Document:

Exhibit 10.1 to St. Jude Medical, Inc. Form 8-K dated January 29, 2007

Exhibit 10.1 

STOCK PURCHASE PLAN ENGAGEMENT AGREEMENT

Stock Purchase Plan Engagement Agreement dated as of January 29, 2007 (this “Agreement”) between St. Jude Medical, Inc., a Minnesota corporation (the “Company”), and Banc of America Securities LLC (“Broker”), acting as agent for the Company.

WHEREAS, the Company desires to establish a trading plan (subject to the terms and provisions of this Agreement, the “Plan”) that qualifies for the safe harbors provided by Rule 10b-18 (“Rule 10b-18”) and Rule 10b5-1 (“Rule 10b5-1”) each under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

WHEREAS, the Company wishes to engage Broker as its exclusive agent to make purchases of shares of the common stock, par value $0.10, of the Company (the “Securities”) on its behalf under the Plan;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, agreements, representations and warranties contained in this Agreement and intending to be legally bound, the parties agree as follows:

	
            1.
 	
            ENGAGEMENT OF BROKER. 
 

The Company hereby engages the Broker as the Company’s exclusive agent to purchase the Securities during the term of this Agreement. Subject to the terms and conditions set forth herein, Broker hereby accepts such appointment and engagement.  

	
            2.
 	
            TERMS OF THE PLAN.
 

A.            Broker is authorized to begin purchasing the Securities as agent for the Company pursuant to the Plan on January 29, 2007, after the execution of this Agreement by both parties, and shall cease purchasing the Securities on the Termination Date (as defined below). The time period beginning on the date purchases are to first be made to the date of the termination of the Plan is referred to herein as the “Plan Period”.

B.             (i)          On each Trading Day during the Plan Period on which no Market Disruption Event (as defined below) occurs, Broker shall purchase as agent for the Company and for the account of the Company the lesser of (a) the maximum number of Securities that the Company could purchase under Rule 10b-18 and (b) number of Securities that Broker is able, subject to market conditions and principles of best execution, to purchase as agent for the Company and for the account of the Company on such Trading Day using commercially reasonable means in accordance with the guidelines set forth below (the “Guidelines”). The dollar value of the
Securities purchased pursuant to this Plan including commissions, shall not exceed $700,000,000.00.

	
            Purchase Price Range 
 	
            Number of Shares to be Purchased
 
	
            Greater than or equal to $50.00
 	
            0 shares
 
	
            Less than $50.00
 	
            Up to $700,000,000 of shares
 

The Company shall pay to Broker a commission of $0.02 per Security so purchased.

(ii)           A “Trading Day” is any day during the Plan Period that the New York Stock Exchange, Inc. (the “Principal Market”) is open for business and the Securities trade regular way on the Principal Market. “Market Disruption Event” has the meaning set forth in Section 6.3(a) of the 2002 Equity Derivatives Definitions, as published by the International Swaps and Derivatives Association, Inc., and references therein to “Exchange” shall be deemed to be references to the Principal Market.

(iii)          Any Securities so purchased shall be purchased under ordinary principles of best execution at the then-prevailing market price. Subject to the terms set forth in this Agreement, Broker shall have full discretion with respect to the execution of all purchases, and the Company acknowledges and agrees that the Company does not have, and shall not attempt to exercise, any influence over how, when or whether to effect such purchases of Securities pursuant to the Plan. The Company acknowledges and agrees that, in acting under this Agreement, Broker will be an independent contractor and will not be acting as the Company’s trustee or fiduciary or in any similar capacity.

(iv)          In the event that Broker, in its discretion, determines that it is appropriate with regard to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or  

 

 

 

procedures are imposed by law or have been voluntarily
adopted by Broker, and including without limitation Rule 10b-18, Rule 10b-5, Regulation 13D-G and Regulation 14E under the
Exchange Act, “Requirements”) for Broker to refrain from purchasing
Securities or to purchase fewer than the otherwise applicable Number of Shares to be Purchased on any Trading Day during the Plan
Period, then Broker may, in its discretion, elect that the Number of Shares to be Purchased for such Trading Day shall be reduced
for such day to an amount determined by Broker in its discretion as appropriate with regard to any Requirements. 

(v)           Any Number of Shares to be Purchased (and the corresponding purchase price limits or ranges) set forth in the Guidelines shall be adjusted automatically on a proportionate basis to take into account any stock split, reverse stock split or stock dividend with respect to the Securities or any change in capitalization with respect to the Company or any similar event that occurs during the Plan Period, as determined by Broker in good faith and a commercially reasonable manner.

C.            Broker may purchase Securities on the Principal Market, any national securities exchange, in the over-the-counter market, on an automated trading system or otherwise.

D.            Broker shall use good faith efforts to execute all purchase transactions under this Agreement in accordance with the timing, price and volume restrictions contained in subparagraphs (2), (3) and (4) of Rule 10b-18. Nothing herein shall preclude the purchase by Broker of the Securities for its own account, or the solicitation or execution of purchase or sale orders of the Securities for the account of Broker’s clients. Please be advised that, due to the manual process involved in executing and reporting trades on the floor of the New York Stock Exchange, Inc. (the “NYSE”), a trade that is otherwise compliant with the price restrictions of Rule 10b-18 may appear to have been effected outside of the price restriction.
Such a condition typically occurs as a result of the delays inherent in the NYSE specialist process of reporting a trade to the Consolidated Tape. In those instances in which there is a delay between the execution and reporting of a trade by the specialist on the NYSE floor, a trade reported to the Consolidated Tape by another market may cause the NYSE trade report to appear as an “uptick”, i.e., a trade executed at a price higher than the highest independent bid or last sale price. These conditions are more likely to occur in actively traded stocks.

E.            It is the intent of the parties that this Agreement and the Plan comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act, and the parties agree that this Agreement shall be interpreted to comply with the requirements of Rule 10b5-1(c) and the Company shall take no action that results in this transaction not so complying with such requirements.   

F.             The Company also acknowledges and agrees that any amendment, modification or waiver of this Agreement or the Plan, must be effected in accordance with the requirements for the amendment of a “plan” as defined in Rule 10b5-1(c). Without limiting the generality of the foregoing, any such amendment, modification or waiver shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment, modification or waiver shall be made at any time at which the Company is aware of any material nonpublic information concerning the Company or the Securities. Upon any amendment, modification or waiver of this Agreement or the Plan, the Company shall immediately deliver to Broker a letter
substantially in the form of Exhibit A hereto.

	
            3.
 	
            REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
 

A.            The Company is not entering this Agreement “on the basis of” (as defined in Rule 10b5-1(b) under the Exchange Act) any material nonpublic information concerning the Securities or the business, operations or prospects of the Company.   

B.            During the Plan Period, the Company agrees not to enter into or alter any corresponding or hedging transaction or position with respect to the securities covered by the Plan (including, without limitation, with respect to any securities convertible or exchangeable into the Securities) and agrees not to alter or deviate from the terms of the Plan.

C.            The Company agrees that, during the Plan Period, neither the Company nor its officers or employees shall, directly or indirectly, communicate any information relating to the Securities or the Company to any employee of Broker or its affiliates involved in trading the Securities in connection with the transactions contemplated hereby, who currently include the individuals specified in Annex A hereto.

D.            The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated will not (i) result in a breach of any of the terms or
provisions of, or constitute a default under, any agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its 

 

 

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subsidiaries is bound, nor will such action result in
any violation of the provisions of the certificate of incorporation, by-laws or other constitutive documents of the Company or any
statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their respective properties or (ii) conflict with or exceed the authority granted under resolutions
of the board of directors of the Company authorizing this Agreement or the consummation of the Plan.

E.            The Company has made, and shall use its best efforts during the Plan Period to make in a timely manner, all filings required to be made by it with the Securities and Exchange Commission, any securities exchange or any other regulatory body with respect to the transactions contemplated hereby. The Company agrees to immediately notify Broker of any failure or delay in making any such filings when due.

F.             Without the prior written consent of Broker, the Company agrees that during the Plan Period (or until the Plan has been terminated, if earlier) the Company shall not, directly or indirectly (including, without limitation, by means of a cash-settled or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, any Securities (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable for Securities, except for any Securities tendered to or withheld by the Company to satisfy the exercise price of any stock option or to satisfy tax withholding obligations upon the exercise of any stock option or the
vesting of any restricted stock under the Company’s stock plans. 

G.            The Company shall notify Broker prior to the opening of trading in the Securities on any day on which the Company makes, or expects to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to the Company (other than any such transaction in which the consideration consists solely of cash and there is no valuation period), and shall promptly notify Broker with information relating to actual purchases by the Company during the three calendar months preceding such announcement (unless Broker already has such information relating to actual purchases by the Company). The Company acknowledges that if the Company does not provide such notice and information to Broker,
Broker may in it is discretion cease any purchase activity hereunder after such an announcement is made by the Company until such time as the Company provides Broker with the necessary information.

H.            The Company shall, on the business day prior to the intended date of such purchase, notify Broker of the intention on the part of any affiliated purchaser, as defined in Rule 10b-18, of the Company to purchase Securities on any day if such purchase is to be effected otherwise than through Broker pursuant to this Agreement and Broker shall refrain from purchasing any Securities hereunder on the day following receipt of such notice. The Company shall be solely responsible for any purchases made by Broker as the Company’s agent prior to Broker’s receipt of such written notice. Notwithstanding the foregoing, if Broker receives such notice, Broker may nevertheless be entitled to make, and the Company shall be solely responsible for, a purchase hereunder pursuant to a bid
made before such notice is received by Broker. The Company shall be solely responsible for notifying Broker of any purchases of Securities by any such affiliated purchaser, and the Company agrees to indemnify and hold harmless Broker for any failure to so notify Broker or any error in any such notification. The Company also acknowledges that purchases of Securities by any such affiliated purchaser (including without limitation any purchases caused or influenced by any action of the Company) may cause the Number of Shares to be Purchased on any Trading Day to be reduced pursuant to Section 2.B(iv) above. The Company acknowledges that any action it takes that causes or influences any purchase of Securities by any affiliated purchaser must comply with the standards set forth in Section 2.F above.

I.              The Company agrees that neither the Company nor any of its affiliates or agents shall take any action that would cause Regulation M under the Exchange Act (“Regulation M”) to be applicable to any purchases of Securities, or any security for which the Securities are a reference security (as defined in Regulation M), by the Company or any of its affiliated purchasers (as defined in Regulation M) during the Plan Period.

J.             The Company represents and warrants that it has publicly disclosed on January 25, 2007 its intention to institute a program for the acquisition of the Securities as contemplated hereby.

