Document:

Exhibit 4.8

 

EXECUTION COPY

 

 

AMENDED AND RESTATED CASH MANAGEMENT

AGREEMENT

 

 

DATED 12th March, 2004

 

HALIFAX plc

 

and

 

PERMANENT MORTGAGES TRUSTEE LIMITED

 

and

 

PERMANENT FUNDING (NO. 1) LIMITED

 

and

 

THE BANK OF NEW YORK

 

 

LONDON

 

 

CONTENTS

 

	
  Clause

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and
  Interpretation

  	
   

  
	
  2.

  	
  Appointment of Cash Manager

  	
   

  
	
  3.

  	
  The Services

  	
   

  
	
  4.

  	
  Payments, Accounts, Ledgers

  	
   

  
	
  5.

  	
  Early Repayment Fees

  	
   

  
	
  6.

  	
  Swaps

  	
   

  
	
  7.

  	
  No Liability

  	
   

  
	
  8.

  	
  Costs and Expenses

  	
   

  
	
  9.

  	
  Information

  	
   

  
	
  10.

  	
  Remuneration

  	
   

  
	
  11.

  	
  Covenants of Cash Manager

  	
   

  
	
  12.

  	
  Services Non-Exclusive

  	
   

  
	
  13.

  	
  Termination

  	
   

  
	
  14.

  	
  Further Assurance

  	
   

  
	
  15.

  	
  Miscellaneous

  	
   

  
	
  16.

  	
  Confidentiality

  	
   

  
	
  17.

  	
  Notices

  	
   

  
	
  18.

  	
  Variation and Waiver

  	
   

  
	
  19.

  	
  No Partnership

  	
   

  
	
  20.

  	
  Assignment

  	
   

  
	
  21.

  	
  Amendments

  	
   

  
	
  22.

  	
  Exclusion of Third
  Party Rights

  	
   

  
	
  23.

  	
  Counterparts

  	
   

  
	
  24.

  	
  Governing
  Law and Submission to Jurisdiction

  	
   

  

 

Schedule

 

	
  1.

  	
  The Cash Management
  Services

  	
   

  
	
  2.

  	
  Cash
  Management and Maintenance of Ledgers

  	
   

  
	
   

  	
  Part 1

  	
  Form of
  Mortgages Trustee Quarterly Report

  	
   

  
	
   

  	
  Part 2

  	
  Form of Funding 1
  Quarterly Report

  	
   

  
	
  3.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatories

  	
   

  

 

 

THIS CASH MANAGEMENT AGREEMENT is made on 12th March, 2004

 

BETWEEN:

 

(1)                                  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, in its
capacity as Cash Manager;

 

(2)                                  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, in its
capacity as Seller of the Loans and one of the Beneficiaries;

 

(3)                                  PERMANENT
MORTGAGES TRUSTEE LIMITED (registered number 83116), a private 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;

 

(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
offices at 48th Floor, One Canada Square, London E14 5AL, acting 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)                              On the Initial Closing Date and on several
subsequent dates, the Seller agreed to sell and assign certain mortgage loans
(together with their related security) it had originated to the Mortgages
Trustee. The Mortgage Trustee holds the assigned mortgage loans as bare trustee
for Funding 1 and the Seller pursuant to the terms of the Mortgages Trust Deed.

 

(B)                                On the Initial Closing Date and several
subsequent Closing Dates, Funding 1 has used the proceeds of Intercompany Loans
granted to it by Issuers to pay the Seller for an increased share in the trust.

 

(C)                                The Cash Manager has agreed to provide Cash
Management Services to the Mortgages Trustee, Funding 1 and the Security
Trustee on the terms and subject to the conditions contained in the Cash
Management Agreement dated 14th June, 2002, as amended and restated by this
Agreement and from time to time (the Cash Management Agreement) in relation to, inter alia,
the Trust Property.

 

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

 

IT IS HEREBY AGREED as follows:

 

1

 

1.                                      DEFINITIONS AND INTERPRETATION

 

1.1                                 The 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                                 This Agreement amends and
restates the Cash Management Agreement made on 14th June, 2002 (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                                 Any reference in this
Agreement to any discretion, power or right on the part of the Mortgages
Trustee shall be 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.

 

2.                                      APPOINTMENT OF CASH MANAGER

 

2.1                               Appointment

 

Until
termination pursuant to Clause 13, the Mortgages Trustee, Funding 1
and the Security Trustee (according to their respective estates and interests)
each hereby appoints the Cash Manager as its lawful agent to provide the Cash
Management Services set out in this Agreement, including in relation to:

 

(a)                                  the Mortgages Trust; and

 

(b)                                 Funding 1,

 

and the
Cash Manager in each case hereby accepts such appointment on the terms and
subject to the conditions of this Agreement.

 

2.2                               Duties prescribed by
Transaction Documents

 

For the
avoidance of doubt and in connection with the powers conferred under Clause 2.1,
save as expressly provided elsewhere in this Agreement, nothing herein shall be
construed so as to give the Cash Manager any powers, rights, authorities,
directions or obligations other than as specified in this Agreement or any of
the other Transaction Documents.

 

2.3                               Appointment conditional upon
issuance of First Issuer Notes

 

The
appointment pursuant to Clause 2.1 is conditional upon the issue of
the First Issuer Notes and the making of the First Issuer Term Advances under
the First Issuer Intercompany Loan Agreement 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 by the First Issuer has not occurred by 14th June, 2002, or such
later date as the

 

2

 

First
Issuer and the Lead Manager may agree this Agreement shall cease to be of
further effect.

 

3.                                      THE SERVICES

 

3.1                               General

 

The
Cash Manager shall provide the services set out in this Agreement (including,
without limitation, the Schedules to this Agreement) (the Cash
Management Services).

 

3.2                               Approvals and authorisations

 

The
Cash Manager shall maintain, or procure the maintenance of, the approvals,
authorisations, consents and licences required in connection with the
respective businesses of the Mortgages Trustee and Funding 1 and shall prepare
and submit, or procure the preparation and submission of, on behalf of the
Mortgages Trustee and Funding 1, all necessary applications and requests for
any further approvals, authorisations, consents or licences which may be
required in connection with the respective businesses of the Mortgages Trustee
and Funding 1 and shall, so far as it is reasonably able to do so, perform the
Cash Management Services in such a way as not to prejudice the continuation of
any such approvals, authorisations, consents or licences.

 

3.3                               Compliance with Transaction
Documents, etc.

 

The
Cash Management Services shall include procuring (so far as the Cash Manager,
using its reasonable endeavours, is able so to do) compliance by the Mortgages
Trustee and Funding 1 with all applicable legal requirements and with the terms
of the Transaction Documents to which each of the Mortgages Trustee and/or
Funding 1 is a party, PROVIDED ALWAYS THAT the Cash Manager shall
not lend or provide any sum to the Mortgages Trustee or Funding 1 (other than
as expressly contemplated by the Transaction Documents) and the Cash Manager shall
have no liability whatsoever to the Mortgages Trustee, Funding 1, the Security
Trustee or any other person for any failure by the Mortgages Trustee or Funding
1 to make any payment due under any of the Transaction Documents (other than to
the extent arising from (i) the Cash Manager failing to make a payment in its
capacity as Servicer or Funding 1 Swap Provider or in any other capacity under
the Transaction Documents, or (ii) the Cash Manager failing to perform any of
its obligations under any of the Transaction Documents).

 

3.4                               Liability of Cash Manager

 

(a)                                  The Cash Manager shall
indemnify each of the Mortgages Trustee, Funding 1 and the Security Trustee 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, bad faith or
wilful default of the Cash Manager in carrying out its functions as Cash
Manager under this Agreement or under the other Transaction Documents or as a
result of a breach by the Cash Manager of the terms and provisions of this
Agreement or such other Transaction Documents to which the Cash Manager is a
party (in its capacity as Cash Manager) in relation to such functions.

 

(b)                                 For the avoidance of doubt,
the Cash Manager shall not be liable in respect of any loss, liability, claim,
expense or damage suffered or incurred by the Mortgages Trustee, Funding 1, or
the Security Trustee and/or any other person as a result of the proper
performance of the Cash Management Services by the Cash Manager save to the
extent that such loss, liability, claim, expense or damage is suffered or
incurred as a result of any negligence, bad faith or wilful default of the Cash
Manager or as a result of a breach by the Cash Manager of the

 

3

 

terms and provisions of this Agreement or
any of the other Transaction Documents to which the Cash Manager is a party (in
its capacity as Cash Manager) in relation to such functions.

 

4.                                      PAYMENTS, ACCOUNTS, LEDGERS

 

4.1                               Bank Accounts

 

(a)                                  The Cash Manager hereby
confirms that the Mortgages Trustee GIC Account has been established on or
before the date hereof pursuant to the Bank Account Agreement and the Mortgages
Trustee Guaranteed Investment Contract and that the Mortgages Trustee GIC Account
Mandate in the agreed form will apply thereto at the Initial Closing Date.  The Cash Manager undertakes (to the extent
to which the same is within its control) that at the Initial Closing Date the
Mortgages Trustee GIC Account will be operative and that the Cash Manager will
not create or permit to subsist any Security Interest in relation to the
Mortgages Trustee GIC Account (but without prejudice to the Mortgages Trust).

