Exhibit 99.4
MORGAN STANLEY
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Date:
January 31, 2006
To:
Morgan Stanley Mortgage Loan Trust 2006-1AR
From: Morgan
Stanley Capital Services Inc.
Attn:
Wells Fargo Bank, National Association
Contact: Kelvin
Borre
9062 Old Annapolis Road
Columbia, MD 21045
Attention: Client
Manager, MSM 2006-1AR
Fax:
(410) 715-4513
Fax:
(212) 507-3837
Tel:
(410) 884-2000
Tel:
(212) 761-1426
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Re: Cap Ref. No. KQBBO, Class 1-A-1 and Class 1-A-2
The
purpose of this letter agreement is to confirm the terms and
conditions of the Swap Transaction entered into between Morgan
Stanley Capital
Services Inc. and Wells Fargo Bank, National Association, solely in
its
capacity as securities administrator (the "Securities
Administrator") on
behalf of the Morgan Stanley Mortgage Loan Trust 2006-1AR pursuant
to the
Pooling and Servicing Agreement (the "PSA"), dated as of January 1,
2006,
among Morgan Stanley Capital I Inc. (the "Depositor"), the
Securities
Administrator as master servicer and securities administrator and
LaSalle Bank
National Association as trustee (the "Trustee"), on the Trade Date
specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation"
as referred to in the ISDA Master Agreement below.
The
definitions and provisions contained in the 2000 ISDA
Definitions
(as published by the International Swaps and Derivatives
Association, Inc.)
are incorporated into this Confirmation. In the event of any
inconsistency
between those definitions and this Confirmation, this Confirmation
will
govern.
1. This
Confirmation evidences a complete, binding agreement between
you
and us as to the terms of the Transaction to which this
Confirmation relates.
In addition, this Confirmation supplements, forms a part of, and is
subject to
an agreement in the form of the ISDA Master Agreement
(Multicurrency-Cross
Border), with such modifications as are specified herein, as if we
had
executed an Agreement in such form on the Trade Date of the first
such
Transaction between us (the "Agreement"). All provisions contained
or
incorporated by reference in the Agreement shall govern this
Confirmation
except as expressly modified below. In the event of any
inconsistency between
the provisions of that Agreement and this Confirmation, this
Confirmation will
prevail for the purpose of this Transaction.
2. The
terms of the particular Transaction to which this Confirmation
relates are as follows:
Party A:
Morgan Stanley Capital Services Inc.
Party A Credit Support:
Payments guaranteed by Morgan Stanley
Party B:
Morgan Stanley Mortgage Loan Trust 2006-1AR
Trade Date:
January 26, 2006
Notional Amount:
See Schedule A attached hereto
Effective Date:
February 25, 2006
Termination Date:
October 25, 2014
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MORGAN STANLEY
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Fixed Amounts:
-------------
Fixed Amount
Payer:
Party B
Fixed Amount
Payer Payment Date:
January 30, 2006
Fixed Amount:
USD $1,600,000 (Party A hereby acknowledges receipt of payment in
full of
this amount)
Floating Amounts:
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Floating Amount:
The product of (a) the Floating Rate,(b) the Floating Rate Day
Count
Fraction, (c) the "Notional Amount" (as set forth in Schedule A
hereto
for the related Floating Rate Payer Payment Date) and (d) the
"Multiplier" (as set forth in Schedule A hereto for the related
Floating
Rate Payer Period End Date).
Floating Rate
Payer:
Party A
Strike Rate:
For the Calculation Period related to a Floating Rate Payer Payment
Date, the
"Strike Rate" (as set forth in Schedule A hereto for such Floating
Rate
Payer Period End Date).
Floating Rate
Payer Payment Dates:
Early Payment -- For each Calculation Period, the first Business
Day prior to
each Floating Rate Payer Period End Date.
Floating Rate
Payer Period End Date(s):
The 25th of each month in each year from (and including) March 25,
2006
to (and including) the Termination Date with no adjustment to
Period End
Dates.
For the avoidance of doubt, the initial Calculation Period will
accrue
from and including the Effective Date to but excluding March 25,
2006
and that the final Calculation Period will accrue from and
including
September 25, 2014 to but excluding the Termination Date.
Floating Rate:
For the Calculation Period related to a Floating Rate Payer
Payment
Date, the excess, if any, of (x) the lesser of (a) USD-LIBOR-BBA
with a
Designated Maturity of 1 month and (b) the "Ceiling Rate" (as set
forth
in Schedule A hereto for the related Floating Rate Payer Period
End
Date) over (y) the Strike Rate.
Floating Rate
Day Count Fraction:
30/360
Reset Dates:
The first day of Each Calculation Period.
