Exhibit 99.4
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Date: January 31, 2006
To: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Loan Trust 2006-2 From: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc.
Attn: ▇▇▇▇▇ Fargo Bank, National Association Contact: ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Client Manager, MSM 2006-2
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
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Re: Cap Ref. No. KQBAX, Class 2-A-1
The purpose of this letter agreement is to confirm the terms and
conditions of the Swap Transaction entered into between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital
Services Inc. and ▇▇▇▇▇ Fargo Bank, National Association, solely in its
capacity as securities administrator (the "Securities Administrator") on
behalf of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Loan Trust 2006-2 pursuant to the
Pooling and Servicing Agreement (the "PSA"), dated as of January 1, 2006,
among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital I Inc. (the "Depositor"), the Securities
Administrator as master servicer and securities administrator and LaSalle Bank
National Association as trustee (the "Trustee"), on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a "Confirmation"
as referred to in the ISDA Master Agreement below.
The definitions and provisions contained in the 2000 ISDA Definitions
(as published by the International Swaps and Derivatives Association, Inc.)
are incorporated into this Confirmation. In the event of any inconsistency
between those definitions and this Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete, binding agreement between you
and us as to the terms of the Transaction to which this Confirmation relates.
In addition, this Confirmation supplements, forms a part of, and is subject to
an agreement in the form of the ISDA Master Agreement (Multicurrency-Cross
Border), with such modifications as are specified herein, as if we had
executed an Agreement in such form on the Trade Date of the first such
Transaction between us (the "Agreement"). All provisions contained or
incorporated by reference in the Agreement shall govern this Confirmation
except as expressly modified below. In the event of any inconsistency between
the provisions of that Agreement and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction.
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
Party A: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc.
Party A Credit Support: Payments guaranteed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Party B: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mortgage Loan Trust 2006-2
Trade Date: January 26, 2006
Notional Amount: See Schedule A attached hereto
Effective Date: February 25, 2006
Termination Date: November 25, 2009
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Notional Amount: With respect to any Calculation Period, the lesser of
----------------
(i) the amount set forth for such period in Schedule A
attached hereto and (ii) the Class Principal Balance
of the Class 2-A-1 Certificates immediately prior to
the related Distribution Date (as such terms are
defined in the PSA).
Fixed Amounts:
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Fixed Amount Payer: Party B
Fixed Amount Payer Payment Date: January 30, 2006
Fixed Amount: USD $251,000 (Party A hereby acknowledges receipt of
payment in full of this amount)
Floating Amounts:
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Floating Amount: To be determined in accordance with the following formula:
Greater of (i) (Floating Rate Option minus Strike
Rate) * Notional Amount * Floating Rate Day Count
Fraction, and (ii) zero.
Floating Rate Payer: Party A
Strike Rate: 4.85%
Floating Rate Payer Payment
Dates: Early Payment -- For each Calculation Period, the first
Business Day prior to each Floating Rate Payer Period End
Date.
Floating Rate Payer Period
End Date(s): The 25th of each month in each year from (and
including) March 25, 2006 to (and including) the
Termination Date with no adjustment to Period End
Dates.
For the avoidance of doubt, the initial Calculation
Period will accrue from and including the Effective
Date to but excluding March 25, 2006 and that the
final Calculation Period will accrue from and
including October 25, 2009 to but excluding the
Termination Date.
Floating Rate Option: USD-LIBOR-BBA, provided, however, that if the Floating
Rate determined from such Floating Rate Option for any
Calculation Period is greater than 8.60% per annum for
such Calculation Period, then the Floating Rate for
such Calculation Period shall be deemed to be equal to
8.60% per annum.
Floating Rate Day Count Fraction: 30/360
Reset Dates: The first day of Each Calculation Period.
Compounding: Inapplicable
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Business Days: New York
Calculation Agent: Party A; provided, however, that if an Event of
Default occurs with respect to Party A, then Party B
shall be entitled to appoint a financial institution
which would qualify as a Reference Market-maker to act
as Calculation Agent.
3. Account Details:
Payments to Party A: Citibank, New York
ABA No. 021 000 089
For: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc.
Account No. ▇▇▇▇ ▇▇▇▇
Operations Contact: ▇▇▇▇ ▇▇▇▇▇▇
Tel ▇▇▇ ▇▇▇-▇▇▇▇
Fax ▇▇▇ ▇▇▇-▇▇▇▇
Payments to Party B: ▇▇▇▇▇ Fargo Bank, National Association
ABA No. ▇▇▇-▇▇▇-▇▇▇
Account Name: Corporate Trust Clearing
Account No. ▇▇▇▇▇▇▇▇▇▇ for further credit to 50890601,
MSM 2006-2
Ref: MSM 2006-2, Class 2-A-1
4. Modifications to the Agreement:
The parties hereby agree to amend the Agreement referenced in paragraph 1
above as follows:
(a) "Cross Default" applies to Party A but not to Party B.
