Document:

Unassociated Document

    MORGAN
      STANLEY ABS CAPITAL I INC. TRUST 2006-WMC2

     

    _____________________

     

    AMENDMENT
      NO. 1 TO POOLING AND SERVICING AGREEMENT

     

    Dated
      as
      of November 7, 2006 

     

     

    _________________________

     

    Morgan
      Stanley ABS Capital I Inc. Trust 2006-WMC2

    

    Mortgage
      Pass-Through Certificates, Series 2006-WMC2

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    AMENDMENT
      NO. 1

     

    AMENDMENT
      NO. 1 (this “Amendment”) effective as of June 1, 2006, among Morgan Stanley ABS
      Capital I Inc., as depositor (the “Depositor”), Wells Fargo Bank, N.A., as
      servicer (the “Servicer”), as securities administrator (the “Securities
      Administrator”) and as custodian (the “Custodian”), WMC Mortgage Corp., as
      responsible party (the “Responsible Party”), and Deutsche Bank National Trust
      Company, as trustee (the “Trustee”).

     

    PRELIMINARY
      STATEMENT

     

    WHEREAS,
      the Depositor, the Servicer, the Securities Administrator, the Custodian, the
      Responsible Party and the Trustee, are parties to the Pooling and Servicing
      Agreement, dated as of June 1, 2006 (the “Agreement”);

     

    WHEREAS,
      Section 11.01 of the Agreement provides that the Agreement may be amended by
      the
      Depositor, the Servicer, the Securities Administrator, the Custodian, the
      Responsible Party and the Trustee; and

     

    NOW,
      THEREFORE, in consideration of the foregoing and of other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

     

    1.  Capitalized
      terms used but not defined herein shall have the meanings ascribed to such
      terms
      in the Agreement.

     

    2.  Amendments:
      

     

    (a)       
       In
      consideration of the mutual agreements herein contained, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto agree to amend
      the Agreement as provided in Exhibit A, attached hereto. Language appearing
      double underlined on Exhibit A will be added to the Agreement and language
      appearing in strikethrough will be removed from the Agreement; and

     

    (b)       
       The
      following provision shall be added to the end of Schedule III to the
      Agreement:

     

    
      	 	
              (71)

            	
              Each
                Prepayment Charge is permissible and enforceable in accordance with
                its
                terms upon the Mortgagor's full and voluntary Principal Prepayment
                (except
                to the extent that: (1) the enforceability thereof may be limited
                by
                bankruptcy, insolvency, moratorium, receivership and other similar
                laws
                relating to creditors' rights generally; (2) the collectability thereof
                may be limited due to acceleration in connection with a foreclosure
                or
                other involuntary prepayment; or (3) subsequent changes in applicable
                law
                may limit or prohibit enforceability thereof) under applicable
                law.

            

    

     

    3.  Except
      as
      expressly modified or amended in this Amendment, all of the terms, covenants,
      provisions, agreements and conditions of the Agreement are hereby ratified
      and
      confirmed in every respect and shall remain unmodified and unchanged and shall
      continue in full force and effect.

     

    4.  The
      Depositor certifies that all conditions for the execution of this Amendment
      have
      been satisfied.

     

    5.  This
      Amendment shall become effective as of the date hereof when, and only when,
      the
      Agent shall have received executed counterparts of this Amendment from the
      parties hereto. 

     

    6.  This
      Amendment may be executed in counterparts, each of which shall be an original
      but all of which, taken together, shall constitute one and the same instrument.
      This Amendment shall be construed in accordance with the laws of the State
      of
      New York (excluding provisions regarding conflicts of laws) and the obligations,
      rights and remedies of the parties hereunder shall be determined in accordance
      with such laws.

     

    

     

    IN
      WITNESS WHEREOF, the parties have duly executed this Amendment No. 1 as of
      the
      date first above written.

     

    
      	 	 	 	 	 	 	 	
              MORGAN
                STANLEY ABS CAPITAL I INC.,

              as
                Depositor

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Steven Shapiro

            
	 	 	 	 	 	 	 	
              Name:

            	
              Steven
                Shapiro

            
	 	 	 	 	 	 	 	
              Title:

            	
              Managing
                Director

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WMC
                MORTGAGE CORP., as Responsible Party

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Mardy Grossman

            
	 	 	 	 	 	 	 	
              Name:

            	
              Mardy
                Grossman

            
	 	 	 	 	 	 	 	
              Title:

            	
              Senior
                Vice President

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WELLS
                FARGO BANK, N.A., as Securities Administrator

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Diane Courtney

            
	 	 	 	 	 	 	 	
              Name:

            	
              Diane
                Courtney

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WELLS
                FARGO BANK, N.A., as Servicer

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Laurie McGoogan

            
	 	 	 	 	 	 	 	
              Name:

            	
              Laurie
                McGoogan

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WELLS
                FARGO BANK, N.A., as Custodian

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Patrick M. Gorren

            
	 	 	 	 	 	 	 	
              Name:

            	
              Patrick
                M. Gorren

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

    

     

    
      	 	 	 	 	 	 	 	
              DEUTSCHE
                BANK NATIONAL TRUST

              COMPANY,
                as Trustee

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Barbara Campbell

            
	 	 	 	 	 	 	 	
              Name:

            	
              Barbara
                Campbell

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Ronaldo Reyes

            
	 	 	 	 	 	 	 	
              Name:

            	
              Ronaldo
                Reyes

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
       

      Exhibit
        A

      

       

      ARTICLE
        X

       

      TERMINATION

       

        Section
          10.01   Termination
          upon Liquidation or Purchase of the Mortgage Loans

        Section
          10.02   Final
          Distribution on the Certificates

        Section
          10.03   Additional
          Termination Requirements

       

      ARTICLE
        XI

       

      MISCELLANEOUS
        PROVISIONS

       

        Section
          11.01   Amendment

        Section
          11.02   Recordation
          of Agreement; Counterparts

        Section
          11.03   Governing
          Law

        Section
          11.04   Intention
          of Parties

        Section
          11.05   Notices

        Section
          11.06   Severability
          of Provisions

        Section
          11.07  
          Assignment; Sales; Advance Facilities

        Section
          11.08   Limitation
          on Rights of Certificateholders

        Section
          11.09  
          Inspection and Audit Rights

        Section
          11.10   Certificates
          Nonassessable and Fully Paid

        Section
          11.11   Rule
          of
          Construction

        Section
          11.12   Waiver
          of
          Jury Trial

        Section
          11.13   Opinions
          of Internal Counsel of WMC

        Section
          11.14  
          Rights of the Swap Provider

        Section
          11.15  
          Regulation AB Compliance; Intent of the Parties;
          Reasonableness

      

      SCHEDULES

      
        	
                Schedule
                  I

              	
                Mortgage
                  Loan Schedule

              
	
                Schedule
                  II

              	
                Representations
                  and Warranties of Wells Fargo Bank, N.A., as Servicer

              
	
                Schedule
                  III

              	
                Representations
                  and Warranties of the Responsible Party as to the Mortgage
                  Loans

              
	
                Schedule
                  IV

              	
                Representations
                  and Warranties of the Responsible Party as to the Responsible
                  Party

              
	
                Schedule
                  V

              	
                Representations
                  and Warranties of Morgan Stanley ABS Capital I Inc. as to the Mortgage
                  Loans

              
	
                Schedule
                  VI

              	
                Representations
                  and Warranties of Wells Fargo Bank, N.A., as Custodian
                  

              

      

       

      EXHIBITS

        
          	
                  Exhibit
                    A

                	
                  Form
                    of Class A, Class M and Class B Certificate

                
	
                  Exhibit
                    B

                	
                  Form
                    of Class P Certificate

                
	
                  Exhibit
                    C

                	
                  Form
                    of Class
                    R CertificateResidual
                    Certificates

                
	
                  Exhibit
                    D

                	
                  Form
                    of Class X Certificate

                

        

       

      REMIC
        III

       

      As
        provided herein, the Securities Administrator, on behalf of the Trustee,
        will
        make an election to treat the segregated pool of assets consisting of the
        REMIC
        II Regular Interests as a REMIC for federal income tax purposes, and such
        segregated pool of assets will be designated as “REMIC III”. The R-III Interest
        will represent the sole class of “residual interests” in REMIC III for purposes
        of the REMIC Provisions. The following table irrevocably sets forth the Class
        designation, Pass-Through Rate and Initial Certificate Principal Balance
        for
        each Class of Certificates that represents one or more of the “regular
        interests” in REMIC III created hereunder:

       

        
          	
                  Class
                    Designation

                	
                  Initial
                    Certificate

                  Principal
                    Balance

                	
                  Pass-Through
                    Rate

                	
                  Assumed
                    Final Distribution Date(1)

                
	
                  Class
                    A-1

                	
                  $

                	
                  581,960,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    A-2fpt

                	
                  $

                	
                  500,000,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    A-2a

                	
                  $

                	
                  340,525,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    A-2b

                	
                  $

                	
                  115,885,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    A-2c

                	
                  $

                	
                  335,030,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    A-2d

                	
                  $

                	
                  242,825,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    M-1

                	
                  $

                	
                   
                    89,803,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    M-2

                	
                  $

                	
                   
                    72,884,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    M-3

                	
                  $

                	
                   
                    45,552,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    M-4

                	
                  $

                	
                   
                    41,648,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    M-5

                	
                  $

                	
                   
                    40,346,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    M-6

                	
                  $

                	
                   
                    36,442,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    B-1

                	
                  $

                	
                   
                    35,140,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    B-2

                	
                  $

                	
                   
                    27,331,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    B-3

                	
                  $

                	
                   
                    26,030,000.00

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    XInterest(3)

                	
                  $

                	
                           
                    71,585,987.33

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  Class
                    PInterest

                	
                  $

                	
                                       
                    100.00

                	
                  N/A(4)

                	
                  July
                    25, 2036

                
	
                  Class
                    IO Interest

                	 	
                  (5)

                	
                  (6)

                	
                  July
                    25, 2036

                
	
                  (1)

                	
                  For
                    purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
                    regulations.

                
	
                  (2)

                	
                  Calculated
                    in accordance with the definition of “Pass-Through Rate”
                    herein.

                
	
                  (3)

                	
                  The
                    Class X CertificatesInterest
                    will not accrue interest on theirits
                    Certificate Principal Balance, but will accrue interest at the
                    Class X
                    Pass-Through Rate on the Certificate Notional Balance of the
                    Class X
                    CertificatesInterest
                    outstanding from time to time which shall equal the aggregate
                    of the
                    Uncertificated Principal Balances of the REMIC II Regular Interests
                    (other
                    than REMIC II Regular Interest LT-P). 

                
	
                  (4)

                	
                  The
                    Class P CertificatesInterest
                    will not be entitled to distributions of interest.

                
	
                  (5)

                	
                  For
                    federal income tax purposes, the Class IO Interest will not have
                    a
                    Pass-Through Rate, but will be entitled to 100]% of the amounts
                    distributed on REMIC II Regular Interest LT-IO. 

                
	
                  (6)

                	
                  For
                    federal income tax purposes, the Class IO Interest will not have
                    an
                    Uncertificated Principal Balance, but will have a notional amount
                    equal to
                    the Uncertificated Notional Amount of REMIC II Regular Interest
                    IO.

                

        

      

        REMIC
          IV

       

        As
          provided herein, the Securities Administrator, on behalf of the Trustee
          will
          make an election to treat the segregated pool of assets consisting of the
          Class
          X Interest as a REMIC for federal income tax purposes, and such segregated
          pool
          of assets will be designated as “REMIC IV”. The R-IV Interest will represent the
          sole class of “residual interests” in REMIC IV for purposes of the REMIC
          Provisions. The following table irrevocably sets forth the Class designation,
          Pass-Through Rate and Initial Certificate Principal Balance for each Class
          of
          Certificates that represents one or more of the “regular interests” in REMIC IV
          created hereunder:

       

        
          	
                  Class
                    Designation

                	
                  Initial
                    Certificate

                  Principal
                    Balance

                	
                  Pass-Through
                    Rate

                	
                  Assumed
                    Final Distribution Date(1)

                
	
                  Class
                    X

                	
                  $ 71,585,987.33

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  (1)

                	
                  For
                    purposes of Section 1.860G-1(a)(4)(iii) of the Treasury regulations,
                    the
                    Distribution Date in the second month following the maturity
                    date for the
                    Mortgage Loan with the latest maturity date has been designated
                    as the
                    “latest possible maturity date” for the Class X
                    Certificates.