K.            The Company acknowledges and agrees that it is not relying, and has not relied, upon Broker or any affiliate of Broker with respect to the legal, accounting, tax or other implications of this Agreement and that it has conducted its own analyses of the legal, accounting, tax and other implications hereof. The Company further acknowledges and agrees that neither Broker nor any affiliate of Broker has acted as its advisor in any capacity in connection with this Agreement or the transactions contemplated hereby. The Company is entering into this Agreement with a full understanding of all of the terms and risks hereof (economic and otherwise), has adequate expertise in financial matters to evaluate those terms and risks and is capable of assuming (financially and otherwise) those risks.

 

 

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            4.
 	
            TERMINATION.
 

A.            This
Agreement and the Plan shall terminate on the Termination Date. “Termination Date” means the earliest to occur of (i) the close of business on February 28, 2007, (ii) the close of business on the
date that the Number of Shares to be Purchased have been purchased, (iii) any Optional Termination Date (as defined below), (iv)
the date on which any Required Termination Notice (as defined below) is received by Broker, (v) the date that the Company or any
other person publicly announces a tender or exchange offer with respect to the Securities or a merger, acquisition,
reorganization, recapitalization or comparable transaction affecting the Securities as a result of which the Securities are to be
exchanged or converted into shares of another company and (vi) the date that Broker becomes aware of the commencement or impending
commencement of any proceedings in respect of or triggered by the Company’s bankruptcy or insolvency. 

B.            This Agreement may be terminated by either party hereto on written notice to the other party in accordance with Section 5.D. below (the date of any such termination, an “Optional Termination Date”).   

C.            If, at any time during the Plan Period, any legal or regulatory restriction that is applicable to the Company or the Company’s affiliates would prohibit any purchase pursuant to the Plan, the Company agrees to give Broker notice of such restriction in accordance with clause (i) of Section 5.D below as soon as practicable (such notice, a “Required Termination Notice”). Such notice shall indicate the anticipated duration of the restriction, but shall not include any other information about the nature of the restriction or its applicability to the Company or otherwise communicate any material nonpublic information about the Company or the Securities to Broker. 

D.            Notwithstanding the termination of this Agreement, the Company shall be solely responsible for any purchases made by Broker on the Company’s behalf prior to Broker’s receipt of any notice of termination, and if Broker receives such notice, Broker may nevertheless be entitled to make, and the Company shall be solely responsible for, a purchase hereunder pursuant to a bid made before such notice is received by Broker.

	
            5.
 	
            GENERAL.
 

A.          Payment for the purchase price of Securities purchased under the Plan for the account of the Company, plus applicable commission, will be delivered to Broker’s account, which Broker shall specify in writing to the Company from time to time, on a normal three-day settlement basis. Broker shall give the Company at least 30 days prior notice before changing such account.

B.            The parties hereto agree and acknowledge that Broker is a “stockbroker” within the meaning of Section 101(53A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge that this Agreement is a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, and Broker is entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 546(e) and 555 of the Bankruptcy Code.

C.            This Agreement constitutes the entire agreement between the parties with respect to the Plan and supercedes any prior agreements or understandings with regard to the Plan. 

D.            All notices to Broker under this Agreement shall be given to Broker, ATTN: Chip Gibbs, by (i) facsimile at (415) 835-2514 followed by telephonic confirmation at (212) 583-8354 or (ii) by certified mail or overnight courier to the address below:

Banc of America Securities LLC

ATTN: Chip Gibbs

9 W. 57th Street

40th Floor

New York, NY 10019

All notices to the Company under this Agreement shall be given to Company, ATTN:  John C. Heinmiller, in the manner specified by this Agreement by (i) facsimile at (651) 482-8318 followed by telephonic confirmation at (651) 483-2000 or (ii) by certified mail or overnight courier to the address below:

St. Jude Medical, Inc. 

One Lillehei Plaza

	
             
 	
            St. Paul, MN
 	
            55117
 

ATTN:  John C. Heinmiller 

 

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E.            The Company’s rights and obligations under this Agreement may not be assigned or delegated without the written consent of Broker, and Broker’s rights and obligations under this Agreement may not be assigned or delegated without written consent of the Company.

F.            If any provision of this Agreement is or becomes inconsistent with any applicable present or future law, rule or regulation, that provision will be deemed modified or, if necessary, rescinded in order to comply with the relevant law, rule or regulation. All other provisions of this Agreement will continue and remain in full force and effect.

G.            THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. The parties hereto irrevocably submit to the non-exclusive jurisdiction of the Federal and state courts located in the Borough of Manhattan, in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

H.            EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 

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IN WITNESS WHEREOF, the undersigned have signed this Agreement as of the date first written above. 

 

	 	ST. JUDE MEDICAL, INC.  
	 
	    	By:    	/s/   John C. Heinmiller 
	 	Name:
Title:	John C. Heinmiller
Executive Vice President and Chief Financial Officer
	 
	 
	 	BANC OF AMERICA SECURITIES LLC  
	 
	    	By:    	/s/   Mike Elgarten 
	 	Name:  
Title:	Mike Elgarten
Managing Director 
	 
	 

ANNEX A

 

The Company agrees that, during the Plan Period, neither the Company nor its officers or employees shall, directly or indirectly, communicate any information relating to the Securities or the Company to any employee of Broker or its affiliates involved in trading the Securities in connection with the transactions contemplated hereby, who currently include the following individuals: Dmitry S. Genkin, Sean W. Groenewald, Soo-Il Lee, Anthony P. Paquette, Marc Mezzadri and John Wall, and such other employees as may be identified to the Company in writing by Broker from time to time.

 

 

Annex A-1

 

 

EXHIBIT A

 

[Company Letterhead]

 

[Date]

Banc of America Securities LLC

9 West 57th Street

New York, NY 10019

Attn: Chip Gibbs

	
             
 	
            Re:
 	
            [Amendment/Modification/Waiver] of Stock Purchase Plan Engagement Agreement
 

Ladies and Gentlemen:

Reference is made to the Stock Purchase Plan Engagement Agreement (the “Repurchase Agreement”) dated as of [_________] between St. Jude Medical, Inc. (the “Company”) and Banc of America Securities LLC (“Broker”). 

In connection with the [amendment/modification/waiver] of the Repurchase Agreement, the Company hereby represents and warrants to Broker that on the date hereof the Company is not aware of any material nonpublic information regarding the Company, and that its decision to [amend/modify/seek a waiver of] the Repurchase Agreement was made in good faith and not as a part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Securities Exchange Act of 1934, as amended.

 

	
            Very truly yours,
 
	 
	
            ST. JUDE MEDICAL, INC. 
 
	 
	
            By:
 	
             
 
	
             
 	
            Name: 
 	
             
 
	
             
 	
            Title:
 	
             
 

 

	
            Acknowledged and agreed to as of
 the date first above written,
 
	 
	
            BANC OF AMERICA SECURITIES LLC
 
	 
	
            By:
 	
             
 
	
             
 	
            Name:
 	
             
 
	
             
 	
            Title:
 	
             
 

 

 

 

Exhibit A-1Exhibit 4.1.1

                                                             EXECUTION VERSION

                            Dated 19 January, 2005

                       GRANITE FINANCE FUNDING 2 LIMITED
                                 as Funding 2

                           GRANITE MASTER ISSUER PLC
                               as Master Issuer

                             THE BANK OF NEW YORK
                         as Funding 2 Security Trustee

                                    -and -

                                CITIBANK, N.A.
                                 as Agent Bank

               ------------------------------------------------

               FIRST AMENDED GLOBAL INTERCOMPANY LOAN AGREEMENT

               ------------------------------------------------

                            SIDLEY AUSTIN (UK) LLP
                               WOOLGATE EXCHANGE
                             25 BASINGHALL STREET,
                                LONDON EC2V 5HA
                            TELEPHONE 020 7360 3600
                            FACSIMILE 020 7626 7937

<PAGE>

                                   CONTENTS

1.   Interpretation..........................................................1

2.   The Facility............................................................1

3.   The Loan Tranches.......................................................1

4.   Purpose.................................................................3

5.   Limited Recourse........................................................3

6.   Advance of Loan Tranches................................................4

7.   Interest................................................................5

8.   Repayment...............................................................9

9.   Prepayment.............................................................10

10.  Taxes..................................................................10

11.  Illegality.............................................................11

12.  Mitigation.............................................................11

13.  Representations and Warranties of Funding 2............................12

14.  Covenants..............................................................13

15.  Default................................................................16

16.  Default Interest and Indemnity.........................................18

17.  Payments...............................................................19

18.  Entrenched Provisions..................................................19

19.  Further Provisions.....................................................20

20.  Redenomination.........................................................21

21.  Notices................................................................22

22.  Governing Law and Submission to Jurisdiction...........................22

SCHEDULE 1  FORM OF LOAN TRANCHE NOTICE.....................................24

SCHEDULE 2  FORM OF LOAN TRANCHE SUPPLEMENT.................................25

                                      i
<PAGE>

THIS AGREEMENT IS MADE ON 19 JANUARY, 2005 AND AMENDED AND RESTATED PURSUANT
TO THE DEED OF AMENDMENT AND RESTATEMENT DATED 19 JANUARY, 2007 BETWEEN:

BETWEEN:

(1)   GRANITE FINANCE FUNDING 2 LIMITED (registered number 5249387), a private
      limited company incorporated under the laws of England and Wales whose
      registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX as
      Funding 2;

(2)   GRANITE MASTER ISSUER PLC (registered number 5250668), a public limited
      company incorporated under the laws of England and Wales whose
      registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX as
      Master Issuer;

(3)   THE BANK OF NEW YORK, a New York banking corporation acting through its
      office at 40th Floor, One Canada Square, London E14 5AL in its capacity
      as Funding 2 Security Trustee; and

(4)   CITIBANK, N.A., acting through its office at Citigroup Centre, Canada
      Square, Canary Wharf, London E14 5LB in its capacity as Agent Bank.

WHEREAS:

(A)   From time to time, the Master Issuer will issue Notes pursuant to the
      Programme.

(B)   The Master Issuer has agreed that it will lend the proceeds (or, as
      applicable, the sterling equivalent thereof) of any issue of Notes by it
      to Funding 2.

(C)   This Agreement sets out the terms and conditions with respect to lending
      by the Master Issuer of the proceeds of the issue of Notes to Funding 2.

1.    Interpretation

1.1   The provisions of the Programme Master Definitions Schedule signed for
      the purposes of identification by Sidley Austin Brown & Wood and Allen &
      Overy LLP on 19 January, 2005 (as the same have been and may be amended,
      varied or supplemented from time to time with the consent of the parties
      hereto) are expressly and specifically incorporated into and shall apply
      to this Agreement.

