Exhibit 99.3
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CORRIDOR CONTRACT ADMINISTRATION AGREEMENT
This CORRIDOR CONTRACT ADMINISTRATION AGREEMENT, dated as of March
30, 2006 (this "Agreement"), among THE BANK OF NEW YORK ("BNY"), as Corridor
Contract Administrator (in such capacity, the "Corridor Contract
Administrator") and as Trustee under the Pooling and Servicing Agreement
referred to below (in such capacity, the "Trustee"), and COUNTRYWIDE HOME
LOANS, INC. ("CHL").
WHEREAS, CHL is a party to an interest rate corridor agreement
between CHL and Bear Xxxxxxx Financial Products Inc. (the "Counterparty"), with
a Trade Date of March 27, 2006 and a reference number of XXXXX0000 (the
"Corridor Contract"), a copy of which is attached to this Agreement at Exhibit
A;
WHEREAS, CHL is conveying certain mortgage loans and other related
assets to a trust fund (the "Trust Fund") created pursuant to a Pooling and
Servicing Agreement, dated as of March 1, 2006 (the "Pooling and Servicing
Agreement"), among CHL, as a seller, Park Monaco Inc., as a seller, Park Sienna
LLC, as a seller, Countrywide Home Loans Servicing LP, as master servicer (the
"Master Servicer") and the Trustee, with respect to the CWHEQ, Inc. Home Equity
Loan Asset-Backed Certificates, Series 2006-S2;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, CHL is assigning all of its rights, and delegating all of its duties
and obligations (other than its obligation to pay the Fixed Amount and any
fees, if applicable (as defined in the Corridor Contract)), under the Corridor
Contract to the Corridor Contract Administrator, pursuant to the Assignment
Agreement, dated as of the date hereof (the "Assignment Agreement"), among CHL,
as assignor, the Corridor Contract Administrator, as assignee, and the
Counterparty;
WHEREAS, CHL desires that the Net Payments (as defined below) on the
Corridor Contract be distributed to the Trustee on behalf of the Trust Fund to
be applied for the purposes specified in the Pooling and Servicing Agreement
and that the Excess Payments (as defined below) on the Corridor Contract be
distributed to CHL;
WHEREAS, CHL and the Trustee desire to appoint the Corridor Contract
Administrator, and the Corridor Contract Administrator desires to accept such
appointment, to distribute funds received under the Corridor Contract to the
Trustee and to CHL as provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined in this
Agreement shall have the respective meanings assigned thereto in the Pooling
and Servicing Agreement.
Benefited Certificates: The Class A-1 Certificates.
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Calculation Period: With respect to the Corridor Contract and any
payment made under or in respect of such Corridor Contract, the related
"Calculation Period" as defined in such Corridor Contract.
Controlling Party: As defined in Section 5.
Corridor Contract Account: The separate account created and
maintained by the Corridor Contract Administrator pursuant to Section 3 with a
depository institution in the name of the Corridor Contract Administrator for
the benefit of CHL and the Trustee on behalf of the Holders of the Benefited
Certificates and designated "The Bank of New York for Countrywide Home Loans,
Inc. and certain registered Holders of CWHEQ, Inc., Home Equity Loan
Asset-Backed Certificates, Series 2006-S2". Funds in the Corridor Contract
Account shall be held for CHL and the Trustee on behalf of the Holders of the
Benefited Certificates as set forth in this Agreement.
Day Count Fraction: With respect to the Corridor Contract and any
Distribution Date, the "Floating Rate Day Count Fraction" specified for the
Calculation Period related to such Distribution Date in such Corridor Contract.
Excess Payment: For any Distribution Date, (a) with respect to any
payment received by the Corridor Contract Administrator from the Counterparty
in respect of the Corridor Contract for such Distribution Date (other than any
payment in respect of an early termination of the Corridor Contract), an amount
equal to the excess, if any, of such payment over the Net Payment for such
Distribution Date and (b) with respect to any payment received by the Corridor
Contract Administrator from the Counterparty in respect of an early termination
of the Corridor Contract received during the period from and including the
immediately preceding Distribution Date to and excluding the day immediately
preceding the current Distribution Date, an amount equal to the excess, if any,
of such payment over the Net Payment in respect of such payment.
Notwithstanding the foregoing, in the event that the aggregate Certificate
Principal Balance of the Benefited Certificates is reduced to zero prior to the
termination of the Corridor Contract, the Excess Payment for any Distribution
Date following the Distribution Date on which the aggregate Certificate
Principal Balance of Benefited Certificates is reduced to zero shall be the
entire payment received from the Counterparty.
LIBOR: With respect to the Corridor Contract, the "Floating Rate
Option" as defined in the Corridor Contract.