 

(b)                                 The Cash Manager hereby
confirms that the Funding 1 GIC Account has been established on or before the
date hereof pursuant to the Bank Account Agreement and the Funding 1 Guaranteed
Investment Contract and that the Funding 1 GIC Account Mandate in the agreed
form will apply thereto at the Initial Closing Date.  The Cash Manager undertakes (to the extent to which the same is
within its control) that at the Initial Closing Date the Funding 1 GIC Account
will be operative and that the Cash Manager will not knowingly create or permit
to subsist any Security Interest in relation to the Funding 1 GIC Account other
than as created under or permitted pursuant to the Funding 1 Deed of Charge.

 

(c)                                  The Cash Manager hereby
confirms that the Funding 1 Transaction Account has been established on or
before the date hereof and that the Funding 1 Transaction Account Mandate in
the agreed form will apply thereto at the Initial Closing Date.  The Cash Manager undertakes (to the extent
to which the same is within its control) that at the Initial Closing Date the
Funding 1 Transaction Account will be operative and that the Cash Manager will
not knowingly create or permit to subsist any Security Interest in relation to
the Funding 1 Transaction Account other than as created under or permitted
pursuant to the Funding 1 Deed of Charge.

 

4.2                               Mortgages Trustee Ledgers

 

(a)                                  The Cash Manager shall open
and maintain in the books of the Mortgages Trustee certain ledgers to be known
as the Revenue Ledger and the Principal Ledger which shall together reflect the
aggregate of all amounts of cash standing to the credit of the Mortgages
Trustee GIC Account from time to time.

 

(b)                                 The Cash Manager shall also
open and maintain in the books of the Mortgages Trustee certain ledgers to be
known as the Losses Ledger and the Funding 1 Share/Seller Share Ledger.

 

(c)                                  The Cash Manager shall make
credits and debits to the Mortgages Trustee Ledgers in the manner described in paragraphs 9,
10, 11, 12 and 13 of Schedule 2.

 

4.3                               Funding 1 Ledgers

 

(a)                                  The Cash Manager shall open
and maintain in the books of Funding 1 certain ledgers to be known as the
Funding 1 Revenue Ledger, the Funding 1 Principal Ledger, the General Reserve
Ledger, the Cash Accumulation Ledger and, if the Liquidity Reserve Fund is
established, the Liquidity Reserve Ledger which shall together reflect the aggregate
of all amounts of cash standing to the credit of the Funding 1 GIC Account and
the Funding 1

 

4

 

Transaction Account and all amounts
invested in Authorised Investments purchased from amounts standing to the
credit of the Funding 1 GIC Account and the Funding 1 Transaction Account from
time to time.

 

(b)                                 The Cash Manager shall also
open and maintain in the books of Funding 1 certain ledgers to be known as (i)
the Principal Deficiency Ledger, which comprised, on the Initial Closing Date,
three sub-ledgers known as the AAA Principal Deficiency Sub Ledger, the AA
Principal Deficiency Sub Ledger and the BBB Principal Deficiency Sub Ledger,
and shall comprise on the Fourth Issuer Closing Date, four sub-ledgers known as
the AAA Principal Deficiency Sub Ledger, the AA Principal Deficiency Sub
Ledger, the A Principal Deficiency Sub Ledger, and the BBB Principal Deficiency
Sub Ledger (ii) the Intercompany Loan Ledger and (iii) the Funding 1 Liquidity
Facility Ledger.  If Funding 1 enters
into New Intercompany Loan Agreements and the New Term Advances advanced
thereunder have different Term Advance Ratings to the Term Advance Ratings
assigned to the existing Term Advances (including the Fourth Issuer Term
Advances), then the Cash Manager shall establish new sub-ledgers in respect of
the Principal Deficiency Ledger, which shall correspond to the Term Advance
Ratings assigned to each such New Term Advance.

 

(c)                                  The Cash Manager shall make
credits and debits to the Funding 1 Ledgers in accordance with the provisions
of paragraphs
9, 10, 14, 15, 16, 17, 18 and 19 of Schedule 2.

 

4.4                               Bank Accounts

 

(a)                                  The Cash Manager shall procure
that so far as it may be able in relation to all Loans comprised in the
Portfolio, the following amounts are paid into the Mortgages Trustee GIC
Account:

 

(i)                                     all Monthly Payments, other
interest received under and in respect of the Loans and any costs or other
amounts received under the Loans (including in any such case amounts recovered
on enforcement of rights against any Borrower or guarantor of the Borrower, any
Property or any of the Borrower’s or guarantor’s other property or assets);

 

(ii)                                  all final releases and all
repayments or prepayments of principal under the Loans;

 

(iii)                               any amount received by or on
behalf of the Mortgages Trustee pursuant to any Halifax Insurance Policy or the
Buildings Policies; and

 

(iv)                              any other amounts whatsoever
received by or on behalf of the Mortgages Trustee after the Initial Closing
Date,

 

and the
Cash Manager shall procure that all interest earned on the Mortgages Trustee
GIC Account is credited to such account.

 

(b)                                 The Cash Manager shall procure
that the following amounts are paid into the Funding 1 GIC Account:

 

(i)                                     all Funding 1 Revenue
Receipts;

 

(ii)                                  all Funding 1 Principal
Receipts;

 

(iii)                               all amounts received by
Funding 1 pursuant to the Funding 1 Swap Agreement; and

 

5

 

(iv)                              any other amounts whatsoever
received by or on behalf of Funding 1 after the Initial Closing Date,

 

and the
Cash Manager shall procure that all interest earned on the Funding 1 Bank
Accounts and all investment proceeds from Authorised Investments purchased from
amounts standing to the credit of the Funding 1 GIC Account are credited to
such account.

 

(c)                                  The Cash Manager shall procure
that all Liquidity Drawings are paid into the Funding 1 Transaction Account.

 

(d)                                 The Cash Manager shall procure
that all transfers and withdrawals of amounts standing to the credit of the
Funding 1 Transaction Account and the Funding 1 GIC Account shall be made in
accordance with the provisions of the Funding 1 Deed of Charge.

 

(e)                                  Each of the payments into the
Mortgages Trustee GIC Account and the Funding 1 GIC Account referred to in Clauses
4.4(a), (b), (c) and (d) shall be made forthwith
upon receipt by the Mortgages Trustee, Funding 1 or the Cash Manager, as the
case may be, of the amount in question.

 

(f)                                    For the avoidance of doubt, as
soon as reasonably practicable after becoming aware of the same, the Cash
Manager may, and shall, withdraw Cash from, as the case may be, the Mortgages
Trustee GIC Account, the Funding 1 Transaction Account or the Funding 1 GIC
Account if, and to the extent that, such Cash was credited thereto in error and
shall use its reasonable endeavours to ensure that such Cash is applied
correctly thereafter.

 

(g)                                 The Cash Manager shall
promptly notify each of the Mortgages Trustee, Funding 1 and the Security
Trustee of any additional account which supplements or replaces any account
specifically referred to in the definitions of the “Mortgages Trustee GIC
Account”, the “Funding 1 Transaction Account” or the “Funding 1 GIC Account” in
the Master Definitions and Construction Schedule.

 

(h)                                 Each of the Cash Manager, the
Mortgages Trustee and Funding 1 undertakes that, so far as it is able to
procure the same, the Mortgages Trustee GIC Account, the Funding 1 Transaction
Account and the Funding 1 GIC Account and all instructions and Mandates in
relation thereto will continue to be operative and will not, save as provided
in Clause
4.6 below or as permitted pursuant to the Bank Account Agreement, be
changed without the prior written consent of the Security Trustee (such consent
not to be unreasonably withheld or delayed). 
For the avoidance of doubt, the Cash Manager may change the Authorised
Signatories in respect of any instructions or Mandates relating to Funding 1
and/or the Mortgages Trustee, without the prior written consent of the Security
Trustee, in accordance with Clause 4.2 of the Bank Account Agreement.

 

(i)                                     The Cash Manager and Funding 1
agree that the Cash Manager shall procure that (i) the tranche of the Advance
being made available to Funding 1 pursuant to paragraph 2(a) of the First
Start-Up Loan Agreement for the purposes of funding the Reserve Fund and (ii)
the tranche (if any) of any New Start-up Loan Agreement for the purposes of
funding further the Reserve Fund (or any other similar reserve fund) shall be
credited to the Funding 1 GIC Account promptly upon receipt of such amounts by
Funding 1, and the Reserve Ledger shall record such credit.

 

(j)                                     The Cash Manager shall give
all notices and make all determinations and withdrawals under the Funding 1
Liquidity Facility Agreement on behalf of Funding 1, as set out therein.

 

6

 

4.5                               Withdrawals

 

The
Cash Manager may make withdrawals:

 

(a)                                  on behalf of the Mortgages
Trustee from the Mortgages Trustee GIC Account; and

 

(b)                                 on behalf of Funding 1 from
the Funding 1 GIC Account, but only until receipt of an Intercompany Loan
Acceleration Notice served by the Security Trustee on Funding 1 (with a copy to
the Cash Manager and the Mortgages Trustee); and

 

(c)                                  on behalf of Funding 1 from
the Funding 1 Transaction Account, but only until receipt of an Intercompany
Loan Acceleration Notice served by the Security Trustee on Funding 1 (with a
copy to the Cash Manager and the Mortgages Trustee),

 

respectively
as permitted by this Agreement, the Mortgages Trust Deed, the Bank Account
Agreement, the Mortgages Trustee Guaranteed Investment Contract, the Funding 1
Guaranteed Investment Contract, the Funding 1 Liquidity Facility Agreement and
the Funding 1 Deed of Charge, but shall not in carrying out its functions as
Cash Manager under this Agreement otherwise make withdrawals from the Mortgages
Trustee GIC Account or the Funding 1 Bank Accounts.

