Exhibit 10.2

Execution Copy

(Multicurrency – Cross Border)

ISDA®

International Swap Dealers Association, Inc.

MASTER AGREEMENT

dated as of March 28, 2006

 

SWISS RE FINANCIAL PRODUCTS CORPORATION    and    ACCREDITED MORTGAGE LOAN TRUST
2006-1 (“Party A”)       (“Party B”)

have entered and/or anticipate entering into one of 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: —

 

1. Interpretation

(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b) 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 purpose of the relevant Transaction.

(c) 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.

 

2. Obligations

 

(a) General Conditions.

(i) 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.

(ii) 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.

(iii) 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.

(iv)

 

Copyright © 1992 by International Swap Dealers Association, Inc.    ISDA® 1992

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(b) 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.

(c) 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.

 

(d) 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 the 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: —

 

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(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.

 

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  (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)).

(e) 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.

 

3. 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

 

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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)).

 

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(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.

 

4. 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 or 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.

 

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(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,

 

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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.

 

5. Events of 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);

 

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(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

 

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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 Specified 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

 

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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.

 

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6. 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)(1), (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

 

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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.

 

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(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.

 

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(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

 

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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.

 

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7. 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.

 

8. 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.

 

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9. 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.

 

10. 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.

 

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11. 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.

 

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12. 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

 

13. 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 Act 1982 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.

 

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(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

 

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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.

 

14. 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.

 

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“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.

 

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“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

 

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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.

 

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“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

 

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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

 

- 27 -

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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.

 

SWISS RE FINANCIAL PRODUCTS CORPORATION   ACCREDITED MORTGAGE LOAN TRUST 2006-1
    By: U.S. Bank Trust National Association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement. By  

 

  By  

 

Name:     Name:   Title:     Title:   Date:     Date:  

 

- 28 -

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SCHEDULE

to the

MASTER AGREEMENT

dated as of March 28, 2006

between

SWISS RE FINANCIAL PRODUCTS CORPORATION,

a corporation organized

under the laws of Delaware

(“Party A”),

and

ACCREDITED MORTGAGE LOAN TRUST 2006-1,

a statutory trust organized

under the laws of

Delaware

(“Party B”).

TERMINATION PROVISIONS.

“Specified Entity” means in relation to Party A for the purpose of:

Section 5(a)(v), Not Applicable.

Section 5(a)(vi), Not Applicable.

Section 5(a)(vii), Not Applicable.

Section 5(b)(iv), Not Applicable.

and in relation to Party B for the purpose of:

Section 5(a)(v), Not Applicable.

Section 5(a)(vi), Not Applicable.

Section 5(a)(vii), Not Applicable.

Section 5(b)(iv), Not Applicable.

 

--------------------------------------------------------------------------------

“Specified Transaction” shall have the meaning specified in Section 14 of this
Agreement.

The “Breach of Agreement” provisions of Section 5(a)(ii) will not apply.

The “Credit Support Default” provisions of Section 5(a)(iii) will apply to Party
A and will not apply to Party B.

The “Misrepresentation” provisions of Section 5(a)(iv) will not apply.

(c) With respect to Party A only, Section 5(a)(vi) is hereby amended by deleting
in the seventh line thereof the words “, or becoming capable at such time of
being declared,”.

The “Cross Default” provisions of Section 5(a)(vi) will apply to Party A, but
not to Party B.

If such provisions apply:

“Specified Indebtedness” will have the meaning specified in Section 14.

“Threshold Amount” means with respect to Party A U.S. $100,000,000 or its
equivalent in another currency.

 

- 2 -

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With respect to Party B only, Section 5(a)(vii)(2) will not apply.

The “Merger without Assumption” provisions of Section 5(a)(viii) will apply to
Party A and will not apply to Party B.

The “Credit Event Upon Merger” provisions of Section 5(b)(iv) will not apply.

The “Automatic Early Termination” provisions of Section 6(a) will not apply.

Payments on Early Termination. For the purpose of Section 6(e):

Market Quotation will apply.

The Second Method will apply.

“Termination Currency” means U.S. Dollars.

The “Additional Termination Event” provisions of Section 5(b)(v) will apply as
set forth in Part 5(n) hereof.

The “Default under Specified Transaction” provisions of Section 5(a)(v) will not
apply.

The “Tax Event” provisions of Section 5(b)(ii) will apply to Party A and will
not apply to Party B.

The “Tax Event Upon Merger” provisions of Section 5(b)(iii) will apply to Party
A and will not apply to Party B.

TAX REPRESENTATIONS.

