Execution Copy
Exhibit 1.1
FIRST ALLIANCE MORTGAGE COMPANY
AND
XXXXXX BROTHERS INC.
UNDERWRITING AGREEMENT
FOR
FIRST ALLIANCE MORTGAGE LOAN TRUST 1999-1
MORTGAGE LOAN ASSET BACKED CERTIFICATES
6.68% CLASS A-1 FIXED RATE GROUP CERTIFICATES
CLASS A-2 VARIABLE RATE GROUP CERTIFICATES
March 11, 1999
Execution Copy
March 11, 1999
First Alliance Mortgage Company
00000 Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Xxxxxx Brothers Inc.
Three World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
First Alliance Mortgage Company (the "Seller") hereby confirms its
agreement to sell certain mortgage loan asset backed certificates to Xxxxxx
Brothers Inc. (the "Underwriter") as described herein relating to the First
Alliance Mortgage Loan Trust 1999-1 (the "Trust"). The certificates, together
with certain subordinate certificates to be issued by the Trust, will evidence
in the aggregate the entire beneficial interest in a trust estate (the "Trust")
consisting of two pools (the "Mortgage Pools") of closed-end mortgage loans (the
"Initial Mortgage Loans") and such amounts as may be held by the Trustee in the
Pre-Funding Account (the "Pre-Funding Account"), the Capitalized Interest
Account (the "Capitalized Interest Account") and any other accounts held by the
Trustee for the Trust. The Initial Mortgage Loans shall have, as of the close of
business on March 1, 1999 (the "Cut-Off Date"), an aggregate principal balance
of $90,033,901.09. The certificates are to be issued under a pooling and
servicing agreement dated as of March 1, 1999 (the "Pooling and Servicing
Agreement"), among the Seller, in its individual capacity and in its capacity as
servicer (the "Servicer") and Norwest Bank Minnesota, National Association, in
its capacity as trustee (the "Trustee") and in its capacity as master servicer
(the "Master Servicer"). On the Closing Date, approximately $24,966,099 will be
deposited in the name of the Trustee in the Pre-Funding Account from the sale of
the Certificates. It is intended that additional Mortgage Loans satisfying the
criteria specified in the Pooling and Servicing Agreement (the "Subsequent
Mortgage Loans") will be purchased by the Trust for inclusion in both Group I
and Group II from the Seller from time to time on or before April 30, 1999 from
funds on deposit in the Pre-Funding Account at the time of execution and
delivery of each Subsequent Transfer Agreement ("Subsequent Transfer
Agreement"). Funds in the Capitalized Interest Account will be applied by the
Trustee to cover shortfalls in interest during the Funding Period.
On or prior to the date of issuance of the Certificates, the Seller
will obtain two certificate guaranty insurance policies (the "Policies") issued
by MBIA Insurance Corporation (the "Insurer") which will unconditionally and
irrevocably guarantee to the Trustee for the benefit of the holders of the Class
A-1 Certificates and the Class A-2 Certificates full and complete payment of all
amounts payable on the Class A-1 Certificates and the Class A-2 Certificates.
All
capitalized terms used but not otherwise defined herein have the respective
meanings set forth in the form of Pooling and Servicing Agreement heretofore
delivered to the Underwriter.
1. Securities. The certificates will be issued in classes as follows:
(i) a senior class with respect to each Mortgage Loan Group consisting of the
Class A-1 Fixed Rate Group Certificates (the "Class A-1 Certificates") and the
Class A-2 Variable Rate Group Certificates (the "Class A-2 Certificates" and
collectively with the Class A-1 Certificates, the "Class A Certificates") and
(ii) a residual class (the "Class R Certificates"). The Class A Certificates and
the Class R Certificates are hereinafter referred to as the "Certificates."
2. Representations and Warranties of the Seller. The Seller represents
and warrants to, and covenants with, the Underwriter that:
A. The Seller has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement (No. 333-44585) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of
Mortgage Loan Asset Backed Certificates and Notes (issuable in series), which
registration statement, as amended at the date hereof, has become effective.
Such registration statement, as amended to the date of this Agreement, meets the
requirements set forth in Rule 415(a)(1)(vii) under the Act and complies in all
other material respects with such Rule. The Seller proposes to file with the
Commission pursuant to Rule 424(b)(5) under the Act, a supplement dated March
11, 1999 to the prospectus dated March 11, 1999 relating to the Certificates and
the method of distribution thereof and has previously advised the Underwriter of
all further information (financial and other) with respect to the Certificates
to be set forth therein. Such registration statement, including the exhibits
thereto, as amended at the date hereof, is hereinafter called the "Registration
Statement"; such prospectus dated March 11, 1999, in the form in which it will
be filed with the Commission pursuant to Rule 424(b)(5) under the Act is
hereinafter called the "Basic Prospectus"; such supplement dated March 11, 1999
to the Basic Prospectus, in the form in which it will be filed with the
Commission pursuant to Rule 424(b)(5) of the Act, is hereinafter called the
"Prospectus Supplement"; and the Basic Prospectus and the Prospectus Supplement
together are hereinafter called the "Prospectus." There are no contracts or
documents of the Seller which are required to be filed as exhibits to the
Registration Statement pursuant to the Act or the Rules and Regulations which
have not been so filed or incorporated by reference therein on or prior to the
effective date of the Registration Statement. The conditions for use by the
Seller of the Registration Statement on Form S-3 under the Act have been
satisfied. The Seller will file with the Commission (i) promptly after receipt
from the Underwriter of any Derived Information (as defined herein) a Form 8-K
incorporating such Derived Information and (ii) within fifteen days of the
issuance of the Certificates a report on Form 8-K setting forth specific
information concerning the related Mortgage Loans (the "8-K").
B. As of the date hereof, when the Registration Statement became
effective, when the Prospectus Supplement is first filed pursuant to Rule
424(b)(5) under the Act and at the Closing Date, (i) the Registration Statement,
as amended as of any such time, and the Prospectus, as amended or supplemented
as of any such time, will comply in all material respects with the applicable
requirements of the Act and the rules and regulations thereunder and (ii) the
Registration Statement, as amended as of any such time, did not and will not
contain any untrue statement of a material fact and did not and will not omit to
state any material fact required to be
2
stated therein or necessary to make the statements therein not misleading and
the Prospectus, as amended or supplemented as of any such time, did not and will
not contain an untrue statement of a material fact and did not and will not omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the Seller makes no representations or warranties as to the
information contained in or omitted from the Prospectus Supplement or any
amendment thereof or supplement thereto in reliance upon and in conformity with
the information furnished in writing to the Seller by or on behalf of the
Underwriter specifically for use in connection with the preparation of the
Prospectus Supplement.
C. The Seller is duly organized, validly existing and in good standing
under the laws of the State of California, has full power and authority
(corporate and other) to own its properties and conduct its business as now
conducted by it, and as described in the Prospectus, and is duly qualified to do
business in each jurisdiction in which it owns or leases real property (to the
extent such qualification is required by applicable law) or in which the conduct
of its business requires such qualification except where the failure to be so
qualified does not involve (i) a material risk to, or a material adverse effect
on, the business, properties, financial position, operations or results of
operations of the Seller or (ii) any risk whatsoever as to the enforceability of
any Mortgage Loan.
