ARTICLE V

THE CERTIFICATES

Section 5.01.

The Certificates.

85

Section 5.02.

Registration of Transfer and Exchange of Certificates.

85

Section 5.03.

Mutilated, Destroyed, Lost or Stolen Certificates.

90

Section 5.04.

Persons Deemed Owners.

90

Section 5.05.

Appointment of Paying Agent.

91

Section 5.06.

Class R Certificate

91

Section 5.07.

Transfer of Exchangeable REMIC Certificates and Exchangeable Certificates.

91

Section 5.08.

Exchanges of Exchangeable REMIC Certificates and Exchangeable Certificates.  92

ARTICLE VI

THE SERVICER, THE MASTER SERVICER AND THE DEPOSITOR

Section 6.01.

Liability of the Servicer, the Master Servicer and the Depositor.

93

Section 6.02.

Merger or Consolidation of, or Assumption of the Obligations of, the Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Depositor.  93

Section 6.03.

Servicer and Master Servicer Not to Resign.

94

Section 6.04.

Delegation of Duties.

94

ARTICLE VII

DEFAULT

Section 7.01.

Events of Default.

95

Section 7.02.

Remedies of Trustee.

98

-ii-

Section 7.03.

Directions by Certificateholders and Duties of Trustee During Master Servicer Event of Default.  99

Section 7.04.

Action upon Certain Failures of the Master Servicer and upon Master Servicer Event of Default.  99

Section 7.05.

SPS or Master Servicer to Act; Trustee to Act; Appointment of Successor.

99

Section 7.06.

Notification to Certificateholders.

101

ARTICLE VIII

THE TRUSTEE, THE SECURITIES ADMINISTRATOR AND THE CUSTODIAN

Section 8.01.

Duties of Trustee and Securities Administrator.

102

Section 8.02.

Certain Matters Affecting the Trustee and the Securities Administrator.

103

Section 8.03.

Neither the Trustee nor the Securities Administrator is Liable for Certificates or Mortgage Loans.  104

Section 8.04.

Trustee and Securities Administrator May Own Certificates.

105

Section 8.05.

Trustee, Custodian and Securities Administrator Compensation and Expenses.

106

Section 8.06.

Eligibility Requirements for Trustee and Securities Administrator.

106

Section 8.07.

Resignation or Removal of Trustee or Securities Administrator.

106

Section 8.08.

Successor Trustee or Securities Administrator.

107

Section 8.09.

Merger or Consolidation of Trustee, Securities Administrator or Custodian.

108

Section 8.10.

Appointment of Co-Trustee or Separate Trustee.

108

Section 8.11.

Limitation of Liability.

109

Section 8.12.

Trustee or Securities Administrator May Enforce Claims Without Possession of Certificates.  110

Section 8.13.

Suits for Enforcement.

110

Section 8.14.

Waiver of Bond Requirement.

111

Section 8.15.

Waiver of Inventory, Accounting and Appraisal Requirement.

111

Section 8.16.

Appointment of Custodian.

111

ARTICLE IX

REMIC AND GRANTOR TRUST ADMINISTRATION

Section 9.01.

REMIC Administration.

114

Section 9.02.

Prohibited Transactions and Activities.

116

Section 9.03.

Payment with Respect to Certain Taxes.

117

Section 9.04.

Grantor Trust Administration.

117

ARTICLE X

TERMINATION

Section 10.01.

Termination.

119

Section 10.02.

Additional Termination Requirements.

120

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ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01.

Amendment.

121

Section 11.02.

Recordation of Agreement; Counterparts.

122

Section 11.03.

Limitation on Rights of Certificateholders.

123

Section 11.04.

Governing Law; Jurisdiction.

124

Section 11.05.

Notices.

124

Section 11.06.

Severability of Provisions.

125

Section 11.07.

Article and Section References.

125

Section 11.08.

[RESERVED].

125

Section 11.09.

Third Party Beneficiary.

125

Section 11.10.

Waiver of Jury Trial.

125

Section 11.11.

Acts of Certificateholders.

125

EXHIBITS

			
	Exhibit A-1

	 
	Form of Class A-1 Certificates

	Exhibit A-2

	 
	Form of Class A-2 Certificates

	Exhibit A-3

	 
	Form of Class A-3 Certificates

	Exhibit A-4

	 
	Form of Class A-4 Certificates

	Exhibit A-5

	 
	Form of Class A-5 Certificates

	Exhibit A-6

	 
	Form of Class A-6 Certificates

	Exhibit A-7

	 
	Form of Class A-7 Certificates

	Exhibit A-8

	 
	Form of Class A-8 Certificates

	Exhibit A-9

	 
	Form of Class A-9 Certificates

	Exhibit A-10

	 
	Form of Class A-10 Certificates

	Exhibit B-1

	 
	Form of Class B-1 Certificates

	Exhibit B-2

	 
	Form of Class B-2 Certificates

	Exhibit C-CE

	 
	Form of Class CE Certificates

	Exhibit C-P

	 
	Form of Class P Certificates

	Exhibit C-R

	 
	Form of Class R Certificate

	Exhibit D

	 
	Mortgage Loan Schedule

	Exhibit E

	 
	Form of Request for Release

	Exhibit F

	 
	Form of Certification as to Mortgage File

	Exhibit G

	 
	Form of Lost Note Affidavit

	Exhibit H

	 
	Form of ERISA Representation

	Exhibit I

	 
	Form of Transferor Certificate 

	Exhibit J

	 
	Form of Transferee Certificate

	Exhibit K

	 
	Form of Class R Certificate Transfer Affidavit

	Exhibit L

	 
	Monthly Information Provided by Servicer to Master Servicer

	Exhibit M-1

	 
	Daily Servicer Report to Sellers

	Exhibit M-2

	 
	Monthly Servicer Report to Sellers

	Exhibit N

	 
	Servicing Transfer Procedures

	Exhibit O

	 
	Delegated Authority Guidelines

-iv-

			
	Exhibit P

	 
	Available Combinations

	Exhibit Q

	 
	Form of Request for Exchange of Exchangeable REMIC Certificates or Exchangeable Certificates

-v-

THIRD STREET FUNDING LLC, as depositor (the “Depositor”), WELLS FARGO BANK, N.A., as master servicer (the “Master Servicer”) and as securities administrator (the “Securities Administrator”), PENNYMAC LOAN SERVICES, LLC, as servicer (the “Servicer”), MOREQUITY, INC., as interim subservicer (the “Interim Subservicer”), SELECT PORTFOLIO SERVICING, INC., as back-up servicer (the “Back-up Servicer”), U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as custodian (the “Custodian”), are entering into this Pooling and Servicing Agreement, dated July 30, 2009 (the “Agreement”).

PRELIMINARY STATEMENT

The Depositor intends to sell pass-through certificates (collectively, the “Certificates”), to be issued hereunder in multiple Classes, which in the aggregate will evidence the entire beneficial ownership interest in the Trust Fund created hereunder.  The Certificates will consist of fifteen Classes of Certificates, designated as (i) the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and Class A-10 Certificates, (ii)  the Class B-1 and Class B-2 Certificates, (iii) the Class CE Certificates, (iv) the Class P Certificates and (v) the Class R Certificate.  The descriptions of the Lower Tier REMIC and the Upper Tier REMIC that follow are part of the Preliminary Statement.  Any inconsistencies or ambiguities in this Agreement or in the administration of this Agreement shall be resolved pursuant to the terms of Section 11.01 hereof in a manner that preserves the validity of such REMIC elections described below.

Lower Tier REMIC

As provided herein, the Securities Administrator will make an election to treat the segregated pool of assets consisting of the Mortgage Loans and certain other related assets subject to this Agreement as a real estate mortgage investment conduit (“REMIC”) for federal income tax purposes, and such segregated pool of assets will be designated as the “Lower Tier REMIC.”  The Lower Tier REMIC shall not include the Class CE Grantor Trust, the Exchangeable Certificates Grantor Trust or any Servicer Prepayment Charge Payment Amounts.  The Class LR Interest will represent the sole class of “residual interests” in the Lower Tier REMIC for purposes of the REMIC Provisions. The following table irrevocably sets forth the designation, the Lower Tier REMIC Pass-Through Rate and the initial Uncertificated Balance for each of the Lower Tier Regular Interests.  None of the Lower Tier Regular Interests will be certificated.

			
	Designations

	Initial Uncertificated Balance

	Lower Tier REMIC Pass-Through Rate

	LT-AA

	$1,926,538,271.08

	Variable(1)

	LT-A1

	$5,446,570.00

	Variable(1)

	LT-A3

	$1,269,710.00

	Variable(1)

	LT-A4

	$1,269,710.00

	Variable(1)

	LT-A5

	$1,269,710.00

	Variable(1)

	LT-A6

	$1,269,710.00

	Variable(1)

	LT-A7

	$1,269,720.00

	Variable(1)

	LT-B1

	$1,965,855.00

	Variable(1)

	LT-B2

	$1,965,855.00

	Variable(1)

	LT-ZZ

	$23,590,267.57

	Variable(1)

	LT-P

	$100.00

	(2)

(1)

Calculated in accordance with the definition of “Lower Tier REMIC Pass-Through Rate” herein.

(2)

The Class LT-P Interest will not bear interest and will be entitled to all the Prepayment Charges received with respect to the Mortgage Loans.

The foregoing Lower Tier REMIC structure is intended to cause all the cash from the Mortgage Loans to flow through the Upper Tier REMIC as cash flow on an Upper Tier Regular Interest, without creating any shortfall, actual or potential (other than for losses), to any Upper Tier Regular Interest.  To the extent that the structure is believed to diverge from such intention, the party identifying such ambiguity or drafting error shall notify the other parties hereto, and the parties hereto shall attempt to resolve such ambiguity or drafting error in accordance with Section 11.01 hereto.

-2-

Upper Tier REMIC

As provided herein, the Securities Administrator will make an election to treat the segregated pool of assets consisting of the Lower Tier Regular Interests and certain other related assets subject to this Agreement as a REMIC for federal income tax purposes, and such segregated pool of assets will be designated as the “Upper Tier REMIC.”  The Upper Tier REMIC shall not include the Class CE Grantor Trust, the Exchangeable Certificates Grantor Trust or any Servicer Prepayment Charge Payment Amounts.  The Class UR Interest will represent the sole class of “residual interests” in the Upper Tier REMIC for purposes of the REMIC Provisions.

The following table irrevocably sets forth (or describes) the Upper Tier Regular Interest designation, the initial Uncertificated Balance and the Upper Tier REMIC Pass-Through Rate for each Upper Tier Regular Interest comprising the “regular interests” in the Upper Tier REMIC for purposes of the REMIC Provisions.

			
	

Designation

	Initial Uncertificated Balance

	Upper Tier REMIC Pass-Through Rate

	A-1

	$544,657,000.00

	Variable(1)

	A-3

	$126,971,000.00

	Variable(1)

	A-4

	$126,971,000.00

	Variable(1)

	A-5

	$126,971,000.00

	Variable(1)

	A-6

	$126,971,000.00

	Variable(1)

	A-7

	$126,972,000.00

	Variable(1)

	B-1

	$196,585,500.00

	Variable(1)

	B-2

	$196,585,500.00

	Variable(1)

	CE

	(2)

	(2)

	P

	$100.00

	(3)

(1)

Interest will accrue on these Upper Tier Regular Interests at a per annum rate equal to the lesser of (i) the related Pass-Through Rate of the Corresponding Class of Certificates and (ii) the Net WAC Cap.

(2)

Solely for federal income tax purposes, the Class CE Upper Tier Regular Interest will have an Uncertificated Balance equal to the Overcollateralization Amount, which as of the Closing Date will equal the Initial Overcollateralization Amount. The Class CE Upper Tier Regular Interest will bear interest at its REMIC Pass-Through Rate on its Notional Amount.

(3)

The Class P Upper Tier Regular Interest will not bear interest.  The Class P Upper Tier Regular Interest will be entitled to 100% of the amounts distributed on the Class LT-P Interest.

-3-

SUMMARY OF CERTIFICATES

The following table sets forth (or describes) the Class designation, Certificate Interest Rate, Original Class Certificate Principal Balance or Maximum Original Class Certificate Principal Balance for each Class of Certificates comprising the interests in the Trust Fund created hereunder:

				
	Class

	Original Class Certificate Principal Balance or Maximum Original Class Certificate Principal Balance

	Certificate Interest Rate

	Assumed Final

Maturity Dates

	Class A-1

	$544,657,000.00

	5.75%(1)

	September 25, 2048

	Class A-2

	$634,856,000.00

	5.75%(1)

	September 25, 2048

	Class A-3

	$126,971,000.00

	5.75%(1)

	September 25, 2048

	Class A-4

	$126,971,000.00

	5.75%(1)

	September 25, 2048

	Class A-5

	$126,971,000.00

	5.75%(1)

	September 25, 2048

	Class A-6

	$126,971,000.00

	5.75%(1)

	September 25, 2048

	Class A-7

	$126,972,000.00

	5.75%(1)

	September 25, 2048

	Class A-8

	$253,942,000.00

	5.75%(1)

	September 25, 2048

	Class A-9

	$380,913,000.00

	5.75%(1)

	September 25, 2048

	Class A-10

	$507,884,000.00

	5.75%(1)

	September 25, 2048

	Class B-1

	$196,585,500.00

	1.00%(1)

	September 25, 2048

	Class B-2

	$196,585,500.00

	1.00%(1)

	September 25, 2048

	Class CE

	(2)

	(2)

	September 25, 2048

	Class P

	$100

	(3)

	September 25, 2048

	Class R

	N/A

	N/A

	N/A

(1)

Interest will accrue on these Certificates at a per annum rate equal to the lesser of (i) the rate specified in the table above and (ii) the Net WAC Cap but all distributions of interest will be made to the Exchangeable REMIC Certificates and, if any exchanges have occurred, the related Exchangeable Certificates will be entitled to their proportionate share of such distributions.

(2)

Solely for federal income tax purposes, the Class CE Certificates will have a principal balance equal to the Overcollateralization Amount, which as of the Closing Date will equal the Initial Overcollateralization Amount.  The Class CE Certificate will be entitled to 100% of the amounts distributed on the Class CE Upper Tier Regular Interest and will have the obligation to pay Cap Carryover Amounts.

(3)

The Class P Certificates will not bear interest.  The Class P Certificates will be entitled to 100% of the amounts distributed on the Class P Upper Tier Regular Interest and Servicer Prepayment Charge Payment Amounts.

-4-

ARTICLE I

DEFINITIONS

Section 1.01.

Defined Terms.

Whenever used in this Agreement (including the exhibits hereto) or in the Preliminary Statement, the following words and phrases, unless the context otherwise requires, shall have the meanings specified in this Article.

1933 Act:  The Securities Act of 1933, as amended.

Account:  Any of the Servicer Custodial Account, the Master Servicer Custodial Account, the Interim Subservicer Custodial Account, the Distribution Account, the Class P Account or the Escrow Accounts.

Accrued Certificate Interest:  With respect to each Distribution Date and Class of Offered Certificates (other than any Class of Exchangeable Certificates) and the Class B Certificates, an amount equal to the interest accrued at the applicable Certificate Interest Rate set forth in the table in the Preliminary Statement during the related Interest Accrual Period on the Certificate Principal Balance of such Class of Certificates immediately prior to such Distribution Date.  Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Actuarial Method:  With respect to any actuarial Mortgage Loan, the method of allocating a payment of interest and principal, pursuant to which interest is calculated based on a 360-day year and twelve 30-day months on the Stated Principal Balance thereof, with each payment applied first to interest and the remainder to principal.

Advance:  A Monthly Advance or a Servicing Advance, as applicable.

Advance Facility:  As defined in Section 3.19(d) hereof.

Advance Facility Notice:  As defined in Section 3.19(d) hereof.

Advance Financing Person:  As defined in Section 3.19(d) hereof.

Advance Reimbursement Amounts:  As defined in Section 3.19(d) hereof.

Advanced Default:  As defined in the Delegated Authority Guidelines.

Adverse REMIC Event:  As defined in Section 9.01(f) hereof.

Affiliate:  With respect to any Person, any other Person controlling, controlled by or under common control with such Person.  For purposes of this definition, “control” means the power to direct the management and policies of a Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise and “controlling” and “controlled” shall have meanings correlative to the foregoing.

-5-

Agreement:  This Pooling and Servicing Agreement and all amendments and supplements hereto.

Applicable Regulations:  As to any Mortgage Loan, all federal, state and local laws, statutes, rules and regulations applicable thereto.

Applied Realized Loss Amount:  With respect to each Distribution Date, the excess, if any, of (a) the aggregate of the Certificate Principal Balances of the Certificates (after taking into account the distribution of the Principal Distribution Amount and any increase in any Certificate Principal Balance of a Class of Class B Certificates as a result of Subsequent Recoveries on such Distribution Date) over (b) the Pool Balance as of the end of the related Collection Period.

Appraised Value:  With respect to any Mortgaged Property, the lesser of (i) the sales price for such Mortgaged Property and (ii) the value thereof as determined by a Qualified Appraiser at the time of origination of the Mortgage Loan.

Assignment:  An assignment of Mortgage, notice of transfer or equivalent instrument, in recordable form, which is sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect or record the sale of the Mortgage.

Assumed Final Maturity Date:  As to each Class of Certificates, the date set forth as such in the Preliminary Statement.

Available Funds:  As to any Distribution Date, the sum of the Interest Remittance Amount and the Principal Remittance Amount for such Distribution Date.

Back-up Servicer:  Select Portfolio Servicing, Inc., its successors and assigns.

Bankruptcy Code:  Title 11 of the United States Code, as amended.

Book-Entry Certificates:  Any of the Certificates that shall be registered in the name of the Depository or its nominee, the ownership of which is reflected on the books of the Depository or on the books of a Person maintaining an account with the Depository (directly, as a “Depository Participant,” or indirectly, as an indirect participant in accordance with the rules of the Depository and as described in Section 5.02 hereof).  On the Closing Date, the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and Class A-10 Certificates shall be Book-Entry Certificates.

Bulk Loans:  As defined in the Delegated Authority Guidelines.

Business Day:  Any day other than (i) a Saturday or a Sunday, (ii) a day on which the New York Stock Exchange or Federal Reserve is closed or (iii) a day on which banking institutions in the State of New York, the State of Indiana, the State of California, the State of Texas, the State of Utah or the state in which the Corporate Trust Offices of the Trustee or the Securities Administrator are located are authorized or obligated by law or executive order to be closed.

-6-

Cap Carryover Amount:  If on any Distribution Date, the Accrued Certificate Interest for any Class of Offered Certificates (other than any Class of Exchangeable Certificates) or Class B Certificates is based upon the Net WAC Cap, the excess of (i) the amount of interest such Class would have been entitled to receive on such Distribution Date based on the related Pass-Through Rate, over (ii) the amount of interest such Class received on such Distribution Date based on the Net WAC Cap, together with the unpaid portion of any such excess from prior Distribution Dates (and interest accrued thereon at the then applicable Pass-Through Rate on such Class).

Certificate:  Any Offered Certificate, Class B Certificate, Class P Certificate, Class CE Certificate or Class R Certificate.

Certificate Custodian:  Initially, Wells Fargo Bank, N.A.; thereafter any other Certificate Custodian acceptable to the Depository and selected by the Securities Administrator.

Certificate Interest Rate:  With respect to each Distribution Date and Class of Certificates, the applicable per annum rate described in the table in the Preliminary Statement during the related Interest Accrual Period.

Certificate Owner:  With respect to each Book-Entry Certificate, any beneficial owner thereof.

Certificate Principal Balance:  With respect to any Class of Certificates (other than the Class CE, Class R and Exchangeable Certificates) and any Distribution Date, the Original Class Certificate Principal Balance of such Class of Certificates or, in the case of a Class of Exchangeable REMIC Certificates, the Maximum Original Class Certificate Principal Balance of such Class (a) reduced by the sum of (i) all amounts actually distributed in respect of principal of such Class on all prior Distribution Dates and (ii) other than with respect to the Senior Certificates, Applied Realized Loss Amounts allocated thereto for previous Distribution Dates and (b) with respect to the Class B Certificates, increased by any Subsequent Recoveries allocated to such Class for previous Distribution Dates.  The Class CE and Class R and a Class of Exchangeable Certificates do not have a Certificate Principal Balance.  With respect to any Certificate (other than the Class CE and Class R Certificates) of a Class and any Distribution Date, Certificate Principal Balance means the portion of the Certificate Principal Balance of such Class represented by such Certificate (assuming in the case of an Exchangeable REMIC Certificate that no exchanges have occurred and in the case of an Exchangeable Certificate that all exchanges have occurred) equal to the product of the Percentage Interest evidenced by such Certificate and the Certificate Principal Balance of such Class or, in the case of a Class of Exchangeable Certificates, the Maximum Certificate Principal Balance of such Class.

Certificate Register and Certificate Registrar:  The register maintained and registrar appointed pursuant to Section 5.02 hereof.

Certificateholder or Holder:  The Person in whose name a Certificate is registered in the Certificate Register, except that a Disqualified Organization or non-U.S. Person shall not be a Holder of the Class R Certificate for any purpose hereof.

-7-

Class:  Collectively, Certificates which have the same priority of payment and bear the same class designation and the form of which is identical except for variation in the Percentage Interest evidenced thereby.

Class A Certificate:  Any one of the Certificates with an “A” designated on the face thereof substantially in the forms annexed hereto executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar.  The Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates each represent a regular interest in the Upper Tier REMIC for purposes of the REMIC Provisions and the right to receive Cap Carryover Amounts as set forth herein.  The Class A-2, Class A-8, Class A-9 and Class A-10 Certificates each represent an interest in a grantor trust for United States federal income tax purposes.

Class B Certificate:  Any one of the Certificates with a “B” designated on the face thereof substantially in the applicable form annexed hereto, executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, each representing a regular interest in the Upper Tier REMIC for purposes of the REMIC Provisions and the right to receive Cap Carryover Amounts as set forth herein.

Class CE Certificate:  Any one of the Certificates with a “CE” designated on the face thereof substantially in the forms annexed hereto executed by the Securities Administrator on behalf of the Trust and authenticated and delivered by the Certificate Registrar, each representing a regular interest in the Upper Tier REMIC for purposes of the REMIC Provisions, the obligation to pay Cap Carryover Amounts and the right to receive amounts from the Class CE Grantor Trust Subaccount as set forth herein.

Class CE Distributable Amount:  With respect to any Distribution Date, the sum of (i) the Uncertificated Accrued Interest with respect to the Class CE Upper Tier Regular Interest less the amount (without duplication) of Cap Carryover Amounts paid pursuant to Section 4.02(a), (ii) on each Distribution Date on or after the Certificate Principal Balances of the Offered Certificates (other than the Exchangeable Certificates) and Class B Certificates have been reduced to zero, up to any remaining Overcollateralization Amounts and (iii) the amounts remaining in the Class CE Grantor Trust Subaccount after the distributions in Section 3.06(e).

Class CE Grantor Trust:  That portion of the Trust exclusive of the Trust REMICs consisting of (a) the right of the Offered Certificates (other than the Exchangeable Certificates) and the Class B Certificates to receive Cap Carryover Amounts, (b) the obligation of the Class CE Certificate to pay Cap Carryover Amounts and (c) the Class CE Grantor Trust Subaccount.

Class CE Grantor Trust Subaccount:  A subaccount of the Distribution Account designated by the Securities Administrator pursuant to Section 3.06(c) into which all payments of Cap Carryover Amounts are deemed deposited.  The Class CE Grantor Trust Subaccount shall not be an asset of any REMIC formed under this Agreement.  Funds in the Class CE Grantor Trust Subaccount shall be held uninvested.

Class P Certificate:  Any one of the Certificates with a “P” designated on the face thereof substantially in the forms annexed hereto executed by the Securities Administrator on behalf of 

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the Trust and authenticated and delivered by the Certificate Registrar, each representing a regular interest in the Upper Tier REMIC for purposes of the REMIC Provisions and the right to receive Servicer Prepayment Charge Payment Amounts as set forth herein.

Class LR Interest:  The residual interest in the Lower Tier REMIC for purposes of the REMIC Provisions.

Class P Account:  The account created or maintained by the Securities Administrator pursuant to Section 3.06(g) hereof.

Class R Certificate:  The Class R Certificate executed by the Securities Administrator on behalf of the Trust, and authenticated and delivered by the Certificate Registrar, substantially in the form annexed hereto as Exhibit C-R and evidencing the ownership of the Class LR Interest and the Class UR Interest.

Class UR Interest:  The residual interest in the Upper Tier REMIC for purposes of the REMIC Provisions.

Closing Date:  July 30, 2009.

Code:  The Internal Revenue Code of 1986, as it may be amended from time to time.

Collection Period:  With respect to any Distribution Date, the calendar month preceding the month in which such Distribution Date occurs.

Combination:  Any Exchangeable Combination or Exchangeable REMIC Combination.

Compensating Interest:  As defined in Section 3.20.

Corporate Trust Office:  With respect to the Trustee, the office of the Trustee, which office at the date of the execution of this Agreement is located at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, Minnesota  55107, Attention:  Structured Finance, AGF, Series 2009-1, or at such other address as the Trustee may designate from time to time by notice to the Certificateholders, the Depositor, the Servicer, the Interim Subservicer, the Back-up Servicer, the Custodian, the Securities Administrator and the Master Servicer.  With respect to the Securities Administrator, the principal corporate trust office of the Securities Administrator at which at any particular time its corporate trust business with respect to this Agreement is conducted, which office at the date of the execution of this Agreement is located at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention:  Client Manager – AGF 2009-1, and for certificate transfer purposes is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention:  Corporate Trust Services – AGF 2009-1, or at such other address as the Securities Administrator may designate from time to time by notice to the Certificateholders, the Depositor, the Servicer, the Interim Subservicer, the Back-up Servicer, the Custodian, the Trustee and the Master Servicer.  

Corresponding Class or Classes:  The Class of interests in one REMIC created under this Agreement that corresponds to the Class of interests in another REMIC or to a Class of Certificates in the manner set out below:

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	Lower Tier Regular Interest

	Upper Tier Regular Interest

	Corresponding Class of Certificates

	LT-A1

	Class A-1 Interest

	Class A-1 Certificates

	LT-A3

	Class A-3 Interest 

	Class A-3 Certificates

	LT-A4

	Class A-4 Interest 

	Class A-4 Certificates

	LT-A5

	Class A-5 Interest 

	Class A-5 Certificates

	LT-A6

	Class A-6 Interest 

	Class A-6 Certificates

	LT-A7

	Class A-7 Interest 

	Class A-7 Certificates

	LT-B1

	Class B-1 Interest

	Class B-1 Certificates

	LT-B2

	Class B-2 Interest

	Class B-2 Certificates

	LT-P

	Class P Interest

	Class P Certificates

	N/A

	Class CE Interest

	Class CE Certificates

Custodial Agreement:  As defined in Section 8.16 hereof.

Custodian:  The Bank of New York Mellon Trust Company, N.A., a national banking association, its successors and assigns and any successor custodian appointed pursuant to Section 8.16.

Customary Servicing Procedures:  With respect to the Servicer, procedures (including collection procedures) that the Servicer customarily employs and exercises in servicing and administering mortgage loans for its own account or for the account of others and which are in accordance with applicable law and accepted mortgage servicing practices of prudent lending institutions servicing mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located.  In the event of any conflict between Customary Servicing Procedures and the Delegated Authority Guidelines, the Delegated Authority Guidelines shall govern.

Cut-off Date: The close of business on June 30, 2009.

Cut-off Date Aggregate Principal Balance:  The aggregate of the Cut-off Date Principal Balances of the Mortgage Loans.

Cut-off Date Principal Balance:  With respect to any Mortgage Loan, the Stated Principal Balance thereof as of the Cut-off Date.

Daily Servicer Report to Sellers:  The report prepared by the Servicer and delivered to the Sellers pursuant to Section 4.08 in form and substance set forth as Exhibit M-1 hereto (and any additional reports and/or data agreed to by the Servicer and the Interim Subservicer as contemplated therein).

Debt Service Reduction:  With respect to any Mortgage Loan, a reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction resulting from a Deficient Valuation.

Default:  As defined in the Delegated Authority Guidelines.

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Defective Mortgage Loan:  A Mortgage Loan (i) repurchased or to be repurchased or (ii) replaced or to be replaced by one or more Eligible Substitute Mortgage Loans, in either case by a Seller or American General Finance Corporation.

Deficient Valuation:  With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding Stated Principal Balance of the Mortgage Loan, which valuation results from a proceeding initiated under the Bankruptcy Code.

Definitive Certificates:  As defined in Section 5.02(c)(iii) hereof.

Delegated Authority Guidelines:  The set of servicing guidelines developed by the Interim Subservicer and the Servicer governing the Servicer’s initial collection efforts and loss mitigation policies attached hereto as Exhibit O, as amended from time to time.  The Interim Subservicer and the Servicer shall review and, if necessary, revise the Delegated Authority Guidelines on a periodic basis (no less than quarterly) following the Closing Date to optimize the servicing guidelines prescribed therein.  Upon any revision to the Delegated Authority Guidelines, the Servicer shall promptly send a copy of the revised guidelines to the Master Servicer.  Any revision to the Delegated Authority Guidelines shall not be considered an amendment for purposes of Section 11.01 hereof and shall not require any Certificateholder consent.

Delinquent:  Any Mortgage Loan with respect to which the Monthly Payment due on a Due Date is not made prior to the next scheduled Due Date for such Mortgage Loan.  With respect to any date of determination, determinations of delinquency shall be made as of the last day of the prior calendar month.  Mortgage Loans with Due Dates which are not the first of the month are treated for determination of delinquency status as if the Due Date was the first of the following month.

Denomination:  The amount, if any, specified on the face of each Certificate (other than the Class CE and Class R Certificates) of a Class representing the principal portion of the Original Class Certificate Principal Balance or Maximum Original Class Certificate Principal Balance of such Class evidenced by such Certificate.

Depositor:  Third Street Funding LLC, a Delaware limited liability company, and its successors and assigns.

Depository:  The initial depository shall be The Depository Trust Company, whose nominee is Cede & Co., or any other organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.  The Depository shall initially be the registered Holder of the Book-Entry Certificates.  The Depository shall at all times be a “clearing corporation” as defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of New York.

Depository Participant:  A broker, dealer, bank or other financial institution or other person for whom from time to time a Depository effects book-entry transfers and pledges of securities deposited with the Depository.

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Determination Date:  With respect to each Distribution Date occurring (i) prior to and in the month of the final Servicing Transfer Date, the last day of the calendar month preceding such Distribution Date and (ii) in any month after the month of the final Servicing Transfer Date, the 15th day (or if such 15th day is not a Business Day, the preceding Business Day) of the month in which such Distribution Date occurs.

Disqualified Organization:  Any of (i) a “disqualified organization” under Section 860E of the Code, which as of the Closing Date is any of:  (A) the United States, any state or political subdivision thereof, any foreign government, any international organization, or any agency or instrumentality of any of the foregoing, (B) any organization (other than a cooperative described in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code unless such organization is subject to the tax imposed by Section 511 of the Code or (C) any organization described in Section 1381(a)(2)(C) of the Code, or (ii) any other Person so designated by the Securities Administrator based upon an Opinion of Counsel provided by nationally recognized counsel to the Securities Administrator that the holding of an ownership interest in the Class R Certificate by such Person may cause the Trust Fund or any Person having an ownership interest in any Class of Certificates (other than such Person) to incur liability for any federal tax imposed under the Code that would not otherwise be imposed but for the transfer of an ownership interest in the Class R Certificate to such Person.  A corporation will not be treated as an instrumentality of the United States or of any state or political subdivision thereof if all of its activities are subject to tax and a majority of its board of directors is not selected by a governmental unit.  The term “United States,” “state” and “international organization” shall have the meanings set forth in Section 7701 of the Code.

Distribution Account:  The account or accounts created and maintained by the Securities Administrator pursuant to Section 3.06(c), which shall be entitled “Distribution Account, Wells Fargo Bank, N.A., as Securities Administrator for U.S. Bank National Association, as Trustee, in trust for registered Holders of American General Mortgage Loan Trust 2009-1, Mortgage Pass-Through Certificates, Series 2009-1,” and which must be an Eligible Account.  The Class CE Grantor Trust Subaccount, Exchangeable Certificates Grantor Trust Subaccount, Lower Tier Distribution Subaccount and Upper Tier Distribution Subaccount shall be subaccounts of the Distribution Account.  Funds in the Distribution Account shall be held in trust for the Holders of the Certificates for the uses and purposes set forth in this Agreement.

Distribution Date:  The 25th day of any calendar month, or if such 25th day is not a Business Day, the Business Day immediately following such 25th day, commencing in August 2009.

Distribution Date Statement:  As defined in Section 4.06(a) hereof.

Due Date:  With respect to each Mortgage Loan and any Distribution Date, the day of the prior calendar month on which the Monthly Payment for such Mortgage Loan was due, exclusive of any grace period.

Early Stage Default:  As defined in the Delegated Authority Guidelines.

Early Stage Delinquency:  As defined in the Delegated Authority Guidelines.

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Eligible Account:  Any of (i) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the short-term unsecured debt obligations of such holding company) are rated “A–1” by S&P and “P-1” by Moody’s at the time any amounts are held on deposit therein, (ii) an account or accounts the deposits in which are fully insured by the FDIC, or (iii) a trust account or accounts maintained with the trust department of a federal or state chartered depository institution, national banking association or trust company acting in its fiduciary capacity.  Eligible Accounts may bear interest.  If an account ceases to be an Eligible Account as described above, the account shall be moved within fifteen (15) Business Days to a depository which does satisfy one of the clauses above.

Eligible Investments:  Any one or more of the following obligations or securities acquired at a purchase price of not greater than par, regardless of whether issued or managed by the Servicer, the Interim Subservicer, the Master Servicer, the Securities Administrator, the Trustee or the Custodian or any of their respective Affiliates or for which an Affiliate of the Depositor, the Servicer, the Interim Subservicer, the Master Servicer, the Securities Administrator, the Trustee or the Custodian serves as an advisor (or for which any such party may provide services or receive compensation): 

(i)

direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States;

(ii)

(A) demand and time deposits in, certificates of deposit of, bankers’ acceptances issued by or federal funds sold by any depository institution or trust company (including the Trustee, the Securities Administrator or the Master Servicer or any of their agents acting in their respective commercial capacities) incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by federal and/or state authorities, so long as, at the time of such investment or contractual commitment providing for such investment, such depository institution or trust company or its ultimate parent has a short-term uninsured debt rating in one of the two highest available rating categories of S&P and Moody’s and provided that each such investment has an original maturity of no more than 365 days and (B) any other demand or time deposit or deposit which is fully insured by the FDIC; 

(iii)

repurchase obligations with a term not to exceed 30 days with respect to any security described in clause (i) above and entered into with a depository institution or trust company (acting as principal) rated “A” or higher by S&P and “A2” or higher by Moody’s, provided, however, that collateral transferred pursuant to such repurchase obligation must be of the type described in clause (i) above and must (A) be valued daily at current market prices plus accrued interest or (B) pursuant to such valuation, be equal, at all times, to 105% of the cash transferred by the Trustee, the Servicer, the Master Servicer or the Securities Administrator, as the case may be, in exchange for such collateral and (C) be delivered to the Trustee, the Servicer, the Master Servicer or the Securities Administrator or, if the Trustee, the Servicer, the Master Servicer or the Securities Administrator, as applicable, is supplying the collateral, an agent for the 

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Trustee, the Servicer, the Master Servicer or the Securities Administrator, in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities; 

(iv)

securities bearing interest or sold at a discount that are issued by any corporation incorporated under the laws of the United States of America or any State thereof and that are rated by each Rating Agency in its highest long-term unsecured rating categories at the time of such investment or contractual commitment providing for such investment; 

(v)

commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than 30 days after the date of acquisition thereof) that is rated by each Rating Agency in its highest short-term unsecured debt rating available at the time of such investment; and

(vi)

units of money market funds registered under the Investment Company Act of 1940 (including funds managed or advised by the Trustee, the Securities Administrator, the Master Servicer, the Custodian or affiliates thereof) that, if rated by each Rating Agency, are rated in its highest rating category (if so rated by such Rating Agency); 

provided, that no instrument described hereunder shall evidence either the right to receive (a) only interest with respect to the obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument and the interest and principal payments with respect to such instrument provide a yield to maturity at par greater than 120% of the yield to maturity at par of the underlying obligations.

Eligible Substitute Mortgage Loan:  A mortgage loan substituted by a Seller or American General Finance Corporation for a Defective Mortgage Loan which must, on the date of such substitution, (i) have an outstanding Stated Principal Balance (or in the case of a substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an aggregate Stated Principal Balance) not in excess of, and not materially less than, the Stated Principal Balance of the Defective Mortgage Loan; (ii) have a Mortgage Interest Rate not less than the Mortgage Interest Rate of the Defective Mortgage Loan; (iii) have a Loan-to-Value Ratio not higher than that of the Defective Mortgage Loan; (iv) have a remaining term to maturity not greater than (and not more than one year less than) that of the Defective Mortgage Loan, (v) comply with each representation and warranty as to the Mortgage Loans set forth in the Mortgage Loan Purchase Agreement (deemed to be made as of the date of substitution); (vi) be current in the payment of principal and interest; (vii) be secured by a Mortgaged Property of the same type and occupancy status as secured the Defective Mortgage Loan; (viii) have payment terms that do not vary in any material respect from those of the Defective Mortgage Loan; and (ix) have a Prepayment Charge at least equal in amount of that of the Defective Mortgage Loan.

ERISA:  The Employee Retirement Income Security Act of 1974, as amended.

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ERISA-Restricted Certificates:  The Class A, Class B, Class CE, Class P and Class R Certificates.

Escrow Account:  The account or accounts created and maintained pursuant to Section 3.07.

Escrow Payments:  The amounts constituting ground rents, taxes, assessments, Primary Mortgage Insurance Policy premiums, fire and hazard insurance premiums, flood insurance premiums, condominium charges and other payments as may be required to be escrowed by the Mortgagor with the Mortgagee pursuant to the terms of any Mortgage Note or Mortgage.

Estate in Real Property:  A fee simple estate in a parcel of real property.

Exchange Act:  The Securities Exchange Act of 1934, as amended.

Exchangeable Certificates:  The Class A-2, Class A-8, Class A-9 and Class A-10 Certificates.

Exchangeable Certificates Grantor Trust:  The portion or portions of the Trust exclusive of the Trust REMICs consisting of (i) interests in the Exchangeable REMIC Certificates beneficially owned in the form of the Exchangeable Certificates and rights with respect thereto and (ii) the Exchangeable Certificates Grantor Trust Subaccount.

Exchangeable Certificates Grantor Trust Subaccount:  The sub-account of the Distribution Account designated by the Securities Administrator pursuant to Section 9.04(a).  The Exchangeable Certificates Grantor Trust Subaccount shall not be an asset of any REMIC formed under this Agreement.  Funds in the Exchangeable Certificates Grantor Trust Subaccount shall be held uninvested.

Exchangeable Combination:  Any of Exchangeable Combination 1, Exchangeable Combination 2, Exchangeable Combination 3 or Exchangeable Combination 4, as applicable.

Exchangeable Combination 1:  The Class A-2 Certificates.

Exchangeable Combination 2:  The Class A-8 Certificates.

Exchangeable Combination 3:  The Class A-9 Certificates.

Exchangeable Combination 4:  The Class A-10 Certificates.

Exchangeable REMIC Certificates:  The Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates.

Exchangeable REMIC Combination:  Any of Exchangeable REMIC Combination 1, Exchangeable REMIC Combination 2, Exchangeable REMIC Combination 3 or Exchangeable REMIC Combination 4, as applicable.

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Exchangeable REMIC Combination 1:  The Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates.

Exchangeable REMIC Combination 2:  The Class A-3 and Class A-4 Certificates.

Exchangeable REMIC Combination 3:  The Class A-3, Class A-4 and Class A-5 Certificates.

Exchangeable REMIC Combination 4:  The Class A-3, Class A-4, Class A-5 and Class A-6 Certificates.

Extra Principal Distribution Amount:  As of any Distribution Date, the lesser of (x) the Monthly Excess Interest Amount for such Distribution Date and (y) the Overcollateralization Deficiency for such Distribution Date.

FDIC:  Federal Deposit Insurance Corporation or any successor thereto.

Financing Person’s Designee:  As defined in Section 3.19(d) hereof.

FIRREA:  The Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended.

Homes Act:  The Helping Families Save Their Homes Act of 2009, as it may be amended from time to time.

Imminent Default:  As defined in the Delegated Authority Guidelines attached hereto as Exhibit O.

Independent:  When used with respect to any specified Person, any such Person who (i) is in fact independent of the Depositor, the Servicer, the Interim Subservicer, the Custodian, the Trustee, the Master Servicer, the Securities Administrator and their respective Affiliates, (ii) does not have any direct financial interest in or any material indirect financial interest in the Depositor, the Servicer, the Interim Subservicer, the Custodian, the Trustee, the Master Servicer, the Securities Administrator or any Affiliate thereof, and (iii) is not connected with the Depositor, the Servicer, the Interim Subservicer, the Custodian, the Trustee, the Master Servicer, the Securities Administrator or any Affiliate thereof as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, however, that a Person shall not fail to be Independent of the Depositor, the Servicer, the Interim Subservicer, the Custodian, the Trustee, the Master Servicer, the Securities Administrator or any Affiliate thereof merely because such Person is the beneficial owner of 1% or less of any class of securities issued by the Depositor, the Servicer, the Interim Subservicer, the Custodian, the Trustee, the Master Servicer, the Securities Administrator or any Affiliate thereof, as the case may be.

Initial Overcollateralization Amount:  $393,171,378.65.

Insurance Proceeds:  Proceeds of any title policy, hazard policy, Primary Mortgage Insurance Policy or other insurance policy covering a Mortgage Loan, to the extent such 

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proceeds are not to be applied to the restoration of the related Mortgaged Property, required to be deposited in an Escrow Account or released to the Mortgagor in accordance with Customary Servicing Procedures, subject to the terms and conditions of the related Mortgage Note and Mortgage.

Interest Accrual Period: With respect to any Distribution Date will be the calendar month preceding the month of such Distribution Date.

Interest Carry Forward Amount:  For any Class of Certificates (other than the Class CE, Class P, Class R and Exchangeable Certificates) and any Distribution Date, the sum of (a) the excess, if any, of the Accrued Certificate Interest and any Interest Carry Forward Amount for the prior Distribution Date, over the amount in respect of interest actually distributed on such Class on such prior Distribution Date and (b) interest on such excess at the applicable Certificate Interest Rate on the basis of a 360-day year consisting of twelve 30-day months.

Interest Remittance Amount:  As to any Distribution Date, (A) the sum, without duplication, of (i) the interest portion of Monthly Payments with respect to the related Collection Period received by the Servicer on or prior to the related Determination Date for such Distribution Date, (ii) all Compensating Interest paid by the Servicer for such Distribution Date, (iii) the portion of any payment in connection with any Principal Prepayment (but excluding any Prepayment Charge) relating to interest received by the Servicer during the related Prepayment Period, (iv) the interest portion of REO Proceeds and Net Liquidation Proceeds received by the Servicer during the related Prepayment Period, (v) the interest portion of payments from the Servicer in connection with Monthly Advances for such Distribution Date, (vi) any Reimbursement Amounts received with respect to the Mortgage Loans during the related Prepayment Period, (vii) the portion of any Purchase Price or Substitution Adjustment Amounts paid during the related Prepayment Period allocable to interest and (viii) on the Distribution Date on which the Mortgage Loans and related REO Property are purchased in accordance with Section 10.01 hereof, that portion of the Termination Price in respect of interest less (B) the Servicing Fees for the Mortgage Loans, amounts reimbursable with respect to Monthly Advances and Servicing Advances with respect to the Mortgage Loans pursuant to Sections 3.07(d), 3.08(a) and 3.08(b) and amounts reimbursable or payable to the Servicer, the Back-up Servicer, the Interim Subservicer, the Master Servicer, the Securities Administrator, the Trustee and the Custodian pursuant to this Agreement, including, without limitation, Sections 3.01(a), 3.08, 3.18, 8.05 and 9.01(c).

Interim Subservicer:  MorEquity, Inc., a Nevada corporation, and its successors and assigns.  From the Closing Date until the Servicing Transfer Date for each Mortgage Loan, the Interim Subservicer shall subservice such Mortgage Loan on behalf of the Servicer in accordance with this Agreement. The Interim Subservicer shall also, with the Servicer, review and, if necessary, revise the Delegated Authority Guidelines on a periodic basis (no less than quarterly) following the Closing Date to optimize the servicing guidelines prescribed therein.

Interim Subservicer Custodial Account:  The account created and maintained by the Interim Subservicer pursuant to Section 3.06(f).

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Interim Subservicing Fee:  With respect to each Mortgage Loan subserviced by the Interim Subservicer prior to the related Servicing Transfer Date, the fee payable out of the Servicing Fee to the Interim Subservicer equal to one-twelfth of the product of 0.40% and the Stated Principal Balance of such Mortgage Loan.  Such fee shall be payable monthly, computed on the basis of the same principal amount and period respecting which any related interest payment on a Mortgage Loan is computed.  The Interim Subservicer’s right to receive the Interim Subservicing Fee is limited to, and payable solely from, the interest portion (including recoveries with respect to interest from Liquidation Proceeds and other proceeds, to the extent permitted by Section 3.06) of related Monthly Payments collected by the Interim Subservicer.

Liquidated Mortgage Loan:  As to any Distribution Date, any Mortgage Loan in respect of which the Servicer has determined, in accordance with Customary Servicing Procedures, as of the end of the related Prepayment Period, that all Liquidation Proceeds which it expects to recover with respect to the liquidation, taking by power of eminent domain or condemnation or sale of the Mortgage Loan or Mortgaged Property, as applicable, or disposition of the related REO Property have been recovered.

Liquidation Proceeds:  The sum of all:  (i) Insurance Proceeds with respect to a Mortgage Loan, (ii) condemnation proceeds received with respect to a Mortgage Loan, to the extent not released to the Mortgagor in accordance with Customary Servicing Procedures and (iii) other cash amounts received and retained in connection with the liquidation, taking, sale or other disposition of such Mortgage Loan or Mortgaged Property (including REO Property) pursuant to this Agreement.

Loan-to-Value Ratio:  With respect to any Mortgage Loan as of the date of origination, the ratio, expressed as a percentage, on such date of the outstanding principal balance of the Mortgage Loan to the Appraised Value of the related Mortgaged Property.

Lost Note Affidavit:  The lost note affidavit signed by a Seller which is in the form of Exhibit G hereto.

Lower Tier Corresponding Marker Interests:  The Class LT-A1 Interest, Class LT-A3 Interest, Class LT-A4 Interest, Class LT-A5 Interest, Class LT-A6 Interest, Class LT-A7 Interest, Class LT-B1 Interest and the Class LT-B2 Interest.

Lower Tier Distribution Amount:  As defined in Section 4.02(e).

Lower Tier Distribution Subaccount:  The sub-account of the Distribution Account designated by the Securities Administrator pursuant to Section 3.06(c).

Lower Tier Interests: The Lower Tier Regular Interests and the Class LR Interest.

Lower Tier Principal Loss Allocation Amount:  With respect to any Distribution Date, an amount equal to the product of (i) the aggregate Stated Principal Balance of the Mortgage Loans and related REO Properties then outstanding and (ii) 1 minus a fraction, the numerator of which is two times the aggregate of the Uncertificated Balances of the Lower Tier Corresponding Marker Interests, and the denominator of which is the aggregate of the Uncertificated Balances of the Lower Tier Corresponding Marker Interests and the Class LT-ZZ Interest.

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Lower Tier Regular Interests: A regular interest in the Lower Tier REMIC which is held as an asset of the Upper Tier REMIC and is entitled to monthly distributions as provided in Section 4.02 hereof.  Any of the Class LT-AA Interest, the Lower Tier Corresponding Marker Interests, the Class LT-ZZ Interest and the Class LT-P Interest are Lower Tier Regular Interests.

Lower Tier REMIC:  As defined in the Preliminary Statement, the assets of which consist of the Mortgage Loans, $100 deposited by the Depositor on the Closing Date, such amounts as shall be held in the Lower Tier Distribution Subaccount, the insurance policies, if any, relating to a Mortgage Loan and property which secured a Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure.  The Lower Tier REMIC will not include any Servicer Prepayment Charge Payment Amounts, the Class CE Grantor Trust or the Exchangeable Certificates Grantor Trust.

Lower Tier REMIC Interest Loss Allocation Amount:  With respect to any Distribution Date, an amount equal to (a) the product of (i) the aggregate Stated Principal Balance of the Mortgage Loans and related REO Properties then outstanding and (ii) the Lower Tier REMIC Pass-Through Rate for the Class LT-AA Interest minus the Marker Rate, divided by (b) 12.

Lower Tier REMIC Overcollateralization Target Amount:  1.00% of the Targeted Overcollateralization Amount.

Lower Tier REMIC Overcollateralized Amount:  With respect to any date of determination, (i) 1% of the aggregate Uncertificated Balances of the Lower Tier Regular Interests minus (ii) the aggregate of the Uncertificated Balances of the Lower Tier Corresponding Marker Interests and 1% of the Class LT-P Interest, in each case as of such date of determination.

Lower Tier REMIC Pass-Through Rate:  With respect to the Class LT-AA Interest, the Lower Tier Corresponding Marker Interests and the Class LT-ZZ Interest, the Net WAC Cap.  The Class LT-P Interest has no Lower Tier REMIC Pass-Through Rate.

Majority Certificateholders:  The Holders of Certificates evidencing at least 51% of the Voting Rights.

Marker Rate:  With respect to the Class CE Upper Tier Regular Interest and any Distribution Date, a per annum rate equal to two (2) times the weighted average of the Lower Tier REMIC Pass-Through Rates for the Lower Tier Corresponding Marker Interests and the Class LT-ZZ Interest, (i) with the rate on each such Lower Tier Corresponding Marker Interest subject to a cap equal to the lesser of (a) the Pass-Through Rate of its Corresponding Class of Certificates and (b) the Net WAC Cap for the purpose of this calculation and (ii) with the rate on the Class LT-ZZ Interest subject to a cap of zero for the purpose of this calculation.

Master Servicer:  Wells Fargo Bank, N.A., a national banking association, its successors and assigns and, if a successor master servicer is appointed hereunder, such successor, as master servicer. 

Master Servicer Custodial Account:  The account or accounts created and maintained by the Master Servicer pursuant to Section 3.06(b), which shall be entitled “Master Servicer 

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Custodial Account, Wells Fargo Bank, N.A., as Master Servicer, in trust for registered Holders of American General Mortgage Loan Trust 2009-1, Mortgage Pass-Through Certificates, Series 2009-1,” and which must be an Eligible Account.  The Master Servicer Custodial Account shall be deemed to be a sub-account of the Distribution Account.

Master Servicer Custodial Account Reinvestment Income:  For each Distribution Date, all income and gain net of any losses realized since the preceding Distribution Date (or since the Closing Date, in the case of the initial Distribution Date) from Eligible Investments of funds in the Master Servicer Custodial Account.

Master Servicer’s Certificate:  The monthly report required by Section 4.07(b).

Master Servicing Officer:  Any officer of the Master Servicer involved in, or responsible for, the administration and master servicing of the Mortgage Loans whose name appears on a list of servicing officers furnished to the Securities Administrator and the Trustee by the Master Servicer, as such list may from time to time be amended.

Master Servicing Transfer Costs:  All reasonable costs and expenses (including attorney’s fees) incurred by the Trustee or a successor master servicer in connection with the transfer of master servicing or servicing from a predecessor master servicer, including, without limitation, any costs or expenses associated with the complete transfer of all master servicing data or servicing data and the completion, correction or manipulation of such master servicing data or servicing data as may be required by the Trustee or successor master servicer to correct any errors or insufficiencies in the master servicing data or servicing data or otherwise to enable the Trustee or a successor master servicer to master service or service, as the case may be, the applicable Mortgage Loans properly and effectively.

Master Servicer Event of Default:  Any one of the conditions or circumstances enumerated in Section 7.01(c).

Maximum Certificate Principal Balance:  As to any date of determination and each Class of Exchangeable Certificates, the portion of the Maximum Original Class Certificate Principal Balance that would be outstanding assuming each Certificate of the Related Classes had been exchanged on the Closing Date.

Maximum LT-ZZ Uncertificated Accrued Interest Deferral Amount:  With respect to any Distribution Date, the excess of (a) accrued interest at the Lower Tier REMIC Pass-Through Rate applicable to the Class LT-ZZ Interest for such Distribution Date on a balance equal to the Uncertificated Balance of the Class LT-ZZ Interest minus the Lower Tier REMIC Overcollateralized Amount, in each case for such Distribution Date, over (b) Uncertificated Accrued Interest on the Lower Tier Corresponding Marker Interests, with the rate on each such Lower Tier Corresponding Marker Interest subject to a cap equal to the lesser of (a) the Pass-Through Rate of the Corresponding Class of Certificates and (b) the Net WAC Cap for the purpose of this calculation.

Maximum Original Class Certificate Principal Balance:  As to each Class of Exchangeable REMIC Certificates or Exchangeable Certificates, the Maximum Original Class Certificate Principal Balance set forth in the Preliminary Statement.

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MERS: The Mortgage Electronic Registration Systems, Inc.

MERS Mortgage Loan:  Any MOM Mortgage Loan or any other Mortgage Loan as to which MERS or its designee is (or is intended to be) the mortgagee of record and as to which a MIN has been assigned.

MIN:  A MERS Mortgage Identification Number assigned to a Mortgage Loan registered under MERS.

MOM Mortgage Loan:  A Mortgage Loan where the related Mortgage names MERS or its designee as the original mortgagee thereof, as to which a MIN has been assigned, and which Mortgage has not been assigned to any other person.

Monthly Advance  The payment made by the Servicer with respect to any Distribution Date pursuant to Section 3.19.

Monthly Excess Cashflow Amount:  The sum of the Monthly Excess Interest Amount and (without duplication) any portion of the Principal Distribution Amount remaining after principal distributions on the Offered Certificates and the Class B Certificates.

Monthly Excess Interest Amount:  With respect to each Distribution Date, the amount, if any, by which the Interest Remittance Amount for such Distribution Date exceeds the aggregate amount distributed on such Distribution Date pursuant to paragraphs (i) through (vi) under Section 4.01(a).

Monthly Payment:  With respect to any Mortgage Loan, the scheduled monthly payment of principal and interest on such Mortgage Loan which is payable by the related Mortgagor from time to time under the related Mortgage Note, determined:  (a) after giving effect to (i) any Deficient Valuation and/or Debt Service Reduction with respect to such Mortgage Loan, (ii) any reduction in the amount of interest collectible from the related Mortgagor pursuant to the Relief Act or similar state laws and (iii) any Servicer Modification or forbearance agreement; and (b) on the assumption that all other amounts, if any, due under such Mortgage Loan are paid when due.

Monthly Servicer Report to Sellers:  The report prepared by the Servicer and delivered to the Sellers pursuant to Section 4.08 in form and substance set forth as Exhibit M-2 hereto (and any additional reports and/or data agreed to by the Servicer and the Interim Subservicer as contemplated therein).

Moody’s:  Moody’s Investors Service, Inc., and its successors, and if such company shall for any reason no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other “nationally recognized statistical rating organization” as set forth on the most current list of such organizations released by the Securities and Exchange Commission.

Mortgage:  The mortgage, deed of trust or other instrument creating a first lien on, or first priority security interest in, a Mortgaged Property securing a Mortgage Note.

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Mortgage File:  The mortgage documents listed in Section 2.01 pertaining to a particular Mortgage Loan.

Mortgage Interest Rate:  With respect to each Mortgage Loan, the annual rate at which interest accrues on such Mortgage Loan from time to time in accordance with the provisions of the related Mortgage Note, after giving effect to the Relief Act, and as such may be modified in accordance with a Servicer Modification.  With respect to each Mortgage Loan that becomes an REO Property, as of any date of determination, the annual rate determined in accordance with the immediately preceding sentence as of the date such Mortgage Loan became an REO Property.

Mortgage Loan:  Each mortgage loan identified in the Mortgage Loan Schedule attached hereto as Exhibit D.

Mortgage Loan Purchase Agreement:  The Mortgage Loan Purchase Agreement, dated July 30, 2009, among the Sellers, American General Finance Corporation and the Depositor, as purchaser.

Mortgage Loan Schedule:  As of any date with respect to the Mortgage Loans, the list of such Mortgage Loans included in the Trust Fund on such date attached hereto as Exhibit D.  The Mortgage Loan Schedule shall set forth the following information with respect to each Mortgage Loan: 

(1)

the Mortgage Loan identifying number; 

(2)

the state and zip code of the Mortgaged Property; 

(3)

a code indicating whether the Mortgaged Property is a single family residence, a 2-4 family dwelling, a PUD, a townhouse or a unit in a high-rise or low-rise condominium project; 

(4)

the occupancy status of the Mortgaged Property at origination; 

(5)

the original months to maturity; 

(6)

the date of origination; 

(7)

the first payment date; 

(8)

the stated maturity date; 

(9)

the stated remaining months to maturity; 

(10)

the original principal amount of the Mortgage Loan; 

(11)

the Cut-off Date Principal Balance of each Mortgage Loan; 

(12)

the Mortgage Interest Rate of the Mortgage Loan as of the Cut-off Date; 

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(13)

the current principal and interest payment of the Mortgage Loan as of the Cut-off Date; 

(14)

the contractual interest paid to date of the Mortgage Loan; 

(15)

the Loan-to-Value Ratio at origination; 

(16)

a code indicating the loan performance status of the Mortgage Loan as of the Cut-off Date; and

(17)

a code indicating whether the Mortgage Loan has a Prepayment Charge, the type of Prepayment Charge and the term.

The Mortgage Loan Schedules shall set forth the following information, as of the Cut-off Date, with respect to the Mortgage Loans in the aggregate:  (1) the number of Mortgage Loans; (2) the Cut-off Date Principal Balance of the Mortgage Loans; (3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans.  The Mortgage Loan Schedule shall be amended from time to time in accordance with the provisions of this Agreement.  With respect to any Eligible Substitute Mortgage Loan, Cut-off Date shall refer to the applicable date of substitution.

Mortgage Note:  The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan, together with all riders thereto and amendments thereof, as the same may be modified in accordance with any Servicer Modification.

Mortgage Pool:  The pool of Mortgage Loans, identified on Exhibit D from time to time, and any REO Properties acquired in respect thereof.

Mortgaged Property:  The underlying property securing a Mortgage Loan, including any REO Property, consisting of an Estate in Real Property improved by a Residential Dwelling.

Mortgagor:  The obligor on a Mortgage Note.

Net Liquidation Proceeds:  With respect to any Liquidated Mortgage Loan, the related Liquidation Proceeds net of unreimbursed Monthly Advances, Servicing Advances, Servicing Fees and any other accrued and unpaid fees or other compensation explicitly set forth in this Agreement received and retained in connection with the liquidation, taking, sale or other disposition of such Mortgage Loan or Mortgaged Property (including REO Property) pursuant to this Agreement.  Net Liquidation Proceeds shall first be applied to outstanding accrued interest and then to outstanding principal on the related Mortgage Loan.

Net Mortgage Interest Rate:  With respect to any Mortgage Loan, the Mortgage Interest Rate borne by such Mortgage Loan minus the Servicing Fee Rate.

Net WAC Cap:  With respect to each Distribution Date, a per annum rate equal to the weighted average of the Net Mortgage Interest Rates for the Mortgage Loans (weighted on the 

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basis of the Stated Principal Balances of the Mortgage Loans as of the first day of the related Collection Period).

NMWHFIT:  A “Non-Mortgage Widely Held Fixed Investment Trust” as that term is defined in Treasury regulations § 1.671-5(b)(12) or successor provisions.

Nonrecoverable Advance:  Any Monthly Advance or Servicing Advance previously made or proposed to be made in respect of a Mortgage Loan or REO Property that, in the good faith business judgment of the Servicer and in accordance with Customary Servicing Procedures, will not or, in the case of a proposed Advance, would not be ultimately recoverable from Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.

Notice of Facility Termination:  As defined in Section 3.19(d) hereof.

Notional Amount:  With respect to the Class CE Upper Tier Regular Interest and the Class CE Certificates and any date of determination, a notional amount equal to the then aggregate Uncertificated Balances of the Lower Tier Regular Interests other than the Class LT-P Interest.

Offered Certificates:  The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and Class A-10 Certificates.

Officer’s Certificate:  A certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a vice president (however denominated), a managing director, a principal, the Treasurer, the Secretary, or one of the assistant treasurers or assistant secretaries of the Master Servicer, the Securities Administrator, the Servicer, the Interim Subservicer, the Custodian or the Depositor, as applicable.

Opinion of Counsel:  A written opinion of counsel, who may, without limitation, be a salaried counsel for the Depositor, the Servicer, the Sellers, the Trustee, the Securities Administrator or the Master Servicer except that any opinion of counsel relating to (a) the qualification of any Trust REMIC as a REMIC or (b) compliance with the REMIC Provisions must be an opinion of Independent counsel.

Original Class Certificate Principal Balance:  With respect to each Class of Certificates (other than the Exchangeable REMIC Certificates and the Exchangeable Certificates), the Certificate Principal Balance thereof on the Closing Date, as set forth opposite such Class in the Preliminary Statement, except with respect to (i) the Class R Certificate, which has no Original Class Certificate Principal Balance and (ii) the Class CE Certificate, which, solely for REMIC purposes, has an Original Class Certificate Principal Balance equal to the Initial Overcollateralization Amount.

Outstanding Certificate: Any Outstanding Exchangeable Certificate or Outstanding Exchangeable REMIC Certificate.

Outstanding Exchangeable Certificate: Any Exchangeable Certificate issued hereunder on the Closing Date; provided, however, that upon the exchange of the Exchangeable Certificate pursuant to Section 5.08 hereof, the Exchangeable Certificate so exchanged shall be deemed no 

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longer to be an Outstanding Exchangeable Certificate, and each Exchangeable REMIC Certificate issued in exchange therefor shall be deemed to be an Outstanding Exchangeable REMIC Certificate.

Outstanding Exchangeable REMIC Certificate: Any Exchangeable REMIC Certificate issued hereunder on the Closing Date; provided, however, that upon the exchange of any Exchangeable REMIC Certificate pursuant to Section 5.08 hereof, the Exchangeable REMIC Certificate so exchanged shall be deemed no longer to be an Outstanding Exchangeable REMIC Certificate, and the Exchangeable Certificate issued in exchange therefor shall be deemed to be an Outstanding Exchangeable Certificate.

Overcollateralization Amount:  As of any Distribution Date, the excess, if any, of (x) the Pool Balance as of the last day of the related Collection Period over (y) the aggregate Certificate Principal Balance of all Classes of Offered Certificates and the Class B Certificates (after taking into account all distributions of principal on such Distribution Date and the increase of any Certificate Principal Balance of a Class of Class B Certificates as a result of Subsequent Recoveries).

Overcollateralization Deficiency:  As of any Distribution Date, the excess, if any, of (x) the Targeted Overcollateralization Amount for such Distribution Date over (y) the Overcollateralization Amount for such Distribution Date.

Ownership Interest:  As to any Certificate, any ownership interest in such Certificate, including any interest in such Certificate as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner.

Paperless Release Request:  As defined in Section 3.13(d) hereof.

Pass-Through Rate:  With respect to each Distribution Date and (i) the Class A Certificates, 5.75% per annum and (ii) the Class B Certificates, 1.00% per annum.

Paying Agent:  Any paying agent appointed pursuant to Section 5.05.

Percentage Interest:  With respect to any Certificate (other than the Class CE and Class R Certificates), a fraction, expressed as a percentage, obtained by dividing the Denomination of such Certificate on the Closing Date by the Original Class Certificate Balance (or the Maximum Original Class Certificate Balance in the case of the Exchangeable Certificates and the Exchangeable REMIC Certificates) of the related Class.  With respect to a Certificate of the Class CE Certificates, the portion of such Class evidenced thereby, expressed as a percentage, as stated on the face of such Certificate.  The Percentage Interest of the Class R Certificate is 100%.  Notwithstanding the foregoing, for purposes of making actual distributions of principal or interest or allocating Voting Rights among the Outstanding Exchangeable REMIC Certificates or Outstanding Exchangeable Certificates of a Class, the Percentage Interest refers to each Outstanding Certificate’s proportionate share of such actual distributions or Voting Interests based on the proportion that such Certificate’s Percentage Interest bears to the aggregate Percentage Interest of all the Outstanding Exchangeable REMIC Certificates or Outstanding Exchangeable Certificates of such Class.

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Permitted Transferee:  Any transferee of the Class R Certificate other than a Disqualified Organization, a non-U.S. Person (other than as provided in Section 5.02(f)(v)) or a U.S. Person with respect to whom income on the Class R Certificate is attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of such Person or any other U.S. Person.

Person:  Any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.

Plans:  As defined in Section 5.02(e) hereof.

Pool Balance:  As of any date of determination, the aggregate Stated Principal Balance of the Mortgage Loans.

Prepayment Charge:  With respect to any Prepayment Period, any prepayment premium, fee or charge payable by a Mortgagor in connection with any principal prepayment pursuant to the terms of the related Mortgage Note.

Prepayment Interest Shortfall:  With respect to any Distribution Date, for each Mortgage Loan that was the subject of a Principal Prepayment during the related Prepayment Period, an amount equal to difference between (x) 30 days’ interest at the applicable Net Mortgage Interest Rate on the amount of the Principal Prepayment on such Mortgage Loan minus (y) the amount of interest actually paid by the related Mortgagor on the amount of such Principal Prepayment.

Prepayment Period:  With respect to any Distribution Date, the calendar month preceding the month in which such Distribution Date occurs.

Primary Mortgage Insurance Policy:  Each policy of primary mortgage guaranty insurance or any replacement policy therefor with respect to any Mortgage Loan, in each case issued by an insurer acceptable to Fannie Mae or Freddie Mac.

Principal Distribution Amount:  As to any Distribution Date, the sum of (i) the Principal Remittance Amount and (ii) the Extra Principal Distribution Amount, if any.

Principal Prepayment:  Any payment of principal made by the Mortgagor on a Mortgage Loan (other than a payahead on a Mortgage Loan subject to the Simple Interest Method) which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest representing the full amount of interest due on any Due Date in any month or months subsequent to the month of prepayment.

Principal Remittance Amount:  As to any Distribution Date, (A) the sum, without duplication, of:  (i) the principal portion of Monthly Payments with respect to the related Collection Period received by the Servicer on or prior to the related Determination Date for such Distribution Date, (ii) all Principal Prepayments received by the Servicer during the related Prepayment Period, (iii) the portion of Net Liquidation Proceeds and REO Proceeds allocable to principal received by the Servicer during the related Prepayment Period, (iv) the portion of any Purchase Price or Substitution Adjustment Amounts allocable to principal received by the Master 

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Servicer with respect to the related Prepayment Period, (v) the principal portion of payments from the Servicer in connection with Monthly Advances for such Distribution Date, (vi) any Subsequent Recoveries received by the Servicer during the related Prepayment Period, (vii) any other amounts received by the Servicer during the related Prepayment Period that are payable to the Trust, as owner of a Mortgage Loan, paid in connection with a loan modification program, including the U.S. Treasury’s Home Affordable Modification Program and (viii) on the Distribution Date on which the Mortgage Loans and related REO Property are purchased in accordance with Section 10.01 hereof, that portion of the Termination Price in respect of principal less (B) without duplication, amounts reimbursable with respect to Monthly Advances and Servicing Advances with respect to the Mortgage Loans pursuant to Sections 3.07(d), 3.08(a) and 3.08(b) and amounts reimbursable or payable to the Servicer, the Back-up Servicer, the Interim Subservicer, the Master Servicer, the Securities Administrator, the Trustee and the Custodian pursuant to this Agreement, including, without limitation, Sections 3.01(a), 3.08, 3.18, 8.05 and 9.01(c).

Purchase Price:  With respect to any Mortgage Loan or REO Property to be purchased pursuant to Section 2.03, an amount equal to the sum of (i) 100% of the Stated Principal Balance thereof as of the date of purchase, (ii) accrued interest on such Stated Principal Balance at the applicable Mortgage Interest Rate in effect from time to time from the Due Date as to which interest was last covered by a payment by the Mortgagor or a Monthly Advance by the Servicer, which payment or Monthly Advance had as of the date of purchase been distributed pursuant to Section 4.01, through the end of the calendar month in which the purchase is effected, (iii) any unreimbursed Servicing Advances and Monthly Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or REO Property, and (iv)  all costs and expenses, including reasonable attorneys fees, incurred by the Trustee to effect the repurchase.

QIB:  A “qualified institutional buyer” as defined in Rule 144A under the 1933 Act.

Qualified Appraiser:  An appraiser of a Mortgaged Property duly appointed by the originator of the related Mortgage Loan, who had no interest, direct or indirect, in such Mortgaged Property or in any loan made on the security thereof, whose compensation is not affected by the approval or disapproval of the related Mortgage Loan and who satisfied the requirements of Title XI of FIRREA.

Rating Agency or Rating Agencies:  Moody’s and S&P, or their respective successors.

Realized Loss:  With respect to any Liquidated Mortgage Loan, the amount by which the Stated Principal Balance exceeds the amount of Net Liquidation Proceeds applied to the Stated Principal Balance.  With respect to any Mortgage Loan, the amount of any Deficient Valuation, the amount of any reduction in the Stated Principal Balance thereof (but not a forbearance) resulting from a Servicer Modification or, with respect to any Mortgage Loan that has become the subject of a Debt Service Reduction, the amount, if any, by which the principal portion of the related Monthly Payment has been reduced.

Realized Loss Amortization Amount:  As to each Class of Class B Certificates and as of any Distribution Date, the lesser of (x) the Unpaid Realized Loss Amount for such Class of 

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Certificates as of such Distribution Date and (y) the remaining Monthly Excess Cashflow Amount available for such Class pursuant to clause (iv) or (v), as applicable, of Section 4.02(a).

Record Date:  With respect to all of the Certificates, the last Business Day of the month immediately preceding the month in which the related Distribution Date occurs.

Regular Interest:  Any of the Lower Tier Regular Interests and the Upper Tier Regular Interests.

Reimbursement Amount:  As defined in Section 2.03.

Related:  As to the Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates, the Class A-2 Certificates.  As to the Class A-3 and Class A-4 Certificates, the Class A-8 Certificates.  As to the Class A-3, Class A-4 and Class A-5 Certificates, the Class A-9 Certificates.  As to the Class A-3, Class A-4, Class A-5 and Class A-6 Certificates, the Class A-10 Certificates.

Related Documents:  With respect to any Mortgage Loan, the related Mortgage Notes and other related documents.

Relief Act:  The Servicemembers Civil Relief Act, as it may be amended from time to time.

REMIC:  A “real estate mortgage investment conduit” within the meaning of Section 860D of the Code.

REMIC Certificate Maturity Date:  The “latest possible maturity date” of the Certificates (other than the Residual Certificate) as that term is defined in Section 9.01(k).

REMIC Pass-Through Rate:  With respect to each Distribution Date and the Lower Tier Regular Interests, the Lower Tier REMIC Pass-Through Rate.  With respect to each Distribution Date and the Upper Tier Regular Interests (other than the Class CE Upper Tier Regular Interest), the Upper Tier REMIC Pass-Through Rate.

