Exhibit 4.1


 


CONFORMED COPY


 


FIRST DEED OF AMENDMENT
TO THE INTERCOMPANY


LOAN TERMS AND
CONDITIONS


 


 


DATED 25th November, 2003


 


 


PERMANENT FUNDING (NO. 1) LIMITED


 


and


 


PERMANENT FINANCING (NO. 1) PLC


 


and


 


PERMANENT FINANCING (NO. 2) PLC


 


and


 


THE BANK OF NEW YORK


 


and


 


CITIBANK, N.A.


 


 


	
  

  
	
   

  
	
  London

  
	
  ICM:7338503

  



 

















 


CONTENTS


 


	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Interpretation

  	
   

  
	
  2.

  	
  Amendments
  To The Original Intercompany Loan Terms and Conditions

  	
   

  
	
  3.

  	
  Amendments

  	
   

  
	
  4.

  	
  Exclusion of Third
  Party Rights

  	
   

  
	
  5.

  	
  Counterparts and
  Severability

  	
   

  
	
  6.

  	
  Governing Law and
  Jurisdiction

  	
   

  
	
   

  	
   

  
	
  Signatories

  	
   

  



 


Appendix


 

















 


THIS FIRST DEED OF AMENDMENT TO THE INTERCOMPANY LOAN TERMS
AND CONDITIONS is made on 25th November, 2003


 


BETWEEN:


 


(1)                                  PERMANENT FUNDING (NO. 1) LIMITED (registered number 4267660),
a private limited company incorporated under the laws of England and Wales,
whose registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(Funding
1);


 


(2)                                  PERMANENT FINANCING (NO. 1) PLC (registered number 4416192),
a public limited company incorporated under the laws of England and Wales,
whose registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(the First
Issuer);


 


(3)                                  PERMANENT FINANCING (NO. 2) PLC (registered number 4623188),
a public limited company incorporated under the laws of England and Wales,
whose registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(the Second
Issuer);


 


(4)                                  THE BANK OF NEW YORK, whose principal office is at
One Canada Square, London E14 5AL  in its capacity as Security Trustee; and


 


(5)                                  CITIBANK, N.A., acting through its office is
at 5 Carmelite Street, London EC4Y 0PA and acting in its capacity as the Agent
Bank.


 


WHEREAS:


 


(A)                              On 14th June, 2002 the First
Issuer made a loan to Funding 1 on the terms set out in the terms and
conditions signed for the purposes of identification by Funding 1, the Agent
Bank and the Security Trustee on 14th June, 2002 (the Original  Intercompany Loan Terms and Conditions)
and a separate intercompany loan confirmation dated 14th June, 2002 (the First Issuer
Intercompany Loan Confirmation (together the First Issuer Intercompany Loan Agreement).


 


(B)                                On 6th March, 2003 the Second
Issuer made a loan to Funding 1 on the terms set out in the Original Intercompany
Loan Terms and Conditions and a separate intercompany loan confirmation dated
6th March, 2003 (the Second Issuer Intercompany Loan Confirmation
(together the Second Issuer Intercompany Loan Agreement).


 


(C)                                From time to time Funding 1
may enter into new intercompany loan agreements with New Issuers on the terms
set out in the Intercompany Loan Terms and Conditions (as amended and restated
in the manner set out in this Deed and from time to time) and the relevant new
intercompany loan confirmation (each a New Intercompany Loan Confirmation and
together with the Intercompany Loan Terms and Conditions a New Intercompany Loan Agreement).


 


(D)                               The parties to the First
Intercompany Loan Agreement and the Second Intercompany Loan Agreement have
agreed to amend and restate the Original Intercompany Loan Terms and Conditions
as set out herein.


 

















 


NOW THIS DEED WITNESSES as follows:


 


1.                                      INTERPRETATION


 


1.1                                 The amended and restated master definitions
and construction schedule signed by, amongst others, the parties to this Deed
and dated 25th November, 2003 (as the same may be amended, varied or
supplemented from time to time with the consent of the parties to this Deed)
(the Master
Definitions and Construction Schedule) are expressly and
specifically incorporated into this Deed and, accordingly, the expressions
defined in the Master Definitions and Construction Schedule (as so amended,
varied or supplemented from time to time) shall, except where the context
otherwise requires and save where otherwise defined herein, have the same
meanings in this Deed, including the Recitals hereto and this Deed shall be
construed in accordance with the interpretation provisions set out in Clause 2
of the Master Definitions and Construction Schedule.


 


1.2                                 The Intercompany Loan Terms and Conditions
as amended and restated pursuant to this Deed will be referred to as the First
Amended and Restated Intercompany Loan Terms and Conditions and/or the
Intercompany Loan Terms and Conditions, as the context so requires.


 


2.                                      AMENDMENTS TO THE ORIGINAL
INTERCOMPANY LOAN TERMS AND CONDITIONS


 


2.1                                 Upon execution of this Deed by the parties
hereto, the Original Intercompany Loan Terms and Conditions shall be and hereby
are amended and restated in the form set out in the form of Appendix 1 hereto
and the First Issuer Intercompany Loan Agreement and the Second Intercompany
Loan Agreement will be deemed to be amended so that references to the
Intercompany Loan Terms and Conditions signed by Funding 1, the Security
Trustee and the Agent Bank for the purposes of identification on 14th June,
2002, shall be construed as the Intercompany Terms and Conditions as amended
and restated by this Deed.


 


3.                                      AMENDMENTS


 


Subject to Clause 25.8 of the Funding 1
Deed of Charge (Supplemental Provisions Regarding the Security Trustee), any
amendments to this Deed will be made only with the prior written consent of
each party to this Deed.


 


4.                                      EXCLUSION OF THIRD PARTY RIGHTS


 


The parties to this Deed do not intend that
any term of this Deed should be enforced, by virtue of the Contracts (Rights of
Third Parties) Act 1999, by any person who is not a party to this Deed.


 


5.                                      COUNTERPARTS AND SEVERABILITY


 


5.1                                 This Deed may be executed in any number of
counterparts (manually or by facsimile) and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
instrument.


 


5.2                                 Where any provision in or obligation under
this Deed shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations under this Deed, or of such provision or obligation in any other
jurisdiction, shall not be affected or impaired thereby.


 

















 


6.                                      GOVERNING LAW AND JURISDICTION


 


6.1                                 This Deed is governed by the laws of
England.


 


6.2                                 Each party to this Deed hereby irrevocably
submits to the non-exclusive jurisdiction of the English courts in any action
or proceeding arising out of or relating to this Deed, and hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined by such courts.  Each party
to this Deed hereby irrevocably waives, to the fullest extent it may possibly
do so, any defence or claim that the English courts are an inconvenient forum
for the maintenance or hearing of such action or proceeding.


 


DULY EXECUTED AND DELIVERED AS A DEED by each of the parties hereto
or on its behalf on the date appearing on page 1.


 

















 


 


SIGNATORIES


 


Funding 1


 


	
  EXECUTED as a DEED by

  	
  )

  
	
  PERMANENT FUNDING (NO.
  1)

  	
  )

  
	
  LIMITED acting by two

  	
  )

  
	
  directors/a
  director and the secretary

  	
  )

  



 


Director: DAVID BALAI


 


Director: JAMES GARNER SMITH MACDONALD


 


 


First Issuer


 


	
  EXECUTED as a DEED by

  	
  )

  
	
  PERMANENT FINANCING (NO.
  1)

  	
  )

  
	
  PLC acting by two

  	
  )

  
	
  directors/a
  director and the secretary

  	
  )

  



 


Director: DAVID BALAI


 


Director: JAMES GARNER SMITH MACDONALD


 


 


Second Issuer


 


	
  EXECUTED as a DEED by

  	
  )

  
	
  PERMANENT FINANCING (NO.
  2)

  	
  )

  
	
  PLC acting by two

  	
  )

  
	
  directors/a
  director and the secretary

  	
  )

  



 


Director: DAVID BALAI


 


Director: JAMES GARNER SMITH MACDONALD


 

















 


Agent Bank


 


	
  EXECUTED as a DEED on behalf of

  	
   

  
	
  CITIBANK, N.A., a company incorporated in

  	
  )

  
	
  the
  United States of America,

  	
  )

  
	
  in
  its capacity as Agent Bank

  	
  )

  
	
  by

  	
  )GEORGIA
  MITCHELL

  



 


being a person who, in accordance with the
laws


of that
territory, is acting under the authority


of the company


 


 


Security
Trustee


 


	
  EXECUTED as a DEED by

  	
  )KATE RUSSELL

  
	
  THE BANK OF NEW YORK

  	
  )

  
	
  acting
  by its attorney in the presence of

  	
  )

  



 


Witness: M. AFSHAR


 


Name: M. AFSHAR


 


Address: ALLEN & OVERY, LONDON


 

















 


APPENDIX 1


 


AMENDED AND RESTATED INTERCOMPANY LOAN TERMS AND
CONDITIONS


 

















 


INTERCOMPANY LOAN TERMS
AND CONDITIONS


 


 


PERMANENT FUNDING (NO. 1) LIMITED


 

















 


CONTENTS


 


	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Interpretation

  	
   

  
	
  2.