2.    The Facility

2.1   Subject to the terms of this Agreement, the Master Issuer agrees to make
      available to Funding 2 a facility in an aggregate amount equal to the
      Total Credit Commitment (the "Global Loan Facility"). On the London
      Business Day prior to each Closing Date, the Master Issuer shall offer
      Loan Tranches to Funding 2 under the Global Loan Facility that
      correspond to each Series and Class of Notes to be issued by the Master
      Issuer on the following Closing Date. Each Loan Tranche shall be
      denominated in Sterling. Subject to the terms of this Agreement, on each
      Closing Date Funding 2 shall accept the offer.

3.    The Loan Tranches

                                      1
<PAGE>

3.1   Conditions precedent: Save as the Master Issuer, Funding 2 and the
      Funding 2 Security Trustee may otherwise agree, each Loan Tranche will
      not be available for utilisation on a Closing Date unless:

      (a)   the related Series and Class of Notes has been issued by the
            Master Issuer on the relevant Closing Date and the subscription
            proceeds thereof have been received by or on behalf of the Master
            Issuer;

      (b)   not later than 2.00 pm (London time) on the relevant Closing Date,
            Funding 2 and the Master Issuer have signed a Loan Tranche
            Supplement (generally in the form set out in Schedule 2 (Form of
            Loan Tranche Supplement)) which shall oblige Funding 2 to borrow
            the whole amount stated in the Loan Tranche Supplement on the
            Closing Date subject to the terms of this Agreement;

      (c)   Funding 2 has confirmed in the applicable Loan Tranche Supplement
            that:

            (i)   no Funding 2 Intercompany Loan Event of Default has occurred
                  and is continuing unremedied (if capable of remedy) or
                  unwaived or would result from the making of such Loan
                  Tranche;

            (ii)  the representations set out in Clause 13 (Representations
                  and Warranties of Funding 2) are true on and as of the
                  Closing Date by reference to the facts and circumstances
                  then existing;

            (iii) there is no debit balance on the Funding 2 Principal
                  Deficiency Ledger;

      (d)   Funding 2 has delivered to the Funding 2 Security Trustee a
            solvency certificate in form and substance satisfactory to the
            Funding 2 Security Trustee;

      (e)   the Master Issuer has confirmed in the applicable Loan Tranche
            Supplement that:

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

            (ii)  the aggregate amount of the Loan Tranches to be made on such
                  Closing Date and any Loan Tranches outstanding on such
                  Closing Date do not exceed the Total Credit Commitment;

      (f)   each of the Rating Agencies has confirmed in writing to the
            Funding 2 Security Trustee and the Issuer Security Trustee that
            there will not, as a result of the Master Issuer issuing any
            Notes, be any reduction, withdrawal or qualification of the then
            current ratings by the Rating Agencies of any existing Notes; and

      (g)   all other conditions precedent as may be specified in the
            applicable Loan Tranche Supplement have been satisfied.

                                      2
<PAGE>

4.    Purpose

4.1   Purpose and application of a Loan Tranche: The proceeds of each Loan
      Tranche may only be used by Funding 2 either:

      (a)   to make a Contribution (excluding a Deferred Contribution) to the
            Mortgages Trustee (which shall increase the Funding 2 Share of the
            Trust Property in accordance with the terms of the Mortgages Trust
            Deed); and/or

      (b)   to refinance the existing debt of Funding 2, including any
            existing Loan Tranche (in whole or in part); and/or

      (c)   to fund or partly fund or replenish the Funding 2 Reserve Fund or
            make a deposit into the Funding 2 GIC Account.

4.2   Application of amounts: Without prejudice to the obligations of Funding
      2 under this Clause 4, neither the Funding 2 Security Trustee nor any of
      the Funding 2 Secured Creditors shall be obliged to concern themselves
      as to the application of amounts raised by Funding 2 under a Loan
      Tranche.

5.    Limited Recourse

5.1   Recourse limited to available funds: Subject to Clause 5.2 (Shortfall on
      Final Repayment Date) but notwithstanding the terms of any other
      provision in this Agreement or any other Transaction Document, each of
      the Master Issuer and the Funding 2 Security Trustee agree that the
      liability of Funding 2 in respect of its obligations to repay principal
      and pay interest or any other amounts due under this Agreement or for
      any breach of any other representation, warranty, covenant or
      undertaking of Funding 2 under this Agreement shall be limited to:

      (a)   in respect of amounts payable prior to the enforcement of the
            Funding 2 Security:

            (i)   the amount of Funding 2 Available Revenue Receipts in
                  respect of interest, fees or other amounts (but excluding
                  principal) payable by Funding 2 to the Master Issuer, but
                  only to the extent of an amount of Funding 2 Available
                  Revenue Receipts remaining after paying amounts of a higher
                  order of priority and providing for amounts payable pari
                  passu therewith in accordance with, and subject to, the
                  relevant Funding 2 Pre-Enforcement Revenue Priority of
                  Payments; and

            (ii)  the amount of Funding 2 Available Principal Receipts in
                  respect of principal payable by Funding 2 to the Master
                  Issuer, but only to the extent of the amount of Funding 2
                  Available Principal Receipts remaining after paying amounts
                  of a higher priority and providing for amounts pari passu
                  therewith, and subject to, the rules set forth in the
                  Funding 2 Pre-Enforcement Principal Priority of Payments;
                  and

      (b)   in respect of amounts payable following enforcement of the Funding
            2 Security, amounts received or recovered by Funding 2, the
            Funding 2 Security Trustee or any Receiver appointed on behalf of
            the Funding 2 Security

                                      3
<PAGE>

            Trustee, but only to the extent of such amount thereof as remains
            after paying amounts of a higher order of priority and providing
            for amounts payable pari passu therewith in accordance with, and
            subject to, the Funding 2 Post-Enforcement Priority of Payments,

      provided that the application of such amounts set forth in sub-clauses
      (a) and (b) above to the discharge of Funding 2's obligations under this
      Agreement shall be subject to the terms of the Funding 2 Deed of Charge.

5.2   Shortfall on Final Repayment Date: To the extent that on the latest
      occurring Final Repayment Date of any Loan Tranche advanced under this
      Agreement there is a shortfall between all amounts (including interest
      and principal) payable under this Agreement and the amounts available
      therefor, that shortfall shall become immediately due and payable to the
      Master Issuer. Following enforcement of the Funding 2 Security and
      distribution of all enforcement proceeds in accordance with the Funding
      2 Deed of Charge, all outstanding claims that the Master Issuer may
      otherwise have against Funding 2 will be extinguished.

6.    Advance of Loan Tranches

6.1   Notice to Funding 2: On the London Business Day prior to each Closing
      Date, the Master Issuer shall give to Funding 2 (copied to the Funding 2
      Security Trustee) a Loan Tranche Notice (generally in the form set out
      in Schedule 1 (Form of Loan Tranche Notice)) setting out, inter alia:

      (a)   the amount and currency or currencies of the proposed issue on the
            next London Business Day of each Series and Class of Notes under
            the Programme;

      (b)   the Specified Currency Exchange Rate(s) at which the Master Issuer
            will swap the proceeds of each Series and Class of Notes that is
            not denominated in Sterling into Sterling; and

      (c)   the principal amount of each Loan Tranche available for drawing
            under the Global Loan Facility on the next Closing Date.

6.2   Loan Tranches correspond to Series and Classes of Notes: Each Loan
      Tranche shall be identified by reference to the relevant Series and
      Class of Notes that is used to fund it, as set out in the applicable
      Loan Tranche Supplement. For instance, the Series 05-1 Class A1 Notes
      shall fund the Series 05-1 AAA (Class A1) Loan Tranche.

6.3   Loan Tranche Supplement: The Loan Tranche Supplement to be signed on
      each Closing Date in accordance with Clause 3.1(b) shall record, amongst
      other things, the amount of each Loan Tranche to be made on such Closing
      Date, which shall correspond to the principal amount of such Loan
      Tranche that is available for drawing which is notified to Funding 2 in
      the applicable Loan Tranche Notice.

6.4   Single drawing of the Loan Tranche: On satisfaction of the conditions
      set out in Clause 3.1 (Conditions Precedent), the Master Issuer shall
      make the applicable Loan Tranches available to Funding 2 on the
      applicable Closing Date. The aggregate of the Loan Tranches to be made
      on such Closing Date will only be available for drawing in

                                      4
<PAGE>

      one amount by Funding 2 on the such Closing Date.

6.5   Redemption/Payment Basis: Each Loan Tranche may be an Index-Linked
      Redemption Loan Tranche, a Bullet Loan Tranche, a Scheduled Repayment
      Loan Tranche, a Controlled Repayment Loan Tranche, a Pass-Through Loan
      Tranche or a combination of any of the foregoing, depending upon the
      Redemption/Payment Basis shown in the applicable Loan Tranche
      Supplement.

6.6   Issuance Fees: The Master Issuer shall, on behalf of Funding 2 and
      itself, pay the fees and expenses incurred by Funding 2 and/or itself in
      connection with the issuance of Notes, the making of Loan Tranches by it
      to Funding 2 and the acquisition by Funding 2 of an additional share in
      the Trust Property using the proceeds of such Loan Tranches.

7.    Interest

7.1   Loan Tranche Interest Periods: The first Loan Tranche Interest Period in
      respect of a Loan Tranche will commence on (and include) the Loan
      Tranche Interest Commencement Date relating to that Loan Tranche and end
      on (but exclude) the first Loan Payment Date falling thereafter. Each
      subsequent Loan Tranche Interest Period shall commence on (and include)
      a Loan Payment Date and end on (but exclude) the next following Loan
      Payment Date.

7.2   Day Count Fraction: Whenever it is necessary to compute an amount of
      interest in respect of a Loan Tranche for any period (including any Loan
      Tranche Interest Period), such interest shall be calculated on the basis
      of actual days elapsed in a 365 day year.

7.3   Determination of Intercompany Loan Tranche Interest Amount: In relation
      to any Loan Tranche, the rate of interest payable (the "Loan Tranche
      Rate of Interest") and the relevant Sterling interest amount (each an
      "Loan Tranche Interest Amount") in respect of such Loan Tranche shall be
      determined on the basis of the provisions set out below:

      (a)   On the Loan Tranche Interest Reset Date in relation to such Loan
            Tranche, the Agent Bank will determine the Relevant Screen Rate in
            respect of such Loan Tranche at or about 11.00 am London time.