Payer Representations. For purposes of Section 3(e) of this Agreement, Party A
and Party B each make 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) of this Agreement) 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 representations made by
the other party pursuant to Section 3(f) of this Agreement, (ii) the
satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this
Agreement and the accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement, and
(iii) the satisfaction of the agreement of the other party contained in
Section 4(d) of this Agreement, provided that it shall not be a breach of this
representation where reliance is placed on

 

- 3 -

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subclause (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 Payee Representations. For the purpose of Section 3(f) of this
Agreement, Party A makes the following representations:

It is a “U.S. payee” within the meaning of Treasury Regulation
Section 1.1441-5(b).

It is a United States person within the meaning of Section 7701(a)(30) of the
Internal Revenue Code of 1986, as amended.

Party B Payee Representations. For the purpose of Section 3(f) of this
Agreement, Party B makes the following representation:

It is a trust created under an agreement governed by Delaware law.

AGREEMENT TO DELIVER DOCUMENTS.

For the purpose of Section 4(a), each party agrees to deliver the following
documents, as applicable:

Tax forms, documents, or certificates to be delivered are:

Party A agrees to complete, execute, and deliver to Party B, United States
Internal Revenue Service Form W-9 or any successor of such form: (i) on a date
which is before the first scheduled payment date under this Agreement;
(ii) promptly upon reasonable demand by Party B; and (iii) promptly upon
learning that any such forms previously provided by Party A has become obsolete
or incorrect.

Party B agrees to complete, execute, and deliver to Party A, United States
Internal Revenue Service Form W-9 or any successor of such forms: (i) on a date
which is before the first scheduled payment date under this Agreement;
(ii) promptly upon reasonable demand by Party A; and (iii) promptly upon
learning that any such forms previously provided by Party B has become obsolete
or incorrect.

 

- 4 -

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Other documents to be delivered are:

 

Party required to deliver document

  

Form/Document/ Certificate

    

Date by which to be delivered

    

Covered by Section 3(d)

Representation

Party A    Guaranty dated as of March 28, 2006 by Swiss Reinsurance Company (the
“Guaranty”),      At execution of this Agreement      Yes Party A    Most
recently prepared annual balance sheet of Party A      As soon as possible
following request of Party B      Yes Party A    Legal opinions with respect to
Party A      At execution of this Agreement      No Party A and Party B   
Incumbency certificate or other documents evidencing the authority, incumbency
and specimen signature of each person executing this Agreement, any Credit
Support Document or any Confirmation, as the case may be.      At execution of
this Agreement      Yes Party B    Servicer Remittance Reports      Promptly
upon becoming available      Yes Party B    Legal opinion with respect to Party
B      At execution of this Agreement      No Party B    An executed copy of the
Indenture, dated as of March 1, 2006, between Party B and Deutsche Bank National
Trust Company, as indenture trustee (the “Indenture”)      Within 30 days after
the date of this Agreement      No

 

- 5 -

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Execution Copy

MISCELLANEOUS.

Addresses for Notices. For the purpose of Section 12(a): Address for notices or
communications to Party A:

 

Address:     

Swiss Re Financial Products Corporation

55 East 52nd Street

New York, New York 10055

Attention:      Head of Operations Facsimile No.:      (917) 322-7201

With a copy to:

 

Address:     

Swiss Re Financial Products Corporation

55 East 52nd Street

New York, New York 10055

Attention:      Head of Legal Facsimile No.      (212) 317-5474

Address for notices or communications to Party B:

 

Address:     

Accredited Home Lenders

15090 Avenue of Sciences,

Suite 200, San Diego, CA 92128

Attention:      Charlie Ryan Facsimile No.:      (858) 676-8129 Telephone No.:
     (858) 676-2769

With a copy to U.S. Bank Trust National Association

 

Address:     

209 South LaSalle Street, Suite 300

Chicago, IL 60604

Attention:      Corporate Trust Services Facsimile No.:      (312) 325-8905
Telephone No.:      (312) 325-8902

ISDA® 1992

--------------------------------------------------------------------------------

With a copy to Deutsche Bank National Trust Company:

 

Address:     

1761 East St. Andrew Place

Santa Ana, California 92705-4934

Attention:      Trust Administration–AC0601

Facsimile:

Telephone No.:

    

(714) 247-6285

(714) 247-6000

Process Agent. For the purpose of Section 13(c):

Party A appoints as its Process Agent: Not Applicable

Party B appoints as its Process Agent: Not Applicable

With a copy to:

 

Address:     

Standard & Poor’s Ratings Services,

55 Water Street,

New York, New York 10041-0003

Attention:      Residential Mortgage Surveillance Group Facsimile:     
212-438-2652

With a copy to:

 

Address:      Moody’s Investors Service, 99 Church Street, New York, New York
10007 Attention:      Keith Wofford Facsimile:      212-553-4773

With a copy to:

 

Address:     

Dominion Bond Rating Service,

55 Broadway, Suite 1502,

New York, New York 10006

Attention:      Quincy Tang Facsimile:      212-635-3278

 

                        - 7 -    ISDA ® 1992

--------------------------------------------------------------------------------

Offices; Multibranch Parties.