  	
  The Term
  Advances

  	
   

  
	
  3.

  	
  Purpose

  	
   

  
	
  4.

  	
  Limited
  Recourse

  	
   

  
	
  5.

  	
  Utilisation of the
  Term Advances

  	
   

  
	
  6.

  	
  Interest

  	
   

  
	
  7.

  	
  Repayment

  	
   

  
	
  8.

  	
  Prepayment

  	
   

  
	
  9.

  	
  Taxes

  	
   

  
	
  10.

  	
  Illegality

  	
   

  
	
  11.

  	
  Mitigation

  	
   

  
	
  12.

  	
  Representations
  and Warranties of Funding 1

  	
   

  
	
  13.

  	
  Covenants

  	
   

  
	
  14.

  	
  Default

  	
   

  
	
  15.

  	
  Default Interest and
  Indemnity

  	
   

  
	
  16.

  	
  Payments

  	
   

  
	
  17.

  	
  Entrenched
  Provisions

  	
   

  
	
  18.

  	
  Further
  Provisions

  	
   

  
	
  19.

  	
  Redenomination

  	
   

  
	
  20.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Amended and
  Restated Intercompany Loan Terms And Conditions

  	
   

  
	
  2.

  	
  Notice of Drawdown
  of a Term Advance

  	
   

  
	
  3.

  	
  Solvency
  Certificate

  	
   

  
	
  4.

  	
  Form of
  Relevant Intercompany Loan Confirmation

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatories

  



 

















 


TERMS AND CONDITIONS MADE ON 14th June, 2002 and signed on the front page
hereof for the purposes of identification by Permanent Funding (No. 1) Limited,
Citibank, N.A., London Branch (in its capacity as Agent Bank) and State Street
Bank and Trust Company (in its capacity as Security Trustee).


 


WHEREAS:


 


(A)                              On 14th June, 2002 Permanent
Financing (No. 1) PLC (the First Issuer) shall make a loan to
Permanent Funding (No. 1) Limited (Funding 1) on the terms set out in these
terms and conditions (the Intercompany Loan Terms and Conditions) and
the separate intercompany loan confirmation dated 14th June, 2002 (the First Issuer
Intercompany Loan Confirmation (together the First Issuer Intercompany Loan Agreement).


 


(B)                                From time to time Funding 1
may enter into new intercompany loan agreements with New Issuers which shall be
made on the terms set out in these Intercompany Loan Terms and Conditions (as
the same may be amended from time to time in the manner set out herein) and the
relevant new intercompany loan confirmation (each a New Intercompany Loan Confirmation
and together with the Intercompany Loan Terms and Conditions a New
Intercompany Loan Agreement).


 


1.                                      INTERPRETATION


 


1.1                                 Terms used but not otherwise defined in
these Intercompany Loan Terms and Conditions shall, except where the context
otherwise requires and save where otherwise defined in these Intercompany Loan
Terms and Conditions or the relevant Intercompany Loan Agreement, have the
meanings given to them in the master definitions and construction schedule
dated 25th November, 2003 and signed by the parties to the Transaction
Documents (as the same may be amended, varied or supplemented from time to time
with the consent of the parties to the Transaction Documents) (the Master
Definitions and Construction Schedule) and these Intercompany Loan
Terms and Conditions shall be construed accordingly.  References in these Intercompany Loan Terms and Conditions to the
Intercompany Loan Agreement shall include references to these Intercompany Loan
Terms and Conditions as incorporated into the Intercompany Loan Agreement by
way of reference and shall be construed accordingly.


 


2.                                      THE TERM ADVANCES


 


2.1                               Conditions precedent


 


Save as the Issuer and the Security Trustee
may otherwise agree, the Term Advances will not be available for utilisation
unless:


 


(a)                                  Funding 1 and the Issuer have
signed an Intercompany Loan Confirmation (substantially in the form set out in
Schedule 3 to these Intercompany Loan Terms and Conditions);


 


(b)                                 the Security Trustee has
confirmed to Funding 1 that it or its advisers have received all of the
information and documents listed in Schedule 1 to the Intercompany Loan
Confirmation in form and substance satisfactory to the Security Trustee; and


 


(c)                                  the conditions set out in
Clause 5.1 (Drawdown conditions relating to the Term Advances) have been
satisfied.


 


1

















 


2.2                               New Intercompany Loan
Agreements


 


Funding 1 may at any time, by written notice
to the Security Trustee and the Rating Agencies, enter into a New Intercompany
Loan Agreement with a New Issuer and draw additional term advances thereunder
(each a New
Term Advance). Each New Term Advance will be financed by the issue
of New Notes by the New Issuer, and will only be permitted if the following
conditions precedent are satisfied on the relevant Drawdown Date:


 


(a)                                  the proceeds of the New
Intercompany Loan are used by Funding 1 in accordance with Clause 3.1 (Purpose
and application of the Term Advances) hereof;


 


(b)                                 each of the Rating Agencies
confirms in writing to the Security Trustee that there will not, as a result of
the New Issuer issuing any New Notes or Funding 1 entering into any additional
agreements as a result of entering into the New Intercompany Loan, be any
adverse effect on the then current ratings by the Rating Agencies of the
existing Notes of any Issuer, the proceeds of which have been advanced to
Funding 1 pursuant to, inter alia, these Intercompany Loan Terms
and Conditions;


 


(c)                                  no Intercompany Loan Event of
Default under any Intercompany Loan Agreement is continuing or unwaived at the
relevant Drawdown Date;


 


(d)                                 the Principal Deficiency
Ledger does not have a debit balance as at the relevant Drawdown Date; and


 


(e)                                  any other relevant conditions
precedent specified in the Intercompany Loan Confirmation.


 


3.                                      PURPOSE


 


3.1                               Purpose and application of the
Term Advances


 


The Term Advances shall be used by Funding
1 either:


 


(a)                                  to pay the Seller (in whole or
in part) for New Loans to be assigned to the Mortgages Trustee pursuant to the
terms of the Mortgage Sale Agreement (which shall increase the Funding 1 Share
of the Trust Property); and/or


 


(b)                                 to acquire a portion of the
Current Seller Share of the Trust Property from the Seller pursuant to the
terms of the Mortgages Trust Deed; and/or


 


(c)                                  to refinance the existing debt
of Funding 1, including any existing Intercompany Loan.


 


3.2                               Application of amounts


 


Without prejudice to the obligations of
Funding 1 under this Clause 3, neither the Security Trustee nor any of the
Funding 1 Secured Creditors shall be obliged to concern themselves as to the
application of amounts drawn by Funding 1 under the Intercompany Loan
Agreement.


 


2

















 


4.                                      LIMITED RECOURSE


 


4.1                               Recourse limited to available
funds


 


Each of the Issuer and the Security Trustee
agree that the liability of Funding 1 in respect of its obligations to repay
principal and pay interest or any other amounts due under the Intercompany Loan
Agreement or for any breach of any other representation, warranty, covenant or
undertaking of Funding 1 under the Intercompany Loan Agreement, shall be
limited to amounts standing to the credit of the Funding 1 Transaction Account
and the Funding 1 GIC Account from time to time (including, for the avoidance
of doubt, amounts received by Funding 1 in respect of the Funding 1 Share of
the Trust Property and from the Funding 1 Swap Provider); provided that the
application of such amounts to the discharge of Funding 1’s obligations under
an Intercompany Loan Agreement shall be subject to the terms of the Funding 1
Deed of Charge and the relevant Funding 1 Priority of Payments in all cases.


 


4.2                               Shortfall on Final Repayment
Date in respect of certain Term Advances


 


(a)                                  Clause 4.2(b) will only apply to those Term
Advances specified in the Intercompany Loan Confirmation.


 


(b)                                 On the Final Repayment Date of an
Intercompany Loan, the amount of interest and principal due and payable on the
Term AA Advances or Term BBB Advances of that Intercompany Loan shall be an
amount equal to the sum available to pay all outstanding interest and/or
principal amounts due (including interest and principal amounts deferred and
unpaid) on such Term Advance after paying amounts of a higher order of priority
in accordance with the relevant Funding 1 Priority of Payments.  To the extent that on the Final Repayment
Date of an Intercompany Loan there is a shortfall between the amount available
to pay such interest and principal on the Term AA Advances or Term BBB Advances
of that Intercompany Loan and the amount required to pay such interest and
principal on such Term Advance, then shall shortfall shall be extinguished on
the Final Repayment Date of such Term Advance and Funding 1 shall have no
further liability therefor.