 

4.6                               Cash Management

 

In
administering the Mortgages Trustee GIC Account, the Funding 1 Transaction
Account and the Funding 1 GIC Account on behalf of the Mortgages Trustee,
Funding 1 and the Security Trustee respectively, the Cash Manager shall comply
with the provisions of Schedule 2 prior to receipt by the Cash
Manager of a copy of any Intercompany Loan Acceleration Notice served by the
Security Trustee on Funding 1.

 

5.                                      EARLY REPAYMENT FEES

 

The
Cash Manager shall withdraw any Early Repayment Fees paid into the Mortgages
Trustee GIC Account and pay the same to the Seller, by telegraphic transfer to
such account as may be specified by the Seller from time to time, promptly
following a request for such withdrawal being received from the Seller.  For the avoidance of doubt, the Cash Manager
shall not record the receipt or withdrawal of Early Repayment Fees in any of the
ledgers maintained under this Agreement.

 

6.                                      SWAPS

 

6.1                               Computations under Funding 1
Swap

 

On each
Calculation Date, the Cash Manager shall determine, in accordance with the
terms of the Funding 1 Swap, in respect of the relevant Calculation Period:

 

(a)                                  the Average Fixed Rate Loan
Balance, the Average Variable Rate Loan Balance and the Average Tracker Rate
Loan Balance (each as defined in the Funding 1 Swap Agreement);

 

(b)                                 the weighted average of the
fixed rates of interest charged to borrowers of Fixed Rate Loans;

 

(c)                                  the Tracker Swap Rate; and

 

7

 

(d)                                 the Variable Rate Swap SVR,

 

and
shall notify Funding 1 and the Security Trustee of such amounts, balances and
rates.

 

6.2                               Termination of Funding 1 Swap

 

If on
or prior to the date of the earlier of either (i) the reduction of the
aggregate principal amount outstanding of all Intercompany Loans to zero or
(ii) the service of an Intercompany Loan Acceleration Notice, the Funding 1
Swap is terminated, then the Cash Manager (on behalf of Funding 1 and the
Security Trustee) shall purchase a new hedge against the possible variance
between (1) the Mortgages Trustee Variable Base Rate payable on the Variable
Rate Loans, the fixed rates of interest payable on the Fixed Rate Loans and the
Tracker Swap Rate and (2) a LIBOR-based rate for three-month sterling deposits,
on terms acceptable to Funding 1 and the Rating Agencies with a new Funding 1
swap provider whom the Rating Agencies have previously confirmed in writing
will not cause the then current rating of any Notes to be downgraded.  The Cash Manager may apply any early
termination payment received from the Funding 1 Swap Provider pursuant to the
Funding 1 Swap for such purpose.

 

7.                                      NO LIABILITY

 

Save as
otherwise provided in this Agreement, the Cash Manager shall have no liability
for the obligations of either the Mortgages Trustee, Funding 1 or the Security
Trustee under any of the Transaction Documents or otherwise and nothing herein
shall constitute a guarantee, or similar obligation, by the Cash Manager of
either the Mortgages Trustee, Funding 1 or the Security Trustee in respect of
any of them.

 

8.                                      COSTS AND EXPENSES

 

8.1                                 Subject to and in accordance
with the applicable Funding 1 Priority of Payments set out in the Funding 1
Deed of Charge, Funding 1 will on each Funding 1 Interest Payment Date
reimburse the Cash Manager for all out-of-pocket costs, expenses and charges
(together with any amounts in respect of Irrecoverable VAT due thereon)
properly incurred by the Cash Manager in the performance of the Cash Management
Services including any such costs, expenses or charges not reimbursed to the
Cash Manager on any previous Funding 1 Interest Payment Date and the Cash
Manager shall supply the Mortgages Trustee or Funding 1 with an appropriate VAT
invoice issued by the Cash Manager or, if the Cash Manager has treated the
relevant cost, expense or charge as a disbursement for VAT purposes, by the
person making the supply.

 

8.2                                 Unless and until otherwise
agreed by Funding 1 and the Security Trustee in writing (notified to the Cash
Manager), Funding 1 shall be solely responsible for reimbursing the Cash
Manager for the out-of-pocket costs, expenses and charges (together with any
amounts in respect of Irrecoverable VAT due thereon) referred to in Clause 8.1 above.

 

9.                                      INFORMATION

 

9.1                               Use of I.T. systems

 

(a)                                  The Cash Manager represents
and warrants that at the date hereof in respect of the software which is to be
used by the Cash Manager in providing the Cash Management Services it has in
place all necessary licences and/or consents from the respective licensor or
licensors (if any) of such software.

 

8

 

(b)                                 The Cash Manager undertakes
that it shall for the duration of this Agreement, use reasonable endeavours to:

 

(i)                                     ensure that the licences
and/or consents referred to in paragraph (a) are maintained in full force and
effect; 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 Funding 1 elect as a substitute cash manager 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.

 

(c)                                  The Cash Manager shall use
reasonable endeavours to maintain in working order the information technology
systems used by the Cash Manager in providing the Cash Management Services.

 

(d)                                 The Cash Manager 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 Funding 1 elect as a substitute cash manager 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.

 

9.2                               Bank Account Statements

 

The
Cash Manager shall take all reasonable steps to ensure that it receives:

 

(a)                                  a monthly bank statement in
relation to the Mortgages Trustee GIC Account (and any additional or
supplemental bank account of the Mortgages Trustee) and that it furnishes a
copy of such statement to the Mortgages Trustee, each of the Beneficiaries and
the Security Trustee; and

 

(b)                                 monthly bank statements in
relation to each of the Funding 1 Transaction Account and the Funding 1 GIC
Account (and any additional or supplemental bank account of the Funding 1
Trustee) and that it furnishes a copy of such statements to Funding 1 and the
Security Trustee.

 

9.3                               Access to Books and Records

 

Subject
to all applicable laws, the Cash Manager shall permit the Auditors of the
Mortgages Trustee and Funding 1 and any other person nominated by the Security
Trustee or the Beneficiaries (to whom the Cash Manager has no reasonable
objection) at any time during normal office hours upon reasonable notice to
have access, or procure that such person or persons are granted access, to all
books of record and account relating to the Cash Management Services provided
by the Cash Manager and related matters in accordance with this Agreement.

 

9.4                               Statutory Obligations

 

The
Cash Manager will use its reasonable endeavours, on behalf of the Mortgages
Trustee and Funding 1, to prepare or procure the preparation of and file all
reports, annual returns, financial statements, statutory forms and other
returns which each of the Mortgages Trustee and Funding 1 is required by law to
prepare and file.  Subject to approval
thereof by the directors of the Mortgages Trustee or Funding 1 (as
appropriate), the Cash Manager shall

 

9

 

cause
such accounts to be audited by the Auditors and shall procure so far as it is
able so to do that the Auditors shall make a report thereon as required by law
and copies of all such documents shall be delivered to the Mortgages Trustee,
the Security Trustee and Funding 1 (as appropriate) and the Rating Agencies as
soon as practicable after the end of each accounting reference period of the
Mortgages Trustee or Funding 1 (as appropriate).

 

9.5                               Information Covenants

 

(a)                                  The Cash Manager shall provide
the Mortgages Trustee, Funding 1, the Security Trustee, the Seller and the
Rating Agencies:

 

(i)                                     quarterly with a report in, or
substantially in, the form set out in Part 1 of Schedule 3 in respect of the
Mortgages Trustee; and

 

(ii)                                  quarterly with a report in, or
substantially in, the form set out in Part 2 of Schedule 3 in respect of
Funding 1.

 

(b)                                 The Cash Manager shall
provide, or procure the provision of, to the Mortgages Trustee, Funding 1, the
Security Trustee and the Rating Agencies copies of any annual returns or
financial statements referred to in Clause 9.4 as soon as reasonably
practicable after the preparation thereof.

 

(c)                                  The Cash Manager shall notify
the Rating Agencies in writing of the details of (i) any material amendment to
the Transaction Documents, (ii) the occurrence of an Intercompany Loan Event of
Default or Potential Intercompany Loan Event of Default and (iii) any other
information relating to the Cash Manager as the Rating Agencies and the
Security Trustee may reasonably request in connection with its obligations
under this Agreement, PROVIDED THAT the Security Trustee shall not
make such a request more than once every three months unless, in the belief of
the Security Trustee, an Intercompany Loan Event of Default, a Note Event of
Default or Cash Manager Termination Event (as defined in Clause 13.1) shall have
occurred and is continuing or a Potential Intercompany Loan Event of Default or
a Potential Note Event of Default shall have accrued and is continuing PROVIDED
FURTHER THAT such request does not adversely interfere with the Cash
Manager’s day to day provision of the Cash Management Services under the other
terms of this Agreement.