Compounding:
Inapplicable
Business Days:
New York
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MORGAN STANLEY
Calculation
Agent:
Party A; provided, however, that if an Event of Default occurs
with
respect to Party A, then Party B shall be entitled to appoint a
financial institution which would qualify as a Reference
Market-maker to
act as Calculation Agent.
3. Account Details:
Payments to Party A:
Citibank, New York
ABA No. 021 000 089
For: Morgan Stanley Capital Services Inc.
Account No. 4072 4601
Operations Contact:
Jean Barnum
Tel 212 761-2630
Fax 410 534-1431
Payments to Party B:
Wells Fargo Bank, National Association
ABA No. 121-000-248
Account Name: Corporate Trust Clearing
Account No. 3970771416 for further credit to 50890501,
MSM 2006-1AR
Ref: MSM 2006-1AR, Class 1-A-1 and Class 1-A-2
4. Modifications to the Agreement:
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The parties hereby agree to amend the Agreement referenced in
paragraph 1
above as follows:
(a) "Cross
Default" applies to Party A but not to Party B.
(b) Fully-Paid
Transactions. Notwithstanding the terms of Sections 5 and 6
of the
Agreement if Party B has satisfied in full all of its payment
obligations under Section 2(a)(i) of the Agreement, then unless
Party A
is
required pursuant to appropriate proceedings to return to Party B
or
otherwise
returns to Party B upon demand of Party B any portion of such
payment,
(a) the occurrence of an event described in Section 5(a) of the
Agreement
with respect to Party B shall not constitute an Event of
Default or
Potential Event of Default with respect to Party B as the
Defaulting
Party and (b) Party A shall be entitled to designate an Early
Termination Event pursuant to Section 6 of the Agreement only as
a
result of
a Termination Event set forth in either Section 5(b)(i) or
Section
5(b)(ii) of the Agreement with respect to Party A as the
Affected
Party or Section 5(b)(iii) of the Agreement with respect to
Party A as
the Burdened Party. For purposes of the Transaction to which
this Confirmation
relates, Party B's only obligation under Section
2(a)(i) of
the Agreement is to pay the Fixed Amount on the Fixed Rate
Payer
Payment Date.
(c) "Threshold
Amount" means, with respect to a party, U.S. $10,000,000 (or
the
equivalent in another currency, currency unit or combination
thereof).
(d) Payments on
Early Termination. "Market Quotation" and "Second Method"
will apply
for the purpose of Section 6(e) of this Agreement.
(e) "Termination
Currency" means United States Dollars.
(f) Party A and
Party B Payer Tax Representations. For the purpose of
Section
3(e), each of Party A and Party B makes the following
representation:
It is not
required by any applicable law, as modified by the practice of
any
relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account
of
any Tax
from any payment (other than interest under Section 2(e),
6(d)(ii)
or 6(e)) to be made by it to the other
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MORGAN STANLEY
party
under this Agreement. In making this representation, it may
rely
on (i) the
accuracy of any representation made by the other party
pursuant
to Section 3(f); (ii) the satisfaction of the agreement of the
other
party contained in Section 4(a)(i) or 4(a)(iii) and the
accuracy
and
effectiveness of any document provided by the other party
pursuant
to Section
4(a)(i) or 4(a)(iii); and (iii) the satisfaction of the
agreement
of the other party contained in Section 4(d), provided that it
shall not
be a breach of this representation where reliance is placed on
clause
(ii) and the other party does not deliver a form or document
under
Section 4(a)(iii) by reason of material prejudice to its legal
or
commercial
position.
(g) Payee Tax
Representations
(i)
For the purpose
of Section 3(f), Party A makes the following
representation:
It is a corporation duly organized and incorporated under the
laws
of the State of Delaware and is not a foreign corporation for
United States tax purposes.
(ii)
For the purpose of
Section 3(f), Party B makes the following
representation:
It is a trust duly formed under the laws of the State of New
York
and is not a foreign corporation for United States tax
purposes.
(h) Governing
Law; Jurisdiction. This Agreement, each Credit Support
Document
and each Confirmation will be governed by and construed in
accordance
with the laws of the State of New York, without reference to
choice of
law doctrine. Section 13(b) is amended by: (1) deleting "non-"
from the
second line of clause (i); and (2) deleting the final
paragraph.
(i) Waiver of
Jury Trial. Each party waives, to the fullest extent permitted
by
applicable law, any right it may have to a trial by jury in
respect
of any
Proceedings relating to this Agreement or any Credit Support
Document.
(j) "Affiliate"
has the meaning specified in Section 14, but excludes Morgan
Stanley
Derivative Products Inc.
