(Multicurrency-Cross Border)
ISDA®
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of June 29, 2006
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC. and RALI Series 2006-QA5 Trust (the “Trust”), acting through
Deutsche Bank Trust Company Americas, not in its
individual capacity but solely as Trustee for the benefit
of RALI Series 2006-QA5 Trust, Mortgage Asset-Backed
Pass-Through Certificates, Series 2006-QA5, Group I
Certificates
have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be
governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents and other
confirming evidence (each a “Confirmation”) exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:
Interpretation
Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for
the purpose of this Master Agreement.
Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions
of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of
any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the
purposes of the relevant Transaction.
Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all
Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the
parties would not otherwise enter into any Transactions.
Obligations
General Conditions.
Each party will make each payment or delivery specified in each Confirmation to be made by it, subject
to the other provisions of this Agreement.
Payments under this Agreement will be made on the due date for value on that date in the place of the
account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required currency. Where settlement
is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date
in the manner customary for the relevant obligation unless otherwise specified in the relevant
Confirmation or elsewhere in this Agreement.
Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no
Event of Default or Potential Event of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant
Transaction has occurred or been effectively designated and (3) each other applicable condition
precedent specified in this Agreement.
(a) Change of Account. Either party may change its account for receiving a payment or delivery by giving
notice to the other party at least five Local Business Days prior to the scheduled date for the payment or
delivery to which such change applies unless such other party gives timely notice of a reasonable objection to
such change.
(b) Netting. If on any date amounts would otherwise be payable: -
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other. then, on such date, each party's obligation to make payment of any such amount will
be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by
one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an
obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party
the excess of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of
all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether
such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a
Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being
subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will
cease to, apply to such Transactions from such date). This election may be made separately for different groups
of Transactions and will apply separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(c) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on
account of any Tax unless such deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will: -
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full
amount required to be deducted or withheld from any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise
entitled under this Agreement, such additional amount as is necessary to ensure that the net
amount actually received by Y (free and clear of Indemnifiable Taxes. whether assessed against
X or Y) will equal ft full amount Y would have received had no such deduction or withholding
been required. However, X will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for: -
(A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d); or
(B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such
failure would not have occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such action is taken or brought
with respect to a party to this Agreement) or (II) a Change in Tax Law.
(ii) Liability. If:
(1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue
authority, to make any deduction or withholding in respect of which X would not be required to
pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against X,
then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y
will promptly pay to X the amount of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(d) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment
obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before
as well as after judgment) on the overdue amount to the other party on demand in the same currency as such
overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date
of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and
the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination
Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be
settled by delivery, it will compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
2. Representations
Each party represents to the other party (which representations will be deemed to be repeated by each party on
each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all
times until the termination of this Agreement) that: -
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its
organisation or incorporation and, if relevant under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other documentation relating to this
Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform its obligations under this
Agreement and any obligations it has under any Credit Support Document to which it is a party and has
taken all necessary action to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any
law applicable to it, any provision of its constitutional documents, any order or judgment of any court
or other agency of government applicable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to have been obtained by it with
respect to this Agreement or any Credit Support Document to which it is a party have been obtained and
are in full force and effect and all conditions of any such consents have been complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it
is a party constitute its legal, valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge,
Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur
as a result of its entering into or performing its obligations under this Agreement or any Credit Support
Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its
Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body,
agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it
of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations
under this Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on
behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of
the date of the information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the
purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as being made by it for the
purpose of this Section 3(f) is accurate and true.
3. Agreements
Each party agrees with the other that, so long as either party has or may have any obligation under this
Agreement or under any Credit Support Document to which it is a party: -
(a) Furnish Specified Information. It will deliver to the other party or, in certain cases under
subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs: -
(i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule of any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that may be required or reasonably
requested in writing in order to allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without any deduction or withholding for
or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the
completion, execution or submission of such form or document would not materially prejudice the legal or
commercial position of the party in receipt of such demand), with any such form or document to be
accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to
be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as
reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all
consents of any governmental or other authority that are required to be obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any
that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which
it may be subject if failure so to comply would materially impair its ability to perform its obligations under
this Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to
be accurate and true promptly upon learning of such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in
respect of its execution or performance of this Agreement by a jurisdiction in which it is
incorporated,organised, managed and controlled. or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will
indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp
Tax Jurisdiction with respect to the other party.
4. Events or Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit
Support Provider of such party or any Specified Entity of such party of any of the following events constitutes
an event of default (an "Event of Default") with respect to such party: -
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or
delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other
than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or
to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or
4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is
not remedied on or before the thirtieth day after notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party to comply with or perform any
agreement or obligation to be complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit
Support Document to be in full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support Document relates without the
written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in
part, or challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or
repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such
party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in
any material respect when made or repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any
applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving
effect to any applicable notice requirement or grace period, there occurs a liquidation of, an
acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults,
after giving effect to any applicable notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of, or any payment on early termination of,
a Specified Transaction (or such default continues for at least three Local Business Days if there is no
applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in
whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or
empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence
or existence of (1) a default, event of default or other similar condition or event (however described)
in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity
of such party under one or more agreements or instruments relating to Specific Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less than the applicable Threshold
Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or
becoming capable at such time of being declared, due and payable under such agreements or instruments,
before it would otherwise have been due and payable or (2) a default by such party, such Credit Support
Provider or such Specified Entity (individually or collectively) in making one or more payments on the
due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such
agreements or instruments (after giving effect to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of
such party:
(1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes
insolvent or is unable to pay its debts or fails or admits in writing its inability generally
to pay its debts as they become due; (3) makes a general assignment, arrangement or composition
with or for the benefit of its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding or petition (A) results in a
judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an
order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or presentation thereof, (5) has a
resolution passed for its winding-up, official management or liquidation (other than pursuant
to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of
an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets; (7) has a secured party
take possession of all or substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains possession, or any such process
is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which. under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or
amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or transfer:
(1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such
Credit Support Provider under this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory
to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to
the performance by such resulting, surviving or transferee entity of its obligations under this
Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit
Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an
Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax
Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event
Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is
specified pursuant to (v) below:-
(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a
Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such
date. it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such
party (which will be the Affected Party):-
(1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment
or delivery in respect of such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other
obligation which the party (or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the
party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the
next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in
respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or
withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e))
and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other
than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date
will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment
from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect
of which the other party is not required to pay an additional amount (other than by reason of Section
2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all its assets to, another entity (which will
be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the
party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its
assets to, another entity and such action does not constitute an event described in Section 5(a)(viii)
but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that
of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to
such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected
Party); of
(v) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any
Confirmation as applying. the occurrence of such event (and, in such event. the Affected Party or
Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such
Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give
rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not
constitute an Event of Default.
5. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a
party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting Party”)
may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate
a day not earlier than the day such notice is effective as an Early Termination Date in respect of all
outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to
a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon
the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6)
or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the
relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party
of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it,
notify the other party, specifying the nature of that Termination Event and each Affected Transaction
and will also give such other information about that Termination Event as the other party may reasonably
require.
(ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(1) or a Tax Event
occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party
is the Affected Party, the Affected Party will, as a condition to its right to designate an Early
Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives
notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the
Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to
exist.
If the Affected Party is not able to make such a transfer it will give notice to the other party to that
effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the
prior written consent of the other party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into transactions with the transferee on the
terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two
Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event.
(iv) Right to Terminate. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not
been effected with respect to all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event
occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger,
any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than
one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon
Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20
days notice to the other party and provided that the relevant Termination Event is then continuing,
designate a day not earlier than the day such notice is effective as an Early Termination Date in
respect of all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early
Termination Date will occur on the date so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or
deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to
be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in
respect of an Early Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination
Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail, such calculations (including
all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of
the relevant account to which any amount payable to it is to be paid. In the absence of written
confirmation from the source of a quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such
quotation.
(ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section
6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of Default) and on the day which
is two Local Business Days after the day on which notice of the amount payable is effective (in the case
of an Early Termination Date which is designated as a result of a Termination Event). Such amount will
be paid together with (to the extent permitted under applicable law) interest thereon (before as well as
after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to
(but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated
on the basis of daily compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall
apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss",
and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a
payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second
Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date
and determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event of Default:-
(1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party
will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the
Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this
Agreement.
(3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be
payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party)
in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid
Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the
Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a Termination Event:-
(1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance
with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to the Non-defaulting Party
will be deemed to be references to the Affected Party and the party which is not the Affected
Party, respectively, and, if Loss applies and fewer than all the Transactions are being
terminated, Loss shall be calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated
Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with the higher Settlement
Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount
("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all
the Transactions are being terminated, in respect of all Terminated Transactions) and
an amount will be payable equal to one-half of the difference between the Loss of the
party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X
will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic
Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for payment determined under Section
6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this
Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss
of bargain and the loss of protection against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any additional damages as a consequence of such
losses.
6. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may
be transferred (whether by way of security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or
merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice
to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a
Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
7. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant
currency specified in this Agreement for that payment (the “Contractual Currency”). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be
discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent
such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner
and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the
Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this
Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If
for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency
payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such
excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency
other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or
(iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii)
above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled
pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any
shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency
and will refund promptly to the other party any excess of the Contractual Currency received by such party as a
consequence of sums paid in such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is converted into the currency of the
judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is
able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual
Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually
received by such party. The term “rate of exchange” includes, without limitation, any premiums and costs of
exchange payable in connection with the purchase of or conversion into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate
and independent obligations from the other obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment
is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums
payable in respect of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate
that it would have suffered a loss had an actual exchange or purchase been made.
8. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with
respect to its subject matter and supersedes all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless
in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or
confirmed by an exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the
parties under this Agreement will survive the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges
provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges
provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and
delivered in counterparts (including by facsimile transmission), each of which will be deemed an
original.
(ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they
agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts (including by facsimile transmission) or
be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging
system, which in each case will be sufficient for all purposes to evidence a binding supplement to this
Agreement. The parties will specify therein or through another effective means that any such
counterpart, telex or electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this
Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or
privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege
or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of reference only and are not to
affect the construction of or to be taken into consideration in interpreting this Agreement.
9. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction
through an Office other than its head or home office represents to the other party that, notwithstanding the
place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such
party are the same as if it had entered into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives payments or deliveries for the
purpose of a Transaction without the prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and
receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the
relevant Confirmation.
10. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable
out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited
to, costs of collection.
11. Notices
(a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner
set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in accordance with the electronic
messaging system details provided (see the Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee
of the recipient in legible form (it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt
requested), on the date that mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt as applicable, is not a Local Business
Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on
a Local Business Day, in which case that communication shall be deemed given and effective on the first following
day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile
number or electronic messaging system details at which notices or other communications are to be given to all
12. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in
the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement
("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by
English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York City, if this Agreement is
expressed to be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in
any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings, that such court does not have any
jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if
this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of
the Civil Jurisdiction and Judgments ▇▇▇ ▇▇▇▇ or any modification, extension or re-enactment thereof for the time
being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its
name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any
reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and
within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent
to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law,
with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on
the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief
by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets
(whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues
or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably
agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings.
13. Definitions
As used in this Agreement:
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or
Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect
to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or
indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of any entity or person means
ownership of a majority of the voting power of the entity or person.
"Applicable Rate" means: -
(a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by
a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date
(determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would have been but for Section
2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or
amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or
exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the
relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this
Agreement but for a present or former connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such recipient (including, without
limitation, a connection arising from such recipient or related person being or having been a citizen or resident
of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such
jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction,
but excluding a connection arising solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of
any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under
Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise
agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in
this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if
different. in the principal financial centre, if any, of the currency of such payment, (c) in relation to any
notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the
address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the
place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant
locations for performance with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a
party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement
or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a
result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any
gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery
required to have been made (assuming satisfaction of each applicable condition precedent) on or before the
relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(c)(i)(1) or (3) or
6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under
Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not
reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need
not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers
in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions and a party making the
determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will
be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party
(expressed as a positive number) in consideration of an agreement between such party (taking into account any
existing Credit Support Document with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving
for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute
or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section
2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the
occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid
Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but,
without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation as such party and the Reference
Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time
(without regard to different time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith
by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the Market Quotation will be the
arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values, If
exactly three such quotations are provided, the Market Quotation will be the quotation remaining after
disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest
value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the
Non-defaulting Party (as certified by it) if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or home office.
"Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a
Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the
criteria that such party applies generally at the time in deciding whether to offer or to make an extension of
credit and (b) to the extent practicable, from among such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated,
organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in
relation to any payment, from or through which such payment is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with
respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or
requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this
Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of.-
(a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each
Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each
Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or
would not (in the reasonable belief of the party making the determination) produce a commercially reasonable
result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or
otherwise, as principal or surety or otherwise) in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect
thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support
Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement
(or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which
is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency
rate swap transaction, currency option or any other similar transaction (including any option with respect to any
of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a
Specified Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including
interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Agreement other than a stamp, registration, documentation or similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination
Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case)
in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if
“Automatic Early Termination” applies, immediately before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such
Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination
Currency (the “Other Currency”), the amount in the Termination Currency determined by the party making the
relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early
Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later
date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign
exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency
at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be
customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant
Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make
a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the
parties
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be
applicable, a Credit Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of
any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in
respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but
for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which
remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction. for each
obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled
by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such
Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required
to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent
permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such
amounts or obligations were or would have been required to have been paid or performed to (but excluding) such
Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if
each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect
from the date specified on the first page of this document.
By: ---/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇--- By: ----/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇---
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Authorized Signatory Title: Authorized Signatory
Date: June 29, 2006 Date: June 29, 2006
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of June 29, 2006
(For the benefit of the holders of the Mortgage Asset-Backed Pass-Through Certificates,
Series 2006-QA5, Group I Certificates)
between
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC.
a Delaware corporation
(“Party A”)
and
RALI Series 2006-QA5 Trust (the “Trust”), acting through Deutsche Bank Trust Company Americas, not in its
individual capacity but solely as Trustee for the benefit of RALI Series 2006-QA5 Trust, Mortgage Asset-Backed
Pass-Through Certificates, Series 2006-QA5, Group I Certificates (“Party B”)
Termination Provisions.
“Specified Entity” means in relation to Party A for the purpose of:
Section 5(a)(v), None Specified
Section 5(a)(vi), None Specified
Section 5(a)(vii), None Specified
Section 5(b)(iv), None Specified
and in relation to Party B for the purpose of:
Section 5(a)(v), None Specified
Section 5(a)(vi), None Specified
Section 5(a)(vii), None Specified
Section 5(b)(iv), None Specified
“Specified Transaction” is not applicable to Party A or Party B for any purpose, and, accordingly,
Section 5(a)(v) shall not apply to Party A or Party B.
“Cross Default” provisions of Section 5(a)(vi) will not apply to Party A and will not apply to Party B.
“Credit Event Upon Merger” provisions of Section 5(b)(iv) will not apply to Party A and will not apply
to Party B.
The “Automatic Early Termination” provisions of Section 6(a) will not apply to Party A and will not
apply to Party B.
Payments on Early Termination. “Market Quotation” and “Second Method” will apply for the purpose of
Section 6(e) of this Agreement.
“Termination Currency” means United States Dollars.
Additional Termination Event will apply. The following Additional Termination Events will apply, in
each case with respect to Party B as the sole Affected Party (unless otherwise provided below):
Upon any amendment, supplement, modification or waiver of any provision of the PSA (as
defined below) without the consent of Party A that materially and adversely affects
the rights or interests of Party A.
Party A fails to comply with the Rating Agency Downgrade provisions as set forth in Part
5(f) below. For all purposes of this Agreement, Party A shall be the sole Affected
Party with respect to the occurrence of a Termination Event described in this Part
1(h)(ii).
The Master Servicer exercises its option to purchase the Mortgage Loans pursuant to Section
9.01 of the PSA.
Upon the irrevocable direction to dissolve or otherwise terminate the Trust following which
all assets of the Trust will be liquidated and the proceeds of such liquidation
distributed to the Certificateholders.
Party A neither provides Swap Financial Disclosure (as defined in Part 5(j)) pursuant to the
Indemnification Agreement (as defined in Part 5(j)) nor assigns this Agreement in
accordance with Part 5(j) hereof. For all purposes of this Agreement, Party A shall
be the sole Affected Party with respect to the occurrence of a Termination Event
described in this Part 1(h)(v); provided, however, that, notwithstanding Section
6(b)(iv) of the Agreement, either Party A or Party B may designate an Early
Termination Date following the occurrence of the Termination Event described in this
Part 1(h)(v).
“Breach of Agreement” provision of Section 5(a)(ii) will not apply to Party A or Party B.
“Credit Support Default” provisions of Section 5(a)(iii) will not apply to Party B.
“Misrepresentation” provisions of Section 5(a)(iv) will not apply to Party A or Party B.
The “Merger Without Assumption” provisions of Section 5(a)(viii) will not apply to Party B.
Failure to Pay or Deliver. Section 5(a)(i) is hereby amended by deleting the word “third” in the third
line thereof and replacing it with the word “second”.
Bankruptcy. Section 5(a)(vii) shall apply to Party A and to Party B; provided, however, with respect to
Party B, Section 5(a)(vii)(2) shall not apply.
Tax Representations.
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:
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.