 

(d)                                 The Cash Manager shall, at the
request of the Security Trustee, furnish the Security Trustee and the Rating
Agencies with such other information relating to its business and financial
condition as it may be reasonable for the Security Trustee to request in
connection with this Agreement, PROVIDED THAT such request does not
adversely interfere with the Cash Manager’s day to day provision of the Cash
Management Services under the other terms of this Agreement.

 

10.                               REMUNERATION

 

10.1                        Fee payable

 

(a)                                  Subject to paragraph
(b) below, Funding 1 shall pay to the Cash Manager for its Cash
Management Services hereunder a cash management fee which shall be agreed in
writing between Funding 1, the Security Trustee and the Cash Manager from time
to time.

 

(b)                                 Unless and until otherwise
agreed by Funding 1 and the Security Trustee in writing (notified to the Cash
Manager), Funding 1 shall be solely responsible for paying the cash management
fee to the Cash Manager which is referred to in paragraph (a) above.

 

10

 

10.2                        Payment of fee

 

The
cash management fee referred to in Clause 10.1 shall be paid to the Cash
Manager in arrear on each Funding 1 Interest Payment Date in the manner
contemplated by and in accordance with the provisions of the applicable Funding
1 Priority of Payments.

 

11.                               COVENANTS OF CASH MANAGER

 

11.1                        Covenants

 

The
Cash Manager hereby covenants with and undertakes to each of the Mortgages Trustee,
Funding 1 and the Security Trustee that without prejudice to any of its
specific obligations hereunder:

 

(a)                                  it will devote all due skill,
care and diligence to the performance of its obligations and the exercise of
its discretions hereunder;

 

(b)                                 it will comply with any proper
directions, orders and instructions which the Mortgages Trustee, Funding 1 or
the Security Trustee 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
Security Trustee shall prevail;

 

(c)                                  it will use its reasonable
endeavours to keep in force all licences, approvals, authorisations and
consents which may be necessary in connection with the performance of the Cash
Management Services and prepare and submit all necessary applications and
requests for any further approval, authorisation, consent or licence required
in connection with the performance of the Cash Management Services;

 

(d)                                 save as otherwise agreed with
the Mortgages Trustee, Funding 1 and the Security Trustee, it will provide free
of charge to the Mortgages Trustee and Funding 1 during normal office hours
office space, facilities, equipment and staff sufficient to fulfil the
obligations of the Mortgages Trustee and Funding 1 under this Agreement;

 

(e)                                  it will not knowingly fail to
comply with any legal requirements in the performance of the Cash Management
Services;

 

(f)                                    it will make all payments
required to be made by it pursuant to this Agreement on the due date for
payment thereof for value on such day without set-off (including, without
limitation, in respect of any fees owed to it) or counterclaim; and

 

(g)                                 it will not without the prior
written consent of the Security Trustee amend or terminate any of the
Transaction Documents save in accordance with their terms.

 

11.2                        Duration of covenants

 

The
covenants of the Cash Manager in Clause 11.1 shall remain in force until
this Agreement is terminated but without prejudice to any right or remedy of
the Mortgages Trustee and/or Funding 1 and/or the Security Trustee arising from
breach of any such covenant prior to the date of termination of this Agreement.

 

12.                               SERVICES NON-EXCLUSIVE

 

Nothing
in this Agreement shall prevent the Cash Manager from rendering or performing
services similar to those provided for in this Agreement to or for itself or
other persons, firms

 

11

 

or
companies or from carrying on business similar to or in competition with the
business of the Mortgages Trustee, Funding 1 or the Security Trustee.

 

13.                               TERMINATION

 

13.1                        Cash Manager Termination
Events

 

If any
of the following events (Cash Manager Termination Events) shall
occur:

 

(a)                                  default is made by the Cash
Manager in the payment on the due date of any payment due and payable by it
under this Agreement or in the performance of its obligations under Clauses 4.4 and
4.5
and such default continues unremedied for a period of three London Business
Days after the earlier of the Cash Manager becoming aware of such default; or

 

(b)                                 default is made by the Cash
Manager in the performance or observance of any of its other covenants and
obligations under this Agreement, which in the reasonable opinion of Funding 1
and/or the Security Trustee is materially prejudicial to the interests of the Funding
1 Secured Creditors and such default continues unremedied for a period of
twenty days after the earlier of the Cash Manager becoming aware of such
default and receipt by the Cash Manager of written notice from the Security
Trustee requiring the same to be remedied;

 

(c)                                  an Insolvency Event occurs,

 

then
Funding 1 and/or the Security Trustee may at once or at any time thereafter
while such default continues by notice in writing to the Cash Manager terminate
its appointment as Cash Manager under this Agreement with effect from a date
(not earlier than the date of the notice) specified in the notice.

 

13.2                        Resignation of Cash Manager

 

The
appointment of the Cash Manager under this Agreement may be terminated upon the
expiry of not less than 12 months’ notice of termination given by the Cash
Manager to the Mortgages Trustee, Funding 1 and the Security Trustee PROVIDED
THAT:

 

(a)                                  the Mortgages Trustee, Funding
1 and the Security Trustee consent in writing to such termination;

 

(b)                                 a substitute cash manager
shall be appointed, such appointment to be effective not later than the date of
such termination;

 

(c)                                  such substitute cash manager
has cash management experience and is approved by the Mortgages Trustee,
Funding 1 and the Security Trustee;

 

(d)                                 the substitute cash manager
enters into an agreement substantially on the same terms as the relevant
provisions of this Agreement and the Cash Manager shall not be released from
its obligations under the relevant provisions of this Agreement until such
substitute cash manager has entered into such new agreement and the rights of
the Mortgages Trustee and Funding 1 under such agreement are charged in favour
of the Security Trustee on terms satisfactory to the Security Trustee; and

 

12

 

(e)                                  the then current ratings of
the Notes are not adversely affected as a result thereof, unless otherwise
agreed by an Extraordinary Resolution (as defined in the trust deeds of each
Issuer) of the holders of each class of the Notes of each Issuer.

 

13.3                        Effect of Termination

 

(a)                                  On and after termination of
the appointment of the Cash Manager under this Agreement pursuant to this
Clause 13, all authority and power of the Cash Manager under this Agreement
shall be terminated and be of no further effect and the Cash Manager shall not
thereafter hold itself out in any way as the agent of the Mortgages Trustee,
Funding 1 or the Security Trustee pursuant to this Agreement.

 

(b)                                 Upon termination of the
appointment of the Cash Manager under this Agreement pursuant to this Clause 13,
the Cash Manager shall:

 

(i)                                     forthwith deliver (and in the
meantime hold on trust for, and to the order of, the Mortgages Trustee, Funding
1 or the Security Trustee, as the case may be) to the Mortgages Trustee, Funding
1 or the Security Trustee, as the case may be or as it shall direct, all books
of account, papers, records, registers, correspondence and documents in its
possession or under its control relating to the affairs of or belongings of the
Mortgages Trustee, Funding 1 or the Security Trustee, as the case may be (if
practicable, on the date of receipt), any monies then held by the Cash Manager
on behalf of the Mortgages Trustee, Funding 1 or, the Security Trustee and any
other assets of the Mortgages Trustee, Funding 1 and the Security Trustee;

 

(ii)                                  take such further action as
the Mortgages Trustee, Funding 1 or the Security Trustee, as the case may be,
may reasonably direct at the expense of the Mortgages Trustee, Funding 1 or the
Security Trustee, as the case may be (including in relation to the appointment
of a substitute cash manager), provided that the Mortgages Trustee or the
Security Trustee, as the case may be, shall not be required to take or direct
to be taken such further action unless it has been indemnified to its
satisfaction (and in the event of a conflict between the directors of Funding
1, the Mortgages Trustee and the Security Trustee, the director of the Security
Trustee shall prevail);

 

(iii)                               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; and

 

(iv)                              co-operate and consult with
and assist the Mortgages Trustee, Funding 1 or the Security Trustee or its
nominee, as the case may be (which shall, for the avoidance of doubt, include
any Receiver appointed by it), 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, Funding 1, or the Security
Trustee or such nominee, as the case may be.

 

13.4                        Notice of event of default

 

The
Cash Manager shall deliver to the Mortgages Trustee, Funding 1 and the Security
Trustee as soon as reasonably practicable but in any event within three London
Business Days of becoming aware thereof a notice of any Cash Manager
Termination Event or any event which with the giving of notice or expiry of any
grace period or certification, as specified in such Cash Manager Termination
Event would constitute the same or any Intercompany Loan Event of Default or
any Potential Intercompany Loan Event of Default.

 

13

 

13.5                        General provisions relating to
termination

 

(a)                                  Termination of this Agreement
or the appointment of the Cash Manager under this Agreement shall be without
prejudice to the liabilities of the Mortgages Trustee, Funding 1 and the
Security Trustee to the Cash Manager or vice versa incurred before the date of
such termination.  The Cash Manager
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, Funding 1 or the
Security Trustee.

 

(b)                                 This Agreement shall terminate
automatically at such time as Funding 1 has no further interest in the Trust
Property and the Intercompany Loans have been fully repaid or Funding 1’s
obligations under the Intercompany Loans have been otherwise discharged.