With respect to the Class CE Upper Tier Regular Interest and any Distribution Date, a per annum rate equal to the percentage equivalent of a fraction, the numerator of which is the sum of the amounts calculated pursuant to clauses (A) through (C) below, and the denominator of which is the aggregate Uncertificated Balances of the Class LT-AA Interest, the Lower Tier Corresponding Marker Interests, and the Class LT-ZZ Interest.  For purposes of calculating the REMIC Pass-Through Rate for the Class CE Upper Tier Regular Interest, the numerator is equal to the sum of the following components:

(A)

the Lower Tier REMIC Pass-Through Rate for the Class LT-AA Interest minus the Marker Rate, applied to an amount equal to the Uncertificated Balance of the Class LT-AA Interest;

(B)

the Lower Tier REMIC Pass-Through Rate for each Lower Tier Corresponding Marker Interest, in each case minus the Marker Rate, applied in each case to an amount equal to 

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the respective Uncertificated Balance of each such Lower Tier Corresponding Marker Interest; and

(C)

the Lower Tier REMIC Pass-Through Rate for the Class LT-ZZ Interest minus the Marker Rate, applied to an amount equal to the Uncertificated Balance of the Class LT-ZZ Interest.

With respect to the Class CE Certificates and any Distribution Date, the Class CE Certificates shall be entitled to 100% of the amounts distributable to the Class CE Upper Tier Regular Interest.

REMIC Provisions:  Provisions of the federal income tax law relating to real estate mortgage investment conduits which appear at Section 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations and rulings promulgated thereunder, as the foregoing may be in effect from time to time.

Remittance Report:  A report prepared by the Servicer and delivered to the Master Servicer pursuant to Section 4.07(a), containing the information attached hereto as Exhibit L.

REO Disposition:  The sale or other disposition of an REO Property on behalf of the Trust.

REO Proceeds:  Proceeds, net of any amount payable or reimbursable to the Servicer pursuant to this Agreement for unpaid Servicing Fees in respect of the related Mortgage Loan and unreimbursed Servicing Advances and Monthly Advances in respect of the related Mortgage Loan or REO Property, received in respect of any REO Property (including, without limitation, proceeds from the rental of the related Mortgaged Property), which are received prior to the REO Disposition.  REO Proceeds shall first be applied to outstanding accrued interest and then to outstanding principal on the related Mortgage Loan.

REO Property:  A Mortgaged Property acquired by the Servicer on behalf of the Trust through foreclosure or deed-in-lieu of foreclosure, as described in Section 3.11.

Request for Release:  A release signed by a Servicing Officer, in the form of Exhibit E attached hereto.

Residential Dwelling: Any one of the following: (i) a detached one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a one-family dwelling unit in a Fannie Mae eligible condominium project, (iv) a manufactured home, (v) a townhouse, (vi) a modular home or (vii) a detached one-family dwelling in a planned unit development, none of which is a co-operative or mobile home.

Residual Certificate:  The Class R Certificate.

Responsible Officer:  When used with respect to the Trustee or the Securities Administrator, any officer within the corporate trust department of the Trustee or the Securities Administrator, as applicable, including any Senior Vice President, any Vice President, any Assistant Vice President, any Assistant Secretary, any Trust Officer or Assistant Trust Officer, or 

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any other officer of the Trustee or the Securities Administrator, as applicable, customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Agreement.

S&P:  Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and its successors, and if such company shall for any reason no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other “nationally recognized statistical rating organization” as set forth on the most current list of such organizations released by the Securities and Exchange Commission.

Securities Administrator:  Wells Fargo Bank, N.A., its successors and assigns and, if a successor securities administrator is appointed hereunder, such successor, as securities administrator.

Securities Administrator Distribution Account Reinvestment Income:  For each Distribution Date, all income and gain net of any losses realized since the preceding Distribution Date (or the Closing Date, in the case of the initial Distribution Date) from Eligible Investments of funds in the Distribution Account.

Sellers:  MorEquity, Inc., a Nevada corporation, American General Home Equity, Inc., a Delaware corporation, and American General Financial Services of Arkansas, Inc., a Delaware corporation, and their respective successors and assigns, in each of their capacities as a Seller under the Mortgage Loan Purchase Agreement.

Senior Certificates:  The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and Class A-10 Certificates.

Servicer:  PennyMac Loan Services, LLC, a Delaware limited liability company, and its successor and assigns, and, if a successor servicer (including the Back-up Servicer) is appointed hereunder, such successor, as servicer.

Servicer Custodial Account:  The account created and maintained by the Servicer pursuant to Section 3.06(a).

Servicer Custodial Account Reinvestment Income:  For each Servicer Remittance Date, all income and gain net of any losses realized since the preceding Servicer Remittance Date (or since the Closing Date, in the case of the initial Servicer Remittance Date) from Eligible Investments of funds in the Servicer Custodial Account.

Servicer Event of Default:  Any one of the conditions or circumstances enumerated in Section 7.01(a).

Servicer Modification:  A modification to the terms of a Mortgage Loan, made in accordance with the terms of the Delegated Authority Guidelines.

Servicer Prepayment Charge Payment Amount:  The amount payable by the Servicer in respect of any waived Prepayment Charges pursuant to Section 3.01(h), which amount shall be equal to the difference between the amount of Prepayment Charge due by a Mortgagor before 

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any waiver and the actual amount of the Prepayment Charge that was paid by the Mortgagor which amounts shall not be part of any Trust REMIC.

Servicer Remittance Date:  The 19th day of each month beginning in August 2009 (or, if such day is not a Business Day, the immediately preceding Business Day).

Servicing Advances:  All customary, reasonable and necessary out-of-pocket costs and expenses incurred in the performance by the Servicer or any subservicer of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration, inspection and protection of the Mortgaged Property, (b) any enforcement or judicial proceedings, including foreclosures (and the attendant cost of recording any Assignments), (c) the management and liquidation of the Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the Mortgage, (d) expenses of sales of Bulk Loans pursuant to the Delegated Authority Guidelines and (e) payments made by the Servicer or any subservicer with respect to a Mortgaged Property pursuant to Section  3.07.

Servicing Fee:  With respect to each Mortgage Loan, the fee payable to the Servicer equal to one-twelfth of the product of the Servicing Fee Rate and the Stated Principal Balance of such Mortgage Loan.  Such fee shall be payable monthly, computed on the basis of the same principal amount and period respecting which any related interest payment on a Mortgage Loan is computed.  The Servicer’s right to receive the Servicing Fee is limited to, and payable solely from, the interest portion (including recoveries with respect to interest from Liquidation Proceeds and other proceeds, to the extent permitted by Section 3.08) of related Monthly Payments collected by the Servicer.

Servicing Fee Rate:  With respect to each Mortgage Loan, 0.50% per annum.

Servicing Officer:  Any officer of the Servicer whose name appears on a list of servicing officers furnished to the Trustee, the Master Servicer, the Interim Subservicer, the Sellers, the Securities Administrator, the Depositor and the Custodian by the Servicer, as such list may be amended from time to time.

Servicing Transfer Costs:  With respect to (i) any transfer of servicing from PennyMac Loan Services, LLC to SPS, as Back-up Servicer, all reasonable costs and expenses incurred by the Master Servicer or the Back-up Servicer in connection with the transfer of servicing from PennyMac Loan Services, LLC to SPS, as Back-up Servicer, including, without limitation, any reasonable costs or expenses of the Master Servicer or the Back-up Servicer associated with the complete transfer of all servicing data and (ii) any transfer from SPS to the Master Servicer or other successor Servicer, all reasonable costs and expenses incurred by the Master Servicer in connection with the appointment of a successor Servicer and the transfer of servicing from SPS, including, without limitation, any reasonable costs or expenses associated with the identification and engagement of a successor Servicer (provided that such costs or expenses shall not involve or relate to any increase in the Servicing Fee or compensation), the documentation of the assumption of servicing by the successor Servicer, the complete transfer of all servicing data and, if the Master Servicer succeeds to the role of Servicer hereunder, the completion, correction or manipulation of such servicing data as may be required by the Master Servicer to correct any 

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errors or insufficiencies in the servicing data or otherwise to enable the Master Servicer to service the Mortgage Loans properly and effectively.

Servicing Transfer Date: With respect to any Mortgage Loan subserviced by the Interim Subservicer, the date on which (a) the Interim Subservicer ceases subservicing such Mortgage Loan on behalf of the Servicer and (b) the Servicer or a subservicer other than the Interim Subservicer begins servicing or subservicing, as applicable, such Mortgage Loan; provided, however, that the final Servicing Transfer Date shall be no later than October 1, 2009 (unless the Servicer and the Interim Subservicer agree in writing to complete the transfer of servicing on a later date).

Simple Interest Method:  With respect to any simple interest Mortgage Loan, the method of allocating a payment to principal and interest, pursuant to which the portion of such payment that is allocated to interest is equal to the product of the applicable Mortgage Interest Rate multiplied by the Stated Principal Balance as of the date of the last payment made by or on behalf of the Mortgagor multiplied by the number of days elapsed since the preceding payment of interest was made and divided by 360 or 365, as specified in the related Mortgage Note, and the remainder of such payment is allocated to principal.

SPS:  Select Portfolio Servicing, Inc., a Utah corporation, and its successors and assigns, and any successor in interest, as Back-up Servicer and as subservicer to PennyMac Loan Services, LLC.

Startup Day:  As defined in Section 9.01(b) hereof.

Stated Principal Balance:  As to any date of determination and any Mortgage Loan (A) (x) subject to the Simple Interest Method and (y) subject to the Actuarial Method and prior to August 1, 2009, the principal balance of such Mortgage Loan at its origination, less the sum of (i) all collections and other amounts credited against the principal balance of such Mortgage Loan prior to such date, (ii) any principal reduction resulting from a Deficient Valuation prior to such date and (iii) any principal reduction resulting from a modification prior to such date plus any principal increase as a result of a capitalization in connection with a modification or (B) subject to the Actuarial Method on and after August 1, 2009, the unpaid principal balance of such Mortgage Loan at the most recent Due Date, as specified in the amortization schedule (before any adjustment to that amortization schedule due to any moratorium or similar waiver or grace period), after giving effect to (i) any previous partial Principal Prepayments and Liquidation Proceeds received, (ii) the payment of principal due on such Due Date, (iii) any principal reduction resulting from a Deficient Valuation, (iv) the principal portion of Realized Losses as a result of Servicer Modifications incurred prior to such Due Date and (v) any principal increase as a result of a capitalization in connection with a Servicer Modification.  For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have a Stated Principal Balance equal to the Stated Principal Balance of the related Mortgage Loan as of the final recovery of related Liquidation Proceeds and a Stated Principal Balance of zero thereafter.  The Stated Principal Balance of any REO Property on any date shall be deemed to equal the Stated Principal Balance of the related Mortgage Loan immediately prior to such Mortgage Loan becoming REO Property, minus any REO Proceeds allocable to principal received with respect thereto on or prior to such day.

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Subordinated Certificates:  The Class B-1, Class B-2, Class CE and Class R Certificates.

Subsequent Recovery: Any amount (net of reimbursable expenses) received on a Mortgage Loan subsequent to such Mortgage Loan being determined to be a Liquidated Mortgage Loan that resulted in a Realized Loss in a prior month.

Substitution Adjustment Amount:  As defined in Section 2.03(c) hereof.

Supplemental Memorandum:  That certain Supplemental Memorandum, dated July 30, 2009, relating to the offering of the Offered Certificates, as it may be amended from time to time.

Targeted Overcollateralization Amount:  As of any Distribution Date, 20% of the Cut-off Date Aggregate Principal Balance.

Tax Matters Person:  The tax matters person appointed pursuant to Section 9.01(e) hereof.

Tax Returns:  The federal income tax returns on Internal Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of the REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed on behalf of the Trust for each REMIC created pursuant to this Agreement under the REMIC Provisions, together with any and all other information reports or returns that may be required to be furnished to the Certificateholders or filed with the Internal Revenue Service or any other governmental taxing authority under any applicable provisions of federal, state or local tax laws.

Termination Price:  As defined in Section 10.01(a) hereof.

Transferred Assets:  As defined in Section 2.01 hereof.

Trust:  American General Mortgage Loan Trust 2009-1, the trust created hereunder.

Trust Fund:  The segregated pool of assets subject hereto, constituting the primary trust created hereby and to be administered hereunder, with respect to a portion of which a REMIC election is to be made, such entire Trust Fund consisting of:  (i) such Mortgage Loans as from time to time are subject to this Agreement, together with all collections thereon and proceeds thereof, (ii) any REO Property, together with all collections thereon and proceeds thereof, (iii) the Trustee’s rights with respect to the Mortgage Loans under all insurance policies required to be maintained pursuant to this Agreement and any proceeds thereof, (iv) the Depositor’s rights under the Mortgage Loan Purchase Agreement (including any security interest created thereby) and (v) the Servicer Custodial Account, the Master Servicer Custodial Account, the Distribution Account, the Class P Account, the Class CE Grantor Trust Subaccount, the Exchangeable Certificates Grantor Trust Subaccount, the Lower Tier Distribution Subaccount and the Upper Tier Distribution Subaccount and such assets that are deposited therein from time to time and any investments thereof, together with any and all income, proceeds and payments with respect thereto.

Trust REMIC:  Either of the Lower Tier REMIC or the Upper Tier REMIC.

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Trustee:  U.S. Bank National Association, a national banking association, and its successors and assigns and, if a successor trustee is appointed as herein provided, such successor, as trustee.

Uncertificated Accrued Interest: With respect to each Regular Interest (other than the Class CE Upper Tier Regular Interest) and each Distribution Date, an amount equal to one month’s interest at the related REMIC Pass-Through Rate on the Uncertificated Balance of such Regular Interest.  With respect to the Class CE Upper Tier Regular Interest on each Distribution Date, an amount equal to one month’s interest at its REMIC Pass-Through Rate on its Notional Amount.

Uncertificated Balance:  The amount of any Regular Interest outstanding as of any date of determination.  As of the Closing Date, the Uncertificated Balance of each Regular Interest shall equal the amount set forth in the Preliminary Statement hereto as its initial Uncertificated Balance.  On each Distribution Date, the Uncertificated Balance of each such Regular Interest shall be reduced by all distributions of principal made on such Regular Interest on such Distribution Date pursuant to Section 4.02 and, if and to the extent necessary and appropriate, shall be further reduced on such Distribution Date by Realized Losses as provided in Section 4.02.  If and to the extent necessary and appropriate, the Uncertificated Balance of each Regular Interest shall be increased on such Distribution Date by Subsequent Recoveries as provided in Section 4.02.  The Uncertificated Balance of the Class LT-ZZ Interest shall be increased by interest deferrals as provided in Section 4.02.  The Uncertificated Balance of the Class CE Upper Tier Regular Interest shall at all times equal the Overcollateralization Amount.  The Uncertificated Balance of each Regular Interest shall never be less than zero.

United States Person or U.S. Person:  (i) A citizen or resident of the United States, (ii) a corporation, partnership or other entity treated as a corporation or partnership for United States federal income tax purposes organized in or under the laws of the United States or any state thereof or the District of Columbia (unless, in the case of a partnership, Treasury regulations provide otherwise), (iii) an estate the income of which is includible in gross income for United States tax purposes, regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust (or to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 that are eligible and elect to be treated as United States Persons).  Notwithstanding the preceding sentence, for purposes of the definition of a “Permitted Transferee,” a U.S. Person shall not include any person whose income is attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of such Person or any other U.S. Person.

Unpaid Realized Loss Amount:  For any of the Class B Certificates and as to any Distribution Date, the excess of (x) the aggregate Applied Realized Loss Amounts allocated to such Class for all prior Distribution Dates over (y) the sum of (a) the cumulative amount of any Subsequent Recoveries allocated to such Class on or prior to such Distribution Date and (b) the aggregate Realized Loss Amortization Amounts with respect to such Class for all prior Distribution Dates.

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Upper Tier Distribution Subaccount:  The sub-account of the Distribution Account designated by the Securities Administrator pursuant to Section 3.06(c).

Upper Tier Interests:  The Upper Tier Regular Interests and the Class UR Interest.

Upper Tier Regular Interest: Any of the regular interests in the Upper Tier REMIC listed in the Preliminary Statement, the ownership of which is represented by the Certificates.  Any of the Class A-1 Interest, the Class A-3 Interest, the Class A-4 Interest, the Class A-5 Interest, the Class A-6 Interest, the Class A-7 Interest, the Class B-1 Interest, the Class B-2 Interest, the Class CE Interest and the Class P Interest are Upper Tier Regular Interests.

Upper Tier REMIC:  As defined in the Preliminary Statement, the assets of which consist of the Lower Tier Regular Interests and such amounts as shall be deemed held in the Upper Tier Distribution Subaccount.

Upper Tier REMIC Pass-Through Rate:  As set forth in the Preliminary Statement.  

Voting Rights:  The portion of the voting rights of all of the Certificates which is allocated to any Certificate.  As of any date of determination, (a) 97% of all Voting Rights shall be allocated to the Holders of the Senior Certificates (other than the Exchangeable Certificates) and the Class B Certificates in proportion to the Certificate Principal Balances of their respective Certificates, (b) 1% of all Voting Rights shall be allocated to the Holder of the Class R Certificate, (c) 1% of all Voting Rights shall be allocated to the Holders of the Class CE Certificates and (d) 1% of all Voting Rights shall be allocated to the Holders of the Class P Certificates.

In the event that all or a portion of a Combination of Classes of Exchangeable REMIC Certificates in any Exchangeable REMIC Combination is exchanged for a  proportionate portion of the Class of Exchangeable Certificates in the related Combination, the Class of such Exchangeable Certificates will be entitled to a proportionate share of the Voting Rights allocated to the Classes of Exchangeable REMIC Certificates in the related Combination.

WHFIT:  A “Widely Held Fixed Investment Trust” as that term is defined in Treasury regulations § 1.671-5(b)(22) or successor provisions.

WHFIT Regulations:  Treasury regulations § 1.671-5, as amended.

Written Order to Authenticate:  A written order by which the Depositor directs the Securities Administrator to execute, authenticate and deliver the Certificates.

Section 1.02.

Accounting.

Unless otherwise specified herein, for the purpose of any definition or calculation, whenever amounts are required to be netted, subtracted or added or any distributions are taken into account such definition or calculation and any related definitions or calculations shall be determined without duplication of such functions.

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ARTICLE II

CONVEYANCE OF MORTGAGE LOANS;

ORIGINAL ISSUANCE OF CERTIFICATES

Section 2.01.

Conveyance of Mortgage Loans.

The Depositor, concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and otherwise convey to the Trustee, on behalf of the Trust, without recourse, for the benefit of the Certificateholders, all the right, title and interest of the Depositor, including any security interest therein for the benefit of the Depositor, in and to (1) each Mortgage Loan identified on the Mortgage Loan Schedule, including the related Cut-off Date Principal Balance, all interest accruing thereon after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (2) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (3) its interest in any insurance policies in respect of the Mortgage Loans; (4) the rights of the Depositor under the Mortgage Loan Purchase Agreement; (5) $100 (which amount has been delivered by the Depositor to the Securities Administrator to be held in the Class P Account until distributed to the Holders of the Class P Certificates pursuant to Section 4.02(a)(vii)); (6) all other assets included or to be included in the Trust Fund; and (7) all proceeds of any of the foregoing (collectively, the “Transferred Assets”).

The Depositor shall deliver, or cause to be delivered, to the Custodian on behalf of the Trustee, the following documents or instruments with respect to each Mortgage Loan (a “Mortgage File”): 

(i)

(A) the original Mortgage Note bearing an unbroken chain of endorsements or allonges from origination to the last named endorsee and including any riders or addenda to the Mortgage Note, endorsed to blank and signed in the name of the last named endorsee by an authorized officer and a power of attorney, if applicable, or (B) with respect to any lost Mortgage Note, a Lost Note Affidavit from the related Seller, with a copy of the related lost Mortgage Note;

(ii)

for each Mortgage Loan that is not a MERS Mortgage Loan, the original Mortgage or certified copy thereof, with evidence of recording thereon, or a certified copy if the original Mortgage has not yet been returned from the recording office along with evidence that the Mortgage has been sent for recording, and in the case of each MERS Mortgage Loan, the original Mortgage or a certified copy thereof, with evidence of recording thereon, or a certified copy if the original Mortgage has not yet been returned from the recording office along with evidence that the Mortgage has been sent for recording, noting the presence of the MIN of the related Mortgage Loan and either language indicating that the Mortgage Loan is a MOM Mortgage Loan if the mortgage loan is a MOM Mortgage Loan or if the Mortgage Loan was not a MOM Mortgage Loan at origination, the original Mortgage or certified copy thereof and the Assignment thereof to MERS, with evidence of recording indicated thereon, or a certified copy if the original Mortgage has not yet been returned from the recording office along with evidence that the Mortgage has been sent for recording;

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(iii)

except with respect to each MERS Mortgage Loan, an original Assignment in blank, in form and substance acceptable for recording;

(iv)

for each Mortgage Loan that was not a MERS Mortgage Loan at its origination, the originals of any intervening recorded Assignments or certified copies thereof, showing an unbroken chain of assignment from origination to the last assignee, with evidence of recording thereon (or, if an original intervening Assignment has not been returned from the recording office, a copy thereof certified by or on behalf of the related Seller, the original to be delivered to the Custodian forthwith after return from such recording office;

(v)

an original or copy of the mortgage title insurance policy, or original or copy of title commitment (or in appropriate jurisdictions, attorney’s opinion of title or copy thereof); and

(vi)

originals or certified copies of all assumption, modification, consolidation or extension agreements or if required by law of the applicable jurisdiction to protect the Trust, a certified copy with evidence of recording thereon (or if not yet returned from the recording office, a copy thereof certified by or on behalf of the related Seller, the original or certified copy to be delivered to the related Seller forthwith after return from such recording office) with evidence of recording thereon, if required by law of the applicable jurisdiction to protect the Trust.

With respect to any MERS Mortgage Loan, the Servicer shall take all actions as are necessary to cause the Trust to be shown as the owner of the related Mortgage Loan on the records of MERS for the purpose of the system of recording transfers of beneficial  ownership of mortgages maintained by MERS.  In addition, if MERS discontinues the MERS system and it becomes necessary to record an assignment of mortgage to the Trustee, any related expenses will be paid by the Trust.

Upon discovery or receipt of notice of any materially defective document in, or that a document is missing from, a Mortgage File, the related Seller shall cure such defect or deliver such missing document to the Custodian on behalf of the Trustee within the time frame specified in Section 2.03.  If such Seller does not cure such defect or deliver such missing document within such time period, such Seller shall either repurchase or substitute for such Mortgage Loan in accordance with Section 2.03 if such defect or missing document prevents or materially delays the Trust from (a) realizing against the related Mortgaged Property through foreclosure or similar loss mitigation activity or (b) processing any title claim under the related title insurance policy (unless such Seller provides appropriate recourse under a representation and warranty relating to good title).

The Depositor herewith delivers to the Trustee an executed copy of the Mortgage Loan Purchase Agreement.

The Servicer shall cause the notice required by Section 404 of the Homes Act to be provided within thirty (30) days of the Closing Date to each Mortgagor with respect to each Mortgage Loan and each such notice shall, to the extent permitted by the Homes Act, specify (i) 

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the Trust is “creditor” for purposes of the Homes Act, (ii) the address of the Trust is c/o the Trustee at its Corporate Trust Office; (iii) the Closing Date; (iv) the Servicer is the contact person with authority to act on behalf of the Trust; and (v) Assignments of Mortgage are not being recording in connection with the sale of the Mortgage Loans to the Trust.  If the Mortgage Loan is a MERS Mortgage Loan, such notice shall state, “Ownership of your Mortgage Loan is also recorded on Mortgage Electronic Registrations System’s registry at 1818 Library Street, Suite 300 Reston, VA 20190.”

Section 2.02.

Acceptance by Trustee or Custodian.

Subject to the provisions of the following paragraph, the Trustee declares that it, or the Custodian as its agent, will hold the documents referred to in Section 2.01 and the other documents delivered to it or the Custodian as its agent, as the case may be, constituting the Mortgage Files, and that it will hold such other assets as are included in the Trust Fund delivered to it, in trust for the exclusive use and benefit of all present and future Certificateholders.

The Custodian on behalf of the Trustee agrees, for the benefit of the Certificateholders, to review each Mortgage File upon the receipt thereof and to certify in substantially the form attached hereto as Exhibit F that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in the exception report annexed thereto as not being covered by such certification), (i) all documents constituting part of such Mortgage File required to be delivered to it pursuant to this Agreement are in its possession, (ii) the Mortgage Note has been signed by the Mortgagor and any co-Mortgagor, (iii) other than with respect to any MERS Mortgage Loan, the related Mortgage Note has been endorsed in blank and (iv) based on its examination and only as to the foregoing, the information set forth in the Mortgage Loan Schedule that corresponds to items (6), (8), (10) and (12) of the Mortgage Loan Schedule accurately reflects information set forth in the Mortgage File.  It is herein acknowledged that, in conducting such review, the Custodian is under no duty or obligation to inspect, review or examine any such documents, instruments, certificates or other papers to determine that they are genuine, enforceable, or appropriate for the represented purpose or that they have actually been recorded or that they are other than what they purport to be on their face nor shall the Custodian be under any duty to determine whether there are any intervening assignments or assumption or modification agreements with respect to any Mortgage Loan.  The Custodian shall have no responsibility for reviewing any Mortgage File except as expressly provided for in this Section 2.02 or determining if a mortgage loan qualifies as an Eligible Substitute Mortgage Loan.

If in the process of reviewing the Mortgage Files and making or preparing, as the case may be, the certification referred to above, the Custodian finds any document or documents constituting a part of a Mortgage File to be missing or defective in any material respect, at the conclusion of its review the Custodian shall so notify the applicable Seller, the Depositor, the Securities Administrator, the Master Servicer and the Servicer.  Such notification shall be in the form of an exception report.

The Depositor and the Trustee intend that the assignment and transfer herein contemplated constitute a sale of the Mortgage Loans and the other Transferred Assets, conveying good title thereto free and clear of any liens and encumbrances, from the Depositor to 

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the Trustee and that such property not be part of the Depositor’s estate or property of the Depositor in the event of any insolvency by the Depositor.  In the event that such conveyance is deemed to be, or to be made as security for, a loan, the parties intend that the Depositor shall be deemed to have granted and the Depositor does hereby grant to the Trustee, on behalf of the Trust, a first priority perfected security interest in all of the Depositor’s right, title and interest, whether now owned or hereafter acquired, in and to the Mortgage Loans, the other Transferred Assets and the proceeds thereof, and that this Agreement shall constitute a security agreement under applicable law.

Section 2.03.

Repurchase or Substitution of Mortgage Loans.

(a)

Upon discovery by any of the Depositor, the Master Servicer, the Securities Administrator, the Servicer, the Trustee or the Custodian of (i) any materially defective document in, or that, a document is missing from, a Mortgage File which defect or missing document prevents or materially delays the Trust from (A) realizing against the related Mortgaged Property through foreclosure or similar loss mitigation activity or (B) processing any title claim under the related title insurance policy (unless the applicable Seller provides appropriate recourse under a representation and warranty in the Mortgage Loan Purchase Agreement relating to good title) or (ii) the breach by a Seller of any representation or warranty under the Mortgage Loan Purchase Agreement in respect of any Mortgage Loan which materially adversely affects such Mortgage Loan or the interest therein of the Certificateholders, the party discovering such breach shall give prompt written notice to the other parties, to the applicable Seller and to American General Finance Corporation of such defect, missing document or breach.  The Custodian shall give such notice in the form of an exception report.  Upon receipt of any such notice, in the case of a defective or missing document, the Trustee shall promptly request that the applicable Seller cure such defect or deliver such missing document within 120 days from the date such Seller was notified of such missing document or defect or, in the case of a breach of a representation or warranty, request the applicable Seller cure such breach within 90 days from the date such Seller was notified of such breach.  If the applicable Seller does not deliver such missing document or cure such defect or if such Seller does not cure such breach in all material respects during such period, the Trustee, on behalf of the Trust, shall enforce such Seller’s obligation under the Mortgage Loan Purchase Agreement and cause such Seller to repurchase such Mortgage Loan from the Trust Fund at the Purchase Price on the last Business Day of the calendar month in which such period expires (subject to Section 2.03(d)).  The Purchase Price for the repurchased Mortgage Loan shall be deposited in the Master Servicer Custodial Account, and the Custodian on behalf of the Trustee, upon receipt of written notice from the Master Servicer of such deposit and a Request for Release from the Servicer, shall release, to the applicable Seller the related Mortgage File, and the Trustee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as the applicable Seller shall furnish to it and as shall be necessary to vest in such Seller any Mortgage Loan released pursuant hereto and neither the Trustee nor the Custodian shall have any further responsibility with regard to such Mortgage Loan.  In lieu of repurchasing any such Mortgage Loan as provided above, the related Seller may cause such Mortgage Loan to be removed from the Trust Fund (in which case it shall become a Defective Mortgage Loan) and substitute one or more Eligible Substitute Mortgage Loans in the manner and subject to the limitations set forth in Section 2.03(c).  Pursuant to the Mortgage Loan Purchase Agreement, to the extent a Seller fails to repurchase or substitute for a Mortgage Loan as required by the Mortgage Loan Purchase 

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Agreement, American General Finance Corporation is obligated to repurchase or substitute a similar Mortgage Loan for such Defective Mortgage Loan.  In addition, if the Trustee receives written notice from the Depositor, the Master Servicer, the Securities Administrator or the Servicer of a breach of a representation with respect to a Mortgage Loan set forth in Section 6.01(d) or (w) of the Mortgage Loan Purchase Agreement that occurs as a result of a violation of an applicable predatory or abusive lending law, the Trustee, on behalf of the Trust, shall enforce the right of the Trust to reimbursement by the applicable Seller or American General Finance Corporation for all costs or damages incurred by the Trust as a result of the violation of such law (such amount, the “Reimbursement Amount”).  

It is understood and agreed that the representations and warranties set forth in the Mortgage Loan Purchase Agreement shall survive the transfer and assignment of the Mortgage Loans to the Trust and shall inure to the benefit of the Certificateholders notwithstanding any restrictive or qualified endorsement or assignment.  It is understood and agreed that the obligations of the Sellers (and, if applicable, American General Finance Corporation) set forth in this Section 2.03(a) to cure, substitute or repurchase a Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement and to pay the Reimbursement Amount constitute the sole remedies available to the Certificateholders and to the Trustee on their behalf respecting a breach of the representations and warranties contained in the Mortgage Loan Purchase Agreement.

The representations and warranties of the Sellers with respect to the Mortgage Loan Purchase Agreement, which have been assigned to the Trustee hereunder, were made as of the dates specified in the Mortgage Loan Purchase Agreement.  It is hereby acknowledged that the Depositor shall have no obligation or liability with respect to any materially defective document in, or that, a document is missing from, a Mortgage File or breach of any representation or warranty with respect to the Mortgage Loans under any circumstances.

(b)

Within 90 days of the earlier of discovery by the Servicer or receipt of notice by the Servicer of the breach of any representation, warranty or covenant of the Servicer set forth in Section 2.05 which materially and adversely affects the interests of the Certificateholders in any Mortgage Loan, the Servicer shall cure such breach in all material respects.

(c)

Any substitution of Eligible Substitute Mortgage Loans by a Seller for Defective Mortgage Loans made pursuant to Section 2.03(a) must be effected prior to the last Business Day that is within two years after the Closing Date.  As to any Defective Mortgage Loan for which a Seller substitutes an Eligible Substitute Mortgage Loan or Loans, such substitution shall be effected by such Seller, delivering to the Custodian on behalf of the Trustee for such Eligible Substitute Mortgage Loan or Loans, the documents and agreements, with all necessary endorsements thereon, as are required by Section 2.01, together with an Officer’s Certificate of such Seller providing that each such Eligible Substitute Mortgage Loan satisfies the definition thereof and specifying the Substitution Adjustment Amount (as described below), if any, in connection with such substitution.  The Custodian on behalf of the Trustee shall acknowledge receipt for such Eligible Substitute Mortgage Loan or Loans and, within ten Business Days thereafter, shall review such documents as specified in Section 2.02 and deliver to the Servicer, the Master Servicer, the Securities Administrator and the Depositor, with respect to such Eligible Substitute Mortgage Loan or Loans, a certification substantially in the form attached hereto as Exhibit F, with any applicable exceptions noted on the exception report attached to the 

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certification.  Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the month of substitution are not part of the Trust Fund and will be retained by the related Seller.  For the month of substitution, distributions to Certificateholders will reflect the collections and recoveries in respect of such Defective Mortgage Loan in the Collection Period preceding the date of substitution and the related Seller shall thereafter be entitled to retain all amounts subsequently received in respect of such Defective Mortgage Loan.  The Depositor shall give or cause to be given written notice to the Certificateholders that such substitution has taken place, shall amend the Mortgage Loan Schedule to reflect the removal of such Defective Mortgage Loan from the terms of this Agreement and the substitution of the Eligible Substitute Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan Schedule to the Trustee, the Master Servicer, the Securities Administrator and the Servicer.  Upon such substitution, such Eligible Substitute Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be subject in all respects to the terms of this Agreement and, in the case of a substitution effected by a Seller, all applicable representations and warranties thereof included in the Mortgage Loan Purchase Agreement as of the date of substitution.

For any month in which a Seller or American General Finance Corporation substitutes one or more Eligible Substitute Mortgage Loans for one or more Defective Mortgage Loans, the Servicer will determine the amount (the “Substitution Adjustment Amount”), if any, by which the aggregate Purchase Price of all such Defective Mortgage Loans exceeds the aggregate, as to each such Eligible Substitute Mortgage Loan, of the Stated Principal Balance thereof as of the date of substitution, together with one month’s interest on such Stated Principal Balance at the applicable Net Mortgage Interest Rate.  On the date of such substitution, the applicable Seller will deliver or cause to be delivered to the Master Servicer for deposit in the Master Servicer Custodial Account an amount equal to the Substitution Adjustment Amount, if any, and the Custodian on behalf of the Trustee, upon receipt of the related Eligible Substitute Mortgage Loan or Loans and notice by the Master Servicer of such deposit, shall release to the applicable Seller the related Mortgage File or Files and the Trustee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as the applicable Seller shall deliver to it and as shall be necessary to vest therein any Defective Mortgage Loan released pursuant hereto.

In addition, the applicable Seller shall obtain at its own expense and deliver to the Trustee and the Securities Administrator an Opinion of Counsel to the effect that such substitution will not cause (a) any United States federal income tax to be imposed on the Trust Fund, including without limitation, any United States federal income tax imposed on “prohibited transactions” under Section 860F(a)(1) of the Code or on “contributions after the startup date” under Section 860G(d)(1) of the Code, or (b) any Trust REMIC created hereunder to fail to qualify as a REMIC at any time that any Certificate is outstanding.  If such Opinion of Counsel cannot be delivered, then such substitution may only be effected at such time as the required Opinion of Counsel can be given.

(d)

Upon discovery by a Seller, the Servicer, the Master Servicer, the Securities Administrator or the Trustee that any Mortgage Loan does not constitute a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall within two Business Days give written notice thereof to the other parties.  In connection therewith, the applicable Seller shall repurchase or, subject to the limitations set forth in Section 2.03(c), such Seller may substitute one or more Eligible Substitute Mortgage Loans for 

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the affected Mortgage Loan within 90 days of the earlier of discovery or receipt of such notice with respect to such affected Mortgage Loan.  Any such repurchase or substitution shall be made in the same manner as set forth in Section 2.03(a).  The Trustee shall reconvey to the applicable Seller the Mortgage Loan to be released pursuant hereto in the same manner, and on the same terms and conditions, as it would a Mortgage Loan repurchased for breach of a representation or warranty.

Section 2.04.

Representations and Warranties of the Depositor.

The Depositor represents and warrants to the Trust and the Trustee on behalf of the Certificateholders and to the Servicer, the Interim Subservicer, the Master Servicer, the Securities Administrator and the Custodian, as of the Closing Date, as follows:

(i)

This Agreement constitutes a legal, valid and binding obligation of the Depositor, enforceable against the Depositor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity);

(ii)

Immediately prior to the sale and assignment by the Depositor to the Trustee on behalf of the Trust of each Mortgage Loan, the Depositor had good and marketable title to each Mortgage Loan (insofar as such title was conveyed to it by the Sellers) subject to no prior lien, claim, participation interest, mortgage, security interest, pledge, charge or other encumbrance or other interest of any nature;

(iii)

As of the Closing Date, the Depositor has transferred all right, title interest in the Mortgage Loans to the Trustee on behalf of the Trust;

(iv)

The Depositor has not transferred the Mortgage Loans to the Trustee on behalf of the Trust with any intent to hinder, delay or defraud any of its creditors;

(v)

The Depositor has been duly incorporated and is validly existing as a limited liability company in good standing under the laws of the State of Delaware, with full power and authority to own its assets and conduct its business as presently being conducted;

(vi)

The Depositor is not in violation of its organizational documents or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Depositor is a party or by which it or its properties may be bound, which default might result in any material adverse changes in the financial condition, earnings, affairs or business of the Depositor or which might materially and adversely affect the properties or assets, taken as a whole, of the Depositor;

(vii)

The execution, delivery and performance of this Agreement by the Depositor, and the consummation of the transactions contemplated thereby, do not and will not result in a material breach or violation of any of the terms or provisions of, or, to 

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the knowledge of the Depositor, constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Depositor is a party or by which the Depositor is bound or to which any of the property or assets of the Depositor is subject, nor will such actions result in any violation of the provisions of the certificate of formation or operating agreement of the Depositor or, to the best of the Depositor’s knowledge without independent investigation, any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Depositor or any of its properties or assets (except for such conflicts, breaches, violations and defaults as would not have a material adverse effect on the ability of the Depositor to perform its obligations under this Agreement); and

(viii)

To the best of the Depositor’s knowledge without any independent investigation, no consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body of the United States or any other jurisdiction is required for the issuance of the Certificates, or the consummation by the Depositor of the other transactions contemplated by this Agreement, except such consents, approvals, authorizations, registrations or qualifications as (a) may be required under State securities or Blue Sky laws, (b) have been previously obtained or (c) the failure of which to obtain would not have a material adverse effect on the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement.

The representations and warranties made pursuant to this Section 2.04 shall survive delivery of the respective Mortgage Files to the Custodian on the Trustee’s behalf and shall inure to the benefit of the Certificateholders.

Section 2.05.

Representations, Warranties and Covenants of the Servicer.

The Servicer represents and warrants to the Trust and the Trustee on behalf of the Certificateholders and to the Depositor, the Interim Subservicer, the Master Servicer, the Securities Administrator and the Custodian, as of the Closing Date, as follows:

(i)

Organization and Good Standing of the Servicer.  It is a limited liability company duly organized, validly existing and in good standing under the laws of the State of its formation and has, in all material respects, full power and authority to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement and when this Agreement has been executed and delivered, this Agreement will constitute the legal, valid and binding obligation of the Servicer, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies (whether in a proceeding at law or in equity).

(ii)

Due Qualification.  The Servicer is duly qualified to do business and is in good standing as a foreign corporation and has obtained all necessary licenses and approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would render any Mortgage File relating to any Mortgage Loan unenforceable 

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by it, the Depositor or the Trustee and would have a material adverse effect on its business, properties, assets or condition (financial or other) or has appointed the Interim Subservicer or SPS as subservicer such that the Servicer’s failure to be duly qualified to do business, to be in good standing as a foreign corporation or to have obtained all necessary licenses and approvals would not render any Mortgage File relating to any Mortgage Loan unenforceable by the Interim Subservicer or SPS as subservicer, the Depositor or the Trustee and would not have a material adverse effect on its business, properties, assets or condition (financial or other).

(iii)

Due Authorization.  The execution, delivery and performance of this Agreement and any other document or instrument delivered pursuant hereto or thereto and the consummation of the transactions provided for in this Agreement have been duly authorized by all necessary action on the part of the Servicer.

(iv)

No Conflict.  The Servicer’s execution and delivery of this Agreement, the performance of the transactions contemplated by this Agreement, and the fulfillment of the terms of this Agreement applicable to it will not violate any existing law or regulation or any order or decree of any court applicable to the Servicer or any provision of the formation documents of the Servicer, or constitute (with or without notice or lapse of time or both) a material default under, any contract, agreement, mortgage, deed of trust, or other instrument to which it is a party or by which it or any of its properties are bound.

(v)

Governmental Authorization.  No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by the Servicer of this Agreement to which it is a party and the performance of its obligations hereunder and thereunder other than those authorizations and approvals that have been obtained and those notices and filings that have been made.

(vi)

No Proceedings.  There are no proceedings or investigations pending or, to the best of the Servicer’s knowledge, threatened against the Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, (iii) seeking any determination or ruling that, in its judgment, has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement or  (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforcement of this Agreement.

(vii)

All Consents.  All authorizations, consents, orders or approvals of any court or other governmental authority required to be obtained by the Servicer in connection with the execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement have been obtained.

(viii)

Fannie Mae/Freddie Mac/HUD Approvals.  The Servicer is an approved servicer of conventional mortgage loans for Fannie Mae and Freddie Mac and is a 

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mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act.

The representations and warranties made pursuant to this Section 2.05 shall survive delivery of the respective Mortgage Files to the Custodian on the Trustee’s behalf and shall inure to the benefit of the Certificateholders.

Section 2.06.

Representations, Warranties and Covenants of the Master Servicer.

The Master Servicer represents and warrants to the Trust and the Trustee on behalf of the Certificateholders and to the Depositor, the Interim Subservicer, the Servicer, the Securities Administrator and the Custodian, as of the Closing Date, as follows:

(i)

Organization and Good Standing of the Master Servicer.  The Master Servicer is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America and has all licenses necessary to carry on its business as now being conducted and is licensed, qualified and in good standing in each of the states where a Mortgaged Property securing a Mortgage Loan is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by the Master Servicer.  The Master Servicer has power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by the Master Servicer and the consummation of the transactions contemplated hereby have been duly and validly authorized.  This Agreement, assuming due authorization, execution and delivery by the other parties hereto, constitutes the valid and binding obligation of the Master Servicer, enforceable against the Master Servicer in accordance with its terms, subject to applicable law and except as enforceability may be limited by (A) bankruptcy, insolvency, liquidation, receivership, moratorium, reorganization or other similar laws affecting the enforcement of the rights of creditors and (B) general principles of equity, whether enforcement is sought in a proceeding in equity or at law.  All requisite corporate action has been taken by the Master Servicer to make this Agreement valid and binding upon the Master Servicer in accordance with its terms.

(ii)

All Consents.  No consent, approval, authorization or order is required for the transactions contemplated by this Agreement from any court, governmental agency or body, or federal or state regulatory authority having jurisdiction over the Master Servicer or, if required, such consent, approval, authorization or order has been or will, prior to the Closing Date, be obtained.

(iii)

No Conflict.  The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Master Servicer and will not result in the breach of any term or provision of the articles of association or by-laws of the Master Servicer or result in the breach of any term or provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any agreement, indenture or loan or credit agreement or other instrument to which the Master Servicer or its property is subject, or result in the violation of any law, rule, 

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regulation, order, judgment or decree to which the Master Servicer or its property is subject.

(iv)

No Proceedings.  There is no action, suit, proceeding or investigation pending or, to the best knowledge of the Master Servicer, threatened against the Master Servicer which, either individually or in the aggregate, would result in any material adverse change in the business, operations, financial condition, properties or assets of the Master Servicer, or in any material impairment of the right or ability of the Master Servicer to carry on its business substantially as now conducted or which would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of the Master Servicer contemplated herein, or which would materially impair the ability of the Master Servicer to perform under the terms of this Agreement.

The representations and warranties made pursuant to this Section 2.06 shall survive delivery of the respective Mortgage Files to the Trustee or the Custodian on the Trustee’s behalf and shall inure to the benefit of the Certificateholders.

Section 2.07.

Issuance of Certificates.

The Trustee hereby (i) acknowledges the assignment to it of the Mortgage Loans, (ii) acknowledges the assignment to it of all other assets included in the Trust Fund and (iii) acknowledges the issuance of, and hereby declares that it holds the Lower Tier Regular Interests on behalf of the Upper Tier REMIC and the Certificateholders.  Concurrently with such assignment and delivery and in exchange therefor, the Securities Administrator, pursuant to the Written Order to Authenticate executed by an officer of the Depositor, has executed, and the Certificate Registrar has authenticated and delivered to or upon the order of the Depositor, the Certificates (other than the Class CE, Class P and Class  R Certificates) in minimum dollar denominations of $100,000 and integral dollar multiples of $1 in excess.  The Class CE, Class P and Class R Certificates are issuable only as single certificates.

The Depositor hereby designates the Upper Tier Regular Interests as “regular interests” and the Class UR Interest as the single class of “residual interest” in the Upper Tier REMIC for purposes of Code Sections 860G(a)(1) and 860G(a)(2), respectively. The Depositor hereby further designates the Lower Tier Regular Interests as “regular interests” and the Class LR Interest as the single class of “residual interest” in the Lower Tier REMIC for purposes of Code Sections 860G(a)(1) and 860G(a)(2), respectively.

The Securities Administrator acknowledges the obligation of the Class CE Certificate to pay Cap Carryover Amounts, and declares that it holds any such Cap Carryover Amounts in the Class CE Grantor Trust Subaccount as assets of the Class CE Grantor Trust on behalf of the Holders of the Offered Certificates and the Class B Certificates, which shall be treated as beneficially owning the right to receive the Cap Carryover Amounts from the Class CE Grantor Trust.  The interests evidenced by the Certificates constitute the entire beneficial ownership interest in the Trust Fund.

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Section 2.08.

Execution and Delivery of Certificates.

The Securities Administrator has executed and delivered to or upon the order of the Depositor, in exchange for the Mortgage Loans, together with all other assets included in the definition of “Trust Fund,” receipt of which is hereby acknowledged, Certificates in authorized denominations which evidence ownership of the entire Trust Fund.

The Depositor hereby directs the Securities Administrator to execute on behalf of the Trust Fund any letters of representation and related riders required by the Depository with respect to the Book-Entry Certificates.

ARTICLE III

ADMINISTRATION AND SERVICING

OF THE TRUST FUND

Section 3.01.

Master Servicing and Servicing of the Mortgage Loans; Subservicing.

(a)

For and on behalf of the Certificateholders, the Master Servicer shall monitor the obligations of the Servicer to service and administer the Mortgage Loans in accordance with the terms of this Agreement and shall have full power and authority to do or cause to be done any and all things which it may deem necessary or desirable in connection with such master servicing and administration; provided, however, the Master Servicer shall have no obligation to monitor the Servicer’s compliance with, or the Servicer’s actions or inactions under, the Delegated Authority Guidelines, including the Servicer’s loss mitigation activities with regard to Delinquent and defaulted Mortgage Loans, and any Realized Losses and expenses associated therewith.  Notwithstanding anything in this Agreement to the contrary, the Master Servicer shall enforce the obligations of the Servicer under the Delegated Authority Guidelines only to the extent the Master Servicer receives (i) written notice of any instance of non-compliance by the Servicer under the terms of the Delegated Authority Guidelines and (ii) the most recent version of the Delegated Authority Guidelines.  In performing its obligations hereunder, the Master Servicer shall act in a manner consistent with this Agreement, subject to the prior sentence, and with customary and usual standards of practice of prudent mortgage loan master servicers.  Furthermore, the Master Servicer shall consult with the Servicer as necessary from time to time to carry out the Master Servicer’s obligations hereunder, shall receive and review all reports, information and other data provided to the Master Servicer by the Servicer and shall enforce the obligation of the Servicer to perform and observe the covenants, obligations and conditions to be performed or observed by the Servicer under this Agreement.  The Master Servicer shall independently monitor the Servicer’s servicing activities with respect to each Mortgage Loan, reconcile the reports and other data provided to the Master Servicer pursuant to the previous sentence on a monthly basis based on the Mortgage Loan data provided to the Master Servicer by or on behalf of the Depositor on the Closing Date (upon which data the Master Servicer shall be entitled to rely and shall have no obligation to confirm or verify) and coordinate corrective adjustments to the Servicer’s and Master Servicer’s records, and based on such reconciled and corrected information, prepare the Master Servicer’s Certificate and any other information and statements required hereunder.  The Master Servicer shall reconcile the results of its Mortgage 

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Loan monitoring with the actual remittances of the Servicer to the Master Servicer Custodial Account pursuant to this Agreement.

Notwithstanding anything in this Agreement to the contrary, the Master Servicer shall not be responsible or liable for the day-to-day servicing activities of the Servicer or for any unlawful act or omission, breach, negligence, fraud, willful misconduct or bad faith of the Servicer.  In addition, any information about any of the Mortgage Loans acquired or obtained by Wells Fargo Bank, N.A. in any other capacity under this Agreement shall not be attributable to the Master Servicer unless communication of that information to the Master Servicer is an express duty of such person under this Agreement.

The relationship of the Master Servicer (and of any successor to the Master Servicer as master servicer under this Agreement) to the Trustee and the Securities Administrator under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent.

In the event the Master Servicer receives written notice of any instance of non-compliance by the Servicer under the terms of the Delegated Authority Guidelines, or the Master Servicer has knowledge of any other instance of non-compliance by the Servicer with its duties under this Agreement, the Master Servicer shall be responsible for reporting any such non-compliance by the Servicer to the Interim Subservicer, the Back-up Servicer, the Servicer, the Trustee, the Securities Administrator and the Depositor.  In the review of the Servicer’s activities, the Master Servicer may rely upon an Officer’s Certificate of the Servicer (or similar document signed by an officer of the Servicer), and the Servicer’s annual statement of compliance and accountant’s report required under Sections 3.15 and 3.16, respectively, with regard to the Servicer’s compliance with the terms of this Agreement.  In the event that the Master Servicer, in its judgment, determines that the Servicer should be terminated in accordance with this Agreement, or that a notice should be sent pursuant to this Agreement with respect to the occurrence of an event that, unless cured, would constitute grounds for such termination, the Master Servicer shall notify the Depositor, the Securities Administrator, the Servicer, the Interim Subservicer, the Back-up Servicer and the Trustee thereof and the Master Servicer shall issue such notice or take such other action as it deems appropriate.

The Master Servicer, for the benefit of the Trustee and the Certificateholders, shall enforce the obligations of the Servicer under this Agreement, and shall, in the event of a Servicer Event of Default, act in accordance with Sections 7.01 and 7.05.  Such enforcement, including, without limitation, the legal prosecution of claims and the pursuit of other appropriate remedies, shall be in such form and carried out to such an extent and at such time as the Master Servicer, in its good faith business judgment, would require were it the owner of the Mortgage Loans.  The Master Servicer shall not be required to prosecute or defend any legal action except to the extent that the Master Servicer shall have received reasonable indemnity for its costs and expenses in pursuing such action.

To the extent that the costs and expenses incurred by the Master Servicer or the Trustee, as the case may be, in connection with any alleged or actual Servicer Event of Default, the termination of the Servicer, any appointment of a successor servicer and/or any transfer and assumption of servicing by the Master Servicer (including, without limitation, (i) all legal costs 

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and expenses and all due diligence costs and expenses associated with the investigation of any alleged or actual Servicer Event of Default, the evaluation of potential termination and/or the actual termination of the Servicer and (ii) all Servicing Transfer Costs), are not fully and timely reimbursed by the terminated Servicer, the Master Servicer or the Trustee, as the case may be, shall be entitled to reimbursement of such Servicing Transfer Costs from the Master Servicer Custodial Account; provided, however, that if such Servicing Transfer Costs are ultimately reimbursed by the terminated Servicer to the Master Servicer or the Trustee, as applicable, after the Master Servicer has withdrawn such amounts from the Master Servicer Custodial Account then the Master Servicer or the Trustee, as applicable, shall remit such amounts that are reimbursed by the terminated Servicer to the Master Servicer Custodial Account.

If the Master Servicer or another successor Servicer acts as Servicer, it will not assume liability for the representations and warranties of the Servicer, if any, that it replaces and, as successor Servicer, it will not be accountable or liable for any unlawful act or omission, breach, negligence, fraud, willful misconduct or bad faith of the predecessor Servicer.

The Master Servicer shall indemnify the Depositor, the Trustee, the Servicer, the Interim Subservicer, the Custodian and the Securities Administrator and any of their directors, officers, employees or agents and hold them harmless against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and any other costs, fees and expenses that any of them may sustain in any way related to a breach of the Master Servicer’s obligation set forth in this Section 3.01(a) or the failure of the Master Servicer to perform any of its obligations under Section 3.15.

(b)

The Servicer, as an independent contractor, shall service and administer the Mortgage Loans in accordance with this Agreement (including the Delegated Authority Guidelines) and Customary Servicing Procedures and the terms of the Mortgage Notes and Mortgages, and shall have full power and authority, acting alone or through subservicers or agents, including the Interim Subservicer and SPS as subservicer, to do or cause to be done any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable and consistent with the terms of this Agreement.  In addition, the Interim Subservicer shall service and administer each Mortgage Loan as subservicer for the Servicer until the Servicing Transfer Date for such Mortgage Loan in accordance with this Agreement (including the Delegated Authority Guidelines) and Customary Servicing Procedures and the terms of the Mortgage Notes and Mortgages, shall perform all of the duties, obligations and covenants of the Servicer under this Agreement and shall have full power and authority, acting alone or through subservicers or agents, to do or cause to be done any and all things in connection with such servicing and administration which the Interim Subservicer may deem necessary or desirable and consistent with the terms of this Agreement.  The Servicer may arrange for the subservicing of any Mortgage Loan it services by a subservicer pursuant to a subservicing agreement or this Agreement; provided, however, that such subservicing arrangement and the terms of the related subservicing agreement must provide for the servicing of such Mortgage Loan in a manner consistent with the servicing arrangements contemplated hereunder.  Notwithstanding the provisions of any subservicing agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a subservicer or reference to actions taken through a subservicer or otherwise, the Servicer shall remain obligated and liable to the Depositor, the Trustee, the Custodian, the Master Servicer, the 

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Securities Administrator and the Certificateholders for the servicing and administration of the Mortgage Loans in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue of such subservicing agreements or arrangements or by virtue of indemnification from the subservicer and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Mortgage Loans.  All actions of each subservicer, including the Interim Subservicer and SPS as subservicer,  shall be performed as agent of the Servicer with the same force and effect as if performed directly by the Servicer.  The Servicer shall pay all fees and expenses of any subservicer, including the Interim Subservicer and SPS as subservicer, from its own funds (provided that any such expenditures that would constitute Servicing Advances if made by the Servicer hereunder shall be reimbursable to the Servicer as Servicing Advances).  The Interim Subservicing Fee shall be paid to the Interim Subservicer out of the Servicing Fee.  For the avoidance of doubt, the Master Servicer shall have no obligation to monitor any subservicer (including the Interim Subservicer and SPS as subservicer).

(c)

At the cost and expense of the Servicer, without any right of reimbursement from the Trust Fund, the Servicer shall be entitled to terminate the rights and responsibilities of a subservicer and arrange for any servicing responsibilities to be performed by a successor subservicer; provided, however, that nothing contained herein shall be deemed to prevent or prohibit the Servicer, at the Servicer’s option, from electing to service the related Mortgage Loans itself.  If the Servicer’s responsibilities and duties under this Agreement are terminated and if requested to do so by the Depositor, the Master Servicer, the Securities Administrator or the Trustee, the Servicer shall at its own cost and expense terminate the rights and responsibilities of the subservicer as soon as is reasonably possible.  The Servicer shall pay all fees, expenses or penalties necessary in order to terminate the rights and responsibilities of the subservicer from the Servicer’s own funds without reimbursement from the Trust Fund.

(d)

The Servicer shall be entitled to enter into an agreement with a subservicer for indemnification of the Servicer by the subservicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification.  Except as expressly set forth herein, no subservicer shall be entitled to any indemnification from the Trust Fund.

(e)

Any subservicing agreement and any other transactions or services relating to the Mortgage Loans involving a subservicer shall be deemed to be between the subservicer and Servicer alone, and, except as set forth herein, the Depositor, the Master Servicer, the Securities Administrator, the Custodian and the Trustee shall have no obligations, duties or liabilities with respect to the subservicer including no obligation, duty or liability of the Depositor, the Master Servicer, the Securities Administrator, the Custodian or the Trustee to pay the subservicer’s fees and expenses.  For purposes of distributions and advances by the Servicer pursuant to this Agreement, the Servicer shall be deemed to have received a payment on a Mortgage Loan when a subservicer, including the Interim Subservicer and SPS as subservicer, has received such payment.  The parties to this Agreement acknowledge that the Interim Subservicer shall subservice each Mortgage Loan on behalf of the Servicer until the related Servicing Transfer Date and thereafter as agreed between SPS and the Servicer, SPS shall subservice certain Mortgage Loans.

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(f)

The Servicer shall be responsible for making all required Servicing Advances (although the Interim Subservicer and SPS shall directly make all required Servicing Advances with respect to the Mortgage Loans subserviced by the Interim Subservicer or SPS, as the case may be, and SPS shall make all required Monthly Advances with respect to the Mortgage Loans subserviced by it on behalf of the Servicer and the Servicer shall be required to make any such required Advance only if the Interim Subservicer or SPS fails to do so) and shall service and administer the Mortgage Loans in accordance with all applicable laws, rules and regulations and shall provide to the Mortgagors any reports required to be provided to them thereby.  Each of the Depositor, the Master Servicer, the Securities Administrator and the Trustee shall furnish to the Servicer any powers of attorney and other documents reasonably necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement; provided, however, that none of the Depositor, the Master Servicer, the Securities Administrator or the Trustee shall be held liable for any misuse of any such power of attorney or other documents by the Servicer.  Notwithstanding anything contained herein to the contrary, the Servicer shall not, without the written consent of the Depositor, the Master Servicer, the Securities Administrator or the Trustee, as applicable:  (x) initiate any action, suit or proceeding solely under the name of the Depositor, the Master Servicer, the Securities Administrator or the Trustee, as applicable, without indicating the Servicer’s representative capacity; or (y) take any action with the intent to cause, and that actually causes, the Depositor, the Master Servicer, the Securities Administrator or the Trustee, as applicable, to be registered to do business in any state.  None of the Depositor, the Master Servicer, the Securities Administrator or the Trustee shall be responsible, and the Servicer (from its own funds and without any right of reimbursement from the Trust) shall indemnify the Depositor, the Master Servicer, the Securities Administrator and the Trustee, as applicable, for any action taken by the Servicer pursuant to the application of any power of attorney; provided that the Servicer shall have no obligation to indemnify the Depositor, the Master Servicer, the Securities Administrator or the Trustee, as applicable, for such action to the extent such action was taken pursuant to and in accordance with specific written instructions from the Depositor, the Master Servicer, the Securities Administrator or the Trustee, as applicable, which instructions are not based on the Servicer’s recommendations or proposals.

(g)

With respect to any Mortgage Loan as to which the Servicer has received notice of, or has actual knowledge of, the presence of any toxic or hazardous substance on the related Mortgaged Property, the Servicer shall not (i) obtain title to such Mortgaged Property as a result of or in lieu of foreclosure or otherwise or (ii) otherwise acquire possession of, or take any other action with respect to, such Mortgaged Property if, as a result of any such action, the Trust Fund would be considered to hold title to, to be a mortgagee-in-possession of, or to be an owner or operator of such Mortgaged Property within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, or any comparable law, unless the Servicer has also previously determined, based on its reasonable judgment and a prudent report prepared by a Person who regularly conducts environmental audits using customary industry standards, that (A) such Mortgaged Property is in compliance with applicable environmental laws or, if not, that it would be in the best economic interest of the Certificateholders to take such actions as are necessary to bring the Mortgaged Property into compliance therewith; and (B) there are no circumstances present at such Mortgaged Property relating to the use, management or disposal of any hazardous substances, hazardous materials, hazardous wastes, or petroleum-based materials for which investigation, testing, monitoring, 

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containment, clean-up or remediation could be required under any federal, state or local law or regulation, or that if any such materials are present for which such action could be required, that it would be in the best economic interest of the Certificateholders to take such actions with respect to the affected Mortgaged Property.  The cost of the environmental audit report contemplated by this Section 3.01(g) shall be advanced by the Servicer, subject to the Servicer’s right to be reimbursed therefor from the Servicer Custodial Account as provided in Section 3.08(a).  If the Servicer determines, as described above, that it is in the best economic interest of the Certificateholders to take such actions as are necessary to bring any such Mortgaged Property into compliance with applicable environmental laws, or to take such action with respect to the containment, clean-up or remediation of hazardous substances, hazardous materials, hazardous wastes, or petroleum-based materials affecting any such Mortgaged Property, then the Servicer shall take such action as it deems to be in the best economic interest of the Certificateholders.  The cost of any such compliance, containment, cleanup or remediation shall be advanced by the Servicer as a Servicing Advance, subject to the Servicer’s right to be reimbursed therefor from the Servicer Custodial Account as provided in Section 3.08(a).

(h)

Notwithstanding anything in this Agreement to the contrary, in the event of a voluntary Principal Prepayment in full of a Mortgage Loan, the Servicer may not waive any Prepayment Charge or portion thereof required by the terms of the related Mortgage Note unless (i)(a) the Servicer determines that such waiver is standard and customary in servicing similar mortgage loans, (b) such waiver relates to a default or a reasonably foreseeable default and (c) such waiver would, in the reasonable judgment of such Servicer, maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into account the value of such Prepayment Charge, (ii) the enforceability thereof is limited (1) by bankruptcy, insolvency, moratorium, receivership, or other similar law relating to creditors’ rights generally or (2) due to acceleration in connection with a foreclosure or other involuntary payment or (iii) such waiver is otherwise permitted by the Delegated Authority Guidelines.  If the Servicer has waived or does not collect all or a portion of a Prepayment Charge relating to a voluntary Principal Prepayment in full due to any action or omission of such Servicer, other than as provided above, the Servicer shall, on the date on which the Principal Prepayment in full is remitted to the Master Servicer, deliver to the Master Servicer the Servicer Prepayment Charge Payment Amount with respect to such Mortgage Loan for distribution in accordance with the terms of this Agreement.

(i)

The Servicer shall undertake to defend any claims against the Trust, the Trustee and/or itself by a Mortgagor or otherwise related to the servicing of any Mortgage Loan and shall represent and protect the interests of the Trust Fund in the same manner as it protects its own interests in mortgage loans in its own portfolio in any claim, proceeding or litigation regarding such mortgage loans.

Section 3.02.

Delinquency and Default.

(a)

Subject to Section 3.01(g), in the event that any Mortgage Loan is in Early Stage Delinquency, Early Stage Default or Advanced Default, the Servicer shall proceed according to the Delegated Authority Guidelines.  If the portion of any Liquidation Proceeds allocable as a recovery of interest on any Mortgage Loan is less than the full amount of accrued and unpaid interest on such Mortgage Loan as of the date such proceeds are received, then the applicable 

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Servicing Fees with respect to such Mortgage Loan shall be paid first and any amounts remaining thereafter shall be deposited into the Servicer Custodial Account.

(b)

Consistent with the terms of this Agreement, the Servicer may pursue loss mitigation activities as set forth in the Delegated Authority Guidelines.  Without limiting the generality of the foregoing and provided such action is in accordance with the Delegated Authority Guidelines, the Servicer in its own name or acting through subservicers or agents is hereby authorized and empowered when the Servicer believes it appropriate and reasonable in its best judgment, to execute and deliver, on behalf of itself and the Trustee, the Depositor, the Master Servicer, the Securities Administrator, the Custodian and the Certificateholders, all instruments of satisfaction or cancellation, or of partial or full release, discharge, sale and all other comparable instruments, with respect to the Mortgage Loans and the Mortgaged Properties and to institute foreclosure proceedings or obtain a deed in lieu of foreclosure so as to convert the ownership of such properties, and to hold or cause to be held title to such properties, on behalf of the Certificateholders pursuant to the provisions of Sections 3.02 and 3.11.

(c)

The Servicer shall deliver to the Custodian on behalf of the Trustee the original documents evidencing an assumption, Servicer Modification, consolidation or extension of any Mortgage Loan entered into in accordance with this Agreement.

(d)

Notwithstanding anything to the contrary herein or under the Delegated Authority Guidelines, no modification, sale, refinancing, foreclosure or similar action shall be permitted in respect of any Mortgage Loan unless such Mortgage Loan is in default or such default is, in the judgment of the Servicer or Interim Subservicer, reasonably foreseeable within the meaning of the REMIC Provisions. 

Section 3.03.

Collection of Mortgage Loan Payments.

Continuously from the date hereof until the principal and interest on all Mortgage Loans are paid in full, the Servicer will proceed diligently, in accordance with this Agreement, to collect all payments due under each of the Mortgage Loans when the same shall become due and payable.

Section 3.04.

Rights of the Depositor, the Securities Administrator and the Trustee in Respect of the Master Servicer.

The Depositor may, but is not obligated to, enforce the obligations of the Master Servicer hereunder and may, but is not obligated to, perform, or cause a designee to perform, any defaulted obligation of the Master Servicer hereunder and in connection with any such defaulted obligation to exercise the related rights of the Master Servicer hereunder; provided that the Master Servicer shall not be relieved of any of its obligations hereunder by virtue of such performance by the Depositor or its designee.  None of the Securities Administrator, the Trustee or the Depositor shall have any responsibility or liability for any action or failure to act by the Master Servicer and none of the Securities Administrator, the Trustee or the Depositor shall be obligated to supervise the performance of the Master Servicer hereunder or otherwise.

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Section 3.05.

[RESERVED].

Section 3.06.

Servicer Custodial Account, Master Servicer Custodial Account, Distribution Account; Exchangeable Certificates Grantor Trust Account; Interim Subservicer Custodial Account and Class P Account.

(a)

The Servicer shall establish and maintain the Servicer Custodial Account which shall be entitled “Servicer Custodial Account, PennyMac Loan Services, LLC, as Servicer under the Pooling and Servicing Agreement, dated July 30, 2009, among Third Street Funding LLC, as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, PennyMac Loan Services, LLC, as Servicer, MorEquity, Inc., as Interim Subservicer, SPS, as Back-up Servicer, U.S. Bank National Association, as Trustee, and The Bank of New York Mellon Trust Company, N.A., as Custodian, in trust for registered Holders of American General Mortgage Loan Trust 2009-1, Mortgage Pass-Through Certificates, Series 2009-1,” which must be an Eligible Account held on behalf of the Trustee for the benefit of the Certificateholders and all references herein to a Servicer Custodial Account shall be deemed to be references to such segregated account.

The Servicer shall deposit or cause to be deposited into the Servicer Custodial Account, within two Business Days of receipt (except as otherwise specifically provided herein), the following payments and collections received by it in respect of the Mortgage Loans subsequent to the Cut-off Date (other than in respect of principal and interest due on the Mortgage Loans on or before the Cut-off Date) and the following amounts required to be deposited hereunder: 

(i)

all payments on account of principal, including Principal Prepayments, on the Mortgage Loans; 

(ii)

all payments on account of interest on the Mortgage Loans, net of the related Servicing Fee; 

(iii)

all Liquidation Proceeds (net of any fees or other compensation specifically permitted herein) and any Subsequent Recoveries;

(iv)

any amount required to be deposited by the Servicer pursuant to this Section 3.06 in connection with any losses on Eligible Investments with respect to the Servicer Custodial Account; 

(v)

any amounts relating to REO Property required to be remitted pursuant to Section 3.11; 

(vi)

Monthly Advances made by or on behalf of the Servicer;

(vii)

all Prepayment Charges collected by the Servicer in connection with the voluntary Principal Prepayment in full of any Mortgage Loan and all Servicer Prepayment Charge Payment Amounts required to be paid by the Servicer pursuant to Section 3.01(h) in connection with any such Principal Prepayment; and

(viii)

any other amounts required to be deposited hereunder.

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If the Servicer shall remit any amount not required to be remitted, it may at any time withdraw such amount from the Servicer Custodial Account, any provision herein to the contrary notwithstanding.  All funds required to be deposited in the Servicer Custodial Account shall be held by the Servicer in trust for the Certificateholders until remitted to the Master Servicer in accordance with this Section 3.06 hereof or withdrawn in accordance with Section 3.08.  

Each institution at which the Servicer Custodial Account is maintained shall invest the funds therein if directed in writing by the Servicer in Eligible Investments, which shall mature not later than the Business Day prior to the next Servicer Remittance Date and shall not be sold or disposed of prior to their maturity.  All such Eligible Investments shall be made in the name of the Trustee, for the benefit of the Certificateholders.  All Servicer Custodial Account Reinvestment Income shall be for the benefit of the Servicer as additional compensation and the amount of any losses realized in the Servicer Custodial Account in respect of any such Eligible Investments shall promptly be deposited by the Servicer from its own funds to the Servicer Custodial Account.

The Servicer shall deliver to the Master Servicer in immediately available funds for deposit in the Master Servicer Custodial Account by 2:00 p.m. New York time on each Servicer Remittance Date, all amounts on deposit in the Servicer Custodial Account with respect to the related Collection Period and Prepayment Period.  Any remittance received from the Servicer after 2:00 p.m. New York time on the Servicer Remittance Date shall be deemed received on the next Business Day.

With respect to any amount required to be delivered by the Servicer to the Master Servicer pursuant to the immediately preceding paragraph that is received by the Master Servicer after the applicable Servicer Remittance Date, unless such late amount is the direct result of the Master Servicer’s failure to timely remit funds to the Servicer Custodial Account from the Interim Subservicer Custodial Account on behalf of the Interim Subservicer, the Servicer shall pay to the Master Servicer interest on any such late amount at an annual rate equal to The Wall Street Journal Prime Rate as of such applicable Servicer Remittance Date (but in no event greater than the maximum amount permitted by applicable law).  Such interest shall be deposited in the Servicer Custodial Account by the Servicer and paid to the Master Servicer on the date that eventual payment of such late amount is made and shall cover the period commencing on the day following the applicable Servicer Remittance Date and ending on the Business Day on which such payment is made, both inclusive.  The payment by the Servicer of any such interest shall not be deemed an extension of time for payment or a waiver of any Servicer Event of Default.

(b)

The Master Servicer shall establish and maintain the Master Servicer Custodial Account, which may be deemed to be a sub-account of the Distribution Account for so long as the Master Servicer and the Securities Administrator are the same Person.  The Master Servicer shall, promptly upon receipt or as otherwise required, deposit in the Master Servicer Custodial Account and retain therein any amounts which are required to be deposited in the Master Servicer Custodial Account by the Master Servicer.

