EXHIBIT 99.1
CORRIDOR CONTRACT ADMINISTRATION AGREEMENT
This CORRIDOR CONTRACT ADMINISTRATION AGREEMENT, dated as of June 29,
2006 (this "Agreement"), among THE BANK OF NEW YORK ("BNY"), as Corridor
Contract Administrator (in such capacity, the "Corridor Contract
Administrator") and as Trustee under the Pooling and Servicing Agreement
referred to below (in such capacity, the "Trustee"), and COUNTRYWIDE HOME
LOANS, INC. ("CHL").
WHEREAS, CHL is a party to an interest rate corridor agreement
between CHL and Barclays Bank PLC(the "Counterparty"), with a Trade Date of
June 16, 2006 and a reference number of 1249296B/1249292B (the "Corridor
Contract"), a copy of which is attached to this Agreement at Exhibit A;
WHEREAS, CHL is conveying certain mortgage loans and other related
assets to a trust fund (the "Trust Fund") created pursuant to a Pooling and
Servicing Agreement, dated as of June 1, 2006 (the "Pooling and Servicing
Agreement"), among CHL, as a seller, Park Granada LLC, as a seller, Park
Monaco Inc., as a seller, Park Sienna LLC, as a seller, Countrywide Home Loans
Servicing LP, as master servicer (the "Master Servicer") and the Trustee, with
respect to the CWHEQ, Inc. Home Equity Loan Asset-Backed Certificates, Series
2006-S3;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, CHL is assigning all of its rights, and delegating all of its
duties and obligations (other than its obligation to pay the Fixed Amount and
any fees, if applicable (as defined in the Corridor Contract)), under the
Corridor Contract to the Corridor Contract Administrator, pursuant to the
Assignment Agreement, dated as of the date hereof (the "Assignment
Agreement"), among CHL, as assignor, the Corridor Contract Administrator, as
assignee, and the Counterparty;
WHEREAS, CHL desires that the Net Payments (as defined below) on the
Corridor Contract be distributed to the Trustee on behalf of the Trust Fund to
be applied for the purposes specified in the Pooling and Servicing Agreement
and that the Excess Payments (as defined below) on the Corridor Contract be
distributed to CHL;
WHEREAS, CHL and the Trustee desire to appoint the Corridor Contract
Administrator, and the Corridor Contract Administrator desires to accept such
appointment, to distribute funds received under the Corridor Contract to the
Trustee and to CHL as provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined in this
Agreement shall have the respective meanings assigned thereto in the Pooling
and Servicing Agreement.
Benefited Certificates: The Class A-1 Certificates.
1
Calculation Period: With respect to the Corridor Contract
and any payment made under or in respect of such Corridor Contract, the
related "Calculation Period" as defined in such Corridor Contract.
Controlling Party: As defined in Section 5.
Corridor Contract Account: The separate account created and
maintained by the Corridor Contract Administrator pursuant to Section 3 with a
depository institution in the name of the Corridor Contract Administrator for
the benefit of CHL and the Trustee on behalf of the Holders of the Benefited
Certificates and designated "The Bank of New York for Countrywide Home Loans,
Inc. and certain registered Holders of CWHEQ, Inc., Home Equity Loan
Asset-Backed Certificates, Series 2006-S3". Funds in the Corridor Contract
Account shall be held for CHL and the Trustee on behalf of the Holders of the
Benefited Certificates as set forth in this Agreement.
Day Count Fraction: With respect to the Corridor Contract
and any Distribution Date, the "Floating Rate Day Count Fraction" specified
for the Calculation Period related to such Distribution Date in such Corridor
Contract.