(k) Additional
Representations. Section 3 is hereby amended by adding at the
end
thereof the following Subparagraphs:
(i)
It is an
"eligible contract participant" within the meaning of
Section 1a(12) of the Commodity Exchange Act (7 U.S.C. 1a), as
amended by the Commodity Futures Modernization Act of 2000.
(ii)
It has entered into
this Agreement (including each Transaction
evidenced hereby) in conjunction with its line of business
(including financial intermediation services) or the financing
of
its business.
(iii) It
is entering into this Agreement, any Credit Support Document to
which it is a party, each Transaction and any other
documentation
relating to this Agreement or any Transaction as principal (and
not as agent or in any other capacity, fiduciary or otherwise).
(iv)
ERISA Representation.
It continuously represents that it is not
(i) an employee benefit plan (hereinafter an "ERISA Plan"), as
defined in Section 3(3) of the Employee Retirement Income
Security
Act of 1974, as amended ("ERISA"), subject to Title I of ERISA
or
a plan subject to Section 4975 of the Internal Revenue Code of
1986, as amended, or subject to any other statute, regulation,
procedure or restriction that is materially similar to Section
406
of ERISA or Section 4975 of the Code (together with ERISA
Plans,
"Plans"), (ii) a person acting on behalf of a Plan or (iii) a
person any of the assets of whom constitute assets of a Plan,
unless its entry into and performance under this agreement
satisfy
the requirements for exemptive relief under Prohibited
Transactions Exemption 90-24, as amended. It will provide
notice
to the other party in the event that it is aware that it is in
breach of any aspect of this representation or is aware that
with
the
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MORGAN STANLEY
passing of time, giving of notice or expiry of any applicable
grace period it will breach this representation.
(l) Relationship
Between Parties. Each party will be deemed to represent to
the other
party on the date on which it enters into a Transaction that
(absent a
written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that Transaction):
(i)
Non-Reliance. In
the case of Party A, it is acting for its own
account, and in the case of Party B, it is acting as Trustee.
Party A has made its own independent decisions to enter into
that
Transaction and as to whether that Transaction is appropriate
or
proper for it based upon its own judgment and upon advice from
such advisers as it has deemed necessary and, with respect to
Party B, as directed under the PSA. It is not relying on any
communication (written or oral) of the other party as
investment
advice or as a recommendation to enter into that Transaction;
it
being understood that information and explanations related to
the
terms and conditions of a Transaction shall not be considered
investment advice or a recommendation to enter into that
Transaction. No communication (written or oral) received from
the
other party shall be deemed to be an assurance or guarantee as
to
the expected results of that Transaction.
(ii)
Assessment and
Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts,
the
terms, conditions and risks of that Transaction. It is also
capable of assuming, and assumes, the risks of that
Transaction.
(iii)
Status of Parties. Party A and Party B are not acting as a
fiduciary for or an adviser to each other in respect of that
Transaction.
(iv)
Fiduciary Capacity. It
is expressly understood and agreed by the
parties hereto that (i) this Confirmation is executed and
delivered by Wells Fargo Bank, National Association, not in its
individual capacity but solely as Securities Administrator on
behalf of the Trustee under the PSA in the exercise of the
powers
and authority conferred to and vested in it thereunder, (ii)
each
of the representations, undertakings and agreements herein made
on
behalf of the trust created under the PSA is made and intended
not
as personal representation, undertaking or agreement of the
Securities Administrator, but is made and intended for the
purpose
of binding only such trust and (iii) under no circumstances
shall
Wells Fargo Bank, National Association in its individual
capacity
be personally liable for the payment of any indebtedness or
expenses or be personally liable for the breach or failure of
any
obligation, representation, warranty or covenant made or
undertaken under this Confirmation.
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MORGAN STANLEY
(m) Addresses
for Notices. For the purpose of Section 12(a):
(i)
Address for
notices or communications to Party A:
Morgan Stanley Capital Services Inc.
1585 Broadway, 3rd Floor
New York, New York 10036
Attention: Chief Legal Officer
Facsimile No.: 212-507-4622
(ii)
Address for notices or
communications to Party B:
Address: Wells
Fargo Bank, National Association
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention: Client Manager - MSM 2006-1AR
Facsimile No.: (410) 715-2380 Telephone
No.: (410) 884-2000
(n) Set-Off.
Notwithstanding any provision of this Agreement or any other
existing
or future agreement, each party irrevocably waives any and all
rights it
may have to set off, net, recoup or otherwise withhold or
suspend or
condition payment or performance of any obligation between it
and the
other party hereunder against any obligation between it and the
other
party under any other agreements. The provisions for Set-Off
set
fort in
Section 6(e) of the Agreement shall not apply for purposes of
this
Transaction.