The Master Servicer shall deposit or cause to be deposited into the Master Servicer Custodial Account, on the same Business Day of receipt (except as otherwise specifically provided herein), the following payments and collections remitted by the Servicer, a Seller or 

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American General Finance Corporation or received by the Master Servicer in respect of the Mortgage Loans subsequent to the Cut-off Date (other than in respect of principal and interest due on the Mortgage Loans on or before the Cut-off Date) and the following amounts required to be deposited hereunder:

(i)

all payments on account of principal, including Principal Prepayments, on the Mortgage Loans; 

(ii)

all payments on account of interest on the Mortgage Loans, net of the related Servicing Fee; 

(iii)

all Liquidation Proceeds (net of any fees or other compensation specifically permitted herein) and any Subsequent Recoveries;

(iv)

any amount required to be deposited by the Master Servicer pursuant to this Section 3.06 in connection with any losses on Eligible Investments with respect to the Master Servicer Custodial Account and any amounts received from the Servicer relating to losses on Eligible Investments with respect to the Servicer Custodial Account; 

(v)

any amounts relating to REO Property required to be remitted by the Servicer; 

(vi)

Monthly Advances made by or on behalf of the Servicer and any Compensating Interest paid by the Servicer;

(vii)

all Purchase Prices, Reimbursement Amounts and Substitution Adjustment Amounts paid by a Seller or American General Finance Corporation;

(viii)

all Prepayment Charges collected by the Servicer in connection with the voluntary Principal Prepayment in full of any Mortgage Loan and all Servicer Prepayment Charge Payment Amounts required to be paid by the Servicer in connection with any such Principal Prepayment; and

(ix)

any other amounts required to be deposited hereunder.

If the Master Servicer shall remit any amount not required to be remitted, it may at any time withdraw such amount from the Master Servicer Custodial Account, any provision herein to the contrary notwithstanding.  All funds required to be deposited in the Master Servicer Custodial Account shall be held by the Master Servicer in trust for the Certificateholders until remitted to the Securities Administrator in accordance with this Section 3.06 hereof or withdrawn in accordance with Section 3.08.  

Each institution at which the Master Servicer Custodial Account is maintained shall invest the funds therein as directed in writing by the Master Servicer in Eligible Investments, which shall mature not later than the Business Day prior to the next Distribution Date (except that if such Eligible Investment is an obligation of, or managed or advised by, the institution that maintains such account, then such Eligible Investment shall mature not later than such Distribution Date) and, in each case, shall not be sold or disposed of prior to their maturity.  All 

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such Eligible Investments shall be made in the name of the Trustee, for the benefit of the Certificateholders.  All Master Servicer Custodial Account Reinvestment Income shall be for the benefit of the Master Servicer as part of its master servicing compensation and shall be remitted to the Master Servicer monthly as provided herein.  The amount of any losses realized in the Master Servicer Custodial Account incurred in any such account in respect of any such investments shall promptly be deposited by the Master Servicer from its own funds in the Master Servicer Custodial Account.

(c)

The Securities Administrator will establish and maintain the Distribution Account into which the Master Servicer will deposit on or prior to 11:00 A.M. New York time on each Distribution Date (or, if the Securities Administrator is no longer the same Person as, or an Affiliate of, the Master Servicer, the Business Day preceding each Distribution Date), all amounts on deposit in the Master Servicer Custodial Account for distribution to Certificateholders.  The Securities Administrator shall also deposit in the Distribution Account the Termination Price upon receipt from the Interim Subservicer or the Servicer, as the case may be.  The Securities Administrator hereby designates each of the Lower Tier Distribution Subaccount, the Upper Tier Distribution Subaccount, the Class CE Grantor Trust Subaccount and the Exchangeable Certificates Grantor Trust Subaccount as a sub-account of the Distribution Account.  On each Distribution Date, the Securities Administrator shall (A) from funds available on deposit in the Distribution Account, be deemed to deposit into the Lower Tier Distribution Subaccount, all funds deemed on deposit in the Distribution Account and (B) immediately thereafter, be deemed to deposit into the Upper Tier Distribution Subaccount, the Lower Tier Distribution Amount.  On each Distribution Date, funds on deposit in the Distribution Account and deemed to be on deposit in the Upper Tier Distribution Subaccount shall be used to make payments on the Upper Tier Interests as provided in Sections 4.01 and 4.02.

Each institution at which the Distribution Account is maintained shall invest the funds therein as directed in writing by the Securities Administrator in Eligible Investments, which shall mature not later than the Business Day prior to the next Distribution Date (except that if such Eligible Investment is an obligation of, or managed or advised by, the institution that maintains such account, then such Eligible Investment shall mature not later than such Distribution Date) and, in each case, shall not be sold or disposed of prior to their maturity.  All such Eligible Investments shall be made in the name of the Trustee, for the benefit of the Certificateholders.  All Securities Administrator Distribution Account Reinvestment Income shall be for the benefit of the Securities Administrator as part of its compensation and shall be remitted to the Securities Administrator monthly as provided herein.  The amount of any losses realized in the Distribution Account incurred in any such account in respect of any such investments shall promptly be deposited by the Securities Administrator from its own funds in the Distribution Account.  Funds in the Class CE Grantor Trust Subaccount and the Exchangeable Certificates Grantor Trust Subaccount shall be held uninvested.

(d)

The Servicer shall give notice to the Depositor, the Master Servicer, the Securities Administrator and the Trustee of any proposed change of the location of the Servicer Custodial Account maintained by the Servicer not later than 30 days after and not more than 45 days prior to any change thereof.  The Master Servicer shall give notice to the Depositor, the Servicer, the Securities Administrator and the Trustee of any proposed change of the location of the Master Servicer Custodial Account maintained by the Master Servicer not later than 30 days after and 

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not more than 45 days prior to any change thereof.  The Securities Administrator shall give notice to the Depositor, the Master Servicer, the Servicer and the Trustee of any proposed change of the location of the Distribution Account maintained by the Securities Administrator not later than 30 days after and not more than 45 days prior to any change thereof.  

(e)

On each Distribution Date as to which there is a Cap Carryover Amount payable to the Certificates (other than the Exchangeable, Class CE, Class P and Class R Certificates), the Securities Administrator has been directed by the Holders of the Class CE Certificates to, and therefore will, deposit into the Class CE Grantor Trust Subaccount the amounts described in Section 4.02(a)(i) and (iii), rather than distributing such amounts to the Holders of the Class CE Certificates.  For federal and state income tax purposes, the Holders of the Class CE Certificates will be deemed to be the owners of the Class CE Grantor Trust Subaccount, which will be an asset of the Class CE Grantor Trust as provided in Section 9.04 and all amounts deposited into the Class CE Grantor Trust Subaccount shall be treated as amounts distributed by the Upper Tier REMIC with respect to the Class CE Upper Tier Regular Interest.  Upon a termination of the Trust pursuant to Section 10.01 or the payment in full of the Certificates, all amounts remaining on deposit in the Class CE Grantor Trust Subaccount will be released by the Trust Fund and distributed to the Holders of the Class CE Certificates or their designees.  For federal and state tax return and information reporting purposes, the right of the Holders of the Offered Certificates (other than the Exchangeable Certificates) and the Class B Certificates to receive payments of Cap Carryover Amounts shall be assumed to have a value of zero as of the Closing Date unless and until required otherwise by an applicable taxing authority.  The Class CE Grantor Trust Subaccount will be part of the Trust Fund but not part of any Trust REMIC and any payments to the Holders of the Offered Certificates (other than the Exchangeable Certificates) and Class B Certificates of Cap Carryover Amounts will not be payments with respect to a “regular interest” in a REMIC within the meaning of Code Section 860G(a)(1).  The Class CE Grantor Trust Subaccount is an “outside reserve fund” within the meaning of Treasury regulation § 1.860G-2(h).

By accepting a Class CE Certificate, each Holder of a Class CE Certificate hereby agrees to direct the Securities Administrator, and the Securities Administrator hereby is directed, to deposit into the Class CE Grantor Trust Subaccount the amounts described above on each Distribution Date as to which there is any Cap Carryover Amount rather than distributing such amounts to the Holders of the Class CE Certificates.  By accepting a Class CE Certificate, each Holder of a Class CE Certificate further agrees that such direction is given for good and valuable consideration, the receipt and sufficiency of which is acknowledged by such acceptance.  Amounts held in the Class CE Grantor Trust Subaccount shall be held uninvested.

(f)

The Interim Subservicer shall establish with the Master Servicer the Interim Subservicer Custodial Account which shall be entitled “Interim Subservicer Custodial Account, MorEquity, Inc., as Interim Subservicer under the Pooling and Servicing Agreement, dated July 30, 2009, among Third Street Funding LLC, as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, PennyMac Loan Services, LLC, as Servicer, MorEquity, Inc., as Interim Subservicer, SPS, as Back-up Servicer, U.S. Bank National Association, as Trustee, and The Bank of New York Mellon Trust Company, N.A., as Custodian, in trust for registered Holders of American General Mortgage Loan Trust 2009-1, Mortgage Pass-Through Certificates, Series 2009-1,” which must be an Eligible Account held on behalf of 

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the Trustee for the benefit of the Certificateholders and all references herein to an Interim Subservicer Custodial Account shall be deemed to be references to such segregated account.

The Interim Subservicer shall deposit or cause to be deposited into the Interim Subservicer Custodial Account, within two Business Days of receipt (except as otherwise specifically provided herein), the following payments and collections received by it in respect of the Mortgage Loans subsequent to the Cut-off Date (other than in respect of principal and interest due on the Mortgage Loans on or before the Cut-off Date) and the following amounts required to be deposited hereunder: 

(i)

all payments on account of principal, including Principal Prepayments, on the Mortgage Loans; 

(ii)

all payments on account of interest on the Mortgage Loans (net of the related Interim Subservicing Fee); 

(iii)

all Liquidation Proceeds (net of any fees or other compensation specifically permitted herein) and any Subsequent Recoveries;

(iv)

any amount required to be deposited by the Interim Subservicer pursuant to Section 3.06 in connection with any losses on Eligible Investments with respect to the Interim Subservicer Custodial Account; 

(v)

any amounts relating to REO Property required to be remitted pursuant to Section 3.11; 

(vi)

all Prepayment Charges collected by the Interim Subservicer in connection with the voluntary Principal Prepayment in full of any Mortgage Loan and the amount of any Servicer Prepayment Charge Payment Amount required to be paid by the Servicer as a result of a waiver of a Prepayment Charge by the Interim Subservicer not otherwise permitted by Section 3.01(h); and

(vii)

any other amounts required to be deposited hereunder.

The Interim Subservicer may withdraw from the Interim Subservicer Custodial Account to pay itself (to the extent not previously retained by it), the Interim Subservicing Fee to which the Interim Subservicer is entitled pursuant to this Agreement. If the Interim Subservicer shall remit any amount not required to be remitted, it may at any time withdraw such amount from the Interim Subservicer Custodial Account, any provision herein to the contrary notwithstanding.  All funds required to be deposited in the Interim Subservicer Custodial Account shall be held by the Interim Subservicer in trust for the Certificateholders until remitted to the Servicer in accordance with this Section 3.06 hereof.

Each institution at which the Interim Subservicer Custodial Account is maintained shall invest the funds therein if directed in writing by the Interim Subservicer in Eligible Investments, which shall mature not later than the Business Day prior to the next Servicer Remittance Date and shall not be sold or disposed of prior to their maturity.  All such Eligible Investments shall be made in the name of the Trustee, for the benefit of the Certificateholders.  All income and 

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gains net of any losses from Eligible Investments of funds in the Interim Subservicer Custodial Account shall be for the benefit of the Interim Subservicer as additional compensation and the amount of any losses realized in the Interim Subservicer Custodial Account in respect of any such Eligible Investments shall promptly be deposited by the Interim Subservicer from its own funds to the Interim Subservicer Custodial Account.

The Interim Subservicer hereby instructs the Master Servicer to deliver to the Servicer by 2:00 p.m. New York time on the Business Day prior to each Servicer Remittance Date in immediately available funds all amounts on deposit in the Interim Subservicer Custodial Account that are required to be deposited in the Servicer Custodial Account (less any reimbursed Servicing Advances and the Interim Subservicing Fee for each Mortgage Loan) for deposit to the Servicer Custodial Account.

(g)

The Securities Administrator shall establish and maintain the Class P Account, which must be an Eligible Account held on behalf of the Trustee for the benefit of the Certificateholders.

The Depositor shall deposit or cause to be deposited $100 into the Class P Account on the Closing Date, to be held therein until such amount is distributed by the Securities Administrator to the holders of the Class P Certificates pursuant to Section 4.02(a)(vii).  Such amount shall remain uninvested.

Section 3.07.

Collection of Taxes, Assessments and Similar Items; Escrow Accounts.

(a)

To the extent required by the related Mortgage Note and not violative of current law, the Servicer shall establish and maintain one or more escrow accounts (collectively, the “Escrow Account”) which shall be entitled “Escrow Account, PennyMac Loan Services, LLC, as Servicer under the Pooling and Servicing Agreement, dated July 30, 2009, among Third Street Funding LLC, as Depositor, Wells Fargo Bank, N.A., as Master Servicer and as Securities Administrator, PennyMac Loan Services, LLC, as Servicer, MorEquity, Inc., as Interim Subservicer, SPS, as Back-up Servicer, U.S. Bank National Association, as Trustee, and The Bank of New York Mellon Trust Company, N.A., as Custodian, in trust for registered Holders of American General Mortgage Loan Trust 2009-1, Mortgage Pass-Through Certificates, Series 2009-1,” which must be an Eligible Account held on behalf of the Trustee for the benefit of the Certificateholders and all references herein to an Escrow Account shall be deemed to be references to such segregated account.  Nothing herein shall require the Servicer to establish an Escrow Account in violation of applicable law.  Notwithstanding anything to the contrary hereunder, the Interim Subservicer shall be permitted to use its existing escrow accounts.

(b)

The Servicer shall deposit in the Escrow Account within two Business Days of receipt, and retain therein:  (a) all Escrow Payments collected on account of the Mortgage Loans, for the purpose of effecting timely payment of any such items as required under the terms of this Agreement and (b) all amounts representing proceeds of any Insurance Policy which are to be applied to the restoration or repair of any Mortgaged Property.  The Servicer shall make withdrawals therefrom only in accordance with this Section 3.07.  As part of its servicing duties, the Servicer shall pay to the Mortgagors interest on funds in the Escrow Account, to the extent required by law.

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(c)

With respect to each Mortgage Loan, the Servicer shall maintain accurate records reflecting the status of ground rents, taxes, assessments and other charges which are or may become a lien upon the Mortgaged Property and the status of premiums for Primary Mortgage Insurance Policies, fire and hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such charges (including renewal premiums) and shall effect payment thereof prior to the applicable penalty or termination date and at a time appropriate for securing maximum discounts allowable, employing for such purpose deposits of the Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms of the Mortgage.  To the extent that a Mortgage does not provide for Escrow Payments, the Servicer shall determine that any such payments are made by the Mortgagor.  The Servicer assumes full responsibility for the timely payment of all such bills and shall effect timely payments of all such bills irrespective of each Mortgagor’s faithful performance in the payment of same or the making of the Escrow Payments and shall make Servicing Advances to effect such payments, subject to its ability to recover such Servicing Advances pursuant to Sections 3.07, 3.08(a)(ii) and 3.08(a)(iii).

(d)

Withdrawals from the Escrow Account shall be made by the Servicer only (a) to effect timely payments of ground rents, taxes, assessments, premiums for Primary Mortgage Insurance Policies, fire and hazard insurance premiums or other items constituting Escrow Payments for the related Mortgage, (b) to reimburse the Servicer for any Servicing Advance made by Servicer pursuant to Section 3.01 hereof with respect to a related Mortgage Loan, (c) to refund to any Mortgagor any funds found to be in excess of the amounts required under the terms of the related Mortgage Loan, (d) for transfer to the Servicer Custodial Account upon default of a Mortgagor or in accordance with the terms of the related Mortgage Loan and if permitted by applicable law, (e) for application to restore or repair of the Mortgaged Property, (f) to pay to the Mortgagor, to the extent required by law, any interest paid on the funds deposited in the Escrow Account, (g) to pay to itself any interest earned on funds deposited in the Escrow Account (and not required to be paid to the Mortgagor), (h) to the extent permitted under the terms of the related Mortgage Note and applicable law, to pay late fees with respect to any Monthly Payment which is received after the applicable grace period, (i) to withdraw suspense payments that are deposited into the Escrow Account, (j) to withdraw any amounts inadvertently deposited in the Escrow Account or (k) to clear and terminate the Escrow Account upon the termination of this Agreement.

Section 3.08.

Permitted Withdrawals from the Servicer Custodial Account, the Master Servicer Custodial Account and the Distribution Account.

(a)

The Servicer may from time to time make withdrawals from the Servicer Custodial Account for the following purposes: 

(i)

to pay to the Servicer (to the extent not previously retained by it), the Servicing Fee to which the Servicer is entitled pursuant to this Agreement and to pay itself any Servicer Custodial Account Reinvestment Income; 

(ii)

to reimburse itself or any subservicer for any unreimbursed Servicing Advances or Monthly Advances, the Servicer’s right to reimburse itself or any subservicer pursuant to this clause (ii) with respect to any Mortgage Loan being limited 

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to related Liquidation Proceeds and such other amounts as may be collected by the Servicer from the Mortgagor or otherwise relating to the Mortgage Loan (unless the Mortgage Loan was subject to a Servicer Modification during the related Prepayment Period, in which case the Servicer may reimburse itself or any subservicer for all unreimbursed Servicing Advances and Monthly Advances with respect to such Mortgage Loan from funds on deposit in the Servicer Custodial Account);

(iii)

to reimburse itself or any subservicer for Nonrecoverable Advances (as certified by the Servicer to the Depositor, the Master Servicer and the Securities Administrator in an Officer’s Certificate); 

(iv)

to pay to the purchaser, with respect to each Mortgage Loan or REO Property that has been purchased pursuant to Sections 2.01 and 2.03, all amounts received thereon after the date of such purchase; 

(v)

to reimburse itself for losses, liabilities and expenses incurred by it and reimbursable pursuant to this Agreement, including but not limited to, Section 3.18; 

(vi)

to withdraw any amount deposited in the Servicer Custodial Account and not required to be deposited therein; and 

(vii)

to clear and terminate the Servicer Custodial Account upon termination of the Agreement pursuant to Section 10.01.

Upon request, the Servicer will provide the Depositor, the Master Servicer and the Securities Administrator with copies of invoices or other documentation relating to Servicing Advances that have been reimbursed from the Servicer Custodial Account.

(b)

The Master Servicer may from time to time make withdrawals from the Master Servicer Custodial Account for the following purposes:

(i)

to pay to the Servicer (to the extent not previously retained by it), the Servicing Fee to which it is entitled pursuant to this Agreement and to pay itself any Master Servicer Custodial Account Reinvestment Income; 

(ii)

to pay the Securities Administrator, the Trustee and the Custodian any amounts due to the Securities Administrator, the Trustee and the Custodian under this Agreement (including, without limitation, all amounts provided for under Sections 3.01(a), 3.18(b) and 8.05;

(iii)

to reimburse the Servicer for any unreimbursed Servicing Advances or Monthly Advances, such right to reimbursement pursuant to this clause (iii) with respect to any Mortgage Loan being limited to related Liquidation Proceeds and such other amounts as may be collected from the Mortgagor or otherwise relating to the Mortgage Loan (unless the Mortgage Loan was subject to a Servicer Modification during the related Prepayment Period, in which case the Master Servicer may reimburse the Servicer for all unreimbursed Servicing Advances and Monthly Advances with respect to such Mortgage Loan from funds on deposit in the Master Servicer Custodial Account);

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(iv)

to reimburse the Servicer for Nonrecoverable Advances (as certified by the Servicer to the Depositor, the Master Servicer and the Securities Administrator in an Officer’s Certificate); 

(v)

to pay to the purchaser, with respect to each Mortgage Loan or REO Property that has been purchased pursuant to Sections 2.01 and 2.03, all amounts received thereon after the date of such purchase; 

(vi)

to reimburse itself and the Depositor for losses, liabilities and expenses incurred by any of them and reimbursable pursuant to this Agreement, including but not limited to, Section 3.18; 

(vii)

to withdraw any amount deposited in the Master Servicer Custodial Account and not required to be deposited therein; and 

(viii)

to clear and terminate the Master Servicer Custodial Account upon termination of the Agreement pursuant to Section 10.01.

(c)

The Securities Administrator shall withdraw funds from the Distribution Account for distributions to Certificateholders in the manner specified in this Agreement.  

Section 3.09.

Maintenance of Hazard Insurance.

The Servicer shall cause to be maintained for each Mortgage Loan fire and hazard insurance with extended coverage customary in the area where the Mortgaged Property is located by an insurer generally acceptable to prudent mortgage lending institutions in an amount which is at least equal to the lesser of (a) the full insurable value of the Mortgaged Property or (b) the greater of (i) the Stated Principal Balance owing on the Mortgage Loan (or, in the case of an REO Property, the fair market value of such REO Property) and (ii) an amount such that the proceeds of such insurance shall be sufficient to avoid the application to the Mortgagor or loss payee of any coinsurance clause under the policy.  If required by the National Flood Insurance Act of 1968 or the Flood Disaster Prevention Act of 1973, as amended, the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the Federal Insurance Administration, in an amount representing coverage not less than the least of (A) the replacement value of the improvements that are part of the Mortgaged Property, (B) the Stated Principal Balance of the Mortgage Loan or (C) the maximum amount of insurance available under the National Flood Insurance Act of 1968 or the Flood Disaster Prevention Act of 1973, as amended. Any amounts collected by the Servicer under any such policies (other than amounts to be deposited in the Escrow Account and applied to the restoration or repair of the property subject to the related Mortgage or property acquired in liquidation of the Mortgage Loan, or to be released to the Mortgagor in accordance with Customary Servicing Procedures) shall be deposited in the Servicer Custodial Account, subject to withdrawal pursuant to Section 3.08.  It is understood and agreed that no earthquake or other additional insurance need be required by the Servicer of any Mortgagor or maintained on REO Property other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance.  Any cost incurred by the Servicer in maintaining any such insurance if the Mortgagor defaults in its obligation to do so shall be added to the amount owing under the 

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Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however, that the addition of any such cost shall not be taken into account for purposes of calculating the distributions to be made to Certificateholders and shall be recoverable by the Servicer pursuant to Section 3.08.  All policies required hereunder shall be endorsed with standard mortgagee clauses with loss payable to Servicer, and shall provide for at least thirty (30) days prior written notice of any cancellation, reduction in amount or material change in coverage to the Servicer.  The Servicer shall not interfere with the Mortgagor’s freedom of choice in selecting either its insurance carrier or agent; provided, however, that the Servicer shall not accept any such insurance policies from insurance companies unless such companies are licensed to do business in the state wherein the property subject to the policy is located.  

The Servicer shall be permitted to maintain a blanket insurance policy in sufficient amounts to cover any uninsured loss due to any gap in Mortgagor provided coverage.  In the event that the Servicer shall obtain and maintain a blanket policy insuring against losses arising from flood, fire and hazards covered under extended coverage on all of the Mortgage Loans, then, to the extent such policy provides coverage in an amount equal to the amount required pursuant to the immediately preceding paragraph and otherwise complies with all other requirements of the immediately preceding paragraph, it shall conclusively be deemed to have satisfied its obligations as set forth in this Section 3.09.  Any amounts collected by the Servicer under any such policy relating to a Mortgage Loan shall be deposited in the Servicer Custodial Account subject to withdrawal pursuant to Section 3.08.  Such policy may contain a deductible clause, in which case, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with the immediately preceding paragraph, and there shall have been a loss which would have been covered by such policy, the Servicer shall deposit in the Servicer Custodial Account at the time of such loss the amount not otherwise payable under the blanket policy because of such deductible clause, such amount to be deposited from the Servicer’s funds, without reimbursement therefor (and such amount shall be deemed to be Insurance Proceeds).

Section 3.10.

Fidelity Bond; Errors and Omissions Insurance.

(a)

The Servicer shall maintain, at its own expense, a blanket fidelity bond and errors and omissions insurance, either in the form of a policy with an insurer or as part of a self-insurance program with its subsidiaries and Affiliates, with broad coverage on all officers, employees or other persons acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Mortgage Loans.  The Servicer shall furnish to the Master Servicer, upon request, copies of any fidelity bond or errors and omissions insurance.  These policies or program must insure the Servicer against losses resulting from fraud, theft, errors, omissions, negligence, dishonest or fraudulent acts committed by the Servicer’s personnel, any employees of outside firms that provide data processing services for the Servicer, and temporary contract employees or student interns.  The fidelity bond shall also protect and insure the Servicer against losses in connection with the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby.  No provision of this Section 3.10 requiring such fidelity bond and errors and omissions insurance shall diminish or relieve the Servicer from its duties and obligations as set forth in this Agreement.  

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(b)

The Master Servicer shall maintain, at its own expense, a blanket fidelity bond and errors and omissions insurance, either in the form of a policy with an insurer or as part of a self-insurance program with its subsidiaries and Affiliates, with broad coverage on all officers, employees or other persons acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Mortgage Loans.  These policies or program must insure the Master Servicer against losses resulting from fraud, theft, errors, omissions, negligence, dishonest or fraudulent acts committed by the Master Servicer’s personnel, any employees of outside firms that provide data processing services for the Master Servicer, and temporary contract employees or student interns.  No provision of this Section 3.10 requiring such fidelity bond and errors and omissions insurance shall diminish or relieve the Master Servicer from its duties and obligations as set forth in this Agreement.  

Section 3.11.

REO Property.

(a)

With respect to any REO Property, the deed or certificate of sale shall be taken in the name of the Trust for the benefit of the Certificateholders, or its nominee, on behalf of the Certificateholders.  The Servicer shall (i) cause the Trust to be placed on the title to such REO Property and (ii) ensure that the title to such REO Property references this Agreement.  The Servicer shall sell any REO Property as expeditiously as possible and in accordance with Customary Servicing Procedures.  Pursuant to its efforts to sell such REO Property, the Servicer shall protect and conserve such REO Property in the manner and to the extent required by this Agreement, subject to the REMIC Provisions.

(b)

The Servicer shall deposit all REO Proceeds in the Servicer Custodial Account.  With respect to each REO Property, the Servicer shall account separately for each REO Property with respect to all funds collected and received in connection with the operation of such REO Property.

(c)

The Servicer, upon the final disposition of any REO Property, shall be entitled to reimbursement for any related unreimbursed Monthly Advances and Servicing Advances as well as any unpaid Servicing Fees from Liquidation Proceeds received in connection with the final disposition of such REO Property; provided that any such unreimbursed Monthly Advances or Servicing Advances as well as any unpaid Servicing Fees may be reimbursed or paid, as the case may be, prior to final disposition, out of any REO Proceeds.

(d)

The Net Liquidation Proceeds from the final disposition of the REO Property  shall be deposited in the Servicer Custodial Account within two Business Days of receipt.  Any disposition of REO Property shall be for cash only (unless changes in the REMIC Provisions made subsequent to the Startup Day allow a sale for other consideration and an Opinion of Counsel is obtained by the Servicer to the effect that such sale shall not result in an Adverse REMIC Event).

(e)

In the event that the Trust Fund acquires any REO Property as aforesaid or otherwise in connection with a default or imminent default on a Mortgage Loan, the Servicer shall dispose of such REO Property before the end of the third taxable year beginning after the year of its acquisition by the Trust Fund for purposes of Section 860G(a)(8) of the Code (or the end of such other period as may be identified in the REMIC Provisions as the maximum time 

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during which such REO Property continues to constitute “foreclosure property” under the REMIC Provisions) unless the Servicer shall have applied for and received an extension of such period from the Internal Revenue Service, in which case the Trust Fund may continue to hold such REO Property for the period of such extension.  Notwithstanding any other provision of this Agreement, no REO Property acquired by the Trust shall be rented (or allowed to continue to be rented) or otherwise used for the production of income by or on behalf of the Trust in such a manner or pursuant to any terms that would (i) cause such REO Property to fail to qualify as “foreclosure property” within the meaning of Section 860G(a)(8) of the Code or (ii) subject any Trust REMIC to the imposition of any federal, state or local income taxes on the income earned from such Mortgaged Property under Section 860G(c) of the Code or otherwise, unless the Servicer has agreed to indemnify and hold harmless the Trust with respect to the imposition of any such taxes.

Section 3.12.

Due-on-Sale Clauses; Assumption and Substitution Agreements.

The Servicer shall use its best efforts to enforce any “due-on-sale” provision contained in any Mortgage or Mortgage Note; provided that the Servicer shall permit an assumption if so required in accordance with the terms of the Mortgage or the Mortgage Note.  When the Mortgaged Property has been conveyed by the Mortgagor, the Servicer will, to the extent it has knowledge of such conveyance, exercise its rights to accelerate the maturity of such Mortgage Loan under the “due-on-sale” clause applicable thereto; provided, however, the Servicer will not exercise such rights if prohibited by law from doing so or if the exercise of such rights would impair or threaten to impair any recovery under the related Primary Mortgage Insurance Policy, if any.  In connection with any assumption, the outstanding principal amount, the Monthly Payment and the Mortgage Interest Rate of the related Mortgage Note shall not be changed, and the term of the Mortgage Loan will not be increased or decreased.  If an assumption is allowed pursuant to this Section 3.12, the Servicer with the prior consent of the issuer of the Primary Mortgage Insurance Policy, if any, is authorized to enter into a substitution of liability agreement with the purchaser of the Mortgaged Property pursuant to which the original Mortgagor is released from liability and the purchaser of the Mortgaged Property is substituted as Mortgagor and becomes liable under the Mortgage Note.

Section 3.13.

Custodian to Cooperate; Release of Files.

(a)

Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the Servicer will immediately notify the Custodian by delivering, or causing to be delivered, two copies (one of which will be returned to the Servicer with the Mortgage File) of a Request for Release substantially in the form of Exhibit E hereto or in electronic format acceptable to the Custodian and the Servicer.  Upon receipt of such request, the Custodian shall within three Business Days release the related Mortgage File to the Servicer.  The Trustee shall at the Servicer’s written direction execute and deliver to the Servicer the request for reconveyance, deed of reconveyance or release or satisfaction of mortgage or such instrument releasing the lien of the Mortgage, in each case provided by the Servicer, together with the Mortgage Note with written evidence of cancellation thereon.  If the Mortgage has been recorded in the name of MERS or its designee, the Servicer shall take all necessary action to reflect the release of the 

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Mortgage on the records of MERS.  Expenses incurred in connection with any instrument of satisfaction or deed of reconveyance shall be chargeable to the related Mortgagor.

(b)

From time to time and as shall be appropriate for the master servicing, servicing or foreclosure of any Mortgage Loan, including for such purpose collection under any policy of flood insurance, any fidelity bond or errors or omissions policy, or for the purposes of effecting a partial release of any Mortgaged Property from the lien of the Mortgage or the making of any corrections to the Mortgage Note or the Mortgage or any of the other documents included in the Mortgage File, the Custodian shall, upon delivery to it of a Request for Release substantially in the form of Exhibit E hereto signed by a Servicing Officer or a Master Servicing Officer, release the Mortgage File within three Business Days to the Servicer or Master Servicer, as applicable.  Subject to the further limitations set forth below, the Servicer or Master Servicer, as applicable, shall cause the Mortgage Files so released to be returned to the place where the related Mortgage File was being maintained when the need therefor no longer exists, unless the Mortgage Loan is liquidated and the proceeds thereof are deposited in the Servicer Custodial Account, in which case the Servicer shall deliver to the Custodian a Request for Release substantially in the form of Exhibit E hereto, signed by a Servicing Officer.

(c)

If the Servicer at any time seeks to initiate a foreclosure proceeding in respect of any Mortgaged Property as authorized by this Agreement, the Servicer shall deliver or cause to be delivered to the Trustee, and shall direct the Trustee to execute and deliver for signature, as appropriate, any court pleadings, requests for trustee’s sale or other documents necessary to effectuate such foreclosure or any legal action brought to obtain judgment against the Mortgagor on the Mortgage Note or the Mortgage or to obtain a deficiency judgment or to enforce any other remedies or rights provided by the Mortgage Note or the Mortgage or otherwise available at law or in equity.

(d)

The Servicer may provide an electronic transmission for release of documents in an electronic format mutually agreed upon by the Servicer and the Custodian (a “Paperless Release Request”).  The Servicer agrees to maintain and control access to electronic signature information and assumes liability for any unauthorized use thereof.  The Servicer also agrees to maintain accurate records of electronic transactions related to the Mortgage Files.  The Servicer hereby authorizes Custodian to automatically append the electronic signature of a Servicing Officer to the applicable Paperless Release Request.  The parties hereto agree and acknowledge that the Custodian may rely on any Paperless Release Request.  For purposes of this Agreement the term “electronic signature” is defined as an electronic identifier having the same force and effect as the use of a manual signature by the person designated thereby.

(e)

The Custodian reserves the right to restrict or suspend the Servicer’s access to the Custodian’s computer systems for maintenance or repairs or for any other reason in Custodian’s sole discretion; provided, however, that Custodian shall provide the Servicer reasonable advance notice of such restriction or suspension.

Notwithstanding the foregoing, the Servicer and the Master Servicer are authorized to transmit and the Custodian is authorized to accept signed facsimile or email copies of Requests for Release.

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Section 3.14.

Master Servicing and Servicing Compensation.

(a)

As compensation for its services hereunder, the Master Servicer shall be entitled to compensation in the form of the Master Servicer Custodial Account Reinvestment Income.  The Master Servicer shall be required to pay all expenses incurred by it in connection with its master servicing activities hereunder and shall not be entitled to reimbursement therefor except as specifically provided in this Agreement.

(b)

As compensation for its services hereunder, the Servicer shall be entitled to retain the Servicing Fee from interest payments actually collected with respect to each Mortgage Loan.  Additional servicing compensation in the form of assumption fees, late payment charges, incentive payments payable to the Servicer as provided in the U.S. Treasury’s Home Affordable Modification Program (or other similar mortgage loan modification programs), fees in connection with the successful sale of Bulk Loans (from related Liquidation Proceeds) and other ancillary income shall be retained by the Servicer to the extent not required to be deposited in the Servicer Custodial Account.  The Servicer shall also be entitled to any Servicer Custodial Account Reinvestment Income.  The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor except as specifically provided for herein.

(c)

The Interim Subservicer shall be entitled to: (i) the Interim Subservicing Fee; (ii) all income and gains net of any losses from Eligible Investments of funds in the Interim Subservicer Custodial Account; and (iii) all such additional servicing compensation earned before the related Servicing Transfer Date for a Mortgage Loan to which the Servicer is otherwise entitled pursuant to the preceding paragraph.  The Interim Subservicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor except as specifically provided for herein.

(d)

The Back-up Servicer shall be entitled, for so long as it is acting as Back-up Servicer hererunder, to receive a back-up servicing fee equal to 4.5% of the Servicing Fee that would be payable to the Servicer if the Servicer directly serviced each Mortgage Loan with respect to each Collection Period.  Such fee shall be paid by the Servicer to SPS in immediately available funds to an account to be designated by the Back-up Servicer on the Business Day after the Servicer Remittance Date in the following calendar month.

Section 3.15.

Annual Statement as to Compliance.

On or prior to March 30th of each year, beginning in calendar year 2010, each of the Servicer and the Master Servicer shall deliver to the Master Servicer (in the case of the Servicer) and the Depositor a statement to the effect that (i) an authorized officer of the Servicer or the Master Servicer, as applicable, has reviewed (or a review has been made under its supervision of) such party’s activities under this Agreement during the prior calendar year (or applicable portion thereof) and (ii) to the best of such officers’ knowledge, based on such review, the Servicer or the Master Servicer, as applicable, has fulfilled all of its obligations under this Agreement in all material respects throughout the period covered by the prior calendar year (or applicable portion thereof) or, if there has been a failure to fulfill any such obligation in any respect, a statement of such failure known to such officer and the nature and the status thereof.

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Section 3.16.

Annual Independent Certified Public Accountants’ Reports.

On or prior to March 30th of each year, beginning in calendar year 2010, the Servicer, at its expense, shall cause a firm of independent public accountants which is a member of the American Institute of Certified Public Accountants to furnish a statement to the Master Servicer and the Depositor to the effect that such firm has, with respect to the Servicer’s overall servicing operations, examined such operations in accordance with the requirements of either the Uniform Single Attestation Program for Mortgage Bankers or the Securities and Exchange Commission’s Regulation AB, stating such firm’s conclusions relating thereto.

Section 3.17.

Access to Certain Documentation and Information Regarding the Mortgage Loans; Access to Servicing Systems and Data.

The Master Servicer and the Servicer shall provide to regulatory authorities supervising Holders of Certificates and the examiners and supervisory agents of such regulators, access to the documentation required by applicable regulations of such regulators with respect to the Mortgage Loans.  In addition, as necessary for the Interim Subservicer’s accounting and reporting requirements, the Servicer shall (i) provide the Interim Subservicer with access to the Servicer’s servicing systems and servicing data and (ii) cooperate with the Interim Subservicer should the Interim Subservicer need to validate such data.  Such access shall be afforded without charge, but only upon reasonable and prior written request and during normal business hours at the offices designated by the Master Servicer or the Servicer, as applicable.  Nothing in this Section 3.17 shall limit the obligation of the Master Servicer or the Servicer to observe any applicable law and the failure of the Master Servicer or the Servicer to provide access as provided in this Section 3.17 as a result of such obligation shall not constitute a breach of this Section 3.17.

In addition, each of the Master Servicer and the Servicer shall furnish upon request by the Trustee or the Master Servicer, during the term of this Agreement, such periodic, special or other reports or information, whether or not provided for herein, as shall be necessary, reasonable and appropriate with respect to the purposes of this Agreement and applicable regulations.  All such reports or information shall be provided by and in accordance with all reasonable instructions and directions the requesting party may require.  Each of the Master Servicer and the Servicer agrees to execute and deliver all such instruments and take all such action as the Trustee from time to time, may reasonably request in order to effectuate the purposes and to carry out the terms of this Agreement.

Section 3.18.

Liability of Parties; Indemnification.

(a)

Subject to clause (b) below, the Servicer indemnifies and holds the Trustee, the Depositor, the Securities Administrator, the Master Servicer, the Interim Subservicer, the Back-up Servicer, the Custodian and the Trust Fund harmless against any and all third party claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other costs, fees and expenses that the Trustee, the Depositor, the Securities Administrator, the Master Servicer, the Interim Subservicer, the Back-up Servicer, the Custodian and the Trust Fund may sustain in any way related to the failure of the Servicer to perform its duties in compliance with this Agreement.  In addition, the Servicer indemnifies and holds the Interim 

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Subservicer and its Affiliates harmless against any and all third party claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments and any other costs, fees and expenses that the Interim Subservicer and its Affiliates may sustain as a result of the failure of the Interim Subservicer and its Affiliates to properly account for the Mortgage Loans in accordance with on-balance sheet accounting treatment under accounting principles generally accepted in the United States where such failure was directly due to the material failure of the Servicer to comply with its reporting obligations specified in Section 4.08 hereof.  The Servicer shall immediately notify the Trustee, the Depositor, the Securities Administrator, the Master Servicer, the Interim Subservicer, the Back-up Servicer and the Custodian if a claim is made that may result in such claims, losses, penalties, fines, forfeitures, legal fees or related costs, judgments, or any other costs, fees and expenses, and the Servicer shall assume (with the consent of the Trustee, the Depositor, the Securities Administrator, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Custodian, as applicable) the defense of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the Servicer, Trustee, the Depositor, the Securities Administrator, the Master Servicer, the Interim Subservicer, the Back-up Servicer, the Custodian and/or the Trust Fund in respect of such claim.  The Interim Subservicer indemnifies and holds the Servicer harmless against any amounts that the Servicer may be required to pay pursuant to Section 3.01(f) or this Section 3.18 to the extent such amounts relate to the failure of the Interim Subservicer to perform its duties in compliance with this Agreement.  The provisions of this Section 3.18 shall survive the termination of this Agreement and the payment of the outstanding Certificates.  

(b)

None of the parties to this Agreement or any of the directors, officers, employees or agents of such parties shall be under any liability to the Trust Fund or the Certificateholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect any such Person against any breach of warranties or representations made by such party herein, or against any specific liability imposed on such party for a breach of its duties in compliance with this Agreement, or against any liability which would otherwise be imposed by reason of its respective willful misfeasance, bad faith, fraud or negligence in the performance of its duties hereunder or by reasons of reckless disregard of its respective obligations or duties hereunder.

Each of the parties to this Agreement and any director, officer, employee or agent of each such party, may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any appropriate Person with respect to any matters arising hereunder.  Each of the parties to this Agreement and any director, officer, employee or agent of each such party shall be indemnified and held harmless by the Trust Fund against any loss, claim, liability, damage, cost or expense incurred in connection with any legal action relating to this Agreement or the Certificates, other than any loss, claim, liability, damage, cost or expense incurred in connection with any legal action incurred by reason of its respective willful misfeasance, bad faith, fraud or negligence or a breach of a representation or warranty made by such party hereunder.  In addition, each of the parties hereto and any director, officer, employee or agent of such parties will be indemnified by the Trust Fund and will be held harmless against any loss, claim, liability, damage, cost or expense (including without limitation, any legal fees and expenses and any extraordinary or unanticipated expense, but not including expenses, disbursements and advances incurred or made by such party in the ordinary course of such 

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party’s performance in accordance with the provisions hereof) such party incurs arising out of or in connection with the acceptance or administration of its rights, powers, obligations and duties hereunder, other than any loss, liability or expense (i) that constitutes a specific liability of such party hereunder or (ii) incurred by reason of willful misfeasance, bad faith or negligence in the performance of such party’s duties hereunder or by reason of reckless disregard of such party’s obligations and duties hereunder.  None of the Depositor, the Master Servicer, the Servicer, the Securities Administrator, the Custodian or the Interim Subservicer shall be under any obligation to appear in, prosecute or defend any legal action unless such action is related to its respective duties under this Agreement and in its opinion does not expose it to any expense or liability; provided, however, that the Depositor, the Master Servicer, the Servicer, the Securities Administrator, the Custodian or the Interim Subservicer may in their discretion undertake any action related to their obligations hereunder which they may deem necessary or desirable with respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder.  In such event, the legal expenses and costs of such action and any liability resulting therefrom (except any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of duties hereunder or by reason of reckless disregard of obligations and duties hereunder) shall be expenses, costs and liabilities of the Trust, and such party shall be entitled to be reimbursed therefrom.  Each party’s right to indemnity or reimbursement pursuant to this Section shall survive any resignation or termination of such party pursuant to this Agreement with respect to any losses, expenses, costs or liabilities arising prior to such resignation or termination (or arising from events that occurred prior to such resignation or termination).

Section 3.19.

Monthly Advances.

(a)

On the Business Day immediately preceding each Servicer Remittance Date, the Servicer (and not the Interim Subservicer) shall deposit in the Servicer Custodial Account an amount equal to the aggregate amount of all Monthly Payments which were due on the Mortgage Loans during the applicable Collection Period but not received by the Servicer on or before the related Determination Date (each such advance, a “Monthly Advance”).  A Monthly Advance for a Mortgage Loan subject to the Simple Interest Method shall be deemed to be made on the Due Date for such Mortgage Loan for purposes of determining the allocation of principal and interest thereon.  The Servicer shall pay such Monthly Advance from either (i) its own funds, (ii) from the Servicer Custodial Account, to the extent of funds held therein for future distribution (in which case it will cause to be made an appropriate entry in the records of the Servicer Custodial Account that amounts held for future distribution have been, as permitted by this Section 3.19, used by the Servicer in discharge of any such Monthly Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the total amount of Monthly Advances to be made by the Servicer with respect to the Mortgage Loans.  Any such funds held for future distribution and so used shall be appropriately reflected in the Servicer’s records and replaced by the Servicer by deposit in the Servicer Custodial Account on or before any future Servicer Remittance Date to the extent that the Available Funds for the related Distribution Date (determined without regard to Monthly Advances to be made on the Servicer Remittance Date) shall be less than the total amount that would be distributed to the Certificateholders pursuant to Section 4.01 and Section 4.02 on such Distribution Date if such funds held for future distributions had not been so used to make Monthly Advances.  The Master Servicer will provide notice to the Servicer by telecopy by the close of business on any Servicer Remittance Date in the event that the amount remitted by 

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the Servicer to the Master Servicer on such date is less than the Monthly Advances required to be made by the Servicer for the related Servicer Remittance Date, as set forth in the related Remittance Report.

(b)

The obligation of the Servicer (and not the Interim Subservicer) to make such Monthly Advances is mandatory, notwithstanding any other provision of this Agreement but subject to (c) below, and, with respect to any Mortgage Loan, shall continue until such Mortgage Loan is paid in full by the Mortgagor or disposed of by the Trust Fund.

(c)

Notwithstanding anything herein to the contrary, (i) the Servicer shall not be required to make any Monthly Advance with respect to any Collection Period following the Collection Period that relates to the Distribution Date on which the Certificate Principal Balance of the Class B-2 Certificates is reduced to zero and (ii) no Monthly Advance shall be required to be made hereunder by the Servicer if such Monthly Advance would, if made, constitute a Nonrecoverable Advance.  The determination by a Servicer that it has made a Nonrecoverable Advance or that any proposed Monthly Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officer’s Certificate of the Servicer delivered to the Depositor, the Securities Administrator and the Master Servicer.  The Master Servicer shall be entitled to conclusively rely upon any such determination by the Servicer.

(d)

The Servicer is hereby authorized to enter into a financing or other facility (any such arrangement, an “Advance Facility”), under which (i) the Servicer assigns or pledges its rights under this Agreement to be reimbursed for any or all Monthly Advances and/or Servicing Advances made by the Servicer pursuant to this Agreement to another Person, which may include a trustee acting on behalf of holders of debt instruments (any such Person, an “Advance Financing Person”), and/or (2) an Advance Financing Person agrees to fund some or all Monthly Advances and/or Servicing Advances required to be made by the Servicer pursuant to this Agreement.  No consent of the Trustee, Master Servicer, Depositor, Certificateholders or any other party is required before the Servicer may enter into an Advance Facility.  There shall only exist one Advance Facility at any one time.  Notwithstanding the existence of any Advance Facility under which an Advance Financing Person agrees to fund Monthly Advances and/or Servicing Advances on the Servicer’s behalf, the Servicer shall remain obligated pursuant to this Agreement to make Monthly Advances and Servicing Advances pursuant to and as required by this Agreement, and shall not be relieved of such obligations by virtue of such Advance Facility.  If the Servicer enters into an Advance Facility, and for so long as an Advance Financing Person remains entitled to receive reimbursement for any Monthly Advances and/or Servicing Advances outstanding and previously unreimbursed pursuant to this Agreement, then the Servicer shall remit or cause to be remitted directly to the Advance Financing Person’s designee (which may be the Advance Financing Person; in either case, the “Financing Person’s Designee”) amounts withdrawn by the Servicer from the Servicer Custodial Account or Escrow Account, in either case to reimburse itself for previously unreimbursed Monthly Advances and/or Servicing Advances (“Advance Reimbursement Amounts”).  No rights of set-off by the Trustee or otherwise shall attach to any rights to be reimbursed for Monthly Advances or Servicing Advances that have been assigned or pledged to the Advance Financing Person.

To the extent that a successor Servicer (including SPS, as Back-up Servicer) assumes the servicing obligations under this Agreement, until such time as the successor Servicer receives a 

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Notice of Facility Termination (as defined below), the successor Servicer shall, with respect to all Advance Reimbursement Amounts it otherwise would be entitled to withdraw and as promptly as practicable, cause to be remitted, directly from the Escrow Account and the Servicer Custodial Account, to the Financing Person’s Designee, all amounts that such successor Servicer would otherwise have the right to withdraw from the Escrow Account and the Servicer Custodial Account, but to which the predecessor Servicer would otherwise be entitled.

If the Servicer enters into an Advance Facility, the Servicer and the related Advance Financing Person shall deliver to the Securities Administrator and the Master Servicer a written notice of the existence of such Advance Facility (an “Advance Facility Notice”), stating the identity of the Advance Financing Person and the related Financing Person’s Designee.  An Advance Facility Notice may only be terminated by the joint written direction of the Servicer and the related Advance Financing Person.

Advance Reimbursement Amounts collected with respect to each Mortgage Loan shall be allocated to outstanding unreimbursed Monthly Advances or Servicing Advances (as the case may be) made with respect to that Mortgage Loan on a “first-in, first out” basis. 

At any time when the Advance Financing Person shall have ceased funding Monthly Advances and/or Servicing Advances (as the case may be) and the Financing Person’s Designee shall have received Advance Reimbursement Amounts sufficient in the aggregate to reimburse all Monthly Advances and/or Servicing Advances (as the case may be) the right to reimbursement for which were assigned to the Advance Financing Person, then upon the delivery of a written notice signed by the Financing Person’s Designee, the Advance Financing Person and the Servicer to the Securities Administrator and the Master Servicer terminating the Advance Facility Notice (the “Notice of Facility Termination”), the Servicer shall again be entitled to withdraw and retain the related Advance Reimbursement Amounts. 

Notwithstanding the assignment or pledge by the Servicer of its rights to reimbursed for Monthly Advances and/or Servicing Advances, the Servicer will not be released from any of its obligations under the Agreement and none of the Trustee, the Securities Administrator or the Master Servicer has any right or ability to require the Advance Financing Person to make any Advances and neither shall have any rights or remedies against the Advance Financing Person for any failure by the Servicer to service the Mortgage Loans in accordance with the terms of this Agreement.  Each Advance Financing Person is an intended third party beneficiary of this Section 3.19(d).  This Section 3.19(d) shall not be amended or modified without the consent of any applicable Advance Financing Person.

Section 3.20.

Compensating Interest.

Not later than the close of business on each Servicer Remittance Date, the Servicer (and not the Interim Subservicer) shall deliver to the Master Servicer for deposit in the Master Servicer Custodial Account an amount equal to the lesser of (A) the aggregate of the Prepayment Interest Shortfalls on the Mortgage Loans for the related Distribution Date resulting from Principal Prepayments in full on the Mortgage Loans during the related Prepayment Period and (B) the aggregate Servicing Fee for the related Distribution Date (“Compensating Interest”).  The Servicer shall not have the right to reimbursement for any amounts remitted to the Master 

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Servicer in respect of Compensating Interest.  Such amounts so remitted shall be included in Available Funds and distributed therewith on the next Distribution Date.  The Servicer shall not be obligated to pay Compensating Interest with respect to any interest shortfalls resulting from the Relief Act.

Section 3.21.

Transfer of Servicing for the Mortgage Loans.

Prior to the final Servicing Transfer Date, the Depositor shall use reasonable efforts to cause the Interim Subservicer to comply with each of the servicing transfer requirements set forth in the Servicing Transfer Procedures set forth on Exhibit N hereto or otherwise as agreed to by the Interim Subservicer and the Servicer and in accordance with Customary Servicing Procedures.  The Depositor, the Interim Subservicer, the Master Servicer and the Servicer acknowledge that the Depositor’s right, title and interest in and to the servicing rights with respect to the Mortgage Loans are being transferred as of the Closing Date to the Servicer, subject to the Servicer’s obligations herein.

ARTICLE IV

FLOW OF FUNDS

Section 4.01.

Interest and Principal Distributions.

(a)

On each Distribution Date, the Securities Administrator shall withdraw from the Distribution Account the Interest Remittance Amount and apply it in the following order of priority (based upon the Mortgage Loan information provided to it in the Master Servicer’s Certificate, upon which the Securities Administrator may conclusively rely), to the extent available: 

(i)

concurrently, to the Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates, pro rata, the applicable Accrued Certificate Interest thereon for such Distribution Date;

(ii)

concurrently, to the Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates, pro rata, the applicable Interest Carry Forward Amount thereon for such Distribution Date; 

(iii)

to the Class B-1 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

(iv)

to the Class B-1 Certificates, the Interest Carry Forward Amount thereon for such Distribution Date;

(v)

to the Class B-2 Certificates, the Accrued Certificate Interest thereon for such Distribution Date;

(vi)

to the Class B-2 Certificates, the Interest Carry Forward Amount thereon for such Distribution Date; and

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(vii)

the amount, if any, of the Interest Remittance Amount remaining after application with respect to the priorities set forth above will be applied as described under Section 4.02 hereof.

(b)

On each Distribution Date, the Securities Administrator shall withdraw the Principal Distribution Amount from the Distribution Account and apply it in the following order of priority (based upon the Mortgage Loan information provided to it in the Master Servicer’s Certificate, upon which the Securities Administrator may conclusively rely), to the extent available: 

(i)

sequentially, to the Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates, in that order, until the Certificate Principal Balances thereof have been reduced to zero;

(ii)

to the Class B-1 Certificates, until the Certificate Principal Balance thereof has been reduced to zero;

(iii)

to the Class B-2 Certificates, until the Certificate Principal Balance thereof has been reduced to zero; and

(iv)

the amount, if any, of the Principal Distribution Amount remaining after application with respect to the priorities set forth above will be applied as described under Section 4.02 hereof.

(c)

Amounts allocated to a Class of Exchangeable REMIC Certificates will be made assuming no exchanges have ever occurred.  Outstanding Exchangeable Certificates shall be entitled to receive their proportionate share of distributions in respect of interest and/or principal and other amounts allocated to the Classes of Exchangeable REMIC Certificates in the Related Exchangeable Combination pursuant to Section 4.01(a) and (b), Section 4.02(a) and Section 10.01.

Section 4.02.

Distributions of Monthly Excess Cashflow Amounts.

(a)

On each Distribution Date, any Monthly Excess Cashflow Amount shall be distributed by the Securities Administrator, to the extent available, from Available Funds remaining after application with respect to the priorities set forth in Section 4.01 above and, with respect to Section 4.02(a)(vii) on the applicable Distribution Date, from the amount in the Class P Account, in the following order of priority on such Distribution Date: 

(i)

concurrently, from amounts otherwise distributable to the Class CE Certificates, to fund the amount of any Cap Carryover Amount, pro rata (based on the Cap Carryover Amount of each such class), to the Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates;

(ii)

sequentially, to the Class A-1, Class A-3, Class A-4, Class A-5, Class A-6 and Class A-7 Certificates, in that order, until the Certificate Principal Balances thereof have been reduced to zero;

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(iii)

from amounts otherwise distributable to the Class CE Certificates, to fund the amount of any Cap Carryover Amount, sequentially, to the Class B-1 and Class B-2 Certificates, in that order;

(iv)

to the Class B-1 Certificates, any Realized Loss Amortization Amounts for such Class for such Distribution;

(v)

to the Class B-2 Certificates, any Realized Loss Amortization Amounts for such Class for such Distribution;

(vi)

sequentially, to the Class B-1 and Class B-2 Certificates, in that order, until the Certificate Principal Balances thereof have been reduced to zero;

(vii)

to pay to the Class CE Certificates, up to the Class CE Distributable Amount for such Distribution Date; and

(viii)

on the earliest of (i) the Distribution Date following the date of expiration of the final Prepayment Charge, (ii) the final Distribution Date or (iii) the Distribution Date immediately following the date on which the Pool Balance is reduced to $100,000 or less, from the amount in the Class P Account, to the Holder of the Class P Certificate, $100 in reduction of the Certificate Principal Balance of such Class.

(b)

On each Distribution Date, there shall be distributed to the Holder of the Class R Certificate (in respect of the Class UR Interest), any remaining amount in the Distribution Account on such date after the application pursuant to Sections 4.01 and 4.02(a).

(c)

On each Distribution Date, the Securities Administrator shall withdraw any amounts then on deposit in the Distribution Account that represent Prepayment Charges collected by the Servicer in connection with the Principal Prepayment of any of the Mortgage Loans or Servicer Prepayment Charge Payment Amounts and shall distribute such amounts to the Holders of the Class P Certificates.  Any such amounts in respect of Servicer Prepayment Charge Payment Amounts shall not be payments with respect to a “regular interest” in a REMIC within the meaning of Code Section 860G(a)(1).  Such amounts shall not be applied to reduce the Certificate Principal Balance of the Class P Certificates.

(d)

Any amounts distributed to the Offered Certificates (other than the Exchangeable Certificates) and the Class B Certificates in respect of interest pursuant to Section 4.02(a) which constitute Cap Carryover Amounts shall first be deemed currently distributed by the Upper Tier REMIC as a distribution of Uncertificated Accrued Interest with respect to the Class CE Upper Tier Regular Interest, and then shall be deemed distributed into the Class CE Grantor Trust Subaccount and then distributed to the Offered Certificates (other than the Exchangeable Certificates) and Class B Certificates as payments on notional principal contracts in the nature of cap contracts.  Any such amounts deemed distributed will not increase the Uncertificated Principal Balance of the Class CE Certificates or result in any carryforward of accrued interest in respect of the Class CE Certificates.  To the extent any additional amounts would be distributed currently pursuant to the Class CE Distributable Amount in excess of amounts constituting Cap Carryover Amounts, such remaining amount shall be distributed to the Holders of the Class CE Certificates.  The Securities Administrator shall account for Cap Carryover Amounts as property 

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held separate and apart from any Trust REMIC.  The provisions of this paragraph are intended to satisfy the requirements of Treasury regulations § 1.860G-2(i) for the treatment of property rights coupled with regular interests to be separately respected and shall be interpreted consistent with such regulation.

(e)

Distributions on the Lower Tier Interests. On each Distribution Date, the Securities Administrator shall be deemed to cause in the following order of priority, the following amounts to be distributed to the Upper Tier REMIC on account of the Lower Tier Regular Interests (such amount, the “Lower Tier Distribution Amount”) or withdrawn from the Distribution Account and distributed to the Holder of the Class R Certificate (in respect of the Class LR Interest), as the case may be:

(i)

to the extent of the Interest Remittance Amounts, to the Holders of the Class LT-AA Interest, the Lower Tier Corresponding Marker Interests and the Class LT-ZZ Interest, pro rata, in an amount equal to (A) the Uncertificated Accrued Interest for such Distribution Date, plus (B) any amounts in respect thereof remaining unpaid from previous Distribution Dates.  Amounts payable as Uncertificated Accrued Interest in respect of the Class LT-ZZ Interest shall be reduced and deferred when (I) the Lower Tier REMIC Overcollateralized Amount is less than the Lower Tier REMIC Overcollateralization Target Amount and (II) without duplication, when amounts are distributed to the Offered Certificates (other than the Exchangeable Certificates) or the Class B Certificates pursuant to Section 4.02(a)(ii), by the lesser of (x) the sum of the amount of such difference described in clause (I) and 1% of the amount described in clause (II) and (y) the Maximum LT-ZZ Uncertificated Accrued Interest Deferral Amount and such amount will be payable to the Holders of the Lower Tier Corresponding Marker Interests, in the same proportion as the Overcollateralization Deficiency is allocated to the Corresponding Classes or amounts are distributed to the Corresponding Classes under Section 4.02(a)(ii) and the Uncertificated Balance of the Class LT-ZZ Interest shall be increased by such amount;

(ii)

to the Holders of the Lower Tier Regular Interests, in an amount equal to the remainder of the Interest Remittance Amount and Principal Remittance Amount for such Distribution Date after the distributions made pursuant to clause (i) above plus, on the earliest of (A) the Distribution Date following the date of expiration of the final Prepayment Charge, (B) the final Distribution Date or (C) the Distribution date immediately following the date on which the Pool Balance is reduced to $100,000 or less, the amount held in the Class P Account, allocated as follows:

(1)

to the Class LT-AA Interest, 98.00% of such remainder, until the Uncertificated Balance of such Lower Tier Interests are reduced to zero;

(2)

to the Lower Tier Corresponding Marker Interests, 1.00% of such remainder, in the same proportion as principal payments are allocated to the Corresponding Classes, until the Uncertificated Balances of such Lower Tier Regular Interests are reduced to zero; then to the Class LT-ZZ Interest, 1.00% of such remainder, until the Uncertificated Balance of such Lower Tier Regular Interest is reduced to zero;

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(3)

on the earliest of (i) the Distribution Date following the date of expiration of the final Prepayment Charge, (ii) the final Distribution Date or (iii) the Distribution Date immediately following the date on which the Pool Balance is reduced to $100,000 or less, from the amount held in the Class P Account, $100 to the Class LT-P Interest until the Uncertificated Balance of such Lower Tier Regular Interest is reduced to zero; and

(4)

any remaining amount to the Holder of the Class R Certificate (in respect of the Class LR Interest).

provided, however, that an amount equal to any Overcollateralization Amount included in the Class CE Distributable Amount and distributed to the Class CE Certificates shall be allocated to (i) the Class LT-AA Interest and (ii) the Class LT-ZZ Interest, 98.00% and 2.00%, respectively.

(iii)

On each Distribution Date, all amounts representing Prepayment Charges in respect of the Mortgage Loans during the related Prepayment Period will be distributed to the Holders of the Class LT-P Interest. Such amount shall not reduce the Uncertificated Balance of the Class LT-P Interest.

(f)

Distributions on the Upper Tier Interests. On each Distribution Date, 100% of the amounts deemed distributed by the Lower Tier REMIC to the Upper Tier REMIC shall be deemed distributed with respect to the Upper Tier Interests so as to (i) pay the Uncertificated Accrued Interest on such Upper Tier Interest plus any amounts in respect thereof remaining unpaid from previous Distribution Dates at the same time and in the same manner that such amounts are distributed to the Corresponding Classes of Certificates and (ii) reduce the Uncertificated Balance of each such Upper Tier Interest to the extent necessary so that it equals the Certificate Principal Balance of the Corresponding Class of Certificates, if any. Any amounts distributed to the Class CE Certificates in respect of Overcollateralization Amounts shall reduce its Uncertificated Balance.  Any remaining amounts will be deemed distributed to the Holder of the Class R Certificate with respect to the Class UR Interest.

(g)

Allocation of Losses on the Lower Tier Interests and the Upper Tier Interests. The Securities Administrator shall be deemed to cause the following allocation of losses:

(i) (a) All Realized Losses on the Mortgage Loans shall be allocated by the Securities Administrator on each Distribution Date to the following Lower Tier Interests in the specified percentages, as follows: first, to Uncertificated Accrued Interest payable to (i) the Class LT-AA Interest and (ii) the Class LT-ZZ Interest up to an aggregate amount equal to the Lower Tier REMIC Interest Loss Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated Balances of the Class LT-AA Interest and the Class LT-ZZ Interest up to an aggregate amount equal to the Lower Tier REMIC Principal Loss Allocation Amount, 98% and 2%, respectively; third, to the Uncertificated Balances of the Class LT-AA Interest, the Class LT-B2 Interest and the Class LT-ZZ Interest, 98%, 1% and 1%, respectively, until the Uncertificated Balance of the Class LT-B2 has been reduced to zero; and fourth, to the Uncertificated Balances of the Class LT-AA Interest, the Class LT-B1 Interest and the Class LT-ZZ Interest, 98%, 1% and 1%, 

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respectively, until the Uncertificated Balance of the Class LT-B1 has been reduced to zero.  Subsequent Recoveries with respect to the Mortgage Loans shall be allocated by the Securities Administrator on each Distribution Date in the same manner and priority as Realized Losses are allocated pursuant to the preceding sentence.

(b) All Realized Losses and Subsequent Recoveries on the Mortgage Loans shall be allocated by the Securities Administrator on each Distribution Date to the Upper Tier Interests such that the Uncertificated Balance or Notional Amount of each such Upper Tier Interest equals the Certificate Principal Balance or Notional Amount of the corresponding Class of Certificates.

(h)

Notwithstanding anything to the contrary contained herein, the above distributions in Sections 4.02(e) through (g) (other than on the Certificates) are deemed distributions, and actual distributions of funds from the Distribution Account shall be made only in accordance with Sections 4.01 and 4.02(a) through (d) hereof.

(i)

It is the intention of all of the parties hereto that the Class CE Certificates receive all principal and interest received by the Trust on the Mortgage Loans that is not otherwise distributable to the Offered Certificates, the Class B Certificates or the Class P Certificates.  If the Securities Administrator determines that the Class R Certificates are entitled to any distributions of principal or interest on the Mortgage Loans, the Securities Administrator, prior to any such distribution to any Class R Certificate, shall notify the Depositor of such impending distribution.  Upon such notification, the Depositor will request an amendment to this Agreement to correct such mistake in the distribution provisions and the Securities Administrator shall hold such distribution until such Amendment is executed.  The Class R Certificateholders, by their acceptance of their Certificates, and the Servicer, the Master Servicer, the Securities Administrator, the Trustee, the Custodian and the Interim Subservicer hereby agree to such amendment and no further consent shall be necessary, notwithstanding anything to the contrary in this Agreement.

Section 4.03.

Allocation of Losses.

Any Applied Realized Loss Amount for a Distribution Date shall be allocated sequentially to the Class B-2 and the Class B-1 Certificates, in that order, until the respective Certificate Principal Balances thereof are reduced to zero.  No Applied Realized Loss Amount shall be allocated to any other Class of Certificates hereunder.  Once the Certificate Principal Balance of a Class of Subordinated Certificates has been reduced to zero, such Class will not be entitled to distributions on future Distribution Dates regardless of whether Subsequent Recoveries are received with respect to such Class.

Section 4.04.

Method of Distribution.

The Securities Administrator shall make distributions in respect of a Distribution Date to each Certificateholder of record on the related Record Date (other than as provided in Section 10.01 respecting the final distribution), in the case of Certificateholders of the Certificates, by wire transfer in immediately available funds to the account of the Person entitled thereto if such Person shall have so notified the Securities Administrator in writing at least five 

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Business Days prior to the Record Date immediately prior to such Distribution Date and is the registered owner of such Certificates, or by check mailed by first class mail to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, provided that the Securities Administrator may deduct a reasonable wire transfer fee from any payment made by wire transfer.  Distributions among Certificateholders shall be made in proportion to the Percentage Interests evidenced by the Certificates held by such Certificateholders.

Section 4.05.

Distributions on Book-Entry Certificates.

Each distribution with respect to a Book-Entry Certificate shall be paid to the Depository, which shall credit the amount of such distribution to the accounts of its Depository Participants in accordance with its normal procedures.  Each Depository Participant shall be responsible for disbursing such distribution to the Certificate Owners that it represents and to each indirect participating brokerage firm (a “brokerage firm” or “indirect participating firm”) for which it acts as agent.  Each brokerage firm shall be responsible for disbursing funds to the Certificate Owners that it represents.  All such credits and disbursements with respect to a Book-Entry Certificate are to be made by the Depository and the Depository Participants in accordance with the provisions of the Certificates.  None of the parties to this Agreement shall have any responsibility therefor except as otherwise provided by applicable law.

Section 4.06.

Statements.

(a)

On each Distribution Date, based on the Mortgage Loan information contained in the Master Servicer’s Certificate, the Securities Administrator shall prepare a statement (the “Distribution Date Statement”) as to the distributions made on such Distribution Date: 

(i)

the amount of the distribution made on such Distribution Date to the Holders of each Class of Certificates allocable to principal separately identifying the amount of the distribution made on such Distribution Date to the Holders of the Class P Certificates allocable to Prepayment Charges and Servicer Prepayment Charge Payment Amounts; 

(ii)

the amount of the distribution made on such Distribution Date to the Holders of each Class of Certificates allocable to interest and the Class CE Distributable Amount, separately identified; 

(iii)

the Overcollateralization Amount and the Overcollateralization Deficiency as of such Distribution Date and the Monthly Excess Interest Amount and Monthly Excess Cashflow Amount for such Distribution Date; 

(iv)

the aggregate amount of servicing compensation received by the Servicer during the related Collection Period and the amount of Compensating Interest paid by the Servicer; 

(v)

the amount of Monthly Advances for the related Collection Period, unreimbursed Monthly Advances and Servicing Advances and Advances that are Nonrecoverable Advances; 

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(vi)

the Pool Balance, at the close of business at the end of the related Collection Period; 

(vii)

the number, weighted average remaining term to maturity and weighted average Mortgage Interest Rate of the Mortgage Loans as of the related Due Date; 

(viii)

the number and aggregate Stated Principal Balance of Mortgage Loans (a) 30 to 59 days past due on a contractual basis, (b) 60 to 89 days past due on a contractual basis, (c) 90 or more days past due on a contractual basis, (d) as to which foreclosure proceedings have been commenced and (e) in bankruptcy as of the close of business on the last day of the related Collection Period; 

(ix)

the aggregate number of Mortgage Loans that became REO Properties during the related Collection Period and the aggregate Stated Principal Balance of such Mortgage Loans (calculated as of the date each such Mortgage Loan became an REO Property); 

(x)

the total number and aggregate Stated Principal Balance of all REO Properties as of the close of business of the last day of the related Collection Period; 

(xi)

the aggregate amount of Principal Prepayments made during the related Prepayment Period; 

(xii)

the Mortgage Loan identifying number of each Mortgage Loan with a Prepayment Charge that was the subject of a Principal Prepayment in full during the related Prepayment Period, the Prepayment Charge listed on each related Mortgage Note and the Prepayment Charge collected or the Servicer Prepayment Charge Payment Amount paid by the Servicer with respect to each such Mortgage Loan;

(xiii)

the aggregate amount of Realized Losses incurred during the related Collection Period and the cumulative amount of Realized Losses; 

(xiv)

the Certificate Principal Balance or Maximum Certificate Principal Balance of each Class of Certificates, after giving effect to the distributions, and allocations of Applied Realized Loss Amounts made on such Distribution Date, separately identifying any reduction thereof due to allocations of Applied Realized Loss Amounts; 

(xv)

the Accrued Certificate Interest in respect of each Class of Certificates for such Distribution Date and any related Cap Carryover Amounts (assuming in the case of a Class of Exchangeable REMIC Certificates no exchanges have occurred and in the case of a Class of Exchangeable Certificates that all exchanges have occurred), and the respective portions thereof, if any, remaining unpaid following the distributions made in respect of such Certificates on such Distribution Date; 

(xvi)

the aggregate amount of any Prepayment Interest Shortfalls for such Distribution Date; 

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(xvii)

the Cap Carryover Amounts distributed on such Distribution Date; 

(xviii)

the Available Funds; the rate at which interest accrues for each Class of Certificates for such Distribution Date;

(xix)

the aggregate amount of Net Liquidation Proceeds for the related Collection Period; 

(xx)

the aggregate Stated Principal Balance of Mortgage Loans purchased by or substituted for by a Seller or American General Finance Corporation during the related Prepayment Period; 

(xxi)

the number and aggregate Stated Principal Balance of Mortgage Loans that were the subject of a Principal Prepayment in full during the related Prepayment Period;

(xxii)

the amount of Subsequent Recoveries received during the related Prepayment Period;

(xxiii)

with respect to Mortgage Loans that were subject to a Servicer Modification during the related Collection Period: (a) the Mortgage Loan identifying number; (b) the date of modification; (c) the Stated Principal Balance prior to and after modification; (d) the Monthly Payment prior to and after modification; (e) the forborne amount (if any); (f) the Mortgage Interest Rate prior to and after modification; (g) the maturity date prior to and after modification; and (h) the number of days Delinquent prior to modification;

(xxiv)

whether any exchanges of Exchangeable or Exchangeable REMIC Certificates have taken place since the preceding Distribution Date and, if applicable, the Class designations, Certificate Principal Balances, Maximum Certificate Principal Balances and any interest and principal paid, including any shortfalls allocated, of any Classes of Exchangeable REMIC Certificates or Exchangeable Certificates that were received by the Certificateholder as a result of such exchange; and

(xxv)

if there has been a revision to the Delegated Authority Guidelines, a copy thereof.

The Securities Administrator may fully rely upon and shall have no liability with respect to information with respect to the Mortgage Loans provided by the Master Servicer.

In the case of information furnished pursuant to subclauses  (i), (ii) and (xv) above, the amounts shall be expressed in a separate section of the report as a dollar amount for each Class for each $1,000 original dollar amount as of the Cut-off Date.