Party A and Party B Payee Tax Representations.
For the purpose of Section 3(f), Party A makes the following representation:
It is a U.S. corporation organized under the laws of the State of Delaware.
For the purpose of Section 3(f), Party B makes the following representations:
(1) The Trust is duly formed under the laws of the State of New York and is a U.S.
person for United States tax purposes.
(2) For U.S. federal income tax purposes, (a) it entered into the Agreement on behalf
of the RALI Series 2006-QA5 Trust and (b) the RALI Series 2006-QA5 Trust is a trust
organized under the laws of the State of New York and is a U.S. person for U.S.
federal income tax purposes.
Agreement to Deliver Documents.
For the purpose of Sections 4(a)(i) and (ii), each party agrees to deliver the following documents, as applicable:
Tax forms, documents or certificates to be delivered are:
Party required to
deliver document Form/Document/Certificate Date by which to be delivered
Party B A correct, complete and executed U.S. (i) Upon execution of this Agreement, (ii)
Internal Revenue Service Form W-9 (or promptly upon reasonable demand by Party A,
any successor thereto) of the RALI (iii) promptly upon learning that such form or
Series 2006-QA5 grantor trust that document is required, and (iv) promptly upon
eliminates U.S. federal backup learning that any such form previously provided
withholding tax on payments under this by Party B has become obsolete or incorrect.
Agreement, and any other document
reasonably requested by Party A to
allow Party A to make payments under
this Agreement without any deduction or
withholding for or on the account of
any Tax or with such deduction or
withholding at a reduced rate.
Other documents to be delivered are:-
Party required to deliver
document Form/Document/Certificate Date by which to be delivered
Party B A correct, complete and executed U.S. Internal Revenue (i) Upon execution of this Agreement, (ii) promptly upon
Service Form W-9 (or any successor thereto) of the reasonable demand by Party A, (iii) promptly upon learning that
RALI Series 2006-QA5 grantor trust that eliminates such form or document is required, and (iv) promptly upon
U.S. federal backup withholding tax on payments under learning that any such form previously provided by Party B has
this Agreement, and any other document reasonably become obsolete or incorrect.
requested by Party A to allow Party A to make payments
under this Agreement without any deduction or
withholding for or on the account of any Tax or with
such deduction or withholding at a reduced rate.
Other documents to be delivered are:-
------------------------------------------------------------------------------------------------------------------------------------------------------------
Party required to deliver Covered by Section 3(d)
document Form/Document/Certificate Date by which to be delivered Representation
Party A Either (1) a signature booklet containing secretary’s The earlier of the fifth Business Day Yes
and certificate and resolutions (“authorizing resolutions”) after the Trade Date of the first
Party B authorizing the party to enter into derivatives Transaction or upon execution of this
transactions of the type contemplated by the parties or Agreement and as deemed necessary for
(2) a secretary’s certificate, authorizing resolutions any further documentation.
and incumbency certificate, in either case, for such
party and any Credit Support Provider of such party
reasonably satisfactory in form and substance to the
other party.
Party B An executed copy of the Standard Terms of Pooling and No later than 15 days after the Yes
Servicing Agreement dated as of March 1, 2006 and Effective Date.
related Series Supplement dated as of June 1, 2006
(together, the “PSA’) among Residential Accredit Loans,
Inc., as Depositor, Residential Funding Corporation, as
Master Servicer, and Deutsche Bank Trust Company
Americas, as Trustee.
Party A A duly executed copy of the Credit Support Document As soon as practicable after the No
and specified in Part 4 of this Schedule. execution of this Agreement.
Party B
Party A and Party B An opinion of counsel reasonably satisfactory in form As soon as practicable after the No
and substance to the other party. execution of this Agreement.
Miscellaneous
------------------------------------------------------------------------------------------------------------------------------------------------------------
Addresses for Notices. For the purpose of Section 12(a):-
Address for notices or communications to Party A:-
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC.
Transaction Management Group
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: CHIEF LEGAL OFFICER
Fax No: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Address for notices or communications to Party B:
DEUTSCHE BANK TRUST COMPANY AMERICAS
▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Trust Administration-RF06A5
Facsimile No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Telephone No.: ▇▇▇ ▇▇▇ ▇▇▇▇
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.”
Process Agent. For the purpose of Section 13(c):
Party A does not appoint a Process Agent.
Party B does not appoint a Process Agent.
Offices. The provisions of Section 10(a) will not apply to Party A and to Party B.
Multibranch Party. For the purpose of Section 10(c):
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
“Calculation Agent” means Party A.
“Credit Support Document” means any Confirmation and any other document any of which by its terms
secures, guarantees or otherwise supports either or both parties’ obligations under this
Agreement, including, but not limited to, the ISDA Credit Support Annex attached hereto as
Exhibit A and dated as of the date hereof (the provisions of which are incorporated by
reference herein) and the guarantee of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Credit Support Provider means in relation to Party A: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a Delaware corporation.
Credit Support Provider means in relation to Party B: None
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 regard
to conflict of law provisions thereof other than New York General Obligations Law Sections
5-1401 and 5-1402. Section 13(b) is amended by: (1) deleting “non-” from the second line of
clause (i); and (2) deleting the final paragraph.
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.
Netting of Payments. Clause (ii) of Section 2(c) will apply to any amounts payable with respect to
Transactions from the date of this Agreement.
“Affiliate”. Party A and Party B shall be deemed not to have any Affiliates for purposes of this
Agreement, including for purposes of Section 6(b)(ii). For the avoidance of doubt, with
respect to Party A, such definition shall be understood to exclude ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Derivative
Products Inc.
Additional Definitions. All capitalized terms used but not otherwise defined in this Agreement shall
have the meanings given thereto in the PSA.
Other Provisions
Representations.
The introductory clause of Section 3 of this Agreement is hereby amended to read in its
entirety as follows:
“Each party represents to the other party (which representations will be deemed to be
repeated by each party on each date on which a Transaction is entered into and, in the
case of the representations in Section 3(f) and Section 3(g)(4), at all times until
the termination of this Agreement) that:-”
Section 3 of this Agreement is hereby amended by adding at the end thereof the following
subsection (g):
“(g) Relationship Between Parties.
(1) Nonreliance. It is not relying on any statement or representation of
the other party regarding a Transaction (whether written or oral), other than
the representations expressly made in this Agreement or the Confirmation in
respect of that Transaction.
(2) Evaluation and Understanding.
(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. It 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. The other party is not acting as a
fiduciary for or an adviser to it in respect of that Transaction.
(3) Purpose. It is an “eligible swap participant” as such term is
defined in Section 35.1(b)(2) of the regulations (17 C.F.R 35) promulgated
under, and an “eligible contract participant” as defined in Section 1a(12) of,
the Commodity Exchange Act, as amended, and it is entering into the
Transaction for the purposes of managing its borrowings or investments,
hedging its underlying assets or liabilities or in connection with a line of
business.
(4) ERISA Representation.
(i) Party A represents and warrants at all times hereunder that it
is not a pension plan or employee benefits plan and that it is not using
assets of any such plan or assets deemed to be assets of such a plan in
connection with any Transaction under this Agreement, and
(ii) Party B represents and warrants at all times hereunder that (x)
it is not a pension plan or employee benefit plan, and (y) to the best of
Party B’s knowledge and assuming compliance by the applicable
Certificateholders with the PSA, (i) no pension plan or employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended
(the “Code”), or any person who is acting on behalf of such a plan, may
purchase a Group I Certificate issued by the Trust while this Agreement is in
existence and (ii) any pension plan or employee benefit plan subject to ERISA
or Section 4975 of the Code, or any person who is acting on behalf of such a
plan, who purchases a Class I-R Certificate issued by the Trust while this
Agreement is in existence shall provide an opinion of counsel which states
that such purchase is permissible under applicable law and will not result in
a prohibited transaction under ERISA or Section 4975 of the Code.”
Set off. Subject to Section 2(c), notwithstanding any other 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, 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 forth in Section 6(e)
of this Agreement shall not apply.
Confirmations. Party A will deliver to Party B a Confirmation relating to each Transaction.
Form of Agreement. The parties hereby agree that the text of the body of this Agreement is intended to
be the printed form of 1992 ISDA Master Agreement (Multicurrency-Cross Border) as published and
copyrighted by the International Swaps and Derivatives Association, Inc.
Transfer, Amendment and Assignment. No transfer, amendment, waiver, supplement, assignment or other
modification of this Agreement shall be permitted by either party unless each of Standard &
Poor’s Ratings Service, a division of The McGraw Hill Companies, Inc. (“S&P”), ▇▇▇▇▇’▇ Investors
Service, Inc. (“Moody’s”) and Fitch, Inc. (“Fitch”, and together with S&P and Moody’s, the
“Rating Agencies”) has been provided notice of the same and confirms in writing (including by
facsimile transmission) within five Business Days after such notice is given that it will not
downgrade, qualify, withdraw or otherwise modify its then current rating of the RALI Series
2006-QA5 Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA5.