Net Payment: For any Distribution Date, (a) with respect to any
payment received by the Corridor Contract Administrator from the Counterparty
in respect of the Corridor Contract for such Distribution Date (other than any
payment in respect of an early termination of the Corridor Contract), an amount
equal to the product of (i) the excess, if any, of (x) LIBOR over (y) the
related Strike Rate, (ii) the lesser of (x) the related Notional Balance for
such Distribution Date and (y) the aggregate Certificate Principal Balance of
the Benefited Certificates immediately prior to such Distribution Date and
(iii) the Day Count Fraction, and (b) with respect to any payment received by
the Corridor Contract Administrator from the Counterparty in respect of an
early termination of the Corridor Contract received during the period from and
including the immediately preceding Distribution Date to and excluding the day
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immediately preceding the current Distribution Date, an amount equal to the
product of (i) a fraction, the numerator of which is equal to the lesser of (x)
the related Notional Balance for the first Distribution Date on or after the
early termination of the Corridor Contract and (y) the aggregate Certificate
Principal Balance of the Benefited Certificates immediately prior to the first
Distribution Date on or after the early termination of the Corridor Contract,
and the denominator of which is equal to the related Notional Balance for the
first Distribution Date on or after the early termination of the Corridor
Contract and (ii) the amount of such payment received in respect of such early
termination. Notwithstanding the foregoing, in the event that the Benefited
Certificates are retired prior to the termination of the Corridor Contract, the
Net Payment for any Distribution Date following the Distribution Date on which
such Benefited Certificates are retired shall be $0.
Notional Balance: With respect to the Corridor Contract and any
Distribution Date, the "Notional Amount" specified for the Calculation Period
related to such Distribution Date in such Corridor Contract.
Responsible Officer: When used with respect to the Corridor Contract
Administrator, any Vice President, any Assistant Vice President, the Secretary,
any Assistant Secretary, any Trust Officer or any other officer of the Corridor
Contract Administrator customarily performing functions similar to those
performed by any of the above designated officers and also to whom, with
respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
Strike Rate: With respect to the Corridor Contract and any
Distribution Date, "Cap Rate" specified for the Calculation Period related to
such Distribution Date in such Corridor Contract.
2. Appointment of Corridor Contract Administrator.
CHL and the Trustee hereby appoint BNY to serve as Corridor Contract
Administrator pursuant to this Agreement. The Corridor Contract Administrator
accepts such appointment and acknowledges the transfer and assignment to it of
CHL's rights under the Corridor Contract pursuant to the Assignment Agreement.
The Corridor Contract Administrator agrees to exercise the rights referred to
above for the benefit of CHL and the Trustee on behalf of the Trust Fund and to
perform the duties set forth in this Agreement.
3. Receipt of Funds; Corridor Contract Account.
The Corridor Contract Administrator hereby agrees to receive, on behalf of
CHL and the Trustee on behalf of the Trust Fund, all amounts paid by the
Counterparty under the Corridor Contract. The Corridor Contract Administrator
shall establish and maintain a Corridor Contract Account into which the
Corridor Contract Administrator shall deposit or cause to be deposited on the
Business Day of receipt, all amounts payable by the Counterparty under the
Corridor Contract. All funds deposited in the Corridor Contract Account shall
be held for the benefit of CHL and the Trustee on behalf of the Holders of the
Benefited Certificates until withdrawn in accordance with this Section 3. The
Corridor Contract Account shall be an "Eligible Account" as defined in the
Pooling and Servicing Agreement and, if the Trust Fund is terminated pursuant
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to the Pooling and Servicing Agreement prior to the termination of this
Agreement, the Corridor Contract Account shall be an account that would
otherwise qualify as an "Eligible Account" under the Pooling and Servicing
Agreement had the termination of the Trust Fund not occurred.
Funds in the Corridor Contract Account shall remain uninvested.
The Corridor Contract Administrator shall give at least 30 days' advance
notice to CHL and the Trustee of any proposed change of location of the
Corridor Contract Account prior to any change thereof.
4. Calculations; Distribution of Payments; Delivery of Notices.
The Corridor Contract Administrator hereby agrees to perform the
calculations necessary to distribute payments in accordance with this Section
4. The Corridor Contract Administrator shall perform such calculations based on
(x) the Certificate Principal Balances of the Benefited Certificates provided
by the Trustee pursuant to the Pooling and Servicing Agreement and (y) the
Notional Balances, Day Count Fractions and values of LIBOR provided by the
Counterparty pursuant to the Corridor Contract. The Corridor Contract
Administrator shall, absent manifest error, be entitled to rely on information
provided by the Trustee and the Counterparty.