 


5.                                      UTILISATION OF THE TERM ADVANCES


 


5.1                               Drawdown conditions relating
to the Term Advances


 


Save as otherwise provided in the
Intercompany Loan Agreement, the Term Advances will be made available by the
Issuer to Funding 1 on the Closing Date if:


 


(a)                                  the Notes have been issued by
the Issuer and the subscription proceeds have been received by or on behalf of
the Issuer;


 


(b)                                 not later than 2.00 p.m.
(London time) on the Closing Date (or such later time as may be agreed in
writing by Funding 1, the Issuer and the Security Trustee), the Issuer and the
Security Trustee have received from Funding 1 a Drawdown Notice requesting a
drawing under the Intercompany Loan Agreement, receipt of which shall (subject
to the terms of the Intercompany Loan Agreement and to the issue of the Notes
by the Issuer) oblige Funding 1 to borrow the whole of the amount requested in
the Drawdown Notice on the date stated in the Drawdown Notice (which shall be
the Closing Date) upon the terms and subject to the conditions contained in the
Intercompany Loan Agreement;


 


(c)                                  Funding 1 has confirmed in the
relevant Drawdown Notice that:


 


3

















 


(i)                                     no Intercompany Loan Event of
Default has occurred and is continuing unremedied (if capable of remedy) or
unwaived or would result from the making of the Term Advances;


 


(ii)                                  the representations set out in
Clause 12 (Representations and Warranties of Funding 1) are true on and as of
the Closing Date by reference to the facts and circumstances then existing;


 


(d)                                 the aggregate principal amount
of the Term Advances to be drawn on the Drawdown Date would not exceed the
amount available for drawing under the Intercompany Loan Agreement as at the
relevant Drawdown Date; and


 


(e)                                  Funding 1 has delivered a
solvency certificate substantially in the form set out in Schedule 2 to these
Intercompany Loan Terms and Conditions.


 


5.2                               Single drawing of the Term
Advances


 


Each of the Term Advances will only be
available for drawing in one amount by Funding 1 on the Drawdown Date subject
to satisfaction of the matters specified in Clause 2.1 (Conditions precedent)
and Clause 5.1 (Drawdown conditions relating to the Term Advances).


 


6.                                      INTEREST


 


6.1                               Interest Periods


 


(a)                                  The first Interest Period will commence on
(and include) the Drawdown Date of the Term Advances and end on (but exclude)
the first Funding 1 Interest Payment Date falling thereafter.  Each subsequent Interest Period shall
commence on (and include) a Funding 1 Interest Payment Date and end on (but
exclude) the next following Funding 1 Interest Payment Date.


 


(b)                                 Whenever it is necessary to compute an
amount of interest in respect of the Term Advances for any period (including
any Interest Period), such interest shall be calculated on the basis of actual
days elapsed in a 365 day year.


 


6.2                               Determination of Term Advance
Rates of Interest


 


(a)                                  The rate of interest payable in respect of
each Term Advance (each a Term Advance Rate of Interest and together
the Term
Advance Rates of Interest) shall be determined on the basis of the
provisions set out below:


 


(i)                                     On the first Term Advance Interest Determination Date
(being the first day of the Interest Period for which the rate will apply) of
the Term Advances, the Agent Bank will determine the Term Advance Rates of
Interest in accordance with the provisions of the Intercompany Loan
Confirmation;


 


(ii)                                  on each subsequent Term Advance Interest
Determination Date, the Agent Bank will determine the Relevant Screen Rate  in respect of each Term Advance as at or
about 11.00 a.m. (London time) on the Term Advance Interest Determination Date
in question.  If the Relevant Screen
Rate is unavailable, the Agent Bank will request the principal London office of
each of the Reference Banks to provide the Agent Bank with its offered
quotation to leading banks for three-month Sterling deposits of £10,000,000 in
the London inter-bank market as at or about 11.00 a.m. (London time)


 


4

















 


on the
Term Advance Interest Determination Date and the Term Advance Rates of Interest
for the relevant Interest Period shall be the aggregate of (A) the Relevant
Margin (as defined in the relevant Intercompany Loan Confirmation) for the Term
Advances and (B) the Relevant Screen Rate for the Term Advances or, if the
Relevant Screen Rate is unavailable, the linear interpolation of the arithmetic
mean of such offered quotations for three-month Sterling deposits (rounded
upwards, if necessary, to five decimal places); and


 


(iii)                               if on any Term Advance Interest
Determination Date, the Relevant Screen Rate is unavailable and only two or
three of the Reference Banks provide offered quotations, the Term Advance Rates
of Interest for the relevant Interest Period shall be determined in accordance
with the provisions of sub-paragraph (i) or, as the case may be, (ii) above on
the basis of the offered quotations of those Reference Banks providing such
quotations.  If, on any such Term
Advance Interest Determination Date, only one or none of the Reference Banks
provide the Agent Bank with such an offered quotation, the Agent Bank shall
forthwith consult with the Security Trustee and the Issuer for the purposes of
agreeing two banks (or, where one only of the Reference Banks provided such a quotation,
one additional bank) to provide such a quotation or quotations to the Agent
Bank (which bank or banks are in the opinion of the Security Trustee suitable
for such purpose) and the Term Advance Rates of Interest for the Interest
Period in question shall be determined, as aforesaid, on the basis of the
offered quotations of such banks as so agreed (or, as the case may be, the
offered quotations of such bank as so agreed and the relevant Reference
Bank).  If no such bank or banks is or
are so agreed or such bank or banks as so agreed does or do not provide such a
quotation or quotations, then the Term Advance Rates of Interest for the
relevant Interest Period shall be the Term Advance Rates of Interest in effect
for the last preceding Interest Period to which sub-paragraph (i) or
sub-paragraph (ii), as the case may be, shall have applied but taking account
of any change in the Relevant Margin.


 


There will be no maximum or minimum Term
Advance Rate of Interest.


 


(b)                                 The Agent Bank shall, as soon as practicable
after 11.00 a.m. (London time) on each Term Advance Interest Determination
Date, determine and notify the Issuer, Funding 1, the Cash Manager and the
Security Trustee of (i) the Term Advance Rates of Interest applicable to the
relevant Interest Period and (ii) the sterling amount (the Interest Amount) payable in
respect of such Interest Period in respect of the Outstanding Principal Balance
of each Term Advance.  The Interest
Amount in respect of each Term Advance shall be determined by applying the relevant
Term Advance Rate of Interest to the Outstanding Principal Balance of the
relevant Term Advance, multiplying the sum by 365 days and rounding the
resultant figure to the nearest pence (half a pence being rounded upwards).


 


(c)                                  If the Agent Bank does not at any time for
any reason determine the Term Advance Rate of Interest and/or calculate the
Interest Amount for any of the Term Advances in accordance with the foregoing
paragraphs, the Security Trustee shall (i) determine the Term Advance Rate of Interest
at such rate as (having such regard as it shall think fit to the procedure
described above) it shall deem fair and reasonable in all the circumstances
and/or (as the case may be) (ii) calculate the Interest Amount for each Term
Advance in the manner specified in Clause 6.2(a) and any such determination
and/or calculation shall be deemed to have been made by the Agent Bank.


 


(d)                                 All notifications, opinions,
determinations, certificates, calculations, quotations and decisions given,
expressed, made or obtained for the purposes of this Clause 6, whether by the


 


5

















 


Reference
Banks (or any of them) or any other bank or the Agent Bank or the Security
Trustee shall (in the absence of wilful default, bad faith or manifest error)
be binding on Funding 1, the Issuer, the Cash Manager, the Reference Banks,
such bank, the Agent Bank, the Security Trustee and (in such absence as
aforesaid) no liability to Funding 1 shall attach to the Issuer, the Reference
Banks, such bank, the Agent Bank, the Security Trustee or the Cash Manager in
connection with the exercise or non-exercise by them or any of them of their
powers, duties and discretions hereunder.


 


7.                                      REPAYMENT


 


7.1                               Repayment on Funding 1
Interest Payment Dates


 


Each Term Advance shall be repaid in
instalments on the Funding 1 Interest Payment Dates and in the amounts
specified in the Intercompany Loan Confirmation.


 


7.2                               Term Advance Ratings determine
order of repayment


 


(a)                                  Unless otherwise specified in the Intercompany
Loan Confirmation, each Term Advance shall be repaid (as to both interest and
principal) in accordance with the Term Advance Rating of that Term Advance,
such that, to the extent that amounts are due and payable on more than one Term
Advance on any Funding 1 Interest Payment Date, the Term Advance with the
highest Term Advance Rating shall be repaid (as to both interest and principal)
ahead of the Term Advances with the next highest Term Advance Rating, down to
the Term Advances with the lowest Term Advance Rating being repaid (as to both
interest and principal) only after all of the Term Advances with higher Term
Advance Ratings have been repaid.