Rating Agency Downgrade. (i) In the event that any of the Rating Agencies downgrades ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or
a replacement counterparty, or an entity that guarantees the obligations of Party A or a
replacement counterparty, below the Required Swap Counterparty Rating (as defined below) or
Moody’s or Fitch withdraws its ratings of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or a replacement counterparty, or an
entity that guarantees the obligations of Party A or a replacement counterparty, then, within
30 days after such rating downgrade or withdrawal, Party A or such replacement counterparty, as
the case may be, shall, subject to the Rating Agency Condition (as defined below), at its own
expense, either (1) cause another entity to replace Party A as party to this Agreement that
meets or exceeds the Required Swap Counterparty Rating on terms substantially similar to this
Agreement, (2) obtain a guaranty of, or a contingent agreement of another person with the
Required Swap Counterparty Rating to honor Party A’s obligations under this Agreement, (3)
collateralize its exposure to the Trust pursuant to the ISDA Credit Support Annex attached
hereto as Exhibit A, subject to the satisfaction of the Rating Agency Condition or (4) take
other steps, if any, to enable the Trust to satisfy the Rating Agency Condition; provided that
for purposes of this Part 5(f), Party A shall be responsible for (A) posting collateral in
accordance with such ISDA Credit Support Annex at its own cost and (B) any cost incurred by it
in complying with its obligations.
“Required Swap Counterparty Rating” means, with respect to a counterparty or entity
guaranteeing the obligations of such counterparty, (x) either (i) if such counterparty or
entity has only a long-term rating by Moody’s, a long-term senior, unsecured debt obligation
rating, credit rating or other similar rating (as the case may be, the “Long-Term Rating”) of
at least “Aa3” by Moody’s and if rated “Aa3” by ▇▇▇▇▇’▇ is not on negative credit watch by
Moody’s or (ii) if such counterparty or entity has a Long-Term Rating and a short-term rating by
Moody’s, a Long-Term Rating of at least “A1” by Moody’s and a short-term rating of “P-1” by
Moody’s and, in each case, such rating is not on negative credit watch by Moody’s, (y) (i) a
short-term rating of at least “A-1” by S&P or (ii) if such counterparty or entity does not have
a short-term rating by S&P, a Long-Term Rating of at least “A+” by S&P and (z) (i) short-term
rating of at least “F1” by Fitch or (ii) if such counterparty or entity does not have a
short-term rating by Fitch, a Long-Term Rating of at least “A+” by Fitch.
“Rating Agency Condition” means, with respect to any particular proposed act or omission to act
hereunder that the party acting or failing to act must consult with each of the Rating Agencies
then providing a rating of the Certificates and receive from each Rating Agency a prior written
confirmation that the proposed action or inaction would not cause a downgrade or withdrawal of
the then current rating of the Certificates.
(ii) In the event that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or a replacement counterparty, or an entity that
guarantees the obligations of Party A or a replacement counterparty, has its rating by S&P
withdrawn, has a rating of less than “BBB-” or “A-3”, if applicable, by S&P, a rating of less
than “BBB-” or “F3”, if applicable, by Fitch or a rating less than or equal to “A3” or “P-2,”
if applicable, by Moody’s, Party A or such replacement counterparty, as the case may be, shall,
within 10 days thereafter, while collateralizing its exposure to the Trust pursuant to the ISDA
Credit Support Annex attached hereto as Exhibit A, (1) transfer this Agreement at its sole cost
and expense, in whole, but not in part, to a counterparty that satisfies the Required Swap
Counterparty Rating, subject to satisfaction of the Rating Agency Condition or (2) obtain a
guaranty of, or a contingent agreement of, another person with the Required Swap Counterparty
Rating to honor Party A’s obligations under this Agreement, subject to satisfaction of the
Rating Agency Condition.
(iii) Failure to act in accordance with this Part 5(f) shall constitute an Additional
Termination Event but shall not constitute an Event of Default under Section 5(a)(ii) (Breach
of Agreement).
Severability. If any term, provision, covenant, or condition of this Agreement, or the application
thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or
in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof
shall continue in full force and effect as if this Agreement had been executed with the invalid
or unenforceable portion eliminated, so long as this Agreement as so modified continues to
express, without material change, the original intentions of the parties as to the subject
matter of this Agreement and the deletion of such portion of this Agreement will not
substantially impair the respective benefits or expectations of the parties; provided, however,
that nothing in this provision shall adversely affect the rights of each party under this
Agreement; and provided further that this severability provision shall not be applicable if any
provision of Section 1, 2, 5, 6, or 13 (or any definition or provision in Section 14 to the
extent it relates to, or is used in or connection with any such Section) shall be so held to be
invalid or unenforceable. The parties shall endeavor to engage in good faith negotiations to
replace any invalid or unenforceable term, provision, covenant or condition with a valid or
enforceable term, provision, covenant or condition, the economic effect of which comes as close
as possible to that of the invalid or unenforceable term, provision, covenant or condition.
Consent to Recording. Each party hereto consents to the monitoring or recording, at any time and from
time to time, by the other party of any and all communications between trading and marketing
personnel of the parties, waives any further notice of such monitoring or recording, and agrees
to notify its officers and employees of such monitoring or recording.
Proceedings. Party A shall not institute against or cause any other person to institute against, or
join any other person in instituting against, the Trust or Deutsche Bank Trust Company
Americas, not individually, but solely as Trustee, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law for a period of one year and one day (or, if longer, the applicable
preference period) following payment in full of the Certificates; provided, however, that this
shall not restrict or prohibit Party A from joining in any bankruptcy, reorganization,
arrangement, insolvency, moratorium or liquidation proceedings or other analogous proceedings
under applicable laws.
Regulation AB. Reference is hereby made to the Indemnification Agreement (the “Indemnification
Agreement”) dated as of June 29, 2006, among Residential Accredit Loans Inc., Residential
Funding Corporation and Party A. In accordance with the Indemnification Agreement, Party A
may, in lieu of providing Swap Financial Disclosure (as defined below), within 10 Business Days
after a request for Swap Financial Disclosure pursuant to the terms of the Indemnification
Agreement, assign this Agreement at its own cost to another entity that has agreed to provide
Swap Financial Disclosure with respect to itself (and which has the Required Swap Counterparty
Rating and the assignment to which would satisfy the Rating Agency Condition); provided, that
the failure of Party A to so assign will not constitute an Event of Default under this
Agreement. If Party A neither provides Swap Financial Disclosure pursuant to the
Indemnification Agreement nor assigns this Agreement pursuant to the preceding sentence, an
Additional Termination Event will occur as provided in Part 1(h)(v).
“Swap Financial Disclosure” has the meaning given thereto in the Indemnification Agreement.
Trustee Capacity. It is expressly understood and agreed by the parties hereto that insofar as this
Agreement is executed by Deutsche Bank Trust Company Americas (i) this Agreement is executed
and delivered by Deutsche Bank Trust Company Americas not in its individual capacity but solely
as Trustee under the PSA in the exercise of the powers and authority conferred and vested in it
as trustee thereunder, (ii) each of the representations, undertakings and agreements herein
made on behalf of the Trust is made and intended not as personal representations of the Trustee
but is made and intended for the purpose of binding only the Trust, and (iii) under no
circumstances shall Deutsche Bank Trust Company Americas 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 Agreement; and (iv) nothing contained herein shall be construed as
creating any liability on Deutsche Bank Trust Company Americas, individually or personally, to
perform any covenant either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any Person claiming by, through or under
the parties hereto; provided that nothing in this paragraph shall relieve Deutsche Bank Trust
Company Americas from performing its duties and obligations under the PSA in accordance with
the standard of care set forth therein.
IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers
as of the date hereof:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC. RALI SERIES 2006-QA5 TRUST
By: DEUTSCHE BANK TRUST COMPANY AMERICAS, a New
York banking corporation, not individually, but
solely as Trustee for RALI Series 2006-QA5 Trust,
for the benefit of the holders of the Mortgage
Asset-Backed Pass-Through Certificates, Series
2006-QA5, Group I Certificates
By: /s/ ▇▇▇▇▇▇▇▇▇ Fearon_______________________________ By: /s/ ▇▇▇▇▇▇ Campbell___________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Authorized Signatory Title: Authorized Signatory
Date: June 29 2006 Date: June 29 2006
EXHIBIT A
Credit Support Annex
(Bilateral Form) (ISDA Agreements Subject to New York Law Only)
ISDA®
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
ISDA MASTER AGREEMENT
dated as of June 29, 2006
between
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC. and RALI Series 2006-QA5 Trust (the “Trust”), acting
through Deutsche Bank Trust Company Americas, not
in its individual capacity by solely as Trustee
for the benefit of RALI Series 2006-QA5 Trust,
Mortgage Asset-Backed Pass-Through Certificates,
Series 2006-QA5, Group I Certificates
(“Party A”) (“Party B”)
This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule
and is a Credit Support Document under this Agreement with respect to each party.