                
	
                  (2)

                	
                  The
                    Class X Certificates will be entitled to 100% of amounts distributed
                    on
                    the Class X Interest.

                

        

       

       

        REMIC
          V

       

        As
          provided herein, the Securities Administrator, on behalf of the Trustee
          will
          make an election to treat the segregated pool of assets consisting of the
          Class
          P Interest as a REMIC for federal income tax purposes, and such segregated
          pool
          of assets will be designated as “REMIC V”. The R-V Interest will represent the
          sole class of “residual interests” in REMIC V for purposes of the REMIC
          Provisions. The following table irrevocably sets forth the Class designation,
          Pass-Through Rate and Initial Certificate Principal Balance for each Class
          of
          Certificates that represents one or more of the “regular interests” in REMIC V
          created hereunder:

       

        
          	
                  Class
                    Designation

                	
                  Initial
                    Certificate

                  Principal
                    Balance

                	
                  Pass-Through
                    Rate

                	
                  Assumed
                    Final Distribution Date(1)

                
	
                  Class
                    P

                	
                  $ 100

                	
                  (2)

                	
                  July
                    25, 2036

                
	
                  (1)

                	
                  For
                    purposes of Section 1.860G-1(a)(4)(iii) of the Treasury regulations,
                    the
                    Distribution Date in the second month following the maturity
                    date for the
                    Mortgage Loan with the latest maturity date has been designated
                    as the
                    “latest possible maturity date” for the Class P
                    Certificates.

                
	
                  (2)

                	
                  The
                    Class P Certificates will be entitled to 100% of amounts distributed
                    on
                    the Class P Interest.

                

        

       

        REMIC
          VI

       

        As
          provided herein, the Securities Administrator, on behalf of the Trustee
          will
          make an election to treat the segregated pool of assets consisting of the
          Class
          IO Interest as a REMIC for federal income tax purposes, and such segregated
          pool
          of assets will be designated as “REMIC VI”. The R-VI Interest will represent the
          sole class of “residual interests” in REMIC VI for purposes of the REMIC
          Provisions. The following table irrevocably sets forth the Class designation,
          Pass-Through Rate and Initial Certificate Principal Balance for each Class
          of
          Certificates that represents one or more of the “regular interests” in REMIC VI
          created hereunder:

       

        
          	
                  Class
                    Designation

                	
                  Initial
                    Certificate

                  Principal
                    Balance

                	
                  Pass-Through
                    Rate

                	
                  Assumed
                    Final Distribution Date(1)

                
	
                  Swap-IO

                	
                  $ (2)

                	
                  (3)

                	
                  July
                    25, 2036

                
	
                  (1)

                	
                  For
                    purposes of Section 1.860G-1(a)(4)(iii) of the Treasury regulations,
                    the
                    Distribution Date in the second month following the maturity
                    date for the
                    Mortgage Loan with the latest maturity date has been designated
                    as the
                    “latest possible maturity date” for the REMIC VI Regular Interest
                    Swap-IO.

                
	
                  (2)

                	
                  REMIC
                    VI Regular Interest Swap-IO will not have a Certificate Notional
                    Balance
                    but will be entitled to 100% of amounts distributed on the Class
                    IO
                    Interest.

                
	
                  (3)

                	
                  REMIC
                    VI Regular Interest Swap-IO will be entitled to 100% of amounts
                    distributed on the Class IO
                    Interest.

                

        

       

       

        The
          minimum denomination for each Class of Certificates, other than the Class
          P,
          Class R,
          Class R-X
          and the
          Class X Certificates, will be $25,000 with integral multiples of $1 in
          excess
          thereof. The minimum denomination for the Class P and the Class X Certificates
          will each be a 1% Percentage Interest in such Class. The Class R Certificateand
          Class R-XCertificates
          will
          represent a 100% Percentage Interest in such Class.

       

      It
        is
        expected that each Class of Certificates will receive its final distribution
        of
        principal and interest on or prior to the Final Scheduled Distribution
        Date.

       

      Set
        forth
        below are designations of Classes of Certificates to the categories used
        herein:

       

       

      
        	
                Book-Entry
                  Certificates

              	 	
                All
                  Classes of Certificates other than the Physical
                  Certificates.

              

      

       

      
        	
                Class
                  A Certificates

              	 	
                Class
                  A-1, Class A-2fpt, Class A-2a, Class A-2b, Class A-2c and Class
                  A-2d.

              

      

       

      
        	
                Delay
                  Certificates

              	 	
                None.

              

      

       

      ERISA-Restricted

        
          	
                  Certificates

                	 	
                  Class
                    RResidual
                    Certificates, Class P Certificates and Class X Certificates;
                    any
                    certificate with a rating below the lowest applicable permitted
                    rating
                    under the Underwriters’
Exemption.

                

        

       

      
        	
                Non-Delay
                  Certificates

              	 	
                Class
                  A, Class X and Subordinated
                  Certificates.

              

      

       

      
        	
                Offered
                  Certificates

              	 	
                All
                  Classes of Certificates other than the Private
                  Certificates.

              

      

         

        
          	
                  Physical
                    Certificates

                	 	
                  Class
                    P, Class X and Class
                    RResidual
                    Certificates.

                

        

         

        
          	
                  Private
                    Certificates

                	 	
                  Class
                    P, Class X and Class
                    RResidual
                    Certificates.

                

        

       

      
        	
                Rating
                  Agencies

              	 	
                Moody’s,
                  Fitch and Standard & Poor’s.

              

      

         

        
          	
                  Regular
                    Certificates

                	 	
                  All
                    Classes of Certificates other than the Class P and Class
                    RResidual
                    Certificates.

                

        

         

        
          	
                  Residual
                    Certificates

                	 	
                  Class
                    R
                    Certificates and Class R-X
                    Certificates.

                

        

       

      
        	
                Subordinated
                  Certificates

              	 	
                Class
                  M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class
                  B-1,
                  Class B-2 and Class B-3
                  Certificates.

              

      

        minus
          all
          distributions of principal previously made with respect thereto and in
          the case
          of any Certificates, reduced by any Applied Realized Loss Amounts allocated
          to
          such Class of Certificates pursuant to Section 4.05; provided, however,
          that
          immediately following the Distribution Date on which a Subsequent Recovery
          is
          distributed, the Class Certificate Balances of any Class or Classes of
          Certificates that have been previously reduced by Applied Realized Loss
          Amounts
          will be increased, in order of seniority, by the amount of the Subsequent
          Recovery distributed on such Distribution Date (up to the amount of the
          Unpaid
          Realized Loss Amount for such Class or Classes for such Distribution Date).
          With
          respect to the Class X Certificates and any Distribution Date, the excess,
          if
          any, of (i) the then Stated Principal Balance of the Mortgage Loans over
          (ii)
          the then aggregate Certificate Balance of the Class A Certificates, Class
          M
          Certificates and the Class P Certificates. The Class
          RResidual
          Certificates have no Certificate Balance.

       

      “Certificate
        Owner”: With respect to a Book-Entry Certificate, the Person who is the
        beneficial owner of such Book-Entry Certificate.

       

      “Certificate
        Register”: The register maintained pursuant to Section 5.02.

       

      “Certificateholder”
        or “Holder”: The person in whose name a Certificate is registered in the
        Certificate Register, except that, solely for the purpose of giving any consent
        pursuant to this Agreement, any Certificate registered in the name of the
        Depositor or any Affiliate of the Depositor shall be deemed not to be
        Outstanding and the Percentage Interest evidenced thereby shall not be taken
        into account in determining whether the requisite amount of Percentage Interests
        necessary to effect such consent has been obtained; provided, however, that
        if
        any such Person (including the Depositor) owns 100% of the Percentage Interests
        evidenced by a Class of Certificates, such Certificates shall be deemed to
        be
        Outstanding for purposes of any provision hereof that requires the consent
        of
        the Holders of Certificates of a particular Class as a condition to the taking
        of any action hereunder. The Securities Administrator is entitled to rely
        conclusively on a certification of the Depositor or any Affiliate of the
        Depositor in determining which Certificates are registered in the name of
        an
        Affiliate of the Depositor.

       

      “Class”:
        All Certificates bearing the same class designation as set forth in the
        Preliminary Statement.

       

      “Class
        A Certificates”:
        As
        specified in the Preliminary Statement.

       

      “Class
        A
        Certificate Group”: The Group I Class A Certificates or the Group II Class A
        Certificates, as applicable.

       

      “Class
        A
        Principal Allocation Percentage”: With respect to any Distribution Date, the
        percentage equivalent of a fraction, determined as follows: (A) with respect
        to
        the Group I Class A Certificates, a fraction, the numerator of which is (x)
        the
        portion of the Principal Remittance Amount for such Distribution Date that
        is
        attributable to the principal received or advanced on the Group I Mortgage
        Loans
        and the denominator of which is (y) the Principal Remittance Amount for such
        Distribution Date and (B) with respect to the Group II Class A Certificates,
        a
        fraction, the numerator of which is (x) the portion of the Principal Remittance
        Amount for such Distribution Date that is attributable to the principal received
        or advanced on

      Certificates
        (after taking into account the distribution of the Class M-1 Principal
        Distribution Amount for such Distribution Date), (C) the Class Certificate
        Balance of the Class M-2 Certificates (after taking into account the
        distribution of the Class M-2 Principal Distribution Amount for such
        Distribution Date), (D) the Class Certificate Balance of the Class M-3
        Certificates (after taking into account the distribution of the Class M-3
        Principal Distribution Amount for such Distribution Date), (E) the Class
        Certificate Balance of the Class M-4 Certificates (after taking into account
        the
        distribution of the Class M-4 Principal Distribution Amount for such
        Distribution Date) and (F) the Class Certificate Balance of the Class M-5
        Certificates immediately prior to such Distribution Date over (ii) the lesser
        of
        (A) 84.90% of the aggregate Stated Principal Balance of the Mortgage Loans
        for
        such Distribution Date and (B) the excess, if any, of the aggregate Stated
        Principal Balance of the Mortgage Loans for such Distribution Date over
        $13,014,935.44.

       

      “Class
        M-6 Certificates”:
        All
        Certificates bearing the class designation of “Class M-6,” and evidencing (i) a
        REMIC Regular Interest in REMIC III, (ii) the right to receive the related
        Basis
        Risk CarryForward Amount and (iii) the obligation to pay any Class IO
        Distribution Amount.

       

      “Class
        M-6 Principal Distribution Amount”: With respect to any Distribution Date, the
        excess of (i) the sum of (A) the aggregate Class Certificate Balances of
        the
        Class A Certificates (after taking into account the distribution of the Class
        A
        Principal Distribution Amount for such Distribution Date), (B) the Class
        Certificate Balance of the Class M-1 Certificates (after taking into account
        the
        distribution of the Class M-1 Principal Distribution Amount for such
        Distribution Date), (C) the Class Certificate Balance of the Class M-2
        Certificates (after taking into account the distribution of the Class M-2
        Principal Distribution Amount for such Distribution Date), (D) the Class
        Certificate Balance of the Class M-3 Certificates (after taking into account
        the
        distribution of the Class M-3 Principal Distribution Amount for such
        Distribution Date), (E) the Class Certificate Balance of the Class M-4
        Certificates (after taking into account the distribution of the Class M-4
        Principal Distribution Amount for such Distribution Date), (F) the Class
        Certificate Balance of the Class M-5 Certificates (after taking into account
        the
        distribution of the Class M-5 Principal Distribution Amount for such
        Distribution Date) and (G) the Class Certificate Balance of the Class M-6
        Certificates immediately prior to such Distribution Date over (ii) the lesser
        of
        (A) 87.70% of the aggregate Stated Principal Balance of the Mortgage Loans
        for
        such Distribution Date and (B) the excess, if any, of the aggregate Stated
        Principal Balance of the Mortgage Loans for such Distribution Date over
        $13,014,935.44.

       

      “Class
        P
        Certificates”: All Certificates bearing the class designation of “Class
        P”.

       

        “Class
          P Interest”: An uncertificated interest in the Trust Fund held by the Trustee on
          behalf of the Holders of the Class P Certificates, evidencing a Regular
          Interest
          in REMIC III for purposes of the REMIC Provisions.

