ASSET BACKED FUNDING
CORPORATION
$1,061,338,000
(Approximate)
Asset-Backed Certificates,
Series 2006-OPT2
October 10, 2006
UNDERWRITING
AGREEMENT
Banc of America Securities
LLC
214 North Tryon Street
Charlotte, North Carolina
28255
Ladies and Gentlemen:
SECTION 1.
Introductory
. Asset Backed Funding Corporation,
a Delaware corporation (the “ Company ”),
proposes to sell to Banc of America Securities LLC (“
BAS ” or the “ Underwriter
”) $1,061,338,000 aggregate Certificate Principal Balance of
its Asset-Backed Certificates identified in Schedule I
hereto (the “ Offered Certificates ”)
having the Original Certificate Principal Balances set forth in
Schedule I (subject to an upward or downward variance, not
to exceed 5%, of the precise Original Certificate Principal
Balances within such range to be determined by the Company in its
sole discretion). The Offered Certificates, together with the Class
B, Class CE, Class P, Class R and Class R-X (the “
Non-Offered Certificates ”) are collectively
referred to herein as the “ Certificates
” and evidence the entire ownership interest in the assets of
a trust estate (the “ Trust Estate ”)
consisting primarily of a pool of fixed and adjustable interest
rate mortgage loans as described in Schedule I (the “
Mortgage Loans ”) to be acquired by the Company
pursuant to a mortgage loan purchase agreement (the “
Mortgage Loan Purchase Agreement ”), dated as
of September 1, 2006 by and between the Company, as purchaser and
Bank of America, National Association, as seller. As of the close
of business on the date specified in Schedule I as the
cut-off date (the “ Cut-off Date ”), the
Mortgage Loans will have the aggregate principal balance set forth
in Schedule I . This Underwriting Agreement shall
hereinafter be referred to as the “ Agreement
.” Elections will be made to treat the assets of the Trust
Estate (exclusive of the arrangements intended to protect against
basis risk for certain of the Certificates, the Cap Carryover
Reserve Account, the Supplemental Interest Trust, the Interest Rate
Swap Agreement, the Swap Account and certain other assets specified
in the Pooling and Servicing Agreement) as multiple separate real
estate mortgage investment conduits (each, a “
REMIC ”). The Certificates are to be issued
pursuant to a pooling and servicing agreement, dated as of October
1, 2006 (the “ Pooling and Servicing Agreement
”), among the Company, as depositor, Option One Mortgage
Corporation, as servicer (the “ Servicer
”) and Wells Fargo Bank, N.A., as trustee (the “
Trustee ”). The Offered Certificates will be
issued in the denominations specified in Schedule I . The
Pooling and Servicing Agreement, this
Agreement, and the Mortgage Loan
Purchase Agreement are collectively referred to herein as the
“ Basic Documents .”
Capitalized terms used herein that
are not otherwise defined herein have the meanings assigned thereto
in the Pooling and Servicing Agreement.
SECTION 2.
Representations and Warranties of
the Company . The Company
represents and warrants to the Underwriter as follows:
(a)
The Company meets the requirements
for use of Form S-3 under the Securities Act of 1933, as amended
(the “ Act ”) and has filed with the
Securities and Exchange Commission (the “
Commission ”) a registration statement on Form
S-3 (the file number of which is set forth in Schedule I
hereto), which has become effective, for the registration under the
Act of the Offered Certificates. Such registration statement, as
amended to the date of this Agreement, meets the requirements set
forth in Rule 415(a)(1) under the Act and complies in all other
material respects with Rule 415(a)(1). The Company proposes to file
with the Commission pursuant to Rule 424 under the Act a supplement
to the form of prospectus included in such registration statement
relating to the Offered Certificates and the plan of distribution
thereof and has previously advised you of all further information
(financial and other) with respect to the Company to be set forth
therein. Such registration statement, including the exhibits
thereto, as amended to the date of this Agreement, is hereinafter
called the “ Registration Statement ”;
the prospectus first required to be filed to satisfy the condition
set forth in Rule 172(c) and pursuant to Rule 424(b) under the Act
is hereinafter called the “ Basic Prospectus
”; and such supplement to the Basic Prospectus, in the form
required to be filed to satisfy the condition set forth in Rule
172(c) and pursuant to Rule 424(b) under the Act, is hereinafter
called the “ Prospectus Supplement ” and,
collectively with the Basic Prospectus, the “ Final
Prospectus .” Any reference herein to the
Registration Statement, the Basic Prospectus or the Final
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Securities Exchange Act of 1934, as
amended (the “ Exchange Act ”), on or
before the date of this Agreement, or the issue date of the Basic
Prospectus or the Final Prospectus, as the case may be; and any
reference herein to the terms “amend,”
“amendment” or “supplement” with respect to
the Registration Statement, the Basic Prospectus or the Final
Prospectus shall be deemed to refer to and include the filing of
any document under the Exchange Act after the date of this
Agreement, or the issue date of the Basic Prospectus or the Final
Prospectus, as the case may be, and deemed to be incorporated
therein by reference.