The provisions of Section 10(a) will be applicable.

For the purpose of Section 10(c):

Party A is not a Multibranch Party.

Party B is not a Multibranch Party.

Calculation Agent. The Calculation Agent is Party A.

Credit Support Document. Details of any Credit Support Document.

With respect to Party A, (A) the Guaranty and (B) any Credit Support Annex that
may be entered into in connection with any of the events described in Part
5(n)(ii) of this Schedule.

With respect to Party B, the Indenture.

Each Credit Support Document is incorporated by reference into and constitutes
part of this Agreement and each Confirmation as if set forth in full in this
Agreement or such Confirmation.

Credit Support Provider.

Credit Support Provider means in relation to Party A, Swiss Reinsurance Company.

Credit Support Provider means in relation to Party B, Not Applicable.

(g) Governing Law. This Agreement and each Confirmation will be governed by, and
construed and enforced in accordance with, the substantive law of the State of
New York, without reference to its choice of law doctrine.

 

                        - 8 -    ISDA ® 1992

--------------------------------------------------------------------------------

Jurisdiction. Section 13(b) is hereby amended by: (i) deleting in the second
line of subparagraph (i) thereof the word “non-”; and (ii) deleting the final
paragraph thereof.

Netting of Payments. Subparagraph (ii) of Section 2(c) will apply to
Transactions with effect from the date of this Agreement.

“Affiliate” will have the meaning specified in Section 14; provided, however,
that for purposes of Section 3(c), such term shall only refer to any Credit
Support Provider of the party and/or any party that is a Specified Entity for
Bankruptcy and shall apply to Party A only. Party B shall be deemed to have no
Affiliates.

OTHER PROVISIONS.

Accuracy of Specified Information. With respect to Party A, Section 3(d) is
hereby amended by adding in the third line thereof after the word “respect” and
before the period the words “or, in the case of audited or unaudited financial
statements or balance sheets, a fair presentation of the financial condition of
the relevant person.”

Transfer. Section 7 is hereby amended by:

adding in the third line thereof after the word “party,” the words “which
consent shall not be unreasonably withheld or delayed” and adding in the third
line thereof after the clause “that: -” the words “provided that the Rating
Agency Condition is satisfied”;

adding in the second line of subparagraph (a) thereof after the words “assets
to,” the words “or reorganization, incorporation, reincorporation,
reconstitution, or reformation into or as”;

deleting at the end of subparagraph (a) thereof the word “and”;

deleting in the second line of subparagraph (b) thereof the period and replacing
it with “; and”;

adding after subparagraph (b) thereof the following subparagraph (c):

(c) in addition to, and not in lieu of, the preceding transfer rights, Party A
may, without recourse by Party B or Party A’s transferee to or against Party A,
transfer this Agreement, in whole, but not in part, to any of Party A’s
Affiliates or any of the Affiliates of Swiss Reinsurance Company pursuant to
documentation prepared by Party A, provided that:

 

                        - 9 -    ISDA ® 1992

--------------------------------------------------------------------------------

either (A) such transferee must have a long-term, unsecured, unsubordinated debt
obligation ratings or financial program ratings (or other similar ratings) by
S&P and Moody’s which are equal to or greater than the comparable long-term,
unsecured, unsubordinated debt obligation ratings or financial program ratings
(or other similar ratings) of Party A immediately prior to such transfer, or
(B) the obligations transferred to such transferee must be guaranteed by Party A
pursuant to a guaranty in substantially the form of the Guaranty of the Credit
Support Provider or other agreement or instrument consented to by Party B or
other agreement or instrument mutually agreed upon by both parties and
satisfactory to S&P;

the transferee will not, as a result of such transfer, be required to withhold
or deduct on account of a Tax under Section 2(d)(i) on the next succeeding
Scheduled Payment Date an amount in excess of that which Party A would have been
required to so withhold or deduct on the next succeeding Scheduled Payment Date
in the absence of such transfer unless the transferee will be required to make
payments of additional amounts pursuant to Section 2(d)(i)(4) in respect of such
excess;

an Event of Default or a Termination Event does not occur as a result of such
transfer;

the Rating Agency Condition is satisfied. With respect to the results described
in subclause (ii) above, Party A will cause the transferee to make, and Party B
will make, such reasonable Payer Tax Representations and Payee Tax
Representations as may be mutually agreed upon by the transferee and Party B in
order to permit such parties to determine that such results will not occur upon
or after the transfer;

