Document:

Exhibit 4.10

 

EXECUTION COPY

 

 

AMENDED AND RESTATED SERVICING AGREEMENT

 

 

DATED 12th March, 2004

 

 

HALIFAX plc

as Servicer

 

and

 

PERMANENT
MORTGAGES TRUSTEE LIMITED

as Mortgages
Trustee

 

and

 

HALIFAX plc

as Seller

 

and

 

PERMANENT
FUNDING (NO. 1) LIMITED

as Funding 1

 

and

 

THE BANK OF
NEW YORK

as
Security Trustee

 

 

 

London

 

 

CONTENTS

 

	
  Clause

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and Interpretation

  	
   

  
	
  2.

  	
  Appointment of Servicer

  	
   

  
	
  3.

  	
  The Administration Services

  	
   

  
	
  4.

  	
  Mortgages
  Trustee Variable Base Rate/Mortgages Trustee Tracker Rate

  	
   

  
	
  5.

  	
  Administration of Mortgages

  	
   

  
	
  6.

  	
  No Liability

  	
   

  
	
  7.

  	
  New
  Loans

  	
   

  
	
  8.

  	
  Product
  Switching and Further Advances

  	
   

  
	
  9.

  	
  Redemption of Mortgages

  	
   

  
	
  10.

  	
  Powers of Attorney

  	
   

  
	
  11.

  	
  Costs and Expenses

  	
   

  
	
  12.

  	
  Information

  	
   

  
	
  13.

  	
  Remuneration

  	
   

  
	
  14.

  	
  Insurances

  	
   

  
	
  15.

  	
  Halifax Insurance Policies

  	
   

  
	
  16.

  	
  Buildings Policies

  	
   

  
	
  17.

  	
  Title Deeds and Customer
  Files

  	
   

  
	
  18.

  	
  Data Protection

  	
   

  
	
  19.

  	
  Covenants of Servicer

  	
   

  
	
  20.

  	
  Services Non-Exclusive

  	
   

  
	
  21.

  	
  Termination

  	
   

  
	
  22.

  	
  Further Assurance

  	
   

  
	
  23.

  	
  Miscellaneous

  	
   

  
	
  24.

  	
  Confidentiality

  	
   

  
	
  25.

  	
  Notices

  	
   

  
	
  26.

  	
  Variation and Waiver

  	
   

  
	
  27.

  	
  No Partnership

  	
   

  
	
  28.

  	
  Assignment

  	
   

  
	
  29.

  	
  Change of Security Trustee

  	
   

  
	
  30.

  	
  Amendments

  	
   

  
	
  31.

  	
  Exclusion of Third
  Party Rights

  	
   

  
	
  32.

  	
  Counterparts and
  Severability

  	
   

  
	
  33.

  	
  Governing Law and
  Jurisdiction

  	
   

  
	
  34.

  	
  Process Agent

  	
   

  

 

	
  Schedule

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  The Services

  	
   

  
	
  2.

  	
  Form of
  Quarterly Pool Cut

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatories

  	
   

  

 

 

THIS AMENDED AND RESTATED SERVICING AGREEMENT is made as a deed on 12th
March, 2004

 

BETWEEN:

 

(1)                                  HALIFAX
plc
(registered number 02367076), a public limited company incorporated under the
laws of England and Wales whose registered office is at Trinity Road, Halifax,
West Yorkshire HX1 2RG in its capacity as the Servicer of the Loans and their
Related Security;

 

(2)                                  PERMANENT
MORTGAGES TRUSTEE LIMITED (registered number 83116), a private limited company
incorporated under the laws of Jersey, Channel Islands whose registered office
is at 47 Esplanade, St. Helier, Jersey JE1 0BD, Channel Islands, in its
capacity as the Mortgages Trustee;

 

(3)                                  HALIFAX
plc
(registered number 02367076), a public limited company incorporated under the
laws of England and Wales whose registered office is at Trinity Road, Halifax,
West Yorkshire HX1 2RG in its capacity as the Seller and as one of the
Beneficiaries;

 

(4)                                  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 in its capacity
as Funding 1 and one of the Beneficiaries; and

 

(5)                                  THE
BANK OF NEW YORK, a New York banking corporation acting through its
office at 48th Floor, One Canada Square, London E14 5AL, the Security Trustee,
which expression shall include such company and all other persons or companies
for the time being acting as security trustee (or co-trustee) pursuant to the
terms of the Funding 1 Deed of Charge.

 

WHEREAS:

 

(A)                              The Servicer carries on the business of, inter alia,
administering mortgage loans secured on residential properties within the
United Kingdom.

 

(B)                                By the Mortgage Sale Agreement, the Seller
agreed to sell certain mortgage loans it had originated to individual borrowers
together with their Related Security to the Mortgages Trustee.  The Mortgages Trustee holds those mortgage
loans as bare trustee for Funding 1 and the Seller pursuant to the terms of the
Mortgages Trust Deed.

 

(C)                                The Servicer has agreed to provide
administration and management services to the Mortgages Trustee, the Seller and
Funding 1 on the terms and subject to the conditions contained in the Servicing
Agreement dated 14th June, 2002, as amended and restated on 6th March, 2003,
25th November, 2003 and as further amended and restated by this Agreement and
from time to time (the Servicing Agreement) in relation to, inter alia,
the Loans and their Related Security sold to the Mortgages Trustee by the
Seller.

 

(D)                               The parties to the Servicing Agreement have
agreed to amend and restate the terms of that Agreement as set out herein.

 

1

 

IT IS HEREBY AGREED as follows:

 

1.                                      DEFINITIONS
AND INTERPRETATION

 

1.1                                 The amended and restated
master definitions and construction schedule signed by, amongst others, the
parties to this Agreement and dated 12th March, 2004 (as the same may be
amended, varied or supplemented from time to time with the consent of the
parties to this Agreement) (the Master Definitions and Construction Schedule)
is expressly and specifically incorporated into this Agreement 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 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.

 

1.2                                 Any reference in this
Agreement to any discretion, power or right on the part of the Mortgages
Trustee shall be as exercised by the Mortgages Trustee only as directed by the
Beneficiaries but subject in each case to the provisions of Clause 16.2
of the Mortgages Trust Deed.

 

1.3                                 Save as expressly provided
herein, any warranties or undertakings provided under this Agreement are made
to each other party to this Agreement.

 

1.4                                 This Agreement amends and
restates the Servicing Agreement made on 14th June, 2002 as amended and
restated on 6th March 2003 and as further amended on 25th November, 2003 (the Principal
Agreement).  As of the date
of this Agreement, any future rights or obligations (excluding such obligations
accrued to the date of this Agreement) of a party under the Principal Agreement
shall be extinguished and shall instead be governed by this Agreement.  The parties agree that this amended and
restated Agreement shall have effect and be operational as from 14th June,
2002.

 

2.                                      APPOINTMENT OF SERVICER

 

2.1                                 Subject to Clauses 2.3 and 4.3(d),
and until termination pursuant to Clause 21, the Mortgages Trustee, the
Seller and Funding 1 (according to their respective estates and interests) each
hereby appoints the Servicer as its lawful agent on their respective behalfs to
administer the Loans and their Related Security, to provide certain other
administration and management services and to exercise their respective rights,
powers and discretions, and to perform their respective duties, under and in
relation to the Loans and their Related Security.  The Servicer in each case hereby accepts such appointment on the
terms and subject to the conditions of this Agreement.  The Security Trustee consents to the
appointment of the Servicer on the terms of and subject to the conditions of
this Agreement.

 

2.2                                 For the avoidance of doubt and
in connection with the rights, powers and discretions conferred under Clause 2.1,
during the continuance of its appointment hereunder, the Servicer shall,
subject to the terms and conditions of this Agreement, the Mortgage Conditions,
the Mortgage Sale Agreement and the Mortgages Trust Deed, have the full power,
authority and right to do or cause to be done any and all things which it
reasonably considers necessary, convenient or incidental to the administration
of the Loans and their Related Security or the exercise of such rights, powers
and discretions, provided however that neither the Mortgages Trustee nor
Funding 1 nor their respective directors shall be required or obliged at any time
to enter into any transaction or to comply with any directions which the
Servicer may give with respect to the operating and financial policies of the
Mortgages Trustee or Funding 1 and the

 

2

 

Servicer hereby acknowledges that all
powers to determine such policies (including the determination of whether or
not any particular policy is for the benefit of the Mortgages Trustee or
Funding 1) are, and shall at all times remain, vested, as the case may be, in the
Mortgages Trustee and/or Funding 1 (and their respective directors) and none of
the provisions of this Agreement shall be construed in a manner inconsistent
with this proviso.

 

2.3                                 The appointment pursuant to Clause 2.1
is conditional upon the issue of the First Issuer Notes having taken place and
shall take effect upon and from the Initial Closing Date automatically without
any further action on the part of any person PROVIDED THAT if the issue of
the First Issuer Notes has not occurred by the 14th June, 2002, or such later
date as the First Issuer and the Joint Lead Managers may agree, this Agreement
shall cease to be of further effect.

 

3.                                      THE ADMINISTRATION SERVICES

 

3.1                               General

 

(a)                                  The duty of the Servicer shall
be to provide the services set out in this Agreement including SCHEDULE 1
hereto (the Services).

 

(b)                                 If and when the Servicer is
requested to confirm or state the capacity in which it is administering and
servicing the Loans, their Related Security and related matters pursuant to
this Agreement by any Borrower or any third party not being a party to this
Agreement and to whom the Servicer is obliged by law to disclose such
information, the Servicer shall confirm or state that it is acting in its
capacity as servicer of the Loans, their Related Security and related matters
as agent for and on behalf of the Mortgages Trustee and the Beneficiaries and
not on its own behalf.

 

3.2                               Sub-contracts

 

(a)                                  The Servicer may sub-contract
or delegate the performance of all or any of its powers and obligations under
this Agreement, provided that (but subject to Clause 3.2(b)):

 

(i)                                     the prior written consent of
Funding 1 and the Security Trustee to the proposed arrangement (including, if
Funding 1 and the Security Trustee consider it necessary, approving any contract
which sets out the terms on which such arrangements are to be made) has been
obtained and written notification has been given to each of the Rating
Agencies;

 

(ii)                                  where the arrangements involve
the custody or control of any Customer Files and/or Title Deeds relating to the
Portfolio for the purpose of performing any delegated Services the
sub-contractor or delegate has executed an acknowledgement in form and
substance acceptable to Funding 1 and the Security Trustee to the effect that
any such Customer Files and/or Title Deeds are and will be held to the order of
the Mortgages Trustee (as trustee for the Beneficiaries);

 

(iii)                               where the arrangements involve
or may involve the receipt by the sub-contractor or delegate of monies
belonging to the Beneficiaries which, in accordance with this Agreement, are to
be paid into the Mortgages Trustee GIC Account and/or the Funding 1 GIC
Account, the sub-contractor or delegate has executed a declaration in form and
substance acceptable to the Beneficiaries that any such monies held by it or to
its order are held on trust for the Beneficiaries and will be paid forthwith
into, as applicable, the Mortgages Trustee GIC Account and/or the Funding 1 GIC
Account in accordance with the terms of the Mortgages Trust Deed;

 

3

 

(iv)                              any such sub-contractor or
delegate has executed a written waiver of any Security Interest arising in
connection with such delegated Services (to the extent that such Security
Interest relates to the Portfolio or any amount referred to in (iii) above);
and

 

(v)                                 neither the Security Trustee,
the Mortgages Trustee nor Funding 1 shall have any liability for any costs,
charges or expenses payable to or incurred by such sub-contractor or delegate
or arising from the entering into, the continuance or the termination of any
such arrangement.

 

(b)                                 The provisos to Clause
3.2(a)(i), (ii) and (iii) shall not apply:

 

(i)                                     to the engagement by the
Servicer of:

 

(A)                              any receiver, solicitor,
insurance broker, valuer, surveyor, accountant, estate agent, insolvency
practitioner, auctioneer, bailiff, sheriff officer, debt counsellor, tracing
agent, property management agent, licensed conveyancer, qualified conveyancer
or other professional adviser acting as such; or

 

(B)                                any locksmith, builder or
other contractor acting as such in relation to a Property,

 

in any
such case being a person or persons whom the Servicer would be willing to
appoint in respect of its own mortgages in connection with the performance by
the Servicer of any of its obligations or functions or in connection with the
exercise of its powers under this Agreement; or

 

(ii)                                  to any delegation to any
wholly-owned subsidiary of the Seller or HBOS plc from time to time.

 

(c)                                  The Mortgages Trustee and/or
Funding 1 and the Security Trustee may by notice in writing require the
Servicer to assign to the Mortgages Trustee any rights which the Servicer may
have against any sub-contractor or delegate arising from the performance of
services by such person relating to any matter contemplated by this Agreement
and the Servicer acknowledges that such rights assigned to the Mortgages
Trustee will be exercised by the Mortgages Trustee as trustee for the
Beneficiaries subject to the terms of the Mortgages Trust Deed.

 

(d)                                 Notwithstanding any
sub-contracting or delegation of the performance of its obligations under this
Agreement, the Servicer shall not thereby be released or discharged from any
liability hereunder and shall remain responsible for the performance of all of
the obligations of the Servicer under this Agreement, and the performance or
non-performance or the manner of performance of any sub-contractor or delegate
of any of the Services shall not affect the Servicer’s obligations under this
Agreement and any breach in the performance of the Services by such
sub-contractor or delegate shall, subject to the Servicer being entitled for a
period of 20 London Business Days from receipt of any notice of the breach to
remedy such breach by any sub-contractor or delegate, be treated as a breach of
this Agreement by the Servicer.

 

3.3                               Notices etc.

 

(a)                                  Within 20 London Business Days
of the Initial Closing Date, the Servicer will give notice (or procure that
notice is given) by courier or by special delivery to HBOS Insurance (PCC)
Guernsey Limited of the assignment to the Mortgages Trustee by the Seller of
its interests in the Halifax Mortgage Re Limited MIG Policies pursuant to the
Assignment of Halifax Mortgage Re Limited MIG Policies, which shall be held by
the Mortgages Trustee absolutely

 

4

 

as bare trustee for the Beneficiaries
pursuant to the Mortgages Trust Deed, and the Servicer shall take all
reasonable steps to ensure the return by the relevant recipient of the
duplicate notices of assignment by way of acknowledgement thereof.

 

(b)                                 Promptly upon request by
Funding 1 and the Security Trustee, the Servicer shall procure that any notices
permitted to be given by the Mortgages Trustee under Clause 6.4 of the Mortgage
Sale Agreement are so given by the Servicer on the Mortgages Trustee’s behalf.

 

3.4                               Liability of Servicer

 

(a)                                  The Servicer shall indemnify
each of the Mortgages Trustee and the Beneficiaries on demand on an after-tax
basis for any loss, liability, claim, expense or damage suffered or incurred by
any of them in respect of the negligence or wilful default of the Servicer in
carrying out its functions as Servicer under this Agreement or the other
Transaction Documents or as a result of a breach by the Servicer of the terms
and provisions of this Agreement or the other Transaction Documents in relation
to such functions.

 

(b)                                 For the avoidance of doubt,
the Servicer shall not be liable in respect of any loss, liability, claim,
expense or damage suffered or incurred by the Mortgages Trustee and/or the
Beneficiaries and/or any other person as a result of the proper performance of
the Services by the Servicer save where such loss, liability, claim, expense or
damage is suffered or incurred as a result of any negligence or wilful default
of the Servicer or as a result of a breach by the Servicer of the terms and
provisions of this Agreement or the other Transaction Documents in relation to
such functions.

 

(c)                                  Any indemnification under this
Clause
3.4 in respect of loss suffered by the Beneficiaries shall be paid
for by reducing the Seller Share of the Trust Property by an amount equal to
the relevant loss incurred by the Beneficiaries in accordance with Clause 8.4
of the Mortgages Trust Deed and Schedule 2 to the Cash Management
Agreement.

 

4.                                      MORTGAGES TRUSTEE VARIABLE BASE
RATE/MORTGAGES TRUSTEE TRACKER RATE

 

4.1                                 The Mortgages Trustee and each
of the Beneficiaries each hereby grants the Servicer full right, liberty and
authority from time to time, in accordance with the relevant Mortgage Terms, to
determine and set the Mortgages Trustee Variable Base Rate and any variable
margin incorporated within the Mortgages Trustee Tracker Rate above the Bank of
England repo rate applicable in relation to Tracker Rate Loans chargeable to
Borrowers from time to time.  In
exercising such right, liberty and authority the Servicer undertakes to each of
the other parties to this Agreement that it shall not at any time, without the
prior consent of the Mortgages Trustee and Funding 1, set or maintain the
Mortgages Trustee Variable Base Rate at a rate which is higher than (although
it may be lower than or equal to) the then prevailing Seller’s Variable Base
Rate, nor will it set or maintain a margin incorporated within the Mortgages
Trustee Tracker Rate above the Bank of England repo rate in respect of any
Tracker Rate Loan, which is higher than the margin above the Bank of England
repo rate then applying to those Tracker Rate Loans beneficially owned by the
Seller outside the Portfolio except in the limited circumstances described in
this paragraph when the Mortgages Trustee will be entitled to do so.  The Servicer will not at any time, without
the prior consent of the Mortgages Trustee and Funding 1, set or maintain:

 

(a)                                  the Mortgages Trustee Variable
Base Rate at a rate which is higher than (although it may be lower than or
equal to) the then prevailing Seller’s Variable Base Rate which applies to
loans beneficially owned by the Seller outside the Portfolio;

 

5

 

(b)                                 the margin incorporated within
the Mortgages Trustee Tracker Rate in respect of any Tracker Rate Loan in the
Portfolio which, where the offer conditions for that Tracker Rate Loan provide
that the margin above the Bank of England repo rate shall be the same as the
margin above the Bank of England repo rate applicable to all other loans having
the same offer conditions in relation to interest rate setting as that Tracker
Rate Loan, is higher or lower than the margin above the Bank of England repo
rate then applying to those Tracker Rate Loans beneficially owned by the Seller
outside the Portfolio; and

 

(c)                                  the margin incorporated within
the Mortgages Trustee Tracker Rate above the Bank of England repo rate in
respect of any other Tracker Rate Loan which is higher than the margin above
the Bank of England repo rate which would then be set in accordance with the
Seller’s Policy from time to time in relation to that Tracker Rate Loan,

 

unless
the Servicer is required to do so pursuant to Clause 4.3, and, subject to
that requirement, that it shall not change the Mortgages Trustee Variable Base
Rate nor the Mortgages Trustee Tracker Rate save for the same reasons as the
Seller was entitled, under the Mortgage Conditions, to change the Seller’s Variable
Base Rate and the Seller’s Tracker Rate prior to the sale to the Mortgages
Trustee of the Loans comprised in the Portfolio and their Related
Security.  Each of the Mortgages Trustee
and the Beneficiaries shall be bound by the Mortgages Trustee Variable Base
Rate and the Mortgages Trustee Tracker Rate set in accordance with this
Agreement.

 

4.2                                 The Servicer shall take the
steps rendered necessary by the relevant Mortgage Terms and applicable law
(including, without limitation, the Guidance Note on Interest Variation Terms
issued by the Office of Fair Trading in February 2000 and any successor
guideline or applicable additional guidelines) to bring each change in such
rate or rates of interest to the attention of the relevant Borrowers, whether
due to a change in the Mortgages Trustee Variable Base Rate or the Mortgages
Trustee Tracker Rate or as a consequence of any provisions of the Mortgage
Terms.  Any change in the Mortgages
Trustee Variable Base Rate or the Mortgages Trustee Tracker Rate shall be notified
in writing to each of the Mortgages Trustee, the Security Trustee and the
Beneficiaries as soon as reasonably practicable and shall, upon receipt of a
request from any of such parties, notify such requesting party of any changes
in the Monthly Payments in relation to the Loans.  All costs arising in relation to such a notification of a change
in such rate or rates of interest shall be borne by the Servicer.

 

4.3                                 (a)           On each Funding 1 Interest Payment Date the
Servicer shall determine, having regard to the aggregate of:

 

(i)                                     the revenue which Funding 1
would expect to receive during the next succeeding Interest Period;

 

(ii)                                  the Mortgages Trustee Variable
Base Rate, any variable margins applicable in relation to any Tracker Rate
Loans and the Variable Mortgage Rates in respect of the Loans which the
Servicer proposes to set under this Clause 4; and

 

(iii)                               the other resources available
to Funding 1 including the Funding 1 Swap Agreement, the Funding 1 Liquidity
Facility, the General Reserve Fund and the Liquidity Reserve Fund,

 

whether
Funding 1 would receive an amount of revenue during that Loan Interest Period
which when aggregated with the funds otherwise available to it is less than the

 

6

 

amount
which is the aggregate of (A) the amount of interest which will be payable in
respect of the Term AAA Advances on the Funding 1 Interest Payment Date falling
at the end of such Loan Interest Period and (B) the other senior expenses of
Funding 1 which rank in priority thereto (the amount (if any) by which it is
less being the Interest Rate Shortfall).

 

(b)                                 If the Servicer determines
that there will be an Interest Rate Shortfall, it will within one London
Business Day of such determination give written notice thereof to the Mortgages
Trustee, Funding 1 and the Security Trustee of such Interest Rate Shortfall and
of the Mortgages Trustee Variable Base Rate and/or the Mortgages Trustee
Tracker Rate which would (taking into account the applicable Mortgage Conditions),
in the Servicer’s reasonable opinion, need to be set in order for no Interest
Rate Shortfall to arise, having regard to the date(s) (which shall be specified
in the notice) on which such change to the Mortgages Trustee Variable Base Rate
and the Mortgages Trustee Tracker Rate would take effect and at all times
acting in accordance with the standards of a Reasonable, Prudent Mortgage
Lender as regards the competing interests of Borrowers with Mortgage Trustee
Variable Base Rate Loans and Borrowers with Mortgages Trustee Tracker Rate
Loans.