(b)
At or prior to the time when sales
to investors of the Offered Certificates were first made (the
“ Time of Sale ”), the Company had
prepared the information (collectively, the “ Time of
Sale Information ”) listed in Schedule II
hereto. If, subsequent to the date of this Agreement, the Company
or any Underwriter has determined that such information included an
untrue statement of material fact or omitted to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading and have terminated their old purchase contracts and
entered into new purchase contracts with purchasers of the
Offered
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Certificates, then “Time of
Sale Information” will refer to the information available to
purchasers at the time of entry into the first such new purchase
contract, including any information that corrects such material
misstatements or omissions (“ Corrective
Information ”) and “Time of Sale” will
refer to the time and date on which such new purchase contracts
were entered into.
(c)
As of the date hereof, when the
Final Prospectus is first filed pursuant to Rule 424 under the Act,
when, prior to the Closing Date (as hereinafter defined), any
amendment to the Registration Statement becomes effective
(including the filing of any document incorporated by reference in
the Registration Statement), when any supplement to the Final
Prospectus is filed with the Commission and at the Closing Date,
(i) the Registration Statement, as amended as of any such time, and
the Final Prospectus, as amended or supplemented as of any such
time, will comply in all material respects with the Act and the
respective rules thereunder, (ii) the Registration Statement, as
amended as of any such time, will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein not misleading, and (iii) the Final Prospectus, as amended
or supplemented as of any such time, will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading; provided , however , that
the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement
or the Final Prospectus or any amendment thereof or supplement
thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the
Underwriter specifically for use in connection with the preparation
of the Registration Statement or the Final Prospectus.
(d)
The Time of Sale Information, at the
Time of Sale did not, and at the Closing Date will not, contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no
representation and warranty with respect to the information
contained in or omitted from the Time of Sale Information or any
amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by
or on behalf of the Underwriter specifically for use in connection
with the preparation of the Time of Sale Information.
(e)
The Company has been duly
incorporated and is validly existing as a corporation under the
laws of the State of Delaware and has corporate and other power and
authority to own its properties and conduct its business, as now
conducted by it, and to enter into and perform its obligations
under this Agreement and the other Basic Documents to which it is a
party.
(f)
The Company is not aware of (i) any
request by the Commission for any further amendment of the
Registration Statement or the Basic Prospectus or for any
additional information or (ii) the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement.
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(g)
This Agreement has been duly
authorized, executed and delivered by the Company, and each of the
other Basic Documents to which the Company is a party, when
delivered by the Company, will have been duly authorized, executed
and delivered by the Company, and will constitute a legal, valid
and binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium, receivership and similar laws affecting
creditors’ rights generally and to general principles of
equity (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law), and except as
rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or principles of public
policy.
(h)
The Company is not, and on the date
on which the first bona fide offer of the Offered Certificates is
made will not be, an “ineligible issuer,” as defined in
Rule 405 under the Act.
(i)
On the Closing Date, the Basic
Documents will conform to the description thereof contained in the
Registration Statement, the Final Prospectus and the Time of Sale
Information; the Offered Certificates will have been duly and
validly authorized and, when such Offered Certificates are duly and
validly executed, issued and delivered in accordance with the
Pooling and Servicing Agreement, and sold to the Underwriter as
provided herein, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing
Agreement.