Accordingly, the parties agree as follows:-
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in this
Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs
are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of
this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other
provisions of this Annex, Paragraph 13 will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the “Secured Party” will be to either party
when acting in that capacity and all corresponding references to the “Pledgor” will be to the other party when
acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all
references herein to that party as the Secured Party with respect to that Other Posted Support will be to that
party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to
provisions of law generally relating to security interests and secured parties.
Paragraph 2. Security Interest
Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its
Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right
of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the
Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted
hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further
action by either party.
Paragraph 1. ____Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Secured Party on or promptly
following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor’s
Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a
Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph
13). Unless otherwise specified in Paragraph 13, the “Delivery Amount” applicable to the Pledgor for any
Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly
following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds the Secured Party’s
Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by
the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable
Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the “Return Amount”
applicable to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party
exceeds
(ii) the Credit Support Amount.
“Credit Support Amount” means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured
Party’s Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the
Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the
Pledgor’s Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the
calculation of Credit Support Amount yields a number less than zero.
Paragraph 2. ____Conditions Precedent, Transfer Timing, Calculations and Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the
Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is
continuing with respect to the other party; and
(ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or
been designated as the result of an Event of Default or Specified Condition with respect to the
other party.
(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the
Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant
Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made
after the Notification Time, then the relevant Transfer will be made not later than the close of business on the
second Local Business Day thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made
by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party,
if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business
Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation).
(d) Substitutions.
(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of
Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the
Secured Party substitute Eligible Credit Support (the “Substitute Credit Support”); and
(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted
Credit Support specified by the Pledgor in its notice not later than the Local Business Day following
the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified
in Paragraph 13 (the “Substitution Date”); provided that the Secured Party will only be obligated to
Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support
equal to the Value as of that date of the Substitute Credit Support.
Paragraph 3. ....Dispute Resolution
If a party (a “Disputing Party”) disputes (I) the Valuation Agent’s calculation of a Delivery Amount or a Return
Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the
Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other
party) not later than the close of business on the Local Business Day following (X) the date that the demand is
made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (2)
subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later
than the close of business on the Local Business Day following (X) the date that the demand is made under
Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will
consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the
Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the
Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by:
(A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the
parties have agreed are not in dispute;
(B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four
actual quotations at mid-market from Reference Market-makers for purposes of calculating Market
Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are
not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may
be used for that Transaction (or Swap Transaction); and if no quotations are available for a
particular Transaction (or Swap Transaction), then the Valuation Agent’s original calculations will
be used for that Transaction (or Swap Transaction); and
(C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of
Posted Credit Support.
(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the
Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13.
Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other
party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day
following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation
Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate
Transfer.
Paragraph 4. ....Holding and Using Posted Collateral
(a) Care of Posted Collateral. Without limiting the Secured Party’s rights under Paragraph 6(c), the
Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent
required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care
if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as
specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral,
including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights
pertaining thereto.
(b) Eligibility to Hold Posted Collateral; Custodians.
(i) General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted
Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a
“Custodian”) to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the
Pledgor of the appointment of a Custodian, the Pledgor’s obligations to make any Transfer will be
discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian
will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian
is acting.
(ii) Failure to Satisfy Conditions. If the Secured Party or its Custodian fails to satisfy any
conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party
will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to
Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the
Secured Party if it satisfies those conditions.
(iii) Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the same
extent that the Secured Party would be liable hereunder for its own acts or omissions.
(c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the rights and
obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting
Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or
been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party,
then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the
right to:
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise
use in its business any Posted Collateral it holds, free from any claim or right of any nature
whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and
(ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for
either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to
Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed
to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the
Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above.
(d) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive
Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following
Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery
Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the
date of calculation will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu
of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted
Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party
will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent
that a Delivery Amount would not be created or increased by that Transfer, as calculated by the
Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose).
The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted
Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2.
Paragraph 5. ....Events of Default
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible
Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that
failure continues for two Local Business Days after notice of that failure is given to that party;
(ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect
to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days
after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or obligation other than those specified
in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is
given to that party.
Paragraph 6. ....Certain Rights and Remedies
(a) Secured Party’s Rights and Remedies. If at any time (1) an Event of Default or Specified Condition with
respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been
designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless
the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more
of the following rights and remedies:
(i) all rights and remedies available to a secured party under applicable law with respect to Posted
Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted
Support, if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against
any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any
obligation of the Secured Party to Transfer that Posted Collateral); and
(iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public
or private sales or other dispositions with such notice, if any, as may be required under applicable
law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right
of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the
Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the
liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any
Obligations in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value
and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior
notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under
applicable law and cannot be waived.
(b) Pledgor’s Rights and Remedies. If at any time an Early Termination Date has occurred or been designated
as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in
the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the
Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to a pledgor under applicable law with
respect to Posted Collateral held by the Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of
Other Posted Support, if any;
(iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest
Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii)
above, the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or
any obligation of the Secured Party to Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of
any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value
of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is
Transferred to the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds and Posted
Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after
satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all
events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application
under Paragraphs 8(a) and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any
Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will
Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any.
Paragraph 7. ....Representations
Each party represents to the other party (which representations will be deemed to be repeated as of each date on
which it, as the Pledgor, Transfers Eligible Collateral) that:
(i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as
the Pledgor and has taken all necessary actions to authorize the granting of that security interest and
lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers
to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other
restrictions other than the security interest and lien granted under Paragraph 2;
(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex,
the Secured Party will have a valid and perfected first priority security interest therein (assuming
that any central clearing corporation or any third-party financial intermediary or other entity not
within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices
and takes the action required of it under applicable law for perfection of that interest); and
(iv) the performance by it of its obligations under this Annex will not result in the creation of any
security interest, lien or other encumbrance on any Posted Collateral other than the security interest
and lien granted under Paragraph 2.
Paragraph 8. ....Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its own costs
and expenses in connection with performing its obligations under this Annex and neither party will be liable for
any costs and expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges of any
nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware of
the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under
Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured
Party’s rights under Paragraph 6(c).
(c) Liquidation/Application of Posted Credit Support. All reasonable costs and expenses incurred by or on
behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted
Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this
Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties.
Paragraph 9. ....Miscellaneous
(a) Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the
Interest Amount will be obligated to pay the Pledgor (to the extent permitted under applicable law) an amount
equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be
Transferred, from (and including) the date that Posted Collateral or Interest Amount was required to be
Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest
will be calculated on the basis of daily compounding and the actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party, the other party will execute, deliver,
file and record any financing statement, specific assignment or other document and take any other action that may
be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any
security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under
this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a
security interest on Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against,
any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could
adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action,
proceeding or lien results from the exercise of the Secured Party’s rights under Paragraph 6(c).
(d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex,
including, but not limited to, all calculations, valuations and determinations made by either party, will be made
in good faith and in a commercially reasonable manner.
(e) Demands and Notices. All demands and notices made by a party under this Annex will be made as specified
in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13.
(f) Specifications of Certain Matters. Anything referred to in this Annex as being specified in Paragraph
13 also may be specified in one or more Confirmations or other documents and this Annex will be construed
accordingly.
Paragraph 10. ...Definitions
As used in this Annex:-
“Cash” means the lawful currency of the United States of America.
“Credit Support Amount” has the meaning specified in Paragraph 3.
“Custodian” has the meaning specified in Paragraphs 6(b)(i) and 13.
“Delivery Amount” has the meaning specified in Paragraph 3(a).
“Disputing Party” has the meaning specified in Paragraph 5.
“Distributions” means with respect to Posted Collateral other than Cash, all principal, interest and other
payments and distributions of cash or other property with respect thereto, regardless of whether the Secured
Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of
property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect
to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified
herein.
“Eligible Collateral” means, with respect to a party, the items, if any, specified as such for that party in
Paragraph 13.
“Eligible Credit Support” means Eligible Collateral and Other Eligible Support.
“Exposure” means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5
in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the
other party (expressed as a positive number) or by a party that is the Secured Party to the other party
(expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or
Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will
be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for
Replacement Transactions (as that term is defined in the definition of “Market Quotation”).
“Independent Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13;
if no amount is specified, zero.
“Interest Amount” means, with respect to an Interest Period, the aggregate sum of the amounts of interest
calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash
held by the Secured Party on that day, determined by the Secured Party for each such day as follows:
(x) the amount of that Cash on that day; multiplied by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
“Interest Period” means the period from (and including) the last Local Business Day on which an Interest Amount
was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted
Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local
Business Day on which the current Interest Amount is to be Transferred.