            If the Relevant Screen Rate is unavailable, the Agent Bank will
            request the principal London Office of each of the Reference Banks
            to provide the Agent Bank with its offered quotation to leading
            Banks for Sterling Deposits of (GBP)10,000,000 for the Loan
            Reference Rate in the London inter-bank market as at or about
            11.00 am London time on such Loan Tranche Interest Reset Date.

            The Loan Tranche Rate of Interest for such Loan Tranche for the
            Loan Tranche Interest Period relating to such Loan Tranche shall
            be the aggregate of:

            (i)   the Relevant Margin in respect of such Loan Tranche; and

            (ii)  the Relevant Screen Rate in respect of such Loan Tranche or,
                  if the Relevant Screen Rate is unavailable, the arithmetic
                  mean (or, in the

                                      5
<PAGE>

                  case of the initial Loan Tranche Interest Determination Date
                  for such Loan Tranche, the linear interpolation of the
                  arithmetic mean) of such offered quotations by the Reference
                  Banks (rounded upwards, if necessary, to five decimal
                  places).

      (b)   If on any Loan Tranche Interest Reset Date in relation to such
            Loan Tranche, the Relevant Screen Rate in respect of such Loan
            Tranche is unavailable and only two or three of the Reference
            Banks provide offered quotations, the Loan Tranche Rate of
            Interest for such Loan Tranche for the relevant Loan Tranche
            Interest Period shall be determined in accordance with the
            provisions of sub-paragraph (a) above on the basis of the offered
            quotations of those Reference Banks providing such quotations.

      (c)   If, on any such Loan Tranche Interest Reset Date, only one or none
            of the Reference Banks provides the Agent Bank with such an
            offered quotation, the Agent Bank shall forthwith consult with the
            Funding 2 Security Trustee for the purposes of agreeing two banks
            (or, where one only of the Reference Banks provided such a
            quotation, one additional bank) to provide such a quotation or
            quotations to the Agent Bank (which bank or banks are in the
            opinion of the Funding 2 Security Trustee suitable for such
            purpose) and the Loan Tranche Rate of Interest for such Loan
            Tranche for the Loan Tranche Interest Period in question shall be
            determined, as aforesaid, on the basis of the offered quotations
            of such banks as so agreed (or, as the case may be, the offered
            quotations of such bank as so agreed and the relevant Reference
            Bank).

      (d)   If no such bank or banks is or are so agreed or such bank or banks
            as so agreed does or do not provide such a quotation or
            quotations, then the Loan Tranche Rate of Interest for such Loan
            Tranche for the relevant Loan Tranche Interest Periods shall be
            the Loan Tranche Rate of Interest in relation to such Loan Tranche
            in effect for the immediately preceding Loan Tranche Interest
            Period to which sub-paragraph (a) above shall have applied but
            taking account of any change in the Relevant Margin in relation to
            such Loan Tranche.

      (e)   There will be no minimum or maximum Loan Tranche Rate of Interest
            for such Loan Tranche.

      (f)   The Agent Bank shall: (i) as soon as practicable on each Loan
            Tranche Interest Reset Date, determine and notify the Master
            Issuer, Funding 2, the Cash Manager and the Funding 2 Security
            Trustee of the Loan Tranche Rate of Interest applicable to such
            Loan Tranche for the relevant Loan Tranche Interest Periods and
            (ii) as soon as practicable on each Loan Interest Determination
            Date determine and notify the Master Issuer, Funding 2, the Cash
            Manager and the Funding 2 Security Trustee of the Loan Tranche
            Interest Amount payable in respect of such Loan Tranche for the
            relevant Loan Tranche Interest Period.

      (g)   The Loan Tranche Interest Amount for such Loan Tranche shall be
            determined by applying the relevant Loan Tranche Rate of Interest
            to the Outstanding Principal Balance of such Loan Tranche,
            multiplying the sum by the day count fraction described in Clause
            7.2 (Day Count Fraction) and rounding the resultant figure to the
            nearest penny (half a penny being rounded upwards).

                                      6
<PAGE>

      (h)   If the Agent Bank does not at any time for any reason determine
            the Loan Tranche Rate of Interest and the Loan Tranche Interest
            Amount for any Loan Tranche in accordance with 7.2(a) to (g)
            above, the Funding 2 Security Trustee shall (subject to it being
            indemnified to its satisfaction) determine the Loan Tranche Rate
            of Interest and Loan Tranche Interest Amount for each Loan Tranche
            and any such determination shall be deemed to have been made by
            the Agent Bank.

      (i)   All notifications, opinions, determinations, certificates,
            calculations and decisions given, expressed, made or obtained for
            the purposes of this Clause 7, whether by the Agent Bank or the
            Funding 2 Security Trustee, shall (in the absence of wilful
            default, bad faith or manifest error) be binding on Funding 2, the
            Master Issuer, the Cash Manager, the Agent Bank, the Funding 2
            Security Trustee and (in such absence as aforesaid) no liability
            to Funding 2 shall attach to such Master Issuer, the Agent Bank,
            the Funding 2 Security Trustee or the Cash Manager in connection
            with the exercise or non-exercise by them or any of them of their
            powers, duties and discretions hereunder.

      (j)   In the event of the then Agent Bank being unwilling to act as the
            Agent Bank, or resigning pursuant to the Issuer Paying Agent and
            Agent Bank Agreement, the Master Issuer shall, with the approval
            of the Issuer Security Trustee, appoint a successor Agent Bank. If
            the Master Issuer shall fail to appoint a successor Agent Bank,
            the Agent Bank shall appoint such other bank as may be previously
            approved in writing by the Issuer Security Trustee to act as the
            Agent Bank. The resignation of the Agent Bank will not take effect
            until a successor approved by the Issuer Security Trustee has been
            appointed.

7.4   Payment on Loan Payment Dates: Subject to Clause 5.1 (Recourse limited
      to available funds), Funding 2 shall pay interest in respect of each
      Loan Tranche on the Loan Payment Dates specified in the applicable Loan
      Tranche Supplement.

7.5   Deferred Interest: Subject to Clause 5.2 (Shortfall on Final Repayment
      Date), to the extent that there are insufficient funds available to pay
      interest on a Loan Tranche on any Loan Payment Date, the shortfall in
      the interest amount payable will not then fall due but will instead be
      due on the following Loan Payment Date on which sufficient funds are
      available to pay such interest, and pending such payment, will accrue
      interest at the rate specified for such Loan Tranche in the applicable
      Loan Tranche Supplement.

7.6   Certain Fees: In addition to the interest and principal payments to be
      made by Funding 2 in respect of each Loan Tranche under this Clause 7
      and Clause 8 (Repayment), respectively, on each Loan Payment Date (or,
      in respect of the payment to be made as set forth in (a) below, on the
      Closing Date for each Loan Tranche) or on any other date on which the
      Master Issuer notifies Funding 2, but subject to Clause 5.1 (Recourse
      limited to available funds), Funding 2 shall pay to the Master Issuer
      for same day value to the Issuer Transaction Account a fee for the
      provision of the Global Loan Facility (except that in the case of
      payments due under paragraphs (c), (e), (f) and (k) below, such payments
      shall be paid when due). Such fee shall be an amount or amounts in the
      aggregate equal to the following:

                                      7
<PAGE>

      (a)   the Issuance Fees (other than to the extent such Issuance Fees are
            specified in items (b) to (k) below);

      (b)   the fees, costs, charges, liabilities and expenses and any other
            amounts due and payable to the Note Trustee and the Issuer
            Security Trustee pursuant to the Issuer Trust Deed, the Issuer
            Deed of Charge or any other Transaction Document, together with
            interest thereon as provided therein;

      (c)   the reasonable fees and expenses of any legal advisers,
            accountants and auditors appointed by the Master Issuer and
            properly incurred in their performance of their functions under
            the Transaction Documents which have fallen due;

      (d)   the fees, costs and expenses due and payable to the Paying Agents,
            the Agent Bank, the Transfer Agent and the Registrar pursuant to
            the Issuer Paying Agent and Agent Bank Agreement;

      (e)   any amounts due and payable by the Master Issuer to the Inland
            Revenue in respect of the Master Issuer's liability to United
            Kingdom corporation tax (insofar as payment is not satisfied by
            the surrender of group relief or out of the profits, income or
            gains of the Master Issuer and subject to the terms of the Issuer
            Deed of Charge) or any other Taxes payable by the Master Issuer;

      (f)   the fees, costs, charges, liabilities and expenses due and payable
            to the Issuer Account Bank pursuant to the Issuer Bank Account
            Agreement (if any);

      (g)   the fees, costs, charges, liabilities and expenses due and payable
            to the Issuer Cash Manager pursuant to the Issuer Cash Management
            Agreement;

      (h)   any termination payment due and payable by the Master Issuer to an
            Issuer Swap Provider pursuant to an Issuer Swap Agreement;

      (i)   the fees, costs, charges, liabilities and expenses due and payable
            to the Issuer Corporate Services Provider pursuant to the Issuer
            Corporate Services Agreement;

      (j)   any amounts due and payable (other than principal) by the Master
            Issuer to the Start-Up Loan Provider(s) in respect of the Master
            Issuer's obligations under the Start-Up Loan Agreements; and

      (k)   any other amounts due or overdue by the Master Issuer to third
            parties including the Rating Agencies and the amounts paid by the
            Master Issuer under the Programme Agreement, each Subscription
            Agreement and each Underwriting Agreement (excluding, for these
            purposes, the Noteholders) other than amounts specified in
            paragraphs (b) to (j) above,

      together with, (i) in respect of taxable supplies made to the Master
      Issuer, any amount in respect of any VAT or similar tax payable in
      respect thereof against production of a valid tax invoice; and (ii) in
      respect of taxable supplies made to a person other than the Master
      Issuer, any amount in respect of any Irrecoverable VAT or similar tax
      payable in respect thereof (against production of a copy of the relevant
      tax invoice), and to be applied subject to and in accordance with the
      provisions of the Issuer Pre-

                                      8
<PAGE>

      Enforcement Revenue Priority of Payments in the Issuer Cash Management
      Agreement.

7.7   Set-off: Funding 2 and each of the other parties to this Agreement agree
      that the Master Issuer shall be entitled to set-off those amounts due
      and payable by Funding 2 pursuant to Clause 7.6 (Certain Fees) on the
      Closing Date for a Loan Tranche against the amount to be advanced by the
      Master Issuer to Funding 2 under such Loan Tranche on such Closing Date.