Party A agrees to transfer only to a transferee in a jurisdiction, which it is
aware is a “netting” jurisdiction, that is in which, by opinion of counsel
published by ISDA, netting under this Agreement shall be enforceable; and

Party A will be responsible for any costs or expenses incurred in connection
with such transfer.

adding at the end of Section 7 the following sentence:

Except as may otherwise be stated in Section 7(c) hereof or in the documentation
evidencing a transfer, a transfer of all of the obligations of Party A made in
compliance with this Section will constitute an acceptance and assumption of
such obligations (and any related interests so transferred) by the transferee, a
novation of the transferee in place of Party A with respect to such obligations
(and any related interests so transferred), and a release and discharge by Party
B of Party A from, and an agreement by Party B not to make any claim for
payment, liability, or otherwise against Party A with respect to, such
obligations from and after the effective date of the transfer.

 

                        - 10 -    ISDA ® 1992

--------------------------------------------------------------------------------

Set-Off. Notwithstanding any provision of this Agreement or any other existing
or future agreement, Party A hereby irrevocably waives any and all rights it may
have to set-off, net, recoup or otherwise withhold or suspend or condition
payment or performance of any obligation between it and Party B against any
obligation between it and Party B under any other agreements; provided that
nothing herein shall be construed as limiting the provisions contained in
Section 2(c), 9(c) or any other Section of this Agreement with respect to the
netting of the parties’ respective obligations under this Agreement or the right
of Party B to exercise any set-off right, by operation of law or otherwise.
Except as stated above, the provisions for Set-off set forth in Section 6(e) of
the Agreement shall not apply.

Reference Market-makers. The definition of “Reference Market-makers” in
Section 14 is hereby amended by adding in the fourth line thereof after the word
“credit” the words “or to enter into transactions similar in nature to
Transactions”.

Procedures for Entering into Transactions. On or promptly following the Trade
Date or other transaction date of each Transaction, Party A will send to Party B
a Confirmation. Party B will promptly thereafter request any correction of such
Confirmation (indicating how it believes the terms of such Confirmation should
be correctly stated and such other terms which should be added to or deleted
from such Confirmation to make it correct).

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 to this Agreement; provided, however, that this
severability provision shall not be applicable if any provision of Section 2, 5,
6, or 13 (or any definition or provision in Section 14 to the extent it relates
to, or is used in or in connection with any such Section) shall be so held to be
invalid or unenforceable.

Waiver of Right to Trial by Jury. Each party hereby irrevocably waives, to the
fullest extent permitted by applicable law, any right it may have to trial by
jury in respect of any suit, action or proceeding relating to this Agreement.

Credit Support Default. Subparagraph (3) of Section 5(a)(iii) is hereby amended
by adding in the second line thereof after the word “Document” and before the
semicolon the words “(or such action is taken by any person or entity appointed
or empowered to operate it or act on its behalf).”

Additional Representations. Section 3 is hereby amended by adding the following
additional subsections:

No Agency. It is entering into this Agreement and each Transaction as principal
(and not as agent or in any other capacity, fiduciary or otherwise).

Eligible Contract Participant. It is an “eligible contract participant” as
defined in the U.S. Commodity Exchange Act.

 

                        - 11 -    ISDA ® 1992

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No Reliance. In connection with the negotiation of, the entering into, and the
confirming of the execution of, this Agreement and each Transaction: (i) the
other party is not acting as a fiduciary or financial or investment advisor for
it; (ii) it is not relying upon any representations (whether written or oral) of
the other party other than the representations expressly set forth in this
Agreement; and (iii) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon any advice from such advisors as
it has deemed necessary and not upon any view expressed by the other party.

Consent to Assignment. Notwithstanding Section 7 of this Agreement, Party A
hereby acknowledges and consents to the assignment of this Agreement, solely for
security purposes for the benefit of the Noteholders, by Party B to Deutsche
Bank National Trust Company, as indenture trustee (the “Indenture Trustee”)
under the Indenture. The Indenture Trustee shall not be deemed to be a party to
this Agreement; provided, however, that the Indenture Trustee, acting on behalf
of the Noteholders, shall have the right to enforce this Agreement, including
the terms of Part 5(n), against Party A. Party A shall be entitled to rely on
any notice or communication from the Indenture Trustee to that effect; provided,
further, that any such notice shall be in writing and delivered to Party A in
accordance with Section 12 hereof. Party A shall be entitled to assume the
authenticity of any such notice and shall have no obligation to verify the
accuracy of any facts asserted therein and shall be entitled to reasonably rely
on the apparent authority of the sender thereof. Party B hereby indemnifies
Party A against any losses, costs, claims or liabilities arising from Party A’s
reliance on any such notice and Party A shall be released from any further
obligations to Party B with respect to the rights transferred to the Indenture
Trustee (for so long as Party A has fulfilled its obligations hereunder to the
Indenture Trustee). Notwithstanding any provision to the contrary contained
herein, the parties acknowledge that the indemnity contained in this Part 5(j)
shall be considered an accrued and unpaid expense of the Trust (reimbursable to
Party A) (which expense shall be payable with Interest Proceeds under
Section 5.07(i) of the Indenture and not as a payment due to a Swap Provider
under the Swap Agreement) and is only due to the extent funds are available for
the payment thereof in accordance with the priority of payments described in
Article VIII of the Indenture.