“Interest Rate” means the rate specified in Paragraph 13.
“Local Business Day”, unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions
Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
“Minimum Transfer Amount” means, with respect to a party, the amount specified as such for that party in
Paragraph 13; if no amount is specified, zero.
“Notification Time” has the meaning specified in Paragraph 13.
“Obligations” means, with respect to a party, all present and future obligations of that party under this
Agreement and any additional obligations specified for that party in Paragraph 13.
“Other Eligible Support” means, with respect to a party, the items, if any, specified as such for that party in
Paragraph 13.
“Other Posted Support” means all Other Eligible Support Transferred to the Secured Party that remains in effect
for the benefit of that Secured Party.
“Pledgor” means either party, when that party (i) receives a demand for or is required to Transfer Eligible
Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a).
“Posted Collateral” means all Eligible Collateral, other property, Distributions, and all proceeds thereof that
have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor
pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest
Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the
form of Cash.
“Posted Credit Support” means Posted Collateral and Other Posted Support.
“Recalculation Date” means the Valuation Date that gives rise to the dispute under Paragraph 5; provided,
however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute,
then the “Recalculation Date” means the most recent Valuation Date under Paragraph 3.
“Resolution Time” has the meaning specified in Paragraph 13.
“Return Amount” has the meaning specified in Paragraph 3(b).
“Secured Party” means either party, when that party (i) makes a demand for or is entitled to receive Eligible
Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support.
“Specified Condition” means, with respect to a party, any event specified as such for that party in Paragraph 13.
“Substitute Credit Support” has the meaning specified in Paragraph 4(d)(i).
“Substitution Date” has the meaning specified in Paragraph 4(d)(ii).
“Threshold” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no
amount is specified, zero.
“Transfer” means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in
accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified
by the recipient;
(ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or
delivery in appropriate physical form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to
constitute a legally valid transfer to the recipient;
(iii) in the case of securities that can be paid or delivered by book-entry, the giving of written
instructions to the relevant depository institution or other entity specified by the recipient, together
with a written copy thereof to the recipient, sufficient if complied with to result in a legally
effective transfer of the relevant interest to the recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13.
“Valuation Agent” has the meaning specified in Paragraph 13.
“Valuation Date” means each date specified in or otherwise determined pursuant to Paragraph 13.
“Valuation Percentage” means, for any item of Eligible Collateral, the percentage specified in Paragraph 13.
“Valuation Time” has the meaning specified in Paragraph 13.
“Value” means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in
the case of a dispute, with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage, if any;
(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13
Paragraph 13......Elections and Variables
Security Interest for “Obligations”. The term “Obligations” as used in this Annex includes the following
additional obligations with respect to Party A and Party B: None.
Credit Support Obligations.
“Delivery Amount” and “Return Amount” each has the meaning specified in Paragraph 3. “Credit Support
Amount” has the meaning specified in Paragraph 3; provided, however, that in the event Party A
elects or is required to post collateral pursuant to Part 5(f) of the Schedule due to a ratings
downgrade or withdrawal by S&P, “Credit Support Amount” means, with respect to a Valuation
Date, an amount equal to the greater of (1) the sum of (a) the MTM and (b) the Volatility
Buffer multiplied by the Notional Amount and (2) zero. “MTM” means the Secured Party’s
Exposure for that Valuation Date. “Volatility Buffer” means (a) if, on the date of
determination, Party A has a short-term credit rating of “A-2” by S&P and the Termination Date
of the Transaction will occur in less than 5 years, 3.25%, (b) if, on the date of
determination, Party A has a short-term credit rating of “A-2” by S&P and the Termination Date
of the Transaction will occur in less than 10 years but more than 5 years, 4.00%, (c) if, on
the date of determination, Party A has a short-term credit rating of “A-3” by S&P and the
Termination Date of the Transaction will occur in less than 5 years, 4.00%, (d) if, on the date
of determination, Party A has a short-term credit rating of “A-3” by S&P and the Termination
Date of the Transaction will occur in less than 10 years but more than 5 years, 5.00%, (e) if,
on the date of determination, Party A has a long-term credit rating of “BB+” or lower by S&P
and the Termination Date of the Transaction will occur in less than 5 years, 4.50%, or (f) if,
on the date of determination, Party A has a long-term credit rating of “BB+” or lower by S&P
and the Termination Date of the Transaction will occur in less than 10 years but more than 5
years, 5.75%.
In the event Party A elects or is required to post collateral pursuant to Part 5(f) of the
Schedule due to a ratings downgrade or withdrawal by S&P, the Valuation Agent shall verify its
calculation of the Secured Party’s Exposure on a quarterly basis by seeking two quotations from
Reference Market-makers. If two Reference Market-makers are not available to provide a
quotation, then fewer than two Reference Market-makers may be used for such purpose. If no
Reference Market-makers are available, then the Valuation Agent’s estimates at mid-market will
be used. The Valuation Agent may not obtain the quotations referred to above from the same
person in excess of four times during any 12 month period. Where more than one quotation is
obtained, the quotation representing the greatest amount of Exposure shall be used by the
Valuation Agent. In the event the verification procedures set forth above indicate that there
is a deficiency in the amount of Eligible Collateral that has been Transferred to the Secured
Party, the Pledgor shall Transfer the amount of Eligible Collateral necessary to cure such
deficiency to the Secured Party within three Local Business Days.
Eligible Collateral. The following items will qualify as “Eligible Collateral” for Party A:
Valuation Percentage
Eligible Collateral Party A
(A) Cash X 100.0%
(B) Treasury Securities with a remaining maturity of 52 weeks or less X 98.5%
(C) Treasury Securities with a remaining maturity of more than 52 weeks X 93.6%
but no more than 5 years
(D) Treasury Securities with a remaining maturity of more than 5 years X 89.9%
but no more than 10 years
(E) Treasury Securities with a remaining maturity of more than 10 years X 83.9%
but no more than 30 years
(F) Agency Notes with a remaining maturity of no more than 15 years X 81.3%
(G) Agency Notes with a remaining maturity of more than 15 years but no X 74.8%
more than 30 years
(H) Commercial Paper rated “A-1+” by S&P and “P-1” by ▇▇▇▇▇’▇, with a X 98.0%
remaining maturity of 180 days or less
(I) Commercial Paper rated “A-1” by S&P and P-1 by ▇▇▇▇▇’▇, with a X 97.0%
remaining maturity of 180 days or less
(J) Commercial Paper rated “A-1” by S&P and “P-1” by ▇▇▇▇▇’▇, with a X 94.0%
remaining maturity of more than 180 days or but no more than 360 days
Notwithstanding the above, Commercial Paper will qualify as Eligible Collateral for Party A only if the aggregate amount of
Commercial Paper Transferred as Eligible Collateral under this Annex constitutes the obligations of 10 or more issuers.
-------------------------------------------------------------------------------------------------------------------
Other Eligible Support: Not applicable.
Thresholds.
“Independent Amount” means, with respect to Party A, zero; provided, however, if Party A elects
or is required to post collateral pursuant to Part 5(f) of the Schedule due to a
ratings downgrade or withdrawal by ▇▇▇▇▇’▇ or Fitch, then the “Independent Amount”
with respect to Party A shall be the aggregate of any Transaction Independent Amounts
in respect of all Transactions outstanding at that time. “Transaction Independent
Amount” shall mean (unless otherwise agreed by ▇▇▇▇▇’▇ and Fitch) 1% of the Notional
Amount of each Transaction.
“Independent Amount” means, with respect to Party B, zero.
“Threshold” means with, respect to Party A: Infinite; provided, however, if Party A elects or
is required to post collateral pursuant to Part 5(f) of the Schedule due to a ratings
downgrade or withdrawal by ▇▇▇▇▇’▇ or Fitch, then the “Threshold” with respect to
Party A shall be zero (unless otherwise agreed by ▇▇▇▇▇’▇ and Fitch);
“Threshold” means with respect to Party B: Infinite.
“Minimum Transfer Amount” means with respect to Party A: USD 100,000; and with respect to
Party B: USD 100,000; provided, however, that if such party is a Defaulting Party at
the time,
“Minimum Transfer Amount” shall mean zero with respect to such party.
Rounding. The Delivery Amount will be rounded up to the nearest multiple of $1000 and the
Return Amount will be rounded down to the nearest multiple of $1000.
Valuation and Timing.
“Valuation Agent” means for purposes of Paragraphs 3 and 5, the party making the demand under
Paragraph 3, and, for purposes of Paragraph 6(d), the Secured Party receiving or deemed to
receive the Distributions or the Interest Amount, as applicable.
“Valuation Date” means (A) each and every Wednesday commencing on the first such date following the
date hereof or if any Wednesday is not a Local Business Day, the next succeeding Local Business
Day and (B) any other Local Business Day on which notice is made before 12:00 noon, New York
time on the immediately preceding Local Business Day.