(j)
As of the Closing Date, the
representations and warranties of the Company set forth in the
Pooling and Servicing Agreement will be true and
correct.
(k)
Neither the execution and delivery
by the Company of this Agreement or any other of the Basic
Documents nor the consummation by the Company of the transactions
contemplated herein or therein, nor the issuance of the Offered
Certificates or the public offering thereof as contemplated in the
Final Prospectus or the Time of Sale Information will conflict in
any material respect with or result in a material breach of, or
constitute a material default (with notice or passage of time or
both) under, or result in the imposition of any lien, pledge,
charge, of the property or assets of the Company (except as
required or permitted pursuant thereto or hereto), pursuant to any
material mortgage, indenture, loan agreement, contract or other
instrument to which the Company is party or by which it is bound,
nor will such action result in any violation of any provisions of
any applicable law, administrative regulation or administrative or
court decree, the certificate of incorporation or by-laws of the
Company. The Company is not in violation of its certificate of
incorporation, in default in any material respect in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease, trust agreement, transfer
and servicing agreement or other instrument to which a party or by
which it may be bound, or to which any material portion of its
property or assets is subject.
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(l)
No legal or governmental proceedings
are pending to which the Company is a party or of which any
property of the Company is subject, which if determined adversely
to the Company would, individually or in the aggregate, have a
material adverse effect on the financial position,
stockholders’ equity or results of operations of the Company;
and to the best of the Company’s knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(m)
Since the date of which information is given in
the Registration Statement, there has not been any material adverse
change in the business or net worth of the Company.
(n)
Any taxes, fees and other
governmental charges in connection with the execution and delivery
of the Basic Documents and the execution, delivery and sale of the
Offered Certificates have been or will be paid at or prior to the
Closing Date.
(o)
No consent, approval, authorization
or order of, or registration, filing or declaration with, any court
or governmental agency or body is required, or will be required, in
connection with (i) the execution and delivery by the Company of
any Basic Document or the performance by the Company of any of its
obligations under the Basic Documents or (ii) the offer, sale or
delivery of the Offered Certificates except such as shall have been
obtained or made, as the case may be, or will be obtained or made,
as the case may be, prior to the Closing Date, or will not
materially adversely affect the ability of the Company to perform
its obligations under any Basic Document.
(p)
The Company possesses, and will
possess, all material licenses, certificates, authorities or
permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now
conducted by it and as described in the Final Prospectus and the
Time of Sale Information, except to the extent that the failure to
have such licenses, certificates, authorities or permits does not
have a material adverse effect on the Offered Certificates or the
financial condition of the Company, and the Company has not
received, nor will it have received as of the Closing Date, any
notice of proceedings relating to the revocation or modification of
any such license, certificate, authority or permit which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would materially and adversely affect the conduct of
its business, operations or financial condition.
(q)
On the Closing Date, (i) the Company
will have good and marketable title to the related Mortgage Loans
being transferred by it to the Trust pursuant thereto, free and
clear of any lien, (ii) the Company will not have assigned to any
person any of its right, title or interest in such Mortgage Loans
or in the Pooling and Servicing Agreement, and (iii) the Company
will have the power and authority to sell such Mortgage Loans to
the Trust, and upon execution and delivery of the Pooling and
Servicing Agreement by the Trustee, the Company and the Servicer,
the Trust will have good and marketable title thereto, in each case
free of liens.
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(r)
The properties and businesses of the
Company conform, and will conform, in all material respects, to the
descriptions thereof contained in the Final Prospectus and the Time
of Sale Information.
(s)
The Trust Fund (as defined in the
Pooling and Servicing Agreement) is not required to be registered
under the Investment Company Act of 1940, as amended.
(t)
It is not necessary in connection
with the offer, sale and delivery of the Offered Certificates in
the manner contemplated by this Agreement to qualify the Pooling
and Servicing Agreement under the Trust Indenture Act of 1939, as
amended.