Regarding Party A. Party B acknowledges and agrees that Party A has had and will
have no involvement in and, accordingly, accepts no responsibility for: (i) the
establishment, structure, or choice of assets of Party B; (ii) the selection of
any person performing services for or acting on behalf of Party B; (iii) the
selection of Party A as the counterparty; (iv) the terms of the Notes and the
Certificates; (v) the preparation of or passing on the disclosure and other
information contained in any prospectus or prospectus supplement for the Notes
and the Certificates, the Sale and Servicing Agreement, or any other agreements
or documents used by Party B or any other party in connection with the marketing
and sale of the Notes and the Certificates; (vi) the ongoing operations and
administration of Party B, including the furnishing of any information to Party
B which is not specifically required under this Agreement; or (vii) any other
aspect of Party B’s existence except for those matters specifically identified
in this Agreement.

No Recourse. The Notes represent the non-recourse obligations of Party B only
and the Certificates represent an equity interest in Party B only and each of
the foregoing does not represent an interest in or obligation of Party A, and no
recourse may be had by the holders of the Notes and the Certificates against
Party A or its assets with respect to the Notes and the Certificates and/or this
Agreement.

 

                        - 12 -    ISDA ® 1992

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Indemnifiable Tax. Party A agrees that Party B will not be required to pay any
additional amounts pursuant to Section 2(d)(i)(4) of the Agreement in respect of
an Indemnifiable Tax. If Party A is required to pay additional amounts in
respect of a withholding tax pursuant to Section 2(d)(i)(4) of this Agreement,
Party A may transfer this Agreement, subject to satisfaction of the Rating
Agency Condition, as provided in Section 6(b)(ii) of this Agreement and such
transfer shall not require the consent of Party B to the extent it is in
conformance with the provisions of Section 7(c), as amended herein.

Additional Termination Events.

It shall be an Additional Termination Event, with Party B as the sole Affected
Party, if all Indenture Collateral is liquidated and the proceeds thereof
distributed following an Event of Default that has resulted in the principal of
all the Notes being declared to be immediately due and payable.

It shall also be an Additional Termination Event if (i) the Indenture Trustee
receives direction (a “Redemption Notice”) for an optional redemption, in whole,
of the Notes under Article 10 of the Indenture (a “Redemption Termination”) and
(ii) there remains no more than 5 Business Days prior to the proposed Redemption
Date. In the case of a Redemption Termination, both Party A and Party B shall
have the right to cause a termination of this Agreement and, for purposes of
Section 6(e)(ii) of this Agreement, Party B shall be the sole Affected Party.
Following notification from the Indenture Trustee that it has received a
Redemption Notice, Party A shall provide the Indenture Trustee from time to
time, upon request, with good faith estimates of the amount that would be
payable under Section 6(e)(ii) in the event of such Redemption Termination. Any
termination payment payable in respect of such Additional Termination Event
shall be paid on the relevant Redemption Date.

(I) It shall also be an Additional Termination Event, with Party A the sole
Affected Party (except as expressly provided herein) if Party A, a replacement
counterparty, or a person or an entity that guarantees the obligations of Party
A or a replacement counterparty, as the case may be, has a rating that does not
satisfy the Required Hedge Counterparty Rating (but is at least “BBB-” or “A-3”
(if applicable) by S&P or S&P or Moody’s withdraws its ratings and none of the
following events has occurred:

within 30 days of such failure to satisfy the Required Hedge Counterparty
Rating, Party A or such replacement counterparty, as the case may be, transfers
this Agreement, in whole, but not in part, to a counterparty that satisfies the
Required Hedge Counterparty Rating, subject to satisfaction of the Rating Agency
Condition;

within 30 days of such failure to satisfy the Required Hedge Counterparty
Rating, Party A or such replacement counterparty, as the case may be,
collateralizes its Exposure to Party B pursuant to an ISDA Credit Support Annex,
subject to satisfaction of the Rating Agency Condition, as applicable; provided
that such ISDA Credit Support Annex shall be made a Credit Support Document for
Party A pursuant to an amendment of this Agreement in a form acceptable to the
Indenture Trustee;

within 30 days of such failure to satisfy the Required Hedge Counterparty
Rating, the obligations of Party A or such replacement counterparty, as the case
may be, under this Agreement are guaranteed by a person or entity that satisfies
the Required Hedge Counterparty Rating, subject to satisfaction of the Rating
Agency Condition; or

within 30 days of such failure to satisfy the Required Hedge Counterparty
Rating, Party A or such replacement counterparty, as the case may be, takes such
other steps, if any, to enable the Issuer to satisfy the Rating Agency
Condition.