 

(c)                                  On termination of the
appointment of the Cash Manager under the provisions of this Clause 13,
the Cash Manager shall be entitled to receive all fees and other monies accrued
up to (but excluding) the date of termination but shall not be entitled to any
other or further compensation.  Such
monies so receivable by the Cash Manager shall be paid by Funding 1, on the
dates on which they would otherwise have fallen due hereunder and under the
terms of the Funding 1 Deed of Charge. 
For the avoidance of doubt, such termination shall not affect the Cash
Manager’s rights to receive payment of all amounts (if any) due to it from
Funding 1 other than under this Agreement.

 

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

 

14.                               FURTHER ASSURANCE

 

14.1                        Co-operation, etc.

 

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.

 

14.2                        Powers of attorney

 

Without
prejudice to the generality of Clause 14.1, the Mortgages Trustee, Funding
1 and the Security Trustee shall upon request by the Cash Manager forthwith
give to the Cash Manager such further powers of attorney or other written
authorisations, mandates or instruments as are necessary to enable the Cash
Manager to perform the Cash Management Services.

 

14.3                        Change of Security Trustee

 

In the
event that there is any change in the identity of the Security Trustee or an
additional Security Trustee is appointed in accordance with the Funding 1 Deed
of Charge, as the case may be, the Cash Manager shall execute such documents
with any other parties to this Agreement and take such actions as such new Security
Trustee may reasonably require for the purposes of vesting in such new Security
Trustee the rights of the Security Trustee under this Agreement and under the
Funding 1 Deed of Charge and releasing the retiring Security Trustee from
further obligations thereunder and while any of the Notes of any Issuer remains
outstanding shall give notice thereof to the Rating Agencies.

 

14

 

14.4                        No obligation on Security
Trustee

 

Nothing
herein contained shall impose any obligation or liability on the Security
Trustee to assume or perform any of the obligations of the Mortgages Trustee,
Funding 1 or the Cash Manager hereunder or render it liable for any breach
thereof.

 

15.                               MISCELLANEOUS

 

15.1                        No set-off

 

Each of
the Seller and the Cash Manager agrees that it will not:

 

(a)                                  set off or purport to set off
any amount which either the Mortgages Trustee or Funding 1 is or will become
obliged to pay to it under this Agreement 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 Transaction Account or the Funding 1 GIC Account or any
replacement or additional bank account of either the Mortgages Trustee or
Funding 1; 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 Transaction Account or the Funding 1 GIC Account or any replacement
of additional bank account of either the Mortgages Trustee or Funding 1.

 

15.2                        No Petition

 

The
Cash Manager agrees that for so long as any Notes of any Issuer are outstanding
it will not petition or commence proceedings for the administration (including,
for the avoidance of doubt, the filing of documents with the court or the
service of a notice of intention to appoint an administrator) or winding up of
the Mortgages Trustee, Funding 1 or any Issuer or participate in any ex parte
proceedings with regard thereto.

 

15.3                        No recourse

 

(a)                                  In relation to all sums due
and payable by the Mortgages Trustee or Funding 1 to the Cash Manager, the Cash
Manager agrees that it shall have recourse only to sums paid to or received by
(or on behalf of) the Mortgages Trustee or Funding 1 pursuant to the provisions
of the Transaction Documents.

 

(b)                                 For the avoidance of doubt,
the Security Trustee shall not be liable to pay any amounts due under Clauses 6 and
8,
and without prejudice to the obligations of the Mortgages Trustee or Funding 1,
as the case may be, or any receiver appointed pursuant to the Funding 1 Deed of
Charge in respect of such amounts.

 

(c)                                  Notwithstanding any other
provisions of this Agreement, all obligations to, and rights of, the Security
Trustee under or in connection with this Agreement (other than its obligations
under Clause
14) shall automatically terminate upon the discharge in full of the
Funding 1 Secured Obligations, PROVIDED THAT this shall be without
prejudice to any claims in respect of such obligations and rights arising on or
prior to such date.

 

15

 

16.                               CONFIDENTIALITY

 

During
the continuance of this Agreement or after its termination, each of the
Mortgages Trustee, the Cash Manager, the Seller, Funding 1 and the Security
Trustee 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
16 shall not apply:

 

(a)                                  to any information already
known to the recipient otherwise than as a result of entering into any of the
Transaction Documents;

 

(b)                                 to any information
subsequently received by the recipient 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
recipient;

 

(d)                                 to any extent that the
recipient is required to disclose the same pursuant to any law or order of any
court of competent jurisdiction 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);

 

(e)                                  to the extent that the
recipient needs to disclose the same for determining the existence of, or
declaring, a Note Event of Default, an Intercompany Loan Event of Default or a
Cash Manager 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 recipient or (in connection with
a prospective rating of any debt issued or to be issued by an Issuer or any New
Issuer) to any Rating Agency or any prospective new cash manager or prospective
new security trustee.

 

17.                               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 17.00 hours on a London Business Day or on the
next London Business Day if delivered thereafter or on a day which is not a
London Business Day or (in the case of first class post) when it would be
received in the ordinary course of the post and shall be sent:

 

(a)                                  in the case of the Cash
Manager, to Halifax plc, Trinity Road, Halifax, West Yorkshire HX1 2RG
(LP/3/3/SEC) (facsimile number +44 (0) 113 235 7511) for the attention of the
Head of Mortgage Securitisation with a copy to HBOS Treasury Services plc, 33
Old Broad Street, London EC2N 1HZ (facsimile number +44 (0) 20 7574 8784) for
the attention of Head of Capital Markets and Securitisation;

 

16

 

(b)                                 in the case of the Mortgages
Trustee, to Permanent Mortgages Trustee Limited, 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 number +44 (0) 20 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 (LP/3/3/SEC)
(facsimile number +44 (0) 113 235 7511) for the attention of the Head of
Mortgage Securitisation with a copy to HBOS Treasury Services plc, 33 Old Broad
Street, London EC2N 1HZ (facsimile number +44 (0) 20 7574 8784) for the
attention of Head of Capital Markets and 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 & Securitisation; and

 

(e)                                  in the case of the Security
Trustee, to The Bank of New York, One Canada Square, London E14 5AL (facsimile
number +44 (0) 20 7964 6061/6399) for the attention of Global Structured
Finance - Corporate Trust,

 

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 17.

 

18.                               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.

 

19.                               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.

 

20.                               ASSIGNMENT

 

20.1                        Assignment by the Mortgages
Trustee and Funding 1

 

Neither
of the Mortgages Trustee nor Funding 1 may assign or transfer any of its
respective rights and obligations under this Agreement without the prior
written consent of:

 

(a)                                  in the case of the Mortgages
Trustee, each of the Beneficiaries and the Security Trustee; and

 

(b)                                 in the case of Funding 1, each
of the Security Trustee and the Cash Manager,

 

except
that Funding 1 may assign its respective rights hereunder without such consent
pursuant to the Funding 1 Deed of Charge.

 

17

 

20.2                        No assignment by Cash Manager

 

The
Cash Manager may not assign or transfer any of its rights and obligations under
this Agreement without the prior written consent of the Mortgages Trustee, each
of the Beneficiaries, Funding 1 and the Security Trustee.

 

21.                               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.

 

22.                               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.

 

23.                               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.

 

24.                               GOVERNING LAW AND SUBMISSION TO
JURISDICTION

 

24.1                           This Agreement is governed by,
and shall be construed in accordance with, the laws of England.

 

24.2                           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. 
The Mortgages Trustee irrevocably appoints Structured Finance Management
Limited at Blackwell House, Guildhall Yard, London EC2V 5AE as its agent for
the service of process.

 

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

 

18

 

SCHEDULE 1

 

THE CASH MANAGEMENT SERVICES

 

The Cash
Manager shall:

 

(a)                                  operate the Mortgages Trustee GIC Account,
the Funding 1 GIC Account and the Funding 1 Transaction Account or any other
Bank Account and ensure that payments are made into and from such accounts in
accordance with this Agreement, the Mortgages Trust Deed, the Funding 1 Deed of
Charge, the Bank Account Agreement, the Mortgages Trustee Guaranteed Investment
Contract, the Funding 1 Guaranteed Investment Contract and any other applicable
Transaction Document PROVIDED HOWEVER THAT nothing herein shall
require the Cash Manager to make funds available to the Mortgages Trustee or
Funding 1 to enable such payments to be made other than as expressly required
by the provisions of this Agreement;

 

(b)                                 keep records for all taxation purposes
(including, without limitation VAT);

 

(c)                                  assist the auditors of the Mortgages
Trustee and Funding 1 and provide such information to them as they may
reasonably request for the purpose of carrying out their duties as auditors;

 

(d)                                 make all filings, give all notices and make
all registrations and other notifications required in the day-to-day operation
of the respective businesses of the Mortgages Trustee and Funding 1 or required
to be given by the Mortgages Trustee or Funding 1 pursuant to the Transaction
Documents;

 

(e)                                  arrange for all payments due to be made by
the Mortgages Trustee and/or Funding 1 under any of the Transaction Documents, PROVIDED
THAT such monies are at the relevant time available to the Mortgages
Trustee and/or Funding 1 and PROVIDED FURTHER that nothing herein shall
constitute a guarantee by the Cash Manager of all or any of the obligations of
the Mortgages Trustee or Funding 1 under any of the Transaction Documents;

 