D. There are no actions, proceedings or investigations pending, or, to
the knowledge of the Seller, threatened, before any court, governmental agency
or body or other tribunal (i) asserting the invalidity of this Agreement, the
Certificates, the Insurance Agreement, the Indemnification Agreement or of the
Pooling and Servicing Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Pooling and Servicing Agreement or any Subsequent Transfer
Agreement, (iii) which (except as noted in the Prospectus Supplement under the
Caption "Risk Factors--Litigation") may, individually or in the aggregate,
materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement, the Certificates,
the Pooling and Servicing Agreement or any Subsequent Transfer Agreement, or
(iv) which may affect adversely the federal income tax attributes of the
Certificates as described in the Prospectus.
E. The execution and delivery by the Seller of this Agreement, the
Indemnification Agreement, the Insurance Agreement and the Pooling and Servicing
Agreement, the issuance of the Certificates and the transfer and delivery of the
Mortgage Loans to the Trustee by the Seller are within the corporate power of
the Seller and have been, or will be, prior to the Closing Date duly authorized
by all necessary corporate action on the part of the Seller and the execution
and delivery of such instruments, the consummation of the transactions therein
contemplated and compliance with the provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute or any agreement or instrument to which the Seller or
any of its affiliates is a party or by which it or any of them is bound or to
which any of the property of the Seller or any of its affiliates is subject, the
Seller's charter or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Seller, any of its affiliates or any of its or their properties; and no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body or other tribunal is required for the consummation of the
transactions
3
contemplated by this Agreement or the Prospectus in connection with the issuance
and sale of the Certificates by the Seller except pursuant to the Act. Neither
the Seller nor any of its affiliates is a party to, bound by or in breach or
violation of any indenture or other agreement or instrument, or subject to or in
violation of any statute, order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Seller or any of
its affiliates, which materially and adversely affects, or may in the future
materially and adversely affect, (i) the ability of the Seller to perform its
obligations under the Pooling and Servicing Agreement, this Agreement, the
Insurance Agreement, the Indemnification Agreement and any Subsequent Transfer
Agreement or (ii) the business, operations, results of operations, financial
position, income, properties or assets of the Seller, taken as a whole.
F. This Agreement and the Indemnification Agreement have been duly
executed and delivered by the Seller, and on or prior to the Closing Date the
Pooling and Servicing Agreement, the Insurance Agreement and any Subsequent
Transfer Agreement will be duly executed and delivered by the Seller, and each
constitutes and/or will constitute, as applicable, the legal, valid and binding
obligation of the Seller enforceable in accordance with their respective terms,
except as enforceability may be limited by (i) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other similar laws
affecting the enforcement of the rights of creditors and (ii) general principles
of equity, whether enforcement is sought in a proceeding at law or in equity.
G. The Certificates will conform in all material respects to the
description thereof to be contained in the Prospectus and will be duly and
validly authorized and, when duly and validly executed, authenticated, 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.
H. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Certificates and the sale of the
Certificates to the Underwriter, or for the consummation by the Seller, of the
other transactions contemplated by this Agreement, the Indemnification
Agreement, the Pooling and Servicing Agreement, the Insurance Agreement and any
Subsequent Transfer Agreement, other than those that have been obtained.
I. On the Closing Date, the Initial Mortgage Loans will conform in all
material respects to the description thereof contained in the Prospectus and the
representations and warranties contained in this Agreement will be true and
correct in all material respects. The representations and warranties set out in
the Pooling and Servicing Agreement are hereby made to the Underwriter as though
set out herein, and at the dates specified in the Pooling and Servicing
Agreement, and in any Subsequent Transfer Agreement, such representations and
warranties were, or will be, true and correct in all material respects.
J. On the Closing Date, (x) the Seller will have good title to the
Initial Mortgage Loans free of any liens, (y) the Trustee on behalf of the Trust
will have acquired beneficial ownership of the Seller's right, title and
interest in the Initial Mortgage Loans and (z) the Underwriter will have good
title to the Certificates free of any liens. The transfer of the Initial
Mortgage Loans to
4
the Trust on the Closing Date will be treated by the Seller for financial
accounting and reporting purposes as a sale of assets and not as a pledge of
assets to secure debt.
K. The Seller possesses all material licenses, certificates, permits or
other authorizations issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now operated by
it and as described in the Prospectus and, except as noted in the Prospectus
Supplement under the caption "RISK FACTORS--Litigation", there are no
proceedings, pending or, to the best knowledge of the Seller, threatened,
relating to the revocation or modification of any such license, certificate,
permit or other authorization which singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and adversely
affect the business, operations, results of operations, financial position,
income, property or assets of the Seller taken as a whole.
L. Any taxes, fees and other governmental charges in connection with
the execution and delivery of this Agreement, the Insurance Agreement, the
Indemnification Agreement, and the Pooling and Servicing Agreement or the
execution and issuance of the Certificates have been or will be paid on or prior
to the Closing Date.
M. There has not been any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Seller or its
subsidiaries, taken as a whole, from December 31, 1998, to the date hereof.
N. This Agreement and the Pooling and Servicing Agreement will conform
in all material respects to the descriptions thereof contained in the
Prospectus.
O. The Seller is not aware of (i) any request by the Commission for any
further amendment of the Registration Statement or the Prospectus or for any
additional information, (ii) 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 or (iii) any notification with
respect to the suspension of the qualification of the Certificates for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
P. Each assignment of Mortgages required to be prepared pursuant to the
Pooling and Servicing Agreement is based on forms recently utilized by the
Seller with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of the Seller's business. Based on
the Seller's experience with such matters it is reasonable to believe that upon
execution each such assignment will be in recordable form and will be sufficient
to effect the assignment of the Mortgage to which it relates as provided in the
Pooling and Servicing Agreement.
Q. The Seller is eligible to use the Registration Statement.
R. Neither the Seller nor the Trust created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of such term
under the Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations of the Commission thereunder.
5
S. On the Closing Date, the Class A Certificates shall have been rated
in the highest rating category by at least two nationally recognized rating
agencies.
T. The Seller is not in violation of its articles of incorporation or
by-laws or, to our knowledge, in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Seller is a party or by which it or its properties may be bound, which
default might result in any material adverse changes in the financial condition,
earnings, affairs or business of the Seller or which might materially and
adversely affect the properties or assets, taken as a whole, of the Seller.
U. To the best knowledge of the Seller, Deloitte & Touche LLP are
independent public accountants with respect to the Sellers as required by the
Securities Act and the Rules and Regulations.
Any certificate signed by any officer of the Seller and delivered to
the Underwriter in connection with the sale of the Certificates hereunder shall
be deemed a representation and warranty as to the matters covered thereby by the
Seller to each person to whom the representations and warranties in this Section
2 are made.
3. Agreements of the Underwriter. The Underwriter agrees with the
Seller that upon the execution of this Agreement and authorization by the
Underwriter of the release of the Class A Certificates, the Underwriter shall
offer the Class A Certificates for sale upon the terms and conditions set forth
in the Prospectus as amended or supplemented.