 

                        - 13 -    ISDA ® 1992

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(II) It shall also be an Additional Termination Event, with Party A as the sole
Affected Party (except as expressly provided herein) if Party A, a replacement
counterparty, or a person or an entity that guarantees the obligations of Party
A or a replacement counterparty, as the case may be, has a rating of less than
“BBB-” or “A-3” (if applicable) by S&P and within 7 days thereafter, Party A or
such replacement counterparty, as the case may be, while collateralizing its
Exposure to Party B, fails to transfers this Agreement, in whole, but not in
part, to a counterparty that satisfies the Required Hedge Counterparty Rating,
subject to satisfaction of the Rating Agency Condition.

Upon downgrade of Party A below the Required Hedge Counterparty Rating or below
“BBB-” or “A-3”, or if S&P or Moody’s withdraws its ratings for any reason,
Party A will promptly give notice of the circumstances to Party B and to the
rating agencies that at the time are providing ratings for the Notes and
Certificates.

Party B shall be entitled to (A)(1) in case of an Additional Termination Event
described in Part 5(n)(iii)(I), designate a date that is not earlier than the
expiration of the 30 day period referred to in Part 5(n)(iii)(I) as an Early
Termination Date in respect of all transactions under this Agreement by giving
notice to Party A at least 10 days prior to the date so designated (which notice
may be given prior to the expiration of such 30 day period) and (2) in case of
an Additional Termination Event described in this Part 5(n)(iii)(II),
immediately designate an Early Termination Date, in respect of all transactions
under this Agreement by giving notice to Party A and (B) no later than the
respective dates specified in clause (A)(1) and (A)(2), transfer the rights and
obligations of Party A hereunder to a counterparty that satisfies the Required
Hedge Counterparty Rating, subject to satisfaction of the Rating Agency
Condition.

In connection with a transfer of this Agreement as described in this Part
5(n)(iii), Party A shall, at its sole cost and expense, use commercially
reasonable efforts to seek a replacement counterparty and Party A shall
reimburse Party B for (I) commercially reasonable fees and expenses incurred in
connection with any of the alternative actions contemplated in paragraphs (A),
(B), (C) and (D) of Part 5(n)(iii)(I) above (whether or not they are completed
within the 30 day period) and, if applicable, with the negotiation and
documentation of a replacement hedge agreement and (II) the fees and expenses,
if any, incurred in connection with any of the alternative actions contemplated
in paragraphs (A), (B), (C) and (D) of Part 5(n)(iii)(I) above (whether or not
they are completed within the 30 day period) and, if applicable, with the
negotiation and documentation of a replacement hedge agreement that is not
covered by subclause (I) for so long as Party A shall have consented to such
fees and expenses prior to their incurrence by Party B, with Party’s A consent
not to be unreasonably withheld or delayed.

As used herein, “Required Hedge Counterparty Rating” means, with respect to a
counterparty or entity guaranteeing the obligations of such

 

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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,
financial program 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 Moody’s
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 and
(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.

For the purposes of determining the Settlement Amount with respect to the
designation of an Early Termination Date arising from the Additional Termination
Event specified in Party 5(n)(iii), both Party A and Party B shall be Affected
Parties. If the Settlement Amount calculated pursuant to this subclause (iii) is
an amount owing by Party B to Party A, then such payment shall be a Swap
Termination Payment payable by Party B to Party A in accordance with the
priority of payments described in the Indenture; provided, however, that (a) if
Party A does not after the exercise of commercially reasonable efforts cause any
of the conditions specified in Part 5(n)(iii)(I)(A) to (D) to be satisfied,
Party B shall use commercially reasonable efforts to enter into a replacement
Transaction(s) with a counterparty acceptable to the Rating Agencies, in respect
of the Affected Transaction(s) relating to the Additional Termination Event; and
(b) where multiple quotations are available such replacement Transaction(s)
shall be entered into based on the quoted price(s) that would result in the
largest payment made to Party B by the replacement counterparty (it being
understood that Party A may be permitted to actively solicit and obtain such
quotations on behalf of Party B); and (c) to the extent that payments
(“Replacement Payments”) are received from a replacement counterparty by Party B
as a result of entering into such replacement Transaction(s), then Party A shall
have first priority as to such Replacement Payments versus all other creditors
of Party B and Party B shall pay from the Replacement Payments received the
lesser of (x) the Replacement Payments so received and (y) the Swap Termination
Payment to the extent not already paid by Party B over to Party A immediately
upon receipt.