“Valuation Time” means the close of business in New York on the New York Banking Day before the
Valuation Date or date of calculation, as applicable, or any time on the Valuation Date or date
of calculation, as applicable; provided that the calculations of Value and Exposure will be
made as of approximately the same time on the same date.
“Notification Time” means 1:00 p.m., New York time, on a Local Business Day.
The Valuation Agent’s calculations pursuant to the terms hereof shall be made in accordance with
standard market practice, using commonly accepted third party sources that comply with S&P’s
criteria (e.g. Bloomberg, Bridge Information Services, Reuters and Telerate).
Conditions Precedent and Secured Party’s Rights and Remedies. The following Termination Events will be a
“Specified Condition” for the party specified (that party being the Affected Party of the Termination
Event occurs with respect to that party): Not Applicable.
Substitution.
“Substitution Date” has the meaning specified in Paragraph 4(d)(ii).
Consent. The Pledgor need not obtain the Secured Party's consent for any substitution pursuant to
Paragraph 4(d).
Dispute Resolution.
“Resolution Time” means 1:00 p.m., New York time, on the Local Business Day following the date on
which the notice of the dispute is given under Paragraph 5.
Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit Support or of any
Transfer of Eligible Credit Support or Posted Credit Support, as the case may be, will be
calculated by the Valuation Agent in accordance with standard market practice using third party
sources (such as, by way of example only, Bloomberg or Reuters) where available.
Alternative. The provisions of Paragraph 5 will apply.
Holding and Using Posted Collateral.
Eligibility to Hold Posted Collateral; Custodian.
Party B and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b);
provided that the following conditions applicable to it are satisfied:
Party B is not a Defaulting Party.
Posted Collateral may be held only in the following jurisdictions: the United States of
America.
Initially, the Custodian for Party B is Party B
Use of Posted Collateral. The provisions of Paragraph 6(c) will apply.
Distributions and Interest Amount.
“Interest Rate”. The “Interest Rate” shall be the rate actually earned by the Custodian on Posted
Collateral in the form of Cash.
Transfer of Interest Amount. The Transfer of the Interest Amount will be made on the last Local
Business Day of each calendar month and on any Local Business Day that Posted Collateral in the
form of Cash is Transferred to the Pledgor pursuant to Paragraph 3(b).
Alternative to Interest Amount. The provisions of Paragraph 6(d)(ii) will apply.
Additional Representation(s). None.
Other Eligible Support and Other Posted Support. “Value” and “Transfer” with respect to Other Eligible Support
and Other Posted Support each means: Not applicable.
Demands and Notices.
All demands, specifications and notices to Party A under this Annex will be made to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇. - FID Controllers
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: FID Collateral Manager
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
and all demands, specifications and notices to Party B under this Annex will be to:
Deutsche Bank Trust Company Americas, as trustee of the Trust
▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Trust Administration-RF06A5
Facsimile No.: (▇▇▇) ▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇ ▇▇▇▇
; provided that any demand, specification or notice may be made by telephone (“Telephone Notice”)
between employees of each party if such Telephone Notice is confirmed by a subsequent written
instruction (which may be delivered via facsimile or email) by the close of business on the same day
that such Telephone Notice is given.
Addresses for Transfers.
Party A:
Cash: CITIBANK, New York
ABA No.: 021 000 089
Account No.: 4072 - 4601
Treasury Securities
and Agency Notes: Bank of New York, New York/▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
ABA No.: ▇▇▇▇▇▇▇▇▇
Other Forms of Eligible Collateral: As provided by Party A.
Party B:
Cash: As provided by Party B
DTC Eligible Securities: As provided by Party B
Other Provisions.
Notwithstanding any other provision in this Agreement to the contrary, no full or partial failure to
exercise and no delay in exercising, on the part of Party A or Party B, any right, remedy,
power or privilege permitted hereunder shall operate in any way as a waiver thereof by such
party, including without limitation any failure to exercise or any delay in exercising to any
or to the full extent of such party's rights with respect to transfer timing pursuant to
Paragraph 4(b), regardless of the frequency of such failure or delay.
In all cases, in order to facilitate calculation of the Delivery Amount and the Return Amount for a
particular Valuation Date in accordance with Paragraph 3 of this Annex:
Eligible Collateral;
Exposure; and
Posted Collateral
shall each be expressed in US Dollars. If any of these items are expressed in a currency other
than US Dollars, then they shall be converted into US Dollar amounts at the spot exchange rate
determined by the Valuation Agent on that Valuation Date.
Form of Annex. The parties hereby agree that the text of the body of this Annex is intended to be
the printed form of 1994 ISDA Credit Support Annex (Bilateral Form - ISDA Agreements Subject to
New York Law Only version) as published and copyrighted by the International Swaps and
Derivatives Association, Inc.
Agreement as to Single Secured Party and Pledgor. Party A and Party B agree that, notwithstanding anything to
the contrary in the recital to this Annex, Paragraph 1(b) or Paragraph 2 or the definitions of Paragraph
12, (a) the term “Secured Party” as used in this Annex shall mean only Party B, (b) the term “Pledgor”
as used in this Annex shall mean only Party A, (c) only Party A makes the pledge and grant in Paragraph
2, the acknowledgement in the final sentence of Paragraph 8(a) and the representations in paragraph 9
and (d) only Party A will be required to make Transfers of Eligible Credit Support hereunder.
Additional Definitions
“Agency Notes” means U.S. Dollar-denominated fixed rate, non-amortising, non-mortgage-backed, senior
debt securities of fixed maturity, rated Aaa by ▇▇▇▇▇'▇ and AAA by S&P issued by any of the Federal Home
Loan Banks (including their consolidated obligations issued through the Office of Finance of the Federal
Home Loan Bank System), the Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or the Federal Farm Credit Bank.
“Commercial Paper” means U.S. Dollar-denominated, coupon-bearing, commercial paper issued by a
corporation, finance company, partnership or limited liability company.
“Treasury Securities” means U.S. Dollar-denominated, coupon-bearing, senior debt securities of the
United States of America issued by the U.S. Treasury Department and backed by the full faith and credit
of the United States of America.
Trustee Capacity. It is expressly understood and agreed by the parties hereto that insofar as this Annex is
executed by Deutsche Bank Trust Company Americas (i) this Annex is executed and delivered by Deutsche
Bank Trust Company Americas not in its individual capacity but solely as Trustee under the PSA in the
exercise of the powers and authority conferred and invested in it as trustee thereunder, (ii) each of
the representations, undertakings and agreements herein made on behalf of the Trust is made and intended
not as personal representations of the Trustee but is made and intended for the purpose of binding only
the Trust, and (iii) under no circumstances shall Deutsche Bank Trust Company Americas 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 Annex, and (iv) nothing contained herein shall be construed as creating any liability on
Deutsche Bank Trust Company Americas, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being expressly waived by the parties
hereto and by any Person claiming by, through or under the parties hereto; provided that nothing in this
paragraph shall relieve Deutsche Bank Trust Company Americas from performing its duties and obligations
under the PSA in accordance with the standard of care set forth therein.
IN WITNESS WHEREOF, the parties have executed this Credit Support Annex by their duly
authorized officers as of the date hereof.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ Fearon_________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Authorized Signatory
Date: June 29 2006
RALI SERIES 2006-QA5 TRUST
By: DEUTSCHE BANK TRUST COMPANY AMERICAS, a New
York banking corporation, not individually, but
solely as Trustee for RALI Series 2006-QA5 Trust,
for the benefit of the holders of the Mortgage
Asset-Backed Pass-Through Certificates, Series
2006-QA5, Group I Certificates
By: /s/ ▇▇▇▇▇▇ Campbell__________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Authorized Signatory
Date: June 29 2006
DATE: June 29, 2006
TO: RALI Series 2006-Trust, acting through Deutsche Bank Trust Company Americas, a
New York banking corporation, not in its individual capacity, but solely as
Trustee for the benefit of RALI Series 2006-QA5 Trust, for the benefit of the
holders of the Mortgage Asset-Backed Pass-Through Certificates, Series
2006-QA5, Group I Certificates
ATTENTION: Trust Administration-RF06A5
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
FROM: New York Derivative Client Services Group
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
SUBJECT: Fixed Income Derivatives Confirmation
REFERENCE NUMBER: FRUPJ
The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the Swap
Transaction entered into on the Trade Date specified below (the “Transaction”) between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital
Services Inc. (“Party A”) and Deutsche Bank Trust Company Americas, not individually, but solely as Trustee
(“Party B”) under the Standard Terms of Pooling and Servicing Agreement dated as of March 1, 2006 and related
Series Supplement dated as of June 1, 2006 (together, the “PSA”) among Residential Accredit Loans, Inc., as
Depositor, Residential Funding Corporation, as Master Servicer, and Deutsche Bank Trust Company Americas, as
Trustee, for the RALI Series 2006-QA5 Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA5.