 

(c)                                  If the Mortgages Trustee,
Funding 1 and the Security Trustee notify the Servicer that, having regard to
the obligations of Funding 1, the Mortgages Trustee Variable Base Rate and/or
the Mortgages Trustee Tracker Rate should be increased, the Servicer, as agent
for and on behalf of, inter alia, the Mortgages Trustee and the
Beneficiaries, shall take all steps which are necessary, including publishing
any notice which is required in accordance with the Mortgage Terms, to effect
such change in the Mortgages Trustee Variable Base Rate and/or the Mortgages
Trustee Tracker Rate on the date(s) specified in the notice referred to in Clause
4.3(b).

 

(d)                                 The Mortgages Trustee and/or
Funding 1 and the Security Trustee may terminate the authority of the Servicer
under Clause
4.1 and Clause 4.3 to determine the Mortgages
Trustee Variable Base Rate and the Mortgages Trustee Tracker Rate on or after
the occurrence of a Servicer Termination Event, in which case the Mortgages
Trustee shall set the Mortgages Trustee Variable Base Rate and the Mortgages
Trustee Tracker Rate in accordance with this Clause 4.

 

5.                                      ADMINISTRATION OF MORTGAGES

 

5.1                               Direct Debiting Scheme

 

(a)                                  For the purposes of collecting
amounts due from Borrowers under the Loans and their Related Security comprised
in the Portfolio in accordance with this Agreement the Servicer will unless
otherwise agreed in writing with the Beneficiaries:

 

(i)                                     act, or procure that another
person approved in writing by the Beneficiaries (such approval not to be
unreasonably withheld) (the Third Party Collection Agent) acts, as
collection agent for the Mortgages Trustee and the Beneficiaries under the
Direct Debiting Scheme and remains a member of the Direct Debiting Scheme or
any scheme which replaces the Direct Debiting Scheme;

 

(ii)                                  subject to Clauses
5.1(b) and 5.1(c), deliver to the Bankers Automated
Clearing System (BACS) or to the Account Bank such instructions as may be
necessary from time to time for the debit of the account of each Borrower in
respect of which there is a direct debit mandate (the date of such delivery
being the D.D.
Date) with the Monthly Payment due from such Borrower, and for the
amount of such Monthly

 

7

 

Payment to be credited to the Mortgages
Trustee GIC Account on the day after the D.D. Date or, if such is not a London
Business Day, the following London Business Day unless the short-term ratings
of the Account Bank fall below A-1 by S&P, P-1 by Moody’s or F-1 by Fitch,
in which case all further instructions by the Servicer to debit the accounts of
Borrowers that are subject to direct debit bank mandates shall be made to
another bank which has a rating of at least A-1 by S&P, P-1 by Moody’s or
F-1 by Fitch, or directly to the Mortgages Trustee GIC Account;

 

(iii)                               subject to Clauses
5.1(b) and 5.1(c), deliver to the Account Bank or BACS
(as appropriate) instructions for the debit of the account of each Borrower in
respect of which there is a direct debit mandate and the Monthly Payment due
and owing from such Borrower on the D.D. Date immediately preceding the next
succeeding Monthly Payment Date remains outstanding to the extent that, on the
date of presentation of such instructions, such Monthly Payment has not been received
in full by the Servicer on behalf of the Mortgages Trustee and where the
instructions for the debit of the account of the relevant Borrower for the
Monthly Payment due and owing from such Borrower was returned to the Servicer
marked “insufficient funds” within 10 London Business Days of receipt by the
Servicer of any such returned instructions;

 

(iv)                              subject to Clauses
5.1(b) and 5.1(c), deliver to the Account Bank or BACS
(as appropriate) such other instructions for the debit of the account of each Borrower
in respect of which there is a direct debit mandate in accordance with the
Direct Debiting Scheme as may be appropriate for the recovery of sums due by
such Borrower;

 

(v)                                 comply in all material
respects with the requirements from time to time of the Direct Debiting Scheme
including “The Originator’s Guide and Rules to the Direct Debiting Scheme” as
amended from time to time,

 

and
take all such other steps as are reasonably appropriate, including in
particular the preparation and administration of appropriate computer tapes in
connection with BACS, to ensure that all monies received from Borrowers during
banking hours on any particular day are credited on the next day to the
Mortgages Trustee GIC Account.

 

(b)                                 The Servicer may agree with a
Borrower that the Direct Debiting Scheme shall not apply to Monthly Payments to
be made by such Borrower, provided, subject to Clause 5.1(d), that (i)
alternative payment arrangements are made which are intended to ensure timely
payment of Monthly Payments due from the Borrower to the Mortgages Trustee on
behalf of the Beneficiaries, and (ii) the change in arrangements was made at
the instigation of the Borrower or by the Servicer in accordance with the
procedures which would be adopted by a Reasonable, Prudent Mortgage Lender.

 

(c)                                  The Servicer may,
notwithstanding the proviso to Clause 5.1(b), agree such procedures for
the payment by a Borrower of (i) overdue amounts and (ii) amounts payable on
redemption of a Mortgage in whole or in part other than through the Direct
Debiting Scheme as would be agreed by a Reasonable, Prudent Mortgage Lender.

 

(d)                                 The Servicer shall,
notwithstanding the proviso to Clause 5.1(b), use its reasonable
endeavours to credit Monthly Payments made by a Borrower under a payment
arrangement other than the Direct Debiting Scheme to the Mortgages Trustee GIC
Account as follows:

 

(i)                                     where the Borrower pays by
standing order, by close of business on the second London Business Day
following the day on which such amount is received or credited by the Servicer;

 

8

 

(ii)                                  where the Borrower pays by
payment of cash, by transfer payment from another account of the Seller or by
cheque where reference to the relevant Borrower is provided or payments are made
by way of paying-in book, by close of business on the London Business Day which
immediately follows the day on which such amount is received or credited by the
Servicer; and

 

(iii)                               where the Borrower pays by
cheque where a reference to the relevant Borrower is not provided, by close of
business on the next London Business Day after notification from the banks
operating the Seller Bank Accounts of the identity of the Borrower.

 

(e)                                  Where a Borrower permits a
direct debit to be made to his bank account, the Servicer will endeavour to
procure that such Borrower maintains a valid and effective mandate relating to
such direct debit in relation to each Monthly Payment due from that Borrower,
provided that in any case where a Borrower will not permit a direct debit to be
made to his bank account the Servicer will endeavour to make alternative
arrangements acceptable to a Reasonable, Prudent Mortgage Lender so that such
Borrower nevertheless pays each Monthly Payment within the month in which it
falls due.

 

(f)                                    In the event that the BACS
system ceases to operate for any reason the Servicer will use reasonable
endeavours to make alternative arrangements for the use of the back up systems
available to each Account Bank.

 

(g)                                 If at any time the Servicer
shall receive notice whether under the Direct Debiting Scheme or otherwise that
any amount (or part thereof), which was paid in or credited pursuant to Clause 5.1
and which has been transferred to the Mortgages Trustee GIC Account has not
been received as cleared funds or has otherwise been recalled, the Servicer
shall notify the Cash Manager and instruct the Cash Manager forthwith to debit
the Mortgages Trustee GIC Account and credit the relevant collection account
for the whole or any part of such amount (such amount hereinafter referred to
as the shortfall)
and, an amount equal to any costs which are irrecoverable by the Servicer from
the relevant Borrower incurred by the Servicer as a result of such shortfall; PROVIDED
THAT no debit from the Mortgages Trustee GIC Account for the credit
of the collection accounts in respect of any shortfall may be made on or after
a Calculation Date in respect of the relevant period between that Calculation
Date and the next Distribution Date unless sufficient funds are available after
providing or making provision for all payments to be made on the next
succeeding Distribution Date.  After
that following Distribution Date the Mortgages Trustee shall transfer, or
procure on its behalf the transfer, from the Mortgages Trustee GIC Account to
the relevant collection account of an amount equal to such shortfall subject to
it having sufficient funds available to it or the Servicer shall deduct an
amount equal to such shortfall from payments otherwise due on a daily basis
from the Seller to the Mortgages Trustee in respect of Principal Receipts and
Interest Receipts received under the Loans.

 

5.2                               Administration and Enforcement
of Mortgages

 

(a)                                  The Mortgages Trustee and the
Beneficiaries hereby direct the Servicer to administer the Loans comprised in
the Portfolio and carry out its specific obligations under this Agreement in
accordance with the Seller’s Policy.

 

(b)                                 The Servicer will, in relation
to any default by a Borrower under or in connection with a Loan or a Mortgage
comprised in the Portfolio, comply with the Enforcement Procedures or, to the
extent that the Enforcement Procedures are not applicable having regard to the
nature of the default in question, take such action as is not materially
prejudicial to the interests of the Mortgages Trustee (as trustee for the
Beneficiaries) and the Beneficiaries under the relevant MIG Policy, provided
that:

 

9

 

(i)                                     the Servicer shall only become
obliged to comply with the Enforcement Procedures (to the extent applicable) or
to take action as aforesaid after it has become aware of the default;

 

(ii)                                  it is acknowledged by the
Beneficiaries that mortgage lenders generally exercise discretion in pursuing
their respective enforcement procedures and that the Servicer may exercise such
discretion as would a Reasonable, Prudent Mortgage Lender in applying the
Enforcement Procedures to any particular defaulting Borrower or taking action
as aforesaid, provided that in exercising such discretion the interest of Funding
1 in the Portfolio is not materially prejudiced; and

 

(iii)                               in any case where any of the
Insurance Policies requires exact compliance with certain enforcement
procedures the Servicer shall procure the prior written consent of the relevant
insurance company for any deviation by it from such enforcement procedures.

 

5.3                               Records

 

The
Servicer shall keep and maintain records in relation to the Portfolio, on a
Loan by Loan basis, for the purposes of identifying amounts paid by each
Borrower, any amount due from a Borrower and the principal balance (and, if
different, the total balance) from time to time outstanding on a Borrower’s
account and such other records as would be kept by a Reasonable, Prudent
Mortgage Lender.  The Servicer will
provide such information to the Mortgages Trustee and/or Funding 1 and/or the
Security Trustee or to their order at any time upon reasonable notice subject
to the Servicer being reasonably capable of providing such information without
significant additional cost and subject to the provisions of the Data
Protection Act 1998 and other applicable legislation from time to time and
provided that no duty of confidence and no industry code of practice will or
may be breached thereby.

 

5.4                               Trust

 

(a)                                  If the Servicer in carrying
out its functions as Servicer under this Agreement receives (including in its
capacity as agent for the Mortgages Trustee and the Beneficiaries) any money
whatsoever arising from the Loans and their Related Security, which money
belongs to the Mortgages Trustee (as trustee for the Beneficiaries) and is to
be paid to the Mortgages Trustee GIC Account pursuant to this Agreement or any
of the other Transaction Documents or otherwise, it will hold such monies on
trust for the Mortgages Trustee and shall keep such money separate from all
other monies held by the Servicer and shall, as soon as reasonably practicable
and in any event within the time limits referred to in Clause 5.1, pay the monies
into the Mortgages Trustee GIC Account.

 

(b)                                 All other sums received by the
Servicer in respect of the Loans and their Related Security shall be held by
the Servicer for itself.

 

6.                                      NO LIABILITY

 

6.1                                 The Servicer shall have no
liability for any obligation of a Borrower under any Loan comprised in the
Portfolio or any Related Security and nothing herein shall constitute a
guarantee, or similar obligation, by the Servicer of any Loan, Mortgage or any
Borrower.

 

6.2                                 Save as otherwise provided in
this Agreement, the Servicer shall have no liability for the obligations of the
Mortgages Trustee or the Beneficiaries under any of the Transaction Documents
or otherwise and nothing herein shall constitute a guarantee, or similar
obligation, by the Servicer of the Mortgages Trustee or the Beneficiaries in
respect of any of them.

 

10

 

7.                                      NEW LOANS

 

7.1                                 The Portfolio may be augmented
from time to time by the sale to the Mortgages Trustee on any Sale Date of a
New Portfolio by the Seller.

 

7.2                                 The sale of each New Portfolio
to the Mortgages Trustee will in all cases be subject to the terms set out in
the Mortgage Sale Agreement including, without limitation, the conditions set
out in Clauses
4 of the Mortgage Sale Agreement and the representations and
warranties set out in Clause 8 of the Mortgage Sale Agreement.

 

8.                                      PRODUCT SWITCHING AND FURTHER
ADVANCES

 

8.1         (a)                                        The Servicer shall not accept
an application for a Further Advance without first having received confirmation
in writing from the Seller that the Seller would, if so offered by the Mortgages
Trustee, purchase the relevant Loan and its Related Security from the Mortgages
Trustee.

 

(b)                                 The Servicer shall not accept
an application for a Product Switch without first having received confirmation
in writing from the Seller save where the Seller and the Servicer are both
Halifax plc that the Seller would, if so offered by the Mortgages Trustee,
purchase the relevant Loan and its Related Security from the Mortgages Trustee
if on the immediately preceding Distribution Date, the Seller is in breach of
the conditions referred to in Clauses 4.2(a) to (o) inclusive of the Mortgage
Sale Agreement as if references therein to “New Loans” and “New
Portfolio” were references to the Loan which would result from the
implementation of such Product Switch and as if references to “Sale
Date”
were references to the date when the Seller and relevant Borrower complete such
Product Switch.

 

8.2                                 Subject to complying with the
terms of Clause
8.1, where the Servicer accepts a Product Switch or a Further
Advance, the Servicer shall then notify the Seller and the Mortgages Trustee in
writing.

 

8.3                                 Notwithstanding Clause 8.2,
subject to complying with the terms of Clause 8.1, the Servicer, on behalf of and
as agent for the Mortgages Trustee (or, in the case of Product Switches and
Further Advances relative to Scottish Loans, on behalf of and as agent for the
Seller, in its capacity as trustee for the Mortgages Trustee under the relevant
Scottish Declaration of Trust) may accept requests from Borrowers for Product
Switches and Further Advances provided that the Servicer acts in accordance
with its then procedure which would be acceptable to a Reasonable, Prudent
Mortgage Lender.

 

9.                                      REDEMPTION OF MORTGAGES

 

9.1                                 Upon repayment in full of all
sums secured by a Mortgage and/or other Related Security comprised in the
Portfolio, the Servicer shall, and is hereby authorised by the Mortgages
Trustee and the Beneficiaries to execute a receipt or discharge or relevant
H.M. Land Registry Form DS1 of the Mortgage and any such other or further
instrument or deed of satisfaction regarding such Mortgage and/or the Related
Security as it considers to be necessary or advisable, to implement an
Electronic Notification of Discharge to H.M. Land Registry and to release the
relevant Title Deeds to the person or persons entitled thereto.

 

9.2                                 The Servicer undertakes that
prior to any actual release by it of the relevant Title Deeds it will take
reasonable and appropriate steps to satisfy itself that the relevant Title
Deeds are being released to the person or persons entitled thereto.

 

11

 

9.3                                 The Servicer shall procure
that if, upon completion of the Enforcement Procedures, an amount in excess of
all sums due by the relevant Borrower is recovered or received, the balance,
after discharge of all sums due by the Borrower, is paid to the person or
persons next entitled thereto.

 

10.                               POWERS OF ATTORNEY

 

10.1                           For good and valuable
consideration and as security for the interests of the Mortgages Trustee and
the Beneficiaries hereunder, each of the Seller, the Mortgages Trustee and the
Beneficiaries hereby appoints the Servicer as its attorney on its behalf, and
in its own or the attorney’s name, for the following purposes:

 

(a)                                  executing all documents necessary
for the purpose of discharging a Mortgage comprised in the Portfolio which has
been repaid in full and any Related Security or for the sale of a Property as
Mortgagee;

 

(b)                                 executing all documents and
implementing all Electronic Notifications of Discharge to H.M. Land Registry
necessary for the purpose of releasing a Borrower in accordance with Clause 9;

 

(c)                                  executing all documents and
doing all such acts and things which in the reasonable opinion of the Servicer
are necessary or desirable for the efficient provision of the Services
hereunder; and

 

(d)                                 exercising its rights, powers
and discretion under the Mortgages including the right to fix the Mortgages
Trustee Variable Base Rate and the Mortgages Trustee Tracker Rate or any
related rights,

 

provided that, for the avoidance of doubt,
these Powers of Attorney shall not authorise the Servicer to sell any of the
Loans and/or their Related Security comprised in the Portfolio except as
specifically authorised in the Transaction Documents.  For the avoidance of doubt, neither the Seller (where the
Servicer is not Halifax plc), the Mortgages Trustee nor Funding 1 shall be
liable or responsible for the acts of the Servicer or any failure by the
Servicer to act under or in respect of these Powers of Attorney.

 

10.2                           The appointments contained in Clause 10.1
shall be irrevocable unless and until following a Termination Event the
Mortgages Trustee and/or Funding 1 and the Security Trustee serves notice
pursuant to Clause 21 to terminate the Servicer’s appointment under this
Agreement upon which the appointments contained in Clause 10.1 shall be
automatically revoked.

 

11.                               COSTS AND EXPENSES

 

11.1                           The Mortgages Trustee (on
behalf of the Beneficiaries) will on each Distribution Date reimburse, in
accordance with Clause 10.2 of the Mortgages Trust Deed, the Servicer for all
out-of-pocket costs, expenses and charges (together with any amounts in respect
of Irrecoverable Value Added Tax due thereon) properly incurred by the Servicer
in the performance of the Services including any such costs, expenses or
charges not reimbursed to the Servicer on any previous Distribution Date and
the Servicer shall supply the Mortgages Trustee with a copy of an appropriate
VAT invoice issued by the person making the supply.

 

11.2                           The Servicer will use
reasonable endeavours to recover from the relevant Borrowers all costs and
expenses incurred by the Servicer which are properly recoverable from those
Borrowers under the relevant Mortgage Conditions.

 

12

 

12.                               INFORMATION

 

12.1                        Maintenance of Records

 

(a)                                  Subject to Clause 18,
the Servicer shall keep the Customer Files relating to the Portfolio in safe
custody and shall take appropriate technical and organisational measures
against the unauthorised or unlawful processing of personal data and against
accidental loss or destruction of, or damage to, personal data.  The Servicer shall maintain in an adequate
form such records as are necessary to enforce each Mortgage comprised in the
Portfolio and, where relevant, any other Related Security.

 

(b)                                 A duplicate of any computer
records held by the Servicer which contains information relating to the Loans
and the Related Security shall be lodged by the Servicer on a daily basis at
the offices of the Seller at the Pudsey Data Centre or at such other locations
selected by the Servicer, so long as such location is a location separate from
that in which the original computer records are stored and in an environment
conducive to the safe storage of electronic media, such records to be held to
the order of the Mortgages Trustee and to be replaced by a revised duplicate as
and when the original records are revised. 
The Servicer shall keep the Mortgages Trustee informed of the location
of the Customer Files and duplicate computer records.

 

12.2                        Use of I.T. systems

 

(a)                                  The Servicer covenants that at
the date hereof in respect of the software which is used by the Servicer in
providing the Services, it shall for the duration of this Agreement:

 

(i)                                     ensure that it has in place
all necessary licences and/or consents from the respective licensor or
licensors (if any) of such software; and

 

(ii)                                  except in so far as it would
breach any other of its legal obligations, grant to any person to whom it may
sub-contract or delegate the performance of all or any of its powers and
obligations under this Agreement and/or to such person as the Mortgages Trustee
and the Beneficiaries elect as a substitute servicer in accordance with the
terms of this Agreement a licence to use any proprietary software together with
any updates which may be made thereto from time to time.

 

(b)                                 The Servicer shall use
reasonable endeavours to maintain in working order the information technology
systems used by the Servicer in providing the Services.

 

(c)                                  The Servicer shall pass to any
person to whom it may sub-contract or delegate the performance of all or any of
its powers and obligations under this Agreement and/or to such person as the
Mortgages Trustee and the Beneficiaries elect as a substitute servicer in
accordance with the terms of this Agreement the benefit of any warranties in
relation to the software insofar as the same are capable of assignment.

 

12.3                        Access to Books and Records

 

Subject
to all applicable laws, the Servicer shall permit the Mortgages Trustee and
Funding 1 (and their auditors) and the Security Trustee and any other person
nominated by the Beneficiaries (to whom the Servicer has no reasonable
objection) upon reasonable notice during normal office hours to have access, or
procure that such person or persons are granted access, to all books of record
and account (including, for the avoidance of doubt, the Title Deeds and
Customer Files) relating to the administration of the Loans and their Related
Security comprised in the Portfolio and related matters in accordance with this
Agreement.

 

13

 

12.4                        Information Covenants

 

(a)                                  The Servicer shall provide the
Mortgages Trustee, the Beneficiaries, each Manager (as set out in each Issuer
Master Definitions and Construction Schedule) (if requested by such Manager to
do so) and the Rating Agencies quarterly with a report in, or substantially in,
the form set out in SCHEDULE 2 and shall assist the Cash
Manager in the production of quarterly reports substantially in the forms set
out in Schedule 3 of the Cash Management Agreement.

 

The
Servicer shall notify the Rating Agencies in writing of the details of (i) any
material amendment to the Transaction Documents, (ii) any proposed material
change in the valuation procedures or policies applied or to be applied in
relation to Properties by it in connection with its mortgage business (details
of which change may be included in a report provided under paragraph ((a)) and
(iii) any other information relating to its mortgage business and financial
condition as the Rating Agencies may reasonably request in connection with the
ratings of the Notes and other matters contemplated by the Transaction
Documents, provided that such request does not adversely interfere with the
Servicer’s day to day provision of the Services under the other terms of this
Agreement.

 

(b)                                 The Servicer shall, at the
request of Funding 1 and the Security Trustee (where the Servicer is the
Seller) and at the request of the Beneficiaries (where the Servicer is no
longer the Seller), furnish Funding 1, the Security Trustee and/or the
Beneficiaries (as appropriate) and the Rating Agencies with such other
information relating to its business and financial condition as it may be
reasonable for Funding 1, the Security Trustee and/or the Beneficiaries (as
appropriate) to request in connection with the ratings of the Notes and other
matters contemplated by the Transaction Documents, provided that Funding 1, the
Security Trustee or the Beneficiaries (as appropriate) shall not make such a
request more than once every three months unless, in the belief of Funding 1,
the Security Trustee or the Beneficiaries (as appropriate), an Intercompany
Loan Event of Default or a Termination Event shall have occurred and is
continuing or may reasonably be expected to occur.