The Securities Administrator will make the Distribution Date Statement (and, at its option, any additional files containing the same information in an alternative format) available each month to beneficial owners of Certificates that provide appropriate certification in the form furnished by the Securities Administrator (which may be submitted electronically via the 

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Securities Administrator’s internet website) and other parties to this Agreement via the Securities Administrator’s internet website.  The Securities Administrator’s internet website shall initially be located at “http://www.ctslink.com.”  Assistance in using the website can be obtained by calling the Securities Administrator’s customer service desk at (866) 846-4526.  Parties that are unable to use the website are entitled to have a paper copy mailed to them via first class mail by calling the customer service desk and indicating such.  The Securities Administrator shall have the right to change the way the monthly statements to Certificateholders are distributed in order to make such distribution more convenient and/or more accessible to the above parties and the Securities Administrator shall provide timely and adequate notification to all above parties regarding any such changes.

(b)

Within a reasonable period of time after the end of each calendar year, the Securities Administrator shall furnish to each Person who at any time during the calendar year was a Certificateholder, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information set forth in subclauses (i), (ii), (xiv) and (xv) above, aggregated for such calendar year or applicable portion thereof during which such Person was a Certificateholder.  Such obligation of the Securities Administrator shall be deemed to have been satisfied to the extent that substantially comparable information shall be prepared and furnished by the Securities Administrator to Certificateholders pursuant to any requirements of the Code as are in force from time to time.

(c)

On each Distribution Date, the Securities Administrator shall forward to the Class R Certificateholder upon request a copy of the reports forwarded to the Certificateholders of Certificates other than the Class R Certificate in respect of such Distribution Date with such other information as the Securities Administrator deems necessary or appropriate.  Such obligation of the Securities Administrator shall be deemed to have been satisfied to the extent that substantially comparable information shall be prepared and furnished to the Class R Certificateholder by the Servicer pursuant to any requirements of the Code as from time to time in force.

Section 4.07.

Remittance Reports; Master Servicer’s Certificate.

(a)

No later than the 5th day of each month (or if such 5th day is not a Business Day, the following Business Day), the Servicer (and not any subservicer) shall deliver to the Master Servicer and Back-up Servicer a Remittance Report in form and substance set forth in Exhibit L hereto with respect to the related Distribution Date.  On the same date, the Servicer (and not the Interim Subservicer) shall deliver to the Master Servicer such information reasonably available to the Servicer necessary in order for the Master Servicer to prepare the Master Servicer’s Certificate.  The Master Servicer shall not be responsible to recompute, recalculate or verify any information provided to it by the Servicer.  In addition, for so long as the Interim Subservicer is subservicing any Mortgage Loans, it shall provide no later than the Business Day prior to the Business Day on which the Servicer is required to deliver the Remittance Report, a report in form and substance to be agreed upon by the Interim Subservicer and the Servicer regarding such Mortgage Loans, to be utilized by the Servicer in preparing the Remittance Report.

(b)

Each month, not later than 12:00 noon Eastern time on the 18th calendar day of such month (or if such day is not a Business Day, the following Business Day), the Master 

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Servicer shall deliver to the Securities Administrator, a Master Servicer’s Certificate based solely on the information provided by the Servicer (and not the Interim Subservicer) (in substance and format mutually acceptable to the Master Servicer and the Securities Administrator) certified by a Master Servicing Officer setting forth the information necessary in order for the Securities Administrator to perform its obligations under this Agreement.  The Securities Administrator may conclusively rely upon the information contained in a Master Servicer’s Certificate delivered by the Master Servicer for all purposes hereunder and shall have no duty to verify or re-compute any of the information contained therein.

Section 4.08.

Servicer Reports to Sellers.

So long as the Servicer or any subservicer (other than the Interim Subservicer) directly services any Mortgage Loan, the Servicer shall deliver electronically to the Sellers information with respect to such Mortgage Loan as part of the Daily Servicer Report to Sellers in form and substance set forth as Exhibit M-1 (and any additional reports agreed to by the Servicer and the Interim Subservicer as contemplated therein), in accordance with the timeframes set forth therein.  In addition, beginning with first month the Servicer or any subservicer (other than the Interim Subservicer) directly services any Mortgage Loan, the Servicer shall deliver electronically to the Sellers information with respect to such Mortgage Loan as part of the Monthly Servicer Report to Sellers with respect to the related Distribution Date in form and substance set forth as Exhibit M-2 (and any additional reports agreed to by the Servicer and the Interim Subservicer as contemplated therein), in accordance with the timeframes set forth therein.

On or prior to January 31st of each year, beginning in calendar year 2010, the Servicer shall, at its expense, provide the Sellers with a Type II SAS 70 Service Auditor’s Report (or equivalent report as may be agreed to by the Servicer and the Interim Subservicer) with respect to the previous calendar year.  Notwithstanding the foregoing, for calendar year 2009, the Servicer shall only be required to deliver such report by January 31, 2010 on a “best efforts” basis; provided, however, such report shall be delivered no later than February 28, 2010.  In addition, if SPS or another entity becomes successor Servicer, such successor shall use its best efforts to deliver its initial Type II SAS 70 Service Auditor’s Report (or equivalent report as may be agreed to by such successor and the Interim Subservicer) by the last day of February in the year following the year during which it begins servicing the Mortgage Loans.

Section 4.09.

Compliance with Withholding Requirements.

Notwithstanding any other provision of this Agreement, the Securities Administrator shall comply with all federal withholding requirements with respect to payments to Certificateholders that the Securities Administrator reasonably believes are applicable under the Code.  The consent of Certificateholders shall not be required for any such withholding.  In the event the Securities Administrator withholds any amount from interest or original issue discount payments or advances thereof to any Certificateholder pursuant to federal withholding requirements, the Securities Administrator shall indicate the amount withheld to such Certificateholder.

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ARTICLE V

THE CERTIFICATES

Section 5.01.

The Certificates.

Each of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, Class A-10, Class B-1, Class B-2, Class CE, Class P and Class R Certificates shall be substantially in the forms annexed hereto as exhibits, and shall, on original issue, be executed by the Securities Administrator and authenticated and delivered by the Certificate Registrar to or upon the receipt of a Written Order to Authenticate from the Depositor concurrently with the sale and assignment to the Trustee of the Trust Fund.  Each Class of the Offered Certificates shall be initially evidenced by one or more Certificates representing a Percentage Interest with a minimum dollar denomination of $100,000 and integral multiples of $1 in excess thereof.  The Class CE, Class P and Class R Certificates are issuable only as single certificates.

The Certificates shall be executed on behalf of the Trust by manual or facsimile signature on behalf of the Securities Administrator by a Responsible Officer.  Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Securities Administrator shall bind the Trust, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificate.  No Certificate shall be entitled to any benefit under this Agreement or be valid for any purpose, unless such Certificate shall have been manually authenticated by the Certificate Registrar substantially in the form provided for herein, and such authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder.  All Certificates shall be dated the date of their authentication.  Subject to Section 5.02(c), the Offered Certificates shall be Book-Entry Certificates.  The Class B-1, Class B-2, Class CE, Class P and Class R Certificates shall not be Book-Entry Certificates but shall be issued in fully registered certificate form.

Section 5.02.

Registration of Transfer and Exchange of Certificates.

(a)

The Certificate Registrar shall cause to be kept at the Corporate Trust Office of the Securities Administrator a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided.  The Securities Administrator shall initially serve as Certificate Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as herein provided.  The Securities Administrator as Certificate Registrar shall be subject to the same standards of care, limitations on liability and rights to indemnity as the Securities Administrator, and the provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.14, 8.15 and 8.16 shall apply to the Certificate Registrar to the same extent as they apply to the Securities Administrator.  Any Certificate Registrar appointed in accordance with this Section 5.02(a) may at any time resign by giving at least 30 days’ advance written notice of resignation to each of the parties to this Agreement, such 

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resignation to become effective upon appointment of a successor Certificate Registrar by the Depositor.

(b)

At the option of the Certificateholders, Certificates may be exchanged for other Certificates of authorized denominations or Percentage Interests of a like Class, tenor and aggregate Percentage Interest, upon surrender of the Certificates to be exchanged at any such office or agency.  Whenever any Certificates are so surrendered for exchange, the Securities Administrator shall execute and the Certificate Registrar shall authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive.  Every Certificate presented or surrendered for transfer or exchange shall (if so required by the Securities Administrator or the Certificate Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Securities Administrator and the Certificate Registrar duly executed by, the Holder thereof or its attorney duly authorized in writing.

(c)

(i) Except as provided in paragraph (c)(iii) below, the Book-Entry Certificates shall at all times remain registered in the name of the Depository or its nominee and at all times: (A) registration of the Book-Entry Certificates may not be transferred by the Securities Administrator except to another Depository; (B) the Depository shall maintain book-entry records with respect to the Certificate Owners and with respect to ownership and transfers of such Book-Entry Certificates; (C) ownership and transfers of registration of the Book-Entry Certificates on the books of the Depository shall be governed by applicable rules established by the Depository; (D) the Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (E) the Securities Administrator shall deal with the Depository as the representative of the Certificate Owners of the Book-Entry Certificates for purposes of exercising the rights of Holders under this Agreement, and requests and directions for and votes of the Depository shall not be deemed to be inconsistent if they are made with respect to different Certificate Owners; and (F) the Securities Administrator may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Depository Participants and furnished by the Depository Participants with respect to indirect participating firms and persons shown on the books of such indirect participating firms as direct or indirect Certificate Owners.

(ii)  All transfers by Certificate Owners of Book-Entry Certificates shall be made in accordance with the procedures established by the Depository Participant or brokerage firm representing such Certificate Owner.  Each Depository Participant shall only transfer Book-Entry Certificates of Certificate Owners it represents or of brokerage firms for which it acts as agent in accordance with the Depository’s normal procedures.

(iii)  If the Depository advises the Securities Administrator in writing that the Depository is no longer willing or able to properly discharge its responsibilities as Depository and neither the Securities Administrator nor the Depositor is able to locate a qualified successor, the Securities Administrator shall notify all Certificate Owners through the Depository of the occurrence of such event and of the availability of definitive, fully-registered Certificates (the “Definitive Certificates”) to such Certificate Owners requesting the same.  Upon surrender to the Certificate Registrar of the related Class of Certificates by the Depository (or by the Certificate Custodian, if it holds such 

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Class on behalf of the Depository), accompanied by the instructions from the Depository for registration, the Securities Administrator shall execute and the Certificate Registrar shall authenticate and deliver the Definitive Certificates.  None of the Servicer, the Master Servicer, the Securities Administrator, the Depositor or the Trustee shall be liable for any delay in delivery of such instruction and may conclusively rely on, and shall be protected in relying on, such instructions.  Upon the issuance of Definitive Certificates, the Securities Administrator shall recognize the Holders of the Definitive Certificates as Certificateholders hereunder.

(d)

No transfer of a Certificate shall be made unless such transfer is exempt from the registration requirements of the 1933 Act and any applicable state securities laws or is made in accordance with the 1933 Act and such laws.  In the event of any such transfer (i) unless such transfer is made in reliance on Rule 144A under the 1933 Act, the Securities Administrator or the Depositor may require a written Opinion of Counsel (which may be in-house counsel) acceptable to and in form and substance reasonably satisfactory to the Securities Administrator and the Depositor that such transfer may be made pursuant to an exemption, describing the applicable exemption and the basis therefor, from the 1933 Act and such laws or is being made pursuant to the 1933 Act and such laws, which Opinion of Counsel shall not be an expense of the Securities Administrator or the Depositor and (ii) the Securities Administrator shall require a certificate from the Certificateholder desiring to effect such transfer substantially in the form attached hereto as Exhibit I and a certificate from such Certificateholder’s prospective transferee substantially in the form attached hereto as Exhibit J, which certificates shall not be an expense of the Securities Administrator or the Depositor; provided that the foregoing requirements under clauses (i) and (ii) shall not apply to a transfer of a Certificate between the Depositor and its affiliates.  The Securities Administrator shall provide upon request to any Holder of a Certificate and any prospective transferees designated by any such Holder, information regarding the related Certificates and the Mortgage Loans and such other information as shall be necessary to satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer of any such certificate without registration thereof under the 1933 Act pursuant to the registration exemption provided by Rule 144A.  The Holder of a Certificate desiring to effect such transfer shall, and does hereby agree to, indemnify the Securities Administrator and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws.  For purposes of clause (ii) of this Section 5.02(d) the representations required in any transferor certificate (substantially in the form of Exhibit I hereto) and any investment letter (substantially in the form of Exhibit J hereto) shall be deemed to have made in connection with the transfer of any Certificate that is a Book-Entry Certificate.

(e)

No transfer of an ERISA-Restricted Certificate shall be made unless the Securities Administrator shall have received (i) a representation from the transferee of such Certificate, acceptable to and in form and substance satisfactory to the Securities Administrator and the Depositor (such requirement is satisfied only by the Securities Administrator’s receipt of a representation letter from the transferee substantially in the form of Exhibit H hereto), to the effect that such transferee is not an employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, a plan or arrangement (as defined in Section 4975 of the Code) subject to Section 4975 of the Code or any other arrangement, including bank collective funds and insurance company general and separate accounts, in which assets of such employee benefit plans or other plans or arrangements are invested (collectively, “Plans”), nor a person acting on 

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behalf of any such Plan nor using the assets of any such Plan to effect such transfer.  Notwithstanding the preceding sentence, a transfer of an ERISA-Restricted Certificate other than a Class R Certificate may be permitted to a Plan or a plan or arrangement subject to any federal, state or local law that is substantially similar to Title I of ERISA or Section 4975 of the Code (“Similar Law”), or a person acting on behalf of, or using assets of, any such Plan or plan, if the transferee delivers to the Securities Administrator an Opinion of Counsel, in form and substance satisfactory to the Securities Administrator and the Depositor, to the effect that the purchase and holding of such ERISA-Restricted Certificate by or on behalf of such Plan or with assets of such Plan will not constitute or result in a non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code or, in the case of an arrangement subject to Similar Law, a violation of any such Similar Law and will not subject the parties to this Agreement to any obligation in addition to those undertaken in this Agreement and such Opinion shall not be the expense of any party to this Agreement.  Any beneficial owner of an ERISA-Restricted Certificate that is a Book-Entry Certificate or interest therein shall be deemed to have made the representation letter described in the first sentence of this Section 5.02(e) by acceptance of such Certificate or interest therein.  Notwithstanding anything else to the contrary herein, any purported transfer of an ERISA-Restricted Certificate that is a Definitive Certificate (other than a Class R Certificate) to or on behalf of a Plan or to any Person using assets of a Plan without delivery of a properly completed representation letter (or, in lieu thereof, an Opinion of Counsel) as described above or any transfer of a Class R Certificate to a Plan or any Person acting on behalf of, or using assets of, a Plan shall be void and of no effect.

Neither the Securities Administrator nor the Certificate Registrar shall have any liability for transfers of Book-Entry Certificates made through the book-entry facilities of the Depository or between or among any Depository Participants or Certificate Owners, made in violation of applicable restrictions.  The Securities Administrator may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Depository Participants and furnished by the Depository Participants with respect to indirect participating firms and Persons shown on the books of such indirect participating firms as direct or indirect Certificate Owners.

To the extent permitted under applicable law (including, but not limited to, ERISA), neither the Securities Administrator nor the Certificate Registrar shall be under any liability to any Person for any registration of transfer of any ERISA Restricted Certificate that is in fact not permitted by this Section 5.02 or for making any payments due on such Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the transfer was registered by the Securities Administrator in accordance with the foregoing requirements.

(f)

Each Person who has or who acquires any Ownership Interest in a Residual Certificate shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the following provisions, and the rights of each Person acquiring any Ownership Interest in a Residual Certificate are expressly subject to the following provisions:

(i)

Each Person holding or acquiring any Ownership Interest in a Residual Certificate shall be a Permitted Transferee and shall promptly notify the Securities Administrator of any change or impending change in its status as a Permitted Transferee.

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(ii)

No Person shall acquire an Ownership Interest in a Residual Certificate unless such Ownership Interest is a pro rata undivided interest.

(iii)

In connection with the initial registration and any proposed transfer of any Ownership Interest in a Residual Certificate, the Securities Administrator shall require delivery to it, in form and substance satisfactory to it, of an affidavit substantially in the form attached hereto as Exhibit K from the proposed transferee and a certificate substantially in the form attached hereto as Exhibit I.

(iv)

Notwithstanding the delivery of an affidavit by a proposed transferee under clause (iii) above, if a Responsible Officer of the Securities Administrator has actual knowledge that the proposed transferee is not a Permitted Transferee, no transfer of any Ownership Interest in a Residual Certificate to such proposed transferee shall be effected.

(v)

No Ownership Interest in a Residual Certificate may be purchased by or transferred to any Person that is not a U.S. Person, unless (A) such Person holds such Residual Certificate in connection with the conduct of a trade or business within the United States and furnishes the transferor and the Securities Administrator with an effective Internal Revenue Service Form W-8ECI (or successor thereto) or (B) the transferee delivers to both the transferor and the Securities Administrator an Opinion of Counsel from a nationally-recognized tax counsel to the effect that such transfer is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of a Residual Certificate will not be disregarded for federal income tax purposes.

(vi)

Any attempted or purported transfer of any Ownership Interest in a Residual Certificate in violation of the provisions of this Section 5.02 shall be absolutely null and void and shall vest no rights in the purported transferee.  If any purported transferee shall, in violation of the provisions of this Section 5.02, become a Holder of a Residual Certificate, then the prior Holder of such Residual Certificate that is a Permitted Transferee shall, upon discovery that the registration of transfer of such Residual Certificate was not in fact permitted by this Section 5.02, be restored to all rights as Holder thereof retroactive to the date of registration of transfer of such Residual Certificate.  The Securities Administrator shall be under no liability to any Person for any registration of transfer of a Residual Certificate that is in fact not permitted by this Section 5.02 or for making any distributions due on such Residual Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of the Agreement so long as the transfer was registered in accordance with this Section 5.02.  The Securities Administrator shall be entitled to recover from any Holder of a Residual Certificate that was in fact not a Permitted Transferee at the time such distributions were made all distributions made on such Residual Certificate.  Any such distributions so recovered by the Securities Administrator shall be distributed and delivered by the Securities Administrator to the prior Holder of such Residual Certificate that is a Permitted Transferee.

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(vii)

If any Person other than a Permitted Transferee acquires any Ownership Interest in a Residual Certificate in violation of the restrictions in this Section 5.02, then, upon discovery, the Securities Administrator will provide to the Internal Revenue Service, and to the Persons specified in Section 860E(e)(3) and (6) of the Code, information needed to compute the tax imposed under Section 860E(e) of the Code on transfers of residual interests to disqualified organizations.  The expenses of the Securities Administrator under this clause (vii) shall be reimbursable by the Trust so long as they constitute “unanticipated expenses” within the meaning of Treasury regulations Section 1.860G-1(b)(3)(ii) and (iii).

(viii)

No Ownership Interest in a Residual Certificate shall be acquired by a Plan.

(g)

No service charge shall be imposed for any transfer or exchange of Certificates of any Class, but the Securities Administrator may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates.

(h)

All Certificates surrendered for transfer and exchange shall be destroyed by the Certificate Registrar.

Section 5.03.

Mutilated, Destroyed, Lost or Stolen Certificates.

If (i) any mutilated Certificate is surrendered to the Certificate Registrar or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (ii) there is delivered to the Securities Administrator, the Depositor and the Certificate Registrar such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Securities Administrator or the Certificate Registrar that such Certificate has been acquired by a bona fide purchaser, the Securities Administrator shall execute on behalf of the Trust, and the Certificate Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and Percentage Interest.  Upon the issuance of any new Certificate under this Section, the Securities Administrator or the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Securities Administrator and the Certificate Registrar) in connection therewith.  Any duplicate Certificate issued pursuant to this Section, shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.

Section 5.04.

Persons Deemed Owners.

The Servicer, the Master Servicer, the Interim Subservicer, the Securities Administrator, the Depositor, the Trustee, the Certificate Registrar, any Paying Agent and any agent of the Servicer, the Master Servicer, the Interim Subservicer, the Securities Administrator, the Depositor, the Trustee, the Certificate Registrar or any Paying Agent may treat the Person, including a Depository, in whose name any Certificate is registered as the owner of such 

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Certificate for the purpose of receiving distributions pursuant to Sections 4.01 and 4.02 and for all other purposes whatsoever, and none of the Servicer, the Master Servicer, the Interim Subservicer, the Securities Administrator, the Depositor, the Trust, the Trustee or any agent of any of them shall be affected by notice to the contrary.

Section 5.05.

Appointment of Paying Agent.

The Paying Agent shall make distributions to Certificateholders from the Distribution Account pursuant to Sections 4.01 and 4.02 and shall report the amounts of such distributions to the Securities Administrator.  The duties of the Paying Agent may include the obligation to distribute statements and provide information to Certificateholders as required hereunder.  The Paying Agent hereunder shall at all times be an entity duly incorporated and validly existing under the laws of the United States of America or any state thereof, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authorities.  The Paying Agent shall initially be the Securities Administrator.  The Securities Administrator may appoint a successor to act as Paying Agent, which appointment shall be reasonably satisfactory to the Depositor.  The Securities Administrator as Paying Agent shall be subject to the same standards of care, limitations on liability and rights to indemnity as the Securities Administrator, and the provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.14, 8.15 and 8.16 shall apply to the Paying Agent to the same extent as they apply to the Securities Administrator.  Any Paying Agent appointed in accordance with this Section 5.05 may at any time resign by giving at least 30 days’ advance written notice of resignation to the parties to this Agreement, such resignation to become effective upon appointment of a successor Paying Agent.

Section 5.06.

Class R Certificate

Each Holder of a Class R Certificate will be entitled to separate such Certificate into its component parts.  Upon receipt of a Class R Certificate and a written request from the Holder thereof to separate such certificate, the Securities Administrator shall issue to such registered Holder in exchange for such Class R Certificate (i) a separately transferable, certificated and fully registered security that will, from the date of its issuance, represent the Holder’s Percentage Interest in the Class LR Interest and (ii) a separately transferable, certificated and fully registered security that will, from the date of its issuance, represent the Holder’s Percentage Interest in the Class UR Interest.  If requested by and at the expense of the Holder, the Securities Administrator shall obtain CUSIP numbers for such newly issued securities.  The Securities Administrator shall make any allocations and distributions with respect to such newly issued securities (in respect of the Class LR Interest or Class UR Interest, as applicable) as set forth herein and such newly issued securities shall be subject to the same rights and restrictions as the Class R Certificate hereunder.

Section 5.07.

Transfer of Exchangeable REMIC Certificates and Exchangeable Certificates.

(a)

Upon the presentation and surrender by any Certificateholder of its Exchangeable REMIC Certificates or Exchangeable Certificates in the appropriate Combination as set forth in Exhibit P hereto, such Certificateholder shall thereby transfer to the Securities Administrator, all of such Certificateholder’s right, title and interest in and to such Exchangeable REMIC 

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Certificates or Exchangeable Certificates, including all payments of interest and principal thereon received after the date of such presentation and surrender and until such Certificateholder informs the Securities Administrator that it wishes to again hold its interest in the form of Exchangeable REMIC Certificates or Exchangeable Certificates, as applicable.

(b)

The Securities Administrator acknowledges any transfer and assignment of Exchangeable REMIC Certificates or Exchangeable Certificates pursuant to the foregoing paragraph, and hereby declares that it will hold the same in trust for the Certificateholders on the terms set forth in this Agreement, and shall treat such Exchangeable REMIC Certificates and Exchangeable Certificates in accordance with Section 9.04 of this Agreement.

Section 5.08.

Exchanges of Exchangeable REMIC Certificates and Exchangeable Certificates.

(a)

The Exchangeable Certificates in a Combination shall be exchangeable on the books of the Depository for the related Exchangeable REMIC Certificates, and Exchangeable REMIC Certificates in a Combination shall be exchangeable on the books of the Depository for the related Exchangeable Certificates, on and after the Closing Date, by notice to the Securities Administrator substantially in the form of Exhibit Q hereto or under the terms and conditions hereinafter set forth and otherwise in accordance with the procedures specified in this Agreement.

(b)

In the case of each Combination, Exchangeable REMIC Certificates in such Combination shall be exchangeable for the Exchangeable Certificates in respective Denominations, determined based on the proportion that the Maximum Original Class Certificate Principal Balance of such Exchangeable REMIC Certificates bear to the Maximum Original Class Certificate Principal Balances of the related Exchangeable Certificates, as set forth in Exhibit P hereto.  Except as provided in Section 9.04 of this Agreement, upon any such exchange, the portions of the Exchangeable REMIC Certificates designated for exchange shall be deemed cancelled and replaced by the Exchangeable Certificate issued in exchange therefor.  Correspondingly, Exchangeable Certificates related to a Combination may be further designated for exchange for Exchangeable REMIC Certificates in such Combination in respective Denominations determined based on the proportion that the Maximum Original Class Certificate Principal Balance of such Exchangeable REMIC Certificates bears to the Maximum Original Class Certificate Principal Balance of the related Exchangeable Certificates, as set forth in Exhibit P hereto.  There shall be no limitation on the number of exchanges authorized pursuant to this Section 5.08, and, except as provided below, no fee or other charge shall be payable to the Securities Administrator or the Depository in connection therewith.

(c)

In order to effect an exchange of Exchangeable REMIC Certificates or the Exchangeable Certificates, the Certificateholder shall notify the Securities Administrator by e-mail at ctsspgexchanges@wellsfargo.com no later than three Business Days before the proposed exchange date.  The exchange date may be any Business Day other than the first or last Business Day of the month, subject to the Securities Administrator’s approval.  In addition, the Certificateholder must provide notice on the Certificateholder’s letterhead, which notice must carry a medallion stamp guarantee and set forth the following information: the CUSIP number of each Exchangeable REMIC Certificate or Exchangeable Certificate to be exchanged and 

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Exchangeable REMIC Certificates or Exchangeable Certificates to be received; the outstanding portion of the Certificate Principal Balance and the Maximum Original Class Certificate Principal Balance of the Exchangeable REMIC Certificates or Exchangeable Certificates to be exchanged; the Certificateholder’s Depository participant number; and the proposed exchange date.  After receiving the notice, the Securities Administrator shall e-mail the Certificateholder with wire payment instructions relating to the exchange fee.  The Certificateholder will utilize the “deposit and withdrawal system” at the Depository to exchange the Certificates.  The Securities Administrator shall verify the proposed proportions to ensure that the principal and interest entitlements of the Certificates received equal the entitlements of the Certificates surrendered. If there is an error, the exchange will not occur until such error is corrected.  Unless rejected for error, a notice becomes irrevocable on the third Business Day before the proposed exchange date.

(d)

Notwithstanding any other provision herein set forth, a fee of $5,000 shall be payable to the Securities Administrator in connection with each exchange.

(e)

The Securities Administrator shall make the first distribution on an Exchangeable REMIC Certificate or Exchangeable Certificate received in an exchange transaction on the Distribution Date in the month following the month of the exchange to the Certificateholder of record as of the close of business on the last day of the month of the exchange.

ARTICLE VI

THE SERVICER, THE MASTER SERVICER AND THE DEPOSITOR

Section 6.01.

Liability of the Servicer, the Master Servicer and the Depositor.

The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Servicer herein.  The Master Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Master Servicer herein.  The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Depositor herein. 

Section 6.02.

Merger or Consolidation of, or Assumption of the Obligations of, the Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Depositor.

Any entity into which the Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Depositor may be merged or consolidated, or any entity resulting from any merger, conversion or consolidation to which Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Depositor shall be a party, or any organization succeeding to the business of Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Depositor, shall be the successor of the Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer or the Depositor, as the case may be, hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that the successor or 

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surviving Person to the Servicer shall satisfy all the requirements of Section 7.05 with respect to the qualifications of a successor Servicer.

Section 6.03.

Servicer and Master Servicer Not to Resign.

Subject to the provisions of Section 6.02 and Section 7.05, neither the Servicer nor the Master Servicer shall resign from the obligations and duties hereby imposed on it except (i) upon determination that the performance of its obligations or duties hereunder are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it or its subsidiaries or Affiliates, the other activities of the Servicer or the Master Servicer, as applicable, so causing such a conflict being of a type and nature carried on by the Servicer or the Master Servicer, as applicable, or their respective subsidiaries or Affiliates at the date of this Agreement or (ii) upon satisfaction of the following conditions: the Servicer or the Master Servicer, as applicable, has proposed a successor Servicer or successor Master Servicer to the Trustee and the Master Servicer (in the case of a proposed successor Servicer) in writing and such proposed successor Servicer or successor Master Servicer is reasonably acceptable to the Trustee and the Master Servicer (in the case of a successor Servicer); provided, however, that if PennyMac Loan Services, LLC is the resigning Servicer, all power and authority of the Servicer shall pass to and be vested in SPS and, in the case of (ii) above, PennyMac Loan Services, LLC shall not be required to propose any successor Servicer to the Trustee or the Master Servicer.  In the case of the resignation of the Master Servicer or if PennyMac Loan Services, LLC is not the resigning Servicer, no such resignation by the Servicer or the Master Servicer, as applicable, shall become effective until a successor party (including the Master Servicer as the successor to the resigning Servicer) shall have assumed the Servicer’s or Master Servicer’s responsibilities and obligations hereunder, as the case may be, or the Master Servicer shall have designated a successor Servicer in accordance with Section 7.05 and such successor Servicer shall have assumed the Servicer’s responsibilities and obligations hereunder.  Any such determination permitting the resignation of the Servicer or the Master Servicer, as applicable, pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee and the Master Servicer (in the case of the Servicer).

Section 6.04.

Delegation of Duties.

In the ordinary course of business, the Servicer at any time may delegate any of its duties hereunder to any Person, including any of its Affiliates, who agrees to conduct such duties in accordance with standards comparable to those set forth in Section 3.01.  Such delegation shall not relieve the Servicer of its liabilities and responsibilities with respect to such duties and shall not constitute a resignation.  The Servicer shall provide the Trustee and the Master Servicer with written notice prior to the delegation of any of its duties to any Person or any of the Servicer’s Affiliates or their respective successors and assigns.

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ARTICLE VII

DEFAULT

Section 7.01.

Events of Default.

(a)

If any one of the following events (a “Servicer Event of Default”) shall occur and be continuing with respect to the Servicer (and not the Interim Subservicer): 

(i)

(A)

The failure by the Servicer to make any required Advance or to pay Compensating Interest as set forth in this Agreement; or (B) any failure by the Servicer to deposit amounts in the Servicer Custodial Account or remit to the Master Servicer for deposit in the Master Servicer Custodial Account any payment required to be made in the amount and manner provided herein, which failure continues unremedied for a period of one (1) Business Day after the date upon which written notice of such failure shall have been given to the Servicer by the Trustee, the Master Servicer, the Securities Administrator or the Depositor; or 

(ii)

failure on the part of the Servicer duly to observe or perform in any material respect any other covenants or agreements of the Servicer set forth in the Certificates or in this Agreement, which covenants and agreements continue unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, the Master Servicer, the Securities Administrator or the Depositor, or to the Servicer, the Master Servicer, the Securities Administrator, the Depositor, and the Trustee by the Holders of Certificates evidencing Voting Rights aggregating not less than 25% of all Certificates affected thereby; or 

(iii)

the entry of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings against the Servicer, or for the winding up or liquidation of the Servicer’s affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or

(iv)

the consent by the Servicer to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to substantially all of its property; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations; or

(v)

failure by the Servicer to maintain its license to do business in any jurisdiction where a Mortgaged Property is located if such license is required; provided, however, that such failure shall not constitute a Servicer Event of Default if within 30 days the Servicer has arranged for the subservicing of such Mortgage Loan by a 

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subservicer that satisfies the licensing requirements for the jurisdiction where such Mortgaged Property is located; or

(vi)

the Servicer ceases to meet the minimum net worth requirements of Fannie Mae set forth in Fannie Mae’s Announcement 08-23: Policy Changes with Respect to Lender Eligibility and Contractual Requirements (09/16/08), as such requirements may be amended from time to time by Fannie Mae; or

(vii)

an intentional or willful pattern of violations of the Delegated Authority Guidelines by the Servicer.

(b)

Then, except as set forth in the proviso to this sentence, so long as a Servicer Event of Default shall not have been remedied within the applicable grace period, if any, the Master Servicer may, and at the direction of the Holders of not less than 51% of the Voting Rights shall, by notice then given in writing to the Servicer, terminate all of the rights and obligations of the Servicer as servicer under this Agreement; provided, however, in the case of any Servicer Event of Default set forth in Section 7.01(a)(vii) (for which there shall be no grace period), the Interim Subservicer and not the Master Servicer may, by notice given in writing to the Servicer (with a copy to the Master Servicer), terminate all of the rights and obligations of the Servicer as servicer under this Agreement.  Any such notice by the Master Servicer or Interim Subservicer to the Servicer shall also be given to the Depositor and the Trustee.  On or after the receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Certificates or the Mortgage Loans or otherwise, shall pass to and be vested in SPS as successor Servicer pursuant to and under this Section 7.01 and Section 7.05(a), unless SPS is serving at such time as the Servicer in which case the Master Servicer shall assume the role of the Servicer or appoint a successor Servicer pursuant to Section 7.05, and, without limitation, the Master Servicer is hereby authorized and empowered to execute and deliver, on behalf of the 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 notice of termination.  The Servicer agrees to cooperate with the Master Servicer in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the transfer to SPS (or the Master Servicer or any successor Servicer appointed by the Master Servicer, if SPS is currently the Servicer) for the administration by it of all cash amounts that have been deposited by the Servicer in the Servicer Custodial Account or thereafter received by the Servicer with respect to the Mortgage Loans.  Upon obtaining written notice or actual knowledge of the occurrence of any Servicer Event of Default, the Person obtaining such notice or knowledge shall give prompt written notice thereof to the Master Servicer and the Securities Administrator (who shall in turn give prompt written notice to the Certificateholders at their respective addresses appearing in the Certificate Register).  All costs and expenses (including attorneys’ fees) incurred in connection with amending this Agreement to reflect such succession as Servicer pursuant to this Section 7.01 shall be paid by the predecessor Servicer or from funds in the Master Servicer Custodial Account if the predecessor Servicer fails to pay such costs and expenses.  Notwithstanding the termination of the Servicer pursuant hereto, (i) the Servicer shall remain liable for its actions hereunder and any causes of action arising out of any Servicer Event of Default occurring prior to such termination and (ii) the Servicer shall be entitled to receive any amount owing to it under 

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Section 3.08(a)(i) through (vii), the entitlement to which arose prior to its termination under this Section 7.01.

(c)

If any one of the following events (a “Master Servicer Event of Default”) shall occur and be continuing:

(i)

any failure by the Master Servicer to remit amounts to the Securities Administrator for deposit into the Distribution Account in the amount and manner provided herein so as to enable the Securities Administrator to distribute to Holders of Certificates any payment required to be made under the terms of such Certificates and this Agreement which continues unremedied by 12:00 P.M. New York time on the related Distribution Date; or

(ii)

failure on the part of the Master Servicer duly to observe or perform in any material respect any other covenants or agreements of the Master Servicer set forth in the Certificates or in this Agreement, which covenants and agreements continue unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Securities Administrator, the Trustee, the Servicer or the Depositor, or to the Master Servicer, the Depositor, the Securities Administrator, the Servicer and the Trustee by the Holders of Certificates evidencing Voting Rights aggregating not less than 25% of all Certificates affected thereby; or

(iii)

the entry of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings against the Master Servicer, or for the winding up or liquidation of the Master Servicer’s affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or

(iv)

the consent by the Master Servicer to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Master Servicer or of or relating to substantially all of its property; or the Master Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations.

(d)

Then, and in each and every such case, so long as a Master Servicer Event of Default shall not have been remedied within the applicable grace period, the Trustee may, and shall at the direction of the Holders of not less than 51% of the Voting Rights, by notice then given in writing to the Master Servicer, terminate all of the rights and obligations of the Master Servicer as master servicer under this Agreement.  Any such notice by the Trustee to the Master Servicer shall also be given to the Depositor, the Securities Administrator, the Servicer and the Custodian.  On or after the receipt by the Master Servicer of such written notice and subject to Section 7.05(d), all authority and power of the Master Servicer under this Agreement, whether with respect to the Certificates or the Mortgage Loans or otherwise, shall pass to and be vested in 

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the Trustee as successor Master Servicer pursuant to and under this Section 7.01 and Section 7.05(d), unless and until such time as the Trustee shall appoint a successor Master Servicer pursuant to Section 7.05(d), and, without limitation, the Trustee is hereby authorized and empowered to execute and deliver, on behalf of the Master 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 notice of termination.  The Master Servicer agrees to cooperate with the Trustee in effecting the termination of the responsibilities and rights of the Master Servicer hereunder, including, without limitation, the transfer to the Trustee for the administration by it of all cash amounts that have been deposited by the Master Servicer in the Master Servicer Custodial Account or thereafter received by the Master Servicer with respect to the Mortgage Loans.  Upon obtaining written notice or actual knowledge of the occurrence of any Master Servicer Event of Default, the Person obtaining such notice or knowledge shall give prompt written notice thereof to the Trustee and the Securities Administrator (who shall in turn give prompt written notice to the Certificateholders at their respective addresses appearing in the Certificate Register).  All costs and expenses (including attorneys’ fees) incurred in connection with amending this Agreement to reflect such succession as Master Servicer pursuant to this Section 7.01 shall be paid by the predecessor Master Servicer (unless the predecessor Master Servicer is the Trustee, in which event the previous Master Servicer shall be responsible for payment of such costs and expenses so long as the transfer of servicing is not the result of a Master Servicer Event of Default on the part of the Trustee in its capacity as the predecessor Master Servicer).  Notwithstanding the termination of the Master Servicer pursuant hereto, the Master Servicer shall remain liable for its actions hereunder and any causes of action arising out of any Master Servicer Event of Default occurring prior to such termination.

(e)

If the Master Servicer and the Securities Administrator are the same Person, then upon any resignation or termination of the Master Servicer hereunder, the Securities Administrator shall resign or be terminated as securities administrator hereunder and replaced as provided in Section 8.08.

Section 7.02.

Remedies of Trustee.

(a)

During the continuance of any Master Servicer Event of Default, so long as such Master Servicer Event of Default shall not have been remedied, the Trustee, in addition to the rights specified in Section 7.01, shall have the right, in its own name as trustee of an express trust, to take all actions now or hereafter existing at law, in equity or by statute to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Certificateholders (including the institution and prosecution of all judicial, administrative and other proceedings and the filing of proofs of claim and debt in connection therewith).  Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Master Servicer Event of Default.

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Section 7.03.

Directions by Certificateholders and Duties of Trustee During Master Servicer Event of Default.

During the continuance of any Master Servicer Event of Default, Holders of Certificates evidencing Voting Rights aggregating not less than 25% of each Class of Certificates affected thereby may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Agreement; provided, however, that the Trustee shall be under no obligation to pursue any such remedy, or to exercise any of the trusts or powers vested in it by this Agreement (including, without limitation, (a) the conducting or defending of any administrative action or litigation hereunder or in relation hereto, and (b) the terminating of the Master Servicer or any successor Master Servicer from its rights and duties as master servicer hereunder) at the request, order or direction of any of the Certificateholders, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby and, provided, further, that, subject to the provisions of Section 8.01, the Trustee shall have the right to decline to follow any such direction if the Trustee, based upon an Opinion of Counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith determines that the action or proceeding so directed would subject the Trustee to a risk of personal liability or be unjustly prejudicial to the non-assenting Certificateholders.

Section 7.04.

Action upon Certain Failures of the Master Servicer and upon Master Servicer Event of Default.

In the event that a Responsible Officer of the Trustee shall have actual knowledge of any failure of the Master Servicer specified in Section 7.01(c)(i) or (ii) which would become a Master Servicer Event of Default upon the Master Servicer’s failure to remedy the same after notice, the Trustee shall give notice thereof to the Master Servicer.  If a Responsible Officer of the Trustee shall have actual knowledge of a Master Servicer Event of Default, the Trustee shall give prompt written notice thereof to the Securities Administrator and the Securities Administrator shall give prompt written notice thereof to the Certificateholders.

Section 7.05.

SPS or Master Servicer to Act; Trustee to Act; Appointment of Successor.

(a)

On and after the time the Servicer resigns or receives a notice of termination pursuant to Section 7.01, SPS (or the Master Servicer or other successor appointed by the Master Servicer, if SPS resigns or is terminated as Servicer) shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof.  SPS hereby agrees as Back-up Servicer hereunder to act as successor Servicer to PennyMac Loan Services, LLC and succeed to all the responsibilities, duties and liabilities placed on the Servicer by the terms and provisions hereof in the event of the resignation or removal of PennyMac Loan Services, LLC, as Servicer.  Notwithstanding the foregoing, (i) the parties hereto agree that SPS (or the Master Servicer or other successor appointed by the Master Servicer, if SPS resigns or is terminated as Servicer), in its capacity as successor Servicer, immediately will assume all of the obligations of the Servicer under this Agreement and (ii) SPS (or the Master Servicer or other successor appointed by the 

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Master Servicer, if SPS resigns or is terminated as Servicer), in its capacity as successor Servicer, shall not be responsible for the lack of information and/or documents that it cannot obtain through reasonable efforts.  Subject to Section 7.05(b), as compensation therefor, SPS (or the Master Servicer or other successor appointed by the Master Servicer, if SPS resigns or is terminated as Servicer), as successor Servicer, shall be entitled to such compensation as the resigning or terminated Servicer would have been entitled to hereunder if no such notice of resignation or termination had been given.  Notwithstanding the above, if SPS resigns or is terminated as Servicer, the Master Servicer may, if it shall be unwilling so to act, or shall, if it is legally unable so to act, appoint, or petition a court of competent jurisdiction to appoint, any established housing and home finance institution having a net worth of not less than $10,000,000 as the successor to the resigning or terminated Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder.  The appointment of a successor Servicer shall not affect any liability of the predecessor Servicer which may have arisen under this Agreement prior to its resignation or termination as Servicer, nor shall any successor Servicer be liable for any acts or omissions of the predecessor Servicer or for any breach by such predecessor Servicer of any of its representations or warranties contained herein or in any related document or agreement.  If SPS resigns or is terminated as Servicer, pending appointment of a successor to SPS and unless the Master Servicer is prohibited by law from so acting, the Master Servicer shall act in such capacity as provided above.  The Master Servicer (or any other successor) shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession.  All Servicing Transfer Costs shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs, and if such predecessor Servicer defaults in its obligation to pay such costs, such costs shall be paid by the successor Servicer or the Master Servicer (in which case the successor Servicer or the Master Servicer shall be entitled to reimbursement therefor from the assets of the Trust).

(b)

In connection with the appointment of a successor Servicer to SPS as specified in Section 7.05(a), the Master Servicer may make such arrangements for the compensation of such successor as it and such successor agree, provided that such compensation shall not exceed the servicing compensation set forth in Section 3.14(b).

(c)

Any successor, including SPS or the Master Servicer, to the Servicer as servicer shall during the term of its service as servicer maintain in force (i) a policy or policies of insurance covering errors and omissions in the performance of its obligations as servicer hereunder and (ii) a fidelity bond in respect of its officers, employees and agents to the same extent as the Servicer is so required pursuant to Section 3.10.

(d)

On and after the time the Master Servicer resigns or receives a notice of termination pursuant to Section 7.01, the Trustee (or other named successor) shall be the successor in all respects to the Master Servicer in its capacity as master servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Master Servicer by the terms and provisions hereof or shall appoint a successor pursuant to this Section 7.02 and the transition to such successor Master Servicer shall be fully effected within 90 days following the termination of the prior Master Servicer.  Notwithstanding the foregoing, (i) the parties hereto agree that the Trustee, in its capacity as successor Master Servicer, immediately will assume all of the obligations of the Master Servicer under this Agreement, (ii) the Trustee, in its capacity as 

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successor Master Servicer, shall not be responsible for the lack of information and/or documents that it cannot obtain through reasonable efforts and (iii) under no circumstances shall any provision of this Agreement be construed to require the Trustee to be liable for any losses or acts or omissions of the predecessor Master Servicer hereunder.  As compensation therefor, the Trustee, as successor Master Servicer, shall be entitled to such compensation as the resigning or terminated Master Servicer would have been entitled to hereunder if no such notice of resignation or termination had been given.  Notwithstanding the above, the Trustee may, if it shall be unwilling so to act, or shall, if it is legally unable so to act, appoint, or petition a court of competent jurisdiction to appoint, any established housing and home finance institution having a net worth of not less than $10,000,000 as the successor to the terminated or resigning Master Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Master Servicer hereunder.  The appointment of a successor Master Servicer shall not affect any liability of the predecessor Master Servicer which may have arisen under this Agreement prior to its termination or resignation as Master Servicer, nor shall any successor Master Servicer be liable for any acts or omissions of the predecessor Master Servicer or for any breach by such predecessor Master Servicer of any of its representations or warranties contained herein or in any related document or agreement.  Pending appointment of a successor Master Servicer to the resigning or terminated Master Servicer hereunder, unless the Trustee is prohibited by law from so acting, the Trustee shall act in such capacity as provided above.  The Trustee (or any other successor) shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession.  All Master Servicing Transfer Costs shall be paid by the predecessor Master Servicer (unless the predecessor Master Servicer is the Trustee, in which event the previous Master Servicer shall be responsible for the payment of such costs and expenses so long as the transfer to a new Master Servicer is not as a result of a Master Servicer Event of Default on the part of the Trustee in its capacity as Master Servicer) upon presentation of reasonable documentation of such costs, and if such predecessor Master Servicer defaults in its obligation to pay such costs, such costs shall be paid by the successor master servicer or the Trustee (in which case the successor Master Servicer or the Trustee shall be entitled to reimbursement therefor from the assets of the Trust).

(e)

In connection with the appointment of a successor master servicer or the assumption of the duties of the Master Servicer, as specified in Section 7.02(d), the Trustee may make such arrangements for the compensation of such successor as it and such successor agree; provided, however, that such compensation shall not exceed the compensation of the Master Servicer being replaced.

(f)

Any successor, including the Trustee, to the Master Servicer as master servicer shall during the term of its service as master servicer maintain in force (i) a policy or policies of insurance covering errors and omissions in the performance of its obligations as master servicer hereunder and (ii) a fidelity bond in respect of its officers, employees and agents to the same extent as the Master Servicer is so required pursuant to Section 3.10.

Section 7.06.

Notification to Certificateholders.

Upon any termination or appointment of a successor to the Servicer pursuant to this Article VII, the Securities Administrator shall give prompt written notice thereof to Certificateholders at their respective addresses appearing in the Certificate Register and the 

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Depositor.  Upon any termination or appointment of a successor to the Master Servicer pursuant to this Article VII, the Securities Administrator shall give prompt written notice thereof to Certificateholders at their respective addresses appearing in the Certificate Register and the Depositor.

ARTICLE VIII

THE TRUSTEE, THE SECURITIES ADMINISTRATOR AND THE CUSTODIAN

Section 8.01.

Duties of Trustee and Securities Administrator.

(a)

The Trustee, prior to the occurrence of a Master Servicer Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge and after the curing or waiver of all Master Servicer Events of Default which may have occurred, and the Securities Administrator each undertake to perform such duties and only such duties as are specifically set forth in this Agreement.  In case a Master Servicer Event of Default has occurred of which a Responsible Officer of the Trustee shall have actual knowledge (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise as a reasonably prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

Each of the Trustee and the Securities Administrator, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee and the Securities Administrator which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they conform on their face to the requirements of this Agreement; provided, however, that neither the Trustee nor the Securities Administrator shall be responsible for the accuracy or content of any resolution, certificate, statement, opinion, report, document, order or other instrument furnished pursuant to any provision of this Agreement.  If any such instrument is found not to conform in any material respect to the requirements of this Agreement, the Trustee or the Securities Administrator, as the case may be, shall notify the Certificateholders of such instrument in the event that the Trustee or the Securities Administrator, after so requesting, does not receive a satisfactorily corrected instrument.

(b)

No provision of this Agreement shall be construed to relieve the Trustee or the Securities Administrator from liability for its own negligent action, its own negligent failure to act or its own willful misfeasance; provided, however, that:

(i)

Prior to the occurrence of a Master Servicer Event of Default, and after the curing or waiver of all such Master Servicer Events of Default which may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any 

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certificates or opinions furnished to it which on their face do not contradict the requirements of this Agreement;

(ii)

Neither the Trustee nor the Securities Administrator shall be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of such party, unless it shall be proved that the Trustee or the Securities Administrator, as the case may be, was negligent in ascertaining the pertinent facts;

(iii)

The Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of Certificateholders as provided in Section 7.03;

(iv)

The Trustee shall not be charged with knowledge of a default, failure, Servicer Event of Default or Master Servicer Event of Default unless a Responsible Officer of the Trustee assigned to and working in the Corporate Trust Office of the Trustee obtains actual knowledge of such default, failure, Servicer Event of Default or Master Servicer Event of Default or any Responsible Officer of the Trustee receives written notice of such default, failure, Servicer Event of Default or Master Servicer Event of Default at its Corporate Trust Office from any of the other parties to this Agreement or any Certificateholder; and 

(v)

Except to the extent provided in Section 7.05 in respect of the Trustee as successor Master Servicer, no provision in this Agreement shall require the Trustee or the Securities Administrator to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its duties as Trustee or Securities Administrator hereunder, or in the exercise of any of its rights or powers, if the Trustee or the Securities Administrator shall have reasonable grounds for believing that repayment of funds or adequate indemnity or security satisfactory to it against such risk or liability is not reasonably assured to it.

Section 8.02.

Certain Matters Affecting the Trustee and the Securities Administrator.

(a)

Except as otherwise provided in Section 8.01: 

(i)

The Trustee and the Securities Administrator may request and rely upon, and shall be protected in acting or refraining from acting upon, any resolution, Officer’s Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; 

(ii)

The Trustee and the Securities Administrator may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; 

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(iii)

Neither the Trustee nor the Securities Administrator shall be under any obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of the Certificateholders pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee or the Securities Administrator, as the case may be, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;  

(iv)

Neither the Trustee nor the Securities Administrator shall be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; 

(v)

Prior to the occurrence of a Master Servicer Event of Default and after the curing of all Master Servicer Events of Default which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or documents, unless requested in writing to do so by the Majority Certificateholders; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee not reasonably assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity against such cost, expense or liability as a condition to such proceeding; 

(vi)

The Trustee shall not be accountable, have any liability or make any representation as to any acts or omissions hereunder of the Servicer, Master Servicer, Interim Subservicer, Back-up Servicer or Custodian until, with respect to the Master Servicer, such time as the Trustee may be required to act as Master Servicer pursuant to Section 7.05;

(vii)

The Trustee and the Securities Administrator may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian and neither the Trustee nor the Securities Administrator shall be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed by it with due care; and

(viii)

The right of the Trustee or the Securities Administrator to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and neither the Trustee nor the Securities Administrator shall be answerable for other than its negligence or willful misconduct in the performance of such act.

Section 8.03.

Neither the Trustee nor the Securities Administrator is Liable for Certificates or Mortgage Loans.

The recitals contained herein and in the Certificates (other than the signature of the Securities Administrator on the Certificates) shall be taken as the statements of the Depositor, 

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and neither the Trustee nor the Securities Administrator assumes any responsibility for the correctness of the same.  Neither the Trustee nor the Securities Administrator makes any representations as to the validity or sufficiency of this Agreement or of the Certificates (other than the signature of the Securities Administrator on the Certificates) or of any Mortgage Loan or Related Document.  Neither the Trustee nor the Securities Administrator shall be accountable for the use or application by the Master Servicer, or for the use or application of any funds paid to the Master Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the Master Servicer Custodial Account by the Master Servicer.  Neither the Trustee nor the Securities Administrator shall at any time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage or any Mortgage Loan, or the perfection and priority of any Mortgage or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust or its ability to generate the payments to be distributed to Certificateholders under this Agreement, including, without limitation:  the existence, condition and ownership of any Mortgaged Property; the existence and enforceability of any hazard insurance thereon (other than if the Trustee shall assume the duties of the Master Servicer pursuant to Section 7.05(d) and thereupon only for the acts or omissions of the Trustee as the successor to the Master Servicer); the validity of the assignment of any Mortgage Loan to the Trustee or of any intervening assignment; the completeness of any Mortgage Loan; the performance or enforcement of any Mortgage Loan (other than if the Trustee shall assume the duties of the Master Servicer pursuant to Section 7.05(d) and thereupon only for the acts or omissions of the Trustee as the successor to the Master Servicer); the compliance by the Depositor or the Master Servicer with any warranty or representation made under this Agreement or in any related document or the accuracy of any such warranty or representation prior to the Trustee’s or Securities Administrator’s receipt of written notice or actual knowledge of any non-compliance therewith or any breach thereof; any investment of monies by or at the direction of the Master Servicer or any loss resulting therefrom; the acts or omissions of any of the Master Servicer (other than if the Trustee shall assume the duties of the Master Servicer pursuant to Section 7.05(d) and thereupon only for the acts and omissions of the Trustee as the successor to the Master Servicer), or any Mortgagor; any action of the Master Servicer (other than if the Trustee shall assume the duties of the Master Servicer pursuant to Section 7.05(d) and thereupon only for the acts or omissions of the Trustee as the successor to the Master Servicer), taken in the name of the Trustee or the Securities Administrator; the failure of the Master Servicer to act or perform any duties required of it as agent of the Trustee hereunder; or any action by the Trustee or the Securities Administrator taken at the instruction of the Master Servicer (other than if the Trustee shall assume the duties of the Master Servicer pursuant to Section 7.05(d) and thereupon only for the acts or omissions of the Trustee as the successor to the Master Servicer); provided, however, that the foregoing shall not relieve the Trustee and the Securities Administrator of their obligation to perform their respective duties under this Agreement.  Neither the Trustee nor the Securities Administrator shall have any responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to them hereunder.

Section 8.04.

Trustee and Securities Administrator May Own Certificates.

Each of the Trustee and the Securities Administrator in their individual or any other capacities may become an owner or pledgee of Certificates with the same rights as they would have if it were not the Trustee or the Securities Administrator, as the case may be, and may 

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transact any banking and trust business with the Servicer, the Master Servicer, the Custodian, the Depositor or their Affiliates.

Section 8.05.

Trustee, Custodian and Securities Administrator Compensation and Expenses.

The Trustee, as compensation for its services hereunder, shall be entitled to a fee in an amount agreed upon between the Trustee and the Master Servicer, payable by the Master Servicer out of its own funds and not out of any funds of the Trust Fund.  The Custodian, as compensation for its services hereunder, shall be entitled to a fee in an amount agreed upon between the Custodian and the Servicer, payable by the Servicer out of its own funds and not out of any funds of the Trust Fund.  The Securities Administrator shall be entitled to the Securities Administrator Distribution Account Reinvestment Income as compensation for its services hereunder.  Except as otherwise provided herein, none of the Trustee, the Custodian or the Securities Administrator shall be entitled to payment or reimbursement for any routine ongoing expenses incurred by the Trustee, the Custodian or the Securities Administrator, as applicable, in the ordinary course of its duties as Trustee, Custodian or Securities Administrator.  This Section shall survive termination of this Agreement or the resignation or removal of the Trustee, the Custodian or the Securities Administrator.

Section 8.06.

Eligibility Requirements for Trustee and Securities Administrator.

The Trustee and the Securities Administrator shall at all times be an entity duly organized and validly existing under the laws of the United States of America or any state thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and a minimum long-term debt rating of “BBB” by S&P and a long term debt rating of at least “Baa2” or better by Moody’s and subject to supervision or examination by federal or state authority.  The Trustee shall not be an affiliate of the Depositor, the Servicer or the Master Servicer.  If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 8.06, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  The principal office of the Trustee (other than the initial Trustee) shall be in a state with respect to which an Opinion of Counsel has been delivered to such Trustee at the time such Trustee is appointed Trustee to the effect that the Trust will not be a taxable entity under the laws of such state.  In case at any time the Trustee or the Securities Administrator shall cease to be eligible in accordance with the provision of this Section 8.06, the Trustee or the Securities Administrator, as the case may be, shall resign immediately in the manner and with the effect specified in Section 8.07.

Section 8.07.

Resignation or Removal of Trustee or Securities Administrator.

The Trustee or the Securities Administrator may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the other parties to this Agreement.  Upon receiving such notice of resignation, the Depositor shall promptly appoint a successor Trustee or Securities Administrator by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee or Securities Administrator, as 

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applicable, and one copy to the successor Trustee or Securities Administrator, as the case may be.  If no successor Trustee or Securities Administrator, as applicable, shall have been so appointed and having accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee or Securities Administrator, as applicable, may petition any court of competent jurisdiction for the appointment of a successor Trustee or Securities Administrator, as the case may be.

If at any time the Trustee or the Securities Administrator shall cease to be eligible in accordance with the provisions of Section 8.06 and shall fail to resign after written request therefor by the Depositor, or if at any time the Trustee or the Securities Administrator shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or the Securities Administrator or of their respective property shall be appointed, or any public officer shall take charge or control of the Trustee or the Securities Administrator or of their respective property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Depositor may remove the Trustee or the Securities Administrator, as the case may be, and appoint a successor Trustee or Securities Administrator, as applicable, by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee or Securities Administrator so removed and one copy to the successor Trustee or Securities Administrator, as applicable.

The Majority Certificateholders may at any time remove the Trustee or the Securities Administrator, as the case may be, by written instrument or instruments delivered to the other parties to this Agreement; the Depositor shall thereupon use its best efforts to appoint a successor Trustee or Securities Administrator, as the case may be, in accordance with this Section.

Any resignation or removal of the Trustee or the Securities Administrator and appointment of a successor Trustee or Securities Administrator, as applicable, pursuant to any of the provisions of this Section 8.07 shall become effective upon acceptance of appointment by the successor Trustee or Securities Administrator, as the case may be, as provided in Section 8.08.

If the Securities Administrator and the Master Servicer are the same Person, then upon any resignation or termination of the Securities Administrator hereunder, the Master Servicer shall resign or be terminated as master servicer hereunder and replaced as provided in Section 7.05.

Section 8.08.

Successor Trustee or Securities Administrator.

Any successor Trustee or Securities Administrator appointed as provided in Section 8.07 shall execute, acknowledge and deliver to the Depositor, the Servicer, the Master Servicer, the Custodian and to its predecessor Trustee or Securities Administrator, as applicable, an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee or Securities Administrator, as the case may be, shall become effective, and such successor Trustee or Securities Administrator, as applicable, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee or Securities Administrator, as the case may be.  The other parties to this Agreement and the predecessor Trustee or Securities Administrator, as the case may be, shall execute and deliver such 

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instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Trustee or Securities Administrator, as applicable, all such rights, powers, duties and obligations.

No successor Trustee or Securities Administrator shall accept appointment as provided in this Section 8.08 unless at the time of such acceptance such successor Trustee or Securities Administrator, as applicable, shall be eligible under the provisions of Section 8.06.

Upon acceptance of appointment by a successor Trustee or Securities Administrator, as applicable, as provided in this Section 8.08, the Master Servicer shall cooperate to mail notice of the succession of such Trustee or Securities Administrator, as the case may be, hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register.  If the Master Servicer fails to mail such notice within ten days after acceptance of appointment by the successor Trustee or Securities Administrator, as applicable, the successor Trustee or Securities Administrator, as the case may be, shall cause such notice to be mailed at the expense of the Master Servicer.

Section 8.09.

Merger or Consolidation of Trustee, Securities Administrator or Custodian.

Any entity into which the Trustee, the Securities Administrator or Custodian, as applicable, may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Trustee, Securities Administrator or Custodian, as applicable, shall be a party, or any entity succeeding to the business of the Trustee, the Securities Administrator or Custodian, as the case may be, shall be the successor hereunder, provided such entity shall be eligible under the provisions of Sections 8.06 and 8.08 or 8.16, as applicable, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding.

Section 8.10.

Appointment of Co-Trustee or Separate Trustee.

Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust or any Mortgaged Property may at the time be located, the Master Servicer and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Certificateholders, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 8.10, such powers, duties, obligations, rights and trusts as the Master Servicer and the Trustee may consider necessary or desirable.  Any such co-trustee or separate trustee shall be subject to the written approval of the Master Servicer.  If the Master Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in the case a Master Servicer Event of Default shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment.  No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 8.06, and no notice to Certificateholders of the 

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appointment of any co-trustee or separate trustee shall be required under Section 8.08.  Any fees and expenses of any co-trustee or separate trustee appointed hereunder shall be an expense of the Trust.

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

(i)

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

(ii)

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

(iii)

the Depositor and the Trustee, acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee.

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

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

Section 8.11.

Limitation of Liability.

The Certificates are executed by the Securities Administrator, not in its individual capacity but solely as Securities Administrator of the Trust, in the exercise of the powers and authority conferred and vested in it by this Agreement.  Each of the undertakings and agreements made on the part of the Securities Administrator in the Certificates is made and intended not as a 

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personal undertaking or agreement by the Securities Administrator but is made and intended for the purpose of binding only the Trust.

Section 8.12.

Trustee or Securities Administrator May Enforce Claims Without Possession of Certificates.

(a)

All rights of action and claims under this Agreement or the Certificates may be prosecuted and enforced by the Trustee or the Securities Administrator, as the case may be, without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and such proceeding instituted by the Trustee or the Securities Administrator, as the case may be, shall be brought in its own name or in its capacity as Trustee or the Securities Administrator, as the case may be.  Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursement and advances of the Trustee or the Securities Administrator, as the case may be, or their agents and counsel, be for the ratable benefit of the Certificateholders in respect of which such judgment has been recovered.

(b)

The Trustee shall afford the Depositor, the Servicer, the Master Servicer, the Securities Administrator and each Certificateholder upon reasonable notice during the Trustee’s normal business hours, access to all records maintained by the Trustee in respect of its duties hereunder and access to officers of the Trustee responsible for performing such duties.  The Trustee shall cooperate fully with the Servicer, the Master Servicer, the Securities Administrator, the Depositor and such Certificateholder and shall make available to the Servicer, the Master Servicer, the Securities Administrator, the Depositor and such Certificateholder for review and copying at the expense of the party requesting such copies, such books, documents or records as may be requested with respect to the Trustee’s duties hereunder.  The Servicer, the Master Servicer, the Securities Administrator, the Depositor and the Certificateholders shall not have any responsibility or liability for any action or failure to act by the Trustee and are not obligated to supervise the performance of the Trustee under this Agreement or otherwise.

(c)

The Securities Administrator shall afford the Depositor, the Servicer, the Master Servicer, the Trustee and each Certificateholder upon reasonable notice during the Securities Administrator’s normal business hours, access to all records maintained by the Securities Administrator in respect of its duties hereunder and access to officers of the Securities Administrator responsible for performing such duties.  The Securities Administrator shall cooperate fully with the Servicer, the Master Servicer, the Trustee, the Depositor and such Certificateholder and shall make available to the Servicer, the Master Servicer, the Trustee, the Depositor and such Certificateholder for review and copying at the expense of the party requesting such copies, such books, documents or records as may be requested with respect to the Securities Administrator’s duties hereunder.  The Servicer, the Master Servicer, the Trustee, the Depositor and the Certificateholders shall not have any responsibility or liability for any action or failure to act by the Securities Administrator and are not obligated to supervise the performance of the Securities Administrator under this Agreement or otherwise.

Section 8.13.

Suits for Enforcement.

In case a Servicer Event of Default, Master Servicer Event of Default or other default by the Servicer or the Master Servicer, as applicable, hereunder shall occur and be continuing, the 

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Trustee may proceed to protect and enforce its rights and the rights of the Certificateholders under this Agreement by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the execution of any power granted in this Agreement or for the enforcement of any other legal, equitable or other remedy, as the Trustee, being advised by counsel, and subject to the foregoing, shall deem most effectual to protect and enforce any of the rights of the Trustee and the Certificateholders upon receipt of satisfactory indemnification from Certificateholders pursuant to Section 7.03.

Section 8.14.

Waiver of Bond Requirement.

The Trustee shall be relieved of, and each Certificateholder hereby waives, any requirement of any jurisdiction in which the Trust, or any part thereof, may be located that the Trustee post a bond or other surety with any court, agency or body whatsoever.

Section 8.15.

Waiver of Inventory, Accounting and Appraisal Requirement.

The Trustee shall be relieved of, and each Certificateholder hereby waives, any requirement of any jurisdiction in which the Trust, or any part thereof, may be located that the Trustee file any inventory, accounting or appraisal of the Trust with any court, agency or body at any time or in any manner whatsoever.

Section 8.16.

Appointment of Custodian.

(a)

The Custodian shall at all times be (i) an entity duly organized and validly existing under the laws of the United States of America or any state thereof, (ii) qualified to do business in the jurisdiction in which it holds a Mortgage File and (iii) a depository institution subject to supervision by federal or state authority with a combined capital and surplus of at least $10,000,000.  The Bank of New York Mellon Trust Company, N.A. is hereby appointed as the Custodian and the Trustee shall have no responsibility or liability for any act or omission of The Bank of New York Mellon Trust Company, N.A., as the Custodian.

(b)

No representations, warranties, covenants (other than those expressly made by the Custodian in this Agreement) or obligations of the Custodian shall be implied with respect to this Agreement or the Custodian’s services hereunder.  Without limiting the generality of the foregoing, the Custodian:

(i)

shall have no duties or obligations other than those specifically set forth herein or as may subsequently be agreed in writing by the parties hereto and shall use reasonable care in the performance of its duties hereunder and shall act in good faith and in accordance with the reasonable commercial standards of the mortgage banking business for document custodians;

(ii)

makes no representations as to and shall not be responsible for or required to verify (A) the validity, legality, enforceability, due authorization, effectiveness, recordability, insurability, sufficiency, value, form, substance, or genuineness of any of the documents contained in any Mortgage File or (B) the collectibility, ownership, 

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insurability, validity, transferability, insurability, value, effectiveness, perfection, priority or suitability of any Mortgage Loan;

(iii)

shall not be obligated to take any legal action hereunder that might in its judgment involve any expense or liability unless it has been furnished with indemnity satisfactory to it;

(iv)

may conclusively rely on and shall be fully protected in acting in good faith upon any certificate, instrument, opinion, notice, instructions, letter, telegram or other document or communication, or any security, delivered to it and in good faith believed by it to be genuine and to have been signed by the proper party or parties;

(v)

may rely on and shall be protected in acting in good faith upon the written instructions received from the Servicer, the Master Servicer or any Seller and any such employees and representatives of the Servicer, the Master Servicer or any Seller, that the Servicer, Master Servicer or Seller may hereinafter designate in writing;

(vi)

may consult with counsel satisfactory to it (including counsel for Servicer);

(vii)

shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or for any mistake of fact or law, or for anything that it may do or refrain from doing in connection therewith, except in the case of willful misfeasance, bad faith, fraud or negligence in the performance of its duties or by reasons of reckless disregard of its obligations or duties hereunder; and

(viii)

may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys.

(c)

The Custodian shall not be responsible for delays or failures in performance resulting from acts beyond its control.  Such acts shall include, but not be limited to, acts of God, strikes, lockouts, riots, acts of war or terrorism, epidemics, nationalization, expropriation, currency restrictions, governmental regulations superimposed after the fact, fire, communication line failures, power failures, earthquakes or other disasters.

(d)

In order to comply with laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including those relating to the funding of terrorist activities and money laundering, the Custodian is required to obtain, verify and record certain information relating to individuals and entities which maintain a business relationship with the Custodian.  Accordingly, the Servicer agrees to provide to the Custodian upon its request from time to time such identifying information and documentation as may be available for such party in order to enable the Custodian to comply with such laws, rules, regulations and executive orders.

(e)

In the event that the Custodian is directed by the Servicer to deliver Mortgage Files or other loan documents to any Person in accordance with the terms of this Agreement, the Servicer shall be responsible for compliance with all applicable laws and regulations regarding 

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customer information or personally identifiable information of a Mortgagor included in any such Mortgage Files or other loan documents.

(f)

In no event shall the Custodian or its directors, affiliates, officers, agents and employees be held liable for any exemplary, punitive, special, indirect or consequential damages of any kind resulting from any action taken or omitted to be taken by it or them hereunder or in connection herewith even if advised of the possibility of such damages.

(g)

Any other provision of this Agreement to the contrary notwithstanding, the Custodian shall have no notice of and shall not be bound by any of the terms and conditions of any other document or agreement executed or delivered in connection with, or intended to control any part of, the transactions anticipated by or referred to in this Agreement (including, but not limited to, the Mortgage Loan Purchase Agreement) unless the Custodian is a signatory party to that document or agreement.

(h)

As of the Closing Date, the Custodian shall be responsible for the safekeeping and custody of the Mortgage Files and the Custodian acknowledges the existence therein of the documents and the accuracy of the data described in the certification delivered on the Closing Date substantially in the form of Exhibit F hereto, other than with respect to those documents or data discrepancies identified in the final exception report provided in connection with the delivery of such certification.  Upon receipt of any trailing document, cured document or reinstated Mortgage File, the Custodian shall check such document or Mortgage File in under the same review terms as the certification, and confirm such check-in to the Servicer, the Sellers, the Securities Administrator and the Master Servicer by sending an updated exception report.  Upon such confirmation, the Custodian shall be responsible for the safekeeping and custody of such trailing document, cured document or reinstated Mortgage File, as the case may be.

(i)

The Custodian shall be under no responsibility or duty with respect to the disposition of any Mortgage File or any document constituting part of a Mortgage File while such Mortgage File or document is not in its possession.  If the Custodian shall request instructions from the Servicer or any other party with respect to any act, action or failure to act in connection with this Agreement, the Custodian shall be entitled to refrain from taking such action and continue to refrain from acting unless and until the Custodian shall have received written instructions from the Servicer or other party without incurring any liability therefor to the Servicer, or any other Person.  No provision of this Agreement shall require the Custodian to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties under this Agreement if it shall have grounds for believing that repayment of such funds or adequate indemnity is not reasonably assured to it.

(j)

Any notice, demand or request made to the Custodian shall be deemed to have been received on the date delivered to the premises of the Custodian (as evidenced, in the case of registered or certified mail, by the date noted on the return receipt, or in the case of facsimile or other telecommunication device, the date noted on the confirmation of such transmission), except that any notice, demand or request received by the Custodian after 5:00 P.M. (New York City time) shall be deemed to have been received on the next succeeding Business Day.

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(k)

The Custodian may terminate its obligations under this Agreement upon sixty 60 days’ prior written notice to the Servicer and the Trustee.  The Majority Certificateholders may also remove the Custodian upon sixty 60 days’ prior written notice to the other parties to this Agreement.  In the event of such termination or removal, the Trustee shall, within sixty (60) days, appoint a successor custodian meeting the requirements set forth in Section 8.16(a) hereof.  The Custodian, promptly upon payment of its fees and expenses, shall transfer to the successor custodian, as directed, all Mortgage Files being held by Custodian under this Agreement.  