(b) Fully-Paid Transactions. Notwithstanding the terms of Sections 5 and 6
of the Agreement if Party B has satisfied in full all of its payment
obligations under Section 2(a)(i) of the Agreement, then unless Party A
is required pursuant to appropriate proceedings to return to Party B or
otherwise returns to Party B upon demand of Party B any portion of such
payment, (a) the occurrence of an event described in Section 5(a) of the
Agreement with respect to Party B shall not constitute an Event of
Default or Potential Event of Default with respect to Party B as the
Defaulting Party and (b) Party A shall be entitled to designate an Early
Termination Event pursuant to Section 6 of the Agreement only as a
result of a Termination Event set forth in either Section 5(b)(i) or
Section 5(b)(ii) of the Agreement with respect to Party A as the
Affected Party or Section 5(b)(iii) of the Agreement with respect to
Party A as the Burdened Party. For purposes of the Transaction to which
this Confirmation relates, Party B's only obligation under Section
2(a)(i) of the Agreement is to pay the Fixed Amount on the Fixed Rate
Payer Payment Date.
(c) "Threshold Amount" means, with respect to a party, U.S. $10,000,000 (or
the equivalent in another currency, currency unit or combination
thereof).
(d) Payments on Early Termination. "Market Quotation" and "Second Method"
will apply for the purpose of Section 6(e) of this Agreement.
(e) "Termination Currency" means United States Dollars.
(f) Party A and Party B Payer Tax Representations. For the purpose of
Section 3(e), each of Party A and Party B makes the following
representation:
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It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account
of any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e)) to be made by it to the other party under this
Agreement. In making this representation, it may rely on (i) the
accuracy of any representation made by the other party pursuant to
Section 3(f); (ii) the satisfaction of the agreement of the other
party contained in Section 4(a)(i) or 4(a)(iii) and the accuracy and
effectiveness of any document provided by the other party pursuant to
Section 4(a)(i) or 4(a)(iii); and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d), provided that
it shall not be a breach of this representation where reliance is
placed on clause (ii) and the other party does not deliver a form or
document under Section 4(a)(iii) by reason of material prejudice to
its legal or commercial position.
(g) Payee Tax Representations
(i) For the purpose of Section 3(f), Party A makes the following
representation:
It is a corporation duly organized and incorporated under the laws
of the State of Delaware and is not a foreign corporation for
United States tax purposes.
(ii) For the purpose of Section 3(f), Party B makes the following
representation:
It is a trust duly formed under the laws of the State of New York
and is not a foreign corporation for United States tax purposes.
(h) Governing Law; Jurisdiction. This Agreement, each Credit Support
Document and each Confirmation will be governed by and construed in
accordance with the laws of the State of New York, without reference to
choice of law doctrine. Section 13(b) is amended by: (1) deleting "non-"
from the second line of clause (i); and (2) deleting the final
paragraph.
(i) Waiver of Jury Trial. Each party waives, to the fullest extent permitted
by applicable law, any right it may have to a trial by jury in respect
of any Proceedings relating to this Agreement or any Credit Support
Document.
(j) "Affiliate" has the meaning specified in Section 14, but excludes ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Derivative Products Inc.
(k) Additional Representations. Section 3 is hereby amended by adding at the
end thereof the following Subparagraphs:
(i) It is an "eligible contract participant" within the meaning of
Section 1a(12) of the Commodity Exchange Act (7 U.S.C. 1a), as
amended by the Commodity Futures Modernization Act of 2000.
(ii) It has entered into this Agreement (including each Transaction
evidenced hereby) in conjunction with its line of business
(including financial intermediation services) or the financing of
its business.
(iii) It is entering into this Agreement, any Credit Support Document to
which it is a party, each Transaction and any other documentation
relating to this Agreement or any Transaction as principal (and
not as agent or in any other capacity, fiduciary or otherwise).
(iv) ERISA Representation. It continuously represents that it is not
(i) an employee benefit plan (hereinafter an "ERISA Plan"), as
defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or
a plan subject to Section 4975 of the Internal Revenue Code of
1986, as amended, or subject to any other statute, regulation,
procedure or restriction that is materially similar to Section 406
of ERISA or Section 4975 of the Code (together with ERISA Plans,
"Plans"), (ii) a person acting on behalf of a Plan or (iii) a
person any of the assets of whom constitute assets of a Plan,
unless its entry into and
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performance under this agreement satisfy the requirements for
exemptive relief under Prohibited Transactions Exemption 90-24, as
amended. It will provide notice to the other party in the event
that it is aware that it is in breach of any aspect of this
representation or is aware that with the passing of time, giving
of notice or expiry of any applicable grace period it will breach
this representation.