4. Purchase, Sale and Delivery of the Class A Certificates. The Seller
hereby agrees, subject to the terms and conditions hereof, to sell the Class A
Certificates to the Underwriter, who, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
hereby agrees to purchase the entire aggregate principal amount of the Class A
Certificates, consisting of the Class A-1 Certificates in the amount of
$85,000,000 and the Class A-2 Certificates in the amount of $30,000,000. At the
time of issuance of the Certificates, the Initial Mortgage Loans will be sold by
the Seller to the Trust pursuant to the Pooling and Servicing Agreement. The
Subsequent Mortgage Loans will be purchased by the Trust for inclusion in both
Mortgage Loan Groups, from time to time on or before April 30, 1999. The
Servicer and the Master Servicer will be obligated, under the Pooling and
Servicing Agreement, to service the Mortgage Loans either directly or through
sub-servicers.
The Class A Certificates to be purchased by the Underwriter will be
delivered by the Seller to the Underwriter (which delivery shall be made through
the facilities of The Depository Trust Company ("DTC")) against payment of the
purchase price therefor, equal to 99.60% of the aggregate principal amount of
each Class of the Class A Certificates, including accrued interest at the Class
A-1 Pass-Through Rate on the Class A-1 Certificates from March 1, 1999 to, but
not including, the Closing Date, by a same day federal funds wire payable to the
order of the Seller. No accrued interest will be payable on the Class A-2
Variable Rate Group Certificates, which shall be dated their date of delivery.
6
Settlement shall take place at the offices of Xxxxx & Xxxxxx LLP, 0000
X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, at 10:00 a.m. (E.S.T.), on March 19,
1999, or at such other time thereafter as the Underwriter and the Seller
determine (such time being herein referred to as the "Closing Date"). The Class
A Certificates will be prepared in definitive form and in such authorized
denominations as the Underwriter may request, registered in the name of Cede &
Co., as nominee of DTC.
The Seller agrees to have the Class A Certificates available for
inspection and review by the Underwriter in New York City not later than 1:00
p.m. (E.S.T.) on the business day prior to the Closing Date.
5. Covenants of the Seller. The Seller covenants and agrees with the
Underwriter that:
A. The Seller will promptly advise the Underwriter and its counsel (i)
when any amendment to the Registration Statement shall have become effective,
(ii) of any request by the Commission for any amendment to the Registration
Statement or the Prospectus or for any additional information, (iii) 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 (iv) of the receipt by the Seller of any notification with
respect to the suspension of the qualification of the Class A Certificates for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Seller will not file any amendment to the Registration
Statement or supplement to the Prospectus after the date hereof and prior to the
Closing Date for the Certificates unless the Seller has furnished the
Underwriter and its counsel copies of such amendment or supplement for their
review prior to filing and will not file any such proposed amendment or
supplement to which the Underwriter reasonably objects, unless such filing is
required by law. The Seller will use its best efforts to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if issued, to obtain as soon as possible the withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which the
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 the light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Act or the rules under the Act, the Seller will
promptly prepare and file with the Commission, subject to Paragraph A of this
Section 5, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, if such amendment
or supplement is required to be contained in a post-effective amendment to the
Registration Statement, will use its best efforts to cause such amendment of the
Registration Statement to be made effective as soon as possible.
C. The Seller will furnish to the Underwriter, without charge, executed
copies of the Registration Statement (including exhibits thereto) and, so long
as delivery of a Prospectus by the Underwriter or a dealer may be required by
the Act, as many copies of the Prospectus, as amended or supplemented, and any
amendments and supplements thereto as the Underwriter
7
may reasonably request. The Seller will pay the expenses of printing (or
otherwise reproducing) all offering documents relating to the offering of the
Class A Certificates.
D. As soon as practicable, but not later than sixteen months after the
date hereof, the Seller will cause the Trust to make generally available to
Owners of the Certificates an earning statement of the Trust covering a period
of at least 12 months beginning after the effective date of the Registration
Statement which will satisfy the provisions of Section 11(a) of the Act and, at
the option of the Seller, will satisfy the requirements of Rule 158 under the
Act.
E. During a period of 20 calendar days from the date as of which this
Agreement is executed, neither the Seller nor any affiliate of the Seller will,
without the Underwriter's prior written consent (which consent shall not be
unreasonably withheld), enter into any agreement to offer or sell mortgage loan
asset-backed securities backed by mortgage loans, except pursuant to this
Agreement.
F. So long as any of the Class A Certificates are outstanding, the
Seller will cause to be delivered to the Underwriter (i) all documents required
to be distributed to Owners of the Class A Certificates and (ii) from time to
time, any other information concerning the Trust filed with any government or
regulatory authority that is otherwise publicly available.
G. The Seller, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses in
connection with the transactions contemplated herein, including, but not limited
to, the expenses of printing (or otherwise reproducing) all documents relating
to the offering, the reasonable fees and disbursements of its counsel and
expenses of the Underwriter (including the reasonable fees and disbursements of
Xxxxx & Wood LLP, as special counsel to the Underwriter) incurred in connection
with (i) the issuance and delivery of the Certificates, (ii) preparation,
printing, reproducing and delivery of all documents specified in this Agreement,
(iii) any fees and expenses of the Trustee, the Insurer and any other credit
support provider (including legal fees), accounting fees and disbursements, and
(iv) any fees charged by investment rating agencies for rating the Class A
Certificates.
H. The Seller agrees that, so long as any of the Class A Certificates
shall be outstanding, it will deliver or cause to be delivered to the
Underwriter (i) the annual statement as to compliance delivered to the Trustee
pursuant to the Pooling and Servicing Agreement, (ii) the annual statement of a
firm of independent public accountants furnished to the Trustee pursuant to the
Pooling and Servicing Agreement as soon as such statement is furnished to the
Seller and (iii) any information required to be delivered by the Seller or the
Servicer to the Trustee in order for the Trustee to prepare the report required
pursuant to Section 7.8 of the form of Pooling and Servicing Agreement
heretofore delivered to the Underwriter.
I. The Seller will enter into the Pooling and Servicing Agreement, the
Insurance Agreement, and all related agreements on or prior to the Closing Date.
J. The Seller will endeavor to qualify the Class A Certificates for
sale to the extent necessary under any state securities or Blue Sky laws in any
jurisdictions as may be reasonably requested by the Underwriter, if any, and
will pay all expenses (including fees and disbursements
8
of counsel) in connection with such qualification and in connection with the
determination of the eligibility of the Class A Certificates for investment
under the laws of such jurisdictions as the Underwriter may reasonably
designate, if any.
6. Conditions of the Underwriter's Obligation. The obligation of the
Underwriter to purchase and pay for the Class A Certificates as provided herein
shall be subject to the accuracy as of the date hereof and the Closing Date (as
if made at the Closing Date) of the representations and warranties of the Seller
contained herein (including those representations and warranties set forth in
the Pooling and Servicing Agreement and incorporated herein), to the accuracy of
the statements of the Seller made in any certificate or other document delivered
pursuant to the provisions hereof, to the performance by the Seller of its
obligations hereunder, and to the following additional conditions:
A. The Registration Statement shall have become effective no later than
the date hereof, and 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 threatened, and the Prospectus shall have
been filed pursuant to Rule 424(b).