The cost of the shipment of Mortgage Files arising out of the resignation or ineligibility of the Custodian shall be at the expense of the Custodian (and any release fees shall be waived) unless such resignation is due to the nonpayment of the Custodian’s fees and expenses by the Servicer, in which case such expense and fees shall be paid by the Servicer.  If the Custodian is removed by the Majority Certificateholders, such cost of the shipment of Mortgage Files and any release fees shall be paid by the Trust.  If a successor custodian is not appointed by the Trustee within sixty (60) days, all duties and obligations of the Custodian shall cease and terminate and the Trustee shall assume all duties and obligations of the Custodian. The Custodian’s sole responsibility after termination of its obligations as aforesaid shall be to safely maintain all of the Mortgage Files and to deliver the same to a successor custodian; provided, however, if the Trustee has not appointed a successor custodian within such sixty (60) day period, the Custodian shall deliver such documents to the Trustee.  If the Trustee becomes the Custodian hereunder, the Servicer shall pay the Trustee’s reasonable fees as Custodian as provided in Section 8.05 hereof.

(l)

The provisions of this Section 8.16 shall survive any termination of this Agreement and the resignation or removal of the Custodian.

ARTICLE IX

REMIC AND GRANTOR TRUST ADMINISTRATION

Section 9.01.

REMIC Administration.

(a)

The Securities Administrator shall timely make or cause to be made a REMIC election for each Trust REMIC as set forth in the Preliminary Statement on IRS Form 1066 or other appropriate federal Tax Return or information return for the taxable year ending on the last day of the calendar year in which the Certificates are issued on or prior to the date such election is due (plus any extensions available under applicable law).  Such election shall designate the Lower Tier Regular Interests as the “regular interests” and the Class LR Interest as the single class of “residual interest” in the Lower Tier REMIC and the Upper Tier Regular Interests as the “regular interests” and the Class UR Interest as the single class of “residual interest” in the Upper Tier REMIC, each as set forth in the Preliminary Statement.  The Securities Administrator shall, upon request, provide or cause to be provided a copy of such election to the Holder of the Class R Certificate on or prior to the date such election is due (plus any extensions available under applicable law).  The Securities Administrator shall timely file or cause to be filed such election via U.S. certified mail return receipt requested no later than the date such election is due (plus any extensions available under applicable law) and upon request, provide confirmation to the Holder of the Class R Certificate that such election has been filed.

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(b)

The Closing Date is hereby designated as the “Startup Day” of each Trust REMIC within the meaning of Section 860G(a)(9) of the Code.

(c)

The Securities Administrator shall pay any and all tax related expenses (not including taxes, except as provided in Section 9.03) of each Trust REMIC, including but not limited to any professional fees or expenses related to audits or any administrative or judicial proceedings with respect to a Trust REMIC that involve the Internal Revenue Service or state or local tax authorities, but only to the extent that (i) such expenses are ordinary or routine expenses, including expenses of a routine audit but not expenses of litigation (except as described in (ii)); or (ii) such expenses or liabilities (including taxes and penalties) are attributable to the negligence or willful misconduct of the Securities Administrator in fulfilling its duties hereunder.  Except as provided in Section 9.01(d) below, the Securities Administrator shall be entitled to withdraw the amount of expenses to the extent provided in clause (i) above from the Distribution Account.

(d)

The Securities Administrator shall prepare or cause to be prepared, the Trustee shall sign and the Securities Administrator shall timely file or cause to be timely filed, each Trust REMIC’s federal and state Tax Returns and information returns (including, but not limited to, IRS Form 8811 and IRS Form 1066, including Schedule Q) as the Trust REMICs’ direct representative.  The expenses of preparing and filing such returns shall be borne by the Securities Administrator.

(e)

The Holder of the Class R Certificate shall be the “tax matters person” as defined in the REMIC Provisions (the “Tax Matters Person”) with respect to each Trust REMIC, and the Securities Administrator is irrevocably designated as and shall act as attorney-in-fact and agent for such Tax Matters Person for each Trust REMIC.  Subject to Section 9.01(a), the Securities Administrator as agent for the Tax Matters Person shall perform, on behalf of each Trust REMIC, all reporting and other tax compliance duties that are the responsibility of such REMIC under the Code, the REMIC Provisions, or other compliance guidance issued by the Internal Revenue Service or any state or local taxing authority.  Among its other duties, if required by the Code, the REMIC Provisions or state or local law, or other such guidance, the Securities Administrator, as agent for the Tax Matters Person, shall timely provide (i) to the Treasury or other governmental authority such information as is necessary for the computation of any tax relating to the transfer of the Class R Certificate to any disqualified person or organization and (ii) to the Certificateholders such information or reports as are required by the Code or REMIC Provisions or state or local law, including, but not limited to, IRS Forms 1099-INT, IRS Forms 1099-OID and the information required to be provided to the Holders of the Certificates under Treasury regulations § 1.6049-7(e).

(f)

Each of the parties to this Agreement and the Holders of Certificates shall take any action or cause any Trust REMIC to take any action necessary to create or maintain the status of each Trust REMIC as a REMIC under the REMIC Provisions and shall assist each other as necessary to create or maintain such status.  None of the parties to this Agreement or the Holder of the Class R Certificate shall take any action or cause any Trust REMIC to take any action or fail to take (or fail to cause to be taken) any action that, under the REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger the status of any Trust REMIC as a REMIC or (ii) result in the imposition of United States federal income tax upon any Trust 

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REMIC (including but not limited to the tax on prohibited transactions as defined in Code Section 860F(a)(2) and the tax on contributions after the startup day set forth on Section 860G(d) of the Code) (either such event, an “Adverse REMIC Event”) unless the Trustee and the Securities Administrator have received an Opinion of Counsel (at the expense of the party seeking to take such action) to the effect that the contemplated action will not endanger such status or result in the imposition of such a tax.  In addition, prior to taking any action with respect to any Trust REMIC or the assets therein, or causing any Trust REMIC to take any action, which is not expressly permitted under the terms of this Agreement, any Holder of the Class R Certificate will consult with the Trustee and the Securities Administrator, or their respective designees, in writing, with respect to whether such action could cause an Adverse REMIC Event to occur with respect to any Trust REMIC, and no such Person shall take any such action or cause any Trust REMIC to take any such action as to which the Trustee or the Securities Administrator has advised it in writing that an Adverse REMIC Event could occur.

(g)

Subject to Section 9.03, the Holder of the Class R Certificate shall pay when due any and all taxes imposed on each Trust REMIC formed under this Agreement by federal or state governmental authorities, but only from amounts, if any, distributable thereon.  To the extent that such REMIC taxes are not paid by the Class R Certificateholder, subject to Section 9.03, the Securities Administrator shall pay any remaining REMIC taxes out of future amounts otherwise distributable to the Holder of the Class R Certificate or, if no such amounts are available, out of other amounts held in the Distribution Account, and shall reduce amounts otherwise payable to Holders of the Certificates.

(h)

The Securities Administrator, shall, for federal income tax purposes, maintain or cause to be maintained books and records with respect to each Trust REMIC formed under this Agreement on a calendar year and on an accrual basis.

(i)

No additional contributions of assets shall be made to any Trust REMIC, except as expressly provided in this Agreement with respect to Eligible Substitute Mortgage Loans.

(j)

None of the parties to this Agreement shall enter into any arrangement by which the REMIC will receive a fee or other compensation for services.

(k)

Solely for purposes of satisfying Section 1.860G-1(a)(4)(iii) of the Treasury regulations, the “latest possible maturity date” of the regular interests in the Lower Tier REMIC and the Upper Tier REMIC is the date three years following the maturity of the latest maturing Mortgage Loan.

Section 9.02.

Prohibited Transactions and Activities.

None of the Depositor, the Servicer, the Master Servicer, the Securities Administrator, the Custodian or the Trustee shall sell, dispose of, or substitute for any of the Mortgage Loans, except in a disposition pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the Trust Fund, (iii) the termination of the Lower Tier REMIC pursuant to Article X of this Agreement, (iv) a substitution pursuant to Article II of this Agreement, (v) a repurchase of Mortgage Loans pursuant to Article II of this Agreement or (vi) a sale of a Mortgage Loan pursuant to Section 3.02 of this Agreement, nor acquire any assets for any Trust REMIC, nor sell 

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or dispose of any investments in the Distribution Account for gain, nor accept any contributions to any Trust REMIC after the Closing Date, unless such party has received an Opinion of Counsel (at the expense of the party causing such sale, disposition, or substitution) that such disposition, acquisition, substitution, or acceptance will not (a) affect adversely the status of any Trust REMIC as a REMIC or (b) cause any Trust REMIC to be subject to a tax on prohibited transactions or contributions after the startup day pursuant to the REMIC Provisions.

Section 9.03.

Payment with Respect to Certain Taxes.

In the event that any tax is imposed on “prohibited transactions” of any Trust REMIC as defined in Section 860F(a)(2) of the Code, on the “net income from foreclosure property” of any Trust REMIC as defined in Section 860G(c) of the Code, on any contribution to any Trust REMIC after the startup day pursuant to Section 860G(d) of the Code or for any other reason on any Trust REMIC, such tax shall be paid by (i) the Securities Administrator, to the extent any such tax arises out of or results from a breach by the Securities Administrator of any of its obligations under Article IX of this Agreement or any other provision of this Agreement relating to the administration of the Trust REMICs, (ii) the Servicer, to the extent any such tax arises out of or results from a breach by the Servicer of any of its obligations under this Agreement, (iii) the Master Servicer, to the extent any such tax arises out of or results from a breach by the Master Servicer of any of its obligations under this Agreement, and (iv) the Trust Fund, in all other cases or in the event that the Securities Administrator, the Servicer or the Master Servicer fails to honor its obligations under the preceding clauses (i), (ii) and (iii).

Section 9.04.

Grantor Trust Administration.

(a)

The Securities Administrator shall treat the portions of the Trust Fund consisting of the right of the Offered Certificates and Class B Certificates to receive Cap Carryover Amounts, the obligation of the Class CE Certificates to pay Cap Carryover Amounts, and the Class CE Grantor Trust Subaccount and any other rights and obligations with respect thereto as the Class CE Grantor Trust and provisions of this Agreement shall be interpreted consistently with this treatment.  Funds in the Class CE Grantor Trust Subaccount shall remain uninvested.  In addition, the Securities Administrator shall treat any interests in the Exchangeable REMIC Certificates beneficially owned in the form of Exchangeable Certificates and rights with respect thereto and the Exchangeable Certificate Grantor Trust Subaccount as assets of the Exchangeable Certificates Grantor Trust.  Each beneficial owner of Exchangeable REMIC Certificates that elects to hold its interest in the Exchangeable REMIC Certificates in the form of an Exchangeable Certificate pursuant to Sections 5.07 and 5.08 of this Agreement shall be deemed to have instructed the Securities Administrator to deposit the applicable Exchangeable REMIC Certificates into the Exchangeable Certificates Grantor Trust and all distributions in respect of such Exchangeable REMIC Certificates shall be deposited into the Exchangeable Certificates Grantor Trust Subaccount.  Funds in the Exchangeable Certificates Grantor Trust Subaccount shall remain uninvested.  The Securities Administrator hereby designates the Exchangeable Certificates Grantor Trust Subaccount as a sub-account of the Distribution Account.  

On each Distribution Date, the Securities Administrator shall be deemed to deposit all distributions in respect of the Exchangeable REMIC Certificates deemed received by it from the Distribution Account pursuant to this Section 9.04(a) in the Exchangeable Certificates Grantor 

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Trust Account and shall immediately distribute such amounts in respect of the related Exchangeable Certificates.

Any beneficial owner of an Exchangeable Certificate that exchanges such Exchangeable Certificate for the related Exchangeable REMIC Certificates shall be deemed to have instructed the Securities Administrator to remove such Exchangeable REMIC Certificates from the Exchangeable Certificates Grantor Trust, so that distributions on such Exchangeable REMIC Certificates are made directly from the Distribution Account to such beneficial owner.

(b)

The Securities Administrator shall account for the Class CE Grantor Trust and the Exchangeable Certificates Grantor Trust and the respective assets and rights and obligations with respect thereto as, for United States federal income tax purposes, separate grantor trusts as described in Subpart E of Part I of Subchapter J of the Code and Treasury regulation §301.7701-4(c)(2) and not as assets of any Trust REMIC.  The Securities Administrator shall apply for taxpayer identification numbers for the grantor trusts on IRS Form SS-4 and any similarly required state or local forms for each grantor trust.  The Securities Administrator shall furnish or cause to be furnished to the Holders of the related Certificates and shall file or cause to be filed such forms as may be required by the Code and regulations promulgated thereunder and any similar state or local laws with respect to the allocable shares of income and expenses with respect to the assets of the respective grantor trust at the time and in the manner required by the Code and regulations promulgated thereunder and any similar state or local laws.  The Trustee shall sign any such forms presented by the Securities Administrator to the Trustee for signature.

(c)

Each grantor trust shall be treated as a WHFIT that is a NMWHFIT unless or until otherwise required by applicable law.  The Securities Administrator shall report as required under the WHFIT Regulations to the extent such information as is reasonably necessary to enable the Securities Administrator to do so, and is not in its possession, is provided to the Securities Administrator on a timely basis.  The Depositor shall pay for any tax reporting penalties that may arise as a result of the Depositor incorrectly determining the status of a grantor trust as a WHFIT.

(d)

The Securities Administrator, in its discretion, shall report required WHFIT information using either the cash or accrual method, except to the extent the WHFIT Regulations specifically require a different method.  The Securities Administrator shall be under no obligation to determine whether any Certificateholder or other beneficial owner of a Certificate uses the cash or accrual method.  The Securities Administrator will make available information as required by the WHFIT Regulations to Certificateholders annually.  In addition, the Securities Administrator shall not be responsible or liable for providing subsequently amended, revised or updated information to any Certificateholder, unless requested by the Certificateholder.

(e)

Absent receipt of information regarding any sale of Certificates, including the price, amount of proceeds and date of sale from the beneficial owner thereof, the Depositor and the Securities Administrator may assume there is no secondary market trading of WHFIT interests.

(f)

To the extent required by the WHFIT Regulations, the Securities Administrator will use reasonable efforts to publish on an appropriate website the CUSIPs for the Certificates 

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that represent ownership of a WHFIT.  The Securities Administrator will make reasonable good faith efforts to keep the website accurate and updated to the extent CUSIPs have been received.  The Securities Administrator will not be liable for investor reporting delays that result from the receipt of inaccurate or untimely CUSIP information.

ARTICLE X

TERMINATION

Section 10.01.

Termination.

(a)

The respective obligations and responsibilities of the Servicer, the Depositor, the Trustee, the Master Servicer, the Interim Subservicer, the Back-up Servicer, the Securities Administrator, the Custodian and the Certificate Registrar created hereby (other than the obligation of the Securities Administrator to make certain payments to Certificateholders after the final Distribution Date and the obligation of the Securities Administrator to send certain notices as hereinafter set forth) shall terminate upon notice to the Securities Administrator upon the earliest of (i) the Distribution Date on which the Certificate Principal Balance of each Class of Certificates has been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, and (iii) the optional purchase of the Mortgage Loans by the Interim Subservicer or the Servicer as described below.  Notwithstanding the foregoing, in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date hereof.

The Interim Subservicer may, at its option, terminate the Trust Fund and retire the Certificates on the next succeeding Distribution Date (or any subsequent Distribution Date) upon which the aggregate current Pool Balance is less than 10% of the aggregate Pool Balance of the Mortgage Loans as of the Cut-off Date, by purchasing all of the outstanding (i) Mortgage Loans in the Trust Fund at a price equal to the sum of the outstanding Stated Principal Balance of the Mortgage Loans and accrued and unpaid interest thereon at the weighted average of the Mortgage Interest Rates in effect for the Collection Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Monthly Advances and any unpaid Servicing Fees allocable to such Mortgage Loans and (ii) REO Properties in the Trust Fund at a price equal to their fair market value as determined in good faith by the Servicer (the “Termination Price”).  To the extent the Interim Subservicer does not exercise this option on any applicable Distribution Date, the Servicer may exercise such option.  If either the Interim Subservicer or the Servicer is subject to regulation by the Office of the Comptroller of the Currency, the FDIC, the Federal Reserve or the Office of Thrift Supervision or similar regulatory agency, the option may not be exercised unless the aggregate fair market value of the Mortgage Loans and REO Properties is greater than or equal to the Termination Price.  Notwithstanding the foregoing, neither the Interim Subservicer nor the Servicer may exercise this optional purchase right unless any Reimbursement Amount owed to the Trust pursuant to Section 2.03 hereof has been paid.

Any such purchase shall be accomplished by delivery before such Distribution Date of the Termination Price to the Securities Administrator for deposit into the Distribution Account as part of Available Funds.

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(b)

Notice of any termination, specifying the Distribution Date (which shall be a date that would otherwise be a Distribution Date) upon which the Certificateholders may surrender their Certificates to the Securities Administrator for payment of the final distribution and cancellation, shall be given promptly by the Securities Administrator upon the Securities Administrator and the Servicer receiving notice of such date from the Interim Subservicer no later than the 5th day of the month of such final distribution (and if the Securities Administrator and the Servicer do not receive such notice by the 5th day of the month of such final distribution, the Servicer may give notice to the Securities Administrator no later than the 10th day of the month of such final distribution), by letter to the Certificateholders mailed not later than the 15th day of the month of such final distribution specifying (1) the Distribution Date upon which final distribution of the Certificates will be made upon presentation and surrender of such Certificates at the office or agency of the Securities Administrator therein designated, (2) the amount of any such final distribution (to the extent determinable at the time such notice is given) and (3) that the Record Date otherwise applicable to such Distribution Date is not applicable, distributions being made only upon presentation and surrender of the Certificates at the office or agency of the Securities Administrator therein specified.  Not less than five (5) Business Days prior to the Distribution Date, the Securities Administrator shall notify the Depositor and the Interim Subservicer or the Servicer, as the case may be, of the amount of any unpaid Reimbursement Amount owed to the Trust.

(c)

Upon presentation and surrender of the Certificates, the Securities Administrator shall cause to be distributed to the Holders of the Certificates on the Distribution Date for such final distribution, in proportion to the Percentage Interests of their respective Class and to the extent that funds are available for such purpose, an amount equal to the amount required to be distributed to such Holders in accordance with the provisions of Sections 4.01 and 4.02 for such Distribution Date.

(d)

In the event that all Certificateholders shall not surrender their Certificates for final payment and cancellation on or before such final Distribution Date, the Securities Administrator shall on such date cause all funds in the Distribution Account not distributed in final distribution to Certificateholders to continue to be held by the Securities Administrator in an Eligible Account for the benefit of such Certificateholders, and the Securities Administrator shall give a second written notice to the remaining Certificateholders, to surrender their Certificates for cancellation and receive the final distribution with respect thereto.  If within nine months after the final Distribution Date all the Certificates shall not have been surrendered for cancellation, the Class R Certificateholder shall be entitled to all unclaimed funds and other assets which remain subject hereto and the Securities Administrator upon transfer of such funds to the Class R Certificateholder shall be discharged of any responsibility for such funds, and all other Certificateholders shall look to the Class R Certificateholder for payment.

Section 10.02.

Additional Termination Requirements.

(a)

In the event that the Interim Subservicer or the Servicer exercises its purchase option as provided in Section 10.01, the Trust shall be terminated in accordance with the following additional requirements, unless the Securities Administrator shall have been furnished with an Opinion of Counsel to the effect that the failure of the Trust to comply with the requirements of this Section will not (i) result in the imposition of taxes on “prohibited 

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transactions” of any Trust REMIC as defined in Section 860F of the Code on any Trust REMIC or (ii) cause any Trust REMIC to fail to qualify as a REMIC at any time that any Certificates are outstanding:

(i)

Within 90 days prior to the final Distribution Date set forth in the notice given pursuant to Section 10.01, the Securities Administrator shall adopt a plan of liquidation for the Trust REMICs created hereunder specifying the first day in the 90-day liquidation period and meeting the requirements of a “qualified liquidation” under Section 860F of the Code and any regulations thereunder.  The Securities Administrator shall attach such plans of liquidation to each Trust REMIC’s final tax return;

(ii)

After the date of adoption of such plan of complete liquidation and at or prior to the final Distribution Date, the Securities Administrator shall sell all of the assets of the Trust to the Interim Subservicer or the Servicer for cash; and 

(iii)

At the time of the making of the final payment on the Certificates, the Securities Administrator shall distribute or credit, or cause to be distributed or credited in the order of priority set forth in Sections 4.01 and 4.02 and then to the Class R Certificateholder, all cash on hand in respect of each Trust REMIC after such payment (other than cash retained to meet claims) in complete liquidation of the Trust REMICs and the Trust shall terminate at such time.

(b)

By their acceptance of Certificates, the Holders thereof hereby appoint the Securities Administrator as their attorney in fact to:  (i) adopt such plans of complete liquidation and (ii) to take such other action in connection therewith as may be reasonably required to carry out such plans of complete liquidation all in accordance with the terms hereof.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01.

Amendment.

This Agreement may be amended from time to time by the Depositor, the Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer, the Securities Administrator, the Custodian and the Trustee and without the consent of the Certificateholders, (i) to cure any ambiguity or mistake, (ii) to correct, modify or supplement any provision herein which may be inconsistent with any other provision herein or the Supplemental Memorandum, (iii) to make any other provisions with respect to matters or questions arising under this Agreement, which shall not be inconsistent with the provisions of this Agreement, (iv) to preserve the status of any Trust REMIC as a REMIC, to prevent the imposition of any United States federal income tax on the Trust and otherwise to comply with any requirements imposed by the Code and (v) to preserve the accounting treatment of the transfers of the Mortgage Loans from the Sellers to the Depositor and from the Depositor to the Trust; provided, however, that any such action listed in clause (iii) above shall not adversely affect in any respect the interests of any Certificateholder, as evidenced by an Opinion of Counsel delivered to the Servicer, the Master Servicer, the Interim Subservicer, the Securities Administrator, the Custodian, the Depositor and the Trustee.

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The Interim Subservicer and the Servicer may amend the Delegated Authority Guidelines without the consent of the Certificateholders, the Depositor, the Master Servicer, the Back-up Servicer, the Securities Administrator, the Custodian or the Trustee as set forth in Section 10 thereof.

In addition, this Agreement may be amended from time to time by the Depositor, the Servicer, the Master Servicer, the Interim Subservicer, the Back-up Servicer, the Securities Administrator, the Custodian and the Trustee, with the consent of the Majority Certificateholders for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of Certificates; provided, however, that no such amendment or waiver shall (x) reduce in any manner the amount of, or delay the timing of, payments on the Certificates which are required to be made on any Certificate without the consent of the Holder of such Certificate, (y) adversely affect in any material respect the interests of the Holders of any Class of Certificates in a manner other than as described in clause (x) above, without the consent of the Holders of Certificates of such Class evidencing at least a majority of the Percentage Interest in such Class, or (z) reduce the percentage of Voting Rights required by clause (y) above without the consent of the Holders of all Certificates of such Class then outstanding.

Prior to the execution of any amendment to this Agreement (other than any amendment to the Delegated Authority Guidelines by the Servicer and the Interim Subservicer), the Trustee and the Securities Administrator shall be entitled to receive and rely upon an Opinion of Counsel (at the expense of the Person seeking such amendment) stating that the execution of such amendment is authorized or permitted by this Agreement and any conditions precedent have been satisfied.  The Trustee and the Securities Administrator may, but shall not be obligated to, enter into any such amendment which affects the Trustee’s or Securities Administrator’s own rights, duties or immunities under this Agreement.

Other than any amendment to the Delegated Authority Guidelines by the Servicer and the Interim Subservicer, unless 100% of the Certificateholders consent, neither the Trustee nor the Securities Administrator shall consent to any amendment to this Agreement unless they shall have first received an Opinion of Counsel, delivered by (and at the expense of) the Person seeking such amendment, to the effect that such amendment will not result in the imposition of United States federal income tax on any Trust REMIC pursuant to the REMIC Provisions or cause any Trust REMIC to fail to qualify as a REMIC at any time that any Certificates are outstanding and that the amendment is being made in accordance with the terms hereof.

It shall not be necessary for the consent of Certificateholders under this Section 11.01 to approve the particular form of any proposed amendment; instead it shall be sufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Securities Administrator may prescribe.

Section 11.02.

Recordation of Agreement; Counterparts.

To the extent permitted by applicable law, this Agreement is subject to recordation in all appropriate public offices for real property records in all the counties or other comparable 

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jurisdictions in which any or all of the properties subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Securities Administrator at the expense of the Trust, but only upon direction of Certificateholders, accompanied by an Opinion of Counsel to the effect that such recordation materially and beneficially affects the interests of the Certificateholders.

For the purpose of facilitating the recordation of this Agreement as herein provided and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument.

Section 11.03.

Limitation on Rights of Certificateholders.

The death or incapacity of any Certificateholder shall not (i) operate to terminate this Agreement or the Trust, (ii) entitle such Certificateholder’s legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Trust, or (iii) otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.

Except as expressly provided for herein, no Certificateholder shall have any right to vote or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto, nor shall anything herein set forth or contained in the terms of the Certificates be construed so as to constitute the Certificateholders from time to time as partners or members of an association; nor shall any Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof.

No Certificateholder shall have any right by virtue of any provision of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Holder previously shall have given to the Trustee a written notice of default and of the continuance thereof, as herein provided, and unless also the Holders of Certificates entitled to at least 25% of the Voting Rights shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding.  It is understood and intended, and expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, which priority or preference is not otherwise provided for herein, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Certificateholders.  For the protection and enforcement of the provisions of this Section 11.03 each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

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Section 11.04.

Governing Law; Jurisdiction.

This Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.  With respect to any claim arising out of this Agreement, each party irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in The City of New York, and each party irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such courts, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and further irrevocably waives the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party, provided that service of process has been made by any lawful means.

Section 11.05.

Notices.

All directions, demands and notices hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by first class mail, postage prepaid, or by express delivery service, to (a) in the case of the Trustee, U.S. Bank National Association, 60 Livingston Avenue, EP-MN-WS3D, St. Paul, Minnesota  55107, Attention:  Structured Finance, AGF 2009-1, (b) in the case of the Depositor and the Interim Subservicer, 601 N.W. Second Street, Evansville, Indiana 47708 Attn: Treasurer, or such other address as may be furnished to the Trustee in writing, (c) in the case of the Servicer, PennyMac Loan Services, LLC, 27001 Agoura Road, Calabasas, California  91301, Attention:  Director, Servicing Operations, with a copy to the same address, Attention:  General Counsel, (d) in the case of the Master Servicer, Wells Fargo Bank, N.A., 9062 Old Annapolis Road, Columbia, Maryland  21045, Attention: Client Manager – AGF 2009-1, (e) in the case of the Securities Administrator, Wells Fargo Bank, N.A., 9062 Old Annapolis Road, Columbia, Maryland 21045-1951, Attention:  Client Manager – AGF, Series 2009-1, and for Certificate transfer purposes to Wells Fargo Bank, N.A., Sixth Street and Marquette Avenue, Minneapolis, Minnesota, 55479, Attention: Corporate Trust Services – AGF, Series 2009-1, (f) in the case of the Back-up Servicer, Select Portfolio Servicing, Inc., 3815 South West Temple, Salt Lake City, Utah 84115, Attention:  Lester Cheng, with a copy to: Select Portfolio Servicing, Inc., 3815 South West Temple, Salt Lake City, Utah  84115, Attention:  General Counsel; and (g) in the case of the Custodian, The Bank of New York Mellon Trust Company, N.A., 2220 Chemsearch Blvd., Suite 150, Irving, Texas  75062, Attention: Document Custodian.  Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register.  Notice of any Servicer Event of Default or Master Servicer Event of Default shall be given by telecopy and by certified mail.  Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have duly been given when mailed, whether or not the Certificateholder receives such notice.  A copy of any notice required to be telecopied hereunder shall also be mailed to the appropriate party in the manner set forth above.

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Section 11.06.

Severability of Provisions.

If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof.

Section 11.07.

Article and Section References.

All article and section references used in this Agreement, unless otherwise provided, are to articles and sections in this Agreement.

Section 11.08.

[RESERVED].

Section 11.09.

Third Party Beneficiary.

Nothing in this Agreement or in the Certificates, expressed or implied, shall give to any Person, other than the Certificateholders, the parties hereto, and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement.

Section 11.10.

Waiver of Jury Trial.

EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

Section 11.11.

Acts of Certificateholders.

(a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by the Certificateholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by agent duly appointed in writing; and such action shall become effective when such instrument or instruments are delivered to the Trustee, the Servicer, the Master Servicer, the Securities Administrator and the Custodian.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “act” of the Certificateholders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee, the Securities Administrator and the Trust, if made in the manner provided in this Section 11.10.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof.  Whenever such execution is by a signer acting in a capacity other than his or her 

-125-

individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.

(c)

Any request, demand, authorization, direction, notice, consent, waiver or other action by any Certificateholder shall bind every future Holder of such Certificate and the Holder of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee, the Securities Administrator or the Trust in reliance thereon, whether or not notation of such action is made upon such Certificate.

-126-

IN WITNESS WHEREOF, the Depositor, the Servicer, the Master Servicer, the Securities Administrator, the Interim Subservicer, the Back-up Servicer, the Custodian and the Trustee have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written.

THIRD STREET FUNDING LLC, 

as Depositor

By:  /s/  Kevin J. Small

Name:  Kevin J. Small

Title:  President

WELLS FARGO BANK, N.A., 

as Master Servicer and as Securities Administrator

By:  /s/  Amy Doyle

Name:  Amy Doyle

Title:  Vice President

PENNYMAC LOAN SERVICES, LLC, 

as Servicer

By:  /s/  David M. Walker

Name:  David M. Walker

Title:  Chief Credit Officer

MOREQUITY, INC., 

as Interim Subservicer

By:  /s/  Kevin J. Small

Name:  Kevin J. Small

Title:  President

[AGF 2009-1 -- Pooling & Servicing Agreement]

SELECT PORTFOLIO SERVICING, INC., 

as Back-up Servicer

By:  /s/  Lester Cheng

Name:  Lester Cheng

Title:  Senior Vice President

U.S. BANK NATIONAL ASSOCIATION, 

as Trustee

By:  /s/  Diane L. Reynolds

Name:  Diane L. Reynolds

Title:  Vice President

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Custodian

By:  /s/  Barbara G. Robinson

Name:  Barbara G. Robinson

Title:  Assistant Vice President

                                                      [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF

Indiana

)

) ss.:

COUNTY OF

Vanderburgh

)

On the 30th day of July, 2009 before me, a notary public in and for said State, personally appeared Kevin J. Small, known to me to be the President of Third Street Funding LLC, a Delaware limited liability company that executed the within instrument, and also known to me to be the person who executed it on behalf of said company, and acknowledged to me that such company executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public

/s/  Linda C. Meredith

                                                      [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF

Maryland

)

) ss.:

COUNTY OF

Howard

)

On the 30th day of July, 2009 before me, a notary public in and for said State, personally appeared Amy Doyle, known to me to be a Vice President of Wells Fargo Bank, N.A., a national banking association that executed the within instrument, and also known to me to be the person who executed it on behalf of said association, and acknowledged to me that such association executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public

/s/  Antoinette Jordan

                                           

                                              [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF

California

)

) ss.:

COUNTY OF

Los Angeles

)

On the 30th day of July, 2009 before me, a notary public in and for said State, personally appeared David M. Walker, known to me to be a Chief Credit Officer of PennyMac Loan Services, LLC, a CA limited liability company that executed the within instrument, and also known to me to be the person who executed it on behalf of said company, and acknowledged to me that such company executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public

/s/  Stacey Lynn Myer

                                                [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF

Indiana

)

) ss.:

COUNTY OF

Vanderburgh

)

On the 30th day of July, 2009 before me, a notary public in and for said State, personally appeared Kevin J. Small, known to me to be the President of MorEquity, Inc., a Nevada Corporation that executed the within instrument, and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public

/s/  Linda C. Meredith

                                                         [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF

Utah

)

) ss.:

COUNTY OF

Salt Lake

)

On the 30th day of July, 2009 before me, a notary public in and for said State, personally appeared Lester Cheng, known to me to be a Senior Vice President of Select Portfolio Servicing, Inc., a Utah Corporation that executed the within instrument, and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public 

/s/  Elle Nelson

                                                     [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF MINNESOTA

)

) ss.:

COUNTY OF RAMSEY

)

On the 30th day of July, 2009 before me, a notary public in and for said State, personally appeared Diane L. Reynolds, known to me to be a Vice President of U.S. Bank National Association, a national banking association that executed the within instrument, and also known to me to be the person who executed it on behalf of said company, and acknowledged to me that such association executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public 

/s/  Karen L. Warren

                                                     

                                                        [AGF 2009-1 -- Pooling & Servicing Agreement]

STATE OF NEW YORK

)

) ss.:

COUNTY OF

)

On the         day of July, 2009 before me, a notary public in and for said State, personally appeared Barbara G. Robinson, known to me to be a Assistant Vice President of The Bank of New York Mellon Trust Company, N.A., a national banking association, that executed the within instrument, and also known to me to be the person who executed it on behalf of said association, and acknowledged to me that such corporation executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Notary Public 

/s/  Diana L. Parker

[AGF 2009-1 -- Pooling & Servicing Agreement]a0660941.htm

    
      
         

      

      
         

        
        

      

      
         

        
           Exhibit
4.1

        

      

    

    

     

    ENTERGY
TEXAS RESTORATION FUNDING, LLC,

     

    Issuer,

     

    and

     

    THE
BANK OF NEW YORK MELLON,

     

    Indenture
Trustee and Securities Intermediary

     

    ______________________________

     

    INDENTURE

     

    Dated
as of November 6, 2009

     

    ______________________________

     

    

     

    TABLE OF
CONTENTS

     

    Page

     

    ARTICLE
I

     

     

    DEFINITIONS
AND INCORPORATION BY REFERENCE

     

    
      	
               
      

            	
              SECTION
      1.01.  Definitions

            

    

    
      	
               
      

            	
              SECTION
      1.02.  Incorporation by Reference of Trust Indenture
      Act

            

    

    
      	
               
      

            	
              SECTION
      1.03.  Rules of
Construction

            

    

     

    ARTICLE
II

     

     

    THE
TRANSITION BONDS

     

    
      	
               
      

            	
              SECTION
      2.01.  Form

            

    

    
      	
               
      

            	
              SECTION
      2.02.  Denominations; Transition
Bonds

            

    

    
      	
               
      

            	
              SECTION
      2.03.  Execution, Authentication and
  Delivery

            

    

    
      	
               
      

            	
              SECTION
      2.04.  Temporary Transition
Bonds

            

    

    
      	
               
      

            	
              SECTION
      2.05.  Registration; Registration of Transfer and Exchange of
      Transition Bonds

            

    

    
      	
               
      

            	
              SECTION
      2.06.  Mutilated, Destroyed, Lost or Stolen Transition
      Bonds

            

    

    
      	
               
      

            	
              SECTION
      2.07.  Persons Deemed
Owner

            

    

    
      	
               
      

            	
              SECTION
      2.08.  Payment of Principal, Premium, if any, and Interest;
      Interest on Overdue Principal; Principal, Premium, if any, and Interest
      Rights Preserved.

            

    

    
      	
               
      

            	
              SECTION
      2.09.  Cancellation

            

    

    
      	
               
      

            	
              SECTION
      2.10.  Outstanding Amount; Authentication and Delivery of
      Transition Bond

            

    

    
      	
               
      

            	
              SECTION
      2.11.  Book-Entry Transition
Bonds

            

    

    
      	
               
      

            	
              SECTION
      2.12.  Notices to Clearing
Agency

            

    

    
      	
               
      

            	
              SECTION
      2.13.  Definitive Transition
Bonds

            

    

    
      	
               
      

            	
              SECTION
      2.14.  CUSIP Number

            

    

    
      	
               
      

            	
              SECTION
      2.15.  Letter of
Representations

            

    

    
      	
               
      

            	
              SECTION
      2.16.  [RESERVED]

            

    

    
      	
               
      

            	
              SECTION
      2.17.  Tax Treatment

            

    

    
      	
               
      

            	
              SECTION
      2.18.  State Pledge

            

    

    
      	
               
      

            	
              SECTION
      2.19.  Security Interests

            

    

     

    ARTICLE
III

     

     

    COVENANTS

     

    
      	
               
      

            	
              SECTION
      3.01.  Payment of Principal, Premium, if any, and
      Interest

            

    

    
      	
               
      

            	
              SECTION
      3.02.  Maintenance of Office or
Agency

            

    

    
      	
               
      

            	
              SECTION
      3.03.  Money for Payments To Be Held in
  Trust

            

    

    
      	
               
      

            	
              SECTION
      3.04.  Existence

            

    

    
      	
               
      

            	
              SECTION
      3.05.  Protection of Transition Bond
  Collateral

            

    

    
      	
               
      

            	
              SECTION
      3.06.  Opinions as to Transition Bond
  Collateral.

            

    

    
      	
               
      

            	
              SECTION
      3.07.  Performance of Obligations; Servicing; SEC
      Filings.

            

    

    
      	
               
      

            	
              SECTION
      3.08.  Certain Negative
Covenants

            

    

    
      	
               
      

            	
              SECTION
      3.09.  Annual Statement as to
  Compliance

            

    

    
      	
               
      

            	
              SECTION
      3.10.  Issuer May Consolidate, etc., Only on Certain
      Terms.

            

    

    
      	
               
      

            	
              SECTION
      3.11.  Successor or
Transferee.

            

    

    
      	
               
      

            	
              SECTION
      3.12.  No Other Business

            

    

    
      	
               
      

            	
              SECTION
      3.13.  No Borrowing

            

    

    
      	
               
      

            	
              SECTION
      3.14.  Servicer’s
Obligations

            

    

    
      	
               
      

            	
              SECTION
      3.15.  Guarantees, Loans, Advances and Other
      Liabilities

            

    

    
      	
               
      

            	
              SECTION
      3.16.  Capital
Expenditures

            

    

    
      	
               
      

            	
              SECTION
      3.17.  Restricted
Payments

            

    

    
      	
               
      

            	
              SECTION
      3.18.  Notice of Events of
Default

            

    

    
      	
               
      

            	
              SECTION
      3.19.  Further Instruments and
Acts

            

    

    
      	
               
      

            	
              SECTION
      3.20.  [RESERVED]

            

    

    
      	
               
      

            	
              SECTION
      3.21.  Inspection

            

    

    
      	
               
      

            	
              SECTION
      3.22.  Sale Agreement, Servicing Agreement, and Administration
      Agreement Covenants.

            

    

    
      	
               
      

            	
              SECTION
      3.23.  Taxes

            

    

     

    ARTICLE
IV

     

     

    SATISFACTION
AND DISCHARGE; DEFEASANCE

     

    
      	
               
      

            	
              SECTION
      4.01.  Satisfaction and Discharge of Indenture;
      Defeasance.

            

    

    
      	
               
      

            	
              SECTION
      4.02.  Conditions to
Defeasance

            

    

    
      	
               
      

            	
              SECTION
      4.03.  Application of Trust
Money

            

    

    
      	
               
      

            	
              SECTION
      4.04.  Repayment of Moneys Held by Paying
  Agent

            

    

     

    ARTICLE
V

     

     

    REMEDIES

     

    
      	
               
      

            	
              SECTION
      5.01.  Events of Default

            

    

    
      	
               
      

            	
              SECTION
      5.02.  Acceleration of Maturity; Rescission and
      Annulment

            

    

    
      	
               
      

            	
              SECTION
      5.03.  Collection of Indebtedness and Suits for Enforcement by
      Indenture Trustee.

            

    

    
      	
               
      

            	
              SECTION
      5.04.  Remedies;
Priorities.

            

    

    
      	
               
      

            	
              SECTION
      5.05.  Optional Preservation of the Transition Bond
      Collateral

            

    

    
      	
               
      

            	
              SECTION
      5.06.  Limitation of
Suits

            

    

    
      	
               
      

            	
              SECTION
      5.07.  Unconditional Rights of Holders To Receive Principal,
      Premium, if any, and Interest

            

    

    
      	
               
      

            	
              SECTION
      5.08.  Restoration of Rights and
  Remedies

            

    

    
      	
               
      

            	
              SECTION
      5.09.  Rights and Remedies
Cumulative

            

    

    
      	
               
      

            	
              SECTION
      5.10.  Delay or Omission Not a
Waiver

            

    

    
      	
               
      

            	
              SECTION
      5.11.  Control by Holders

            

    

    
      	
               
      

            	
              SECTION
      5.12.  Waiver of Past
Defaults

            

    

    
      	
               
      

            	
              SECTION
      5.13.  Undertaking for
Costs

            

    

    
      	
               
      

            	
              SECTION
      5.14.  Waiver of Stay or Extension
  Laws

            

    

    
      	
               
      

            	
              SECTION
      5.15.  Action on Transition
Bonds

            

    

     

    ARTICLE
VI

     

     

    THE
INDENTURE TRUSTEE

     

    
      	
               
      

            	
              SECTION
      6.01.  Duties of Indenture
Trustee.

            

    

    
      	
               
      

            	
              SECTION
      6.02.  Rights of Indenture
Trustee

            

    

    
      	
               
      

            	
              SECTION
      6.03.  Individual Rights of Indenture
  Trustee

            

    

    
      	
               
      

            	
              SECTION
      6.04.  Indenture Trustee’s
Disclaimer

            

    

    
      	
               
      

            	
              SECTION
      6.05.  Notice of
Defaults.

            

    

    
      	
               
      

            	
              SECTION
      6.06.  Reports by Indenture Trustee to
  Holders.

            

    

    
      	
               
      

            	
              SECTION
      6.07.  Compensation and
Indemnity

            

    

    
      	
               
      

            	
              SECTION
      6.08.  Replacement of Indenture Trustee and Securities
      Intermediary.

            

    

    
      	
               
      

            	
              SECTION
      6.09.  Successor Indenture Trustee by
  Merger

            

    

    
      	
               
      

            	
              SECTION
      6.10.  Appointment of Co-Trustee or Separate
      Trustee.

            

    

    
      	
               
      

            	
              SECTION
      6.11.  Eligibility;
Disqualification

            

    

    
      	
               
      

            	
              SECTION
      6.12.  Preferential Collection of Claims Against
      Issuer

            

    

    
      	
               
      

            	
              SECTION
      6.13.  Representations and Warranties of Indenture
      Trustee

            

    

    
      	
               
      

            	
              SECTION
      6.14.  Annual Report by Independent Registered Public
      Accountants

            

    

    
      	
               
      

            	
              SECTION
      6.15.  Custody of Transition Bond
  Collateral

            

    

     

    ARTICLE
VII

     

     

    HOLDERS’
LISTS AND REPORTS

     

    
      	
               
      

            	
              SECTION
      7.01.  Issuer To Furnish Indenture Trustee Names and Addresses
      of Holders

            

    

    
      	
               
      

            	
              SECTION
      7.02.  Preservation of Information; Communications to
      Holders.

            

    

    
      	
               
      

            	
              SECTION
      7.03.  Reports by Issuer.

            

    

    
      	
               
      

            	
              SECTION
      7.04.  Reports by Indenture
Trustee

            

    

     

    ARTICLE
VIII

     

     

    ACCOUNTS,
DISBURSEMENTS AND RELEASES

     

    
      	
               
      

            	
              SECTION
      8.01.  Collection of
Money

            

    

    
      	
               
      

            	
              SECTION
      8.02.  Collection Account and REP Deposit
    Accounts.

            

    

    
      	
               
      

            	
              SECTION
      8.03.  General Provisions Regarding the Collection
      Accounts.

            

    

    
      	
               
      

            	
              SECTION
      8.04.  Release of Transition Bond
  Collateral.

            

    

    
      	
               
      

            	
              SECTION
      8.05.  Opinion of Counsel

            

    

    
      	
               
      

            	
              SECTION
      8.06.  Reports by Independent Registered Public
      Accountants

            

    

     

    ARTICLE
IX

     

     

    SUPPLEMENTAL
INDENTURES

     

    
      	
               
      

            	
              SECTION
      9.01.  Supplemental Indentures Without Consent of
      Holders

            

    

    
      	
               
      

            	
              SECTION
      9.02.  Supplemental Indentures with Consent of
      Holders

            

    

    
      	
               
      

            	
              SECTION
      9.03.  PUCT Condition

            

    

    
      	
               
      

            	
              SECTION
      9.04.  Execution of Supplemental
  Indentures

            

    

    
      	
               
      

            	
              SECTION
      9.05.  Effect of Supplemental
  Indenture

            

    

    
      	
               
      

            	
              SECTION
      9.06.  Conformity with Trust Indenture
  Act

            

    

    
      	
               
      

            	
              SECTION
      9.07.  Reference in Transition Bonds to Supplemental
      Indentures

            

    

     

    ARTICLE
X

     

     

    MISCELLANEOUS

     

    
      	
               
      

            	
              SECTION
      10.01.  Compliance Certificates and Opinions,
    etc.

            

    

    
      	
               
      

            	
              SECTION
      10.02.  Form of Documents Delivered to Indenture
      Trustee

            

    

    
      	
               
      

            	
              SECTION
      10.03.  Acts of Holders.

            

    

    
      	
               
      

            	
              SECTION
      10.04.  Notices, etc., to Indenture Trustee, Issuer and Rating
      Agencies.

            

    

    
      	
               
      

            	
              SECTION
      10.05.  Notices to Holders;
Waiver

            

    

    
      	
               
      

            	
              SECTION
      10.06.  [Intentionally
Omitted.]

            

    

    
      	
               
      

            	
              SECTION
      10.07.  Conflict with Trust Indenture
  Act

            

    

    
      	
               
      

            	
              SECTION
      10.08.  Effect of Headings and Table of
  Contents

            

    

    
      	
               
      

            	
              SECTION
      10.09.  Successors and
Assigns

            

    

    
      	
               
      

            	
              SECTION
      10.10.  Severability

            

    

    
      	
               
      

            	
              SECTION
      10.11.  Benefits of
Indenture

            

    

    
      	
               
      

            	
              SECTION
      10.12.  Legal Holidays

            

    

    
      	
               
      

            	
              SECTION
      10.13.  GOVERNING LAW

            

    

    
      	
               
      

            	
              SECTION
      10.14.  Counterparts

            

    

    
      	
               
      

            	
              SECTION
      10.15.  Recording of
Indenture

            

    

    
      	
               
      

            	
              SECTION
      10.16.  Issuer Obligation

            

    

    
      	
               
      

            	
              SECTION
      10.17.  No Recourse to
Issuer

            

    

    
      	
               
      

            	
              SECTION
      10.18.  Basic Documents

            

    

    
      	
               
      

            	
              SECTION
      10.19.  No Petition

            

    

    
      	
               
      

            	
              SECTION
      10.20.  Securities
Intermediary

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBITS
AND SCHEDULES

     

    
      	
              EXHIBIT A

            	
              Form
      of Transition Bonds

            

    

    
      	
              EXHIBIT B

            	
              Form
      of Series Supplement

            

    

    
      	
              EXHIBIT C

            	
              Servicing
      Criteria to be Addressed by Indenture Trustee in Assessment of
      Compliance

            

    

     

    APPENDIX

     

    
      	
              APPENDIX A

            	
              Definitions

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TRUST INDENTURE ACT CROSS
REFERENCE TABLE

     

    
      	
              TIA Section

            	
              Indenture Section

            
	
              310

            	
              (a)(1)

            	
              6.11

            
	 
      	
              (a)(2)

            	
              6.11

            
	 
      	
              (a)(3)

            	
              6.10(b)(i)

            
	 
      	
              (a)(4)

            	
              N.A.

            
	 
      	
              (a)(5)

            	
              6.11

            
	 
      	
              (b)

            	
              6.11

            
	 
      	
              (c)

            	
              N.A.

            
	
              311

            	
              (a)

            	
              6.12

            
	 
      	
              (b)

            	
              6.12

            
	 
      	
              (c)

            	
              N.A.

            
	
              312

            	
              (a)

            	
              7.01
      and 7.02

            
	 
      	
              (b)

            	
              7.02

            
	 
      	
              (c)

            	
              7.02

            
	
              313

            	
              (a)

            	
              7.04

            
	 
      	
              (b)(1)

            	
              7.04

            
	 
      	
              (b)(2)

            	
              7.04

            
	 
      	
              (c)

            	
              7.04

            
	 
      	
              (d)

            	
              7.04

            
	
              314

            	
              (a)

            	
              3.09,
      4.01, and 7.03(a)

            
	 
      	
              (b)

            	
              3.06
      and 4.01

            
	 
      	
              (c)(1)

            	
              2.10,
      4.01, 8.04(b) and 10.01(a)

            
	 
      	
              (c)(2)

            	
              2.10,
      4.01, 8.04(b) and 10.01(a)

            
	 
      	
              (c)(3)

            	
              2.10
      4.01 and 10.01(a)

            
	 
      	
              (d)

            	
              2.10,
      8.04(b) and 10.01(b)

            
	 
      	
              (e)

            	
              10.01(a)

            
	 
      	
              (f)

            	
              10.01(a)

            
	
              315

            	
              (a)

            	
              6.01(b)(i)(ii)

            
	 
      	
              (b)

            	
              6.05

            
	 
      	
              (c)

            	
              6.01
      (a)

            
	 
      	
              (d)

            	
              6.01(c)(i)-(iii)

            
	 
      	
              (e)

            	
              5.13

            
	
              316

            	
              (a)
      (last sentence)

            	
              Appendix A
      – definition of “Outstanding”

            
	 
      	
              (a)(1)(A)

            	
              5.11

            
	 
      	
              (a)(1)(B)

            	
              5.12

            
	 
      	
              (a)(2)

            	
              Omitted

            
	 
      	
              (b)

            	
              5.07

            
	 
      	
              (c)

            	
              Appendix A
      – definition of “Record Date”

            
	
              317

            	
              (a)(1)

            	
              5.03(a)

            
	 
      	
              (a)(2)

            	
              5.03(c)(iv)

            
	 
      	
              (b)

            	
              3.03

            
	
              318

            	
              (a)

            	
              10.07

            

    

    

    **           “N.A.”  shall
mean “not applicable”.

     

    THIS
CROSS REFERENCE TABLE SHALL NOT, FOR ANY PURPOSE,

     

    BE DEEMED
TO BE PART OF THIS INDENTURE.

     

    This
INDENTURE dated as of November 6, 2009, by and between ENTERGY TEXAS RESTORATION
FUNDING, LLC, a Delaware limited liability company (the “Issuer”), and THE
BANK OF NEW YORK MELLON, a New York banking corporation, in its capacity as
indenture trustee (the “Indenture Trustee”)
for the benefit of the Secured Parties (as defined herein) and in its separate
capacity as a securities intermediary (the “Securities
Intermediary”).

     

    In
consideration of the mutual agreements herein contained, each party agrees as
follows for the benefit of the other and each of the Holders:

     

    RECITALS
OF THE ISSUER

     

    The
Issuer has duly authorized the execution and delivery of this Indenture and the
creation and issuance of the Transition Bonds issuable hereunder, which will be
of substantially the tenor set forth herein and in the Series
Supplement.

     

    The
Transition Bonds shall be non-recourse obligations and shall be secured by and
payable solely out of the proceeds of the Transition Property and the other
Transition Bond Collateral.  If and to the extent that such proceeds
of Transition Property and the other Transition Bond Collateral are insufficient
to pay all amounts owing with respect to the Transition Bonds, then, except as
otherwise expressly provided hereunder, the Holders shall have no Claim in
respect of such insufficiency against the Issuer or the Indenture Trustee, and
the Holders, by their acceptance of the Transition Bonds, waive any such
Claim.

     

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

     

    NOW,
THEREFORE, THIS INDENTURE WITNESSETH:

     

    That the
Issuer, in consideration of the premises herein contained and of the purchase of
the Transition Bonds by the Holders and of other good and lawful consideration,
the receipt and sufficiency of which are hereby acknowledged, and to secure,
equally and ratably without prejudice, priority or distinction, except as
specifically otherwise set forth in this Indenture, the payment of the
Transition Bonds, the payment of all other amounts due under or in connection
with this Indenture (including, without limitation, all fees, expenses, counsel
fees, indemnity amounts and other amounts due and owing to the Indenture
Trustee) and the performance and observance of all of the covenants and
conditions contained herein or in such Transition Bonds, has hereby executed and
delivered this Indenture and by these presents does hereby and under the Series
Supplement will convey, grant and assign, transfer and pledge, in and unto the
Indenture Trustee, its successors and assigns forever, for the benefit of the
Secured Parties, all and singular the property described in the Series
Supplement (such property hereinafter referred to as the “Transition Bond
Collateral”).  The Series Supplement will more particularly
describe the obligations of the Issuer secured by the Transition Bond
Collateral.

     

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

     

    ARTICLE
I

     

    DEFINITIONS
AND INCORPORATION BY REFERENCE

     

    SECTION
1.01. Definitions.  Except
as otherwise specified herein or as the context may otherwise require, the
capitalized terms used herein shall have the respective meanings set forth in
Appendix A
attached hereto and made a part hereof for all purposes of this
Indenture.

     

    SECTION
1.02. Incorporation by Reference
of Trust Indenture Act.  Whenever this Indenture refers to a
provision of the TIA, that provision is incorporated by reference in and made a
part of this Indenture.  The following TIA terms used in this
Indenture have the following meanings:

     

    “indenture
securities” means the Transition Bonds.

     

    “indenture
security holder” means a Holder.

     

    “indenture
to be qualified” means this Indenture.

     

    “indenture
trustee” or “institutional trustee” means the Indenture Trustee.

     

    “obligor”
on the indenture securities means the Issuer and any other obligor on the
indenture securities.

     

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

     

    SECTION
1.03. Rules of
Construction.  Unless the context otherwise
requires:

     

    (i) a term has the meaning assigned to
it;

     

    (ii) an accounting term not otherwise
defined has the meaning assigned to it in accordance with generally accepted
accounting principles in the United States of America as in effect from time to
time;

     

    (iii) “or” is not exclusive;

     

    (iv) “including” means including without
limitation;

     

    (v) words in the singular include the
plural and words in the plural include the singular; and

     

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

     

    ARTICLE
II

     

    THE
TRANSITION BONDS

     

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

     

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

     

    Each
Transition Bond shall be dated the date of its authentication.  The
terms of the Transition Bonds set forth in Exhibit A are
part of the terms of this Indenture.

     

    SECTION
2.02. Denominations; Transition
Bonds.  The Transition Bonds shall be issuable in the Minimum
Denomination.

     

    The
Transition Bonds may, at the election of and as authorized by a Responsible
Officer of the Issuer, be issued in one or more Tranches, and shall be
designated generally as the “Transition Bonds” of the Issuer, with such further
particular designations added or incorporated in such title for the Transition
Bonds of any particular Tranche as a Responsible Officer of the Issuer may
determine.  Each Transition Bond shall bear upon its face the
designation so selected for the Tranche to which it belongs.  All
Transition Bonds shall be identical in all respects except for the denominations
thereof, unless the Transition Bonds are comprised of one or more Tranches, in
which case all Transition Bonds of the same Tranche shall be identical in all
respects except for the denominations thereof.  All Transition Bonds
of a particular Tranche shall be in all respects equally and ratably entitled to
the benefits hereof without preference, priority, or distinction on account of
the actual time or times of authentication and delivery, all in accordance with
the terms and provisions of this Indenture.

     

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

     

    (1) designation of the Tranches
thereof;

     

    (2) the principal amount;

     

    (3) the Transition Bond Interest
Rate;

     

    (4) the Payment Dates;

     

    (5) the Scheduled Payment
Dates;

     

    (6) the Scheduled Final Payment
Date;

     

    (7) the Final Maturity Date;

     

    (8) the Closing Date;

     

    (9) the place or places for the payment of
interest, principal and premium, if any;

     

    (10) the Minimum Denominations;

     

    (11) the Expected Amortization
Schedule;

     

    (12) provisions with respect to the
definitions set forth in Appendix A
hereto;

     

    (13) whether or not the Transition Bonds are
to be Book-Entry Transition Bonds and the extent to which Section 2.11
should apply;

     

    (14) to the extent applicable, the extent to
which payments on the Transition Bonds of any Tranche are subordinate to or
pari passu
in right of payment of principal and interest to other Tranches;

     

    (15) provisions
with respect to application of the proceeds of the Transition Bonds including
the payment of costs of issuing the Transition Bonds; and

     

    (16) any other provisions expressing or
referring to the terms and conditions upon which the Transition Bonds of the
applicable Tranche are to be issued under this Indenture that are not in
conflict with the provisions of this Indenture and as to which the Rating Agency
Condition is satisfied.

     

    SECTION
2.03. Execution, Authentication
and Delivery.  The Transition Bonds shall be executed on behalf
of the Issuer by any of its Responsible Officers.  The signature of
any such Responsible Officer on the Transition Bonds may be manual or
facsimile.

     

    Transition
Bonds bearing the manual or facsimile signature of individuals who were at any
time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding
that such individuals or any of them have ceased to hold such offices prior to
the authentication and delivery of such Transition Bonds or did not hold such
offices at the date of such Transition Bonds.

     

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

     

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

     

    SECTION
2.04. Temporary Transition
Bonds.  Pending the preparation of Definitive Transition Bonds
pursuant to Section 2.13,
the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, Temporary Transition Bonds which are
printed, lithographed, typewritten, mimeographed or otherwise produced, of the
tenor of the Definitive Transition Bonds in lieu of which they are issued and
with such variations not inconsistent with the terms of this Indenture as the
officers executing such Transition Bonds may determine, as evidenced by their
execution of such Transition Bonds.

     

    If
Temporary Transition Bonds are issued, the Issuer will cause Definitive
Transition Bonds to be prepared without unreasonable delay.  After the
preparation of Definitive Transition Bonds, the Temporary Transition Bonds shall
be exchangeable for Definitive Transition Bonds upon surrender of the Temporary
Transition Bonds at the office or agency of the Issuer to be maintained as
provided in Section 3.02,
without charge to the Holder.  Upon surrender for cancellation of any
one or more Temporary Transition Bonds, the Transition Bond Issuer shall execute
and the Indenture Trustee shall authenticate and deliver in exchange therefor a
like principal amount of Definitive Transition Bonds of authorized
denominations.  Until so delivered in exchange, the Temporary
Transition Bonds shall in all respects be entitled to the same benefits under
this Indenture as Definitive Transition Bonds.

     

    SECTION
2.05. Registration; Registration
of Transfer and Exchange of Transition Bonds.  The Issuer shall
cause to be kept a register (the “Transition Bond
Register”) in which the Issuer shall provide for the registration of
Transition Bonds and the registration of transfers of Transition
Bonds.  The Indenture Trustee shall be “Transition Bond
Registrar” for the purpose of registering Transition Bonds and transfers
of Transition Bonds as herein provided.  Upon any resignation of any
Transition Bond Registrar, the Issuer shall promptly appoint a successor or, if
it elects not to make such an appointment, assume the duties of Transition Bond
Registrar.

     

    If a
Person other than the Indenture Trustee is appointed by the Issuer as Transition
Bond Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Transition Bond Registrar and of the location, and
any change in the location, of the Transition Bond Register, and the Indenture
Trustee shall have the right to inspect the Transition Bond Register at all
reasonable times and to obtain copies thereof, and the Indenture Trustee shall
have the right to rely conclusively upon a certificate executed on behalf of the
Transition Bond Registrar by a Responsible Officer thereof as to the names and
addresses of the Holders and the principal amounts and number of such Transition
Bonds (separately stated by Tranche).

     

    Upon
surrender for registration of transfer of any Transition Bond at the office or
agency of the Issuer to be maintained as provided in Section 3.02,
provided that the requirements of Section 8-401 of the UCC are met, the
Issuer shall execute, and the Indenture Trustee shall authenticate and the
Holder shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Transition Bonds in any Minimum
Denominations, of the same Tranche and aggregate principal amount.

     

    At the
option of the Holder, Transition Bonds may be exchanged for other Transition
Bonds in any Minimum Denominations, of the same Tranche and aggregate principal
amount, upon surrender of the Transition Bonds to be exchanged at such office or
agency as provided in Section 3.02.  Whenever
any Transition Bonds are so surrendered for exchange, the Issuer shall, provided
that the requirements of Section 8-401 of the UCC are met, execute and,
upon any such execution, the Indenture Trustee shall authenticate and the Holder
shall obtain from the Indenture Trustee, the Transition Bonds which the Holder
making the exchange is entitled to receive.

     

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

     

    Every
Transition Bond presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by (a) a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by the Holder thereof or such Holder’s attorney duly authorized in
writing, with such signature guaranteed by an institution which is a member of
one of the following recognized Signature Guaranty
Programs:  (i) The Securities Transfer Agent Medallion Program
(STAMP); (ii) The New York Stock Exchange Medallion Program (MSP);
(iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other
guarantee program acceptable to the Indenture Trustee, and (b) such other
documents as the Indenture Trustee may require.

     

    No
service charge shall be made to a Holder for any registration, transfer or
exchange of Transition Bonds, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge or any fees or expenses of the Indenture Trustee that may be imposed in
connection with any registration of transfer or exchange of Transition Bonds,
other than exchanges pursuant to Sections 2.04 or
2.06 not
involving any transfer.

     

    The
preceding provisions of this Section 2.05
notwithstanding, the Issuer shall not be required to make, and the Transition
Bond Registrar need not register transfers or exchanges (i) of any Transition
Bond that has been submitted within fifteen (15) days preceding the due
date for any payment with respect to such Transition Bond until after such due
date has occurred or (ii) of Unregistered Transition Bonds unless Section 2.16 has
been complied with in connection with such transfer or exchange.

     

    SECTION
2.06. Mutilated, Destroyed, Lost
or Stolen Transition Bonds.  If (i) any mutilated
Transition Bond is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Transition Bond and (ii) there is delivered to the Indenture Trustee
such security or indemnity as may be required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Transition Bond Registrar or the Indenture Trustee that such Transition Bond has
been acquired by a Protected Purchaser, the Issuer shall, provided that the
requirements of Section 8-401 of the UCC are met, execute and, upon the
Issuer’s written request, the Indenture Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Transition Bond, a replacement Transition Bond of like Tranche, tenor and
principal amount, bearing a number not contemporaneously outstanding; provided, however, that if any
such destroyed, lost or stolen Transition Bond, but not a mutilated Transition
Bond, shall have become or within seven (7) days shall be due and payable,
instead of issuing a replacement Transition Bond, the Issuer may pay such
destroyed, lost or stolen Transition Bond when so due or payable without
surrender thereof.  If, after the delivery of such replacement
Transition Bond or payment of a destroyed, lost or stolen Transition Bond
pursuant to the proviso to the preceding sentence, a Protected Purchaser of the
original Transition Bond in lieu of which such replacement Transition Bond was
issued presents for payment such original Transition Bond, the Issuer and the
Indenture Trustee shall be entitled to recover such replacement Transition Bond
(or such payment) from the Person to whom it was delivered or any Person taking
such replacement Transition Bond from such Person to whom such replacement
Transition Bond was delivered or any assignee of such Person, except a Protected
Purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.

     

    Upon the
issuance of any replacement Transition Bond under this Section 2.06,
the Issuer and/or the Indenture Trustee may require the payment by the Holder of
such Transition Bond of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Indenture Trustee and the Transition
Bond Registrar) connected therewith.

     

    Every
replacement Transition Bond issued pursuant to this Section 2.06 in
replacement of any mutilated, destroyed, lost or stolen Transition Bond shall
constitute an original additional contractual obligation of the Issuer, whether
or not the mutilated, destroyed, lost or stolen Transition Bond shall be found
at any time or enforced by any Person, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Transition
Bonds duly issued hereunder.

     

    The
provisions of this Section 2.06 are
exclusive and shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Transition Bonds.

     

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

     

    SECTION
2.08. Payment of Principal,
Premium, if any, and Interest; Interest on Overdue Principal; Principal,
Premium, if any, and Interest Rights Preserved.

     

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

     

    (b) The
principal of each Transition Bond of each Tranche shall be paid, to the extent
funds are available therefor in the Collection Account, in installments on each
Payment Date specified in the Series Supplement; provided that
installments of principal not paid when scheduled to be paid in accordance with
the Expected Amortization Schedule shall be paid upon receipt of money available
for such purpose, in the order set forth in the Expected Amortization
Schedule.  Failure to pay principal in accordance with such Expected
Amortization Schedule because moneys are not available pursuant to Section 8.02 to
make such payments shall not constitute a Default or Event of Default under this
Indenture; provided, however that failure
to pay the entire unpaid principal amount of the Transition Bonds of a Tranche
upon the Final Maturity Date for the Transition Bonds shall constitute a Default
or Event of Default with respect to the Transition Bonds under this
Indenture.  Notwithstanding the foregoing, the entire unpaid principal
amount of the Transition Bonds shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
if the Indenture Trustee or the Holders of the Transition Bonds representing not
less than a majority of the Outstanding Amount of the Transition Bonds have
declared the Transition Bonds to be immediately due and payable in the manner
provided in Section 5.02.  All
payments of principal and premium, if any, on the Transition Bonds shall be made
pro rata to the Holders entitled thereto unless otherwise provided in the
Series Supplement with respect to any Tranche of Transition
Bonds.  The Indenture Trustee shall notify the Person in whose name a
Transition Bond is registered at the close of business on the Record Date
preceding the Payment Date on which the Issuer expects that the final
installment of principal of and premium, if any, and interest on such Transition
Bond will be paid.  Such notice shall be mailed no later than five
(5) days prior to such final Payment Date and shall specify that such final
installment will be payable only upon presentation and surrender of such
Transition Bond and shall specify the place where such Transition Bond may be
presented and surrendered for payment of such installment.

     

    (c) If
interest on the Transition Bonds is not paid when due, such defaulted interest
shall be paid (plus interest on such defaulted interest at the applicable
Transition Bond Interest Rate to the extent lawful) to the Persons who are
Holders on a subsequent Special Record Date.  The Issuer shall fix or
cause to be fixed any such Special Record Date and Special Payment Date, and, at
least ten (10) days before any such Special Record Date, the Issuer shall
mail to each affected Holder a notice that states the Special Record Date, the
Special Payment Date and the amount of defaulted interest (plus interest on such
defaulted interest) to be paid.

     

    SECTION
2.09. Cancellation.  All
Transition Bonds surrendered for payment, registration of transfer or exchange
shall, if surrendered to any Person other than the Indenture Trustee, be
delivered to the Indenture Trustee and shall be promptly canceled by the
Indenture Trustee.  The Issuer may at any time deliver to the
Indenture Trustee for cancellation any Transition Bonds previously authenticated
and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Transition Bonds so delivered shall be promptly canceled by
the Indenture Trustee.  No Transition Bonds shall be authenticated in
lieu of or in exchange for any Transition Bonds canceled as provided in this
Section 2.09,
except as expressly permitted by this Indenture.  All canceled
Transition Bonds may be held or disposed of by the Indenture Trustee in
accordance with its standard retention or disposal policy as in effect at the
time.

     

    SECTION
2.10. Outstanding Amount;
Authentication and Delivery of Transition Bonds.  The aggregate
Outstanding Amount of Transition Bonds that may be authenticated and delivered
under this Indenture shall not exceed the aggregate of the amounts of Transition
Bonds that are authorized in the Financing Order.

     

    Transition
Bonds created and established by the Series Supplement may at any time be
executed by the Issuer and delivered to the Indenture Trustee for authentication
and thereupon the same shall be authenticated and delivered by the Indenture
Trustee upon Issuer Request and upon delivery by the Issuer to the Indenture
Trustee, and receipt by the Indenture Trustee, or the causing to occur by the
Issuer, of the following; provided, however, that
compliance with such conditions and delivery of such documents shall only be
required in connection with the original issuance of a Transition Bond or
Transition Bonds:

     

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

     

    (2) Authorizations.  Copies
of (x) the Financing Order which shall be in full force and effect and be Final,
(y) certified resolutions of the Managers or Member of the Issuer
authorizing the execution and delivery of the Series Supplement and the
execution, authentication and delivery of such Transition Bonds and (z) a
duly executed Series Supplement for the Transition Bonds to be
issued.

     

    (3) Opinions.

     

    (a) An
Opinion of Counsel of Independent counsel of the Issuer that the Financing Order
is in full force and effect, that the Financing Order is Final and that no other
authorization, approval or consent of any Federal governmental body or bodies at
the time having jurisdiction in the premises is required for the valid issuance,
authentication and delivery of such Transition Bonds, except for such
registrations as are required under the “Blue Sky” and securities laws of any
State or such authorizations, approvals or consents of governmental bodies that
have been obtained and copies of which have been delivered with such Opinion of
Counsel.

     

    (b) An
Opinion of Counsel of Independent counsel of the Issuer that no authorization,
approval or consent of any Delaware, New York or Texas governmental body or
bodies at the time having jurisdiction in the premises is required for the valid
execution and delivery by the Issuer of each of the Basic Documents to which the
Issuer is a party and that is executed and delivered in connection with such
Transition Bond issuance, except for such authorizations, approvals or consents
of governmental bodies that have been obtained and copies of which have been
delivered with such Opinion of Counsel.

     

    (4) Authorizing
Certificate.  An Officer’s Certificate, dated the Closing Date,
of the Issuer certifying that (a) the Issuer has duly authorized the
execution and delivery of this Indenture and the Series Supplement and the
execution and delivery of the Transition Bonds and (b) that the Series
Supplement for the Transition Bonds is in the form attached thereto, which
Series Supplement shall comply with the requirements of Section 2.02.

     

    (5) The Transition Bond
Collateral.  The Issuer shall have made or caused to be made
all filings with the PUCT and the Texas Secretary of State pursuant to the
Financing Order and the Securitization Law and all other filings necessary to
perfect the Grant of the Transition Bond Collateral to the Indenture Trustee and
the Lien of this Indenture.

     

    (6) Certificates of the Issuer
and the Seller.

     

    (a) An
Officer’s Certificate, dated as of the Closing Date:

     

    (i) to the effect that (A) the Issuer
is not in Default under this Indenture and that the issuance of the Transition
Bonds will not result in any Default or in any breach of any of the terms,
conditions or provisions of or constitute a default under the Financing Order
relating to the Transition Bonds or any indenture, mortgage, deed of trust or
other agreement or instrument to which the Issuer is a party or by which it or
its property is bound or any order of any court or administrative agency entered
in any Proceeding to which the Issuer is a party or by which it or its property
may be bound or to which it or its property may be subject and (B) that all
conditions precedent provided in this Indenture relating to the execution,
authentication and delivery of the Transition Bonds have been complied
with;

     

    (ii) to the effect that the Issuer has not
assigned any interest or participation in the Transition Bond Collateral except
for the Grant contained in the Series Supplement; the Issuer has the power and
right to Grant the Transition Bond Collateral to the Indenture Trustee as
security hereunder and thereunder; and the Issuer, subject to the terms of this
Indenture, has Granted to the Indenture Trustee a first priority perfected
security interest in all of its right, title and interest in and to such
Transition Bond Collateral free and clear of any Lien, mortgage, pledge, charge,
security interest, adverse claim or other encumbrance arising as a result of
actions of the Issuer or through the Issuer, except Permitted
Liens;

     

    (iii) to the effect that the Issuer has
appointed the firm of Independent registered public accountants as contemplated
in Section 8.06;

     

    (iv) to the effect that attached thereto are
duly executed, true and complete copies of the Sale Agreement, the Servicing
Agreement, and the Administration Agreement, which are, to the knowledge of the
Issuer, in full force and effect and, to the knowledge of the Issuer, that no
party is in default of its obligations under such agreements; and

     

    (v) stating that all filings with the PUCT,
the Texas Secretary of State and the Delaware Secretary of State pursuant to the
Securitization Law, the UCC and the Financing Order relating to the Transition
Bonds and all UCC financing statements with respect to the Transition Bond
Collateral which are required to be filed by the terms of the Financing Order,
the Securitization Law, the Sale Agreement, the Servicing Agreement and this
Indenture have been filed as required.