 


(b)                                 The Term Advances shall be funded by the
issue of a class or classes of Notes to be issued by the Issuer.  The Term Advance Ratings shall be determined
by the rating assigned by the Rating Agencies to the relevant class of Notes on
the Closing Date.  If the ratings
assigned to a class of Notes by any Rating Agency changes after the Closing
Date, then that shall not affect the designated Term Advance Ratings. If the
ratings assigned to two or more Term Advances (including any New Term Advances)
are the same, then those Term Advances and New Term Advances will be repaid (as
to both interest and principal) pro rata and pari passu (but subject to
the relevant Schedule Repayment Dates and permitted repayment dates
thereof).  If the ratings assigned to a
class of Notes by the Rating Agencies are not consistent, then the affected
Term Advance will reflect all the ratings assigned to it and Funding 1 will
make payments on such Term Advance after making payments on Term Advances with
a Term Advance Rating equivalent to or higher than the highest of the ratings
assigned to the affected Term Advance and before Term Advances with a Term
Advance Rating equivalent to or lower than the lowest of the ratings assigned
to the affected Term Advance (unless otherwise agreed with the Security Trustee
and the Rating Agencies).


 


(c)                                  The Term Advance Ratings for each Term
Advance are specified in the Intercompany Loan Confirmation.


 


8.                                      PREPAYMENT


 


8.1                               Prepayment for taxation or
other reasons


 


If:


 


(a)                                  the total Interest Amount in
relation to the Intercompany Loan for any Interest Period ceases to be
receivable (on account of any present or future Taxes, duties, assessments or
governmental charges of whatever nature); or


 


6

















 


(b)                                 a Term Advance becomes illegal
as described in Clause 10 (Illegality); or


 


(c)                                  the Issuer is required to
deduct or withhold from any payment of principal, interest or premium in
respect of its Notes any amount for or on account of Tax,


 


then, without prejudice to the obligations
of Funding 1 under Clause 10 (Illegality) and subject to Clause 11
(Mitigation), Funding 1 may, on any Funding 1 Interest Payment Date having
given not more than 60 days and not less than 30 days’ (or such shorter period
as may be required by any relevant law in the case of any Term Advance which
becomes illegal pursuant to Clause 10 (Illegality)) prior written notice to the
Issuer and the Security Trustee (or on or before the latest date permitted by
the relevant law in the case of Clause 10 (Illegality)) and while the relevant
circumstances continue, prepay all but not some only of all of the Term
Advances without penalty or premium but subject to Clause 15 (Default Interest
and Indemnity).


 


8.2                               Application of monies


 


The Issuer hereby agrees to apply any
amounts received by way of prepayment pursuant to Clauses 7.1 (Repayment on
Funding 1 Interest Payment Dates) and 8.1 (Prepayment for taxation or other
reasons) in making prepayments under the Notes.


 


8.3                               Funding 1 Ledgers


 


Funding 1 shall maintain, or cause to be
maintained, the Funding 1 Ledgers in accordance with the Cash Management Agreement.


 


9.                                      TAXES


 


9.1                               No gross up


 


All payments by Funding 1 under the
Intercompany Loan Agreement shall be made without any deduction or withholding
for or on account of and free and clear of, any Taxes, except to the extent
that Funding 1 is required by law to make payment subject to any Taxes.


 


9.2                               Tax receipts


 


All Taxes required by law to be deducted or
withheld by Funding 1 from any amounts paid or payable under the Intercompany
Loan Agreement shall be paid by Funding 1 when due and Funding 1 shall, within
30 days of the payment being made, deliver to the Issuer evidence satisfactory
to that Issuer (including all relevant Tax receipts) that the payment has been
duly remitted to the appropriate authority.


 


10.                               ILLEGALITY


 


If, at any time, it is unlawful for the
Issuer to make, fund or allow to remain outstanding a Term Advance made or to
be made by it under the Intercompany Loan Agreement, then the Issuer shall,
promptly after becoming aware of the same, deliver to Funding 1, the Security
Trustee and the Rating Agencies a legal opinion to that effect from reputable
counsel and if the Issuer so requires, Funding 1 shall promptly to the extent
necessary to cure such illegality prepay all the Term Advances subject to and
in accordance with the provisions of Clause 8.1 (Prepayment for taxation or
other reasons).


 


7

















 


11.                               MITIGATION


 


If circumstances arise in respect of the
Issuer which would, or would upon the giving of notice, result in:


 


(a)                                  the prepayment of the Term
Advances pursuant to Clause 10 (Illegality);


 


(b)                                 a withholding or deduction
from the amount to be paid by Funding 1 on account of Taxes, pursuant to Clause
9 (Taxes),


 


then, without in any way limiting, reducing
or otherwise qualifying the obligations of Funding 1 under this Agreement, the
Issuer shall:


 


(i)                                     promptly upon becoming aware
of the circumstances, notify the Security Trustee,  Funding 1 and the Rating Agencies; and


 


(ii)                                  upon written request from
Funding 1, take such steps as may be practical to mitigate the effects of those
circumstances including (without limitation) the assignment of all its rights
under the Intercompany Loan Agreement to, and assumption of all its obligations
under that Intercompany Loan Agreement by, another company satisfactory to the
Security Trustee, which is willing to participate in the relevant Term Advances
in its place and which is not subject to (a) and/or (b) above,


 


provided that no such transfer or
assignment and transfer may be permitted unless the Rating Agencies confirm in
writing to the Issuer and the Security Trustee that there will be no
downgrading of the then current rating of the Notes of any Issuer as a result
and Funding 1 indemnifies the Issuer and the Security Trustee for any
reasonable costs and expenses properly incurred as a result of such transfer or
assignment.


 


12.                               REPRESENTATIONS AND WARRANTIES OF
FUNDING 1


 


12.1                        Representations and warranties


 


Funding 1 makes the representations and
warranties set out in this Clause 12 to the Issuer and the Security Trustee (as
trustee for each of the Funding 1 Secured Creditors).


 


12.2                        Status


 


(a)                                  It is a limited liability company duly
incorporated, validly existing and registered under the laws of the
jurisdiction in which it is incorporated, capable of being sued in its own
right and not subject to any immunity from any proceedings.


 


(b)                                 It has the power to own its property and
assets and to carry on its business as it is being conducted.


 


12.3                        Powers and authority


 


It has the power to enter into, perform and
deliver, and has taken all necessary corporate and other action to authorise
the execution, delivery and performance by it of each of the Transaction
Documents to which it is a party.


 


8

















 


12.4                        Legal validity


 


Each Transaction Document to which it is or
will be a party constitutes or when executed in accordance with its terms will
constitute, a legal, valid and binding obligation enforceable in accordance
with its terms, subject to general equitable principles, insolvency,
liquidation and other laws affecting creditors rights generally.


 


12.5                        Non-conflict


 


The execution by it of each of the
Transaction Documents to which it is a party and the exercise by it of its
rights and the performance of its obligations under such Transaction Documents
including, without limitation, borrowing pursuant to the terms of the
Intercompany Loan Agreement or granting any security contemplated by the
Transaction Documents will not:


 


(a)                                  result in the existence or
imposition of nor oblige it to create any Security Interest in favour of any
person (other than the Funding 1 Secured Creditors) over all or any of its
present or future revenues or assets;


 


(b)                                 conflict with any document
which is binding upon it or any of its assets;


 


(c)                                  conflict with its
constitutional documents; or


 


(d)                                 conflict with any law,
regulation or official or judicial order of any government, governmental body
or court, domestic or foreign, having jurisdiction over it.


 


12.6                        No litigation


 


No litigation, arbitration or
administrative proceedings are current or, to its knowledge, pending or
threatened.


 


12.7                        No default


 


No Intercompany Loan Event of Default is
continuing unremedied (if capable of remedy) or unwaived or would result from
the making of any Term Advance.


 


12.8                        Authorisations


 


All governmental consents, licences and
other approvals and authorisations required or desirable in connection with the
entry into, performance, validity and enforceability of, and the transactions
contemplated by, the Transaction Documents have been obtained or effected (as
appropriate) and are in full force and effect.


 


12.9                        Registration requirements


 


Except for due registration of the Funding
1 Deed of Charge under Section 395 of the Companies Act 1985, it is not necessary
that the Funding 1 Deed of Charge or the Intercompany Loan Agreement be filed,
recorded or enrolled with any authority or that, except for registration fees
payable to the Registrar of Companies in respect of the Security Documents, any
stamp, registration or similar tax be paid on or in respect thereof.


 


9

















 


12.10                 Ranking of security


 


The security conferred by the Funding 1
Deed of Charge constitutes a first priority security interest of the type
described in the Funding 1 Deed of Charge, over the security assets referred
to, in the Funding 1 Deed of Charge and the security assets are not subject to
any prior or pari passu Security Interests.