The definitions and provisions contained in the 2000 ISDA Definitions (the “Definitions”), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of
any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. Terms
capitalized but not defined in this Confirmation (including the Definitions) have the meanings attributed to them
in the PSA.
This Confirmation constitutes a “Confirmation” as referred to in, and supplements, forms part of and is subject
to, the ISDA Master Agreement dated as of June 29, 2006, as amended and supplemented from time to time (the
“Agreement”), between Party A and Party B. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below.
The terms of the particular Transaction to which this Confirmation relates are as follows:
Notional Amount:................................... With respect to any Calculation Period, the amount
set forth for such Calculation Period in Schedule I
attached hereto.
Trade Date:........................................ June 27, 2006
Effective Date:.................................... June 29, 2006
Termination Date:.................................. June 25, 2011, subject to adjustment in accordance
with the Business Day Convention.
Fixed Amounts:
Fixed Rate Payer:......................... Party B
Fixed Rate Payer Payment Dates:........... The 25th calendar day of each month during the Term
of this Transaction, commencing July 25, 2006 and
ending on the Termination Date, subject to
adjustment in accordance with the Business Day
Convention.
Fixed Rate Payer Period End
Dates:.................................. The 25th calendar day of each month during the Term
of this Transaction, commencing July 25, 2006 and
ending on the Termination Date, subject to No
Adjustment.
Fixed Rate:............................... 5.59%
Fixed Amount:............................. To be determined in accordance with the following
formula:
10 * Fixed Rate * Notional Amount * Fixed Rate Day
Count Fraction.
Fixed Rate Day Count Fraction:............ 30/360
Floating Amounts:
Floating Rate Payer:...................... Party A
Floating Rate Payer Payment
Dates:.................................. The 25th calendar day of each month during the Term
of this Transaction, commencing July 25, 2006 and
ending on the Termination Date, subject to
adjustment in accordance with the Business Day
Convention.
Floating Rate Payer Period End
Dates:.................................. The 25th calendar day of each month during the Term
of this Transaction, commencing July 25, 2006 and
ending on the Termination Date, subject to
adjustment in accordance with the Business Day
Convention.
Floating Rate Option:..................... USD-LIBOR-BBA
Floating Amount:.......................... To be determined in accordance with the following
formula:
10 * Floating Rate * Notional Amount *
Floating Rate Day Count Fraction.
Designated Maturity:...................... One month
Floating Rate Day Count Fraction:......... Actual/360
Reset Dates:.............................. The first day of each Calculation Period.
Compounding:.............................. Inapplicable
Business Days:..................................... New York and Los Angeles
Business Day Convention:........................... Following
Account Details and Settlement Information:
Payments to Party A:
Citibank, New York
ABA No.: 021 000 089
Account No.: 4072-4601
Account Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc.
Payments to Party B:
Deustche Bank National Trust Company Americas
ABA No.: ▇▇▇▇▇▇▇▇▇
Account No: ▇▇▇▇▇▇▇▇
Acct Name: NYLTD Funds Control - Stars West
Ref: RALI 2006-QA5 Swap
Trustee Capacity. It is expressly understood and agreed by the parties hereto that insofar as this Confirmation
is executed by Deutsche Bank Trust Company Americas (i) this Confirmation is executed and delivered by
Deutsche Bank Trust Company Americas not in its individual capacity but solely as Trustee under the PSA
in the exercise of the powers and authority conferred and invested in it as trustee thereunder, (ii)
each of the representations, undertakings and agreements herein made on behalf of the Trust is made and
intended not as personal representations of the Trustee but is made and intended for the purpose of
binding only the Trust, and (iii) under no circumstances shall Deutsche Bank Trust Company Americas 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; and (iv) nothing contained herein shall be construed as creating
any liability on Deutsche Bank Trust Company Americas, individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if any, being expressly
waived by the parties hereto and by any Person claiming by, through or under the parties hereto;
provided that nothing in this paragraph shall relieve Deutsche Bank Trust Company Americas from
performing its duties and obligations under the PSA in accordance with the standard of care set forth
therein.
We are very pleased to have entered into this Transaction with you and we look forward to completing other
transactions with you in the near future.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CAPITAL SERVICES INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ Fearon_________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Authorized Signatory
Party B, acting through its duly authorized signatory, hereby agrees to, accepts and confirms the terms of the
foregoing as of the Trade Date.
RALI SERIES 2006-QA5 TRUST
By: DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York
banking corporation, not individually, but solely
as Trustee for RALI Series 2006-QA5 Trust, for the
benefit of the holders of the Mortgage Asset-Backed
Pass-Through Certificates, Series 2006-QA5, Group I
Certificates
By:_ /s/ ▇▇▇▇▇▇ Campbell_____________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Authorized Signatory
SCHEDULE I
Line Calculation Period Notional Amount ($) Multiplier
1 Effective Date 7/25/2006 60,608,600.00 10
2 7/25/2006 8/25/2006 57,627,419.94 10
3 8/25/2006 9/25/2006 54,791,352.14 10
4 9/25/2006 10/25/2006 52,093,359.43 10
5 10/25/2006 11/25/2006 49,526,720.92 10
6 11/25/2006 12/25/2006 47,085,019.00 10
7 12/25/2006 1/25/2007 44,762,197.07 10
8 1/25/2007 2/25/2007 42,552,468.36 10
9 2/25/2007 3/25/2007 40,450,327.76 10
10 3/25/2007 4/25/2007 38,450,538.06 10
11 4/25/2007 5/25/2007 36,548,116.97 10
12 5/25/2007 6/25/2007 34,738,324.67 10
13 6/25/2007 7/25/2007 33,016,652.01 10
14 7/25/2007 8/25/2007 31,378,809.35 10
15 8/25/2007 9/25/2007 29,820,715.78 10
16 9/25/2007 10/25/2007 28,338,489.03 10
17 10/25/2007 11/25/2007 26,928,435.81 10
18 11/25/2007 12/25/2007 25,577,106.02 10
19 12/25/2007 1/25/2008 24,301,524.59 10
20 1/25/2008 2/25/2008 23,088,056.23 10
21 2/25/2008 3/25/2008 21,933,677.07 10
22 3/25/2008 4/25/2008 20,835,510.44 10
23 4/25/2008 5/25/2008 19,790,819.69 10
24 5/25/2008 6/25/2008 18,797,001.37 10
25 6/25/2008 7/25/2008 17,851,578.75 10
26 7/25/2008 8/25/2008 16,952,195.65 10
27 8/25/2008 9/25/2008 16,096,610.60 10
28 9/25/2008 10/25/2008 15,282,691.21 10
29 10/25/2008 11/25/2008 14,508,408.91 10
30 11/25/2008 12/25/2008 13,771,833.86 10
31 12/25/2008 1/25/2009 13,071,130.16 10
32 1/25/2009 2/25/2009 12,391,006.56 10
33 2/25/2009 3/25/2009 11,743,903.34 10
34 3/25/2009 4/25/2009 11,141,959.93 10
35 4/25/2009 5/25/2009 10,203,951.25 10
36 5/25/2009 6/25/2009 8,965,275.76 10
37 6/25/2009 7/25/2009 8,357,632.38 10
38 7/25/2009 8/25/2009 8,318,573.30 10
39 8/25/2009 9/25/2009 7,902,862.40 10
40 9/25/2009 10/25/2009 7,504,236.67 10
41 10/25/2009 11/25/2009 7,128,192.95 10
42 11/25/2009 12/25/2009 6,770,464.78 10
43 12/25/2009 1/25/2010 6,430,160.30 10
44 1/25/2010 2/25/2010 6,106,431.08 10
45 2/25/2010 3/25/2010 5,798,469.98 10
46 3/25/2010 4/25/2010 5,505,509.18 10
47 4/25/2010 5/25/2010 5,226,818.22 10
48 5/25/2010 6/25/2010 4,954,863.91 10
49 6/25/2010 7/25/2010 4,702,998.78 10
50 7/25/2010 8/25/2010 4,461,660.89 10
51 8/25/2010 9/25/2010 4,225,984.26 10
52 9/25/2010 10/25/2010 4,009,622.50 10
53 10/25/2010 11/25/2010 3,791,302.64 10
54 11/25/2010 12/25/2010 3,596,114.05 10
55 12/25/2010 1/25/2011 3,379,874.86 10
56 1/25/2011 2/25/2011 3,191,680.67 10
57 2/25/2011 3/25/2011 3,021,112.44 10
58 3/25/2011 4/25/2011 2,788,997.57 10
59 4/25/2011 5/25/2011 1,965,831.00 10
60 5/25/2011 Termination Date 86,615.20 10
-------------------------------------------------------------------------------------------------------------------
