EXHIBIT 99.7
The Credit Support Annex to the ISDA Master Agreement
CREDIT SUPPORT ANNEX
Elections and Variables
dated as of August 30, 2006
between
XXXXXX BROTHERS SPECIAL FINANCING INC.
(hereinafter referred to as "Party A" or "Pledgor")
and
THE BANK OF NEW YORK, not in its individual or corporate capacity but solely
as Swap Contract Administrator for CWALT, Inc. Alternative Loan Trust
2006-OC7, pursuant to a Swap Contract Administration Agreement (hereinafter
referred to as "Party B" or "Secured Party")
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term "Obligations" as used in
this Annex includes the following additional obligations:
With respect to Party A, not applicable.
With respect to Party B, not applicable.
(b) Credit Support Obligations.
(i) Delivery Amount, Return Amount and Credit Support Amount
(A) "Delivery Amount" has the meaning specified in Paragraph
3(a)
(B) "Return Amount" has the meaning specified in Paragraph 3(b).
(C) "Credit Support Amount" means, for any Valuation Date,
"Credit Support Amount" means, for any Valuation Date, an
amount equal to 100.0% of the Secured Party's Exposure for
the next Valuation Date and the product of the Volatility
Buffer and the Notional Amount.
(ii) Eligible Collateral. At such time as Party A is required to post
collateral pursuant to Part 1(h)(A) of the Schedule), the
following items will qualify as "Eligible Collateral" (together
with such other collateral types (and related valuation
percentages) with respect to which Rating Agency Confirmation is
provided):
Valuation
Collateral Type Percentage
(A) cash. 100.0%
(B) Negotiable debt obligations issued by the U.S. Treasury Department 98.5%
having a maturity at issuance of not more than one year.
(C) Negotiable debt obligations issued by the U.S. Treasury Department 89.9%
having a maturity at issuance of more than one year but not more than
ten years.
(D) Negotiable debt obligations issued by the U.S. Treasury Department 83.9%
having a maturity at issuance of more than ten years.
(E) demand and time deposits in, certificates of deposit of, bankers' 98.0%
acceptances payable within 183 days of issuance issued by, or federal
funds sold by any U.S. federal or state depository institution or trust
company, the commercial paper and/or debt obligations of which (or, in
11
the case of the principal depository institution in a holding company
system, the commercial paper or debt obligations of such holding
company) at the time of such investment or contractual commitment
providing for such investment have a long-term credit rating of "Aaa" by
Moody's and "AAA" by Standard & Poor's, in the case of long-term debt
obligations, or "Prime-1" by Moody's and "A-1+" by Standard & Poor's, in
the case of commercial paper and short-term obligations; provided, that
in the case of commercial paper and short-term debt obligations with a
maturity of longer than 91 days, the issuer thereof must also have at
the time of such investment a long-term credit rating of "Aaa" by
Moody's and "AAA" by Standard & Poor's.
(iii) Other Eligible Support. The following items will qualify as "Other
Eligible Support" for the party specified: Not applicable.
(iv) Thresholds.
(A) "Independent Amount" shall not be applicable with respect to
Party A or Party B unless otherwise specified in a
Confirmation.
(B) "Threshold" means, with respect to Party A, zero at any time
that (1) Party A (or to the extent applicable, its Credit
Support Provider) does not have the required ratings set
forth in Part 1(h)(A) of the Schedule from Standard & Poor's
and has failed to transfer its rights and obligations under
this Agreement within 30 days of its downgrade or (2) Party
A (or to the extent applicable, its Credit Support Provider)
does not have the required ratings from Moody's; otherwise
the Threshold shall be unlimited.
(C) "Minimum Transfer Amount" means, with respect to a party,
$100,000.
(D) "Rounding". The Delivery Amount and the Return Amount will
be rounded up and down respectively to the nearest integral
multiple of $1,000.
(c) Valuation and Timing.
(i) "Valuation Agent" means Party A. All calculations by the Valuation
Agent must be made in accordance with standard market practice,
including, in the event of a dispute as to the Value of any
Eligible Credit Support or Posted Credit Support, by making
reference to quotations received by the Valuation Agent from
commonly accepted third party sources.
(ii) "Valuation Date" means, for purposes of each time that Party A is
required to post collateral pursuant to Part 1(h)(A) of the
Schedule, each Wednesday or, if such day is not a Local Business
Day, the next following Local Business Day.
(iii) "Valuation Time" means the close of business in the location where
the relevant product is traded, provided that the calculations of
Value and Exposure will made as of approximately the same time on
the same date.
(iv) "Notification Time" means 3:00 p.m., New York time, on a Local
Business Day.
(v) Notice to S&P. At any time while Party A's Credit Support Provider
shall fail to have the Approved Rating Thresholds from S&P, Party
A shall provide to S&P not later than the Notification Time on the
Local Business Day following each Valuation Date the calculations
of Exposure and the Value of any Eligible Credit Support or Posted
Credit Support for that Valuation Date.
(vi) External Verification. Notwithstanding the definition of Valuation
Agent and Valuation Date, at any time while the long-term
unsecured debt or counterparty rating of Party A's Credit Support
Provider is not above "BBB", the calculations of Exposure and the
Value of any Eligible Credit Support or Posted Credit Support must
be verified by an external
12
xxxx quarterly. The external xxxx must be obtained by an
independent third party, and cannot be verified by the same entity
more than four times in any 12-month period. In addition, the
external xxxx-to-market valuations should reflect the higher of
two bids from counterparties that would be eligible and willing to
provide the swap in the absence of the current provider. The Value
of any Eligible Credit Support or Posted Credit Support and
Exposure should be based on the greater of the calculations of the
Valuation Agent and the external marks, and any deficiencies in
Value and Exposure must be cured within three days.