 


12.11                 No other business


 


(a)                                  It has not traded or carried on any
business since its date of incorporation or engaged in any activity whatsoever
that is not incidental to or necessary in connection with any of the activities
in which the Transaction Documents provide or envisage that it will engage.


 


(b)                                 It is not party to any material agreements
other than the Transaction Documents.


 


12.12                 Ownership


 


(a)                                  Its entire issued share capital is legally
and beneficially owned and controlled by Holdings.


 


(b)                                 Its shares are fully paid.


 


12.13                 Good title as to assets


 


Funding 1 is and will remain the absolute
beneficial owner of the Funding 1 Share and absolute legal and beneficial owner
of all other assets charged or assigned by the Funding 1 Deed of Charge to
which it is a party.


 


12.14                 Tax


 


(a)                                  It is tax resident and legally domiciled in
its jurisdiction of incorporation.


 


(b)                                 It has no branch, business establishment or
other fixed establishment outside the United Kingdom.


 


12.15                 Repetition


 


The representations in this Clause 12 shall
survive the execution of the Intercompany Loan Agreement and the making of each
Term Advance under the Intercompany Loan Agreement, and shall be repeated by
Funding 1 on each Funding 1 Interest Payment Date after the date of the
Intercompany Loan Agreement by reference to the facts and circumstances then
subsisting.


 


13.                               COVENANTS


 


13.1                        Duration


 


The undertakings in this Clause 13 remain
in force from the date of the Intercompany Loan Agreement for so long as any
amount is or may be outstanding under the Intercompany Loan Agreement.


 


13.2                        Information


 


Funding 1 shall supply to the Security
Trustee and the Rating Agencies:


 


(a)                                  as soon as the same are
available its audited accounts for that Financial Year; and


 


10

















 


(b)                                 promptly, such other
information in connection with the matters contemplated by the Transaction
Documents as the Security Trustee or the Rating Agencies may reasonably
request.


 


13.3                        Notification of Default


 


Funding 1 shall notify the Issuer and the
Security Trustee of any Intercompany Loan Event of Default (and the steps, if
any, being taken to remedy it) promptly upon its occurrence.


 


13.4                        Authorisations


 


Funding 1 shall promptly:


 


(a)                                  obtain, maintain and comply
with the terms of; and


 


(b)                                 upon request, supply certified
copies to the Issuer and the Security Trustee of,


 


any authorisation required under any law or
regulation to enable it to perform its obligations under, or for the validity
or enforceability of, any Transaction Document to which it is a party.


 


13.5                        Pari passu ranking


 


Funding 1 shall procure that its
obligations under the Transaction Documents do and will rank at least pari passu
with all its other present and future unsecured obligations, except for
obligations mandatorily preferred by law applying to companies generally.


 


13.6                        Negative pledge


 


Funding 1 shall not create or permit to
subsist any security interest (including but not limited to any mortgage,
standard security, charge (whether legal or equitable), assignment by way of
security, pledge, lien, hypothecation or other security interest securing any
obligation of any person (including, without limitation, any trust or
arrangement having the effect of providing security)) over or in respect of any
of its assets (unless arising by operation of law) other than as provided
pursuant to the Transaction Documents.


 


13.7                        Disposals


 


Funding 1 shall not either in a single
transaction or in a series of transactions, whether related or not and whether
voluntarily or involuntarily, sell, transfer, lease or otherwise dispose of all
or any part of its assets, properties or undertakings or any interest, estate,
rights, title or benefits therein, other than as provided for pursuant to the
Transaction Documents.


 


13.8                        Mergers and acquisitions


 


(a)                                  Funding 1 shall not, without the consent of
the Issuer and the Security Trustee, enter into any amalgamation, demerger,
merger or reconstruction.


 


(b)                                 Funding 1 shall not acquire any assets or
business or make any investments other than as contemplated in the Transaction
Documents.


 


11

















 


13.9                        Lending and borrowing


 


(a)                                  Save as contemplated by the Transaction
Documents, Funding 1 shall not make any loans or provide any other form of
credit to any person.


 


(b)                                 Funding 1 shall not give any guarantee or
indemnity to or for the benefit of any person in respect of any obligation of
any other person or enter into any document under which Funding 1 assumes any
liability of any other person.


 


(c)                                  Funding 1 shall not incur any indebtedness
in respect of any borrowed money other than under the Transaction Documents.


 


13.10                 Shares and dividends


 


Funding 1 shall not:


 


(a)                                  declare or pay any dividend or
make any other distribution in respect of any of its shares other than in
accordance with the Funding 1 Deed of Charge;


 


(b)                                 issue any further shares or
alter any rights attaching to its issued shares as at the date hereof; or


 


(c)                                  repay or redeem any of its
share capital.


 


13.11                 Change of business


 


(a)                                  Funding 1 shall not carry on any business
or engage in any activity other than as contemplated by the Transaction
Documents.


 


(b)                                 Funding 1 shall not have any subsidiaries
or subsidiary undertakings as defined in the Companies Act 1985.


 


(c)                                  Funding 1 shall not have any employees or
own any premises.


 


13.12                 Tax


 


(a)                                  Funding 1 shall join with the Issuer in
making a group income election under section 247 of the Income and Corporation
Taxes Act 1988 in relation to any such payments as are referred to in section
247(4) of that Act and which are made under the Intercompany Loan Agreement by
Funding 1 to the Issuer and Funding 1 will ensure that no steps will be taken
(whether by act, omission or otherwise) by it which would reasonably be
expected to lead to the revocation or invalidation of the aforementioned
election.  Funding 1 shall immediately
notify the Issuer and the Security Trustee if it becomes aware that the
aforementioned election has ceased to be in full force and effect or if
circumstances arise, of which it is aware, which would be reasonably likely to
result in that election ceasing to be in full force and effect.


 


(b)                                 Funding 1 shall not apply to become part of
any group for the purposes of section 43 of the Value Added Tax Act 1994 with
the Issuer unless required to do so by law.


 


13.13                 United States Activities


 


Funding 1 will not engage in any activities
in the United States (directly or through agents), will not derive any income
from United States sources as determined under United States income tax
principles and will not hold any property if doing so would cause it to be
engaged


 


12

















 


or deemed to be engaged in a trade or
business within the United States as determined under United States tax
principles.


 


14.                               DEFAULT


 


14.1                        Intercompany Loan Events of
Default


 


Each of the events set out in Clauses 14.2
to 14.9 (inclusive) is an Intercompany Loan Event of Default (whether or not
caused by any reason whatsoever outside the control of Funding 1 or any other
person).


 


14.2                        Non-payment


 


Subject to Clause 4.1 (Recourse limited to
available funds), Funding 1 does not pay on the due date or for a period of
three London Business Days after such due date any amount payable by it under
any Intercompany Loan Agreement at the place at and in the currency in which it
is expressed to be payable.


 


14.3                        Breach of other obligations


 


Funding 1 does not comply in any material
respect with any of its obligations under the Transaction Documents (other than
those referred to in Clause 14.2 (Non-payment)) and such non-compliance, if capable
of remedy, is not remedied promptly and in any event within twenty London
Business Days of Funding 1 becoming aware of the non-compliance or receipt of a
notice from the Security Trustee requiring Funding 1’s non-compliance to be
remedied.


 


14.4                        Misrepresentation


 


A representation, warranty or statement
made or repeated in or in connection with any Transaction Document or in any
document delivered by or on behalf of Funding 1 under or in connection with any
Transaction Document is incorrect in any material respect when made or deemed
to be made or repeated.


 


14.5                        Insolvency


 


Any corporate action is taken by Funding 1,
or any legal proceedings are started, for the winding-up, dissolution,
administration or appointment of a liquidator, receiver, administrator,
administrative receiver, trustee or similar officer of Funding 1 or of any or
all of Funding 1’s revenues and assets or any documents are filed with the
court for the appointment of an administrator of Funding 1 or any formal notice
of intention to appoint an administrator of Funding 1 is served or any
application is made or petition is lodged for the making of an administration
order in relation to Funding 1 .


 


14.6                        Creditors’ process


 


Any attachment, sequestration, distress or
execution affects any asset of Funding 1 and is not discharged within twenty
London Business Days.


 


14.7                        Unlawfulness


 


It is or becomes unlawful for Funding 1 to
perform any of its obligations under any Transaction Document.


 


13

















 


14.8                        The Funding 1 Deed of Charge


 


The Funding 1 Deed of Charge is not, or is
alleged by Funding 1 not to be, binding on or enforceable against Funding 1 or
effective to create the security intended to be created by it.


 


14.9                        Ownership


 


The entire issued share capital of Funding
1 ceases to be legally and beneficially owned and controlled by Holdings.