(u)
Other than the Final Prospectus, the
Company (including its agents and representatives other than the
Underwriter) has not made, used, prepared, authorized, approved or
referred to and will not make, use, prepare, authorize, approve or
refer to any “written communication” (as defined in
Rule 405 under the Act) that constitutes an offer to sell or
solicitation of an offer to buy the Offered Certificates other than
(i) information included in the Time of Sale Information, (ii) any
document not constituting a prospectus pursuant to Section
2(a)(10)(a) of the Act or Rule 134 under the Act or (iii) other
written communication approved in writing in advance by the
Underwriter.
(v)
Any Issuer Free Writing Prospectus
(as defined in Section 11(e)(i)) included in the Time of Sale
Information complied in all material respects with the Act and has
been, or will be filed in accordance with Rule 433 under the Act
(to the extent required thereby).
SECTION 3.
Purchase, Sale and Delivery of
Offered Certificates . On
the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the Underwriter, and
the Underwriter agrees to purchase from the Company, the Offered
Certificates at the purchase price set forth in Schedule I
hereto.
The Company will deliver the Offered
Certificates to the Underwriter, against payment of the purchase
price therefor in same day funds wired to such bank as may be
designated by the Company, or by such other manner of payment as
may be agreed upon by the Company and the Underwriter, at the
offices of Hunton & Williams LLP, New York, New York, at 10:00
A.M., Eastern time, on October 12, 2006, or at such other place or
time not later than seven full business days thereafter as the
Underwriter and the Company determine, such time being referred to
herein as the “ Closing Date
.”
The Offered Certificates so to be
delivered will be in such denominations and registered in such
names as the Underwriter requests two full business days prior to
the Closing Date and will be made available at the offices of Banc
of America Securities LLC, Charlotte, North Carolina or, upon the
Underwriter’s request, through the facilities of The
Depository Trust Company.
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SECTION 4.
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Offering by the
Underwriter .
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(a)
It is understood that the
Underwriter proposes to offer the Offered Certificates subject to
this Agreement for sale to the public (which may include selected
dealers) on the terms as set forth in the Final
Prospectus.
(b)
The Underwriter represents and
warrants to, and agrees with, the Company, that:
(i)
In relation to each Member State of
the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”), it has not
made and will not make an offer of Certificates to the public in
that Relevant Member State prior to the publication of a prospectus
in relation to the Offered Certificates which has been approved by
the competent authority in that Relevant Member State or, where
appropriate, approved in another Relevant Member State and notified
to the competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that it may, with
effect from and including the relevant implementation date, make an
offer of Certificates to the public in that Relevant Member State
at any time:
a)
to
legal entities which are authorized or regulated to operate in the
financial markets or, if not so authorized or regulated, whose
corporate purpose is solely to invest in securities;
b)
to any legal entity which has two or
more of (1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
(euro) 43,000,000 and (3) an annual net turnover of more than
(euro) 50,000,000, as shown in its last annual or consolidated
accounts; or
c)
in
any other circumstances which do not required the publication by
the issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
For the purposes of this
representation, the expression an “offer of Certificates to
the public” in relation to any Offered Certificates in any
Relevant Member State means the communication in any form and by
any means of sufficient information on the terms of the offer and
the Certificates to be offered so as to enable an investor to
decide to purchase or subscribe the Certificates, as the same may
be varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression
“Prospectus Directive” means the European Commission
Directive 2003/71/EC and includes any relevant implementing measure
in each Relevant Member State.
(ii)
It has only communicated or caused
to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the United
Kingdom Financial Services and Markets Act 2000 (the
“FSMA”)) received by it in connection with the issue or
sale of the Certificates in circumstances in which
Section 21(1) of the FSMA does not apply to the
issuer.
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(iii)
It has complied and will comply with all
applicable provisions of the FSMA with respect to anything done by
it in relation to the Offered Certificates in, from or otherwise
involving the United Kingdom.
SECTION 5.