       

      “Class
        R
        Certificates”: All Certificates bearing the class designation of “Class R,” and
        evidencing ownership of the Class R-I Interest, the Class R-II Interest and
        the
        Class R-III Interest.

       

        “Class
          R-X Certificates”: All Certificates bearing the class designation of “Class
          R-X,” and evidencing the ownership of the Class R-IV Interest, the Class R-V
          Interest and the Class R-VI Interest.

       

      “Class
        R-I Interest”: The uncertificated residual interest in REMIC I.

       

      “Class
        R-II Interest”: The uncertificated residual interest in REMIC II.

       

      “Class
        R-III Interest”: The uncertificated residual interest in REMIC III.

       

        “Class
          R-IV Interest”: The uncertificated residual interest in REMIC
          IV.

       

        “Class
          R-V Interest”: The uncertificated residual interest in REMIC
          V.

       

        “Class
          R-VI Interest”: The uncertificated residual interest in REMIC
          VI.

       

        “Class
          X
          Certificate”: All Certificates bearing the designation “Class X” and evidencing
          (i) a REMIC Regular Interest in REMIC IIIIV,
          (ii)
          the obligation to pay Basis Risk Shortfall and (iii) the obligation to
          pay any
          Class IO Distribution Amount. 

       

      “Class
        X
        Distributable Amount”: On any Distribution Date, the sum of (i) as a
        distribution in respect of interest, the amount of interest that has accrued
        on
        the Class X Interest and not applied as an Extra Principal Distribution Amount
        on such Distribution Date, plus any such accrued interest remaining
        undistributed from prior Distribution Dates, plus, without duplication (ii)
        as a
        distribution in respect of principal, any portion of the principal balance
        of
        the Class X Certificates which is distributable as a Subordination Reduction
        Amount, minus (iii) any amounts paid from the Excess Reserve Fund Account
        to pay
        any Basis Risk CarryForward Amount or any Swap Termination Payment.

       

        “Class
          X Interest”: An uncertificated interest in the Trust Fund held by the Trustee on
          behalf of the Holders of the Class X Certificates, evidencing a Regular
          Interest
          in REMIC III for purposes of the REMIC Provisions.

       

      “Closing
        Date”: June 28, 2006.

       

      “Closing
        Date Deposit Amount”: $4.19 deposited by the Depositor into the Distribution
        Account on the Closing Date. $0.02 of the Closing Date Deposit Amount shall
        be
        attributable to interest in respect of the Group I Mortgage Loans and $2.72
        of
        the Closing Date Deposit Amount shall be attributable to principal in respect
        of
        the Group I Mortgage Loans. $0.01 of the Closing Date Deposit amount shall
        be
        attributable to interest in respect of the Group II Mortgage Loans and $1.47
        of
        the Closing Date Deposit Amount shall be attributable to principal in respect
        of
        the Group II Mortgage Loans.

       

      “Code”:
        The Internal Revenue Code of 1986, including any successor or amendatory
        provisions.

       

      “Collection
        Account”: As defined in Section 3.10(a).

       

      “LIBOR
        Determination Date”: With respect to any Interest Accrual Period for the Offered
        Certificates, the second London Business Day preceding the commencement of
        such
        Interest Accrual Period.

       

      “Liquidated
        Mortgage Loan”: With respect to any Distribution Date, a defaulted Mortgage Loan
        (including any REO Property) which either (a) was liquidated in the calendar
        month preceding the month of such Distribution Date and as to which the Servicer
        has certified to the Securities Administrator that it has received all amounts
        it expects to receive in connection with the liquidation of such Mortgage
        Loan
        including the final disposition of an REO Property, or (b) is a Second Lien
        Mortgage Loan (1) that is delinquent 180 days or longer, (2) for which the
        related first lien mortgage loan is not a Mortgage Loan, and (3) as to which
        the
        Servicer has certified to the Securities Administrator that it does not believe
        there is a reasonable likelihood that any further net proceeds will be received
        or recovered with respect to such Second Lien Mortgage Loan.

       

      “Liquidation
        Proceeds”: Cash received in connection with the liquidation of a Liquidated
        Mortgage Loan, whether through a trustee’s sale, foreclosure sale or otherwise,
        including any Subsequent Recoveries.

       

      “Loan
        Group”: The Group I Mortgage Loans or the Group II Mortgage Loans, as
        applicable.

       

      “Loan
        Group Cap”: The Group I Loan Cap or the Group II Loan Cap, as
        applicable.

       

      “Loan-to-Value
        Ratio” or “LTV”: With respect to any First Lien Mortgage Loan, the ratio
        (expressed as a percentage) of the original outstanding principal amount
        of the
        First Lien Mortgage Loan as of the Cut-off Date (unless otherwise indicated),
        to
        the lesser of (a) the Appraised Value of the Mortgaged Property at origination,
        and (b) if the First Lien Mortgage Loan was made to finance the acquisition
        of
        the related Mortgaged Property, the purchase price of the Mortgaged
        Property.

       

      “London
        Business Day”: Any day on which dealings in deposits of United States dollars
        are transacted in the London interbank market.

       

        “Marker
          Rate”: With respect to the Class A Certificates, Class M Certificates and Class
          B
          CertificatesX
          Interest
          and any
          Distribution Date, a per annum rate equal to two (2) times the weighted
          average
          of the Uncertificated REMIC II Pass-Through Rates for REMIC II Regular
          Interest
          LT-A1, REMIC II Regular Interest LT-A2fpt, REMIC II Regular Interest LT-A2a,
          REMIC II Regular Interest LT-A2b, REMIC II Regular Interest LT-A2c, REMIC
          II
          Regular Interest LT-A2d, REMIC II Regular Interest LT-M1, REMIC II Regular
          Interest LT-M2, REMIC II Regular Interest LT-M3, REMIC II Regular Interest
          LT-M4, REMIC II Regular Interest LT-M5, REMIC II Regular Interest LT-M6,
          REMIC
          II Regular Interest LT-B1, REMIC II Regular Interest LT-B2, REMIC II Regular
          Interest LT-B3 and REMIC II Regular Interest LT-ZZ, with the per annum
          rate on
          each such REMIC II Regular Interest (other than REMIC II Regular Interest
          LT-ZZ)
          subject to a cap equal to the Pass-Through Rate on the Corresponding Certificate
          for the purpose of this calculation; and with the per annum rate on REMIC
          II
          Regular

      

      (xiii) the
        Class
        B-1 Certificates, the lesser of (i) LIBOR plus the applicable Pass-Through
        Margin and (ii) the WAC Cap;

       

      (xiv) the
        Class
        B-2 Certificates, the lesser of (i) LIBOR plus the applicable Pass-Through
        Margin and (ii) the WAC Cap;

       

      (xv) the
        Class
        B-3 Certificates, the lesser of (i) LIBOR plus the applicable Pass-Through
        Margin and (ii) the WAC Cap; and

       

        (xvi) the
          Class
          X CertificatesInterest,
          a per
          annum rate equal to the percentage equivalent of a fraction, the numerator
          of
          which is the sum of the amounts calculated pursuant to clauses (A) through
          (R)
          below, and the denominator of which is the aggregate Uncertificated Principal
          Balance of REMIC II Regular Interest LT-AA, REMIC II Regular Interest LT-A1,
          REMIC II Regular Interest LT-A2fpt, REMIC II Regular Interest LT-A2a, REMIC
          II
          Regular Interest LT-A2b, REMIC II Regular Interest LT-A2c, REMIC II Regular
          Interest LT-A2d, REMIC II Regular Interest LT-M1, REMIC II Regular Interest
          LT-M2, REMIC II Regular Interest LT-M3, REMIC II Regular Interest LT-M4,
          REMIC
          II Regular Interest LT-M5, REMIC II Regular Interest LT-M6, REMIC II Regular
          Interest LT-B1, REMIC II Regular Interest LT-B2, REMIC II Regular Interest
          LT-B3
          and REMIC II Regular Interest LT-ZZ. For purposes of calculating the
          Pass-Through Rate for the Class X CertificatesInterest,
          the
          numerator is equal to the sum of the following components:

       

      (A)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-AA
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-AA;

       

      (B)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-A1
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-A1;

       

      (C)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest
        LT-A2fpt, minus the Marker Rate, applied to an amount equal to the
        Uncertificated Principal Balance of REMIC II Regular Interest
        LT-A2fpt;

       

      (D)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-A2a,
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-A2a;

       

      (E)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-A2b,
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-A2b;

       

      (F)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-A2c,
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-A2c;

       

      (G)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-A2d,
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-A2d;

       

      (H)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-M1
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-M1;

       

      (I)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-M2
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-M2;

       

      (J)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-M3
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-M3;

       

      (K)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-M4
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-M4;

       

      (L)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-M5
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-M5;

       

      (M)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-M6
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-M6;

       

      (N)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-B1
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-B1;

       

      (O)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-B2
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-B2;

       

      (P)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-B3
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-B3;

       

      (Q)  the
        Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest LT-ZZ
        minus the Marker Rate, applied to an amount equal to the Uncertificated
        Principal Balance of REMIC II Regular Interest LT-ZZ; and

       

      (R)  100%
        of
        the interest on REMIC II Regular Interest LT-P.

       

        (xvii) the
          Class X Certificates, 100% of the interest distributable to the Class X
          Interest, expressed as a per annum rate.

       

      REMIC
        II
        Regular Interest LT-2SUB, REMIC II Regular Interest LT-2GRP and REMIC II
        Regular
        Interest LT-XX.

       

      “REMIC
        II
        Regular Interest LT-ZZ Maximum Interest Deferral Amount”: With respect to any
        Distribution Date, the excess of (i) accrued interest at the Uncertificated
        REMIC II Pass-Through Rate applicable to REMIC II Regular Interest LT-ZZ
        for
        such Distribution Date on a balance equal to the Uncertificated Principal
        Balance of REMIC II Regular Interest LT-ZZ minus the REMIC II
        Overcollateralization Amount, in each case for such Distribution Date, over
        (ii)
        the Uncertificated Accrued Interest on REMIC II Regular Interest LT-A1, REMIC
        II
        Regular Interest LT-A2fpt, REMIC II Regular Interest LT-A2a, REMIC II Regular
        Interest LT-A2b, REMIC II Regular Interest LT-A2c, REMIC II Regular Interest
        LT-A2d, REMIC II Regular Interest LT-M1, REMIC II Regular Interest LT-M2,
        REMIC
        II Regular Interest LT-M3, REMIC II Regular Interest LT-M4, REMIC II Regular
        Interest LT-M5, REMIC II Regular Interest LT-M6, REMIC II Regular Interest
        LT-B1, REMIC II Regular Interest LT-B2 and REMIC II Regular Interest LT-B3
        for
        such Distribution Date, with the rate on each such REMIC II Regular Interest
        subject to a cap equal to the related Pass-Through Rate.

       

      “REMIC
        II
        Sub WAC Allocation Percentage”: 50% of any amount payable or loss attributable
        from the Mortgage Loans, which shall be allocated to REMIC II Regular Interest
        LT-1SUB, REMIC II Regular Interest LT-1GRP, REMIC II Regular Interest LT-2SUB,
        REMIC II Regular Interest LT-2GRP and REMIC II Regular Interest
        LT-XX.

       

      “REMIC
        II
        Subordinated Balance Ratio”: The ratio among the Uncertificated Principal
        Balances of each REMIC II Regular Interest ending with the designation “SUB”,
        equal to the ratio between, with respect to each such REMIC II Regular Interest,
        the excess of (x) the aggregate Stated Principal Balance of the Group I Mortgage
        Loans and the Group II Mortgage Loans, as applicable, over (y) the current
        Certificate Principal Balance of the related Senior Certificates.

       

      “REMIC
        II
        Targeted Overcollateralization Amount”: 0.50% of the Targeted
        Overcollateralization Amount.

       

        “REMIC
          III”: The
          segregated pool of assets consisting of all of the REMIC II Regular Interests
          conveyed in trust to the Trustee, for the benefit of the REMIC III
          Certificateholders
          pursuant to Section 2.07,,
          and all
          amounts deposited therein, with respect to which a separate REMIC election
          is to
          be made.

       

      “REMIC
        III
        Certificate”: Any Regular Certificate or Class R Certificate.

       

      “REMIC
        III Certificateholder”: The Holder of any REMIC III Certificate.