 


14.10                 Acceleration


 


Upon the occurrence of an Intercompany Loan
Event of Default which is continuing unremedied and/or has not been waived, the
Security Trustee may by written notice to Funding 1 (the Intercompany Loan Acceleration Notice)
which is copied to each of the Funding 1 Secured Creditors and the Mortgages
Trustee:


 


(a)                                  declare the Term Advances
under each or any Intercompany Loan Agreement to be immediately due and payable
(whereupon the same shall, subject to Clause 14.11 (Repayment of Term Loan on
acceleration)), become so payable together with accrued interest thereon and
any other sums then owed by Funding 1 under the relevant Intercompany Loan
Agreement or Agreements; and/or


 


(b)                                 declare the Term Advances
under each or any Intercompany Loan Agreement to be due and payable on demand
of the Security Trustee.


 


14.11                 Repayment of Term Loan on acceleration


 


Upon the Security Trustee declaring the Term
Advances to be immediately due and payable pursuant to Clause 14.10(a)
(Acceleration), the amount due and payable in respect of the Term Advances
shall be calculated on the basis described in Clause 8.1 (Prepayment for
taxation or other reasons).


 


15.                               DEFAULT INTEREST AND INDEMNITY


 


15.1                        Default Loan Interest Periods


 


If any sum due and payable by Funding 1
under the Intercompany Loan Agreement is not paid on the due date for payment
in accordance with the relevant provision of the Intercompany Loan Agreement or
if any sum due and payable by Funding 1 under any judgment or decree of any
court in connection with the Intercompany Loan Agreement is not paid on the
date of such judgment or decree, the period beginning on such due date or, as
the case may be, the date of such judgment or decree and ending on the date
upon which the obligation of Funding 1 to pay such sum (the balance thereof for
the time being unpaid being herein referred to as an unpaid sum) is discharged
shall be divided into successive periods, each of which (other than the first)
shall start on the last day of the preceding such period and the duration of
each of which shall (except as otherwise provided in this Clause 15) be
selected by the Security Trustee having regard to when such unpaid sum is
likely to be paid.


 


15.2                        Default interest


 


During each such period relating to an
unpaid sum as is mentioned in this Clause 15 an unpaid sum shall bear interest
at the rate per annum which the Issuer, acting reasonably, determines and
certifies to Funding 1 and the Security Trustee, will be sufficient to enable
it


 


14

















 


to pay interest and other costs and
indemnities on or in respect of any amount which the Issuer does not pay as a
result of a non-payment under the Intercompany Loan Agreement, and/or any
drawing made by it under the Liquidity Facility Agreement, as a result of such
unpaid sum not being paid to it.


 


15.3                        Payment of default interest


 


Any interest which shall have accrued under
Clause 15.2 (Default interest) in respect of an unpaid sum shall be due and
payable and shall be paid by Funding 1 at the end of the period by reference to
which it is calculated or on such other date or dates as the Security Trustee
may specify by written notice to Funding 1.


 


15.4                        Broken periods


 


Funding 1 shall forthwith on demand
indemnify the Issuer against any loss or liability that the Issuer incurs as a
consequence of any payment of principal being received from any source
otherwise than on a Funding 1 Interest Payment Date or an overdue amount being
received otherwise than on its due date.


 


15.5                        Funding 1’s payment indemnity


 


Funding 1 undertakes to indemnify the
Issuer:


 


(a)                                  against any cost, claim, loss,
expense (including legal fees) or liability together with any amount in respect
of Irrecoverable VAT thereon (other than by reason of the negligence or wilful
default by the Issuer), which it may sustain or incur as a consequence of the
occurrence of any Intercompany Loan Event of Default or any default by Funding
1 in the performance of any of the obligations expressed to be assumed by it in
any of the Transaction Documents (other than by reason of negligence or wilful
default on the part of the Issuer or prior breach by the Issuer of the terms of
any of the Transaction Documents to which it is a party);


 


(b)                                 against any loss it may suffer
as a result of its funding a Term Advance requested by Funding 1 under the
Intercompany Loan Agreement (which shall include the amounts referred to in
clause 6 of the Intercompany Loan Confirmation) but not made; and


 


(c)                                  against any other loss or
liability (other than by reason of the negligence or default of the Issuer or
breach by the Issuer of the terms of any of the Transaction Documents to which
it is a party (except where such breach is caused by the prior breach of
Funding 1) or loss of profit) it may suffer by reason of having made the
Term Advances available or entering into the Intercompany Loan Agreement or
enforcing any security granted pursuant to the Funding 1 Deed of Charge.


 


16.                               PAYMENTS


 


16.1                        Payment


 


(a)                                  Subject to Clause 4 (Limited Recourse),
interest and principal shall be paid on the Term Advances for value by Funding
1 to the Issuer Transaction Account specified by the Issuer in the Intercompany
Loan Confirmation on each Funding 1 Interest Payment Date and the relevant
irrevocable payment instruction for such payment shall be given by Funding 1 by
no later than noon to the Cash Manager under the Cash Management Agreement
(with a copy to the Issuer and the Security Trustee) on the Intercompany Loan
Determination Date immediately before the relevant Funding 1 Interest Payment
Date.


 


15

















 


(b)                                 On each date on which the Intercompany Loan
Agreement requires an amount to be paid by Funding 1 under that Intercompany
Loan Agreement, Funding 1 shall, unless the Intercompany Loan Agreement
specifies otherwise, make the same available to the Issuer in accordance with
the terms of the Intercompany Loan Agreement and by payment in Sterling in
immediately available, freely transferable, cleared funds to the Issuer
Transaction Account specified in the Intercompany Company Loan Confirmation or,
if the Intercompany Loan Agreement specifies otherwise, to the relevant account
or to such other account as the Issuer (with the consent of the Security
Trustee) may notify to Funding 1 for this purpose.


 


16.2                        Alternative payment
arrangements


 


If, at any time, it shall become
impracticable (by reason of any action of any governmental authority or any
change in law, exchange control regulations or any similar event) for Funding 1
to make any payments under the Intercompany Loan Agreement in the manner
specified in Clause 16.1 (Payment), then Funding 1 shall make such alternative
arrangements for the payment direct to the Issuer of amounts due under the
Intercompany Loan Agreement as are acceptable to the Security Trustee (acting
reasonably).


 


16.3                        No set-off


 


Subject to the terms of the Intercompany
Loan Confirmation, all payments required to be made by Funding 1 under the
Intercompany Loan Agreement shall be calculated without reference to any
set-off or counterclaim and shall be made free and clear of and without any
deduction for or on account of any set-off or counterclaim.


 


17.                               ENTRENCHED PROVISIONS


 


Each of Funding 1, the Issuer and the
Security Trustee acknowledge and agree that Funding 1 may from time to time
enter into New Intercompany Loan Agreements subject to the provisions of Clause
2 (The Term Advances) of this Agreement. 
If Funding 1 intends to enter into a New Intercompany Loan Agreement
then the provisions of this Agreement may be varied (with the consent of the
parties to this Agreement) in the Intercompany Loan Confirmation to the extent
necessary to reflect the terms of that New Intercompany Loan PROVIDED THAT no
variation shall be made to any of the following terms without the prior written
consent of the Funding 1 Secured Creditors and the Rating Agencies:


 


(a)                                  the Funding 1 Interest Payment
Dates;


 


(b)                                 the determination of the Term
Advance Rates of Interest (other than the Relevant Margin);


 


(c)                                  Clause 4 (Limited Recourse);


 


(d)                                 Clause 7 (Repayment); and


 


(e)                                  Clause 9 (Taxes).


 


18.                               FURTHER PROVISIONS


 


18.1                        Evidence of indebtedness


 


In any proceeding, action or claim relating
to the Intercompany Loan Agreement a statement as to any amount due to the
Issuer under the Intercompany Loan Agreement which is certified as being
correct by an officer of the Security Trustee shall, unless otherwise provided
in the


 


16

















 


Intercompany Loan Agreement, be prima facie
evidence that such amount is in fact due and payable.


 


18.2                        Rights cumulative, waivers


 


The respective rights of the Issuer and the
Security Trustee under the Intercompany Loan Agreement:


 


(a)                                  may be exercised as often as
necessary;


 


(b)                                 are cumulative and not
exclusive of its rights under the general law; and


 


(c)                                  may be waived only in writing
and specifically.


 


Delay in exercising or non-exercise of any
such right is not a waiver of that right.


 


18.3                        Severability


 


If a provision of the Intercompany Loan
Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction,
that shall not affect:


 


(a)                                  the validity or enforceability
in that jurisdiction of any other provision of the Intercompany Loan Agreement;
or


 


(b)                                 the validity or enforceability
in other jurisdictions of that or any other provision of the Intercompany Loan
Agreement.