On the Business Day of receipt of any payment from the Counterparty, the
Corridor Contract Administrator shall withdraw the amount of such payment from
the Corridor Contract Account and distribute such amounts sequentially, as
follows:
(a) first, to the Trustee for deposit into the Carryover Reserve Fund,
the applicable Net Payment; and
(b) second, to CHL, the applicable Excess Payment, in accordance with the
following wiring instructions:
Bank: Bank of New York
Account Name: Countrywide Home Loans
Account No: [8900038632]
ABA No: 000000000
REF: CWHEQ 2006-S2
The Corridor Contract Administrator shall prepare and deliver any notices
required to be delivered under the Corridor Contract.
5. Control Rights.
The Controlling Party shall have the right to direct the Corridor Contract
Administrator with respect to the exercise of any right under the Corridor
Contract (such as the right to designate an Early Termination Date following an
Event of Default (each such term as defined in the Corridor Contract)). For
purposes of this Agreement, the "Controlling Party" shall mean (i) if the
aggregate Certificate Principal Balance of the Benefited Certificates
immediately prior to the most recent Distribution Date (or, prior to the first
Distribution Date, the original aggregate Certificate Principal Balance) is
equal to or greater than 50% of the Notional Balance of the
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Corridor Contract as of such Distribution Date (or, prior to the first
Distribution Date, the original Notional Balance of the Corridor Contract), the
Trustee, and (ii) if the aggregate Certificate Principal Balance of the
Benefited Certificates immediately prior to the most recent Distribution Date
(or, prior to the first Distribution Date, the original aggregate Certificate
Principal Balance) is less than 50% of the Notional Balance of the Corridor
Contract as of such Distribution Date (or, prior to the first Distribution
Date, the original Notional Balance of the Corridor Contract), CHL.
6. Monitoring of Significance Percentage. With respect to each Distribution
Date, the Corridor Contract Administrator shall calculate the "significance
percentage" (as defined in Item 1115 of Subpart 229.1100 - Asset Backed
Securities (Regulation AB), 17 C.F.R. xx.xx. 229.1100-229.1123) of the Corridor
Contract based on the Certificate Principal Balance of the Benefited
Certificates for such Distribution Date (after all distributions to be made
thereon on such Distribution Date) and based on the methodology provided in
writing by or on behalf of CHL no later than the fifth Business Day preceding
such Distribution Date. On each Distribution Date, the Corridor Contract
Administrator shall provide to CHL a written report (which written report may
include similar information with respect to other derivative instruments
relating to securitization transactions sponsored by CHL) specifying the
"significance percentage" of the Corridor Contract for that Distribution Date.
If the "significance percentage" of the Corridor Contract exceeds 7.0% with
respect to any Distribution Date, the Corridor Contract Administrator shall
make a separate notation thereof in the written report described in the
preceding sentence. Such written report may contain such assumptions and
disclaimers as are deemed necessary and appropriate by the Corridor Contract
Administrator.
7. Representations and Warranties of the Corridor Contract Administrator. The
Corridor Contract Administrator represents and warrants as follows:
(a) BNY is duly organized and validly existing as a banking corporation
under the laws of the State of New York and has all requisite power
and authority to execute and deliver this Agreement and to perform
its obligations as Corridor Contract Administrator under this
Agreement.
(b) The execution, delivery and performance of this Agreement by BNY as
Corridor Contract Administrator has been duly authorized by BNY.
(c) This Agreement has been duly executed and delivered by BNY as
Corridor Contract Administrator and is enforceable against BNY in
accordance with its terms, except as enforceability may be affected
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law).
8. Certain Matters Concerning the Corridor Contract Administrator.
(a) The Corridor Contract Administrator shall undertake to perform such
duties and only such duties as are specifically set forth in this
Agreement.
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(b) No provision of this Agreement shall be construed to relieve the
Corridor Contract Administrator from liability for its own grossly
negligent action, its own gross negligent failure to act or its own
misconduct, its grossly negligent failure to perform its obligations
in compliance with this Agreement, or any liability that would be
imposed by reason of its willful misfeasance or bad faith; provided
that:
(i) the duties and obligations of the Corridor Contract Administrator
shall be determined solely by the express provisions of this
Agreement, the Corridor Contract Administrator shall not be liable,
individually or as Corridor Contract Administrator, except for the
performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be
read into this Agreement against the Corridor Contract Administrator
and the Corridor Contract Administrator may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Corridor Contract Administrator and conforming to the requirements of
this Agreement that it reasonably believed in good faith to be
genuine and to have been duly executed by the proper authorities
respecting any matters arising hereunder;
(ii) the Corridor Contract Administrator shall not be liable, individually
or as Corridor Contract Administrator, for an error of judgment made
in good faith by a Responsible Officer or Responsible Officers of the
Corridor Contract Administrator, unless the Corridor Contract
Administrator was grossly negligent or acted in bad faith or with
willful misfeasance; and
(iii) the Corridor Contract Administrator shall not be liable, individually
or as Corridor Contract Administrator, with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Controlling Party, or exercising
any power conferred upon the Corridor Contract Administrator under
this Agreement.