B. The Underwriter shall have received the Pooling and Servicing
Agreement and the Class A Certificates in form and substance satisfactory to the
Underwriter, duly executed by all signatories required pursuant to the
respective terms thereof.
C.1. The Underwriter shall have received the favorable opinion of the
General Counsel to the Seller, with respect to the following items, dated the
Closing Date, to the effect that:
(a) The Seller has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of
California, and is qualified to do business in each state necessary to
enable it to perform its obligations as Servicer under the Pooling and
Servicing Agreement. The Seller has the requisite power and authority
to execute and deliver, engage in the transactions contemplated by, and
perform and observe the conditions of, this Agreement, the Pooling and
Servicing Agreement, any Subsequent Transfer Agreement, the Insurance
Agreement and the Indemnification Agreement.
(b) This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Insurance Agreement and the Indemnification Agreement
have been duly and validly authorized, executed and delivered by the
Seller, all requisite corporate action having been taken with respect
thereto, and each (other than the Certificates) constitutes the valid,
legal and binding agreement of the Seller enforceable against the
Seller in accordance with its respective terms.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trust, the issuance or sale of the Certificates nor the execution,
delivery or performance by the Seller of the Pooling and Servicing
Agreement, this Agreement, any Subsequent Transfer Agreement, the
Insurance Agreement or the Indemnification Agreement (A) conflicts or
will conflict with or results or will result in a breach of, or
constitutes or will constitute a default under, (i) any term or
provision of the articles of incorporation or bylaws of the Seller;
(ii) any term or provision of any material agreement, contract,
instrument or
9
indenture, to which the Seller is a party or is bound; or (iii) any
order, judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having jurisdiction over
the Seller; or (B) results in, or will result in the creation or
imposition of any lien, charge or encumbrance upon the Trust or upon
the Certificates, except as otherwise contemplated by the Pooling and
Servicing Agreement.
(d) The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment in recordable
form, with respect to each Mortgage (in the absence of the delivery of
the opinions described in Section 3.5(b)(ii)(y) of the Pooling and
Servicing Agreement), as and in the manner contemplated by the Pooling
and Servicing Agreement, is sufficient fully to transfer to the Trustee
for the benefit of the Owners all right, title and interest of the
Seller in the Note and Mortgage, as noteholder and mortgagee or
assignee thereof, and will be sufficient to permit the Trustee to avail
itself of all protection available under applicable law against the
claims of any present or future creditors of the Seller and to prevent
any other sale, transfer, assignment, pledge or other encumbrance of
the Mortgage Loans by the Seller from being enforceable.
(e) No consent, approval, authorization or order of, registration
or filing with, or notice to, courts, governmental agency or body or
other tribunal is required under the laws of the State of California,
for the execution, delivery and performance of the Pooling and
Servicing Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement or the offer, issuance, sale or delivery of
the Certificates or the consummation of any other transaction
contemplated thereby by the Seller, except such which have been
obtained.
(f) The Seller possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it and as described in the Prospectus and,
except as noted in the Prospectus Supplement under the caption "RISK
FACTORS--Litigation", there are no proceedings, pending or, to the
best knowledge of the Seller, threatened, relating to the revocation or
modification of any such license, certificate, permit or other
authorization which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect the business, operations, results of operations, financial
position, income, property or assets of the Seller taken as a whole.
(g) There are no actions, proceedings or investigations pending
or, to such counsel's knowledge, threatened against the Seller before
any court, governmental agency or body or other tribunal (i) asserting
the invalidity of the Pooling and Servicing Agreement, the Insurance
Agreement, this Agreement, the Indemnification Agreement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by the
Pooling and Servicing Agreement, the Indemnification Agreement, the
Insurance Agreement or this Agreement or (iii) which (except as noted
in the Prospectus Supplement under the caption "RISK
FACTORS--Litigation") would materially and adversely affect the
performance by the Seller of obligations under, or the validity or
enforceability of, the Pooling and Servicing
10
Agreement, the Certificates, the Indemnification Agreement, the
Insurance Agreement or this Agreement.
(h) The statements in the Prospectus under the caption "CERTAIN
LEGAL ASPECTS OF MORTGAGE LOANS AND RELATED MATTERS", to the extent
that statements in such section constitute matters of law or legal
conclusions with respect thereto, have been reviewed by attorneys under
the supervision of General Counsel to the Seller and are complete and
correct in all material respects.
2. The Underwriter shall have received the favorable opinion of Xxxxx &
Xxxxxx LLP, special counsel to the Seller, dated the Closing Date, to the effect
that:
(a) The Certificates, assuming due execution and authentication by
the Trustee, and delivery and payment therefor pursuant to this
Agreement are validly issued and outstanding and are entitled to the
benefits of the Pooling and Servicing Agreement.
(b) No consent, approval, authorization or order of, registration
or filing with, or notice to, any governmental authority or court is
required under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of the Pooling
and Servicing Agreement, this Agreement, any Subsequent Transfer
Agreement, the Indemnification Agreement, the Insurance Agreement or
the offer, issue, sale or delivery of the Certificates or the
consummation of any other transaction contemplated thereby by the
Seller, except such which have been obtained.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trustee, the issuance or sale of the Class A Certificates, nor the
execution, delivery or performance by the Seller of the Pooling and
Servicing Agreement, the Insurance Agreement, any Subsequent Transfer
Agreement, the Indemnification Agreement or this Agreement will (a)
conflict with or result in a breach of, or constitute a default under
any law, rule or regulation of the State of New York or the federal
government, or (b) to such counsel's knowledge, without independent
investigation, results in, or will result in, the creation or
imposition of any lien, charge or encumbrance upon the Trust or upon
the Certificates, except as otherwise contemplated by the Pooling and
Servicing Agreement.
(d) Each Subsequent Transfer Agreement at the time of its
execution and delivery will be sufficient to convey all of the Seller's
right, title and interest in the Subsequent Mortgage Loans to the
Trustee and following the consummation of the transaction contemplated
by each Subsequent Transfer Agreement, the transfer of the Subsequent
Mortgage Loans by the Seller to the Trustee will be a sale thereof.
(e) The Registration Statement has become effective under the Act,
no objection to the use of Form S-3 with respect to the Registration
Statement was made by the Commission prior to the time it became
effective and, to the best of such counsel's knowledge, no stop order
has been issued and no proceedings therefor initiated or threatened and
the Registration Statement, the Basic Prospectus and the Prospectus
Supplement (other than the financial and statistical data included
therein, as to which such counsel need express no opinion), as of the
date on which the Registration
11
Statement was declared effective and as of the date hereof, comply as
to form in all material respects with the requirements of the Act and
the rules and regulations thereunder, and such counsel does not know of
any amendment to the Registration Statement required to be filed, or of
any contracts, indentures or other documents of a character required to
be filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement, the Basic Prospectus or the
Prospectus Supplement which has not been filed or described as
required.