8.    Repayment

8.1   Repayment of Loan Tranches: Subject to Clause 5 (Limited Recourse), on
      each Loan Payment Date, other than a Loan Payment Date on which a Loan
      Tranche is to be repaid under Clause 9 (Prepayment), Funding 2 shall
      repay principal in respect of such Loan Tranche in an amount equal to:

      (a)   prior to the earlier to occur of the Step-Up Date (if any) in
            respect of such Loan Tranche and a Pass-Through Trigger Event, the
            lower of:

            (i)   the amount due to be paid on such Loan Payment Date as
                  specified for such Loan Tranche in the applicable Loan
                  Tranche Supplement; and

            (ii)  the amount which is available, under the terms of the
                  Funding 2 Deed of Charge and the Cash Management Agreement
                  to repay principal in respect of such Loan Tranche,

            provided that, in the case of any Pass-Through Loan Tranche, the
            amount of principal to be repaid by Funding 2 in respect of such
            Loan Tranche on the applicable Loan Payment Date shall be
            calculated in accordance with sub-paragraph (ii) above; or

      (b)   following the earlier to occur of the Step-Up Date (if any) in
            respect of such Loan Tranche and a Pass-Through Trigger Event
            (whereupon each following Monthly Payment Date shall constitute a
            Loan Payment Date), the amount which is available under the terms
            of the Funding 2 Deed of Charge and the Cash Management Agreement
            to repay principal in respect of such Loan Tranche.

      To the extent that there are insufficient funds available to Funding 2
      to repay the amount due to be paid on such Loan Payment Date, Funding 2
      will be required to repay the shortfall, to the extent that it receives
      funds therefor (and subject to the terms of the Funding 2 Deed of Charge
      and the Cash Management Agreement) on subsequent Loan Payment Dates in
      respect of such Loan Tranche.

8.2   Loan Tranche Ratings: Unless otherwise specified for any Loan Tranche in
      the applicable Loan Tranche Supplement, such Loan Tranche shall be
      repaid (as to both interest and principal) in the priority according to
      the Loan Tranche Rating of that Loan Tranche. The Loan Tranche Rating
      for a Loan Tranche will be specified for such Loan Tranche in the
      applicable Loan Tranche Supplement.

8.3   Payment subject to terms of the Funding 2 Deed of Charge: The terms and
      conditions of Clause 7 (Interest) and this Clause 8 (Repayment) are to
      be read in

                                      9
<PAGE>

      conjunction with the provisions of Schedule 3 to the Funding 2 Deed of
      Charge, as the same may be amended or varied from time to time in
      accordance with the provisions thereof.

9.    Prepayment

9.1   Prepayment for taxation or other reasons: If:

      (a)   Funding 2 is required to withhold or deduct from any payment of
            principal or interest in respect of any Loan Tranche any amount
            for or on account of Tax; or

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

      (c)   a Loan Tranche becomes illegal as described in Clause 11
            (Illegality);

      then, without prejudice to the obligations of Funding 2 under Clause 11
      (Illegality) and subject to Clause 12 (Mitigation), the Master Issuer
      may require Funding 2 to prepay, on any Loan Payment Date, having given
      not more than 60 days' and not less than 30 days' (or such shorter
      period as may be required by any relevant law in the case of any Loan
      Tranche which becomes illegal pursuant to Clause 11 (Illegality)) prior
      written notice to Funding 2 and the Note Trustee (or on or before the
      latest date permitted by the relevant law in the case of Clause 11
      (Illegality)) so long as the relevant circumstances continue, the
      applicable Loan Tranches without penalty or premium but subject to
      Clause 16 (Default Interest and Indemnity), provided that the Repayment
      Tests will be satisfied following such prepayment and the Master Issuer
      is able to repay the related Notes used to fund such Loan Tranche on
      such Loan Payment Date from funds received from repayment of such Loan
      Tranche.

9.2   Prepayment at option of Master Issuer: The Master Issuer, at its option,
      may require Funding 2 to prepay the outstanding principal amount of a
      Loan Tranche (together with any accrued interest) on any Loan Payment
      Date on which the Master Issuer has decided to exercise its option, if
      any, to redeem in full the Notes used to fund such Loan Tranche or on
      any date which is a Step-Up Date in respect of the Notes used to fund
      such Loan Tranche provided that, in each case, the Repayment Tests will
      be satisfied following such prepayment. The Master Issuer shall give
      Funding 2 not less than 30 days' prior written notice of the Master
      Issuer's decision to exercise its option to require Funding 2 to prepay
      the relevant Loan Tranche. Any prepayment by Funding 2 will be made
      without penalty or premium but will be subject to Clause 16 (Default
      interest and indemnity).

9.3   Application of monies: The Master Issuer hereby agrees to apply any
      amounts received by way of prepayment pursuant to Clause 9.1 (Prepayment
      for taxation or other reasons) or Clause 9.2 (Prepayment at option of
      Master Issuer) in making prepayments under the relevant Notes.

10.   Taxes

10.1  No gross up: All payments by Funding 2 under this Agreement shall be
      made without

                                      10
<PAGE>

      any deduction or withholding for or on account of, and free and clear
      of, any Taxes, except to the extent that Funding 2 is required by law to
      make payment subject to any Taxes.

10.2  Tax receipts: All Taxes required by law to be deducted or withheld by
      Funding 2 from any amounts paid or payable under this Agreement shall be
      paid by Funding 2 when due and Funding 2 shall, within 30 days of the
      payment being made, deliver to the Master Issuer evidence satisfactory
      to the Master Issuer (including all relevant Tax receipts) that the
      payment has been duly remitted to the appropriate authority.

11.   Illegality

      If, at any time, it is unlawful for the Master Issuer to make, fund or
      allow to remain outstanding a Loan Tranche made by it under this
      Agreement, then the Master Issuer shall, promptly after becoming aware
      of the same, deliver to Funding 2, the Funding 2 Security Trustee and
      the Rating Agencies a certificate to that effect and if the Master
      Issuer so requires, Funding 2 shall promptly to the extent necessary to
      cure such illegality prepay such Loan Tranche subject to and in
      accordance with the provisions of Clause 9.1 (Prepayment for taxation or
      other reasons).

12.   Mitigation

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

      (a)   the prepayment of the Loan Tranches pursuant to Clause 11
            (Illegality);

      (b)   a withholding or deduction from the amount to be paid by Funding 2
            on account of Taxes pursuant to Clause 10 (Taxes),

      then, without in any way limiting, reducing or otherwise qualifying the
      obligations of Funding 2 under this Agreement, the Master Issuer shall:

            (i)   promptly upon becoming aware of the circumstances, notify
                  the Funding 2 Security Trustee, Funding 2 and the Rating
                  Agencies; and

            (ii)  upon written request from Funding 2, take such reasonable
                  steps as may be practical to mitigate the effects of those
                  circumstances including (without limitation) the assignment
                  by novation of the Master Issuer's rights under this Loan
                  Agreement to, and assumption by novation of all the Master
                  Issuer's obligations under this Agreement by, another
                  company, which is willing to participate in the Loan
                  Tranches in its place and which is not subject to (a) and/or
                  (b) above,

            provided that no such transfer or assignment and transfer by
            novation of such rights and obligations may be permitted unless
            the Rating Agencies confirm in writing to Funding 2 and the
            Funding 2 Security Trustee that there will be no downgrading of
            the then current rating of the Notes issued by the Master Issuer
            as a result and Funding 2 indemnifies the Master Issuer for any
            reasonable costs and expenses properly incurred as a result of
            such transfer or assignment.

                                      11
<PAGE>

13.   Representations and Warranties of Funding 2

13.1  Representations and warranties: Funding 2 makes the representations and
      warranties set out in this Clause 13 to the Master Issuer and the
      Funding 2 Security Trustee (as trustee for each of the Funding 2 Secured
      Creditors).

13.2  Status:

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

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

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

13.4  Legal validity: Each Transaction Document to which it is or will be a
      party constitutes or when executed in accordance with its terms will
      constitute, a legal, valid and binding obligation of Funding 2.

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

      (a)   result in the existence or imposition of, nor oblige it to create,
            any Security Interest in favour of any person (other than the
            Funding 2 Security Trustee for itself and on behalf of the other
            Funding 2 Secured Creditors or as otherwise contemplated in the
            Transaction Documents) over all or any of its present or future
            revenues or assets;

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

      (c)   conflict with its constitutional documents; or

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

13.6  No litigation: It is not a party to any material litigation, arbitration
      or administrative proceedings and, to its knowledge, no material
      litigation, arbitration or administrative proceedings are pending or
      threatened against it.

13.7  No default: No Funding 2 Intercompany Loan Event of Default is
      continuing unremedied (if capable of remedy) or unwaived or would result
      from the making of any Loan Tranche.

                                      12
<PAGE>

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

13.9  Registration requirements: Except for due registration of the Funding 2
      Deed of Charge under Section 395 of the Companies Act 1985, it is not
      necessary that the Funding 2 Deed of Charge or this Agreement be filed,
      recorded or enrolled with any authority or that, except for registration
      fees payable at Companies Registry in respect of the Funding 2 Deed of
      Charge, any stamp, registration or similar tax be paid on or in respect
      thereof.

13.10 Ranking of security: The security conferred by the Funding 2 Deed of
      Charge constitutes a first priority security interest of the type
      described, and over the security assets referred to, in the Funding 2
      Deed of Charge and the Funding 2 Charged Property is not subject to any
      prior or pari passu Security Interests.

13.11 No other business:

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

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

13.12 Ownership:

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

      (b)   its shares are fully paid.

13.13 Good title as to assets: Subject to the Security Interests created under
      the Funding 2 Deed of Charge, it is and will remain the absolute
      beneficial owner of the Funding 2 Share and absolute legal and
      beneficial owner of all other assets charged or assigned by the Funding
      2 Deed of Charge to which it is a party.

13.14 Repetition: The representations in this Clause 13 (Representations and
      Warranties of Funding 2) shall survive the execution of this Agreement
      and the making of each Loan Tranche under this Agreement, and shall be
      repeated by Funding 2 on each Closing Date relating to the making of
      each Loan Tranche by reference to the facts and circumstances then
      existing.

14.   Covenants

14.1  Duration: The undertakings in this Clause 14 (Covenants) shall remain in
      force from the date of this Agreement for so long as any amount is or
      may be outstanding under this Agreement.

                                      13
<PAGE>

14.2  Information: Funding 2 shall supply to the Funding 2 Security Trustee
      and the Rating Agencies:

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

      (b)   promptly, such other information in connection with the matters
            contemplated by the Transaction Documents as the Funding 2
            Security Trustee or the Rating Agencies may reasonably request.