 

(c)                                  The Servicer shall make
available to beneficial owners of the Notes, who have provided beneficial
ownership certification as described herein, on a monthly basis a report
containing information about the loans in the Mortgages Trust.

 

13.                               REMUNERATION

 

The
Mortgages Trustee (on behalf of the Beneficiaries) shall pay to the Servicer
for its Services hereunder an administration fee (the Administration Fee)
(inclusive of Value Added Tax) which:

 

(a)                                  shall be calculated in
relation to each Distribution Period on the basis of the number of days elapsed
and a 365 day year at the rate of 0.05 per cent. per annum, inclusive of Value
Added Tax, on the aggregate amount of the Trust Property as at close of business
on the preceding Funding 1 Interest Payment Date (or, as applicable, the
Initial Closing Date); and

 

(b)                                 shall be paid to the Servicer
in arrear on each Distribution Date in the manner contemplated by and in
accordance with the provisions of Clause 10.2 of the Mortgages Trust Deed.

 

14.                               INSURANCES

 

14.1                           The Servicer will administer
the arrangements for insurance to which the Mortgages Trustee is a party or in
which either the Seller or the Mortgages Trustee (on behalf of the

 

14

 

Beneficiaries) has an interest and which
relate to the Loans and the Mortgages comprised in the Portfolio or the
business of the Mortgages Trustee.  In
particular, but without limitation, the Servicer shall promptly notify the
Mortgages Trustee and the Beneficiaries and the Trustee of the existence of any
insurance policies to which the Seller is a party or in which it has an
interest in addition to those specifically referred to in the definition of
“Halifax Insurance Policies” in the Master Definitions and Construction
Schedule.

 

14.2                           The Servicer shall use its
reasonable endeavours to credit to the Mortgages Trustee GIC Account all
proceeds received from any claim made under any Insurance Policy in relation to
any Loan or its Related Security by close of business on the London Business
Day which immediately follows the day on which such amounts are received or
credited by the Servicer and which is to be applied either in whole or in part
in repayment of a Loan.

 

15.                               HALIFAX INSURANCE POLICIES

 

15.1                           The Servicer shall not
knowingly take or omit to take any action which would:

 

(a)                                  result in the avoidance or
termination of any of the Halifax Insurance Policies in relation to any Loans
and Mortgages to which any Halifax Insurance Policy applies; or

 

(b)                                 reduce the amount payable on
any claim made on behalf of the Mortgages Trustee (as trustee for the
Beneficiaries) under any Halifax Insurance Policy; or

 

(c)                                  invalidate any Halifax
Insurance Policy.

 

15.2                           The Servicer shall prepare and
submit any claim under the Halifax Insurance Policies in accordance with the
requirements of the relevant Halifax Insurance Policy and otherwise with the
usual procedures undertaken by a Reasonable, Prudent Mortgage Lender on behalf
of the Mortgages Trustee and the Beneficiaries and shall comply with the other
requirements of the insurer under the relevant Halifax Insurance Policy.

 

15.3                           If the Seller’s Policy
requires the Servicer to make a claim under the relevant MIG Policy and the
Servicer has failed to make such a claim, then the Beneficiaries may direct the
Mortgages Trustee on their behalf to direct the Servicer to make a claim or, in
default thereof by the Servicer, the Beneficiaries may direct the Mortgages
Trustee to itself make a claim under such policy and the Servicer shall, within
10 London Business Days of receiving a written request from the Mortgages
Trustee (as trustee for the Beneficiaries), provide the Mortgages Trustee with
such information as the Mortgages Trustee may require to enable it to make a
claim under the relevant MIG Policy.

 

16.                               BUILDINGS POLICIES

 

16.1                           The Servicer shall not
knowingly take any action or omit to take any action which would result in the
avoidance or termination of any applicable Buildings Policy or would reduce the
amount payable on any claim thereunder.

 

16.2                           Upon receipt of notice that
any Borrower whose Loan is secured by a mortgage of or a standard security over
a leasehold Property including a Property in Scotland held under a long lease
has failed to make a payment when due of any sums due under the relevant lease
in respect of the insurance of the property the Servicer may debit that
Borrower’s account with the relevant amount which shall then be paid to the
landlord.

 

15

 

16.3                           If the Servicer becomes aware
that a Borrower has failed to pay premiums due under any Buildings Policy, the
Servicer shall take such action as would a Reasonable, Prudent Mortgage Lender
with a view to ensuring that the relevant Property continues to be insured in
accordance with the applicable Mortgage Terms or the Alternative Insurance
Recommendations.

 

17.                               TITLE DEEDS AND CUSTOMER FILES

 

17.1                           The Servicer shall keep the
Title Deeds, Customer Files and (where applicable) Insurance Policies and the
receipt of notes of assignment relating to the Portfolio in safe custody and
shall not without the prior written consent of the Mortgages Trustee and the
Beneficiaries part with possession, custody or control of them otherwise than
to a sub-contractor or delegate appointed pursuant to Clause 3.2 or to a solicitor,
licensed conveyancer, qualified conveyancer or authorised practitioner, subject
to the usual undertaking to hold them to the order of the Servicer (who in turn
will hold them to the order of the Mortgages Trustee (as trustee for the
Beneficiaries) or in the case of Scottish Loans, to the order of the Seller, in
its capacity as trustee for the Mortgages Trustee (as trustee for the
Beneficiaries) or to H.M. Land Registry or Registers of Scotland or, upon
redemption of the relevant Loan, to the order of the Borrower.

 

17.2                           The Title Deeds and Customer
Files relating to the Portfolio shall be kept in such manner so that a computer
record is maintained of their location and they are identifiable and
retrievable by reference to an account number and pool identifier and
identifiable and distinguishable from the title deeds relating to other
properties and mortgages and standard securities in respect of which the
Servicer is mortgagee or heritable creditor or servicer.  In the event of receipt by the Servicer of
notice that the short-term, unsecured, unsubordinated and unguaranteed debt of
the Servicer is rated less than A-1 by S&P and P-1 by Moody’s and F1 by
Fitch, the Servicer shall use reasonable endeavours to ensure that the Title
Deeds are identified as distinct from the title deeds of other properties and
mortgages and standard securities which do not form part of the Portfolio.

 

17.3                           The Servicer shall provide
access or procure that access is provided to the Title Deeds, Customer Files
and other records relating to the administration of the Loans and Mortgages in
the Portfolio to the Mortgages Trustee, the Beneficiaries, the Security Trustee
and their respective agents at all reasonable times and upon reasonable written
notice.  The Servicer acknowledges that
the Title Deeds and Customer Files relating to the Portfolio in its possession,
custody or control will be held to the order of the Mortgages Trustee (as
trustee for the Beneficiaries) or in the case of Scottish Loans, to the order
of the Seller, in its capacity as trustee for the Mortgages Trustee (as trustee
for the Beneficiaries), and that it has, in its capacity as Servicer, no
beneficial interest therein and the Servicer (in its capacity as such but not
in its capacity as a Beneficiary) irrevocably waives any rights or any Security
Interest which it might have therein or to which it might at any time be
entitled.

 

17.4                           The Servicer shall, forthwith
on the termination of the appointment of the Servicer pursuant to Clause 21,
deliver the Title Deeds and Customer Files in its possession, custody or
control or that of its sub-contractors or agents to or to the order of the
Mortgages Trustee or to such person as the Mortgages Trustee elects as a
substitute servicer in accordance with the terms of this Agreement upon written
request by the Mortgages Trustee made at any time on or after notice of, or on
or after, termination of the appointment of the Servicer pursuant to Clause 21.

 

17.5                           The Servicer undertakes that
it will use all reasonable efforts to obtain as soon as reasonably practicable:

 

16

 

(a)                                  the title number to each
Property in respect of which a Mortgage is registered at H.M. Land Registry to
the extent that such title number does not appear in the Exhibit to the
Mortgage Sale Agreement (or, as the case may be, the Schedule to the relevant
New Portfolio Notice); and

 

(b)                                 The title number to each
Property in respect of which a Mortgage is registered in the Land Register of
Scotland to the extent that such title number does not appear in the Schedule
to the relevant New Portfolio Notice.

 

The
Servicer shall include in the quarterly report to be delivered in accordance
with Clause
12.4 of this Agreement (i) details of such title numbers relating to
the Initial Portfolio as are then known to the Servicer at the time of such
report and (ii) details of such title numbers relating to any New Loans
purchased from the Seller as are then known to the Seller at the time of such
report, together with such other information relating thereto as the Mortgages
Trustee may reasonably request.

 

18.                               DATA PROTECTION

 

18.1                           The Servicer and the Mortgages
Trustee each represents that as at the date hereof it has and hereafter it will
maintain all appropriate registrations, licences, consents and authorities (if
any) required under the Data Protection Act 1998 together, with its ancillary
legislation (the Data Protection Act) to enable it to perform its respective
obligations under this Agreement.  In
addition to the foregoing and notwithstanding any of the other provisions of
this Agreement, each of the Servicer and the Mortgages Trustee hereby agree and
covenant as follows:

 

(a)                                  that only data that is not
“personal data” (as described in the Data Protection Act) may be transferred by
the Servicer to the Mortgages Trustee or any other entity located in Jersey
(unless: (i) Jersey is determined, on the basis of Article 25(b) of Directive
95/46/EC, a third country which ensures an adequate level of protection of
“personal data” by the European Commission or (ii) the Servicer and the
Mortgages Trustee have entered into a data transfer agreement in a form
approved by the EC Commission as meeting the requirements of Article 26(2) of
Directive 95/46/EC for the transfer of personal data to third countries which
do not ensure an adequate level of protection (the Standard Contractual Clauses)
in which case, subject to Clause 18(e), the Servicer may transfer such personal
data to the Mortgages Trustee in Jersey);

 

(b)                                 that if, at the date at which
circumstances enable the Mortgages Trustee to exercise its right to demand that
the Servicer transfer inter alia personal data to the Mortgages
Trustee, (i) Jersey has been determined, on the basis of Article 25(b) of
Directive 95/46/EC a third country which ensures an adequate level of
protection of personal data by the European Commission or (ii) the Servicer and
the Mortgages Trustee have entered into the Standard Contractual Clauses then,
subject to the Clause 18(e), the Servicer shall transfer the relevant
personal data to the Mortgages Trustee or to its order;

 

(c)                                  that the Servicer will, if the
Mortgages Trustee requires the Servicer to do so, take all reasonable steps to
notify each Borrower that the Mortgages Trustee is a “data controller” (as
defined in the Data Protection Act) and provide each such Borrower with such
details as the Mortgage Trustee shall reasonably request including but not
limited to the Mortgages Trustee’s contact details for the purposes of the Data
Protection Act;

 

17

 

(d)                                 that the Servicer and the
Mortgages Trustee will only use any data in relation to the Loans and the
related Borrowers for the purposes of administering and/or managing the
Portfolio, and will not sell such data to any third party or allow any third
party to use such data other than in compliance with the Data Protection Act,
the conditions stated in this Clause 18 and for the sole purpose of
administering and/or managing the Portfolio;

 

(e)                                  that the Mortgages Trustee
will comply with the provisions of the Data Protection (Jersey) Law 1987 (as
amended) or any law which supersedes or replaces the Data Protection (Jersey)
Law 1987 and (so long as the provisions of the Data Protection Act do not
conflict with the provisions of the Data Protection (Jersey) Law 1987 (as
amended) or any law which supersedes or replaces the Data Protection (Jersey)
Law 1987) with the provisions of the Data Protection Act;

 

(f)                                    that the Mortgages Trustee
shall maintain a written record of its reasons for applying the Data Protection
Order 2000/185 (as set forth under the Conditions under paragraph 3 of Part II
of Schedule I of the Data Protection Act).

 

18.2                           The Servicer will use all
reasonable endeavours to ensure that, in the event of the appointment of a
sub-contractor in accordance with Clause 3.2 such sub-contractor shall obtain
and maintain all appropriate registrations, licences, consents and authorities
required (including, without limitation, those required under the Data
Protection Act), and comply with obligations equivalent to those imposed on the
Servicer in this Clause 18, to enable it to perform its obligations.

 

19.                               COVENANTS OF SERVICER

 

19.1                           The Servicer hereby covenants
with and undertakes to each of the Mortgages Trustee, the Beneficiaries and the
Security Trustee that without prejudice to any of its specific obligations
hereunder it will:

 

(a)                                  administer the Loans and their
Related Security as if the same had not been sold to the Mortgages Trustee but
had remained on the books of the Seller;

 

(b)                                 provide the Services in such
manner and with the same level of skill, care and diligence as would a
Reasonable, Prudent Mortgage Lender;

 

(c)                                  comply with any proper
directions, orders and instructions which the Mortgages Trustee or the
Beneficiaries may from time to time give to it in accordance with the
provisions of this Agreement and, in the event of any conflict, those of the
Mortgages Trustee shall prevail;

 

(d)                                 keep in force all licences,
approvals, authorisations and consents which may be necessary in connection
with the performance of the Services and prepare and submit on a timely basis
all necessary applications and requests for any further approval,
authorisation, consent or licence required in connection with the performance
of the Services and in particular any necessary registrations under the Data
Protection Act;

 

(e)                                  save as otherwise agreed with
the Mortgages Trustee and each of the Beneficiaries, provide free of charge to
the Mortgages Trustee and the Beneficiaries, office space, facilities,
equipment and staff sufficient to fulfil the obligations of the Mortgages
Trustee and the Beneficiaries under this Agreement;

 

18

 

(f)                                    not knowingly fail to comply
with any legal requirements in the performance of the Services;

 

(g)                                 make all payments required to
be made by it pursuant to this Agreement on the due date for payment thereof in
sterling (or as otherwise required under the Transaction Documents) in
immediately available funds for value on such day without set-off (including,
without limitation, in respect of any fees owed to it) or counterclaim but
subject to any deductions required by law;

 

(h)                                 not without the prior written
consent of the Security Trustee amend or terminate any of the Transaction
Documents save in accordance with their terms; and

 

(i)                                     forthwith upon becoming aware
of any event which may reasonably give rise to an obligation of the Seller to
repurchase any Loan pursuant to the Mortgage Sale Agreement, notify the
Mortgages Trustee and the Beneficiaries in writing of such event.

 

19.2                           The covenants of the Servicer
in Clause
19.1 shall remain in force until this Agreement is terminated but
without prejudice to any right or remedy of the Mortgages Trustee and/or the
Seller and/or Funding 1 arising from breach of any such covenant prior to the
date of termination of this Agreement.

 

20.                               SERVICES NON-EXCLUSIVE

 

Nothing
in this Agreement shall prevent the Servicer from rendering or performing
services similar to those provided for in this Agreement to or for itself or
other persons, firms or companies or from carrying on business similar to or in
competition with the business of the Mortgages Trustee and the Beneficiaries.

 

21.                               TERMINATION

 

21.1                           If any of the following events
(Servicer
Termination Events) shall occur:

 

(a)                                  default is made by the
Servicer in the payment on the due date of any payment due and payable by it
under this Agreement and such default continues unremedied for a period of five
London Business Days after the earlier of the Servicer becoming aware of such
default and receipt by the Servicer of written notice from Funding 1, the
Security Trustee and the Mortgages Trustee requiring the same to be remedied;
or

 

(b)                                 default is made by the
Servicer in the performance or observance of any of its other covenants and
obligations under this Agreement, which in the reasonable opinion of the
Security Trustee is materially prejudicial to the interests of Funding 1 and/or
the Issuers under the Intercompany Loans and/or the interests of the holders of
the Notes from time to time and such default continues unremedied for a period
of 20 London Business Days after becoming aware of such default provided
however that where the relevant default occurs as a result of a default by any
person to whom the Servicer has sub-contracted or delegated part of its
obligations hereunder, such default shall not constitute a Termination Event
if, within such period of 10 London Business Days of receipt of such notice
from Funding 1 and the Security Trustee, the Servicer terminates the relevant
sub-contracting or delegation arrangements and takes such steps as Funding 1
and the Security Trustee may in their absolute discretion specify to remedy
such default or to indemnify the Mortgages Trustee and the Beneficiaries
against the consequences of such default; or

 

19

 

(c)                                  the occurrence of an
Insolvency Event in relation to the Servicer; or

 

(d)                                 the Board of Funding 1
resolves, after due consideration and acting reasonably, that the appointment
of the Servicer should be terminated,

 

then
the Mortgages Trustee and/or Funding 1 and the Security Trustee may at once or
at any time thereafter while such default continues by notice in writing to the
Servicer terminate its appointment as Servicer under this Agreement with effect
from a date (not earlier than the date of the notice) specified in the notice.  Upon termination of the Servicer as servicer
under this Agreement, the Security Trustee shall use its reasonable endeavours
to appoint a substitute servicer that satisfies the conditions set forth in Clauses
21.2(c), (d) and (e).

 

21.2                           The appointment of the
Servicer under this Agreement may be terminated upon the expiry of not less
than 12 months’ notice of termination given by the Servicer to the Mortgages
Trustee and the Beneficiaries provided that:

 

(a)                                  the Mortgages Trustee and the
Beneficiaries consent in writing to such termination;

 

(b)                                 a substitute servicer shall be
appointed, such appointment to be effective not later than the date of such
termination and the Servicer shall notify the Rating Agencies in writing of the
identity of such substitute servicer;

 

(c)                                  such substitute servicer has
experience of administering mortgages of and standard securities over
residential property in the United Kingdom and is approved by the Mortgages
Trustee and the Beneficiaries;

 

(d)                                 such substitute servicer
enters into an agreement substantially on the same terms as the relevant
provisions of this Agreement and the Servicer shall not be released from its
obligations under the relevant provisions of this Agreement until such
substitute servicer has entered into such new agreement; and

 

(e)                                  the then current ratings (if
any) of the Notes are not adversely affected as a result thereof, unless
otherwise agreed by an Extraordinary Resolution (as defined in the Note Trust
Deed) of the holders of the relevant series and class of Notes.

 

21.3                           On and after termination of
the appointment of the Servicer under this Agreement pursuant to this Clause 21,
all authority and power of the Servicer under this Agreement shall be
terminated and be of no further effect and the Servicer shall not thereafter
hold itself out in any way as the agent of the Mortgages Trustee and/or the
Beneficiaries pursuant to this Agreement.

 

21.4                           Upon termination of the
appointment of the Servicer under this Agreement pursuant to this Clause 21
(but subject to Clause 18(e)), the Servicer shall:

 

(a)                                  forthwith deliver (and in the
meantime hold on trust for, and to the order of, the Mortgages Trustee) to the
Mortgages Trustee or as it shall direct the Customer Files, the Title Deeds,
all books of account, papers, records, registers, correspondence and documents
in its possession or under its control relating to the affairs of or belonging
to the Mortgages Trustee (as trustee for the Beneficiaries) and the Mortgages
in the Portfolio and any other Related Security, (if practicable, on the date
of receipt) any monies then held by the Servicer on behalf of the Mortgages
Trustee and any other assets of the Mortgages Trustee and the Beneficiaries;

 

20

 

(b)                                 take such further action as the
Mortgages Trustee, Funding 1 and the Security Trustee may reasonably direct at
the expense of the Beneficiaries (including in relation to the appointment of a
substitute servicer) provided that the Mortgages Trustee shall not be required
to take or direct to be taken such further action unless it has been
indemnified to its satisfaction;

 

(c)                                  provide all relevant
information contained on computer records in the form of magnetic tape,
together with details of the layout of the files encoded on such magnetic
tapes;

 

(d)                                 co-operate and consult with
and assist the Mortgages Trustee, Funding 1, the Security Trustee and their
nominees (which shall, for the avoidance of doubt, include any new servicer
appointed by any of them) for the purposes of explaining the file layouts and
the format of the magnetic tapes generally containing such computer records on
the computer system of the Mortgages Trustee or such nominee; and

 

(e)                                  permit the Mortgages Trustee,
Funding 1 and the Security Trustee to have access at reasonable times to the
Halifax Insurance Policies.

 

21.5                           The Servicer shall deliver to
the Mortgages Trustee and the Beneficiaries as soon as reasonably practicable
but in any event within five days of becoming aware thereof a notice of any
Termination Event or any event which with the giving of notice or lapse of time
or certification would constitute the same. 
Such notification shall specify which event in Clause 21 has occurred and
was the cause of such Termination Event (or any event which the giving of notice
or lapse of time or certification would constitute a Termination Event), a
description of the details of such Termination Event, and, if relevant, a
reference to the provision in this Agreement or the other Transaction Documents
which the Servicer has breached.

 

21.6                           Termination of this Agreement
or the appointment of the Servicer under this Agreement shall be without
prejudice to the liabilities of the Mortgages Trustee and the Beneficiaries to
the Servicer or vice versa incurred before the date of such
termination.  The Servicer shall have no
right of set-off or any lien in respect of such amounts against amounts held by
it on behalf of the Mortgages Trustee.

 

21.7                           This Agreement shall terminate
at such time as Funding 1 has no further interest in any of the Loans or the
Mortgages which have been comprised in the Portfolio.

 

21.8                           On termination of the
appointment of the Servicer under the provisions of this Clause 21, the Servicer shall
be entitled to receive all fees and other monies accrued up to the date of
termination but shall not be entitled to any other or further
compensation.  Such monies so receivable
by the Servicer shall be paid by the Mortgages Trustee on the dates on which
they would otherwise have fallen due hereunder.  For the avoidance of doubt, such termination shall not affect the
Servicer’s rights to receive payment of all amounts (if any) due to it from the
Mortgages Trustee other than under this Agreement.

 

21.9                           Prior to termination of this
Agreement, the Servicer, the Seller, the Security Trustee, the Mortgages
Trustee and Funding 1 shall co-operate to obtain the agreement of the Borrowers
to a new bank mandate permitting the Mortgages Trustee to operate the Direct
Debiting Scheme.

 

21.10                     Any provision of this Agreement which is
stated to continue after termination of the Agreement shall remain in full
force and effect notwithstanding termination.