       

        “REMIC
          III Regular Interest”: Any of the Class X Interest, Class P Interest, Class IO
          Interest and any “regular interest” in REMIC III the ownership of which is
          represented by a Senior Certificate or Subordinate
          Certificate.

       

        “REMIC
          IV”: The segregated pool of assets consisting of all of the Class X Interest
          conveyed in trust to the Trustee, for the benefit of the REMIC IV
          Certificateholders and the Class R-X Certificateholders (in respect of
          the Class
          R-IV Regular Interest), and all amounts deposited therein, with respect
          to which
          a separate REMIC election is to be made.

       

        “REMIC
          V”: The segregated pool of assets consisting of the Class P Interest conveyed
          in
          trust to the Trustee, for the benefit of the Class P Certificateholders
          and the
          Class R-X Certificateholders (as holders of the Class R-V Regular Interest),
          and
          all amounts deposited therein, with respect to which a separate REMIC election
          is to be made.

       

        “REMIC
          VI”: The segregated pool of assets consisting of all of the Class IO Interest
          conveyed in trust to the Trustee, for the benefit of the Holders of REMIC
          VI
          Regular Interest IO and the Holders of the Class R-X Certificates (as holders
          of
          the Class R-VI Regular Interest), and all amounts deposited therein, with
          respect to which a separate REMIC election is to be made.

       

      “REMIC
        Opinion”: Shall mean an Opinion of Counsel to the effect that the proposed
        action will not have an adverse affect on any REMIC created
        hereunder.

       

      “REMIC
        Provisions”: Provisions of the federal income tax law relating to real estate
        mortgage investment conduits, which appear at Sections 860A through 860G
        of
        Subchapter M of Chapter 1 of the Code, and related provisions, and regulations
        promulgated thereunder, as the foregoing may be in effect from time to time
        as
        well as provisions of applicable state laws.

       

        “REMIC
          Regular Interest”: Any REMIC I Regular Interest, REMIC II Regular Interest,
Class
          X Interest, Class P Interest, Regular
          Certificate or Class IO Interest.

       

      “Remittance
        Date”: With respect to any Distribution Date, the second Business Day
        immediately preceding such Distribution Date.

       

      “REO
        Disposition”: The final sale by the Servicer of any REO Property.

       

      “REO
        Imputed Interest”: As to any REO Property, for any period, an amount equivalent
        to interest (at the Mortgage Rate net of the Servicing Fee Rate that would
        have
        been applicable to the related Mortgage Loan had it been outstanding) on
        the
        unpaid principal balance of the Mortgage Loan as of the date of acquisition
        thereof (as such balance is reduced pursuant to Section 3.17 by any income
        from
        the REO Property treated as a recovery of principal).

       

      “REO
        Mortgage Loan”: A Mortgage Loan where title to the related Mortgaged Property
        has been obtained by the Servicer in the name of the Trustee on behalf of
        the
        Certificateholders.

       

      “REO
        Property”: A Mortgaged Property acquired by the Trust Fund through foreclosure
        or deed-in-lieu of foreclosure in connection with a defaulted Mortgage
        Loan.

       

      “Replacement
        Swap Provider Payment”:
        Any
        payments that have been received by the Supplemental Interest Trust as a
        result
        of entering into a replacement interest rate swap agreement following an
        Additional Termination Event described in Part 1(h)(ii) of the Interest Rate
        Swap Agreement.

       

      for
        notices to Standard & Poor’s shall be Standard & Poor’s, 55 Water
        Street, New York, New York 10041, Attention: Residential Mortgage Surveillance
        Group - Morgan Stanley ABS Capital I Inc. Trust 2006-WMC2, or such other
        address
        as Standard & Poor’s may hereafter furnish to the Depositor, the Securities
        Administrator, the Trustee and the Servicer.

       

      “Standard
        & Poor’s Glossary”: The Standard & Poor’s LEVELS®
        Glossary, as may be in effect from time to time.

       

        “Startup
          Day”: The Closing
          DateStartup
          Day for REMIC I, REMIC II and REMIC III shall be the Closing Date. The
          Startup
          Date for REMIC IV, REMIC V and REMIC VI shall be November
          7, 2006.

       

      “Stated
        Principal Balance”: As to each Mortgage Loan and as of any date of
        determination, (i) the principal balance of the Mortgage Loan at the Cut-off
        Date after giving effect to payments of principal due on or before such date
        (whether or not received), minus (ii) all amounts previously remitted to
        the
        Securities Administrator with respect to the related Mortgage Loan representing
        payments or recoveries of principal including advances in respect of scheduled
        payments of principal. For purposes of any Distribution Date, the Stated
        Principal Balance of any Mortgage Loan will give effect to any scheduled
        payments of principal received by the Servicer on or prior to the related
        Determination Date or advanced by the Servicer for the related Remittance
        Date
        and any unscheduled principal payments and other unscheduled principal
        collections received during the related Prepayment Period, and the Stated
        Principal Balance of any Mortgage Loan that has prepaid in full or has become
        a
        Liquidated Mortgage Loan during the related Prepayment Period shall be
        zero.

       

      “Stepdown
        Date”: The later to occur of (i) the earlier to occur of (a) the Distribution
        Date in July 2009 and (b) the Distribution Date following the Distribution
        Date
        on which the aggregate Class Certificate Balances of the Class A Certificates
        have been reduced to zero and (ii) the first Distribution Date on which the
        Senior Enhancement Percentage (calculated for this purpose only after taking
        into account payments of principal on the Mortgage Loans applied to reduce
        the
        Stated Principal Balances of the Mortgage Loans for the applicable Distribution
        Date but prior to any allocation of the Principal Distribution Amount and
        principal payments from the Swap Account to the Certificates on such
        Distribution Date) is greater than or equal to the Senior Specified Enhancement
        Percentage.

       

      “Subcontractor”:
        Any
        third-party or Affiliated vendor, subcontractor or other Person utilized
        by the
        Servicer, a Subservicer, the Securities Administrator or the Custodian, as
        applicable, that is not responsible for the overall servicing (as “servicing” is
        commonly understood by participants in the mortgage-backed securities market)
        of
        Mortgage Loans but performs one or more discrete functions identified in
        Item
        1122(d) of Regulation AB with respect to Mortgage Loans.

       

      “Subordinated
        Amount”: With respect to any Distribution Date, the excess, if any, of (a) the
        aggregate Stated Principal Balance of the Mortgage Loans for such Distribution
        Date over (b) the aggregate of the Class Certificate Balances of the Offered
        Certificates and the Class P Certificates as of such Distribution Date (after
        giving effect to the payment of the Principal Remittance Amount on such
        Certificates on such Distribution Date).

       

      “Supplemental
        Interest Trust Trustee”: The Securities Administrator, and its successors in
        interest and, if a successor securities administrator is appointed hereunder,
        such successor.

       

      “Swap
        Account”: As defined in Section 4.06.

       

      “Swap
        Assets”:
        Collectively, the Swap Account, the Interest Rate Swap Agreement, the Class
        IO
        Interest and the right to receive Class IO Shortfalls, subject to the obligation
        to pay amounts specified in Section 4.06.

       

      “Swap
        LIBOR”: With respect to any Distribution Date (and the related Interest Accrual
        Period), the product of (i) USD-LIBOR-BBA (as used in the Interest Swap
        Agreement), (ii) two, and (iii) the quotient of (a) the actual number of
        days in
        the Interest Accrual Period for the Offered Certificates divided by (b)
        30.

       

      “Swap
        Payment Allocation”: For any Class of Certificates and any Distribution Date,
        that Class’s pro
        rata
        share of
        the Net Swap Receipts, if any, for that Distribution Date, based on the Class
        Certificate Balances of the Classes of Certificates.

       

      “Swap
        Payment Rate”: For any Distribution Date, a fraction, the numerator of which is
        any Net Swap Payment or Swap Termination Payment owed to the Swap Provider
        for
        such Distribution Date and the denominator of which is the aggregate Stated
        Principal Balance of the Mortgage Loans at the beginning of the related Due
        Period, multiplied by 12.

       

      “Swap
        Provider”: Morgan Stanley Capital Services Inc., a Delaware corporation, and its
        successors in interest.

       

      “Swap
        Termination Payment”:
        Any
        payment payable by the Supplemental Interest Trust or the Swap Provider upon
        termination of the Interest Rate Swap Agreement as a result of an Event of
        Default (as defined in the Interest Rate Swap Agreement) or a Termination
        Event
        (as defined in the Interest Rate Swap Agreement).

       

        “Tax
          Matters Person”:
          The
          Holder of the Class R Certificates designated as “tax matters person” of
each
          Trust REMIC in the manner providedREMIC
          I, REMIC II and REMIC III in the manner provided under Treasury Regulations
          Section 1.860F-4(d) and Treasury Regulations Section 301.6231(a)(7)-1.
          The
          Holder of the Class R-X Certificates designated as “tax matters person” of REMIC
          IV, REMIC V and REMIC VI in the manner provided
          under
          Treasury Regulations Section 1.860F-4(d) and Treasury Regulations Section
          301.6231(a)(7)-1.

       

      “Tax
        Service Contract”: As defined in Section 3.09(a).

       

      “Telerate
        Page 3750”: The display page currently so designated on the Bridge Telerate
        Service (or such other page as may replace that page on that service for
        displaying comparable rates or prices).

       

      “Total
        Monthly Excess Spread”: As to any Distribution Date, an amount equal to the
        excess if any, of (i) the interest on the Mortgage Loans received by the
        Servicer on or prior to the related Determination Date (other than Prepayment
        Interest Excesses) or advanced by the

      Servicer
        for the related Remittance Date (net of Expense Fees) over (ii) the sum of
        (A)
        the amounts payable to the Certificates pursuant to Section 4.02(a)(i) on
        such
        Distribution Date, (B) any Net Swap Payments to the Swap Provider and (C)
        any
        Swap Termination Payment (other than a Defaulted Swap Termination Payment
        that
        is not a Senior Defaulted Swap Termination Payment) to the Swap
        Provider.

       

      “Transfer”:
        Any direct or indirect transfer or sale of any Ownership Interest in a Residual
        Certificate.

       

      “Transfer
        Affidavit”: As defined in Section 5.02(c).

       

      “Transferor
        Certificate”: As defined in Section 5.02(b).

       

      “Trigger
        Event”: Either a Cumulative Loss Trigger Event or a Delinquency Trigger
        Event.

       

      “Trust”:
        The express trust created hereunder in Section 2.01(c).

       

      “Trust
        Fund”: The corpus of the trust created hereunder consisting of (i) the Mortgage
        Loans and all interest and principal with respect thereto received on or
        after
        the related Cut-off Date, other than such amounts which were due on the Mortgage
        Loans on or prior to the related Cut-off Date; (ii) the Collection Account,
        Excess Reserve Fund Account, the Distribution Account, and all amounts deposited
        therein pursuant to the applicable provisions of this Agreement; (iii) property
        that secured a Mortgage Loan and has been acquired by foreclosure, deed-in-lieu
        of foreclosure or otherwise; (iv) the Closing Date Deposit Amount; (v) the
        Interest Rate Swap Agreement; (vi) the Swap Assets; and (vii) all proceeds
        of
        the conversion, voluntary or involuntary, of any of the foregoing.

       

        “Trust
          REMIC”: Any of REMIC I, REMIC II,
          REMIC III, REMIC IV, REMIC V
          or REMIC
IIIVI.

       

      “Trustee”:
        Deutsche Bank National Trust Company, a national banking association, and
        its
        successors in interest and, if a successor trustee is appointed hereunder,
        such
        successor.

       

      “Uncertificated
        Accrued Interest”: With respect to each Uncertificated REMIC Regular Interest on
        each Distribution Date, an amount equal to one month’s interest at the related
        Uncertificated Pass-Through Rate on the Uncertificated Principal Balance
        of such
        REMIC Regular Interest. In each case, Uncertificated Accrued Interest will
        be
        reduced by any Prepayment Interest Shortfalls and shortfalls resulting from
        application of the Relief Act (allocated to such REMIC Regular Interests
        as set
        forth in Section 8.14).