Excess Payment: For any Distribution Date, (a) with respect
to any payment received by the Corridor Contract Administrator from the
Counterparty in respect of the Corridor Contract for such Distribution Date
(other than any payment in respect of an early termination of the Corridor
Contract), an amount equal to the excess, if any, of such payment over the Net
Payment for such Distribution Date and (b) with respect to any payment
received by the Corridor Contract Administrator from the Counterparty in
respect of an early termination of the Corridor Contract received during the
period from and including the immediately preceding Distribution Date to and
excluding the day immediately preceding the current Distribution Date, an
amount equal to the excess, if any, of such payment over the Net Payment in
respect of such payment. Notwithstanding the foregoing, in the event that the
aggregate Certificate Principal Balance of the Benefited Certificates is
reduced to zero prior to the termination of the Corridor Contract, the Excess
Payment for any Distribution Date following the Distribution Date on which the
aggregate Certificate Principal Balance of Benefited Certificates is reduced
to zero shall be the entire payment received from the Counterparty.
LIBOR: With respect to the Corridor Contract, the "Floating
Rate Option" as defined in the Corridor Contract.
Net Payment: For any Distribution Date, (a) with respect to
any payment received by the Corridor Contract Administrator from the
Counterparty in respect of the Corridor Contract for such Distribution Date
(other than any payment in respect of an early termination of the Corridor
Contract), an amount equal to the product of (i) the excess, if any, of (x)
LIBOR over (y) the related Strike Rate, (ii) the lesser of (x) the related
Notional Balance for such Distribution Date and (y) the aggregate Certificate
Principal Balance of the Benefited Certificates immediately prior to such
Distribution Date and (iii) the Day Count Fraction, and (b) with respect to
any payment received by the Corridor Contract Administrator from the
Counterparty in respect of an early termination of the Corridor Contract
received during the period from and including the immediately preceding
Distribution Date to and excluding the day
2
immediately preceding the current Distribution Date, an amount equal to the
product of (i) a fraction, the numerator of which is equal to the lesser of
(x) the related Notional Balance for the first Distribution Date on or after
the early termination of the Corridor Contract and (y) the aggregate
Certificate Principal Balance of the Benefited Certificates immediately prior
to the first Distribution Date on or after the early termination of the
Corridor Contract, and the denominator of which is equal to the related
Notional Balance for the first Distribution Date on or after the early
termination of the Corridor Contract and (ii) the amount of such payment
received in respect of such early termination. Notwithstanding the foregoing,
in the event that the Benefited Certificates are retired prior to the
termination of the Corridor Contract, the Net Payment for any Distribution
Date following the Distribution Date on which such Benefited Certificates are
retired shall be $0.
Notional Balance: With respect to the Corridor Contract and
any Distribution Date, the "Notional Amount" specified for the Calculation
Period related to such Distribution Date in such Corridor Contract.
Responsible Officer: When used with respect to the Corridor
Contract Administrator, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, any Trust Officer or any other officer of
the Corridor Contract Administrator customarily performing functions similar
to those performed by any of the above designated officers and also to whom,
with respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
Strike Rate: With respect to the Corridor Contract and any
Distribution Date, "Cap Rate" specified for the Calculation Period related to
such Distribution Date in such Corridor Contract.
2. Appointment of Corridor Contract Administrator.
CHL and the Trustee hereby appoint BNY to serve as Corridor Contract
Administrator pursuant to this Agreement. The Corridor Contract Administrator
accepts such appointment and acknowledges the transfer and assignment to it of
CHL's rights under the Corridor Contract pursuant to the Assignment Agreement.
The Corridor Contract Administrator agrees to exercise the rights referred to
above for the benefit of CHL and the Trustee on behalf of the Trust Fund and
to perform the duties set forth in this Agreement.