     

    (b) An
officer’s certificate from the Seller, dated as of the Closing Date, to the
effect that, in the case of the Transition Property identified in the related
Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant
to the Sale Agreement:

     

    (i) the Seller was the original and the
sole owner of such Transition Property, free and clear of any Lien; the Seller
had not assigned any interest or participation in such Transition Property and
the proceeds thereof other than to the Issuer pursuant to the Sale Agreement;
the Seller has the power, authority and right to own, sell and assign such
Transition Property and the proceeds thereof to the Issuer; and the Seller,
subject to the terms of the Sale Agreement, has validly sold and assigned to the
Issuer all of its right, title and interest in and to such Transition Property
and the proceeds thereof, free and clear of any Lien (other than Permitted
Liens) and such sale and assignment is absolute and irrevocable and has been
perfected; and

     

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

     

    (7) Opinion of Tax
Counsel.  The Seller shall have received and delivered to the
Issuer and the Indenture Trustee an opinion of Independent tax counsel (as
selected by the Seller, and in form and substance reasonably satisfactory to the
Issuer and the Indenture Trustee) to the effect that (a) the Issuer will
not be subject to United States federal income tax as an entity separate from
its sole owner and that the Transition Bonds will be treated as debt of the
Issuer’s sole owner for United States federal income tax purposes and
(b) for United States federal income tax purposes, the issuance of the
Transition Bonds will not result in gross income to the Seller.

     

    (8) Opinion of
Counsel.  Unless otherwise specified in the Series Supplement,
an Opinion or Opinions of Counsel, portions of which may be delivered by one or
more Independent counsel for the Issuer, portions of which may be delivered by
one or more Independent counsel for the Servicer, and portions of which may be
delivered by one or more Independent counsel for the Seller, dated the Closing
Date, in each case subject to the customary exceptions, qualifications and
assumptions contained therein, to the collective effect that:

     

    (a) The
Indenture has been duly qualified under the Trust Indenture Act and no
qualification of the Series Supplement is necessary under the Trust Indenture
Act.

     

    (b) All
instruments furnished to the Indenture Trustee pursuant to the Indenture conform
to the requirements set forth in the Indenture and constitute all of the
documents required to be delivered under the Indenture for the Indenture Trustee
to authenticate and deliver the Transition Bonds.  All conditions
precedent provided for in the Indenture relating to the authentication and
delivery of the Transition Bonds have been complied with.

     

    (c) The
Transition Bonds have been duly authorized, executed and delivered by the Issuer
and when duly authenticated by the Indenture Trustee in accordance with the
provisions of the Indenture and delivered against payment of the purchase price
therefor, as provided in the Underwriting Agreement, the Transition Bonds will
constitute legal, valid and binding obligations of the Issuer entitled to the
benefits provided by the Indenture and the Series Supplement and will be
enforceable against the Issuer in accordance with their terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws of general applicability
relating to or affecting the enforcement of creditors’ rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).

     

    (d) Each of
the Indenture, the Series Supplement, the Administration Agreement, the Sale
Agreement, and the Servicing Agreement has been duly authorized, executed and
delivered by the Issuer and is a legal, valid and binding agreement of the
Issuer, enforceable against the Issuer in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws of general
applicability relating to or affecting the enforcement of creditors’ rights and
by the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).  Each of the Administration Agreement, the Sale Agreement, and
the Servicing Agreement has been duly authorized, executed and delivered by ETI
and constitutes a legal, valid and binding agreement of ETI, enforceable against
ETI in accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws of general applicability relating to or affecting the
enforcement of creditors’ rights and by the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

     

    (e) (i)  With
respect to the Transition Bond Collateral, upon the giving of value by the
Holders to the Issuer with respect to the Transition Bond Collateral, the
Indenture, together with the Series Supplement, creates in favor of the
Indenture Trustee, for the benefit of the Secured Parties, a valid security
interest under Article 9 of the NY UCC in the Transition Bond Collateral
(to the extent the Transition Bond Collateral is of a type in which a security
interest can be created under Article 9 of the NY UCC) to secure the
payment of the Secured Obligations with respect to the Series
Supplement.  Assuming that the collateral described in the Delaware
Financing Statement is Transition Bond Collateral pursuant to the Indenture,
then insofar as Section 9-509 of the NY UCC is applicable, the Indenture
Trustee is authorized to file the Delaware Financing Statement.

     

    (ii) Under Section 9-305(a)(3) of the
NY UCC, the local law of the Securities Intermediary’s jurisdiction as specified
in Section 8-110(e) of the NY UCC governs perfection, the effect of
perfection or nonperfection and priority in the Securities Account and Security
Entitlements.  Under the Indenture, for purposes of
Section 8-110(e) of the NY UCC, the jurisdiction of the Securities
Intermediary is the State of New York.

     

    (iii) To the extent that the Collection
Account is a Securities Account, the provisions of the Indenture are effective
to perfect by control the security interest of the Indenture Trustee, for the
benefit of the Secured Parties, in the Collection Account and the Issuer’s
Security Entitlements with respect to the Financial Assets credited to the
Collection Account and, subject to and to the extent provided in
Section 9-315 of the NY UCC and the Federal Book-Entry Regulations,
identifiable cash proceeds thereof.  Such security interest will have
priority over any security interest held by a secured party perfected by a means
other than control.

     

    (iv) Insofar as Article 9 of the NY UCC
is applicable, (A) pursuant to Section 9-301 of the NY UCC, the law of
the location of the debtor governs the perfection of a nonpossessory security
interest in the Transition Bond Collateral; (B) pursuant to 9-307 of the NY
UCC, a registered organization that is organized under the law of a State is
deemed to be located in that State for purposes of Section 9-301;
(C) the Issuer is a “registered organization” as defined in
Section 9-102(a)(70) of the NY UCC organized in the State of Delaware; and
(D) therefore, the law of the State of Delaware governs the perfection of a
nonpossessory security interest in the Transition Bond Collateral.

     

    (f) The
Registration Statement covering the Transition Bonds has become effective under
the Securities Act; and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued under
the Securities Act and no proceedings for that purpose have been initiated or
are pending or threatened by the SEC.

     

    (g) Neither
the Issuer nor ETI is now and, assuming that the Issuer uses the net proceeds of
the sale of the Transition Bonds for the purpose of acquiring Transition
Property in accordance with the terms of the Sale Agreement following the sale
of the Transition Bonds to the Underwriters pursuant to the Underwriting
Agreement, neither the Issuer nor ETI will be required to register as an
investment company under the Investment Company Act.

     

    (h) No
authorization, approval or consent of any federal governmental body or bodies
having jurisdiction in the premises is required for the valid issuance,
authentication and delivery of the Transition Bonds and for the valid execution
and delivery by the Issuer of each of the Basic Documents except for such
authorizations, approvals or consents of federal governmental bodies that have
been obtained.

     

    (i) Each of
the Sale Agreement, the proviso (relating to Liens in Transition Property
governed by Texas law) to Section 10.13,
and the portions of this Indenture referred to by such proviso, constitutes the
legal, valid and binding obligation of each of ETI and the Issuer, to the extent
each is a party thereto, enforceable against such parties in accordance with its
terms.

     

    (j) In
accordance with the Securitization Law, (i) the rights and interests of ETI
under the Financing Order related to the Transition Bonds, including the right
to impose, collect, and receive the Transition Charges authorized in the
Financing Order related to the Transition Bonds, are assignable and shall become
Transition Property when they are first transferred to the Issuer in connection
with the issuance of Transition Bonds; (ii) upon the transfer by ETI of the
Transition Property to the Issuer, the Issuer shall have all of the rights of
ETI with respect to such Transition Property, including, without limitation, the
right to exercise any and all rights and remedies with respect thereto,
including the right to impose, collect and receive any amounts payable by any
Customer in respect of the Transition Property; (iii) the Financing Order
related to the Transition Bonds approves the issuance by the Issuer of the
Transition Bonds in an aggregate principal amount which equals or exceeds the
initial Outstanding Amount of the Transition Bonds; and (iv) the Transition
Bonds are “transition bonds” within the meaning of Sections 36.403(e) and
39.302(6) of the Securitization Law.

     

    (k) No
governmental approvals are required for the valid issuance, authentication and
delivery of the Transition Bonds or the performance by either ETI or the Issuer
of its respective obligations under the Basic Documents, and the proviso
(relating to Liens in Transition Property governed by Texas law) to Section 10.13,
and the portions of this Indenture referred to by such proviso, to which either
ETI or the Issuer is a party, except for (i) the Financing Order related to
the Transition Bonds and the governmental approvals expressly contemplated
therein and (ii) the filings contemplated by paragraphs (n),
(p) and (bb) below.

     

    (l) A Texas
state court, or a federal court applying Texas conflict-of-law rules, would give
effect to the choice of the laws of New York (to the extent so stated therein)
as the governing law in each of the Indenture, the Series Supplement and the
Underwriting Agreement.

     

    (m) Under the
terms of Section 39.309(c) of the Securitization Law, the transfer of the
Transition Property by ETI to the Issuer is perfected under
Section 39.309(c) of the Securitization Law against all third parties,
including subsequent judicial or other lien creditors.

     

    (n) A valid
and enforceable lien and security interest in the Transition Property has been
created and has attached in favor of the Indenture Trustee (on behalf of the
Secured Parties) by the Financing Order related to the Transition Bonds and the
execution and delivery of this Indenture and the Series Supplement by the Issuer
in connection with the issuance and funding of the Transition
Bonds.  Such Lien has been perfected in accordance with
Section 39.309(b) of the Securitization Law and in accordance with the
Financing Order.  Such Lien has priority in the order of filing and
takes precedence over any subsequent judicial or other lien
creditor.  Based on lien searches conducted in the appropriate office,
such Lien is first priority.

     

    (o) UCC lien
searches identify no secured party who has filed with the Secretary of State of
the State of Texas naming ETI or the Issuer as debtor and describing any of the
Transition Bond Collateral.

     

    (p) The
Transition Property Notices related to the Transition Bonds are in appropriate
form for filing pursuant to the Section 39.309 of the Securitization Law
and pursuant to Chapter 96 of the Rules of the Secretary of State of the
State of Texas with respect to the Transition Property.

     

    (q) The
Issuer has been duly formed and is validly existing in good standing as a
limited liability company under the laws of the State of Delaware, and is in
good standing in the State of Texas.

     

    (r) The LLC
Agreement constitutes a valid and binding agreement of ETI and is enforceable
against ETI, in its capacity as member of the Issuer, in accordance with its
terms.

     

    (s) Under the
LLC Act and the LLC Agreement, the Issuer has the limited liability company
power and authority to execute and deliver each of this Indenture, the Sale
Agreement, the Servicing Agreement, the Underwriting Agreement and the
Transition Bonds and to perform its obligations hereunder or
thereunder.  Under the LLC Act and the LLC Agreement, the execution
and delivery by the Issuer of each of this Indenture, the Sale Agreement, the
Servicing Agreement, the Underwriting Agreement and the Transition Bonds, and
the performance by the Issuer of its obligations hereunder or thereunder, have
been duly authorized by all necessary limited liability company action on the
part of the Issuer.

     

    (t) Neither
the execution or delivery by the Issuer of each of this Indenture, the Sale
Agreement, the Servicing Agreement, the Underwriting Agreement or the Transition
Bonds nor the compliance by the Issuer with the terms hereof or thereof, nor the
consummation by the Issuer of any of the transactions contemplated hereby or
thereby requires the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action with respect to any
Delaware court, or Delaware governmental or Delaware regulatory authority or
Delaware agency under the laws of the State of Delaware, except for the filing
of the Certificate of Formation with the Secretary of State of the State of
Delaware, which Certificate of Formation has been duly filed.

     

    (u) Neither
the execution and delivery by the Issuer of the Indenture, the Sale Agreement,
the Servicing Agreement, the Underwriting Agreement or the Transition Bonds nor
the compliance by the Issuer with the terms hereof or thereof, nor the
consummation by the Issuer of any of the transactions contemplated hereby or
thereby conflicts with or constitutes a breach of or default under the
Certificate of Formation or the LLC Agreement, or violates any law, governmental
rule or regulation of the State of Delaware.

     

    (v) After due
inquiry, limited to, and solely to the extent disclosed thereupon, court dockets
for active cases of the Court of Chancery of the State of Delaware in and for
New Castle County, Delaware, of the Superior Court of the State of Delaware in
and for New Castle County, Delaware, and of the United States District Court
sitting in the State of Delaware, such counsel is not aware of any legal or
governmental proceeding pending against the Issuer.

     

    (w) If
properly presented to a Delaware court, a Delaware court applying Delaware law
would conclude that (i) in order for any Person to file a voluntary
bankruptcy petition on behalf of the Issuer, the affirmative vote of the Member
and the affirmative vote of all the Managers, including the one
(1) Independent Managers, as provided in Section 1.08(b) of the LLC
Agreement, is required and (ii) such provision, contained in
Section 1.08(b) of the LLC Agreement that requires the affirmative vote of
the Member and the affirmative vote of all the Managers, including the one
(1) Independent Managers, in order for a Person to file a voluntary
bankruptcy petition on behalf of the Issuer, constitutes a legal, valid and
binding agreement of the Member, and is enforceable against ETI, in accordance
with its terms.

     

    (x) Under the
LLC Act and the LLC Agreement, the bankruptcy (as defined in the LLC Act) or
dissolution of ETI will not, by itself, cause the Issuer to be dissolved or its
affairs to be wound up.

     

    (y) While
under the LLC Act, on application to a court of competent jurisdiction, a
judgment creditor of the Member may be able to charge ETI’s share of any profits
and losses of the Issuer and ETI’s right to receive distributions of Issuer
assets (“ETI’s
Interest”), to the extent so charged, the judgment creditor has only the
right to receive any distribution or distributions to which the Member would
otherwise have been entitled in respect of such Member’s
Interest.  Under the LLC Act, no creditor of ETI shall have any right
to obtain possession of, or otherwise exercise legal or equitable remedies with
respect to, the property of the Issuer.  Thus, under the LLC Act, a
judgment creditor of ETI may not satisfy its claims against ETI by asserting a
claim against the assets of the Issuer.

     

    (z) Under the
LLC Act (i) the Issuer is a separate legal entity, and (ii) the
existence of the Issuer as a separate legal entity shall continue until the
cancellation of its Certificate of Formation.

     

    (aa) The
Delaware Financing Statements are in an appropriate form for filing in the State
of Delaware under Section 9-502(a) and 9-516 of the Delaware
UCC.

     

    (bb) Insofar
as Article 9 of the Delaware UCC is applicable (without regard to conflict
of laws principles), upon the filing of the Delaware Financing Statements, the
Indenture Trustee will have a perfected security interest in the Issuer’s rights
in that portion of the Transition Bond Collateral described in the Delaware
Financing Statements that may be perfected by the filing of a UCC financing
statement and the proceeds thereof (as defined in Section 9-102(a)(64) of
the Delaware UCC), and such security interest will be prior to any other
security interest granted by the Issuer that is perfected solely by the filing
of financing statements under the Delaware UCC.  Insofar as
Article 9 of the Delaware UCC is applicable (without regard to conflict of
laws principles), the Delaware Secretary of State is the appropriate place to
file a financing statement to perfect a security interest except for
as-extracted collateral or timber to be cut (as described in
Section 9-501(a)(1)(A) of the Delaware UCC) or fixture filings where the
collateral is goods that are or are to become fixtures (as described in
Section 9-501(a)(1)(B) of the Delaware UCC).

     

    (cc) UCC lien
searches have been conducted in the proper filing office and against the proper
debtor necessary to identify those Persons who under the Delaware UCC have on
file financing statements against the Issuer covering the Transition Bond
Collateral.  The UCC lien searches identify no secured party who has
filed a financing statement naming the Issuer as debtor and describing the
Transition Bond Collateral.

     

    (dd) Insofar
as Article 9 of the Delaware UCC is applicable (without regard to conflict
of laws principles), the provisions of the Indenture are sufficient to
constitute authorization by the Issuer of the filing of the Delaware Financing
Statements for purposes of Section 9-509 of the Delaware UCC.

     

    (ee) Insofar
as Article 9 of the Delaware UCC is applicable (without regard to conflict
of laws principles), for purposes of the Delaware UCC, the Issuer is a
“registered organization” (as defined in Section 9-102(a)(70) of the
Delaware UCC).

     

    (9) Accountant’s Certificate or
Letter.  One or more certificates or letters, addressed to the
Issuer complying with the requirements of Section 10.01(a),
of a firm of Independent registered public accountants of recognized national
reputation to the effect that (a) such accountants are Independent with
respect to the Issuer within the meaning of this Indenture, and are independent
public accountants within the meaning of the standards of The American Institute
of Certified Public Accountants, and (b) with respect to the Transition
Bond Collateral, they have applied such procedures as instructed by the
addressee of such certificate or letter.

     

    (10) Rating Agency
Condition.  The Indenture Trustee shall receive evidence
reasonably satisfactory to it that the Rating Agency Condition will be satisfied
with respect to the issuance of such new Transition Bonds.

     

    (11) Requirements of Series
Supplement.  Such other funds, accounts, documents,
certificates, agreements, instruments or opinions as may be required by the
terms of the Series Supplement.

     

    (12) Required Capital
Level.  Evidence that the Required Capital Level has been
credited to the Capital Subaccount.

     

    (13) Other
Requirements.  Such other documents, certificates, agreements,
instruments or opinions as the Indenture Trustee may reasonably
require.

     

    SECTION
2.11. Book-Entry Transition
Bonds.  Unless the Series Supplement provides otherwise, all of
the Transition Bonds shall be issued in Book-Entry Form, and the Issuer shall
execute and the Indenture Trustee shall, in accordance with this Section 2.11 and
the Issuer Order, authenticate and deliver one or more Global Transition Bonds,
evidencing the Transition Bonds which (i) shall be an aggregate original
principal amount equal to the aggregate original principal amount of such
Transition Bonds to be issued pursuant to the applicable Issuer Order,
(ii) shall be registered in the name of the Clearing Agency therefor or its
nominee, which shall initially be Cede & Co., as nominee for The
Depository Trust Company, the initial Clearing Agency, (iii) shall be
delivered by the Indenture Trustee pursuant to such Clearing Agency’s or such
nominee’s instructions, and (iv) shall bear a legend substantially to the
effect set forth in Exhibit A.

     

    Each
Clearing Agency designated pursuant to this Section 2.11
must, at the time of its designation and at all times while it serves as
Clearing Agency hereunder, be a “clearing agency” registered under the Exchange
Act and any other applicable statute or regulation.

     

    No Holder
of the Transition Bonds issued in Book-Entry Form shall receive a Definitive
Transition Bond representing such Holder’s interest in any such Transition
Bonds, except as provided in Section 2.13.  Unless
(and until) certificated, fully registered Transition Bonds (the “Definitive Transition
Bonds”) have been issued to the Holders pursuant to Section 2.13 or
pursuant to the Series Supplement relating thereto:

     

    (a) the
provisions of this Section 2.11
shall be in full force and effect;

     

    (b) the
Issuer, the Servicer, the Paying Agent, the Transition Bond Registrar and the
Indenture Trustee may deal with the Clearing Agency for all purposes (including
the making of distributions on the Transition Bonds and the giving of
instructions or directions hereunder) as the authorized representatives of the
Holders;

     

    (c) to the
extent that the provisions of this Section 2.11
conflict with any other provisions of this Indenture, the provisions of this
Section 2.11
shall control;

     

    (d) the
rights of Holders of the Transition Bonds shall be exercised only through the
Clearing Agency and the Clearing Agency Participants and shall be limited to
those established by law and agreements between such Holders and the Clearing
Agency and/or the Clearing Agency Participants.  Pursuant to the
Letter of Representations, unless and until Definitive Transition Bonds are
issued pursuant to Section 2.13,
the initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of principal and
interest on the Book-Entry Transition Bonds to such Clearing Agency
Participants; and

     

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

     

    SECTION
2.12. Notices to Clearing
Agency.  Unless and until Definitive Transition Bonds shall
have been issued to Holders pursuant to Section 2.13,
whenever notice, payment, or other communications to the holders of Book-Entry
Transition Bonds is required under this Indenture, the Indenture Trustee, the
Servicer and the Paying Agent, as applicable, shall give all such notices and
communications specified herein to be given to Holders to the Clearing
Agency.

     

    SECTION
2.13. Definitive Transition
Bonds.  If (a) (i) the Issuer advises the Indenture
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities under any Letter of Representations and
(ii) the Issuer is unable to locate a qualified successor Clearing Agency,
(b) the Issuer, at its option, advises the Indenture Trustee in writing
that it elects to terminate the book-entry system through the Clearing Agency or
(c) after the occurrence of an Event of Default hereunder, Holders holding
Transition Bonds aggregating not less than a majority of the aggregate
Outstanding Amount of the Transition Bonds maintained as Book-Entry Transition
Bonds advise the Indenture Trustee, the Issuer and the Clearing Agency (through
the Clearing Agency Participants) in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best interests
of the Holders, the Issuer shall notify the Clearing Agency, the Indenture
Trustee and all such Holders in writing of the occurrence of any such event and
of the availability of Definitive Transition Bonds to the Holders requesting the
same.  Upon surrender to the Indenture Trustee of the Global
Transition Bonds by the Clearing Agency accompanied by registration instructions
from such Clearing Agency for registration, the Issuer shall execute, and the
Indenture Trustee shall authenticate and deliver, Definitive Transition Bonds in
accordance with the instructions of the Clearing Agency.  None of the
Issuer, the Transition Bond Registrar, the Paying Agent or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions.  Upon the issuance of Definitive Transition Bonds, the
Indenture Trustee shall recognize the Holders of the Definitive Transition Bonds
as Holders hereunder.

     

    Definitive
Transition Bonds will be transferable and exchangeable at the offices of the
Transition Bonds Registrar.  With respect to any transfer of such
Definitive Transition Bonds, the new Definitive Transition Bonds registered in
the names specified by the transferee and the original transferor shall be
available at the offices of such transfer agent.

     

    SECTION
2.14. CUSIP
Number.  The Issuer in issuing any Transition Bond may use a
“CUSIP” number and, if so used, the Indenture Trustee shall use the CUSIP number
provided to it by the Issuer in any notices to the Holders thereof as a
convenience to such Holders; provided, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Transition Bonds
and that reliance may be placed only on the other identification numbers printed
on the Transition Bonds.  The Issuer shall promptly notify the
Indenture Trustee in writing of any change in the CUSIP number with respect to
any Transition Bond.

     

    SECTION
2.15. Letter of
Representations.  Notwithstanding anything to the contrary in
this Indenture or the Series Supplement, the parties hereto shall comply with
the terms of each Letter of Representations applicable to such
party.

     

    SECTION
2.16. [RESERVED]

     

    SECTION
2.17. Tax
Treatment.  The Issuer and the Indenture Trustee, by entering
into this Indenture, and the Holders and any Persons holding a beneficial
interest in any Transition Bond, by acquiring any Transition Bond or interest
therein, (a) express their intention that, solely for the purposes of
federal taxes and, to the extent consistent with applicable state, local and
other tax law, solely for the purposes of state, local and other taxes, the
Transition Bonds qualify under applicable tax law as indebtedness of the Member
secured by the Transition Bond Collateral and (b) solely for the purposes
of federal taxes and, to the extent consistent with applicable state, local and
other tax law, solely for purposes of state, local and other taxes, so long as
any of the Transition Bonds are outstanding, agree to treat the Transition Bonds
as indebtedness of the Member secured by the Transition Bond Collateral unless
otherwise required by appropriate taxing authorities.

     

    SECTION
2.18. State
Pledge.  Under the laws of the State of Texas in effect on the
Closing Date, the State of Texas has agreed for the benefit of the Holders and
the Indenture Trustee, pursuant to Sections 39.310 and 36.403 of the
Securitization Law, as follows:

     

    “Transition
bonds are not a debt or obligation of the state and are not a charge on its full
faith and credit or taxing power.  The state pledges, however, for the
benefit and protection of financing parties and the electric utility, that it
will not take or permit any action that would impair the value of transition
property, or, except as permitted by Section 39.307, reduce, alter, or
impair the transition charges to be imposed, collected, and remitted to
financing parties, until the principal, interest and premium, and any other
charges incurred and contracts to be performed in connection with the related
transition bonds have been paid and performed in full.  Any party
issuing transition bonds is authorized to include this pledge in any
documentation relating to those bonds.”

     

    The
Issuer hereby acknowledges that the purchase of any Transition Bond by a Holder
or the purchase of any beneficial interest in a Transition Bond by any Person
and the Indenture Trustee’s obligations to perform hereunder are made in
reliance on such agreement and pledge by the State of Texas.

     

    SECTION
2.19. Security
Interests.  The Issuer hereby makes the following
representations and warranties.

     

    (a) Other
than the security interests granted to the Indenture Trustee pursuant to this
Indenture, the Issuer has not pledged, granted, sold, conveyed or otherwise
assigned any interests or security interests in the Transition Bond Collateral
and no security agreement, financing statement or equivalent security or Lien
instrument listing the Issuer as debtor covering all or any part of the
Transition Bond Collateral is on file or of record in any jurisdiction, except
such as may have been filed, recorded or made by the Issuer in favor of the
Indenture Trustee on behalf of the Secured Parties in connection with this
Indenture;

     

    (b) This
Indenture constitutes a valid and continuing lien on, and first priority
perfected security interest in, the Transition Bond Collateral in favor of the
Indenture Trustee on behalf of the Secured Parties, which lien and security
interest is prior to all other Liens and is enforceable as such as against
creditors of and purchasers from the Issuer in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors’ rights generally or by general equitable principles, whether
considered in a proceeding at law or in equity and by an implied covenant of
good faith and fair dealing;

     

    (c) With
respect to all Transition Bond Collateral, this Indenture, together with the
Series Supplement, creates a valid and continuing first priority perfected
security interest (as defined in the UCC and as such term is used in the
Securitization Law) in such Transition Bond Collateral, which security interest
is prior to all other Liens and is enforceable as such as against creditors of
and purchasers from the Issuer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors’ rights
generally or by general equitable principles, whether considered in a proceeding
at law or in equity and by an implied covenant of good faith and fair
dealing;

     

    (d)   The
Issuer has good and marketable title to the Transition Bond Collateral free and
clear of any Lien, claim or encumbrance of any Person other than Permitted
Liens;

     

    (e) All of
the Transition Bond Collateral constitutes either Transition Property or
accounts, deposit accounts, investment property or general intangibles (as each
such term is defined in the UCC) except that proceeds of the Transition Bond
Collateral may also take the form of instruments;

     

    (f) The
Issuer has taken, or caused the Servicer to take, all action necessary to
perfect the security interest in the Transition Bond Collateral granted to the
Indenture Trustee, for the benefit of the Secured Parties;

     

    (g) The
Issuer has filed (or has caused the Servicer to file) all appropriate financing
statements in the proper filing offices in the appropriate jurisdictions under
applicable law in order to perfect the security interest in the Transition Bond
Collateral granted to the Indenture Trustee;

     

    (h) The
Issuer has not authorized the filing of and is not aware, after due inquiry, of
any financing statements against the Issuer that include a description of the
Transition Bond Collateral other than those filed in favor of the Indenture
Trustee;

     

    (i) The
Issuer is not aware of any judgment or tax Lien filings against the
Issuer;

     

    (j) The
Collection Account (including all subaccounts thereof) constitutes a “securities
account” within the meaning of the UCC;

     

    (k) The
Issuer has taken all steps necessary to cause the Securities Intermediary of
each such securities account to identify in its records the Indenture Trustee as
the person having a security entitlement against the Securities Intermediary in
such securities account, the Collection Account is not in the name of any person
other than the Indenture Trustee, and the Issuer has not consented to the
Securities Intermediary to comply with entitlement orders of any person other
than the Indenture Trustee;

     

    (l) All of
the Transition Bond Collateral constituting investment property has been and
will have been credited to the Collection Account or a subaccount thereof, and
the Securities Intermediary for the Collection Account has agreed to treat all
assets credited to the Collection Account as “financial assets” within the
meaning of the UCC.  Accordingly, the Indenture Trustee has a first
priority perfected security interest in the Collection Account, all funds and
financial assets on deposit therein, and all securities entitlements relating
thereto; and

     

    (m) The
representations and warranties set forth in this Section 2.19
shall survive the execution and delivery of this Indenture and the issuance of
any Transition Bonds, shall be deemed re-made on each date on which any funds in
the Collection Account are distributed to Issuer or otherwise released from the
Lien of this Indenture and may not be waived by any party hereto except pursuant
to a supplemental indenture executed in accordance with Article IX and
as to which the Rating Agency Condition has been satisfied.

     

    ARTICLE
III

     

    COVENANTS

     

    SECTION
3.01. Payment of Principal,
Premium, if any, and Interest.  The principal of and premium,
if any, and interest on the Transition Bonds shall be duly and punctually paid
by the Issuer, or the Servicer on behalf of the Issuer, in accordance with the
terms of the Transition Bonds and this Indenture; provided that except
on the Final Maturity Date or upon the acceleration of the Transition Bonds
following the occurrence of an Event of Default, the Issuer shall only be
obligated to pay the principal of such Transition Bonds on each Payment Date
therefor to the extent moneys are available for such payment pursuant to Section 8.02.  Amounts
properly withheld under the Code or other tax laws by any Person from a payment
to any Holder of interest or principal or premium, if any, shall be considered
as having been paid by the Issuer to such Holder for all purposes of this
Indenture.

     

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

     

    SECTION
3.03. Money for Payments To Be
Held in Trust.  As provided in Section 8.02(a),
all payments of amounts due and payable with respect to any Transition Bonds
that are to be made from amounts withdrawn from the Collection Account pursuant
to Section 8.02(d)
shall be made on behalf of the Issuer by the Indenture Trustee or by another
Paying Agent, and no amounts so withdrawn from the Collection Account for
payments with respect to any Transition Bonds shall be paid over to the Issuer
except as provided in this Section 3.03 and
Section 8.02.

     

    The
Issuer will cause each Paying Agent other than the Indenture Trustee to execute
and deliver to the Indenture Trustee an instrument in which such Paying Agent
shall agree with the Indenture Trustee (and if the Indenture Trustee acts as
Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03,
that such Paying Agent will:

     

    (i) hold all sums held by it for the
payment of amounts due with respect to the Transition Bonds in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;

     

    (ii) give the Indenture Trustee written
notice of any Default by the Issuer of which it has actual knowledge in the
making of any payment required to be made with respect to the Transition
Bonds;

     

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

     

    (iv) immediately resign as a Paying Agent
and forthwith pay to the Indenture Trustee all sums held by it in trust for the
payment of Transition Bonds if at any time the Paying Agent determines that it
has ceased to meet the standards required to be met by a Paying Agent at the
time of such determination; and

     

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

     

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

     

    Subject
to applicable laws with respect to escheat of funds, any money held by the
Indenture Trustee or any Paying Agent in trust for the payment of any amount due
with respect to any Transition Bond and remaining unclaimed for two
(2) years after such amount has become due and payable shall be discharged
from such trust and be paid to the Issuer on an Issuer Request; and, subject to
Section 10.16,
the Holder of such Transition Bond shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof (but only to the extent of
the amounts so paid to the Issuer), and all liability of the Indenture Trustee
or such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the
Indenture Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Issuer, cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than thirty (30) days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Issuer.  The Indenture Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including mailing notice of such repayment to Holders whose right to
or interest in moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).

     

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

     

    SECTION
3.05. Protection of Transition
Bond Collateral.  The Issuer shall from time to time execute
and deliver all such supplements and amendments hereto and all filings with the
PUCT or the Texas Secretary of State pursuant to the Financing Order or to the
Securitization Law and all financing statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action necessary or advisable to:

     

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

     

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

     

    (iii) enforce any of the Transition Bond
Collateral;

     

    (iv) preserve and defend title to the
Transition Bond Collateral and the rights of the Indenture Trustee and the
Holders in such Transition Bond Collateral against the Claims of all Persons and
parties, including, without limitation, the challenge by any party to the
validity or enforceability of the Financing Order, any Tariff, the Transition
Property or any proceeding relating thereto and institute any action or
proceeding necessary to compel performance by the PUCT or the State of Texas of
any of its obligations or duties under the Securitization Law, the State Pledge,
or the Financing Order or any Tariff; or

     

    (v) pay any and all taxes levied or
assessed upon all or any part of the Transition Bond Collateral.

     

    The
Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to
execute or authorize, as the case may be, any filings with the PUCT or the Texas
Secretary of State, financing statements, continuation statements or other
instrument required pursuant to this Section 3.05, it
being understood that the Indenture Trustee shall have no such obligation or any
duty to prepare such documents.

     

    SECTION
3.06. Opinions as to Transition
Bond Collateral.

     

    (a) On the
Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel of Independent counsel of the Issuer either stating that, in the opinion
of such counsel, such action has been taken with respect to the recording and
filing of this Indenture, any indentures supplemental hereto, and any other
requisite documents, and with respect to the execution and filing of any filings
with the PUCT or the Texas Secretary of State pursuant to the Securitization Law
and the Financing Order and any financing statements and continuation
statements, as are necessary to perfect and make effective the Lien, and the
first priority perfected security interest created by this Indenture and the
Series Supplement, and no other Lien or security interest is equal or prior to
the Lien and security interest of the Indenture Trustee in the Transition Bond
Collateral, and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make effective such Lien
and security interest.

     

    (b) Within
ninety (90) days after the beginning of each calendar year beginning with
the calendar year beginning January 1, 2011, the Issuer shall furnish to
the Indenture Trustee an Opinion of Counsel of Independent counsel of the Issuer
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and with respect to the execution and filing of any filings with the PUCT or the
Texas Secretary of State pursuant to the Securitization Law and the Financing
Order and any financing statements and continuation statements as are necessary
to maintain the Lien and the first priority perfected security interest created
by this Indenture and the Series Supplement, and reciting the details of such
action or stating that, in the opinion of such counsel, no such action is
necessary to maintain such Lien and security interest.  Such Opinion
of Counsel shall also describe the recording, filing, re-recording and refiling
of this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any filings with the PUCT or the Texas
Secretary of State, financing statements and continuation statements that will,
in the opinion of such counsel, be required within the twelve-month period
following the date of such opinion to maintain the Lien and the first priority
perfected security interest created by this Indenture and the Series
Supplement.

     

    (c) Prior to
the effectiveness of any amendment to the Sale Agreement or the Servicing
Agreement, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel of Independent counsel of the Issuer either (i) stating that, in
the opinion of such counsel, all filings, including UCC financing statements and
other filings with the PUCT and the Texas Secretary of State pursuant to the
Securitization Law or the Financing Order, have been executed and filed that are
necessary fully to preserve and protect the Lien and security interest of the
Issuer and the Indenture Trustee in the Transition Property and the Transition
Bond Collateral, respectively, and the proceeds thereof, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such Lien and security
interest.

     

    SECTION
3.07. Performance of Obligations;
Servicing; SEC Filings.

     

    (a) The
Issuer (i) shall diligently pursue any and all actions to enforce its
rights under each instrument or agreement included in the Transition Bond
Collateral and (ii) shall not take any action and shall use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person’s covenants or obligations under any such
instrument or agreement or that would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such instrument or agreement, except, in each case, as
expressly provided in this Indenture, the Series Supplement, the Sale Agreement,
the Servicing Agreement or such other instrument or agreement.

     

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

     

    (c) The
Issuer shall punctually perform and observe all of its obligations and
agreements contained in this Indenture, the Series Supplement, the other Basic
Documents and in the instruments and agreements included in the Transition Bond
Collateral, including filing or causing to be filed all filings with the PUCT or
the Texas Secretary of State pursuant to the Securitization Law or the Financing
Order, all UCC financing statements and continuation statements required to be
filed by it by the terms of this Indenture, the Series Supplement, the Sale
Agreement and the Servicing Agreement in accordance with and within the time
periods provided for herein and therein.

     

    (d) If the
Issuer shall have knowledge of the occurrence of a Servicer Default under the
Servicing Agreement, the Issuer shall promptly give written notice thereof to
the Indenture Trustee and the Rating Agencies, and shall specify in such notice
the response or action, if any, the Issuer has taken or is taking with respect
to such default.  If a Servicer Default shall arise from the failure
of the Servicer to perform any of its duties or obligations under the Servicing
Agreement with respect to the Transition Property, the Transition Bond
Collateral or the Transition Charges, the Issuer shall take all reasonable steps
available to it to remedy such failure.

     

    (e) As
promptly as possible after the giving of notice of termination to the Servicer
and the Rating Agencies of the Servicer’s rights and powers pursuant to Section 7.01 of the
Servicing Agreement, the Indenture Trustee shall, at the written direction of
the Holders evidencing not less than a majority of the Outstanding Amount of the
Transition Bonds, appoint a successor Servicer (the “Successor Servicer”),
and such Successor Servicer shall accept its appointment by a written assumption
in a form acceptable to the Issuer and the Indenture Trustee.  A
Person shall qualify as a Successor Servicer only if such Person satisfies the
requirements of the Servicing Agreement.  If within thirty
(30) days after the delivery of the notice referred to above, 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.  In connection with any such appointment, ETI may make such
arrangements for the compensation of such Successor Servicer as it and such
successor shall agree, subject to the limitations set forth in Section 8.02
and in the Servicing Agreement.

     

    (f) Upon any
termination of the Servicer’s rights and powers pursuant to the Servicing
Agreement, the Indenture Trustee shall promptly notify the Issuer, the Holders
and the Rating Agencies.  As soon as a Successor Servicer is
appointed, the Indenture Trustee shall notify the Issuer, the Holders and the
Rating Agencies of such appointment, specifying in such notice the name and
address of such Successor Servicer.

     

    (g) The
Issuer shall (or shall cause the Sponsor to) post on its website (or the
Sponsor’s or an affiliate’s website) and file with or furnish to the SEC in
periodic reports and other reports as are required from time to time under
Section 13 or Section 15(d) of the Exchange Act (without regard to the
number of Holders of Transition Bonds to the extent permitted by and consistent
with the Issuer’s and the Sponsor’s obligations under applicable law) the
following information with respect to the Outstanding Transition Bonds to the
extent such information is reasonably available to the Issuer:

     

    (i) statements of any remittances of
Transition Charges made to the Indenture Trustee (to be included in a
Form 10-D or Form 10-K);

     

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

     

    (iii) a statement showing the balance of
Outstanding Transition Bonds that reflects the actual periodic payments made on
the Transition Bonds versus the expected periodic payments (to be included in
the next Form 10-D or Form 10-K filed);

     

    (iv) the Semi-Annual Servicer’s Certificate
and the Monthly Servicer’s Certificate which are required to be submitted
pursuant to the Servicing Agreement (to be filed with a Form 10-D,
Form 10-K or Form 8-K);

     

    (v) the text (or a link to the website
where a reader can find the text) of each filing of a True-Up Adjustment and the
results of each such filing following the issuance of the Transition
Bonds;

     

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

     

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

     

    (viii) a quarterly statement either affirming
that, to the Issuer’s or the Sponsor’s knowledge, as applicable, in all material
respects, for each materially significant REP, if any (to be included in each
Form 10-D and each Form 10-K) (A) each such REP has been billed
in compliance with the requirements outlined in the Financing Order,
(B) each such REP has made payments in compliance with the requirements
outlined in the Financing Order, and (C) each such REP satisfies the
creditworthiness requirements of the Financing Order, or if clauses (A),
(B) and (C) has not occurred,
such quarterly statements shall describe the Servicer’s actions.

     

    (h) The
Issuer shall make all filings required under the Securitization Law relating to
the transfer of the ownership or security interest in the Transition Property
other than those required to be made by the Seller or the Servicer pursuant to
the Basic Documents.

     

    SECTION
3.08. Certain Negative
Covenants.  So long as any Transition Bonds are Outstanding,
the Issuer shall not:

     

    (i) except as expressly permitted by this
Indenture and the other Basic Documents, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer, including those
included in the Transition Bond Collateral, unless directed to do so by the
Indenture Trustee in accordance with Article V;

     

    (ii)            claim
any credit on, or make any deduction from the principal or premium, if any, or
interest payable in respect of, the Transition Bonds (other than amounts
properly withheld from such payments under the Code or other tax laws) or assert
any claim against any present or former Holder by reason of the payment of the
taxes levied or assessed upon any part of the Transition Bond
Collateral;

     

    (iii) terminate its existence or dissolve or
liquidate in whole or in part, except in a transaction permitted by Section 3.10;

     

    (iv) (A) permit the validity or
effectiveness of this Indenture or the other Basic Documents to be impaired, or
permit the Lien of this Indenture and the Series Supplement to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Transition Bonds
under this Indenture except as may be expressly permitted hereby,
(B) permit any Lien (other than the Lien of this Indenture or the Series
Supplement) to be created on or extend to or otherwise arise upon or burden the
Transition Bond Collateral or any part thereof or any interest therein or the
proceeds thereof (other than tax liens arising by operation of law with respect
to amounts not yet due) or (C) permit the Lien of the Series Supplement not
to constitute a valid first priority perfected security interest in the
Transition Bond Collateral;

     

    (v) enter into any swap, hedge or similar
financial instrument;

     

    (vi) elect to be classified as an
association taxable as a corporation for federal income tax purposes or
otherwise take any action, file any tax return, or make any election
inconsistent with the treatment of the Issuer, for purposes of federal taxes
and, to the extent consistent with applicable state tax law, state income and
franchise tax purposes, as a disregarded entity that is not separate from the
sole owner of the Issuer;

     

    (vii) change its name, identity or structure
or the location of its chief executive office, unless at least ten
(10) days’ prior to the effective date of any such change the Issuer
delivers to the Indenture Trustee such documents, instruments or agreements,
executed by the Issuer, as are necessary to reflect such change and to continue
the perfection of the security interest of this Indenture and the Series
Supplement;

     

    (viii) take any action which is subject to the
Rating Agency Condition without satisfying the Rating Agency
Condition;

     

    (ix) voluntarily suspend or terminate its
filing obligations with the SEC as described in Section 3.07(g);
or

     

    (x) issue any transition bonds under the
Securitization Law or any similar law (other than the Transition
Bonds).

     

    SECTION
3.09. Annual Statement as to
Compliance.  The Issuer will deliver to the Indenture Trustee
and the Rating Agencies not later than March 31 of each year (commencing
with March 31, 2010), an Officer’s Certificate stating, as to the
Responsible Officer signing such Officer’s Certificate, that:

     

    (i) a review of the activities of the
Issuer during the preceding twelve (12) months ended December 31 (or,
in the case of the first such Officer’s Certificate, since the Closing Date) and
of performance under this Indenture has been made; and

     

    (ii) to the best of such Responsible
Officer’s knowledge, based on such review, the Issuer has in all material
respects complied with all conditions and covenants under this Indenture
throughout such twelve-month period (or such shorter period in the case of the
first such Officer’s Certificate), or, if there has been a default in the
compliance of any such condition or covenant, specifying each such default known
to such Responsible Officer and the nature and status thereof.

     

    SECTION
3.10. Issuer May Consolidate,
etc., Only on Certain Terms.

     

    (a) The
Issuer shall not consolidate or merge with or into any other Person,
unless:

     

    (i) the Person (if other than the Issuer)
formed by or surviving such consolidation or merger shall (A) be a Person
organized and existing under the laws of the United States of America or any
State, (B) expressly assume, by an indenture supplemental hereto, executed
and delivered to the Indenture Trustee, in form and substance satisfactory to
the Indenture Trustee, the performance or observance of every agreement and
covenant of this Indenture and the Series Supplement on the part of the Issuer
to be performed or observed, all as provided herein and in the Series
Supplement, and (C) assume all obligations and succeed to all rights of the
Issuer under the Sale Agreement, the Servicing Agreement and each other Basic
Document to which the Issuer is a party;

     

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

     

    (iii) the Rating Agency Condition shall have
been satisfied with respect to such merger or consolidation;

     

    (iv) the Issuer shall have delivered to ETI,
the Indenture Trustee and the Rating Agencies an opinion or opinions of
Independent tax counsel (as selected by the Issuer, in form and substance
reasonably satisfactory to ETI and the Indenture Trustee, and which may be based
on a ruling from the Internal Revenue Service (unless the Internal Revenue
Service has announced that it will not rule on the issues described in this
paragraph)) to the effect that, as a result of the consolidation or merger,
(a) the Issuer will not be subject to United States federal income tax as
an entity separate from its sole owner and that the Transition Bonds will be
treated as debt of the Issuer’s sole owner for United States federal income tax
purposes and (b) for United States federal income tax purposes, the
issuance of the Transition Bonds will not result in gross income to the
Seller;

     

    (v) any action as is necessary to maintain
the Lien and the first priority perfected security interest in the Transition
Bond Collateral created by this Indenture and the Series Supplement shall have
been taken as evidenced by an Opinion of Counsel of Independent counsel of the
Issuer delivered to the Indenture Trustee; and

     

    (vi) the Issuer shall have delivered to the
Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of
Independent counsel of the Issuer each stating that such consolidation or merger
and such supplemental indenture comply with this Indenture, the Series
Supplement and that all conditions precedent herein provided for in this Section 3.10(a)
with respect to such transaction have been complied with (including any filing
required by the Exchange Act).

     

    (b) Except as
specifically provided herein, the Issuer shall not sell, convey, exchange,
transfer or otherwise dispose of any of its properties or assets included in the
Transition Bond Collateral, to any Person, unless:

     

    (i) the Person that acquires the properties
and assets of the Issuer, the conveyance or transfer of which is hereby
restricted shall (A) be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State,
(B) expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form and substance satisfactory to the
Indenture Trustee, the performance or observance of every agreement and covenant
of this Indenture on the part of the Issuer to be performed or observed, all as
provided herein and in the Series Supplement, (C) expressly agrees by means
of such supplemental indenture that all right, title and interest so sold,
conveyed, exchanged, transferred or otherwise disposed of shall be subject and
subordinate to the rights of Holders, (D) unless otherwise provided in the
supplemental indenture referred to in clause (B)
above, expressly agrees to indemnify, defend and hold harmless the Issuer and
the Indenture Trustee against and from any loss, liability or expense arising
under or related to this Indenture, the Series Supplement and the Transition
Bonds, (E) expressly agrees by means of such supplemental indenture that
such Person (or if a group of Persons, then one specified Person) shall make all
filings with the SEC (and any other appropriate Person) required by the Exchange
Act in connection with the Transition Bonds and (F) if such sale,
conveyance, exchange, transfer or disposal relates to the Issuer’s rights and
obligations under the Sale Agreement or the Servicing Agreement, assume all
obligations and succeed to all rights of the Issuer under the Sale Agreement and
the Servicing Agreement, as applicable;

     

    (ii) immediately after giving effect to such
transaction, no Default, Event of Default or Servicer Default shall have
occurred and be continuing;

     

    (iii) the Rating Agency Condition shall have
been satisfied with respect to such transaction;

     

    (iv) the Issuer shall have delivered to ETI,
the Indenture Trustee and the Rating Agencies an opinion or opinions of
Independent tax counsel (as selected by the Issuer, in form and substance
reasonably satisfactory to ETI and the Indenture Trustee, and which may be based
on a ruling from the Internal Revenue Service) to the effect that, as a result
of the disposition, (a) the Issuer will not be subject to United States
federal income tax as an entity separate from its sole owner and that the
Transition Bonds will be treated as debt of the Issuer’s sole owner for United
States federal income tax purposes and (b) for United States federal income
tax purposes, the issuance of the Transition Bonds will not result in gross
income to the Seller;

     

    (v) any action as is necessary to maintain
the Lien and the first priority perfected security interest in the Transition
Bond Collateral created by this Indenture and the Series Supplement shall have
been taken as evidenced by an Opinion of Counsel of Independent counsel of the
Issuer delivered to the Indenture Trustee; and

     

    (vi) the Issuer shall have delivered to the
Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of
Independent counsel of the Issuer each stating that such sale, conveyance,
exchange, transfer or other disposition and such supplemental indenture comply
with this Indenture and the Series Supplement and that all conditions precedent
herein provided for in this Section 3.10(b)
with respect to such transaction have been complied with (including any filing
required by the Exchange Act).

     

    SECTION
3.11. Successor or
Transferee.

     

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

     

    (b) Except as
set forth in Section 6.07,
upon a sale, conveyance, exchange, transfer or other disposition of all the
assets and properties of the Issuer in accordance with Section 3.10(b),
the Issuer will be released from every covenant and agreement of this Indenture
and the other Basic Documents to be observed or performed on the part of the
Issuer with respect to the Transition Bonds and the Transition Property
immediately following the consummation of such acquisition upon the delivery of
written notice to the Indenture Trustee from the Person acquiring such assets
and properties stating that the Issuer is to be so released.

     

    SECTION
3.12. No Other
Business.  The Issuer shall not engage in any business other
than financing, purchasing, owning and managing the Transition Property and the
other Transition Bond Collateral and the issuance of the Transition Bonds in the
manner contemplated by the Financing Order and this Indenture and the Basic
Documents and activities incidental thereto.

     

    SECTION
3.13. No
Borrowing.  The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Transition Bonds and any other indebtedness
expressly permitted by or arising under the Basic Documents.

     

    SECTION
3.14. Servicer’s
Obligations.  The Issuer shall enforce the Servicer’s
compliance with and performance of all of the Servicer’s material obligations
under the Servicing Agreement.

     

    SECTION
3.15. Guarantees, Loans, Advances
and Other Liabilities.  Except as otherwise contemplated by the
Sale Agreement, the Servicing Agreement or this Indenture, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another’s payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other
Person.

     

    SECTION
3.16. Capital
Expenditures.  Other than the purchase of Transition Property
from the Seller on the Closing Date and other than expenditures made out of
available funds in an aggregate amount not to exceed $25,000 in any calendar
year, the Issuer shall not make any expenditure (by long-term or operating lease
or otherwise) for capital assets (either realty or personalty).

     

    SECTION
3.17. Restricted
Payments.  Except as provided in Section 8.04(c), the
Issuer shall not, directly or indirectly, (a) pay any dividend or make any
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, to any owner of an interest in the Issuer
or otherwise with respect to any ownership or equity interest or similar
security in or of the Issuer, (b) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or similar security or
(c) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that, if no
Event of Default shall have occurred and be continuing or would be caused
thereby, the Issuer may make, or cause to be made, any such distributions to any
owner of an interest in the Issuer or otherwise with respect to any ownership or
equity interest or similar security in or of the Issuer using funds distributed
to the Issuer pursuant to Section 8.02(e)(x)
to the extent that such distributions would not cause the balance of the Capital
Subaccount to decline below the Required Capital Level.  The Issuer
will not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the other Basic
Documents.

     

    SECTION
3.18. Notice of Events of
Default.  The Issuer agrees to give the Indenture Trustee, the
PUCT and the Rating Agencies prompt written notice of each Default or Event of
Default hereunder as provided in Section 5.01,
and each default on the part of the Seller or the Servicer of its obligations
under the Sale Agreement or the Servicing Agreement, respectively.

     

    SECTION
3.19. Further Instruments and
Acts.  Upon request of the Indenture Trustee, the Issuer shall
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture and to maintain the first priority perfected security interest of the
Indenture Trustee in the Transition Bond Collateral.

     

    SECTION
3.20. [RESERVED]

     

    SECTION
3.21. Inspection.  The
Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee, during the Issuer’s normal business
hours, to examine all the books of account, records, reports and other papers of
the Issuer, to make copies and extracts therefrom, to cause such books to be
audited annually by Independent registered public accountants, and to discuss
the Issuer’s affairs, finances and accounts with the Issuer’s officers,
employees and Independent registered public accountants, all at such reasonable
times and as often as may be reasonably requested.  The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations
hereunder.  Notwithstanding anything herein to the contrary, the
preceding sentence shall not be construed to prohibit (a) disclosure of any
and all information that is or becomes publicly known, or information obtained
by the Indenture Trustee from sources other than the Issuer, provided such
parties are rightfully in possession of such information, (b) disclosure of
any and all information (i) if required to do so by any applicable statute,
law, rule or regulation, (ii) pursuant to any subpoena, civil investigative
demand or similar demand or request of any court or regulatory authority
exercising its proper jurisdiction, (iii) in any preliminary or final
offering circular, registration statement or other document a copy of which has
been filed with the SEC or (iv) to any affiliate, independent or internal
auditor, agent, employee or attorney of the Indenture Trustee having a need to
know the same, provided that such parties agree to be bound by the
confidentiality provisions contained in this Section 3.21, or
(c) any other disclosure authorized by the Issuer.

     

    SECTION
3.22. Sale Agreement, Servicing
Agreement, and Administration Agreement Covenants.

     

    (a) The
Issuer agrees to take all such lawful actions to enforce its rights under the
Sale Agreement, the Servicing Agreement and the Administration Agreement to
compel or secure the performance and observance by the Seller, the Servicer, the
Administrator and ETI of each of their respective obligations to the Issuer
under or in connection with the Sale Agreement, the Servicing Agreement and the
Administration Agreement in accordance with the terms thereof.  So
long as no Event of Default occurs and is continuing, but subject to Section 3.22(f),
the Issuer may exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with the Sale Agreement,
the Servicing Agreement and the Administration Agreement; provided that such
action shall not adversely affect the interests of the Holders in any material
respect.

     

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

     

    (c) Except as
set forth in Section 3.22(e),
with the prior written consent of the Indenture Trustee and the consent of the
PUCT pursuant to Section 9.03,
the Administration Agreement, the Sale Agreement and the Servicing Agreement may
be amended in accordance with the provisions thereof, so long as the Rating
Agency Condition is satisfied in connection therewith, at any time and from time
to time, without the consent of the Holders of Transition Bonds; provided that such
amendment, as evidenced by an Opinion of Counsel of Independent counsel of the
Issuer, shall not adversely affect the interest of any Holder of Transition
Bonds in any material respect.

     

    (d) Except as
set forth in Section 3.22(e),
if the Issuer, the Seller, ETI, the Administrator, the Servicer or any other
party to the respective agreement proposes to amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, waiver,
supplement, termination or surrender of, the terms of the Sale Agreement, the
Administration Agreement, or the Servicing Agreement, or waive timely
performance or observance by the Seller, ETI, the Administrator or the Servicer
under the Sale Agreement, the Administration Agreement or the Servicing
Agreement, in each case in such a way as would materially and adversely affect
the interests of any Holder of Transition Bonds, the Issuer shall first notify
the Rating Agencies of the proposed amendment, modification, waiver, supplement,
termination or surrender and shall promptly notify the Indenture Trustee and the
PUCT in writing and the Indenture Trustee shall notify the Holders of the
Transition Bonds of the proposed amendment, modification, waiver, supplement,
termination or surrender and whether the Rating Agency Condition has been
satisfied with respect thereto.  The Indenture Trustee shall consent
to such proposed amendment, modification, waiver, supplement, termination or
surrender only with the prior written consent of the Holders of a majority of
the Outstanding Amount of Transition Bonds of the Tranches materially and
adversely affected thereby and, if the proposed amendment, modification, waiver,
supplement, termination or surrender would increase ongoing qualified costs as
defined in the Financing Order, the consent of the PUCT pursuant to Section 9.03.  If
any such amendment, modification, waiver, supplement, termination or surrender
shall be so consented to by the Indenture Trustee or such Holders, the Issuer
agrees to execute and deliver, in its own name and at its own expense, such
agreements, instruments, consents and other documents as shall be necessary or
appropriate in the circumstances.

     

    (e) If the
Issuer or the Servicer proposes to amend, modify, waive, supplement, terminate
or surrender, or to agree to any amendment, modification, supplement,
termination, waiver or surrender of, the process for True-Up Adjustments, the
Issuer shall notify the PUCT and the Indenture Trustee in writing and the
Indenture Trustee shall notify the Holders of the Transition Bonds of such
proposal and the Indenture Trustee shall consent thereto only with the consent
of the PUCT pursuant to Section 9.03 and
the prior written consent of the Holders of a majority of the Outstanding Amount
of Transition Bonds of the Tranches affected thereby and only if the Rating
Agency Condition has been satisfied with respect thereto.

     

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

     

    Before
consenting to any amendment, modification, supplement, termination, waiver or
surrender under Sections 3.22(d)
or (e), the
Indenture Trustee shall be entitled to receive, and subject to Sections 6.01
and 6.02, shall
be fully protected in relying upon, an Opinion of Counsel stating that such
action is authorized or permitted by this Indenture.

     

    SECTION
3.23. Taxes.  So
long as any of the Transition Bonds are Outstanding, the Issuer shall pay or
cause to be paid all taxes, assessments and governmental charges imposed upon it
or any of its properties or assets or with respect to any of its franchises,
business, income or property before any penalty accrues thereon if the failure
to pay any such taxes, assessments and governmental charges would, after any
applicable grace periods, notices or other similar requirements, result in a
Lien on the Transition Bond Collateral; provided that no such
tax need be paid if the Issuer is contesting or causing to be contested the same
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if the Issuer has established appropriate reserves as shall be
required in conformity with generally accepted accounting
principles.

     

    ARTICLE
IV

     

    SATISFACTION
AND DISCHARGE; DEFEASANCE

     

    SECTION
4.01. Satisfaction and Discharge
of Indenture; Defeasance.

     

    (a) This
Indenture shall cease to be of further effect with respect to the Transition
Bonds and the Indenture Trustee, on reasonable written demand of and at the
expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Transition
Bonds, when:

     

    (i) either

     

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

     

    (B) either (1) the Scheduled Final
Payment Date has occurred with respect to all Transition Bonds not theretofore
delivered to the Indenture Trustee for cancellation or (2) such Transition
Bonds will be due and payable on their respective Scheduled Final Payment Dates
within one year, and in any such case, the Issuer has irrevocably deposited or
caused to be irrevocably deposited in trust with the Indenture Trustee
(i) cash and/or (ii) U.S. Government Obligations which through the
scheduled payments of principal and interest in respect thereof in accordance
with their terms are in an amount sufficient to pay principal, interest and
premium, if any, on such Transition Bonds not theretofore delivered to the
Indenture Trustee for cancellation and all other sums payable hereunder by the
Issuer with respect to such Transition Bonds when scheduled to be paid and to
discharge the entire indebtedness on such Transition Bonds when
due;

     

    (ii) the Issuer has paid or caused to be
paid all other sums payable hereunder by the Issuer with respect to the
Transition Bonds; and

     

    (iii) the Issuer has delivered to the
Indenture Trustee an Officer’s Certificate, an Opinion of Counsel of Independent
counsel of the Issuer and (if required by the TIA or the Indenture Trustee) an
Independent Certificate from a firm of registered public accountants, each
meeting the applicable requirements of Section 10.01(a)
and each stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture with respect to Transition
Bonds have been complied with.

     

    (b) Subject
to Sections 4.01(c)
and 4.02, the
Issuer at any time may terminate (i) all its obligations under this
Indenture with respect to the Transition Bonds (“Legal Defeasance
Option”) or (ii) its obligations under Sections 3.04,
3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18 and 3.19 and the
operation of Section 5.01(iii)
(“Covenant Defeasance
Option”) with respect to the Transition Bonds.  The Issuer may
exercise the Legal Defeasance Option with respect to the Transition Bonds
notwithstanding its prior exercise of the Covenant Defeasance
Option.

     

    If the
Issuer exercises the Legal Defeasance Option, the maturity of the Transition
Bonds may not be accelerated because of an Event of Default.  If the
Issuer exercises the Covenant Defeasance Option, the maturity of the Transition
Bonds may not be accelerated because of an Event of Default specified in Section 5.01(iii).

     

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

     

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

     

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

     

    (a) the
Issuer has irrevocably deposited or caused to be irrevocably deposited in trust
with the Indenture Trustee (i) cash and/or (ii) U.S. Government
Obligations which through the scheduled payments of principal and interest in
respect thereof in accordance with their terms are in an amount sufficient to
pay principal, interest and premium, if any, on the Transition Bonds not
therefore delivered to the Indenture Trustee for cancellation and all other sums
payable hereunder by the Issuer with respect to the Transition Bonds when
scheduled to be paid and to discharge the entire indebtedness on the Transition
Bonds when due;

     

    (b) the
Issuer delivers to the Indenture Trustee a certificate from a nationally
recognized firm of Independent registered public accountants expressing its
opinion that the payments of principal and interest when due and without
reinvestment of the deposited U.S. Government Obligations plus any deposited
cash without investment will provide cash at such times and in such amounts
(but, in the case of the Legal Defeasance Option only, not more than such
amounts) as will be sufficient to pay in respect of the Transition Bonds
(i) principal in accordance with the Expected Amortization Schedule
therefor, (ii) interest when due and (iii) all other sums payable
hereunder by the Issuer with respect to such Transition Bonds;

     

    (c) in the
case of the Legal Defeasance Option, ninety-five (95) days pass after the
deposit is made and during the ninety-five (95)-day period no Default specified
in Section 5.01(v)
or (vi) occurs
which is continuing at the end of the period;

     

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

     

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

     

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

     

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

     

    (h) the
Issuer delivers to the Indenture Trustee an Opinion of Counsel of Independent
counsel of the Issuer to the effect that (i) in a case under the Bankruptcy
Code in which ETI (or any of its Affiliates, other than the Issuer) is the
debtor, the court would hold that the deposited moneys or U.S. Government
Obligations would not be in the bankruptcy estate of ETI (or any of its
Affiliates, other than the Issuer, that deposited the moneys or U.S. Government
Obligations); and (ii) in the event ETI (or any of its Affiliates, other
than the Issuer, that deposited the moneys or U.S. Government Obligations) were
to be a debtor in a case under the Bankruptcy Code, the court would not
disregard the separate legal existence of ETI (or any of its Affiliates, other
than the Issuer, that deposited the moneys or U.S. Government Obligations) and
the Issuer so as to order substantive consolidation under the Bankruptcy Code of
the Issuer’s assets and liabilities with the assets and liabilities of ETI or
such other Affiliate; and

     

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

     

    Notwithstanding
any other provision of this Section 4.02, no
delivery of moneys or U.S. Government Obligations to the Indenture Trustee shall
terminate any obligation of the Issuer to the Indenture Trustee under this
Indenture or the Series Supplement or any obligation of the Issuer to apply such
moneys or U.S. Government Obligations under Section 4.03
until such Transition Bonds shall have been redeemed in accordance with the
provisions of this Indenture and the Series Supplement.

     

    SECTION
4.03. Application of Trust
Money.  All moneys or U.S. Government Obligations deposited
with the Indenture Trustee pursuant to Section 4.01 or
4.02 shall be
held in trust and applied by it, in accordance with the provisions of the
Transition Bonds and this Indenture, to the payment, either directly or through
any Paying Agent, as the Indenture Trustee may determine, to the Holders of the
particular Transition Bonds for the payment of which such moneys have been
deposited with the Indenture Trustee, of all sums due and to become due thereon
for principal, premium, if any, and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the
Servicing Agreement or required by law.  Notwithstanding anything to
the contrary in this Article IV, the
Indenture Trustee shall deliver or pay to the Issuer from time to time upon
Issuer Request any moneys or U.S. Government Obligations held by it pursuant to
Section 4.02
which, in the opinion of a nationally recognized firm of Independent registered
public accountants expressed in a written certification thereof delivered to the
Indenture Trustee (and not at the cost or expense of the Indenture Trustee), are
in excess of the amount thereof which would be required to be deposited for the
purpose for which such moneys or U.S. Government Obligations were deposited,
provided that
any such payment shall be subject to the satisfaction of the Rating Agency
Condition.

     

    SECTION
4.04. Repayment of Moneys Held by
Paying Agent.  In connection with the satisfaction and
discharge of this Indenture or the Covenant Defeasance Option or Legal
Defeasance Option with respect to the Transition Bonds, all moneys then held by
any Paying Agent other than the Indenture Trustee under the provisions of this
Indenture with respect to such Transition Bonds shall, upon demand of the
Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.03 and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.

     

    ARTICLE
V

     

    REMEDIES

     

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

     

    (i) default in the payment of any interest
on any Transition Bond when the same becomes due and payable (whether such
failure to pay interest is caused by a shortfall in Transition Charges received
or otherwise), and such default shall continue for a period of five
(5) Business Days; or

     

    (ii) default in the payment of the then
unpaid principal of any Transition Bond of any Tranche on the Final Maturity
Date for such Tranche; or

     

    (iii) default in the observance or
performance of any covenant or agreement of the Issuer made in this Indenture
(other than defaults specified in clauses (i) or
(ii) above),
and such default shall continue or not be cured, for a period of thirty
(30) days after the earlier of (A) the date that there shall have been
given, by registered or certified mail, to the Issuer by the Indenture Trustee
or to the Issuer and the Indenture Trustee by the Holders of at least 25 percent
of the Outstanding Amount of the Transition Bonds, a written notice specifying
such default and requiring it to be remedied and stating that such notice is a
“Notice of
Default” hereunder or (B) the date that the Issuer has actual
knowledge of the default; or

     

    (iv) any representation or warranty of the
Issuer made in this Indenture or in any certificate or other writing delivered
pursuant hereto or in connection herewith proving to have been incorrect in any
material respect as of the time when the same shall have been made, and the
circumstance or condition in respect of which such misrepresentation or warranty
was incorrect shall not have been eliminated or otherwise cured, within thirty
(30) days after the earlier of (A) the date that there shall have been
given, by registered or certified mail, to the Issuer by the Indenture Trustee
or to the Issuer and the Indenture Trustee by the Holders of at least 25 percent
of the Outstanding Amount of the Transition Bonds, a written notice specifying
such incorrect representation or warranty and requiring it to be remedied and
stating that such notice is a “Notice of Default”
hereunder or (B) the date the Issuer has actual knowledge of the default,
or

     

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

     

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

     

    (vii) any act or failure to act by the State
of Texas or any of its agencies (including the PUCT), officers or employees
which violates or is not in accordance with the State Pledge; or

     

    (viii) any other event designated as such in
the Series Supplement.

     

    The
Issuer shall deliver to a Responsible Officer of the Indenture Trustee and to
the Rating Agencies, within five (5) days after a Responsible Officer of
the Issuer has knowledge of the occurrence thereof, written notice in the form
of an Officer’s Certificate of any event (I) which is an Event of Default
under clauses (i),
(ii), (v), (vi), (vii), or (viii) or
(II) which with the giving of notice, the lapse of time, or both, would
become an Event of Default under clause (iii) or
(iv),
including, in each case, the status of such Event of Default and what action the
Issuer is taking or proposes to take with respect thereto.

     

    SECTION
5.02. Acceleration of Maturity;
Rescission and Annulment.  If an Event of Default (other than
an Event of Default under clause (vii) of
Section 5.01)
should occur and be continuing, then and in every such case the Indenture
Trustee or the Holders representing not less than a majority of the Outstanding
Amount of the Transition Bonds may declare the Transition Bonds to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Holders), and upon any such declaration the unpaid
principal amount of the Transition Bonds, together with accrued and unpaid
interest thereon through the date of acceleration, shall become immediately due
and payable.

     

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

     

    (i) the Issuer has paid or deposited with
the Indenture Trustee a sum sufficient to pay:

     

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

     

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

     

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

     

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

     

    SECTION
5.03. Collection of Indebtedness
and Suits for Enforcement by Indenture Trustee.

     

    (a) If an
Event of Default under Section 5.01(i)
or (ii) has
occurred and is continuing, subject to Section 10.19,
the Indenture Trustee, in its own name and as trustee of an express trust, may
institute a Proceeding for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and, subject to the
limitations on recourse set forth herein, may enforce the same against the
Issuer or other obligor upon such Transition Bonds and collect in the manner
provided by law out of the property of the Issuer or other obligor upon such
Transition Bonds, wherever situated the moneys payable, or the related
Transition Bond Collateral and the proceeds thereof, the whole amount then due
and payable on the Transition Bonds for principal, premium, if any, and
interest, with interest upon the overdue principal and premium, if any, and, to
the extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the respective rate borne by the Transition
Bonds or the applicable Tranche and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.

     

    (b) If an
Event of Default (other than Event of Default under clause (vii) of
Section 5.01)
occurs and is continuing, the Indenture Trustee shall, as more particularly
provided in Section 5.04, in
its discretion, proceed to protect and enforce its rights and the rights of the
Holders, by such appropriate Proceedings as the Indenture Trustee shall deem
most effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Indenture Trustee by this Indenture and
the Series Supplement or by law, including foreclosing or otherwise enforcing
the Lien of the Transition Bond Collateral securing the Transition Bonds or
applying to a court of competent jurisdiction for sequestration of revenues
arising with respect to the Transition Property.

     

    (c) If an
Event of Default under Section 5.01(v)
or (vi) has
occurred and is continuing, the Indenture Trustee, irrespective of whether the
principal of any Transition Bonds shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand pursuant to the provisions of this
Section 5.04,
shall be entitled and empowered, by intervention in any Proceedings related to
such Event of Default or otherwise:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    SECTION
5.04. Remedies;
Priorities.

     

    (a) If an
Event of Default (other than an Event of Default under clause (vii) of
Section 5.01)
shall have occurred and be continuing, the Indenture Trustee may do one or more
of the following (subject to Section 5.05):

     

    (i) institute Proceedings in its own name
and as trustee of an express trust for the collection of all amounts then
payable on the Transition Bonds or under this Indenture with respect thereto,
whether by declaration of acceleration or otherwise, and, subject to the
limitations on recovery set forth herein, enforce any judgment obtained, and
collect from the Issuer or any other obligor moneys adjudged due upon such
Transition Bonds;

     

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

     

    (iii) exercise any remedies of a secured
party under the UCC, the Securitization Law or any other applicable law and take
any other appropriate action to protect and enforce the rights and remedies of
the Indenture Trustee and the Holders of the Transition Bonds;

     

    (iv) at the written direction of the Holders
of a majority of the Outstanding Amount of the Transition Bonds, sell the
Transition Bond Collateral or any portion thereof or rights or interest therein,
at one or more public or private sales called and conducted in any manner
permitted by law; and

     

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

     

    provided, however, that the
Indenture Trustee may not sell or otherwise liquidate any portion of the
Transition Bond Collateral following such an Event of Default, other than an
Event of Default described in Section 5.01(i),
or (ii), with
respect to the Transition Bonds unless (A) the Holders of 100 percent of
the Outstanding Amount of the Transition Bonds consent thereto, (B) the
proceeds of such sale or liquidation distributable to the Holders are sufficient
to discharge in full all amounts then due and unpaid upon the Transition Bonds
for principal, premium, if any, and interest after taking into account payment
of all amounts due prior thereto pursuant to the priorities set forth in Section 8.02(e)
or (C) the Indenture Trustee determines that the Transition Bond Collateral
will not continue to provide sufficient funds for all payments on the Transition
Bonds as they would have become due if the Transition Bonds had not been
declared due and payable, and the Indenture Trustee obtains the written consent
of Holders of 66-2/3 percent of the Outstanding Amount of the Transition
Bonds.  In determining such sufficiency or insufficiency with respect
to clause (B) and
(C), the
Indenture Trustee may, but need not, obtain and conclusively rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Transition Bond Collateral for such purpose.