14.3  Notification of Default: Funding 2 shall notify the Master Issuer and
      the Funding 2 Security Trustee of any Funding 2 Intercompany Loan Event
      of Default (and the steps, if any, being taken to remedy it) or any
      event which with the giving of notice or lapse of time or certification
      would constitute the same promptly upon Funding 2 becoming aware of the
      occurrence of each Funding 2 Intercompany Loan Event of Default or such
      other event.

14.4  Authorisations: Funding 2 shall promptly:

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

      (b)   upon request, supply certified copies to the Master Issuer and the
            Funding 2 Security Trustee of,

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

14.5  Pari passu ranking: Funding 2 shall procure that its obligations under
      the Transaction Documents do and will rank at least pari passu with all
      its other present and future unsecured obligations, except for
      obligations mandatorily preferred by law.

14.6  Negative pledge: Funding 2 shall not create or permit to subsist any
      Security Interest over or in respect of any of its assets (unless
      arising by operation of law) other than as provided pursuant to the
      Transaction Documents.

14.7  Disposals; Mergers and Acquisitions: Funding 2 shall not, either in a
      single transaction or in a series of transactions, whether related or
      not and whether voluntarily or involuntarily, sell, assign, transfer,
      lease or otherwise dispose of or grant any option over all or any part
      of its assets, properties or undertakings or any interest, estate,
      right, title or benefit therein, other than as provided for pursuant to
      the Transaction Documents. In addition to the foregoing:

      (a)   Funding 2 shall not enter into any amalgamation, demerger, merger
            or reconstruction; and

      (b)   Funding 2 shall not acquire any assets or business or make any
            investments other than as contemplated in the Transaction
            Documents.

                                      14
<PAGE>

14.8  Lending and borrowing:

      (a)   Except as provided or contemplated under the Transaction
            Documents, Funding 2 shall not make any loans or provide any other
            form of credit to any person.

      (b)   Funding 2 shall not give any guarantee or indemnity to or for the
            benefit of any person in respect of any obligation of any other
            person or enter into any document under which Funding 2 assumes
            any liability of any other person.

      (c)   Funding 2 shall not incur any indebtedness in respect of any
            borrowed money other than under the Transaction Documents.

14.9  Shares and dividends: Funding 2 shall not:

      (a)   declare or pay any dividend or make any other distribution in
            respect of any of its shares other than in accordance with the
            Funding 2 Deed of Charge;

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

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

14.10 Change of business:

      (a)   Funding 2 shall not carry on any business or engage in any
            activity other than as contemplated by the Transaction Documents
            or which is not incidental to or necessary in connection with any
            of the activities in which the Transaction Documents provide or
            envisage that Funding 2 will engage.

      (b)   Other than in respect of the Master Issuer (and any other Funding
            2 Issuer), Funding 2 shall not have any subsidiaries or subsidiary
            undertakings as defined in the Companies Act 1985, as amended.

      (c)   Funding 2 shall not own any premises.

14.11 Tax: Funding 2 shall not apply to become part of any group for the
      purposes of section 43 of the Value Added Tax Act 1994 (as amended) with
      the Master Issuer unless required to do so by law.

14.12 United States Activities: Funding 2 will not engage in any activities in
      the United States (directly or through agents), will not derive any
      income from United States sources as determined under United States
      income tax principles and will not hold any property if doing so would
      cause it to be engaged or deemed to be engaged in a trade or business
      within the United States as determined under United States tax
      principles.

14.13 Funding 2 Ledgers: Funding 2 shall maintain, or cause to be maintained,
      the Funding 2 Ledgers in accordance with the Cash Management Agreement.

14.14 Funding 2 Liquidity Reserve Fund: Funding 2 will establish the Funding 2
      Liquidity Reserve Fund and the Funding 2 Liquidity Reserve Ledger,
      should the long-term, unsecured, unsubordinated and unguaranteed debt
      obligations of the Seller cease to be

                                      15
<PAGE>

      rated at least A3 by Moody's or A- by Fitch (unless Moody's or Fitch, as
      applicable, confirms the then current ratings of the Notes of the Master
      Issuer will not be adversely affected by such ratings downgrade). Any
      such Funding 2 Liquidity Reserve Fund and Funding 2 Liquidity Reserve
      Ledger shall be established and maintained in accordance with the
      provisions of the Cash Management Agreement.

15.   Default

15.1  Funding 2 Intercompany Loan Events of Default: Each of the events set
      out in Clause 15.2 (Non-payment) to Clause 15.8 (Ownership) (both
      inclusive) is a Funding 2 Intercompany Loan Event of Default (whether or
      not caused by any reason whatsoever outside the control of Funding 2 or
      any other person).

15.2  Non-payment: Subject to Clause 5.1 (Recourse limited to available
      funds), Funding 2 does not pay on the due date or such failure to pay
      continues for a period of five London Business Days after such due date
      any amount payable by it under any Funding 2 Intercompany Loan Agreement
      at the place at and in the currency in which it is expressed to be
      payable.

15.3  Breach of other obligations: Funding 2 does not comply in any material
      respect (in the opinion of the Funding 2 Security Trustee) with any of
      its obligations under the Transaction Documents to which it is a party
      (other than those referred to in Clause 15.2 (Non-payment)) and such
      non-compliance, if capable of remedy, is not remedied promptly and in
      any event within twenty London Business Days of Funding 2 becoming aware
      of the non-compliance or receipt of a written notice from the Funding 2
      Security Trustee requiring Funding 2's non-compliance to be remedied.

15.4  Misrepresentation: A representation, warranty or statement made or
      repeated in or in connection with any Transaction Document or in any
      document delivered by or on behalf of Funding 2 under or in connection
      with any Transaction Document is incorrect in any material respect (in
      the opinion of the Funding 2 Security Trustee) when made or deemed to be
      made or repeated.

15.5  Insolvency:

      (a)   An order is made or an effective resolution is passed for the
            winding up of Funding 2 (except, in any such case, a winding-up or
            dissolution for the purpose of a reconstruction, amalgamation or
            merger the terms of which have been previously approved by the
            Funding 2 Security Trustee; or

      (b)   Except for the purposes of an amalgamation, merger or
            restructuring as described in (a) above, Funding 2 ceases or
            threatens to cease to carry on all or a substantial part of its
            business or stops payment or threatens to stop payment of its
            debts or is deemed unable to pay its debts within the meaning of
            Section 123(a), (b), (c) or (d) of the Insolvency Act 1986 (as
            amended, modified or re-enacted) or becomes unable to pay its
            debts within the meaning of Section 132(2) of the Insolvency Act
            1986 (as amended, modified or re-enacted); or

      (c)   Proceedings are otherwise initiated against Funding 2 under any
            applicable liquidation, insolvency, composition, reorganisation or
            other similar laws (including, but not limited to, presentation of
            a petition for an administration

                                      16
<PAGE>

            order or the making of an application for an administration order
            or the filing of documents for an administration order) and
            (except in the case of presentation of a petition for or making an
            application for or filing of any documents for an administration
            order) such Proceedings are not, in the opinion of the Funding 2
            Security Trustee being disputed in good faith with a reasonable
            prospect of success; or a formal notice is given of intention to
            appoint an administrator; or an administration order is granted or
            an administrative receiver or other receiver, liquidator or other
            similar official is appointed in relation to Funding 2 or in
            relation to the whole or any substantial part of the undertaking
            or assets of Funding 2; or an encumbrancer taking possession of
            the whole or any substantial part of the undertaking or assets of
            Funding 2; or a distress, execution, diligence or other process is
            levied or enforced upon or sued out against the whole or any
            substantial part of the undertaking or assets of Funding 2 and
            such possession or process (as the case may be) is not discharged
            or not otherwise cease to apply within 30 days; or Funding 2
            initiates or consents to judicial proceedings relating to itself
            under applicable liquidation, insolvency, composition,
            reorganisation or other similar laws or makes a conveyance or
            assignment for the benefit of its creditors generally.

15.6  Unlawfulness: It is or becomes unlawful for Funding 2 to perform any of
      its obligations under any Transaction Document.

15.7  The Funding 2 Deed of Charge: The Funding 2 Deed of Charge is no longer
      binding on or enforceable against Funding 2 or effective to create the
      security intended to be created by it.

15.8  Ownership: The entire issued share capital of Funding 2 ceases to be
      legally and beneficially owned and controlled by Holdings.

15.9  Acceleration of Global Intercompany Loan: Upon the Funding 2 Security
      Trustee's receipt from the Master Issuer or other party to a Transaction
      Document of notice of the occurrence of a Funding 2 Intercompany Loan
      Event of Default which is continuing unremedied and/or has not been
      waived, the Funding 2 Security Trustee may by written notice to Funding
      2 (a "Funding 2 Intercompany Loan Enforcement Notice") which is copied
      to each of the Funding 2 Secured Creditors and the Mortgages Trustee:

      (a)   declare all Loan Tranches made under this Agreement to be
            immediately due and payable, whereupon the same shall, subject to
            Clause 15.10 (Repayment of Global Intercompany Loan on
            acceleration), become so payable together with accrued interest
            thereon and any other sums then owed by Funding 2 under this
            Agreement; and/or

      (b)   declare the Loan Tranches to be due and payable on demand of the
            Funding 2 Security Trustee.

15.10 Repayment of Global Intercompany Loan on acceleration: Upon the Funding
      2 Security Trustee declaring the Loan Tranches to be immediately due and
      payable pursuant to Clause 15.9 (Acceleration of Global Intercompany
      Loan), the amount due and payable in respect of each Loan Tranche shall
      be paid by Funding 2 without

                                      17
<PAGE>

      penalty or premium but subject to Clause 16 (Default interest and
      indemnity).

16.   Default Interest and Indemnity

16.1  Default Loan Interest Periods: If any sum due and payable by Funding 2
      under a Loan Tranche is not paid on the due date for payment in
      accordance with this Agreement or if any sum due and payable by Funding
      2 under any judgment or decree of any court in connection with this
      Agreement is not paid on the date of such judgment or decree, the period
      beginning on such due date or, as the case may be, the date of such
      judgment or decree and ending on the date upon which the obligation of
      Funding 2 to pay such sum (the balance thereof for the time being unpaid
      being herein referred to as an "unpaid sum") is discharged shall be
      divided into successive periods, each of which (other than the first)
      shall start on the last day of the preceding such period and the
      duration of each of which shall (except as otherwise provided in this
      Clause 16) be selected by the Funding 2 Security Trustee having regard
      to when such unpaid sum is likely to be paid.