As used herein, “Exposure” means, as of any date of determination, the amount,
if any, that would be payable to Party B by Party A under this Agreement if an
Early Termination Date were to occur as of such date of determination as a
result of a Termination Event, Party A were the sole Affected Party, all
Transactions were terminated in connection with such Early Termination Date and
(solely for purposes of determining Exposure) the amount of such payment were
calculated using Market Quotation.

 

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It shall be an Additional Termination Event, with Party B as the sole Affected
Party, if the Indenture is amended or modified in a manner that materially and
adversely affects Party A’s interests, without the prior consent of Party A,
where such consent is required under the terms of the Indenture.

It shall be an Additional Termination Event, with Party A as the sole Affected
Party, if a Swap Disclosure Event (as defined below) occurs and Party A has not,
within 10 days after such Swap Disclosure Event, complied with one of the
solutions listed below.

It shall be a swap disclosure event (“Swap Disclosure Event”) if at any time
after the date hereof Accredited Home Lenders, Inc. (the “Sponsor”) shall notify
Party A that in the reasonable discretion of the Sponsor acting in good faith,
the “aggregate significance percentage” of all derivative instruments (as such
term is defined in Item 1115(b)(2) of Regulation AB) provided by Party A and any
of its affiliates to Party B (the “Significance Percentage”) is 10% or more.

Following a Swap Disclosure Event, Party A shall take one of the following
actions at its own expense: either (I) (a) if the Significance Percentage is 10%
or more, but less than 20%, Party A shall provide the information set forth in
Item 1115(b)(1) of Regulation AB for Party A (or for the group of affiliated
entities, if applicable) to the Sponsor or (b) if the Significance Percentage is
20% or more, Party A shall provide the information set forth in Item 1115(b)(2)
of Regulation AB for Party A (or for the group of affiliated entities, if
applicable) (collectively, the “Additional Swap Disclosure Information”) to the
Sponsor or (II) Party A shall assign all of its rights and obligations under the
Transactions to a replacement counterparty with the Required Hedge Counterparty
Rating or to a counterparty whose guarantor satisfies the Required Hedge
Counterparty Rating (or which satisfies the Rating Agency Condition), pursuant
to documentation substantially similar to the documentation then in place and
subject to prior notification to the Rating Agencies, which counterparty is
willing to provide the Additional Swap Disclosure Information (with respect to
itself or for its group of affiliated entities, if applicable) to the Sponsor.

“Regulation AB” means Subpart 229.1100 – Asset Backed Securities (Regulation
AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time,
and subject to such clarification and interpretation as have been provided by
the Securities and Exchange Commission (“SEC”) in the adopting release
(Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg.
1,506, 1,531 (Jan. 7, 2005)) or by the staff of the SEC, or as may be provided
by the SEC or its staff from time to time.

For any Additional Termination Event, the date that Party A or Party B, as the
case may be, specifies in its notice of its election to terminate shall be the
Early Termination Date for the Transactions; provided, that solely in the case
of an Additional Termination Event described in subclause (ii) above, the Early
Termination Date shall be no earlier than the 3rd Business Day preceding the
Redemption Date and no later than the Redemption Date.

 

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Indemnifiable Tax. The definition of “Indemnifiable Tax” in Section 14 is hereby
amended by adding the following sentence at the end thereof:

Notwithstanding the foregoing, “Indemnifiable Tax” also means any Tax imposed in
respect of a payment under this Agreement by reason of a Change in Tax Law by a
government or taxing authority of a Relevant Jurisdiction of the party making
such payment, unless the other party is incorporated, organized, managed and
controlled, or considered to have its seat in such jurisdiction, or is acting
for purposes of this Agreement through a branch or office located in such
jurisdiction.

 

                        - 17 -    ISDA ® 1992

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Limited Recourse; Non-petition. Party A agrees that the obligations of Party B
hereunder are limited recourse obligations payable solely from the Indenture
Collateral, and due to the extent funds are available for the payment thereof in
accordance with the priority of payments described in Article VIII of the
Indenture, all outstanding obligations of Party B hereunder shall be
extinguished. Party A agrees that it will not, prior to the date which is at
least one year and one day or, if longer, the then applicable preference period
following the payment in full of all the Notes issued pursuant to the Indenture
and the expiration of all applicable preference periods under Title 11 of the
United States Code or other applicable law relating to any such payment,
acquiesce, petition or otherwise invoke or cause Party B to invoke the process
of any governmental authority for the purpose of commencing or sustaining a case
(whether voluntary or involuntary) against Party B under any bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of Party B or any
substantial part of its property or ordering the winding-up or liquidation of
the affairs of Party B. Nothing contained herein shall prohibit Party A from
submitting a claim, or proof of claim, in any proceeding or process instituted
by or against Party B by any person other than Party A or its Affiliates. Party
A and Party B agree that this Part 5(p) shall survive the termination of this
Agreement for any reason whatsoever.