     

    (b) If an
Event of Default under clause (vii) of
Section 5.01
shall have occurred and be continuing, the Indenture Trustee, for the benefit of
the Secured Parties, shall be entitled and empowered to the extent permitted by
applicable law, to institute or participate in Proceedings necessary to compel
performance of or to enforce the State Pledge and to collect any monetary
damages incurred by the Holders or the Indenture Trustee as a result of any such
Event of Default, and may prosecute any such Proceeding to final judgment or
decree.  Such remedy shall be the only remedy that the Indenture
Trustee may exercise if the only Event of Default that has occurred and is
continuing is an Event of Default under Section 5.01(vii).

     

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

     

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

     

    SECTION
5.06. Limitation of
Suits.  Notwithstanding any provision hereof to the contrary,
no Holder of any Transition Bond shall have any right to institute any
Proceeding, judicial or otherwise, to avail itself of any remedies provided in
the Securitization Law or to avail itself of the right to foreclose on the
Transition Bond Collateral or otherwise enforce the Lien and the security
interest on the Transition Bond Collateral with respect to this Indenture and
the Series Supplement, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    SECTION
5.07. Unconditional Rights of
Holders To Receive Principal, Premium, if any, and
Interest.  Notwithstanding any other provisions in this
Indenture, the Holder of any Transition Bond shall have the right, which is
absolute and unconditional, (a) to receive payment of (i) the interest, if
any, on such Transition Bond on the due dates thereof expressed in such
Transition Bond or in this Indenture or (ii) the unpaid principal, if any,
of such Transition Bonds on the Final Maturity Date therefor and (b) to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.

     

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

     

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

     

    SECTION
5.10. Delay or Omission Not a
Waiver.  No delay or omission of the Indenture Trustee or any
Holder to exercise any right or remedy accruing upon any Default or Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Default or Event of Default or an acquiescence therein.  Every right
and remedy given by this Article V or by
law to the Indenture Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Holders, as the case may be.

     

    SECTION
5.11. Control by
Holders.  The Holders of not less than a majority of the
Outstanding Amount of the Transition Bonds of an affected Tranche or Tranches
shall have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Indenture Trustee with respect to the
Transition Bonds of such Tranche or Tranches or exercising any trust or power
conferred on the Indenture Trustee with respect to such Tranche or Tranches;
provided
that:

     

    (i) such direction shall not be in conflict
with any rule of law or with this Indenture and shall not involve the Indenture
Trustee in any personal liability or expense;

     

    (ii) subject to other conditions specified
in Section 5.04,
any direction to the Indenture Trustee to sell or liquidate any Transition Bond
Collateral shall be by the Holders representing not less than 100 percent of the
Outstanding Amount of the Transition Bonds;

     

    (iii) if the conditions set forth in Section 5.05
have been satisfied and the Indenture Trustee elects to retain the Transition
Bond Collateral pursuant to Section 5.05,
then any direction to the Indenture Trustee by Holders representing less than
100 percent of the Outstanding Amount of the Transition Bonds to sell or
liquidate the Transition Bond Collateral shall be of no force and effect;
and

     

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

     

    provided, however, that, the
Indenture Trustee’s duties shall be subject to Section 6.01,
and the Indenture Trustee need not take any action that it determines might
involve it in liability or might materially adversely affect the rights of any
Holders not consenting to such action.  Furthermore and without
limiting the foregoing, the Indenture Trustee shall not be required to take any
action for which it reasonably believes that it will not be indemnified to its
satisfaction against any cost, expense or liabilities.

     

    SECTION
5.12. Waiver of Past
Defaults.  Prior to the declaration of the acceleration of the
maturity of the Transition Bonds as provided in Section 5.02,
the Holders representing not less than a majority of the Outstanding Amount of
the Transition Bonds of an affected Tranche, together with the PUCT, may waive
any past Default or Event of Default and its consequences except a Default
(a) in payment of principal of or premium, if any, or interest on any of
the Transition Bonds or (b) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Holder of each
Transition Bond of all Tranches affected.  In the case of any such
waiver, the Issuer, the Indenture Trustee and the Holders shall be restored to
their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.

     

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

     

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

     

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

     

    SECTION
5.15. Action on Transition
Bonds.  The Indenture Trustee’s right to seek and recover
judgment on the Transition Bonds or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture.  Neither the Lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Holders shall be impaired by
the recovery of any judgment by the Indenture Trustee against the Issuer or by
the levy of any execution under such judgment upon any portion of the Transition
Bond Collateral or any other assets of the Issuer.

     

    ARTICLE
VI

     

    THE
INDENTURE TRUSTEE

     

    SECTION
6.01. Duties of Indenture
Trustee.

     

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

     

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

     

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

     

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

     

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

     

    (i) this paragraph (c)
does not limit the effect of paragraph (b) of
this Section 6.01;

     

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

     

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

     

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

     

    (e) The
Indenture Trustee shall not be liable for interest on any money received by it
except as the Indenture Trustee may agree in writing with the
Issuer.

     

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

     

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

     

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

     

    (i) In the
event that the Indenture Trustee is also acting as Paying Agent or Transition
Bond Registrar hereunder, the protections of this Article VI shall
also be afforded to the Indenture Trustee in its capacity as Paying Agent or
Transition Bond Registrar.

     

    (j) Except
for the express duties of the Indenture Trustee with respect to the
administrative functions set forth in the Basic Documents, the Indenture Trustee
shall have no obligation to administer, service or collect Transition Property
or to maintain, monitor or otherwise supervise the administration, servicing or
collection of the Transition Property.

     

    (k) Under no
circumstance shall the Indenture Trustee be liable for any indebtedness of the
Issuer, the Servicer or the Seller evidenced by or arising under the Transition
Bonds or the Basic Documents.

     

    (l) On or
before March 31 of each fiscal year ending December 31, the Indenture
Trustee shall (i) deliver to the Issuer a report (in form and substance
reasonably satisfactory to the Issuer and addressed to the Issuer and signed by
an authorized officer of the Indenture Trustee) regarding the Indenture
Trustee’s assessment of compliance, during the immediately preceding fiscal year
ending December 31, with each of the applicable servicing criteria
specified on Exhibit C hereto
as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122
of Regulation AB and (ii) deliver to the Issuer a report of an Independent
registered public accounting firm reasonably acceptable to the Issuer that
attests to and reports on, in accordance with Rules 1-02(a)(3) and 2-02(g) of
Regulation S-X under the Securities Act and the Exchange Act, the assessment of
compliance made by the Indenture Trustee and delivered pursuant to clause (i).

     

    SECTION
6.02. Rights of Indenture
Trustee.  (a) The Indenture Trustee may conclusively rely and
shall be fully protected in relying on any document believed by it to be genuine
and to have been signed or presented by the proper person.  The
Indenture Trustee need not investigate any fact or matter stated in such
document.

     

    (b) Before
the Indenture Trustee acts or refrains from acting, it may require and shall be
entitled to receive an Officer’s Certificate or an Opinion of Counsel of
Independent counsel of the Issuer (at no cost or expense to the Indenture
Trustee) that such action is required or permitted hereunder.  The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officer’s Certificate or Opinion of
Counsel.

     

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

     

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

     

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

     

    (f) The
Indenture Trustee shall be under no obligation to take any action or exercise
any of the rights or powers vested in it by this Indenture or any other Basic
Document, or to institute, conduct or defend any litigation hereunder or
thereunder or in relation hereto or thereto, at the request, order or direction
of any of the Bondholders pursuant to the provisions of this Indenture and the
Series Supplement or otherwise, unless it shall have grounds to believe in its
discretion that security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby is to its satisfaction
assured to it.

     

    SECTION
6.03. Individual Rights of
Indenture Trustee.  The Indenture Trustee in its individual or
any other capacity may become the owner or pledgee of Transition Bonds and may
otherwise deal with the Issuer or its Affiliates with the same rights it would
have if it were not Indenture Trustee.  Any Paying Agent, Transition
Bond Registrar, co-registrar or co-paying agent or agent appointed under Section 3.02 may
do the same with like rights.  However, the Indenture Trustee must
comply with Sections 6.11
and 6.12.

     

    SECTION
6.04. Indenture Trustee’s
Disclaimer.  The Indenture Trustee shall not be responsible for
and makes no representation (other than as set forth in Section 6.13) as
to the validity or adequacy of this Indenture or the Transition Bonds, it shall
not be accountable for the Issuer’s use of the proceeds from the Transition
Bonds, and it shall not be responsible for any statement of the Issuer in the
Indenture or in any document issued in connection with the sale of the
Transition Bonds or in the Transition Bonds other than the Indenture Trustee’s
certificate of authentication.  The Indenture Trustee shall not be
responsible for the form, character, genuineness, sufficiency, value or validity
of any of the Transition Bond Collateral, or for or in respect of the Transition
Bonds (other than the certificate of authentication for the Transition Bonds) or
the Basic Documents and the Indenture Trustee shall in no event assume or incur
any liability, duty or obligation to any Holder, other than as expressly
provided in this Indenture.  The Indenture Trustee shall not be liable
for the default or misconduct of the Issuer, the Seller, the Servicer or any
other Person under the Basic Documents or otherwise, and the Indenture Trustee
shall have no obligation or liability to perform the obligations of such
Persons.

     

    SECTION
6.05. Notice of
Defaults.

     

    (a) If a
Default occurs and is continuing and if it is actually known to a Responsible
Officer of the Indenture Trustee, the Indenture Trustee shall mail to the PUCT,
each Rating Agency and each Bondholder notice of the Default within ninety
(90) days after actual notice of such Default was received by a Responsible
Officer of the Indenture Trustee.  Except in the case of a Default in
payment of principal of and premium, if any, or interest on any Transition Bond,
the Indenture Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice is
in the interests of Holders.  Except for an Event of Default under
Sections 5.01(i)
or (ii) that occur
at a time when the Indenture Trustee is acting as the Paying Agent, and except
as provided in the first sentence of this Section 6.05, in
no event shall the Indenture Trustee be deemed to have knowledge of a
Default.

     

    (b) If a
Default occurs and is continuing and if it is actually known to a Responsible
Officer of the Indenture Trustee, the Indenture Trustee shall promptly, but no
more frequently than monthly, mail to the PUCT notice of any legal fees or other
expenses incurred by the Indenture Trustee in defending or prosecuting any
actual or threatened litigation, including any administrative proceeding, in
respect of the Transition Bonds or the Transition Bond Collateral.

     

    SECTION
6.06. Reports by Indenture Trustee
to Holders.

     

    (a) So long
as Transition Bonds are Outstanding and the Indenture Trustee is the Transition
Bond Registrar and Paying Agent, upon the written request of any Holder or the
Issuer, within the prescribed period of time for tax reporting purposes after
the end of each calendar year, it shall deliver to each relevant current or
former Holder such information in its possession as may be required to enable
such Holder to prepare its federal income and any applicable local or state tax
returns.  If the Transition Bond Registrar and Paying Agent is other
than the Indenture Trustee, such Transition Bond Registrar and Paying Agent,
within the prescribed period of time for tax reporting purposes after the end of
each calendar year, shall deliver to each relevant current or former Holder such
information in its possession as may be required to enable such Holder to
prepare its federal income and any applicable local or state tax
returns.

     

    (b) With
respect to the Transition Bonds, on or prior to the Payment Date or Special
Payment Date therefor, the Indenture Trustee will deliver to the PUCT and each
Holder of the Transition Bonds on such Payment Date or Special Payment Date a
statement as provided and prepared by the Servicer which will include (to the
extent applicable) the following information (and any other information so
specified in the Series Supplement) as to the Transition Bonds with respect to
such Payment Date or Special Payment Date or the period since the previous
Payment Date, as applicable:

     

    (i) the amount of the payment to Holders
allocable to principal, if any;

     

    (ii) the amount of the payment to Holders
allocable to interest;

     

    (iii) the aggregate Outstanding Amount of
such Transition Bonds, before and after giving effect to any payments allocated
to principal reported under clause (i)
above;

     

    (iv) the difference, if any, between the
amount specified in clause (iii)
above and the Outstanding Amount specified in the related Expected Amortization
Schedule;

     

    (v) any other transfers and payments to be
made on such Payment Date or Special Payment Date, including amounts paid to the
Indenture Trustee and to the Servicer; and

     

    (vi) the amounts on deposit in the
applicable Capital Subaccount and the applicable Excess Funds Subaccount, after
giving effect to the foregoing payments.

     

    (c) The
Issuer shall send a copy of each of the Certificate of Compliance delivered to
it pursuant to Section 3.03 of the Servicing Agreement and the Annual
Accountant’s Report delivered to it pursuant to Section 3.04 of the
Servicing Agreement to the Rating Agencies.  A copy of such
certificate and report may be obtained by any Holder by a request in writing to
the Indenture Trustee.

     

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

     

    SECTION
6.07. Compensation and
Indemnity.  The Issuer shall pay to the Indenture Trustee from
time to time reasonable compensation for its services.  The Indenture
Trustee’s compensation shall not be limited by any law on compensation of a
trustee of an express trust.  The Issuer shall reimburse the Indenture
Trustee for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its
services.  Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee’s agents, counsel,
accountants and experts.  The Issuer shall indemnify and hold harmless
the Indenture Trustee and its officers, directors, employees and agents against
any and all cost, damage, loss, liability, tax or expense (including reasonable
attorney’s fees and expenses) incurred by it in connection with the
administration and the enforcement of this Indenture, the Series Supplement and
the Basic Documents and the Indenture Trustee’s rights, powers and obligations
under this Indenture, the Series Supplement and the Basic Documents and the
performance of its duties hereunder and obligations under or pursuant to this
Indenture, the Series Supplement and the Basic Documents.  The
Indenture Trustee shall notify the Issuer as soon as is reasonably practicable
of any claim for which it may seek indemnity.  Failure by the
Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder.  The Issuer shall defend the claim and the
Indenture Trustee may have separate counsel and the Issuer shall pay the
reasonable fees and expenses of such counsel.  The Issuer need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee through the Indenture Trustee’s own willful
misconduct, negligence or bad faith.  The rights of the Indenture
Trustee set forth in this Section 6.07 are
subject to and limited by the priority of payments set forth in Section 8.02(e).

     

    The
payment obligations to the Indenture Trustee pursuant to this Section 6.07
shall survive the discharge of this Indenture and the Series Supplement or the
earlier resignation or removal of the Indenture Trustee.  When the
Indenture Trustee incurs expenses after the occurrence of a Default specified in
Section 5.01(v)
or (vi) with
respect to the Issuer, the expenses are intended to constitute expenses of
administration under the Bankruptcy Code or any other applicable federal or
state bankruptcy, insolvency or similar law.

     

    SECTION
6.08. Replacement of Indenture
Trustee and Securities Intermediary.

     

    (a) The
Indenture Trustee may resign at any time upon thirty (30) days’ prior
written notice to the Issuer subject to clause (c)
below.  The Holders of a majority of the Outstanding Amount of the
Transition Bonds may remove the Indenture Trustee by so notifying the Indenture
Trustee and may appoint a successor Indenture Trustee.  The Issuer
shall remove the Indenture Trustee if:

     

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

     

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

     

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

     

    (iv) the Indenture Trustee otherwise becomes
incapable of acting; or

     

    (v) the Indenture Trustee fails to provide
to the Issuer any information reasonably requested by the Issuer pertaining to
the Indenture Trustee and necessary for the Issuer or the Sponsor to comply with
its reporting obligations under the Exchange Act and Regulation AB and such
failure is not resolved to the Issuer’s and the Indenture Trustee’s mutual
satisfaction within a reasonable period of time.

     

    Any
removal or resignation of the Indenture Trustee shall also constitute a removal
or resignation of the Securities Intermediary.

     

    (b) If the
Indenture Trustee gives notice of resignation or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee and Securities
Intermediary.

     

    (c) A
successor Indenture Trustee shall deliver a written acceptance of its
appointment as the Indenture Trustee and as the Securities Intermediary to the
retiring Indenture Trustee and to the Issuer.  Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee and Securities Intermediary, as applicable, under this
Indenture.  No resignation or removal of the Indenture Trustee
pursuant to this Section 6.08
shall become effective until acceptance of the appointment by a successor
Indenture Trustee having the qualifications set forth in Section 6.11.  The
successor Indenture Trustee shall mail a notice of its succession to
Holders.  The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee (including unless otherwise agreed by
the successor Indenture Trustee, all REP Deposit Accounts held by the Indenture
Trustee) to the successor Indenture Trustee.

     

    (d) If a
successor Indenture Trustee does not take office within sixty (60) days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Transition Bonds may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.

     

    (e) If the
Indenture Trustee fails to comply with Section 6.11,
any Holder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture
Trustee.

     

    (f) Notwithstanding
the replacement of the Indenture Trustee pursuant to this Section 6.08,
the Issuer’s obligations under Section 6.07
shall continue for the benefit of the retiring Indenture Trustee.

     

    SECTION
6.09. Successor Indenture Trustee
by Merger.  If the Indenture Trustee consolidates with, merges
or converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation or banking association without
any further act shall be the successor Indenture Trustee; provided, however,
that if such successor Indenture Trustee is not eligible under Section 6.11,
then the successor Indenture Trustee shall be replaced in accordance with Section 6.08.  Notice
of any such event shall be promptly given to each Rating Agency by the successor
Indenture Trustee and any agent in Ireland appointed pursuant to Section 3.02.

     

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

     

    SECTION
6.10. Appointment of Co-Trustee or
Separate Trustee.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    SECTION
6.11. Eligibility;
Disqualification.  The Indenture Trustee shall at all times
satisfy the requirements of TIA § 310(a)(1) and § 310(a)(5) and
Section 26(a)(1) of the Investment Company Act.  The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it shall have
a long term debt rating of “Baa3” or better by Moody’s “BBB-” or better by
Standard & Poor’s and, if Fitch provides a rating thereon, “BBB-” or
better by Fitch.  The Indenture Trustee shall comply with TIA
§ 310(b), including the optional provision permitted by the second sentence
of TIA § 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA § 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA § 310(b)(1) are
met.

     

    SECTION
6.12. Preferential Collection of
Claims Against Issuer.  The Indenture Trustee shall comply with
TIA § 311(a), excluding any creditor relationship listed in TIA
§ 311(b).  An Indenture Trustee who has resigned or been removed
shall be subject to TIA § 311(a) to the extent indicated
therein.

     

    SECTION
6.13. Representations and
Warranties of Indenture Trustee.  The Indenture Trustee hereby
represents and warrants that:

     

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

     

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

     

    SECTION
6.14. Annual Report by Independent
Registered Public Accountants.  In the event the firm of
Independent registered public accountants requires the Indenture Trustee to
agree or consent to the procedures performed by such firm pursuant to
Section 3.05 of the Servicing Agreement, the Indenture Trustee shall
deliver such letter of agreement or consent in conclusive reliance upon the
direction of the Issuer in accordance with Section 3.05 of the Servicing
Agreement.  In the event such firm requires the Indenture Trustee to
agree to the procedures performed by such firm, the 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 in conclusive
reliance upon the direction of the Issuer, and the Indenture Trustee makes no
independent inquiry or investigation to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.

     

    SECTION
6.15. Custody of Transition Bond
Collateral.  The Indenture Trustee shall hold such of the
Transition Bond Collateral (and any other collateral that may be granted to the
Indenture Trustee) as consists of instruments, deposit accounts, negotiable
documents, money, goods, letters of credit, and advices of credit in the State
of New York.  The Indenture Trustee shall hold such of the Transition
Bond Collateral as constitute investment property through the Securities
Intermediary (which, as of the date hereof, is The Bank of New York
Mellon).  The initial Securities Intermediary, hereby agrees (and each
future Securities Intermediary shall agree) with the Indenture Trustee that
(a) such investment property shall at all times be credited to a securities
account of the Indenture Trustee, (b) the Securities Intermediary shall
treat the Indenture Trustee as entitled to exercise the rights that comprise
each financial asset credited to such securities account, (c) all property
credited to such securities account shall be treated as a financial asset,
(d) the Securities Intermediary shall comply with entitlement orders
originated by the Indenture Trustee without the further consent of any other
person or entity, (e) the Securities Intermediary will not agree with any
person other than the Indenture Trustee to comply with entitlement orders
originated by such other person, (f) such securities accounts and the
property credited thereto shall not be subject to any Lien, or right of set-off
in favor of the Securities Intermediary or anyone claiming through it (other
than the Indenture Trustee), and (g) such agreement shall be governed by
the internal laws of the State of New York.  Terms used in the
preceding sentence that are defined in the UCC and not otherwise defined herein
shall have the meaning set forth in the UCC.  Except as permitted by
this Section 6.15, or
elsewhere in this Indenture, the Indenture Trustee shall not hold Transition
Bond Collateral through an agent or a nominee.

     

    ARTICLE
VII

     

    HOLDERS’
LISTS AND REPORTS

     

    SECTION
7.01. Issuer To Furnish Indenture
Trustee Names and Addresses of Holders.  The Issuer will
furnish or cause to be furnished to the Indenture Trustee (a) not more than
five (5) days after the earlier of (i) each Record Date and (ii) six
(6) months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Bondholders as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within thirty (30) days after
receipt by the Issuer of any such request, a list of similar form and content as
of a date not more than ten (10) days prior to the time such list is
furnished; provided, however, that so long
as the Indenture Trustee is the Transition Bond Registrar, no such list shall be
required to be furnished.

     

    SECTION
7.02. Preservation of Information;
Communications to Holders.

     

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

     

    (b) Holders
may communicate pursuant to TIA § 312(b) with other Holders with respect to
their rights under this Indenture or under the Transition Bonds.  In
addition, upon the written request of any Holder or group of Holders of
Transition Bonds evidencing not less than 10 percent of the Outstanding Amount
of the Transition Bonds, the Indenture Trustee shall afford the Holder or
Holders making such request a copy of a current list of Holders of the
Transition Bonds for purposes of communicating with other Holders with respect
to their rights hereunder.

     

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

     

    SECTION
7.03. Reports by
Issuer.

     

    (a) The
Issuer shall:

     

    (i) so long as the Issuer or the Sponsor is
required to file such documents with the SEC, provide to the Indenture Trustee,
within fifteen (15) days after the Issuer is required to file the same with
the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
from time to time by rules and regulations prescribe) which the Issuer or the
Sponsor may be required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act;

     

    (ii) provide to the Indenture Trustee, file
with the SEC, in accordance with rules and regulations prescribed from time to
time by the SEC such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this Indenture
as may be required from time to time by such rules and regulations;
and

     

    (iii) supply to the Indenture Trustee (and
the Indenture Trustee shall transmit by mail to all Holders described in TIA
§ 313(c)), such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a)
as may be required by rules and regulations prescribed from time to time by the
SEC.

     

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

     

    SECTION
7.04. Reports by Indenture
Trustee.  If required by TIA § 313(a), within sixty
(60) days after December 31 of each year, commencing with the year
after the issuance of the Transition Bonds, the Indenture Trustee shall mail to
each Bondholder as required by TIA § 313(c) a brief report dated as of such
date that complies with TIA § 313(a).  The Indenture Trustee also
shall comply with TIA § 313(b); provided, however, that the
initial report so issued shall be delivered not more than twelve
(12) months after the Closing Date.

     

    A copy of
each report at the time of its mailing to Holders shall be filed by the Servicer
with the SEC and each stock exchange, if any, on which the Transition Bonds are
listed.  The Issuer shall notify the Indenture Trustee in writing if
and when the Transition Bonds are listed on any stock exchange.

     

    ARTICLE
VIII

     

    ACCOUNTS,
DISBURSEMENTS AND RELEASES

     

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

     

    SECTION
8.02. Collection Account and REP
Deposit Accounts.

     

    (a) Prior to
the Closing Date, the Issuer shall open or cause to be opened, at the Indenture
Trustee’s office located at the Corporate Trust Office, or at another Eligible
Institution, a segregated trust account in the Indenture Trustee’s name for the
deposit of TC Collections and all other amounts received with respect to the
Transition Bond Collateral (the “Collection
Account”).  The Collection Account will consist of three
subaccounts:  a general subaccount (the “General Subaccount”),
an excess funds subaccount (the “Excess Funds
Subaccount”) and a capital subaccount (the “Capital Subaccount”
and, together with the General Subaccount and the Excess Funds Subaccount, the
“Subaccounts”);
provided that the Series Supplement may provide for the establishment of a cost
of issuance subaccount to provide for the application of Transition Bond
proceeds to the payment of the costs of issuing the Transition
Bonds.  For administrative purposes, the Subaccounts may, but need
not, be established by the Indenture Trustee as separate
accounts.  Such separate accounts will be recognized individually as a
Subaccount and collectively as the “Collection Account.”  Prior to or
concurrently with the issuance of the Transition Bonds, the Member shall deposit
into the Capital Subaccount an amount equal to the Required Capital Level for
the Transition Bonds.  All amounts in the Collection Account not
allocated to any other subaccount shall be allocated to the General
Subaccount.  Prior to the initial Payment Date, all amounts in the
Collection Account (other than funds deposited into the Capital Subaccount, up
to the Required Capital Level for the Transition Bonds) shall be allocated to
the General Subaccount.  All references to the Collection Account
shall be deemed to include reference to all subaccounts contained
therein.  Withdrawals from and deposits to each of the foregoing
subaccounts of the Collection Account shall be made as set forth in Section 8.02(d)
and (e).  The
Collection Account shall at all times be maintained in an Eligible Account, will
be under the sole dominion and exclusive control of the Indenture Trustee, and
only the Indenture Trustee shall have access to the Collection Account for the
purpose of making deposits in and withdrawals from the Collection Account in
accordance with this Indenture.  Funds in the Collection Account shall
not be commingled with any other moneys.  All moneys deposited from
time to time in the Collection Account, all deposits therein pursuant to this
Indenture, and all investments made in Eligible Investments as directed in
writing by the Issuer with such moneys, including all income or other gain from
such investments, shall be held by the Indenture Trustee in the Collection
Account as part of the Transition Bond Collateral as herein
provided.  The Indenture Trustee shall have no liability in respect of
losses incurred as a result of the liquidation of any Eligible Investment prior
to its stated maturity or its date of redemption or the failure of the Issuer or
the Servicer to provide timely written investment direction.

     

    (b) The
Securities Intermediary hereby confirms that (i) the Collection Account is,
or at inception will be established as, a “securities account” as such term is
defined in Section 8-501(a) of the UCC, (ii) it is a “securities
intermediary” (as such term is defined in Section 8-102(a) (14) of the UCC)
and is acting in such capacity with respect to such accounts, and (iii) the
Indenture Trustee for the benefit of the Secured Parties is the sole
“entitlement holder” (as such term is defined in Section 8-102(a)(7) of the
UCC) with respect to such accounts and no other Person shall have the right to
give “entitlement orders” (as such term is defined in Section 8-102(a)(8))
with respect to such accounts.  The Securities Intermediary hereby
further agrees that each item of property (whether investment property,
financial asset, security, instrument or cash) received by it will be credited
to the Collection Account and shall be treated by it as a “financial asset”
within the meaning of Section 8-102(a)(9) of the
UCC.  Notwithstanding anything to the contrary, New York State shall
be deemed to be the location and jurisdiction of the Securities Intermediary for
purposes of Section 8-110 of the UCC, and the Collection Account (as well
as the securities entitlements related thereto) shall be governed by the laws of
the State of New York.

     

    (c) The
Indenture Trustee shall have sole dominion and exclusive control over all moneys
in the Collection Account and shall apply such amounts therein as provided in
this Section 8.02.  The
Indenture Trustee shall also pay from the Collection Account any amounts
requested to be paid by or to the Servicer pursuant to Section 6.11(c)(ii)
of the Servicing Agreement.

     

    (d) TC
Collections shall be deposited in the General Subaccount as provided in Section 6.11 of
the Servicing Agreement.  All deposits to and withdrawals from the
Collection Account, all allocations to the subaccounts of the Collection Account
and any amounts to be paid to the Servicer under Section 8.02(c)
shall be made by the Indenture Trustee in accordance with the written
instructions provided by the Servicer in the Monthly Servicer’s Certificate, the
Semi-Annual Servicer’s Certificate or upon other written notice provided by the
Servicer pursuant to Section 6.11(c)(ii)
of the Servicing Agreement, as applicable.

     

    (e) On each
Payment Date for the Transition Bonds, the Indenture Trustee shall apply all
amounts on deposit in the Collection Account, including all net earnings
thereon, to pay the following amounts, in accordance with the Semi-Annual
Servicer’s Certificate, in the following priority:

     

    (i) all amounts owed by the Issuer to the
Indenture Trustee (including legal fees and expenses) shall be paid to the
Indenture Trustee (subject to Section 6.07) in
an amount not to exceed annually the amount set forth in the Series
Supplement;

     

    (ii) the Servicing Fee for such Payment Date
and all unpaid Servicing Fees for prior Payment Dates shall be paid to the
Servicer;

     

    (iii) the Administration Fee for such Payment
Date shall be paid to the Administrator and the Independent Manager Fee for such
Payment Date shall be paid to the Independent Manager;

     

    (iv) all other Operating Expenses for such
Payment Date not described above shall be paid to the parties to which such
Operating Expenses are owed;

     

    (v) Periodic Interest for such Payment
Date, including any overdue Periodic Interest (together with, to the extent
lawful, interest on such overdue Periodic Interest at the applicable Transition
Bond Interest Rate), with respect to the Transition Bonds shall be paid to the
Holders of the Transition Bonds;

     

    (vi) principal due and payable on the
Transition Bonds as a result of an Event of Default or on the Final Maturity
Date of the Transition Bonds shall be paid to the Holders of the Transition
Bonds;

     

    (vii) Periodic Principal for such Payment
Date, including any overdue Periodic Principal, with respect to the Transition
Bonds shall be paid to the Holders of the Transition Bonds in the order provided
in the Series Supplement;

     

    (viii) any other unpaid Operating Expenses,
fees, expenses and indemnity amounts owed to the Indenture Trustee;

     

    (ix) the amount, if any, by which the
Required Capital Level with respect to the Transition Bonds exceeds the amount
in the Capital Subaccount as of such Payment Date shall be allocated to the
Capital Subaccount;

     

    (x) if there is a positive balance after
making the foregoing allocations, provided that no Event of Default has occurred
or is continuing, an amount not to exceed the lesser of such balance and the
investment earnings on the Capital Subaccount shall be paid to the
Issuer;

     

    (xi) the balance, if any, shall be allocated
to the Excess Funds Subaccount for distribution on subsequent Payment Dates;
and

     

    (xii) after principal of and premium, if any,
and interest on all Transition Bonds, and all of the other foregoing amounts,
have been paid in full, including, without limitation, amounts due and payable
to the Indenture Trustee under Section 6.07 or
otherwise, the balance (including all amounts then held in the Capital
Subaccount and the Excess Funds Subaccount), if any, shall be paid to the
Issuer, free from the Lien of this Indenture and the Series
Supplement.

     

    All
payments to the Holders pursuant to clauses (v),
(vi) and (vii) above shall be
made to such Holders pro rata based on the respective amounts of interest
and/or principal owed, unless, in the case of Transition Bonds comprised of two
or more Tranches, the Series Supplement provides otherwise.  Payments
in respect of principal of and premium, if any, and interest on any Tranche of
Transition Bonds will be made on a pro rata basis among all the Holders of
such Tranche.  In the case of an Event of Default, then, in accordance
with Section
5.04(c), moneys will be applied pursuant to clauses (v) and (vi), in such order,
on a pro rata basis, based upon the interest or the principal owed.

     

    The
amounts paid during any calendar year pursuant to clauses (i) and
(iv) may
not exceed the amounts set forth in the Series Supplement.

     

    (f) If on any
Payment Date funds on deposit in the General Subaccount are insufficient to make
the payments contemplated by clauses
(i) through (viii) of Section 8.02(e),
the Indenture Trustee shall (i) first, draw from
amounts on deposit in the Excess Funds Subaccount and (ii) second, draw from
amounts on deposit in the Capital Subaccount, in each case, up to the amount of
such shortfall in order to make the payments contemplated by clauses (i)
through (viii)
of Section 8.02(e).  In
addition, if on any Payment Date funds on deposit in the General Subaccount are
insufficient to make the allocations contemplated by clause (ix)
above, the Indenture Trustee shall draw from amounts on deposit in the Excess
Funds Subaccount to make such allocations.

     

    (g) The
Indenture Trustee, shall, if in the future directed by the Servicer under Section 3.05(e)
of the Servicing Agreement, maintain one or more segregated accounts in the
Indenture Trustee’s name (the “REP Deposit
Accounts”) at its office located at the Corporate Trust Office, or at
another Eligible Institution, for REP deposits provided pursuant to the
Financing Order or any Tariff, each such account for the benefit of the
Indenture Trustee.  Pursuant to and in accordance with the Financing
Order, amounts received from any REP as a security deposit shall be deposited
into the applicable REP Deposit Account.  To the extent permitted by
the Financing Order, any Tariff and PUCT Regulations, the REP Deposit Accounts
shall at all times be maintained in Eligible Accounts, shall be subject to a
perfected first priority security interest in favor of the Indenture Trustee for
the benefit of the Secured Parties, and shall be under the sole dominion and
exclusive control of the Indenture Trustee.  Funds in the REP Deposit
Accounts shall not be commingled with any other moneys.  All or a
portion of the funds in the REP Deposit Accounts shall be invested in Eligible
Investments and reinvested by the Indenture Trustee in Eligible Investments
pursuant to the written direction of the Servicer (or, absent such direction, in
accordance with Section 8.03(c));
provided, however, that
(i) such Eligible Investments shall not mature or be redeemed later than
the Business Day prior to the next Payment Date for the Transition Bonds and
(ii) such Eligible Investments shall not be sold, liquidated or otherwise
disposed of at a loss prior to the maturity or the date of redemption
thereof.  All moneys deposited from time to time in the REP Deposit
Accounts and all investments made in Eligible Investments with such moneys,
including all income or other gain from such investments, shall be held by the
Indenture Trustee in a REP Deposit Account as part of the Transition Bond
Collateral as herein provided and shall only be allocated and released upon the
direction of the Servicer in accordance with Section 3.05(e)
of the Servicing Agreement as required or permitted by this Indenture, the
Financing Order, any Tariff, or other applicable PUCT
Regulations.  Any loss resulting from investment made in Eligible
Investments with moneys in a REP Deposit Account shall be charged to such REP
Deposit Account.  The Indenture Trustee shall release property from a
REP Deposit Account only as and to the extent directed by the Servicer pursuant
to the Financing Order and the Servicing Agreement and as required or permitted
by this Indenture.  The Indenture Trustee shall have no liability in
respect of losses incurred as a result of the liquidation of any Eligible
Investment prior to its stated maturity or its date of redemption or the failure
of the Issuer or the Servicer to provide timely written investment
direction.

     

    SECTION
8.03. General Provisions Regarding
the Collection Accounts.

     

    (a) So long
as no Default or Event of Default shall have occurred and be continuing, all or
a portion of the funds in the Collection Account shall be invested in Eligible
Investments and reinvested by the Indenture Trustee upon Issuer Order; provided, however, that
(i) such Eligible Investments shall not mature or be redeemed later than
the Business Day prior to the next Payment Date or Special Payment Date, if
applicable, for the Transition Bonds and (ii) such Eligible Investments
shall not be sold, liquidated or otherwise disposed of at a loss prior to the
maturity or the date of redemption thereof.  All income or other gain
from investments of moneys deposited in the Collection Account shall be
deposited by the Indenture Trustee in the Collection Account, and any loss
resulting from such investments shall be charged to the Collection
Account.  The Issuer will not direct the Indenture Trustee to make any
investment of any funds or to sell any investment held in the Collection Account
unless the security interest Granted and perfected in such account will continue
to be perfected in such investment or the proceeds of such sale, in either case
without any further action by any Person, and, in connection with any direction
to the Indenture Trustee to make any such investment or sale, if requested by
the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an
Opinion of Counsel of Independent counsel of the Issuer (at the Issuer’s cost
and expense) to such effect.  In no event shall the Indenture Trustee
be liable for the selection of Eligible Investments or for investment losses
incurred thereon.  The Indenture Trustee shall have no liability in
respect of losses incurred as a result of the liquidation of any Eligible
Investment prior to its stated maturity or its date of redemption or the failure
of the Issuer or the Servicer to provide timely written investment
direction.  The Indenture Trustee shall have no obligation to invest
or reinvest any amounts held hereunder in the absence of written investment
direction pursuant to an Issuer Order.

     

    (b) Subject
to Section 6.01(c),
the Indenture Trustee shall not in any way be held liable by reason of any
insufficiency in the Collection Account resulting from any loss on any Eligible
Investment included therein except for losses attributable to the Indenture
Trustee’s failure to make payments on such Eligible Investments issued by the
Indenture Trustee, in its commercial capacity as principal obligor and not as
trustee, in accordance with their terms.

     

    (c) If
(i) the Issuer shall have failed to give written investment directions for
any funds on deposit in the Collection Account to the Indenture Trustee by
11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer
and Indenture Trustee) on any Business Day; or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Transition
Bonds but the Transition Bonds shall not have been declared due and payable
pursuant to Section 5.02,
then the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Collection Account in one or more money market funds
described under clause (d) of
the definition of “Eligible Investments” pursuant to the most recent written
investment directions delivered by the Issuer to the Indenture Trustee with
respect to such type of Eligible Investments; provided that if the
Issuer has never delivered written investment directions to the Indenture
Trustee, the Indenture Trustee shall not invest or reinvest such funds in any
investments.

     

    (d) The
parties hereto acknowledge that the Servicer may, pursuant to the Servicing
Agreement, select Eligible Investments on behalf of the Issuer.

     

    SECTION
8.04. Release of Transition Bond
Collateral.

     

    (a) So long
as the Issuer is not in default hereunder and no Default hereunder would occur
as a result of such action, the Issuer, through the Servicer, may collect, sell
or otherwise dispose of written-off receivables, at any time and from time to
time in the ordinary course of business, without any notice to, or release or
consent by, the Indenture Trustee, but only as and to the extent permitted by
the Basic Documents; provided, however, that any and
all proceeds of such dispositions shall become Transition Bond Collateral and be
deposited to the General Subaccount immediately upon receipt thereof by the
Issuer or any other Person, including the Servicer.  Without limiting
the foregoing, the Servicer, may, at any time and from time to time without any
notice to, or release or consent by, the Indenture Trustee, sell or otherwise
dispose of any Transition Bond Collateral which is part of a Bill previously
written-off as a defaulted or uncollectible account in accordance with the terms
of the Servicing Agreement and the requirements of the proviso in the
immediately preceding sentence.

     

    (b) The
Indenture Trustee may, and when required by the provisions of this Indenture
shall, execute instruments to release property from the Lien of this Indenture,
or convey the Indenture Trustee’s interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this
Indenture.  No party relying upon an instrument executed by the
Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee’s authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.  The Indenture Trustee shall release property from the Lien of
this Indenture pursuant to this Section 8.04(b)
only upon receipt of an Issuer Request accompanied by an Officer’s Certificate,
an Opinion of Counsel of Independent counsel of the Issuer (at the Issuer’s cost
and expense) and (if required by the TIA) Independent Certificates in accordance
with TIA §§ 314(c) and 314(d)(1) meeting the applicable requirements of
Section 10.01.

     

    (c) The
Indenture Trustee shall, at such time as there are no Transition Bonds
Outstanding and all sums payable to the Indenture Trustee pursuant to Section 6.07 or
otherwise have been paid, release any remaining portion of the Transition Bond
Collateral that secured the Transition Bonds from the Lien of this Indenture,
release to the Issuer or any other Person entitled thereto any funds or
investments then on deposit in or credit to the Collection Account and, subject
to the instructions of the Servicer, shall release the REP Deposit Accounts in
accordance with Section 8.02.

     

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

     

    SECTION
8.06. Reports by Independent
Registered Public Accountants.  As of the Closing Date, the
Issuer shall appoint a firm of Independent registered public accountants of
recognized national reputation for purposes of preparing and delivering the
reports or certificates of such accountants required by this Indenture and the
Series Supplement.  In the event such firm requires the Indenture
Trustee to agree to the procedures performed by such firm, the 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 in
conclusive reliance upon the direction of the Issuer, and the Indenture Trustee
makes no independent inquiry or investigation to, and shall have no obligation
or liability in respect of, the sufficiency, validity or correctness of such
procedures.  Upon any resignation by, or termination by the Issuer of,
such firm the Issuer shall provide written notice thereof to the Indenture
Trustee and shall promptly appoint a successor thereto that shall also be a firm
of Independent registered public accountants of recognized national
reputation.  If the Issuer shall fail to appoint a successor to a firm
of Independent registered public accountants that has resigned or been
terminated within fifteen (15) days after such resignation or termination,
the Indenture Trustee shall promptly notify the Issuer of such failure in
writing.  If the Issuer shall not have appointed a successor within
ten (10) days thereafter the Indenture Trustee shall promptly appoint a
successor firm of Independent registered public accountants of recognized
national reputation; provided that the
Indenture Trustee shall have no liability with respect to such
appointment.  The fees of such Independent registered public
accountants and its successor shall be payable by the Issuer.

     

    ARTICLE
IX

     

    Supplemental
Indentures

     

    SECTION
9.01. Supplemental Indentures
Without Consent of Holders.

     

    (a) Without
the consent of the Holders of any Transition Bonds but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, and, if the contemplated amendment may in the judgment of the PUCT
increase ongoing Qualified Costs, with the consent of the PUCT pursuant to Section 9.03
(which consent shall not be required with regard to the Series Supplement), at
any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the TIA as in
force at the date of the execution thereof), in form satisfactory to the
Indenture Trustee, for any of the following purposes:

     

    (i) to correct or amplify the description
of any property, including, without limitation, the Transition Bond Collateral,
at any time subject to the Lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to be
subjected to the Lien of this Indenture and the Series Supplement;

     

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

     

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

     

    (iv) to convey, transfer, assign, mortgage
or pledge any property to or with the Indenture Trustee;

     

    (v) to cure any ambiguity, to correct or
supplement any provision herein or in any supplemental indenture, including the
Series Supplement, which may be inconsistent with any other provision herein or
in any supplemental indenture, including the Series Supplement, or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that
(i) such action shall not, as evidenced by an Opinion of Counsel of
Independent counsel of the Issuer, adversely affect in any material respect the
interests of the Holders of the Transition Bonds and (ii) the Rating Agency
Condition shall have been satisfied with respect thereto;

     

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

     

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

     

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

     

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

     

    (x) to satisfy any Rating Agency
requirements.

     

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

     

    (b) The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also
without the consent of any of the Holders of the Transition Bonds, with the
consent of the PUCT pursuant to Section 9.03,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Transition Bonds under this Indenture; provided, however, that
(i) such action shall not, as evidenced by an Opinion of Counsel of
nationally recognized counsel of the Issuer experienced in structured finance
transactions, adversely affect in any material respect the interests of the
Holders and (ii) the Rating Agency Condition shall have been satisfied with
respect thereto.

     

    SECTION
9.02. Supplemental Indentures with
Consent of Holders.  The Issuer and the Indenture Trustee, when
authorized by an Issuer Order, also may, with the consent of the PUCT pursuant
to Section 9.03,
with prior notice to the Rating Agencies and with the consent of the Holders of
not less than a majority of the Outstanding Amount of the Transition Bonds of
each Tranche to be affected, by Act of such Holders delivered to the Issuer and
the Indenture Trustee, enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Transition Bonds under this Indenture;
provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Transition Bond of each Tranche affected thereby:

     

    (i) change the date of payment of any
installment of principal of or premium, if any, or interest on any Transition
Bond of such Tranche, or reduce the principal amount thereof, the interest rate
thereon or premium, if any, with respect thereto, change the provisions of this
Indenture and the Series Supplement relating to the application of collections
on, or the proceeds of the sale of, the Transition Bond Collateral to payment of
principal of or premium, if any, or interest on the Transition Bonds, or change
any place of payment where, or the coin or currency in which, any Transition
Bond or the interest thereon is payable, or impair the right to institute suit
for the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Transition Bonds on or after the
respective due dates thereof;

     

    (ii) reduce the percentage of the
Outstanding Amount of the Transition Bonds or of a Tranche thereof, the consent
of the Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance with
certain provisions of this Indenture or certain defaults hereunder and their
consequences provided for in this Indenture;

     

    (iii) reduce the percentage of the
Outstanding Amount of the Transition Bonds required to direct the Indenture
Trustee to direct the Issuer to sell or liquidate the Transition Bond Collateral
pursuant to Section 5.04;

     

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

     

    (v) modify any of the provisions of this
Indenture in such manner as to affect the calculation of the amount of any
payment of interest, principal or premium, if any, due on any Transition Bond on
any Payment Date (including the calculation of any of the individual components
of such calculation) or change the Expected Amortization Schedules or Final
Maturity Dates of any Tranche of Transition Bonds;

     

    (vi) decrease the Required Capital
Level;

     

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

     

    (viii) cause any material adverse federal
income tax consequence to the Seller, the Issuer, the Managers, the Indenture
Trustee or the then existing Holders.

     

    It shall
not be necessary for any Act of Holders under this Section 9.02 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.

     

    Promptly
after the execution by the Issuer and the Indenture Trustee of any supplemental
indenture pursuant to this Section 9.02,
the Issuer shall mail to the Rating Agencies and the Holders of the Transition
Bonds to which such supplemental indenture relates a notice setting forth in
general terms the substance of such supplemental indenture.  Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.

     

    SECTION
9.03. PUCT
Condition.  Notwithstanding anything to the contrary in Section 9.01 or
9.02, no
supplemental indenture (other than the Series Supplement) shall be effective
unless the process set forth in this Section 9.03 has
been followed.

     

    (a) At least
thirty-one (31) days prior to the effectiveness of any such supplemental
indenture and after obtaining the other necessary approvals set forth in Section 9.01 or
9.02, as
applicable, except for the consent of the Indenture Trustee and the Holders if
the consent of the Holders is required or sought by the Indenture Trustee in
connection with such supplemental indenture, the Issuer shall have delivered to
the PUCT’s executive director and general counsel written notification of any
proposed supplemental indenture, which notification shall contain:

     

    (i) a reference to Docket
No. 37247;

     

    (ii) an Officer’s Certificate stating that
the proposed supplemental indenture has been approved by all parties to this
Indenture; and

     

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

     

    (b) The PUCT
or its staff shall, within thirty (30) days of receiving the notification
complying with Section 9.03(a)
above, either:

     

    (i)            provide
notice of its determination that the proposed supplemental indenture will not
under any circumstances have the effect of increasing the ongoing Qualified
Costs related to the Transition Bonds,

     

    (ii) provide notice of its consent or lack
of consent to the person specified in Section 9.03(a)(iii)
above, or

     

    (iii) be conclusively deemed to have
consented to the proposed supplemental indenture,

     

    unless,
within thirty (30) days of receiving the notification complying with Section 9.03(a)
above, the PUCT or its staff delivers to the office of the person specified in
Section 9.03(a)(iii)
above a written statement requesting an additional amount of time not to exceed
thirty (30) days in which to consider whether to consent to the proposed
supplemental indenture.  If the PUCT or its staff requests an
extension of time in the manner set forth in the preceding sentence, then the
PUCT shall either provide notice of its consent or lack of consent or notice of
its determination that the proposed supplemental indenture will not under any
circumstances increase ongoing Qualified Costs to the person specified in Section 9.03(a)(iii)
above no later than the last day of such extension of time or be conclusively
deemed to have consented to the proposed supplemental indenture on the last day
of such extension of time.  Any supplemental indenture requiring the
consent of the PUCT shall become effective on the later of (i) the date proposed
by the parties to such supplemental indenture and (ii) the first day after
the expiration of the thirty (30)-day period provided for in this Section 9.03(b),
or, if such period has been extended pursuant hereto, the first day after the
expiration of such period as so extended.

     

    (c) Following
the delivery of a notice to the PUCT by the Issuer under Section 9.03(a)
above, the Issuer shall have the right at any time to withdraw from the PUCT
further consideration of any notification of a proposed supplemental
indenture.  Such withdrawal shall be evidenced by the prompt written
notice thereof by the Issuer to the PUCT, the Indenture Trustee and the
Servicer.

     

    SECTION
9.04. Execution of Supplemental
Indentures.  In executing any supplemental indenture permitted
by this Article IX or
the modifications thereby of the trust created by this Indenture, the Indenture
Trustee shall be entitled to receive, and subject to Sections 6.01
and 6.02, shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture.  The Indenture Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Indenture Trustee’s
own rights, duties, liabilities or immunities under this Indenture or
otherwise.

     

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

     

    SECTION
9.06. Conformity with Trust
Indenture Act.  Every amendment of this Indenture and every
supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.

     

    SECTION
9.07. Reference in Transition
Bonds to Supplemental Indentures.  Transition Bonds
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may,
and if required by the Indenture Trustee shall, bear a notation in form approved
by the Indenture Trustee as to any matter provided for in such supplemental
indenture.  If the Issuer or the Indenture Trustee shall so determine,
new Transition Bonds so modified as to conform, in the opinion of the Indenture
Trustee and the Issuer, to any such supplemental indenture may be prepared and
executed by the Issuer and authenticated and delivered by the Indenture Trustee
in exchange for Outstanding Transition Bonds.

     

    ARTICLE
X

     

    Miscellaneous

     

    SECTION
10.01. Compliance Certificates and
Opinions, etc.

     

    (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officer’s Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with and
(iii) (if required by the TIA) an Independent Certificate from a firm of
registered public accountants meeting the applicable requirements of this Section 10.01,
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.

     

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

     

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

     

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

     

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

     

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

     

    (b) (i)  Prior
to the deposit of any Transition Bond Collateral or other property or securities
with the Indenture Trustee that is to be made the basis for the release of any
property or securities subject to the Lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 10.01(a)
or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within ninety (90) days of such deposit)
to the Issuer of the Transition Bond Collateral or other property or securities
to be so deposited.

     

    (ii) Whenever the Issuer is required to
furnish to the Indenture Trustee an Officer’s Certificate certifying or stating
the opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Indenture Trustee an Independent
Certificate as to the same matters, if the fair value to the Issuer of the
securities to be so deposited and of all other such securities made the basis of
any such withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above
and this clause (ii), is
ten percent or more of the Outstanding Amount of the Transition Bonds, but such
a certificate need not be furnished with respect to any securities so deposited,
if the fair value thereof to the Issuer as set forth in the related Officer’s
Certificate is less than the lesser of (A) $25,000 or (B) one percent of
the Outstanding Amount of the Transition Bonds.

     

    (iii) Whenever any property or securities are
to be released from the Lien of this Indenture other than pursuant to Section 8.02(e),
the Issuer shall also furnish to the Indenture Trustee an Officer’s Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within ninety (90) days of such release) of the property or
securities proposed to be released and stating that in the opinion of such
person the proposed release will not impair the security under this Indenture in
contravention of the provisions hereof.

     

    (iv) Whenever the Issuer is required to
furnish to the Indenture Trustee an Officer’s Certificate certifying or stating
the opinion of any signatory thereof as to the matters described in clause (iii)
above, the Issuer shall also furnish to the Indenture Trustee an Independent
Certificate as to the same matters if the fair value of the property or
securities and of all other property with respect to the Transition Bonds, or
securities released from the Lien of this Indenture (other than pursuant to
Section 8.02(e))
since the commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii)
above and this clause (iv),
equals 10 percent or more of the Outstanding Amount of the Transition Bonds, but
such certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer’s
Certificate is less than the lesser of (A) $25,000 or (B) one percent of
the then Outstanding Amount of the Transition Bonds.

     

    (v) Notwithstanding Section 2.16 or
any other provision of this Section 10.01,
the Indenture Trustee may (A) collect, liquidate, sell or otherwise dispose
of the Transition Property and the other Transition Bond Collateral as and to
the extent permitted or required by the Basic Documents and (B) make cash
payments out of each Collection Account as and to the extent permitted or
required by the Basic Documents.

     

    SECTION
10.02. Form of Documents Delivered
to Indenture Trustee.  In any case where several matters are
required to be certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.

     

    Any
certificate or opinion of a Responsible Officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous.  Any such certificate of a Responsible Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer or the Issuer stating that the information with respect to such
factual matters is in the possession of the Servicer or the Issuer, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.

     

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

     

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

     

    SECTION
10.03. Acts of
Holders.

     

    (a) Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly appointed in writing;
and except as herein otherwise expressly provided such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, and, where it is hereby expressly required, to the
Issuer.  Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders
signing such instrument or instruments.  Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section 10.03.

     

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

     

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

     

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

     

    SECTION
10.04. Notices, etc., to Indenture
Trustee, Issuer and Rating Agencies.

     

    (a) Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other documents provided or permitted by this Indenture to be made
upon, given or furnished to or filed with:

     

    (i) the Indenture Trustee by any Holder or
by the Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing by facsimile transmission, first-class mail or
overnight delivery service to or with the Indenture Trustee at the Corporate
Trust Office,

     

    (ii) the Issuer by the Indenture Trustee or
by any Holder shall be sufficient for every purpose hereunder if in writing and
mailed, first-class, postage prepaid, to the Issuer addressed
to:  Entergy Texas Restoration Funding, LLC at Capital Center,
919 Congress Avenue, Suite 840-C, Austin, Texas 78701,
Attention:  Manager, Telephone:  (512) 487-3982,
Facsimile:  (512) 487-3958, or at any other address previously
furnished in writing to the Indenture Trustee by the Issuer.  The
Issuer shall promptly transmit any notice received by it from the Holders to the
Indenture Trustee, or

     

    (iii) the PUCT by the Seller, the Issuer or
the Indenture Trustee shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to the PUCT addressed
to:  to 1701 N. Congress Avenue, P.O. Box 13326, Austin, Texas
78711-3326, Attention of Executive Director, telephone: (512) 936-7040,
facsimile:  (512) 936-7036 and General Counsel, telephone: (512)
936-7261, Facsimile: (512) 936-7268.

     

    (b) Notices
required to be given to the Rating Agencies by the Issuer or the Indenture
Trustee shall be in writing, facsimile, personally delivered or mailed by
certified mail, or email in the case of Standard & Poor’s, return receipt
requested to:

     

    (i) in the case of Moody’s,
to:  Moody’s Investors Service, Inc., ABS Monitoring Department,
7 World Trade Center at 250 Greenwich Street, New York, New York 10007,
Telephone:  (212) 553-3686, Facsimile
(212) 553-0573,

     

    (ii) in the case of Standard &
Poor’s, to:  Standard & Poor’s Ratings Services, a Standard
& Poor’s Financial Services LLC business, 55 Water Street, 41st Floor, New
York, New York 10041, Attention:  Structured Credit Surveillance
Group, 41st Floor, Telephone:  (212) 438-2000,
Facsimile:  (212) 438-2665; monthly reports should be sent to
servicerreports@sandp.com,

     

    (iii) in the case of Fitch, to Fitch Ratings,
One State Street Plaza, New York, New York 10004, Attention:  ABS
Surveillance, Telephone:  (212) 908-0500,
Facsimile:  (212) 908-0355, and

     

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

     

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

     

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

     

    In case,
by reason of the suspension of regular mail service as a result of a strike,
work stoppage or similar activity, it shall be impractical to mail notice of any
event of Holders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving
of such notice.

     

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

     

    SECTION
10.06. [Intentionally
Omitted.]

     

    SECTION
10.07. Conflict with Trust
Indenture Act.  If any provision hereof limits, qualifies or
conflicts with another provision hereof that is required to be included in this
Indenture by any of the provisions of the TIA, such required provision shall
control.

     

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

     

    SECTION
10.08. Effect of Headings and Table
of Contents.  The Article and Section headings herein and the
Table of Contents are for convenience only and shall not affect the construction
hereof.

     

    SECTION
10.09. Successors and
Assigns.  All covenants and agreements in this Indenture and
the Transition Bonds by the Issuer shall bind its successors and assigns,
whether so expressed or not.  All agreements of the Indenture Trustee
in this Indenture shall bind its successors.

     

    SECTION
10.10. Severability.  Any
provision in this Indenture or in the Transition Bonds 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 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
10.11. Benefits of
Indenture.  Nothing in this Indenture or in the Transition
Bonds, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Holders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Transition Bond Collateral, any benefit or any legal or equitable right,
remedy or claim under this Indenture.

     

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

     

    SECTION
10.13. GOVERNING
LAW.  THIS INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS; PROVIDED THAT THE
CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED HEREUNDER IN TRANSITION
PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE AND THE HOLDERS
WITH RESPECT TO SUCH TRANSITION PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.

     

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

     

    SECTION
10.15. Recording of
Indenture.  If this Indenture is subject to recording in any
appropriate public recording offices, such recording is to be effected by the
Issuer and at its expense accompanied by an Opinion of Counsel at the Issuer’s
cost and expense (which may be counsel to the Indenture Trustee or any other
counsel reasonably acceptable to the Indenture Trustee or, if requested by the
Indenture Trustee, Independent counsel of the Issuer) to the effect that such
recording is necessary either for the protection of the Holders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.

     

    SECTION
10.16. Issuer
Obligation.  No recourse may be taken, directly or indirectly,
with respect to the obligations of the Issuer or the Indenture Trustee on the
Transition Bonds or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Indenture
Trustee or the Managers in their respective individual capacities, (ii) any
owner of a membership interest in the Issuer (including ETI) or (iii) any
shareholder, partner, owner, beneficiary, agent, officer, or employee of the
Indenture Trustee, the Managers or any owner of a membership interest in the
Issuer (including ETI) in its respective individual capacity, or of any
successor or assign of any of them in their respective individual or corporate
capacities, except as any such Person may have expressly agreed in writing (it
being understood that none of the Indenture Trustee, the Managers or ETI has any
such obligations in their respective individual or corporate
capacities).

     

    SECTION
10.17. No Recourse to
Issuer.  Notwithstanding any provision of this Indenture or the
Series Supplement to the contrary, Holders shall have no recourse against the
Issuer, but shall look only to the Transition Bond Collateral with respect to
any amounts due to the Holders hereunder and under the Transition
Bonds.

     

    SECTION
10.18. Basic
Documents.  The Indenture Trustee is hereby authorized to
execute and deliver the Servicing Agreement and to execute and deliver any other
Basic Document which it is requested to acknowledge.

     

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

     

    SECTION
10.20. Securities
Intermediary.  The Securities Intermediary, in acting under
this Indenture, is entitled to all rights, benefits, protections, immunities and
indemnities accorded The Bank of New York Mellon, a New York banking
corporation, in its capacity as Indenture Trustee under this
Indenture.

     

    

    [SIGNATURE PAGE FOLLOWS]

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

     

    
      	 
      	
               

              ENTERGY
      TEXAS RESTORATION FUNDING, LLC, as Issuer

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:
      /s/ Steven C. McNeal

              Name:  Steven
      C. McNeal

              Title:  Vice
      President and Treasurer

            
	 
      	 
      
	 
      	 
      
	 
      	
              THE
      BANK OF NEW YORK MELLON, a New York banking corporation, as Indenture
      Trustee and as Securities Intermediary

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:  /s/ Jared Fischer

              Name:  Jared
      Fischer

              Title:  Senior
      Associate

            
	 
      	 
      
	 
      	 
      

    

    

    STATE OF
LOUISIANA       )

                                                      
) ss:

    COUNTY OF
ORLEANS       )

     

    On the
28th day of October 2009, before me, Jennifer Favalora, a Notary Public in and
for said county and state, personally appeared Steven C. McNeal, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person and officer whose name is subscribed to the within instrument and
acknowledged to me that such person executed the same in such person’s
authorized capacity, and that by the signature on the instrument The Bank of New
York Mellon, a New York banking association, and the entity upon whose behalf
the person acted, executed this instrument.

     

    WITNESS
my hand and official seal.

     

     

    /s/ Jennifer
Favalora

    Jennifer
B. Favalora

                                                                                                   
Notary Public (ID# 57639)

    Commission
Issued For Life

     

    

    STATE OF
NEW
YORK              )

                                                            
) ss:

    COUNTY OF
NEW
YORK          )

     

    On the
3rd day
of November, 2009, before me, Jonathan Kaplan, a Notary Public in and for said
county and state, personally appeared Jared Fischer, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his capacity as a manager of Entergy Texas Restoration
Funding, LLC, and that by his signature on the instrument Entergy Texas
Restoration Funding, LLC, a Delaware limited liability company and the
entity upon whose behalf such person acted, executed this
instrument.

     

    WITNESS
my hand and official seal.

     

     

    /s/ Jonathan
Kaplan

    Jonathan
Kaplan

    Notary
Public (No. 01KA6178956)

    My
commission expires:  12/17/2011

     

    

    EXHIBIT A

     

    FORM OF TRANSITION
BOND

     

    UNLESS
AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE
REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.  UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

     

    REGISTERED
No. _____ $________

     

    SEE
REVERSE FOR CERTAIN DEFINITIONS

     

    CUSIP
NO.

     

    THE
PRINCIPAL OF THIS TRANCHE [ - ] TRANSITION BOND (“THIS
TRANCHE [ - ] TRANSITION BOND”)
WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN.  ACCORDINGLY, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS TRANCHE [ - ] TRANSITION BOND AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.  THE HOLDER OF
THIS TRANSITION BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK
ONLY TO THE TRANSITION BOND COLLATERAL, AS DESCRIBED IN THE INDENTURE AND THE
SERIES SUPPLEMENT REFERRED TO ON THE REVERSE HEREOF, FOR PAYMENT OF ANY
AMOUNTS DUE HEREUNDER.  ALL OBLIGATIONS OF THE ISSUER OF THIS TRANCHE
[ - ] TRANSITION BOND UNDER THE
TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL
HEREOF OR AS OTHERWISE PROVIDED IN ARTICLE IV OF
THE INDENTURE.  THE HOLDER OF THIS TRANCHE [ - ] TRANSITION BOND HEREBY
COVENANTS AND AGREES THAT PRIOR TO THE DATE WHICH IS ONE (1) YEAR AND ONE
(1) DAY AFTER THE PAYMENT IN FULL OF THE TRANCHE [ - ] TRANSITION BONDS, IT WILL NOT
INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER
ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION
PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR
ANY STATE OF THE UNITED STATES.  NOTHING IN THIS PARAGRAPH SHALL
PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO
TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING
VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT
TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO
THE ISSUER WHICH IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN
SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH
HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE
OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW, OR
(B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION WHICH IS NOT AN
INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE
ISSUER OR ANY OF ITS PROPERTIES.

     

    ENTERGY
TEXAS RESTORATION FUNDING, LLC TRANSITION BONDS,

     

    Tranche
[ - ].

     

    
      	
              
                INTEREST

                RATE

              

            	
              
                ORIGINAL
      PRINCIPAL

                AMOUNT

              

            	
              
                FINAL
      MATURITY

                DATE

              

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

    

    Entergy
Texas Restoration Funding, LLC, a limited liability company created under
the laws of the State of Delaware (herein referred to as the “Issuer”), for value
received, hereby promises to pay to [  ], or registered assigns, the
Original Principal Amount shown above [in semi-annual
installments] on the
Payment Dates and in the amounts specified on the reverse hereof or, if less,
the amounts determined pursuant to Section 8.02 of
the Indenture, in each year, commencing on the date determined as provided on
the reverse hereof and ending on or before the Final Maturity Date shown above
and to pay interest, at the Interest Rate shown above, on each __________ and
__________ or if any such day is not a Business Day, the next succeeding
Business Day, commencing on [ ] and continuing until the
earlier of the payment in full of the principal hereof and the Final Maturity
Date (each a “Payment
Date”), on the principal amount of this Tranche [ - ] Transition Bond (hereinafter
referred to as this “Tranche [ - ] Transition
Bond”).  Interest on this Tranche [ - ] Transition Bond will accrue
for each Payment Date from the most recent Payment Date on which interest has
been paid to but excluding such Payment Date or, if no interest has yet been
paid, from the date of issuance.  Interest will be computed on the
basis of [specify method
of computation].  Such principal of
and interest on this Tranche [ - ] Transition Bond shall be paid
in the manner specified on the reverse hereof.

     

    The
principal of and interest on this Tranche [ - ] Transition Bond are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts.  All payments
made by the Issuer with respect to this Tranche [ - ] Transition Bond shall be
applied first to interest due and payable on this Tranche [ - ] Transition Bond as provided
above and then to the unpaid principal of and premium, if any, on this Tranche
[ - ] Transition Bond, all in the
manner set forth in the Indenture.

     

    Reference
is made to the further provisions of this Tranche [ - ] Transition Bond set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Tranche [ - ] Transition Bond.

     

    Unless
the certificate of authentication hereon has been executed by the Indenture
Trustee whose name appears below by manual signature, this Tranche [ - ] Transition Bond shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.

     

    IN
WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or
in facsimile, by its Responsible Officer.

     

    

     

    
      	
              Date:

            	
              ENTERGY
      TEXAS RESTORATION FUNDING, LLC

            
	 
      	 
      
	 
      	
              By:  _________________________________

              Name:

              Title:

               

            

    

    
 

    
 

    

    INDENTURE
TRUSTEE’S CERTIFICATE OF AUTHENTICATION

     

    Dated:  [___________,
_____]

     

    This is
one of the Tranche [ -
] Transition Bonds,
designated above and referred to in the within-mentioned Indenture.

     

    
      	 
      	
              THE
      BANK OF NEW YORK MELLON, as Indenture Trustee

            
	 
      	 
      
	 
      	
              By:  _________________________________

              Name:

              Title:

               

            

    

    

    REVERSE
OF TRANSITION BOND* 1

     

    This
Tranche [ - ] Transition Bond is one of a
duly authorized issue of Transition Bonds of the Issuer (herein called the
“Transition
Bonds”), issued or which are issuable in one or more Tranches, and the
Transition Bonds consists of [  ] Tranches, including this
Tranche [ - ] Transition Bond (herein called
the “Tranche
[ - ] Transition Bonds”),
all issued and to be issued under that certain Indenture dated as of November 6,
2009, (as supplemented by the Series Supplement (as defined below), the “Indenture”), between
the Issuer and The Bank of New York Mellon, a New York banking corporation, in
its capacity as indenture trustee (the “Indenture Trustee”,
which term includes any successor indenture trustee under the Indenture) and in
its separate capacity as securities intermediary (the “Securities Intermediary”,
which term includes any successor securities intermediary under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights and obligations thereunder of the
Issuer, the Indenture Trustee and the Holders of the Transition
Bonds.  For purposes herein, “Series Supplement” means that certain
Series Supplement dated as of November 6, 2009 between the Issuer and the
Indenture Trustee.  All terms used in this Tranche [ - ] Transition Bond that are
defined in the Indenture, as amended, restated, supplemented or otherwise
modified from time to time, shall have the meanings assigned to such terms in
the Indenture.

     

    The
Tranche [ - ] Transition Bonds and the other
Tranches of the Transition Bonds (all of such Tranches being referred to herein
as the “Transition
Bonds”) are and will be equally and ratably secured by the Transition
Bond Collateral pledged as security therefor as provided in the
Indenture.

     

    The
principal of this Tranche [ - ] Transition Bond shall be
payable on each Payment Date only to the extent that amounts in the Collection
Account are available therefor, and only until the outstanding principal balance
thereof on the preceding Payment Date (after giving effect to all payments of
principal, if any, made on the preceding Payment Date) has been reduced to the
principal balance specified in the Expected Amortization Schedule which is
attached to the Series Supplement as Schedule A, unless payable earlier
because an Event of Default shall have occurred and be continuing and the
Indenture Trustee or the Bondholders representing not less than a majority of
the Outstanding Amount of the Transition Bonds have declared such Transition
Bonds to be immediately due and payable in accordance with Section 5.02 of
the Indenture (unless such declaration shall have been rescinded and annulled in
accordance with Section 5.02 of
the Indenture).  However, actual principal payments may be made in
lesser than expected amounts and at later than expected times as determined
pursuant to Section 8.02 of
the Indenture.  The entire unpaid principal amount of this Tranche
[ - ] Transition Bond shall be due
and payable on the Final Maturity Date hereof.  Notwithstanding the
foregoing, the entire unpaid principal amount of the Transition Bonds shall be
due and payable, if not then previously paid, on the date on which an Event of
Default shall have occurred and be continuing and the Indenture Trustee or the
Holders of the Transition Bonds representing not less than a majority of the
Outstanding Amount of the Transition Bonds have declared the Transition Bonds to
be immediately due and payable in the manner provided in Section 5.02 of
the Indenture (unless such declaration shall have been rescinded and annulled in
accordance with Section 5.02 of
the Indenture).  All principal payments on the Tranche [ - ] Transition Bonds shall be made
pro rata to the Tranche [ - ] Holders entitled thereto based
on the respective principal amounts of the Tranche [ - ] Transition Bonds held by
them.

     

    Payments
of interest on this Tranche [ - ] Transition Bond due and
payable on each Payment Date, together with the installment of principal or
premium, if any, shall be made by check mailed first-class, postage prepaid, to
the Person whose name appears as the Registered Holder of this Tranche [ - ] Transition Bond (or one or
more Predecessor Transition Bonds) on the Transition Bond Register as of the
close of business on the Record Date or in such other manner as may be provided
in the Indenture or the Series Supplement, except that (i) upon application
to the Indenture Trustee by any Holder owning a Global Transition Bond
evidencing this Tranche [
- ] Transition Bond in the
principal amount of $10,000,000 or more not later than the applicable Record
Date payment will be made by wire transfer to an account maintained by such
Holder and (ii) if this Tranche [ - ] Transition Bond is held in
Book-Entry Form, payments will be made by wire transfer in immediately available
funds to the account designated by the Holder of the applicable Global
Transition Bond evidencing this Tranche [ - ] Transition Bond unless and
until such Global Transition Bond is exchanged for Definitive Transition Bonds
(in which event payments shall be made as provided above) and except for the
final installment of principal and premium, if any, payable with respect to this
Tranche [ - ] Transition Bond on a Payment
Date which shall be payable as provided below.  Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Transition Bond Register as of the applicable Record Date without
requiring that this Tranche [ - ] Transition Bond be submitted
for notation of payment.  Any reduction in the principal amount of
this Tranche [ - ] Transition Bond (or any one or
more Predecessor Transition Bonds) effected by any payments made on any Payment
Date shall be binding upon all future Holders of this Tranche [ - ] Transition Bond and of any
Transition Bond issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon.  If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Tranche [ - ] Transition Bond on a Payment
Date, then the Indenture Trustee, in the name of and on behalf of the Issuer,
will notify the Person who was the Registered Holder hereof as of the Record
Date preceding such Payment Date by notice mailed no later than five
(5) days prior to such final Payment Date and shall specify that such final
installment will be payable only upon presentation and surrender of this Tranche
[ - ] Transition Bond and shall
specify the place where this Tranche [ - ] Transition Bond may be
presented and surrendered for payment of such installment.

     

    The
Issuer shall pay interest on overdue installments of interest at the Transition
Bond Interest Rate to the extent lawful.

     

    This
Transition Bond is a “transition bond” as such term is defined in the
Securitization Law.  Principal and interest due and payable on this
Transition Bond are payable from and secured primarily by Transition Property
created and established by a Financing Order obtained from the Public Utility
Commission of Texas pursuant to the Securitization Law.  Transition
Property consists of the rights and interests of the Seller in the Financing
Order, including the right to impose, collect and recover certain charges
(defined in the Securitization Law as “Transition Charges”)
to be included in regular electric utility bills of existing and future electric
service customers within the service territory of Entergy Texas, Inc., a
Texas electric utility, or its successors or assigns, as more fully described in
the Financing Order.