16.2  Default interest: During each such period relating to an unpaid sum as
      is mentioned in this Clause 16 an unpaid sum shall bear interest at the
      rate per annum which the Master Issuer, acting reasonably, determines
      and certifies to Funding 2 and the Funding 2 Security Trustee will be
      sufficient to enable it to pay interest and other costs and indemnities
      on or in respect of any amount which the Master Issuer does not pay as a
      result of Funding 2's non-payment under this Agreement, as a result of
      such unpaid sum not being paid to it.

16.3  Payment of default interest: Any interest which shall have accrued under
      Clause 16.2 (Default interest) in respect of an unpaid sum shall be due
      and payable and shall be paid by Funding 2 at the end of the period by
      reference to which it is calculated or on such other date or dates as
      the Funding 2 Security Trustee may specify by written notice to Funding
      2.

16.4  Broken periods: Funding 2 shall forthwith on demand indemnify the Master
      Issuer against any loss or liability that the Master Issuer incurs as a
      consequence of any payment of principal being received from any source
      otherwise than on a Loan Payment Date or an overdue amount being
      received otherwise than on its due date.

16.5  Funding 2's payment indemnity: Funding 2 undertakes to indemnify the
      Master Issuer:

      (a)   against any cost, claim, loss, expense (including legal fees) or
            liability together with any amount in respect of Irrecoverable VAT
            thereon (other than by reason of the negligence or wilful default
            by the Master Issuer) which it may sustain or incur as a
            consequence of the occurrence of any Funding 2 Intercompany Loan
            Event of Default or any default by Funding 2 in the performance of
            any of the obligations expressed to be assumed by it in any of the
            Transaction Documents (other than by reason of negligence or
            wilful default on the part of the Master Issuer or prior breach by
            the Master Issuer of the terms of any of the Transaction Documents
            to which it is a party); and

      (b)   against any other loss or liability (other than by reason of the
            negligence or default of the Master Issuer or breach by the Master
            Issuer of the terms of any

                                      18
<PAGE>

            of the Transaction Documents to which it is a party (except where
            such breach is caused by the prior breach of Funding 2) or loss of
            profit) it may suffer by reason of having made a Loan Tranche
            available or entering into this Agreement or enforcing any
            security granted pursuant to the Funding 2 Deed of Charge.

17.   Payments

17.1  Payment:

      (a)   Subject to Clause 5 (Limited Recourse), all amounts of interest
            and principal to be paid to the Master Issuer under this Agreement
            shall be paid in Sterling for value by Funding 2 to the Issuer
            Transaction Account and the relevant irrevocable payment
            instruction for such payment shall be given by Funding 2 by no
            later than noon to the Issuer Cash Manager under the Issuer Cash
            Management Agreement (with a copy to the Master Issuer and the
            Funding 2 Security Trustee) on the Distribution Date immediately
            preceding the relevant Loan Payment Date.

      (b)   On each date on which this Agreement requires any amount other
            than the amounts specified in Clause 17.1(a) to be paid by Funding
            2, Funding 2 shall, save as provided otherwise herein, make the
            same available to the Master Issuer by payment in Sterling in
            immediately available, freely transferable, cleared funds to the
            Issuer Transaction Account.

17.2  Alternative payment arrangements: If, at any time, it shall become
      impracticable (by reason of any action of any governmental authority or
      any change in law, exchange control regulations or any similar event)
      for Funding 2 to make any payments under this Agreement in the manner
      specified in Clause 17.1 (Payment), then Funding 2 shall make such
      alternative arrangements for the payment direct to the Master Issuer of
      amounts due under this Agreement as are acceptable to the Funding 2
      Security Trustee.

17.3  No set-off: All payments required to be made by Funding 2 under this
      Agreement shall be calculated without reference to any set-off or
      counterclaim and shall be made free and clear of, and without any
      deduction for or on account of, any set-off or counterclaim.

18.   Entrenched Provisions

      Each of Funding 2, the Master Issuer and the Funding 2 Security Trustee
      acknowledge and agree that Funding 2 may from time to time enter into
      new Funding 2 Intercompany Loan Agreements and that the obligation of
      Funding 2 to repay the Loan Tranches made under this Agreement will rank
      pari passu with the obligations of Funding 2 to repay any such other
      loans made under such Funding 2 Intercompany Loan Agreements. If Funding
      2 intends to enter into a new Funding 2 Intercompany Loan Agreement then
      the provisions of this Agreement may be varied (with the consent of the
      parties to this Agreement to the extent necessary to reflect the terms
      of that Funding 2 Intercompany Loan Agreement) PROVIDED THAT no
      variation shall be made to any of the following terms without the prior
      written consent of the Funding 2 Secured Creditors and the Rating
      Agencies:

                                      19
<PAGE>

      (a)   the Loan Payment Dates;

      (b)   Clause 5 (Limited Recourse);

      (c)   Clause 10 (Taxes); and

      (d)   Clause 19.5 (Funding 2 Security Trustee).

19.   Further Provisions

19.1  Evidence of indebtedness: In any proceeding, action or claim relating to
      a Loan Tranche a statement as to any amount due to the Master Issuer
      under such Loan Tranche which is certified as being correct by an
      officer of the Funding 2 Security Trustee shall, unless otherwise
      provided in this Agreement, be prima facie evidence that such amount is
      in fact due and payable.

19.2  Entire Agreement, Amendments and Waiver and Rights cumulative:

      (a)   Entire Agreement: This Agreement sets out the entire agreement and
            understanding between the parties with respect to the subject
            matter of this Agreement superseding all prior oral or written
            understandings other than the other Transaction Documents.

      (b)   Amendments and Waiver: Subject to Clause 18 (Entrenched
            Provisions), no amendment or waiver of any provision of this
            Agreement nor consent to any departure by any of the parties
            therefrom shall in any event be effective unless the same shall be
            in writing and signed by each of the parties hereto. In the case
            of a waiver or consent, such waiver or consent shall be effective
            only in the specific instance and as against the party or parties
            giving it for the specific purpose for which it is given.

      (c)   Rights cumulative: The respective rights of each of the parties to
            this Agreement are cumulative and may be exercised as often as
            they consider appropriate. No failure on the part of any party to
            exercise, and no delay in exercising, any right hereunder shall
            operate as a waiver thereof, nor shall any single or partial
            exercise of any such right preclude any other or further exercise
            thereof or the exercise of any other right. The remedies in this
            Agreement are cumulative and not exclusive of any remedies
            provided by law.

19.3  Assignment: Neither the Master Issuer nor Funding 2 may assign or
      transfer any of its respective rights and obligations under this
      Agreement PROVIDED THAT:

      (a)   the Master Issuer may assign its rights, title, interest or
            benefit hereunder to the Issuer Security Trustee pursuant to the
            Issuer Deed of Charge;

      (b)   Funding 2 may assign its rights hereunder to the Funding 2
            Security Trustee pursuant to the Funding 2 Deed of Charge.

19.4  Severability: 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

                                      20
<PAGE>

      thereby.

19.5  Funding 2 Security Trustee:

      (a)   The Funding 2 Security Trustee shall have no responsibility for
            any of the obligations of any other party to this Agreement (other
            than itself). For the avoidance of doubt, the parties to this
            Agreement acknowledge that the rights and obligations of the
            Funding 2 Security Trustee under this Agreement are governed by
            the Funding 2 Deed of Charge.

      (b)   As between the Funding 2 Security Trustee and the parties hereto
            any liberty or power which may be exercised or any determination
            which may be made hereunder by the Funding 2 Security Trustee may
            be exercised or made in the Funding 2 Security Trustee's absolute
            discretion without any obligation to give reasons therefor, but in
            any event must be exercised or made in accordance with the
            provisions of the Funding 2 Deed of Charge.

19.6  Counterparts: 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.

19.7  Third Party Rights: A person who is not a party to this Agreement may
      not enforce any of its terms under the Contracts (Rights of Third
      Parties) Act 1999, but this shall not affect any right or remedy of a
      third party which exists or is available apart from that Act.

19.8  Corporate Obligations: To the extent permitted by law, no recourse under
      any obligation, covenant, or agreement of any person contained in this
      Agreement shall be had against any shareholder, officer or director of
      such person as such, by the enforcement of any assessment or by any
      legal proceeding, by virtue of any statute or otherwise; it being
      expressly agreed and understood that this Agreement is a corporate
      obligation of each person expressed to be a party hereto and no personal
      liability shall attach to or be incurred by the shareholders, officers,
      agents or directors of such person as such, or any of them, under or by
      reason of any of the obligations, covenants or agreements of such person
      contained in this Agreement, or implied therefrom, and that any and all
      personal liability for breaches by such person of any of such
      obligations, covenants or agreements, either under any applicable law or
      by statute or constitution, of every such shareholder, officer, agent or
      director is hereby expressly waived by each person expressed to be a
      party hereto as a condition of and consideration for the execution of
      this Agreement.

20.   Redenomination

      Each obligation under this Agreement which has been denominated in
      Sterling shall be redenominated in Euro in accordance with applicable
      legislation passed by the European Monetary Union upon such
      redenomination of the Sterling Notes.

                                      21
<PAGE>

21.   Notices

      Any notices or other communication or document to be given or delivered
      pursuant to this Agreement to any of the parties hereto shall be
      sufficiently served if sent by prepaid first class post, by hand or by
      facsimile transmission and shall be deemed to be given (in the case of
      facsimile transmission) when despatched or (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 (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 Master Issuer, to Granite Issuer Master plc,
            Fifth Floor, 100 Wood Street, London EC2V 7EX (facsimile number
            020 7606 0643) for the attention of the Company Secretary with a
            copy to Northern Rock plc, Northern Rock House, Gosforth,
            Newcastle upon Tyne NE3 4PL (facsimile number 0191 213 2203) for
            the attention of the Group Secretary;

      (b)   in the case of Funding 2, to Granite Finance Funding 2 Limited,
            Fifth Floor, 100 Wood Street, London EC2V 7EX (facsimile number
            020 8409 8911) for the attention of the Company Secretary (with a
            copy to Northern Rock plc, Northern Rock House, Gosforth,
            Newcastle upon Tyne NE3 4PL (facsimile number 0191 213 2203) for
            the attention of the Group Secretary);

      (c)   in the case of Funding 2 Security Trustee, to The Bank of New
            York, 40th Floor, One Canada Square, London, E14 5AL (facsimile
            number 020 7964 6399) for the attention of the Global Structured
            Finance (Corporate Trust); and

      (d)   in the case of Agent Bank, to Citibank, N.A., Citigroup Centre,
            Canada Square, Canary Wharf, London E14 5LB, (facsimile number 020
            7508 3881) for the attention of Rate Fixing,

            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 22. All notices
            served under this Agreement shall be simultaneously copied to the
            Funding 2 Security Trustee by the person serving the same.