(f)                                    without prejudice to the role of and in
conjunction with the relevant Corporate Services Provider under the relevant
Corporate Services Agreement, keep general books of account and records of the
Mortgages Trustee and Funding 1; provide accounting services, including
reviewing receipts and payments, supervising and assisting in the preparation
of interim statements and final accounts and supervising and assisting in the
preparation of Tax returns;

 

(g)                                 without prejudice to the role of and in
conjunction with the relevant Corporate Services Provider under the relevant
Corporate Services Agreement, provide or procure the provision of company
secretarial and administration services to the Mortgages Trustee and Funding 1
including the keeping of all registers and the making of all returns and
filings required by applicable law or by US or UK regulatory authorities
(including the Securities and Exchange Commission), co-operate in the convening
of board and general meetings and provide registered office facilities;

 

(h)                                 itself on behalf of the Mortgages Trustee
and Funding 1, PROVIDED THAT such monies are at the relevant time available
to the Mortgages Trustee and Funding 1, pay all the out-of-pocket expenses of
the Mortgages Trustee and Funding 1, incurred by the Cash Manager on behalf of
the Mortgages Trustee and Funding 1 in the performance of the Cash Manager’s
duties hereunder including without limitation:

 

(i)                                     all Taxes which may be due or payable by
the Mortgages Trustee and Funding 1;

 

19

 

(ii)                                  all registration, transfer, filing and
other fees and other charges payable in respect of the sale by the Seller of
the Portfolio to the Mortgages Trustee;

 

(iii)                               all necessary filing and other fees in
compliance with regulatory requirements;

 

(iv)                              all legal and audit fees and other
professional advisory fees;

 

(v)                                 all communication expenses including
postage, courier and telephone charges; and

 

(vi)                              all premiums payable by the Mortgages
Trustee in respect of the Insurance Policies;

 

(i)                                     at the request of Funding 1 (but also with
the prior written consent of the Security Trustee), invest monies standing from
time to time to the credit of the Funding 1 GIC Account and the Funding 1
Liquidity Stand-by Account, if any, in Authorised Investments, subject to the
following provisions:

 

(i)                                     any such Authorised Investment shall be
made in the joint names of Funding 1 and the Security Trustee; and

 

(ii)                                  any costs properly and reasonably incurred
in making and changing Authorised Investments will be reimbursed to the Cash
Manager and the Security Trustee by Funding 1; and

 

(iii)                               all income or other distributions arising
on, or proceeds following the disposal or maturity of, Authorised Investments
shall be credited to the Funding 1 GIC Account;

 

(iv)                              the Security Trustee and the Cash Manager
shall not be responsible (save where any loss results from the Security
Trustee’s or the Cash Manager’s, as the case may be, own fraud, wilful default
or negligence or that of their respective officers or employees) for any loss
occasioned by reason of any such Authorised Investments whether by depreciation
in value or otherwise provided that such Authorised Investments were made in
accordance with the above provisions.

 

20

 

SCHEDULE 2

 

CASH MANAGEMENT AND MAINTENANCE OF LEDGERS

 

1.                                      Determination

 

(a)                                  On each Calculation Date based on the
amount of monies standing to the credit of the Mortgages Trustee GIC Account as
at close of business on the London Business Day immediately preceding the
relevant Calculation Date, the Cash Manager shall determine each of the
following:

 

(i)                                     the amount of Principal Receipts and
Revenue Receipts received during the preceding Calculation Period;

 

(ii)                                  the amount of any Mortgages Trust Available
Revenue Receipts received during the preceding Calculation Period; and

 

(iii)                               the amount of Mortgages Trust Available
Revenue Receipts and Principal Receipts to be distributed to Funding 1 and to
the Seller on the Distribution Date immediately following the relevant
Calculation Date.

 

(b)                                 On each Calculation Date, the Cash Manager
shall determine each of the following:

 

(i)                                     the amount of any Losses incurred on the
Loans in the period from the immediately preceding Calculation Date to the
relevant Calculation Date;

 

(ii)                                  the Funding 1 Share, the Seller Share, the
Funding 1 Share Percentage and the Seller Share Percentage in accordance with Clause 8
of the Mortgages Trust Deed; and

 

(iii)                               the Minimum Seller Share in accordance with
Clause
9.2 of the Mortgages Trust Deed.

 

(c)                                  Four Business Days prior to each Funding 1
Interest Payment Date the Cash Manager shall determine each of the following:

 

(i)                                     the amount of any Funding 1 Available
Revenue Receipts to be applied on the following Funding 1 Interest Payment Date
in accordance with the Funding 1 Pre-Enforcement Revenue Priority of Payments;

 

(ii)                                  the amount of any Funding 1 Available
Principal Receipts to be applied on the following Funding 1 Interest Payment
Date in accordance with Funding 1’s Principal Priorities of Payments; and

 

(iii)                               the amount of any Funding 1 Income Deficit.

 

(d)                                 The Cash Manager shall make all the
determinations referred to in paragraphs 1(a) to (c) above on the basis of the
following assumptions:

 

(i)                                     that the amount of any Losses will not
increase;

 

(ii)                                  that any debit balance on the Principal
Deficiency Ledger will not increase; and

 

21

 

(iii)                               such other assumptions (including without
limitation as to the amount of any payments or provisions to be made in
accordance with the applicable Funding 1 Priority of Payments during the period
from and including the Intercompany Loan Determination Date prior to each
Funding 1 Interest Payment Date to and excluding such Funding 1 Interest
Payment Date) as the Cash Manager considers appropriate.

 

The
Cash Manager shall on request notify the Mortgages Trustee, Funding 1 and the
Security Trustee in writing of any such other assumptions and shall take
account of any representations made by the Mortgages Trustee, Funding 1 and the
Trustee (as the case may be) in relation thereto.

 

(e)                                  The Cash Manager shall:

 

(i)                                     make or procure to be made all returns and
filings required to be made by Funding 1 and the Mortgages Trustee;

 

(ii)                                  provide or procure the provision of company
secretarial and administration services to Funding 1 and the Mortgages Trustee
including the keeping of all registers and the making of all returns required
by applicable law or by UK regulatory authorities, co-operate in the convening
of board and general meetings and provide registered office facilities;

 

(iii)                               itself on behalf of Funding 1 and the
Mortgages Trustee, provided that such moneys are at the relevant time available
to Funding 1 and the Mortgages Trustee, pay all out-of-pocket expenses of
Funding 1 and the Mortgages Trustee incurred in the performance of the Cash
Manager’s duties hereunder including, without limitation, all fees payable to
the London Stock Exchange Limited.

 

(f)                                    The Cash Manager shall, if necessary,
perform all currency conversions free of charge, cost or expense at the
relevant exchange rate (for the purposes of any calculations referred to above,
(i) all percentages resulting from such calculations will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point (e.g.
9.876541% being rounded down to 9.87654% and (ii) any currency amounts used in
or resulting from such calculations will be rounded in accordance with the
relevant market practice).

 

(g)                                 Each determination made in accordance with
this paragraph 1 shall (in the absence of bad faith, wilful default, negligence
and manifest error) be final and binding on all persons.

 

2.                                      Notification of Determinations

 

(a)                                  The Cash Manager will cause each
determination of Principal Receipts, Revenue Receipts, Losses, Mortgages Trust
Available Revenue Receipts, the Funding 1 Share and the Seller Share, the
Funding 1 Share Percentage, the Seller Share Percentage and the Minimum Seller
Share to be notified forthwith in writing to the Mortgages Trustee, the
Beneficiaries and the Security Trustee.

 

(b)                                 The Cash Manager will cause each
determination of the Funding 1 Income Deficit (if any), the Funding 1 Liquidity
Shortfall (if any), the Funding 1 Available Principal Receipts and Funding 1
Available Revenue Receipts to be notified forthwith in writing to Funding 1 and
the Security Trustee.

 

22

 

3.                                      Priority of Payments for
Mortgages Trust Available Revenue Receipts

 

The
Cash Manager shall (unless the intended recipient of the relevant payment
agrees otherwise) on each Distribution Date withdraw Cash from the Mortgages
Trustee GIC Account and/or, in the case of sums to be provided for, retain Cash
in the amounts required (to the extent that such withdrawal does not cause the
Mortgages Trustee GIC Account to become overdrawn or, if any amounts are
retained by way of provision for the relevant liability and are thus not
withdrawn, to the extent that withdrawal of those amounts that are withdrawn
would not, if such retained amounts were also to be withdrawn, cause the
balance on the Mortgages Trustee GIC Account to become overdrawn). The
aggregate amount of the withdrawal shall equal the Mortgages Trust Available
Revenue Receipts on each Distribution Date. The withdrawal shall be used to
make the payments and provisions in the order of priority set out in Clause 10.2
of the Mortgages Trust Deed (in each case only if and to the extent that
payments or provisions of a higher priority have been made in full).

 

4.                                      Priority of Payments for
Mortgages Trust Available Principal Receipts

 

The
Cash Manager shall (unless the intended recipient of the relevant payment agrees
otherwise) on each Distribution Date, withdraw Cash from the Mortgages Trustee
GIC Account (to the extent only that such withdrawal does not cause the
Mortgages Trustee GIC Account to become overdrawn) in an aggregate amount equal
to the Mortgages Trust Available Principal Receipts on each Distribution Date
to make the payments in the order of priority set out in Clause 11 of the Mortgages
Trust Deed.

