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EXECUTION COPY
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ASSET BACKED FUNDING CORPORATION
$1,386,432,000
(Approximate)
Asset-Backed Certificates,
Series 2006-HE1
December 12, 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")
$1,386,432,000
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 "Initial
Mortgage Loans") to be
acquired by the
Company pursuant to a mortgage loan
purchase agreement
(the "Mortgage Loan Purchase Agreement"), dated as of
November 1, 2006 by and between the Company, as purchaser and Bank of America,
National Association, as seller and funds in the Pre-Funding
Accounts. As of the
close of business on the date specified in Schedule I as the cut-off date
(the
"Cut-off Date"), the
Initial Mortgage Loans
will have the aggregate principal
balance set forth in Schedule I. On or before February 28, 2007,
the Company may
sell and the Securities Administrator will be obligated to
purchase, on
behalf
of the Trust,
additional mortgage
loans (the "Additional
Mortgage Loans"
and
together with
the Initial Mortgage Loans, the "Mortgage Loans"). 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, the Additional
Mortgage Loan
Interest, the Pre-Funding Accounts 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 November 1,
2006 (the "Pooling and Servicing Agreement"), among the Company, as
depositor,
Option One Mortgage
Corporation, as a
servicer ("Option One"), JPMorgan Chase
<PAGE>
Bank, National
Association,
as a servicer
("JPM Chase Bank"), Litton Loan
Servicing LP, as a
servicer ("Litton,"
and together with Option One and JPM
Chase Bank, the "Servicers," and each of Litton, Option One and JPM Chase Bank
individually, a
"Servicer"), Wells
Fargo Bank, N.A., as
master servicer
(the
"Master
Servicer") and
securities
administrator (the "Securities
Administrator"), and U.S. Bank National Association, 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.
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(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 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
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<PAGE>
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 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
4
<PAGE>
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 Initial Mortgage Loans being transferred by it to the
Trust pursuant
thereto, free and
clear of any lien, (ii) the Company will
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<PAGE>
not
have assigned to any person any of its right, title or interest in
such
Initial Mortgage Loans or in the Pooling and Servicing Agreement,
and (iii)
the
Company will have the power and authority to sell such Initial
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.
(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 December 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 offices of Banc of
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<PAGE>
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 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
7
<PAGE>
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
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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
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
9
<PAGE>
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 outbr