3. Receipt of Funds; Corridor Contract Account.
The Corridor Contract Administrator hereby agrees to receive, on
behalf of CHL and the Trustee on behalf of the Trust Fund, all amounts paid by
the Counterparty under the Corridor Contract. The Corridor Contract
Administrator shall establish and maintain a Corridor Contract Account into
which the Corridor Contract Administrator shall deposit or cause to be
deposited on the Business Day of receipt, all amounts payable by the
Counterparty under the Corridor Contract. All funds deposited in the Corridor
Contract Account shall be held for the benefit of CHL and the Trustee on
behalf of the Holders of the Benefited Certificates until withdrawn in
accordance with this Section 3. The Corridor Contract Account shall be an
"Eligible Account" as defined in the Pooling and Servicing Agreement and, if
the Trust Fund is terminated pursuant
3
to the Pooling and Servicing Agreement prior to the termination of this
Agreement, the Corridor Contract Account shall be an account that would
otherwise qualify as an "Eligible Account" under the Pooling and Servicing
Agreement had the termination of the Trust Fund not occurred.
Funds in the Corridor Contract Account shall remain uninvested.
The Corridor Contract Administrator shall give at least 30 days'
advance notice to CHL and the Trustee of any proposed change of location of
the Corridor Contract Account prior to any change thereof.
4. Calculations; Distribution of Payments; Delivery of Notices.
The Corridor Contract Administrator hereby agrees to perform the
calculations necessary to distribute payments in accordance with this Section
4. The Corridor Contract Administrator shall perform such calculations based
on (x) the Certificate Principal Balances of the Benefited Certificates
provided by the Trustee pursuant to the Pooling and Servicing Agreement and
(y) the Notional Balances, Day Count Fractions and values of LIBOR provided by
the Counterparty pursuant to the Corridor Contract. The Corridor Contract
Administrator shall, absent manifest error, be entitled to rely on information
provided by the Trustee and the Counterparty.
On the Business Day of receipt of any payment from the Counterparty,
the Corridor Contract Administrator shall withdraw the amount of such payment
from the Corridor Contract Account and distribute such amounts sequentially,
as follows:
(a) first, to the Trustee for deposit into the Carryover Reserve
Fund, the applicable Net Payment; and
(b) second, to CHL, the applicable Excess Payment, in accordance
with the following wiring instructions:
Bank: Bank of New York
Account Name: Countrywide Home Loans
Account No: 8900038632
ABA No: ▇▇▇▇▇▇▇▇▇
REF: CWHEQ 2006-S3
The Corridor Contract Administrator shall prepare and deliver any
notices required to be delivered under the Corridor Contract.
5. Control Rights.
The Controlling Party shall have the right to direct the Corridor
Contract Administrator with respect to the exercise of any right under the
Corridor Contract (such as the right to designate an Early Termination Date
following an Event of Default (each such term as defined in the Corridor
Contract)). For purposes of this Agreement, the "Controlling Party" shall mean
(i) if the aggregate Certificate Principal Balance of the Benefited
Certificates immediately prior to the most recent Distribution Date (or, prior
to the first Distribution Date, the original aggregate Certificate Principal
Balance) is equal to or greater than 50% of the Notional Balance of the
4
Corridor Contract as of such Distribution Date (or, prior to the first
Distribution Date, the original Notional Balance of the Corridor Contract),
the Trustee, and (ii) if the aggregate Certificate Principal Balance of the
Benefited Certificates immediately prior to the most recent Distribution Date
(or, prior to the first Distribution Date, the original aggregate Certificate
Principal Balance) is less than 50% of the Notional Balance of the Corridor
Contract as of such Distribution Date (or, prior to the first Distribution
Date, the original Notional Balance of the Corridor Contract), CHL.
6. Monitoring of Significance Percentage. With respect to each
Distribution Date, the Corridor Contract Administrator shall calculate the
"significance percentage" (as defined in Item 1115 of Subpart 229.1100 - Asset
Backed Securities (Regulation AB), 17 C.F.R. ▇▇.▇▇. 229.1100-229.1123) of the
Corridor Contract based on the Certificate Principal Balance of the Benefited
Certificates for such Distribution Date (after all distributions to be made
thereon on such Distribution Date) and based on the methodology provided in
writing by or on behalf of CHL no later than the fifth Business Day preceding
such Distribution Date. On each Distribution Date, the Corridor Contract
Administrator shall provide to CHL a written report (which written report may
include similar information with respect to other derivative instruments
relating to securitization transactions sponsored by CHL) specifying the
"significance percentage" of the Corridor Contract for that Distribution Date.