 

5.                                      Priority of Payments for
Funding 1 Available Revenue Receipts

 

Funding
1 Available Revenue Receipts will be applied by the Cash Manager on each
Funding 1 Interest Payment Date until enforcement of the Funding 1 Security
pursuant to the Funding 1 Deed of Charge or until such time as there are no
amounts outstanding under any Intercompany Loan Agreement, in making such
payments and provisions in the order of priority set out in the Funding 1
Pre-Enforcement Revenue Priority of Payments (in each case only if and to the
extent that payments or provisions of a higher priority have been made in full)
as set out in Part 1 of Schedule 3 to the Funding 1 Deed of Charge (as the same
may be amended, varied or restated from time to time).

 

6.                                      Priority of Payments for
Funding 1 Available Principal Receipts

 

Funding
1 Available Principal Receipts will be applied by the Cash Manager on each
Funding 1 Interest Payment Date until enforcement of the Funding 1 Security
pursuant to the Funding 1 Deed of Charge or until such time as there are no
amounts outstanding under any Intercompany Loan Agreement, in making such
payments and provisions in the order of priority (in each case only if and to
the extent that payments or provisions of a higher priority have been made in
full) set out in Part 2 of Schedule 3 to the Funding 1 Deed of Charge.

 

7.                                      Funding 1 Income
Deficit/Funding 1 Liquidity Facility

 

(a)                                  If the Cash Manager determines four
Business Days prior to a Funding 1 Interest Payment Date that there will be a
Funding 1 Income Deficit, then the Cash Manager, on behalf of Funding 1, shall
pay or provide for such Funding 1 Income Deficit by applying Funding 1
Principal Receipts (plus any part of the balance of the Cash Accumulation
Ledger which is not comprised in Funding 1 Available Principal Receipts) to
make good such Funding 1 Income Deficit, and the Cash Manager shall make a
corresponding entry in the relevant Funding 1 Ledgers as described in
paragraphs 11 and 16 below.

 

23

 

(b)                                 If the Cash Manager determines there are no
(or insufficient) amounts standing to the credit of the Funding 1 Principal
Ledger and the Cash Accumulation Ledger to cure the Funding 1 Income Deficit
then on the London Business Day immediately preceding a Funding 1 Interest
Payment Date the Cash Manager will, subject to paragraph (c) below, (i) direct
Funding 1 to request a drawing pursuant to Clause 5.1 of the Funding 1 Liquidity
Facility Agreement to apply towards such Funding 1 Income Deficit.

 

(c)                                  A Funding 1 Liquidity Drawing may not be
used to pay interest or principal (as applicable) on the Term Advances if and
to the extent that there are funds standing to the credit of the Liquidity
Reserve Fund that are available to cure such Funding 1 Income Deficit on such
Funding 1 Interest Payment Date.

 

8.                                      Other Payments

 

Each of
the Beneficiaries and the Cash Manager agrees, and the Mortgages Trustee
concurs, that (save as otherwise specified below) the following payments may be
made from the Mortgages Trustee GIC Account (to the extent that withdrawal of
those amounts would not cause the balance of the Mortgages Trustee GIC Account
to become overdrawn) on any date:

 

(i)                                     if any amount has been received from a
Borrower for the express purpose of payment being made to a third party for the
provision of a service (including giving insurance cover) to either that Borrower
or the Seller or the Mortgages Trustee, to pay such amount when due to such
third party or, in the case of the payment of an insurance premium, where such
third party and the Cash Manager have agreed that payment of commission should
be made by deduction from such insurance premium, to pay such amount less such
commissions when due to such third party and to pay such commission to the Cash
Manager and to pay any premiums in respect of any Insurance Policy or other
insurance policy relating to any Loan comprised in the Portfolio;

 

(ii)                                  to pay to any person (including the Cash
Manager) any amounts due arising from any overpayment by any person or arising
from any reimbursement by any person of any such overpayment (including, for
the avoidance of doubt, where arising from the failure of a direct debit);

 

(iii)                               to pay when due (but subject to any right
to refuse or withhold payment or of set-off that has arisen by reason of the
Borrower’s breach of the terms of the relevant Mortgage or Loan) any amount payable
to a Borrower under the terms of the Mortgage or the Loan to which that
Borrower is a party, and to pay when due any amount payable by the Mortgages
Trustee to the Seller pursuant to Clauses 3.3, 4.4 and 5.2 of the Mortgage Sale
Agreement;

 

(iv)                              to pay to the Seller any amounts
(including, for the avoidance of doubt, any Early Repayment Fees) received and
held by the Mortgages Trustee on trust for the Seller pursuant to Clause 5
of the Mortgage Sale Agreement;

 

(v)                                 to pay when due and payable any amounts due
and payable by the Mortgages Trustee to third parties and incurred without
breach by the Mortgages Trustee of the Mortgages Trust Deed and not provided
for payment elsewhere in this paragraph 8;

 

(vi)                              to refund any amounts due arising from the
rejection of any payments in respect of a Loan and any other amounts which have
not been received by the Mortgages Trustee as cleared funds; and

 

24

 

(vii)                           to refund to the Seller any amounts which
represent amounts received from Borrowers but which do not form part of the
Mortgage Account balance or comprise unpaid interest as at the relevant date
and which are amounts owed by such Borrowers in respect of the period prior to
the date on which the Mortgage Loan (together with its Related Security)
relating to such Mortgage Account was transferred to the Mortgages Trustee as
and when identified by the Cash Manager and if a Borrower fails to pay the full
amount that it owes, the Cash Manager shall be obliged to refund to the Seller
only such portion of the amount which relates to any period prior to such
transfer.

 

9.                                      Use of Ledgers

 

The
Cash Manager shall forthwith record monies received or payments made by it on
behalf of the Mortgages Trustee or Funding 1 in the ledgers in the manner set
out in this Agreement.  If, at any time,
the Cash Manager is in any doubt as to which ledger a particular amount should
be credited or debited, it shall consult with the Security Trustee thereon.

 

Except
in the case of the Principal Deficiency Ledger, a debit item shall only be made
in respect of any of the Mortgages Trustee Ledgers and the Funding 1 Ledgers
and the corresponding payment or transfer (if any) may only be made from the
Mortgages Trustee GIC Account, the Funding 1 GIC Account or the Funding 1
Transaction Account, as the case may be, to the extent that such entry does not
cause the relevant ledger to have a debit balance. In the case of the Principal
Deficiency Ledger and each Principal Deficiency Sub Ledger, a credit item shall
only be made to the extent that such entry does not cause such ledger to have a
credit balance.

 

10.                               Revenue Ledger

 

The
Cash Manager shall ensure that:

 

(a)                                  the following amounts shall be credited to
the Revenue Ledger:

 

(i)                                     all Revenue Receipts; and

 

(ii)                                  all interest received by the Mortgages
Trustee on the Mortgages Trustee GIC Account; and

 

(b)                                 any payment or provision made under
paragraph 3 above shall be debited to the Revenue Ledger.

 

11.                               Principal Ledger

 

The
Cash Manager shall ensure that:

 

(a)                                  all Principal Receipts shall be credited to
the Principal Ledger; and

 

(b)                                 any payment or provision made under
paragraph 4 above shall be debited to the Principal Ledger.

 

12.                               Losses Ledger

 

The
Cash Manager shall ensure that all Losses shall be recorded in the Losses
Ledger.

 

25

 

13.                               Funding 1 Share/Seller Share
Ledger

 

The
Cash Manager shall ensure that the Current Funding 1 Share and the Current
Funding 1 Share Percentage of the Trust Property and the Current Seller Share
and the Current Seller Share Percentage of the Trust Property are recorded in
the Funding 1 Share/Seller Share Ledger on the Initial Closing Date and
thereafter on each Distribution Date.

 

14.                               Funding 1 Revenue Ledger

 

The
Cash Manager shall ensure that:

 

(a)                                  the following amounts shall be credited to
the Funding 1 Revenue Ledger:

 

(i)                                     all Funding 1 Revenue Receipts;

 

(ii)                                  all interest received by Funding 1 in
respect of the Funding 1 Bank Accounts;

 

(iii)                               all amounts received by Funding 1
representing income on any Funding 1 Authorised Investments;

 

(iv)                              all amounts (other than any early
termination payment which is to be used to acquire, if necessary, a new swap)
received by Funding 1 under the Funding 1 Swap Agreement; and

 

(v)                                 any amount debited to the Funding 1
Principal Ledger under paragraph 16(b)(ii) below; and

 

(b)                                 any payment or provision made under
paragraph 5 above shall be debited to the Funding 1 Revenue Ledger.

 

15.                               Funding 1 Liquidity Facility
Ledger

 

The
Cash Manager shall ensure that:

 

(a)                                  all Funding 1 Liquidity Facility Drawings
shall be credited to the Funding 1 Liquidity Facility Ledger; and

 

(b)                                 all Funding 1 Liquidity Facility Repayments
shall be noted on the Funding 1 Liquidity Facility Ledger.