(o) Notices.
Section 12(a) is amended by adding in the third line thereof
after the
phrase "messaging system" and before the ")" the words, ";
provided,
however, any such notice or other communication may be given
by
facsimile transmission if telex is unavailable, no telex number
is
supplied
to the party providing notice, or if answer back confirmation
is not
received from the party to whom the telex is sent."
(p) Obligations.
Section 2 is amended by adding the following to the end
thereof:
"(f) Party
B shall deliver or cause to be delivered to Party A IRS Form
W-9 (or
successor thereto) as soon as is practicable after the
Effective
Date."
(q) Covenant to
Provide Additional Hedge Counterparty Information. If
requested
by the Depositor for the purpose of compliance with Item
1115(b) of
Regulation AB with respect to any Transaction under this
Agreement,
Party A shall upon five days written notice either (A) (a)
provide
the financial data required by Item 1115(b)(1) or (b)(2) of
Regulation AB
(as specified by the Depositor to Party A) with respect to
Party A
(or any entity that guarantees Party A) and any affiliated
entities
providing derivative instruments to Party B (the "Company
Financial
Information"), in a form appropriate for use in the Prospectus
Supplement
and in an EDGAR-compatible form; (b) if applicable, cause its
accountants to issue their consent to filing or incorporation
by
reference
of such financial statements in the Exchange Act Reports of
Party B
and (c) within 5 Business Days of the release of any updated
financial
data, provide current Company Financial Information as
required
under Item 1115(b) of Regulation AB to the Depositor in an
EDGAR-compatible form and if applicable, cause its accountants to
issue
their
consent to filing or incorporation by reference of such
financial
statements
in the Exchange Act Reports of Party A or (B) assign this
Agreement
as provided below.
It shall
be an Additional Termination Event, with Party A the sole
Affected
Party, if Party A has failed to deliver any Company Financial
Information when and as required under this Part 4(q) hereof,
which
continues
unremedied for the lesser of ten calendar days after the date
on which
such information, report, certification or accountants' consent
was
required to be delivered or such period in which the applicable
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MORGAN STANLEY
Exchange
Act Report for which such information is required can be timely
filed
(without taking into account any extensions permitted to be
filed),
and Party A has not, at its own cost, within the period in
which
the
applicable Exchange Act Report for which such information is
required
can be timely filed caused another entity (which meets any
ratings
related requirement of the applicable rating agencies at such
time) to
replace Party A as party to this Agreement that (i) has agreed
to deliver
any information, report, certification or accountants'
consent
when and as required under this Part 4(q) hereof, (ii)
satisfies
the
requirements of each Rating Agency and (iv) is approved by the
Depositor
(which approval shall not be unreasonably withheld).
As used in
this Agreement the following words shall have the following
meanings:
"Depositor" shall mean Morgan Stanley Capital I Inc.
"EDGAR"
shall mean the Commission's Electronic Data Gathering, Analysis
and
Retrieval system.
"Exchange
Act" shall mean the Securities Exchange Act of 1934, as
amended
and the rules and regulations promulgated thereunder
"Exchange
Act Reports" shall mean all Distribution Reports on Form 10-D,
Current
Reports on Form 8-K and Annual Reports on Form 10-K that are to
be filed
with respect to Party B pursuant to the Exchange Act.
"Prospectus Supplement" shall mean the prospectus supplement
prepared in
connection
with the public offering and sale of the Offered
Certificates.
"Rating
Agency" shall mean each of Standard & Poor's, a division of
The
McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. If
any
such
organization or a successor is no longer in existence, "Rating
Agency"
shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by
the
Depositor,
notice of which designation shall be given to the Trustee.
References
herein to a given rating category of a Rating Agency shall
mean such
rating category without giving effect to any modifiers.
"Regulation AB" shall mean the Asset Backed Securities Regulation
AB, 17
C.F.R.
ss.ss.229.1100-229.1123, as such may be amended from time to
time, and
subject to such clarification and interpretation as have been
provided
by the Commission in the adopting release (Asset-Backed
Securities, Securities Act Release No. 33-8518, 70 Fed. Reg.
1,506,
1,531
(Jan. 7, 2005)) or by the staff of the Commission, or as may be
provided
by the Commission or its staff from time to time.
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MORGAN STANLEY
Please confirm that the foregoing correctly sets forth the terms of
our
agreement by executing this Confirmation and returning it to
us.
Best Regards,
MORGAN STANLEY CAPITAL SERVICES INC.
By: /s/ David N.
Moore
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Name:
David N. Moore
Title:
Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION,
acting not in its
individual capacity but