If the "significance percentage" of the Corridor Contract exceeds 7.0% with
respect to any Distribution Date, the Corridor Contract Administrator shall
make a separate notation thereof in the written report described in the
preceding sentence. Such written report may contain such assumptions and
disclaimers as are deemed necessary and appropriate by the Corridor Contract
Administrator.
7. Representations and Warranties of the Corridor Contract
Administrator. The Corridor Contract Administrator represents and warrants as
follows:
(a) BNY is duly organized and validly existing as a banking
corporation under the laws of the State of New York and has
all requisite power and authority to execute and deliver
this Agreement and to perform its obligations as Corridor
Contract Administrator under this Agreement.
(b) The execution, delivery and performance of this Agreement by
BNY as Corridor Contract Administrator has been duly
authorized by BNY.
(c) This Agreement has been duly executed and delivered by BNY
as Corridor Contract Administrator and is enforceable
against BNY in accordance with its terms, except as
enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered
in a proceeding in equity or at law).
8. Certain Matters Concerning the Corridor Contract Administrator.
(a) The Corridor Contract Administrator shall undertake to
perform such duties and only such duties as are specifically
set forth in this Agreement.
5
(b) No provision of this Agreement shall be construed to relieve
the Corridor Contract Administrator from liability for its
own grossly negligent action, its own gross negligent
failure to act or its own misconduct, its grossly negligent
failure to perform its obligations in compliance with this
Agreement, or any liability that would be imposed by reason
of its willful misfeasance or bad faith; provided that:
(i) the duties and obligations of the Corridor Contract
Administrator shall be determined solely by the express
provisions of this Agreement, the Corridor Contract
Administrator shall not be liable, individually or as
Corridor Contract Administrator, 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 Corridor Contract
Administrator and the Corridor Contract Administrator may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Corridor Contract
Administrator and conforming to the requirements of this
Agreement that it reasonably believed in good faith to be
genuine and to have been duly executed by the proper
authorities respecting any matters arising hereunder;
(ii) the Corridor Contract Administrator shall not be liable,
individually or as Corridor Contract Administrator, for an
error of judgment made in good faith by a Responsible
Officer or Responsible Officers of the Corridor Contract
Administrator, unless the Corridor Contract Administrator
was grossly negligent or acted in bad faith or with willful
misfeasance; and
(iii) the Corridor Contract Administrator shall not be liable,
individually or as Corridor Contract Administrator, with
respect to any action taken, suffered or omitted to be taken
by it in good faith in accordance with the direction of the
Controlling Party, or exercising any power conferred upon
the Corridor Contract Administrator under this Agreement.
(c) Except as otherwise provided in Sections 8(a) and 8(b):
(i) the Corridor Contract 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 believed
by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) the Corridor Contract Administrator may consult
with counsel and any 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 opinion of counsel;
(iii) the Corridor Contract Administrator shall not be
liable, individually or as Corridor Contract
Administrator, for any action taken, suffered or
omitted
6
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;
(iv) the Corridor Contract Administrator 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 document, unless requested in writing so
to do by CHL or the Trustee; provided, however,
that if the payment within a reasonable time to the
Corridor Contract Administrator of the costs,
expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the
opinion of the Corridor Contract Administrator not
reasonably assured to the Corridor Contract
Administrator by CHL and/or the Trustee, the
Corridor Contract Administrator may require
reasonable indemnity against such expense, or
liability from CHL and/or the Trustee, as the case
may be, as a condition to taking any such action;
(v) the Corridor Contract Administrator shall not be
required to expend its own funds or otherwise incur
any financial liability in the performance of any
of its duties hereunder if it shall have reasonable
grounds for believing that repayment of such funds
or adequate indemnity against such liability is not
assured to it; and
(vi) the Corridor Contract Administrator shall not be
liable, individually or as Corridor Contract
Administrator, with respect to or in connection
with errors or omissions contained in the report to
be provided pursuant to Section 6 hereof, to the
extent such errors or omissions are the result of
inaccuracies in the methodology or other
information provided to the Corridor Contract
Administrator by CHL.