 

16.                               Funding 1 Principal Ledger

 

Without
prejudice to paragraph 17 below, the Cash Manager shall ensure that:

 

(a)                                  the following amounts shall be credited to
the Funding 1 Principal Ledger:

 

(i)                                     all Funding 1 Principal Receipts; and

 

(ii)                                  amounts credited to the Principal
Deficiency Ledger under paragraph 5 above and paragraph 17 below; and

 

(b)                                 the following amounts shall be debited to
the Funding 1 Principal Ledger:

 

(i)                                     the aggregate amount of principal repaid on
the Intercompany Loan Agreement pursuant to paragraph 6 above; and

 

26

 

(ii)                                  on each Funding 1 Interest Payment Date, an
amount equal to the Funding 1 Income Deficit on such Funding 1 Interest Payment
Date.

 

17.                               Principal Deficiency Ledger

 

(a)                                  Without prejudice to paragraph 5 above, the
Cash Manager shall ensure that there shall be debited to the Principal
Deficiency Ledger:

 

(i)                                     deficiencies arising from Losses which have
been allocated to the Funding 1 Share; and

 

(ii)                                  any amount required to be debited to the Funding
1 Principal Ledger under paragraph 16(b)(ii) above.

 

(b)                                 The Cash Manager shall ensure that there
shall be credited to the Principal Deficiency Ledger any amount to be credited
in accordance with paragraph 5 above.

 

(c)                                  Amounts to be debited to the Principal
Deficiency Ledger shall be debited in the following order:

 

(i)                                     first, to the Principal Deficiency Sub Ledger
corresponding to the Term Advance with the lowest ranking Term Advance Rating
until the debit balance thereon is equal to the then principal amount
outstanding of the corresponding Term Advance(s); and

 

(ii)                                  secondly, to the Principal Deficiency
Sub Ledger corresponding to the Term Advance with the next lowest Term Advance
Rating until the debit balance thereon is equal to the then principal amount
outstanding of corresponding Term Advance(s),

 

and so
on until amounts are debited to the AAA Principal Deficiency Sub Ledger, at
which point there will be an Asset Trigger Event.

 

Losses
on the Loans and/or the application of Funding 1 Available Principal Receipts
to pay interest on the Term Advances will not be recorded on the Principal
Deficiency Ledger to the extent that the Funding 1 Share of the Trust Property
together with amounts standing to the credit of the Funding 1 Cash Accumulation
Ledger and the Funding 1 Principal Ledger, in aggregate, is greater than or
equal to the aggregate Outstanding Principal Balance of the Intercompany Loans
on the relevant Funding 1 Interest Payment Date, after taking account of such
Losses or the relevant application of Principal Receipts.

 

(d)                                 Amounts to be credited to a Principal
Deficiency Ledger shall be credited in the following order:

 

(i)                                     first, to the Principal Deficiency Sub Ledger
corresponding to the Term Advance with the highest ranking Term Advance Rating
until the debit balance thereon is reduced to zero;

 

(ii)                                  secondly, to the Principal Deficiency
Sub Ledger corresponding to the Term Advance with the next highest ranking Term
Advance Rating until the debit balance thereon is reduced to zero; and

 

(iii)                               thirdly, to the Principal Deficiency
Sub Ledger corresponding to the Term Advance with the next highest ranking Term
Advance Rating until the debit balance thereon is reduced to zero,

 

27

 

and so
on until the balance of the Principal Deficiency Ledger is zero.

 

18.                               General Reserve Ledger

 

(a)                                  A tranche (if any) drawn down on a relevant
Closing Date by Funding 1 pursuant to a Start-Up Loan Agreement for the
purposes of funding the General Reserve Fund (or any other similar reserve
fund) will be credited to the General Reserve Ledger.

 

(b)                                 Amounts shall be credited to the General
Reserve Ledger in accordance with the Funding 1 Priority of Payments above.

 

(c)                                  Amounts shall be debited to the General
Reserve Ledger on each Funding 1 Interest Payment Date in order to be applied
in accordance with the order of priority of payments set out in Schedule 3 to
the Funding 1 Deed of Charge.

 

19.                               Liquidity Reserve Ledger

 

(a)                                  Amounts shall be credited to the Liquidity
Reserve Ledger in accordance with the Funding 1 Priority of Payments above.

 

(b)                                 Amounts shall be debited to the Liquidity
Reserve Ledger to the extent permitted on each 
relevant Funding 1 Interest Payment Date in order to be applied in
accordance with the priority of payments set out in Schedule 3 to the Funding 1
Deed of Charge.

 

20.                               Intercompany Loan Ledger

 

The
Cash Manager shall ensure that all payments of interest and repayments of
principal on each of the Term Advances are recorded in the Intercompany Loan
Ledger.

 

21.                               Cash Accumulation Ledger

 

The
Cash Manager shall ensure that all Funding 1 Principal Receipts reserved by
Funding 1 to pay the relevant Bullet Term Advances are recorded on the Cash
Accumulation Ledger.

 

28

 

SCHEDULE 3

 

PART 1

 

FORM OF MORTGAGES TRUSTEE QUARTERLY REPORT

 

 

Permanent Mortgages Trustee Limited

Profit & Loss Account

 

	
  Period
  Ended

  	
   

  	
  This
  Quarter

  	
   

  	
  Prior
  Quarter

  	
   

  
	
   

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest
  Receivable - Mortgages

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Interest
  Payable - Mortgages

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Net
  Operating Income

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fees
  Receivable

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fees
  Payable

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Profit/loss
  on ordinary activities before tax

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Taxation

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Profit/loss
  on ordinary activities after tax

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Dividend

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Retained
  profit brought forward

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Retained
  profit for the year

  	
   

  	
  0

  	
   

  	
  0

  	
   

  

 

29

 

	
  Permanent Mortgages Trustee Limited

  Balance Sheet

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Period Ended

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fixed Asset Investments

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New
  Loans

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Interest
  Receivable

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Other
  Debtors

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Cash
  at Bank

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Creditors: Amounts falling due within one year

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accruals

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Interest
  Payable Accrual

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Taxation

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Net
  current assets

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Total
  Assets less current liabilities

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Share
  Capital

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Reserves

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
  Diff

  	
   

  	
  0

  	
   

  

 

30

 

PART 2

 

FORM OF FUNDING 1 QUARTERLY REPORT

 

Permanent Funding (No. 1) Limited

Profit & Loss Account

 

	
  Period
  Ended

  	
   

  	
  This
  Quarter

  	
   

  	
  Prior
  Quarter

  	
   

  
	
   

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Interest
  Receivable - Mortgages

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest
  Receivable - Cash Deposits

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Interest
  Payable - Intercompany Loan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest
  Payable

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Net
  Operating Income

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Other
  Income

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Insurance
  Commission  Operating Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deferred
  Consideration

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Profit/loss
  on ordinary activities before tax

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Taxation

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Profit/loss
  on ordinary activities after tax

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Dividend

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Retained
  profit brought forward

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Retained
  profit for the year

  	
   

  	
  0

  	
   

  	
  0

  	
   

  

 

31

 

	
  Permanent
  Funding (No. 1)

  Limited  Balance Sheet

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Period Ended

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fixed Asset Investments

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beneficial
  Interest in Mortgage portfolio

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest
  Receivable

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Deferred
  Expenditure (costs of Securing)

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Other
  debtors

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Cash
  at Bank

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reserve
  Funding 1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Transaction
  Account

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Funding
  1 GIC Account

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Creditors: Amounts falling due within one year

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accruals

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Deferred
  Consideration Creditor

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Interest
  Payable Accrual

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Taxation

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Net
  current assets

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Creditors: Amounts falling due after one year

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Intercompany
  Loan

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Start
  Up Loan

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Total
  Assets less current liabilities

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Share
  Capital

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Reserves

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
  Diff

  	
   

  	
  0

  	
   

  

 

32

 

	
  Permanent Funding (No. 1) Limited

  	
   

  	
   

  	
   

  
	
  Notes to Balance Sheet

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Period Ended

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Balance on Cash Accumulation Ledger

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Available Credit Enhancement

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  General
  Reserve Fund at closing

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Last
  Quarter Closing General Reserve Fund

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Drawings
  to make a bullet repayment

  	
   

  	
   

  	
   

  
	
  Other
  drawings

  	
   

  	
   

  	
   

  
	
  Closing
  General Reserve Fund Balance

  	
   

  	
   

  	
   

  
	
  Target
  General Reserve Fund Balance

  	
   

  	
   

  	
   

  

 

	
  Principal
  Deficiency Ledger

  	
   

  	
  AAA

  	
   

  	
  AA

  	
   

  	
  BBB

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Opening
  PDL Balance

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Losses
  this Quarter

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PDL
  top up from Revenue Income

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Closing
  PDL Balance

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subordinated Loan Outstanding

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial
  Balance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Last
  Quarter Closing Outstanding

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accrued
  Interest

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Repayments
  Made

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Closing
  Balance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

33

 

SIGNATORIES

 

	
  Signed by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
  as Cash Manager

  	
  )

  
	
   

  	
   

  
	
  Signed by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
  as Seller

  	
  )

  
	
   

  	
   

  
	
  Signed by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  PERMANENT MORTGAGES TRUSTEE

  	
  )

  
	
  LIMITED

  	
  )

  
	
   

  	
   

  
	
  Signed by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  PERMANENT FUNDING (NO. 1) LIMITED

  	
  )

  
	
   

  	
   

  
	
  Signed by

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  BANK OF NEW YORK

  	
  )

  

 

34Exhibit 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

  
			

 

30

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