 

21

 

22.                               FURTHER ASSURANCE

 

22.1                           The parties hereto agree that
they will co-operate fully to do all such further acts and things and execute
any further documents as may be necessary or desirable to give full effect to
the arrangements contemplated by this Agreement.

 

22.2                           Without prejudice to the
generality of Clause 21.1, the Mortgages Trustee and the Beneficiaries shall
upon request by the Servicer forthwith give to the Servicer such further powers
of attorney or other written authorisations, mandates or instruments as are
necessary to enable the Servicer to perform the Services.

 

22.3                           In the event that there is any
change in the identity of the Mortgages Trustee or an additional Mortgages
Trustee is appointed, the remaining Mortgages Trustee and/or the retiring
Mortgages Trustee, as the case may be, shall execute such documents with any
other parties to this Agreement and take such actions as such new Mortgages
Trustee may reasonably require for the purposes of vesting in such new
Mortgages Trustee the rights of the Mortgages Trustee under this Agreement and
releasing the retiring Mortgages Trustee from further obligations thereunder
and while any Note remains outstanding shall give notice thereof to the Rating
Agencies.

 

22.4                           Nothing herein contained shall
impose any obligation or liability on the Mortgages Trustee to assume or
perform any of the obligations of the Servicer hereunder or render it liable
for any breach thereof.

 

23.                               MISCELLANEOUS

 

23.1                           Subject to Clause 23.2,
in the event that the funds available to the Mortgages Trustee on any Funding 1
Interest Payment Date are not sufficient to satisfy in full the aggregate
amount payable to the Servicer by the Mortgages Trustee on such Funding 1
Interest Payment Date then the amount payable to the Servicer on such Funding 1
Interest Payment Date shall be reduced by the amount of the shortfall and such
shortfall shall (subject always to the provisions of this Clause 23) be payable on the
immediately succeeding Funding 1 Interest Payment Date.

 

23.2                           In the event that:

 

(a)                                  after redemption in full of
the Intercompany Loans; or

 

(b)                                 after service of an
Intercompany Loan Acceleration Notice and payment of all other prior claims,

 

the
remaining sums available to the Mortgages Trustee or remaining proceeds of
enforcement are insufficient to satisfy in full the outstanding fees or other
claims of the Servicer, such fees shall be reduced by the amount of the
deficiency.

 

23.3                           Each of the Seller and the
Servicer agrees that it will not:

 

(a)                                  set off or purport to set off
any amount which the Mortgages Trustee, Funding 1 or each Issuer is or will
become obliged to pay to it under any of the Transaction Documents against any
amount from time to time standing to the credit of or to be credited to the
Mortgages Trustee GIC Account, the Funding 1 GIC Account, the Funding 1
Transaction Account or any Issuer Transaction Account or in any other account
prior to transfer to the Mortgages Trustee GIC Account, the Funding 1 GIC

 

22

 

Account, the Funding 1 Transaction Account
or any Issuer Account, as appropriate; or

 

(b)                                 make or exercise any claims or
demands, any rights of counterclaim or any other equities against or withhold
payment of any and all sums of money which may at any time and from time to
time be standing to the credit of the Mortgages Trustee GIC Account, the
Funding 1 GIC Account, the Funding 1 Transaction Account or the relevant Issuer
Account.

 

23.4                           The Servicer agrees that for
so long as any Notes are outstanding it will not petition nor commence
proceedings for the administration or winding up of the Mortgages Trustee or
Funding 1 or any Issuer nor participate in any ex parte proceedings with regard
thereto.

 

23.5                           In relation to all sums due
and payable by the Mortgages Trustee to the Servicer, the Servicer agrees that
it shall have recourse only to sums paid to or received by (or on behalf of)
the Mortgages Trustee pursuant to the provisions of the Mortgage Sale
Agreement, the other Transaction Documents and in relation to the Mortgages.

 

23.6                           For the avoidance of doubt,
neither Beneficiary shall be liable to pay any amounts due under Clauses 11
and 13
without prejudice to the obligations of the Mortgages Trustee in respect of
such amounts.

 

23.7                           Notwithstanding any other
provisions of this Agreement, all obligations to, and rights of, Funding 1
under or in connection with this Agreement (other than its obligations under Clause 24)
shall automatically terminate upon the discharge in full of all amounts owing
by it under any Intercompany Loan Agreement, provided that this shall be
without prejudice to any claims in respect of such obligations and rights
arising on or prior to such date.

 

24.                               CONFIDENTIALITY

 

During
the continuance of this Agreement or after its termination, each of the
Mortgages Trustee and the Beneficiaries shall use its best endeavours not to
disclose to any person, firm or company whatsoever any information relating to
the business, finances or other matters of a confidential nature of any other
party hereto of which it may exclusively by virtue of being party to the
Transaction Documents have become possessed and shall use all reasonable
endeavours to prevent any such disclosure as aforesaid, provided however that
the provisions of this Clause 24 shall not apply:

 

(a)                                  to any information already
known to the Mortgages Trustee or the Beneficiaries otherwise than as a result
of entering into any of the Transaction Documents;

 

(b)                                 to any information
subsequently received by the Mortgages Trustee or the Beneficiaries which it
would otherwise be free to disclose;

 

(c)                                  to any information which is or
becomes public knowledge otherwise than as a result of the conduct of the
Mortgages Trustee or the Beneficiaries;

 

(d)                                 to any extent that the
Mortgages Trustee or the Beneficiaries is required to disclose the same
pursuant to any law or order of any court or pursuant to any direction, request
or requirement (whether or not having the force of law) of any central bank or
any governmental or other authority (including, without limitation, any
official bank examiners or regulators);

 

23

 

(e)                                  to the extent that the
Mortgages Trustee or the Beneficiaries needs to disclose the same for
determining the existence of, or declaring, an Intercompany Loan Event of
Default or a Termination Event, the protection or enforcement of any of its
rights under any of the Transaction Documents or in connection herewith or
therewith or for the purpose of discharging, in such manner as it thinks fit,
its duties under or in connection with such agreements in each case to such persons
as require to be informed of such information for such purposes; or

 

(f)                                    in relation to any information
disclosed to the professional advisers of the Mortgages Trustee or the
Beneficiaries or (in connection with the review of current ratings of the Notes
or with a prospective rating of any debt to be issued by an Issuer) to any
credit rating agency or any prospective new Servicer or Mortgages Trustee.

 

25.                               NOTICES

 

Any
notices to be given pursuant to this Agreement to any of the parties hereto
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. on a London Business Day or on the
next London Business Day if delivered thereafter or (in the case of first class
post) when it would be received in the ordinary course of the post and shall be
sent:

 

(a)                                  in the case of the Servicer,
to Halifax plc, Trinity Road, Halifax, West Yorkshire HX1 2RG (facsimile
number +44 (0) 1422 391777) for the attention of Mortgage
Securitisation Manager with a copy to HBOS Treasury Services plc, 33 Old Broad
Street, London EC2N 1HZ (facsimile number
+44 (020) 7574 8784) for the attention of Head of Capital
Markets and Securitisation;

 

(b)                                 in the case of the Mortgages
Trustee, to Permanent Mortgages Trustee Limited, 47 Esplanade, St. Helier,
Jersey JE1 0BD (facsimile number +44 (0) 1534 726391) for
the attention of the Secretary with a copy to HBOS Treasury Services plc, 33
Old Broad Street, London EC2N 1HZ (facsimile number
+44 (020) 7574 8784) for the attention of Head of Capital
Markets and Securitisation;

 

(c)                                  in the case of the Seller, to
Halifax plc, Trinity Road, Halifax, West Yorkshire HX1 2RG (facsimile
number +44 (0) 1422 391777) for the attention Mortgage
Securitisation Manager with a copy to HBOS Treasury Services PLC, 33 Old Broad
Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8784)
for the attention of Head of Capital Markets and Securitisation;

 

(d)                                 in the case of Funding 1, to
Permanent Funding (No. 1) Limited, Blackwell House, Guildhall Yard, London
EC2V 5AE (facsimile number +44 (020) 7556 0975) for the
attention of the Secretary with a copy to HBOS Treasury Services plc, 33 Old
Broad Street, London EC2N 1HZ (facsimile number
+44 (020) 7574 8784) for the attention of Head of Capital
Markets and Securitisation;

 

(e)                                  in the case of the Security
Trustee, to the Bank of New York, 48th Floor, One Canada Square,
London E14 5AL (facsimile number + 44 (20) 7964 6061 or + 44 (20) 7964 6399,
for the attention of Global Structured Finance – Corporate Trust:

 

(f)                                    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 25. 
All notices served under

 

24

 

this Agreement shall be simultaneously
copied to the Security Trustee by the person serving the same.

 

26.                               VARIATION AND WAIVER

 

No
variation or waiver of this Agreement shall be effective unless it is in
writing and signed by (or by some person duly authorised by) each of the
parties.  No single or partial exercise
of, or failure or delay in exercising, any right under this Agreement shall
constitute a waiver or preclude any other or further exercise of that or any
other right.  No variation or waiver of
this Agreement shall be made if the same would adversely affect the then
current ratings of any of the Notes.

 

27.                               NO PARTNERSHIP

 

It is
hereby acknowledged and agreed by the parties that nothing in this Agreement
shall be construed as giving rise to any partnership between any of the
parties.

 

28.                               ASSIGNMENT

 

28.1                           The Mortgages Trustee may not
assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each of the Beneficiaries.

 

28.2                           The Servicer may not assign or
transfer any of its rights and obligations under this Agreement without the
prior written consent of the Mortgages Trustee (as trustee for the
Beneficiaries) and each of the Beneficiaries.

 

28.3                           The Servicer acknowledges that
Funding 1 has assigned its rights under this Agreement to the Security Trustee
pursuant to the Funding 1 Deed of Charge and acknowledges that pursuant to the
terms of the Funding 1 Deed of Charge, Funding 1 has, inter alios, authorised the
Security Trustee, prior to the Funding 1 Security becoming enforceable, to
exercise, or refrain from exercising, all rights, powers, authorities,
discretions and remedies under or in respect of the Transaction Documents,
including this Agreement, in such manner as in its absolute discretion it shall
think fit.

 

29.                               CHANGE OF SECURITY TRUSTEE

 

29.1                           If there is any change in the
identity of the Security Trustee in accordance with the Funding 1 Deed of
Charge, the Servicer, the Seller, Funding 1 and the Mortgages Trustee shall
execute such documents and take such action as the successor Security Trustee
and the outgoing Security Trustee may reasonably require for the purpose of
vesting in the successor Security Trustee the rights and obligations of the
outgoing Security Trustee under this Agreement and releasing the outgoing
Security Trustee from its future obligations under this Agreement.

 

29.2                           It is hereby acknowledged and
agreed that by its execution of this Agreement the Security Trustee shall not
assume or have any of the obligations or liabilities of the Servicer, the
Seller, Funding 1 or the Mortgages Trustee under this Agreement.

 

30.                               AMENDMENTS

 

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.

 

25

 

31.                               EXCLUSION OF THIRD PARTY RIGHTS

 

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

 

32.                               COUNTERPARTS AND SEVERABILITY

 

32.1                           This Agreement 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.

 

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

 

33.                               GOVERNING LAW AND JURISDICTION

 

33.1                           This Agreement is governed by
the laws of England (provided that any terms of this Agreement which are
particular to Scots law shall be construed in accordance with the laws of
Scotland).

 

33.2                           Each party to this Agreement
hereby irrevocably submits to the non-exclusive jurisdiction of the English
courts in any action or proceeding arising out of or relating to this
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 this 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.

 

34.                               PROCESS AGENT

 

The
Mortgages Trustee irrevocably and unconditionally appoints Structured Finance
Management Limited of Blackwell House, Guildhall Yard, London EC2V 5AE for
the time being as its agent for service of process in England in respect of any
proceedings in respect of this Agreement and undertakes that in the event of
Structured Finance Management Limited ceasing so to act it will appoint another
person with a registered office in London as its agent for service of process.

 

IN WITNESS WHEREOF the parties have caused this Agreement to
be executed as a deed the day and year first before written.

 

26

 

SCHEDULE 1

THE SERVICES

 

In addition to
the Services set out in the body of the Servicing Agreement, the Servicer
shall:

 

(a)                                  keep records and books of account for the
Mortgages Trustee in relation to the Loans and their Related Security comprised
in the Portfolio;

 

(b)                                 keep records for all taxation purposes and
Value Added Tax;

 

(c)                                  notify relevant Borrowers of any change in
their Monthly Payments;

 

(d)                                 assist the auditors of the Mortgages
Trustee and provide information to them upon reasonable request;

 

(e)                                  provide a redemption statement upon the
request of a Borrower or the Borrower’s solicitor, licensed conveyancer or
qualified conveyancer;

 

(f)                                    notify relevant Borrowers of any other
matter or thing which the applicable Mortgage Conditions or Offer Conditions
require them to be notified of in the manner and at the time required by the
relevant Mortgage Terms;

 

(g)                                 subject to the provisions of this Agreement
(including without limitation Clause 5.2) take all reasonable steps to
recover all sums due to the Mortgages Trustee including without limitation by
the institution of proceedings and/or the enforcement of any Loan comprised in
the Portfolio or any Related Security;

 

(h)                                 take all other action and do all other
things which it would be reasonable to expect a Reasonable, Prudent Mortgage
Lender to do in administering its loans and their related security; and

 

(i)                                     act as collection agent for the Mortgages
Trustee under the Direct Debiting Scheme in accordance with the provisions of
this Agreement.

 

27

 

SCHEDULE 2

FORM OF QUARTERLY POOL CUT

 

	
  FIELD

  	
   

  	
  DESCRIPTION

  
	
  Year/Month

  	
   

  	
  Processing year and month in YYYYMM format

  
	
  Account Number

  	
   

  	
  Unique Mortgage Account Identifier

  
	
  Original Advance

  	
   

  	
   

  
	
  Current Loan balance

  	
   

  	
  Includes Capital, Interest, Arrears and Unpaid
  Charges

  
	
  Latest Property Valuation

  	
   

  	
  Most recent valuation. It will be equal to original
  valuation if no further valuation was done

  
	
  Completion Date

  	
   

  	
  The date the advance was completed

  
	
  Outstanding Monthly Periods

  	
   

  	
  The number of monthly periods remaining on the Loan

  
	
  Method of Repayment

  	
   

  	
  Code to signify types of Loans: e.g. Endowment,
  Interest Only, Repayment, Pension, Investment Linked based on worst case
  reporting

  
	
  First Income

  	
   

  	
  First applicant’s primary income

  
	
  Second Income

  	
   

  	
  Second applicant’s primary income

  
	
  Post Code

  	
   

  	
  Property postcode

  
	
  MIG Cover Amount

  	
   

  	
  Amount of MIG Policy cover

  
	
  Current Arrears Balance

  	
   

  	
  Includes unpaid interest, unpaid capital, unpaid
  charges

  
	
  Arrears Multiplier (Current)

  	
   

  	
  Arrears at previous month end divided by current
  month payment due

  
	
  Arrears Multiplier (1 to 2 months)

  	
   

  	
  Arrears at previous month end divided by current
  month payment due

  
	
  Arrears Multiplier (2 to 3 months)

  	
   

  	
  Arrears at previous month end divided by payment due
  for that month

  
	
  Arrears Multiplier (3 to 6 months)

  	
   

  	
  As above, but for 3 months prior to current month

  
	
  Arrears Multiplier (6 to 12 months)

  	
   

  	
  As above, but for 6 months prior to current month

  
	
  Arrears Multiplier (1 to 2 years)

  	
   

  	
  As above, but for 1 year prior to current month

  
	
  Arrears Multiplier (2 years plus)

  	
   

  	
  As above, but for 2 years prior to current month

  
	
  Property type

  	
   

  	
  Terraced, semi-detached, detached, other (flats,
  maisonettes, etc.) or unknown

  
	
  Loan Use

  	
   

  	
  House purchase or remortgage

  
	
  Property Use

  	
   

  	
  Owner occupied, rental, etc.

  
	
  Product code(s)

  	
   

  	
  Code identifier for the product(s)

  
	
  MAR

  	
   

  	
  Monthly payment amount

  
	
  Arrangement term

  	
   

  	
  Where an arrangement exists for the primary account
  the period of the arrangement from the start of the arrangement

  
	
  Arrangement amount

  	
   

  	
  Amount of the arrangement made

  
	
  Arrangement type

  	
   

  	
  Code for the arrangement type

  

 

28

 

SIGNATORIES

 

	
  Servicer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTED as
  a DEED by

  	
  )

  	
   

  
	
  HALIFAX plc

  	
  )

  	
   

  
	
  acting by its attorney

  	
  )

  	
   

  
	
  in the presence of:

  	
  )

  	
  (as attorney for HALIFAX PLC)

  
	
   

  	
   

  	
   

  
	
  Witness’s
  signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Mortgages Trustee

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTED as
  a DEED on behalf of

  	
  )

  	
   

  
	
  PERMANENT  MORTGAGES

  	
  )

  	
   

  
	
  TRUSTEE LIMITED,

  	
  )

  	
   

  
	
  a company incorporated in Jersey,

  	
  )

  	
   

  
	
  Channel Islands, by

  	
  )

  	
   

  
	
  being a person who,

  	
  )

  	
   

  
	
  in accordance with the laws of that

  	
  )

  	
   

  
	
  territory is acting under the authority of

  	
  )

  	
   

  
	
  the company in the presence of:

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness’s
  signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Seller

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTED as
  a DEED by

  	
  )

  	
   

  
	
  HALIFAX plc

  	
  )

  	
   

  
	
  acting by its attorney

  	
  )

  	
  (as attorney for HALIFAX PLC)

  
	
  in the presence of

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness’s
  signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  

 

29

 

	
  Funding 1

  
	
   

  
	
  EXECUTED as
  a DEED by

  	
  )

  
	
  PERMANENT FUNDING (NO. 1)

  	
  )

  
	
  LIMITED acting by two directors/

  	
  )

  
	
  a director and the secretary

  	
  )

  
	
   

  	
   

  
	
  Director

  	
   

  
	
   

  	
   

  
	
  Director/Secretary

  	
   

  
	
   

  	
   

  
	
  Security Trustee

  	
   

  
	
   

  	
   

  
	
  EXECUTED as
  a DEED by an authorised

  	
  )

  
	
  signatory for and on behalf of

  	
  )

  
	
  THE BANK OF NEW YORK

  	
  )

  
	
   

  
	
  Authorised
  signatory

  
			

 

30Exhibit 10.1

 

EXECUTION COPY

 

AMENDED AND RESTATED FUNDING 1 LIQUIDITY

FACILITY AGREEMENT

 

 

DATED 12th March, 2004

 

 

PERMANENT FUNDING (NO. 1) LIMITED

as Funding 1

 

and

 

JPMORGAN CHASE BANK

as Funding 1 Liquidity Facility Provider

 

and

 

HALIFAX plc

as Cash Manager

 

and

 

THE BANK OF NEW YORK 

as Security Trustee

 

 

 

London

 

 

CONTENTS

 

	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and Interpretation

  	
   

  
	
  2.

  	
  The Funding 1 Liquidity Facility

  	
   

  
	
  3.

  	
  Purpose

  	
   

  
	
  4.

  	
  Conditions Precedent

  	
   

  
	
  5.

  	
  Drawdown

  	
   

  
	
  6.

  	
  Repayment

  	
   

  
	
  7.

  	
  Cancellation

  	
   

  
	
  8.

  	
  Interest

  	
   

  
	
  9.

  	
  Payments

  	
   

  
	
  10.

  	
  Taxes

  	
   

  
	
  11.

  	
  Market Disruption

  	
   

  
	
  12.

  	
  Increased Costs

  	
   

  
	
  13.

  	
  Illegality

  	
   

  
	
  14.

  	
  Representations and Warranties

  	
   

  
	
  15.

  	
  Undertakings

  	
   

  
	
  16.

  	
  Default

  	
   

  
	
  17.

  	
  Fees

  	
   

  
	
  18.

  	
  Enforcement and Subordination

  	
   

  
	
  19.

  	
  Expenses

  	
   

  
	
  20.

  	
  Stamp
  Duties

  	
   

  
	
  21.

  	
  Indemnities

  	
   

  
	
  22.

  	
  Evidence and Calculations

  	
   

  
	
  23.

  	
  Amendments and Waivers

  	
   

  
	
  24.

  	
  Changes to the Parties

  	
   

  
	
  25.

  	
  Disclosure of Information

  	
   

  
	
  26.

  	
  Set-Off

  	
   

  
	
  27.

  	
  Severability

  	
   

  
	
  28.

  	
  Counterparts

  	
   

  
	
  29.

  	
  Notices

  	
   

  
	
  30.

  	
  Third Party Rights

  	
   

  
	
  31.

  	
  Governing
  Law

  	
   

  
	
  32.

  	
  Submission to Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Conditions Precedent Documents

  	
   

  
	
  2.

  	
  Calculation of the Mandatory Liquid Asset
  Cost

  	
   

  
	
  3.

  	
  Form of Funding 1 Liquidity Facility
  Request

  	
   

  
	
  4.

  	
  Form of Novation Certificate

  	
   

  
	
  5.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatories

  	
   

  

 

 

THIS AMENDED AND RESTATED FUNDING 1 LIQUIDITY
FACILITY AGREEMENT is dated 12th March, 2004

 

BETWEEN:

 

(1)                                  PERMANENT FUNDING (NO. 1) LIMITED, (registered number 4267660) whose
registered office is Blackwell House, Guildhall Yard, London EC2V 5AE (Funding 1);

 

(2)                                  JPMORGAN CHASE BANK, acting through its offices at 125 London Wall, London EC2Y 5AJ acting
in its capacity as the Funding 1 Liquidity Facility Provider;

 

(3)                                  HALIFAX plc,
a public limited company incorporated under the laws of England and Wales whose
registered office is at Trinity Road, Halifax, West Yorkshire HX1 2RG acting in
its capacity as Cash Manager; and

 

(4)                                  THE BANK OF NEW YORK, acting
through its offices at 48th Floor, One Canada Square, London E14 5AL in its
capacity as Security Trustee, which expression shall include such company and
all other persons or companies for the time being acting as security trustee
(or co-trustee) pursuant to the terms of the Funding 1 Deed of Charge.