       

      “Uncertificated
        Notional Amount”: With respect to REMIC II Regular Interest LT-IO and each
        Distribution Date listed below, the aggregate Uncertificated Principal Balance
        of the REMIC 1 Regular Interests ending with the designation “A” listed below:

       

      
        	
                Distribution
                  

                Date

              	 	
                REMIC
                  1 Regular Interests

              	 

      

      (S)  to
        the
        Excess Reserve Fund Account, the amount of any Basis Risk Payment (without
        regard to Net Swap Receipts) for such Distribution Date;

       

      (T)  from
        funds on deposit in the Excess Reserve Fund Account with respect to such
        Distribution Date, an amount equal to any remaining Basis Risk CarryForward
        Amount with respect to the Offered Certificates for such Distribution Date,
        allocated to the Offered Certificates in the same order and priority in which
        the Accrued Certificate Interest Distribution Amount is allocated among such
        Classes of Certificates, with the allocation to the Class A Certificates
        being
        (a) first, among the Class A Certificates, pro
        rata,
        based
        on their respective Class Certificate Balances and (b) second, any remaining
        amounts to the Class A Certificates, pro
        rata,
        based
        on any Basis Risk CarryForward Amounts remaining unpaid, in order to reimburse
        such unpaid amounts;

       

      (U)  to
        the
        Swap Account, the amount of any remaining Defaulted Swap Termination Payment
        owed to the Swap Provider;

       

      (V)  to
        the
        Class X Certificates, the remainder of the Class X Distributable Amount not
        distributed pursuant to Sections 4.02(a)(iii)(A)-(U); and

       

      (W)  if
        such
        Distribution Date follows the Prepayment Period during which occurs the latest
        date on which a Prepayment Charge may be required to be paid in respect of
        any
        Mortgage Loan, to the Class P Certificates, in reduction of the Class
        Certificate Balance thereof; and 

       

        (X)  to
          the
Class
          RResidual
          Certificates, any remaining amount in the Trust REMICs.

       

      (ii)  Solely
        for purposes of interest allocation calculations, the Interest Remittance
        Amount
        attributable to Group I Mortgage Loans will be allocated:

       

      (1)  first,
        to
        the Class A-1 Certificates, the Accrued Certificate Interest Distribution
        Amount
        and any Unpaid Interest Amount for the Class A-1 Certificates; and

       

      (2)  second,
        concurrently, to the Class A-2fpt, Class A-2a, Class A-2b, Class A-2c, and
        Class
        A-2d Certificates, pro rata (based on the amounts distributable or payable
        under
        Section 4.02(a)(i)(B) to such Classes of Certificates), the Accrued Certificate
        Interest Distribution Amount and any Unpaid Interest Amount for the Class
        A-2fpt, Class A-2a, Class A-2b, Class A-2c and Class A-2d Certificates,
        respectively, to the extent not otherwise previously paid from the Interest
        Remittance Amount attributable to Group II Mortgage Loans.

       

      (iii)  Solely
        for purposes of interest allocation calculations, the Interest Remittance
        Amount
        attributable to Group II Mortgage Loans will be allocated:

       

      Section
        1.02  deliver,
        in the name of the designated transferee or transferees, one or more new
        Certificates of the same Class and aggregate Percentage
        Interest.

       

      At
        the
        option of a Certificateholder, Certificates may be exchanged for other
        Certificates of the same Class in authorized denominations and evidencing
        the
        same aggregate Percentage Interest upon surrender of the Certificates to
        be
        exchanged at the office or agency of the Securities Administrator. Whenever
        any
        Certificates are so surrendered for exchange, the Securities Administrator
        shall
        execute, authenticate, and deliver the Certificates which the Certificateholder
        making the exchange is entitled to receive. Every Certificate presented or
        surrendered for registration of transfer or exchange shall be accompanied
        by a
        written instrument of transfer in form satisfactory to the Securities
        Administrator duly executed by the Holder thereof or his attorney duly
        authorized in writing.

       

      No
        service charge to the Certificateholders shall be made for any registration
        of
        transfer or exchange of Certificates, but payment of a sum sufficient to
        cover
        any tax or governmental charge that may be imposed in connection with any
        transfer or exchange of Certificates may be required.

       

      All
        Certificates surrendered for registration of transfer or exchange shall be
        cancelled and subsequently destroyed by the Securities Administrator in
        accordance with the Securities Administrator’s customary
        procedures.

       

        (a)  No
          transfer of a Private Certificate shall be made unless such transfer is
          made
          pursuant to an effective registration statement under the Securities Act
          and any
          applicable state securities laws or is exempt from the registration requirements
          under said Act and such state securities laws. In determining whether a
          transfer
          is being made pursuant to an effective registration statement, the Securities
          Administrator shall be entitled to rely solely upon a written notice to
          such
          effect from the Depositor. Except with respect to (i) the transfer of the
          Class
          X, Class P or Class
          RResidual
          Certificates to the Depositor or
          an
          Affiliate of the Depositor or, in the case of the Class R-X Certificates,
          the
          initial transfer by an Affiliate of the Depositor or the first transfer
          by the
          initial transferee of
          an
          Affiliate of the Depositor, (ii) the transfer of the Class X or Class P
          Certificates to the NIM Issuer or the NIM Trustee, or (iii) a transfer
          of the
          Class X or Class P Certificates from the NIM Issuer or the NIM Trustee
          to the
          Depositor or an Affiliate of the Depositor, in the event that a transfer
          of a
          Private Certificate which is a Physical Certificate is to be made in reliance
          upon an exemption from the Securities Act and such laws, in order to assure
          compliance with the Securities Act and such laws, the Certificateholder
          desiring
          to effect such transfer shall certify to the Securities Administrator in
          writing
          the facts surrounding the transfer in substantially the form set forth
          in
          Exhibit H (the “Transferor
          Certificate”)
          and
          either (i) there shall be delivered to the Securities Administrator a letter
          in
          substantially the form of Exhibit I (the “Rule
          144A Letter”)
          or
          (ii) there shall be delivered to the Securities Administrator at the expense
          of
          the transferor an Opinion of Counsel that such transfer may be made without
          registration under the Securities Act. In the event that a transfer of
          a Private
          Certificate which is a Book-Entry Certificate is to be made in reliance
          upon an
          exemption from the Securities Act and such laws, in order to assure compliance
          with the Securities Act and such laws, the Certificateholder desiring to
          effect
          such transfer will be deemed to have made as of the transfer date each
          of the
          certifications set forth in the Transferor Certificate in respect of such
          Certificate and the transferee will be deemed to have made as of the transfer
          date each of the certifications set forth in the Rule 144A Letter in respect
          of
          such Certificate, in each case as if such Certificate were evidenced by
          a
          Physical Certificate. The Depositor shall provide to any Holder of a Private
          Certificate and any prospective transferee designated by any such Holder,
          information regarding the related Certificates and the Mortgage Loans and
          such
          other information as shall be necessary to satisfy the condition to eligibility
          set forth in Rule 144A(d)(4) for transfer of any such Certificate without
          registration thereof under the Securities Act pursuant to the registration
          exemption provided by Rule 144A. The Securities Administrator and the Servicer
          shall cooperate with the Depositor in providing the Rule 144A information
          referenced in the preceding sentence, including providing to the Depositor
          such
          information regarding the Certificates, the Mortgage Loans and other matters
          regarding the Trust Fund as the Depositor shall reasonably request to meet
          its
          obligation under the preceding sentence. Each Holder of a Private Certificate
          desiring to effect such transfer shall, and does hereby agree to, indemnify
          the
          Trustee, the Securities Administrator, the Depositor and the Servicer against
          any liability that may result if the transfer is not so exempt or is not
          made in
          accordance with such federal and state laws.

       

        Except
          with respect to (A) the transfer of the
          Class R,
          Class
          X
          or,
          Class P
or
          Residual Certificates
          to the Depositor or
          an
          Affiliate of the Depositor or, in the case of the Class R-X Certificates,
          the
          initial transfer by an Affiliate of the Depositor or the first transfer
          by the
          initial transferee of
          an
          Affiliate of the Depositor, (B) the transfer of the Class X or Class P
          Certificates to the NIM Issuer or the NIM Trustee, or (C) a transfer of
          the
          Class X or Class P Certificates from the NIM Issuer or the NIM Trustee
          to the
          Depositor or an Affiliate of the Depositor, no transfer of an ERISA-Restricted
          Certificate shall be made unless the Securities Administrator shall have
          received either (i) a representation from the transferee of such Certificate
          acceptable to and in form and substance satisfactory to the Securities
          Administrator (in the event such Certificate is a Class P Certificate or
          a
          Residual Certificate, such requirement is satisfied only by the Securities
          Administrator’s receipt of a representation letter from the transferee
          substantially in the form of Exhibit I), to the effect that such transferee
          is
          not an employee benefit plan or arrangement subject to Section 406 of ERISA,
          a
          plan subject to Section 4975 of the Code or a plan subject to any Federal,
          state
          or local law (“Similar
          Law”)
          materially similar to the foregoing provisions of ERISA or the Code, nor
          a
          Person acting on behalf of any such plan or arrangement nor using the assets
          of
          any such plan or arrangement to effect such transfer, or (ii) in the case
          of an
          ERISA-Restricted Certificate other than a Residual Certificate or a Class
          P
          Certificate that has been the subject of an ERISA-Qualifying Underwriting,
          and
          the purchaser is an insurance company, a representation that the purchaser
          is an
          insurance company that is purchasing such Certificates with funds contained
          in
          an “insurance company general account” (as such term is defined in Section V(e)
          of Prohibited Transaction Class Exemption 95-60 (“PTCE
          95-60”))
          and
          that it is eligible for exemptive relief under PTCE 95-60 prior to termination
          of the Supplemental Interest Trust and the purchase and holding of such
          Certificates are covered under Sections I and III of PTCE 95-60 after
          termination of the Supplemental Interest Trust or (iii) in the case of
          any such
          ERISA-Restricted Certificate other than a Residual Certificate or Class
          P
          Certificate presented for registration in the name of an employee benefit
          plan
          subject to Title I of ERISA, a plan or arrangement subject to Section 4975
          of
          the Code (or comparable provisions of any subsequent enactments), or a
          plan
          subject to Similar Law, or a trustee of any such plan or any other person
          acting
          on behalf of any such plan or arrangement or using such plan’s or arrangement’s
          assets, an Opinion of Counsel satisfactory to the Securities Administrator,
          which Opinion of Counsel shall not be an expense of the Servicer, the Depositor,
          the Securities Administrator or the Trust Fund, addressed to the Securities
          Administrator, to the

         

      (b)  together
        with such additional information as may be required by such Form, and update
        such information at the time or times in the manner required by the
        Code;

       

      (c)  make
        an
        election that each Trust REMIC be treated as a REMIC on the federal tax return
        for its first taxable year (and, if necessary, under applicable state
        law);

       

      (d)  prepare
        and forward to the Certificateholders and to the Internal Revenue Service
        and,
        if necessary, state tax authorities, all information returns and reports
        as and
        when required to be provided to them in accordance with the REMIC Provisions,
        including the calculation of any original issue discount using the prepayment
        assumption (as described in the Prospectus Supplement);

       

      (e)  provide
        information necessary for the computation of tax imposed on the Transfer
        of a
        Residual Certificate to a Person that is a Non-Permitted Transferee, or an
        agent
        (including a broker, nominee or other middleman) of a Non-Permitted Transferee,
        or a pass-through entity in which a Non-Permitted Transferee is the record
        holder of an interest (the reasonable cost of computing and furnishing such
        information may be charged to the Person liable for such tax);

       

      (f)  to
        the
        extent that they are under its control, conduct matters relating to such
        assets
        at all times that any Certificates are Outstanding so as to maintain the
        status
        of each Trust REMIC as a REMIC under the REMIC Provisions;

       

      (g)  not
        knowingly or intentionally take any action or omit to take any action that
        would
        cause the termination of the REMIC status of any Trust REMIC created
        hereunder;

       

      (h)  pay,
        from
        the sources specified in the last paragraph of this Section 8.11, the amount
        of
        any federal or state tax, including prohibited transaction taxes as described
        below, imposed on any Trust REMIC created hereunder before its termination
        when
        and as the same shall be due and payable (but such obligation shall not prevent
        the Securities Administrator or any other appropriate Person from contesting
        any
        such tax in appropriate proceedings and shall not prevent the Securities
        Administrator from withholding payment of such tax, if permitted by law,
        pending
        the outcome of such proceedings);

       

      (i)  cause
        federal, state or local income tax or information returns to be signed by
        the
        Trustee or such other Person as may be required to sign such returns by the
        Code
        or state or local laws, regulations or rules; and

       

      (j)  maintain
        records relating to each Trust REMIC created hereunder, including the income,
        expenses, assets, and liabilities thereof on a calendar year basis and on
        the
        accrual method of accounting and the fair market value and adjusted basis
        of the
        assets determined at such intervals as may be required by the Code, as may
        be
        necessary to prepare the foregoing returns, schedules, statements or
        information.