(d) CHL covenants and agrees to pay or reimburse the Corridor
Contract Administrator, upon its request, for all reasonable
expenses and disbursements incurred or made by the Corridor
Contract Administrator in accordance with any of the
provisions of this Agreement except any such expense or
disbursement as may arise from its negligence, bad faith or
willful misconduct. The Corridor Contract Administrator and
any director, officer, employee or agent of the Corridor
Contract Administrator shall be indemnified by CHL and held
harmless against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement,
or in connection with the performance of any of the Corridor
Contract Administrator's duties hereunder, other than any
loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of
any of the Corridor Contract Administrator's duties
hereunder. Such indemnity shall survive the termination of
this Agreement or the resignation of the Corridor Contract
Administrator hereunder. Notwithstanding anything to the
contrary in this Section 8(d), any expenses, disbursements,
losses or liabilities of the Corridor Contract Administrator
or any director, officer, employee or agent thereof that are
made or incurred as a result of any request, order or
direction of
7
any NIM Insurer or any of the Certificateholders made to the
Trustee as contemplated by Section 8.02(a)(9) of the Pooling
and Servicing Agreement and consequently made to the
Corridor Contract Administrator by the Trustee shall be
payable by the Trustee out of the security or indemnity
provided by any NIM Insurer or such Certificateholders
pursuant to Section 8.02(a)(9) of the Pooling and Servicing
Agreement.
(e) Upon the resignation of BNY as Trustee in accordance with
the Pooling and Servicing Agreement, (i) BNY shall resign
and be discharged from its duties as Corridor Contract
Administrator hereunder and (ii) the Person that succeeds
BNY as Trustee shall be appointed as successor Corridor
Contract Administrator hereunder upon its execution,
acknowledgement and delivery of the instrument accepting
such appointment in accordance with Section 8.08 of the
Pooling and Servicing Agreement, whereupon the duties of the
Corridor Contract Administrator hereunder shall pass to such
Person. In addition, upon the appointment of a successor
Trustee under the Pooling and Servicing Agreement, such
successor Trustee shall succeed to the rights of the Trustee
hereunder.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(b) Each of BNY and CHL hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceedings arising out
of or relating to this Agreement.
(c) This Agreement shall terminate upon the termination of the
Corridor Contract and the disbursement by the Corridor
Contract Administrator of all funds received under the
Corridor Contract to CHL and the Trustee on behalf of the
Holders of the Benefited Certificates.
(d) This Agreement may be amended, supplemented or modified in
writing by the parties hereto.
(e) This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all such
counterparts taken together shall be deemed to constitute
one and the same instrument.
(f) Any provision of this Agreement which 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
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other
jurisdiction.
(g) The representations and warranties made by the parties to
this Agreement shall survive the execution and delivery of
this Agreement. No act or omission on the
8
part of any party hereto shall constitute a waiver of any
such representation or warranty.
(h) The article and section headings in this Agreement are for
convenience of reference only, and shall not limit or
otherwise affect the meaning of this Agreement.
[SIGNATURE PAGE FOLLOWS]
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
THE BANK OF NEW YORK,
as Corridor Contract Administrator
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Assistant Treasurer
THE BANK OF NEW YORK,
as Trustee
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Assistant Treasurer
COUNTRYWIDE HOME LOANS, INC.
By:
-------------------------------------
Name:
Title:
10
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
THE BANK OF NEW YORK,
as Corridor Contract Administrator
By:
-------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
-------------------------------------
Name:
Title:
COUNTRYWIDE HOME LOANS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
EXHIBIT A
CORRIDOR CONTRACT
A-1