(c) Except as otherwise provided in Sections 8(a) and 8(b):
(i) the Corridor Contract Administrator may request and rely upon
and shall be protected in acting or refraining from acting upon
any resolution, officer's certificate, certificate of auditors
or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) the Corridor Contract Administrator may consult with counsel and
any opinion of counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with
such opinion of counsel;
(iii) the Corridor Contract Administrator shall not be liable,
individually or as Corridor Contract Administrator, for any
action taken, suffered or omitted
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by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this
Agreement;
(iv) the Corridor Contract Administrator shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing so to do by CHL or the
Trustee; provided, however, that if the payment within a
reasonable time to the Corridor Contract Administrator of the
costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the
Corridor Contract Administrator not reasonably assured to the
Corridor Contract Administrator by CHL and/or the Trustee, the
Corridor Contract Administrator may require reasonable indemnity
against such expense, or liability from CHL and/or the Trustee,
as the case may be, as a condition to taking any such action;
(v) the Corridor Contract Administrator shall not be required to
expend its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder if it shall
have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such liability is not
assured to it; and
(vi) the Corridor Contract Administrator shall not be liable,
individually or as Corridor Contract Administrator, with respect
to or in connection with errors or omissions contained in the
report to be provided pursuant to Section 6 hereof, to the
extent such errors or omissions are the result of inaccuracies
in the methodology or other information provided to the Corridor
Contract Administrator by CHL.
(d) CHL covenants and agrees to pay or reimburse the Corridor Contract
Administrator, upon its request, for all reasonable expenses and
disbursements incurred or made by the Corridor Contract Administrator
in accordance with any of the provisions of this Agreement except any
such expense or disbursement as may arise from its negligence, bad
faith or willful misconduct. The Corridor Contract Administrator and
any director, officer, employee or agent of the Corridor Contract
Administrator shall be indemnified by CHL and held harmless against
any loss, liability or expense incurred in connection with any legal
action relating to this Agreement, or in connection with the
performance of any of the Corridor Contract Administrator's duties
hereunder, other than any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the
performance of any of the Corridor Contract Administrator's duties
hereunder. Such indemnity shall survive the termination of this
Agreement or the resignation of the Corridor Contract Administrator
hereunder. Notwithstanding anything to the contrary in this Section
8(d), any expenses, disbursements, losses or liabilities of the
Corridor Contract Administrator or any director, officer, employee or
agent thereof that are made or incurred as a result of any request,
order or direction of
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any NIM Insurer or any of the Certificateholders made to the Trustee
as contemplated by Section 8.02(a)(9) of the Pooling and Servicing
Agreement and consequently made to the Corridor Contract
Administrator by the Trustee shall be payable by the Trustee out of
the security or indemnity provided by any NIM Insurer or such
Certificateholders pursuant to Section 8.02(a)(9) of the Pooling and
Servicing Agreement.
(e) Upon the resignation of BNY as Trustee in accordance with the Pooling
and Servicing Agreement, (i) BNY shall resign and be discharged from
its duties as Corridor Contract Administrator hereunder and (ii) the
Person that succeeds BNY as Trustee shall be appointed as successor
Corridor Contract Administrator hereunder upon its execution,
acknowledgement and delivery of the instrument accepting such
appointment in accordance with Section 8.08 of the Pooling and
Servicing Agreement, whereupon the duties of the Corridor Contract
Administrator hereunder shall pass to such Person. In addition, upon
the appointment of a successor Trustee under the Pooling and
Servicing Agreement, such successor Trustee shall succeed to the
rights of the Trustee hereunder.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
(b) Each of BNY and CHL hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in
any legal proceedings arising out of or relating to this Agreement.
(c) This Agreement shall terminate upon the termination of the Corridor
Contract and the disbursement by the Corridor Contract Administrator
of all funds received under the Corridor Contract to CHL and the
Trustee on behalf of the Holders of the Benefited Certificates.
(d) This Agreement may be amended, supplemented or modified in writing by
the parties hereto.
(e) This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by
facsimile transmission), and all such counterparts taken together
shall be deemed to constitute one and the same instrument.
(f) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
(g) The representations and warranties made by the parties to this
Agreement shall survive the execution and delivery of this Agreement.
No act or omission on the
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part of any party hereto shall constitute a waiver of any such
representation or warranty.
(h) The article and section headings in this Agreement are for
convenience of reference only, and shall not limit or otherwise
affect the meaning of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
THE BANK OF NEW YORK,
as Corridor Contract Administrator
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Assistant Vice President
THE BANK OF NEW YORK,
as Trustee
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Assistant Vice President
COUNTRYWIDE HOME LOANS, INC.
By: /s/ Xxxxxx Xxxxx
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Name: Xxxxxx Xxxxx
Title: Senior Vice President
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EXHIBIT A
CORRIDOR CONTRACT
A-1