       

        The
          Holder of the largest Percentage Interest of the Class R Certificates shall
          act
          as Tax Matters Person for each
          Trust REMIC
          I,
          REMIC II and REMIC III,
          within
          the meaning of Treasury Regulations Section 1.860F-4(d),
          and the.
          The
          Holder of the largest Percentage Interest of the Class R-X Certificates
          shall
          act as Tax Matters Person for REMIC IV, REMIC V and REMIC VI, within the
          meaning
          of Treasury Regulations Section 1.860F-4(d). The
          Securities Administrator is hereby designated as agent of such Certificateholder
          for such purpose (or if the Securities Administrator is not so permitted,
          such
          Holder shall be the Tax Matters Person in accordance with the REMIC Provisions).
          In such capacity, the Securities Administrator shall, as and when necessary
          and
          appropriate, represent each Trust REMIC created hereunder in any administrative
          or judicial proceedings relating to an examination or audit by any governmental
          taxing authority, request an administrative adjustment as to any taxable
          year of
          each Trust REMIC created hereunder, enter into settlement agreements with
          any
          governmental taxing agency, extend any statute of limitations relating
          to any
          tax item of each Trust REMIC created hereunder, and otherwise act on behalf
          of
          each Trust REMIC in relation to any tax matter or controversy involving
          it.

       

      To
        enable
        the Securities Administrator to perform its duties under this Agreement,
        the
        Depositor shall provide to the Securities Administrator within ten days after
        the Closing Date all information or data that the Securities Administrator
        requests in writing and determines to be relevant for tax purposes to the
        valuations and offering prices of the Certificates, including the price,
        yield,
        prepayment assumption, and projected cash flows of the Certificates and the
        Mortgage Loans. Moreover, the Depositor shall provide information to the
        Securities Administrator concerning the value, if any, to each Class of
        Certificates of the right to receive Basis Risk CarryForward Amounts from
        the
        Excess Reserve Fund Account and Basis Risk CarryForward Amounts from the
        Swap
        Account. Thereafter, the Depositor shall provide to the Securities Administrator
        promptly upon written request therefor any additional information or data
        that
        the Securities Administrator may, from time to time, reasonably request to
        enable the Securities Administrator to perform its duties under this Agreement;
        provided,
        however,
        that
        the Depositor shall not be required to provide any information regarding
        the
        Mortgage Loans that the Servicer is required to provide to the Securities
        Administrator pursuant to this Agreement. The Depositor hereby indemnifies
        the
        Securities Administrator for any losses, liabilities, damages, claims, or
        expenses of the Securities Administrator arising from any errors or
        miscalculations of the Securities Administrator that result from any failure
        of
        the Depositor to provide pursuant to this paragraph accurate information
        or data
        to the Securities Administrator on a timely basis.

       

      None
        of
        the Servicer, the Trustee or the Securities Administrator shall (i) permit
        the
        creation of any interests in any Trust REMIC other than the regular and residual
        interests set forth in the Preliminary Statement, (ii) receive any amount
        representing a fee or other compensation for services (except as otherwise
        permitted by this Agreement or the related Mortgage Loan documents) or (iii)
        otherwise knowingly or intentionally take any action, cause the Trust Fund
        to
        take any action or fail to take (or fail to cause to be taken) any action
        reasonably within its control and the scope of duties more specifically set
        forth herein, that, under the REMIC Provisions, if taken or not taken, as
        the
        case may be, could (i) endanger the status of any Trust REMIC as a REMIC
        or (ii)
        result in the imposition of a tax upon any Trust REMIC or the Trust Fund
        (including but not limited to the tax on “prohibited transactions” as defined in
        Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set
        forth
        in Section 860G(d) of the Code, or the tax on “net income from foreclosure
        property”) unless the Trustee and the Securities Administrator receive an
        Opinion of Counsel (at the expense of the party seeking to take such action
        or,
        if such party fails to pay such expense, and the Securities Administrator
        determines that taking such action is in the best interest of the Trust Fund
        and
        the Certificateholders, at the expense of the Trust Fund, but in no event
        at the
        expense of the Trustee

      A
        Notice
        of Final Distribution, specifying the Distribution Date on which
        Certificateholders may surrender their Certificates for payment of the final
        distribution and cancellation, shall be given promptly by the Securities
        Administrator by letter to Certificateholders mailed not earlier than the
        10th
        day and not later than the 15th day of the month of such final distribution.
        Any
        such Notice of Final Distribution shall specify (a) the Distribution Date
        upon
        which final distribution on the Certificates will be made upon presentation
        and
        surrender of Certificates at the office therein designated, (b) the amount
        of
        such final distribution, (c) the location of the office or agency at which
        such
        presentation and surrender must be made, and (d) that the Record Date otherwise
        applicable to such Distribution Date is not applicable, distributions being
        made
        only upon presentation and surrender of the Certificates at the office therein
        specified. The Securities Administrator will give such Notice of Final
        Distribution to each Rating Agency at the time such Notice of Final Distribution
        is given to Certificateholders.

       

      In
        the
        event such Notice of Final Distribution is given, the Servicer shall cause
        all
        funds in the Collection Account to be remitted to the Securities Administrator
        for deposit in the Distribution Account on the Business Day prior to the
        applicable Distribution Date in an amount equal to the final distribution
        in
        respect of the Certificates. Upon such final deposit with respect to the
        Trust
        Fund and the receipt by the Custodian of a Request for Release therefor,
        the
        Custodian shall promptly release to the Servicer, the Custodial Files for
        the
        Mortgage Loans.

       

      Upon
        presentation and surrender of the Certificates, the Securities Administrator
        shall cause to be distributed to the Certificateholders of each Class (after
        reimbursement of all amounts due to the Servicer, the Securities Administrator,
        the Depositor and the Trustee hereunder), in each case on the final Distribution
        Date and in the order set forth in Section 4.02, in proportion to their
        respective Percentage Interests, with respect to Certificateholders of the
        same
        Class, up to an amount equal to (i) as to each Class of Regular Certificates
        (except the Class X Certificates), the Certificate Balance thereof plus for
        each
        such Class and the Class X Certificates accrued interest thereon in the case
        of
        an interest-bearing Certificate and all other amounts to which such Classes
        are
        entitled pursuant to Section 4.02 and (ii) as to the Residual Certificates,
        the
        amount, if any, which remains on deposit in the Distribution Account (other
        than
        the amounts retained to meet claims) after application pursuant to clause
        (i)
        above.

       

        In
          the
          event that any affected Certificateholders shall not surrender Certificates
          for
          cancellation within six months after the date specified in the above mentioned
          written notice, the Securities Administrator shall give a second written
          notice
          to the remaining Certificateholders to surrender their Certificates for
          cancellation and receive the final distribution with respect thereto. If
          within
          six months after the second notice all the applicable Certificates shall
          not
          have been surrendered for cancellation, the Securities Administrator may
          take
          appropriate steps, or may appoint an agent to take appropriate steps, to
          contact
          the remaining Certificateholders concerning surrender of their Certificates,
          and
          the cost thereof shall be paid out of the funds and other assets which
          remain a
          part of the Trust Fund. If within one year after the second notice all
          Certificates shall not have been surrendered for cancellation, the Class
          RResidual
          Certificateholders shall be entitled to all unclaimed funds and other assets
          of
          the Trust Fund which remain subject hereto.

       

      MORGAN
        STANLEY ABS CAPITAL I INC.

       

      Morgan
        Stanley ABS Capital I Inc. Trust 2006-WMC2

      Mortgage
        Pass-Through Certificates, Series 2006-WMC2

        Class [R][R-X]

       

      evidencing
        a percentage interest in the distributions allocable to the Certificates
        of the
        above-referenced Class.

       

        Distributions
          in respect of this Certificate is distributable monthly as set forth herein.
          This Class [R][R-X]
          Certificate has no Certificate Balance and is not entitled to distributions
          in
          respect of principal or interest. This Certificate does not evidence an
          obligation of, or an interest in, and is not guaranteed by the Depositor,
          the
          Trustee or any other party to the Agreement referred to below or any of
          their
          respective affiliates. Neither this Certificate nor the Mortgage Loans
          are
          guaranteed or insured by any governmental agency or
          instrumentality.

       

      This
        certifies that _____________ is the registered owner of the Percentage Interest
        evidenced by this Certificate (obtained by dividing the denomination of this
        Certificate by the aggregate of the denominations of all Certificates of
        the
        Class to which this Certificate belongs) in certain monthly distributions
        pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date
        specified above (the “Agreement”)
        among
        Morgan Stanley ABS Capital I Inc., as depositor (the “Depositor”),
        Wells
        Fargo Bank, N.A., as securities administrator (the “Securities
        Administrator”),
        Wells
        Fargo Bank, N.A., as servicer and custodian, WMC Mortgage Corp., as responsible
        party, and Deutsche Bank National Trust Company, as trustee (the “Trustee”).
        To
        the extent not defined herein, the capitalized terms used herein have the
        meanings assigned in the Agreement. This Certificate is issued under and
        is
        subject to the terms, provisions and conditions of the Agreement, to which
        Agreement the Holder of this Certificate by virtue of the acceptance hereof
        assents and by which such Holder is bound.

       

        Any
          distribution of the proceeds of any remaining assets of the Trust Fund
          will be
          made only upon presentment and surrender of this Class [R][R-X]
          Certificate at the offices designated by the Securities Administrator for
          such
          purposes or such other location specified in the notice to
          Certificateholders.

       

        No
          transfer of a Class [R][R-X]
          Certificate shall be made unless the Securities Administrator shall have
          received a representation letter from the transferee of such Certificate,
          acceptable to and in form and substance satisfactory to the Securities
          Administrator, to the effect that such transferee is not an employee benefit
          plan or arrangement subject to Section 406 of ERISA, a plan or arrangement
          subject to Section 4975 of the Code or a plan subject to Similar Law, or
          a
          person acting on behalf of any such plan or arrangement nor using the assets
          of
          any such plan or arrangement to effect such transfer, which representation
          letter shall not be an expense of the Trustee, the Servicer, the Securities
          Administrator or the Trust Fund. In the event that such representation
          is
          violated, or any attempt is made to transfer to a plan or arrangement subject
          to
          Section 406 of ERISA or a plan subject to Section 4975 of the Code or a
          plan
          subject to Similar Law, or a person acting on behalf of any such plan or
          arrangement or using the assets of any such plan or arrangement, such attempted
          transfer or acquisition shall be void and of no effect.

       

        Each
          Holder of this Class [R][R-X]
          Certificate shall be deemed by the acceptance or acquisition an Ownership
          Interest in this Class [R][R-X]
          Certificate to have agreed to be bound by the following provisions, and
          the
          rights of each Person acquiring any Ownership Interest in this Class
[R][R-X]
          Certificate are expressly subject to the following provisions: (i) each
          Person
          holding or acquiring any Ownership Interest in this Class [R][R-X]
          Certificate shall be a Permitted Transferee and shall promptly notify the
          Securities Administrator of any change or impending change in its status
          as a
          Permitted Transferee, (ii) no Ownership Interest in this Class [R][R-X]
          Certificate may be registered on the Closing Date or thereafter transferred,
          and
          the Securities Administrator shall not register the Transfer of this Certificate
          unless, in addition to the certificates required to be delivered to the
          Securities Administrator under Section 5.02(b) of the Agreement, the Securities
          Administrator shall have been furnished with a Transfer Affidavit of the
          initial
          owner or the proposed transferee in the form attached as Exhibit G to the
          Agreement, (iii) each Person holding or acquiring any Ownership Interest
          in this
          Class [R][R-X]
          Certificate shall agree (A) to obtain a Transfer Affidavit from any other
          Person
          to whom such Person attempts to Transfer its Ownership Interest this Class
          [R][R-X]
          Certificate, (B) to obtain a Transfer Affidavit from any Person for whom
          such
          Person is acting as nominee, trustee or agent in connection with any Transfer
          of
          this Class [R][R-X]
          Certificate, (C) not to cause income with respect to the Class [R][R-X]
          Certificate to be attributable to a foreign permanent establishment or
          fixed
          base, within the meaning of an applicable income tax treaty, of such Person
          or
          any other U.S. Person and (D) not to Transfer the Ownership Interest in
          this
          Class [R][R-X]
          Certificate or to cause the Transfer of the Ownership Interest in this
          Class
[R][R-X]
          Certificate to any other Person if it has actual knowledge that such Person
          is a
          Non-Permitted Transferee and (iv) any attempted or purported Transfer of
          the
          Ownership Interest in this Class [R][R-X]
          Certificate in violation of the provisions herein shall be absolutely null
          and
          void and shall vest no rights in the purported Transferee.

