Exhibit 1.1
ASSET BACKED FUNDING CORPORATION
$803,217,000
(Approximate)
Asset Backed Funding Corporation Asset-Backed Certificates,
Series 2006-OPT3
November 13, 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
(the "Underwriter"), $803,217,000 aggregate Certificate Principal
Balance of its
Asset-Backed Certificates identified in Schedule I hereto (the
"Offered
Certificates") having the Original Class Certificate Principal
Balances set
forth in Schedule I (subject to an upward or downward variance, not
to exceed
5%, of the precise Original Class 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 Certificates are collectively referred to herein as the
"Certificates" and
evidence the entire ownership interest in the assets of a trust
fund consisting
primarily of three pools of fixed and adjustable-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"), to be dated as of October 1, 2006, between the Company
and Bank of
America, National Association. 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 segregated pool of assets consisting of the
Mortgage Loans and
certain other related assets (exclusive of the arrangements
intended to protect
against basis risk for certain of the certificates, the interest
rate swap
agreement, the swap account, the cap carryover reserve account and
prepayment
charges) as multiple separate real estate mortgage investment
conduits (each, a
"REMIC"). The Certificates are to be issued pursuant to a pooling
and servicing
agreement, to be dated as of October 1, 2006 (the "Pooling
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 Agreement, this Agreement, the Mortgage Loan Purchase
Agreement and the
purchase agreement, to be dated November 14, 2006, among Banc of
America
Securities LLC, as Initial Purchaser and the Company (the "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 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 such Form (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 said Rule. 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 the Underwriter 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 the 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 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.
(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 Agreement, and sold to
the
Underwriter as provided herein, will be validly issued and
outstanding
and entitled to the benefits of the Pooling Agreement.
(j) As of the Closing Date, the representations and warranties
of the Company set forth in the Pooling 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.
(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 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
Agreement by the Trustee, the Company and the Servicer, the Trust
will
have
good and marketable title thereto, in each case free of liens.
(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 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 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 aggregate Certificate Principal Balance of the
Offered
Certificates at a 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
Cadwalader, Wickersham & Taft LLP, New York, New York at 10:00
A.M., Eastern
time, on November 14, 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 office
of Banc of America Securities LLC, Charlotte, North Carolina or,
upon the
Underwriter's request, through the facilities of The Depository
Trust Company.
SECTION 4. Offering by
the Underwriter.
(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
require 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.
(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.
(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
obligation 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 rating 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 emergency makes
it
impractical or inadvisable to proceed with completion of the sale
of
and payment for the Offered Certificates.
(d) On or before the Closing Date, the Underwriter shall have
received evidence satisfactory to it that each class of Offered
Certificates has been given the ratings set forth on Schedule I
hereto.
(e) The Underwriter shall have received a favorable opinion of
Cadwalader, Wickersham & Taft LLP, special tax counsel for the
Company,
addressed to the Underwriter and dated the Closing Date and
reasonably
satisfactory in form and substance to the Underwriter and counsel
to
the Underwriter.
(f) The Underwriter shall have received a favorable opinion of
Cadwalader, Wickersham & Taft LLP, special counsel for the
Company,
addressed to the Underwriter and dated the Closing Date and
reasonably
satisfactory