(f) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration of
the Trust created by such Agreement under the 1940 Act is presently
required.
(g) The statements in the Basic Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES" and "THE POOLING AND SERVICING
AGREEMENT" and the statements in the Prospectus Supplement set forth
under the captions "DESCRIPTION OF THE CLASS A CERTIFICATES" and "THE
POOLING AND SERVICING AGREEMENT," to the extent such statements purport
to summarize certain provisions of the Certificates or of the Pooling
and Servicing Agreement, are fair and accurate in all material
respects.
(h) Except as to any financial or statistical data contained in
the Registration Statement, the statements set forth in the Basic
Prospectus under the caption "DESCRIPTION OF CREDIT ENHANCEMENT," and
in the Prospectus Supplement under the caption "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER," and any Derived
Information as to which no opinion or belief need be expressed, to the
best of such counsel's knowledge, the Registration Statement, the Basic
Prospectus and the Prospectus Supplement do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading.
(i) Upon receipt by the Trustee, on behalf of the Owners of the
Certificates, of the related Notes, endorsed as described in the
Pooling and Servicing Agreement, and the receipt by the Seller of the
purchase price for the Certificates and for so long as the Trustee
maintains actual physical possession of such Notes, (i) the Trustee
shall be vested with good and indefeasible title to, and shall be the
sole owner of, and shall obtain all right, title and interest of the
Seller in, each Mortgage Loan, (ii) in the event that the sale of the
Mortgage Loans were to be recharacterized as a financing secured by the
Mortgage Loans, the Trustee has a first perfected security interest in
the Mortgage Loans and (iii) in the jurisdictions listed in such
opinion, the recordation of the assignments of the Mortgages is not
required for the Trustee to obtain such rights, as against creditors
of, and purported transferees of, the Seller.
(j) To the best of the knowledge of such counsel, the Commission
has not issued any stop order suspending the effectiveness of the
Registration Statement or any order directed to any prospectus relating
to the Certificates (including the Prospectus), and has not initiated
or threatened any proceeding for that purpose.
12
3. The Underwriter shall have received the favorable opinion of Xxxxx &
Xxxxxx LLP, special tax and bankruptcy counsel to the Seller, dated the Closing
Date, to the effect that:
(a) Assuming the REMIC election is made in compliance with the
Pooling and Servicing Agreement, (i) the Trust, exclusive of the
Pre-Funding Account and the Capitalized Interest Account (as defined in
the Prospectus Supplement) will qualify as a real estate mortgage
investment conduit ("REMIC") (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) for Federal income tax purposes and
(ii) each Class of the Class A Certificates (as defined in the
Prospectus Supplement) will be treated as "regular interests" in the
REMIC and the Class R Certificates will be treated as the sole
"residual interest" in the REMIC.
(b) To the best of such counsel's knowledge, there are no actions,
proceedings or investigations pending that would adversely affect the
Trust Estate (exclusive of the Pre-Funding Account and the Capitalized
Interest Account) as a real estate mortgage investment conduit
("REMIC") as such term is defined in the Code.
(c) The statements under the captions "SUMMARY OF PROSPECTUS--
CERTAIN FEDERAL INCOME TAX CONSEQUENCES", "--ERISA CONSIDERATIONS",
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "ERISA CONSIDERATIONS" in
the Basic Prospectus and under the captions "SUMMARY--TAX ASPECTS",
"--ERISA", "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "ERISA
CONSIDERATIONS" in the Prospectus Supplement as they relate to federal
tax matters are true and correct in all material respects.
(d) As a consequence of the qualification of the Trust (exclusive
of the Pre-Funding Account and the Capitalized Interest Account) as a
REMIC, the Class A Certificates will be treated as "regular . . .
interest(s) in a REMIC" under Section 7701(a)(19)(C) of the Code and
"real estate assets" under Section 856(c) of the Code in the same
proportion that the assets in the Trust consist of qualifying assets
under such Sections. In addition, as a consequence of the qualification
of the Trust (exclusive of the Pre-Funding Account and the Capitalized
Interest Account) as a REMIC, interest on the Class A Certificates will
be treated as "interest on obligations secured by mortgages on real
property" under Section 856(c) of the Code to the extent that such
Class A Certificates are treated as "real estate assets" under Section
856(c) of the Code.
(e) The Trust will not be subject to tax upon its income or assets
by the taxing authority of New York State or New York City.
(f) The Trust will not be subject to the California state income
tax. While REMICs are subject to the California state minimum franchise
tax imposed under Article 2, Section 23153 of the California Revenue
and Taxation Code, such counsel does not express an opinion as to
whether the Trust is subject to such tax.
(g) A court would hold that the conveyance by the Seller of all
right, title and interest in the Mortgage Loans to the Trustee (except
for the Seller's right, title and interest in the principal and
interest due on such Mortgage Loans on or prior to the Cut-
13
Off Date), constitutes a sale of the Mortgage Loans and not a borrowing
by the Seller secured by the pledge of the Mortgage Loans. A court
would find that, following such conveyance, the Mortgage Loans and
proceeds thereof (net of payments of principal and interest due on such
Mortgage Loans on or prior to the Cut-Off Date) are not property of the
estate of the Seller within the meaning of Section 541 of the
Bankruptcy Code, and, further that the Trustee's rights with respect to
the Mortgage Loans and the proceeds thereof would not subject it to the
automatic stay provisions of Section 362 of the Bankruptcy Code. Since
the conveyance of the Mortgage Loans (net of payments of scheduled
principal due and interest accrued on or prior to the Cut-Off Date)
constitutes a sale of said Mortgage Loans then the payments thereunder
(net of payments of scheduled principal due on and interest accrued on
or prior to the Cut-Off Date) are not property of the estate of the
Seller and the distributions of such payments by the Trustee to the
Owners of the Certificates are not preferential payments made by, for,
or on behalf of the Seller under the provisions of Section 547 of the
Bankruptcy Code.
(h) If a court characterized the transfer of the Mortgage Loans to
the Trustee, on behalf of the Owners of the Certificates, as a pledge
of collateral rather than an absolute sale or assignment, with respect
to the Mortgage Loans and other property included in the Trust on the
date hereof, to the extent governed by the laws of the State of New
York, a valid security interest has been created in favor of the
Trustee, which security interest of the Trustee will be perfected and
will constitute a first perfected security interest, with respect to
the Seller's right, title and interest in and to the Notes, upon
endorsement and delivery thereof to the Trustee. With respect to the
security interest of the Trustee in the Notes, New York law would
govern.
4. The Underwriter shall have received the favorable opinion of Xxxxx &
Wood LLP, special counsel to the Underwriter, dated the Closing Date, to the
effect that:
(a) The Certificates, assuming due execution and authentication by
the Trustee, and delivery and payment therefor pursuant to this
Agreement, are validly issued and outstanding and are entitled to the
benefits of the Pooling and Servicing Agreement.
(b) No fact has come to such counsel's attention which causes them
to believe that the Prospectus (other than the financial statement and
other financial and statistical data contained therein, as to which
such counsel need express no opinion), as of the date thereof,
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Such other matters as the Underwriter may reasonably request.