     

    The
Securitization Law provides that:  “Transition bonds are not a debt or
obligation of the state and are not a charge on its full faith and credit or
taxing power.  The state pledges, however, for the benefit and
protection of financing parties and the electric utility, that it will not take
or permit any action that would impair the value of transition property, or,
except as permitted by Section 39.307, reduce, alter, or impair the
transition charges to be imposed, collected, and remitted to financing parties,
until the principal, interest and premium, and any other charges incurred and
contracts to be performed in connection with the related transition bonds have
been paid and performed in full.  Any party issuing transition bonds
is authorized to include this pledge in any documentation relating to those
bonds.”

     

    As a
result of the foregoing pledge, the State of Texas may not, except as provided
in the succeeding sentence, in any way reduce, alter or impair the Transition
Charges until the Transition Bonds, together with interest thereon, are fully
paid and discharged.  Notwithstanding the immediately preceding
sentence, the State of Texas would be allowed to effect a temporary impairment
of the Holders’ rights if it could be shown that such impairment was necessary
to advance a significant and legitimate public purpose.

     

    The
Issuer and ETI hereby acknowledge that the purchase of this Transition Bond by
the Holder hereof or the purchase of any beneficial interest herein by any
Person are made in reliance on the foregoing pledge.

     

    As
provided in the Indenture and subject to certain limitations set forth therein,
the transfer of this Tranche [  -  ] Transition Bond may be
registered on the Transition Bond Register upon surrender of this Tranche [  -  ] Transition Bond for
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, duly endorsed by, or accompanied by (a) a
written instrument of transfer in form satisfactory to the Indenture Trustee
duly executed by the Holder hereof or such Holder’s attorney duly authorized in
writing, with such signature guaranteed by an institution which is a member of
one of the following recognized Signature Guaranty
Programs:  (i) The Securities Transfer Agent Medallion Program
(STAMP); (ii)The New York Stock Exchange Medallion Program (MSP); (iii) The
Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee
program acceptable to the Indenture Trustee, and (b) such other documents
as the Indenture Trustee may require, and thereupon one or more new Tranche
[  -  ] Transition Bonds of Minimum
Denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No service charge will be
charged for any registration of transfer or exchange of this Tranche [  -  ] Transition Bond, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange, other than exchanges pursuant to Sections 2.04 or
2.06 of the
Indenture not involving any transfer.

     

    Each
Transition Bond holder, by acceptance of a Transition Bond, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer or the Indenture Trustee on the Transition Bonds or
under the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Managers in their
respective individual capacities, (ii) any owner of a membership interest
in the Issuer (including ETI) or (iii) any shareholder, partner, owner,
beneficiary, agent, officer or employee of the Indenture Trustee, the Managers
or any owner of a membership interest in the Issuer (including ETI) in its
respective individual or corporate capacities, or of any successor or assign of
any of them in their individual or corporate capacities, except as any such
Person may have expressly agreed in writing (it being understood that none of
the Indenture Trustee, the Managers or ETI has any such obligations in their
respective individual or corporate capacities).

     

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

     

    The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Issuer and the
rights of the Holders of the Transition Bonds under the Indenture at any time by
the Issuer with the consent of the Bondholders representing not less than a
majority of the Outstanding Amount of all Transition Bonds at the time
outstanding of each Tranche to be affected.  The Indenture also
contains provisions permitting the Bondholders representing specified
percentages of the Outstanding Amount of the Transition Bonds, on behalf of the
Holders of all the Transition Bonds, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences.  Any such consent or waiver by the
Holder of this Tranche [ -
] Transition Bond (or any
one of more Predecessor Transition Bonds) shall be conclusive and binding upon
such Holder and upon all future Holders of this Tranche [ - ] Transition Bond and of any
Transition Bond issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof whether or not notation of such consent or waiver is
made upon this Tranche [ -
] Transition
Bond.  The Indenture also permits the Indenture Trustee to amend or
waive certain terms and conditions set forth in the Indenture without the
consent of Holders of the Transition Bonds issued thereunder.

     

    The
Indenture contains provisions for defeasance at any time of (a) the entire
indebtedness of the Issuer on this Tranche [ - ] Transition Bond and
(b) certain restrictive covenants and the related Events of Default, upon
compliance by the Issuer with certain conditions set forth herein, which
provisions apply to this Tranche [ - ] Transition Bond.

     

    The term
“Issuer” as used in this Tranche [ - ] Transition Bond includes any
successor to the Issuer under the Indenture.

     

    The
Issuer is permitted by the Indenture, under certain circumstances, to merge or
consolidate, subject to the rights of the Indenture Trustee and the Bondholders
under the Indenture.

     

    The
Tranche [ - ] Transition Bonds are issuable
only in registered form in denominations as provided in the Indenture and the
Series Supplement subject to certain limitations therein set forth.

     

    THIS
TRANCHE [ - ] TRANSITION BOND, THE INDENTURE
AND THE SERIES SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER
THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS
9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS; PROVIDED
THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE
INDENTURE IN TRANSITION PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE
TRUSTEE AND THE HOLDERS WITH RESPECT TO SUCH TRANSITION PROPERTY, SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

     

    No
reference herein to the Indenture and no provision of this Tranche [ - ] Transition Bond or of the
Indenture shall alter or impair the obligation, which is absolute and
unconditional, to pay the principal of and interest on this Tranche [ - ] Transition Bond at the times,
place, and rate, and in the coin or currency herein prescribed.

     

    The
Holder of this Tranche [ -
] Transition Bond by the
acceptance hereof agrees that, notwithstanding any provision of the Indenture or
the Series Supplement to the contrary, the Holder shall have no recourse against
the Issuer, but shall look only to the Transition Bond Collateral, with respect
to any amounts due to the Holder under this Tranche [ - ] Transition Bond.

     

    The
Issuer and the Indenture Trustee, by entering into the Indenture, and the
Holders and any Persons holding a beneficial interest in any Tranche [ - ] Transition Bond, by acquiring
any Tranche [ - ] Transition Bond or interest
therein, (i) express their intention that, solely for the purpose of
federal taxes and, to the extent consistent with applicable state, local and
other tax law, solely for the purpose of state, local and other taxes, the
Tranche [ - ] Transition Bonds qualify under
applicable tax law as indebtedness of the sole owner of the Issuer secured by
the Transition Bond Collateral and (ii) solely for purposes of federal
taxes and, to the extent consistent with applicable state, local and other tax
law, solely for purposes of state, local and other taxes, so long as any of the
Tranche [ - ] Transition Bonds are
outstanding, agree to treat the Tranche [ - ] Transition Bonds as
indebtedness of the sole owner of the Issuer secured by the Transition Bond
Collateral unless otherwise required by appropriate taxing
authorities.

     

    

      

    

     

      *           The
form of the reverse of a Transition Bond is substantially as follows, unless
otherwise specified in the Series Supplement.

       

    

    ABBREVIATIONS

     

    The
following abbreviations, when used in the inscription of the face of this
Tranche [ - ] Transition Bond, shall be
construed as though they were written out in full according to applicable laws
or regulations.

     

    
      	
              TEN
      COM

            	
              as
      tenants in common

               

            
	
              TEN
      ENT

            	
              as
      tenants by the entireties

               

            
	
              JT
      TEN

            	
              as
      joint tenants with right of survivorship and not as tenants

              in
      common

               

            
	
              UNIF
      GIFT MIN ACT

            	
              ___________________
      Custodian ______________________

              (Custodian)                                                      (minor)

            
	 
      	
              Under
      Uniform Gifts to Minor Act (____________________)

              (State)

               

            

    

    Additional
abbreviations may also be used though not in the above list.

     

    ASSIGNMENT

     

    Social
Security or taxpayer I.D.  or other identifying number of assignee
____________

     

    FOR VALUE
RECEIVED, the undersigned2 hereby sells, assigns and transfers
unto

     

    (name and
address of assignee)

     

    the
within Tranche [ - ] Transition Bond and all rights
thereunder, and hereby irrevocably constitutes and appoints ________________,
attorney, to transfer said Tranche [ - ] Transition Bond on the books
kept for registration thereof, with full power of substitution in the
premises.

     

    
      	
              Dated:  [___________,
      _____]

            	
              ______________________________________

              Signature
      Guaranteed:

               

            
	 
      	
               

              ______________________________________

            

    

    

      

    

     

      2           TRANSITION
BOND:  The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Tranche
[  -  ] Transition Bond in every particular, without
alteration, enlargement or any change whatsoever.

       

      NOTE:  Signature(s) must be
guaranteed by an institution which is a member of one of the following
recognized Signature Guaranty Programs:  (i) The Securities Transfer
Agent Medallion Program (STAMP), (ii) The New York Stock Exchange Medallion
Program (MSP), (iii) the Stock Exchange Medallion Program (SEMP) or (iv) such
other guarantee program acceptable to the Indenture Trustee.

       

    

    EXHIBIT B

     

    FORM OF
SERIES SUPPLEMENT

     

    This
SERIES SUPPLEMENT dated as of [__________, 2009] (this “Supplement”), by and
between ENTERGY TEXAS RESTORATION FUNDING, LLC, a limited liability company
created under the laws of the State of Delaware (the “Issuer”), and THE
BANK OF NEW YORK MELLON, a New York banking corporation (“BNYM”), in its
capacity as indenture trustee (the “Indenture Trustee”)
for the benefit of the Secured Parties under the Indenture dated as of November
6, 2009 by and between the Issuer and BNYM, in its capacity as Indenture Trustee
and in its separate capacity as securities intermediary (the “Indenture”).

     

    PRELIMINARY
STATEMENT

     

    Section 9.01 of
the Indenture provides, among other things, that the Issuer and the Indenture
Trustee may at any time enter into an indenture supplemental to the Indenture
for the purposes of authorizing the issuance by the Issuer of the Transition
Bonds and specifying the terms thereof.  The Issuer has duly
authorized the creation of the Transition Bonds with an initial aggregate
principal amount of [$_____] to be known as Entergy Texas Restoration
Funding, LLC Transition Bonds (the “Transition Bonds”),
and the Issuer and the Indenture Trustee are executing and delivering this
Supplement in order to provide for the Transition Bonds.

     

    All terms
used in this Supplement that are defined in the Indenture, either directly or by
reference therein, have the meanings assigned to them therein, except to the
extent such terms are defined or modified in this Supplement or the context
clearly requires otherwise.  In the event that any term or provision
contained herein shall conflict with or be inconsistent with any term or
provision contained in the Indenture, the terms and provisions of this
Supplement shall govern.

     

    GRANTING
CLAUSE

     

    With
respect to the Transition Bonds, the Issuer hereby Grants to the Indenture
Trustee, as Indenture Trustee for the benefit of the Secured Parties of the
Transition Bonds, all of the Issuer’s right, title and interest (whether now
owned or hereafter acquired or arising) in and to (a) the Transition
Property created under and pursuant to the Financing Order, and transferred by
the Seller to the Issuer pursuant to the Sale Agreement (including, to the
fullest extent permitted by law, the right to impose, collect and receive
Transition Charges, all revenues, collections, claims, rights, payments, money
or proceeds of or arising from the Transition Charges authorized in the
Financing Order and any Tariffs filed pursuant thereto and any contractual
rights to collect such Transition Charges from Customers and REPs), (b) all
Transition Charges related to such Transition Property, (c) the Sale
Agreement and each Bill of Sale executed in connection therewith and all
property and interests in property transferred under the Sale Agreement and such
Bills of Sale with respect to such Transition Property and the Transition Bonds,
(d) the Servicing Agreement, the Administration Agreement and any
subservicing, agency, intercreditor, administration or collection agreements
executed in connection therewith, to the extent related to the foregoing
Transition Property and the Transition Bonds, (e) the Collection Account,
all subaccounts thereof and all amounts of cash, instruments, investment
property or other assets on deposit therein or credited thereto from time to
time and all financial assets and securities entitlements carried therein or
credited thereto, (f) all rights to compel the Servicer to file for and
obtain adjustments to the Transition Charges in accordance with
Section 36.402 and Section 39.307 of the Securitization Law, the
Financing Order or any Tariff filed in connection therewith, (g) all
deposits, guarantees, surety bonds, letters of credit and other forms of credit
support provided by or on behalf of REPs pursuant to the Financing Order or such
Tariff, including investment earnings thereon and all amounts on deposit in the
REP Deposit Accounts, (h) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing, whether such
claims, demands, causes and choses in action constitute Transition Property,
accounts, general intangibles, instruments, contract rights, chattel paper or
proceeds of such items or any other form of property, (i) all accounts,
chattel paper, deposit accounts, documents, general intangibles, goods,
instruments, investment property, letters of credit, letters-of-credit rights,
money, commercial tort claims and supporting obligations related to the
foregoing, and (j) all payments on or under, and all proceeds in respect
of, any or all of the foregoing; it being understood that the
following do not constitute Transition Bond
Collateral:  (i) cash that has been released pursuant to
Section 8.02(e)(x)
of the Indenture and, following retirement of all Outstanding Transition Bonds,
cash that has been released pursuant to Section 8.02(e)(xii)
of the Indenture and (ii) amounts deposited with the Issuer on the Closing
Date, for payment of costs of issuance with respect to the Transition Bonds
(together with any interest earnings thereon), it being understood that such
amounts described in clauses (i) and
(ii) above
shall not be subject to Section 3.17 of
the Indenture.

     

    The
foregoing Grant is made in trust to secure the payment of principal of and
premium, if any, interest on, and any other amounts owing in respect of, the
Transition Bonds and all fees, expenses, indemnity amounts, counsel fees and
other amounts due and payable to the Indenture Trustee (collectively, the “Secured Obligations”)
equally and ratably without prejudice, priority or distinction, except as
expressly provided in the Indenture, to secure compliance with the provisions of
the Indenture with respect to the Transition Bonds, all as provided in the
Indenture and to secure the performance by the Issuer of all of its obligations
under the Indenture.  The Indenture and this Series Supplement
constitutes a security agreement within the meaning of the Securitization Law
and under the UCC to the extent that the provisions of the UCC are applicable
hereto.

     

    The
Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the
Transition Bonds, acknowledges such Grant and accepts the trusts under this
Supplement and the Indenture in accordance with the provisions of this
Supplement and the Indenture.

     

    SECTION 1.  Designation.  The
Transition Bonds shall be designated generally as the Transition Bonds and
further denominated as Tranches [ ] through [ ].

     

    SECTION 2.  Initial Principal Amount;
Transition Bond Interest Rate; Scheduled Payment Date; Final Maturity
Date.  The Transition Bonds of each Tranche shall have the
initial principal amount, bear interest at the rates per annum and shall have
the Scheduled Payment Dates and the Final Maturity Dates set forth
below:

     

    
      	
              Tranche

            	
              Initial

              Principal

              Amount

            	
              Transition
      Bond

              Interest

              Rate

            	
              Scheduled

              Payment

              Date

            	
              Final

              Maturity

              Date

            

    

    

    The
Transition Bond Interest Rate shall be computed on the basis of a 360-day year
of twelve 30-day months.

     

    SECTION 3.  Authentication Date; Payment
Dates; Expected Amortization Schedule for Principal; Periodic Interest; No
Premium; Other Terms.

     

    (a)           Authentication
Date.  The Transition Bonds that are authenticated and
delivered by the Indenture Trustee to or upon the order of the Issuer on [  ] (the “Closing Date”) shall
have as their date of authentication [   ].

     

    (b)           Payment
Dates.  The Payment Dates for the Transition Bonds are
__________ and __________ of each year or, if any such date is not a Business
Day, the next succeeding Business Day, commencing on [  ] and continuing until the
earlier of repayment of the Tranche [  ] Transition Bonds in full and
the Final Maturity Date for the Tranche [  ] Transition Bonds.

     

    (c)           Expected Amortization
Schedule for Principal.  Unless an Event of Default shall have
occurred and be continuing on each Payment Date, the Indenture Trustee shall
distribute to the Holders of record as of the related Record Date amounts
payable pursuant to Section 8.02(e)
of the Indenture as principal, in the following order and
priority:  [(1)
to the holders of the Tranche [  ] Transition Bonds, until the
Outstanding Amount of such Tranche of Transition Bonds thereof has been reduced
to zero; (2) to the holders of the Tranche [  ] Transition Bonds, until the
Outstanding Amount of such Tranche of Transition Bonds thereof has been reduced
to zero; and (3) to the holders of the Tranche [  ] Transition Bonds, until the
Outstanding Amount of such Tranche of Transition Bonds thereof has been reduced
to zero; (4)] provided, however, that in no
event shall a principal payment pursuant to this Section 3(c) on
any Tranche on a Payment Date be greater than the amount necessary to reduce the
Outstanding Amount of such Tranche of Transition Bonds to the amount specified
in the Expected Amortization Schedule which is attached as Schedule A
hereto for such Tranche and Payment Date.

     

    (d)           Periodic
Interest.  Periodic Interest will be payable on each Tranche of
the Transition Bonds on each Payment Date in an amount equal to [one-half] of the product of (i) the
applicable Transition Bond Interest Rate and (ii) the Outstanding Amount of
the related Tranche of Transition Bonds as of the close of business on the
preceding Payment Date after giving effect to all payments of principal made to
the Holders of the related Tranche of Transition Bonds on such preceding Payment
Date; provided,
however, that
with respect to the Initial Payment Date, or, if no payment has yet been made,
interest on the outstanding principal balance will accrue from and including the
Closing Date to, but excluding, the following Payment Date.

     

    [(e)           Book-Entry Transition
Bonds.  The Transition Bonds shall [not] be Book-Entry Transition Bonds
and the applicable provisions of Section 2.11 of
the Indenture shall [not] apply to such Transition
Bonds.]

     

    (f)           Waterfall
Cap.  The amount payable with respect to the Transition Bonds
pursuant to Section 8.02(e)(i)
of the Indenture shall not exceed $1,000,000 annually.

     

    SECTION 4.  Minimum
Denominations.  The Transition Bonds shall be issuable in the
Minimum Denomination and integral multiples thereof.

     

    SECTION 5.  Certain Defined
Terms.  Article I of the
Indenture provides that the meanings of certain defined terms used in the
Indenture shall, when applied to the Transition Bonds, be as defined in Appendix A to
the Indenture.  Additionally, Article II of
the Indenture provides that certain terms will have the meanings specified in
this Supplement.  With respect to the Transition Bonds, the following
definitions shall apply:

     

    “Initial Payment Date”
shall mean the first Payment Date for a Tranche of the Transition Bonds
specified in the Expected Amortization Schedule which is attached as Schedule A
hereto.

     

    “Minimum Denomination”
shall mean $100,000.

     

    “Payment Date” has the
meaning set forth in Section 3(b) of
this Supplement.

     

    “Periodic Interest”
has the meaning set forth in Section 3(d) of
this Supplement.

     

    “Transition Bond Interest
Rate” has the meaning set forth in Section 2 of
this Supplement.

     

    SECTION 6.  Delivery and Payment for the
Transition Bonds; Form of the Transition Bonds.  The Indenture
Trustee shall deliver the Transition Bonds to the Issuer when authenticated in
accordance with Section 2.03 of
the Indenture.  The Transition Bonds of each Tranche shall be in the
form of Exhibits A-1
through A-3 hereto.

     

    SECTION 7.  Ratification of
Agreement.  As supplemented by this Supplement, the Indenture
is in all respects ratified and confirmed and the Indenture, as so supplemented
by this Supplement, shall be read, taken, and construed as one and the same
instrument.  This Supplement amends, modifies and supplemented the
Indenture only in so far as it relates to the Transition Bonds.

     

    SECTION 8.  Counterparts.  This
Supplement may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts shall
together constitute but one and the same instrument.

     

    SECTION 9.  GOVERNING
LAW.  THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH
9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED
THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE
INDENTURE IN TRANSITION PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE
TRUSTEE AND THE HOLDERS WITH RESPECT TO SUCH TRANSITION PROPERTY, SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

     

    SECTION 10.  Issuer
Obligation.  No recourse may be taken directly or indirectly,
by the Holders with respect to the obligations of the Issuer on the Transition
Bonds, under the Indenture or under this Supplement or any certificate or other
writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Managers in their respective individual capacities,
(ii) any owner of a beneficial interest in the Issuer (including ETI) or
(iii) any shareholder, partner, owner, beneficiary, agent, officer,
director, employee or agent of the Indenture Trustee, the Managers or any owner
of a beneficial interest in the Issuer (including ETI) in its individual
capacity, or of any successor or assign of any of them in their respective
individual or corporate capacities, except as any such Person may have expressly
agreed (it being understood that none of the Indenture Trustee, the Managers and
ETI have any such obligations in their respective individual or corporate
capacities).

     

    SECTION 11.  Application of Transition
Bond Proceeds; Costs of Issuance Account.  The proceeds of the
Transition Bond Proceeds shall be applied to pay the costs of issuing the
Transition Bonds and to purchase the Transition Property, as directed in an
Officer’s Certificate.  The Indenture Trustee shall, pursuant to an
Issuer Order, deposit the amounts directed to be applied to the payment of the
costs of issuance into a segregated trust account (the “Costs of Issuance
Account”).  Amounts in the Costs of Issuance Account shall be applied
from time to time as directed by an Officer’s Certificate, to pay costs of
issuing the Transition Bonds, and, upon payment of all such costs, for deposit
into the General Subaccount and applied as a credit against Transition Charges
as required by the Financing Order.  Pending such application, amounts
in the Costs of Issuance Account may be invested in the same manner and subject
to the same restrictions as amounts in the General Subaccount, provided that any
amount earned, or gains or losses, shall be credited to the Costs of Issuance
Account.

     

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

     

    
      	 
      	
               

              ENTERGY
      TEXAS RESTORATION FUNDING, LLC, as Issuer

               

            
	 
      	
              By:  __________________________________

              Name:

              Title:

               

            
	 
      	 
      
	 
      	 
      
	 
      	
              THE
      BANK OF NEW YORK MELLON, a New York banking corporation, as Indenture
      Trustee

               

            
	 
      	 
      
	 
      	
              By:  __________________________________

              Name:

              Title:

               

            

    

    

    SCHEDULE
A

     

    EXPECTED
AMORTIZATION SCHEDULE

     

    

     

    OUTSTANDING
PRINCIPAL BALANCE OF EACH TRANCHE

     

    

    
      	
              PAYMENT DATE

            	
              TRANCHE

            	
              TRANCHE

            	
              TRANCHE

            
	
              Closing
      Date

            	
              $

            	
              $

            	
              $

            
	
              ________ ___,
      200_

            	 
      	 
      	 
      
	
              ________ ___,
      200_

            	 
      	 
      	 
      
	
              ________ ___,
      200_

            	 
      	 
      	 
      
	
              ________ ___,
      200_

            	 
      	 
      	 
      

    

    

    EXHIBIT C

     

    SERVICING CRITERIA TO BE
ADDRESSED

    BY INDENTURE TRUSTEE IN
ASSESSMENT OF COMPLIANCE

    

    

    
      	
              Reg
      AB Reference

            	
              Servicing
      Criteria

            	
              Applicable
      Indenture Trustee

              Responsibility

            
	 
      	
              General
      Servicing Considerations

            	 
      
	
              1122(d)(1)(i)

            	
              Policies
      and procedures are instituted to monitor any performance or other triggers
      and events of default in accordance with the transaction
      agreements.

            	 
      
	
              1122(d)(1)(ii)

            	
              If
      any material servicing activities are outsourced to third parties,
      policies and procedures are instituted to monitor the third party’s
      performance and compliance with such servicing activities.

            	 
      
	
              1122(d)(1)(iii)

            	
              Any
      requirements in the transaction agreements to maintain a back-up servicer
      for the pool assets are maintained.

            	 
      
	
              1122(d)(1)(iv)

            	
              A
      fidelity bond and errors and omissions policy is in effect on the party
      participating in the servicing function throughout the reporting period in
      the amount of coverage required by and otherwise in accordance with the
      terms of the transaction agreements.

            	 
      
	 
      	
              Cash
      Collection and Administration

            	 
      
	
              1122(d)(2)(i)

            	
              Payments
      on pool assets are deposited into the appropriate custodial bank accounts
      and related bank clearing accounts no more than two (2) business days
      following receipt, or such other number of days specified in the
      transaction agreements.

            	
              X

            
	
              1122(d)(2)(ii)

            	
              Disbursements
      made via wire transfer on behalf of an obligor or to an investor are made
      only by authorized personnel.

            	
              X

            
	
              1122(d)(2)(iii)

            	
              Advances
      of funds or guarantees regarding collections, cash flows or distributions,
      and any interest or other fees charged for such advances, are made,
      reviewed and approved as specified in the transaction
      agreements.

            	 
      
	
              1122(d)(2)(iv)

            	
              The
      related accounts for the transaction, such as cash reserve accounts or
      accounts established as a form of overcollateralization, are separately
      maintained (e.g., with respect to commingling of cash) as set forth in the
      transaction agreements.

            	
              X

            
	
              1122(d)(2)(v)

            	
              Each
      custodial account is maintained at a federally insured depository
      institution as set forth in the transaction agreements.  For
      purposes of this criterion, “federally insured depository institution”
      with respect to a foreign financial institution means a foreign financial
      institution that meets the requirements of Rule 13k-1(b)(1) of the
      Securities Exchange Act.

            	 
      
	
              1122(d)(2)(vi)

            	
              Unissued
      checks are safeguarded so as to prevent unauthorized
    access.

            	 
      
	
              1122(d)(2)(vii)

            	
              Reconciliations
      are prepared on a monthly basis for all asset-backed securities related
      bank accounts, including custodial accounts and related bank clearing
      accounts.  These reconciliations are (A) mathematically
      accurate; (B) prepared within thirty (30) calendar days after
      the bank statement cutoff date, or such other number of days specified in
      the transaction agreements; (C) reviewed and approved by someone
      other than the person who prepared the reconciliation; and
      (D) contain explanations for reconciling items.  These
      reconciling items are resolved within ninety (90) calendar days of
      their original identification, or such other number of days specified in
      the transaction agreements.

            	 
      
	 
      	
              Investor
      Remittances and Reporting

            	 
      
	
              1122(d)(3)(i)

            	
              Reports
      to investors, including those to be filed with the SEC, are maintained in
      accordance with the transaction agreements and applicable SEC
      requirements.  Specifically, such reports (A) are prepared
      in accordance with timeframes and other terms set forth in the transaction
      agreements; (B) provide information calculated in accordance with the
      terms specified in the transaction agreements; (C) are filed with the
      SEC as required by its rules and regulations; and (D) agree with
      investors’ or the trustee’s records as to the total unpaid principal
      balance and number of pool assets serviced by the
servicer.

            	 
      
	
              1122(d)(3)(ii)

            	
              Amounts
      due to investors are allocated and remitted in accordance with timeframes,
      distribution priority and other terms set forth in the transaction
      agreements.

            	
              X

            
	
              1122(d)(3)(iii)

            	
              Disbursements
      made to an investor are posted within two (2) business days to the
      servicer’s investor records, or such other number of days specified in the
      transaction agreements.

            	
              X

            
	
              1122(d)(3)(iv)

            	
              Amounts
      remitted to investors per the investor reports agree with cancelled
      checks, or other form of payment, or custodial bank
      statements.

            	
              X

            
	 
      	
              Pool
      Asset Administration

            	 
      
	
              1122(d)(4)(i)

            	
              Collateral
      or security on pool assets is maintained as required by the transaction
      agreements or related pool asset documents.

            	
              X*

            
	
              1122(d)(4)(ii)

            	
              Pool
      assets and related documents are safeguarded as required by the
      transaction agreements.

            	 
      
	
              1122(d)(4)(iii)

            	
              Any
      additions, removals or substitutions to the asset pool are made, reviewed
      and approved in accordance with any conditions or requirements in the
      transaction agreements.

            	 
      
	
              1122(d)(4)(iv)

            	
              Payments
      on pool assets, including any payoffs, made in accordance with the related
      pool asset documents are posted to the servicer’s obligor records
      maintained no more than two (2) business days after receipt, or such
      other number of days specified in the transaction agreements, and
      allocated to principal, interest or other items (e.g., escrow) in
      accordance with the related pool asset documents.

            	 
      
	
              1122(d)(4)(v)

            	
              The
      servicer’s records regarding the pool assets agree with the servicer’s
      records with respect to an obligor’s unpaid principal
    balance.

            	 
      
	
              1122(d)(4)(vi)

            	
              Changes
      with respect to the terms or status of an obligor’s pool assets (e.g.,
      loan modifications or re-agings) are made, reviewed and approved by
      authorized personnel in accordance with the transaction agreements and
      related pool asset documents.

            	 
      
	
              1122(d)(4)(vii)

            	
              Loss
      mitigation or recovery actions (e.g., forbearance plans, modifications and
      deeds in lieu of foreclosure, foreclosures and repossessions, as
      applicable) are initiated, conducted and concluded in accordance with the
      timeframes or other requirements established by the transaction
      agreements.

            	 
      
	
              1122(d)(4)(viii)

            	
              Records
      documenting collection efforts are maintained during the period a pool
      asset is delinquent in accordance with the transaction
      agreements.  Such records are maintained on at least a monthly
      basis, or such other period specified in the transaction agreements, and
      describe the entity’s activities in monitoring delinquent pool assets
      including, for example, phone calls, letters and payment rescheduling
      plans in cases where delinquency is deemed temporary (e.g., illness or
      unemployment).

            	 
      
	
              1122(d)(4)(ix)

            	
              Adjustments
      to interest rates or rates of return for pool assets with variable rates
      are computed based on the related pool asset documents.

            	 
      
	
              1122(d)(4)(x)

            	
              Regarding
      any funds held in trust for an obligor (such as escrow
      accounts):  (A) such funds are analyzed, in accordance with
      the obligor’s pool asset documents, on at least an annual basis, or such
      other period specified in the transaction agreements; (B) interest on
      such funds is paid, or credited, to obligors in accordance with applicable
      pool asset documents and state laws; and (C) such funds are returned
      to the obligor within thirty (30) calendar days of full repayment of
      the related pool assets, or such other number of days specified in the
      transaction agreements.

            	 
      
	
              1122(d)(4)(xi)

            	
              Payments
      made on behalf of an obligor (such as tax or insurance payments) are made
      on or before the related penalty or expiration dates, as indicated on the
      appropriate bills or notices for such payments, provided that such support
      has been received by the servicer at least thirty (30) calendar days
      prior to these dates, or such other number of days specified in the
      transaction agreements.

            	 
      
	
              1122(d)(4)(xii)

            	
              Any
      late payment penalties in connection with any payment to be made on behalf
      of an obligor are paid from the servicer’s funds and not charged to the
      obligor, unless the late payment was due to the obligor’s error or
      omission.

            	 
      
	
              1122(d)(4)(xiii)

            	
              Disbursements
      made on behalf of an obligor are posted within two (2) business days
      to the obligor’s records maintained by the servicer, or such other number
      of days specified in the transaction agreements.

            	 
      
	
              1122(d)(4)(xiv)

            	
              Delinquencies,
      charge-offs and uncollectible accounts are recognized and recorded in
      accordance with the transaction agreements.

            	 
      
	
              1122(d)(4)(xv)

            	
              Any
      external enhancement or other support, identified in Item 1114(a)(1)
      through (3) or Item 1115 of Regulation AB, is maintained as set forth
      in the transaction agreements.

            	 
      

    

    

    *With
respect to its custodial functions relating to the Collection Account and the
REP Deposit Account.

    APPENDIX
A

     

    DEFINITIONS

     

    This is
Appendix A to
the Indenture.

     

    A.                           Defined
Terms.  As used in the Indenture, the Sale Agreement, the LLC
Agreement, the Servicing Agreement, the Series Supplement or any other Basic
Document as hereinafter defined, as the case may be (unless the context requires
a different meaning), the following terms have the following
meanings:

     

    “Act” is defined in
Section 10.03(a) of the Indenture.

     

    “Actual TC
Collections” means, with respect to Billed TCs in any Reconciliation
Period, the amount of such Billed TCs (less the amounts held back under the
Tariffs by an applicable REP to reflect potential write-offs calculated for such
Reconciliation Period), as adjusted for actual system write-off percentages
experienced in the Reconciliation Period.

     

    “Administration
Agreement” means the Administration Agreement, dated as of November 6,
2009 by and between Entergy Texas and the Issuer, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

     

    “Administration Fee”
is defined in Section 2 of the Administration Agreement.

     

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

     

    “Agency Office” means
the office of the Issuer maintained pursuant to Section 3.02 of the
Indenture.

     

    “Amendatory Tariff”
means a revision to service riders or any other notice filing filed with the
PUCT in respect of a Tariff pursuant to a True-Up Adjustment.

     

    “Annual Accountant’s
Report” is defined in Section 3.04 of the Servicing
Agreement.

     

    “Annual True-Up
Adjustment” means each adjustment to the Transition Charges made pursuant
to the terms of the related Tariff in accordance with Section 4.01(b)(i) of the
Servicing Agreement.

     

    “Annual True-Up Adjustment
Date” means the first billing cycle of November of each year, commencing
on October 29, 2010.

     

    “Applicable REP”
means, with respect to each Customer taking service from a REP, the REP, if any,
responsible for billing and collecting all charges to such Customer, including
the Transition Charges.

     

    “Application” means
the Application of ETI for a Financing Order to securitize qualified costs filed
by Entergy Texas with the PUCT on July 16, 2009 pursuant to the Securitization
Law.

     

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

     

    “Basic Documents”
means the Indenture, the Administration Agreement, the Sale Agreement, the
Certificate of Formation, the LLC Agreement, the Servicing Agreement, the Series
Supplement, the Letter of Representations, the Underwriting Agreement and all
other documents and certificates delivered in connection therewith.

     

    “Benefit Plan” means,
with respect to any Person, any defined benefit plan (as defined in Section
3(35) of ERISA) that (a) is or was at any time during the past six years
maintained by such Person or any ERISA Affiliate of such person, or to which
contributions by any such Person are or were at any time during the past six (6)
years required to be made or under which such Person has or could have any
liability or (b) is subject to the provisions of Title IV of ERISA.

     

    “Bill of Sale” means a
bill of sale substantially in the form of Exhibit A to the Sale
Agreement.

     

    “Billed TCs” is
defined in Annex
I to the Servicing Agreement.

     

    “Billing Period” means
the period created by dividing the calendar year into twelve (12) consecutive
periods of approximately twenty-one (21) Servicer Business Days.

     

    “Bills” means each of
the regular monthly bills, summary bills, opening bills and closing bills issued
to Customers by ETI or REPs or to REPs by ETI on its own behalf and in its
capacity as Servicer.

     

    “Book-Entry Form”
means, with respect to any Transition Bond that such Transition Bond is not
certificated and the ownership and transfers thereof shall be made through book
entries by a Clearing Agency as described in Section 2.11 of the Indenture and
the Series Supplement pursuant to which such Transition Bond was
issued.

     

    “Book-Entry Transition
Bonds” means any Transition Bonds issued in Book-Entry Form; provided, however, that after
the occurrence of a condition whereupon book-entry registration and transfer are
no longer permitted and Definitive Transition Bonds are to be issued to the
Holder of such Transition Bonds, such Transition Bonds shall no longer be
“Book-Entry Transition Bonds”.

     

    “Business Day” means
any day other than a Saturday, a Sunday or a day on which banking institutions
in Dallas, Texas or New York, New York are, or DTC is, authorized or obligated
by law, regulation or executive order to remain closed.

     

    “Calculation Period”
means initially, the period commencing on the Closing Date and ending on the
last day of the billing cycle of October, 2010 and, thereafter, each period of
twelve (12) Collection Periods ending immediately preceding the next Annual
True-Up Adjustment Date; provided, that, if an
Interim True-Up Adjustment is required, then the Calculation Period for such
Interim True-Up Adjustment shall mean the period of six (6) Collection Periods
commencing with the period during which such Interim True-Up Adjustment is
implemented and ending on the date immediately preceding the next Annual True-Up
Adjustment Date; provided further, that, if a
quarterly Interim True-Up Adjustment is required, then the Calculation Period
for such quarterly Interim True-Up Adjustment shall mean the period of three (3)
Collection Periods commencing with the period during which such quarterly
Interim True-Up Adjustment is implemented and ending on the date immediately
preceding the next quarterly Interim True-Up Adjustment Date.

     

    “Capital Contribution”
means the amount of cash contributed to the Issuer  by ETI as
specified in the LLC Agreement.

     

    “Capital Subaccount”
is defined in Section 8.02(a) of the Indenture.

     

    “Certificate of
Compliance” means the certificate referred to in Section 3.03 of the
Servicing Agreement and substantially in the form of Exhibit B attached to
the Servicing Agreement.

     

    “Certificate of
Formation” means the Certificate of Formation filed with the Secretary of
State of the State of Delaware on August 12, 2009 pursuant to which the Issuer
was formed.

     

    “Claim” means a
“claim” as defined in Section 101(5) of the Bankruptcy Code.

     

    “Clearstream” means
Clearstream Banking, Luxembourg, S.A.

     

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

     

    “Clearing Agency
Participant” means a securities broker, dealer, bank, trust company,
clearing corporation or other financial institution or other Person for whom
from time to time a Clearing Agency effects book entry transfers and pledges of
securities deposited with the Clearing Agency.

     

    “Closing Date” means
November 6, 2009.

     

    “Code” means the
Internal Revenue Code of 1986, as amended.

     

    “Collection Account”
means the account established by the Issuer and maintained by the Indenture
Trustee in accordance with Section 8.02(a) of the Indenture and any subaccounts
contained therein.

     

    “Collection Period”
means any period commencing on the first Servicer Business Day of any Billing
Period and ending on the last Servicer Business Day of such Billing
Period.

     

    “Corporate Trust
Office” means the principal office of the Indenture Trustee at which, at
any particular time, its corporate trust business shall be administered, which
office as of the Closing Date is located at 101 Barclay Street, Floor 4W, New
York, New York 10286, Attention: Corporate Trust - ABS Group, Telephone: (212)
815-8139, Facsimile: (212) 815-3883 or at such other address as the Indenture
Trustee may designate from time to time by notice to the Holders of Transition
Bonds and the Issuer, or the principal corporate trust office of any successor
trustee by like notice.

     

    “Covenant Defeasance
Option” is defined in Section 4.01(b) of the Indenture.

     

    “Customers” means all
existing and future retail customers of ETI in the Service Area who are
obligated to pay Transition Charges pursuant to the Financing Order or any
Tariff.

     

    “Daily Remittance” is
defined in Section 6.11(a) of the Servicing Agreement.

     

    “Days Sales
Outstanding” is defined in Annex I to the
Servicing Agreement.

     

    “Default” means any
occurrence that is, or with notice or the lapse of time or both would become, an
Event of Default as defined in Section 5.01 of the Indenture.

     

    “Definitive Transition
Bonds” means Transition Bonds issued in definitive form in accordance
with  Section 2.13 of the Indenture.

     

    “Delaware Financing
Statements” means one or more Uniform Commercial Code financing
statements to be filed in the appropriate filing office in the State of
Delaware.

     

    “Delaware UCC” means
the Uniform Commercial Code as in effect on the date hereof in the State of
Delaware.

     

    “Depositing REP” means
a REP who provides a cash deposit pursuant to Section 3.05(e) of the Servicing
Agreement.

     

    “DTC” means The
Depository Trust Company or any successor thereto.

     

    “Eligible Account”
means a segregated non-interest-bearing trust account with either (a) an
Eligible Institution or (b) the corporate trust department of a depository
institution organized under the laws of the United States of America or any
State (or any domestic branch of a foreign bank), having corporate trust powers
and acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories which such Rating Agency
defines as investment grade from time to time.  At the Closing Date,
the lowest investment-grade rating is BBB- from Fitch, Baa3 from Moody’s and
BBB- from S&P.

     

    “Eligible Institution”
means:

     

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

     

    (b)           a
depository institution organized under the laws of the United States of America
or any State (or any domestic branch of a foreign bank), which (i) has either
(A) a short-term issuer rating of AAA by S&P and A2 by Moody’s, and, if
rated by Fitch, AAA by Fitch or (B) a long-term issuer rating of A-1+ by S&P
and P-1 by Moody’s or any other long-term or, short-term rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the
FDIC.

     

    If so
qualified under clause (b) above, the Indenture Trustee may be considered an
Eligible Institution for the purposes of clause (a) of this
definition.

     

    “Eligible Investments”
mean instruments or investment property, which shall not include any structured
finance assets (including instruments commonly known as RMBS, CMBS or CDO’s),
which evidence:

     

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

     

    (b)                      time
deposits and certificates of deposit of depository institutions meeting the
requirements of clause (b) of the definition of Eligible
Institution;

     

    (c)                      commercial
paper (other than commercial paper of ETI or any of its Affiliates) having, at
the time of the investment or contractual commitment to invest therein, a rating
from each of the Rating Agencies from which a rating is available in the highest
investment category granted thereby;

     

    (d)                      investments
in money market funds having a rating in the highest investment category granted
thereby (including funds for which the Indenture Trustee or any of its
Affiliates is investment manager or advisor) from Moody’s, Standard & Poor’s
and Fitch, if rated by Fitch; or

     

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

     

    in each
case maturing not later than the Business Day immediately preceding the next
Payment Date or Special Payment Date, if applicable (for the avoidance of doubt,
investments in money market funds or similar instruments which are redeemable on
demand shall be deemed to satisfy the foregoing
requirement).  Notwithstanding the foregoing, any securities or
investments which mature in 32 days or more shall not be “Eligible Investments”
unless the issuer thereof has a short-term issuer rating of at least A1 from
Moody’s and A+ from S&P, any securities or investments described in clauses
(b) through (d) above which have maturities of less than or equal to 3 months
shall not be “Eligible Investments” unless the issuer thereof has a short-term
and long-term issuer debt rating of at least A1/P-1 from Moody’s and any
securities or investments described in clauses (b) through (d) above which have
maturities of more than 3 months shall not be an “Eligible Investment” unless
the issuer thereof has a long-term and short-term issuer rating of at least
Aa3/P-1 from Moody’s.

     

    “Entergy Texas” or
“ETI” means
Entergy Texas, Inc. and its successor and assigns.

     

    “ERCOT” means the
Electric Reliability Council of Texas or any successor thereto.

     

    “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

     

    “ERISA Affiliate”
means with respect to any Person at any time, each trade or business (whether or
not incorporated) that would, at that time, be treated together with such Person
as a single employer under Section 401 of ERISA or Section 414(b), (c), (m) or
(o) of the Code.

     

    “Estimated TC
Collections” means the sum of the payments in respect of Transition
Charges which are estimated to have been received by the Servicer, directly or
indirectly (including through a REP), from or on behalf of Customers, calculated
in accordance with Annex I of the
Servicing Agreement.

     

    “Euroclear” means the
Euroclear System.

     

    “Event of Default” is
defined in Section 5.01 of the Indenture.

     

    “Excess Funds
Subaccount” is defined in Section 8.02(a) of the Indenture.

     

    “Excess Remittance”
means the amount, if any, calculated for a particular Reconciliation Period, by
which all Estimated TC Collections remitted to the Collection Account during
such Reconciliation Period exceed Actual TC Collections received by the Servicer
during such Reconciliation Period.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    “Expected Amortization
Schedule” means, the expected amortization schedule set forth in the
Series Supplement.

     

    “FDIC” means the
Federal Deposit Insurance Corporation or any successor thereto.

     

    “Federal Book-Entry
Regulations” means 31 C.F.R. Part 357 et seq. (Department of
Treasury).

     

    “Federal Book-Entry
Securities” means securities issued in book-entry form by the United
States Treasury.

     

    “Federal Funds Rate”
means, for any period, a fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the Servicer from three (3) federal funds brokers of recognized standing
selected by it.

    

    “FERC” means the
Federal Energy Regulatory Commission or any successor thereto.

     

    “Final” means, with
respect to any Financing Order, that such Financing Order has become final, is
not being appealed and that the time for filing an appeal therefrom has
expired.

     

    “Final Maturity Date”
means, with respect to any Tranche of Transition Bonds, the Final Maturity Date
therefor, as specified in the Series Supplement.

     

    “Financial Asset”
means “financial asset” as set forth in Section 8-102(a)(9) of the NY
UCC.

     

    “Financing Order”
means the Final Financing Order issued on September 11, 2009 by the PUCT
pursuant to the Securitization Law, Docket No. 37247, authorizing the creation
of the Transition Property pledged as collateral.

     

    “Fitch” means Fitch,
Inc. or any successor thereto.

     

    “General Subaccount”
is defined in Section 8.02(a) of the Indenture.

     

    “Global Transition
Bond” means a Transition Bond evidencing all or any part of the
Transition Bonds to be issued to the Holders thereof in Book-Entry Form, which
Global Transition Bond shall be issued to the Clearing Agency, or its nominee,
in accordance with Section 2.11 of the Indenture and the Series Supplement
pursuant to which the Transition Bond is issued.

     

    “Governmental
Authority” means any nation or government, any federal, state, local or
other political subdivision thereof and any court, administrative agency or
other instrumentality or entity exercising executive, legislative, judicial,
regulatory or administrative function of government.

     

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

     

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

     

    “Indenture” means the
Indenture, dated as of November 6, 2009, by and between the Issuer and the
Indenture Trustee as originally executed and, as from time to time supplemented
or amended by the Series Supplement or one or more indentures supplemental
thereto entered into pursuant to the applicable provisions of the Indenture, as
so supplemented or amended, or both, and shall include the forms and terms of
the Transition Bonds established thereunder.

     

    “Indenture Trustee”
means The Bank of New York Mellon, a New York banking corporation, as indenture
trustee for the benefit of the Secured Parties, or any successor indenture
trustee under the Indenture.

     

    “Independent” means,
when used with respect to any specified Person, that the Person (a) is in fact
independent of the Issuer, any other obligor on the Transition Bonds, the
Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller, the Servicer or any
Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any
of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director (other than as an independent director or manager) or
person performing similar functions.

     

    “Independent
Certificate” means a certificate or opinion to be delivered to the
Indenture Trustee under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 10.01 of the Indenture, made by an
Independent appraiser or other expert appointed by an Issuer Order and consented
to by the Indenture Trustee, and such opinion or certificate shall state that
the signer has read the definition of “Independent” in the Indenture and that
the signer is Independent within the meaning thereof.

     

    “Independent Manager”
is defined in Section 4.01 of the LLC Agreement.

     

    “Independent Manager
Fee” is defined in Section 4.01(a) of the LLC Agreement.

     

    “Indirect Participant”
means a securities broker, dealer, bank, trust company or other Person that
clears through or maintains a custodial relationship with a Clearing Agency
Participant, either directly or indirectly.

     

    “Initial Tariff” means
the initial Tariff filed with the PUCT to evidence the Transition Charges
pursuant to the Financing Order.

     

    “Insolvency Event”
means, with respect to a specified Person, (a) the filing of a decree or order
for relief by a court having jurisdiction in the premises in respect of such
Person or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person’s
affairs, and such decree or order shall remain unstayed and in effect for a
period of sixty (60) consecutive days; or (b) the commencement by such Person of
a voluntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the
foregoing.

     

    “Insolvency Law” means
any applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect.

     

    “Interim True-Up
Adjustment” means each adjustment to the Transition Charges made pursuant
to the terms of the related Tariff and in accordance with Section 4.01(b)(iii)
of the Servicing Agreement.

     

    “Interim True-Up Adjustment
Date” means the effective date of any Interim True-Up
Adjustment.

     

    “Internal Revenue
Code” means the Internal Revenue Code of 1986, as amended.

     

    “Internal Revenue
Service” means the Internal Revenue Service of the United States of
America.

     

    “Investment Company
Act” means the Investment Company Act of 1940, as amended.

     

    “Investment Earnings”
means investment earnings on funds deposited in the Collection Account net of
losses and investment expenses.

     

    “Issuance Advice
Letter” means the Issuance Advice Letter filed with the PUCT pursuant to
the Financing Order with respect to the Transition Charges.

     

    “Issuer” means Entergy
Texas Restoration Funding, LLC, a Delaware limited liability company, named as
such in the Indenture until a successor replaces it and, thereafter, means the
successor and, for purposes of any provision contained herein and required by
the TIA, each other obligor on the Transition Bonds.

     

    “Issuer Order” and
“Issuer
Request” mean a written order or request signed in the name of the Issuer
by any one of its Responsible Officers and delivered to the Indenture Trustee or
Paying Agent, as applicable.

     

    “kWh” means
kilowatt-hour.

     

    “Legal Defeasance
Option” is defined in Section 4.01(b) of the Indenture.

     

    “Letter of
Representations” means any applicable agreement between  the
Issuer and the applicable Clearing Agency, with respect to such Clearing
Agency’s rights and obligations (in its capacity as a Clearing Agency) with
respect to any Book-Entry Transition Bonds, as the same may be amended,
supplemented, restated or otherwise modified from time to time.

     

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

     

    “LLC Act” means the
Delaware Limited Liability Company Act, as amended.

     

    “LLC Agreement” means
the Amended and Restated Limited Liability Company Agreement of Entergy Texas
Restoration Funding, LLC, dated as of October 16, 2009, as the same may be
amended, restated, supplemented or otherwise modified from time to
time.

     

    “Manager” means each
manager of the Issuer under the LLC Agreement.

     

    “Member” has the
meaning specified in the first paragraph of the LLC Agreement.

     

    “Minimum Denomination”
means, with respect to any Transition Bond, the minimum denomination therefor
specified in the Series Supplement, which minimum denomination shall be not less
than $100,000, except for one transition bond of each tranche which may be of a
smaller denomination, and, except as otherwise provided in the Series
Supplement, integral multiples thereof.

     

    “Monthly Servicer’s
Certificate” means a certificate, substantially in the form of Exhibit A to the
Servicing Agreement, completed and executed by a Responsible Officer of the
Servicer pursuant to Section 3.01(b)(iii) of the Servicing
Agreement.

     

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

     

    “MWh” means
megawatt-hour.

     

    “Net TC Write-Offs”
means, for any  Reconciliation Period, an amount equal to the product
of (i) the Net Write-Off Percentage for such period times (ii) total Billed TCs
attributable to such Reconciliation Period.

     

    “Net Write-Off
Percentage” for any Reconciliation Period means the Servicer’s actual
system wide charge-off percentage, as adjusted for recoveries on previously
written-off bills.

     

    “Non-Standard True-Up
Adjustment” means any special adjustment to the Transition Charges to
reallocate the amounts of such Transition Charges among TC Customer Classes
pursuant to the terms of the related Tariff under the heading “Non-Standard
True-Up Procedure” and in accordance with Section 4.01(b)(ii) of the
Servicing Agreement.

     

    “Non-Standard True-Up
Adjustment Date” means the earlier of (i) the date revised Transition
Charges are approved and effective pursuant to a final order of the PUCT in the
related Non-Standard True-Up Adjustment proceeding and (ii) the first billing
cycle of November of the applicable year.

     

    “Non-U.S. Holder”
means a holder of Transition Bonds that is not a U.S. Holder, but does not
include (i) an entity or arrangement treated as a partnership for U.S. federal
income tax purposes, (ii) a former citizen of the United States or (iii) a
former resident of the United States.

     

    “Notice of Default” is
defined in Section 5.01 of the Indenture.

     

    “NY UCC” means the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.

     

    “Officer’s
Certificate” means a certificate signed by a Responsible Officer of the
Issuer under the circumstances described in, and otherwise complying with, the
applicable requirements of Section 10.01 of the Indenture, and delivered to the
Indenture Trustee.

     

    “Operating Expenses”
means all unreimbursed fees, costs and expenses of the Issuer, including all
amounts owed by the Issuer to the Indenture Trustee, or any Manager, the
Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency
fees, any franchise taxes owed on investment income in the Collection Account,
and costs and expenses of the Issuer and (to the extent payable from Transition
Charges under the Securitization Law) of ETI.

     

    “Opinion of Counsel”
means one or more written opinions of counsel who may, except as otherwise
expressly provided in the Basic Documents, be employees of or counsel to the
party providing such opinion of counsel, which counsel shall be reasonably
acceptable to the party receiving such opinion of counsel, and shall be in form
and substance reasonably acceptable to such party.

     

    “Outstanding” means,
as of the date of determination, all Transition Bonds theretofore authenticated
and delivered under this Indenture except:

     

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

     

    (b)                 Transition
Bonds or portions thereof the payment for which money in the necessary amount
has been theretofore irrevocably deposited with the Indenture Trustee or any
Paying Agent in trust for the Holders of such Transition Bonds; and

     

    (c)                 Transition
Bonds in exchange for or in lieu of other Transition Bonds which have been
issued pursuant to the Indenture unless proof satisfactory to the Indenture
Trustee is presented that any such Transition Bonds are held by a Protected
Purchaser;

     

    provided that in
determining whether the Holders of the requisite Outstanding Amount of the
Transition Bonds or any Tranche thereof have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any Basic
Document, Transition Bonds owned by the Issuer, any other obligor upon the
Transition Bonds, the Member, the Seller, the Servicer or any Affiliate of any
of the foregoing Persons shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Indenture Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Transition Bonds that the Indenture Trustee actually knows to be
so owned shall be so disregarded.  Transition Bonds so owned that have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Indenture Trustee the pledgee’s right so
to act with respect to such Transition Bonds and that the pledgee is not the
Issuer, any other obligor upon the Transition Bonds, the Member, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons.

     

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

     

    “Paying Agent” means
with respect to the Indenture, the Indenture Trustee and any other Person
appointed as a paying agent for the Transition Bonds pursuant to the
Indenture.

     

    “Payment Date” means,
with respect to any Tranche of Transition Bonds, the dates specified in the
Series Supplement; provided that if any
such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.

     

    “Periodic Billing
Requirement” means, for any Calculation Period, the aggregate amount of
Transition Charges calculated by the Servicer as necessary to be billed during
such period in order to collect the Periodic Payment Requirement on or before
the end of the Collection Period immediately preceding the next Annual True-Up
Adjustment Date.

     

    “Periodic Billing Requirement
Allocation Factors” or “PBRAF”  means,
for any Calculation Period, the percentages of the Period Billing Requirement
allocable to each Transition Charge rate class as established by the applicable
Tariff.

     

    “Periodic Interest”
means, with respect to any Payment Date, the periodic interest for such Payment
Date as specified in the Series Supplement.

     

    “Periodic Payment
Requirement” for any Calculation Period means the total dollar amount of
TC Collections reasonably calculated by the Servicer in accordance with Section
4.01 of the Servicing Agreement as necessary to be received during such period
(after giving effect to the allocation and distribution of amounts on deposit in
the Excess Funds Subaccount at the time of calculation and which will be
available for payments on the Transition Bonds at the end of such Calculation
Period and including any shortfalls in the Periodic Payment Requirement for any
prior Calculation Period) in order to ensure that, as of the last Payment Date
occurring in such Calculation Period, (1) all accrued and unpaid interest on the
Transition Bonds then due shall have been paid in full, (2) the Outstanding
Amount of the Transition Bonds is equal to the Projected Unrecovered Balance,
(3) the balance on deposit in the Capital Subaccount equals the aggregate
Required Capital Level and (4) all other fees and expenses due and owing and
required or allowed to be paid under Section 8.02 of the Indenture as of such
date shall have been paid in full; provided that, with
respect to any Annual True-Up Adjustment or Interim True-Up Adjustment occurring
after the last Scheduled Final Payment Date for any Transition Bonds, the
Periodic Payment Requirement shall be calculated to ensure that sufficient
Transition Charges will be collected to retire such Transition Bonds in full as
of the earlier of (x) the Payment Date preceding the next Annual True-Up
Adjustment Date and (y) the Final Maturity Date for such Transition
Bonds.

     

    “Periodic Principal”
means, with respect to any Payment Date, the excess, if any, of the Outstanding
Amount of the Transition Bonds over the outstanding Projected Unrecovered
Balance specified for such Payment Date on the Expected Amortization
Schedule.

     

    “Permitted Lien” means
the Lien created by the Indenture.

     

    “Permitted Successor”
is defined in Section 5.02 of the Sale Agreement.

     

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

     

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

     

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

     

    “Projected Unrecovered
Balance” means, as of any Payment Date, the projected outstanding
principal amount of the Transition Bonds for such Payment Date set forth in the
Expected Amortization Schedule.

     

    “Protected Purchaser”
has the meaning specified in Section 8-303 of the UCC.

     

    “PUCT” means the
Public Utility Commission of Texas, or any Governmental Authority succeeding to
the duties of such agency.

     

    “PUCT Regulations”
means the regulations, including proposed or temporary regulations, promulgated
under the Utilities Code.

     

    “Qualified Costs”
means all qualified costs as defined in Sections 39.302 and 36.403(d) of the
Securitization Law.

     

    “Rating Agency”, with
respect to any Tranche of Transition Bonds, means any of Moody’s, Standard &
Poor’s or Fitch which provides a rating with respect to such Transition
Bonds.  If no such organization or successor is any longer in
existence, “Rating Agency” shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Issuer, notice of
which designation shall be given to the Indenture Trustee and the
Servicer.

     

    “Rating Agency
Condition” means, with respect to any action, the notification in writing
to each Rating Agency of such action, and written confirmation from Standard
& Poor’s to the Servicer, the Indenture Trustee and the Issuer that such
action will not result in a suspension, reduction or withdrawal of the then
current rating by such Rating Agency of any Tranche of Transition
Bonds.

     

    “Reconciliation
Period” means, with respect to any Collection Period, the twelve-month
period ending the last day of such Collection Period preceding the delivery of
the Monthly Servicer’s Certificate required under Section 6(e)(i) of Annex I to
the Servicing Agreement; provided, that the
initial Reconciliation Period shall commence on the Closing Date and that a
shorter Reconciliation Period may be established pursuant to Section 8.01(b) of
the Servicing Agreement.

     

    “Record Date” means,
with respect to a Payment Date, in the case of Definitive Transition Bonds, the
close of business on the last day of the calendar month preceding the calendar
month in which such Payment Date occurs, and in the case of Book-Entry
Transition Bonds, the close of business one Business Day prior to the applicable
Payment Date.

     

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

     

    “Registration
Statement” means the registration statement, Form S-3 Registration Nos.
333-161911 and No. 333-161911-01, filed with the SEC under the Securities Act
relating to the offering and sale of the Transition Bonds, and including all
amendments thereto.

     

    “Regulation AB” means
the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed
Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be
amended from time to time.

     

    “Remittance
Requirement” means, with respect to any Third-Party Collector, the
requirement that such Third-Party Collector remit Transition Charges to the
Servicer within a prescribed number of days of billing by the Servicer in
accordance with, if applicable, the Financing Order, Tariffs, other tariffs and
any other PUCT Regulations.

     

    “Remittance Shortfall”
means the amount, if any, calculated for a particular Reconciliation Period, by
which Actual TC Collections received by the Servicer during such Reconciliation
Period exceed all Estimated TC Collections remitted to the Collection Account
during such Reconciliation Period.

     

    “REP” means a retail
electric provider as defined in Section 31.002(17) of the Utilities Code
and shall include any REP that acts as the provider of last resort.

     

    “REP Credit
Requirements” means the credit and collection policies applicable to REPs
under the Financing Order, Tariffs and other PUCT Regulations.

     

    “REP Deposit Accounts”
is defined in Section 8.02(g) of the Indenture.

     

    “REP Deposit
Requirements” means the deposit, credit rating and alternative credit
support requirements applicable to REPs under the Financing Order, Tariffs and
other PUCT Regulations.

     

    “Required Capital
Level” means, with respect to the Transition Bonds, an amount equal to
0.50% of the initial principal amount of the Transition Bonds, or such other
amount as may be permitted or required under the Financing Order and applicable
Internal Revenue Service rulings, deposited into the Capital Subaccount by the
Member prior to or upon the issuance of the Transition Bonds.

     

    “Requirement of Law”
means any foreign, federal, state or local laws, statutes, regulations, rules,
codes or ordinances enacted, adopted, issued or promulgated by any Governmental
Authority or common law.

     

    “Responsible Officer”
means with respect to (a) the Issuer, any Manager or any duly authorized
officer; (b) the Indenture Trustee, any officer within the Corporate Trust
Office of such trustee (including the President, any Vice President, Assistant
Vice President, Secretary or Assistant Treasurer, Trust Officer or any other
officer of the Indenture Trustee customarily performing functions similar to
those performed by persons who at the time shall be such officers, respectively,
and that has direct responsibility for the administration of the Indenture and
also, with respect to a particular matter, any other officer to whom such matter
is referred to because of such officer’s knowledge and familiarity with the
particular subject); (c) any corporation (other than the Indenture
Trustee), the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Assistant Treasurer or any other
duly authorized officer of such Person who has been authorized to act in the
circumstances; (d) any partnership, any general partner thereof; and (e) any
other Person (other than an individual or the Indenture Trustee), any duly
authorized officer or member of such Person, as the context may require, who is
authorized to act in matters relating to such Person.

     

    “Restricted Plan”
means (a) an “employee benefit plan” as defined in and subject to Title I of
ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code, (c)
an entity whose underlying assets include the assets of such employee benefit
plan or plan or (d) a governmental or church plan which is subject to any
federal, state or local law that is substantially similar to the provisions of
Section 406 of ERISA or Section 4975 of the Code.

     

    “Retirement of the Transition
Bonds” means any day on which the final distribution is made to the
Indenture Trustee in respect of the last Outstanding Transition
Bonds.

     

    “Sale Agreement” means
the Transition Property Purchase and Sale Agreement, dated as of November 6,
2009, by and between Entergy Texas and the Issuer, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

     

    “Scheduled Final Payment
Date” means, with respect to each Tranche of Transition Bonds, the date
when all interest and principal is scheduled to be paid with respect to that
Tranche in accordance with the Expected Amortization Schedule, as specified in
the Series Supplement therefor.  For the avoidance of doubt, the
Scheduled Final Payment Date with respect to any Tranche shall be the last
Scheduled Payment Date set forth in the Expected Amortization Schedule relating
to such Tranche.

     

    “Scheduled Payment
Date” is defined in the Series Supplement with respect to each Tranche of
Transition Bonds.

     

    “SEC” means the U.S.
Securities and Exchange Commission.

     

    “Secretary of State”
means the Secretary of State of the State of Delaware or the Secretary of State
of the State of Texas, as the case may be, or any Governmental Authority
succeeding to the duties of such offices.

     

    “Secured Obligations”
is defined in the Series Supplement.

     

    “Secured Parties”
means, with respect to the Transition Bonds, the Indenture Trustee, the relevant
Bondholders and any credit enhancer described in the Series
Supplement.

     

    “Securities Account”
means the Collection Account (to the extent it constitutes a securities account
as defined in the NY UCC and Federal Book-Entry Regulations).

     

    “Securities Act” means
the Securities Act of 1933, as amended.

     

    “Securities
Intermediary” means The Bank of New York Mellon, a New York banking
corporation, solely in the capacity of a “securities intermediary” as defined in
the NY UCC and Federal Book-Entry Regulations or any successor securities
intermediary under the Indenture.

     

    “Securitization Law”
means S.B. 769, effective April 2009, codified as Sections 36.401-36.406 of
Subchapter I of Chapter 36 of the Texas Utilities Code, together with Subchapter
G of Chapter 39 of the Texas Utilities Code, Sections
39.301-39.313.

     

    “Security Entitlement”
means “security entitlement” (as defined in Section 8-102(a)(17) of the NY UCC)
with respect to Financial Assets now or hereafter credited to the Securities
Account and, with respect to Federal Book-Entry Regulations, with respect to
Federal Book-Entry Securities now or hereafter credited to the Securities
Account, as applicable.

     

    “Seller” is defined in
the Preamble to the Sale Agreement.

     

    “Semi-Annual Servicer’s
Certificate” means a certificate, substantially in the form of Exhibit B to the
Servicing Agreement, completed and executed by a Responsible Officer of the
Servicer pursuant to Section 4.01(c)(ii) of the Servicing
Agreement.

     

    “Series Supplement”
means an indenture supplemental to the Indenture that authorizes the issuance of
the Transition Bonds, a form of which is attached as Exhibit B to the
Indenture.

     

    “Service Area” means
Entergy Texas’ certificated service area as it existed on September 11,
2009.

     

    “Servicer” means
Entergy Texas, as Servicer under the Servicing Agreement, or any successor
Servicer to the extent permitted under the Servicing Agreement.

     

    “Servicer Business
Day” means any day other than a Saturday, Sunday or holiday on which the
Servicer maintains normal office hours and conducts business.

     

    “Servicer Default” is
defined in Section 7.01 of the Servicing Agreement.

     

    “Servicing Agreement”
means the Transition Property Servicing Agreement, dated as of November 6, 2009,
by and between the Issuer and Entergy Texas, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

     

    “Servicing Fee” means
the fee payable to the Servicer on each Payment Date for services rendered
during the period from, but not including, the preceding Payment Date (or from
the Closing Date in the case of the first Payment Date) to and including the
current Payment Date, determined pursuant to Section 6.06 of the Servicing
Agreement.

     

    “Servicing Standard”
means the obligation of the Servicer to calculate, apply, remit and reconcile
proceeds of the Transition Property, including TC Payments, and all other
Transition Bond Collateral for the benefit of the Issuer and the Holders (i)
with the same degree of care and diligence as the Servicer applies with respect
to payments owed to it for its own account, (ii) in accordance with all
applicable procedures and requirements established by the PUCT for collection of
electric utility tariffs and (iii) in accordance with the other terms of the
Servicing Agreement.

     

    “Special Member” is
defined in Section 1.02 of the LLC Agreement.

     

    “Special Payment”
means with respect to any Tranche of Transition Bonds, any payment of principal
of or interest on (including any interest accruing upon default), or any other
amount in respect of, the Transition Bonds of such Tranche that is not actually
paid within five (5) days of the Payment Date applicable thereto.

     

    “Special Payment Date”
means the date on which a Special Payment is to be made by the Indenture Trustee
to the Holders.

     

    “Special Record Date”
means with respect to any Special Payment Date, the close of business on the
fifteenth (15th) day
(whether or not a Business Day) preceding such Special Payment
Date.

     

    “Sponsor” means
Entergy Texas, in its capacity as “sponsor” of the Transition Bonds within the
meaning of Regulation AB.

     

    “Standard & Poor’s or
S&P” means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.

     

    “State” means any one
of the fifty states of the United States of America or the District of
Columbia.

     

    “State Pledge” means
the pledge of the State of Texas as set forth in Section 39.310 of the
Securitization Law.

     

    “Subaccounts” is
defined in Section 8.02(a) of the Indenture.

     

    “Successor Servicer”
is defined in Section 3.07(e) of the Indenture.

     

    “Tariff” means any
rate tariff filed with the PUCT pursuant to the Securitization Law to evidence
the Transition Charges.

     

    “TC Collections” means
the Transition Charges received by the Servicer to be remitted to the Collection
Account.

     

    “TC Customer Class”
means each customer class identified as a separate rate class in any
Tariff.

     

    “TC Payments” means
the payments made by Customers based on the Transition Charges.

     

    “Temporary Transition
Bonds” means Transition Bonds executed by the Issuer, and upon the
receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee
pending the preparation of Definitive Transition Bonds pursuant to Section 2.04
of the Indenture.

     

    “Termination Notice”
is defined in Section 7.01 of the Servicing Agreement.

     

    “Texas UCC” means the
Uniform Commercial Code as in effect on the date hereof in the State of
Texas.

     

    “Third-Party
Collector” means each third party, including each REP, which, pursuant to
any Tariff, any other tariffs filed with the PUCT, or any agreement with ETI, is
obligated to bill, pay or collect Transition Charges.

     

    “Tranche” means, with
respect to the Transition Bonds, any one of the tranches of the Transition
Bonds.

     

    “Transition Bonds”
means the Transition Bonds authorized by the Financing Order and issued under
the Indenture.

     

    “Transition Bond
Collateral” has the meaning specified in the preamble of the
Indenture.

     

    “Transition Bond Interest
Rate” means, with respect to any Tranche of Transition Bonds, the rate at
which interest accrues on the Transition Bonds of such Tranche, as specified in
the Series Supplement.

     

    “Transition Bond
Register” means the register maintained pursuant to Section 2.05 of the
Indenture, providing for the registration of the Transition Bonds and transfers
and exchanges thereof.

     

    “Transition Bond
Registrar” means the registrar at any time of the Transition Bond
Register, appointed pursuant to Section 2.05 of the Indenture.

     

    “Transition Charges”
means any transition charges as defined in Sections 39.302(7) and 36.403(f) of
the Securitization Law authorized pursuant to the Financing Order.

     

    “Transition Property”
means all transition property as defined in Section 39.302(8) of the
Securitization Law created in favor of ETI pursuant to the Financing Order,
including the right to impose, collect and receive the Transition Charges
authorized in the Financing Order, and sold or otherwise conveyed to the Issuer
under the Sale Agreement.  As used in the Basic Documents, unless the
context requires otherwise, the term “Transition Property” when used with
respect to ETI includes the contract rights of ETI that exist prior to the time
that such rights are first transferred in connection with the issuance of the
Transition Bonds, at which time they become transition property in accordance
with Section 39.304 of the Securitization Law.

     

    “Transition Property
Notices” means transition property notices filed with the Secretary of
State of the State of Texas pursuant to Section 39.309 of the Securitization
Law.

     

    “Transition Property
Records” is defined in Section 5.01 of the Servicing
Agreement.

     

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

     

    “True-Up Adjustment”
means any Annual True-Up Adjustment, Interim True-Up Adjustment or Non-Standard
True-Up Adjustment, as the case may be.

     

    “Trust Indenture Act”
or “TIA” means
the Trust  Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990, as in force on the Closing Date, unless otherwise
specifically provided.

     

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

     

    “Underwriters” means
the underwriters who purchase Transition Bonds of any Tranche from the Issuer
and resell such Transition Bonds in a public offering.

     

    “Underwriting
Agreement” means the Underwriting Agreement, dated October 29, 2009, by
and among Entergy Texas, the Underwriters and the Issuer, as the same may be
amended, supplemented or modified from time to time.

     

    “Unrecovered Balance”
means, as of any Payment Date, the sum of the Outstanding Amount of the
Transition Bonds less the amount in the Excess Funds Subaccount available to
make principal payments on the Transition Bonds.

     

    “Utilities Code” means
the Texas Utilities Code, as amended from time to time.

     

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

     

    B.           Other
Terms.  All accounting terms not specifically defined herein
shall be construed in accordance with United States generally accepted
accounting principles.  To the extent that the definitions of
accounting terms in any Basic Document are inconsistent with the meanings of
such terms under generally accepted accounting principles or regulatory
accounting principles, the definitions contained in such Basic Document shall
control.  As used in the Basic  Documents, the term “including” means
“including without limitation,” and other forms of the verb “to include” have
correlative meanings.  All references to any Person shall include such
Person’s permitted successors.

     

    C.           Computation of Time
Periods.  Unless otherwise stated in any of the Basic
Documents, as the case may be, in the computation of a period of time from a
specified date to a later specified date, the word “from” means “from and
including” and the words “to” and “until” each means “to but
excluding”.

     

    D.           Reference;
Captions.  The words “hereof”, “herein” and “hereunder” and
words of similar import when used in any Basic Document shall refer to such
Basic Document as a whole and not to any particular provision of such Basic
Document; and references to “Section”, “subsection”, “Schedule” and “Exhibit” in any Basic
Document are references to Sections, subsections, Schedules and Exhibits in or
to such Basic Document unless otherwise specified in such Basic
Document.  The various captions (including the tables of contents) in
each Basic  Document are provided solely for convenience of reference
and shall not affect the meaning or interpretation of any Basic
Document.

     

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

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