 

WHEREAS:

 

(A)                              The parties hereto entered into the Funding
1 Liquidity Facility Agreement (as amended and restated by this Agreement and
from time to time, the Funding 1 Liquidity Facility Agreement) to
assist Funding 1 in, among other things, (i) making Eligible Liquidity Facility
Principal Repayments and (ii) meeting its interest payment liabilities in
respect of relevant Term Advances from time to time.

 

(B)                                Upon the terms and subject to the conditions
set out in the Funding 1 Liquidity Facility Agreement, the Funding 1 Liquidity
Facility Provider agreed to make a Funding 1 Liquidity Facility available to
Funding 1 on and subject to the terms set out in the Funding 1 Liquidity
Facility Agreement.

 

(C)                                The parties to the Funding 1 Liquidity
Facility Agreement have agreed to amend and restate the terms of that Agreement
as set out herein.

 

IT IS AGREED as
follows:

 

1.                                      DEFINITIONS
AND INTERPRETATION

 

1.1                               Definitions

 

The amended and restated master definitions
and construction schedule signed by, amongst others, the parties to this
Agreement and dated 12th March, 2004 (as the same may be amended, varied or supplemented from time to
time with the consent of the parties to this Agreement) (the Master Definitions
and Construction Schedule) is expressly and specifically
incorporated into this Agreement 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 Agreement and this Agreement shall be construed in accordance with the
interpretation provisions set out in Clause 2 of the Master Definitions and
Construction Schedule.

 

3

 

1.2                               This Agreement amends and restates the
Funding 1 Liquidity Facility Agreement made on 14th June, 2002 as amended and
restated on the 6th March, 2003 and as further amended and restated on 25th
November, 2003 (the Principal Agreement).  As of the date of this Agreement, any future
rights or obligations (excluding such obligations accrued to the date of this
Agreement) of a party under the Principal Agreement shall be extinguished and
shall instead be governed by this Agreement.

 

1.3                               Construction

 

The Security Trustee has agreed to become a
party to this Agreement only for the purpose of taking the benefit of Clauses 2.3
(Extension), 5.1(b) (Funding 1 Liquidity Drawings), 5.2(a), (b) and (d) (Stand by Drawings), 6(b)
and (c)
(Repayment), 14.1 (Representations and warranties by Funding 1), 7.2
(Voluntary Cancellation), 7.3 (Additional right of prepayment and
cancellation), 14 (Representations and warranties). 15.2 (Financial information),
18 (Enforcement
and Subordination), 24 (Changes to the Parties) and 29
(Notices) and for agreeing amendments to this Agreement pursuant to Clause
23
(Amendments and waivers) and for the better preservation and enforcement of its
rights under the Funding 1 Deed of Charge and (without prejudice to the terms
of the Funding 1 Deed of Charge), other than as specified above, the Security
Trustee shall assume no obligations or liabilities whatsoever to the Funding 1
Liquidity Facility Provider or Funding 1 by virtue of the provisions of this
Agreement.

 

2.                                      THE
FUNDING 1 LIQUIDITY FACILITY

 

2.1                               Facility

 

Subject to the terms of this Agreement, the
Funding 1 Liquidity Facility Provider grants to Funding 1 the  Funding 1 Liquidity Facility.  The Funding 1 Liquidity Facility may be
utilised by way of Funding 1 Liquidity Facility Drawings or Funding 1 Liquidity
Facility Stand-by Drawings.

 

2.2                               Facility Limits

 

The aggregate principal amount of the Funding
1 Liquidity Facility Loan shall not at any time exceed the Funding 1 Liquidity
Facility Commitment.  The Funding 1
Liquidity Facility Provider is not obliged to lend more than the Funding 1
Liquidity Facility Commitment.

 

Save as otherwise provided in the Agreement (including, for the
avoidance of doubt, Clause 7 (Cancellation)), if any of the
following shall occur, the Funding 1 Liquidity Facility Commitment shall be
reduced in the manner provided:

 

(a)                                  if
the First Issuer Intercompany Loan is repaid in full or is otherwise cancelled,
the Liquidity Facility Commitment shall be reduced by the lesser of £60,000,000
and an amount which the Rating Agencies have confirmed will have no material
adverse effect on the then current ratings of any Notes of any Issuer (or if
the rating of any of the Notes of any Issuer has been downgraded, an amount
which will not prevent the restoration of such rating); or

 

(b)                                 if
the Second Issuer Intercompany Loan is repaid in full or is otherwise
cancelled, the Liquidity Facility Commitment shall be reduced by the lesser of
£47,500,000 and an amount which the Rating Agencies have confirmed will have no
material adverse effect on the then current ratings of any Notes of any Issuer
(or if the rating of any of the Notes of any Issuer has been downgraded, an
amount which will not prevent the restoration of such rating); or

 

4

 

(c)                                  if
the Third Issuer Intercompany Loan is repaid in full or is otherwise cancelled,
the Liquidity Facility Commitment shall be reduced by the lesser of £42,500,000
and an amount which the Rating Agencies have confirmed will have no material
adverse effect on the then current ratings of any Notes of any Issuer (or if
the rating of any of the Notes of any Issuer has been downgraded, an amount
which will not prevent the restoration of such rating);

 

(d)                                 if
the Fourth Issuer Intercompany Loan is repaid in full or is otherwise
cancelled, the Liquidity Facility Commitment shall be reduced by an amount
which the Rating Agencies have confirmed will have no material adverse effect
on the then current ratings of any Notes of any Issuer (or if the rating of any
of the Notes of any Issuer has been downgraded, an amount which will not
prevent the restoration of such rating.

 

2.3                               Extension

 

(a)                                  Save as otherwise provided in this
Agreement, Funding 1 (or the Security Trustee or the Cash Manager on its
behalf) may deliver, not more than 60 days and not less than 30 days before the
end of the Funding 1 Liquidity Facility Commitment Period, to the Funding 1
Liquidity Facility Provider an irrevocable request in writing that the Funding
1 Liquidity Facility Commitment Period should be extended (an Extension
Request) to a date that is not more than (subject to Clause
2.3(d) below) 364 days from the last day of the then current Funding
1 Liquidity Facility Commitment Period.

 

(b)                                 The Funding 1 Liquidity Facility Provider
shall promptly send the Security Trustee a copy of any Extension Request
received by it.

 

(c)                                  If the Funding 1 Liquidity Facility Provider
wishes to accept an Extension Request then the Funding 1 Liquidity Facility
Provider shall, not more than 15 days after receipt of the Extension Request,
deliver to Funding 1 (with a copy to the Security Trustee) an irrevocable
notice (a Notice
of Extension) that the Funding 1 Liquidity Facility Provider has
consented to the Extension Request. 
Failure to deliver such a Notice of Extension within the 15-day time
period referred to above shall be deemed to constitute a refusal to grant an
extension of the Funding 1 Liquidity Facility Commitment Period.

 

(d)                                 The Funding 1 Liquidity Facility Provider is
not obliged to agree to extend the Funding 1 Liquidity Facility Commitment
Period and in no event may it be extended beyond the Repayment Date, being the
earlier to occur of:

 

(i)                                     the date when the First Issuer Intercompany
Loan, the Second Issuer Intercompany Loan, the Third Issuer Intercompany Loan
and the Fourth Issuer Intercompany Loan have been repaid in full; and

 

(ii)                                  the Funding 1 Interest Payment Date in June
2042 (unless the parties hereto agree to extend the provision of the Funding 1
Liquidity Facility beyond such date).

 

2.4                               Change of currency

 

(a)                                  If more than one currency or currency unit
are at the same time recognised by the central bank of any country as the
lawful currency of that country, then:

 

(i)                                     any reference in the Funding 1 Liquidity
Documents to, and any obligations arising under the Funding 1 Liquidity
Documents in, the currency of that country shall be

 

5

 

translated into, or paid in, the currency or
currency unit of that country designated by the Funding 1 Liquidity Facility
Provider; and

 

(ii)                                  any translation from one currency or
currency unit to another shall be at the official rate of exchange recognised
by the central bank for the conversion of that currency or currency unit into
the other, rounded up or down by the Funding 1 Liquidity Facility Provider
acting reasonably.

 

(b)                                 If a change in any currency of a country
occurs, this Agreement will be amended to the extent the Funding 1 Liquidity
Facility Provider specifies to be necessary to reflect the change in currency
and to put the Funding 1 Liquidity Facility Provider in the same position, so
far as possible, that it would have been in if no change in currency had
occurred.

 

3.                                      PURPOSE

 

(a)                                  Funding 1 (or the Cash Manager on
behalf of Funding 1) shall apply each Funding 1 Liquidity Facility Drawing to
meet a Funding 1 Liquidity Shortfall existing at that time, to the extent that
it relates to payment obligations of Funding 1 arising in connection with the
First Issuer Intercompany Loan Agreement, the Second Issuer Intercompany Loan
Agreement, the Third Issuer Intercompany Loan Agreement or the Fourth Issuer
Intercompany Loan Agreement.  For the
avoidance of doubt, the parties agree that the Funding 1 Liquidity Facility
will be available notwithstanding that one or more (but not all) of the First
Issuer Intercompany Loan Agreement, the Second Issuer Intercompany Loan
Agreement, the Third Issuer Intercompany Loan Agreement or the Fourth Issuer
Intercompany Loan Agreement may have been repaid in full or cancelled, subject
to any reduction of the Funding 1 Liquidity Facility Commitment in accordance
with Clause
2.2  (Facility Limits).

 

(b)                                 Funding 1 (or the Cash Manager on behalf of
Funding 1) shall apply a Funding 1 Liquidity Facility Stand-by Drawing for the
purposes set out in Clause 5.2 (Stand-by Drawings).

 

(c)                                  Without affecting the obligations of Funding
1 in any way, the Funding 1 Liquidity Facility Provider is not bound to monitor
or verify the application of any Funding 1 Liquidity Facility Drawing.

 

4.                                      CONDITIONS
PRECEDENT

 

4.1                               Documentary conditions
precedent

 

The obligations of the Funding 1 Liquidity
Facility Provider to Funding 1 under this Agreement are subject to the
condition precedent that the Funding 1 Liquidity Facility Provider has notified
Funding 1 that it has received all of the documents set out in Schedule 1 and
that each is in form and substance satisfactory to it.

 

4.2                               Further conditions
precedent

 

(a)                                  The obligation of the Funding 1 Liquidity
Facility Provider to make a Funding 1 Liquidity Facility Drawing available is
subject to the further conditions precedent that on both the date of the
Funding 1 Liquidity Facility Request and the Funding 1 Liquidity Facility
Drawdown Date for that Funding 1 Liquidity Facility Drawing:

 

(i)                                     no Asset Trigger Event has occurred;

 

(ii)                                  no Funding 1 Liquidity Facility Default is
outstanding or would result from the making of the Funding 1 Liquidity Facility
Drawing; and

 

6

 

(iii)                               no or insufficient amounts are available for
drawing from the Reserve Funds in order to pay the liabilities in respect of
which the relevant Funding 1 Liquidity Facility Drawing is to be applied.

 

(b)                                 The obligation of the Funding 1 Liquidity
Facility Provider to make a Funding 1 Liquidity Facility Drawing available for
the purpose of a Funding 1 Liquidity Revenue Shortfall is subject to the
further conditions precedent that, on the Funding 1 Liquidity Facility Drawdown
Date for that Funding 1 Liquidity Facility Drawing, Funding 1 (or the Cash
Manager on its behalf) provides confirmation to the Funding 1 Liquidity
Facility Provider that:

 

(i)                                     in respect of any Funding 1 Liquidity
Facility Drawing to assist the payment of interest on the relevant Term AAA
Advances, the debit balance on the relevant AAA Principal Deficiency Sub-Ledger
is not in an amount equal to or in excess of 50 per cent. of the principal
amount outstanding of the relevant Term AAA Advances;

 

(ii)                                  in respect of any Funding 1 Liquidity
Facility Drawing to assist the payment of interest on the relevant Term AA
Advances, the debit balance on the relevant AA Principal Deficiency Sub-Ledger
is not in an amount equal to or in excess of 50 per cent. of the principal
amount outstanding of the relevant Term AA Advances;

 

(iii)                               in respect of any Funding 1 Liquidity Facility Drawing to assist the
payment of interest on the relevant Term A Advances, the debit balance on the
relevant A Principal Deficiency Sub-Ledger is not in an amount equal to or in
excess of 50 per cent. of the principal amount outstanding of the relevant Term
A Advances; and

 

(iv)                              in respect of any Funding 1 Liquidity
Facility Drawing to assist the payment of interest on the relevant Term BBB
Advances, the debit balance on the relevant BBB Principal Deficiency Sub-Ledger
is not in an amount equal to or in excess of 50 per cent. of the principal
amount outstanding of the relevant Term BBB Advances.

 

(c)                                  The obligation of the Funding 1 Liquidity
Facility Provider to make a Funding 1 Liquidity Facility Drawing available for
the purpose of a Funding 1 Liquidity Principal Shortfall is subject to the
further conditions precedent that, on the Funding 1 Liquidity Facility Drawdown
Date for that Funding 1 Liquidity Facility Drawing, Funding 1 (or the Cash
Manager on its behalf) provides confirmation to the Funding 1 Liquidity
Facility Provider that:

 

(i)                                     if a Non-Asset Trigger Event has occurred,
then a Funding 1 Liquidity Facility Drawing will be utilised only to make
Eligible Liquidity Facility Principal Repayments on the respective Final
Repayment Date of each relevant Term Advance (in accordance with paragraph
(b) of the definition of Eligible Liquidity Facility Principal
Repayments); and

 

(ii)                                  if an Asset Trigger Event has occurred, then
a Funding 1 Liquidity Facility Drawing will not be utilised to make Eligible
Liquidity Facility Principal Repayments (in accordance with the last paragraph
of the definition of Eligible Liquidity Facility Principal Repayments).

 

5.                                      DRAWDOWN

 

5.1                               Funding 1 Liquidity
Facility Drawings

 

(a)                                  If, on the Business Day immediately
preceding a relevant Funding 1 Interest Payment Date,

 

7

 

the Cash Manager determines that, on the
relevant Funding 1 Interest Payment Date, a Funding 1 Liquidity Shortfall will
arise, the Cash Manager will direct Funding 1 to make a Funding 1 Liquidity
Facility Drawing on the Business Day immediately preceding that Funding 1
Interest Payment Date, subject to the terms of this Agreement, for all or any
of the purposes set out in Clause 3 (Purpose) (as appropriate) and,
subject to the limits set out in Clause 2.2 (Facility limits), in an amount
equal to the Funding 1 Liquidity Shortfall.

 

(b)                                 Funding 1 (or Cash Manager on behalf of
Funding 1) will serve on the Funding 1 Liquidity Facility Provider a Funding 1
Liquidity Facility Request (substantially in the form set out in Schedule 3
to this Agreement) for each Funding 1 Liquidity Facility Drawing, such request
to be given by facsimile in accordance with Clause 29 (Notices) of this
Agreement to be received by the Funding 1 Liquidity Facility Provider not later
than 10.00 a.m. on the Business Day immediately preceding the proposed Funding
1 Liquidity Facility Drawdown Date.

 

(c)                                  No Funding 1 Liquidity Drawing may be made,
or requested to be made, on or after the last day of the then current Funding 1
Liquidity Facility Commitment Period.

 

5.2                               Funding 1 Liquidity
Facility Stand-by Drawings

 

(a)                                  The Funding 1 Liquidity Provider shall, upon
becoming aware of a Relevant Event, promptly notify Funding 1, the Security
Trustee and the Cash Manager in writing of that fact.

 

(b)                                 If a Relevant Event occurs, Funding 1 (or
the Security Trustee or the Cash Manager on behalf of Funding 1) may, subject
to the terms of this Agreement, and after serving a Funding 1 Liquidity
Facility Request on the Funding 1 Liquidity Facility Provider, make a Funding 1
Liquidity Facility Stand-by Drawing equal to the undrawn portion of the Funding
1 Liquidity Facility Commitment at that time provided that such Funding 1
Liquidity Facility Stand-by Drawing shall be used only in accordance with paragraph
(e) below.  No Funding 1
Liquidity Facility Stand-by Drawing may be made or requested to be made after
the end of the Funding 1 Liquidity Facility Commitment Period.

 

(c)                                  Upon making a Funding 1 Liquidity Facility
Stand-by Drawing, Funding 1 (or the Security Trustee or the Cash Manager on
behalf of Funding 1) shall forthwith pay the Funding 1 Liquidity Facility
Stand-by Drawing into the Funding 1 Liquidity Facility Stand-by Account, which
shall be an account with the Funding 1 Liquidity Facility Provider if the
Relevant Event leading to the making of the Funding 1 Liquidity Facility
Stand-by Drawing is of the type described in paragraph (b) of the
definition of Relevant Event, and, otherwise with the Account Bank.

 

(d)                                 Subject to the terms of the Funding 1 Deed
of Charge, interest earned on the Funding 1 Liquidity Facility Stand-by
Account, together with any income derived from any Authorised Investments made
in accordance with paragraph (e)(iii) below using amounts
standing to the credit of the Funding 1 Liquidity Facility Stand-by Account
from time to time, shall belong to and be for the account of Funding 1 (and
Funding 1 shall be entitled to withdraw and retain such interest earned).

 

(e)                                  Amounts from time to time standing to the
credit of the Funding 1 Liquidity Facility Stand-by Account shall belong to
Funding 1 and the Funding 1 Liquidity Facility Provider shall not have any
proprietary interest or Security Interest in such amounts save as arises under
the Funding 1 Deed of Charge.  Other
than as referred to in paragraph (d) above, Funding 1 (or the
Security Trustee or the Cash Manager on behalf of Funding 1) shall only make
withdrawals from the Funding 1 Liquidity Facility Stand-by Account:

 

8

 

(i)                                     in such circumstances and in such amount as
it would otherwise have been able to make a Funding 1 Liquidity Drawing
pursuant to Clause  5.1 (Funding 1 Liquidity Drawings), which
withdrawal shall be deemed to be a Funding 1 Liquidity Drawing made under Clause 5.1;
or

 

(ii)                                  in order to make a repayment of a Funding 1
Liquidity Facility Stand-by Drawing in accordance with Clause 6 (Repayment); or

 

(iii)                               in order to invest funds standing to the
credit of the Funding 1 Liquidity Facility Stand-by Account in Authorised
Investments (the nature and characteristics of which Authorised Investments Funding
1 will notify to the Funding 1 Liquidity Facility Provider at the same time as
making the payment described in Clause 5.2(d)),

 

but not otherwise, and the amounts of the
Funding 1 Liquidity Facility Stand-by Drawing shall be reduced by the amount of
such deemed Funding 1 Liquidity Drawings or, as the case may be, repayment.

 

5.3                               Payment of Proceeds

 

Subject to the terms of this Agreement, the
Funding 1 Liquidity Facility Provider shall make each Funding 1 Liquidity
Facility Loan available for Funding 1 on the relevant Funding 1 Liquidity
Facility Drawdown Date and shall remit each Funding 1 Liquidity Facility Loan
to Funding 1 by noon on the relevant Funding 1 Liquidity Facility Drawdown Date
or, if LIBOR is determined otherwise than in accordance with paragraph
(a) of its definition, by 2.00 p.m. on the relevant Funding 1
Liquidity Facility Drawdown Date.

 

6.                                      REPAYMENT

 

(a)                                  Subject as provided below and subject to Clause 7.2
(Voluntary Cancellation), Clause 18 (Enforcement and Subordination)
and Clause
21.2 (Other indemnities) on the earlier of:

 

(i)                                     the immediately succeeding Funding 1
Interest Payment Date; and

 

(ii)                                  the Repayment Date,

 

Funding 1 shall repay the outstanding balance
of the Funding 1 Liquidity Drawing, if any, from Funding 1 Available Principal
Receipts (but only to the extent that the Funding 1 Liquidity Drawing has been
made to meet Funding 1 Liquidity Principal Shortfalls (if any)) and from
Funding 1 Available Revenue Receipts (but only to the extent that the Funding 1
Liquidity Drawing has been made to meet Funding 1 Liquidity Revenue Shortfalls
(if any)) as at the opening of business on such date.  Other than on the Repayment Date and subject to the terms of this
Agreement, Funding 1 may draw a new Funding 1 Liquidity Drawing or rollover an
existing Funding 1 Liquidity Drawing for the purposes of this paragraph
(a).  Funding 1 Liquidity
Drawings so repaid may be redrawn in accordance with and subject to the terms
of this Agreement.

 

(b)                                 While a Funding 1 Liquidity Facility
Stand-by Drawing is outstanding, any amount that has been withdrawn from the
Funding 1 Liquidity Facility Stand-by Account shall be repaid by crediting such
amount to the Funding 1 Liquidity Facility Stand-by Account as if it were a
Funding 1 Liquidity Drawing repayable in accordance with paragraph (a) above and the
Funding 1 Liquidity Facility Stand-by Account shall be increased by the amount
of the Funding 1 Liquidity Drawing repaid. 
For the avoidance of doubt, any repayment pursuant to this paragraph
(b) shall not be applied to reduce the amount of the Funding 1
Liquidity Facility Stand-by Drawing.