In rendering their opinions, the counsels described in this Paragraph
(C) may rely, as to matters of fact, on certificates of responsible officers of
the Seller, the Trustee and public officials. Such opinions may also assume the
due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Seller.
14
D. The Underwriter shall have received a letter from Deloitte & Touche
LLP, dated on or before the Closing Date, in form and substance satisfactory to
the Underwriter and counsel for the Underwriter, to the effect that they have
performed certain specified procedures requested by the Underwriter with respect
to the information set forth in the Prospectus and certain matters relating to
the Seller.
E. The Class A Certificates shall have been rated in the highest rating
category by Xxxxx'x Investors Service, Inc., and by Standard & Poor's Ratings
Service, a division of The XxXxxx-Xxxx Companies, Inc., and such ratings shall
not have been rescinded. The Underwriter and its counsel shall have received
copies of any opinions of counsel supplied to the rating organizations relating
to any matters with respect to the Class A Certificates. Any such opinions shall
be dated the Closing Date and addressed to the Underwriter or accompanied by
reliance letters to the Underwriter or shall state that the Underwriter may rely
upon them.
F. The Underwriter shall have received from the Seller a certificate,
signed by the president, a senior vice president or a vice president of the
Seller, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Registration Statement, the Pooling and
Servicing Agreement and this Agreement and that, to the best of his or her
knowledge based upon reasonable investigation:
1. the representations and warranties of the Seller in this Agreement,
and in the Indemnification Agreement, as of the Closing Date, in the
Pooling and Servicing Agreement, in the Insurance Agreement and in all
related agreements, as of the date specified in such agreements, are
true and correct, and the Seller has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
2. except as noted in the Prospectus Supplement under the caption "RISK
FACTORS--Litigation", there are no actions, suits or proceedings
pending, or to the best of such officer's knowledge, threatened against
or affecting the Seller which if adversely determined, individually or
in the aggregate, would be reasonably likely to adversely affect the
Seller's obligations under the Pooling and Servicing Agreement, the
Insurance Agreement, this Agreement or under the Indemnification
Agreement in any material way; and no merger, liquidation, dissolution
or bankruptcy of the Seller is pending or contemplated;
3. the information contained in the Registration Statement and
Prospectus relating to the Seller, the Mortgage Loans or the servicing
procedures of it or its affiliates or the subservicer is true and
accurate in all material respects and nothing has come to his or her
attention that would lead such officer to believe that the Registration
Statement and Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading;
4. the information set forth in the Schedules of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing
Agreement is true and correct in all material respects;
15
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Seller since August 1, 1996,
and no such amendment has been authorized. No event has occurred since
March 16, 1999, which has affected the good standing of the Seller
under the laws of the State of California;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Seller and its subsidiaries, taken as a whole, from
December 31, 1998;
7. on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading
or (B) any review or possible changes in rating, the direction of which
has not been indicated, in the rating, if any, accorded the Seller or
in any rating accorded any securities of the Seller, if any, by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the Act; and
8. each person who, as an officer or representative of the Seller,
signed or signs the Registration Statement, the Pooling and Servicing
Agreement, this Agreement, the Indemnification Agreement, the Insurance
Agreement, or any other document delivered pursuant hereto, on the date
of such execution, or on the Closing Date, as the case may be, in
connection with the transactions described in the Pooling and Servicing
Agreement, the Indemnification Agreement, the Insurance Agreement and
this Agreement was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and acting
as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
The Seller shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and bylaws which
are in full force and effect on the date of such certificate and a certified
true copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
G. The Underwriter shall have received an opinion of counsel to the
Trustee, dated the Closing Date and in form and substance satisfactory to the
Underwriter and its counsel, to the effect that:
1. the Trustee is a national banking association duly organized,
validly existing and in good standing under the laws of the United
States and has the power and authority to enter into and to take all
actions required of it under the Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and the Pooling and Servicing
Agreement constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms,
except as enforceability thereof may be limited by (A) bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, as such laws would apply in
the event of a bankruptcy, insolvency or
16
reorganization or similar occurrence affecting the Trustee, and (B)
general principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Trustee in connection with its execution and delivery of the
Pooling and Servicing Agreement or the performance of its obligations
thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee;
5. the execution and delivery of, and performance by the Trustee of its
obligations under, the Pooling and Servicing Agreement do not conflict
with or result in a violation of any statute or regulation applicable
to the Trustee, or the articles or bylaws of the Trustee, or to the
best knowledge of such counsel, any governmental authority having
jurisdiction over the Trustee or the terms of any indenture or other
agreement or instrument to which the Trustee is a party or by which it
is bound; and
6. in the event that the Servicer defaults in its obligation to make
advances under the Pooling and Servicing Agreement, the Trustee or any
affiliate of the Trustee, is not prohibited by a provision of its
Articles of Incorporation or Bylaws or by any provision of the banking
and trust laws of the United States of America or the State of New
York, as the case may be (or any rule, regulation, decree or order
thereunder), from assuming its obligation to make such advances.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Seller, the Trustee and
public officials. Such opinion may also assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
H. The Underwriter shall have received from the Trustee a certificate,
signed by the President, a senior vice president or an assistant vice president
of the Trustee, dated the Closing Date, to the effect that each person who, as
an officer or representative of the Trustee, signed or signs the Certificates,
the Pooling and Servicing Agreement or any other document delivered pursuant
hereto, on the date hereof or on the Closing Date, in connection with the
transactions Tescribed in the Pooling and Servicing Agreement was, at the
respective times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures.
I. The Policies relating to the Class A Certificates shall have been
duly executed and issued at or prior to the Closing Date and shall conform in
all material respects to the description thereof in the Prospectus.
17
J. The Underwriter shall have received a favorable opinion of Xxxxx
Xxxx, counsel to the Insurer, dated the Closing Date and in form and substance
satisfactory to counsel for the Underwriter, to the effect that:
1. The Insurer is a stock insurance corporation, duly incorporated and
validly existing under the laws of the State of New York. The Insurer
is validly licensed and authorized to issue the Policies and perform
its obligations under the Policies in accordance with the terms
thereof, under the laws of the State of New York.
2. The execution and delivery by the Insurer of the Policies, the
Insurance Agreement and the Indemnification Agreement are within the
corporate power of the Insurer and have been authorized by all
necessary corporate action on the part of the Insurer; the Policies
have been duly executed and are the valid and binding obligations of
the Insurer enforceable in accordance with their terms except that the
enforcement of the Policies may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity.
3. The Insurer is authorized to deliver the Insurance Agreement, and
the Indemnification Agreement, and the Insurance Agreement and the
Indemnification Agreement have been duly executed and are the valid and
binding obligations of the Insurer enforceable in accordance with their
terms except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity and by public policy considerations relating to
indemnification for securities law violations.
4. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required on the part of the
Insurer, the lack of which would adversely affect the validity or
enforceability of the Policies; to the extent required by applicable
legal requirements that would adversely affect validity or
enforceability of the Policies, the form of the Policies has been filed
with, and approved by, all governmental authorities having jurisdiction
over the Insurer in connection with such Policies.