Covenants of the
Company . The Company
hereby covenants and agrees with the Underwriter that:
(a)
Prior to the termination of the
offering of the Offered Certificates, the Company will not file any
amendment of the Registration Statement or supplement (including
the Final Prospectus) to the Basic Prospectus unless the Company
has furnished the Underwriter a copy for its review prior to filing
and will not file any such proposed amendment or supplement to
which the Underwriter reasonably objects. Subject to the foregoing
sentence, the Company will cause the Final Prospectus to be filed
with the Commission pursuant to Rule 424. The Company will advise
the Underwriter promptly (i) when the Final Prospectus shall have
been filed with the Commission pursuant to Rule 424, (ii) when any
amendment to the Registration Statement relating to the Offered
Certificates shall have become effective, (iii) of any request by
the Commission for any amendment of the Registration Statement or
amendment of or supplement to the Final Prospectus or for any
additional information, (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for
that purpose and (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Offered Certificates for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b)
If, at any time when a prospectus
relating to the Offered Certificates is required to be delivered
under the Act, any event occurs as a result of which the Final
Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend or supplement the Final Prospectus to
comply with the Act or the Exchange Act or the respective rules
thereunder, the Company promptly will prepare and file with the
Commission, subject to the first sentence of paragraph (a) of this
Section 5, an amendment or supplement which will correct such
statement or omission or an amendment which will effect such
compliance and will use its best efforts to cause any required
post-effective amendment to the Registration Statement containing
such amendment to be made effective as soon as possible.
(c)
The Company will furnish to the
Underwriter and counsel for the Underwriter, without charge,
executed copies of the Registration Statement (including exhibits
thereto) and each amendment thereto which shall become effective on
or prior to the Closing Date and, so long as delivery of a
prospectus by the Underwriter or dealers may be required by the
Act, as many copies of the Final Prospectus and any amendments
thereof and supplements thereto as the Underwriter may reasonably
request. The Company will pay the expenses of printing all
documents relating to the initial offering.
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(d)
The Company will furnish such
information as may be required and otherwise cooperate in
qualifying the Offered Certificates for sale under the laws of such
jurisdictions as the Underwriter may reasonably designate and to
maintain such qualifications in effect so long as required for the
distribution of the Offered Certificates; provided ,
however , that the Company shall not be required to qualify
to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to general or
unlimited service of process in any jurisdiction where it is not
now so subject.
SECTION 6.
Conditions to the Obligations of
the Underwriter . The
obligations of the Underwriter to purchase the Offered Certificates
shall be subject to the accuracy of the representations and
warranties on the part of the Company contained herein as of the
date hereof, as of the date of the effectiveness of any amendment
to the Registration Statement filed prior to the Closing Date
(including the filing of any document incorporated by reference
therein) and as of the Closing Date, to the accuracy of the
statements of the Company made in any certificates delivered
pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following
additional conditions:
(a)
The Underwriter shall have received
from Deloitte & Touche LLP a letter, dated the date hereof,
confirming that they are independent public accountants within the
meaning of the Act and the rules and regulations of the Commission
promulgated thereunder and otherwise in form and substance
reasonably satisfactory to the Underwriter and counsel to the
Underwriter.
(b)
All actions required to be taken and
all filings required to be made by the Company under the Act prior
to the sale of the Offered Certificates shall have been duly taken
and made. At and prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have
been instituted, or to the knowledge of the Company or the
Underwriter, shall have been contemplated by the
Commission.
(c)
Subsequent to the execution and
delivery of this Agreement, there shall not have occurred (i) any
change, or any development involving a prospective change, in or
affecting particularly the business or properties of the Company or
the Servicer which, in the reasonable judgment of the Underwriter,
materially impairs the investment quality of the Offered
Certificates; (ii) any downgrading in the rating of the Servicer by
any “nationally recognized statistical rating
organization” (as such term is defined for purposes of Rule
436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its ratings of the
Servicer (other than an announcement with positive implications of
a possible upgrading, and no implication of a possible downgrading,
of such rating); (iii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting
of minimum prices for trading on such exchange; (iv) any banking
moratorium declared by federal, North Carolina or New York
authorities; or (v) any outbreak or escalation of major hostilities
in which the United States is involved, any declaration of war by
Congress or any other substantial national or international
calamity or emergency if, in the reasonable judgment of the
Underwriter, the effects of any such outbreak, escalation,
declaration, calamity or
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emergency makes it impractical or
i