 

9

 

(c)                                  The Funding 1 Liquidity Facility Stand-by
Drawing shall, subject to Clause 18 (Enforcement and Subordination),
be repayable to the Funding 1 Liquidity Facility Provider, together with
accrued interest pursuant to Clause 8 (Interest), on the earlier of:

 

(i)                                    (A)          if
the Relevant Event resulting in the making of the Funding 1 Liquidity Facility
Stand-by Drawing was of the type described in paragraph (a) of the
definition of Relevant Event:

 

I.                                         Funding 1 cancelling the Funding 1 Liquidity
Facility Commitment in full (in accordance with Clause 7.2(b) (Voluntary
cancellation)) or the Funding 1 Liquidity Facility Provider entering into a
Novation Certificate with a Qualifying Lender having the Requisite Ratings; or

 

II.                                     the day which is two London Business Days
after the date on which the Funding 1 Liquidity Facility Provider has given
notice to Funding 1 that it again has the Requisite Ratings; or

 

(B)                                if the Relevant Event resulting in the
making of the Funding 1 Liquidity Facility Stand-by Drawing was of the type
described in paragraph (b) of the definition of Relevant Event, Funding 1
entering into a replacement liquidity facility on terms acceptable to the
Security Trustee and the Rating Agencies;

 

(ii)                                  the Repayment Date; and

 

(iii)                               Funding 1 electing to repay the Funding 1
Liquidity Facility Stand-by Drawing as a result of Funding 1 not having
available to it sufficient funds to pay interest and other amounts due and
payable in respect of the Funding 1 Liquidity Facility Stand-by Drawing.

 

7.                                      CANCELLATION

 

7.1                               Automatic cancellation of
the Funding 1 Liquidity Facility Commitment

 

The Funding 1 Liquidity Facility Commitment
shall be automatically cancelled at close of business on the last day of the
Funding 1 Liquidity Facility Commitment Period.

 

7.2                               Voluntary cancellation

 

(a)                                  Funding 1 may with the prior written consent
of the Security Trustee and provided that:

 

(i)                                     the Rating Agencies have confirmed that such
cancellation will have no material adverse effect on the then current ratings
of any of the Notes of any Issuer; or

 

(ii)                                  if the ratings of any of the Notes of any
Issuer has previously been downgraded that such cancellation will not prevent
the restoration of such rating,

 

without premium or penalty, cancel the
undrawn and uncancelled part of the Funding 1 Liquidity Facility Commitment in
whole or in part (but if in part, in multiples of not less than £50,000 unless
the Funding 1 Liquidity Facility Commitment is less than £50,000) at any time
provided that it has given the Funding 1 Liquidity Facility Provider not less
than seven London Business Days’ prior notice (which notice Funding 1 shall
copy to the Security Trustee, the Cash Manager and to the Rating Agencies)
stating the principal amount to be cancelled. 
During such seven Business Day period Funding 1may not serve a Funding 1

 

10

 

Liquidity Facility Request purporting to draw
all or any part of the amount the subject of such notice of such cancellation.

 

(b)                                 If a Relevant Event of the type described in
paragraph
(a) or (b) of the definition of such term occurs,
Funding 1 may, without premium or penalty, by notice to the Funding 1 Liquidity
Facility Provider (which notice Funding 1 shall copy to the Security Trustee
and the Cash Manager):

 

(i)                                     cancel the undrawn and uncancelled part of
the Funding 1 Liquidity Facility, provided that Funding 1 shall first have made
arrangements for a replacement liquidity facility provider which is a
Qualifying Lender and has the Requisite Ratings to enter into an agreement on
substantially the same terms as this Agreement and provided that the Funding 1
Liquidity Facility Provider has been repaid all amounts outstanding to it under
this Agreement in full; or

 

(ii)                                  require the Funding 1 Liquidity Facility
Provider to enter into a novation agreement (at the cost of Funding 1) in a
form reasonably satisfactory to the Funding 1 Liquidity Facility Provider,
Funding 1 and the Security Trustee with, or otherwise transfer the Funding 1
Liquidity Facility Provider’s rights and obligations under this Agreement in
such manner as is required by Funding 1 and the Security Trustee to, a replacement
liquidity facility provider which is a Qualifying Lender and has the Requisite
Ratings, provided that the Funding 1 Liquidity Facility Provider has been
repaid all amounts outstanding to it under this Agreement in full as a result
of the novation.

 

(c)                                  Without prejudice to Funding 1’s rights
under paragraph
(b) above, if a Relevant Event of the type described in paragraph
(a) or (b) of the definition of such term occurs,
the Funding 1 Liquidity Facility Provider may make arrangements either:

 

(i)                                     to replace itself with a replacement
liquidity facility provider which is acceptable to Funding 1 which is a
Qualifying Lender and has the Requisite Ratings to enter into an agreement on
substantially the same terms as this Agreement; or

 

(ii)                                  request Funding 1, the Security Trustee and
the Cash Manager to enter into a novation agreement in a form reasonably
satisfactory to Funding 1 and the Security Trustee with, or otherwise to
transfer the Funding 1 Liquidity Facility Provider’s rights and obligations under
this Agreement in such manner as is required by Funding 1 and the Security
Trustee to, a replacement liquidity facility provider which is a Qualifying
Lender and has the Requisite Ratings,

 

and in either case, Funding 1 shall take all
reasonable steps to effect such arrangement.

 

(d)                                 To the extent that there is any conflict
between Funding 1’s rights under paragraph (b) and the Funding 1 Liquidity
Facility Provider’s rights under paragraph (c) above, the views of Funding 1
will prevail with the result that if each of Funding 1 and the Funding 1
Liquidity Facility Provider had selected a replacement liquidity facility
provider, or wished to adopt a different approach under paragraph  (b) above
or paragraph
(c) above,
as appropriate, the selection and/or the approach to be adopted will be that
selected or adopted (as the case may be) by Funding 1.

 

(e)                                  Funding 1 may also, without premium or
penalty, by notice to the Funding 1 Liquidity Facility Provider, cancel the
whole of the Funding 1 Liquidity Facility Commitment on the Repayment Date.

 

11

 

7.3                               Additional right of
prepayment and cancellation

 

If:

 

(a)                                  Funding 1 is required to pay to the Funding
1 Liquidity Facility Provider any additional amounts under Clause 10 (Taxes); or

 

(b)                                 Funding 1 is required to pay to the Funding
1 Liquidity Facility Provider any amount under Clause 12 (Increased costs),

 

then, without prejudice to the obligations of
Funding 1 under those Clauses, Funding 1 may, whilst the circumstances
continue, give a notice of prepayment and cancellation to the Funding 1
Liquidity Facility Provider with a copy to the Security Trustee.  On the date falling five London Business
Days after the date of giving of the notice:

 

(i)                                     Funding 1 shall prepay the Funding 1
Liquidity Facility Loans; and

 

(ii)                                  the Funding 1 Liquidity Facility Commitment
shall be cancelled.

 

7.4                               Miscellaneous provisions

 

(a)                                  Any notice of prepayment and/or cancellation
under this Agreement is irrevocable.

 

(b)                                 All prepayments under this Agreement shall
be made together with accrued interest on the amount prepaid and, subject to Clause 21
(Indemnities), without premium or penalty.

 

(c)                                  No prepayment or cancellation is permitted
except in accordance with the express terms of this Agreement.

 

(d)                                 No amount of the Funding 1 Liquidity
Facility Commitment cancelled under this Agreement may subsequently be
reinstated except with the prior written consent of the Funding 1 Liquidity
Facility Provider, Funding 1 and the Security Trustee.

 

8.                                      INTEREST

 

8.1                               Interest rate (Funding 1
Liquidity Facility Drawings)

 

The rate of interest on each Funding 1
Liquidity Facility Drawing for each Funding 1 Liquidity Facility Interest
Period is the rate per annum determined by the Funding 1 Liquidity Facility Provider
to be the aggregate of the applicable:

 

(a)                                  Funding 1 Liquidity Facility Margin;

 

(b)                                 LIBOR; and

 

(c)                                  subject to Clause 18 (Enforcement and
Subordination), Mandatory Liquid Asset Cost.

 

8.2                               Interest
rate (Funding 1 Liquidity Facility Stand-by Drawings)

 

For so long as any amount is outstanding under the First Issuer
Intercompany Loan, and without prejudice to Clause 17.1(a) (Commitment
Fee and Contingent Fee), the rate of interest on each Funding 1 Liquidity
Facility Stand-by Drawing shall be:

 

12

 

(a)                                  in
respect of a Funding 1 Liquidity Facility Stand-by Drawing up to (and
including) the first £60,000,000, the amount of interest payable will be
determined in accordance with Clause 8.1 (Interest Rate (Funding 1
Liquidity Facility Drawing)); and

 

(b)                                 in
respect of a Funding 1 Liquidity Facility Stand-by Drawing equal to and in
excess of £60,000,001, interest will not be payable.

 

In the event that the First Issuer Intercompany Loan is repaid or is
otherwise cancelled, interest will not be payable in respect of any part of a
Funding 1 Liquidity Facility Stand-by Drawing.

 

8.3                               Due dates

 

Except as otherwise provided in this
Agreement (including, without limitation, Clause 6 (Repayment)), accrued interest on
each Funding 1 Liquidity Facility Loan is payable by Funding 1 on each Funding
1 Interest Payment Date.

 

8.4                               Default interest

 

(a)                                  If Funding 1 fails to pay any amount payable
by it under this Agreement, it shall forthwith on demand by the Funding 1 Liquidity
Facility Provider pay interest on the overdue amount from the due date up to
the date of actual payment, as well after as before judgment, at a rate (the Default Rate)
determined by the Funding 1 Liquidity Facility Provider to be one per cent. per
annum above the higher of:

 

(i)                                     the rate on the overdue amount under Clause 8.1
(Interest rate) immediately before the due date (if of principal); and

 

(ii)                                  the rate which would have been payable if
the overdue amount had, during the period of non-payment, constituted a Funding
1 Liquidity Facility Drawing in the currency of the overdue amount for such
successive Funding 1 Liquidity Facility Interest Periods of such duration as
the Funding 1 Liquidity Facility Provider may determine (each a Designated
Interest Period).

 

(b)                                 The Default Rate will be determined on each
Business Day or the first day of the relevant Designated Interest Period, as
appropriate.

 

(c)                                  If LIBOR is to be determined in accordance
with paragraph
(b) of its definition and the Funding 1 Liquidity Facility Provider
determines that deposits in the currency of the overdue amount are not at the
relevant time being made available by the Reference Banks to leading banks in
the London interbank market, the Default Rate will be determined by reference
to the cost of funds to the Funding 1 Liquidity Facility Provider from whatever
sources it reasonably selects.

 

(d)                                 Default interest will be compounded at the
end of each Designated Interest Period.

 

(e)                                  This Clause 8.4 shall not apply to amounts
deferred as a result of the operation of Clause 18 (Enforcement and Subordination).

 

8.5                               Notification of rates of
interest

 

The Funding 1 Liquidity Facility Provider
shall promptly notify each relevant party of the determination of a rate of
interest under this Agreement.

 

13

 

9.                                      PAYMENTS

 

9.1                               Place

 

All payments by Funding 1 under this
Agreement shall be made to the Funding 1 Liquidity Facility Provider’s account
at JPMorgan Chase Bank, Sort Code: 60-92-42, Account Reference: European Loans
or to its account at such office or bank as it may notify to Funding 1 for this
purpose.

 

9.2                               Funds

 

Payments under this Agreement to the Funding
1 Liquidity Facility Provider shall be made for value on the due date at such
times and in such funds as the Funding 1 Liquidity Facility Provider may
specify to the party concerned as being customary at the time for the
settlement of transactions in Sterling.

 

9.3                               Currency

 

(a)                                  Amounts payable in respect of costs,
expenses, taxes and the like are payable in the currency in which they are
incurred.

 

(b)                                 Any other amount payable under this
Agreement is, except as otherwise provided in this Agreement, payable in
Sterling.

 

9.4                               Set-off and counterclaim

 

All payments made by the Funding 1 under this
Agreement shall be made without set-off or counterclaim.

 

9.5                               Non-Business Days

 

(a)                                  If a payment under this Agreement is due on
a day which is not a London Business Day, the due date for that payment shall
instead be the next London Business Day in the same calendar month (if there is
one) or the preceding London Business Day (if there is not).

 

(b)                                 During any extension of the due date for
payment of any principal under this Agreement interest is payable on the
principal at the rate payable on the original due date.

 

10.                               TAXES

 

10.1                        Gross-up

 

Subject to Clause 18 (Enforcement and
Subordination) and Clause 10.3 (Qualifying Lender), all
payments by Funding 1 under the Funding 1 Liquidity Documents shall be made
free and clear of and without deduction or withholding for or on account of any
Taxes, except to the extent that Funding 1 is required by law to make payment
subject to any such deduction or withholding for or on account of any
Taxes.  If any Tax or amount in respect
of Tax is required by law to be deducted or withheld from any amounts payable
or paid by Funding 1 under the Funding 1 Liquidity Documents, subject to Clause 18
(Enforcement and Subordination) the payment due from Funding 1 shall be
increased to include such additional amounts as may be necessary to ensure that
(after any deduction or withholding required including in respect of such
additional amounts) the Funding 1 Liquidity Facility Provider receives a net
amount equal to the full amount which would have been due had no deduction or
withholding for or on account of any Taxes been required.

 

14

 

10.2                        Tax receipts

 

Subject to Clause 18 (Enforcement and
Subordination), all Taxes required by law to be deducted or withheld by Funding
1 from any amounts paid or payable under the Funding 1 Liquidity Documents
shall be paid by Funding 1 no later than when due and Funding 1 shall, within
30 days of making either the deduction or withholding for or on account of any
Tax or the payment in respect of such deduction or withholding, deliver to the
Funding 1 Liquidity Facility Provider evidence satisfactory to the Funding 1
Liquidity Facility Provider (acting reasonably) (including all relevant Tax
receipts) that the payment has been duly remitted to the appropriate authority.

 

10.3                        Qualifying Lender

 

Funding 1 shall not be required to pay an
additional amount as referred to in Clause 10.1 (Gross-up) above in respect of
any deduction or withholding for or on account of any Taxes levied or imposed
by the United Kingdom (or any taxing authority of or in the United Kingdom)
from a payment of interest, if on the date on which the payment falls due:

 

(a)                                  the payment could have been made to the
Funding 1 Liquidity Facility Provider in the absence of a deduction or
withholding for or on account of any Taxes if the Funding 1 Liquidity Facility
Provider were a Qualifying Lender, but on that date the Funding 1 Liquidity
Facility Provider is not or has ceased to be a Qualifying Lender other than as
a result of any change occurring after the date of this Agreement in (or in the
interpretation, administration or application of) any law or regulation or
applicable Double Taxation Treaty or any published practice or concession of
any relevant Tax authority;

 

(b)                                 (i)            the
Funding 1 Liquidity Facility Provider is a Qualifying Lender solely because it
is a UK Non-Bank Lender;

 

(ii)                                  the Board of the United Kingdom Inland
Revenue has given (and not revoked) a direction (a Direction) under Section 349C
ICTA (as that provision has effect on the date of this Agreement) which relates
to such payment and Funding 1 has notified the Funding 1 Liquidity Facility
Provider of the precise terms of that notice; and

 

(iii)                               the payment could have been made to the Funding 1 Liquidity Facility
Provider without any deduction
or withholding for or on account of Tax in the absence of that Direction;

 

(c)                                  the Funding 1 Liquidity Facility Provider is
a Treaty Lender and Funding 1 is able to demonstrate that the additional
amounts referred to in Clause 10.1 (Gross-up) above would not have
been required if the Funding 1 Liquidity Facility Provider had complied with
its obligations under Clause 10.6 (Treaty Lender) below.

 

10.4                        Refund of Tax Credits

 

If Funding 1 makes a payment under Clause 10.1
(Gross-up) (a Tax Payment) in respect of a payment to the Funding 1
Liquidity Facility Provider under this Agreement and the Funding 1 Liquidity
Facility Provider determines that it has obtained a refund of Tax or obtained
and used a credit against Tax on its overall net income (a Tax Credit) which the Funding
1 Liquidity Facility Provider determines to be attributable to that Tax
Payment, then the Funding 1 Liquidity Facility Provider shall reimburse Funding
1 such amount as the Funding 1 Liquidity Facility Provider determines to be
such proportion of that Tax Credit as will leave

 

15

 

the Funding 1 Liquidity Facility Provider
(after that reimbursement) in no better or worse position than it would have
been in if no Tax Payment had been required. 
The Funding 1 Liquidity Facility Provider shall not be obliged to
disclose to any party to this Agreement or otherwise any information regarding
its Tax affairs and computations.

 

10.5                        Status of Qualifying Lender

 

If the Funding 1 Liquidity Facility Provider
or replacement liquidity facility provider (as applicable) ceases, for whatever
reason, to be a Qualifying Lender, it shall promptly notify Funding 1 in
writing of that change in its status.

 

10.6                        Treaty Lender

 

A Treaty Lender and Funding 1 shall
co-operate in completing any procedural formalities necessary for Funding 1 to
obtain authorisation to make payments under the Funding 1 Liquidity Documents
free and clear of and without deduction or withholding for or on account of any
Taxes levied or imposed by the United Kingdom or any taxing authority of or in
the United Kingdom.

 

10.7                        Tax Indemnity

 

(a)                                  Funding 1 shall (within three Business Days
of demand by the Funding 1 Liquidity Facility Provider (the Protected
Party)) pay to a Protected Party an amount equal to the loss,
liability or cost which that Protected Party determines will be or has been
(directly or indirectly) suffered for on and account of Tax by that Protected
Party in respect of the Funding 1 Liquidity Documents.

 

(b)                                 Paragraph (a) above shall not apply:

 

(i)                                     with respect to any Tax assessed on a
Protected Party:

 

(A)                              under the law of the jurisdiction in which
that Protected Party is incorporated or, if different, the jurisdiction in
which that Protected Party is treated as resident for tax purposes; or

 

(B)                                under the law of the jurisdiction in which
that Protected Party’s Facility Office is located in respect of amounts
received or receivable in that jurisdiction,

 

if that Tax is imposed or calculated by reference
to the net income received or receivable (but not any sum deemed to be received
or receivable) by that Protected Party;

 

(ii)                                  to the extent a loss, liability or cost:

 

(A)                              is compensated for by an increased payment
under Clause
10.1 (Gross-up); or

 

(B)                                would have been compensated for by an
increased payment under Clause 10.1 (Gross-up) but was not so
compensated solely because one of the exclusions in Clause 10.3 (Qualifying
Lender) applied.

 

16

 

11.                               MARKET DISRUPTION

 

(a)                                  If LIBOR is to be determined in accordance
with paragraph
(b) of its definition and a Reference Bank does not supply an
offered rate by 1.00 p.m. on a Funding 1 Liquidity Facility Drawdown Date, the
applicable LIBOR shall, subject to paragraph  (b) below,
be determined on the basis of the quotations of the remaining Reference
Bank(s).

 

(b)                                 If, in relation to any Funding 1 Liquidity
Facility Drawing or proposed Funding 1 Liquidity Facility Drawing:

 

(i)                                     LIBOR is to be determined in accordance with
paragraph
(b) of its definition and no, or only one, Reference Bank supplies a
rate for the purposes of determining the applicable LIBOR or the Funding 1
Liquidity Facility Provider otherwise determines that adequate and fair means
do not exist for ascertaining the applicable LIBOR; or

 

(ii)                                  in the Funding 1 Liquidity Facility
Provider’s opinion:

 

(A)                              matching deposits may not be available to it
in the London interbank market in the ordinary course of business to fund that
Funding 1 Liquidity Facility Loan for the relevant Funding 1 Liquidity Facility
Interest Period; or

 

(B)                                the cost to it of matching deposits in the
London interbank market would be in excess of the relevant LIBOR,

 

the Funding 1 Liquidity Facility Provider
shall promptly notify Funding 1 of the fact and that this Clause 11 is in operation.

 

(c)                                  After any notification under paragraph
(b)
above, the Funding 1 Liquidity Facility Loan shall bear interest at the rate
per annum equal to the sum of the applicable Funding 1 Liquidity Facility
Margin, Mandatory Liquid Asset Cost and the cost to the Funding 1 Liquidity
Facility Provider (expressed as a rate per annum) of funding the Funding 1
Liquidity Facility Loan by whatever means it reasonably determines to be
appropriate.

 

12.                               INCREASED COSTS

 

12.1                        Increased costs

 

(a)                                  Subject to Clause 12.2 (Exceptions) and Clause 18
(Enforcement and Subordination), Funding 1 shall forthwith on demand by the
Funding 1 Liquidity Facility Provider pay the Funding 1 Liquidity Facility
Provider the amount of any increased cost incurred by it as a result of:

 

(i)                                     the introduction of, or any change in, or
any change in the interpretation by any court or official authority or
application of, any law or regulation or in the case of Tax, the introduction
of or any change in or any change in the interpretation, administration or
application of any law or regulation or published practice or concession of any
relevant tax authority (in each case occurring after the date of this
Agreement);

 

(ii)                                  compliance with any regulation made or
modified after the date of this Agreement,

 

including any law or regulation relating to
change in currency of a country or reserve asset, special deposit, cash ratio,
liquidity or capital adequacy requirements or any other form of banking or
monetary control or in the case of taxation, any law, regulation, published
practice or concession relating to Tax.

 

17

 

(b)                                 In this Agreement increased cost means:

 

(i)                                     an additional cost incurred by the Funding 1
Liquidity Facility Provider or its holding company as a result of it having
entered into, or performing, maintaining or funding its obligations under, the
Funding 1 Liquidity Documents; or

 

(ii)                                  that portion of an additional cost incurred
by the Funding 1 Liquidity Facility Provider or its holding company in making,
funding or maintaining all or any advances comprised in a class of advances
formed by or including the Funding 1 Liquidity Facility Loans made or to be
made under the Funding 1 Liquidity Documents as is attributable to it making,
funding or maintaining those participations; or

 

(iii)                               a reduction in any amount payable to the
Funding 1 Liquidity Facility Provider or its holding company or the effective
return to a Funding 1 Liquidity Facility Provider under this Agreement or (to
the extent that it is attributable to this Agreement) on its capital, including
any reduction in the effective return from the Funding 1 Liquidity Facility
Margin or the commitment fee payable under Clause 17 (Fees) of this Agreement; or

 

(iv)                              the amount of any payment made by the
Funding 1 Liquidity Facility Provider or its holding company, or the amount of
interest or other return foregone by the Funding 1 Liquidity Facility Provider,
calculated by reference to any amount received or receivable by the Funding 1
Liquidity Facility Provider from any other Party under this Agreement.