5. To the extent any Policy constitutes a security within the meaning
of Section 2(1) of the Act, it is a security that is exempt from the
registration requirements of the Act.
6. The information set forth under the caption "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER" in the Prospectus
Supplement dated March 11, 1999, insofar as such statements constitute
a description of the Policies, accurately summarizes the Policies.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Seller, the Trustee, the
Insurer and public officials. Such opinion may assume the due authorization,
execution and delivery of the instruments and documents referred to therein by
the parties thereto other than the Insurer.
18
K. On or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or (B)
any review or possible changes in rating, the direction of which has not been
indicated, in the rating, if any, accorded the Seller or in any rating accorded
any securities of the Seller, if any, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the Act.
L. On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the Insurer's
claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act.
M. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since December 31, 1998, (A) of the Seller or
its subsidiaries and affiliates, or (B) of the Insurer, that is in the
Underwriter's judgment material and adverse and that makes it in the
Underwriter's judgment impracticable to market the Class A Certificates on the
terms and in the manner contemplated in the Prospectus.
N. The Underwriter shall have received from the Insurer a certificate,
signed by the President, a senior vice president or a vice president of the
Insurer, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Policies, the Insurance Agreement, the
Indemnification Agreement and the related documents and that, to the best of his
or her knowledge based on reasonable investigation:
1. each person who as an officer or representative of the Insurer,
signed or signs the Policies, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection with
the transactions described in this Agreement was, at the respective
times of such signing and delivery, and is now a duly authorized
representative of the Insurer and is authorized to execute and deliver
this certificate.
2. The financial data presented in the table set forth under the
heading "THE CERTIFICATE INSURANCE POLICIES AND THE CERTIFICATE
INSURER" in the Prospectus Supplement presents fairly the
capitalization of the Insurer and its wholly-owned subsidiaries as of
December 31, 1997 and September 30, 1998, respectively, and to the best
of the Insurer's knowledge since such date, no material and adverse
change has occurred in the financial position of the Insurer other than
as set forth in the Prospectus Supplement.
3. The audited financial statements dated as of December 31, 1997 and
the unaudited financial statements dated as of September 30, 1998
incorporated by reference into the Prospectus Supplement are true and
accurate.
4. The information which relates to the Insurer or the Policies under
the caption titled "THE CERTIFICATE INSURANCE POLICIES AND THE
CERTIFICATE INSURER" in the Prospectus Supplement is true and correct
in all material respects.
19
5. There are no actions, suits, proceedings or investigations pending
or, to the best of the Insurer's knowledge, threatened against it at
law or in equity or before or by any court, governmental agency, board
or commission or any arbitrator which, if decided adversely, would
materially and adversely affect its condition (financial or otherwise)
or operations or which would materially and adversely affect its
ability to perform its obligations under the Policies or the Insurance
Agreement.
6. The execution and delivery of the Insurance Agreement and the
Policies and the compliance with the terms and provisions thereof will
not conflict with, result in a breach of, or constitute a default under
any of the terms, provisions or conditions of the Restated Charter or
By-Laws of the Insurer or of any agreement, indenture or instrument to
which the Insurer is a party.
7. The issuance of the Policies and the execution, delivery and
performance of the Insurance Agreement have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals or further
filing with any governmental agency or other governmental authority, or
any approval of the Insurer's board of directors or stockholders, are
necessary for the Policies and the Insurance Agreement to constitute
the legal, valid and binding obligations of the Insurer.
The officer of the Insurer certifying to items 2 and 3 shall be an
officer in charge of a principal financial function.
The Insurer shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and its bylaws,
all of which are in full force and effect on the date of such certificate.
O. The Underwriter shall have received from Xxxxx & Xxxx LLP, special
counsel to the Underwriter, such opinion or opinions, dated the Closing Date,
with respect to the issuance and sale of the Certificates, the Prospectus and
such other related matters as the Underwriter shall reasonably require.
P. The Underwriter and its counsel shall have received copies of any
opinions of counsel to the Seller or the Insurer supplied to the Trustee
relating to matters with respect to the Certificates or the Policies. Any such
opinions shall be dated the Closing Date and addressed to the Underwriter or
accompanied by reliance letters to the Underwriter or shall state that the
Underwriter may rely thereon.
Q. The Underwriter shall have received such further information,
certificates and documents as the Underwriter may reasonably have requested not
fewer than three (3) full business days prior to the Closing Date.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all respects when and as provided in this Agreement, if the
Seller is in breach of any covenants or agreements contained herein or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all material respects reasonably satisfactory in form
20
and substance to the Underwriter and its counsel, this Agreement and all
obligations of the Underwriter hereunder, may be canceled on, or at any time
prior to, the Closing Date by the Underwriter. Notice of such cancellation shall
be given to the Seller in writing, or by telephone or telegraph confirmed in
writing.
7. Expenses. If the sale of the Class A Certificates provided for
herein is not consummated by reason of a default by the Seller in its
obligations hereunder, then the Seller will reimburse the Underwriter, upon
demand, for all reasonable out-of-pocket expenses (including, but not limited
to, the reasonable fees and expenses of Xxxxx & Wood LLP) that shall have been
incurred by the Underwriter in connection with its investigation with regard to
the Seller, the Class A Certificates and the proposed purchase and sale of the
Class A Certificates.
8. Indemnification and Contribution. A. Regardless of whether any Class
A Certificates are sold, the Seller will indemnify and hold harmless the
Underwriter, each of its respective officers and directors and each person who
controls the Underwriter within the meaning of the Act or the Securities
Exchange Act of 1934 (the "1934 Act"), against any and all losses, claims,
damages, or liabilities (including the cost of any investigation, legal and
other expenses incurred in connection with any amounts paid in settlement of any
action, suit, proceeding or claim asserted), joint or several, to which they may
become subject, under the Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, or any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, not misleading or (ii)
in the Basic Prospectus or the Prospectus Supplement or any amendment thereto or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will promptly reimburse each such indemnified party upon demand
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or
action; provided, however, that the Seller shall not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Seller by or on behalf of the Underwriter
specifically for use in connection with the preparation thereof.
B. Regardless of whether any Class A Certificates are sold, the
Underwriter agrees to indemnify and hold harmless the Seller, each of its
officers and directors and each person, if any, who controls the Seller within
the meaning of the Act or the 1934 Act against any losses, claims, damages or
liabilities to which they or any of them become subject under the Act, the 1934
Act or other federal or state law or regulation, at common law or otherwise, to
the same extent as the foregoing indemnity, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in (i) the Registration Statement, or any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading or in (ii) the Basic Prospectus or the Prospectus
Supplement or any amendment thereto or supplement thereto, or
21
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information furnished to the Seller by or on behalf
of the Underwriter specifically for use in the preparation thereof and so
acknowledged in writing, and will promptly reimburse the Seller upon demand for
any legal or other expenses reasonably incurred by the Seller in connection with
investigating or defending against such loss, claim, damage, liability or
action.
C. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Paragraphs A and B above such person (hereinafter called the
indemnified party) shall promptly notify the person against whom such indemnity
may be sought (hereinafter called the indemnifying party) in writing thereof;
but the omission to notify the indemnifying party shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under such Paragraph. The indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such proceeding
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has not retained counsel reasonably
satisfactory to the indemnified party, (ii) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
or (iii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm for all such indemnified parties, and that all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Underwriter in the case of parties indemnified
pursuant to Paragraph A and by the Seller in the case of parties indemnified
pursuant to Paragraph B. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there is a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated above, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement
22
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
D. The Underwriter agrees to provide the Seller, for its review, no
later than two Business Days prior to the date on which the information required
to be filed in accordance with the terms of the No-Action Letters (as defined
herein) with a copy of its Derived Information for filing with the Commission on
Form 8-K.
E. The Underwriter agrees, assuming all Seller-Provided Information (as
defined below) is accurate and complete in all material respects, to indemnify
and hold harmless the Seller, each of the Seller's officers and directors and
each person who controls the Seller within the meaning of Section 15 of the
Securities Act against any and all losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Derived Information provided by the Underwriter,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse such indemnified party for any
legal or other expenses reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such loss, claim, damage,
liability or action as such expenses are incurred. The obligations of the
Underwriter under this Section 8(E) shall be in addition to any liability which
the Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally applicable to
this Section 8(E).
F. If the indemnification provided for in this Section 8 is unavailable
to an indemnified party in respect of any losses, claims, damages or liabilities
referred to herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Seller and the Underwriter from the sale of the Class A Certificates or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
relative benefits referred to in clause (i) above but also the relative fault of
the Seller and of the Underwriter in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations.
The relative benefits received by the Seller and the Underwriter shall
be deemed to be in such proportion so that the Underwriter is responsible for
that portion determined by multiplying the total amount of such losses, claims,
damages and liabilities, including legal and other expenses, by a fraction, the
numerator of which is (x) the excess of the Aggregate Resale Price of the Class
A Certificates purchased by the Underwriter over the aggregate purchase price of
the Class A Certificates specified in Section 4 of this Agreement and the
denominator of which is (y) the Aggregate Resale Price of the Class A
Certificates purchased by the Underwriter and the Seller is responsible for the
balance, provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to
23
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of the immediately preceding sentence, the
"Aggregate Resale Price" of the Class A Certificates at the time of any
determination shall be the weighted average of the purchase prices (in each case
expressed as a percentage of the aggregate principal amount of the Class A
Certificates so purchased), determined on the basis of such principal amounts,
paid to the Underwriter by all subsequent purchasers that purchased the Class A
Certificates on or prior to such date of determination. The relative fault of
the Seller and the Underwriter shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Seller or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
G. The Seller and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Paragraph D. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Paragraph D shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, the
Underwriter shall not be required to contribute any amount in excess of the
amount of the underwriting discounts and commissions received by the Underwriter
in connection with its purchase of the Certificates.
H. For purposes of this Section VIII, the term "Derived Information"
means such portion, if any, of the information delivered to the Seller pursuant
to Section 8(D) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference; and
(ii) does not constitute Seller-Provided Information.
(iii) is of the type of information defined as Collateral term
sheets, structural term sheets or Computational Materials (as such
terms are interpreted in the No-Action Letters (as defined below)).
"Seller-Provided Information" means the information contained on any computer
tape furnished to the Underwriter by the Seller concerning the assets comprising
the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb, Xxxxx & Xxxxxxxx on behalf of the Public
Securities Association (which letter, and the SEC staff's response thereto, were
publicly available February 17, 1995). The term "Collateral term sheet" as used
herein includes any subsequent Collateral term sheet that reflects a substantive
change in the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "Xxxxxx letter" and
together with the PSA Letter,
24
the "No-Action Letters") of Xxxxx & Xxxx LLP on behalf of Xxxxxx, Peabody & Co.,
Inc. (which letter, and the SEC staff's response thereto, were publicly
available May 20, 1994).
I. The Seller and the Underwriter each expressly waive, and agree not
to assert, any defense to their respective indemnification and contribution
obligations under this Section 8 which they might otherwise assert based upon
any claim that such obligations are unenforceable under federal or state
securities laws or by reasons of public policy.
J. The obligations of the Seller under this Section 8 shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Underwriter within the meaning of the Act or the 1934 Act; and the obligations
of the Underwriter under this Section 8 shall be in addition to any liability
that the Underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller and to each person, if any, who
controls the Seller within the meaning of the Act or the 1934 Act; provided,
however, that in no event shall the Seller or the Underwriter be liable for
double indemnification.
9. Information Supplied by the Underwriter. The statements set forth in
the first sentence of the second and seventh paragraphs under the heading
"UNDERWRITING" in the Prospectus Supplement (to the extent such statements
relate to the Underwriter), constitute the only information furnished by the
Underwriter to the Seller for the purposes of Sections 2(B) and 8(A) hereof.
10. Notices. All communications hereunder shall be in writing and, if
sent to the Underwriter, shall be mailed or delivered or telecopied and
confirmed in writing to the Underwriter at Xxxxxx Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Xxxxx Xxxxx, and, if sent
to the Seller, shall be mailed, delivered or telegraphed and confirmed in
writing to the Seller at the address set forth above, Attention: Director of
Secondary Marketing.
11. Survival. All representations, warranties, covenants and agreements
of the Seller contained herein or in agreements or certificates delivered
pursuant hereto, the agreements of the Underwriter and the Seller contained in
Section 8 hereof, and the representations, warranties and agreements of the
Underwriter contained in Section 3 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriter or any controlling persons, or any subsequent purchaser or the
Seller or any of its officers, directors or any controlling persons, and shall
survive delivery of and payment for the Class A Certificates. The provisions of
Sections 5, 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Termination. The Underwriter shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior to
the Closing Date if (a) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (b) trading of any securities of the
Seller shall have been suspended on any exchange or in any over-the-counter
market, (c) a general moratorium on
25
commercial banking activities shall have been declared by either federal or New
York State authorities, (d) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
which, in the Underwriter's reasonable judgment, is material and adverse, and,
in the case of any of the events specified in clauses (a) through (d), such
event singly or together with any other such event makes it in the Underwriter's
reasonable judgment impractical to market the Class A Certificates. Any such
termination shall be without liability of any other party except that the
provisions of Paragraph G of Section 5 (except with respect to expenses of the
Underwriter) and Sections 7 and 8 hereof shall at all times be effective. If the
Underwriter elects to terminate this Agreement as provided in this Section 12,
the Seller shall be notified promptly by the Underwriter by telephone, telegram
or facsimile transmission, in any case, confirmed by letter.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person purchasing a Class A
Certificate from the Underwriter), and the officers and directors and
controlling persons referred to in Section 8 hereof and their respective
successors and assigns, and no other persons will have any right or obligations
hereunder.
14. Applicable Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of forum non conveniens they may have with respect to any such action or
proceeding brought.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
16. Amendments and Waivers. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
26
IN WITNESS WHEREOF, the parties hereto hereby execute this Underwriting
Agreement, as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY
By: /s/ Xxxxxxxxx Xxxxx
---------------------------
Xxxxxxxxx Xxxxx
XXXXXX BROTHERS INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx
