EXHIBIT 1.1
Execution Copy
FIRST ALLIANCE MORTGAGE COMPANY
AND
PRUDENTIAL SECURITIES INCORPORATED,
AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
FIRST ALLIANCE MORTGAGE LOAN TRUST 1997-1
MORTGAGE LOAN ASSET BACKED CERTIFICATES,
7.20% CLASS A-1 FIXED RATE GROUP CERTIFICATES
CLASS A-2 VARIABLE RATE GROUP CERTIFICATES
March 11, 1997
March 11, 1997
First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614
Prudential Securities Incorporated
As Representative of the Several Underwriters
One New York Plaza, 15th Floor
New York, New York 10292
First Alliance Mortgage Company (the "Company" or the "Sponsor") hereby
confirms its agreement to sell certain mortgage loan asset backed certificates
to Prudential Securities Incorporated and Lehman Brothers Inc. (collectively,
the "Underwriters") as described herein relating to the First Alliance Mortgage
Loan Trust 1997-1 (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 Estate")
consisting of two segregated 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 ("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, 1997 (the "Cut-off Date"), an aggregate
principal balance of $53,640,790.30. The certificates are to be issued under a
pooling and servicing agreement dated as of March 1, 1997 (the "Pooling and
Servicing Agreement"), among the Company, in its individual capacity and in its
capacity as servicer (the "Servicer") and The Chase Manhattan Bank, in its
capacity as trustee (the "Trustee"). On the Closing Date, approximately
$19,359,209.70 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 Company from time to time on or
before March 31, 1997 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 Company 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
Underwriters.
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 Company. The Company represents
and warrants to, and covenants with, the Underwriters that:
A. The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement (No. 33-99604) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of
Mortgage Asset Backed Certificates (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 Company proposes to file with the
Commission pursuant to Rule 424(b)(5) under the Act a supplement dated March 11,
1997 to the prospectus dated September 10, 1996 relating to the Certificates and
the method of distribution thereof and has previously advised the Underwriters
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 September 10, 1996, 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, 1997 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." The Company will
file with the Commission (i) promptly after receipt from any Underwriter of any
Computational Material (as defined herein) a Form 8-K incorporating such
Computational Materials 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 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 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 Company makes no representations or warranties as to
the information contained in or omitted from the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto in reliance upon and
in conformity with the information furnished in writing to the Company by or on
behalf of any Underwriter specifically for use in connection with the
preparation of the Registration Statement and the Prospectus.
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C. The Company 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 Company 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 Company, 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 dated March
11, 1997 (the "Indemnification Agreement") among the Company, the Insurer and
the Underwriters 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 may, individually or in the
aggregate, materially and adversely affect the performance by the Company 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 Company 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 Company are within the corporate power of
the Company and have been, or will be, prior to the Closing Date duly authorized
by all necessary corporate action on the part of the Company 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 Company
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 Company or any of its affiliates is subject,
the Company's charter or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Company, 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 contemplated by this Agreement or the Prospectus in
connection with the issuance and sale of the Certificates by the Company except
pursuant to the Act. Neither the Company 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 Company or any of its affiliates, which materially and
adversely affects, or may in the future materially and adversely affect, (i) the
ability of the Company 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 Company, taken as a whole.
F. This Agreement and the Indemnification Agreement have been duly executed
and delivered by the Company, and the Pooling and Servicing Agreement, the
Insurance Agreement and any Subsequent Transfer Agreement will be duly executed
and delivered by the Company, and each constitutes and will constitute the
legal, valid and binding obligation of the Company enforceable in
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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 Underwriters as provided herein, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing Agreement.
H. At 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 Underwriters as
though set out herein, and at the dates specified in the Pooling and Servicing
Agreement, and any Subsequent Transfer Agreement, such representations and
warranties were or will be true and correct in all material respects.
I. The transfer of the Initial Mortgage Loans to the Trust at the Closing
Date will be treated by the Company for financial accounting and reporting
purposes as a sale of assets and not as a pledge of assets to secure debt.
J. The Company 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 there are no proceedings, pending or,
to the best knowledge of the Company, 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 Company taken as a whole.
K. 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 at or prior
to the Closing Date.
L. 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 Company or its
subsidiaries, taken as a whole, from December 31, 1996 to the date hereof.
M. This Agreement and the Pooling and Servicing Agreement will conform in
all material respects to the descriptions thereof contained in the Prospectus.
N. The Company 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
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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.
O. Each assignment of Mortgages required to be prepared pursuant to the
Pooling and Servicing Agreement is based on forms recently utilized by the
Company with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of the Company's business. Based on
the Company'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.
P. The Company is current in all filings under the Securities Exchange Act
and is eligible to use the Registration Statement.
Any certificate signed by any officer of the Company and delivered to the
Representative in connection with the sale of the Certificates hereunder shall
be deemed a representation and warranty as to the matters covered thereby by the
Company to each person to whom the representations and warranties in this
Section 2 are made.
3. Agreements of the Representative. The Representative agrees with the
Company that upon the execution of this Agreement and authorization by the
Representative of the release of the Class A Certificates, the Underwriters
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 Certificates. The Company hereby
agrees, subject to the terms and conditions hereof, to sell the Class A
Certificates to the Underwriters, who, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
hereby agree to purchase the entire aggregate principal amount of the Class A
Certificates in the amounts specified in Schedule A hereto. At the time of
issuance of the Certificates, the Initial Mortgage Loans will be sold by the
Company 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 March 31, 1997. The Company
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 Underwriters will be
delivered by the Company to the Underwriters (which delivery shall be made
through the facilities of The Depository Trust Company ("DTC")) against payment
of the purchase price therefor, equal to $24,500,000 of the aggregate principal
amount of the Class A-1 Certificates and $48,500,000 of the aggregate principal
amount of the Class A-2 Certificates, plus interest accrued at the Class A-1
Asset-backed Rate on the Class A-1 Certificates from March 1, 1997 to, but not
including, the settlement date, by a same day federal funds wire payable to the
order of the Company. No accrued interest will be payable on the Class A-2
Variable Rate Group Certificates, which shall be dated their date of delivery.
The Underwriter's fee shall be 35 basis points of each of the Class A
Certificates.
Settlement shall take place at the offices of Arter & Hadden, 1801 K
Street, N.W., Washington, D.C. 20006, at 10:00 a.m. (E.S.T.), on March 27, 1997,
or at such other time thereafter as the Representative and the Company 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 Representative may request, registered in the name of Cede
& Co., as nominee of DTC.
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The Company agrees to have the Certificates available for inspection and
review by the Representative 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 Company. The Company covenants and agrees with the
Representative that:
A. The Company will promptly advise the Representative 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 Company 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 Company 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 Company has furnished the
Representative 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 Company 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 Company 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 Company will furnish to the Representative, without charge, executed
copies of the Registration Statement (including exhibits thereto) and, so long
as delivery of a Prospectus by the Underwriters 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 Underwriters may reasonably request.
The Company 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 Company will cause the Trust to make generally available to
Certificate Owners of the Trust an earnings 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 Company, 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 Company nor any affiliate of the Company
will, without the Representative's prior
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written consent (which consent shall not be unreasonably withheld), enter into
any agreement to offer or sell mortgage loan asset-backed certificates backed by
mortgage loans, except pursuant to this Agreement.
F. So long as any of the Class A Certificates are outstanding, the Company
will cause to be delivered to the Representative (i) all documents required to
be distributed to Certificate Owners of the Trust 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 Company, 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 Representative incurred in connection with (i) the issuance and delivery of
the Certificates, (ii) preparation 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 Company agrees that, so long as any of the Class A Certificates
shall be outstanding, it will deliver or cause to be delivered to the
Representative (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 Company and (iii) any information required to be delivered by
the Company or the Servicer to prepare the report by the Trustee pursuant to
Section 7.8 of the form of Pooling and Servicing Agreement heretofore delivered
to the Representative.
I. The Company will enter into the Pooling and Servicing Agreement, the
Insurance Agreement, and all related agreements on or prior to the Closing Date.
J. The Company 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 Representative, if any, and
will pay all expenses (including fees and disbursements 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 Representative may reasonably designate, if any.
6. Conditions of the Underwriters' Obligation. The obligation of the
Underwriters to purchase and pay for the Class A Certificates as provided herein
and on Schedule A hereto 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 Company 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 Company made in any
certificate or other document delivered pursuant to the provisions hereof, to
the performance by the Company 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).
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B. The Representative shall have received the Pooling and Servicing
Agreement and the Class A Certificates in form and substance satisfactory to the
Representative, duly executed by all signatories required pursuant to the
respective terms thereof.
C.1. The Underwriters shall have received the favorable opinion of the Vice
President and General Counsel to the Company, with respect to the following
items, dated the Closing Date, to the effect that:
(a) The Company 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
Company 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 among the Company, the Insurer and the
Underwriters.
(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 Company,
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 Company enforceable against the Company 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 Company 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 Company; (ii) any term or provision of any material
agreement, contract, instrument or indenture, to which the Company 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 Company; or (B) results in, or will result in the
creation or imposition of any lien, charge or encumbrance upon the Trust
Estate 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 Company 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
Company and to prevent any other sale, transfer, assignment, pledge or
other encumbrance of the Mortgage Loans by the Company from being
enforceable.
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(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 Company,
except such which have been obtained.
(f) There are no actions, proceedings or investigations pending or, to
such counsel's knowledge, threatened against the Company 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 would materially and adversely affect the performance by the
Company of obligations under, or the validity or enforceability of, the
Pooling and Servicing Agreement, the Certificates, the Indemnification
Agreement, the Insurance Agreement or this Agreement.
(g) To the best of such counsel's knowledge, the Registration
Statement, the Prospectus Supplement and the Prospectus 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 with respect to the statements set forth in the
Prospectus under the caption "Certain Legal Aspects of Mortgage Loans and
Related Matters".
2. The Underwriters shall have received the favorable opinion of Arter &
Hadden, special counsel to the Company, 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 Company 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 Company, except such which have
been obtained.
(c) Neither the transfer of the Initial Mortgage Loans to the Trustee,
the issuance or sale of the Certificates, nor the execution, delivery or
performance by the Company 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
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imposition of any lien, charge or encumbrance upon the Trust Estate 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 Company'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
Company to the Trustee will be a sale thereof.
(e) The Registration Statement, the 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 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 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 Investment Company Act of 1940 is
presently required.
(g) The statements in the 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 OFFERED 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 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 Computational Materials as to which no
opinion or belief need be expressed, to the best of such counsel's
knowledge, the Registration Statement does 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 of the related Notes, endorsed as
described in the Pooling and Servicing Agreement, and the receipt by the
Company 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 Company 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) the recordation of the assignments
10
of the Mortgages is not required for the Trustee to obtain such rights, as
against creditors of, and purported transferees of, the Company.
(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.
3. The Underwriters shall have received the favorable opinion of Arter &
Hadden, special tax and bankruptcy counsel to the Company, 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, the Group II Available Funds Cap Carry-Forward Amount 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 Offered Certificates
(as defined in the Prospectus Supplement) will be treated as "regular
interests" in the REMIC and the R Class 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 PreFunding Account, the Group II Available Funds
Cap Carry-Forward Amount 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" and "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" in the Prospectus and under the captions "SUMMARY -- FEDERAL
TAX ASPECTS" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" 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 PreFunding Account, the Group II Available Funds Cap Carry-Forward
Amount Account and the Capitalized Interest Account) as a REMIC, the Class
A Certificates will be treated as "qualifying real property loans" under
Section 593(d) of the Code, "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, the Group II Available Funds Cap CarryForward Amount 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.
11
(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 Sponsor of all
right, title and interest in the Mortgage Loans to the Trustee (except for
the Sponsor's right, title and interest in the principal and interest due
on such Mortgage Loans on or prior to the Cut-Off Date), constitutes a sale
of the Mortgage Loans and not a borrowing by the Sponsor 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 Sponsor 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 Sponsor 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 Sponsor under the provisions of Section 547 of the
Bankruptcy Code.
(h) If a court characterized the transfer of the Mortgage Loans to the
Trustee 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
Sponsor'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 Underwriters shall have received the favorable opinion of Dewey
Ballantine, special counsel to the Underwriters, 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 Underwriters may reasonably request.
12
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
Company, 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 Company.
D. The Underwriter shall have received a letter from Deloitte & Touche,
dated on or before the Closing Date, in form and substance satisfactory to the
Underwriters and counsel for the Underwriters, to the effect that they have
performed certain specified procedures requested by the Underwriters with
respect to the information set forth in the Prospectus and certain matters
relating to the Company.
E. The Class A Certificates shall have been rated in the highest rating
category by Moody's Investors Service, Inc., and by Standard & Poor's Ratings
Service, a division of The McGraw-Hill Companies, and such ratings shall not
have been rescinded. The Underwriters and counsel for the Underwriters 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
Underwriters or accompanied by reliance letters to the Underwriter or shall
state that the Underwriters may rely upon them.
F. The Underwriters shall have received from the Company a certificate,
signed by the president, a senior vice president or a vice president of the
Company, 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 Company 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 Company 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. there are no actions, suits or proceedings pending, or to the best
of such officer's knowledge, threatened against or affecting the Company
which if adversely determined, individually or in the aggregate, would be
reasonably likely to adversely affect the Company'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 Company is pending or
contemplated;
3. the information contained in the Registration Statement and
Prospectus relating to the Company, 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;
13
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Company since August 1, 1996,
and no such amendment has been authorized. No event has occurred since
March 17, 1997, which has affected the good standing of the Company 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 Company and its subsidiaries, taken as a whole, from
December 31, 1996;
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 Company or in any
rating accorded any securities of the Company, 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 Company,
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 Company 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 Underwriters shall have received the favorable opinion of counsel to
the Trustee, dated the Closing Date and in form and substance satisfactory to
the Underwriters, to the effect that:
1. the Trustee is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of New York 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 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;
14
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 Company, 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 Underwriters 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 described 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.
J. The Underwriters shall have received a favorable opinion of Kutak Rock,
counsel to the Insurer, dated the Closing Date and in form and substance
satisfactory to counsel for the Underwriters, 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.
15
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 each Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Insurer in connection
with such Policy.
5. To the extent the Policies constitute securities within the meaning
of Section 2(1) of the Act, they are securities that are 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, 1997, 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 Company, 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.
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 Company or in any rating accorded
any securities of the Company, 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, 1996, of (A) the Company,
its subsidiaries and affiliates or since September 30, 1996, of (B) the Insurer,
that is in the Underwriters' 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 Underwriters 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
16
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 financial position of the
Insurer as of December 31, 1995 and September 30, 1996, 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, 1995 and
the unaudited financial statements dated as of September 30, 1996
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.
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 dated as of March
1, 1997 (the "Insurance Agreement") among the Insurer, First Alliance
Mortgage Company, as Company, First Alliance Mortgage Company, as Servicer,
and The Chase Manhattan Bank, as Trustee.
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.
17
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 Underwriters shall have received from Dewey Ballantine, special
counsel to the Underwriters, 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 Underwriters shall reasonably require.
P. The Underwriters and counsel for the Underwriters shall have received
copies of any opinions of counsel to the Company 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 Underwriters or shall
state that the Underwriters may rely thereon.
Q. The Underwriters shall have received such further information,
certificates and documents as the Underwriters 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 Company
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 and substance to
the Underwriters and counsel to the Underwriters, this Agreement and all
obligations of the Underwriters hereunder, may be canceled on, or at any time
prior to, the Closing Date by the Underwriters. Notice of such cancellation
shall be given to the Company 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 Company in its obligations
hereunder, then the Company will reimburse the Underwriters, upon demand, for
all reasonable out-of-pocket expenses (including, but not limited to, the
reasonable fees and expenses of Dewey Ballantine) that shall have been incurred
by each of them in connection with their investigation with regard to the
Company and 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 Company will indemnify and hold harmless each
Underwriter, each of its respective officers and directors and each person who
controls such 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
18
circumstances under which they were made, not misleading, and will reimburse
each such indemnified party 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 Company 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 Company by or on behalf of
an Underwriter specifically for use in connection with the preparation thereof.
B. Regardless of whether any Class A Certificates are sold, each
Underwriter severally agrees to indemnify and hold harmless the Company, each of
its officers and directors and each person, if any, who controls the Company
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 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 Company by or on behalf
of such Underwriter specifically for use in the preparation thereof and so
acknowledged in writing, and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company 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 and the indemnified party shall have
mutually agreed to the retention of such counsel, or (ii) 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
Underwriters in the case of parties indemnified pursuant to Paragraph A and by
the Company 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
19
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
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
D. 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 Company and the related Underwriters from the sale of the 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 Company and of the related Underwriters 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 Company and the related Underwriters
shall be deemed to be in such proportion so that the related 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 such 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 such Underwriter and the Company 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 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 related Underwriter by all subsequent purchasers that
purchased the Class A Certificates on or prior to such date of determination.
The relative fault of the Company and the related 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 Company or by the related
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
E. The Company and the Underwriters 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
20
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 Underwriters shall not be required to
contribute any amount in excess of the amount by which the Aggregate Resale
Price exceeds the amount of any damages that the Underwriters have otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission.
F. Each Underwriter agrees to provide the Company no later than two
Business Days prior to the day on which such materials are required to be filed
with a copy of any Computational Materials (as defined below) produced by such
Underwriter for filing with the Commission on Form 8-K.
G. Each Underwriter severally agrees, assuming all information provided to
it by the Company is accurate and complete in all material respects, to
indemnify and hold harmless the Company, each of the Company's officers and
directors and each person who controls the Company 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 Computational Materials
provided by such Underwriter and agrees to reimburse each 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 an Underwriter under this Section 8(G) shall be in addition to
any liability which such Underwriter may otherwise have.
H. The Company and each 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.
I. The obligations of the Company under this Section 8 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls each Underwriter
within the meaning of the Act or the 1934 Act; and the obligations of each
Underwriter under this Section 8 shall be in addition to any liability that such
Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company and to each person, if any, who
controls the Company within the meaning of the Act or the 1934 Act; provided,
however, that in no event shall the Company or any Underwriter be liable for
double indemnification.
9. Information Supplied by the Underwriters. The statements set forth in
the last paragraph on the front cover page of the Prospectus regarding
market-making and under the heading "Underwriting" in the Supplement (to the
extent such statements relate to the Underwriters), together with the
Computational Materials, constitute the only information furnished by the
Underwriter to the Company for the purposes of Sections 2(B) and 8(A) hereof.
The Underwriters confirm that such statements (to such extent) are correct.
The Company will cause any Computational Materials (as defined below) with
respect to the Class A Certificates which are delivered by any Underwriter to
the Company to be filed with the Commission on a Current Report on Form 8-K (the
"Form 8-K -- Computational Materials") not later than the date on which such
materials are required to be filed pursuant to the Kidder/PSA Letters (as
defined below), provided, however, that the Company shall have no obligation to
file any materials
21
which, in the reasonable determination of the Company after consultation with
such Underwriter, (i) are not required to be filed pursuant to the Kidder/PSA
Letters or (ii) contain any erroneous information or untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; it being understood,
however, that the Company shall have no obligation to review or pass upon the
accuracy or adequacy of, or to correct, any Computational Materials provided by
any Underwriter to the Depositor as aforesaid. For purposes hereof, as to each
Underwriter, the term "Computational Materials" shall mean those materials
delivered by an Underwriter to the Company within the meaning of the no-action
letter dated May 20, 1994 issued by the Division of Corporation Finance of the
Commission to Kidder, Peabody Acceptance Corporation I and certain affiliates,
the no-action letter dated May 27, 1994 issued by the Division of Corporation
Finance of the Commission to the Public Securities Association and the no-action
letter of February 17, 1995 issued by the Commission to the Public Securities
Association (together, the "Kidder/PSA Letters") for which the filing of such
material is a condition of the relief granted in such letters.
10. Notices. All communications hereunder shall be in writing and, if sent
to the Representative, shall be mailed or delivered or telecopied and confirmed
in writing to the Representative at Prudential Securities Incorporated, One New
York Plaza, New York, New York 10292, Attention: Len Blum; and, if sent to the
Company, shall be mailed, delivered or telegraphed and confirmed in writing to
the Company at the address set forth above, Attention: Director of Secondary
Marketing.
11. Survival. All representations, warranties, covenants and agreements of
the Company contained herein or in agreements or certificates delivered pursuant
hereto, the agreements of the Underwriters and the Company contained in Section
8 hereof, and the representations, warranties and agreements of the Underwriters
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 Underwriters
or any controlling persons, or any subsequent purchaser or the Company or any of
its officers, directors or any controlling persons, and shall survive delivery
of and payment for the Certificates. The provisions of Sections 5, 7 and 8
hereof shall survive the termination or cancellation of this Agreement.
12. Termination. The Underwriters 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
Company shall have been suspended on any exchange or in any over-the-counter
market, (c) a general moratorium on 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 Representative'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 Representative'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 Underwriters) and Sections
7 and 8 hereof shall at all times be effective. If the Underwriters elect to
terminate this Agreement as provided in this Section 12, the Company shall be
notified promptly by the Underwriters 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
22
person purchasing a Certificate from the Underwriters), 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.
23
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/ Mark Mason
----------------------------------------------
Name: Mark Mason
Title: Executive Vice President,
Chief Financial Officer
PRUDENTIAL SECURITIES INCORPORATED,
As Representative of the Several Underwriters
By: /S/ Murray Weiss
---------------------------------------------
Name: Murray Weiss
Title: Director
{UNDERWRITING AGREEMENT SIGNATURE PAGE}
Schedule A
CLASS A-1 CERTIFICATES
Underwriters Principal Purchase Price
- ------------ --------- --------------
Prudential Securities $14,700,000 $14,648,550
Incorporated
Lehman Brothers Inc. $ 9,800,000 $ 9,765,700
Total
CLASS A-2 CERTIFICATES
Underwriters Principal Purchase Price
- ------------ --------- --------------
Prudential Securities $29,100,000 $28,998,150
Incorporated
Lehman Brothers Inc. $19,400,000 $19,332,100
Total