Acknowledgement of Pledge of Collateral. Party A acknowledges Party B’s pledge
of its assets under the Indenture and understands that the proceeds of such
assets will be applied, including to payments hereunder, only in the order set
forth in the Indenture.

Replacement Counterparty. Following a failure to satisfy the Required Hedge
Counterparty Rating in accordance with Part 5(n)(iii)(I), Party A will take one
of the alternative actions contemplated in paragraphs (A), (B) and (C) of Part
5(n)(iii)(I) above.

Confirmations. Transactions shall be promptly confirmed by the parties by
Confirmations exchanged by mail, telex, facsimile or other electronic means.
Where a Transaction is confirmed by means of an electronic messaging system that
the parties have elected to use to confirm such Transaction (i) such
confirmation will constitute a “Confirmation” as referred to in this Agreement
even where not so specified in the confirmation and (ii) such Confirmation will
supplement, form part of, and be subject to this Agreement and all provisions in
this Agreement will govern the Confirmation except as modified therein.

Tax Documentation. Section 4(a)(iii) of the Agreement is hereby amended by
adding prior to the existing text:

“upon the earlier of learning that any such form or document is required or”

 

                        - 18 -    ISDA ® 1992

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Inconsistency-Trade Call. In the event of any inconsistency between a telephone
conversation, including a trade call and a Confirmation signed by both parties,
the Confirmation shall govern.

Condition Precedent. The condition precedent in Section 2(a)(iii)(1) does not
apply to a payment and delivery owing by a party if the other party shall have
satisfied in full all its payment or delivery obligations under Section 2(a)(i)
and shall at the relevant time have no future payment or delivery obligations,
whether absolute or contingent, under Section 2(a)(i).

Definitions. This Agreement shall be subject to the 2000 Definitions (the “2000
Definitions”) as published by the International Swaps and Derivatives
Association Inc. The provisions of the 2000 Definitions are incorporated by
reference in and shall be deemed a part of this Agreement, except that all
references in the 2000 Definitions to a “Swap Transaction” shall be deemed
references to a “Transaction” for the purposes of this Agreement. Capitalized
terms used and not otherwise defined herein (or in the 2000 Definitions) shall
have the respective meanings ascribed to such terms in the Sale and Servicing
Agreement referred to in Part 5(k), except that for purposes hereof “Indenture
Collateral” shall have the meaning ascribed to the term “Collateral” in the
Indenture. If in relation to any Transaction there is any inconsistency between
the 2000 Definitions, this Agreement, the Indenture, any Confirmation and any
other definitions published by ISDA that are incorporated into any Confirmation,
the following will prevail for purposes of such Transaction in the order of
precedence indicated: (i) such Confirmation (without reference to any
definitions or provisions incorporated therein); (ii) the Indenture; (iii) this
Agreement; (iv) such other definitions; and (v) the 2000 Definitions.

Amendments. Section 9(b) is hereby amended as follows:

by inserting the following phrase immediately prior to the period at the end of
the sentence: “and the Rating Agency Condition is satisfied”; and

by adding the following text thereto immediately following the first sentence:
“Amendments to this Agreement or the Schedule may not be effected in a
Confirmation.”

(z) It is expressly understood and agreed by the parties hereto that (i) this
Agreement is executed and delivered by U.S. Bank Trust National Association, not
individually or personally but solely as Owner Trustee of Party B, in the
exercise of the powers and authority conferred and vested in it under the Trust
Agreement, (ii) each of the representations, undertakings and agreements herein
made on the part of Party B is made and intended not as personal
representations, undertakings and agreements by U.S. Bank Trust National
Association but is made and intended for the purpose of binding only Party B,
(iii) nothing herein contained shall be construed as creating any liability on
U.S. Bank Trust National Association, 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 and (iv) under no circumstances shall U.S.
Bank Trust National Association be personally liable for the payment of any
indebtedness or expenses of Party B or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by Party
B under this Agreement or any other related documents.

 

                        - 19 -    ISDA ® 1992

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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.

 

SWISS RE FINANCIAL PRODUCTS CORPORATION By:  

 

  Name:   Title:   Date: ACCREDITED MORTGAGE LOAN TRUST 2006-1 By: U.S. Bank
Trust National Association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement. By:  

 

  Name:   Title:   Date:

 

                        - 20 -    ISDA ® 1992