(d) Conditions Precedent and Secured Party's Rights and Remedies. There will
be no Specified Conditions for Party A and Party B.
(e) Substitution
(i) "Substitution Date" has the meaning specified in Paragraph
4(d)(ii).
(ii) "Consent." The Pledgor need not obtain the Secured Party's consent
for any substitution pursuant to Paragraph 4(d).
(f) Dispute Resolution
(i) "Resolution Time" means 1:00 p.m. on the Local Business Day
following the date on which notice is given that gives rise to a
default.
(ii) "Value." For the purpose of Paragraph 5(i)c) and 5(ii), the Value
of Posted Credit Support other than Cash will be calculated as
follows:
With respect to any Eligible Collateral in the form of securities
listed in Paragraph 13(b)(ii) (referred to herein as "Collateral
Obligations") the sum of (I)(x) the bid price quoted on such date
by a mutually acceptable principal market maker for such
Collateral Obligations, or (y) if no such quotation is available
from a principal market maker for such date, such bid price as of
the day, next preceding such date, on which such quotation was
available, in either case multiplied by the applicable Valuation
Percentage, plus (II) the accrued interest on such Collateral
Obligations (except to the extent Transferred to a party pursuant
to any applicable section of this Agreement or included in the
applicable price referred to in (I) of this Clause) as of such
date.
(ii) "Alternative." Paragraph 5 will apply.
(g) Holding and Using Posted Collateral.
(i) "Eligibility to Hold Posted Collateral; Custodians."
Party B and or its Custodian will be entitled to hold Posted
Collateral pursuant to Paragraph 6(b), provided that the following
conditions applicable to it are satisfied:
(1) The Custodian is a bank or trust company located in the
United States having total assets of at least $250,000,000
and a short term unsecured debt or counterparty rating of
"Prime-1" from Moody's and "A-1" from Standard & Poor's.
Initially, the Custodian for Party B is: The Bank of New York.
(ii) "Use of Posted Collateral" The provisions of Paragraph 6(c) will
not apply with respect to the collateral posted by Party A.
(h) Distributions and Interest Amount.
(i) "Interest Rate. " The Interest Rate shall be the actual interest
rate achieved on Posted Collateral in the form of Cash that is
held by Party B's Custodian. . Party B's Custodian
13
shall hold Posted Collateral in the form of Cash in such deposit
or investment account as specified by Party A to Party B and
reasonably acceptable to Party B's Custodian.
(ii) "Transfer of Interest Amount." The Transfer of the Interest Amount
will be made on the first 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).
(iii) "Alternative to Interest Amount." Not applicable.
(i) Additional Representation(s). Not applicable.
(j) "Other Eligible Support and Other Posted Support."
(i) "Value" with respect to Other Eligible Support and Other Posted
Support means: Not applicable.
(ii) "Transfer" with respect to Other Eligible Support and Other Posted
Support means: Not applicable.
(k) Demands and Notices. All demands, specifications and notices made by a
party to this Annex will be made pursuant to the Notices Section of this
Agreement.
(l) Addresses for Transfers. As agreed upon between the parties from time to
time.
(m) Other Provisions.
(i) "Volatility Buffer" shall mean the percentage set forth in the
following table with respect to any Transaction (other than a
Transaction identified in the related Confirmation as a Timing
Hedge):
-------------------------- ---------------------- ----------------------- ---------------------- ------------------------
The higher of the Remaining Weighted Remaining Weighted Remaining Weighted Remaining Weighted
short-term credit rating Average Life Average Life Maturity Average Life Average Life Maturity
of (i) Party A and (ii) Maturity up to 3 up to 5 years Maturity up to 10 up to 30 years
the Credit Support years years
Provider of Party A
-------------------------- ---------------------- ----------------------- ---------------------- ------------------------
At least "A-2" 2.75 3.25 4.00 4.75
-------------------------- ---------------------- ----------------------- ---------------------- ------------------------
"A-3" 3.25 4.00 5.00 6.25
-------------------------- ---------------------- ----------------------- ---------------------- ------------------------
"BB+" or lower 3.50 4.50 5.75 7.50
-------------------------- ---------------------- ----------------------- ---------------------- ------------------------
14
(ii) Agreement as to Single Secured Party and Pledgor. Party A and
Party B agree that, notwithstanding anything to the contrary in
the recital of this Annex, Paragraph 1(b) or Paragraph 2 of the
definitions in Paragraph 12, (a) the term "Secured Party" as used
in this Annex means only Party B, (b) the term "Pledgor" as used
in this Annex means only Party A, (c) only Party A makes the
pledge and grant in Paragraph 2, the acknowledgment in the final
sentence of Paragraph 8(a) and the representations in Paragraph 9
and (d) only Party A will be required to post Eligible Credit
Support hereunder. Party A also agrees that it shall pay all costs
of transferring Eligible Credit Support required to be delivered
by Party A hereunder.
The parties executing this Credit Support Annex have executed the Master
Agreement and have agreed as to the contents of this Credit Support Annex.
THE BANK OF NEW YORK, not in its individual or corporate
XXXXXX BROTHERS SPECIAL FINANCING INC. capacity but solely as Swap Contract Administrator for
CWALT, Inc. Alternative Loan Trust 2006-OC7, pursuant to a
Swap Contract Administration Agreement
Party A Party B
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxxx Xxxxxxxxxxx
-------------------------------------- -------------------------------------------
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxxxx Xxxxxxxxxxx
Title: Authorized Signatory Title: Vice President
Date: August 30, 2006 Date: August 30, 2006
15