(l) Relationship Between Parties. Each party will be deemed to represent to
the other party on the date on which it enters into a Transaction that
(absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that Transaction):
(i) Non-Reliance. In the case of Party A, it is acting for its own
account, and in the case of Party B, it is acting as Trustee.
Party A has made its own independent decisions to enter into that
Transaction and as to whether that Transaction is appropriate or
proper for it based upon its own judgment and upon advice from
such advisers as it has deemed necessary and, with respect to
Party B, as directed under the PSA. It is not relying on any
communication (written or oral) of the other party as investment
advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to the
terms and conditions of a Transaction shall not be considered
investment advice or a recommendation to enter into that
Transaction. No communication (written or oral) received from the
other party shall be deemed to be an assurance or guarantee as to
the expected results of that Transaction.
(ii) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the
terms, conditions and risks of that Transaction. It is also
capable of assuming, and assumes, the risks of that Transaction.
(iii) Status of Parties. Party A and Party B are not acting as a
fiduciary for or an adviser to each other in respect of that
Transaction.
(iv) Fiduciary Capacity. It is expressly understood and agreed by the
parties hereto that (i) this Confirmation is executed and
delivered by ▇▇▇▇▇ Fargo Bank, National Association, not in its
individual capacity but solely as Securities Administrator on
behalf of the Trustee under the PSA in the exercise of the powers
and authority conferred to and vested in it thereunder, (ii) each
of the representations, undertakings and agreements herein made on
behalf of the trust created under the PSA is made and intended not
as personal representation, undertaking or agreement of the
Securities Administrator, but is made and intended for the purpose
of binding only such trust and (iii) under no circumstances shall
▇▇▇▇▇ Fargo Bank, National Association in its individual capacity
be personally liable for the payment of any indebtedness or
expenses or be personally liable for the breach or failure of any
obligation, representation, warranty or covenant made or
undertaken under this Confirmation.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(m) Addresses for Notices. For the purpose of Section 12(a):
(i) Address for notices or communications to Party A:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Legal Officer
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(ii) Address for notices or communications to Party B:
Address: ▇▇▇▇▇ Fargo Bank, National Association
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Client Manager - MSM 2006-2
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(n) Set-Off. Notwithstanding any provision of this Agreement or any other
existing or future agreement, each party irrevocably waives any and all
rights it may have to set off, net, recoup or otherwise withhold or
suspend or condition payment or performance of any obligation between it
and the other party hereunder against any obligation between it and the
other party under any other agreements. The provisions for Set-Off set
fort in Section 6(e) of the Agreement shall not apply for purposes of
this Transaction.
(o) Notices. Section 12(a) is amended by adding in the third line thereof
after the phrase "messaging system" and before the ")" the words, ";
provided, however, any such notice or other communication may be given
by facsimile transmission if telex is unavailable, no telex number is
supplied to the party providing notice, or if answer back confirmation
is not received from the party to whom the telex is sent."
(p) Obligations. Section 2 is amended by adding the following to the end
thereof:
"(f) Party B shall deliver or cause to be delivered to Party A IRS Form
W-9 (or successor thereto) as soon as is practicable after the Effective
Date."
(q) Covenant to Provide Additional Hedge Counterparty Information. If
requested by the Depositor for the purpose of compliance with Item
1115(b) of Regulation AB with respect to any Transaction under this
Agreement, Party A shall upon five days written notice either (A) (a)
provide the financial data required by Item 1115(b)(1) or (b)(2) of
Regulation AB (as specified by the Depositor to Party A) with respect to
Party A (or any entity that guarantees Party A) and any affiliated
entities providing derivative instruments to Party B (the "Company
Financial Information"), in a form appropriate for use in the Prospectus
Supplement and in an ▇▇▇▇▇-compatible form; (b) if applicable, cause its
accountants to issue their consent to filing or incorporation by
reference of such financial statements in the Exchange Act Reports of
Party B and (c) within 5 Business Days of the release of any updated
financial data, provide current Company Financial Information as
required under Item 1115(b) of Regulation AB to the Depositor in an
▇▇▇▇▇-compatible form and if applicable, cause its accountants to issue
their consent to filing or incorporation by reference of such financial
statements in the Exchange Act Reports of Party A or (B) assign this
Agreement as provided below.
It shall be an Additional Termination Event, with Party A the sole
Affected Party, if Party A has failed to deliver any Company Financial
Information when and as required under this Part 4(q) hereof, which
continues unremedied for the lesser of ten calendar days after the date
on which such information, report, certification or accountants' consent
was required to be delivered or such period in which the applicable
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Exchange Act Report for which such information is required can be timely
filed (without taking into account any extensions permitted to be
filed), and Party A has not, at its own cost, within the period in which
the applicable Exchange Act Report for which such information is
required can be timely filed caused another entity (which meets any
ratings related requirement of the applicable rating agencies at such
time) to replace Party A as party to this Agreement that (i) has agreed
to deliver any information, report, certification or accountants'
consent when and as required under this Part 4(q) hereof, (ii) satisfies
the requirements of each Rating Agency and (iv) is approved by the
Depositor (which approval shall not be unreasonably withheld).
As used in this Agreement the following words shall have the following
meanings:
"Depositor" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital I Inc.
"▇▇▇▇▇" shall mean the Commission's Electronic Data Gathering, Analysis
and Retrieval system.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder
"Exchange Act Reports" shall mean all Distribution Reports on Form 10-D,
Current Reports on Form 8-K and Annual Reports on Form 10-K that are to
be filed with respect to Party B pursuant to the Exchange Act.
"Prospectus Supplement" shall mean the prospectus supplement prepared in
connection with the public offering and sale of the Offered
Certificates.
"Rating Agency" shall mean each of Standard & Poor's, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. and ▇▇▇▇▇'▇ Investors Service, Inc. If any
such organization or a successor is no longer in existence, "Rating
Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the
Depositor, notice of which designation shall be given to the Trustee.
References herein to a given rating category of a Rating Agency shall
mean such rating category without giving effect to any modifiers.
"Regulation AB" shall mean the Asset Backed Securities Regulation AB, 17
C.F.R. ss.ss.229.1100-229.1123, as such may be amended from time to
time, and subject to such clarification and interpretation as have been
provided by the Commission in the adopting release (Asset-Backed
Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506,
1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be
provided by the Commission or its staff from time to time.
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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to us.
Best Regards,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC.
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
acting not in its individual capacity but solely
as Securities Administrator on behalf of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE LOAN TRUST 2006-2
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
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Schedule A
Class 2-A-1
Interest Rate Cap Schedule
Floating Rate Notional
Payer Amount
Period End Date ($)
---------------------- --------------
March 25, 2006........ 53,122,575.46
April 25, 2006........ 52,125,574.91
May 25, 2006.......... 51,011,535.62
June 25, 2006......... 49,783,307.03
July 25, 2006......... 48,444,044.33
August 25, 2006....... 46,997,200.48
September 25, 2006.... 45,446,516.96
October 25, 2006...... 43,796,013.18
November 25, 2006..... 42,049,974.48
December 25, 2006..... 40,341,854.29
January 25, 2007...... 38,671,021.13
February 25, 2007..... 37,036,854.03
March 25, 2007........ 35,438,742.27
April 25, 2007........ 33,876,085.32
May 25, 2007.......... 32,348,292.56
June 25, 2007......... 30,854,783.21
July 25, 2007......... 29,394,986.09
August 25, 2007....... 27,968,339.53
September 25, 2007.... 26,574,291.17
October 25, 2007...... 25,212,297.80
November 25, 2007..... 23,881,825.25
December 25, 2007..... 22,582,348.19
January 25, 2008...... 21,313,350.05
February 25, 2008..... 20,074,322.78
March 25, 2008........ 18,864,766.82
April 25, 2008........ 17,684,190.86
May 25, 2008.......... 16,532,111.76
June 25, 2008......... 15,408,054.43
July 25, 2008......... 14,311,551.62
August 25, 2008....... 13,242,143.88
September 25, 2008.... 12,199,379.38
October 25, 2008...... 11,182,813.77
November 25, 2008..... 10,192,010.12
December 25, 2008..... 9,226,538.73
January 25, 2009...... 8,285,977.05
February 25, 2009..... 7,369,909.54
March 25, 2009........ 6,477,927.58
April 25, 2009........ 5,609,629.32
May 25, 2009.......... 4,764,619.61
June 25, 2009......... 3,942,509.85
July 25, 2009......... 3,142,917.91
August 25, 2009....... 2,365,468.00
September 25, 2009.... 1,609,790.58
October 25, 2009...... 875,522.26
November 25, 2009..... 162,305.68
December 25, 2009
and thereafter........ 0.00
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