22.   Governing Law and Submission to Jurisdiction

22.1  Governing Law: This Agreement is governed by, and shall be construed in
      accordance with, English law.

22.2  Submission to Jurisdiction: Each of the parties hereto irrevocably
      agrees that the courts of England shall have jurisdiction to hear and
      determine any suit, action or proceeding, and to settle any disputes,
      which may arise out of or in connection with this Agreement and, for
      such purposes, irrevocably submits to the jurisdiction of such courts.

22.3  Forum: Each of the parties hereto irrevocably waives any objection which
      it might now or hereafter have to the courts of England being nominated
      as the forum to hear and determine any suit, action or proceeding and to
      settle any disputes, and agrees not

                                      22
<PAGE>

      to claim that any such court is not a convenient or appropriate forum.

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

                                      23
<PAGE>

                                  SCHEDULE 1

                          FORM OF LOAN TRANCHE NOTICE

From:  Granite Master Issuer plc (the "Master Issuer")

To:    Granite Finance Funding 2 Limited ("Funding 2")

Copy:  The Bank of New York (the "Funding 2 Security Trustee")

Dear Sirs,

1.    We refer to the agreement between, inter alios, ourselves, Funding 2 and
      the Funding 2 Security Trustee (as from time to time amended, varied,
      novated or supplemented (the "Global Intercompany Loan Agreement"))
      dated 19 January, 2005 whereby a Global Loan Facility was made available
      to Funding 2. Terms defined in the Global Intercompany Loan Agreement
      shall have the same meaning in this notice.

2.    We hereby give you notice that, pursuant to the Global Intercompany Loan
      Agreement and upon the terms and subject to the conditions contained
      therein, we wish to make the following Loan Tranches available to
      Funding 2 on [specify Closing Date]:

      o     Series [o] [o] (Class [o]) Loan Tranche to be funded by the Series
            [o] Class [o] Notes on the Closing Date:

            (a)   principal amount and currency of [o];

            (b)   specified Currency Exchange Rate of GBP 1.00/[o];

            (c)   Principal amount (in Sterling) available to be drawn in
                  respect of such Loan Tranche of (GBP)[o];

      [repeat for all applicable Loan Tranches]

3.    The interest rate(s) applicable to each Loan Tranche will be as follows:

      o     Series [o] [o] (Class [o]) Loan Tranche: [o] [Set out relevant
            interest rate(s)]

      [repeat for all applicable Loan Tranches]

Yours faithfully,

For and on behalf of
Granite Master Issuer plc

                                      24
<PAGE>

                                  SCHEDULE 2

                        FORM OF LOAN TRANCHE SUPPLEMENT

                                      25
<PAGE>

                                   Dated [o]

                       GRANITE FINANCE FUNDING 2 LIMITED
                                 as Funding 2

                           GRANITE MASTER ISSUER PLC
                               as Master Issuer

                             THE BANK OF NEW YORK
                         as Funding 2 Security Trustee

                                CITIBANK, N.A.
                                 as Agent Bank

                 -------------------------------------------

                            LOAN TRANCHE SUPPLEMENT

                 -------------------------------------------

                                      26
<PAGE>

THIS LOAN TRANCHE SUPPLEMENT is dated [o] between:

(1)   GRANITE FINANCE FUNDING 2 LIMITED (registered number 5249387) a private
      limited liability company incorporated under the laws of England and
      Wales whose registered office is at Fifth Floor, 100 Wood Street, London
      EC2V 7EX as Funding 2;

(2)   GRANITE MASTER ISSUER PLC (registered number 5250668) a public limited
      company incorporated under the laws of England and Wales whose
      registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX as
      Master Issuer;

(3)   THE BANK OF NEW YORK, acting through its office at 40th Floor, One
      Canada Square, London E14 5AL in its capacity as the Funding 2 Security
      Trustee; and

(4)   CITIBANK, N.A., acting through its office at Citigroup Centre, Canada
      Square, Canary Wharf, London E14 5LB in its capacity as the Agent Bank.

This document constitutes the Loan Tranche Supplement relating to the Loan
Tranches described herein. Terms used herein shall be deemed to be defined as
such for the purposes of the Global Intercompany Loan Agreement entered into
between the parties hereto on 19 January, 2005. This Loan Tranche Supplement
contains the final terms of the Loan Tranches identified and described herein,
is supplemental to and must be read in conjunction with the Global
Intercompany Loan Agreement.

[To be repeated for each Loan Tranche funded by Notes of each class of the
same Series]

Loan Tranche: The Series [o] Class [o] Notes will fund the [identifier] Loan
Tranche which shall have the following terms:

<TABLE>
<CAPTION>

<S>   <C>                                          <C>
1.    Borrower:                                    Granite Finance Funding 2 Limited

2.    Lender:                                      Granite Master Issuer plc

3.    (i)      Loan Tranche Rating:                [o]

      (ii)     Series Number:                      [o]

4.    Initial Outstanding Principal Balance:       [o]

5.    (i)      Closing Date:                       [o]

      (ii)     Loan Tranche Interest               [o]
               Commencement Date:

      (iii)    Loan Tranche Interest Reset Dates:  The Monthly Payment Date falling in [o], [o], [o] and
                                                   [o] of each year or, following the earlier to occur of
                                                   the Step-Up Date in relation to this Loan Tranche or a
                                                   Pass-Through Trigger Event, each Monthly Payment Date
                                                   of each year.

                                      27
<PAGE>

6.    Final Repayment Date:                        [o]

7.    Loan Payment Dates:                          Each Monthly Payment Date in each year up to and
                                                   including the Final Repayment Date

8.    Initial Relevant Screen Rate:                [o]

9.    Loan Reference Rate:                         [o] or, following the earlier to occur of the Step-Up
                                                   Date in relation to this Loan Tranche or a
                                                   Pass-Through Trigger Event, LIBOR for one-month
                                                   sterling deposits

10.   Relevant Margin:                             [o]

11.   Step-Up Date:                                [Not Applicable/The Loan Payment Date occurring in
                                                   [specify date]]
                                                   (If not applicable, delete the remaining parts of this
                                                   sub-paragraph)

12.   Relevant Margin following Step-Up Date:      [Not Applicable/[o]]

13.   Redemption/Payment Basis:                    [Redemption at par]
                                                   [Index Linked Redemption]
                                                   [Bullet Redemption]
                                                   [Scheduled Redemption]
                                                   [Controlled Amortisation]
                                                   [Pass-through]

14.   Change of Redemption/Payment Basis:          [Specify details of any provision for change of Loan
                                                   Tranches into another Redemption/Payment Basis

15.   Details relating to Bullet Loan Tranche:     [Applicable/Not Applicable]

                                                   [if not applicable, delete the remaining
                                                   sub-paragraphs of this paragraph]

      (i)      Bullet Repayment Loan Amount:       [o]

      (ii)     Bullet Redemption Date:             [o]

                                      28
<PAGE>

16.   Details relating to Scheduled Repayment      [Applicable/Not Applicable]
      Loan Tranche:
                                                   [If the Scheduled Repayment Loan Tranche is
                                                   applicable, specify the Scheduled Repayment Dates and
                                                   Scheduled Repayment Loan Instalments below]
                                                   [if not applicable, delete the remaining
                                                   sub-paragraphs of this paragraph]

            Scheduled Repayment Dates                    Scheduled Repayment Loan Instalment:
       Loan Repayment Dates occurring in:
                      [o]                                                [o]

17.   Details relating to Controlled Repayment     [Applicable/Not Applicable]
      Loan Tranche:
                                                   [If the Controlled Repayment Loan Tranche is
                                                   applicable, specify the Target Balance for each Loan
                                                   Payment Date below]
                                                   [if not applicable, delete the remaining
                                                   sub-paragraphs of this paragraph]

         Controlled Repayment Dates                               Target Balance:
       Loan Payment Date occurring in:

                     [o]                                                [o]

18.   Details relating to Pass-through Loan        [Applicable/Not Applicable]
      Tranches:
                                                   [If the Pass-through Loan Tranche is applicable,
                                                   specify the Loan Payment Date following which the
                                                   Pass-Through Loan Tranches will be due]

                                                   [If not applicable, delete the remaining
                                                   sub-paragraphs of this paragraph].

19.   Other terms and special conditions:          [Not Applicable/give details]

</TABLE>

                                      29
<PAGE>

Confirmations:

Funding 2 confirms that:

(a)   no Funding 2 Intercompany Loan Event of Default has occurred and is
      continuing which has not been waived, or would result from the making of
      such Loan Tranche;

(b)   the representations and warranties set out in Clause 13 (Representations
      and Warranties of Funding 2) are true on and as of the Closing Date
      specified in this Loan Tranche Supplement by reference to the facts and
      circumstances then existing; and

(c)   as of the Closing Date specified in this Loan Tranche Supplement, there
      is no debit balance on the Funding 2 Principal Deficiency Ledger.

The Master Issuer confirms that:

(a)   no Issuer Event of Default has occurred and is continuing which has not
      been waived, or would result from the making of such Loan Tranche;

(b)   the aggregate amount of the Loan Tranches to be made on the Closing Date
      specified in this Loan Tranche Supplement and any Loan Tranches
      outstanding on such Closing Date do not exceed the Total Credit
      Commitment.

                                      30
<PAGE>

                                EXECUTION PAGE
                          for Loan Tranche Supplement

as Funding 2
EXECUTED for and on behalf of                     )
GRANITE FINANCE FUNDING 2 LIMITED                 )
by                                                )

-------------------------

Name:

as Master Issuer
EXECUTED for and on behalf of                     )
GRANITE MASTER ISSUER PLC                         )
by                                                )

-------------------------

Name:

as Funding 2 Security Trustee
EXECUTED for and on behalf of                     )
THE BANK OF NEW YORK                              )
by                                                )

-------------------------

Name:

as Agent Bank
EXECUTED for and on behalf of                     )
CITIBANK, N.A.                                    )
by                                                )

-------------------------

Name:

                                      31
<PAGE>

                                EXECUTION PAGE

as Funding 2
EXECUTED for and on behalf of                     )
GRANITE FINANCE FUNDING 2 LIMITED                 )
by                                                )

-------------------------

Name:

as Master Issuer
EXECUTED for and on behalf of                     )
GRANITE MASTER ISSUER PLC                         )
by                                                )

-------------------------

Name:

as Funding 2 Security Trustee
EXECUTED for and on behalf of                     )
THE BANK OF NEW YORK                              )
by                                                )

-------------------------

Name:

as Agent Bank
EXECUTED for and on behalf of                     )
CITIBANK, N.A.                                    )
by                                                )

-------------------------

Name:

                                      32

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