 


18.4                        Notices


 


Any notices to be given pursuant to the
Intercompany Loan Agreement to any of the parties thereto shall be in writing
and shall be sufficiently served if sent by prepaid first class post, by hand
or facsimile transmission and shall be deemed to be given (in the case of
facsimile transmission) when despatched, (where delivered by hand) on the day
of delivery if delivered before 5.00 p.m. (London time) on a London Business
Day or on the next London Business Day if delivered thereafter or on a day
which is not a London Business Day or (in the case of first class post) when it
would be received in the ordinary course of post and shall be sent to such
addresses as are set out in the Intercompany Loan Confirmation or to such other
address or facsimile number or for the attention of such other person or entity
as may from time to time be notified by any party to the others by written
notice in accordance with the provisions of this Clause 18.4.


 


18.5                        Variation


 


Subject to Clause 17 (Entrenched
Provisions), no variation of any provision(s) of the Intercompany Loan
Agreement shall be effective unless it is in writing and signed by (or by a
person duly authorised by) each of the parties to the Intercompany Loan
Agreement.


 


18.6                        Security Trustee


 


The Security Trustee shall have no
responsibility for any of the obligations of the Issuer or any other party to
the Intercompany Loan Agreements (other than itself).  For the avoidance of doubt, the parties to the Intercompany Loan
Agreement acknowledge that the rights and obligations of the Security Trustee under
the Intercompany Loan Agreements are governed by the Funding 1 Deed of Charge.


 


17

















 


18.7                        Counterparts


 


The Intercompany Loan Agreement may be
signed (manually or by facsimile) and delivered in more than one counterpart
all of which, taken together, shall constitute one and the same Agreement.


 


18.8                        Third Party Rights


 


The Intercompany Loan Agreement does not
create any right under the Contracts (Rights of Third Parties) Act 1999 which
is enforceable by any person who is not a party to the Intercompany Loan
Agreement.


 


19.                               REDENOMINATION


 


Each obligation under this Agreement which
has been denominated in sterling shall be redenominated in Euro in accordance
with EMU legislation upon such redenomination of the Notes.


 


20.                               GOVERNING LAW


 


The Intercompany Loan Agreement is governed
by English law.


 


21.                               SUBMISSION
TO JURISDICTION


 


Each party to the Intercompany Loan
Agreement hereby irrevocably submits to the non-exclusive jurisdiction of the
English courts in any action or proceeding arising out of or relating to the
Intercompany Loan Agreement, and hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined by such
courts.  Each party to the Intercompany
Loan Agreement hereby irrevocably waives, to the fullest extent it may possibly
do so, any defence or claim that the English courts are an inconvenient forum
for the maintenance or hearing of such action or proceeding.


 


18

















 


SCHEDULE 2


 


NOTICE OF DRAWDOWN OF A
TERM ADVANCE


 


From:      Permanent
Funding (No. 1) Limited (Funding 1)


 


To:          [     ]
(the Issuer)


 


Copy:     The
Bank of New York (the Security Trustee)


 


Dear Sirs,


 


1.                                       We refer to the agreement
between, inter
alios, ourselves, the Issuer and the Security Trustee (as from time
to time amended, varied, novated or supplemented (the Intercompany Loan Agreement))
dated [          ] whereby an
Intercompany Loan was made available to Funding 1.  Terms defined in the Intercompany Loan Agreement shall have the
same meaning in this notice.


 


2.                                       We hereby give you notice
that, pursuant to the Intercompany Loan Agreement and upon the terms and
subject to the conditions contained therein, we wish a [describe Term Advance] to be
made to us as follows:


 


(a)                                  Amount:
£[     ] of which £[     ] is
to be retained by you by way of set off against our obligation to reimburse
such amount to you on the Closing Date under [clause 6.1] (Fee for provision of
Term Advance) of the Intercompany Loan Confirmation.


 


(b)                                 Drawdown Date:
[          ]


 


3.                                       We confirm that no
Intercompany Loan Event of Default has occurred and is continuing which has not
been waived, or would result from the making of such Term Advance.


 


4.                                       We confirm that the principal
amount of the Term Advance requested does not exceed the amount available under
the Intercompany Loan Agreement as at [relevant Drawdown Date].


 


5.                                       The net proceeds of this
drawdown should be credited to our account numbered
[          ] with
[          ].


 


Yours faithfully,


 


 


for and on behalf of


Permanent
Funding (No. 1) Limited


 


19

















 


SCHEDULE 3


 


SOLVENCY CERTIFICATE


 


Permanent Funding (No. 1) Limited (the Company)


 


To:          [•]


 


 


(the Issuer)


 


The Bank of New York (the Security
Trustee)


 


We the undersigned HEREBY CERTIFY, that (i)
having made all appropriate searches and investigations of the Company’s books
and records and the Company’s accounts (both management and those required by
law); and (ii) the officers of the Company having duly considered the provisions
of the insolvency laws of the United Kingdom (including, without limitation,
the provisions of sections 123 and 238 to 241 and 423 of the Insolvency Act
1986 (the Act)):


 


(a)                                  the Company is not unable to pay its debts
within the meaning of section 123 of the Act and would not become unable to do
so in consequence of entering into the Transaction Documents to which it is a
party or making any drawing or granting any security under the Transaction
Documents to which it is a party, and the Company’s assets currently exceed its
liabilities (taking into account its actual, contingent and prospective
liabilities) and will continue to do so notwithstanding the entry into by it of
the Transaction Documents and the making of any drawing or the granting of any security
under the Transaction Documents to which it is a party;


 


(b)                                 no execution or other process issued on a
judgment, decree or order of any court in favour of a creditor of the Company
remains unsatisfied in whole or in part;


 


(c)                                  to the best of our knowledge and belief no
corporate action has been taken or is pending, no other steps have been taken
and no legal proceedings have been commenced or are threatened or are pending
for (i) the winding-up, liquidation, dissolution, administration or reorganisation
of the Company and no documents have been filed with the court for the
appointment of an administrator and no notice of intention to appoint an
administrator has been served; or (ii) the Company to enter into any
composition or arrangement with its creditors generally; or (iii) the
appointment of a receiver, administrative receiver, trustee or similar officer
in respect of the Company or any of its property, undertaking or assets.  No event equivalent to any of the foregoing
has occurred in or under the laws of any relevant jurisdiction;


 


(d)                                 no steps have been
taken by the Company with a view to obtaining a moratorium in respect of any
indebtedness of the Company or for the purpose of proposing a company voluntary
arrangement.  No event equivalent to any of the foregoing
has occurred in or under the laws of any relevant jurisdiction;


 


(e)                                  neither the entry into of the Transaction
Documents to which it is a party nor the making of any drawing nor granting of
security under the Transaction Documents to which it is a party would be a
transaction at an undervalue within the meaning of section 238 of the Act,
since the value of any consideration received by the Company as a result of
such drawing and/or 


 


20

















 


grant
of security would not be significantly less than the value of any consideration
provided by the Company under the Transaction Documents to which it is a party;


 


(f)                                    the entry into of the Transaction Documents
to which it is a party, any drawing made by the Company under or pursuant to
the Transaction Documents to which it is a party, and any security granted by
the Company under or pursuant to the Transaction Documents to which it is a
party will be entered into or made, as the case may be, by the Company, in good
faith and for the purpose of carrying on its business, and there are reasonable
grounds for believing that such entry into of such Transaction Documents, such
drawings and grants of security would benefit the Company; and


 


(g)                                 in entering into the Transaction Documents
to which it is a party, making a drawing under or pursuant to the Transaction
Documents to which it is a party and/or granting security under or pursuant to
the Transaction Documents to which it is a party the Company has no desire to
give a preference to any person as contemplated by section 239 of the Act nor
is it the purpose of the Company to put assets beyond the reach of a person who
is making, or may at some time make, a claim against the Company or of
otherwise prejudicing the interests of such a person in relation to the claim
which he is making or may make.


 


Terms defined in the Master Definitions and
Construction Schedule signed by the parties to the Transaction Documents  and dated 25th November, 2003 shall have the
same respective meanings when used in this Certificate.