 

12.2                        Exceptions

 

Clause 12.1 does not apply to any increased cost:

 

(a)                                  to the extent compensated for by the payment
of the Mandatory Liquid Asset Cost;

 

(b)                                 to the extent compensated for by the
operation of Clause 10.7 (Tax Indemnity); or

 

(c)                                  to the extent that any such increased cost
is attributable to any deduction or withholding for or on account of any Tax
required to be made by Funding 1.

 

13.                               ILLEGALITY

 

If it is or becomes unlawful in any
jurisdiction for the Funding 1 Liquidity Facility Provider to give effect to
any of its obligations as contemplated by this Agreement or to fund or maintain
any Funding 1 Liquidity Facility Loan, then:

 

(a)                                  the Funding 1 Liquidity Facility Provider
may notify Funding 1 accordingly; and

 

(b)                                 (i)                                     subject to Clause 18 (Enforcement and
Subordination), Funding 1 shall forthwith prepay the Funding 1 Liquidity
Facility Loans together with all interest and all other amounts payable by it
to the Funding 1 Liquidity Facility Provider under this Agreement; and

 

(ii)                                  the Funding 1 Liquidity Facility Commitment
shall be cancelled.

 

18

 

14.                               REPRESENTATIONS
AND WARRANTIES

 

14.1                        Representations and
warranties by Funding 1

 

Funding 1 makes the representations and
warranties set out in this Clause 14.1 to the Funding 1 Liquidity
Facility Provider and the Security Trustee:

 

(a)                                  Status

 

(i)                                     It is a limited liability company, duly
incorporated and validly existing under the laws of England and Wales; and

 

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

 

(b)                                 Powers and
authority

 

It has the power to enter into and perform,
and has taken all necessary action to authorise the entry into, performance and
delivery of, the Funding 1 Liquidity Documents to which it is or will be a
party and the transactions contemplated by those Funding 1 Liquidity Documents.

 

(c)                                  Legal
validity

 

Each Funding 1 Liquidity Document to which it
is or will be a party constitutes, or when executed in accordance with its
terms will constitute, its legal, valid and binding obligation enforceable in
accordance with its terms.

 

(d)                                 Non-conflict

 

The entry into and performance by it of, and
the transactions contemplated by, the Funding 1 Liquidity Documents do not and
will not:

 

(i)                                     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;

 

(ii)                                  conflict with any law or regulation or
judicial or official order;

 

(iii)                               conflict with its constitutional documents; or

 

(iv)                              conflict with any document which is binding upon it or any of its
assets.

 

(e)                                  No default

 

No Liquidity Facility Default is outstanding
or might result from the making of any Funding 1 Liquidity Facility Loan.

 

(f)                                    Authorisations

 

All authorisations required or desirable in
connection with the entry into, performance, validity and enforceability of,
and the transactions contemplated by, the Funding 1 Liquidity Documents have
been obtained or effected (as appropriate) and are in full force and effect.

 

19

 

(g)                                 Litigation

 

No litigation, arbitration or administrative
proceedings involving Funding 1 are current or, to its knowledge, pending or
threatened, which might, if adversely determined, have a material adverse
effect on the business or financial condition of Funding 1 or the ability of
Funding 1 to perform its obligations under this Agreement.

 

(h)                                 Security
Interests

 

None of the assets of Funding 1 is affected
by any Security Interest, and Funding 1 is not a party to, nor is it or any of
its assets bound by, any order, agreement or instrument under which Funding 1
is, or in certain events may be, required to create, assume or permit to arise
any Security Interest, other than the Security Interests created by the Funding
1 Deed of Charge.

 

(i)                                     No other business

 

(i)                                     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; and

 

(ii)                                  it is not party to any material agreements
other than the Transaction Documents.

 

(j)                                     Ownership

 

(i)                                     Its entire issued share capital is legally
and beneficially owned and controlled by Holdings; and

 

(ii)                                  its shares are fully paid.

 

(k)                                  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.

 

(l)                                     Tax

 

(i)                                     It is tax resident and legally domiciled in
its jurisdiction of incorporation; and

 

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

 

(m)                               Funding 1
Deed of Charge

 

The Funding 1 Deed of Charge creates, or will
create when the Funding 1 Liquidity Facility Stand-by Account is opened and the
Funding 1 Liquidity Facility Stand-By Deposit is credited to such account, a
first priority Security Interest of the type described in the Funding 1 Deed of
Charge over the Funding 1 Liquidity Facility Stand-by Deposit in favour of the
Security Trustee.

 

For the avoidance of doubt, a breach by
Funding 1 of any representation or warranty contained in this Clause 14.1
or otherwise in this Agreement shall not entitle the Funding 1

 

20

 

Liquidity Facility Provider to terminate this
Agreement or declare the Funding 1 Liquidity Drawing or the Funding 1 Liquidity
Facility Stand-by Drawing or any other amounts payable under this Agreement due
and payable or to prevent any utilisation of the Funding 1 Liquidity Facility
or the Standby-by Facility or any Funding 1 Liquidity Facility Loan being made.

 

14.2                        Representations and
warranties by the Funding 1 Liquidity Facility Provider

 

The Funding 1 Liquidity Facility Provider
makes the representations and warranties set out in this Clause 14.2 to Funding 1 and
the Security Trustee.

 

(a)                                  Status

 

It is duly incorporated with limited
liability under the laws of the jurisdiction of its incorporation and is an
authorised institution under the FSMA 2000.

 

(b)                                 Tax status

 

It is a Qualifying Lender.

 

(c)                                  Powers and
authorisations

 

The documents which contain or establish its
constitution include provisions which give power, and all necessary corporate
authority has been obtained and action taken, for it to sign and deliver, and
perform the transactions contemplated in this Agreement and the agreements
entered into in connection herewith and this Agreement and the agreements
entered into in connection herewith constitute its valid, legal and binding
obligations.

 

(d)                                 Rating

 

It has the Requisite Ratings (and will
promptly notify both Funding 1 and the Security Trustee of the occurrence of
any downgrading by the Rating Agencies of any of its rated debt obligations to
a level below the Requisite Ratings).

 

(e)                                  Non-violation

 

Neither the signing and delivery of this
Agreement nor the performance of any of the transactions contemplated in it
does or will contravene or constitute a default under, or cause to be exceeded
any limit on the Funding 1 Liquidity Facility Provider or the powers of its
directors imposed by or contained in (i) any law by which it or any of its
assets is bound or affected, or (ii) any agreement to which it is a party or by
which any of its assets is bound.

 

14.3                        Times for making
representations and warranties

 

The representations and warranties set out in
this Clause
14 (Representations and warranties):

 

(a)                                  are made on the date of this Agreement; and

 

(b)                                 save in respect of the warranty of the
Funding 1 Liquidity Facility Provider given under Clause 14.2(b) (Tax Status),
are deemed to be repeated by the relevant Party on the date of each Funding 1
Liquidity Facility Request, each Funding 1 Liquidity Facility Drawdown Date and
each Funding 1 Interest Payment Date with reference to the facts and
circumstances then existing.

 

21

 

15.                               UNDERTAKINGS

 

15.1                        Duration

 

The undertakings in this Clause 15 remain in force
from the date of this Agreement for so long as any amount is or may be
outstanding under this Agreement or any Funding 1 Liquidity Facility Commitment
is in force.

 

15.2                        Financial information

 

Funding 1 shall supply to the Funding 1
Liquidity Facility Provider and the Security Trustee:

 

(a)                                  as soon as the same are available (and in
any case before the latest date for publication in accordance with the
Companies Act 1985, as amended), its audited accounts for that financial year
which shall be in such form as will comply with relevant legal and
accounting requirements for the time being; and

 

(b)                                 promptly such other information as the
Security Trustee may reasonably request.

 

15.3                        Information - miscellaneous

 

Funding 1 shall supply to the Funding 1
Liquidity Facility Provider promptly, such further information in its
possession or control regarding its financial condition and operations as it
supplies to the Security Trustee, if the Funding 1 Liquidity Facility Provider
so requests.

 

15.4                        Notification of Default

 

Funding 1 shall notify the Funding 1
Liquidity Facility Provider of any Funding 1 Liquidity Facility Default (and
the steps, if any, being taken to remedy it) promptly upon its occurrence.

 

15.5                        Authorisations

 

Funding 1 shall promptly:

 

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

 

(b)                                 supply certified copies to the Funding 1
Liquidity Facility Provider 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 Funding 1 Liquidity Document.

 

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

 

16.                               DEFAULT

 

16.1                        Funding 1 Liquidity
Facility Default

 

Each of the events set out in Clauses 16.2
(Non-Payment) to 16.4 (Unlawfulness) (inclusive) is a Funding 1 Liquidity
Facility Default (whether or not caused by any reason whatsoever

 

22

 

outside the control of Funding 1 or any other
person).

 

16.2                        Non-payment

 

(a)                                  Subject to paragraph (b) below, Funding
1 does not pay within 3 London Business Days of the due date any amount payable
by it under the Funding 1 Liquidity Documents at the place at and in the
currency in which it is expressed to be payable.

 

(b)                                 The Funding 1 Liquidity Facility Provider
agrees that the non-payment of any Funding 1 Liquidity Subordinated Amounts
shall only constitute a Funding 1 Liquidity Facility Default under paragraph
(a) above in circumstances where Funding 1 has the requisite funds
to pay such amounts in accordance with the Funding 1 Deed of Charge on the
relevant due date and any such Funding 1 Liquidity Subordinated Amounts are not
then paid.

 

16.3                        Intercompany Loan
Acceleration Notice

 

An Intercompany Loan Acceleration Notice is
served or the Security Trustee having become bound to serve an Intercompany
Loan Acceleration Notice fails to do so within 30 days of becoming so bound.

 

16.4                        Unlawfulness

 

It is or becomes unlawful for Funding 1 to
perform any of its obligations under the Funding 1 Liquidity Documents.

 

16.5                        Acceleration

 

On and at any time after the occurrence of a
Funding 1 Liquidity Facility Default and subject to Clause 18 (Enforcement and
Subordination) and if such Funding 1 Liquidity Facility Default is continuing
the Funding 1 Liquidity Facility Provider may by notice to Funding 1:

 

(a)                                  cancel the Funding 1 Liquidity Facility
Commitment; and/or

 

(b)                                 demand that all or part of the Funding 1
Liquidity Facility Loans, together with accrued interest, and all other amounts
accrued under this Agreement be immediately due and payable, whereupon they
shall become immediately due and payable; and/or

 

(c)                                  demand that all or part of the Funding 1 Liquidity
Facility Loans be payable on demand, whereupon they shall immediately become
payable on demand.

 

17.                               FEES

 

17.1                        Commitment Fee and
Contingent Fee

 

(a)                                  Funding 1 shall (subject to Clause
17.1(b) and (c) below and to Clause 18 (Enforcement and
Subordination)) pay to the Funding 1 Liquidity Facility Provider a commitment
fee computed at the rate of 0.08 per cent. per annum on the undrawn,
uncancelled amount of the Funding 1 Liquidity Facility Commitment during the
period from the date of this Agreement up to and including the last day of the
Funding 1 Liquidity Facility Commitment Period.

 

(b)                                 In the event that a Funding 1 Liquidity
Facility Stand-by Drawing is made, and for so long as any amount is outstanding
under the First Issuer Intercompany Loan:

 

(i)                                     in respect of a Funding 1 Liquidity Facility
Stand-by Drawing up to (and including) the first £60,000,000, the Commitment
Fee referred to in Clause 17.1(a)

 

23

 

(Commitment Fee and Contingent Fee) will not
be payable and in its place Funding 1 will (subject to Clause 18 (Enforcement and
Subordination)) pay to the Funding 1 Liquidity Facility Provider interest as
determined in accordance with Clause 8.1 (Interest Rate (Funding 1 Liquidity
Facility Drawing)) and Clause 8.2(b) (Interest Rate (Funding 1 Liquidity
Facility Stand-by Drawing)); and

 

(ii)                                  in respect of a Funding 1 Liquidity Facility
Stand-by Drawing equal to and in excess of £60,000,001, the Commitment Fee
referred to in Clause 17.1(a) (Commitment Fee and Contingent Fee) will not be
payable and in its place Funding 1 will (subject to Clause 18 (Enforcement and
Subordination) pay to the Funding 1 Liquidity Facility Provider a contingent
fee computed at the rate of 0.38 per cent. per annum on the amount of the
Funding 1 Liquidity Facility Stand-by Drawing in excess of £60,000,000, plus an
amount equal to any interest received by Funding 1 on the Funding 1 Liquidity
Facility Stand-by Account insofar as it relates to the amount in excess of
£60,000,000.

 

(c)                                  In the event that the First Issuer
Intercompany Loan is repaid or is otherwise cancelled and a Funding 1 Liquidity
Stand-by Drawing is made, the Commitment Fee referred to in Clause
17.1(a) (Commitment Fee and Contingent Fee) will not be payable and
in its place Funding 1 will (subject to Clause 18 (Enforcement and Subordination)
pay to the Funding 1 Liquidity Facility Provider a contingent fee computed at
the rate of 0.38 per cent. per annum on the amount of the Funding 1 Liquidity
Stand-by Drawing, plus an amount equal to any interest received by Funding 1 on
the Funding 1 Liquidity Facility Stand-by Account.

 

(d)                                 Subject to Clause 18 (Enforcement and
Subordination), the accrued commitment fee and contingent fee is payable
quarterly in arrear on each Funding 1 Interest Payment Date.  The accrued commitment fee and contingent
fee is also payable to the Funding 1 Liquidity Facility Provider on the
cancelled amount of the Funding 1 Liquidity Facility Commitment at the time the
cancellation takes effect.

 

17.2                        VAT

 

(a)                                  All payments to be made by Funding 1 under
the Funding 1 Liquidity Documents are exclusive of VAT chargeable thereon and
Funding 1 shall pay to the Funding 1 Liquidity Facility Provider a sum in
respect of any VAT chargeable in respect of any supply made by the Funding 1
Liquidity Facility Provider for the purposes of VAT in connection with the
Funding 1 Liquidity Documents.

 

(b)                                 If VAT is chargeable
on any supply made by the Funding 1 Liquidity Facility Provider to any other
person in connection with a Funding 1 Liquidity Document and Funding 1 is
required by the terms of any Funding 1 Liquidity Document to pay an amount
equal to the consideration for such supply to the Funding 1 Liquidity Facility
Provider, Funding 1 shall also pay to the Funding 1 Liquidity Facility Provider
(in addition to and at the same time as paying such amount) an amount equal to
the amount of such VAT.

 

(c)                                  Where under the Funding 1 Liquidity
Documents, Funding 1 is required to reimburse or indemnify the Funding 1 Liquidity
Facility Provider against any costs, expenses (including legal fees), loss or
liability or otherwise, such obligation to reimburse or indemnify shall extend
to any VAT charged to the Funding 1 Liquidity Facility Provider on such costs,
expenses (including legal fees) or in respect of such loss, liability or
otherwise which is irrecoverable by the Funding 1 Liquidity Facility Provider.

 

24

 

18.                               ENFORCEMENT
AND SUBORDINATION

 

(a)                                  The Funding 1 Liquidity Facility Provider
acknowledges to the Security Trustee that it is bound by the terms of the
Funding 1 Deed of Charge and, in particular, confirms that no sum, whether in
respect of principal or interest or otherwise relating to any Funding 1
Liquidity Facility Loan, shall be paid by Funding 1 except in accordance with
the provisions of the Funding 1 Cash Management Agreement and the Funding 1
Deed of Charge unless and until all sums required by the Funding 1 Cash
Management Agreement or the Funding 1 Deed of Charge, as the case may be, to be
paid or provided for in priority thereto have been paid or discharged in full.

 

(b)                                 The Funding 1 Liquidity Facility Provider
further agrees that only the Security Trustee may enforce the security created
in favour of, inter alia, the Funding 1 Liquidity Facility Provider and
the Security Trustee by the Funding 1 Deed of Charge and that the Funding 1
Liquidity Facility Provider shall not take any steps for the purpose of:

 

(i)                                     recovering any debts whatsoever owing to it by
Funding 1 save as provided for in accordance with the terms of the Funding 1
Deed of Charge (including, without limitation, by exercising any right of
set-off); or

 

(ii)                                  enforcing any rights arising out of this
Agreement against Funding 1; or

 

(iii)                               procuring the winding-up, administration or
liquidation of Funding 1 in respect of any of its liabilities whatsoever,

 

unless the Security Trustee, having become
bound to serve an Intercompany Loan Acceleration Notice, fails to do so within
30 days of becoming so bound and that failure is continuing (in which case the
Funding 1 Liquidity Facility Provider shall be entitled to take any such steps
and proceedings as it shall deem necessary other than (i) any legal proceedings
for the winding-up of, or for an administration order  or (ii) filing documents with the court for the appointment of an
administrator or (iii) serving a notice of intention to appoint an
administrator, in respect of Funding 1) provided that the Funding 1 Liquidity
Facility Provider shall not be entitled to take any steps or proceedings
pursuant to this Agreement which would contravene Clauses 5 to 9
of the Funding 1 Deed of Charge.

 

(c)                                  Subject to paragraph (b) above, the
Funding 1 Liquidity Facility Provider agrees to defer taking any action or
proceedings against Funding 1 to recover any amounts payable by Funding 1 to
the Funding 1 Liquidity Facility Provider under this Agreement except to the
extent expressly permitted by the provisions of the Funding 1 Deed of Charge
unless and until (then only to the extent that) Funding 1 has assets sufficient
to meet such claim in full having taken into account all other liabilities
(actual, contingent or prospective) of Funding 1 which under the Funding 1 Deed
of Charge rank pari passu with or in priority to its liabilities to the
Funding 1 Liquidity Facility Provider under this Agreement, provided however
that nothing in this paragraph (c) shall prevent the Funding 1
Liquidity Facility Provider from proving for the full amount owed to it by
Funding 1 under this Agreement in the liquidation of Funding 1.

 

(d)                                 Without prejudice to the other provisions of
this Clause
18, the Funding 1 Liquidity Facility Provider covenants with the
Security Trustee that if, whether in the liquidation of Funding 1 or otherwise
(and notwithstanding the provisions of this Clause 18), any payment
(whether of principal, interest or otherwise) is received by it in respect of a
Funding 1 Liquidity Facility Loan other than in accordance with Clauses
4
and 6
of the Funding 1 Cash Management Agreement and Clauses  7 and 8 of the Funding 1 Deed of
Charge, the amount so paid shall be received and held by the Funding 1
Liquidity Facility Provider upon trust for the Security

 

25

 

Trustee and shall be paid over to the Security Trustee forthwith upon
receipt provided however that this paragraph (d) shall have effect only to the
extent that it does not constitute or create and is not deemed to constitute or
create any mortgage, charge or other Security Interest of any kind.

 

19.                               EXPENSES

 

19.1                        Initial and special costs

 

Subject to Clause 18 (Enforcement and Subordination),
Funding 1 shall forthwith on demand pay the Funding 1 Liquidity Facility
Provider the amount of all costs and expenses (including reasonable legal fees)
incurred by it in connection with:

 

(a)                                  the negotiation, preparation, printing and
execution of:

 

(i)                                     this Agreement and any other documents
referred to in this Agreement;

 

(ii)                                  any other Funding 1 Liquidity Document
(other than a Novation Certificate) executed after the date of this Agreement;

 

(b)                                 any amendment, waiver, consent or suspension
of rights (or any proposal for any of the foregoing) requested by or on behalf
of Funding 1 or, in the case of Clause 2.4 (Change of currency), the
Funding 1 Liquidity Facility Provider and relating to a Funding 1 Liquidity
Document or a document referred to in any Funding 1 Liquidity Document; and

 

(c)                                  any other matter, not of an ordinary
administrative nature, arising out of or in connection with a Funding 1
Liquidity Document.

 

19.2                        Enforcement costs

 

Subject to Clause 18 (Enforcement and Subordination),
Funding 1 shall forthwith on demand pay to the Funding 1 Liquidity Facility
Provider the amount of all costs and expenses (including legal fees) incurred
by it:

 

(a)                                  in connection with the enforcement of, or
the preservation of any rights under, any Funding 1 Liquidity Document; or

 

(b)                                 in investigating any possible Funding 1
Liquidity Facility Default.

 

20.                               STAMP DUTIES

 

Subject to Clause 18 (Enforcement and Subordination),
Funding 1 shall pay and forthwith on demand indemnify the Funding 1 Liquidity
Facility Provider against any liability it incurs in respect of any United
Kingdom stamp, registration and similar tax which is or becomes payable in
connection with the entry into, performance or enforcement of any Funding 1
Liquidity Document.

 

21.                               INDEMNITIES

 

21.1                        Currency indemnity

 

(a)                                  Subject to Clause 18 (Enforcement and
Subordination), if the Funding 1 Liquidity Facility Provider receives an amount
in respect of Funding 1’s liability under the Funding 1 Liquidity Documents or
if that liability is converted into a claim, proof, judgment or order in a
currency

 

26

 

other than the currency (the contractual currency) in which the amount
is expressed to be payable under the relevant Funding 1 Liquidity Document:

 

(i)                                     Funding 1 shall indemnify the Funding 1
Liquidity Facility Provider as an independent obligation against any loss or
liability arising out of or as a result of the conversion;

 

(ii)                                  if the amount received by the Funding 1
Liquidity Facility Provider, when converted into the contractual currency at a
market rate in the usual course of its business, is less than the amount owed
in the contractual currency, Funding 1 shall forthwith on demand pay to the
Funding 1 Liquidity Facility Provider an amount in the contractual currency
equal to the deficit; and

 

(iii)                               Funding 1 shall forthwith on demand pay to
the Funding 1 Liquidity Facility Provider on demand any exchange costs and
taxes payable in connection with any such conversion.

 

(b)                                 Funding 1 waives any right it may have in
any jurisdiction to pay any amount under the Funding 1 Liquidity Documents in a
currency other than that in which it is expressed to be payable.