       

      Reference
        is hereby made to the further provisions of this Certificate set forth on
        the
        reverse hereof, which further provisions shall for all purposes have the
        same
        effect as if set forth at this place.

       

      This
        Certificate shall not be entitled to any benefit under the Agreement or be
        valid
        for any purpose unless manually authenticated by an authorized signatory
        of the
        Securities Administrator.

       

       

      * * *

      EXHIBIT
        G

      

      RESIDUAL
        TRANSFER AFFIDAVIT

       

      Morgan
        Stanley ABS Capital I Inc. Trust 2006-WMC2,

      Mortgage
        Pass-Through Certificates,

      Series
        2006-WMC2

      
        	
                STATE
                  OF_____________

              	
                )

              	 
	 	
                )

              	
                ss.:

              
	
                COUNTY
                  OF___________

              	
                )

              	 

      

      

       

      The
        undersigned, being first duly sworn, deposes and says as follows:

       

        1. The
          undersigned is an officer of ___________________, the proposed Transferee
          of an
          Ownership Interest in a Class [R][R-X]
          Certificate (the “Certificate”)
          issued
          pursuant to the Pooling and Servicing Agreement (the “Agreement”),
          relating to the above-referenced Series, by and among Morgan Stanley ABS
          Capital
          I Inc., as Depositor, Wells Fargo Bank, N.A., as Servicer, Securities
          Administrator and Custodian, WMC Mortgage Corp., as Responsible Party,
          and
          Deutsche Bank National Trust Company, as Trustee (the “Trustee”).
          Capitalized terms used, but not defined herein, shall have the meanings
          ascribed
          to such terms in the Agreement. The Transferee has authorized the undersigned
          to
          make this affidavit on behalf of the Transferee for the benefit of the
          Depositor
          and the Trustee.

       

      2. The
        Transferee is, as of the date hereof, and will be, as of the date of the
        Transfer, a Permitted Transferee. The Transferee is acquiring its Ownership
        Interest in the Certificate for its own account. The Transferee has no knowledge
        that any such affidavit is false.

       

      3. The
        Transferee has been advised of, and understands that (i) a tax will be imposed
        on Transfers of the Certificate to Persons that are Non-Permitted Transferees;
        (ii) such tax will be imposed on the transferor, or, if such Transfer is
        through
        an agent (which includes a broker, nominee or middleman) for a Person that
        is a
        Non-Permitted Transferee, on the agent; and (iii) the Person otherwise liable
        for the tax shall be relieved of liability for the tax if the subsequent
        Transferee furnished to such Person an affidavit that such subsequent Transferee
        is a Permitted Transferee and, at the time of Transfer, such Person does
        not
        have actual knowledge that the affidavit is false.

       

      4. The
        Transferee has been advised of, and understands that a tax will be imposed
        on a
“pass-through entity” holding the Certificate if at any time during the taxable
        year of the pass-through entity a Person that is a Non-Permitted Transferee
        is
        the record holder of an interest in such entity. The Transferee understands
        that
        such tax will not be imposed for any period with respect to which the record
        holder furnishes to the pass-through entity an affidavit that such record
        holder
        is a Permitted Transferee and the pass-through entity does not have actual
        knowledge that such affidavit is false. (For this purpose, a “pass-through
        entity” includes a regulated investment company, a real estate investment trust
        or common trust fund, a partnership, trust or estate, and certain cooperatives
        and, except as may be provided in Treasury Regulations, persons holding
        interests in pass-through entities as a nominee for another
        Person.)<PAGE>

                                                                  EXHIBIT 10.1.3

                           WESTERN DIGITAL CORPORATION
              AMENDED AND RESTATED 2004 PERFORMANCE INCENTIVE PLAN
                   NON-EMPLOYEE DIRECTOR OPTION GRANT PROGRAM

1. ESTABLISHMENT; PURPOSE. This Non-Employee Director Option Grant Program (this
"PROGRAM") is adopted under the Western Digital Corporation Amended and Restated
2004 Performance Incentive Plan (the "PLAN"). The purpose of this Program is to
promote the success of the Corporation and the interests of its stockholders by
providing members of the Board who are not officers or employees of the
Corporation or one of its Subsidiaries ("NON-EMPLOYEE DIRECTORS") an opportunity
to acquire an ownership interest in the Corporation and more closely aligning
the interests of Non-Employee Directors and stockholders. Except as otherwise
expressly provided herein, the provisions of the Plan shall govern all awards
made pursuant to this Program. Capitalized terms are defined in the Plan if not
defined herein.

2. PARTICIPATION. Awards under this Program shall be made only to Non-Employee
Directors, shall be evidenced by award agreements substantially in the form of
Exhibit 1 hereto and shall be further subject to such other terms and conditions
set forth therein.

3. OPTION GRANTS.

     3.1 INITIAL AWARD FOR NEW DIRECTORS. Upon first being appointed or elected
     to the Board and subject to approval by the Board or the Administrator, a
     Non-Employee Director who has not previously served on the Board shall be
     granted a nonqualified stock option to purchase a number of shares of
     Common Stock that produces an approximate value for the option grant equal
     to $300,000 (using a Black-Scholes valuation as of the time of grant as
     determined in consultation with Company management); provided, however,
     that the Board or the Administrator, in its discretion, may increase or
     decrease the number of shares of Common Stock subject to the stock option.
     The date of grant of each such stock option will be the date on which such
     stock option is approved by the Board or the Administrator, which date
     shall coincide to the extent practicable with the date such Non-Employee
     Director is first appointed or elected to the Board.

     3.2 SUBSEQUENT AWARDS. Immediately following the Corporation's regular
     annual meeting of stockholders in each year during the term of the Plan
     commencing in 2005 and subject to approval by the Board or the
     Administrator, each Non-Employee Director then in office shall be granted a
     nonqualified stock option to purchase a number of shares of Common Stock
     that produces an approximate value for the option grant equal to $100,000
     (using a Black-Scholes valuation as of the time of grant as determined in
     consultation with Company Management); provided, however, that the Board or
     the Administrator, in its discretion, may increase or decrease the number
     of shares of Common Stock subject to the stock option. The date of grant of
     each such stock option will be the date on which such stock option is
     approved by the Board or the Administrator, which date shall coincide to
     the extent practicable with the date of the annual meeting of stockholders.
     An individual who was previously a member of the Board, who then ceased to
     be a member of the Board for any reason, and who then again

                                        1

<PAGE>

     becomes a Non-Employee Director shall thereupon again become eligible to be
     granted stock options under this Section 3.2.

     3.3 OPTION PRICE. The purchase price per share of the Common Stock covered
     by each option granted pursuant to this Section 3 shall be 100 percent of
     the Fair Market Value of a share of Common Stock on the date of grant of
     the option (the "AWARD DATE"). The exercise price of any option granted
     under this Section 3 shall be paid in full at the time of each purchase in
     cash or by check, in shares of Common Stock valued at their fair market
     value on the date of exercise of the option, or partly in such shares and
     partly in cash, or in any other manner authorized by the Administrator
     pursuant to Section 5.5 of the Plan; provided that any shares used in
     payment shall have been owned by the Non-Employee Director for at least six
     months prior to the date of exercise.

     3.4 TRANSFER RESTRICTIONS. Options granted pursuant to this Section 3 shall
     be subject to the transfer restrictions set forth in Section 5.7 of the
     Plan. For purposes of clarity, the Administrator has not approved any
     transfer exceptions with respect to the options in accordance with Section
     5.7.2 of the Plan.

4. OPTION PERIOD AND EXERCISABILITY. Each option granted under Section 3 above
and all rights or obligations under this Program with respect to a particular
option shall expire ten years after the date of grant of such option and shall
be subject to earlier termination as provided below. Subject to Sections 5, 6
and 7 hereof, each option granted under Section 3 shall become exercisable as to
25% of the total number of shares subject thereto on the first anniversary of
the date of grant of the option and as to an additional 6.25% of the total
number of shares subject thereto at the end of each of the next 12 three-month
periods thereafter.

5. TERMINATION OF DIRECTORSHIP. Subject to the maximum ten-year term of the
option and subject to earlier termination pursuant to Section 7 below, if a
Non-Employee Director ceases to be a member of the Board for any reason, the
following rules shall apply with respect to any option granted to the
Non-Employee Director pursuant to Section 3 above (the last day that the
Director is a member of the Board is, except as otherwise provided below,
referred to as the Director's "SEVERANCE DATE"):

     -    other than as expressly provided below in this Section 5, (a) the
          Non-Employee Director will have until the date that is one (1) year
          after his or her Severance Date to exercise such option (or portion
          thereof) to the extent that it was vested on the Severance Date, (b)
          such option, to the extent not vested on the Severance Date, shall
          terminate on the Severance Date, and (c) such option, to the extent
          exercisable for the one-year period following the Severance Date and
          not exercised during such period, shall terminate at the close of
          business on the last day of the one-year period;

     -    if the Non-Employee Director ceases to be a member of the Board due to
          his or her Retirement (as defined below) and the Non-Employee Director
          has served as a member of the Board of Directors for at least twelve
          (12) continuous months following the grant date of such option, (a)
          the Non-Employee Director will have until the date that is three (3)
          years after his or her Severance Date to exercise

                                        2

<PAGE>

          such option, (b) such option, to the extent not otherwise vested on
          the Severance Date, shall automatically become fully vested as of the
          Severance Date, and (c) such option, to the extent exercisable for the
          three-year period following the Severance Date and not exercised
          during such period, shall terminate at the close of business on the
          last day of the three-year period;

provided, however, that if the Board or the Administrator determines that any
such Non-Employee Director who has Retired renders services as an employee,
director, consultant, contractor or otherwise to a competitor of the Corporation
or one of its Subsidiaries at any time during such three-year period, then any
such option shall immediately terminate to the extent not exercised as of the
date the Board or the Administrator makes such determination. In addition, in
such event the Corporation shall have the right to recover any profits realized
by such Retired Non-Employee Director as a result of any exercise of such option
during the six-month period prior to the date such Non-Employee Director
commenced providing such services to a competitor.

     For purposes of this Section 5, the term "RETIREMENT" (which term shall
include "Retired") shall mean the cessation of a director's services as a member
of the Board due to his or her voluntary resignation at any time after such
director has served as a member of the Board for at least forty-eight (48)
months.

     Notwithstanding any other provision of this Section 5, if a Non-Employee
Director ceases to be a member of the Board (regardless of the reason) but,
immediately thereafter, is employed by the Corporation or one of its
Subsidiaries, such director's Severance Date shall not be the date the director
ceases to be a member of the Board but instead shall be the last day that the
director is either or both (1) a member of the Board and/or (2) employed by the
Corporation or a Subsidiary.

6. ADJUSTMENTS. Options granted under this Program shall be subject to
adjustment as provided in Section 7.1 of the Plan, but only to the extent that
such adjustment is consistent with adjustments to options held by persons other
than executive officers or directors of the Corporation (to the extent that
persons other than executive officers or directors of the Corporation then hold
options). The grant levels reflected in Section 3 above shall be automatically
adjusted upon the record date for any stock split, reverse stock split, or stock
dividend to give effect to such change in capitalization unless otherwise
provided by the Board or the Administrator in the circumstances, and may be
adjusted in the discretion of the Board or the Administrator in any other
circumstances contemplated by Section 7.1.

7. ACCELERATION AND POSSIBLE EARLY TERMINATION. If a Change in Control Event (as
such term is defined in the Plan) occurs and in connection with such Change in
Control Event a Non-Employee Director ceases to be a member of the Board, each
option granted under Section 3 above to such Non-Employee Director, to the
extent such option is then outstanding, shall become immediately exercisable and
vested in full. For purposes of this Section 7, but without limitation, a
director will be deemed to have ceased to be a member of the Board in connection
with a Change in Control Event if such director (a) is removed by or resigns
upon the request of any Person exercising practical voting control over the
Corporation following such Change in Control Event or a person acting upon
authority or at the instruction of such Person, or (b) is

                                        3

<PAGE>

willing or able to continue as a member of the Board but is not re-elected to or
retained as a member of the Board by the Corporation's stockholders at the
stockholder vote or consent action for the election of directors that precedes
and is taken in connection with, or next follows, such Change in Control Event.

     Each option granted under this Program shall be subject to adjustment and
termination pursuant to Section 7 of the Plan.

8. MAXIMUM NUMBER OF SHARES; AMENDMENT; ADMINISTRATION. If option grants
otherwise required pursuant to this Program would otherwise exceed any
applicable share limit under Section 4.2 of the Plan, such grants shall be made
pro-rata to directors entitled to such grants. The Board or the Administrator
may from time to time amend this Program without stockholder approval; provided
that no such amendment shall materially and adversely affect the rights of a
Non-Employee Director as to an option granted under this Program before the
adoption of such amendment. This Program does not limit the authority of the
Board or the Administrator to make other, discretionary award grants to
Non-Employee Directors pursuant to the Plan. The Plan Administrator's power and
authority to construe and interpret the Plan and awards thereunder pursuant to
Section 3.1 of the Plan shall extend to this Program and awards granted
hereunder. As provided in Section 3.2 of the Plan, any action taken by, or
inaction of, the Administrator relating or pursuant to this Program and within
its authority or under applicable law shall be within the absolute discretion of
that entity or body and shall be conclusive and binding upon all persons.

                                       ###

As amended (Sections 3.1 and 3.2) and restated November 17, 2005

As amended (Section 5) November 9, 2006

                                        4
<PAGE>

                                                                       EXHIBIT 1

(WESTERN DIGITAL(R) LOGO)

Western Digital Corporation 20511 Lake Forest Drive
Lake Forest, California 92630 Telephone 949-672-7000

NOTICE OF GRANT OF STOCK OPTION
AND OPTION AGREEMENT - NON-EMPLOYEE DIRECTORS

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________________________________________________________________________________

Western Digital Corporation (the "Corporation") has granted to you (the
"Participant"), effective on the Date of Grant set forth below, a nonqualified
option to purchase shares of the Corporation's Common Stock (the "Option") as
follows:

Grant Number                   <<nbr>>
Date of Grant                  <<optdt>>
Option Price per Share(1)     $<<optprc>>
Number of Shares Granted(1)    <<shgtd>>
Expiration Date(2)

1. OPTION SUBJECT TO AMENDED AND RESTATED 2004 PERFORMANCE INCENTIVE PLAN. The
Option was granted pursuant to the Non-Employee Director Option Grant Program
(the "Program"), adopted under the Western Digital Corporation Amended and
Restated 2004 Performance Incentive Plan (the "Plan"). The Option is subject to
the terms and conditions of this Notice, the Program and the Plan. By accepting
the Option, you are agreeing to the terms of the Option as set forth in these
documents. A copy of each of these documents has been provided to you. If you
need another copy of any of these documents, or if you would like to confirm
that you have the most recent version, you may obtain another copy in the
Company Library on the E*TRADE Stock Plans web site. The documents are also
available on the Western Digital Intranet site under Legal.

You should read the Program, the Plan, the Prospectus for the Plan and this
Notice. The Program and the Plan are each incorporated into (made a part of)
this Notice by this reference. To the extent any information in this Notice, the
Prospectus for the Plan, or other information provided by the Corporation
conflicts with the Program and/or the Plan, the Program or the Plan, as
applicable, shall control. Capitalized terms not defined herein have the
meanings set forth in the Plan.

You do not have to accept the Option. If you do not agree to the terms of the
Option, you should promptly return this Notice to the Western Digital
Corporation Stock Plans Administrator.

----------
(1)  The number of shares subject to the Option and the per-share exercise price
     of the Option are subject to adjustment under Section 6 of the Program and
     Section 7.1 of the Plan (for example, and without limitation, in connection
     with stock splits).

(2)  The Option is subject to early termination under Sections 5 and 7 of the
     Program.

<PAGE>

Unless otherwise expressly provided in other sections of this Notice, provisions
of the Plan that confer discretionary authority on the Board or the
Administrator do not and shall not be deemed to create any rights in the
Participant unless such rights are expressly set forth herein or are otherwise
in the sole discretion of the Board or the Administrator so conferred by
appropriate action of the Board or the Administrator under the Plan after the
grant date of the Option.

2. OPTION AGREEMENT. This Notice constitutes the Option Agreement with respect
to the Option pursuant to Section 5.3 of the Plan.

3. TYPE OF STOCK OPTION. The Option is not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended.

4. VESTING. Subject to earlier termination in accordance with Section 5, the
Option shall vest and become exercisable in percentage installments of the
aggregate number of shares subject to the Option as set forth in this Notice and
Section 4 of the Program. The Option may be exercised only to the extent it is
vested and exercisable. To the extent that the Option is vested and exercisable,
the Participant has the right to exercise the Option (to the extent not
previously exercised), and such right shall continue, until the expiration or
earlier termination of the Option as provided in Section 5. Fractional share
interests shall be disregarded, but may be cumulated.

The vesting schedule requires continued service through each applicable vesting
date as a condition to the vesting of the applicable installment of the Option
and the rights and benefits under this Option Agreement. Service for only a
portion of the vesting period with respect to a vesting installment, even if
services are provided for a substantial portion of that period, will not entitle
the Participant to any proportionate vesting or avoid or mitigate a termination
of rights and benefits upon or following a termination of services as provided
under Section 5 of the Program or under the Plan.

5. EXPIRATION OF OPTION. The Option shall expire and the Participant shall have
no further rights with respect thereto upon the earliest to occur of (a) the
termination of the Option in connection with a termination of the director's
services as provided in Section 5 of the Program, (b) the termination of the
Option as provided in Section 7.4 of the Plan, or (c) the Expiration Date set
forth in this Notice. The Option may not be exercised at any time after a
termination or expiration of the Option.

6. EXERCISE OF OPTION. The Option shall be exercisable by the delivery to the
Secretary of the Corporation (or such other person as the Administrator may
require pursuant to such administrative exercise procedures as the Administrator
may implement from time to time) of:

     -    a written notice stating the number of shares of Common Stock to be
          purchased pursuant to the Option or by the completion of such other
          administrative exercise procedures as the Administrator may require
          from time to time,

     -    payment in full for the purchase price (the per-share exercise price
          of the Option multiplied by the number of shares to be purchased) in
          cash, check or by electronic funds transfer to the Corporation, or
          (subject to compliance with all applicable laws, rules, regulations
          and listing requirements and further subject to such rules as the
          Administrator may adopt as to any non-cash payment) in shares of
          Common Stock already owned by the Participant, valued at their fair
          market value on the exercise date, provided, however, that any shares
          initially acquired upon exercise of a stock option or otherwise from
          the Corporation must have been owned by the Participant for at least
          six (6) months before the date of such exercise; and

<PAGE>

     -    any written statements or agreements required by the Administrator
          pursuant to Section 8.1 of the Plan.

The Administrator also may, but is not required to, authorize a non-cash payment
alternative by notice and third party payment in such manner as may be
authorized by the Administrator.

7. NONTRANSFERABILITY. The Option and any other rights of the Participant under
this Option Agreement, the Program or the Plan are nontransferable and
exercisable only by the Participant, except as set forth in Section 5.7 of the
Plan. For purposes of clarity, the Administrator has not authorized any transfer
exceptions as contemplated by Section 5.7.2 of the Plan.

8. NO SERVICE COMMITMENT. Nothing contained in this Option Agreement, the
Program or the Plan constitutes an employment or service commitment by the
Corporation or any of its Subsidiaries, confers upon the Participant any right
to remain in service to the Corporation or any Subsidiary, interferes in any way
with the right of the Corporation or any Subsidiary at any time to terminate
such service, or affects the right of the Corporation or any Subsidiary to
increase or decrease the Participant's other compensation.

9. RIGHTS AS A STOCKHOLDER. Neither the Participant nor any beneficiary or other
person claiming under or through the Participant shall have any right, title,
interest or privilege in or to any shares of Common Stock subject to the Option
except as to such shares, if any, as shall have been actually issued to such
person and recorded in such person's name following the exercise of the Option
or any portion thereof.

10. NOTICES. Any notice to be given under the terms of this Option Agreement
shall be in writing and addressed to the Corporation at its principal office to
the attention of the Secretary, and to the Participant at the address last
reflected on the Corporation's records, or at such other address as either party
may hereafter designate in writing to the other. Any such notice shall be
delivered in person or shall be enclosed in a properly sealed envelope addressed
as aforesaid, registered or certified, and deposited (postage and registry or
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government. Any such notice shall be given only
when received, but if the Participant is no longer a member of the Board of
Directors, shall be deemed to have been duly given five business days after the
date mailed in accordance with the foregoing provisions of this Section 10.

11. ARBITRATION. Any controversy arising out of or relating to this Option
Agreement, the Program and/or the Plan, their enforcement or interpretation, or
because of an alleged breach, default, or misrepresentation in connection with
any of their provisions, or any other controversy or claim arising out of or
related to the Option or the Participant's employment, including, but not
limited to, any state or federal statutory claims, shall be submitted to
arbitration in Orange County, California, before a sole arbitrator selected from
Judicial Arbitration and Mediation Services, Inc., Orange, California, or its
successor ("JAMS"), or if JAMS is no longer able to supply the arbitrator, such
arbitrator shall be selected from the American Arbitration Association, and
shall be conducted in accordance with the provisions of California Code of Civil
Procedure Sections 1280 et seq. as The exclusive forum for the resolution of
such dispute; provided, however, that provisional injunctive relief may, but
need not, be sought by either party to this Option Agreement in a court of law
while arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until the matter is finally
determined by the arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the arbitrator deems just and
equitable, including any and all remedies provided by applicable state or
federal statutes. At the conclusion of the arbitration, the arbitrator shall
issue a written decision that sets forth the essential findings and conclusions
upon which the arbitrator's award or decision is based. Any award or relief
granted by the arbitrator hereunder shall be final and binding on

<PAGE>

the parties hereto and may be enforced by any court of competent jurisdiction.
The parties acknowledge and agree that they are hereby waiving any rights to
trial by jury in any action, proceeding or counterclaim brought by either of the
parties against the other in connection with any matter whatsoever arising out
of or in any way connected with any of the matters referenced in the first
sentence above. The parties agree that Corporation shall be responsible for
payment of the forum costs of any arbitration hereunder, including the
arbitrator's fee. The parties further agree that in any proceeding with respect
to such matters, each party shall bear its own attorney's fees and costs (other
than forum costs associated with the arbitration) incurred by it or him or her
in connection with the resolution of the dispute. By accepting the Option, the
Participant consents to all of the terms and conditions of this Option Agreement
(including, without limitation, this Section 11).

12. GOVERNING LAW. This Option Agreement shall be interpreted and construed in
accordance with the laws of the State of Delaware (without regard to conflict of
law principles thereunder) and applicable federal law.

13. SEVERABILITY. If the arbitrator selected in accordance with Section 11 or a
court of competent jurisdiction determines that any portion of this Option
Agreement, the Program or the Plan is in violation of any statute or public
policy, then only the portions of this Option Agreement, the Program or the
Plan, as applicable, which are found to violate such statute or public policy
shall be stricken, and all portions of this Option Agreement, the Program and
the Plan which are not found to violate any statute or public policy shall
continue in full force and effect. Furthermore, it is the parties' intent that
any order striking any portion of this Option Agreement, the Program and/or the
Plan should modify the stricken terms as narrowly as possible to give as much
effect as possible to the intentions of the parties hereunder.

14. ENTIRE AGREEMENT. This Option Agreement, the Program and the Plan together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with respect to the subject
matter hereof. The Plan, the Program and this Option Agreement may be amended
pursuant to Section 8.6 of the Plan. Such amendment must be in writing and
signed by the Corporation. The Corporation may, however, unilaterally waive any
provision hereof in writing to the extent such waiver does not adversely affect
the interests of the Participant hereunder, but no such waiver shall operate as
or be construed to be a subsequent waiver of the same provision or a waiver of
any other provision hereof.

15. SECTION HEADINGS. The section headings of this Option Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.

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