 


DATED •


 


Signed for and on behalf of Permanent
Funding (No. 1) Limited


 


 


	
   

  	
   

  
	
  Director

  
	
   

  
	
   

  	
   

  
	
  Director/Secretary

  



 


21

















 


SCHEDULE 4


 


FORM OF RELEVANT INTERCOMPANY LOAN CONFIRMATION


 


 


LOAN CONFIRMATION


 


INTERCOMPANY LOAN AGREEMENT


 


 


DATED •


 


 


PERMANENT FUNDING (NO.
1) LIMITED


as Funding 1


 


 


•


as Relevant Issuer


 


 


STATE STREET BANK AND
TRUST COMPANY


as Security Trustee


 


 


CITIBANK, N.A., LONDON
BRANCH


as Agent Bank


 


 


	
  

  
	
   

  
	
  London

  



 


22

















 


THIS AGREEMENT is dated •


 


BETWEEN:


 


(6)                                  PERMANENT FUNDING (NO. 1) LIMITED (registered in England and
Wales No. 4267660) whose registered office is at Blackwell House, Guildhall
Yard, London EC2V 5AE (Funding 1);


 


(7)                                  [Relevant Issuer] (registered in England and
Wales No. •) whose registered office is at Blackwell House,
Guildhall Yard, London EC2V 5AE (the [Relevant 
Issuer]);


 


(8)                                  STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company organised under the laws of the Commonwealth of Massachusetts of the
United States of America with a branch office at 1 Canada Square, Canary Wharf,
London  E14 5AF, acting in its capacity
as Security Trustee; and


 


(9)                                  CITIBANK N.A., LONDON BRANCH, whose offices are at 5
Carmelite Street, London EC4Y 0PA, acting in its capacity as Agent Bank.


 


IT IS AGREED as follows:


 


1.                                      INTERPRETATION


 


1.1                                 The Master Definitions and
Construction Schedule signed for the purposes of identification by Allen &
Overy and Sidley Austin Brown & Wood on 13th June, 2002 (as the same may be
amended, varied or supplemented from time to time with the consent of the
parties hereto) and the [Relevant Issuer] Master Definitions and Construction
Schedule signed for the purposes of identification by Allen & Overy and
Sidley Austin Brown & Wood on 13th June, 2002 (as the same may be amended,
varied or supplemented from time to time with the consent of the parties
hereto) are expressly and specifically incorporated into this Agreement and,
accordingly, the expressions defined in the Master Definitions and Construction
Schedule and/or the [Relevant Issuer] Master Definitions and Construction
Schedule (as so amended, varied or supplemented) shall, except where the
context otherwise requires and save where otherwise defined herein, have the
same meanings in this Agreement, including the Recitals hereto and this
Agreement shall be construed in accordance with the interpretation provisions
set out in clause 2 of the Master Definitions and Construction Schedule and the
[Relevant Issuer] Master Definitions and Construction Schedule.  In the event of a conflict between the
Master Definitions and Construction Schedule and the [Relevant Issuer] Master Definitions
and Construction Schedule, the [Relevant Issuer] Master Definitions and
Construction Schedule shall prevail.


 


1.2                                 Unless the context otherwise
requires, references in the Intercompany Loan Term and Conditions to:


 


[complete as appropriate]


 


2.                                      INTERCOMPANY LOAN TERMS AND
CONDITIONS


 


Each of the parties to this Agreement agree
that the Intercompany Loan Terms and Conditions signed by Funding 1 and the
Security Trustee for the purposes of identification on 14th June, 2002 and the
provisions set out therein shall form part of this Agreement and shall be
binding on the parties to this Agreement as if they had expressly been set out
herein.  References in this Agreement to
this
Agreement shall be construed accordingly.


 


23

















 


3.                                      THE TERM ADVANCES


 


3.1                               Term Advances


 


[describe the term advances]


 


3.2                               [Term Advance Rating]


 


The Term Advance Rating in respect of the
[Term AAA Advances] shall be •, in respect of the [Term AA Advances]
shall be • and the Term Advance Rating in respect of the [Term
BBB Advances] shall be •.


 


3.3                               [Conditions  Precedent]


 


Save as the [Relevant Issuer] and the
Security Trustee may otherwise agree, the Term Advances will not be available
for utilisation unless the Security Trustee has confirmed to Funding 1 that it
or its advisers have received all the information and documents listed in 0 in
form and substance satisfactory to the Security Trustee.


 


4.                                      INTEREST


 


[Set out interest rate, interest periods and payment
dates]


 


5.                                      REPAYMENT


 


5.1                                 [Describe, inter alios:


 


Repayment subject to terms of the Funding 1 Deed of Charge;


 


Repayment of relevant Term Advances prior to the occurrence
of a Trigger Event and prior to the service on Funding 1 of an Intercompany
Loan Acceleration Notice or the service on each Issuer of a Note Acceleration
Notice;


 


Repayment of relevant Term Advances following the occurrence
of a Non-Asset Trigger Event but prior to 
the service on Funding 1 of an Intercompany Loan Acceleration Notice or
the service on each Issuer of a Note Acceleration Notice;


 


Repayment of the relevant Terms Advances following the
occurrence of an Asset Trigger Event but prior to  the service on Funding 1 of an Intercompany Loan Acceleration
Notice or the service on each Issuer of a Note Acceleration Notice;


 


Repayment following of relevant Term Advances following the
service on each Issuer of a Note Acceleration Notice bur prior to the service
on Funding 1 of an Intercompany Loan Acceleration Notice;


 


Repayment following the service on Funding 1 of an
Intercompany Loan Acceleration Notice].


 


5.2                               [Acknowledgement of New Intercompany
Loans


 


The [Relevant Issuer] hereby acknowledges
and agrees that from time to time Funding 1 may enter into New Intercompany
Loans with New Issuers and that the obligation of Funding 1 to repay this
Intercompany Loan and any New Intercompany Loan will depend on the Term Advance
Rating of the individual Term Advances made to Funding 1 under the respective


 


24

















 


Intercompany Loans.  Subject to clause 25 of the Funding 1 Deed
of Charge (Supplemental Provisions Regarding the Security Trustee), any
amendments to this Agreement will be made only with the prior written consent
of each party to this Agreement.]


 


6.                                      CERTAIN FEES, ETC.


 


[describe payment and provision, including
set-off,  for fees and indemnities]


 


7.                                      APPLICATION OF CERTAIN
PROVISIONS


 


The provisions set out in Clause 4.2
(Shortfall on Final Repayment Date in respect of certain Term Advances) of the
Intercompany Loan Terms and Conditions shall apply to:  [describe Term Advances]


 


8.                                      ADDRESSES


 


The addresses referred to in [Clause 15.4]
of the Intercompany Loan Terms and Conditions are as follows:


 


The Security Trustee:


 


	
  For the attention of:

  	
   

  	
  Corporate Trust

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  State Street Bank and Trust Company,

  
	
   

  	
   

  	
  1
  Canada Square, Canary Wharf, London E14 5AF

  
	
   

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
  +44 (0) 20 7416 2548

  



 


 


 


The [Relevant Issuer]:


 


	
  For the attention of:

  	
   

  	
  [The Secretary]

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  [Relevant Issuer]

  
	
   

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
  [+44 (0) 20 7556 0975]

  
	
   

  	
   

  	
   

  
	
  Copy to:

  	
   

  	
  HBOS Treasury Services plc

  
	
   

  	
   

  	
  33
  Old Broad Street

  
	
   

  	
   

  	
  London
  EC2N 1HZ

  
	
   

  	
   

  	
  Facsimile
  number +44 (0) 20 7574 8784

  
	
   

  	
   

  	
  For
  the attention of Head of Capital Markets and Securitisations

  



 


25

















 


Funding 1:


 


	
  For the attention of:

  	
   

  	
  The Secretary

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Permanent Funding (No. 1) Limited

  
	
   

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
  +44 (0) 20 7556 0975

  
	
  Copy
  to:

  	
   

  	
  HBOS
  Treasury Services plc

  
	
   

  	
   

  	
  33
  Old Broad Street

  
	
   

  	
   

  	
  London
  EC2N 1HZ

  
	
   

  	
   

  	
  Facsimile
  number +44 (0) 20 7574 8784

  
	
   

  	
   

  	
  For
  the attention of Head of Capital Markets and Securitisations

  
	
   

  	
   

  	
   

  
	
  Rating Agencies:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Moody’s:

  	
   

  	
  2 Minster Court, Mincing Lane, London
  EC3R 7XB

  
	
  For
  the attention of:

  	
   

  	
  Nicholas
  Lindstrom

  
	
  Telephone:

  	
   

  	
  +44
  (0) 20 7772 5332

  
	
  Fax:

  	
   

  	
  +44
  (0) 20 7772 5400

  
	
   

  	
   

  	
   

  
	
  S&P:

  	
   

  	
  Garden House, 18 Finsbury Circus, London
  EC2M 7BP

  
	
  For
  the attention of:

  	
   

  	
  Andre
  Vollman

  
	
  Telephone:

  	
   

  	
  +44
  (0) 20 7826 3855

  
	
  Fax:

  	
   

  	
  +44
  (0) 20 7826 3598

  
	
   

  	
   

  	
   

  
	
  Fitch:

  	
   

  	
  Eldon House, 2 Eldon Street, London EC2M
  7UA

  
	
  For
  the attention of:

  	
   

  	
  European
  Structured Finance

  
	
  Telephone:

  	
   

  	
  +44
  (0) 20 7417 4355

  
	
  Fax:

  	
   

  	
  +44
  (0) 20 7417 6262

  



 


26