 

21.2                        Other indemnities

 

Subject to Clause 18 (Enforcement and Subordination),
Funding 1 shall forthwith on demand indemnify the Funding 1 Liquidity Facility
Provider against any loss or liability which that Funding 1 Liquidity Facility
Provider incurs as a consequence of:

 

(a)                                  the operation of Clause 16.6 (Acceleration) or
if the loss or liability is caused by Funding 1 making a payment other than in
accordance with Clause 9 (Payments);

 

(b)                                 any payment of principal or an overdue
amount being received from any source otherwise than on its Funding 1 Interest
Payment Date and, for the purposes of this paragraph (b), the Funding 1 Interest
Payment Date of an overdue amount is the last day of each Designated Interest
Period (as defined in Clause 8.4 (Default interest)); or

 

(c)                                  (other than by reason of negligence or
default by the Funding 1 Liquidity Facility Provider) a Funding 1 Liquidity
Facility Loan not being made after Funding 1 has delivered a Funding 1
Liquidity Facility Request for that Funding 1 Liquidity Facility Loan; or

 

(d)                                 any reasonable costs, including legal fees,
which the Funding 1 Liquidity Facility Provider may sustain or incur as a
consequence of any default by Funding 1 in the performance of any of the obligations
expressed to be assumed by it in this Agreement.

 

Funding 1’s liability in each case includes any loss of margin or other
loss or expense on account of funds borrowed, contracted for or utilised to
fund any amount payable under any Funding 1 Liquidity Document, any amount
repaid or prepaid or any Funding 1 Liquidity Facility Loan.

 

22.                               EVIDENCE
AND CALCULATIONS

 

22.1                        Accounts

 

27

 

Accounts maintained by the Funding 1
Liquidity Facility Provider in connection with this Agreement are prima facie
evidence of the matters to which they relate.

 

22.2                        Certificates and
determinations

 

Any certification or determination by the Funding 1 Liquidity Facility
Provider of a rate or amount under this Agreement is, in the absence of
manifest error, conclusive evidence of the matters to which it relates.

 

22.3                        Calculations

 

Interest (including any applicable Mandatory Liquid Asset Cost) and the
fee payable under Clause 17.1 (Commitment fee) accrue from
day to day and are calculated on the basis of the actual number of days elapsed
and a year of 365 days or, if market practice dictates, 360 days.

 

23.                               AMENDMENTS AND
WAIVERS

 

23.1                        Procedure

 

Subject to Clause 25 of the Funding 1 Deed of Charge
(Supplemental Provisions Regarding the Security Trustee), any term of the
Funding 1 Liquidity Documents may be amended or waived with the written
agreement of Funding 1, the Security Trustee and the Funding 1 Liquidity
Facility Provider.

 

23.2                        Waivers and remedies
cumulative

 

The rights of the Funding 1 Liquidity Facility Provider under the
Funding 1 Liquidity Documents:

 

(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.

 

24.                               CHANGES TO THE
PARTIES

 

24.1                        Transfers by Funding 1

 

Funding 1 may not assign, transfer, novate or dispose of any of, or any
interest in, the Funding 1 Liquidity Facility Commitment and/or rights and/or
obligations under this Agreement except that Funding 1 may assign its rights
under this Agreement to the Security Trustee pursuant to the Funding 1 Deed of
Charge.

 

24.2                        Transfer by the Security
Trustee

 

The Security Trustee may assign its rights under this Agreement to any
successor security trustee under the Funding 1 Deed of Charge.

 

24.3                        Transfers by the Cash
Manager

 

The Cash Manager may assign its rights under this Agreement to any
successor Cash Manager under the Cash Management Agreement.

 

28

 

24.4                        Transfers by the Funding 1
Liquidity Facility Provider

 

(a)                                  The Funding 1 Liquidity Facility Provider
(the Existing
Funding 1 Liquidity Facility Provider) may, subject to paragraph
(b) below, at any time assign, transfer or novate any of its rights
and/or obligations under this Agreement to another person with the Requisite
Ratings (the New Funding 1 Liquidity Facility Provider) provided that the
then current ratings of the Notes of an Issuer are not adversely affected
thereby and further provided that if, at the time of such assignment, transfer
or novation, the Funding 1 Liquidity Facility Provider is a Qualifying Lender,
such other person is also at such time a Qualifying Lender.

 

(b)                                 The prior written consent of Funding 1 and
the Security Trustee is required for any such assignment, transfer or novation,
unless a Funding 1 Liquidity Facility Default is outstanding in which case no
consent is required from Funding 1. 
However, the prior written consent of Funding 1 and the Security Trustee
must not be unreasonably withheld or delayed and will be deemed to have been
given if, within 14 days of receipt by Funding 1 or the Security Trustee (as
applicable) of an application for consent, it has not been expressly refused.

 

(c)                                  A transfer of obligations will be effective
only if either:

 

(i)                                     the obligations are novated in accordance
with Clause
24.5 (Procedure for novations); or

 

(ii)                                  the New Funding 1 Liquidity Facility
Provider confirms to the Security Trustee and Funding 1 in writing that it
undertakes to be bound by the terms of this Agreement (including, without
limitation, the representations and warranties) to be made by it in accordance
with Clause
14.2 (Representations and warranties by the Funding 1 Liquidity
Facility Provider) and the Funding 1 Deed of Charge.  On the transfer becoming effective in this manner the Existing
Funding 1 Liquidity Facility Provider shall be relieved of its obligations
under this Agreement to the extent that they are transferred to the New Funding
1 Liquidity Facility Provider.

 

(d)                                 Nothing in this Agreement restricts the
ability of the Funding 1 Liquidity Facility Provider to sub-contract an
obligation if the Funding 1 Liquidity Facility Provider remains primarily
liable under this Agreement for that obligation.

 

(e)                                  The Existing Funding 1 Liquidity Facility
Provider is not responsible to a New Funding 1 Liquidity Facility Provider for:

 

(i)                                     the execution, genuineness, validity, enforceability
or sufficiency of any Funding 1 Liquidity Document or any other document;

 

(ii)                                  the collectability of amounts payable under
any Funding 1 Liquidity Document; or

 

(iii)                               the accuracy of any statements (whether
written or oral) made in or in connection with any Funding 1 Liquidity
Document.

 

(f)                                    The New Funding 1 Liquidity Facility
Provider confirms to the Existing Funding 1 Liquidity Facility Provider and the
other Finance Parties that it:

 

(i)                                     has made its own independent investigation
and assessment of the financial condition and affairs of each of Funding 1 and
its related entities in connection with its participation in this Agreement and
has not relied exclusively on any information provided to it by the Existing
Funding 1 Liquidity Facility Provider in connection with any Funding 1
Liquidity Document; and

 

29

 

(ii)                                  will continue to make its own independent
appraisal of the creditworthiness of each of Funding 1 and its related entities
while any amount is or may be outstanding under this Agreement or any Funding 1
Liquidity Facility Commitment is in force.

 

(g)                                 Nothing in any Funding 1 Liquidity Document
obliges the Existing Funding 1 Liquidity Facility Provider to:

 

(i)                                     accept a re-transfer from a New Funding 1
Liquidity Facility Provider of the Funding 1 Liquidity Facility Commitment
and/or rights and/or obligations assigned, transferred or novated under this
Clause; or

 

(ii)                                  support any losses incurred by the New
Funding 1 Liquidity Facility Provider by reason of the non-performance by
Funding 1 of its obligations under this Agreement or otherwise.

 

(h)                                 Any reference in this Agreement to the
Funding 1 Liquidity Facility Provider includes a New Funding 1 Liquidity
Facility Provider.

 

24.5                        Procedure for novations

 

(a)                                  A novation is effected if:

 

(i)                                     the Existing Funding 1 Liquidity Facility
Provider and the New Funding 1 Liquidity Facility Provider deliver to the
Security Trustee a duly completed Novation Certificate, substantially in the
form of Schedule
4; and

 

(ii)                                  the Security Trustee executes such Novation
Certificate.

 

(b)                                 To the extent that they are expressed to be
the subject of the novation in the Novation Certificate:

 

(i)                                     the Existing Funding 1 Liquidity Facility
Provider and the other Parties (the Existing Parties) will be released from
their obligations to each other (the Discharged Obligations);

 

(ii)                                  the New Funding 1 Liquidity Facility
Provider and the Existing Parties will assume obligations towards each other
which differ from the Discharged Obligations only insofar as they are owed to
or assumed by the New Funding 1 Liquidity Facility Provider instead of the
Existing Funding 1 Liquidity Facility Provider;

 

(iii)                               the rights of the Existing Funding 1
Liquidity Facility Provider against the Existing Parties and vice versa (the Discharged
Rights) will be cancelled; and

 

(iv)                              the New Funding 1 Liquidity Facility
Provider and the Existing Parties will acquire rights against each other which
differ from the Discharged Rights only insofar as they are exercisable by or
against the New Funding 1 Liquidity Facility Provider instead of the Existing
Funding 1 Liquidity Facility Provider,

 

all on the date of execution of the Novation Certificate by the
Security Trustee or, if later, the date specified in the Novation Certificate.

 

25.                               DISCLOSURE
OF INFORMATION

 

The Funding 1 Liquidity Facility Provider may
disclose to any person with whom it is

 

30

 

proposing to enter, or has entered into, any
kind of transfer, participation or other agreement in relation to this
Agreement:

 

(a)                                  a copy of any Funding 1 Liquidity Document;
and

 

(b)                                 any information which the Funding 1
Liquidity Facility Provider has acquired under or in connection with any
Funding 1 Liquidity Document,

 

if that person undertakes to Funding 1 and the Security Trustee to keep
the information confidential.

 

26.                               SET-OFF

 

(a)                                  The Funding 1 Liquidity Facility Provider
undertakes with Funding 1 and the Security Trustee not to exercise or claim any
right of set-off or combination or consolidation of accounts in respect of any
account of Funding 1 with the Funding 1 Liquidity Facility Provider and/or
interest accruing on amounts in any such account or any part of such account in
or towards, or conditionally upon satisfaction of any liabilities to the
Funding 1 Liquidity Facility Provider of Funding 1 or itself in any other
capacity whatsoever or any other person.

 

(b)                                 In the event that the Funding 1 Liquidity
Facility Provider (in breach of its undertaking in paragraph (a) above)
exercises any right of set-off or combination or consolidation of accounts, the
Funding 1 Liquidity Facility Provider shall pay to Funding 1 such additional
amount so that the net amount received by Funding 1 will equal the full amount
which would have been received by it if the Funding 1 Liquidity Facility
Provider had not exercised or claimed such right of set-off or combination or
consolidation of accounts.

 

27.                               SEVERABILITY

 

If a provision of any Funding 1 Liquidity Document is or becomes
illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

 

(a)                                  the legality, validity or enforceability in
that jurisdiction of any other provision of the Funding 1 Liquidity Documents;
or

 

(b)                                 the legality, validity or enforceability in
other jurisdictions of that or any other provision of the Funding 1 Liquidity
Documents.

 

28.                               COUNTERPARTS

 

This Agreement may be executed in any number of counterparts (manually
or by facsimile) each of which, when executed and delivered, shall constitute
an original, but all the counterparts shall together constitute but one and the
same instrument provided, however, that this Agreement shall have no force or
effect until it is executed by the last party to execute the same and shall be deemed
to have been executed and delivered in the place where such last party executed
this Agreement.

 

29.                               NOTICES

 

29.1                        Giving of notices

 

Any notice, communication or demand made under or in connection with
this Agreement shall be in writing and shall be delivered personally, or by
post, fax or cable to the addresses given in Clause 29.2 (Addresses) or at
such other address as the recipient may have notified

 

31

 

to the other party in writing. 
Proof of posting or despatch of any notice or communication shall be
deemed to be proof of receipt:

 

(a)                                  in the case of a letter, on the third
business day after posting; and

 

(b)                                 in the case of a facsimile on the business
day of despatch.

 

29.2                        Addresses for notices

 

The addresses referred to in this Clause 29 (Notices) are as follows:

 

(a)                                  in the case of Funding 1, to Permanent
Funding (No. 1) Limited at Blackwell House, Guildhall Yard, London EC2V 5AE
(facsimile number +44 (0) 20 7556 0975) for the attention of the Secretary with
a copy to HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ
(facsimile no. +44 (0) 20 7574 8784) for the attention of Head of Capital
Markets and Securitisation;

 

(b)                                 in the case of the Cash Manager, to Halifax
plc at Trinity Road, Halifax, West Yorkshire HX1 2RG (LP/3/3/SEC) (facsimile
number +44 (0) 113 235 7511) for the attention of Head of Mortgage
Securitisation with a copy to HBOS Treasury Services plc, 33 Old Broad Street,
London EC2N 1HZ (facsimile no. +44 (0) 20 7574 8784) for the attention of Head
of Capital Markets and Securitisation;

 

(c)                                  in the case of the
Security Trustee, to The Bank of New York, One Canada Square, London E14 5AL
(facsimile number + 44 (020) 7964 6061/6399) for the attention of Corporate
Trust Services; and

 

(d)                                 in the case of the Funding 1 Liquidity
Facility Provider, to JPMorgan Chase Bank, 125 London Wall, London EC2Y 5AJ
(facsimile no. +44 20 7777 5305/5311) for the attention of European Loans,

 

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 29.

 

30.                               THIRD PARTY RIGHTS

 

A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
Agreement, but this does not affect any right or remedy of a third party which
exists or is available apart from that Act.

 

31.                               GOVERNING LAW

 

This Agreement is governed by and construed in accordance with English
law.

 

32.                               SUBMISSION
TO JURISDICTION

 

Each party to this Agreement hereby
irrevocably submits to the non-exclusive jurisdiction of the English courts in
any action or proceeding arising out of or relating to this 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 this 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.

 

32

 

This Agreement has been entered
into on the date stated at the beginning of this Agreement.

 

33

 

SCHEDULE 1

 

CONDITIONS PRECEDENT
DOCUMENTS

 

1.                                       A copy of the memorandum and articles of
association and certificate of incorporation of Funding 1.

 

2.                                       A copy of a resolution of the board of
directors of Funding 1:

 

(a)                                  approving the terms of, and the transactions
contemplated by, this Agreement and resolving that it execute this Agreement;

 

(b)                                 authorising a specified person or persons to
execute this Agreement on its behalf; and

 

(c)                                  authorising a specified person or persons,
on its behalf, to sign and/or despatch all other documents and notices to be
signed and/or despatched by it under or in connection with this Agreement.

 

3.                                       A specimen of the signature of each person
authorised by the resolution referred to in paragraph 2 above.

 

4.                                       A certificate of an authorised signatory of
Funding 1 certifying that each copy document specified in this Schedule 1
is correct, complete and in full force and effect as at a date no earlier than
the date of this Agreement.

 

5.                                       The
Transaction Documents.

 

6.                                       Confirmation
from Clifford Chance as legal counsel to the Security Trustee that they have
received, on behalf of the Security Trustee, a transaction legal opinion from
Allen & Overy.

 

34

 

SCHEDULE 2

 

CALCULATION OF THE
MANDATORY LIQUID ASSET COST

 

(a)                                  For the purposes of paragraph (a) of the
definition of Mandatory Liquid Asset Cost, the Mandatory Liquid Asset Cost for
a Funding 1 Liquidity Facility Loan for its Funding 1 Liquidity Facility
Interest Period is the rate determined by the Funding 1 Liquidity Facility
Provider (rounded upward, if necessary, to four decimal places) calculated in
accordance with the following formulae:

 

 

where on the day of application of the formula:

 

B                                        is the
percentage of the Funding 1 Liquidity Facility Provider’s eligible liabilities
(in excess of any stated minimum) which the Bank of England requires the
Funding 1 Liquidity Facility Provider to hold on a non-interest-bearing deposit
account in accordance with its cash ratio requirements;

 

Y                                        is the
applicable LIBOR for that Funding 1 Liquidity Facility Provider;

 

S                                         is the
percentage of the Funding 1 Liquidity Facility Provider’s eligible liabilities
which the Bank of England requires the Funding 1 Liquidity Facility Provider to
place as a special deposit;

 

Z                                        is the
lower of Y and the interest rate per annum paid by the Bank of England on
special deposits; and

 

F                                         is the
charge payable by the Funding 1 Liquidity Facility Provider to the Financial
Services Authority under the fees rules (but, for this purpose, calculated by
the Funding 1 Liquidity Facility Provider on a notional basis as being the
average of the fee tariffs within fee block Category A1 (Deposit acceptors) of
the fees rules, applying any applicable discount and ignoring any minimum fee
required under the fees rules) and expressed in pounds per £1 million of the
tariff base of the Funding 1 Liquidity Facility Provider.

 

(b)                                 For the purposes of this Schedule 2:

 

(i)                                     eligible liabilities and special deposits have the meanings given to them at the time
of application of the formula under or pursuant to the Bank of England Act 1998
or by the Bank of England; and

 

(ii)                                  fee base
means the then current rules on periodic fees in the Supervision Manual of the
FSA Handbook; and

 

(iii)                               tariff base
has the meaning given to it in the fees rules.

 

(c)                                  In the
application of the formula, B, Y, S and Z are included in the formula as
figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated
as 0.5 x 15.  A negative result obtained
by subtracting Z from Y is taken as zero.

 

35

 

(d)                                 (i)            Each formula is applied on the first
day of the relevant Funding 1 Liquidity Interest Period.

 

(ii)                                  Each rate calculated in accordance with the
formula is, if necessary, rounded upward to four decimal places.

 

(iii)                               If the formula produces a negative
percentage, the percentage shall be taken as zero.

 

(e)                                  If the
Funding 1 Liquidity Facility Provider determines, after consultation with
Funding 1 that a change in circumstances has
rendered, or will render, the formula inappropriate, the Funding 1 Liquidity
Facility Provider shall notify Funding 1 of the manner in which the Mandatory
Liquidity Asset Cost will subsequently be calculated. The manner of calculation
so notified by the Funding 1 Liquidity Facility Provider shall, in the absence
of manifest error, be binding on all the parties.

 

36

 

SCHEDULE 3

 

FORM OF
FUNDING 1 LIQUIDITY FACILITY REQUEST

 

To:          JPMorgan
Chase Bank as Funding 1 Liquidity Facility Provider

 

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

 

From:      Permanent
Funding (No. 1) Limited

 

Date:[          ]

 

PERMANENT FUNDING (NO. 1) LIMITED

£[•,000,000] Funding 1
Liquidity Facility Agreement (as amended and/or restated from time to time)

 

1.                                       We wish to borrow a Funding 1 Liquidity
[Facility Drawing/Facility Stand-by Drawing] as follows:

 

(a)                                  Funding 1 Liquidity Facility Drawdown Date:
[                      ]

 

(b)                                 Funding 1 Liquidity Facility

 

(c)                                  Amount:
£[                      ]

 

(d)                                 Payment Instructions:
[                      ].**

 

(e)                                  Term of Funding 1 Liquidity [Facility
Drawing/Facility Stand-by Drawing]:
[          ]

 

2.                                       We confirm that each condition specified in Clause 4.2
(Further conditions precedent) is satisfied on the date of this Funding 1
Liquidity Facility Request.

 

3.                                       We confirm that the Funding 1 Liquidity
Facility Drawing is to be used for one of the purposes specified in Clause 3
(Purpose).

 

By:

 

PERMANENT FUNDING (NO. 1) LIMITED

Authorised
Signatory

 

**           This will be the Funding 1 Liquidity Facility Stand-by
Account if this is a Funding 1 Liquidity Facility Stand-by Drawing.

 

37

 

SCHEDULE 4

 

FORM OF NOVATION CERTIFICATE

 

To:                              [The Bank
of New York] (as Security Trustee)

 

From:      [THE
EXISTING FUNDING 1 LIQUIDITY FACILITY PROVIDER] and

[THE NEW FUNDING 1 LIQUIDITY
FACILITY PROVIDER]                                                                                                                                                                                                                                                                                  Date:
[          ]

 

PERMANENT FUNDING (NO. 1) LIMITED

£[l,000,000] Funding 1 Liquidity Facility Agreement as amended
and/or restated from time to time)

 

We refer to Clause 24.5 (Procedure for
novations).

 

1.                                       We JPMorgan Chase Bank (the Existing
Funding 1 Liquidity Facility Provider) and [                      ]
(the New
Funding 1 Liquidity Facility Provider) agree to the Existing Funding
1 Liquidity Facility Provider and the New Funding 1 Liquidity Facility Provider
novating all the Existing Funding 1 Liquidity Facility Provider’s Funding 1
Liquidity Facility Commitment (or part) and/or rights and
obligations referred to in the Schedule in accordance with Clause 24.5 (Procedure for novations).

 

2.                                       The specified date for the purposes of Clause
24.5(b) (Procedure for novations) is [date of novation].

 

3.                                       The New
Funding 1 Liquidity Facility Provider makes the representations and warranties
to be made by it in accordance with Clause 14
(Representations and warranties) as at [date of novation].

 

4.                                       The address
for notices of the New Funding 1 Liquidity Facility Provider for the purposes
of Clause
29.2 (Addresses
for notices) is set out in the Schedule to this Novation Certificate.

 

5.                                       This
Novation Certificate is governed by English law.

 

38

 

THE SCHEDULE

 

Funding 1 Liquidity Facility Commitment and
rights and obligations to be novated

 

[insert
relevant details]

 

[New Funding 1 Liquidity Facility Provider]

 

[Address for notices]

 

	
  [Existing Funding 1

  	
  [New Funding 1 Liquidity

  	
  [SECURITY TRUSTEE]

  
	
  Liquidity Facility Provider]

  	
  Facility Provider]

  	
   

  
	
  By:

  	
  By:

  	
  By:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  Date:

  	
  Date:

  

 

39

 

SIGNATORIES

 

	
  FUNDING 1

  	
   

  
	
   

  	
   

  
	
  SIGNED by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  PERMANENT
  FUNDING (NO. 1) LIMITED

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
  FUNDING 1 LIQUIDITY
  FACILITY PROVIDER

  	
   

  
	
   

  	
   

  
	
  SIGNED by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  JPMORGAN
  CHASE BANK

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
  CASH MANAGER

  	
   

  
	
   

  	
   

  
	
  SIGNED by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
  SECURITY TRUSTEE

  	
   

  
	
   

  	
   

  
	
  SIGNED by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  THE BANK OF
  NEW YORK

  	
  )

  

 

40

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